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Shipping<br />
July<br />
CHOICE OF LAW NOT IF CHARTERING FOR<br />
2012<br />
SHIPMENTS TO OR FROM AUSTRALIA<br />
Foreign law and jurisdiction clauses<br />
in voyage charters are now void and<br />
unenforceable in Australia<br />
In a very recent decision of domestic and<br />
international significance 1 , the Federal Court<br />
of Australia h<strong>as</strong> determined that London<br />
arbitration awards obtained by vessel owners<br />
against an Australian charterer under a voyage<br />
charter are unenforceable in Australia by re<strong>as</strong>on<br />
of the operation of section 11 of the Carriage of<br />
Goods by Sea Act 1991 (Cth) (COGSA).<br />
Background<br />
Dampskibsselskabet Norden A/S <strong>as</strong> disponent<br />
owners (“Norden”) and Beach Building & Civil<br />
Group Pty Ltd <strong>as</strong> charterers (BBCG) entered<br />
into a voyage charter on the AMWELSH 93<br />
form to carry a cargo of coal from Australia<br />
to China. The charterparty stipulated that the<br />
charter would be governed by and construed<br />
in accordance with English law and that any<br />
disputes arising under the fixture be referred to<br />
arbitration in London.<br />
Norden obtained a Declaratory Arbitration<br />
Award and a Final Arbitration Award (Arbitration<br />
Awards) in November 2010 and January 2011<br />
in the amount of US$824,663.18 for unpaid<br />
demurrage.<br />
BBCG had participated fully in the arbitration<br />
and, notably, at BBCG’s instigation the<br />
Arbitrator w<strong>as</strong> <strong>as</strong>ked to determine whether he<br />
had jurisdiction to hear the dispute arising out<br />
of the Charterparty. As noted by the federal<br />
court judge, BBCG appeared to have accepted<br />
that the Arbitrator had jurisdiction to determine<br />
this issue.<br />
However, in enforcement proceedings in<br />
Australia, BBCG subsequently challenged the<br />
validity of the Arbitration Awards and argued<br />
(among other things) that the arbitration clause<br />
in the charterparty w<strong>as</strong> invalid and ineffective<br />
by re<strong>as</strong>on of the operation of s11 of COGSA<br />
and that the Arbitration Awards should not<br />
be enforced or ‘recognised’ by the Australian<br />
Federal Court.<br />
1. Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd<br />
[2012] FCA 696.
Section 11 of COGSA and Federal<br />
Court decision<br />
In Australia COGSA incorporates<br />
an amended version of the Hague-<br />
Visby Rules. Section 11 of COGSA<br />
effectively renders ineffective any<br />
clause in a ‘sea carriage document’<br />
that purports to exclude the<br />
jurisdiction of the Australian Courts<br />
to adjudicate disputes arising out of a<br />
‘sea carriage document’ in relation to<br />
Australian import or export cargo.<br />
Sections 11(1)(a) and 11(2)(b) of<br />
COGSA which relate specifically to<br />
export cargo state:<br />
1. All parties to:<br />
a. a sea carriage document relating<br />
to the carriage of goods from any<br />
place in Australia to any place<br />
outside Australia…<br />
are taken to have intended to<br />
contract according to the laws in<br />
force at the place of shipment…<br />
2. An agreement (whether made in<br />
Australia or elsewhere) h<strong>as</strong> no<br />
effect so far <strong>as</strong> it purports to:…<br />
b. preclude or limit the jurisdiction<br />
of a court of the Commonwealth<br />
or of a State or Territory in<br />
respect of a bill of lading or<br />
a document mentioned in<br />
subsection (1).<br />
In the absence of a clear definition<br />
of the expression ‘sea carriage<br />
document’ in COGSA, the key<br />
issue for determination by the Court<br />
w<strong>as</strong> whether a voyage charter is<br />
considered to be a ‘sea carriage<br />
document’ for the purpose of<br />
attracting the operation of s11(1)(a)<br />
and 11(2)(b).<br />
The Court decided that for the<br />
purposes of COGSA a voyage<br />
