Companhia Siderurgica Paulista (COSIPA), BLG's client,
concluded a Gencon-form voyage charterparty with Fednav (disponent
owner of the defendant vessel), for the carriage of steel coils
from Brazil to the U.S.A. and Canada. The charter contained a New
York arbitration clause. COSIPA undertook to load, stow and trim
the cargo, and insisted on covering the coils with plastic
sheeting. Because Fednav was concerned about possible condensation
damage to the coils that might result from using the sheeting,
COSIPA had issued before the voyage, a letter of indemnity to
Fednav (LOI), undertaking to hold Fednav harmless against any such
claims. Following discharge, T. Co. Metals, the cargo consignee,
sued Fednav and the shipowner in personam and defendant
ship in rem for condensation damage to the coils. The defendants,
invoking subsect. 46(1) of the Marine Liability Act (MLA),
sought to take third-party proceedings against COSIPA in the same
Federal Court action, under the voyage charterparty and the LOI.
COSIPA moved for an order staying the third party claim, in favour
of either New York arbitration under the voyage charterparty or in
the courts of Brazil, on grounds of forum nonconveniens.
Both Prothonotary Morneau and (in appeal) Justice Scott of the
Federal Court found that the LOI issued by COSIPA was, in fact, an
amendment to the COSIPA-Fednav voyage charterparty and therefore
subject to the New York arbitration clause of that charter. The
Prothonotary nevertheless held that the voyage charterparty was a
"contract for the carriage of goods by water" within the
meaning of the MLA, subsect. 46(1). Therefore, because that
contract provided for the discharge of the cargo in Canada, Fednav
and the shipowner had the option of trying their third-party claim
against COSIPA before the Federal Court in Canada. The Prothonotary
also dismissed COSIPA's forum non conveniens motion,
finding only three factors clearly favouring Brazil litigation.
Justice Scott reversed the Prothonotary on the application of s.
46. Reading the term "contract for the carriage of goods by
water" in its context and in light of the scheme of the MLA
and the intention of Parliament, the court concluded that the MLA
contemplated giving effect in Canada to the Hague/Visby Rules,
while also adopting the Hamburg Rules with a view to their
eventually replacing Hague/Visby. Both those international
conventions excluded charter-parties, as long as the bills of
lading issued under them were not negotiated to third parties, as
was the case here, where the bills had remained in COSIPA's
hands at all material times. In con-sequence, COSIPA's
relationship with Fednav remained subject to the voyage
charterparty alone, requiring the third-party proceedings under the
charter and the LOI to be arbitrated in New York.
It was not logical to construe s. 46 of the MLA as granting more
rights to sue in Canada than the Hamburg Rules themselves
conferred. Enforcing the arbitration clause also reflected
Canada's support for international arbitration agreements,
pursuant to the New York Convention 1958.
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