Arbitration- Bills of Lading Incorporated Voyage Charterparty

This dispute arose under the Bills of Lading for the carriage of some 65,736.68 mt of Brazilian soya beans from Santos, Brazil to Nantong, China.

This is an interesting case that addresses procedural issues, particularly regarding the tribunal's satisfaction that the Claimants’ application and the tribunal’s subsequent directions have been brought to the notice of the Respondents, so that they have a reasonable opportunity to deal with them.

Two issues arose for determination, and these can conveniently be discussed under the following headings:-

(a) Jurisdiction - Do the Bills of Lading incorporate the arbitration clause in the Head Voyage Charterparty ("the First Issue")?

(b) Liability - Is the Owner liable for damage to the cargo ("the Second Issue")?

Jurisdiction

This issue concerns the question of whether the Bills of Lading incorporate the arbitration clause in the Head Voyage Charterparty, and therefore whether the BL Holders were in breach of the arbitration agreement in that charterparty, which is incorporated into the Bills of Lading by pursuing its claim in the Wuhan Maritime Court.

The Vessel was chartered out in a chain of contracts as: time charter, time charter, time charter, voyage charter and voyage charter.

Where a bill of lading incorporates a charterparty but does not identify the relevant charterparty, the general rule is that the head charter to which the shipowner is party is incorporated: see The San Nicholas [1976] 1 Lloyd’s Rep 8. However, where (as here) the head charter is a time charter, the general rule does not apply where there is another more relevant charterparty on the basis of the presumed unlikelihood of the parties wishing to incorporate the terms of a time charter which are different in kind: see Aikens, Bills of Lading (2006) para 7.105. Thus, where there is a voyage charterparty, the terms of the voyage charter are usually the more appropriate candidate for incorporation: see e.g. The SLS Everest [1981] 2 Lloyd’s Rep 389, p 392 and Cooke, Voyage Charters (4th Ed), para 18.61. Where there is more than one voyage charter, the incorporated charterparty is the head voyage charter and not the sub-voyage charter: Cooke, Voyage Charters (4th Ed), para 18.62.

Held,

The Head Voyage Charter was more appropriate for incorporation than the Head Time Charter. Many terms of the time charter will not be relevant in the context of the Bills of Lading contracts. Furthermore, even though there was at least one sub-voyage charter, in accordance with the principle set out in Cooke, Voyage Charters (4th Ed), para 18.62, the Head Voyage Charter is the charterparty which is incorporated into the Bills of Lading contracts. In any event, Clause 44 of the sub-voyage charter is in identical terms to Clause 44 of the Head Voyage Charter in any event.

As a matter of English law, the Head Voyage Charter was the charterparty which was incorporated into the Bills of Lading, the Owners’ claim was properly brought in this arbitration, and the tribunal had jurisdiction to determine it.  By pursuing its claim under the Bills of Lading in the Wuhan Maritime Court in China, it was a breach of its obligation to pursue its claim in arbitration in London and is liable to Owners for any damages.

Cargo damage

Owner has proceeded on the basis that the claim against them in the Chinese Courts relies upon CIQ Survey Report and is based on the premise that the cargo was loaded in good condition yet delivered in a damaged condition and therefore it is to be inferred that the cargo damage was caused during the voyage in breach of the contract of carriage contained in or evidenced by the Bills of Lading.

Owners contended that there was no evidence to cast even the slightest suspicion that the vessel was unseaworthy at any time or that Owners were negligent at all, let alone causatively negligent in the performance of their duties under Art III r.2, of the Hague Rules to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

The Respondents failed to participate in the proceedings, nevertheless it is the duty of the arbitrator to put the claimants to strict proof of their claims. In order to determine whether Owners were in breach the contract of carriage contained in or evidenced by the Bills of Lading, it was necessary first to determine what as a matter of law were their obligations in carrying the cargo under that contract and then to consider whether as a matter of fact they were  in breach of those obligations.

Having considered the facts and expert evidence adduced by the Owners, the tribunal held that

(a) If there was any loss or damage to the cargo during carriage:-

(i) It was minimal;

(ii) It arose as a result of the inherent instability and/or inherent vice of the cargo, in particular the loading of over moist parcels of cargo within the stow which led to the well-known phenomena of moisture migration, and the cycle of self-heating and microbiological activity which occurs as a consequence.

(iii) It could not be prevented by the ship or her crew during transit.

(b) The cargo was improperly stored and/or cared for after discharge and/or there was an inordinate delay in its processing, with the consequence that it was subjected to microbiological activity.

(c) In any event, no evidence has been produced to show that the protein content of the soya beans was affected adversely and/or that its merchantable value was reduced.

This is an award from an LMAA Full Member, issued on 30 November 2016 under the LMAA Terms 2012, and can be found at Jus Mundi.