In Kallang Shipping SA Panama v AXA Assurance Senegal and in Sotrade Denizcilik Sanayi VE Tikaret AS v Amadou Lo, The Duden - Butterworths Law Direct 21.11.08 the Commercial Court considered the circumstances in which the arrest of vessels in foreign jurisdictions, prompted by overseas cargo insurers, can amount to breach of arbitration clauses incorporated into bills of lading.
In both cases bills of lading had been issued incorporating charterparty arbitration clauses.
When cargo claims arose, the buyers and their cargo insurers procured the arrest of the vessel in Senegal. The owner / carrier asserted that the arrest had been in breach of the arbitration clause, and that the cargo insurers were liable in damages for procuring breach of contract. In the first case it was held that the arbitration clause in the voyage charterparty had been incorporated into the bills of lading; and that cargo interests were under an express duty to go to arbitration. It was held that although it is perfectly legitimate for a party to an arbitration clause to arrest a vessel in a foreign jurisdiction by way of security, it is not legitimate if they are doing so for the purpose of attempting to confer jurisdiction upon the foreign court. On the facts, the cargo interests had gone beyond what was legitimate and were in breach of the arbitration clause. It was also held on the facts that the cargo insurers, by their role in the arrest of the vessel in Senegal, induced cargo interests to break their contract with the carrier and they were therefore held liable for damages for loss of hire for the vessel while under arrest.
In the second case it was held that the bills of lading contained an express agreement, binding on all holders including the receivers, that all disputes were to be referred to arbitration in London to be decided in accordance with English law and practice. If one party sought to use a foreign arrest for ulterior purposes, beyond obtaining reasonable security for the arbitration claim, it was acting in breach of the express agreement whereby it had been agreed that all disputes would be decided by London arbitration. If one party tried to obtain security for proceedings in another jurisdiction or to force the other party to give up his right to arbitrate disputes, that would be a direct and straightforward breach of the arbitration clause. In the instant case, it was clear that the arrest itself had been a conservatory arrest for security and that the third defendant (cargo insurer) had attempted to use the arrest as a means of trying to secure Senegalese jurisdiction and to avoid London arbitration. That conduct went well beyond seeking security for its claims in London arbitration and was in breach of the express terms of the arbitration clause. On the evidence, the third defendant had been the driving force in arresting the vessel and the corresponding subsequent events. Its conduct, knowledge and intent was such as to make it liable for the accessory tort of procuring the receivers' breach of the contract to arbitrate all disputes in London.