Should third parties be bound by arbitration

clauses in bills of lading?

Yvonne Baatz*

This article considers English law on the incorporation of an arbitration clause

from a charterparty into a bill of lading and whether it binds a third party to the
bill of lading. The varying approaches of the EU Member States to arbitration
clauses in bills of lading mean that parallel proceedings in arbitration and court
may carry the risk that conflicting awards or judgments may be made. Recent
European attempts to address these issues have not eliminated uncertainty as to
the position on recognition and enforcement of arbitration awards. The global
position is even more diverse and the latest attempt to address arbitration clauses
in bills of lading in the Rotterdam Rules fails to tackle the problems.

A. INTRODUCTION

The New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards 1958 (the “New York Convention”) has been very widely accepted around the
world.1 It gives effect to the principle of party autonomy. That principle is also at the heart
of many Conventions and EU Regulations in other areas of conflict of laws governing
court jurisdiction and applicable law, such as Council Regulation (EC) No 44/2001 of 22
December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in
Civil and Commercial Matters (the “EC Jurisdiction Regulation”); the Regulation (EU)
No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on
jurisdiction and the recognition and enforcement of judgments in civil and commercial
matters (recast) (the “Recast Regulation”);2 the Hague Convention on Choice of Court
Agreements 2005;3 Regulation (EC) No 593/2008 on the law applicable to contractual

* Professor of Maritime Law and member of the Institute of Maritime Law at the University of Southampton.
My thanks go to Robert Veal, research assistant at the Institute of Maritime Law, for his helpful comments on a
draft of this article. Any errors remain my own.
The following abbreviations are used:
ECJ: Court of Justice of the European Communities; Court of Justice of the European Union;
Heidelberg Review/Report: B Hess, T Pfeiffer and P Schlosser, The Brussels I—Regulation (EC) No
44/2001: The Heidelberg Report on the Application of Regulation Brussels I in 25 Member States (Study JLS/
C4/2005/03) (CH Beck, Hart, Nomos, 2008).
1. As at 17 March 2014, 149 States are party to the New York Convention.
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2. The Recast Regulation will apply to legal proceedings instituted on or after 10 January 2015 (Art.66) and
will apply to all EU Member States, including Denmark, according to the Agreement between the European
Community and the Kingdom of Denmark on jurisdiction and the recognition and enforcement of judgments in
civil and commercial matters [2013] OJ L79/4.
3. On 30 June 2005, the Final Act of the Twentieth Session of the Hague Conference on Private International
Law was signed, including the Convention on Choice of Court agreements. The text of the Convention is available
from [Link]/index_en.php?act=[Link]&cid=98. It is not yet in force. Two ratifications or

85
 86 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

obligations (“Rome I”);4 and Regulation (EC) No 864/2007 on the law applicable to non-
contractual obligations (“Rome II”).5
This article will consider arbitration clauses in bills of lading and whether they bind
third parties. Despite the broad acceptance of the principle of party autonomy, there is
currently no international consensus on whether a third party under a bill of lading should
be bound by an arbitration, court jurisdiction or governing law clause in a bill of lading.
This question is left to be decided by national law, and the national law of different States
may vary significantly. There is also no international consensus as to whether a subrogated
insurer who steps into the shoes of the third-party bill of lading holder is bound by such a
clause when it sues the carrier or another third party, such as a P & I Club. There may, for
example, be a right to sue the liability insurer of the carrier where the bill of lading holder
or its subrogated insurer has a right of direct action against the liability insurer, usually
pursuant to statute and usually where the carrier has become insolvent.
This article will discuss: the position under English law as to whether a third party is
bound by an arbitration clause in a bill of lading; how the rules agreed by the Member
States of the European Union impact on arbitration; and the approach to arbitration of
various international Conventions relevant to carriage of goods by sea culminating in the
Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea
and signed in Rotterdam in September 2009 (the “Rotterdam Rules”).

B. THE POSITION UNDER ENGLISH LAW

The United Kingdom is a party to the New York Convention and it gives effect to its
international obligations under that Convention in the Arbitration Act 1996. Sections 5
and 6 of the Act set out the formalities that have to be complied with for there to be a valid
arbitration agreement. Section 6(2) provides that the reference in an agreement to a written
form of arbitration clause or to a document containing an arbitration clause constitutes an
arbitration agreement if the reference is such as to make that clause part of the agreement.
Arbitration in London is a popular choice of dispute resolution in maritime contracts,
as is the London Maritime Arbitrators Association. Many standard form charterparties6
provide for London arbitration. Many bills of lading purport to incorporate the arbitration
clause in the charterparty under which the bill is issued.7 It will be necessary to determine
whether the charterparty arbitration clause is validly incorporated in the bill of lading.

accessions are required (Art.31). As at June 2014, Mexico had acceded to the Convention on 26 September 2007,
the United States of America had signed on 19 January 2009 and the European Community, now replaced by the
European Union, signed on 1 April 2009 (but this does not bind Denmark). On 4 December 2014 the European
Council approved the Convention. The Convention will come into force “on the first day of the month following
the expiration of three months after the depot of the second instrument of … approval”. However, even when it
comes into force, it does not apply to the carriage of goods: see Art.2(2)(f) and (g).
4. Rome I came into force on 17 December 2009 in all EU Member States, except Denmark, and applies to
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contracts concluded as from 17 December 2009 (Art.28 as amended). The United Kingdom opted in to Rome I.
5. Rome II applies where the events giving rise to damage occurred after 11 January 2009: Homawoo v GMF
Assurance SA & Ors (Case C-412/10) [2011] ECR I-11603, applied in VTB Capital Plc v Nutritek International
Corp [2013] UKSC 5; [2013] 2 AC 337. See Arts 12 and 14 on party choice.
6. See eg NYPE 1946, cl.17; NYPE 1993, cl.45; Gencon 1994, cl.19; and Shelltime 4, cl.46.
7. See eg the Congenbill 1994 and 2007.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 87

1. Neutral choice
The parties may choose a neutral place of arbitration8 and there does not need to be any
link between the factual scenario of the case, such as the loadport or discharge port, and the
chosen place of arbitration. The United Kingdom is not a party to the UN Convention on
the Carriage of Goods by Sea 1978 (the “Hamburg Rules”), Art.22(3) of which provides
that the cargo claimant may choose the venue of the arbitration from a list including the
place designated in the arbitration agreement; however, some other EU Member States
are.9 It may be that the English court would strike out a foreign arbitration clause if the
effect of that choice would be to lessen or minimise the carrier’s liability below that under
the Hague-Visby Rules10 where those Rules would apply mandatorily.11

2. The terms of which charterparty are incorporated into the bill of lading
Sometimes, where a bill of lading states that it incorporates the terms of a charterparty,
it fails to identify the charterparty, and there may be more than one if there is a string
of charters. Even if the bill of lading does not specify which of several charterparties
is incorporated into the bill of lading, the court will determine which is the relevant
charterparty.12 Where there are two or more potentially relevant charters, the courts are
very reluctant to hold that the contract is void for uncertainty, as this does not give effect
to the obvious intention of the parties that the terms of a charter are to be incorporated.13
Although it is a question of construction in each case, the general rule is that the head
charter, to which the shipowner is party, is incorporated.14 This would mean that, if the
carrier is the shipowner, it is party to both the bill of lading and the head charterparty,
the terms of which are back to back. However, the position may well be different where the
head charterparty is a time 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 from
a bill of lading.
In Kallang Shipping SA v Axa Assurances Senegal and Comptoir Commercial Mandiaye
Ndiaye (The Kallang),15 Jonathan Hirst QC, sitting as a Deputy Judge of the High Court,

8. Arbitration Act 1996, s.3.

9. See post, 102.
10. The International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading
(Brussels 25 August 1924) as amended by the Protocol signed at Brussels on 23 February 1968 and by the
Protocol signed at Brussels on 21 December 1979.
11. Compare the position on a foreign jurisdiction clause in The Hollandia [1983] 1 AC 565; sub nom The
Morviken [1983] 1 Lloyd’s Rep 1.
12. Pacific Molasses Co and United Molasses Trading Co v Entre Rios Compania Naviera SA (The San
Nicholas) [1976] 1 Lloyd’s Rep 8; Bangladesh Chemical Industries Corp v Henry Stephens Shipping Co and
Tex-Bilan Shipping Co (The SLS Everest) [1981] 2 Lloyd’s Rep 389.
13. The San Nicholas [1976] 1 Lloyd’s Rep 8; K/S A/S Seateam & Co v Iraq National Oil Co (The Sevonia
Team) [1983] 2 Lloyd’s Rep 640; Sir R Aikens, R Lord and M Bools, Bills of Lading (Informa, London, 2006),
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[7.104].
14. The San Nicholas [1976] 1 Lloyd’s Rep 8, 11, per Lord Denning MR; The Sevonia Team [1983] 2 Lloyd’s
Rep 640, 644, per Lloyd J; Partenreederei M/S Heidberg v Grosvenor Grain & Feed Co Ltd (The Heidberg)
[1994] 2 Lloyd’s Rep 287, 311, per HHJ Diamond QC (“such authorities do no more than indicate guidelines for
ascertaining the intentions of the parties”).
15. [2008] EWHC 2761 (Comm); [2009] 1 Lloyd’s Rep 124.
 88 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

considered bills of lading which expressly provided that all terms and conditions, liberties
and exceptions of the Charter Party dated 1 February 2005 “including the Law and
Arbitration Clauses” were incorporated. There were two charterparties dated 1 February
2005, a time and a voyage charterparty, both of which provided for London arbitration
but in different terms. The bills of lading also provided that freight was payable as per the
charterparty. It was held that this was a reference to the voyage charterparty and that the
terms of the voyage charter are “more naturally germane to a bill of lading” and therefore
the intention was to incorporate the terms of the voyage charter, including its arbitration
clause.16
If a sub voyage charterparty is incorporated, the carrier may not have seen it. In National
Navigation Co v Endesa Generacion SA (The Wadi Sudr),17 the shipowner, which was
also the carrier, had not seen the charterparty when it commenced court proceedings in
England against Endesa, the named consignee under the bill of lading. The bill of lading
was in the Congenbill form, which incorporates the “Law and Arbitration clause” of the
“charterparty dated as overleaf” but no date of the charterparty was given. There were
three charterparties: a head time charter, a sub time charter and a voyage charterparty
between the sub time charterers, Morgan Stanley Capital Group and Endesa’s co-
subsidiary, Carboex SA. The day the owners’ solicitor was instructed, he asked for a copy
of the voyage charterparty. Despite repeated requests, the charterparty was not disclosed
until a court order was made that it be disclosed, over eight months later. Gloster J thought
that the voyage charterparty was incorporated;18 but, even if the head charterparty were
the relevant charterparty, as both head and voyage charterparties provided for London
arbitration, the bill of lading also so provided.19

3. Does the charterparty need to be drawn up?

In recent years a formal charterparty signed by both parties is often not produced. This
raises issues as to whether an arbitration clause which must be in writing or evidenced
in writing can be incorporated into a bill of lading from a charterparty which is recorded
in a fixture recap, or series of emails, and in either case may in turn make reference to a
proforma contract between different parties which contains an arbitration clause.

16. Ibid, [64].

17. [2009] EWHC 196 (Comm); [2009] 1 Lloyd’s Rep 666, which was appealed ([2009] EWCA Civ 1397;
[2010] 1 Lloyd’s Rep 193), though not on this point. See also Viscous Global Investment Ltd v Palladium
Navigation Corp (The Quest) [2014] EWHC 2654 (Comm), where none of the bills of lading identified a
charterparty on its face, as the relevant box for the date of the charterparty was left blank. There were three
charterparties. They all provided for arbitration but the head time charter and trip time charter provided for
London arbitration, whereas the voyage charter provided for arbitration in Singapore and English law. Males J
did not need to decide which of the charterparties was incorporated into the bill of lading, as he held that the P &
I Club letter of undertaking given as security was a variation of whichever arbitration clause was incorporated.
For further discussion of this decision, see post, 101.
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18. [2009] EWHC 196 (Comm); [2009] 1 Lloyd’s Rep 666, [111].
19. In the meantime, the Spanish court held that no arbitration clause was incorporated into the bill of lading
and that the owners had waived their right to rely on the arbitration clause by commencing the English court
proceedings. The Court of Appeal ([2009] EWCA Civ 1397; [2010] 2 All ER (Comm) 1243) held that the
arbitrators were bound to recognise the Spanish judgment on the validity of the arbitration clause as a result of
the common law doctrine of res judicata. See post, 109 and 110.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 89

The Court of Appeal considered the practice of concluding a charterparty in Golden

Ocean Group Ltd v Salgoacar Mining Industries Pvt Ltd,20 in a different context. In that
case the issue was whether a guarantee of a charterparty satisfied the Statute of Frauds, s.4
and was therefore enforceable where the written reference to the guarantee was in a series
of emails resulting in the conclusion of the charterparty. Giving the judgment of the court,
Tomlinson LJ stated:21
“The conclusion of commercial contracts, particularly charterparties, by an exchange of emails,
once telexes or faxes, in which the terms agreed early on are not repeated verbatim later in the
exchanges, is entirely commonplace. It causes no difficulty whatever in the parties knowing at
exactly what point they have undertaken a binding obligation and upon what terms. As Mr Young
pointed out, it is often a matter of happenstance, or, metaphorically, the pressing of a button, whether
a sequence of emails manifests itself in a single document as a thread or string of emails or in a
series of individual documents … I can see no objection in principle to reference to a sequence of
negotiating emails or other documents of the sort which is commonplace in ship chartering and ship
sale and purchase. Whether the pattern of contract negotiation and formation habitually adopted
in other areas of commercial life presents difficulty in adoption of the same approach must await
examination when the problem arises. Nothing I have said is intended to discourage the obviously
sensible practice of incorporating a guarantee either in a readily identifiable self-standing document
or otherwise providing for it as part of the terms of a formally executed document. The Statute
must however, if possible, be construed in a manner which accommodates accepted contemporary
business practice. The present case is not concerned with prescribing best or prudent practice. It
is concerned with ensuring, so far as is possible, that the adoption of usual and accepted practice
cannot be used as a vehicle for injustice by permitting parties to break promises which are supported
by consideration and upon which reliance has been placed.”

Although the decision that the guarantee was enforceable is clearly correct on its merits,
we need to consider how the terms of a charterparty which has never been drawn up can
affect a bill of lading holder.
In The Heidberg,22 HHJ Diamond QC considered which charterparty arbitration
clause had been incorporated in a bill of lading where the latter document provided for
the arbitration clause of an unidentified charterparty to be incorporated in the bill. At
the time the bill of lading was issued there were two potential charterparties containing
arbitration clauses: the first in time was a contract of affreightment on the Synacomex
form which contained a Paris arbitration clause. The second agreement in time was an oral
one concluded by telephone and evidenced in writing by a fixture “recap telex” between
brokers the same day. A formal charterparty was not signed by the charterers until some
two years later. The fixture “recap telex” failed accurately to record the agreement between
the parties, which was for a charterparty in an amended Synacomex 90 form and contained
the Centrocon arbitration clause, which provided for arbitration in London according
to English law. The “recap telex” provided erroneously that the charterparty was in the
Synacomex form. The wording of both arbitration clauses in the two charterparties was
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wide enough to apply to the bill of lading without manipulation. HHJ Diamond QC held:

20. [2012] EWCA Civ 265; [2012] 1 Lloyd’s Rep 542.

