Reviewing the law and the impact on it of both the arguments in the Anna Bo [2015] 2 Lloyd’s Rep 578 and the Congenbill 2016 form

The issue

Bills of lading often include wording which purports to incorporate charterparty terms. Attempts to incorporate charterparty terms – be it specific terms, such as law and arbitration provisions, or the charterparty terms more generally - have been more or less successful before the English Courts depending on the wording used. However, even before considering which particular terms may be incorporated, it is important to identify which charterparty the incorporation provisions refer to and whether such incorporation is effective.

Where a bill of lading refers to the incorporation of a charterparty, an issue arises where there is more than one charterparty governing the voyage and where the charterparty date is left blank in the bill of lading. In such a situation, the parties, after any incident or dispute, may not agree on which charterparty is incorporated However, in the Anna Bo case the argument went one stage further with cargo interests arguing that the time charterparty, which was specifically referred to by date in the bill of lading, was not effectively incorporated into the bill of lading.

The law

Taking the Congenbill form as an example, the new 2016 form deals with the incorporation of charterparty terms as follows;

  • on page 1 the bill of lading states “Freight payable as per CHARTER PARTY dated [BLANK]”
  • on page 2, at clause (1), the bill of lading states: “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”

Thus, if the charterparty date on page 1 is left blank, this leads to uncertainty as to the position in relation to the incorporation of a charterparty.

If a single charterparty exists relating to the voyage, then the absence of its date from the face of the bill of lading will not prevent that charterparty from being incorporated (see, for example, the San Nicholas [1976] 1 Lloyd’s Rep 8). It seems fairly clear from the cases that, whether this single charterparty is a voyage charter or a time charter is irrelevant. In either case it will be incorporated. (This is subject to the discussion of the arguments in the Anna Bo below.)

If more than one charter exists relating to the voyage then the position is more complicated. Which charterparty will be incorporated will be a question of fact depending on the wording of the bill of lading and the circumstances of the case.

The general rule is that the head charter, to which the shipowner is party, is incorporated on the basis that the party issuing the bill of lading must be contemplating a charter to which he is a party. However, if one looks at the intention of the parties, then it might be difficult to argue that the shipper drawing up the bill of lading, intends a charter to which he is not a party to be incorporated.

Where the head charter is a time charter and the sub-charter is a voyage charter, as Scrutton states; “the position is less clear.” This is because the terms of a time charter are; “in many respects inapposite to the carriage of goods on a voyage. The court may well hesitate to hold the consignee liable for, say, unpaid time charter hire”.

Further guidance is derived from the SLS Everest case [1981] 2 Lloyd’s Rep 389.

In the SLS Everest, two charterparties were entered into in respect of a shipment of phosphate of lime from Casablanca to Chittagong. A voyage charter dated 29 November 1979 was entered into between the buyers of the goods and Drumplace Ltd (who were not a party to the proceedings). On 8 December 1979, Drumplace Limited time chartered the SLS Everest from her registered owners. The bill of lading stated “Freight and other conditions as per ….. including the exoneration clause”. The blank was not completed.

During the voyage, the vessel took a list, took on water and eventually sank. In the context of the cargo claim, the plaintiffs (as they then were) applied for an injunction restraining the registered owners from removing hull insurance proceeds out of the jurisdiction. In those proceedings, the Court of Appeal considered, amongst other issues, which charterparty was incorporated. The Court held that the terms of the voyage charter dated 29 November 1979 were incorporated into the bill of lading on the basis that the terms of the time charter “would have been quite inapplicable” (as per Lord Justice Dunn at page 393).

The Anna Bo case

In this recent decision, in the context of an anti-suit injunction, the Commercial Court considered the issue of whether a time charter could be incorporated into a bill of lading.

The Congen bill of lading stated on its face: “Freight payable as per CHARTERPARTY DATED 11/04/13”. The charterparty referred to was a time charter dated 11 April 2011 between registered owners and charterers (who were not a party to the action).

There was also a sub-voyage charter dated 28 November 2013.

The cargo owners argued that there was doubt as to whether the 11 April 2013 charterparty was incorporated into the bill of lading which impacted on the anti-suit injunction (based as it was on the law and jurisdiction provisions within that charterparty). In support of this position, the cargo owners argued that the reference to the 11 April 2013 charterparty should be read as a reference to the sub-voyage charterparty. This was because the bill of lading referred to “freight” being payable as per the specified charterparty, whereas a time charter provides for payment of hire rather than freight.

The court found the cargo owners’ argument unconvincing, holding that the reference to the 11 April 2013 charterparty was clear and unambiguous and that there is nothing impermissible or irreconcilable about the incorporation of the terms of a time charter into a bill of lading. Furthermore, there was no reason to doubt that the time charter was incorporated as per the express terms of the bill of lading.

Congenbill 2016

The sections of Congenbill 2016 quoted above remain unchanged from earlier versions. Given the arguments put forward in the Anna Bo, on one view it could be argued that the drafting committee missed an opportunity to clarify the position where a time charterparty rather than a voyage charterparty is incorporated into the bill of lading. The reference to “freight” on page 1 is potentially misleading where a time charter is incorporated.

However, the Court took the opportunity to make the position extremely clear in the Anna Bo case. The reference to “freight” on page 1 in no way bars or hinders the clear incorporation of a time charterparty and thus an amendment to the standard form was unnecessary. Furthermore, it is open to the parties to delete the wording “freight payable as per” from page 1 and simply record the time charterparty date there to accord with the cross reference to it on page 2.

Impact

The issues discussed above arise from the nature of bill of lading contracts and the way in which they are produced. A bill of lading is often a standard form contract, produced by one party (shipper), issued by another (carrier) which ultimately confers benefit on a third (consignee, who usually plays no part in negotiating its terms). The Court is often faced with significant difficulty in ascertaining the intention of the parties in this situation, which although absolutely standard in international trade is unusual from a contractual perspective and is not mirrored in any other walk of business.

The Anna Bo decision was a triumph of common sense on the issue of charterparty incorporation. For parties preparing and issuing bills of lading, the key point is to make it as clear as possible in the bill of lading which charterparty they want to incorporate. Furthermore, there is absolutely no bar on the incorporation of a time charter into a bill of lading as long as it is done so clearly and unambiguously.