[2000] 3 F.C. 398
A-308-99
Thyssen Canada Limited, Securitas Bremer Allgemeine Vers. A.G. (Appellants)
v.
Mariana Maritime S.A. (Respondent)
Indexed as: Thyssen Canada Ltd. v. Mariana (The) (C.A.)
Court of Appeal, Décary, Robertson and Sexton JJ.A. —Ottawa, February 22 and March 22, 2000.
Maritime law — Practice — Appeal from stay of action for damage to cargo in favour of London arbitration — Bills of lading for two shipments of steel coils incorporating terms and conditions of charter party, including law and arbitration clauses — Both relevant charter parties, time and voyage, providing for arbitration at London, English law governing — (1) Arbitration clauses not required to expressly extend ambit to disputes under bill of lading — Deemed incorporated into bill of lading as three conditions precedent met: (i) bill of lading specifically referring to incorporation of arbitration clause in charter party; (ii) arbitration clause so worded as to make sense in context of bill; (iii) arbitration clause not conflicting with express terms of bill — (2) Voyage charter party not unenforceable because shipowner not party thereto — (3) Once arbitration clause in another document incorporated into bill of lading, consignee bound — Since arbitration clauses essentially same, unnecessary to decide which charter party relevant document — Arbitration clauses not unenforceable on ground of uncertainty because bills of lading not specifically identifying in which charter party arbitration clause found — Appellant bound by provision in charter party even if no knowledge thereof when accepted bills of lading — Parties, sophisticated, familiar with exigencies of marketplace — Appellant not informing itself of terms — Hamburg Rules, in force in Romania, not applicable to provide choice of forum for arbitration as contrary to choice of law provisions in both charter parties, irrelevant to whether stay should be granted — Under Commercial Arbitration Code, once court finds arbitration clause effectively incorporated into bills of lading, not unenforceable, must grant stay in favour of arbitration.
This was an appeal from an order staying an action against the respondent, in favour of arbitration at London. The appellant, Thyssen Canada Limited, had arranged to have 18,000 metric tons of steel coils shipped on the Mariana from Romania to Windsor, Ontario. Two bills of lading were issued to correspond with two shipments of cargo. The parties identified on both bills of lading are the shipper, Metalexportimport S.A., a Romanian steel supplier, and the appellant as consignee. Both bills indicated that they were to be used with charter parties, although neither identified a specific charter party. The bills of lading contained a clause incorporating all terms and conditions of the charterparty, including the law and arbitration clause. There were two relevant charter parties: a 60 to 65-day time charter between the respondent shipowner and Hawknet Ltd., and a voyage charter party between Hawknet Ltd. and Metalexportimport. Both charter parties provided for arbitration at London and that English law governed. After a fire in the hold damaged the steel coils, the appellant commenced an admiralty action in rem, claiming $1.2 million (U.S.) in general damages. Before the matter went to trial the action was stayed and the dispute was ordered to proceed to arbitration at London. The Motions Judge held that the bills of lading incorporated by reference the arbitration clause contained in the voyage charter party, and that the appellant, as the holder of the bill of lading, was bound by this arbitration clause.
The issues were: (1) whether the arbitration clauses applied since they did not expressly refer to disputes arising under a bill of lading; (2) whether the voyage charter party was unenforceable because the shipowner was not a party thereto; (3) whether the failure to identify on the bills of lading which charter party was to apply in respect of the incorporation of an arbitration clause resulted in an “uncertainty of terms” that made that clause unenforceable; and (4) whether Article 22 of the Hamburg Rules, which apply in Romania, applied to provide a choice of forum for arbitration to the appellant.
Held, the appeal should be dismissed.
(1) An arbitration clause in a charter party is not required to expressly extend its ambit to bill of lading disputes. An arbitration clause in a charter party will be deemed incorporated into a bill of lading when the following three conditions precedent are met: (i) the bill of lading makes specific reference to the incorporation of the arbitration clause found in the charter party; (ii) the arbitration clause is so worded as to make sense in the context of the bill; and (iii) the arbitration clause does not conflict with the express terms of the bill. The facts herein fell within this category. It has been held that a bill of lading that expressly refers to the incorporation of an arbitration clause found in another document is sufficient evidence of the parties’ intention to be bound by it and therefore the words of the arbitration clause as found in that document are to be manipulated to give effect to that intention.
