When does the arrest of the ship frustrate the jurisdiction or arbitration agreement of the parties?
Dispute resolution clauses inserted into a charterparty or a B/L may not be recognised by a court when the claimant demands the arrest of the ship as an interim measure ancillary to the cargo claim. The clause has a separate nature from the rest of the contract and will be analysed as such. In the event of a cargo claim against the shipowner, the claimant may be able to obtain an arrest of the vessel for security for the claim in the vessel's present location, which may not be the same forum as that agreed in the relevant contract. In some countries, the issue of a writ for arrest may establish jurisdiction in that country, in contravention of the contractual jurisdiction clause.
In Figure 5, a shipper sues SO and applies for the arrest of the ship where the vessel is located. Will the arbitration or jurisdiction clause of the charterparty or B/L be recognised by the judge who issues the warrant of arrest? International arrest conventions applicable to the matter may constrain SO from resolving the dispute in the forum or ADR venue agreed to in the charterparty, or in the B/L, if applicable. If the judge issues an order for arrest, requiring the shipowner to provide security or provide a letter of indemnity (LOI) to release the ship, the court may hear the substance of the case on the merits, overriding the domestic legislation that would have applied had an arrest not been effected. The arrest of the ship, an interim measure having the nature of an action in rem, thus remains a contested issue for the recognition of clauses of jurisdiction or ADR contained in charterparties or B/Ls.
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Procedural laws regulate the judicial process while the substantive law is composed of the applicable international, conventional or national rules; Sparka, Jurisdiction and Arbitration Clauses in Maritime Transport Documents (n 2) 19-38.
Figure 5 Arrest of ships.
When is the validity of a jurisdiction or arbitration agreement restricted by the substantive applicable law of the forum, including overriding mandatory rules?
Procedural law plays a fundamental role in the recognition of jurisdiction or arbitration agreements. International uniformity has not been achieved, although some regional frameworks, such as in the EU, are compulsory when parties have selected an EU Member State court, subject to formal requirements, regardless of where the parties are domiciled.
When jurisdiction has been determined, the mandatorily applicable legal regime may determine the minimum protective standards applied to the charterparty. When overriding mandatory rules apply, a court can take jurisdiction over a cargo claim dispute even if there is a relevant dispute resolution clause. If there is a conflict, domestic law or EU PIL rules will determine the applicable law and the jurisdiction or arbitration agreement may be overridden. Such practice may remarkably limit party autonomy. Courts in EU Member States will apply the Rome I Regulation or Rome II Regulation, depending on the nature of the claim, if the contract for the carriage of goods by sea does not include an explicit choice of law.
Other problems are present in common law regimes, although not exclusively, where jurisdiction is declined due to public policy or other circumstances related to the nature of the claim. Moreover, the common law forum non conveniens doctrine may assist in avoiding irreconcilable judgments by two different courts. The EU regime is set up to
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Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) OJ 2007 L 199/40 (Rome II Regulation).
avoid irreconcilable decisions while facilitating mutual trust between the EU courts and the execution of judgments generally.
The cargo claimant’s risk of having a non-recognisable judgment and not recovering compensation may encourage it to apply for interim measures, such as arrest of the ship. Some international conventions, such as the 1952 Arrest Convention,[1] will take precedence over the EU jurisdictional framework in certain circumstances. The question of whether the chosen forum or arbitral seat will be recognised in security actions leads to legal uncertainty for the shipowner and the charterer.
The choice of applicable law may constitute an obstacle to the recognition of the chosen dispute resolution venue by the contracting parties. There are restrictions on the shipowner or the charterer in order to limit their responsibility when the substantive law is applied by the court or arbitral tribunal. These restrictions apply where a cargo claim is filed in a jurisdiction less favourable to their interests than that agreed in the contract of carriage. Depending on the identity of the contractual carrier, the shipowner and charterer may be able to limit their responsibility in a cargo claim from the shipper. The limitations on party autonomy concerning the dispute resolution clause incorporated into the B/L also exist in procedural laws and mandatoiy rules, such as ones related to limiting the responsibility (contractual defences) of the carrier, which may also be incorporated into the contract for the carriage of goods.
The international conventions in force, such as the Hague-Visby and Hamburg Rules, mandatorily applicable or not depending on the jurisdiction, regulate the liability regime in the B/L. However, since they are not directly applicable to charterparties, an express incorporation is required through a Paramount Clause.
- [1] International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships (adopted 10 May 1952, entered into force 24 February 1956) (1952 Arrest Convention), 439 UNTS 193. 2 Council Decision 2007/712/EC of 15 October 2007 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2007] OJ 2007, L339/3 (Lugano Convention).
