Note: the decision in this case has now been upheld by the Court of Appeal. To access the note on the Court of Appeal l judgment, click here

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The bill of lading, dated 9 April 2001, was on the Congenbill form (expressly "to be used with Charterparties"). Clause 1 on the reverse of the bill, read
"All the terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law & Arbitration Clause are herewith incorporated".

No charterparty document was produced to the court and there was a factual dispute whether one had ever been drawn up and, if so, whether the arbitration clause contained within it had been incorporated into the bill of lading. For the purposes of this hearing, the parties agreed that the judge was to proceed on the basis that English law was the applicable law.

The only available document was a "re-cap" telex from Caspi Cargo Lines acting on behalf of charterers dated 19 March 2001 which summarised the terms of the agreement and stated (amongst other things) "ARB IN LONDON, ENGLISH LAW TO APPLY". This was accompanied by a standard form amended to read "Arbitration, if any, to be settled in London in accordance with the Rules of the LMAA". In reply, the owners stated that the telex was "in order" and accordingly the vessel was "fully fixed". Confirmation of the fixture was also sent by the consignor to Welex’s parent company, who responded by giving bill of lading instructions in a fax copied to Welex.

Since the bill of lading expressly referred to a charterparty, (i.e. a document) an oral agreement would not be sufficient. Assuming no formal charterparty was ever drawn up, however, could the telex constitute the charterparty?

Welex sought to rely on the decision in The Heidberg ([1994] 2 Lloyd's Rep 287), which concerned a fixture agreed over the telephone followed by a re-cap telex. The telex was in fact erroneous in its terms and the judge in that case was asked whether an incorporation clause in a bill of lading could have the effect of incorporating oral terms that had not been reduced into writing. He found that it could not.

Judgment
Mr Justice David Steel concluded that the telex could constitute the charterparty. Whilst a contract for chartering a ship is normally set out in a written document, the agreement can remain in a written fax or telex and a formal, signed charterparty is not necessary (Lidgett v Williams [1845] 4 Hare 456). The terms of this agreement could be readily identified from the contents of the re-cap telex and the standard form and the absence of an identifying date on the bill of lading did not prevent incorporation of the terms of the agreement (The San Nicholas [1976] 1 Lloyd's Rep 8, The SLS Everest [1981] 2 Lloyd's Rep 389).

The judge accepted the Heidberg decision to the extent that a transferee of a bill of lading should not be affected by oral terms. But he could not agree to Welex’s proposition that, when a contract is contained in or evidenced by a re-cap telex, the terms of the telex should have as little effect on the consignee as oral terms. This would be entirely inconsistent with the commercial reality of the situation. Welex had been aware of and had approved the fixture. On the assumption no charterparty was ever drawn up, the charterparty referred to in the bill of lading was the agreement contained in the re-cap telex and the arbitration clause referred to in the telex had been incorporated into the bill of lading.

In any event, having analysed the evidence, the judge concluded that there was convincing secondary evidence that a charterparty had been duly executed in April 2001.

Accordingly, he ruled that Rosa Maritime were entitled to the declaration they sought, namely that the London arbitration clause of the charterparty had been incorporated into the bill of lading.