Daval Aciers D'Usinor et de Sacilor v Armare S.r.l. (Nerano)

Wednesday 15 February 1995

The question in these proceedings is whether cargo claims advanced by the Plaintiffs in the Admiralty Court against the owners of the motor vessel "Nerano", in respect of the carriage of a cargo of some 3000 mts of steel coils from Fos in France to Marsa el Brega in Libya should be stayed under section 1 of the Arbitration Act 1975. The issues between the parties are whether the relevant Bill of Lading contract contained an arbitration clause within the meaning of this Act binding upon them, and if so whether the Owners have lost the right to a stay under that Act. In the Admiralty Court Clarke J decided that the claims should be stayed and from that decision the Plaintiffs appeal.

On the face of the Bill of Lading appear the following words in capital letters:

"THE CONDITIONS AS PER RELEVANT CHARTER PARTY DATED 02.07.1990 ARE INCORPORATED IN THIS BILL OF LADING AND HAVE PRECEDENCE IF THERE IS A CONFLICT. ENGLISH LAW AND JURISDICTION APPLIES."

The back of the Bill of Lading is headed "Conditions of Carriage". The first sentence of Clause (1) of these conditions is as follows:

"All terms and conditions, liberties, exceptions and arbitration clause of the Charter Party, dated as overleaf, are herewith incorporated."

It is common ground that the Charterparty referred to in the Bill of Lading was one on the Gencon form dated 2 July 1990 and made between Cargill International SA of Antigua as owners and Korf Shipping, GmbH of Frankfurt as charterers. It is also common ground that the contract contained in or evidenced by the Bill of Lading was made with the true Owners of the vessel, the Defendants to these proceedings. It should also be noted that the Charterers under the Charterparty are named as Fourth Plaintiffs in the proceedings, but do not in fact advance any claim against the Defendants.

The Charterparty was expressed to be a contract of affreightment for the carriage of 98,400 mts of steel coils on a number of voyages from Fos (or other ports) to Marsa el Brega over a period of 60 months. The claims relate to one of these voyages.

Clause 24 of the Charterparty provides that the Master and/or Owner are to authorise the Charterers to issue and sign Bills of Lading on their behalf. The last sentence of this clause provides as follows:

"The following to be stamped on all Bills of Lading under this contract: 'The conditions as per relevant Charter Party dated 2nd July, 1990 are incorporated in this Bill of Lading and have precedence if there is a conflict. English law and Jurisdiction applies.'"

The Arbitration Clause in the Charterparty is in the following

terms:

"That should any dispute arise between the Owners and the Charterers the matter in dispute should be determined in London, England, according to the Arbitration Acts, 1950 to 1979 and any amendments or modifications thereto and English law to govern."

The Defendant Shipowners' submission is that this provision was incorporated into the Bill of Lading by the express words of incorporation of the Charterparty Arbitration Clause in Clause (1) on the back of the Bill of Lading and that read in the context of the Bill of Lading contract the expression "the Charterers" must, to make any sense, be read as meaning the parties to the Bill of Lading contract with the Shipowners.

The Plaintiff cargo owners;' submission is that Clause (1) on the back of the Bill of Lading cannot stand with the quoted provision on the face of the Bill of Lading, for this only incorporates the "conditions" of the Charterparty (which do not include the Arbitration Clause) and by its reference to English jurisdiction contains an agreement to refer disputes to the English Courts. Furthermore and in any event the cargo owners submit that it is simply impermissible to "manipulate" the words of the Charterparty Arbitration Clause so as to make them apply to disputes between parties other than the Owners and the Charterers.

The basic English rule for the construction of contracts of the present kind is to examine the words the parties have used in the context in which they have used them, in order to try and ascertain objectively what bargain the parties intended to make. The contract must be looked at as a whole in its context, rather than seeking to construe provisions in isolation, for to do otherwise is in effect to shut one's eyes to what the parties themselves actually did.

In the present case, looked at on its own, the provision on the front of the Bill of Lading only incorporates the conditions of the Charterparty (which it is common ground would not include the Arbitration Clause in the Charterparty) and the reference to English jurisdiction could (in the absence of any reference to arbitration) only be a reference to the English Courts. To my mind, however, once this blinkered approach is discarded and the provision is considered together with Clause (1) in the back of the Bill of Lading, a different meaning emerges. The provision on the face of the Bill of Lading does not expressly prohibit the incorporation of terms other than conditions from the Charterparty, nor is the reference to English jurisdiction couched in language that excludes an English arbitration agreement, which would ex hypothesi be subject to English jurisdiction. Thus there is room for the provisions on the back of the Bill of Lading to be read consistently with the provision on the front, even accepting that the latter is to be given more importance, since it seems more of an ad hoc term than the standard printed clauses on the back. In short, I do not accept that the two provisions (read together) are inconsistent with each other.

There remains the fact that Clause (1) on the back of the Bill of Lading seeks to incorporate an arbitration clause which on its face only applies to disputes between owners and charterers. In The "Rena K" [1979] QB 377, Brandon J, as he then was, took the view that when the parties to a Bill of Lading contract had expressly chosen to incorporate an arbitration clause from a charterparty, they must have intended and agreed to arbitration in accordance with that clause as the means of resolving their disputes; from which it followed that to give effect to that intention and agreement the words of the clause must be manipulated or adapted so that they covered disputes arising under the Bill of Lading contract. Much the same kind of reasoning is to be found, of course, in the decision of the House of Lords in Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum [1939] AC 133, to the effect that the United States Carriage of Goods by Sea Act 1936 was incorporated by express reference into a Charterparty, notwithstanding that the Act itself was expressed to be inapplicable to charterparties.

It is submitted by Miss Bucknall QC on behalf of the cargo-owners that this part of the decision in The "Rena K" cannot stand in the light of earlier authorities and the later judgment of the House of Lords in Miramar Maritime Corporation v Holborn Oil Trading Ltd [1984] AC 676. I disagree. As Brandon J himself pointed out, an essential element in the earlier cases was that the words of incorporation were...