Dampskibsselskabet Norden A/S v Gladstone Civil Pty Ltd
Dampskibsselskabet Norden A/S v Gladstone Civil Pty Ltd
Full Court, Federal Court of Australia: Mansfield, Rares and Buchanan JJ:  FCFCA 107, 18 September 2013
ENFORCEMENT IN AUSTRALIA OF FOREIGN ARBITRATION AWARD UNDER VOYAGE CHARTER: WHETHER VOYAGE CHARTER A “SEA CARRIAGE DOCUMENT” FOR THE PURPOSES OF S.11 OF THE AUSTRALIAN CARRIAGE OF GOODS BY SEA ACT 1991: WHETHER ARBITRATION AWARD UNENFORCEABLE BECAUSE NOT MADE IN AUSTRALIA
Counsel for Appellant: G.J. Nell SC and J.A. Soars, instructed by James Neill
Counsel for Respondent: L. Jurth, instructed by Worcester & Co
This was an appeal from the judgment of Foster J of the Federal Court of Australia in Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd  FCA 696 (noted at DMC/SandT/12/22) in which his Honour had held (1) that a voyage charterparty was a “sea carriage document” for the purposes of s.11 of the Australian Carriage of Goods by Sea Act 1991(COGSA); (2) that, as a result, a foreign arbitration clause within such a charterparty for the carriage of goods from Australia was rendered void by s.11; and (3) that any award made in an arbitration conducted pursuant to a foreign arbitration clause in such a voyage charterparty was, as a consequence, unenforceable under Australian law. By a 2:1 majority (Mansfield and Rares JJ; Buchanan J dissenting) the Full Court of the Federal Court of Australia has allowed an appeal from the judgment of Foster J, the majority concluding (1) that a voyage charterparty was not a “sea carriage document” for the purposes of s.11 of COGSA when that phrase and section were considered in context; (2) that a foreign arbitration clause in such a charterparty was valid; and (3) that any award made in an arbitration conducted pursuant to such a clause was capable of enforcement in Australia.
Case note contributed by Greg Nell SC, Counsel for the Appellant in this case and an international contributor to this website
The proceedings concerned a claim for demurrage arising from the carriage of a cargo of coal from Dalrymple Bay, Australia to Chinese ports on the mv “Ocean Baron” under a voyage charterparty between the Appellant as owner and the Respondent as charterer. The arbitration clause within that charterparty called for arbitration in London with disputes to be governed by English law. The Appellant commenced arbitration in London pursuant to that arbitration clause in respect of its claim for demurrage and obtained an award in its favour against the Respondent. The Appellant then sought to enforce that award in Australia pursuant to s.8 of the Australian International Arbitration Act 1974 (IAA) which gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
The Respondent resisted the enforcement of the award on a number of grounds, including on the basis that the arbitration clause in the charterparty was void by operation of s.11 of COGSA and that the award which the Appellant had obtained in London was therefore unenforceable in Australia and under Australian law.
Section 11(1) of COGSA is a mandatory choice of law clause, by which all parties to certain specified contracts of carriage relating to the shipment of goods from Australia are taken to have intended to contract in accordance with Australian law. Section 11(2) preserves the jurisdiction of Australian courts in respect of certain contracts for the carriage of goods both to and from Australia. In particular, s.11(2)(b), when read in conjunction with s.11(1)(a), provides that any agreement (whether made in Australia or elsewhere) has no effect insofar as it purports to preclude or limit the application of Australian law to export shipments and the jurisdiction of Australian courts in respect of claims concerning both export and import shipments. When s.11 was originally enacted in 1991, its operation was limited to particular types of contracts of carriage, namely “a bill of lading, or similar document of title”. As such, it did not apply to a charterparty, including a voyage charterparty, which was neither a bill of lading nor similar document of title. In this regard, s.11 represented a departure from its predecessor provision (s.9 of the Australian Sea-Carriage of Goods Act 1924) which contained similar terms striking down foreign arbitration and jurisdiction clauses in (inter alia) any “document relating to the carriage of goods from any place in Australia” and thereby preserving the jurisdiction of Australian courts in respect of claims relating to such carriage. In Sonmez Denizcilik Ve Ticaret Anonim Sirketi v mv “Blooming Orchard” (No. 2) (1990) 22 NSWLR 273, the Supreme Court of New South Wales held that a voyage charterparty was a document relating to the carriage of goods within the meaning of s.9 of the 1924 Act and that a foreign arbitration clause in such a charterparty was as a consequence rendered void by reason of that section.
In 1997 and 1998, amendments were made to ss.11(1)(a) and 11(2)(c)(i) of COGSA which omitted the words “a bill of lading, or similar document of title” and substituted in lieu thereof the words “a sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia” and “a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia” respectively. The phrase “sea carriage document” introduced by these amendments was not defined in COGSA. However, there was a definition in Article 1(1)(g) of the “amended Hague Rules” which Rules were introduced by regulation as a new Schedule 1A to COGSA in 1998 at the same time as the above amendments to s.11(1) and 11(2). This definition referred to:
“(i) a bill of lading; or
(ii) a negotiable document of title that is similar to a bill of lading and that contains or evidences a contract of carriage of goods by sea; or
(iii) a bill of lading that, by law, is not negotiable; or
(iv) a non-negotiable document (including a consignment note and a document of the kind known as a sea waybill or the kind known as a ship’s delivery order) that either contains or evidences a contract of carriage of goods by sea.”