21. Ibid, [22].
22. [1994] 2 Lloyd’s Rep. 287.
 90 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

that the English court was bound by the Brussels Convention to recognise a decision of
the French court that the Centrocon clause was not incorporated in the bill of lading;23 that
English law should determine whether the clause was incorporated in the bill; and that, if
English law were to be applied, the clause incorporated in the bill was the Paris arbitration
clause. The judge held that the bill of lading did not incorporate a charter agreed orally.
The bill of lading referred to a charterparty which had been reduced to writing. His reasons
for this conclusion include the need for terms incorporated by reference to be readily
ascertainable. Extensive investigation as to the undocumented contractual arrangements
of third parties would introduce considerable uncertainty.
However, in Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) (No 2),24 the Court
of Appeal held that a bill of lading in the Congenbill form incorporated the charterparty
arbitration clause, even though the charterparty had been concluded by a fixture recap telex
which referred to a standard form charterparty and clearly stated “London arbitration”. The
drawn-up charterparty was subsequently executed but on the date the bill of lading was
issued there was no executed charterparty as it had not been signed on behalf of charterers
by that time. Tuckey LJ, giving the judgment of the court, agreed with the decision in The
Heidberg but distinguished it. He suggested that the courts are more willing to incorporate
terms into bills of lading than in some other contractual contexts, as the carrier wishes to
ensure that its rights and obligations are back to back under both the charterparty and the
bill of lading, as both contracts cover the same voyage by the same carrier.25
More recently, in Caresse Navigation Ltd v Office National de L’Electricite (The
Channel Ranger),26 the English court went further than the decision in The Epsilon Rosa
(No 2) and held that a voyage charterparty jurisdiction clause was incorporated into the bill
of lading and bound the third party, where the terms of the charterparty were recorded in
an email fixture recap and the charterparty had not been drawn up. This part of the decision
in The Channel Ranger is in line with the recent liberal approach of the English courts, as
illustrated in eg Golden Ocean Group Ltd v Salgoacar Mining Industries Pvt Ltd,27 and
reflects the desire of the English courts to accommodate actual business practice.
Furthermore, the main terms of the fixture recap of the voyage charterparty between
U-Sea Bulk A/S and Glencore provided:
“otherwise as per proforma C/P Glencore/Eitzen latest C/P dated 14 January 2009 (see attached)
logically amended as per main terms agreed”.

The Glencore/Eitzen charterparty dated 14 January 2009 was attached and it provided:
“This Charter party shall be governed by English law, and any dispute arising out of or in connection
with this Charter shall be submitted to the exclusive jurisdiction of the High Court of Justice of
England and Wales.”

23. For further discussion of this point see post, 109 and 110.
24. [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep 509.
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25. Ibid, [25].

26. [2014] EWCA Civ 1366; affg [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337. The appeal in this case was
on the issue of the anti-suit injunction to restrain the cargo interests from pursuing proceedings in Casablanca.
For the facts of this case, see post, 92 and 93.
27. [2012] EWCA Civ 265; [2012] 1 Lloyd’s Rep 542 . In this case the brokers did draw up the charterparty
but it was never signed.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 91

Thus, the charterparty terms did not themselves contain an arbitration clause but referred
to another contract between different parties and did not specifically refer to the arbitration
clause. In this case the arbitration clause is twice removed from the bill of lading, which
refers to the voyage charterparty, the terms of which in turn refer to a different charterparty
between different parties. At first instance Males J rejected an argument that specific
reference should have been made in the U-Sea Bulk/Glencore charteparty terms to the
arbitration clause in the Glencore/Eitzen charterparty.28 He stated that reference to a
proforma charterparty in a fixture recap is “very common” and U-S Bulk and Glencore
intended to incorporate the dispute resolution clause from the proforma, as otherwise there
would be no such provision, which would be “extremely unusual”.29 This demonstrates the
different approach to bills of lading which, as we are about to see, require specific words of
incorporation due to the third-party factor, whereas in a charterparty general words suffice
as there are only two parties.

4. How should the words of incorporation be construed?

General words of incorporation in the bill of lading will not successfully incorporate an
arbitration clause in a charterparty.30 The Court of Appeal in The Channel Ranger stressed
that this principle is “an exception to the general approach of English law which in principle
accepts incorporation of standard terms by the use of general words”.31 The reason usually
given for this exception to the general rule is that third parties under negotiable bills of

28. [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337, [51–54].

29. Ibid, [54].
30. Thomas v Portsea [1912] AC 1; Skips A/S Nordheim v Syrian Petroleum Co (The Varenna) [1983] 2
Lloyd’s Rep 592; Federal Bulk Carriers Inc v C Itoh and Co Ltd (The Federal Bulker) [1989] 1 Lloyd’s Rep 103
(the bill of lading provided “all terms ... as per Charterparty ... to be considered as fully incorporated herein as if
fully written”); Navig8Pte Ltd v Al-Riyadh Co for Vegetable Oil Industry (The Lucky Lady) [2013] EWHC 328
(Comm); [2013] 2 All ER (Comm) 145; [2013] 2 Lloyd’s Rep 104 (discussed post, 99 and 100). This principle
also applies to the incorporation of a court jurisdiction clause: Siboti K/S v BP France SA [2003] EWHC
1278; [2003] 2 Lloyd’s Rep 364. Contrast the position in relation to other commercial contracts where there
is a general reference to a standard form contract (eg Sea Trade Maritime Corp v Hellenic Mutual Association
(Bermuda) Ltd (The Athena) [2006] EWHC 2530 (Comm); [2007] 1 All ER (Comm) 183, [65], per Langley J,
considering the war risk insurance cover in the rules which were incorporated, unless the clause was “onerous
and unusual”, an argument that the owners did not pursue before Langley J); or previous contracts between the
same parties which will be sufficient to incorporate an arbitration or jurisdiction clause (see Habas Sinai Ve Tibbi
Gazlar Istihsal Endustrisi AS v Sometal SAL [2010] EWHC 29 (Comm); [2010] 1 All ER (Comm) 1143 (sale
contract—arbitration clause); or to another proforma contract in a charterparty (eg. Caresse Navigation Ltd v
Office National de L’Electricite (The Channel Ranger) [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337 (the case
went to the Court of Appeal [2014] EWCA Civ 1366 but not on this point) (discussed ante, 90 and 91). There
remains some controversy about the decision in The Merak [1965] P 223, where, although there were general
words of incorporation in the bill of lading, the Court of Appeal did consider the wording of the charterparty
clause which applied to claims under the bill of lading. It was not necessary to resolve that controversy in The
Channel Ranger but the Court of Appeal considered that the decision might well have been the same nowadays
but for different reasons: [2014] EWCA Civ 1366, [32–39]. There the bill of lading referred to cl.30 of the
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charterparty but the arbitration clause was cl.32. Clause 30 dealt with the shipowner’s right to substitute another
vessel and had no relevance to the bill of lading. It may be that the slip in the bill of lading would be construed
differently today in light of the more modern principles on construction of contracts and that the reference to
cl.30 would be read as cl.32: ibid, [38].
31. [2014] EWCA Civ 1366, [26], referring to Sea Trade Maritime Corp v Hellenic Mutual Association
(Bermuda) Ltd (The Athena) [2006] EWHC 2530 (Comm); [[2007] 1 All ER (Comm) 183, [65], per Langley J.
 92 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

lading need certainty, as they may not be familiar with the charterparty terms.32 This would
also be the case with a straight bill of lading where the consignee is not a party to the
charterparty. As we have already seen, the carrier who is the shipowner may not be aware
of the terms of the charterparty where a sub voyage charterparty is incorporated into the
bill of lading.33
Words of incorporation that specifically refer to the arbitration clause will be sufficiently
certain, even if it is necessary to manipulate the wording of the charterparty clause.34 For
example, in The Nerano35 the charterparty clause referred “all disputes arising out of this
charterparty” to arbitration. The Court of Appeal determined that the parties made clear
their intention by the specific words in the bill of lading that the arbitration clause was
to be incorporated into the bill and added the words “and under any bill of lading issued
hereunder” to the arbitration clause.
In recent decisions the English court has adopted a liberal approach to construction
where there was a specific reference to arbitration in the bill of lading but the charterparty
clause was a hybrid court and arbitration clause or a court jurisdiction clause. In YM
Mars Tankers Ltd v Shield Petroleum Co (Nigeria) Ltd (The YM Saturn)36 Gloster J
held that a bill of lading which expressly incorporated the “law and arbitration” clause
of the charterparty incorporated the “law and litigation” clause in the time charterparty,
which provided for disputes involving sums less than US$50,000 to go to arbitration in
accordance with the LMAA Small Claims Procedure and disputes for sums in excess of
that amount to be subject to the jurisdiction of the English court. She considered that it
was clear that the “law and arbitration” clause referred to in the bill of lading should be
construed as meaning the “law and litigation” clause in the charterparty. Otherwise there
would only be arbitration for some disputes and no jurisdictional provisions for claims in
excess of US$50,000, which would be “absurd”.
The English court has gone even further in Caresse Navigation Ltd v Office National
de L’Electricite (The Channel Ranger).37 A negotiable bill of lading in the Congenbill
1994 form provided in a printed clause that the “Law and Arbitration clause” of a voyage
charterparty between U-Sea Bulk A/S and Glencore identified by a typed insertion was
incorporated. In addition a central box on the front of the form also included the typed
clause:

32. Federal Bulk Carriers Inc v C Itoh and Co Ltd (The Federal Bulker) [1989] 1 Lloyd’s Rep 103; Caresse
Navigation Ltd v Office National de L’Electricite (The Channel Ranger) [2014] EWCA Civ 1366, [15]; Siboti
K/S v BP France SA [2003] EWHC 1278; [2003] 2 Lloyd’s Rep 364, [24], concerning a court jurisdiction clause.
33. See The Wadi Sudr [2009] EWHC 196 (Comm); [2009] 1 Lloyd’s Rep 666, discussed ante, 88.
34. Daval Aciers d’Usinor et de Sacilor v Armare SRL (The Nerano) [1996] 1 Lloyd’s Rep 1; Owners of
Cargo Lately Laden on Board The MV Delos v Delos Shipping Ltd (The Delos) [2001] 1 Lloyd’s Rep 703;
Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) (No 2) [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep 509.
See also M Ozdel, “Presumptions on the Law Governing the Incorporation of Forum Selection Clauses: Should
the Putative Applicable Law Lead the Way?” [2011] JBL 357, which also considers the differences between
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English and US law. On US law, see R Force and M Davies, “Forum Selection Clauses in International Maritime
Contracts”, in M Davies (ed), Jurisdiction and Forum Selection in International Maritime Law: Essays in Honor
of Robert Force (Kluwer, The Hague, 2005).
35. Daval Aciers d’Usinor et de Sacilor v Armare SRL (The Nerano) [1996] 1 Lloyd’s Rep 1.
36. [2012] EWHC 2652.
37. [2014] EWCA Civ 1366; [2015] 2 WLR 43; affg [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 93

“Freight payable as per Charter Party. All terms, conditions, liberties and exemptions including the
law and arbitration clause, are herewith incorporated.”
As discussed above, Males J held that the identified charterparty provided:
“This Charter party shall be governed by English law, and any dispute arising out of or in connection
with this Charter shall be submitted to the exclusive jurisdiction of the High Court of Justice of
England and Wales.”

The carrier under the bill of lading was a Marshall Islands company and the defendants
were the Moroccan receiver of the cargo and their Moroccan insurers. Coal had been
loaded at Rotterdam and discharged at Nador in Morocco. The receivers claimed for
damage to the cargo as a result of combustion and water used to douse the cargo. In June
2011, the carriers commenced proceedings in England for a declaration of non-liability.
Hamblen J granted permission to serve the English proceedings out of the jurisdiction.
After the English court proceedings were served in Morocco on the defendants, the latter
commenced proceedings in March 2013 in Casablanca, Morocco, where the Hamburg
Rules apply, and they challenged the jurisdiction of the English court. That jurisdiction
was founded on the jurisdictional gateways in Practice Direction 6B para.3.1 of the
Civil Procedure Rules, that the bill of lading contract was governed by English law and
contained an English court jurisdiction agreement. Therefore, the issues were whether
the English court had jurisdiction and whether there was an effective choice of English
law as the law applicable to the bill of lading. At first instance, Males J held that the
English court had jurisdiction on both jurisdictional gateways and granted an interim anti-
suit injunction restraining the cargo interests from pursuing proceedings in Casablanca.
Permission to appeal against the rejection by Males J of the cargo interests’ challenge to
English jurisdiction was refused by both Males J and Aikens LJ, but the insurers appealed
against the anti-suit injunction. The Court of Appeal dismissed that appeal.
The argument for the owners was that the specific incorporating words of the bill of
lading demonstrated an intention to incorporate the charterparty dispute resolution clause
providing for English court jurisdiction. If the parties had made a mistake by referring
to arbitration when they meant court jurisdiction, the bill of lading could be read in
accordance with what a reasonable person would have understood them to mean.
The argument for the cargo interests was that the rules about incorporation give effect
to the need for clarity and certainty, that arbitration is different from litigation in court
and that the words of incorporation should be construed as meaning that the charterparty
arbitration clause “if any” would be incorporated.
Males J accepted the owners’ arguments and the Court of Appeal upheld “his admirably
clear judgment”38 for substantially the same reasons. Males J stated that he “would be
reluctant to conclude that” the typed words of incorporation made “a critical difference in
the present case”.39 It was a question of construction rather than incorporation. The “real
question” was what the parties should reasonably be understood to have meant by the
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words “law and arbitration clause” and he did not accept that the words “if any” should be

38. [2014] EWCA Civ 1366; [2015] 2 WLR 43, [2].

39. [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337, [42].
 94 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

added after these words as that would make the incorporating words empty of content.40
It was accepted that a third party such as a consignee of the bill of lading would not
necessarily know in what forum it would have to litigate. However, that would be the
case even if the charterparty had an arbitration clause, as it would not know where the
arbitration was to take place, the constitution of the arbitration tribunal etc. Males J was
reinforced in his conclusion by the recent decision of Gloster J in The YM Saturn.41 The
difference with that case was that the “Law and Litigation” clause in the charterparty did
contain provisions for arbitration in some circumstances, although not in others.
It is not clear what the position would be if the facts of The Channel Ranger were
reversed and the bill of lading referred to the “dispute resolution clause” or “law and
litigation clause” and the charterparty contained an arbitration clause. Would the more
general wording “dispute resolution clause” or “law and litigation clause” in a bill of
lading be construed as specific enough to refer to arbitration? The more recent Congenbill
2007 form hedges its bets and incorporates the “Law and Arbitration/Dispute Resolution
clause”. The fact that it was considered necessary to add the words “Dispute Resolution
clause” indicates that it was thought by commercial men that the words “the Law and
Arbitration clause” would not have worked to incorporate a court jurisdiction clause.
The decision in The Channel Ranger pushes the boundaries further than in previous
cases, as the clause in the charterparty refers to court jurisdiction and not arbitration.42
Dispute resolution clauses in charterparties are more varied and more complex nowadays:
they may be hybrid clauses, as seen in The YM Saturn;43 or provide for court jurisdiction,
as in The Siboti;44 or, as there is greater competition from other arbitration centres such
as Singapore, they may provide a greater number of venues for arbitration, as in Viscous
Global Investment Ltd v Palladium Navigation Corp (The Quest).45 The only certainty that
the recent decisions can give a party to a bill of lading who has not seen the charterparty
terms incorporated, —whether the carrier where a sub voyage charterparty is incorporated,
or the consignee of a straight bill of lading or bill of lading holder to whom the bill has

40. Ibid, [43].

41. [2012] EWHC 2652.
42. Males J further held that there was a serious issue to be tried on the merits and that, as England was the
chosen jurisdiction, that was sufficient to show that England was the appropriate forum. However, he went on
to deal with the issue of appropriate forum on the assumption that the jurisdiction clause did not apply and that
the bill of lading was governed by English law. Males J held that the express choice of English law was capable
of being a factor of significant and even decisive weight, particularly if the Moroccan court’s application of
Moroccan law would or might lead to a different result, as that would be to deprive the claimant of the benefit
of its bargain ([2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337, [61]), which he thought was a real risk in this
case, as Morocco applies the Hamburg Rules as opposed to the Hague-Visby Rules (ibid, [62]). The point that
the claim would be time barred under the Hague-Visby Rules was not taken at the hearing and not considered.
Therefore, even though the convenience of witnesses and the availability of evidence pointed more to Morocco
than to England, the express choice of English law was of greater weight and England was clearly the appropriate
forum for the case. Furthermore, the claimant could show that there was “a solid practical benefit” in proceedings
in England in accordance with The Lucky Lady [2013] 2 Lloyd’s Rep 104, [31], as a declaration might assist
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the owners to resist enforcement in a third country. There had been no failure of full and frank disclosure in the
application for permission to serve out of the jurisdiction by the owners. Therefore, the cargo interests’ challenge
to the jurisdiction of the English court was dismissed.
43. [2012] EWHC 2652.
44. [2003] EWHC 1278; [2003] 2 Lloyd’s Rep 364.
45. [2014] EWHC 2654 (Comm). See supra, fn.17 and post, 101.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 95

been transferred, where the head charterparty is incorporated—is that there is a dispute
resolution clause of some sort. In order to protect time in the correct jurisdiction and
in accordance with the correct procedure, that party will have to obtain a copy of the
charterparty in order to find out what the clause provides for. It will therefore become
ever more important that a buyer provides, in any letter of credit that it opens in favour
of its seller, that, in order to obtain payment, the seller must present any bill of lading
which incorporates the terms of a charterparty accompanied by the relevant charterparty.46
However, presentation of the documents under the letter of credit might not be made for
some time after the delivery of the goods at the discharge port and the discovery of cargo
loss or damage.

