Cyprus: Cyprus Chapter Of Shipping & International Trade Law

1. CONTRACTS OF CARRIAGE

1.1 Jurisdiction/proper law

1.1.1 In the absence of express provisions in a bill of lading (or charterparty), by what means will the proper law of the contract be determined?

As a general rule an express choice of law by the contracting parties will be recognised and upheld by the Cyprus courts. On 20 April 2006, Cyprus ratified the Rome Convention by Law 15(III) of 2006 and since 17 December 2009 Regulation (EC) No. 593/2008 ('Rome I') has applied.

In the absence of an express provision, the proper law will be determined in accordance with Article 4 of Rome I. A contract for the sale of goods will be governed by the law of the country where the seller has his habitual residence. Where the contract falls under more than one category of paragraph 1 of Article 4, the governing law will be the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.

For contracts of carriage, Article 5 of Rome I provides that in the absence of an express agreement in accordance with Article 3, the law of the country of habitual residence of the carrier will apply, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country, failing which the law of the country where the place of delivery as agreed by the parties is situated will apply.

In the absence of a choice of law, for both Articles 4 and 5, in the event that all circumstances lead to the conclusion that the contract is manifestly more closely connected with a country other than the one that results following the application of the rules under Articles 4 and 5, then the law of that country will apply.

1.1.2 Will a foreign jurisdiction or arbitration clause necessarily be recognised?

The courts will generally respect a foreign jurisdiction clause or an arbitration clause agreed by the parties, but may still consider whether there are sufficient grounds for displacing the prima facie presumption of insisting on the parties honouring their bargain. The presumption may be displaced on 'good and sufficient reasons'.

Proceedings that have commenced notwithstanding the foreign jurisdiction clause or arbitration clause may be challenged. Where an application for stay has been filed a Cyprus court 'is not bound to grant a stay but has a discretion whether to do so or not'. In practice a stay will be granted unless a 'strong cause' for not doing so is shown. The burden of proving such strong cause falls on the party requesting the stay. When exercising its discretion the court should take into account all the circumstances of the case. The stay may not deprive the applicant of a legitimate personal or procedural advantage which would be available to him if he invoked the jurisdiction of the Cyprus courts.

In relation to jurisdiction clauses the Cyprus courts will consider the following factors, based on the decisions in United Feeder Services Ltd v the ship 'Anna Elisabeth' flying the Austrian flag (2010) 1C CLR 1946; Cyprus Phassouri Plantations Co Ltd v Adriatica di Navigazione SPA (1985) 1 CLR 290; Economides v M/V 'Cometa–23' (1986) 1 CLR 443:

  • in which country the evidence on the matters in dispute is situated or is readily available;
  • the relative benefits of each alternative jurisdiction in terms of facilitating a better trial at less expense;
  • to what extent the foreign law applies to the matters in dispute and if so, to what extent it is materially different from Cyprus law;
  • the country to which each of the parties is connected and how close this connection is;
  • whether the defendant genuinely wishes the issue to be tried elsewhere or whether he is merely seeking a procedural advantage; and
  • to what extent the plaintiffs will be prejudiced by filing proceedings abroad.

As regards arbitration clauses, the Cyprus courts will take the following factors into account, based on the decisions in United Feeder Services Ltd v the ship 'Anna Elisabeth' flying the Austrian flag (2010) 1C CLR 1946 and Bulfracht v Third World Steel Company Ltd (1993) 1 CLR 148:

  • the existence of a valid arbitration agreement;
  • the initiation of proceedings before the court;
  • the person filing the proceedings, his capacity and his connection with the arbitration agreement;
  • whether the application for a stay is filed by a party to the main proceedings;
  • the filing of the application immediately after the notice of appearance has been filed and in any case before taking any further steps in the proceedings;
  • the applicant's readiness to do all that is necessary to properly conduct an arbitration.

Regulation (EC) No. 44/2001 applies in Cyprus and provides that if the parties, one or more of whom is domiciled in a member state, have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, then that court or those courts shall have jurisdiction.

1.1.3 In the event that an injunction or order preventing proceedings is obtained in the agreed jurisdiction (whether court or arbitration), will this be recognised in your court?

Anti-suit injunctions may be recognised by the Cyprus courts following an application for the recognition, registration and enforcement of such an injunction.

The court will grant a stay of proceedings simply on the basis of the foreign jurisdiction or arbitration clause unless the presumption that the parties should honour their bargain is rebutted. Thus, if a stay is granted then no issue of recognition of injunction or order preventing proceedings obtained in the agreed jurisdiction will arise. In light of Regulation (EC) No. 44/2001 where jurisdiction is already assumed, this is unlikely to be challenged.

Cyprus has also ratified the New York Convention and arbitration awards conferring jurisdiction on a contracting state can be enforced, provided that the criteria set out in the Convention are satisfied.

1.1.4 Arbitration clauses

1.1.4.1 Will an arbitration and/or a jurisdiction clause set out in an incorporated document (such as a charterparty referred to in a bill of lading) be recognised if its text is not set out in the contract in question?

