Australia: Is my foreign arbitral award enforceable? The effect of COGSA on foreign law and jurisdiction clauses and enforcement in Australia

Last Updated: 20 March 2011
Article by Joe Hurley

This article looks at the effect that section 11 of the Carriage of Goods by Sea Act 1991 (Cth) (COGSA) can have on the prospects of enforcing, in Australia, a foreign arbitral award pursuant to a foreign jurisdiction/arbitration clause in a "sea carriage document". The issue is nothing altogether new, however, it still seems to take maritime practitioners by surprise!

COGSA seeks to implement, amongst other things, the Hague Visby Rules which deal with the liability of a carrier to cargo interests. But COGSA also has a protectionist aspect – namely, protecting Australian courts from having their jurisdiction "ousted" by parties to certain contracts. It does so by rendering invalid any clause in a sea carriage document that purports to preclude or limit the jurisdiction of an Australian court in respect of that sea carriage document (although it expressly preserves Australian arbitration). Such a provision is not unusual. However, the Australian provision arguably seems to go a couple of steps further, applying to (a) voyage charter parties and (b) both outbound and inbound shipments.

The International Arbitration Act 1974 (Cth) seeks to domestically implement the New York Convention[1] (the regime for the recognition and enforcement of foreign arbitral awards). There are certain instances when a party can ask an Australian court not to enforce a foreign arbitral award, including where to do so would be against public policy. The International Arbitration Act, in its own terms, surrenders itself to the primacy of COGSA (section 2C).

Section 11 of COGSA operates as follows:

  1. in relation to outbound shipments, section 11(1) of COGSA would strike down a choice of law clause in a sea carriage document which did not stipulate Australian law. Section 11(2)(b) would then strike down a foreign jurisdiction clause in relation to the same outbound shipment;
  2. in relation to inbound shipments, a foreign choice of law clause in the sea carriage document would be valid, however, section 11(2)(c)(i) of COGSA would strike down a foreign jurisdiction clause;
  3. section 11 of COGSA seems to apply to voyage charter parties, contrary to the meaning of "sea carriage document" in the Hague/Visby Rules.[2] This is despite what is normally a maritime practitioner's initial reaction that it should not apply to voyage charter parties, as they are not "sea carriage documents" within the meaning of the Hague/Visby Rules, such documents not being documents of title (like a Bill of Lading). This effect likely came about as a result of amendments to COGSA in 1997 which probably had the unintended consequence of rendering voyage charter parties (at least) subject to section 11(2)(c) by reason of the use of the words "sea carriage documents" consistent with what was formerly the position under the 1924 Act (as found by Carruthers J in The "Blooming Orchard"[3]) and notwithstanding that COGSA when originally enacted in 1991 was enacted in terms that removed charter parties from section 11 so as to overcome The "Blooming Orchard".

So, it seems, that under Australian law, section 11 of COGSA would strike down a foreign arbitration clause in a voyage charter party. So what? A foreign arbitrator determining a dispute, and any foreign court called upon to enforce any award, is likely to ignore the purported effect of section 11 of COGSA,[4] and so would not find that a foreign choice of law/foreign jurisdiction clause was invalid, and would not find that it (as an arbitral tribunal) had no jurisdiction, as a result of the application of section 11. However, the real issue arises if a (successful) party to any arbitral award needed to enforce that award in Australia. This is because any attempt to enforce the award may fall foul of section 8(7)(b) of the International Arbitration Act 1974 (Cth), which provides that if enforcement of an award would be contrary to public policy, then the Australian court can refuse to enforce it. The argument would likely be that, to allow the foreign award to be enforced in circumstances where the arbitration agreement would be invalid in Australia would be to circumvent the prohibition in section 11(2)(c) and the intention/policy behind it, and therefore be contrary to public policy so that the court could refuse to enforce it.

This places parties in a position where they must make a choice – abandon the idea of a foreign arbitration and commence proceedings in Australia; or take a risk and see the foreign arbitration through to finality, and attempt to enforce it in Australia (hoping that either the court does not find that a voyage charter party is a "sea carriage document" within the meaning of COGSA, or that the court might nonetheless enforce the award (noting that refusal to enforce it is discretionary). The issue is not one of Australia's failure to domestically implement the New York Convention. Rather, it is the protectionist stance taken by COGSA and its anomalous application to voyage charter parties which does not generally sit comfortably within the description of a "sea carriage document".

Therefore, parties to a voyage charter party or other sea carriage document for inbound or outbound voyages should be aware of section 11 of COGSA, and should consider its possible effect on enforcement of a foreign award in Australia. Clients should consider early whether the assistance of Australian courts may be needed to enforce any arbitral award (e.g. because the defendant's assets are in Australia), due to the later issues that may arise with enforceability if the award was made contrary to COGSA. The parties could also consider an "ad hoc" agreement or submission to arbitration which, being apart from or outside the voyage charterparty, would be beyond the reach of section 11 of COGSA and therefore valid.[5]

[1] Convention on the Recognition and Enforcement of Foreign Arbitration Awards 1958.

[2] Hi-Fert Pty Ltd v United Shipping Adriatic Inc & Ors (1998) 89 FCR 166 (Federal Court of Australia) where Emmett J said that section 11 of COGSA has "nothing to do with in Australia the application of the amended Hague Rules".

[3] Sonmez Denizcilik Ve Ticaret Anonim Sirketi v The Blooming Orchard (1990) 22 NSWLR 273, considering what was then section 9 of the Sea Carriage of Goods Act 1924 (Cth), relevantly identical to what is now section 11 of COGSA. Carruthers J's decision on this issue was followed by Hill J in BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211. See also Bulk Chartering & Consultants Australia Pty Ltd v T & T Metal Trading Pty Ltd (1993) 31 NSWLR 18.

[4] This has been the attitude of English courts. For example, the High Court of Australia in Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418 held that a provision of the Insurance Contracts Act 1984 (Cth) overrode an English choice of law clause in an insurance contract. Nonetheless, two years later the English High Court ignored the High Court of Australia finding that the same contract was governed by English law because of the choice of law clause (Akai v PICC [1998] 1 Lloyd's Rep 90). Even more recently, a similar attitude was displayed by an English court in OT Africa Line Ltd v Magic Sportswear [2005] 1 Lloyd's Rep 252; and [2005] 2 Lloyd's Rep 170, where an anti-suit injunction was issued to enforce an English arbitration clause in a bill of lading with an English choice of law clause in circumstances where Canadian legislation gave the claimant a right to sue in Canada. Some English judges have however suggested that they might recognise the effect of foreign legislation on a contract governed by English law because of comity of nations (The 'Al Battani' [1993] 2 Lloyd's Rep 210), although the Federal Court of Australia has recognised that the likely attitude of English courts would be to ignore s ection 11 of COGSA (Walter Rau [2005] FCA 1102).

[5] See for example Westminster Chemicals & Produce Ltd v Eichholz & Loeser [1954] 1 Lloyd's Rep 99; The "Tuyuti" [1984] QB 838; [1984] 2 Lloyd's Rep 51; Furness Withy (Australia) Pty Ltd v Metal Distributors (UK) Ltd ("The Amazonia") [1989] 1 Lloyd's Rep 403; Bulk Chartering & Consultants Australia Pty Ltd v T & T Metal Trading Pty Ltd (1993) 31 NSWLR 18.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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