Welex v. Rosa Maritime

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Welex AG v Rosa Maritime Limited
English Court of Appeal: Brooke, May and Tuckey LJJ.: 3 July 2003
Graham Dunning QC and Ricky Diwan, instructed by Stephenson Harwood, for Welex
Karen Troy-Davies, instructed by Brookes & Co, for Rosa Maritime
This case concerned whether an arbitration clause in a re-cap telex confirming the charter of the vessel had been incorporated into the bill of lading. The Court of Appeal held that the clause had been incorporated. The difference between this case and the recent case of Siboti v. BP France was that here the words of incorporation expressly referred to the law and arbitration clause of the charterparty

DMC Category Rating: Confirmed

This case note is based on an Article in the July 2003 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website.

The dispute related to a shipment of steel plates alleged to have been damaged en route from the Ukraine to Poland on board the Epsilon Rosa. The owners (Rosa Maritime) sought to enforce an arbitration agreement and applied for an anti-suit injunction to prevent Welex (the consignees of the goods) from continuing proceedings in Poland. Welex, in turn, sought a declaration that no arbitration agreement had been incorporated into the contract. For the purposes of deciding the issue, it was agreed that the court would proceed on the basis that English law was the applicable law.

The bill of lading, dated 9 April 2001, was on the Congenbill form, 1994 edition, which expressly stated it was "to be used with Charterparties". On the face of the bill it stated "freight payable as per Charterparty" but the date of the charterparty was left blank. Clause 1 on the reverse read, "All the terms and conditions, liberties and exceptions of the Charterparty, dated as overleaf, including the Law & Arbitration Clause are herewith incorporated".

There was a factual dispute as to whether a formal charterparty had ever been executed and, if so, whether the arbitration clause contained within it had been incorporated into the bill of lading. The only document available was a re-cap telex dated 19 March 2001 from the chartering broker to Rosa Maritime's broker, which summarised the terms of the agreement.

This stated:
47. As written by hand "London".

Shortly before sending the recap, the chartering broker sent Rosa Maritime's broker a standard charterparty form showing clause 47 (the arbitration clause) amended to read London instead of Hamburg. In reply to the recap, Rosa Maritime's broker stated that the telex was in order and they considered the vessel fully fixed.

This exchange concluded a binding voyage charter of the vessel. But there was then some confusion about the formal charterparty, which, although drawn up and sent to the charterers for signature in April 2001, was not returned until October.

At first instance, the judge found that, 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 in the recap telex had been incorporated into the bill of lading. Having analysed the evidence, however, he concluded that a charterparty had been duly executed in April 2001.

On appeal, Welex adopted the same arguments that were successfully used in the Siboti case: arbitration clauses were not germane to the receipt, delivery or carriage of the cargo and, consequently, could not be incorporated by general words. They also maintained that the judge's decision went against the commercial need for certainty. A bill of lading might be held by a number of parties in different capacities, not all of whom would be aware of the terms of the charterparty. In any event, the reference to the charterparty in the bill of lading was meaningless because a recap telex was not a charterparty and, at the time the bill of lading was issued (9 April), there was no executed charterparty in existence.

The Court of Appeal accepted the need for certainty, but pointed out that there were a number of other factors to be taken into account. In this case, the bill of lading and the charterparty related to the same voyage by the same carrier. A shipowner wanted to ensure, so far as possible, that his rights and obligations as carrier against the original and any later holder of the bill of lading were the same as his rights and obligations against the charterer. The Congenbill form was, as it stated, "to be used with Charterparties" and was designed to achieve this objective. It should, therefore, be apparent to any holder of the bill that all the terms of the contract were not contained in that document and that other terms were to be found in the related charterparty.

As for the point about incorporating arbitration clauses, in this case, the words of incorporation specifically referred to the clause in question ("including the Law & Arbitration Clause"). This went further than general words of incorporation, which, on their own, would not have been enough to incorporate this sort of ancillary clause.

In the circumstances, the appeal judges did not think that the reference to the charterparty in the bill of lading had to be given such a narrow meaning as Welex suggested. The clear intention was to refer to the contract under which the vessel had been chartered. Even though the date had been omitted, no one could infer from this that the parties to the bill had not intended to incorporate the terms of the charter, particularly since, immediately above the date box, it stated "freight payable as per charterparty".

Anyone looking at the recap telex and the accompanying terms would have been left in no doubt that London arbitration applied. The situation was different from that in The Heidberg ([1994] 2 Lloyd's Rep 287. In that case, brokers had agreed the terms of a charter orally (including London arbitration), but the subsequent recap telex incorrectly referred to standard terms providing for arbitration in Paris. The terms of the bill of lading incorporated "the terms of the charterparty dated [blank]". These words were held not to incorporate terms agreed orally that had not been reduced to writing. Terms included by reference need to be readily ascertainable.

In the Welex case, however, the terms of the contract had been reduced to writing and were readily ascertainable from the recap telex.

On the facts, the appeal judges also agreed with the judge that a formal charterparty had been executed. Although the document was undated, it clearly referred back to the original fixture agreed in March 2001. In the court's view it did not matter that the formal document was not executed until after the bill of lading was issued, as long as it was available to the bill of lading holder when he first asked to be shown a copy.


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