(2) There was no need for the shipowner to be a party to the voyage charter party, as it was neither suing nor being sued in contract by either Metalexportimport or Hawknet. The issue was whether the respondent was entitled to rely on an arbitration clause which was incorporated, by reference, into a bill of lading. If, as between the shipper and shipowner, there is a contract represented by a bill of lading, then the only question is whether that contract has effectively incorporated by reference an arbitration clause set out in another document. Once incorporated into the bill of lading, the consignee is bound by this provision as is the consignor and the shipowner.
(3) The contract of affreightment was found in the voyage charter party. Thus the relevant charter party was the voyage charter party. Equally relevant was the reference in both bills of lading to “Freight payable as per Charter-party dated …”. Again, the logical inference was that the relevant charter party was the voyage charter party because that was the contract under which the goods were being shipped and freight was payable. But since both arbitration clauses required disputes to be referred to arbitration at London, it was unnecessary to decide which charter party was the relevant document. There was no lack of certainty of terms.
The alternative argument, that the appellant could not be bound by a provision contained in a charter party of which it had no knowledge when it accepted the bills of lading, was not persuasive. Although a bill of lading does not fit within the classic model of a bargained agreement, these parties were familiar with the exigencies of this particular marketplace and were aware that commercial efficacy demands the use of contracts which cannot reasonably be expected to be read until a loss arises. The appellant failed to inform itself of the terms pursuant to which it agreed to have its goods shipped. The appellant could not invoke legal principles designed to protect the weak from the strong.
(4) The appellant argued that the Hamburg Rules, Article 22, in force in Romania applied to provide a choice of forum for arbitration, and that it wished to commence arbitration proceedings in Canada. That argument could not succeed because it was contrary to the choice of law provisions in both charter parties, and was irrelevant to the decision as to whether a stay should be granted. The Court is not required to make determinations as to the proper law of a particular contract in proceedings initiated under the federal Commercial Arbitration Act, but only whether an enforceable arbitration clause subsisted. Under the Commercial Arbitration Code, which has the force of law in Canada, the Court must make two fundamental determinations: (i) whether the arbitration clause was effectively incorporated into the bills of lading (article 7(2)); and (ii) whether the arbitration agreement clause was null and void, inoperative or incapable of being performed (article 8(1)). The arbitration clauses were validly incorporated into the bills of lading, and they were not unenforceable. Thus the Court was required to grant a stay and direct that the matter be referred to arbitration at London. The arbitration panel at London must determine the proper law of the contract(s).
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c. 17, ss. 2 (as am. by R.S.C., 1985 (4th Supp.), c. 1, s. 8), 5 (as am. idem, s. 9; S.C. 1997, c. 14, s. 32).
Commercial Arbitration Code, being Schedule to the Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c. 17, arts. 7, 8.
Federal Court Act, R.S.C., 1985, c. F-7, s. 50.
Hague-Visby Rules, being Schedule I to the Carriage of Goods by Water Act, S.C. 1993, c. 21.
United Nations Convention on the Carriage of Goods by Sea, 1978 (“Hamburg Rules”), being Schedule II to the Carriage of Goods by Water Act, S.C. 1993, c. 21, Art. 22.
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
San Nicholas, The, [1976] 1 Lloyd’s Rep. 8 (C.A.).
CONSIDERED:
Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd., [1994] 2 F.C. 662 (1994), 113 D.L.R. (4th) 536; 167 N.R. 294 (C.A.).
AUTHORS CITED
Castel, Jean-Gabriel. Canadian Conflict of Laws, 4th ed. Toronto: Butterworths, 1997.
Mustill, Sir Michael J. and Stewart C. Boyd. The Law and Practice of Commercial Arbitration in England, 2nd ed. London: Butterworths, 1989.
Scrutton on Charterparties and Bills of Lading, 20th ed. by Stewart C. Boyd et al. London: Sweet & Maxwell, 1996.
Scrutton on Charterparties and Bills of Lading, 18th ed. by Sir Alan Abraham Mocatta et al. London: Sweet & Maxwell, 1974.
Tetley, William. International Conflict of Laws: Common, Civil and Maritime. Montréal: Blais, 1994.
APPEAL from an order of a Motions Judge staying an action against the respondent, in favour of arbitration at London (Thyssen Canada Ltd. v. Mariana Maritime S.A. et al. (1999), 167 F.T.R. 105 (F.C.T.D.)). Appeal dismissed.
APPEARANCES:
A. Barry Oland for appellants.
Sean J. Harrington for respondent.
