View source for Sideridraulic Systems v BBC Chartering & Logistics

DMC/SandT/12/15

'''England'''

'''Sideridraulic Systems SpA v BBC Chartering & Logistic GmbH & Co KG'''

'''English Queen’s Bench (Commercial Court): Andrew Smith J: [2011] EWHC 3106 (Comm): 30 November 2011'''

Mr Stewart Buckingham, instructed by Holman Fenwick Willan LLP, for the Defendant BBC Chartering 

Mr Yash Kulkarni, instructed by Clyde & Co LLP, for the Claimant, Sideridraulic Systems 

'''CARRIAGE OF GOODS BY SEA: INTERPRETATION OF MASTER’S REMARK IN BILL OF LADING: WHETHER CARGO WAS DECK CARGO UNDER HAGUE-VISBY RULES: IF DECK CARGO, WHETHER PARTIES AGREED THAT HAGUE-VISBY RULES NEVERTHELESS APPLIED: WHETHER US COURTS EXCLUSIVE JURISDICTION CLAUSE APPLIED'''

'''Summary'''

The present case was a cargo dispute arising out of a bill of lading with a Master’s remark that “All cargo loaded from open storage area. All cargo carried on deck at shipper’s/charterer’s/receiver’s risk as to perils inherent in such carriage… And on all other respects subject to provisions of the United States Carriage of Goods by Sea Act 1936 [“US COGSA”].” The English Commercial Court held that on its proper construction, the remark should be read as a statement of fact about how the cargo was to be carried. Thus, the cargo was “by the contract of carriage… stated as being carried on deck” for the purpose of the Hague-Visby Rules and constituted deck cargo. Accordingly, the HVR did not apply. Instead, the carriage was governed by US COGSA and the exclusive jurisdiction clause applied. Alabama courts had exclusive jurisdiction over the dispute. Leave granted by the English court to serve an anti-suit injunction claim against the defendant carriers to discontinue the proceedings in Alabama was thus set aside. 

This note has been contributed by Ken To-ching Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.

'''Background'''

The Claimants were the cargo interests. The Defendants issued the relevant bills of lading and were the contractual carriers. 

By a fixture recap dated 16 September 2009, the Defendants’ agents booked the carriage of two shipments of filter tanks from Italy to Alabama in November 2009. A provision giving the Defendants liberty to carry the tanks as deck cargo was included: “shipment under/on deck in owners’ option, deck cargo at merchant risk and b/l to be marked accordingly.”

The first shipment of 13 tanks was completed without incident.
 
The second shipment of 10 tanks was carried under a bill of lading dated 24 November 2009 (“the Bill”). Parties agreed that the tanks were carried on deck. It was stated on the face of the Bill under “Master’s remarks” that, “All cargo loaded from open storage area. All cargo carried on deck at shipper’s/charterer’s/receiver’s risk as to perils inherent in such carriage… And on all other respects subject to provisions of the United States Carriage of Goods by Sea Act 1936 [“US COGSA”].”

A box on the front of the bill stated “Special terms as per Booking note dated: 16/09/2009”. It was taken that this referred to the fixture recap. 

The reverse of the bill contained the following terms:

“3. Liability under the contract

(a) … In trades where [the Hague-Visby Rules (“the Rules”)] apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading…

“4. Law and Jurisdiction

Except as provided elsewhere herein, any dispute arising under or in connection with this Bill of lading shall be referred to arbitration in London… English law to apply.

Special Clause B(i) provided that where US COGSA applied, the carrier might elect to commence suit in a court of proper jurisdiction in the United States, in which case that court would have exclusive jurisdiction.

In that second shipment, one of the tanks was lost and another damaged. The Claimants contended that the Defendants were liable for damages of some US$400,000. They first brought proceedings in Alabama on 23 December 2010 against the owners of the carrying vessel (who were not the Defendants). 

On 27 December 2010, the owners of the vessel and the Defendants brought proceedings in Alabama against the Claimants for a declaration that the limits in the US COGSA applied. 

On 24 March 2011, the Claimants commenced an arbitration reference against the Defendants in London. This was disputed by the Defendants, They denied being party to any arbitration agreement and asserted that the courts of Alabama had exclusive jurisdiction in relation to the dispute. 

On 17 June 2011, the Claimants issued an arbitration claim form, seeking an anti-suit injunction restraining the Defendants from continuing proceedings in Alabama on the ground that they were being pursued in breach of an arbitration agreement in the bill of lading. They also sought a declaration that the Defendants were bound by the terms of the arbitration agreement. 

On 21 June 2011, Flaux J granted the Claimants permission to serve the claim form out of the jurisdiction  on the Defendants. 

The Defendants now applied to set aside that permission and for an order that the court had no jurisdiction in respect of the claim and declaration. They argued that the tanks were deck cargo, and that the Hague-Visby Rules did not apply. Instead, the Bill was subject to US COGSA, and the courts of Alabama should have exclusive jurisdiction over the dispute. The arbitration agreement in clause 4 of the Bill did not apply by virtue of its opening words – “Except as elsewhere provided herein…”. 

The following issues were before the Court:

(i) Whether the tanks were deck cargo and, more specifically whether they were, as per Article I(c) of the Rules, “by the contract of carriage… stated as being carried on deck”;

(ii) If so, whether the Rules nevertheless applied to the carriage because of section 1(6) and 1(7) of the Carriage of Goods by Sea Act 1971 (“COGSA 1971”); and

(iii) If not, whether US COGSA still applied to the carriage so that the US courts had  jurisdiction.

Sections 1(6) and 1(7) of COGSA 1971 provide:

“(6) Without prejudice to Article X(c) of the rules, the Rules shall have the force of law in relation to-

(a) any bill of lading if the contract contained in or evidenced by it expressly provides that the rules shall govern the contract…

(7) If and so far as the contract contained in or evidenced by a bill of lading… within paragraph (a)… of subsection (6) above applies to deck cargo or live animals, the Rules as given the force of law by that subsection shall have effect as if Article 1(c) did not exclude deck cargo and live animals. In this subsection “deck cargo” means cargo which by the contract of carriage is stated as being carried on deck and is so carried.”

Article I(c) of the Rules provides as follows:

““Goods” includes goods, wares, merchandise, and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried…”

'''Judgment''' 

In relation to Issue (i) - whether the tanks were “deck cargo”, the “fixture recap” only stated that the carriers were at liberty to carry them on deck. The judge was of the view that, as the Defendants were asserting that the compulsory statutory regime of the Rules did not apply by reason of the deck cargo exception, it was for them to establish in the Bill that the cargo would be carried on deck. 

The Court held that this was so established and that the tanks were, therefore, deck cargo. The ordinary and natural meaning of the Master’s remark in the Bill was that all cargo was carried on deck at shipper’s risk as to perils inherent in such carriage. Further, it shared a similar grammatical structure with another remark that “All cargo loaded from open storage area”, where a verb “was” should be interpolated after the word “cargo”. 
Thus, the Rules did not apply and the Bill was governed by US COGSA. A US court had exclusive jurisdiction over the case under Special Clause B(i).

In relation to Issue (ii), the Court held that while parties to a carriage contract could agree that the Hague-Visby Rules applied to the carriage of deck cargo, they had not done so on the facts of this case Rather, they had agreed under clause 3(a) that the Hague-Visby Rules would only be incorporated in the Bill in trades where it applied compulsorily. This was clearly not the case for deck cargo. Thus, Article III(8) of the Rules did not operate to displace the application of US COGSA.

The Defendant was accordingly successful in its application to set aside leave to serve out of jurisdiction.