Yes, in accordance with Article 7 of the International Commercial Arbitration Law, Law 101 of 1987, which applies to disputes that are 'international' in nature, and provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement, including an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract. These provisions mirror Article 7 of the UNCITRAL Model Law on International Commercial Arbitration.

However, general words in a bill of lading incorporating into it all the terms and conditions of another document, such as a charterparty, are not sufficient to incorporate an arbitration clause contained in that document into the bill of lading so as to make its provisions applicable to disputes arising under the bill of lading (Elie Sadek v Efpalinos Shipping Company Ltd (1983) 1 CLR 696).

1.1.4.2 Will the incorporation of an unsigned arbitration agreement into a contract be recognised?

An arbitration agreement need not be signed to be incorporated into a contract. The exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement in writing, or an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another may be sufficient to incorporate the agreement into the contract provided that there is reference in the contract to the document containing the arbitration clause.

1.1.5 In any event, will all of the provisions of a charterparty incorporated into a bill of lading contract be recognised? Specifically, if a charterparty with an arbitration clause is incorporated into a bill of lading, is it necessary for the incorporating words to make express mention of the arbitration clause of the charter?

Unless there is specific reference to it, an arbitration clause will not be incorporated into a bill of lading merely by simple reference or incorporation of the charterparty.

1.1.6 If a bill of lading refers to the terms of a charterparty, but without identifying it (eg, by date):

1.1.6.1 Will incorporation be recognised without such detail?

The court will consider the matter and try to identify the charterparty in question. This is a matter to be considered on the facts of the case.

1.1.6.2 If so, which charterparty will be incorporated?

A general reference will normally be construed as relating to the head charter, since this is the contract to which the shipowner, who issues the bill of lading, is a party (Oscar Shipping PTE LTD v the cargo on board the Ship ASPHODEL, of Liberian Flag now lying at Anchorage in Limassol Port, Admiralty Action 22/2011, Judgment dated 12 April 2013). It will depend on the facts of each case how the general approach will be applied.

1.2 Parties to the bill of lading contract

1.2.1 How is the carrier identified? In particular, what is the relationship between statements on the face of the bill and/or the signature by or on behalf of the Master and demise clauses/identity of carrier clauses?

The court will consider all the facts and where appropriate in the circumstances will treat a person as being a carrier even where the carriage was not performed by such party (Andreas Orthodoxou Ltd v Dimitriou Tilliri Ltd (2007) 1B CLR 1247).

As there is no Cyprus case law on demise clauses or identity of carrier clauses, the courts will follow English law (although not binding, English courts' decisions are persuasive). Furthermore, given the decision in Andreas Orthodoxou Ltd, a demise clause or identity of carrier clause is likely to be recognised as binding and, in view of the decision of the House of Lords in 'The Starsin' [2003] 1 Lloyd's Rep. 571, the objective approach in the construction of a bill of lading is likely to be followed.

1.2.2 Who is entitled to sue for loss or damage arising out of the carrier's alleged default? In particular, by what means, if at all, are rights under the contract of carriage transferred?

The English Bills of Lading Act 1855, which applies in Cyprus by virtue of Articles 19 and 29 of The Courts of Justice Law, Law 14 of 1960, (Stavros Georgiou & Son (Scrap Metals) Ltd v The Ship LIPA (2001) 1B CLR 1220) regulates the transfer of rights under a contract of carriage. Any party to a contract of carriage can sue for damages against the carrier, as well as consignees of goods named in a bill of lading and endorsees of a bill of lading, having acquired full proprietary rights upon or by reason of such consignment or endorsement. Ownership of the cargo will also depend on the way the parties deal with each other, and such dealings may or may not include the transfer of the bill of lading (Andreas Orthodoxou Ltd v Dimitriou Tilliri Ltd (2007) 1B CLR 1247; Standard Fruit Company (Bermuda) Ltd v Gold Seal Shipping Company Ltd (1997) 1 CLR 464).

Such transfer extinguishes the rights of the original shipper or any intermediary, but in respect of matters for which the shipper still remained at risk, may entitle him to sue.

The courts have not been called upon to consider whether the original shipper remains liable once title has passed.

1.3 Liability regimes

1.3.1 Which cargo convention applies – Hague Rules/Hague Visby Rules/Hamburg Rules? If such convention does not apply, what, in summary, is the legal regime?

Cyprus has ratified the Hague Rules by the Carriage of Goods by Sea Law, Cap 263.

Cyprus has adopted by way of succession – The International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading and Protocol of Signature, Brussels 25 August 1924 (extended to Cyprus on 2 June 1931).

Cyprus has not ratified the Hamburg Rules.

1.3.2 Have the Rotterdam Rules been ratified?

Cyprus has not ratified the Rotterdam Rules.