charterparty w<strong>as</strong> a ‘sea carriage<br />
document’, consequently the<br />
arbitration clause in the charterparty<br />
w<strong>as</strong> rendered invalid and Norden<br />
could not enforce the Arbitration<br />
Awards in Australia.<br />
Justice Foster, in reaching his<br />
decision, took a literal approach<br />
in interpreting COGSA and looked<br />
at the history and amendments<br />
made to section 11 whereby the<br />
original key phr<strong>as</strong>e of “a bill of<br />
lading or a similar document of title”<br />
w<strong>as</strong> replaced with “a sea carriage<br />
document to which, or relating to<br />
a contract of which, the amended<br />
Hague Rules apply” 2 . The Court<br />
held that “these legislative changes<br />
indicate that, from 1997 onwards,<br />
the legislature w<strong>as</strong> intending by the<br />
relevant amendments which it made<br />
to broaden the cl<strong>as</strong>s of documents<br />
covered by s 11(1)(a) and s 11(2)(b) of<br />
COGSA 1991”.<br />
The predecessor to section 11,<br />
section 9 of the Sea-Carriage<br />
of Goods Act 1924 (Cth), w<strong>as</strong><br />
considered by the Supreme Court of<br />
New South Wales in the c<strong>as</strong>e of the<br />
“Blooming Orchard” 3 where it w<strong>as</strong><br />
held that a voyage charterparty w<strong>as</strong><br />
for relevant purposes a document<br />
relating to the carriage of goods<br />
and that a requirement to submit to<br />
arbitration abroad in such a contract<br />
w<strong>as</strong> void. As originally enacted<br />
under COGSA, section 11 made it<br />
clear that it did not apply to voyage<br />
charterparties.<br />
The recent decision effectively<br />
restores the pre-1991 Blooming<br />
Orchard position. Whether or not the<br />
Australian legislature had intended<br />
by virtue of the amendments in<br />
section 11 of COGSA to strike<br />
down forum selection clauses in<br />
voyage charterparties, is a matter of<br />
academic debate.<br />
Conflicting decision<br />
The issue of the validity of foreign<br />
arbitration clauses in voyage<br />
charterparties for the carriage of<br />
Australian export and import cargo<br />
h<strong>as</strong> been the subject of discussion<br />
for some time in Australia.<br />
In a c<strong>as</strong>e earlier this year heard in the<br />
Supreme Court of South Australia 3<br />
reached the contrary conclusion to<br />
the Federal Court in ruling that a<br />
voyage charterparty w<strong>as</strong> not a sea<br />
carriage document <strong>as</strong> COGSA only<br />
deals with the rights of persons<br />
holding bills of lading or similar<br />
instruments, not charterparties. The<br />
owners were therefore allowed to<br />
enforce London arbitration awards.<br />
Justice Anderson had accepted in<br />
that c<strong>as</strong>e that in interpreting section<br />
11 of COGSA, regard should be<br />
given to the amended Hague Rules<br />
set out in Schedule 1A of COGSA<br />
which draws a distinction between<br />
charterparties and ‘sea carriage<br />
documents’ 4 .<br />
In the Norden c<strong>as</strong>e, Justice Foster<br />
expressly disagreed with the<br />
purposive approach to interpretation<br />
applied by Justice Anderson in the<br />
Jebsens c<strong>as</strong>e.<br />
Section 11(3) COGSA - Arbitration<br />
in Australia<br />
In theory, section 11(3) of COGSA<br />
may operate to allow the parties<br />
to a voyage charter or contract<br />
of affreightment to specify the<br />
international or foreign arbitration<br />
02 Shipping<br />
2. Carriage of Goods by Sea Regulations 1998 (Cth).<br />
3. Sonmez Denizcilik ve Ticaret Anonim Sirketi v MV<br />
“Blooming Orchard” (No 2) (1990) 22 NSWLR 273 followed<br />
in BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996)<br />
67 FCR 211 at 235.<br />
3. Jebsens International (Australia) Pty Ltd v Interfert<br />
Australia Pty Ltd [2012] SASC 50.<br />
4. COGSA, Schedule 1A, Articles 5 and 10 of the Amended<br />
Hague Rules.
