The Milan Court of Appeal recently addressed a demurrage claim under a voyage charterparty. The decision dealt with the issue of contract formation and focused on the choice of law provision contained in the charterparty.

Facts

A Swiss company entered, as disponent owner, into a voyage charterparty with an Italian trading company, acting as charterer, for the carriage of palm kernel shells from an Indonesian port to two different Italian ports.

The voyage charterparty was evidenced by a fixture recap contained in an email sent by the owners to the charterers, to which the charterers never replied in writing. The recap contained a reference to English law as the law chosen by the parties.

The vessel loaded the intended cargo in Indonesia and demurrage accrued at the first port of discharge in Italy. The charterers failed to pay the relevant sum.

The owners commenced proceedings against the charterers before the Tribunal of Milan (the place of domicile of the charterers). By denying the receipt of the abovementioned fixture recap, the charterers defended the claim by arguing (among other things) that they did not agree on the content of the fixture recap contained in the email sent to them by the owners, and that therefore the parties never agreed on the English law provision. According to the charterers, this meant that the voyage charter was subject to Italian law and therefore the owners' claim should be considered time barred (according to the Italian law provision that the carriage of goods by sea is subject to a one-year time bar and not to the standard six-year period in English law).

First-instance decision

The tribunal heard witnesses who confirmed that the email containing the fixture recap was actually sent by the owners to the charterers and, further, that the transport of the goods had been performed pursuant to the terms and conditions contained in the same fixture recap.

The first-instance tribunal held in favour of the owners. By relying on Article 8 of the Rome Convention (which provides that "the existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Convention if the contract or term were valid"), the tribunal stated that, as a matter of English law, the contract of carriage was validly concluded and, consequently, as was its choice of law provision.

Further, the tribunal affirmed that, even by applying Italian law principles on the formation of contract and the validity of the choice of law provisions, the fixture recap should be considered valid evidence of the contract of carriage and the relevant English law provision.

The charterers appealed.

Milan Court of Appeal decision

The court of appeal upheld the first-instance decision and ordered the charterers to pay demurrages, in full, in favour of the owners.

The court focused on Italian law when examining the issue of whether the terms of the voyage charterparty were contained in the fixture recap and whether such recap contained a valid choice of law provision. The charterers' main appeal argument was that, under Italian law, a contract of carriage can be proven only by written documents and not by witness statements. Therefore, the existence of a choice of law provision could not be proven by oral evidence aimed at confirming the acceptance by the charterers of the fixture recap.

The court's reasoning moved from the principle that, although under Italian law a contract of carriage must be proven by written evidence alone, this principle applies only to the existence of the contract itself and not to the existence of auxiliary clauses to the main terms of the contract, as indicated by various Supreme Court precedents. The court of appeal stated that the pactum de lege utenda (ie, the choice of law agreement) can be considered an auxiliary term of the contract, and therefore, even if inserted in a contract of carriage, it can be proven by way of presumptions and witness depositions.

Having established the validity of the fixture recap and of its English choice of law provision, the owners' claim was clearly within the limitation timeframe established by English law, and therefore it was not considered time barred.

As to the merits of the demurrage, the charterers had argued that the demurrage rate included in the fixture recap applied to both the port of loading and of discharge. However, the court confirmed that the acronym 'DEM BENDS' meant 'demurrage both ends', thereby implying that the parties had intended the demurrage rate to apply not only to the loading port, but also to the port of destination.

Comment

Given the predominance of English court jurisdiction, Italian court decisions addressing disputes under voyage charterparties are rarely commented on. However, the first-instance and appeal courts in Milan have confirmed that, when so called, the Italian courts are keen and ready to pronounce judgments in line with commercial shipping practice.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Marco Manzone at Dardani Studio Legale by telephone (+39 010 576 1816) or email (marco.manzone@dardani.it). The Dardani Studio Legale website can be accessed at www.dardani.it.