This definition applied when the phrase was used in the amended Hague Rules but was not expressly said to apply to the provisions or application of COGSA itself.
The Judgment at First Instance[]
At first instance, Foster J upheld the Respondent’s submission that the arbitration clause was invalid under s.11 and any award made pursuant to that clause was thereby unenforceable. In doing so, his Honour found that the legislature had intended by the various amendments made to COGSA in 1997 and 1998 to broaden the class of documents covered by ss.11(1)(a) and 11(2)(b) from the narrower class described by the terms of s.11 as originally enacted. Further, his Honour concluded that assistance could be obtained in ascertaining the meaning of the amended terms of ss. 11(1)(a) and 11(2)(b) – in particular to the extent that they refer to a “sea carriage document relating to the carriage of goods” – from the definition in Article 1(1)(g)(iv) of the amended Hague Rules (although his Honour concluded that recourse could not be had to other provisions of the amended Rules for that purpose). But in construing this definition, Foster J adopted “a meaning reflective of ordinary English usage” and concluded that because the charterparty in which the arbitration clause was found “is a contract of carriage of goods by sea it “contains or evidences” such a contract” and is “therefore a “sea carriage document” within the meaning of section 11(1)(a)”. According to his Honour “the same result would be arrived at by simply construing the phrase “sea carriage document” in section 11(1)(a), without recourse to Art 1 (1)(g)(iv) of the amended Hague Rules”.
Accordingly, Foster J concluded (1) that the arbitration clause in the relevant charterparty had no effect by the operation of ss.11(1)(a) and 11(2)(b) of COGSA, given that it purported to preclude or limit the jurisdiction of Australian courts in relation to disputes under that charterparty; (2) that the Appellant could therefore not rely upon the arbitration clause as the source of the arbitrator’s jurisdiction and power to make the award that the Appellant was seeking to enforce in Australia; and (3) that the award could therefore not be enforced in Australia pursuant to the IAA. This was also having regard to s.2C of the IAA, which expressly provided that nothing in the IAA affected the operation of s.11 of COGSA and which Foster J concluded “seems to carve out of the scheme of the [IAA] such maritime claims as are covered by s.11”.
The Judgment on Appeal
However, on appeal, the majority (Mansfield and Rares JJ) concluded that a voyage charterparty was not a sea carriage document within the meaning of s.11 of COGSA.
This was especially when regard was had to both (a) the legislative history of s.11 and (b) the context in which that section appeared within COGSA in its present terms. Relevantly, that context included a distinction found in the amended Hague Rules – in particular in Articles 1(c), 5, 10(6) and 10(7) – between a sea carriage document (being a document or contract to which the amended Rules applied) and a charterparty (being a document or contract of carriage to which the amended Rules did not apply directly or by their express terms). It was the view of the majority that this same distinction should also be carried through to the interpretation of s.11 of COGSA (a view that Foster J had rejected at first instance, as did the dissenting judge, Buchanan J).
In reaching the above conclusion, the majority of the Full Court also relied upon the policy considerations underlying the protection that the legislature was seeking to extend to shippers and consignees by provisions such as s.11 of COGSA (and its predecessor s.9 of the 1924 Act) and the distinction that was again drawn in this regard between charterparties (including voyage charterparties) and bills of lading and similar contracts of carriage. This protection was directed at shipments under bills of lading and similar contracts of carriage, where there was a perceived imbalance between the bargaining power of the carrier and cargo interests. This was the same imbalance that was sought to be regulated and protected by conventions such as the Hague and Hague Visby Rules. However, there was no such imbalance or a need for protection in relation to charterparties, which were generally negotiated in a free market, where bargaining power may vary as between the owner and charterer depending on the state of the market at the time and where the use of arbitration as a mechanism for the resolution of disputes was widespread and well recognized (as the Federal Court of Appeal in Canada had observed in Canada Moon Shipping Co Ltd c Companhia Siderurgica Paulista-Cosipa (the Federal Ems) 2013 AMC 319).
