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Welex AG v Rosa Maritime Ltd

In a judgment of the Commercial Court dated 25th April 2002, Mr Justice David Steel held that in a dispute as to whether a charterparty containing a London arbitration clause had been incorporated into a Bill of Lading where the existence of the original charterparty itself was disputed, a re-cap telex and associated documentation confirming the terms of the charterparty, would be sufficient to constitute the charterparty. In addition, where a re-cap telex contained or evidenced oral terms, this qualified for the purposes of the terms having been reduced to writing. In relation to the question of human rights, the judge found that Article 6 of the European Convention on Human Rights which guarantees the right to a public hearing, was not relevant to the question of whether an arbitration agreement had been entered into.
The facts
The defendant, Rosa Maritime Ltd ("Rosa"), was the owner of a vessel called Epsilon Rosa ("the vessel"). It concluded a voyage charterparty through its agents, Epsilon Shipmanagement Ltd ("Epsilon"), with the Charterers, Red Sea Heavy Industries LA ("Red Sea"), through Red Sea's brokers, Caspi Cargo Lines ("Caspi"), for the carriage of 2,819 (5,394) tonnes of steel plates on board the vessel from Mariupol, Ukraine to Szchecin, Poland. The claimant, Welex AG ("Welex"), a Swiss corporation, was named as consignee through Korympic Steel International Gmbh ("Korympic"). The Bill of Lading was in the 1994 Congenform. In particular, the Bill of Lading was claused by various ship's remarks that the cargo had been stored in the open, was wet before shipment and exhibited some rust. There was a typed clause to the effect that "freight payable as per Charter Party", and also a box which had not been filled in, that stated,
"Freight payable as per CHARTERPARTY dated...".
But, most importantly, clause 1 of the reverse side of the Bill of Lading stated:
"All the terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated."
The Bill of Lading was dated 9th April 2001. On 1st May 2001, the vessel arrived at the port of Szcecin, where during discharge, Welex's surveyors found that the cargo was damaged. Rosa sold the vessel to Alexia Navigation Ltd ("Alexia") on 31st May 2001. In July 2001, Welex commenced arrest proceedings in the maritime court in Lisbon, Portugal, against both Rosa and Alexia. Welex then went on to file a claim in the District Court of Szczecin against Rosa and Alexia contending that the claim carried a lien under Polish maritime law irrespective of the change of ownership of vessel. On 18th September 2001, Alexia applied unsuccessfully to lift the arrest in Lisbon with the result that the vessel remained under arrest.
Rosa commenced arbitration proceedings in London against Welex. It relied on a fixture evidenced by a re-cap telex dated 19th March 2001. In particular, clause 47 of the re-cap telex read (as written by hand),
"47. Arbitration, if any, to be settled in London in accordance with the Rules of the LMAA".
Welex claimed that no formal charterparty was ever executed by any of the parties, since no such document was produced nor was any satisfactory evidence of its existence tendered. Further, Welex contended that Article 6 of the European Convention of Human Rights ("ECHR") which guarantees the right to a public hearing, precluded the acceptance by Korympic of the London arbitration clause on Welex's behalf.
Both Welex and Rosa made applications to the High Court in London. Welex sought a declaration that no arbitration agreement was incorporated into a contract of carriage evidenced by the Bill of Lading between Welex as consignees and Rosa as owners of the vessel. In addition, Welex sought consequential orders, firstly the arbitration proceedings commenced by Rosa in London were of no effect and, secondly for an order restraining Rosa from continuing with the arbitration. Rosa sought an anti-suit injunction restraining Welex from continuing the proceedings against Rosa in Poland, or otherwise prosecuting proceedings against Rosa other than by way of the arbitration already commenced by Rosa.
The judge, Mr Justice David Steel, had to decide whether there was a charterparty containing a London arbitration clause for the purpose of incorporation into the Bill of Lading. If no charterparty existed, could the re-cap telex and additional documentation constitute a charterparty? Also, regardless of whether or not a charterparty existed, did Article 6 ECHR prevent an agreement to arbitrate accepted by Korympic on Welex's behalf?
The charterparty and the recap telex
Rosa submitted that a charterparty with a London arbitration clause had been duly executed and was incorporated into the Bill of Lading by virtue of clause 1 of the reverse side of the Bill of Lading. Welex disputed the existence of the charterparty, claiming that no original document had been produced, nor had any satisfactory evidence of its existence been tendered. As evidence, Rosa provided a witness statement from Red Sea’s brokers, Caspi, describing how the charterparty had been drawn up and after having obtained Epsilon’s signature, it had been forwarded to Red Sea for signature prior to 3rd April 2001. The charterparty was signed by the Red Sea on 28th October 2001. A faxed copy of the charterparty was produced.