5. Third parties
Under English law, as a result of the Carriage of Goods by Sea Act 1992, a third-party
consignee or indorsee of the bill of lading will also be bound by the arbitration clause in a
bill of lading if it chooses to sue on the bill of lading. Thus, in Welex AG v Rosa Maritime
Ltd (The Epsilon Rosa) (No 2),47 the Court of Appeal held that the consignee of the bill
of lading was bound by the arbitration clause incorporated in the bill of lading from the
charterparty evidenced by the fixture recap telex.
A subrogated cargo insurer would also be bound by the London arbitration clause in the
bill of lading. In Schiffahrtsgesellschaft Detlev von Appen GmbH v Voest Alpine Intertrading
GmbH (The Jay Bola),48 Hobhouse LJ said, after examining earlier authorities:49
“These authorities confirm that the rights which the insurance company has acquired are rights
which are subject to the arbitration clause. The insurance company has the right to refer the claim to
arbitration, obtain if it can an award in its favour from the arbitrators, and enforce the obligation of
the [other party] to pay that award. Likewise an insurance company is not entitled to assert its claim

46. See ICC Uniform Customs and Practice for Documentary Credits (UCP 600), Art.22.
47. [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep 509. See also Caresse Navigation Ltd v Office National de
L’Electricité (The Channel Ranger) [2014] EWCA Civ 1366; affg [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337.
48. [1997] 2 Lloyd’s Rep 279, 285–286, per Hobhouse LJ. See also Navigation Maritime Bulgare v Rustal
Trading Ltd (The Ivan Zagubanski) [2002] 1 Lloyd’s Rep 106, [52] and [54]; Kallang Shipping SA v Axa
Assurances Senegal (The Kallang) [2006] EWHC 2825; [2007] 1 Lloyd’s Rep 160; Starlight Shipping Co v Tai
Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1 Lloyd’s Rep 230; Niagara Maritime SA v Tianjin
Iron & Steel Group Co Ltd [2011] EWHC 3035 (Comm). At first instance in The Front Comor [2005] EWHC
454 (Comm); [2005] 2 Lloyd’s Rep 257, [32] and [33], Colman J considered the issue of which law is applicable
to determine whether the subrogated insurers are bound by the arbitration clause. The insurers contended
that their right to pursue the subrogated claim was a matter of Italian law and that law must also determine
whether the arbitration agreement was binding on the insurers. The owners, however, contended that whether the
arbitration agreement was binding on the insurers fell to be determined by the law of the arbitration agreement
itself, ie English law. Colman J concluded that, under Italian law, the insurers were entitled to enforce the insured
charterer’s right of action in delict against the owners. However, the issue whether the scope of the arbitration
agreement covered the claim in tort was to be determined by reference to the proper construction of the arbitration
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agreement in accordance with English law. Furthermore, by reference to English law as the governing law of the
arbitration agreement, the insurers’ duty to refer their claim to arbitration was “an inseparable component of the
subject-matter transferred to the insurers” ([33]). Colman J also found, after considering the expert evidence on
Italian law, that, if Italian law were applicable, the result would be the same. See also London Steam Ship Owners
Mutual Insurance Association Ltd v Spain (The Prestige) [2014] 1 Lloyd’s Rep 137.
49. [1997] 2 Lloyd’s Rep 279, 286.
 96 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

inconsistently with the terms of the contract. One of the terms of the contract is that, in the event of
a dispute, the claim must be referred to arbitration. The insurance company is not entitled to enforce
its right without also recognizing the obligation to arbitrate.”
This decision was followed in Niagara Maritime SA v Tianjin Iron & Steel Group Co
Ltd,50 where Hamblen J. stated:51
“The insurers here say that they are not bound by the arbitration clause as a matter of the law of
the People’s Republic of China. This, however, is irrelevant so far as these courts are concerned
because the cargo claim is one which gives rise to a dispute ‘arising under the contract’ and is
therefore arbitrable. This is straight forward as a matter of analysis of English private international
law and is established by the decision of Colman J in The Front Comor[52] and Aikens J in The
Ivan Zagubanski.53 The only rights under the Bill of Lading contract which are capable of being
transferred to the insurers by way of subrogation are those which must be enforced by arbitration.
As Colman J put it, the duty to arbitrate is an inseparable component of the claim transferred to the
insurers as part of the subrogated rights.”

6. Anti-suit injunction
Furthermore, if the shipper, consignee, indorsee or their subrogated insurer commences or
threatens to commence proceedings elsewhere in breach of the arbitration agreement, the
other party to the agreement may apply to the English court for an anti-suit injunction to
restrain the first party from commencing or pursuing the proceedings elsewhere, provided
the proceedings are in a court of a State which is neither an EU Member State nor Lugano
Contracting State.54

50. [2011] EWHC 3035 (Comm).

51. Ibid, [14].
52. [2005] EWHC 454 (Comm); [2005] 2 Lloyd’s Rep 257, [32–33].
53. [2000] EWHC 222 (Comm); [2002] 1 Lloyd’s Rep 106, [52(1)] and [54].
54. AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013]
UKSC 35; [2013] 1 WLR 1889 (Kazakhstan); Kallang Shipping SA v Axa Assurances Senegal (The Kallang)
[2006] EWHC 2825; [2007] 1 Lloyd’s Rep 160 (Senegal); Sotrade Denizcilik Sanayi Ve Ticaret AS v Amadou LO
(The Duden) [2008] EWHC 2762 (Comm); [2009] 1 Lloyd’s Rep 145 (Senegal); Noble Assurance Co v Gerling-
Konzern General Insurance Co [2007] EWHC 253 (Comm); [2007] 1 CLC 85; C v D [2007] EWHC 1541
(Comm); [2007] 2 All ER (Comm) 557; Markel International Co Ltd v Craft (The Norseman) [2006] EWHC
3150 (Comm); [2007] Lloyd’s Rep IR 403; Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC
1893 (Comm); [2008] 1 Lloyd’s Rep 230 (China); Midgulf International Ltd v Groupe Chimique Tunisien [2010]
EWCA Civ 66; [2010] 2 Lloyd’s Rep 411 (Tunisia); Royal Bank of Scotland Plc v Hicks [2011] EWHC 287
(Ch) (Texas, USA, where the defendant sought punitive damages); Niagara Maritime SA v Tianjin Iron & Steel
Group Co Ltd [2011] EWHC 3035 (Comm) (China); but not in Navig8 Pte Ltd v Al-Riyadh Co for Vegetable Oil
Industry (The Lucky Lady) [2013] EWHC 328 (Comm); [2013] 2 Lloyd’s Rep 104 (Jordan), where the party sued
in Jordan was not a party to the arbitration clause. For the position where the proceedings are in the court of an
EU Member State or a Lugano Contracting State, see post, 108–110. The position would be the same where there
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is a court jurisdiction clause in the bill of lading: see the decision of Gloster J granting an anti-suit injunction in
YM Mars Tankers Ltd v Shield Petroleum Co Nigeria Ltd (The YM Saturn) [2012] EWHC 2652, which involved
a court jurisdiction clause in the charterparty which was incorporated into the bill of lading and where the
vessel was arrested in Nigeria; Caresse Navigation Ltd v Office National de L’Electricité (The Channel Ranger)
[2014] EWCA Civ 1366; affg [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337; and Compania Sud Americana de
Vapores SA v Hin-Pro Logistics International Ltd [2014] EWHC 3632 (Comm).
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 97

Thus, in Kallang Shipping SA v Axa Assurances Senegal, Comptoir Commercial

Mandiaye Ndiaye and Axa France Assurance SA (The Kallang),55 Gloster J upheld an
order by Cooke J granting an anti-suit injunction sought by Kallang Shipping SA Panama
to restrain the defendants from continuing, instigating or commencing proceedings against
the claimants other than in London arbitration. The defendants were: the receiver of the
cargo of rice from Montevideo under 14 bills of lading; their cargo underwriter, Axa
Senegal; and Axa France, who it was alleged was, if not the parent company of Axa Senegal,
at least in the same group of companies and was directing and controlling Axa Senegal’s
conduct of the litigation. The bills of lading incorporated a charterparty containing an
English law and London arbitration clause. Axa Senegal demanded a guarantee for cargo
allegedly short delivered. It contended that it was not bound by the arbitration clause. The
claimants’ P & I Club, American Protection and Indemnity Club, offered to put up a letter
of undertaking as security, subject to English law and London arbitration being agreed.
That offer was rejected and the receiver and Axa Senegal insisted on a bank guarantee with
Senegalese jurisdiction not only for resolution of any disputes under the guarantee but
also in relation to the cargo. The claimant argued that the anti-suit injunction granted by
Cooke J should be upheld as, although it accepted that the arrest of the vessel in Dakar for
the purposes of obtaining security was not a breach of the arbitration clause, nevertheless
the receiver and the cargo underwriter sought to invoke the jurisdiction of the Senegalese
court, not merely to obtain security for their claim, but also to ensure that the substance
of the cargo claim was litigated in Senegal and to circumvent or frustrate the London
arbitration clause. It was “necessary to look at the wider picture with the result that the
Court should ask itself the question whether, in acting in the way that it did, the Defendants
were attempting to render the London arbitration clause meaningless”.56 It was further
submitted by the claimant that the attempt to obtain Senegalese jurisdiction was to put
pressure on the claimant to settle the dispute disadvantageously as if the defendants were
successful in obtaining Senegalese jurisdiction over the cargo claim, the likelihood was
that the claimant, or their P & I Club would pay up, “since the relatively modest amount
of the claim could not justify the expense of disputing it in Senegalese proceedings as
opposed to the relatively modest costs of a London arbitration”.57 Gloster J accepted this
argument and an argument that the defendants’ conduct amounted to a breach of implied
terms of the arbitration clause, and held that Cooke J was entitled to grant an anti-suit
injunction.

55. [2006] EWHC 2825 (Comm); [2007] 1 Lloyd’s Rep 160.

56. Ibid, [17].
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57. Ibid, [18]. The voyage sub-charterparty incorporated into the bill of lading (see Kallang Shipping SA
v Axa Assurances Senegal and Comptoir Commercial Mandiaye Ndiaye (The Kallang) [2008] EWHC 2761
(Comm); [2009] 1 Lloyd’s Rep 124, [64]) contained a Small Claims Procedure Clause providing, “If the amount
claimed is less than $US50,000, then the arbitration shall be conducted by a sole arbitrator and be conducted in
accordance with ‘The London Maritime Arbitrators’ Association Small Claims Procedure FALCA (fast and low
cost arbitration)’.”
 98 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

7. Damages for breach of an arbitration clause

Moreover, where the common law rules apply, a party to an arbitration or exclusive
court jurisdiction agreement which has been breached may be able to recover damages
for breach of contract58 or for the tort of procuring a breach of contract.59 In Kallang
Shipping SA Panama v Axa Assurances Senegal and Comptoir Commercial Mandiaye
Ndiaye (The Kallang),60 Jonathan Hirst QC sitting as a Deputy Judge of the High Court,
granted Kallang Shipping SA damages of US$130,350 against Axa Senegal, the cargo
underwriters, as their conduct, knowledge and intent was such as to make it liable for the
accessory tort of procuring the receiver’s breach of the contract to arbitrate all disputes
in London. An alternative claim for causing loss by unlawful means did not add anything
and was not pursued.61 A further claim that the cargo underwriters unlawfully conspired
with the receivers to injure the owners—ie a conspiracy involving no acts or means which
were unlawful with the object of causing deliberate damage to the owners without any just
cause—also added nothing and the judge was not satisfied that the receiver was involved in
any conspiracy, as the cargo underwriters took over the running of the claim.62 The judge
found that the ship would have been arrested but could and should have been released
from arrest ten days earlier on the provision of adequate security had the arrest not been
used as a means of defeating the arbitration clause. The cargo underwriters were therefore
liable for ten days of delay during which the ship was under arrest, after she should have
been released and the owners lost the use of their ship.63 The shipowner brought evidence
in relation to numerous ships, which was accepted by the judge: that Axa Senegal did not
accept that charterparty arbitration clauses can be incorporated in bill of lading contracts
and bind receivers and their cargo underwriters; it was Axa Senegal’s standard practice
to try and secure a Senegalese guarantee triggered by Senegalese jurisdiction, whatever
the bill of lading provided; it is very difficult to provide a Senegalese bank guarantee and
may be practically impossible to do so on terms acceptable to Axa Senegal; and that Axa
Senegal acted without the involvement of the receiver.
If the court finds that there is no arbitration agreement, it can grant an anti-suit injunction
only where the claimant can show that the conduct of the other party is unconscionable, as
the proceedings elsewhere are vexatious and oppressive.64 In Navig8 Pte Ltd v Al-Riyadh

58. Compare the position in relation to court jurisdiction clauses in Donohue v Armco [2001] UKHL 64;
[2002] 1 Lloyd’s Rep 425; Horn Linie GmbH & Co v Panamericana Formas E Impresos SA, Ace Seguros SA
(The Hornbay) [2006] EWHC 373 (Comm); [2006] 2 Lloyd’s Rep 44, [26] (court jurisdiction); Compania Sud
Americana de Vapores SA v Hin-Pro Logistics International Ltd [2014] EWHC 3632 (Comm) (court jurisdiction).
Cf West Tankers Inc v Allianz SpA [2012] EWHC 854 (Comm); [2012] 2 Lloyd’s Rep 103 (arbitration clause)
and Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG (The Alexandros T) [2014] EWCA
Civ 1010; [2014] 2 Lloyd’s Rep 544; affg [2014] EWHC 3068 (Comm); discussed post, 111 and 112 (exclusive
English court jurisdiction agreement) where the other proceedings are in an EU Member State.
59. See Morison J in Horn Linie GmbH & Co v Panamericana Formas E Impresos SA, Ace Seguros SA (The
Hornbay) [2006] EWHC 373 (Comm); [2006] 2 Lloyd’s Rep 44, [26] (court jurisdiction). See also The Kallang
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[2008] EWHC 2761 (Comm); [2009] 1 Lloyd’s Rep 124 (arbitration).

60. [2008] EWHC 2761 (Comm); [2009] 1 Lloyd’s Rep 124.
61. Ibid, [94].
62. Ibid, [96].
63. Ibid, [99].
64. Star Reefers Pool Inc v JFC Group Co Ltd [2012] EWCA Civ 14; [2012] 2 All ER (Comm) 225.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 99

Co for Vegetable Oil Industry (The Lucky Lady),65 palm oil and palm olein was sold by a
Malaysian company, to Al Riyadh, a Jordanian company. The seller was the shipper under
the bill of lading, which was issued by the owners of the ship, Ladies Shipping Ltd, a
Maltese company. The owners time chartered the ship to Navig8, a Singaporean company,
who in turn subchartered her to the sellers. The subcharter expressly provided for English
law and London arbitration. The bills of lading provided that:
“This shipment is carried under and pursuant to the terms of the [subcharter] between [Navig8] as
Owners and [the sellers] as charterers, and all conditions liberties and exceptions whatsoever of the
said Charter apply to and govern the rights of the party concerned in this shipment …”

They further provided:

“It is further understood and agreed that, other than the said shipowner or demise charterer, no
person, firm or corporation or other legal entity whatsoever, is or shall be deemed to be liable with
respect to the shipment as carrier, bailee or otherwise in contract or in tort. If, however, it shall
be adjudged that any other than said shipowner or demise charterer is carrier or bailee of the said
shipment or under any responsibility with respect therefor, all limitations of or exonerations from
liability and/or defences provided by law or by the terms of the contract of carriage shall be available
to such other.”

