Australia: Foreign arbitration clauses in voyage charter parties held not to be effective

In brief - Federal Court dismisses application to have award registered and enforced in Australia

In a decision handed down on 29 June 2012 in the case Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd 2012 FCA 696, the Federal Court declined to permit an arbitration award made in London to be enforced in Australia because the arbitration agreement was contained in a voyage charter party.

Decision clarifies ambiguous aspect of maritime law

Justice Foster, sitting as a first instance Judge in the Federal Court of Australia, has determined an issue that has been troubling maritime lawyers since the Federal Government introduced amendments to the Carriage of Goods by Sea Act 1991 (COGSA) in 1998. He has declined to permit an arbitration award, made in London, to be enforced in Australia, by reason of the fact that the arbitration agreement was contained in a voyage charter party.

Justice Foster dismissed the application to have the award registered and enforced in Australia pursuant to the International Arbitration Act 1974 (Cth) as amended because, he held, a voyage charter party is a "sea carriage document" and a provision which purports to preclude or limit the jurisdiction of a court in Australia in such a document is ineffective by reason of section 11(2) of COGSA.

Charterer not named as contracting party on the face of the charter party

The case is also of interest in that the Court had to consider whether or not the arbitration award was registrable under the International Arbitration Act in circumstances in which the charterer, opposing its registration, argued that as it was not named as a contracting party on the face of the charter party, it was not bound by either of the two awards that had been given.

Vessel chartered to carry coal from Dalrymple Bay to China

The facts of the case were that a charter party was entered into on an Americanised Welsh coal charter (AMWELSH 93). The applicant shipowner, Dampskibsselskabet Norden (DKN) chartered a vessel to carry coal from Dalrymple Bay Coal Terminal in Queensland to China. The charter party terms were evidenced by a clean final recap email in which the charterer was described in the following terms:

"Acct: Beach Building & Construction Group (of which Bowen Basin Coal Group forms a part), Australia."

In the arbitration DKN contended that it was always intended that the charterer would be Beach Building & Civil Group Pty Ltd (Beach Civil). The arbitrator had rectified the charter party by specifying that entity as the charterer.

Dispute over liability of charterer to pay demurrage at loading and discharging ports

The dispute in the arbitration centred upon the liability of the charterer to pay demurrage at both the loading and discharging ports. Beach Civil contended in the arbitration in relation to two preliminary issues, namely the arbitrator's jurisdiction to hear an arbitration concerning a dispute arising out of the charter party and the identity/correct name of the charterer, that by reason of section 11 of COGSA, the arbitration clause was invalid and unenforceable.

The arbitrator determined that the arbitration clause was valid and that the name of the charterer had been incorrectly recorded in the charter party. The charterer then took no further part in the arbitration. The arbitrator awarded the owners US$824,663.18.

Was Beach Civil the charterer?

Before Foster J, Beach Civil did not produce any evidence to support its assertion that it was not the charterer and simply pointed to the description in the charter party in support of its assertion that it was not the named charterer. Foster J's decision on that issue was to the effect that the applicant had satisfied the provisions of section 9(5) of the International Arbitration Act which says that a document produced to the Court in accordance with section 9(1) : "is, upon mere production, receivable by the Court as prima facie evidence of the matters to which it relates".

A duly certified copy of the charter party and duly certified copies of each of the awards that had been made had been produced to the Court and therefore the owners complied with section 9. Reaching his decision on this issue, Foster J relied upon the decisions of the English Courts in Dardana Ltd v Yukos Oil Co [2002] 2 Lloyds Rep 326 and Dallah Real Estate v Ministry of Religious Affairs [2010] 2 Lloyds Rep 691.

His Honour also referred to the majority judgment in the Victorian Court of Appeal in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] 282 ALR 717 and indicated a preference for the approach by the English Courts, in reaching the view that "as long as the documents produced to the Court at the first stage establish that the arbitrators had purported to act pursuant to the relevant arbitration agreement, that was sufficient to move the relevant enquiry and the onus of proof onto the award debtor". Foster J stressed that "what is required to be produced is the arbitration agreement under which the award "purports" to have been made".

Accordingly the charterer's challenge to the enforcement of the awards in Australia failed in its reliance on the International Arbitration Act and the argument that it was not a party to the charter party.

Requirement to submit to arbitration abroad is void

As indicated above, however, the charterer succeeded in reliance on section 11 of COGSA. In reaching that conclusion, Foster J relied upon earlier decisions under the Sea-Carriage of Goods Act 1924, although the wording differed slightly from the more recent COGSA. (Those earlier decisions were BHP Trading Asia Ltd v Oceaname Shipping Ltd [1996] 67 FCR 211 and the "Blooming Orchard" (No. 2) [1990] 22 NSWLR 273 in which it had been held that a voyage charter party was for relevant purposes a document relating to the Carriage of Goods and that a requirement to submit to arbitration abroad in such a contract was void).

The owners relied, in part, on the definition contained in Article 1.1(g) of the Amended Hague Rules which are contained in Schedule 1A to COGSA. It provides that "a sea carriage document" includes "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". His Honour took the view that the words which appear outside the parentheses should not be read down by reference to the types of documents described in the text which is within those parentheses.

In concluding his judgment, Foster J noted that his decision was contrary to opinions expressed by Anderson J of the Supreme Court of South Australia in Jebsens International (Australia) Pty Ltd v Interfert Australia Pty Ltd [2012] SASC 50, which he distinguished.

Stuart Hetherington
Trade and transport law
Colin Biggers & Paisley

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