Nathan Cecil, Partner

In June 2012, a single Judge of the Federal Court of Australia held that foreign arbitration agreements in voyage charterparties for the carriage of goods from Australia were void and unenforceable.  On 18 September 2013, a three panel bench of the Full Court overturned that decision.  The result is that Australian courts will recognise and enforce foreign arbitration agreements in voyage charterparties, indeed, in all forms of charterparty. 

The 2012 Decision

A discussion of the 2012 decision can be found in our Newsflash of August 2012.  In summary, it concerned a voyage charterparty for the carriage of coal from Hay Point, Queensland, to Ningbo and Jiangyin, China.  A dispute arose under the charterparty in relation to demurrage.  The charterparty contained an English law and London arbitration clause.  The foreign disponent owners commenced London arbitration and obtained an award for US$824,663.18.  The disponent owner sought to register and enforce the arbitration award against the Australian charterer in Australia.  The Australian charterer successfully challenged the recognition and enforcement of the award.

The Australian charterer referred to section 11 of the Australian Carriage of Goods by Sea Act ("Australian COGSA"), which provides that any clause which purports to limit or oust the jurisdiction of an Australian court over a "sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia" is void and of no effect.

The voyage charterparty related to a carriage of goods from Australia to a place outside Australia.  The question for determination was whether the voyage charterparty was a 'sea carriage document' and therefore caught by the prohibition on foreign arbitration.  A 'sea carriage document' is defined to include a document "that either contains or evidences a contract of carriage of goods by sea".   The trial judge held that a voyage charterparty, as distinct from a time or demise charterparty, provided for the carriage of specific goods on a specific voyage and therefore satisfied this definition.  This was despite the fact that the Australian COGSA also provided that it does "not apply to the carriage of goods by sea under a charterparty unless a sea carriage document is issued for the carriage" and the general distinction drawn between contracts for the carriage of goods (i.e. bill of lading type arrangements) and charterparties.

The Appeal

The Full Court overturned the trial decision, noting that:

"The purpose of s 11 of COGSA is to protect, as part of a regime of marine cargo liability within the object of s 3, the interests of Australian shippers and consignees from being forced contractually to litigate or arbitrate outside Australia [under a contract of carriage of goods by sea]. That purpose does not extend to protection of charterers or shipowners from the consequences of enforcement of their freely negotiated charterparties subjecting them to the well recognised and usual mechanism of international arbitration in their chosen venue."

Implications

Foreign arbitration agreements contained in charterparties, in whatever form, are enforceable under Australian law.  Indeed, recent decisions of our highest courts, including this decision, demonstrate an increasing level of support for international arbitration.  The brief period of uncertainty in 2012 is now resolved and the general distinction between charterparties and contracts of carriage of goods (i.e. bill of lading type arrangements) is now reaffirmed.  However, Australian law still prohibits and will not recognise foreign arbitration agreements in bills of lading for the carriage of goods from or to Australia.

Contact

Nathan Cecil                 +61 2 9230 9450             nathan.cecil@nortonwhite.com
Partner

Robert Wilson               +61 2 9230 9475             robert.wilson@nortonwhite.com
Partner

Claire Morgan                +61 2 9230 9412             claire.morgan@nortonwhite.com
Foreign Registered Solicitor

Charles Street               +61 2 9230 9444             charles.street@nortonwhite.com
Solicitor