Al-Riyadh, as receivers of the cargo, brought proceedings in Jordan against the sellers
of the cargo and Navig8 as carriers under the bills of lading. They arrested the vessel in
Jordan and obtained security for claims against the shipowners but did not commence
proceedings against them. Al Riyadh argued that the Jordanian court had jurisdiction by
virtue of Art.21(1)(c) of the Hamburg Rules, which are enacted in Jordanian law and
permit the cargo claimant to choose the courts of the port of discharge in Jordan.
Navig8 commenced proceedings in the English court. They were unable to rely on the
London arbitration clause in the subcharter because the general words of incorporation in
the bills of lading did not incorporate it. Navig8 sought an anti-suit injunction, permission to
serve the claim form out of the jurisdiction, damages and a declaration that they were not a
party to the bills of lading. Navig8 argued that the pursuit of the Jordanian proceedings was
vexatious and oppressive. There was “no dispute that Navig8 have (at least) a sufficiently
strong argument for present purposes that the contracts evidenced by the bills of lading
are, under English private international law, governed by English law”.66 Andrew Smith J
held that Navig8 did not have a good arguable case that the claim for an injunction was “in
respect of” those contracts. Furthermore, Navig8 did not have a reasonably arguable case
that the conduct of Al Riyadh in bringing the Jordanian proceedings was unconscionable.
Those proceedings were relatively advanced. Al Riyadh’s case in Jordan was not hopeless
and the Jordanian courts might accept that Navig8 were party to the bills of lading. Al
Riyadh had not submitted to the jurisdiction of the English court. Therefore Andrew Smith
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65. [2013] EWHC 328 (Comm); [2013] 2 Lloyd’s Rep 104. Field J subsequently gave a declaration that
Navig8 were not the carrier under the bill of lading: [2013] EWHC 1565 (Comm). See also Starlight Shipping
Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1 Lloyd’s Rep 230 (China), where the
managers of the ship could not obtain an anti-suit injunction to restrain a party from proceeding in China as they
were not a party to the bill of lading and therefore not a party to the arbitration clause.
66. [2013] EWHC 328 (Comm); [2013] 2 Lloyd’s Rep 104, [14].
 100 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

J did not grant permission to serve out of the jurisdiction a claim for an injunction or for
damages. He did, however, give permission to serve the claim for negative declaratory
relief out of the jurisdiction. Navig8 relied on the fact that English law applied because
of the parties’ choice of a contractual governing law,67 and also the apparent differences
between English and Jordanian law.68 He held that the court will exercise its discretion to
allow service out of the jurisdiction of a claim for a negative declaration only if satisfied
“that a solid practical benefit will ensue”. The fact that declaratory relief might help
Navig8 to resist enforcement of a judgment of the Jordanian court in a third country (such
as Singapore) was a “real benefit potentially resulting from a declaration”.69

8. Who decides?
Where arbitration proceedings are commenced by one party and the other party does not
consider it is bound by an arbitration agreement in the contract, the respondent should
object to the jurisdiction of the arbitration tribunal before it contests the merits of the
matter.70 The arbitration tribunal may rule on its own substantive jurisdiction.71 In other
words, the arbitrators may decide, for example, whether there is a valid arbitration clause
and, if there is, whether it is wide enough in scope to cover the dispute that has arisen. The
party wishing to enforce the London arbitration clause may also seek a declaration from
the English court that there is a valid arbitration clause.72 If the court of another country
has already given judgment that there is not a valid arbitration agreement, the English
court or London arbitration tribunal may be bound to recognise that decision due to the
common law on res judicata.73
Where a party to an arbitration clause, which provides for arbitration in England or
abroad,74 commences proceedings in the English court, the court is obliged to stay the
court proceedings if the other party applies for a stay, unless satisfied that the arbitration
agreement is null and void, inoperative or incapable of being performed.75

9. Security
Issues of jurisdiction, governing law, recognition and enforcement may be resolved at the
stage of provision of security for the claim. Thus, where the carrier provides security by

67. Ibid, [26–28], [35] and [38].

68. Ibid, [28]
69. Ibid, [36].
70. Arbitration Act 1996, s.31.
71. Ibid, s.30.
72. Ibid, s.32. For the role of the court to determine whether an arbitration clause binds a party, see Dallah
Real Estate & Tourism Holding Co v Pakistan [2010] UKSC 46; [2011] 1 AC 763; TTMI Sarl v Statoil ASA
[2011] EWHC 1150 (Comm); [2011] 2 Lloyd’s Rep 220; and Excalibur Ventures LLC v Texas Keystone Inc
[2011] EWHC 1624 (Comm); [2011] 2 Lloyd’s Rep 289.
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73. See post, 109–111.

74. Arbitration Act 1996, ss 9–11, which apply even if the seat of the arbitration is outside England and Wales
or Northern Ireland or no seat has been designated or determined (ibid, s.2(2)(a)).
75. Arbitration Act 1996, s.9(4). Halki Shipping Corp v Sopex Oils Ltd [1998] 1 Lloyd’s Rep 465; Exfin
Shipping (India) Ltd Mumbai v Tolani Shipping Co Ltd Mumbai [2006] EWHC 1090 (Comm.); [2006] 2 Lloyd’s
Rep 389; and Joint Stock Company Aeroflot Russian Airlines v Berezovsky [2012] EWHC 1610.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 101

way of a P & I Club letter of undertaking or bank guarantee in consideration of the cargo
claimant’s agreeing not to arrest its ship or releasing its vessel from arrest, the terms of the
security should spell out the trigger for payment by the P & I Club or bank. This should
dovetail with the bill of lading. So, for example, if the bill of lading contains a London
arbitration clause, the trigger for payment should be the production of a final London
arbitration award and not, for example, the courts of Senegal.76 If agreement cannot be
reached, it may be necessary to leave the issue open and for the letter of undertaking to
provide for production of an award or judgment of a competent tribunal.
Where the position was uncertain as to which arbitration clause was incorporated into
four bills of lading, Males J held in Viscous Global Investment Ltd v Palladium Navigation
Corp (The Quest)77 that an arbitration clause in the P & I Club letter of undertaking
replaced the arbitration clauses incorporated in the four bills of lading. The bills of lading
were on the standard Congenbill 1994 form, which incorporates the “Law and Arbitration
Clause of the Charterparty dated as overleaf”. No charterparty was identified and there
were three possible charterparties: a time charterparty, a trip time charterparty and a
voyage charterparty. All three provided for arbitration but the head charter provided for
two arbitrators and an umpire and provided for “claims up to US$100,000 to be dealt with
in accordance with LMAA Small Claims Procedure”. The voyage charter provided for
“Arbitration if any to be settled in Singapore by English law”. The carriers’ P & I Club
gave a letter of undertaking which stated:
“1. We confirm that the Ship Owners agree that the above mentioned claims shall be subject to
London Arbitration (under the auspices of the L.M.A.A.) and English Law to apply ( Hague-
Visby Rules and COGSA 1992), and for each party to nominate its own arbitrator and the two so
appointed may appoint a third.
2. We confirm that upon our receipt from you of a request to proceed with the above claims in
London Arbitration in England and Wales, we shall, within 14 days, appoint an arbitrator on
behalf of the Ship Owners.
3. We confirm that we have received irrevocable authority from the Ship Owners to give this letter
of undertaking in these terms . …”

Males J dismissed the carriers’ argument that the Small Claims Procedure of the LMAA
terms in the head charter still applied for those of the claims under US$100,000, with the
result that the cargo claimants had followed the wrong procedure for those claims and
were time barred. He held that the arbitration clause in the letter of undertaking replaced
the arbitration agreements in whichever charterparty was incorporated in its entirety and
did not just vary them in limited respects. Although the letter of undertaking was intended
to provide security, “it was at least one purpose of this LOU to make provision for the way
in which the parties’ dispute was to be arbitrated”.78
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76. See The Kallang [2006] EWHC 2825 (Comm); [2007] 1 Lloyd’s Rep 160 and The Duden [2008] EWHC
2762 (Comm); [2009] 1 Lloyd’s Rep 145, discussed ante, 97. Even if the cargo claimants have obtained security
from the vessel’s P & I Club, they may still decide to pursue another party, as was the case in The Lucky Lady
[2013] EWHC 328 (Comm); [2013] 2 Lloyd’s Rep 104, discussed ante, 99.
77. [2014] EWHC 2654 (Comm). See also The Pia Vesta [1984] 1 Lloyd’s Rep 169.
78. [2014] EWHC 2654 (Comm), [29].
 102 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

A clear provision in the security can therefore substitute the arbitration clause in the bill
of lading.79 The P & I Club must have authority to vary the terms of the bill of lading in the
letter of undertaking on behalf of its member. The letter of undertaking should also have
its own jurisdiction and governing law provisions, as the letter of undertaking is a separate
contract from the bill of lading.

C. ARBITRATION IN EUROPE

1. Neutral choice
Within the European Union, the EU Member States may apply different rules as to the
validity of an arbitration clause, even though the EU Member States are parties to the New
York Convention. A neutral choice of the place of arbitration in carriage of goods by sea
is permitted under English law but such a choice will not be binding in all EU Member
States, at least as to the venue of the arbitration. For example, where an EU Member State
has ratified the Hamburg Rules, or even where it has not, but has adopted similar rules in
their national legislation, such as the Nordic countries,80 those Rules contain provisions on
arbitration,81 which provide that the cargo claimant can choose from a number of different
fora linked with the carriage of goods and the venue chosen, so that party choice is reduced
to a mere option. Of the EU Member States, Austria, the Czech Republic, Hungary and
Romania have ratified the Hamburg Rules. Austria, the Czech Republic and Hungary are
landlocked and are not therefore notable maritime states. Of the other EU Member States,
some have incorporated the jurisdictional provisions of the Hamburg Rules into their
national law, such as Denmark, Finland, and Sweden.82

79. Contrast ISS Machinery Services Ltd v Aeolian Shipping SA (The Aeolian) [2001] EWCA Civ 1162;
[2001] 2 Lloyd’s Rep 641, where it was held that the P & I Club letter of undertaking did not vary the governing
law of the underlying contract.
80. See eg T Falkanger, HJ Bull and L Brautaset, Scandinavian Maritime Law, The Norwegian Perspective,
3rd edn (Universitetsforlaget, Oslo, 2011), [1.54] and [14.31].
81. Hamburg Rules, Arts 21 and 22. Many of the other transport Conventions in relation to the carriage of
goods by air, road and rail, but not inland waterways, also restrict the effect of exclusive court or arbitration
agreements. See R Herber, “Jurisdiction and Arbitration—Should the New Convention Contain Rules on these
Subjects?” [2002] LMCLQ 405 for a comparison of the provisions of those Conventions. See eg the decision
of the ECJ in TNT Express Nederland BV v Axa Versicherung AG (Case C-533/08) and Nipponkoa Insurance
Co (Europe) Ltd v Inter-Zuid Transport BV (Case C-452/12) [2014] OJ C52/19, considering Art.71 of the EC
Jurisdiction Regulation and Art.31 of the Convention on the Contract for the International Carriage of Goods by
Road 1956 (CMR). The CMR has been acceded to by more than 50 States, including all the Member States of the
European Union.
82. Although the Hamburg Rules did not achieve the international support hoped for by its promoters, some
States which did not ratify them, such as the Nordic countries, have introduced similar national legislation
on jurisdiction. See eg P Wetterstein, “Jurisdiction and Conflict of Laws under the New Rules on Carriage of
Goods by Sea”, in H Honka (ed.), New Carriage of Goods by Sea: the Nordic Approach Including Comparisons
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with Some Other Jurisdictions (Institute of Maritime and Commercial Law, Abo Akademi University Abo,
1997); T Falkanger, HJ Bull and L Brautaset Scandinavian Maritime Law The Norwegian Perspective, 3rd
edn (Universitetsforlaget, Oslo, 2011), [1.51], [1.52], [1.56] and [14.31] on the Maritime Code of 1994: “the
liability system in the Hague-Visby Rules is modified using those provisions of the Hamburg Rules which can
be incorporated into the Scandinavian countries’ maritime codes without conflicting with their obligations as
Hague-Visby states” ([14.31]); H Honka, “Jurisdiction and EC Law: Loss of or Damage to Goods”, ch.7 of M
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 103

This approach is similar to that in relation to court jurisdiction clauses. For example,
in Trasporti Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA,83 a case
concerning a bill of lading, the ECJ, applying the EC Jurisdiction Convention, held that
the original parties to a bill of lading contract may choose a neutral forum. There is no
requirement of any link between the relationship in dispute and the court chosen. However,
where an EU Member State has ratified the Hamburg Rules, the provisions of those rules
could override the parties’ choice as a result of Art.71 of the EC Jurisdiction Regulation,84
but probably not under the Hague-Visby Rules.85

2. Third parties
In some EU Member States the rules as to whether the arbitration clause is incorporated
at all are stricter than under English law.86 Even if the clause is incorporated, the rules
as to whether it binds a third party, such as the transferee of the transport document, or
subrogated insurer, may differ. Difficulties may arise as a result of the different approaches
in the EU Member States.
This position is again similar to the law in relation to jurisdiction clauses. The EC
Jurisdiction Regulation does not provide whether third parties should be bound by a
jurisdiction clause which binds the carrier and the shipper. The matter is currently governed
by the applicable national law of each EU Member State. Transferees of the contract of
carriage of goods by sea will be bound by the jurisdiction clause “if the latter succeeded
to the rights and obligations of the shipper under the applicable national law when he
acquired the bill of lading”.87 As we have already seen, the position under English national
law is that the third party can succeed to the rights and obligations of the shipper. This is
not, however, the position in all the EU Member States88 and as soon as national law is
applicable there is no harmony.

Davies (ed.), Jurisdiction and Forum Selection in International Maritime Law: Essays in Honor of Robert Force
(Kluwer Law International, The Hague, 2005).
83. (Case C-159/97) [1999] IL Pr 492, [50].
84. See supra, fn.81.
85. See Y Baatz, “Forum selection in Contracts for the Carriage of Goods by Sea–the European Dimension”
[2011] LMCLQ 208, 218–220.
86. See eg National Navigation Co v Endesa Generacion SA (The Wadi Sudr) [2009] EWCA Civ 1397;
[2010] 1 Lloyd’s Rep 193, discussed ante, 88.
87. Coreck Maritime GmbH v Handelsveem BV (Case-387/98) [2000] ECR 1-09337; Trasporti Castelletti
Spedizioni Internazionali SpA v Hugo Trumpy SpA (Case C-159/97) [1999] IL Pr 492; OT Africa Line Ltd v
Hijazy [2001] 1 Lloyd’s Rep 76, [65–68]. Under English law, the “lawful holder” of a transferable bill of lading
does have transferred to it the rights and liabilities under the bill of lading pursuant to the Carriage of Goods by
Sea Act 1992, ss 2(1) and 3. Contrast Refcomp SpA v Axa Corporate Solutions Assurance SA (Case C-543/10)
[2013] 1 Lloyd’s Rep 449, [34–36], where the ECJ referred to bills of lading but distinguished the position from a
jurisdiction clause in a contract between the manufacturer of goods and a buyer which does not bind a sub-buyer
as there is no contractual link between them. In Axa Corporate Solutions Assurance SA v Refcomp SpA [2014] IL
Pr 12, the French Cour de Cassation held that a manufacturer of components for air-conditioning units could not
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rely on a jurisdiction clause agreed with an intermediate buyer of the components in its dispute with an insurer
subrogated to the rights of the sub-buyer. The jurisdiction clause had not been agreed between the manufacturer
and the supplier of the units to the sub-buyer.
88. See the Heidelberg Report, [265–270] on the differences that exist in some of the EU Member States.
See also F Berlingieri, “A Review of Some Recent Analyses of the Rotterdam Rules” 2009 Il Diritto Marittimo
955, 1028–1029.
 104 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