SOLICITORS OF RECORD:
A. B. Oland, Vancouver, for appellants.
McMaster Gervais, Montréal, for respondent.
The following are the reasons for judgment rendered in English by
[1] Robertson J.A.: This is an appeal from an order of a Motions Judge staying an action against the respondent, Mariana Maritime S.A., owners of the M.V. Mariana, in favour of arbitration in London (now reported at (1999), 167 F.T.R. 105 (F.C.T.D.)).
[2] The appellant, Thyssen Canada Limited, had through a German company Ferrostaal AG arranged to have 18,000 metric tons of steel coils supplied by a Romanian steel mill shipped on the Mariana from Constanza, Romania to Windsor, Ontario. Two bills of lading were issued to correspond with two shipments of cargo ultimately loaded onto the Mariana. Bill of Lading No.1 acknowledged receipt in good order and condition of 513 coils of hot rolled carbon steel coils and was signed May 31, 1998 by the Master of Mariana, Captain Nikolaos Prinias. Bill of Lading No. 2 acknowledged receipt of 298 carbon steel coils and was signed by Captain Prinias, June 8, 1998. The parties identified on both bills of lading are the shipper, Metalexportimport S.A., a Romanian steel supplier that had voyage-chartered the Mariana for the purpose of transporting the steel from Romania to Windsor, and the appellant as consignee. The face of each bill specifically identifies the form of bill of lading as: “Code Name ‘Congenbill’, Edition 1994”. They also indicate that they are “To Be Used With Charter-Parties”. Neither bill contains any typewritten or handwritten words on the face or reverse side to identify a specific charter party. What is found on the face of both bills of lading in the bottom left hand corner are the printed words:
[traduction]
“Freight payable as per
CHARTER-PARTY DATED
FREIGHT ADVANCE
received on account of freight
Time used for loading ___ days ___ hours.
[3] On the reverse side of the bills of lading is Clause 1 which states:
All terms and conditions, liberties and exceptions of the Charter Party dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated”. [Emphasis mine.]
[4] With respect to the shipment of the appellant’s goods, there are two relevant charter parties. The first charter party consists of a time charter of the Mariana by Hawknet Ltd. of London on a New York Produce Exchange Form dated March 25, 1998 for a period of 60 to 65 days. This is properly called the head charter party because it is the charter party to which the shipowner is a party. In turn Hawknet entered into a voyage charter party with Metalexportimport S.A. of Bucharest, Romania for one voyage to the Great Lakes/Windsor region. That charter party was dated May 31, 1998. Clause 35 of the voyage charter party provides for arbitration between those parties and their choice of law. Specifically, Clause 35 states:
Any dispute arising out of this Charter-Party to be referred to arbitration in London, one Arbitrator to be nominated by the Owners and the other by the Charterers and in case the Arbitrators shall not agree then to refer to the decision of an Umpire to be appointed by them. The award of the Arbitrators or the Umpire to be final and binding upon both parties. The arbitrators are to be commercial shipping men and members of LMAA with daily chartering practice. English law to apply.
[5] Similarly, the head charter party between Mariana Maritime as owner and Hawknet as charterer provides for arbitration in London, pursuant to Clause 65. Clause 66 of the time charter party deals with choice of law and cargo claims. Those clauses read as follows:
[traduction]
65. All disputes from time to time arising out of this contract shall be referred to Arbitration in London in accordance with English Law and Practice. If a claim is made and cannot be amicably settled between the parties then one Arbitrator should be agreed by both parties each providing the other with a choice of three. If the parties cannot agree to one Arbitrator then one Arbitrator [sic] to be appointed by each party. If Arbitrators cannot agree between them, they shall nominate an Umpire, whose decision is to be final and binding for both parties. Should one of the parties neglect or refuse to appoint an Arbitrator 7 days after receipt of written request of the other party, the Arbitrator of this other party shall decide the dispute as sole Arbitrator and his decision is to be final and binding. For disputes less than USD 50,000 F.A.L.C.U./L.M.A.A. quick arbitration clause to apply.
66. This Charter Party and any dispute arising hereunder shall be governed by and construed in accordance with English law both as regards substance(s) and procedure.
Cargo claims under this Charter Party to be settled according to NYPE Interclub Agreement as amended 1984. If cargo claims arise, the matter will be handled by the Owners’ P. and I. Club.
