Grace Ocean v COFCO Global Harvest, MV “Bulk Poland”  EWHC 3343 (Comm)
As with our recent blog article, this case involves the incorporation of charterparty clauses into bills of lading. This judgment gives a helpful textbook summary of the requirements for obtaining an anti-suit injunction on the basis of a London arbitration agreement incorporated into a bill of lading. This is an issue that commonly arises in our shipping practice and will be useful to many involved in the shipping trade.
This dispute involved the not uncommon situation where a PRC cargo receiver alleges cargo damage and demands security. Security is provided to release the vessel, but this is not exclusively subject to English law and arbitration (often referring, as in this case, to a judgment or award of a “competent” court or tribunal). This is despite the fact that the bills of lading evidencing the contracts of carriage are subject to English law and London arbitration.
In this case, shortly after security was provided the PRC receiver (“Cofco”) commenced Chinese proceedings against the shipowner (“Grace Ocean”).
Prospects of successfully defending a claim advanced by PRC receivers in China are never that good. Likewise, it is unlikely in these proceedings that a shipowner would be able to successfully rely upon the London arbitration agreement in the bill of lading.
Grace Ocean wrote to the Cofco informing them that the Chinese proceedings were in breach of the London arbitration agreement in the bills of lading and threatened to seek an anti-suit injunction if this request was not complied with. Cofco did not respond.
Anti-suit injunction proceedings
Grace Ocean applied to the English court for an anti-suit injunction, which was granted on a without notice basis. The anti-suit injunction was served on Cofco and its lawyers but they did not respond or participate in the English proceedings. The judgment was given on a return date hearing, which Cofco did not attend.
The English court considered and decided upon the following issues:
- An application for an anti-suit injunction must show “to a high degree of probability that its case is right”. If that threshold was met, it would normally be for the respondent to prove that there were strong reasons for not granting the injunction.
- Here the bills included standard wording incorporating all terms and conditions of the relevant charterparty “including the Law and Arbitration Clause”. Under Article 10(a) of the Rome I Convention (Regulation No 593/2008/EC), English law governed the issue of whether bills incorporated an express choice of English law. Under English law, the incorporation of a charterparty governed by English law constitutes an express choice that English law applies to the bills of lading.
- It was well established that the words in the bills specifically referring to the arbitration clause in the charterparty were sufficient to incorporate into the bills the terms of the voyage charterparty, including the London arbitration agreement.
- If a contract contains an English law and arbitration agreement, the English court will usually grant an anti-suit injunction, unless there are good or strong reasons to the contrary. Such strong reasons include delay and submission to the jurisdiction of the English court.
- Here, there were no strong reasons to deny or discontinue the anti-suit injunction. Grace Ocean had acted promptly in bringing the injunction proceedings and had done nothing to advance the Chinese proceedings. Grace Ocean’s attendance in the foreign proceedings to challenge them would not be regarded as a voluntary submission to the jurisdiction of the Chinese court.
- The court therefore held that any substantive claim by Cofco under the bills of lading was subject to English law and could only be brought by way of London arbitration. By commencing Chinese proceedings, Cofco were in breach of this agreement.
An interesting point in this case is that it appeared that any cargo claim was in fact time barred under English law. Despite this, Grace Ocean agreed not to rely on any time bar if Cofco withdrew the Chinese claim and started London arbitration proceedings within 60 days of the date of the anti-suit injunction order.
The judge ruled that the anti-suit injunction should continue on this basis, subject to the usual cross-undertaking in damages, which in this case was provided by way of a letter of undertaking from Grace Ocean’s P&I insurers for £50,000.
This judgment should provide helpful guidance to many in the shipping sector who face this common issue of incorporation of charterparty terms into bills of lading, as well as setting out the principles with regard to anti-suit injunctions.
A link to the full judgement can be found here.