The Heidelberg Review of the EC Jurisdiction Regulation recommended that a third-

party bill of lading holder should be bound by a clear jurisdiction clause.89 Although
the Parliament Resolution90 which followed considered that there should be an express
provision to deal with third-party bill of lading holders, it would be binding only if
stringent conditions were satisfied and the choice of venue were limited to one of five
places linked with the dispute. The European Parliament also considered that it should
further be provided that, in all other cases, the third party may bring an action before the
court otherwise competent under the Regulation if it appears that holding that party to
the chosen forum would be blatantly unfair. This proposal was a major departure from the
current position, as it would not permit a neutral choice to bind a third party.
It appears that the Resolution proposal sought to align the provisions of the EC
Jurisdiction Regulation with the provisions on jurisdiction in volume contracts91 for third
parties in the Rotterdam Rules, which are criticised below,92 not least because they do not
permit a neutral choice to bind a third party.93 In the subsequent European Commission
Proposals and the Recast Regulation these proposals were abandoned.
This author considers that the application of national law to third parties under bills of
lading is also the approach taken in the European Regulations which determine the law
applicable to contractual obligations, Rome I, and non-contractual obligations, Rome II.
They both provide that certain matters are excluded from their scope.94 Where the issue
falls outside the scope of Rome I or Rome II, the English court will apply its national law.
Rome I, Art.1(2)(d) and Rome II, Art.1(2)(c) exclude from the scope of those
Regulations “obligations arising under bills of exchange, cheques and promissory notes
and other negotiable instruments to the extent that the obligations under such other
negotiable instruments arise out of their negotiable character”.95 It was not clear under the
Rome Convention whether this exclusion included bills of lading96 but Rome I, Recital 9
clarifies that the exclusion covers obligations under “bills of lading to the extent that the
obligations under the bill of lading arise out of its negotiable character”. There is no such

89. Heidelberg Report, [269–270].

90. 2009/2140 (INI) dated 7 September 2010. See also Recital O and Art.13.
91. Defined in the Rotterdam Rules, Art.1(2).
92. See post, 119–122.
93. Y Baatz, “Jurisdiction clauses in Bills of Lading—Rotterdam Rules by the Back Door in Europe?” [2010]
9 STL 1.
94. Another relevant exclusion is the law applicable to “arbitration agreements and agreements on the choice
of court”: Rome I, Art.1(2)(e). See Sulamérica Cia Nacional De Seguros SA v Enesa Engenharia SA [2012]
EWCA Civ 638; [2012] 1 Lloyd’s Rep 671; Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC
3702; [2013] 2 All ER 1; Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Co Ltd [2013] EWHC
4071 (Comm); Beijing Jianlong Heavy Industry Group v Golden Ocean Group Ltd [2013] EWHC 1063 (Comm);
[2013] 2 Lloyd’s Rep 61; Mauritius Commercial Bank Ltd v Hestia Holdings Ltd [2013] EWHC 1328 (Comm);
[2013] 2 Lloyd’s Rep 121. Consider also “the question whether an agent is able to bind a principal … in relation
to a third party”: Rome I, Art.1(2)(g). The law applicable to determine whether an agent had actual or ostensible
authority to bind Daehan Shipbuilding Co to two guarantees of two charterparties was considered in Rimpacific
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Navigation Inc v Daehan Shipbuilding Co [2009] EWHC 2941 (Comm); [2010] 2 Lloyd’s Rep 236 (Steel J);
[2011] EWHC 2618 (Comm) (Teare J).
95. Rome Convention, Art.1(2)(c).
96. R Asariotis, Y Baatz and N Gaskell, Bills of Lading: Law and Contracts (LLP, London, 2000), [19.7]
and [19.8], where it is argued that, as a bill of lading is not a negotiable instrument, bills of lading are covered
by the Rome Convention.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 105

Recital in Rome II. However, Rome II, Recital 7 provides that the substantive scope and the
provisions of Rome II should be consistent with the EC Jurisdiction Regulation, the Rome
Convention and Rome I;97 and Rome I, Recital 7 is in similar terms. It is clear that Rome
I applies to the obligations between the original parties to the contract, the carrier and the
shipper, as the obligations under the bill of lading between the original parties to the bill of
lading do not “arise out of its negotiable character”. For example, where the shipper, who
is not the charterer, sues the carrier on a bill of lading contract dated 1 October 2010, Rome
I applies. What is not clear is whether the exclusion should be given a wide interpretation98
and the bill of lading is not covered by Rome I in all cases where the bill comes into the
hands of a third party or where there should be a narrower interpretation so that only
proprietary obligations are excluded.99 In the case of the wider interpretation, whether the
bill of lading is negotiable as it is an order bill100 or a bearer bill, Rome I will not apply as
the obligations under it “arise out of their negotiable character”. Where, however, the bill
of lading is a straight bill of lading, made out to a named consignee, the bill of lading is not
negotiable, although it may well be transferred by the shipper (who may be the seller) to
the consignee (who may be the buyer)101 in exchange for payment where the sale contract
or the letter of credit so requires. Moreover, the terms of the straight bill of lading may
well require it to be presented to the carrier in order to obtain delivery of the cargo.102 Do
the obligations of the carrier to the named consignee under the bill of lading arise out of
its negotiable character? It might seem odd if Rome I does not apply to some third parties
but does to others. If Rome I does not apply, the courts of the EU Member States would
apply their differing national laws.
This author considers that it is probable that Rome I reflects the position in the EC
Jurisdiction Regulation. Thus, that Regulation applies to determine the law applicable to
the bill of lading as between the original two parties to the bill of lading. However, if the
bill of lading is transferred to a third party, the law that applies to determine whether the
third party is bound by the choice of law is national law and not Rome I. Under English
law the third party would be bound.

97. “the instruments dealing with the law applicable to contractual obligations”.
98. See the view of H Boonk, “Determining jurisdiction and choice of law in contractual disputes coupled
with property related claims” [2011] LMCLQ 227, 231–232.
99. See the view of Professor Erik Rosaeg that bills of lading are excluded only where the issue is a proprietary
one as opposed to a contractual one: “Issues in determining jurisdiction and choice of law in contractual disputes
coupled with property related claims—special study: Liens and claims for wrongful delivery”, paper at the
Colloquium on Maritime Conflict of Laws held at Southampton, 2010. In the Giuliano Lagarde Report [1980]
OJ C 282/1, 11, it is stated that “certain Member States of the Community regard these obligations [arising from
bills of exchange, cheques, promissory notes] as non-contractual”.
100. In Parsons Corp v C Scheepvaartonderneming Happy Ranger (The Happy Ranger) [2002] 2 Lloyd’s
Rep 357 the Court of Appeal held that the bill of lading issued was a document of title within the Hague-Visby
Rules, Art.1(b) as, although only a named consignee appeared in the consignee box, the printed words on the
front of the bill referred to delivery of the goods to the “consignee or to his or their assigns”. Read together, this
made the bill of lading transferable and not a straight bill of lading.
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101. In Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) [2002] EWHC 762 (Comm); [2002] 2 Lloyd’s Rep
81; affd [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep 509, Steel J and the Court of Appeal applied the Rome
Convention to the contract between the carrier and the consignee.
102. In JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11; [2005] 2
AC 423; [2005] 1 Lloyd’s Rep 347, the House of Lords held that a straight bill of lading is a “similar document
of title” and therefore the Hague-Visby Rules apply to it. The bill of lading in that case provided: “IN WITNESS
 106 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

Support for this approach is found in the decision of Males J in Caresse Navigation Ltd
v Office National de L’Electricité (The Channel Ranger).103 One of the issues in the case
was whether there was an effective choice of English law as the law applicable to the bill
of lading as this would satisfy one of the jurisdictional gateways to found jurisdiction in
England.104
It was argued on behalf of the carriers that general words of incorporation are sufficient
to incorporate a charterparty governing law provision into a bill of lading. A degree of
verbal manipulation of the incorporated clause is allowed. The bill contained two express
and specific references to the proper law clause in the voyage charter, which were more
than sufficient to incorporate that choice of law into the bill of lading. That amounted to
an express choice of English law within Rome I, Art 3.
The argument for the cargo interests was that there was no express choice of English
law, as a consignee is entitled to know with precision from the face of the bill of lading
what law, if any, has been chosen; the terms of the bill of lading were not known to the
receivers until after the dispute arose; and the parties to the bill of lading did not contract
with knowledge of the choice of law clause in the charterparty. Therefore, under Rome
I, Art.5(1), the governing law was the law of Morocco, as the agreed place for delivery.
Males J stressed that the question was a question of construction of the contract between
the original parties to the bill of lading contract: “In determining whether the parties to
the contract have chosen a governing law for the purpose of Article 3, what matters is the
choice if any made by the original parties to the contract.”105 He accepted the submission
that general words of incorporation are sufficient to incorporate a proper law clause.106
This has also been held to be the case under Singapore law in The Dolphina,107 a decision
of the Singapore High Court. Belinda Ang Saw Ean J held that, where the bill of lading
contained no choice of law but had general words of incorporation of the charterparty
terms, they would be sufficient to incorporate an express choice of law clause in the
charterparty.
The express reference to the governing law of the charterparty meant that the parties to
the bill of lading intended their contract to be governed by the same law as was applicable
to the charterparty, at any rate provided that the law so chosen was usual and proper for
the trade. It was in this case in the Amwelsh charter, which is commonly used for the
carriage of coal. Males J then went on to consider the transfer of the negotiable bill lading
to the Moroccan receiver and stated that there was “no reason why this common form bill

whereof the number of Original Bills of Lading stated above [viz three] all of this tenor and date, has been signed,
one of which being accomplished, the others to stand void. One of the Bills of Lading must be surrendered duly
endorsed in exchange for the goods or delivery order.” However, Rix LJ in the Court of Appeal ([2003] EWCA
Civ 556; [2004] QB 702; [2003] 2 Lloyd’s Rep 113, [145]) and Lords Bingham of Cornhill and Steyn in the
House of Lords [2005] UKHL 11, [20] and [45]) stated obiter that a straight bill of lading would be a document
of title even if it contained no express provision requiring surrender. See also Peer Voss v APL Co Pte Ltd [2002]
2 Lloyd’s Rep 707 (Sing CA).
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103. [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337. Although there was an appeal to the Court of Appeal,
this was only on the issue of the anti-suit injunction: [2014] EWCA Civ 1366; [2015] 2 WLR 43.
104. For discussion of the facts of the case and the issues on jurisdiction see ante, 92 and 93.
105. [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337, [33].
106. Applying The Njegos [1936] P 90 and The San Nicholas [1976] 1 Lloyd’s Rep 8.
107. [2011] SGHC 273; [2012] 1 Lloyd’s Rep 304.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 107

of lading should not be transferred to a consignee who (upon becoming a holder of the
bill) would succeed to the rights contained therein, which rights were subject to English
law”.108 He concluded that the owners therefore had “an extremely strong case” that there
was an express choice of English law.109
There is no discussion in the case as to what is the applicable law to determine whether
the incorporation of the charterparty clause is valid.110 It is simply assumed that it is
English law.
There is also no discussion as to whether Rome I applies at all to a negotiable bill of lading
or whether this falls outside the scope of that Regulation in light of Rome I, Art.1(2)(d),
although, from his reasoning above, the judge appears to have assumed this to be the
case.
In Rome II, as in Rome I, obligations arising under bills of lading to the extent that
the obligations arise out of their negotiable character are excluded from the scope of
Rome II.111 Party autonomy is recognised in Rome II, although conditions are imposed
on the choice to protect weaker parties.112 Thus, the parties may choose to submit
non-contractual obligations to the law of their choice in two situations: first, where an
agreement is concluded after the event giving rise to the damage;113 or, secondly, where all
the parties are pursuing a commercial activity, by an agreement freely negotiated before
the event giving rise to the damage occurred.114 In either case the choice must be express
or demonstrated with reasonable certainty. It is important to note that the choice shall not
prejudice the rights of third parties. So once again there is some doubt as to whether such
a choice of law in a bill of lading would bind the third-party bill of lading holder.
Furthermore, certain issues (the effectiveness of an assignment or subrogation of a
claim against third parties and the priority of the assigned or subrogated claim over a right
of another person) are to be reviewed within two,115 and other issues are to be reviewed
within five,116 years of the adoption of Rome I.
Rome II, Art.19 deals with subrogation. Where the insured has a non-contractual claim
against the debtor, and the insurer has a duty to satisfy the insured, or has in fact satisfied
the insured, the law which governs the insurer’s duty to satisfy the insured, ie the law
applicable to the insurance contract, shall determine whether, and the extent to which, the
insured is entitled to exercise against the debtor the rights which the insured had against
the debtor under the law governing their relationship.

108. [2013] EWHC 3081; [2014] 1 Lloyd’s Rep 337, [36].

109. Ibid, [37].
110. See eg Ozdel [2011] JBL 357, which also considers the differences between English and US law. See
M Davies, “Incorporation of charterparty terms into bills of lading held by third parties: choice of law issues”,
delivered at the Tripartite Colloquium between the Institute of Maritime Law, University of Southampton, the
Scandinavian Institute of Maritime Law, University of Oslo and the Institute of Maritime Law, University of
Tulane, held in Romsey in October 2013.
111. The combined effect of Rome II, Recital 7 and Art.1(2)(c) and Rome I, Recital 9.
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112. Rome II, Recital 31 and Art.14.

113. Ibid, Art.14(1)(a).
114. Ibid, Art.14(1)(b). Cf the Rotterdam Rules, considered post, 117–123.
115. Rome II, Art.27(2).
116. The law applicable to insurance contracts and Art.6 in particular as regards consumer protection:
Rome II, Art.27(1).
 108 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

Where the English court has to apply its national law, the third-party bill of lading
holder who wishes to sue on a bill of lading will be bound by the governing law clause in
the bill of lading as would any subrogated cargo insurer who stands in the shoes of the bill
of lading holder.

3. Who decides?
There is no agreement between the EU Member States as to who decides whether an
arbitration clause is valid—the arbitration tribunal allegedly chosen, the court of the seat
of the arbitration or another court. Furthermore, there is no mechanism to ensure that there
are not parallel proceedings in arbitration and court in EU Member States.

4. No anti-suit injunction to restrain a party from commencing or pursuing court

proceedings in an EU Member State court in breach of an arbitration agreement
In Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) v West Tankers Inc (The Front
Comor)117 the ECJ held that, if a party commences court proceedings in an EU Member
State, the English court cannot grant an anti-suit injunction to restrain the respondent in
the English arbitration from pursuing those court proceedings. There must be mutual trust
between the EU Member States and the court of the EU Member State must be trusted to
come to its own correct determination as to whether there is a valid arbitration clause. If
there is such a clause, all the EU Member States are parties to the New York Convention and
therefore each EU Member State would be obliged to stay its court proceedings in favour
of arbitration. In The Front Comor, the ECJ rejected the argument that, since arbitration
proceedings fall outside the scope of the EC Jurisdiction Regulation, as they are excluded
by Art.1(2)(d),118 the judgment of another EU Member State in relation to the validity of
the arbitration agreement was also not within the EC Jurisdiction Regulation and therefore
for the English court to grant an anti-suit injunction was not inconsistent with the EC
Jurisdiction Regulation. The court held that, as the Italian court in that case was seised of
a substantive dispute for damages in a tort claim as a result of the Front Comor’s hitting
the Italian claimants’ jetty in Syracuse, and the Italian court had jurisdiction to decide
the substantive claim under the EC Jurisdiction Regulation, Art.5(3), unless there was a
valid arbitration agreement, the issue as to whether there was a valid arbitration clause
was a preliminary issue to the substantive claim which fell within the EC Jurisdiction
Regulation. Therefore, it was inconsistent with the Regulation for the English court to

