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Incorporating charterparty terms into a bill of lading
In many cases complications in cargo claims arise where there are disputes about which law and jurisdiction governs the contract of carriage. Receivers often seek to bring proceedings against the carrier in the jurisdiction where the goods were delivered; almost always this is the receivers’ local jurisdiction with the local court all too ready to accept jurisdiction. As a result carriers may find themselves far from certain of a fair outcome.
To avoid such uncertainties owners and charterers in the dry bulk and tanker trades will often seek to incorporate the terms and conditions of a charterparty, including the law and jurisdiction clause, into a bill of lading. The questions of how and which terms of the charterparty can be brought into a contract of carriage have been the subject of considerable litigation in the English courts.
The latest case, the English Court of Appeal decision of 21 October in The M/V Channel Ranger  EWCA Civ. 1366 [i] further highlights the need for certainty and clarity when seeking to incorporate charterparty terms into a bill of lading. The two principle issues considered are (i) identifying the charterparty from which terms are to be drawn, and (ii) which charterparty terms will be incorporated?
Identifying the charterparty
On the front of most standard short-form bills of lading, such as the Congenbill, is a box which provides space for a charterparty to be identified by its date – often with reference to the payment of freight. Alternatively there may be a typed clause on the face of the bill which has words to the effect of “freight payable as per charterparty dated…” The purpose of this is to identify the freight payment terms applicable to the contract of carriage. It also identifies the charterparty associated with the carriage of the goods identified on the bill.
Recently the Club has seen a number of cases where no charterparty is identified on the bill of lading. In these circumstances, under English law, where there is only one possible charterparty it is presumed that this is the applicable charterparty to the bill of lading. Where there is a chain of charterparties the presumption is that the head-charter is the incorporated charterparty. This presumption will not extend to cases where the head charter is a time charter but where there is also a voyage Carter in the chain the courts will incorporate the terms of the voyage charter (The Nanfri  1 Lloyd’s Rep. 287).
Although English law has attempted to imply some certainty in these situations, in other jurisdictions this is not necessarily case. In a recent case in China, where no charterparty was identified in a short bill of lading, the Chinese courts simply accepted jurisdiction for the claim and treated the bill of lading as not having incorporated any charterparty. Had the charterparty been identified, based on previous cases, the Chinese court may have accepted the English law and jurisdiction clause contained in the charterparty, and declined jurisdiction.
Many other jurisdictions are likely to adopt a similar approach. In such cases, where the carrier is denied the protection offered to him by the terms of the charterparty, particularly by the law and jurisdiction clause, he may find himself in a less advantageous position. Members are therefore strongly advised to ensure that the relevant charterparty is clearly identified on the face of any bill of lading prior to authorising its release.
Whether or not a charterparty clause is incorporated into a bill of lading will depend on the wording of the incorporation clause printed on the bill. Under English law there are a number of tests designed to protect the receiver from onerous and/or irrelevant charterparty clauses. The general principles are outlined below.
Where the incorporation clause is worded generally (i.e. “clauses from charterparty dated…are incorporated) only those terms which are directly relevant to the carriage of goods will be incorporated. For example, whilst a time bar or F.I.O.S.T. provision may be incorporated, a law and jurisdiction clause would not be. Conversely, where an incorporation clause refers only to specific terms (e.g. “freight payable as per charterparty”), then only those terms will be incorporated.
It is important to note that where there is a conflict between incorporated terms and terms printed on the bill of lading itself then the printed term will prevail over any incorporated terms. Accordingly, a clause paramount printed on the reverse of a bill of lading would prevail over a clause paramount in an associated charterparty.
Turning to charterparty law and jurisdiction clauses, under English Law these clauses will only be incorporated into a bill of lading when the incorporation clause printed on the bill specifically states that the law and jurisdiction clause of the charterparty is incorporated. This is also usually the case in most other jurisdictions where incorporated terms are recognised.
An example of an incorporation clause which addresses all of these issues is clause 1 of the Congenbill 2007, which states as follows:
“All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause/Dispute Resolution Clause, are herewith incorporated”
This wording has been found sufficient to incorporate all of the relevant protective clauses, including the law and jurisdiction clauses, from charterparties into bills of lading under English Law as well as in many other jurisdictions. It was on this wording that the Court of Appeal upheld an anti-suit injunction preventing the cargo interests from commencing proceedings in Morocco in the Channel Ranger case. Accordingly, owners should consider using this, or similar, wording to ensure that charterparty terms are properly incorporated.
Despite many court rulings, the incorporation of charterparty terms into bills of lading remains an uncertain issue in many jurisdictions. In order to best protect their interests Members are advised to ensure that:
- the applicable charterparty is clearly identified on the face of the bill of lading, and
- that the incorporation clause is appropriately worded.
For more information: Please contact Claims Executive Luke Lane