[6] The appellant ultimately presented the bills of lading to agents of Mariana to obtain delivery of the cargo at Windsor, Ontario. However, before the cargo reached its destination a fire broke out in the No. 3 hold of the Mariana on June 9, 1998 causing damage to the appellant’s hot rolled steel coils stowed within. The appellant claims, inter alia, $1.2 million (U.S.) in general damages.
[7] To recover its damages, the appellant commenced an admiralty action in rem against the Mariana in the Federal Court Trial Division in October 1998. However, before the matter went to trial, the respondent applied to have the matter referred to arbitration in London and for a stay of proceedings on the ground that the two bills of lading incorporated by reference the arbitration clauses found in the respective charter parties. Pursuant to those clauses any dispute is to be referred to arbitration in London. The appellant disputed this contention on the ground that neither it nor the respondent were parties to the voyage charter party. The appellant also argued that there was no reference on the face of the bills of lading to any arbitration provision.
[8] The Motions Judge rejected the appellant’s arguments and found that the bills of lading had effectively incorporated, by reference, the arbitration clause contained in the terms and conditions of the voyage charter party pursuant to which the steel coils were being shipped. He further found that the appellant as the holder of the bill of lading was bound by this arbitration clause. As a result, the Motions Judge ordered the action stayed pursuant to section 50 of the Federal Court Act [R.S.C., 1985 c. F-7] and sections 2 [as am. by R.S.C., 1985 (4th Supp.), c. 1, s. 8] and 5 [as am. idem, s. 9; S.C. 1997, c. 14, s. 32] of the federal Commercial Arbitration Act [R.S.C., 1985 (2nd Supp.), c. 17], and directed that the dispute proceed to arbitration in London. The appellant now appeals that order. In my respectful view, the learned Motions Judge did not err in granting the stay and directing that the dispute proceed to arbitration in London.
[9] The appellant argues that it could not be bound by the bill of lading provision purporting to incorporate an arbitration clause (which also includes a choice of law provision) into its contract with the Mariana for several reasons. First, it argues that neither of the two potentially applicable arbitration clauses, that is, the one contained in the head charter party between the Mariana and the time charterers Hawknet, or the arbitration clause contained in the voyage charter party between Hawknet and Metalexportimport, could apply because neither clause expressly refers to disputes arising under a bill of lading. Second, the appellant argues that the failure to identify on the bills of lading, either by date or any other means, the specific charter party in which the arbitration clause can be found resulted in an “uncertainty of terms” that made any agreement to arbitrate unenforceable. Third, the appellant argues that Article 22 of the Hamburg Rules [United Nations Convention on the Carriage of Goods by Sea, 1978 (“Hamburg Rules”), being Schedule II to the Carriage of Goods by Water Act, S.C. 1993, c. 21] which are applicable in Romania applies by force of law to provide a choice of forum for arbitration to the appellant. The appellant submits that the Hamburg Rules do not permit any deviation from the legal rights set out in those Rules which it maintains are more favourable to it. I shall deal with each of these submissions in turn.
[10] With respect to the appellant’s contention that neither arbitration clause found in the respective charter parties expressly refers to disputes arising under the bill of lading, no authority was cited for the proposition that an arbitration clause found in a charter party must contain language expressly extending its ambit to bill of lading disputes. Indeed the law is otherwise. An arbitration clause in a charter party will be deemed to be incorporated into a bill of lading in either one of two circumstances.
[11] The first category consists of cases which meet the following three conditions precedent: (1) the bill of lading makes specific reference to the incorporation of the arbitration clause found in the charter party; (2) the arbitration clause is so worded as to make sense in the context of the bill; and (3) the arbitration clause does not conflict with the express terms of the bill. The facts of the present case fall within this category. The second category consists of cases where the bill of lading incorporates the terms of the charter party generally, that is to say there is no specific reference to the arbitration clause, but the arbitration clause or some other provision in the charter party makes it clear that the arbitration clause is to govern disputes under the bill as well as the charter party. This understanding of the law was adopted by this Court in Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd., [1994] 2 F.C. 662 (C.A.); see also Scrutton On Charterparties and Bills of Lading, 20th ed. (London: Sweet & Maxwell, 1996), at pages 79-80.