117. Allianz SpA (formerly Riunione Adriatica Di Sicurta SpA) v West Tankers Inc (The Front Comor)
(Case C-185/07) [2009] 1 AC 1138; [2009] 1 Lloyd’s Rep 413; applied in Youell v La Reunion Aérienne [2009]
EWCA Civ 175; [2009] 1 Lloyd’s Rep 586. See Y Baatz and A Sandiforth, “A Setback for Arbitration” [2009]
9(4) STL.
118. Marc Rich & Co AG v Societa Italiana PA (The Atlantic Emperor) (Case C-190/89) [1992] 1 Lloyd’s
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Rep 342; The Heidberg [1994] 2 Lloyd’s Rep 287, 298–303; Toepfer International GmbH v Société Cargill
France [1998] 1 Lloyd’s Rep 379; Van Uden Maritime BV v Kommanditgesellschaft in Firma Deco-Line (Case
C-391/95) [1999] All ER (EC) 258; Navigation Maritime Bulgare v Rustal Trading Ltd (The Ivan Zagubanski)
[2000] EWHC 222 (Comm); [2002] 1 Lloyd’s Rep 106; Through Transport Mutual Insurance Association
(Eurasia) Ltd v New India Assurance Co Ltd (The Hari Bhum) [2004] EWCA (Civ) 1598; [2005] 1 Lloyd’s Rep
67; and A v B [2006] EWHC 2006 (Comm); [2007] 1 Lloyd’s Rep 237.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 109

grant an anti-suit injunction restraining the Italian claimant from pursuing proceedings
within the EC Jurisdiction Regulation in Italy.
The unfortunate result of the ECJ’s decision in The Front Comor is that there may
be, and indeed were in The Front Comor, parallel arbitration proceedings in one EU
Member State and court proceedings in another EU Member State. There is no mechanism
to prevent parallel arbitration and court proceedings—with the consequent duplication
of costs; risk of conflicting decisions, both as to whether there is a binding arbitration
agreement and on the substance of the dispute; and complex questions on recognition and
enforcement.119 If the other party is determined to pursue proceedings in its own court for
its own advantage,120 there remains uncertainty as to whether the foreign court judgment
can be refused recognition in the English courts and this may ultimately depend on timing.
In The Front Comor,121 once the arbitration award had been made but before any decision
of the Italian court on jurisdiction, the Court of Appeal upheld the decision of Field J
that the English court had jurisdiction to grant leave to enforce the award122 and to enter
judgment in terms of the award.123 The arbitrators held that the shipowners had no liability
whatsoever in contract, tort or otherwise to the jetty owners or their subrogated insurers
and that, if this were wrong, any liability was limited under the Convention on Limitation
of Liability for Maritime Claims 1976.
Similarly, in London Steam Ship Owners Mutual v Spain (The Prestige)124 Hamblen
J applied The Front Comor and exercised the wide discretion under the Arbitration Act
1996, s.66 to grant leave to enforce the award, as there was “a real prospect of establishing
the primacy of the award over any inconsistent judgment which may be rendered in Spain
and therefore a clear utility in granting leave to enforce”.125
The Front Comor may be contrasted with The Wadi Sudr,126 as in that case the Spanish
court gave their judgment that no arbitration clause was incorporated into the bill of
lading and that the shipowners had waived their right to rely on the arbitration clause by
commencing English court proceedings, before either the London arbitration tribunal or
English court could consider jurisdiction and the Court of Appeal held that the arbitrators
were bound by that judgment.
It will be important to obtain the award of the arbitrators and enter judgment in terms
of the award or a declaration from the English court as quickly as possible on the validity

119. See also National Navigation Co v Endesa Generacion SA (The Wadi Sudr) [2009] EWCA Civ 1397;
[2010] 1 Lloyd’s Rep 193; noted Y Baatz, “A Jurisdiction Race in the Dark” [2010] LMCLQ 364.
120. In the case of The Wadi Sudr (supra, fn.119), because Spanish law imposed absolute liability rather than
an obligation to exercise due diligence under English law. In the case of The Front Comor the Italian insurers may
have preferred the Italian court’s interpretation of the exception of navigational error.
121. West Tankers Inc v Allianz SpA [2012] EWCA Civ 27; [2012] Bus LR 1701, [35–39]; affg [2011] EWHC
829 (Comm); [2011] 2 Lloyd’s Rep 117. The Court of Appeal approved African Fertilizers and Chemicals NIG
Ltd v B D Shipsnavo GmbH & Co Reederei KG [2011] EWHC 2452 (Comm); [2011] 2 Lloyd’s Rep 531. See
also Sovarex SA v Romero Alvarez SA [2011] EWHC 1661 (Comm); [2011] 2 Lloyd’s Rep 320.
122. Pursuant to the Arbitration Act 1996, s.66(1).
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123. Pursuant to the Arbitration Act 1996, s.66(2).

124. [2013] EWHC 3188 (Comm); [2014] 1 Lloyd’s Rep 309; noted in [Link]/arbitration/2013/11/12/
english-high-court-considers-arbitability-of-civil-claims-with-a-criminal-aspect-its-discretion-to-enforce-
awards-under-s66-of-the-arbitration-act-1996-and-the-scope-of-the-arbitration-exception-to/.
125. [2013] EWHC 3188 (Comm); [2014] 1 Lloyd’s Rep 309, [187].
126. [2009] EWCA Civ 1397; [2010] 1 Lloyd's Rep 193 (supra, fn.119).
 110 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

of the arbitration clause, and in any event before the judgment of the court of the other
EU Member State. This may give a defence to recognition of any subsequent judgment of
the other EU Member State court under the EC Jurisdiction Regulation, Art.34(3). In The
Wadi Sudr,127 Waller L.J. indicated obiter that he thought this would be the position, but
the point is controversial.128
Another issue is whether an arbitration tribunal can grant an anti-suit injunction to
restrain a party from proceeding in the court of an EU Member State in breach of an
arbitration agreement or whether this would be inconsistent with the EC Jurisdiction
Regulation. In the Gazprom litigation, the Stockholm Chamber of Commerce made an
arbitration award in arbitration proceedings between Gazprom and the Lithuanian Ministry
of Energy which granted an anti-suit injunction restraining the Lithuanian Ministry of
Energy from pursuing court proceedings in Vilnius, Lithuania. The question whether the
Vilnius court is bound to recognise the arbitration award has been referred to the ECJ129
and judgment is awaited.

5. Damages for breach of an arbitration agreement

In the latest twist of The Front Comor litigation, Flaux J held130 that the arbitration tribunal
was not deprived, by reason of European law, of the jurisdiction to award equitable
damages for breach of the obligation to arbitrate. The damages claimed were for legal fees
and expenses reasonably incurred in connection with the Italian proceedings and for an
indemnity against an award made against the shipowners in the Italian proceedings which
is greater than the liability of the shipowners as established in the London arbitration.
Commenting on The Wadi Sudr Flaux J stated in The Front Comor:131
“The Regulation simply does not apply to arbitration or arbitral tribunals. The reason why the
arbitrators were bound to recognise the Spanish judgment was nothing to do with any principle of

127. Ibid, [63]. This was also the view, obiter, of HHJ Diamond QC in Partenreederei M/S Heidberg v
Grosvenor Grain and Feed Co Ltd (The Heidberg) [1994] 2 Lloyd’s Rep 287, 301–302, where he distinguishes
between the position when the judgment of the foreign court is given before (the facts of the case he had to
decide) and after the English court appoints an arbitrator.
128. See eg African Fertilizers and Chemicals NIG Ltd v B D Shipsnavo GmbH & Co Reederei KG [2011]
EWHC 2452 (Comm); [2011] 2 Lloyd’s Rep 531 and London Steam Ship Owners Mutual v Spain (The Prestige)
[2013] EWHC 3188 (Comm); [2014] 1 Lloyd’s Rep 309, [187–189], where Hamblen J did not feel it necessary
to decide the point, as there was no inconsistent judgment of the Spanish court at the time leave to enforce the
arbitration award was given. See A Briggs and P Rees, Civil Jurisdiction and Judgments Act, 5th edn (2009),
[7.23] and [8.14]; Dicey, Morris & Collins: The Conflict of Laws, 15th edn (2012), [14.206–14.214]; and Hans
Van Houtte, “Why not include Arbitration in The Brussels Jurisdiction Regulation?” (2005) 21 Arbitration
International 509, 514 and 520, where it was proposed that a new fifth ground be added to Art.33 to refuse
recognition or enforcement of a judgment which is irreconcilable with an arbitral award. The position does not
appear to be uniform throughout the EU Member States: see eg the Heidelberg Report, [127] (which states that
“the recognition of judgments of other Member States that were given despite an arbitration agreement is widely
accepted in case law and legal doctrine”) and the Report from the Commission to the European Parliament
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COM(2009) 174 final dated 21.4.2009, [3.7]. See also J Lavelle and R Merkin, “The availability of declaratory
relief” (2010) 10 (4) Arbitration Law Monthly 1.
129. (Case C-536/13). See the opinion of Wathelet AG delivered on 4 December 2014.
130. West Tankers Inc v Allianz SpA [2012] EWHC 854 (Comm); [2012] 2 Lloyd’s Rep 103. For a history of
this litigation, see [4–16].
131. Ibid, [67].
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 111

European law derived from the Regulation but because of the English common law doctrine of res
judicata.”
The position may be compared with a claim for damages for breach of an exclusive
English jurisdiction clause where there are proceedings in the courts of another EU
Member State. Such a claim for damages was considered by the Court of Appeal in
Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG (The Alexandros
T).132 It held that claims by an insured, its manager and co-assured in the Greek courts were
in breach of the settlement and indemnity provisions of settlement agreements between
the insured and the insurers and that the Greek claims fell within the exclusive English
jurisdiction clauses in the settlement agreements on the basis that the principle in Fiona
Trust133 must apply to jurisdiction clauses just as much as to arbitration clauses. Therefore,
the Greek claims should have been brought in England. They also fell within the exclusive
jurisdiction clauses in the original policies. Neither the claims for damages nor the claims
for declaratory relief constituted an interference with the jurisdiction of the Greek court or
infringed EU law. The Court of Appeal upheld the decision of Burton J at first instance134
that the insurers were entitled to summary judgment now for damages to be assessed and
that the claims for an indemnity were not premature, so that it was appropriate for a fund to
be established to indemnify the insurers for the considerable expenses they were incurring
defending the Greek proceedings which should not have been brought.
On the issue of damages, Longmore LJ, giving the judgment of the Court of Appeal,
with which Rimer and Toulson LJJ agreed, rejected the argument of the insured that those
claims interfered with the jurisdiction of the Greek court to determine its own jurisdiction,
relying on the decision in Turner v Grovit.135 That decision concerned an anti-suit injunction
and no such injunction was claimed in The Alexandros T. Longmore LJ stated:136
“The vice of anti-suit injunctions is that they render ineffective the mechanisms which the Jurisdiction
and Judgments Regulation provides for dealing with lites alibi pendentes and related actions.”

As the Supreme Court137 had applied Art.27 and concluded that the Greek proceedings
did not involve the same cause of action as the English proceedings, there was no stay
of the English proceedings and furthermore the Supreme Court had refused a stay under
Art.28. Therefore, the Greek court was free to consider the Greek claims but it would
have to consider whether to recognise any judgment of the English court that the Greek
claims fall within the terms of the settlement agreements and have been released and any
judgment awarding damages for breach of the settlement agreements and the jurisdiction
agreements in both the settlement agreements and the policies.138
The decision of the Court of Appeal was applied in Starlight Shipping Co v Allianz
Marine and Aviation Versicherungs AG (The Alexandros T) (No 3),139 which arose out
132. [2014] EWCA Civ 1010.
133. Fiona Trust & Holding Corp v Privalov [2007] UKHL 40; [2007] Bus LR 1719; [2008] 1 Lloyd’s Rep 254.
134. [2011] EWHC 3381(Comm); [2012] 1 Lloyd’s Rep 162.
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135. [2001] UKHL 65; [2002] ICR 94.

136. [2014] EWCA Civ 1010; [2014] 2 Lloyd’s Rep 544, [15].
137. [2013] UKSC 70; [2014] 1 Lloyd’s Rep 223.
138. Ibid, [16].
139. [2014] EWHC 3068 (Comm). Noted in [Link]/news-pages/15.10.14--judgment--the-
alexandros-t---the-final-(english)-[Link].
 112 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

of the same litigation. Flaux J considered the construction of the settlement agreements
and whether they covered the servants and agents of the insurers, their solicitors and
claims adjusters who had investigated the insurance claim. He held that they did and:
that the insurers and their servants and agents were entitled to declaratory relief that on
construction of the settlement agreements the claims brought against them in Greece fell
within the terms of the settlement agreements and were in breach of those agreements;
that the insurers were entitled to a decree of specific performance; and that the insurers’
lawyers and claims adjusters were entitled to enforce the promise by the insured and their
managers not to sue them by an award of damages pursuant to the Contracts (Rights of
Third parties) Act 1999.140 He went on to hold obiter that, as he had held that the settlement
provisions in the settlement agreements contain a promise not to sue the insurers or their
servants or agents, the lawyers would be entitled to enforce that promise by way of the
equitable remedy of injunction, were it not for the principles established by the ECJ in
Turner v Grovit and The Front Comor. However, the court could award damages in lieu of
an injunction for breach by the insured and its managers of the covenant or promise not
to sue which is implicit in the settlement agreement.141 As a further fall-back, Flaux J held
that, if necessary, he would hold that this was an exceptional case where the insurers could
sue for and on behalf of their lawyers to recover their lawyers’ losses as damages as in The
Albazero142 and Alfred McAlpine Construction Ltd v Panatown Ltd.143
It is important that a party who chooses London arbitration can rely on its disputes being
determined by the arbitrators supported by the English court and will not land up in the courts
of a completely different country. This is not just a matter of protecting London arbitration,
but arbitration in any chosen EU Member State. Although the Advocate General and the
ECJ in The Front Comor were not swayed in their decision by commercial practicalities,
arbitration anywhere in the European Union will be under pressure as a result of competition
from other centres of arbitration, such as New York, Bermuda and Singapore, and centres of
arbitration in Europe must consider how best to maintain their competitive edge.
Although an anti-suit injunction is no longer available to protect an arbitration clause,
the English court will grant damages for breach of an arbitration clause or a jurisdiction
clause. The difference between the two situations is that there is no mechanism to resolve
parallel proceedings or related actions where one set of proceedings is in arbitration and
one is in the court of an EU Member State. There is no equivalent of Arts 27 and 28.
We shall now consider the proposals to introduce such a mechanism and the resulting
amendments to the EC Jurisdiction Regulation by the Recast Regulation.
Originally, it was intended that there should also be European legislation to deal
with arbitration but that has never materialised.144 The Heidelberg Review145 proposed
two possible alternative solutions. The first was the deletion of Art.1(2)(d) of the EC
Jurisdiction Regulation. This would bring arbitration within the scope of the Regulation.
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140. [2014] EWHC 3068 (Comm), [83–89].

141. Ibid, [89].
142. [1977] AC 774; [1976] 2 Lloyd’s Rep 467.
143. [2001] 1 AC 518.
144. See the Heidelberg Report, [105] and the Schlosser Report [1979] OJ C59/71.
145. See the Heidelberg Report.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 113

Such an amendment was suggested by Advocate General Kokott in her opinion in The
Front Comor. The New York Convention would prevail over the Regulation as a result of
Art.71 of the Regulation. This would mean that, if the English court has been requested
to declare, or has already given, a judgment, that an arbitration clause is valid and binds
the subrogated insurer, and it was the court first seised, the court second seised would be
obliged to stay its proceedings under Art.27 of the Regulation. Alternatively, if the English
court had already given a judgment that the arbitration clause was valid and binding, that
judgment would have to be recognised and enforced in any other EU Member State.
The second solution was to insert new provisions into the Regulation to deal with the
interface between arbitration and the Regulation, including specific provisions: first,
that the courts of the Member State in which the arbitration takes place have exclusive
jurisdiction in relation to ancillary proceedings in support of the arbitration; secondly,
requiring a court of a Member State to stay its proceedings if its jurisdiction is contested due
to an arbitration clause where the court of the Member State designated in the arbitration
agreement is seised in relation to the binding nature of the arbitration agreement; and,
thirdly, a new recital recognising the parties’ choice as to the place of arbitration, but
providing default provisions if no such choice is made.146
The European Commission preferred the second solution and proposed amendments to
the Regulation147 to “enhance the effectiveness of arbitration agreements in Europe, prevent
parallel court and arbitration proceedings, and eliminate the incentive for abusive litigation
tactics”.148 Article 29(4) of the revised Regulation provided that, where the jurisdiction
of the courts of a Member State is contested because there is an arbitration agreement
providing for arbitration in another Member State, the court shall stay its proceedings
where the courts of the Member State where the seat of the arbitration is located or the
arbitration tribunal has been seised of proceedings to determine, as their main object or as
an incidental question, the existence, validity or effects of that arbitration agreement. The
risk is that a party alleges an arbitration agreement and it is found that there is not one.149
In a draft report of the Committee on Legal Affairs, this revision was deleted and,
in the draft European Parliament Legislative Resolution,150 Art.1(2)(d) was amended so
that the Regulation did not cover “(d) arbitration, including judicial procedures ruling
on the validity or extent of arbitral competence as a principal issue or as an incidental or
preliminary question”.151 This raised the question whether the English court could grant an
anti-suit injunction to restrain the respondent in the London arbitration proceedings from
pursuing proceedings in the courts of another EU Member State on the preliminary issue
of whether there is a valid arbitration clause. This would no longer be inconsistent with

