Martrade Shipping & Transport GmbH v United Enterprises Corporation

Section 12 of the Late Payment of Commercial Debts (Interest) Act 1998 requires more than an express choice of English law before statutory penal interest applies to an international contract. Under section 12(1)(a), the relevant connection must relate to the substantive transaction and justify applying the Act’s domestic deterrent policy. A London arbitration or English jurisdiction clause, language, English-law provisions for a discrete issue, P&I arrangements and classification references are not, alone or cumulatively, sufficient. Under section 12(1)(b), the court must disregard the parties’ choice of law and apply the Rome Convention’s Article 4 inquiry. A trip time charter is not a contract for the carriage of goods under Article 4(4); the Article 4(2) presumption applies by reference to the owner’s characteristic performance.

The claimant charterers appealed under section 69 of the Arbitration Act 1996 from an arbitral award granting the defendant shipowners unpaid hire and statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998. The charterparty contained an express choice of English law and London arbitration. The parties were internationally connected, and the vessel was owned, registered, managed and operated through entities in different jurisdictions.

The central issues were whether the charterparty had a significant connection with England under section 12(1)(a), and whether, absent the express choice of English law, it would nevertheless have been governed by English law under section 12(1)(b).

The appeal was allowed. The award of principal was not challenged; the award of statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 could not stand.

1. Section 12(1)(a). The provision contains a gateway to the Act’s application. A significant connection must connect the substantive transaction to England and be capable of justifying the extension of the Act’s domestic policy of deterring late payment through penal interest. Relevant factors may include performance or payment in England, English nationality, relevant business carried on in England, and economic consequences felt in the United Kingdom.
2. A London arbitration or English jurisdiction clause is not a relevant connecting factor under section 12(1)(a). It concerns the forum and procedural rights, not the substantive transaction. The use of English, English-language logs, London adjustment of general average, an English-law provision for general average, P&I arrangements, the Inter-Club Agreement, Lloyd’s Register and Lloyd’s of London references were likewise incapable of supplying the required connection, singly or cumulatively.
3. Section 12(1)(b). The phrase “but for that choice” requires the express or implied choice of law to be ignored. The inquiry is therefore under Article 4 of the Rome Convention, not Article 3. A London arbitration clause may ordinarily demonstrate a choice of English law under Article 3, but that significance is excluded from the section 12(1)(b) inquiry.
4. A time charter, including a trip time charter, is not a contract for the carriage of goods for Article 4(4). Its essential nature is the owner’s provision of the vessel and crew for the charterer’s employment. The Article 4(2) presumption therefore applies. The characteristic performance is that of the owner, and the relevant principal place of business is that of the management company where a one-ship company is managed elsewhere. Here that pointed to Greece, not England.
5. The tribunal’s reasoning could not support application of the Act under either gateway. The matter was not remitted, and the appeal was allowed.

The judgment was an appeal under section 69 of the Arbitration Act 1996 from the Second Partial Final Award dated 10 September 2013, as clarified on 11 October 2013. The appeal concerned statutory interest only; the award of principal was not challenged.