Dispute Resolution analysis: The Commercial Court considered its jurisdiction to determine whether a party has submitted to a foreign court when seeking to rely on an arbitration agreement and whether a challenge to a foreign court's jurisdiction satisfies the requirements in the Civil Jurisdiction and Judgments Act 1982 (CJJA 1982). In addition, it considered whether a claim for damage to a ship's cargo, which is brought in a court that applies the Hamburg Rules, counts as a suit for the purpose of the Hague Rules' time limit? Michael Collett QC, of 20 Essex Street, explains the Commercial Court's decision in Golden Endurance Shipping v RMA Watanya.

Original news

Golden Endurance Shipping SA v RMA Watanya SA and others [2016] EWHC 2110 (Comm), [2016] All ER (D) 57 (Aug)

The Commercial Court held that the claimant ship-owner was not estopped by a Moroccan judgment from asking an English court for a declaration of non-liability for alleged damage to a cargo: the Moroccan judgment would not be recognised as the claimant had not submitted to the jurisdiction of the Moroccan courts (it had challenged that jurisdiction seeking to rely on an arbitration agreement). However, the claimant was not entitled to summary judgment of its claim for the declaration on the ground that any cargo claim was time-barred: the Moroccan proceedings had constituted valid suit brought within one year, as required by article 3(6) of the Hague Rules (the 1924 International Convention for the Unification of Certain Rules Relating to Bills of Lading).

What was the background to the case?

The claimant was the owner of the Golden Endurance. The vessel carried a cargo of wheat bran pellets to Morocco in 2013. On the cargo's arrival, the receivers alleged that it had been damaged during the voyage.

The defendants, which were the insurers of the cargo, commenced proceedings in Morocco claiming damages for the alleged cargo damage. The contracts of carriage contained in the bills of lading were governed by English law and incorporated the Hague Rules, but the Moroccan courts apply the Hamburg Rules to cargo claims regardless of whether the Hague Rules have been agreed. The Hamburg Rules are less favourable to ship-owners than the Hague Rules.

The claimant sought to ensure that the defendants' cargo claim was decided in accordance with the terms of the contracts of carriage by seeking relief from the English court. An anti-suit injunction was granted by the English court in relation to one bill of lading, but not the remaining two. The claimant then sought summary judgment on the grounds that the cargo claim was time-barred under the Hague Rules because no suit satisfying the rules had been commenced within one year of when the goods should have been delivered.

Shortly after the summary judgment hearing in the English court, the Moroccan court gave judgment against the claimant. The defendants then argued that the Moroccan judgment should be recognised by the English court, so that the claimant was precluded from seeking summary judgment on the time-bar issue.

What were the issues before the court?

The issues were:

  • whether, applying English conflict-of-laws rules, the claimant had submitted to the Moroccan court
  • if not, whether the claimant was entitled to a declaration of non-liability on the grounds that the cargo claim was time-barred under the Hague Rules

Why did the court find that the claimant had not submitted to the jurisdiction of the Moroccan court?

The court found that the claimant had not submitted to the jurisdiction of the Moroccan court because the claimant appeared in the Moroccan proceedings to ask the court to stay the Moroccan proceedings in favour of arbitration and only engaged with the merits of the cargo claim in Morocco because it had to (or at least a reasonable body of Moroccan practitioners would consider it had to). Thus the claimant could rely on CJJA 1982, s 33(1)(b). The court rejected the defendants' arguments that the English court had a discretion whether to allow a party to rely upon CJJA 1982, s 33(1)(b), and that an irrational challenge to the jurisdiction of the foreign court would not count for the purposes of that provision.

The court also rejected the defendants' argument that it was an abuse of process for the claimant to seek to rely on an alleged arbitration agreement (under Moroccan law) in the Moroccan proceedings when no such argument was advanced in the English proceedings. The court said this was `the type of situation which can arise where disputes are pursued in parallel proceedings in different jurisdictions and governed by different laws'.

It followed from the finding that the claimant had not submitted to the jurisdiction of the Moroccan courts that the Moroccan judgment would not be recognised by the English court.

Why did the court find that the cargo claim was not time-barred under the Hague Rules?

The claimant argued that the Moroccan proceedings, although commenced within one year of when the goods should have been delivered, did not count as suit under the Hague Rules, art 3(6) because they were brought in a jurisdiction which would only apply the Hamburg Rules and therefore were not proceedings brought to establish liability under the Hague Rules.

The court did not accept that argument, saying that suit in a Hamburg Rules state satisfied the purpose of the Hague Rules time-bar to ensure that owners had prompt notification of claims. The court did, however, reject the defendants' argument that a claim by owners for a declaration of non-liability under the Hague Rules would satisfy the obligation to bring a claim against the owners within the one-year time limit.

What are the practical implications of this case?

On the jurisdictional issues, the court followed the principles set out in the decision of the Court of Appeal in AES UstKamenogorsk Hydropower Plant LLC v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647, [2012] 1 All ER (Comm) 845 but clarified two points:

  • the court does not have a discretion whether to find that a party has submitted to the foreign court, and
  • a challenge to the jurisdiction of the foreign court satisfies CJJA 1982, s 33(1)(b), even if it could be characterised as irrational (rejecting a suggestion to the contrary in a leading text book)

On the time-bar issue, the judgment has expanded the categories of suit which count to stop time running under the Hague Rules to include suit in a jurisdiction which does not apply the Hague Rules (because, for example, it is a Hamburg Rules state). This means that, where the Hague Rules have been agreed, the cargo claimant may be able to bring its claim in a Hamburg Rules state without fear that its claim may become time-barred under the Hague Rules. It also means that carriers and their insurers cannot treat claims as discharged after one year, if proceedings have been commenced in a state which does not apply the Hague Rules, unless those proceedings are incompetent under the Hague Rules for some other reason.