Australia: Foreign arbitration awards on voyage charterparties enforceable under Australian law

On 18 September 2013, the Full Federal Court handed down judgment in the appeal in Dampskibsselskabet Norden A/S v Gladstone Civil Group Pty Ltd [2013] FCAFC 107. The Full Court (Buchanan J dissenting) overturned the first instance decision of Foster J and held that charterparties are not "sea carriage documents" as defined in the Carriage of Goods by Sea Act 1991 (Cth) (COGSA).

Dispute over charterer's liability to pay demurrage at both loading and discharging ports

Dampskibsselskabet Norden A/S (DKN) entered into a voyage charterparty with the charterer Gladstone Civil Group Pty Ltd (formerly Beach Building & Civil Group Pty Ltd) for the carriage of coal from Australia to China. The terms of the voyage charterparty required the parties to submit to arbitration in London in the event of any dispute arising out of the voyage charterparty.

A dispute arose in respect of the charterer's liability to pay demurrage at both the loading and discharging ports. DKN was successful at arbitration in the UK and obtained an award against the charterer for demurrage charges of US$824,663.18 plus interest and costs. DKN then sought to have the arbitral award entered and enforced in Australia.

Application for enforcement of arbitral award dismissed at first instance

At first instance, Foster J dismissed DKN's application for enforcement of the arbitral award. In his judgment, his Honour placed emphasis on the earlier decisions in BHP Trading Asia Ltd v Oceaname Shipping (1996) 67 FCR 211 and "The Blooming Orchard" (No. 2) [1992] NSWLR 273, which held that a charterparty was a document relating to the carriage of goods under the earlier Sea-Carriage of Goods Act 1924.

His Honour held that the voyage charterparty was a "sea carriage document" and that the arbitration clause in the voyage charterparty was invalid by operation of section 11(2) of COGSA, as it purported to preclude or limit the jurisdiction of an Australian court in respect of a "sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia".

Appeal allowed, voyage charterparties not "sea carriage documents"

The Full Federal Court (Mansfield and Rares JJ agreeing, Buchanan J dissenting) allowed DKN's appeal, rejecting the trial judge's construction of the definition of "sea carriage document".

Mansfield and Rares JJ, in separate but concurring judgments, considered that the amended Hague Rules incorporated in COGSA maintained the traditional distinction between a charterparty and marine cargo liability based on a sea carriage document.

Their Honours pointed to Articles 10(6) and 10(7) of the amended Hague Rules, which specifically contemplate application of the Hague Rules in circumstances where a "sea carriage document" is issued as distinct from a charterparty. The point of distinction in those provisions, it was held, would be a nullity if a charterparty was construed as a sea carriage document.

Rares J construed the definition of "sea carriage documents" in light of COGSA as a whole, including the modified Hague Rules in the Schedule to the Act. His Honour traced the legislative history of marine cargo liability and concluded that section 11 of COGSA was designed to protect the interests of Australian shippers and consignees, which could otherwise be forced contractually to litigate or arbitrate outside Australia.

That protection does not extend to shipowners and charterers who enter into freely concluded bargains, which subject them to the well recognised mechanisms of international arbitration.

Stuart Hetherington Adrian Konstantinidis
Transport and logistics
Colin Biggers & Paisley

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