146. See LMAA Rules, cl.6.

147. COM (2010) 748. See A Briggs, “The Brussels I bis Regulation Appears on the Horizon” [2011]
LMCLQ 157 for a discussion of those proposals.
148. COM (2010) 748 Explanatory Memorandum, para.3.1.4.
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149. Claxton Engineering Services Ltd v TXM Olaj-Es Gazkutato KFT (No 2) [2011] EWHC 345; [2011]
1 Lloyd’s Rep 510, where an injunction was granted to restrain arbitration proceedings in Hungary, where the
English court had already given a judgment, after finding that there was no Hungarian arbitration clause but an
exclusive English jurisdiction clause.
150. Dated 28 June 2011 (2010/0383 (COD)).
151. See also the amended Recital 11.
 114 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

the EC Jurisdiction Regulation, since for the EU Member State to consider whether there
is a London arbitration clause falls outside the scope of the EC Jurisdiction Regulation.
The Recast Regulation, Art.1(2)(d) simply excludes arbitration from the scope of the
Regulation and Art.73 provides that the Regulation shall not affect the application of the
New York Convention. Recital 12 states that a ruling by the court of a Member State as to
whether or not an arbitration agreement is null and void, inoperative or incapable of being
performed should not be subject to the rules of recognition and enforcement laid down in
the Regulation, regardless of whether the court decided on this as a principal issue or as
an incidental question. The decision of The Front Comor has therefore been reversed.152
Neither an English court judgment nor the Italian court judgment as to the validity of
the arbitration agreement would be a Regulation judgment. However, if the court of an
EU Member State decides that there is not a valid arbitration clause and proceeds to a
substantive judgment on the merits, Recital 12 further states that that judgment will not
be precluded from being recognised or enforced under the Regulation. This should not
prejudice the competence of the courts of the Member States to decide on the recognition
and enforcement of arbitral awards in accordance with the New York Convention, which
takes precedence over the Recast Regulation. Therefore, the London arbitration award
could be enforced in the United Kingdom or another EU Member State even if there were
a court judgment in an EU Member State holding that the arbitration clause is not valid.
Again, it seems that timing will be very important here and there may be a race to award
or judgment. It may be unlikely that a state will recognise and enforce an arbitration award
made in another EU Member State153 if the court of the former has already given judgment
that there is no valid arbitration agreement or has given a judgment on the merits of the
case that conflicts with the award. It will therefore be very important where the assets of
the paying party are or that the successful party has security for its claim154 so that the
uncertainty as to the enforcement of the award may be avoided.
It is unlikely that, despite the revisions, it would be permissible for the English court to
grant an anti-suit injunction to restrain a party from pursuing court proceedings in another
EU Member State in breach of an arbitration award.155
The position on arbitration clauses in Europe is not as clear cut as court jurisdiction
clauses. The Recast Regulation strengthens the principle of party autonomy by permitting

152. However, it is unlikely that the ECJ would permit an anti-suit injunction to restrain a party from pursuing
proceedings in the courts of an EU Member State in breach of a London arbitration clause . See A Ippolito and
M Adler-Nissen, “West Tankers revisited: Has the new Brussels I Regulation brought anti-suit injunctions back
into the procedural armoury?” [2013] Arbitration 1.
153. The State requested to recognise the arbitration award may seek to rely on the ground of public policy
to refuse recognition or on its national law. Compare the position in the non-European arena in the Australian
case Dampskibsselskabet Nordern A/S v Beach Building & Civil Group Pty Ltd [2012] FCA 696; 292 ALR
161 (FCA), where Foster J held that a foreign arbitration clause was of no effect and therefore would not be
enforced. The case went to the Full Court of the Federal Court of Australia (Dampskibsselskabet Nordern A/S
v Gladstone Civil Pty Ltd (The Ocean Baron) [2013] FCAFC 107), where a majority held that the arbitration
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clause in the charterparty did not fall foul of the Australian legislation and it was not therefore necessary to
decide the recognition and enforcement issues. However, the dissenting judge held that it would not be enforced.
See N Gaskell, “Australian Recognition and Enforcement of Foreign Charterparty Arbitration Clauses” [2014]
LMCLQ 174, 180 and 181 and esp fn.42.
154. See ante, 100–102.
155. See [Link]/arbitration/2012/12/12/the-revised-brussels-regulation-are-we-back-to-where-we-started/.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 115

the court chosen to determine the validity of a jurisdiction clause.156 The lis pendens
provisions of the Recast Regulation are subject to Art.31(2), which provides that, where a
court has been chosen in accordance with Art.25, any court of another Member State shall
stay its proceedings until such time as the court seised on the basis of the agreement declares
that it has no jurisdiction under the agreement.157 Where the court chosen has established
that it has jurisdiction, any court of another Member State shall decline jurisdiction in
favour of that court.158 Recital 22 clarifies that the designated court “has priority to decide
on the validity of the agreement and on the extent to which the agreement applies to
the dispute pending before it”, even if it is second seised and even if the other court has
not already decided on the stay of proceedings. Where, however, there is a conflict as
to whether both courts have been chosen, then the court first seised will determine the
validity of the jurisdiction clause.
This solution is similar to that adopted by Art.6 of the Hague Convention on Choice of
Court Agreements 2005,159 an initiative of the Hague Conference on Private International
Law, an intergovernmental organisation whose members include all EU Member States.
That Convention has been signed by the European Union. However, when the Convention
comes into force, it does not apply to the carriage of goods.160
The risk of the solution adopted by the Recast Regulation was outlined by Advocate
General Leger in his Opinion in Erich Gasser GmbH v MISAT Srl.161 He thought that
such a solution might encourage delaying tactics by an unscrupulous party by alleging the
existence of an agreement and bringing an action before the court allegedly designated
in order deliberately to delay judgment until that court had declared that it had no
jurisdiction.162 This is a risk but presumably a lesser one than that to which Gasser gave
rise, as the party would need to point to a jurisdiction agreement.
Under the provisions on recognition and enforcement of judgments in the Recast
Regulation, it is not permissible for the court of an EU Member State requested to
recognise a judgment of another EU Member State to review the jurisdiction of the latter
court to give that judgment.163 Thus, the recognising court cannot refuse to recognise a
judgment on the ground that there was an exclusive jurisdiction agreement in favour of
the court of a State other than that of the court which has given the judgment which is
to be recognised. In other words, by the time the recognition stage has been reached,
jurisdiction is no longer an issue.

156. See Recital N and Art.13 of the EU Parliament Resolution 2009/2140 (INI) dated 7 September 2010 and
Art.32(2) of the revised Brussels I proposed by the European Commission, which has been neither deleted nor
amended in the Draft Report of the Committee on Legal Affairs dated 28 June 2011 (2010/0383 (COD)). See
Briggs [2011] LMCLQ 157 for a discussion of the European Commission proposals.
157. See Recital 22 and Arts.29(1) and 31(2).
158. Art.31(3).
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159. See supra, fn.3.

160. Ibid.
161. (Case C-116/02) [2003] ECR I-14693; [2005] QB 1.
162. Ibid, [74].
163. Art.35(3), except as provided in Art.35(1) in the case of insurance consumer contracts, or exclusive
jurisdiction under Art.22
 116 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

D. THE INTERNATIONAL POSITION

It is accepted internationally that there should be some limit on the freedom of contract in
the carriage of goods by sea in transport documents, other than charterparties, as regards
the minimum obligations imposed on the carrier. The major reason for this is to protect the
rights of third parties such as the consignee under a straight bill of lading164 or the transferee
of a transferable bill of lading. Thus, if such a party sues the carrier, it knows that the
carrier will have minimum obligations which it cannot contract out of. If all States agreed
to be bound by the same rules as to substantive liability, it might be said that there was no
need for any provisions on jurisdiction or arbitration as any court or arbitration tribunal
chosen would apply the same rules. Unfortunately, as there is no international uniformity
on substantive law, it may be argued that there needs to be some provision which prevents
a party intentionally providing for a jurisdiction so that it may avoid the rules.
Some, however, go further than that and argue that, even where the substantive liability
has been agreed between States, there should be limits on the freedom to contract as to
jurisdiction or the place of arbitration in order to protect the rights of the cargo interests.
For example, it has been suggested that it is usually the carrier that has the upper hand
as far as choice of jurisdiction is concerned, as standard form transport documents are
drafted by the carrier and therefore frequently contain a choice of the jurisdiction where
the carrier has its principal place of business.165 This is not always the case, as some
shippers have stronger bargaining power than carriers.166 Either party may prefer to use
its local dispute resolution centres. Therefore, some have argued that a new international
Convention should strike a better balance between the interests of the carrier and the cargo
interests. There are, however, good reasons for choosing the principal place of business
of the carrier, as there is usually only one contractual carrier but there may be many cargo
interests located in different States, with the risk of multiple proceedings arising out of
the same facts. Where there is multimodal transport, the number of possible locations
that could be connected with the claim is increased. The cargo interests usually have the
protection of being able to obtain security for their claim by arresting the carrier’s ship and
therefore being able to enforce any arbitration award swiftly. In practice, it will usually
be the cargo interests’ subrogated insurers who pursue any claims against the carrier. It is
doubtful that they are in need of consumer protection.167
There is no international harmony on which rules apply compulsorily to transport
documents for the carriage of goods by sea. Some States still give effect to the Hague

164. JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11; [2005] 2 AC
423; [2005] 1 Lloyd’s Rep 347.
165. See eg R Herber, “Jurisdiction and Arbitration—Should the New Convention Contain Rules on these
Subjects?” [2002] LMCLQ 405, 406, where it is suggested that the shipper has no power to negotiate the
jurisdiction clause.
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166. Eg, the US Ocean Liner Service Agreements: see DR Thomas (ed.), The Carriage of Goods by Sea
under the Rotterdam Rules (Lloyd’s List, 2010), [1.81–1.84].
167. Under English law the subrogated cargo insurers would be bound by the jurisdiction or arbitration clause
in the bill of lading contract (supra, fn.48). However, see F Berlingieri, in A von Ziegler et al, The Rotterdam
Rules 2008 (Wolters Kluwer, 2010), 22, where he states that the subrogated insurer would not be bound by the
jurisdiction or arbitration clause under the Rotterdam Rules, Art.66(a) or 75(2)(b).
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 117

Rules168 (most notably the United States of America by its US Carriage of Goods by Sea
Act 1936, which Act applies the Rules to both inward and outward shipments). Other
States give effect to the Hague-Visby Rules (including most EU Member States). Yet other
States (including a few EU Member States) give effect to the Hamburg Rules.169 National
legislation which gives effect to a set of Rules may provide for some local variation or a
combination of more than one set of Rules. In a final bid for international unity, the United
Nations Commission on International Trade Law produced the Rotterdam Rules.170 They
are not yet in force.171
Furthermore, the approach taken to jurisdiction and arbitration clauses in the maritime
conventions varies significantly. Neither the Hague nor the Hague-Visby Rules contain any
specific provisions on jurisdiction or arbitration. The Hamburg Rules contain provisions
on both jurisdiction and arbitration, as do many of the other transport Conventions in
relation to the carriage of goods by air, road and rail, but not inland waterways.172 Such
provisions restrict the effect of exclusive court or arbitration agreements.
The international position is therefore fragmented and confused. There is no international
harmony as to which rules apply when, and no coordinated approach between Conventions
on whether a third party is bound. We will now turn to the most recent Convention, the
Rotterdam Rules, to consider its provisions on arbitration in more detail.

1. The Rotterdam Rules

The Rotterdam Rules did not originally provide for jurisdiction and arbitration. As the
reports of the UNCITRAL Transport Law Working Group (Working Group III) show,
there were diametrically opposed views as to whether all or any exclusive choice of court
clauses should be recognised and whether, if they were recognised, they should bind third
parties, and on what conditions.173 There were also strong views in favour of arbitration
agreements provided that arbitration would not be allowed to circumvent the bases of
jurisdiction in the Convention, and other views against all arbitration.174

168. The International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading
(Brussels, 25 August 1924).
169. See eg the Canadian Marine Liability Act 2001, s.46, considered in OT Africa Line Ltd v Magic
Sportswear Corp [2005] EWCA 710; [2005] 2 Lloyd’s Rep 170. On the Nordic position see supra, fn.82.
170. See generally Y Baatz et al, The Rotterdam Rules: A Practical Annotation (Informa, London, 2009);
DR Thomas (ed.), A New Convention for the Carriage of Goods by Sea–The Rotterdam Rules (Lawtext, 2009);
DR Thomas (ed.), The Carriage of Goods by Sea under the Rotterdam Rules (Lloyd’s List, 2010); A Diamond,
“The Rotterdam Rules” [2009] LMCLQ 445; M Sturley et al, The Rotterdam Rules (Sweet & Maxwell, London,
2010); and A von Ziegler et al, The Rotterdam Rules 2008 (Wolters Kluwer, 2010).
171. As at January 2015, the Rotterdam Rules have been signed by Armenia, Cameroon, Congo, the
Democratic Republic of Congo, Denmark, France, Gabon, Ghana, Greece, Guinea, Guinea-Bissau, Luxembourg,
Madagascar, Mali, Netherlands, Niger, Nigeria, Norway, Poland, Senegal, Spain, Sweden, Switzerland, Togo
and the United States of America. Only Congo, Spain and Togo have ratified. They will not enter into force until
they have been ratified by 20 States in accordance with Art.91.
172. See Herber [2002] LMCLQ 405 for a comparison of the provisions of those Conventions.
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173. Reports of Working Group III on its: fourteenth session, A/CN 9/572, [130–134]; fifteenth session,
A/CN 9/576, [156–168]; sixteenth working session, A/CN 9/591, [20–25]; and eighteenth session, A/CN 9/616,
[245–260]. All UNCITRAL working group reports are available from [Link]/uncitral/en/commission/
working_groups/[Link].
174. Reports of Working Group III (supra, fn.173): fourteenth session, [151–157]; fifteenth session, [176–
179]; sixteenth working session, [85–103]; eighteenth session, [267–279].
 118 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

It was decided at the twentieth session of Working Group III in October 2007 that the
provisions on jurisdiction and arbitration would not apply unless a State specifically chose
them. It was hoped that this would encourage States to ratify the Rotterdam Rules, and to
do so quickly.175 Therefore, the provisions of Chapter 14 on Jurisdiction and Chapter 15 on
Arbitration will only bind Contracting States that declare in accordance with Art.91 that
they will be bound by each of them.176 Such declarations may be made177 or withdrawn
at any time.178 So a State may ratify the Rotterdam Rules and not opt in to either of the
chapters on jurisdiction and arbitration or may opt in to either or both of them.179 The
problem with this is that it creates further diversity when one of the key reasons for a new
convention was to seek to achieve international harmonisation.180
The Rotterdam Rules distinguish between those contracts to which the parties are deemed
to be in need of mandatory protection and those contracts called volume contracts.181 The
parties to volume contracts have greater, although still limited, freedom to agree court
jurisdiction or arbitration agreements, in certain circumstances. Those circumstances
differ as between the carrier and the shipper and as between the carrier and a third party.
The key question in the Rotterdam Rules is where arbitration will take place. To a
large extent mirroring the provisions on court jurisdiction, Chapter 15 draws a distinction
between volume contracts which satisfy certain requirements and other contracts. Thus,
the choice of where the arbitration will take place is binding in the following situations:
(1) As between the shipper and the carrier, it is in a volume contract which clearly states
the names and addresses of the parties and either (i) is individually negotiated or (ii)
contains a prominent statement that there is an arbitration agreement182 and specifies
the sections of the volume contract containing that agreement;183 or

