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Implied contract based on bill of lading did not incorporate exclusive jurisdiction clause

07.06.2019 Maritime

Catherine Earnshaw

Catherine Earnshaw Partner

Frances Drain

Frances Drain Associate

Pan Ocean Co. Ltd v. (1) China-Base Group Co. Ltd (2) Beihai Xinan Petrochemical Co. Ltd (Grand Ace 12) [2019] EWHC 982 (Comm)

In the context of the Claimants’ application for an anti-suit injunction (“ASI”) to discontinue proceedings in Singapore, the Court of Appeal found that there was no valid exclusive English jurisdiction clause in an implied contract between owners and buyers under the bill of lading and, even if there had been, the Court would not have granted the ASI as the Claimants had made their application too late.

The background facts

Guvnor Singapore entered into a contract with China-Base (First Defendant) for the sale of light cycle oil for delivery in Nansha, China. China-Base were the agents of Beihai (Second Defendant).

Prior to this, Pan Ocean, the demise charterer of the vessel, agreed a voyage charter for the vessel, GRAND ACE 12, with Clearlake, a company associated with Guvnor. The charterparty was based on a recap on the BP Voy form with amendments, which provided for English law and jurisdiction. 

The Vessel loaded cargoes of light cycle oil and gas oil at Zhoushan, China and Taichung, Taiwan. Pan Ocean issued bills of lading reflecting the load ports and cargo. The Vessel  loaded a further cargo of gasoil at Subic Bay, Philippines, but no separate bill of lading was issued. On Clearlake’s instructions, an agent of Pan Ocean issued switched bills incorrectly naming Subic Bay as the loadport for the entire cargo and mis-describing the entire cargo as light cycle oil.

On arrival in Nansha, neither China-Base nor Beihai presented any bills of lading nor gave any letter of indemnity to Pan Ocean or their agents. China-Base/Beihai tried to have the cargo cleared at customs with documents that mis-described the loadport and cargo. The Chinese authorities impounded the cargo due to the stated origin of the cargo in the customs documents not being accurate. China-Base managed to get the cargo released after paying taxes, fines and other expenses.

Subsequently, China-Base arrested the Vessel in Singapore and brought an action against Pan Ocean for damages for alleged misrepresentations in the cargo documents. Pan Ocean issued English proceedings seeking an ASI to prevent the claim continuing in Singapore. They argued that an implied contract based on the parties’ conduct and on the terms of the bill of lading, containing an exclusive English jurisdiction clause, had been formed between themselves and the Defendants. Pan Ocean argued that the English Court had jurisdiction under Article 25(1) of the Recast Brussels Regulation which provides that any agreement conferring jurisdiction must be “in writing or evidenced in writing”.

The Commercial Court decision

The Court reviewed a number of EU authorities on the evidencing of consent and the requirements of Article 25 before concluding that there was no validly incorporated exclusive jurisdiction clause in this case.

The Court addressed the issue on the assumption that there was an implied contract between the parties, but ultimately held that it was not sufficient that the jurisdiction clause itself was in writing. The agreement or consent to the clause must be in writing, or evidenced (or confirmed) in writing to meet the requirements of Article 25(1)(a). In the Court’s view, the formalities specified in Article 25 were included for a purpose and should be complied with.

Although it had concluded that there was no applicable exclusive jurisdiction clause and so strictly speaking there was no need to consider the point, the Court nevertheless discussed whether it would have granted the ASI.

The Court found that although Pan Ocean had not submitted to the jurisdiction in Singapore, an ASI would not have been granted because the ASI had not been brought promptly (over nine months had passed since the warrant of arrest in Singapore was served) and the foreign proceedings were too far advanced, several hearings having already taken place in Singapore.

Comment

This case provides a comprehensive overview of the requirements needed to comply with Article 25 of the Recast Regulation and confirms that implied contracts by conduct will not be sufficient to fulfil such requirements. Consent to the exclusive jurisdiction clause will not be evidenced by the clause itself and other written confirmation or consent is needed.

Furthermore, in relation to the ASI, the decision provides a timely reminder that it is imperative to take swift action and not allow proceedings in the foreign jurisdiction to progress too far before steps are taken to seek an ASI from the English Court.

Finally, the case is a reminder of the importance of ensuring the accuracy of bills of lading, particularly in a switched bill of lading scenario.


Article authors:

Catherine Earnshaw Frances Drain