odies, provided the parties agree<br />
that an arbitration physically takes<br />
place in Australia.<br />
Section 11(3) of COGSA states:<br />
An agreement, or a provision of an<br />
agreement, that provides for the<br />
resolution of a dispute by arbitration<br />
is not made ineffective by subsection<br />
(2) (despite the fact that it may<br />
preclude or limit the jurisdiction of<br />
a court) if, under the agreement or<br />
provision, the arbitration must be<br />
conducted in Australia.<br />
The parties to a voyage charter<br />
or contract of affreightment could<br />
therefore, in theory, agree for<br />
international arbitration to take<br />
place in Australia. However, while<br />
English arbitration clauses are widely<br />
used internationally, it should be<br />
appreciated that Australia h<strong>as</strong> well<br />
established international arbitration<br />
organisations such <strong>as</strong> ACICA 5 and<br />
the shipping industry focussed<br />
MLAANZ 6 .<br />
Conclusion<br />
As the two recent conflicting c<strong>as</strong>es<br />
show, the position in Australia is<br />
far from settled on whether foreign<br />
court or arbitration awards obtained<br />
under voyage charters (or contracts<br />
of affreightment) relating to cargo<br />
movements to/from Australia<br />
can be enforced. It remains to<br />
be seen whether the recent c<strong>as</strong>e<br />
will be appealed or whether the<br />
Commonwealth Parliament will take<br />
steps to clarify the position under<br />
COGSA.<br />
The recent Federal Court decision<br />
should make owners and charterers<br />
of voyage charterparties or contracts<br />
of affreightment revisit their<br />
5. Australian Centre for International Commercial Arbitration.<br />
6. Maritime Law Association of Australia and New Zealand.<br />
arbitration clauses. Parties already<br />
involved in international charterparty<br />
arbitrations where the shipment<br />
involves cargo movement to or from<br />
Australia may find that ultimately they<br />
hold an award that is unenforceable<br />
in Australia. Parties entering into new<br />
charters with an Australian entity or<br />
when shipping to or from Australia<br />
should be aware that currently<br />
Australian law and jurisdiction will<br />
override any attempt to choose<br />
foreign law or foreign arbitration.<br />
For further information, ple<strong>as</strong>e<br />
contact Hazel Brewer, Partner, on<br />
+61 (0)8 9422 4702 or<br />
hazel.brewer@hfw.com, or<br />
Marina Taouxi, Associate, on<br />
+61 (0)8 9422 4704 or<br />
marina.taouxi@hfw.com, or your<br />
usual <strong>HFW</strong> contact.<br />
For more information,<br />
ple<strong>as</strong>e also contact:<br />
Robert Springall<br />
Melbourne Partner<br />
T: +61 (0)3 8601 4515<br />
robert.springall@hfw.com<br />
David Coogans<br />
Sydney Partner<br />
T: +61 (0)2 9320 4601<br />
david.coogans@hfw.com<br />
Hazel Brewer<br />
Perth Partner<br />
T: +61 (0)8 9422 4702<br />
hazel.brewer@hfw.com<br />
Nichol<strong>as</strong> Poynder<br />
Shanghai Partner<br />
T: +86 21 5888 7711<br />
nichol<strong>as</strong>.poynder@hfw.com<br />
Paul Hatzer<br />
Hong Kong Partner<br />
T: +852 3983 7788<br />
paul.hatzer@hfw.com<br />
Paul Aston<br />
Singapore Partner<br />
T: +65 6305 9538<br />
paul.<strong>as</strong>ton@hfw.com<br />
Simon Cartwright<br />
Dubai Partner<br />
T: +971 4 423 0520<br />
simon.cartwright@hfw.com<br />
Dimitri V<strong>as</strong>sos<br />
Piraeus Partner<br />
T: +30 210 429 3978<br />
dimitri.v<strong>as</strong>sos@hfw.com<br />
Jeremy Davies<br />
Geneva Partner<br />
T: +41 (0)22 322 4810<br />
jeremy.davies@hfw.com<br />
Konstantinos Adamantopoulos<br />
Brussels Partner<br />
T: +32 2 535 7861<br />
konstantinos.adamantopoulos@hfw.com<br />
Stéphane Selegny<br />
Rouen Partner<br />
T: +33 (0)1 44 94 40 50<br />
stephane.selegny@hfw.com<br />
Guillaume Brajeux<br />
Paris Partner<br />
T: +33 (0)1 44 94 40 50<br />
guillaume.brajeux@hfw.com<br />
George Eddings<br />
London Partner<br />
T: +44 (0)20 7264 8114<br />
george.eddings@hfw.com<br />
Jeremy Shebson<br />
São Paulo Partner<br />
T: +55 (11) 3179 2903<br />
jeremy.shebson@hfw.com<br />
Shipping 03
Lawyers for international commerce<br />
HOLMAN FENWICK WILLAN<br />
Level 13<br />
140 St Georges Terrace<br />
Perth 6000<br />
Australia<br />
T: +61 (0)8 9422 4700<br />
F: +61 (0)8 9422 4777<br />
© 2012 Holman Fenwick Willan. All rights reserved<br />
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