[12] In Nanisivik Mines it was held, inter alia, that a bill of lading that expressly refers to the incorporation of an arbitration clause found in another document is sufficient evidence of the parties’ intention to be bound by it and, therefore, the words of the arbitration clause as found in that document are to be “manipulated” to give effect to that intention. At pages 677-678, Mahoney J.A., writing for the Court summarized the law on this point:
In summary, three different situations were considered in Rena K, The: (1) an arbitration clause in a charterparty that makes no reference to disputes under bills of lading issued pursuant to it together with a provision of the bill of lading incorporating generally the terms of the charter party without specific reference to the arbitration clause, (2) an arbitration clause in a charterparty which expressly provides that it applies to disputes under bills of lading issued pursuant to it together with a provision of the bill of lading incorporating generally the terms of the charterparty without specific reference to the arbitration clause and (3) a provision of the bill of lading incorporating terms of the charterparty including, by specific reference, its arbitration clause.
In the first situation, the arbitration clause does not bind the parties to the bill of lading because, incorporated in it, the arbitration clause does not, on a plain construction of its verbiage, apply to disputes under the bill of lading; the clause refers only to disputes arising under the charterparty. In the other two, it does bind the parties to a bill of lading: in the second because when incorporated, on a plain construction, it says it binds them and, in the third, because of the intention to apply it to disputes under the bill of lading as well as incorporate it is sufficiently clear that the words of the clause will be manipulated to give effect to that intention. [Emphasis mine.]
[13] The appellant’s second argument is that the failure of both bills of lading to identify which of the two charter parties was to apply in respect of the incorporation of an arbitration clause renders that clause unenforceable. The appellant also argues that if the voyage charter party were deemed to be the relevant document then the arbitration clause found therein is unenforceable because the respondent shipowner is not a party to that contract. Only Metalexportimport and Hawknet are parties to that contract. In the circumstances, it is necessary to dispose of the latter argument first.
[14] No authority was cited to this Court to support the proposition that a party cannot rely on a contractual provision, which has been incorporated by reference, unless that party is also a party to the contract which is being referenced. In my opinion, the argument is misconceived. The real question is whether the parties to the bills of lading intended and agreed to be bound by an arbitration clause found in another document. There is no need, for example, for the respondent shipowner to be a party to the voyage charter party. It does not seek to sue in contract either Metalexportimport or Hawknet. Nor is either of those parties suing the respondent. The issue is not whether the respondent is a party to the charter party, but whether it is entitled to rely on an arbitration clause which has been incorporated, by reference, into a bill of lading. If, as between the shipper and the shipowner, there is a contract represented by a bill of lading, then the only question is whether that contract has effectively incorporated by reference an arbitration clause set out in another document. Once incorporated into the bill of lading, the consignee is bound by this provision as is the consignor and the shipowner.
[15] I return now to the argument that the failure of both bills of lading to identify which of the two charter parties was to apply is fatal to the application of the arbitration clause on the ground that there has been a failure to comply with the contractual requirement that there be “certainty of terms”. The Motions Judge held that the voyage charter party between Metalexportimport and Hawknet is the relevant charter party. On the other hand, the decision of the English Court of Appeal in San Nicholas, The, [1976] 1 Lloyd’s Rep. 8 (C.A.) suggests otherwise by adopting the view expressed in Scrutton On Charterparties and Bills of Lading, 18th ed., (1974), at page 63:
… a general reference will normally be construed as relating to the head charter, since this is the contract to which the shipowner, who issues the bill of lading, is a party.
[16] If necessary, the San Nicholas case could be distinguished on the basis that the head charter party and the voyage charter party in that case were under one document. More importantly, the authors of Scrutton On Charterparties and Bills of Lading, 20th ed. (London: Sweet & Maxwell, 1996) state at page 76 that if the incorporating clause fails to identify a specific charter party a court will assume that it is the one under which the goods are being carried, which in the present case is the voyage charter party. In my view, there are compelling reasons for adopting the more recent statement of the law. It is a basic tenet of maritime law that in addition to serving as a receipt for goods and a document of title, a bill of lading constitutes evidence of a contract of affreightment. In turn, a contract of affreightment is an agreement whereby a shipowner, or a person having for the time being the right to make such an agreement, agrees to carry goods of the shipper/charterer or to furnish a ship for that purpose: see Scrutton On Charterparties and Bills of Lading, 20th ed. at page 1. In the present case, the contract of affreightment is found in the voyage charter party between Metalexportimport as shipper/charterer and Hawknet as time charterers of the Mariana. It should follow that the relevant charter party is the voyage charter party and not the head charter party. Equally relevant is the fact that both bills of lading refer to “Freight payable as per Charter-party dated”. Once again the logical inference is that the relevant charter party is the voyage charter party because that is the contract under which the goods are being shipped and freight is payable.
