Ulusoy Denizilik A.S. v Cofco Global Harvest (Zhangjiagang) Trading Co. Ltd

A bill of lading may incorporate a charterparty’s governing-law and arbitration provisions where the wording clearly refers to them. The putative governing law ordinarily determines whether incorporation occurred, subject to the narrow exception in Art. 10(2) of the Regulation EC No. 593/2008. A lawful bill of lading holder is bound by incorporated arbitration obligations. Security given by a third party under a separate letter of undertaking does not vary or waive the arbitration agreement without a clear agreement between the contracting parties or unequivocal waiver. Where foreign proceedings breach a binding arbitration agreement, an anti-suit injunction will ordinarily be granted unless strong reasons justify refusal. The fact that security was obtained in the foreign jurisdiction, or that the foreign court may consider itself properly seised, does not itself constitute a strong reason.

The claimant, owner of the vessel Ulusoy-11, sought a final anti-suit injunction under s.37(1) of the Senior Courts Act 1981. The defendant, the lawful holder of bills of lading for cargo carried to China, had commenced proceedings in the Qingdao Maritime Court concerning alleged cargo damage.

The bills incorporated the terms of the governing charterparty, including its law and arbitration clause. The claimant contended that the relevant charterparty provided for English law and London arbitration. The defendant argued that there was no binding arbitration agreement, that the China Re letter of undertaking varied or superseded it, or that the claimant was estopped from relying on it. The central issues were whether the defendant was bound to arbitrate and whether a final injunction should be granted.

1. The claimant proved on the balance of probabilities that the contract of carriage incorporated an agreement for English law and London arbitration. Under Art. 10(1) of the Regulation EC No. 593/2008, English law governed the question of incorporation. The defendant failed to establish the conditions for the Art. 10(2) exception. It was not unreasonable to apply the putative governing law, having regard to international trading practice and the parties’ commercial expectations.

2. The wording of the Congen bills clearly incorporated the charterparty’s law and arbitration clause. Although there was no absolute rule that the head charterparty must be incorporated, the usual presumption favoured the head charterparty. The issue was academic because both the head charter and the sub-charter contained materially identical English law and London arbitration provisions.

3. As lawful holder of the bills, the defendant acquired rights of suit under s.2(1) of the 1992 Act and became bound by the original contracting party’s liabilities under s.3(1), including the obligation to resolve disputes in accordance with the incorporated arbitration clause.

4. The China Re letter of undertaking was a separate contract between China Re and the defendant. Its Chinese law and jurisdiction clause concerned disputes under the letter itself. The wording preserving the owners’ rights and defences included the right to arbitrate. There was no agreement between the claimant and defendant to vary the arbitration clause, no unequivocal waiver, and no representation capable of founding estoppel. The letter would respond to a London arbitration award.

5. The court had power under s.37 of the Senior Courts Act 1981 to restrain foreign proceedings brought in breach of an arbitration agreement. The claimant had established the agreement to arbitrate to the final-hearing standard. Applying the principles in The Angelic Grace, the court should ordinarily grant relief unless the defendant proved strong reasons for refusing it. The defendant bore that burden.

6. Neither the alleged inadequacy of the security nor the possible jurisdiction of the Qingdao court constituted a strong reason. The defendant had agreed to arbitrate, remained in breach by commencing and continuing the Chinese proceedings, and had itself requested the terms of the security. A final anti-suit injunction was therefore granted in the terms sought.