1.3.3 Do the Hague/Hague Visby Rules apply to straight bills of lading?

The matter has not been tested in the courts of Cyprus (but consider the comments of the application of a general paramount clause in 1.3.4 below). As decisions of English courts are persuasive in Cyprus, it is likely that the Cyprus courts would follow the reasoning of the House of Lords in The Rafaela S [2005] 1 Lloyd's Rep. 347.

1.3.4 Are any such rules compulsorily applicable to shipments either from your jurisdiction or to it (or both)?

The Hague Rules are applicable to charterparties only if they are expressly incorporated and if there is an express statement to this effect in the bill of lading (Article 4 of the Carriage of Goods by Sea Law, Cap 263; The Ship Dama v TH. D. Georghiades SA (1980) 1 CLR 386; Kounnas and Sons Ltd v Zim (1966) 1 CLR 181; Said Hamade v Anthimos Demetriou Ltd (1994) 1 A.A.Δ. 443). Subject to this, they only apply for shipments from a port of Cyprus abroad or to another port of Cyprus (Article 2 of Cap 263). However, if a general paramount clause is incorporated in the bill of lading, the Hague Rules apply notwithstanding Article 2 of Cap 263 (Company Loizos Louca & Sons Ltd v The Company Batsi Shipping Ltd (1992) 1B CLR 979).

1.4 Lien rights

1.4.1 To what extent will a lien on cargo be recognised? Specifically:

1.4.1.1 Will liens arising out of obligations under the bill of lading contract be enforceable as against the receiver for, eg, freight, deadfreight, demurrage, general average and any shipper's liabilities in respect of the cargo?

Common law principles apply (Grade One Shipping Ltd, Owners of the Cyprus Ship 'CRIOS II' v The Cargo on Board the Ship 'CRIOS II' (No. 2) (1979) 1 CLR 350). A shipowner's right to exercise a lien on cargo at common law is available only (a) for the recovery of a general average contribution due from the cargo; (b) for expenses incurred by the shipowner in protecting the cargo; and (c) to recover freight due on delivery of the cargo under the bill of lading or the charter. No common law lien arises for deadfreight, demurrages or shipper's liabilities in respect of the cargo.

1.4.1.2 Can the owner lien cargo for time charter hire? If so, is this limited to hire payable by the cargo owners?

Where the time-charterer is the cargo owner, the owner has the right to lien the cargo, if the charterparty provides for this. However, such lien cannot be extended as against third parties, holders of the bill of lading, unless expressly provided in the bill of lading. A bill of lading stamped 'freight prepaid' will defeat any owner's lien on the cargo, either at common law or ex contractu (Grade One Shipping Ltd, Owners of the Cyprus Ship 'CRIOS II' v The Cargo on Board the Ship 'CRIOS II' (No. 2) (1979) 1 CLR 350).

1.4.1.3 Is it necessary for the owners to register its right to lien sub-freights as a charge against a charterer incorporated in your jurisdiction for that lien to be recognised in the event of the charterer's insolvency?

Where a contractual lien on sub-freights is given to the owners by a charterer incorporated in Cyprus, owners must register the lien as a charge against the charterer. Failure to do so will result in such charge being void against the liquidator and any creditor of the company.

2. COLLISIONS

2.1 Is the 1910 Collision Convention in force?

Cyprus has adopted, by way of succession, The International Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels and Protocol of Signature, Brussels 23 September 1910. The UK law ratifying the Convention, the Maritime Conventions Act 1911, will also apply (Danish Kingdom v Mystic Isle Navigation Company Ltd (1990) 1 CLR 850).

2.2 To what extent are the Collision Regulations used to determine liability?

The International Regulations for Preventing Collisions at Sea of 1972 apply in Cyprus by virtue of Law 18 of 1980 ratifying the relevant Convention of 1972 (for their application see The Ship NAWAL v The Ship BAYONNE (1994) 1 CLR 54 and Constantinos Sklavos v the Ship NATALEMAR (1999) 1B CLR 1079). These apply to all Cyprus registered ships and to all other ships within the territorial waters of Cyprus.

2.3 On what grounds will jurisdiction be founded – what essentially is the geographical reach?

The Cyprus courts have jurisdiction to hear any claim for damage done to a ship and damage received by a ship in rem. To invoke the in rem jurisdiction, physical presence of the res is required within the territorial jurisdiction of the Cyprus courts to enable service of the writ of summons. Service out of jurisdiction is not available for in rem proceedings.

Alternatively, proceedings may be filed against the owners of the vessel having their residence or place of business in Cyprus. Where the owners are not residents of Cyprus, in personam proceedings are subject to the rules of court relating to service out of jurisdiction. Leave of the court is granted where the cause of action arose within the jurisdiction or a related action is before the Cyprus courts or where the defendant/owners have submitted to the jurisdiction.

2.4 Can a party claim for pure economic loss in the event of a collision?

As a general rule, pure economic loss is not recoverable under Cyprus law. Collision gives right to an action in tort for damages as a result of the physical damage or interference with the claimant's property.

To read this Chapter in full, please click here.

Originally published by The European Lawyer Reference Series.

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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Authors
Vasileios Psyrras
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