[17] Strictly speaking, it is unnecessary to offer a definitive opinion as to which of the two charter parties is applicable since the parties are agreed that there is no substantive difference between the arbitration clause found in each. Parenthetically, I note that the head charter party, in addition to nominating English law to govern the referral to arbitration in London also instructs that English law is to govern the substantive issues in dispute: see clauses 65 and 66 of the head charter party and compare with Clause 35 of the voyage charter party. The presence of a choice of law clause is raised again when dealing with the appellant’s third argument.
[18] Accepting as I must that the two arbitration clauses in issue do not differ, at least to the extent that both require disputes be referred to arbitration in London, it is unnecessary to decide whether the voyage charter party is the relevant document as opposed to the head charter party. Certainly, it cannot be said that there is a lack of certainty of terms. Even if the two clauses had differed, for example, with one providing for arbitration in London and the other in Bucharest, the issue would have focussed on which of the two charter parties governed and not on whether the clauses were unenforceable on the ground of uncertainty.
[19] The appellant also raises an alternative submission. It asserts that it cannot be bound by a provision contained in a charter party of which it had no knowledge at the time it accepted the bills of lading. In my respectful view, this argument is not persuasive. If the obligation to arbitrate damage claims in London, or any other city, was of critical concern to the appellant then in theory it could have raised this matter at the time it entered into the contract to purchase the steel coils and insisted that any bills of lading comply with that contract. If the appellant did not bargain in this fashion, then presumably it made adequate arrangements to protect itself against financial loss arising from damage to the goods in the normal commercial manner—the procurement of adequate insurance. Admittedly, a bill of lading may be looked on as a contract of adhesion (the so-called “standard form contract”) which does not fit within the classical model of a bargained agreement. But it is also true that we are dealing with sophisticated parties familiar with the exigencies of this particular marketplace; parties who are well aware that commercial efficacy demands the use of contracts which cannot reasonably be expected to be read until such time as a loss arises. In the end, the appellant cannot argue that there was no “agreement to arbitrate” when, in reality, it simply failed to inform itself of the terms pursuant to which it agreed to have its goods shipped. This is not a case where the appellant may invoke legal principles designed to protect the weak from the strong.
[20] The appellant’s final argument is that Article 22 of the Hamburg Rules which are in force in Romania apply by force of law to provide a choice of forum for arbitration to the appellant and that it wishes to commence arbitration proceedings in Canada under that provision: see Appendix to these reasons for full text. Article 22, paragraph 1 provides that it is permissible for a person to agree to refer disputes to arbitration. Article 22, paragraph 2 requires that the bill of lading contain a “special annotation” providing that the arbitration clause is binding as against a holder of the bill. If it does not the carrier is not entitled to invoke the clause. Article 22, paragraph 3 provides that the “claimant” has the right to select the place at which arbitrations can be commenced from a list set out in that Article, which includes the port of discharge (in this case Canada). Article 22, paragraph 4 dictates that the arbitration panel is to apply the Hamburg Rules to the underlying dispute. For greater certainty, Article 22, paragraph 5 states that the previous two subsections are deemed to be part of every arbitration clause.
[21] According to the appellant, the Hamburg Rules are more favourable to cargo owners than are the Hague-Visby Rules [being Schedule I to the Carriage of Goods by Water Act, S.C. 1993, c. 21] which are in force in England. In short, the appellant wishes to arbitrate the dispute in Canada according to Romanian law which has adopted the Hamburg Rules. This is so despite the fact that both bills of lading require disputes to be referred to arbitration in London according to English, not Romanian law. It is worth noting that the issue of the proper law governing disputes which are subject to arbitration arises on no less than three distinct levels.
[22] First, there is the proper law of the arbitration agreement, that is to say, the law governing the obligations of the parties to submit disputes to arbitration and to honour an award. Second, there is the “curial law” which governs the manner in which the parties and the arbitrator are required to conduct the reference of a particular dispute. Third, it is necessary to determine the proper law of the contract, that is the law governing the contract which creates the substantive rights in respect of which the dispute has arisen: see generally Mustill & Boyd, The Law and Practice of Commercial Arbitration in England, 2nd ed. (London: Butterworths, 1989), at page 60 et seq. As to the proper law of the arbitration agreement it is necessary to ask whether the parties have expressly chosen the law which is to apply to the agreement. If so the choice of law will prevail even if the chosen law differs from the law of the underlying contract or the curial law: see Mustill & Boyd, at page 62; Tetley, International Conflict of Laws: Common, Civil and Maritime, (Montréal: Blais, 1994), at page 230; and J.-G. Castel, Canadian Conflict of Laws, 4th ed., (Toronto: Butterworths, 1997), at pages 593-594. However, the autonomy or freedom of choice rule is not absolute, at least in Canada: see Castel, at pages 594-595.
