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UK Case law: Ulusoy Denizilik AS v. COFCO Global Harvest (Zhangjiagang) Trading Co Ltd (The 'Ulusoy- 11')  EWHC 3645 (Comm)
News & Insights 23 March 2021
Key words: Law and jurisdiction clause
Anti-suit injunction – Bills of lading incorporating charterparty English law and London arbitration clause – Whether foreign proceedings in breach of London arbitration clause.
The dispute related to the carriage of another cargo of soyabeans from Brasil to China. Both the head charter, to which the owners were a party, as well as the time trip charter down the line provided for English law and London arbitration.
The bills of lading were issued on the Congen form and contained a wide incorporation clause: 'All terms and conditions, liberties and exceptions of the charter party dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.'
On discharge, the cargo receivers alleged that there was damage to the cargo and arrested the vessel in Chinese proceedings. The vessel was only released upon provision of a China Re LOU to the receivers (counter secured by the owners’ P&I Club) which provided for Chinese law and jurisdiction.
Despite the vessel’s release, the Chinese proceedings continued. The owners applied for an anti-suit injunction restraining the defendants from continuing the proceedings in China in breach of the London arbitration agreement which was incorporated in the bills of lading.
The court held that, according to English law, the incorporation clause was wide enough to incorporate the law and jurisdiction clause of the relevant charterparty. It is common ground that cargo receivers frequently become holders of the bills being unaware of any charterparty terms incorporated in the bills. However, simply being unaware is not sufficient to conclude that the holders were not bound by those terms. A clear intention not to be bound by such terms should be demonstrated, which the defendants failed to do.
The court further dismissed the defendants’ argument that the Chinese law and jurisdiction clause of the China Re LOU altered the parties’ agreement to arbitrate disputes in London as set in the bills. The court highlighted that the LOU was issued by a third party on its own behalf and not on behalf of the owners and could not, therefore, bind them. Further, there had been no submissions to the Chinese courts by the owners by reason of the LOU and, in addition, the LOU responded to a London arbitration award.
If a third party, rather than owners themselves, provides security (whether by way of an LOU or otherwise) in respect of an underlying contractual claim against the owners, the law and jurisdiction clause in the security document should not be deemed a variation to the law and jurisdiction clause applicable to the underlying contractual claim unless it is clear that the owners themselves intended that effect. A contract formed by the LOU or other security document is separate from, say, the bill of lading contract.
However, owners should still beware that LOUs can vary arrangements relating to claims under bills of lading, as demonstrated by the court's conclusion in The Majesty (see below). Ultimately, the outcome of such disputes will depend on how the court construes the express wording used by the parties in the relevant agreements and by considering the commercial context.
Link to commentary here.