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Hong Kong Court upholds jurisdiction clause in bill of lading – with serious consequences for NVOCC

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Li Lian International Ltd v. Herport Hong Kong Ltd (MOL Comfort) [2019] HKCFI 826 [2019] HKEC 964 

This decision of the Hong Kong Court illustrates one of the potential risks associated with acting as a Non Vessel Owning Common Carrier.

The background facts

These proceedings arose from the well-known events resulting in the loss of the container vessel MOL Comfort (the “Vessel”).

Various cargo interests, whose cargo was lost in the incident, sought to bring claims in Hong Kong. They brought those claims against Herport, who had acted as a Non Vessel Owning Common Carrier (“NVOCC”). That was in line with the provisions of the bills of lading that Herport had issued (the “Herport B/Ls”). 

Herport then sought to join NYK, to whom they had subcontracted the carriage of the cargo in question, to the Hong Kong proceedings. NYK resisted, on the basis that the terms of the bills of lading that they had issued (the “NYK B/Ls”) gave the Tokyo Court exclusive jurisdiction. Clause 3 of the NYK B/Ls provided as follows:

“3. (Governing Law and Jurisdiction) (a) The contract evidenced by or contained in this Bill of Lading shall be governed and construed by Japanese law except as may be provided for herein, and (b) notwithstanding anything else contained in this Bill of Lading or in any other contract, any and all actions against the Carrier in respect of the Goods or arising out of the Carriage shall be brought before the Tokyo District Court in Japan to the exclusion of the jurisdiction of any other courts whilst any such actions against the Merchant may be brought before the said Court or any other competent court at the Carrier’s option ...”

Herport obtained leave on an ex parte basis to join NYK and to serve them in respect of the Hong Kong proceedings. NYK challenged that decision.

The issue before the Court was whether the exclusive jurisdiction clause contained in the NYK B/Ls was sufficient for NYK to resist being joined to the Hong Kong proceedings.

The Court of First Instance decision

The Court of First Instance (the “Court”) gave effect to the exclusive jurisdiction clause in the NYK B/Ls and held that the previous order for leave to join and serve NYK should be discharged and set aside.

The practical impact of the decision is that Herport are left facing a raft of claims in Hong Kong which they will not be able to pass on to NYK. They are precluded by this decision from suing NYK in Hong Kong and, having not previously sought to bring proceedings in the Tokyo Court, appear now to be time-barred from doing so.

The decision is in line with the practice of the Hong Kong Court, which is to give exclusive jurisdiction clauses made between the parties a “generous” interpretation, in favour of the party seeking enforcement of the clause. The Court will generally give effect to such a clause, unless there are strong reasons for departing from it.

Notwithstanding this general approach, the Court will take a more restrictive approach where there is ambiguity in the clause in question. In this case, however, the Court saw no ambiguity. The phrase “any and all actions against the Carrier”, as analysed in the judgment, “means just that”.

Herport further sought to argue that this was a case in which there were “strong reasons” to depart from the exclusive jurisdiction clause. Such “strong reasons” will generally have to be factors not in the reasonable contemplation of the parties at the time when the agreement was made.

Herport’s argument was that it would benefit from a “juridical advantage” if it was able to continue with the claim against NYK in Hong Kong, given that the time limit to bring the same claim in Japan had expired. The Court dismissed this argument, saying that the alleged “prejudice” Herport would suffer was an “entirely foreseeable situation of its own making”. On that basis, the Court concluded that there were no “strong reasons” to depart from the exclusive jurisdiction clause.

Comment

An NVOCC assumes potential liability for damage and/or losses of the cargo, notwithstanding that they are not the actual carrier and have sub-contracted the carriage to someone else. It follows that it is essential for an NVOCC to be sure that they can pass any incoming claim from cargo interests on to the actual carrier (or another party). Here, the differing law and jurisdiction provisions in the two sets of B/Ls left Herport in an unfortunate situation, which was then compounded by not bringing a claim before the Tokyo Court.

Bills of lading are, of course, usually standard form documents, with limited scope for amendment. Certainly, it is difficult to see in this case that Herport would have had much scope for amending the terms of the NYK B/Ls, even if they had envisaged the potential issue. Herport were, however, in control of the terms of their own B/Ls.

It would have been possible, for example, to have included a clause that would have compelled cargo interests to bring any claims in the same jurisdiction where Herport would have to sue the party to whom they had sub-contracted the carriage. Such a clause is not straightforward (and it would have left Herport involved in two sets of proceedings in an unfamiliar jurisdiction), but it would have prevented the situation Herport ultimately found itself in, where it was in the middle of a chain, but on terms that were far from back-to-back.

Finally, it is unclear from the judgment whether Article III rule 6bis of the Hague Visby Rules might assist Herport with the time limit issue. Certainly, Herport’s case seemed to accept that they would be time-barred from bringing any kind of indemnity claim in Japan. Ultimately, this is a matter of Japanese law and no doubt an issue Herport have examined closely.

Wai Yue Loh

Wai Yue Loh Partner and Chief Representative of Beijing Office, Beijing; and Partner, Hong Kong

Ruaridh Guy

Ruaridh Guy Partner

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