The following article has been written by Ananya Pratap Singh, an Indian lawyer and arbitrator, currently associated in international projects. He was called to the Bar Council of India in 2017 and to the Bar Council of Delhi, India in 2016; and has also been awarded the Member grade by the Chartered Institute of Arbitrators and the Singapore Institute of Arbitrators in 2018:
Article III, Rule 6 of the Hague rules provides that a carrier will be released from all liabilities except if the shipper sues the carrier within one year from the delivery (emphasis added) of the cargo thus creating a time bar.
But does the word 'delivery' include 'misdelivery' as well?
In a recent English case of Deep Sea Maritime Limited vs. Monjasa A/S EWHC 1495 (Comm), the court answered this question in affirmative.
In this case, Article III, Rule 6 was contractually incorporated into the bill of lading and the shipper discharged cargo to another ship without production of the relevant bill of lading thereby attracting a misdelivery claim.
In the case of Deep Sea Maritime Limited vs. Monjasa A/S EWHC 1495 (Comm), the Commercial High Court (QB) dealt with the issue of whether the requirement in Article III Rule 6 that “suit is brought within one year after delivery of the goods or the date when the goods should have been delivered” can ever be satisfied if proceedings are commenced in the courts of one country, when the bill of lading incorporates a clause from a charterparty giving exclusive jurisdiction to the courts of another country. Detailed case analysis given below:
Owner of a Vessel, acknowledged shipment on board the vessel of some amount of bunker fuel by a bill of lading (Bill) for different purposes related with voyage. Monjasa was the shipper of the Cargo. Clause 1 of the Bill, printed on the reverse in the usual way, provided:
The Bill did not further identify the charterparty referred to. But later on it was agreed that this was a reference to a time charterparty between Owners and Unitaes Energy Sources Company Limited (“Unitaes”). Later, a company (Babecca) agreed to perform the obligations of Unitaes under the Charterparty.
Thereafter, Monjasa sold the Cargo to Unitaes under a contract of sale but payment under that letter of credit was declined due to alleged documentary discrepancies. Owners discharged the Cargo under instructions given pursuant to the Charterparty, without production of the Bill. Monjasa commenced four sets of proceedings in relation to the alleged non-delivery of the Cargo.
Arbitration Clause in Charterparty
Clause 46 of the Charterparty provided:
The words in clause 1 of the Bill were sufficient to incorporate clause 46 (“the Exclusive Jurisdiction Clause”) in the Charterparty into the Bill. The Hague Rules as set out in the 1924 Convention were incorporated into the Bill, taking effect as a matter of contract.
Applicable Legal Principles
Article III Rule 6 of the Hague Rules
Citing Parker LJ from Hispanica de Petroleos SA v Vencedor Oceanica Navegacion S.A. (The Kapetan Markos NL)  1 Lloyd’s Rep. 211 at 213, the Court observed in certain circumstances a defence under Art. III, Rule 6, might be defeated by the fact that another suit had been brought elsewhere. It was explained by giving following example:
“Suppose for example that a cargo-owner were to sue in New York within time and that there was no doubt but that the New York Court had jurisdiction to hear the claim. Suppose further that the shipowner, whilst acknowledging jurisdiction, applied for a stay on the ground that New York was a forum non conveniens and that the forum conveniens was London. Finally suppose that the shipowner lost at first instance but won by a majority in the Court of Appeal and that, time having expired in the meantime, the cargo-owner then issued a writ in London. In such circumstances it would appear at least arguable that art. III, r. 6, did not apply. If such a situation ever arises the matter will then fall for decision.”
This was termed as “enforced substitution” of proceedings in one forum for proceedings in another, where the action commenced by the claimant in a jurisdiction came to an end for reasons arising independently of the claimant’s conduct because a court decided that if the claim was to be pursued, it should be pursued in another forum.
The Court observed that one such context is where the bill of lading contract gives the parties, or the defendant, a right to elect in favour of arbitration after a dispute has arisen, and the election is exercised both after proceedings have been commenced timeously in court and after the expiry of the Article III Rule 6 period.
The other context in which there is enforced substitution of proceedings by reason of a court order is where proceedings are commenced in breach of an arbitration agreement, and a stay is sought under Section 9 English Arbitration Act.
The Court cited the case of Thyssen Inc v Calypso Shipping Corporation S.A.  2 Lloyd’s Rep. 243 where the Court considered the position when US proceedings had been brought in time but stayed in favour of London arbitration. It would have been possible to resolve the case by reference to the “enforced substitution”, with the claimant’s conduct in commencing the original proceedings in breach of the arbitration clause precluding the US proceedings from constituting the bringing of suit. However, the Court addressed the issue on a wider basis. It rejected the suggestion that the commencement of proceedings in a court with jurisdiction to determine the issue on the merits was sufficient, for all time, to prevent Article III Rule 6 operating in subsequent proceedings, describing this as a proposition “of breathtaking proportions” which would give “rise to absurd results”.
In the Thyssen case, the reference to arbitration occurred 7 days after the New York proceedings had been stayed, so that there was no point in the life of the second proceedings when the first set of proceedings remained “valid and effective”. This issue was considered in Fort Sterling Ltd and another v South Atlantic Cargo Shipping NV and others (The Finnrose)  1 Lloyd’s Rep. 559 in which cargo interests had responded to the application to strike out for want of prosecution by issuing fresh proceedings. In The Finnrose the Court inter alia held an action brought in breach of an exclusive jurisdiction or arbitration clause, is not, at any rate under English law, a nullity.
Drawing these strands together with regard to the issue of whether the English Court will regard proceedings commenced in a foreign court in breach of an exclusive jurisdiction or arbitration clause as “suit” for the purposes of Article III Rule 6 in respect of the issue of whether proceedings before the English Court are time-barred, the Court responded in negative holding ordinarily the English Court will not do so.
That will be the case even if the foreign court might itself allow the proceedings there to continue notwithstanding the clause (e.g. because they adopt a different test of incorporation of jurisdiction or arbitration clauses or because of different concepts of ordre publique).
The held that however, it does not follow that the English Court should always be willing to give a declaration that a claim brought in a foreign court in breach of an arbitration or exclusive jurisdiction clause is time-barred in the proceedings before a foreign court. In particular, it might be argued that the particular issue of what constitutes the bringing of “suit” in a jurisdiction involves questions peculiar to that jurisdiction, rather than simply issues of English law as the proper law of the bill of lading contract.
The Court further gave a reason for caution stating that it is possible to conceive of circumstances in which an English Court might allow proceedings commenced here in breach of an exclusive jurisdiction clause to continue, and, if it did so, it seems eminently arguable that those proceedings could be relied upon as an answer to any Article III Rule 6 defence advanced in that action.
Published: 6 July, 2018
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