PETROLEO BRASILIERO S.A. AND OTHERS v. MELLITUS SHIPPING INC. AND OTHERS (THE “BALTIC FLAME”) [2001] EWCA Civ 418

Permission to serve a contribution claim on a foreign necessary or proper party requires caution, but no presumption against service and no additional “special factor”. The court must examine the claim and weigh all relevant circumstances, including litigational convenience, the risk of inconsistent findings, the proper forum and practical justice.

A liability may support contribution under the Civil Liability (Contribution) Act 1978 even though its enforcement is stayed for arbitration. Where the contribution claimant reasonably seeks protection in existing English proceedings, and no remedy is available elsewhere, practical justice may favour joinder. An arbitration agreement between other parties does not confer immunity from an independent contribution claim which is not subject to arbitration.

Two actions arose from allegedly contaminated propane carried aboard the Baltic Flame. The shipowners claimed against the time-charterer, Fortum, while Fortum sought contribution from the Saudi shipper, Saudi Aramco, under section 1 of the Civil Liability (Contribution) Act 1978. The underlying bill of lading claims between the shipowners and Saudi Aramco had been stayed for London arbitration.

Longmore J refused to set aside service of Fortum’s Part 20 claims outside the jurisdiction. He treated the absence of any contribution remedy in Saudi Arabia as decisive. Saudi Aramco appealed, contending that the joinder improperly outflanked the arbitration agreement and that the judge had failed to balance all relevant considerations.

The central issue was whether England was the proper place for Fortum’s contribution claims and whether practical justice justified requiring Saudi Aramco to participate in the English proceedings.

1. The appeals were dismissed unanimously. Potter LJ delivered the judgment, with which Jonathan Parker and Sedley LJJ agreed. Longmore J had properly exercised his discretion in permitting service of Fortum’s Part 20 contribution claims on Saudi Aramco outside the jurisdiction.

2. The necessary-or-proper-party jurisdiction requires caution or special care, not an institutional reluctance to permit service. The court must scrutinise the substance and prospects of the claim, good faith, disclosure and the proper forum. It must then weigh all relevant considerations without requiring an additional “special factor”. Litigational convenience and the avoidance of multiple proceedings or inconsistent findings may weigh heavily, although they are not conclusive.

3. Under section 1(6) of the Civil Liability (Contribution) Act 1978, the relevant liability need not remain procedurally enforceable as a current liability. It is sufficient that the liability had the required substantive character when the damage was suffered and could have been established in an English action. The stay of the shipowners’ claim against Saudi Aramco for arbitration therefore did not prevent Fortum’s independent contribution claim.

4. Saudi Aramco was a proper party because the alleged liabilities depended upon the same investigation into the condition and contamination of the cargoes. Fortum was not a party to the arbitration and could neither control its progress nor influence its result. It remained exposed to a determination of the shipowners’ claim in the English proceedings before, or without, resolution of the arbitration.

5. Saudi Arabia was physically and administratively available as a forum, but a claim there would serve no purpose because Saudi law afforded Fortum no contribution remedy. The 1978 Act applies to proceedings brought in England and is not confined to liabilities incurred in England and Wales. The interests of all parties and practical justice therefore favoured joinder, particularly as Saudi Aramco could be ordered to contribute only if it was in truth directly liable for the relevant damage.

6. Saudi Aramco’s agreement to English law and London arbitration for its international contracts did not confer immunity from an independent court claim by a non-party to the arbitration agreement. The judge was entitled to treat the absence of any other effective contribution remedy as decisive after weighing it with the other circumstances. The appeals were dismissed with costs of £24,500, and permission to appeal was refused.

1. Court of Appeal (Civil Division): The court dismissed Saudi Aramco’s appeals by [2001] EWCA Civ 418, upheld Longmore J’s exercise of discretion and refused permission to appeal.

2. High Court, Queen’s Bench Division, Commercial Court: On 10 April 2000 Longmore J dismissed Saudi Aramco’s applications to set aside Fortum’s Part 20 claims or their service outside the jurisdiction. No citation is stated in the judgment.