It was accepted by the parties that an oral agreement would not have sufficed for the purposes of the charterparty and that the document constituting the charterparty would have had to have been agreed and reduced to writing when the Bill of Lading was issued. Welex contended that the re-cap telex and the associated documentation did not constitute a charterparty. The main reason for this was because the reference to a charterparty as a single document was inconsistent with a group or collection of documents being referred to. Welex also claimed that the use of capital letters suggested a degree of formality as supported by dictionary definitions referring to “charters” or “deeds”. In particular, Welex referred to the case of The Heidberg [1994] 2 Lloyd’s Rep 287, where Judge Diamond QC held that an incorporation clause in a Bill of Lading could not have the effect of incorporating oral terms which had not yet been agreed in writing. However, Judge Diamond QC also concluded that an oral contract evidenced only by a re-cap telex did not qualify for the purposes of having been agreed in writing. Further, Welex contended that as there was no identifying date in the Bills of Lading, this also negated incorporation. Rosa argued that it was wrong both as a matter of commercial practice and commercial common sense to say that a charterparty had to be contained in a single document, since charterparties often comprised two documents, a printed and type filled standard form and a typed “rider” to the standard form containing additional or amending clauses.
Mr Justice Steel held that there was no significance in the use of capital letters nor was there anything to be derived by dictionary references to charterparties in the form of deeds. But more importantly, he found that a charterparty could be contained a written fax or in telex exchanges. The judge adopted the decision in The Heidberg only to the extent that oral terms alone could not qualify as having been reduced to writing. However, where oral terms were contained in or evidenced by a re-cap telex, this qualified for the purposes of having been reduced to writing. Therefore, the judge overturned that part of the decision in The Heidberg. and accordingly, rejected Welex’s contention that contract of carriage contained in/evidenced by re-cap telex did not qualify for the purposes of having been reduced to writing. Further, he said that a signed charterpary was not necessary. and on the basis of the decisions in The San Nicholas [1976] 1 Lloyd’s Rep 9, and The SLS Everest [1981] 2 Lloyd’s Rep 389, the absence of an identifying date did not negate incorporation. Significantly, the judge said that freight was payable and indeed paid according to the terms of the very same charterparty. accept. In conclusion on this point, the judge found that commercial realities were inconsistent with Welex’s submission. Welex was aware of and had approved the fixture. The charterparty was the agreement contained in the re-cap telex and the standard form to which it referred.
Human Rights
Welex contended that Article 6 ECHR which guarantees a right to a public hearing, was applicable in this case with the effect of invalidating the arbitration proceedings. Welex said that it could not have consented to arbitration given that it did not even know of the existence of an arbitration clause. Also, Welex submitted that in keeping with the spirit of the ECHR, the courts should be slow to infer agreement to arbitration. Article 6 requires consent to be clear and unequivocal.
The Judge disagreed with Welex's submission. In his view Article 6 ECHR was not relevant to the question of whether an agreement for arbitration had been entered into. Further, there was no basis to assert that the Human Rights Act required the court to adopt a "reluctant" approach to the incorporation of the arbitration clause into a Bill of Lading.
The judge held that the arbitration clause referred to in the executed charterparty or, alternatively in the recap telex was incorporated into the bill of lading.
Conclusion
The judgment shows that where an original charterparty document cannot be produced, a re-cap telex containing the same clauses, will constitute a charterparty for the purposes of incorporating a clause or clauses into a Bill of Lading. It follows the decision in The Heidberg by not allowing oral terms themselves to qualify as having been reduced to writing, but overturns The Heidberg where oral terms are contained in or evidenced by a re-cap telex and thus, qualifies them for the purposes of having been reduced to writing. In addition, the judgment reaffirms that there is no requirement for a charterparty to be contained in a single document, as it is common in practice for it to be contained in two or more documents.
 
 

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