No business likes to be facing a commercial dispute. A commercial dispute of any description is costly and time-consuming, if the dispute extends across more than one jurisdiction, even more so.
New commercial opportunities are arising in both existing and emerging markets driven by globalisation. It is important that businesses recognise the importance of developing a strategy that diminishes risk wherever possible. One of the key issues when embarking on a new business relationship is that all aspects of the contract for services or products that are provided or received, have been carefully reviewed and the contract is fit for the purpose.
There are several ways that the impact of a dispute can be mitigated both before and after it arises. Ensuring that your contract includes a jurisdiction clause that determines the court and jurisdiction that a dispute, should one arise, is determined can give a business an edge in certain circumstances. In the absence of such a clause, the rules of private international law will be applied. Not only can this result in uncertainty it can also lead to delay and rising costs. Jurisdiction clauses should always be written into the contract rather than relying on the small print on invoices sent once the transaction has been completed. The contract should expressly record the agreement of the jurisdiction by the parties.
Khizar Arif, a partner, suggests "an exclusive jurisdiction clause achieves certainty and ensures that you know where you can sue or be sued. Non-exclusive and hybrid jurisdiction clauses are less appropriate for relatively straightforward contracts and are often applied to specific types of transactions such a loan." He further commented, "Your commercial contract protects your business from risk and should be reviewed frequently to ensure it is current, comprehensive and resilient to attack."
In the recent case involving Batavia EXIMP & Contracting (S) Pte Ltd –v- Pedregal Maritime SA, a complex case involving alleged mis-delivery of cargo. The vessel in question "Taikoo Brilliance" had been time-chartered to China Navigation Co and subsequently sub-chartered to TPT Shipping Ltd. As the matter escalated it was alleged by Batavia that close to the time of the commencement of a claim (August 2020), it requested a copy of the charterparty. Unfortunately, the request was refused.
Batavia arrested a sister vessel in September 2020, whereupon CNC wrote to Batavia regarding the release of the vessel and referred to the fact that the charterparty incorporated into in the bills of lading contained a London arbitration agreement. Batavia immediately requested a copy of the charterparty from CNC, which on this occasion was provided the next day.
It was explicitly stated in Clause 60 of that charterparty that:
"Any dispute arising from or in connection with this Charter Party shall be referred to arbitration in London..."
November 2020, Pedregal applied for a stay of the proceedings in favour of arbitration in London, which was granted on 17 December 2020. However, claims brought under the bills of lading were now time-barred by virtue of Art III Rule 6 of The Hague/Hague Visby Rules. Batavia appealed. The Court refused to exercise its discretion and the appeal was dismissed. Batavia's claim to have been unaware of the clause relating to an arbitration agreement was invalid as, even without the charterparty, Clause 1 on the reverse of the bills of lading referred to the arbitration agreement, making Batavia's lack of action difficult to explain.
The lack of desire to establish the correct forum, led not only to the matter being timed out but also created an environment where the court was disinclined to use its discretion to make the stay of proceedings. The entire situation resulted in considerable time and legal costs being wasted.
The jurisdiction of England & Wales in London has been the jurisdiction of choice by commercial entities for some considerable time due to the fact that the London judiciary has a reputation for delivering incorruptible justice.
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.