London Arbitration Awards on Voyage Charters are Enforceable in Australia

In July last year we reported on the very significant decision of the Federal Court in Dampskibsselskabet Norden v Beach Building & Civil Group [2012] FCA 696 (click here to view the article).  Last night this decision was overturned on appeal.

The first instance decision of the Federal Court

You may recall that in June 2012 the Federal Court had concluded that a voyage charterparty was a "sea carriage document" within the meaning of section 11 of Australian COGSA 1991.  Section 11 is significant because it limits the extent to which parties can contract out of the application of Australian Law (for cargoes from Australia) and the jurisdiction of the Australian Courts (for cargoes to and from Australia). 

Owners and Charterers had chosen London arbitration for disputes under the voyage charter, but when Owners came to enforce the arbitration award against Charterers in Australia, the Federal Court concluded that the London arbitration clause was rendered void by section 11 of COGSA and as such the Arbitrator had no jurisdiction.  The award could not be enforced in Australia under the International Arbitration Act 1974 (Cth).

When reaching this decision the Federal Court applied the Australian authorities with regard to the meaning of "sea carriage document" and concluded that the term covered voyage charters in addition to bills of lading and similar documents normally covered by the Hague-Visby Rules.

While the decision surprised many across the world, it was recognised that the legislators had chosen a wider form of words which, intentionally or not, were at least capable of stretching to a voyage charter. On Appeal it was accepted that there was "obviously an available constructional choice as selected by the primary judge…"

Decision on Appeal to Federal Court of Australia Full Court

Yesterday evening an experienced bench of three Judges (one dissenting) concluded that a voyage charter was not a "sea carriage document" for the purposes of section 11 of Australian COGSA.  The Arbitration agreement in the voyage charter was not therefore void and the London Arbitration Award was enforceable in Australia.

By way of brief summary, the Court's reasoning was driven by the following primary aids to construction:

• The definition of "sea carriage document" in the Amended Hague Rules which limits its scope of application to bills of lading or similar negotiable or non-negotiable documents;
• The definition of "sea carriage document" in the Sea Carriage Documents Act 1997(NSW) which is limited to bill of lading, sea waybill or a ship's delivery order.
• The traditional line drawn between charterparties (generally a contract for hire of a ship) on the one hand and sea carriage documents (contracts of the carriage of cargo) on the other;
• A clear and longstanding acceptance that international commercial disputes, including those arising out of charterparties, may be referred to international arbitration;
• An acceptance that while the interests of shippers are more evidently appropriate for statutory protection, experienced owners and charterers did not require the same protection;
• The unlikelihood that the Australian Parliament, when amending COGSA in 1998, intended to deprive voyage charterers of their right to resort to international arbitration 

The Federal Court of Australia Full Court have adopted a position more consistent with the expectations of the international shipping community and resolved the ambiguity that had existed in the term "sea carriage document".  The decision will allow voyage charterers and owners to continue to refer their disputes to international arbitration.

Note however that with regard to cargo claims for cargoes to or from Australia, international arbitration agreements in bills of lading will continue to be rendered void by section 11 of Australian COGSA.

If you have any questions regarding this development do not hesitate to contact a member of our Transport Team.

Article written by Glenn O'Brien and Chris Sacré

For information on our Transport Group click here.
                                   
Important disclaimer: The material contained in this publication is of a general nature only and is based on the law as at 19, September 2013 It is not, nor is intended to be, legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.