Jurisdiction - Australia
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Australia – Foreign Arbitral Awards In Voyage Charterparties Are Enforceable (Again).

2 October, 2013

WHAT YOU NEED TO KNOW

 

  • The Full Court of the Federal Court of Australia has overturned a previous Federal Court decision on appeal, holding that a voyage charterparty is not a “sea carriage document” under the Carriage of Goods by Sea Act 1991 (Cth).
  • This decision is significant, as it removes the uncertainty created by the original decision regarding the enforceability of foreign arbitral awards made under arbitration clauses of a voyage charterparty.
 

On 18 September 2013, the Full Court of the Federal Court of Australia handed down its decision in Dampskibsselskabet Nordon A/S v Gladstone Civil Pty Ltd [2013] FCAFC 107, on appeal from the Federal Court. The decision is significant as it clarifies the position in Australia on enforceability of foreign arbitral awards which are made under an arbitration clause of a voyage charterparty (for the carriage of goods from Australia to overseas). It is also a further example of Australian courts adopting an approach to statutory interpretation that promotes the policy of recognising and enforcing foreign arbitral awards.

 

Carriage Of Goods By Sea Act 1991


The dispute in this case was over the scope of the definition of “sea carriage document” as applying to the carriage of goods from Australia to overseas, in section 11(1)(a) of the Carriage of Goods By Sea Act 1991 (Cth) (COGSA). Under section 11 of COGSA, an arbitration clause in a sea carriage document for goods being carried to or from Australia which prescribes a place for arbitration outside Australia will be of no effect (and therefore unenforceable) by reason of section 11(2)(b) of COGSA, as it will be seen to preclude or limit the jurisdiction of Australian courts.


In this case, the enforceability in Australia of an award in an arbitration between the parties which was held in London turned on whether the voyage charterparty was a “sea carriage document” under section 11 of COGSA.


The Decision


The Original Decision


In the original decision, Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd [2012] FCA 696, the primary judge found that a voyage charterparty was a “sea carriage document” within the meaning of section 11 of COGSA. Based on this reasoning, the award was unenforceable in Australia.


For further information on the original decision, please see Enforceability of foreign arbitral awards in Australia under the Carriage of Goods By Sea Act 1991.


The Appeal


The owners of the vessel, Dampskibsselskabet Nordon A/S (DKN), brought an appeal against the original decision, the key question on appeal being, again, whether the charterparty was a “sea carriage document” within the meaning of section 11 of COGSA.
DKN submitted on appeal, that:

 

  • the primary judge was incorrect in his finding that the charterparty was a “sea carriage document” under section 11 of COGSA; and
  • that the construction of “sea carriage document” should be in accordance with Articles 5 and 10(6)- (7) of Schedule 1A to COGSA (the amended Hague-Visby Rules). These articles draw a distinction between the functions of a contract of carriage and a charterparty for the purposes of the amended Hague-Visby Rules and COGSA.
 

The Reasoning


In the judgment of Justice Mansfield, agreeing with the reasons of Justice Rares, his Honour outlined the reasons why the term “sea carriage document” should not include a charterparty, including that:


a) there is a traditional line drawn between charterparties and sea carriage documents;


b) there is clear and longstanding acceptance in international and domestic law that 

international commercial disputes under charterparties may be settled by arbitration (also reflected in the International Arbitration Act 1974 (Cth));

 

c) the Court should not too readily construe section 11 of COGSA to limit the effect of arbitration clauses;

 

d) the undefined term “sea carriage document” was introduced into COGSA at the same time as the defined term “Sea carriage document” in Article 1(g) of the amended Hague-Visby Rules, making it appropriate to construe the undefined term consistently with the term as defined;


e) the focus is upon documents having characteristics similar to a bill of lading, and the section does not indicate a clear intention to encompass a charterparty; and


f) the parallel definition in Article 1(g) of the amended Hague-Visby Rules should be construed in the context of the amended Hague-Visby Rules as a whole, which suggest that a charterparty is treated as distinct from a contract for the carriage of goods.


The Court found, by a 2-1 majority, that whilst the original construction of the primary judge was an available choice, the better approach was to adopt the alternative.


It is worth noting in particular the approach of the court in choosing between the competing interpretations having regard to the broader general policy of recognising and enforcing foreign arbitration awards.


The appeal was allowed in favour of DKN, and the Court decided that the charterparty was not a sea carriage document, and so was not rendered unenforceable by section 11 of COGSA.

 

Implications For Parties To Voyage Charterparties


This decision removes the ambiguity from the previous decision regarding the potential enforceability of foreign arbitral awards in Australia which are made under an arbitration clause of a voyage charterparty (for the carriage of goods from or to Australia to or from overseas).


Parties to voyage charterparties of this nature need to be aware of the effect of this decision in contrast to the position that applied previously. Caution should still be exercised in light of any future developments in this area.

 

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For further information, please contact:

 

Shane Bosma, Ashurst
shane.bosma@ashurst.com


Paul Newman, Partner, Ashurst
paul.newman@ashurst.com


Peter Ward, Partner, Ashurst
peter.ward@ashurst.com


Georgia Quick, Partner, Ashurst
georgia.quick@ashurst.com

 

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