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Exclusive jurisdiction clause in charterparty extends to related tort claims

Insights / / London

Eastern Pacific Chartering Inc v. Pola Maritime Ltd (Divinegate) [2021] EWHC 1707 (Comm)

The Owners in this case had brought English Court proceedings in respect of their claims under a time charterparty. The Charterers sought, as part of their counterclaim in those proceedings, to claim damages in tort in relation to an alleged wrongful ship arrest in Gibraltar. The Court found that the wording of the exclusive English jurisdiction clause in the charterparty was sufficiently wide to permit the Charterers to do so.

The background facts

The parties had entered into a time charterparty that provided for English law and the exclusive jurisdiction of the English courts over any disputes “arising out of or in connection with” the charterparty. Following redelivery of the vessel, the Owners alleged that there was unpaid hire. The Charterers contended that they had the right to set off various costs and expenses incurred during the charter period. In order to secure their claim, the Owners arrested a vessel in Gibraltar which they believed was beneficially owned by the Charterers. The Charterers denied this and stated that they were only the time charterers of the arrested vessel. The Owners subsequently lifted the arrest, but without conceding the point on beneficial ownership. The Gibraltarian proceedings were subsequently stayed.

The Owners then commenced English Court proceedings in relation to the unpaid hire. As part of their counterclaim, the Charterers claimed damages in respect of the arrest on a number of alternative bases, all of them under English law, including breach of the Torts (Interference with Goods) Act 1977, tortious interference with use of the arrested vessel and conversion of the arrested vessel. The Owners challenged the English Court’s jurisdiction in relation to the tort claims.

The Commercial Court decision

The Court acknowledged that pursuant to the 1952 Arrest Convention, any claim for damages for wrongful arrest should be dealt with under the law of the place where the arrest took place i.e. under Gibraltarian law. However, it was not considering the merits of the counterclaim at this stage, only addressing the question of jurisdiction. Further, the fact that the Owners had sought security in respect of their claim by arresting a vessel in Gibraltar (as they were permitted to do under the 1952 Arrest Convention) did not mean that the Gibraltarian Court also had exclusive jurisdiction as regards to whether the Owners were liable in tort as a result of that arrest. The Arrest Convention left that question open.

As between England and Gibraltar, the 1968 Brussels Convention applied rather than any of its successors and this remained so notwithstanding Brexit. The Charterers were domiciled in Cyprus, a contracting state, so that Article 17 of the 1968 Convention applied. This provided as follows:

"ARTICLE 17: If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction…"

The Court found that the tort claims fell within the exclusive jurisdiction clause in the charterparty. On the facts, it was clear that the purpose of the arrest in Gibraltar which gave rise to the tort claims was to secure the claims under the charterparty that were to be brought in London. The Owners took those steps in express reliance on their rights under the charterparty and, but for the relationship created by the charterparty, no arrest would have taken place.

The Court emphasised that the wording “in connection with” in the jurisdiction clause was wider than “arising out of” or similar phrases. A tort claim could arise "in connection with" the charterparty both where there were parallel claims in tort and contract and also where there was only a tort claim, but that claim was causatively connected with the relationship created by the charterparty. Here, the arrest was a direct consequence of a contractual claim and, therefore, closely connected to the charterparty contract and the legal relationship that it created. It was not necessary for there to be overlapping facts between the contractual and tort claims for the latter to fall within the jurisdiction clause. In conclusion, the tort claims were claims “in connection with” the charterparty and so the English Court had jurisdiction over them.

The Court further held that the two sets of proceedings did not involve either the same cause of action or the same parties. Therefore, it was not obliged (pursuant to Article 21 of the 1968 Convention, which is in similar terms to Article 29 of the recast Brussels Regulation) to stay its proceedings in favour of the Gibraltarian Court as the court first seised.

The two sets of proceedings were, however, related actions and this meant that the Court had a discretion, under Article 22 of the 1968 Convention (which is in similar terms to Article 30 of the recast Brussels Regulation) to stay its proceedings in favour of the Gibraltarian Court.

The Court declined to do so. The initial presumption in favour of declining jurisdiction was outweighed by several countervailing factors. Among other things: the overlap between the two sets of proceedings was of limited scope; the Gibraltarian proceedings had barely progressed; there was only a limited risk of the proceedings in Gibraltar being reactivated and producing an inconsistent finding; Gibraltarian admiralty law mirrored English law and the English Court could deal effectively with the matter under Gibraltarian law. The Court also emphasised that a “one-stop approach” in the English courts only would be more efficient than siphoning off the tort claims to be dealt with at trial in Gibraltar. The Court, therefore, refused to decline jurisdiction or to stay the tort claims.

Comment

The decision confirms the English Court’s commitment to upholding exclusive jurisdiction clauses and to construing them in a way that allows sufficiently related or connected claims to be dealt with in the same forum. In this case, the Gibraltarian proceedings were unlikely to go much further, so there was little risk of irreconcilable judgments.

From a drafting perspective, the Court has provided a helpful reminder that the words “in connection with” will be construed more broadly than “arising out of”. This should be kept in mind by those drafting dispute resolution clauses in their contracts of carriage and, indeed, in commercial contracts generally.

Christian Dwyer

Christian Dwyer Global Head of Admiralty

Reema Shour

Reema Shour Professional Support Lawyer

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