Choice of law and jurisdiction
Choice of law and jurisdiction
One of the principal effective lines of defence to claims in the event of legal action is the use of jurisdiction clauses in bills of lading in order to dictate the use of a court which is geographically convenient for the ship owner or which applies law which is favourable to the ship owner's interests. In the worst cases, obscure and inconvenient courts are deliberately stipulated to deter the pursuit of claims. Legal action is expensive in itself but it may become prohibitively so when agents have to be appointed by the shipper's own lawyers in a faraway place and any eventual trial of the action may require key managers to be flown across the world to give evidence. Yet choice of jurisdiction has been one of the areas until recently left to contract by international maritime transport conventions and remains one where shippers can do much to secure more satisfactory provisions.
Typical bill of lading terms in relation to choice of law and jurisdiction
"The contract evidenced by or contained in this bill of lading shall be governed by Japanese law except as may be otherwise provided herein and 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."
Sometimes special exceptions are added to avoid conflict with the United States legislation. Thus
"If carriage includes carriage to, from or through a port in the United States of America, the merchant may refer any claim or dispute to the Unites States District Court for the Southern District of New York in accordance with the laws of the United States of America".
Position under international conventions
The Hague Rules contain no mandatory provisions on jurisdiction and, because of this, ship owners have historically felt able to stipulate their own choice of law and jurisdiction within their bill of lading terms.
Similarly, the Hague-Visby Rules contain no jurisdiction provisions.
Although freedom of contract therefore exists under Hague and Hague-Visby Rules and the carrier's bill of lading terms might therefore be expected to be enforced, however unfavourable to shippers, national legislation sometimes sets out jurisdiction provisions which allow courts to hear a shipper's claim even though the claim is not brought in the carrier's chosen jurisdiction. Thus in Australia, Canada, South Africa and New Zealand, clauses ousting the national jurisdiction are often treated as invalid. In France, historically a shipper must be shown to have genuinely consented to forego French jurisdiction in favour of the carrier's chosen jurisdiction and the shipper must not suffer any detriment through use of the alternative jurisdiction. English courts, as so often elsewhere in maritime law, have tended to uphold the carrier's bill of lading terms, provided they are unambiguous and comprehensive.
The Hamburg Rules have detailed and fairly balanced provisions on jurisdiction. The shipper claimant is given the choice to bring a claim in one of the following places:
1. The principal place of business or, in the absence thereof, the habitual residence of the defendant carrier, or
2. The place where the contract was made, provided that the defendant has a place of business, branch or agency there through which the contract was made, or
3. The port of loading or the port of discharge, or
4. Any additional place designated for that purpose in the contract of carriage by sea.
It is likely under these provisions that a shipper consignor or a shipper consignee needing to make a claim would both be able to do so within their home jurisdictions.
The European Union has intervened in the general law on jurisdiction over the years, most recently with EU Regulation 44/2001 which builds on the earlier Brussels Convention of 1968 and Lugano Convention of 1988 in making the domicile of the defendant the main criterion for determining jurisdiction if there is no specific agreement between the parties on choice of jurisdiction. It applies to any court proceedings brought after 1st March 2002.
Regulation 44/2001 does not affect any convention to which a member state is party and which governs jurisdiction in particular matters. As neither the Hague nor Hague- Visby Rules deal with jurisdiction, the EU Regulation is now normally the governing instrument for European domiciled shippers in determining whether a carrier's bill of lading terms will be upheld in relation to claimed jurisdiction. Some of the earlier more favourable interpretations relative to shippers, for example in France, may not be applied in future.
In order to be enforceable, a choice of jurisdiction clause affecting any party to the contract domiciled in a Member State must be
* in writing or evidenced in writing.
* in a form which the parties have agreed or
* in the case of international trade in a form "which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to and regularly observed by" parties to commercial contracts.
It is widely considered that a carrier's bill of lading terms will normally satisfy these requirements.
Furthermore, the chosen jurisdiction will then be deemed exclusive, preventing the courts of any other EU state from hearing the claim unless the parties have specifically agreed otherwise.
One circumstance left outside the scope of Regulation 44/2001 is where a ship has been arrested in pursuit of a claim. This is governed by the Arrest Convention 1952, which permits courts of a contracting state to take jurisdiction to hear a claim based on the arrest of a ship in their territorial waters. It should be noted that the Hamburg Rules also make provisions in relation to arrest of ships and subsequent jurisdiction.
Practical measures by shippers
In the free-market situation which applies under the Hague and Hague-Visby Rules and which is permitted under EU Regulation 44/2001, carriers have until now always called the tune. However, a shipper presenting sufficient commercial interest to a carrier could legitimately seek to ensure that the law and jurisdiction arrangements in the case of a legal claim should be as convenient as possible for its managers, insurers and lawyers. The shipper might seek to amend the standard bill of lading term to reflect its own interest. A good compromise solution, adopted in the Scandinavian countries is to base the bill of lading terms on the Hamburg Rules options outlined above, allowing some flexibility concerning jurisdiction.
No hard and fast recommendations are appropriate, as the circumstances of each trading enterprise will differ widely. Internal debate within the company would be worthwhile to determine whether jurisdiction clauses have caused inconvenience and losses in the past and whether managers should seek to establish a specific jurisdiction for specific trade routes, or one jurisdiction in respect of all carriers engaged. Likewise, they may want to consider whether the law of a particular state should be used to judge any cases. It is sometimes possible to nominate one jurisdiction but a separate set of laws to be used in determining the parties' rights. Most frequently when a law different to the law of the state of jurisdiction is chosen it will be the laws of England for the historical reason that English precedents in maritime law are probably the most extensive and precise in the world. However, as may be seen in various sections of the guide, the laws of England are rarely the most favourable in their treatment of the shipper interest. Similarly, English jurisdiction is often stipulated because of the relative speed and finality of justice in the UK. All other factors being equal, companies would normally find most advantage in being able to sue or be sued in the place of establishment or domicile of their business so for British shippers a choice of law or jurisdiction outside the UK may seem appropriate only in the special circumstances of the particular business.
Even where the carrier's bill of lading term is left unchallenged at the time of contract, the enforceability of a jurisdiction clause may be reviewed at the time of claim to see whether it may be subject to legal challenge in favour of on clause may be reviewed at the time of claim to see whether it may be subject to legal challenge in favour of a jurisdiction more favourable or convenient for the shipper.