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Australia – Enforceability Of Foreign Arbitral Awards Under The Carriage Of Goods By Sea Act 1991.

 31 August, 2012

 

 In brief

 

Any award made under an arbitration clause specifying a forum other than Australia in a voyage charterparty for carriage of goods from Australia to overseas may be unenforceable in Australia. On 29 June 2012, Justice Foster of the Federal Court of Australia handed down his decision in Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd [2012] FCA 696. This decision is significant as it decided that a voyage charterparty is a "sea carriage document" within the meaning of section 11 of the Carriage of Goods by Sea Act 1991 (Cth) ("COGSA"). Based on this decision, any award made under an arbitration clause specifying a forum other than Australia in a voyage charterparty for carriage of goods from Australia to overseas will be unenforceable in Australia.

 

The applicant, Dampskibsselskabet Norden A/S ("DKN"), was the shipowner and sought to enforce an arbitral award declaring its entitlement to demurrage as well as an award rectifying the charterparty. The key issues in the arbitration, which was held in London pursuant to the arbitration clause in the charterparty, were:

 

  • first, whether the charterparty should be rectified so as to refer to the respondent, Beach Building & Civil Group Pty Ltd ("Beach Civil") (the charterparty named Beach Building & Construction Group); and
  • second, whether the voyage charterparty was a "sea carriage document" within the meaning of section 11 of COGSA; and finally, whether Beach Civil was required to pay demurrage and costs to DKN. 

 

The arbitrator held in favour of DKN, finding that the charterparty should be rectified to name Beach Civil, that the voyage charterparty was not a "sea carriage document" and thus not precluded from enforcement under COGSA and finally, that Beach Civil was required to pay demurrage and DKN's costs.

 

In the Federal Court proceedings DKN sought enforcement of all awards. Beach Civil challenged the validity of the awards on two key bases

 

  • first, that Beach Civil was never a party to the charterparty; and
  • second, that section 11 of COGSA was in fact engaged by clause 32 of the charterparty.

 

Justice Foster held that the first argument failed, finding that DKN had successfully established that each of the two awards were "foreign awards" under COGSA and that Beach Civil had failed to subsequently establish either of the grounds in sections 8(5) or 8(7) of COGSA.

 

However, his Honour found in favour of Beach Civil in relation to the second argument, namely that section 11 of COGSA was engaged.

 

Section 11 of COGSA provides:

 

(1) An agreement, or a provision of an agreement, that provides for the resolution of a dispute by arbitration is not made ineffective by subsection (2) (despite the fact that it may preclude or limit the jurisdiction of a court) if, under the agreement or provision, the arbitration must be conducted in Australia.

 

(2) All parties to:

 

(a) a sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia; or

(b) a non‑negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii), relating to such a carriage of goods; are taken to have intended to contract according to the laws in force at the place of shipment.

 

(3) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to:

 

(a) preclude or limit the effect of subsection (1) in respect of a bill of lading or a document mentioned in that subsection; or

(b) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of a bill of lading or a document mentioned in subsection (1); or

(c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of:

(i) a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia; or

(ii) a non‑negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii) relating to such a carriage of goods. (emphasis added)

 

Justice Foster found, notwithstanding that the definition of "sea carriage document" in the amended Hague Rules does not, strictly speaking, apply to COGSA itself, that the definition in the Rules was of assistance. That definition provides that a sea carriage document is a non-negotiable instrument (including a consignment note and a document of the kind known as a sea waybill or the kind known as a ship's delivery order) that either contains or evidences a contract of carriage of goods by sea. Justice Foster found that this definition, despite the narrow class of documents specified in the parentheses, includes voyage charterparties. 

 

His Honour did, however, recognise that his decision that "sea carriage documents" includes voyage charterparties is in direct conflict with a decision of the South Australian Supreme Court earlier this year.

 

Implications for parties to voyage charterparties

 

This decision means that all voyage charterparties which relate to the carriage of goods from Australia to overseas and which incorporate an arbitration clause purporting to preclude or limit the jurisdiction of Australian courts (for eg, by requiring disputes be settled in a forum other than Australia) may result in any arbitral awards obtained in relation to any disputes under the charterparty being unenforceable in Australia, by reason of sections 11(1)(a) and 11(2)(b) of COGSA.

Parties to voyage charterparties of this nature need to be particularly aware of this decision, and consider whether such charterparties should specify that any arbitration occur within Australia to protect the enforceability of any arbitral awards made in relation to the charterparty.

 

 

For further information, please contact:

 

Shane Bosma, Ashurst

shane.bosma@ashurst.com

 

Ashurst Shipping, Maritime & Aviation Practice Profile in Australia

 

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