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The “CHANNEL RANGER” – update

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Clyde & Co logoThe Court of Appeal  confirms some flexibility  is to be retained over the  incorporation of Law and Jurisdiction charterparty clauses into negotiable bills of lading

The first instance decision in the case of Caresse Navigation Ltd v Office National de L’Électricité and 5 others (The “CHANNEL RANGER”) [2013] (reported in our Shipping Newsletter of January 2014) has recently been the subject of an appeal hearing, the judgment of which endorses a departure from the traditional view that in order for the dispute resolution clause in a charter party to be incorporated into a bill of lading, extremely precise reference to the clause is always required.

The original dispute related to damage to a cargo of coal as a result of self-heating
and consequent dousing with sea water.

Cargo interests sought to commence proceedings in Morocco, the port of
discharge, whereas shipowners contended that English jurisdiction was applicable.

They argued that the English law and High Court jurisdiction applicable to the
underlying voyage charter was incorporated into the bill of lading, as it stated on
the bill (which was in Congenbill 1994 form) that “all terms, and conditions, liberties
and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration
clause are herewith incorporated” (our emphasis).

The problem was, however, that the underlying voyage charter party (in Amwelsh
1979 form) did not contain a clause so titled; instead it contained a “Law and
Jurisdiction” clause which did not make reference to arbitration.

Cargo interests argued that owing to the specific rules relating to the
incorporation of ancillary charter party terms into bills of lading (designed to
provide sufficient contractual clarity in order to protect a consignee, who will
almost always not be a party to the original contract of carriage), the charter
party dispute resolution clause could not be deemed incorporated in this case, as
it was not specifically or accurately referred to in the bill of lading.

Neither party suggested that the bill of lading wording implied that the dispute
should be settled by arbitration, given the absence of an arbitration clause in the
charter party.

The Court found for the shipowners at first instance, and granted an anti-suit
injunction to prevent cargo interests from pursuing proceedings in Morocco.

However, leave was granted to the cargo interests to appeal, and the appeal
hearing took place in October 2014.

The appeal judges affirmed the decision of the High Court for “substantially the
same” reasons as those cited at first instance; namely that a certain amount of
verbal manipulation was acceptable in the circumstances, in order to achieve the
result which the parties had originally intended.

They agreed with the judge at first instance that the relevant question raised
by this dispute was one of construction, not of incorporation; as the requisite
specific reference to a charter party clause had already been made, the judges
considered that it was for the Court to apply rules of contractual construction in
order to decide to which clause it referred.

Unlike the strict rules which apply to the incorporation of charter party terms
into bills of lading, rules of contractual construction allow for a more contextual
and, to some extent, purposive approach, notwithstanding the fact that
historically, verbal manipulation has more readily been applied to charter party
wording, rather than the wording of a bill of lading. This allowed the Court of
Appeal to conclude that the reference to a “Law and Arbitration clause” must relate
to the “Law and Jurisdiction” clause in the charter party, as there was no other
possible clause which a reasonable person would have understood to have been
intended by the term.

While the appeal judges made it clear that it is important to ensure sufficient
clarity to protect a party acquiring a negotiable bill of lading without any
knowledge of the charter party, they stated that to refuse to remedy an obvious
mistake in the bill of lading “is a very old-fashioned and outdated approach to
interpretation.” It therefore seems likely that, provided a reference to a charter
party clause in a bill of lading renders it sufficiently identifiable, the Court will
apply a more practical approach in respect of its incorporation into the bill of
lading in future.

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