[23] In my respectful view, the appellant’s third argument cannot succeed. In effect it is arguing that the proper law of the arbitration agreement and underlying dispute is Romanian law. Not only does that argument fly in the face of the choice of law provisions found in both charter parties, but it is also irrelevant to the decision as to whether a stay should be granted. It is not the role of this Court in proceedings initiated under the federal Commercial Arbitration Act to make determinations as to the proper law of a particular contract. All that we are being asked to decide is whether an enforceable arbitration clause subsists. Recall that section 50 of the Federal Court Act grants the Court discretion to stay proceedings in any cause or matter and that pursuant to section 5 of the federal Commercial Arbitration Act, the Commercial Arbitration Code [being Schedule to the Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c. 17] has the force of law in Canada: see Appendix to these reasons. Article 8 of the Code effectively provides that if an arbitration agreement subsists a court shall refer the matter to arbitration unless it finds that that agreement is unenforceable in the sense that it is “null and void” or “inoperative”.
[24] The provisions of the Commercial Arbitration Code render it clear that this Court must make two fundamental determinations. First, in accordance with article 7(2), it must determine whether the arbitration clause was effectively incorporated into the bills of lading. The second determination is whether the arbitration agreement clause is, according to article 8(1), “null and void, inoperative or incapable of being performed”. I have already rejected the appellant’s argument that the arbitration clauses were not validly incorporated into the two bills of lading, as well as its argument that the clauses are unenforceable on the grounds outlined earlier. Both issues were addressed by counsel in terms of Canadian law which, in admiralty cases, largely reflects English law. (It was not argued that Romanian law should be looked at solely for purposes of construing what is meant by the term “null and void” under article 8 of the Commercial Arbitration Code. For example, under Article 22, paragraph 2 of the Hamburg Rules, the bill of lading must contain a “special annotation”, if it does not then the arbitration clause is non-binding on the holder of the bill.) Thus, it follows, that the Court is required to grant a stay and direct that the matter be referred to arbitration in London. It is for the arbitration panel in London to determine the proper law of the contract(s). Undoubtedly, it will wish to consider the choice of law provisions incorporated into the bills of lading.
[25] For these reasons, I would dismiss the appeal with costs.
Décary J.A.: I agree.
Sexton J.A.: I agree.
APPENDIX
The Hamburg Rules
Article 22 reads as follows:
Article 22
Arbitration
1. Subject to the provisions of this article, parties may provide by agreement evidenced in writing that any dispute that may arise relating to carriage of goods under this Convention shall be referred to arbitration.
2. Where a charter-party contains a provision that disputes arising thereunder shall be referred to arbitration and a bill of lading issued pursuant to the charter-party does not contain a special annotation providing that such provision shall be binding upon the holder of the bill of lading, the carrier may not invoke such provision as against a holder having acquired the bill of lading in good faith.
3. The arbitration proceedings shall, at the option of the claimant, be instituted at one of the following places:
(a) a place in a State within whose territory is situated:
(i) the principal place of business of the defendant or, in the absence thereof, the habitual residence of the defendant; or
(ii) the place where the contract was made, provided that the defendant has there a place of business, branch or agency through which the contract was made; or
(iii) the port of loading or the port of discharge; or
(b) any place designated for that purpose in the arbitration clause or agreement.
4. The arbitrator or arbitration tribunal shall apply the rules of this Convention.
5. The provisions of paragraphs 3 and 4 of this article are deemed to be part of every arbitration clause or agreement, and any term of such clause or agreement which is inconsistent therewith is null and void.
6. Nothing in this article affects the validity of an agreement relating to arbitration made by the parties after the claim under the contract of carriage by sea has arisen.
Commercial Arbitration Code
Article 8 and the relevant definitions in Article 7 read as follows:
Article 7
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(1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.
Article 8
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(1) A court before which an action is brought is a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.