175. Reports of Working Group III (supra, fn.173): twentieth session, A/CN 9/642, [202–205], [216–218].
176. Arts 74 and 78 respectively. Pursuant to Art.93(3), any reference to “Contracting States” applies
equally to a regional economic integration organisation; but Art.93(1), which provides that a regional economic
integration organisation may sign, ratify, accept, approve or accede to this Convention, does not mention making
a declaration within Art.91.
177. Art.91(1). A declaration will take effect at the same time as the Convention enters into force in a
Contracting State; but, if the declaration is made after such entry into force, it will take effect six months after the
notification of the declaration is received by the depositary (Art.91(4)).
178. Art.91(5). A declaration may be withdrawn and the withdrawal would be effective six months after
notification of withdrawal is received by the depositary.
179. A proposal that the ability to opt into the chapter on arbitration should be tied to opting into the chapter
on jurisdiction was rejected. See the Report of Working Group III on its twentieth session, A/CN 9/642, [217].
180. See W Tetley, “Some General Criticisms of the Rotterdam Rules”, ch.12 of Thomas (ed.), A New
Convention for the Carriage of Goods by Sea—The Rotterdam Rules (2009), 286.
181. A volume contract is defined in Art.1(2) as a “contract of carriage that provides for the carriage of a
specified quantity of goods in a series of shipments during an agreed period of time. The specification of the
quantity may include a minimum, a maximum or a certain range”. See Baatz et al, The Rotterdam Rules: A
Practical Annotation (2009), [1.04]; R Asariotis, “UNCITRAL Draft Convention on Contracts for the Carriage
of Goods Wholly or Partly by Sea: Mandatory Rules and Freedom of Contract”, in A Antapassis, L Athanassiou
and E Rosaeg (eds), Competition and Regulation in Shipping and Shipping Related Industries (Martinus Nijhoff,
2009); Diamond [2009] LMCLQ 445; DR Thomas, “An Analysis of the Liability Regime of Carriers and Maritime
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Performing Parties”, ch.3 of Thomas (ed.), A New Convention for the Carriage of Goods by Sea—The Rotterdam
Rules (2009), 52 and 84–88; Thomas (ed.), The Carriage of Goods by Sea under the Rotterdam Rules (2010),
[1.77–1.108]; M Sturley et al, The Rotterdam Rules (2010); von Ziegler et al, The Rotterdam Rules 2008 (2010).
182. Contrast the requirements for an exclusive court jurisdiction agreement, which must designate the courts
of one Contracting State or one or more specific courts of one Contracting State. The arbitration agreement can
provide for arbitration in any State.
183. Art.75(3).
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 119

(2) As between the carrier and a third party, it is in a volume contract which satisfies
the requirements of Art.75(3) set out in the previous paragraph and satisfies the
requirements of Art.75(4), which are:
(a) the place of arbitration chosen is situated in one of the places listed in Art.75(2)(b)
(ie the domicile184 of the carrier; the contractual place of receipt; the contractual
place of delivery; the port where the goods are initially loaded on a ship; or the port
where the goods are finally discharged from a ship);
(b) that agreement is contained in the transport document or electronic transport
record;
(c) the person to be bound is given timely and adequate notice185 of the place of
arbitration; and
(d) the applicable law permits that person to be bound by the arbitration agreement;186
(3) As between the parties to the dispute the clause is concluded after the dispute has
arisen.187
Any term of an arbitration clause that is inconsistent with these provisions is void.188
However, if the arbitration agreement is in a contract which is not a volume contract, or,
if it is, the requirements of Art.75(3) and/or (4) are not satisfied, and the parties have not
entered into an arbitration agreement after a dispute has arisen, the cargo claimant is still
bound to arbitrate but can choose to arbitrate in any of the six places listed in Art.75(2): any
place designated in the arbitration agreement; the domicile189 of the carrier; the contractual
place of receipt; the contractual place of delivery; the port where the goods are initially
loaded on a ship; or the port where the goods are finally discharged from a ship.

2. Criticisms of the Rotterdam Rules

The arbitration provisions are very unappealing from the perspective of an English
lawyer.190 The requirements for an arbitration agreement under the Rotterdam Rules are

184. Defined in Art.1(29).

185. Any agreement and notice under this art must be in writing: Art.3.
186. Art.75(4)(d). Raffeisen Zentralbank Osterreich AG v Five Star General Trading LLC (The Mount I)
[2001] EWCA Civ 68; [2001] 1 Lloyd’s Rep 597 in relation to an assignment; Schiffahrtsgesellschaft Detlev
von Appen GmbH v Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyd's Rep 279, 286–285,
per Hobhouse LJ (arbitration clause in time and voyage charterparties bound subrogated insurers); Through
Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd (The Hari Bhum) [2004]
EWCA Civ 1598; [2005] 1 Lloyd’s Rep 67; noted J Harris, “Arbitration Clauses and the Restraint of Proceedings
in Another Member State of the European Union” [2005] LMCLQ 159; and The Front Comor [2005] EWHC
454; [2005] 2 Lloyd’s Rep 257, in relation to an insurer exercising its subrogated right to sue where there was a
claim in tort which was held to fall within the charterparty arbitration clause (see supra, fn.48). The Front Comor
subsequently went to the House of Lords and the ECJ (Allianz SpA (formerly Riunione Adriatica Di Sicurta SpA)
v West Tankers Inc (The Front Comor) (Case C-185/07) [2009] 1 AC 1138; [2009] 1 Lloyd’s Rep 413—see ante,
108 and 109) but not on the point whether a subrogated insurer is bound by an arbitration agreement.
187. Art.77.
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188. Art.75(5).
189. Defined in Art.1(29).
190. See Baatz et al, The Rotterdam Rules: A Practical Annotation (2009), 237–239. See also Berlingieri
2009 Il Diritto Marittimo 955, 1028 and 1029, agreeing with those criticisms. For a different view, see Gaskell
[2014] LMCLQ 174, 182, where he states: “One suspects that the claimant-friendly jurisdiction and arbitration
provisions in the Rotterdam Rules would be attractive for Australia, but that the volume contract provisions may
 120 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

more demanding and complex than those under the Arbitration Act 1996, ss 5 and 6. Those
provisions make no distinction between: volume and other contracts; contracts between
the original parties and consignees or transferees of the contract of carriage of goods; liner
transportation and non-liner transportation.
Working Group III acknowledged that “one difficulty of the approach in the Hamburg
Rules was said to be that they reduced commercial certainty by allowing the arbitration
to take place in one of a number of different possible locations”.191 However, this could
be seen “as an advantage … in terms of promoting the development of arbitration by
providing for it in different locations, but with reference to the same set of rules”.192
There were concerns that moving the place of the arbitration “might in practice render
arbitration impracticable, in particular where the arbitration rules of the arbitral institution
chosen by the parties did not accommodate the conduct of arbitration proceedings away
from the arbitral institution’s seat”.193 In this author’s view, this latter point is a major
stumbling block to acceptance of Chapter 15. It is not in the parties’ best interests to have
an uncertain place of arbitration. As with exclusive jurisdiction agreements, commercial
parties may choose a neutral seat of arbitration on the basis that the arbitrators are very
specialised and experienced in maritime matters, have a speedy and effective procedure for
arbitration, and a good reputation for integrity and are effectively supported by an efficient
court system. The choice of seat may indicate the court system which will support those
arbitration proceedings, for example, in relation to any right of appeal from the arbitration
award.194 Difficult issues arise as to which court system will support the arbitration if, for
example, London arbitration is chosen but the claimant chooses the State where the place
of delivery of the goods is located. Would it be the English courts or the courts of the
State where the place of delivery is located? To suggest that these provisions may promote
the development of arbitration in States which opt in to Chapter 15 will take resources
and initiatives on the part of those States which, if not already in place, will mean that
commercial parties are effectively treated as guinea pigs while a system in support of
arbitration is being developed.
A neutral place chosen by the parties for the expertise of the arbitrators in maritime
matters would be infinitely preferable to arbitration in the place of delivery of the goods,
if that is an inland place to which a container has been transported after the sea leg, where
there is no experience of arbitration and no knowledge of the complex Rotterdam Rules.
Chester Hooper has written that “the arbitration provisions are meant to prevent the parties
from using an arbitration clause to circumvent the jurisdiction chapter”.195 Michael Sturley

be less acceptable.” A foreign jurisdiction or arbitration clause in a bill of lading to or from Australia has no effect
under their Carriage of Goods by Sea Act 1991, s.11.
191. Report of Working Group III, sixteenth session, A/CN9/591, [89].
192. Ibid.
193. Report of Working Group III, eighteenth session, A/CN 9/616, [271].
194. C v D [2007] EWCA Civ 1282; [2008] 1 Lloyd’s Rep 239. See also Shashoua v Sharma [2009] EWHC
957 (Comm).
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195. C Hooper, in von Ziegler et al, The Rotterdam Rules 2008 (2010), 323. Hooper further states (at 326),
“The choices offered by the Rotterdam Rules, Art.75(2) will probably convince carriers not to include arbitration
clauses in their form transport documents or electronic records. Such an agreement would allow the cargo side
to commence arbitration against the carrier in a place that might not have an established arbitration procedure.
Cargo claimants could choose a place of arbitration that would be inconvenient for the carrier or would place
the carrier at a disadvantage. By choosing an inconvenient place for the carrier to arbitrate, the cargo claimant
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 121

has stated that, if the Rotterdam Rules, Chapter 15 has the effect of ensuring that carriers
do not include arbitration clauses in bills of lading subject to the regime, it will be a
success.196 In this author’s view such an attitude is contrary to the spirit of the New York
Convention.
Chapter 15 does not address the issue of which tribunal is to determine the validity of
the arbitration agreement. This can lead to very significant problems, as we have already
seen in the European arena,197 as it may result in parallel arbitration and court proceedings
with the possibility of a conflicting arbitration award and court judgment with difficulties
as to enforcement.
The other major criticism of Chapter 15 is the fact that Art.75(4)(d) provides for the
applicable law to determine whether an arbitration agreement is binding on a third party.
This term is too vague and is likely to lead to major differences of approach by Contracting
States. Working Group III acknowledged this198 and recognised that it might be regarded
as a question of procedural law or substantive contract law. This in turn could lead to a
Contracting State’s refusing to recognise or enforce an arbitration award because its law as
to whether there was an arbitration clause which bound the parties at all differed from that
of the State in which the award was made.199 This provision goes to the heart of Chapter 15.
In a large proportion of cases, the claim for loss or damage will be made by the third party
to the contract of carriage. Whether that party will be bound by the arbitration agreement
will depend on which law is applicable and that may differ according to whether the
procedural or substantive law of the contract is applicable. This is far worse than the
current situation, as the possibilities have been multiplied by creating all the new options
as to the place of arbitration. At present, the parties at least know that if, for example, they
choose a London arbitration clause and English governing law, the arbitration agreement
will bind third parties, the arbitration will have the support of the English court200 and any
appeal will be in accordance with the Arbitration Act 1996. Failure to resolve this central
issue is a major defect of the Rotterdam Rules.
The two chapters on jurisdiction and arbitration in the Rotterdam Rules do not provide
the solution on jurisdiction and arbitration for carriage of goods by sea. First, it is unlikely
that there will be international harmony, as States have to opt in to those chapters which are
extremely controversial. Indeed, it is likely that there will be further diversity. Secondly,
where the States have all agreed on the same rules to determine liability, it is unnecessary
to have specific rules as between those States restricting party choice, provided a real

might apply settlement pressure on the carrier. This pressure would, ironically, be similar to the pressure now
applied by some carriers when choosing a forum in which to litigate or arbitrate. The Rotterdam Rules should,
of course, provide the same substantive law in all its contracting states, but the procedure may change. Carriers
would probably feel more comfortable in allowing cargo interests to sue in a court whose results may be more
predictable than would be obtained by the unknown procedure of an unfamiliar arbitration forum.”
196. See also Sturley et al, The Rotterdam Rules (2010), [12.071–12.074], [12.079] and [12.080].
197. See ante, 109 and 110.
198. Report of Working Group III, twentieth session, A/CN 9/642, [210].
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199. National Navigation Co v Endesa Generacion SA (The Wadi Sudr) [2009] EWCA Civ 1397; [2010] 1
Lloyd’s Rep 193.
200. Arbitration Act 1996, s.44, which applies regardless of the location of the seat of the arbitration (s.2).
See eg the Bermuda Form for liability insurance, which provides for London arbitration and New York law,
which was considered in C v D [2007] EWCA Civ 1282; [2008] 1 Lloyd’s Rep 239. See also Shashoua v Sharma
[2009] EWHC 957 (Comm); [2009] 2 Lloyd’s Rep 376.
 122 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

choice has been made. Thirdly, the provisions in the Rotterdam Rules on jurisdiction and
arbitration are much more restrictive and complex than the position under the English
common law rules, the EC Jurisdiction Regulation, Art.23, the Recast Regulation, Art.25
or the Arbitration Act 1996. None of those systems provides for consumer protection
in contracts for the carriage of goods by sea. Nor do they make any distinction between
volume and other contracts, a distinction which is difficult to justify, as the safeguards
put in place for volume contracts would be more than sufficient for all contracts to which
the Rotterdam Rules apply, both for the original parties and for third parties who take
the benefit of that contract. Thus, the two chapters have failed to provide a satisfactory
balance between the interests of the carrier and the cargo interests, especially where the
substantive rules are much more cargo friendly, as they shift the balance of risk between
the carrier and the shipper.201 A neutral choice of forum cannot bind a third party. The
place of arbitration should not be imposed on the carrier, as this could have a detrimental
economic impact on such countries if carriers preferred not to trade to them at the risk of
litigation with unpredictable results, which could be a significant factor in assessing the
profitability of certain trades. Fourthly, the Rotterdam Rules fail to resolve the central
issue whether a third party will be bound by the arbitration agreement, as the applicable
law must permit that person to be bound by the arbitration agreement. In summary, these
provisions are likely to lead to major differences of approach by Contracting States and
therefore do not provide international harmony. This is a fatal flaw of the Rotterdam Rules,
Chapter 15 on arbitration.

E. CONCLUSION

I have considered the differing approaches of English law, the European rules and existing
international Conventions, including the Rotterdam Rules, on the issue of whether a third
party is bound by the arbitration clause in a bill of lading.
By its very nature, shipping is commonly an international business which may involve
very many different places. By trading its vessel to different places, should a carrier
be obliged to hold any arbitration in any such place? The Rotterdam Rules would go
even further and would impose on the carrier arbitration in an inland place, where the
multimodal transport began or ended, where there is no expertise in maritime matters and
is very unsophisticated in legal matters in general or, even worse, corrupt. Alternatively,
should the parties be entitled to provide for a contractual choice of a place which is highly
regarded for its expertise and integrity?
For this author the answer is clear. Commercial certainty is of great importance in
contracts for the carriage of goods by sea. Where the parties have chosen an arbitration
clause, that choice should be given effect, as this is part of the price for the contract. A
neutral choice should therefore be allowed. The test for whether such a clause is binding
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should be clear and simple, so that money is not wasted on arguing about where a dispute

201. Eg, the limits of liability are higher, the seaworthiness obligation is continuous, the defence of
navigational fault is eliminated etc.
 SHOULD THIRD PARTIES BE BOUND BY ARBITRATION CLAUSES 123

should be determined rather than on the merits of the dispute itself. We should therefore
focus on that test. Once it has been satisfied, then the clause should bind a third party who
wishes to rely on the other terms of the contract. We should avoid variations of national
law, with the risk of conflicting decisions on jurisdiction and then on the merits of the
dispute. The tribunal allegedly chosen should decide whether there is a valid clause.
The English courts have adopted a pro-arbitration stance in its recent case law. One may
argue that this reflects current business practice, as it is very common that charterparties
are not drawn up and signed and that they refer to proforma charterparties concluded
previously, and that the law should move with the times. The problem is that, far from
the certainty that earlier case law demanded in bills of lading to protect third parties, the
position has now become very uncertain and, even though the bill of lading specifically
refers to arbitration, that is not actually what it provides for. The recent decisions do
nothing to encourage commercial parties to adopt less sloppy practices; and to pander
to such practices may be counterproductive, as it may actually drive more States
which are traditionally more cargo friendly to adopt the Hamburg Rules or indeed the
Rotterdam Rules, so that the cargo claimant may ignore the arbitration or jurisdiction
clause incorporated into the bill of lading. The pro-arbitration stance is also evident in:
the attitude to anti-suit injunctions where these are not inconsistent with EU law; granting
claims for damages for breach of an arbitration clause; and granting declaratory judgments
to enforce an arbitration award to ensure that it has the best chance of enforcement and to
take primacy over any subsequent conflicting foreign judgment.
Within Europe the Recast Regulation does not go far enough to avoid parallel proceedings
in arbitration and court proceedings in EU Member States. Differences remain between
national laws on the validity of arbitration clauses in the field of carriage of goods by sea
amongst the EU Member States, and even more so on the world scene. Recent attempts in
the Rotterdam Rules to harmonise the position on arbitration should be strongly resisted
and the European Union and other States should not opt in to the Chapter on arbitration in
those Rules. Significant challenges therefore remain.
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