The majority also found that the context in which the relevant terms of s.11 were to be considered also included the enactment in 1997 and 1998 of the Sea Carriage Document Acts of each of the States and Territories of Australia, at the same time as the relevant amendments to s.11 were made. These Acts were not only cognate legislation dealing with the transfer of rights under (amongst other things) sea carriage documents to which the amended Hague Rules applied, but also reflected both a narrow definition of sea carriage documents and the above distinction between such documents and voyage charterparties (consistent with the majority’s view of the scope of that phrase and distinction to be found in the amended Hague Rules). At paragraph  of his judgment, Rares J concluded that the purpose of s.11 of COGSA was to protect, as part of a regime of marine cargo liability under bills of lading and similar contracts of carriage, the interests of Australian shippers and consignees from being forced contractually to litigate or arbitrate outside Australia. However, this purpose did not extend to the protection of charterers or shipowners from the consequences of enforcement of their freely negotiated charterparties subjecting them to the well recognized and usual mechanism of international arbitration in their chosen venue. Whilst Mansfield J acknowledged (at ) that the construction of s.11 of COGSA found by Foster J was an available one on the language of the section, his Honour nevertheless concluded that the better approach was to adopt the alternative construction in which the charterparty was not a “sea carriage document” for the purposes of s.11(2)(b) of COGSA both for the reasons given by Rares J (with which Mansfield J expressly agreed at ) and for the reasons also set out in paragraphs - of his judgment.
In contrast to the views of the majority, the dissenting judge, Buchanan J, concluded that the findings and conclusions of Foster J were correct and should not be disturbed. In particular, his Honour found that the phrase “sea carriage document” in s.11(1)(a) and s.11(2) of COGSA had the defined meaning in Article 1(1)(g) of the amended Hague Rules. Like Foster J, Buchanan J favoured a literal interpretation of that definition, which was sufficient to include a voyage charterparty at least where the terms of that charter provided for the carriage of goods (as the terms of the charterparty between the Appellant and Respondent expressly did here). However, unlike the majority, Buchanan J concluded that the scope of the definition of the phrase “sea carriage document” was not confined to only those documents to which the amended Hague Rules applied. Nor in his Honour’s opinion, was s.11 of COGSA or its construction to be similarly confined.
It has been suggested that the possible application of s.11 to voyage charterparties in the way found by Foster J was an unintended consequence of the 1998 amendments to COGSA, which (as the majority found) were otherwise directed at marine cargo (bill of lading etc) liability claims. The practical effect of the majority judgment is to reinstate the position as it existed under s.11 of COGSA in the terms in which that section was originally enacted in 1991.
The Full Court’s judgment also removes the uncertainty as to the enforceability in Australia of a foreign arbitral award which results from a claim arising under a voyage charterparty relating to an Australian export or import of cargo which has existed since June 2012 as a consequence of the inconsistency between the judgment of Foster J and the earlier ruling of Anderson J of the Supreme Court of South Australia in Jebsens International (Australia) Pty Ltd v Interfert Pty Ltd (0211) 112 SASR 297 who had concluded that a voyage charterparty was not a sea carriage document for the purposes of s.11. In his judgment, Foster J expressly disagreed with this conclusion in Jebsens. Whilst the approach of the majority on appeal is consistent with the ruling in Jebsens, neither of the majority judges mentioned or relied upon that earlier decision.
The effect of the Full Court’s judgment is not confined to enhancing or promoting the enforcement of foreign awards made under foreign arbitration clauses in voyage charterparties (in particular by removing a ground on which enforcement might otherwise have been resisted by an award debtor). If the conclusion of Foster J as to the invalidity of a foreign arbitration clause in a voyage charterparty had prevailed, then a defendant to proceedings brought before an Australian Court contrary to such a clause would also be unable to rely upon that clause as grounds for an application for a stay of those curial proceedings in favour of the arbitration that the parties had otherwise expressly agreed to. The effect of the majority judgment is to reinstate the entitlement of parties to foreign arbitration clauses in voyage charterparties to insist upon claims against them being pursued in accordance with the agreement of the parties contained within those clauses and to seek a stay of any proceedings brought in a court contrary to that agreement.
In short, as a consequence of the Full Court’s decision, the parties to voyage charterparties relating to the carriage of cargo both in and out of Australia are once again free to include within their charterparties clauses providing for any disputes between them to be resolved by foreign arbitration or exclusive jurisdiction clauses. Moreover, those parties can also now expect that those clauses will be upheld and enforced by the Australian courts (in both of the ways referred to above). However, foreign arbitration and exclusive jurisdiction clauses in bills of lading or similar sea carriage documents relating to the carriage of cargo in and out of Australia will continue to be rendered void and of no effect by s.11 of COGSA. The Full Court’s decision does not in any way alter that aspect of Australian law. Accordingly, if the parties to such bills of lading or sea carriage documents wish for all claims arising out of the carriage of goods under those documents to be determined by arbitration, then that can only be done by an arbitration conducted in Australia, which is excluded from the operation of s.11(2) of COGSA, by reason of s.11(3).
S.11 of the Carriage of Goods by Sea Act 1991 reads in material part as follows:
(1) All parties to:
(a) a sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia; …. are taken to have intended to contract according to the laws in force at the place of shipment.
(2) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to: …..
(c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of:
(i) a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia; or
(3) An agreement, or a provision of an agreement, that provides for the resolution of a dispute by arbitration is not made ineffective by subsection (2) (despite the fact that it may preclude or limit the jurisdiction of a court) if, under the agreement or provision, the arbitration must be conducted in Australia.