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In a recent
decision, the Australian Federal Court of Appeal refused an
anti-suit injunction which sought to prevent the commencement of
arbitral proceedings in England, in relation to a dispute arising
out of a bill of lading for cargo transported between South
Australia and Queensland.
The Court determined that the ‘mandatory
jurisdiction’ provision of the Carriage Of Goods By
Sea Act 1991 (Cth) (COGSA), which
requires parties to bring disputes arising from bills of lading
before Australian Courts, does not apply
to bills of lading where cargo is transported from one Australian
state or territory to another (i.e., inter-State bills of
lading).
The key takeaway is that parties to an inter-State bill of
lading that contains an arbitration clause may be free to commence
arbitral proceedings in accordance with that clause, instead of
commencing proceedings before an Australian Court.
Background
Carmichael Rail Network Pty Ltd v BBC Chartering Carriers
GmbH & Co. KG (The BBC Nile) [2022] FCAFC 171
(Carmichael v BBC) concerned, amongst
other issues, whether Australian Courts’ mandatory
jurisdiction to hear disputes arising from bills of lading,
conferred by section 11 of the COGSA, applies to all bills of
lading without restriction, or whether that mandatory jurisdiction
is limited only to bills of lading where cargo is transported from
an Australian port to another country (ie not inter-State bills of
lading).
In December 2019, Carmichael entered into an agreement with an
unrelated party, whereby the unrelated party would manufacture and
supply circa 21 tonnes of steel rails to Carmichael, to be used in
the construction of a train line in Queensland. The steel rails
were to be manufactured in South Australia.
Between June and December 2020, BBC, on behalf of Carmichael,
made arrangements for the steel rails to be transported from South
Australia to Queensland by sea.
On 17 December 2020, the steel rails were loaded aboard the
vessel, the BBC Nile. A bill of lading (BOL) was
issued by BBC, with Carmichael named as consignee, for the shipment
of the steel rails. The BOL identified the port of loading as
“Whyalla, Australia”, in South Australia, and the port
of discharge as “Mackay, Australia”, in Queensland.
The BBC Nile arrived at the Port of Mackay, Queensland, on 24
December 2020. The next day, 25 December 2020, members of the crew
of the BBC Nile observed that part of the cargo hold of the ship
had collapsed. The steel rails were damaged to such an extent they
were non-compliant with the specifications for their intended use
in railway construction and were eventually sold as scrap.
On 2 August 2022, BBC notified Carmichael that it had commenced
arbitral proceedings in London, in accordance with the arbitration
clause contained in the BOL, in relation to the damage to the steel
rails. The arbitration clause in the BOL stipulated:
- Law and Jurisdiction
Except as provided elsewhere herein, any dispute arising
under or in connection with this Bill of Lading shall be referred
to arbitration in London. The arbitration shall be conducted in
accordance with the London Maritime Arbitrators Association (LMAA)
terms. The arbitration Tribunal is to consist of three arbitrators,
one arbitrator to be appointed by each party and the two so
appointed to appoint a third arbitrator. English law is to
apply.
In August 2022, Carmichael commenced proceedings in the Federal
Court of Australia, seeking to prevent BBC from continuing the
arbitral proceedings in London. Carmichael argued, amongst other
things, that the arbitral proceedings should be stayed and
determined before an Australian Court, on the basis that the BOL is
captured by section 11(2)(b) of the COGSA.
The Federal Court in the first instance granted an interim
injunction restraining BBC from continuing the arbitral
proceedings, until both Carmichael and BBC’s applications
before the Court had been determined.
Decision
The Federal Court of Appeal dismissed Carmichael’s
application for an anti-suit injunction, finding that section
11(2)(b) of the COGSA did not operate to capture inter-State bills
of lading. In making its decision, the Court returned to
fundamental principles of legislative interpretation, and traversed
in detail the legislative history of the COGSA. The Court drew a
distinction between bills of lading for cargo which was transported
from Australia to another country, and bills of lading for cargo
which was transported within Australian states and territories. In
respect of the latter, the Court found that Parliament never
considered, and thus never intended, for inter-State shipments to
be covered by section 11 of the COGSA, observing (at [83]):
Recourse to the legislative history set out above reveals that
from the Bill that led to the 1904 Act until the last of the
amendments in 1998, there was simply no consideration of making the
choice of law and jurisdiction invalidating provisions applicable
to inter-State shipments. There is no possibility of finding as a
point of historical fact that the Parliament intended such an
outcome; it was simply not considered.
The Court also considered whether this legislative
‘gap’ could be filled, but ultimately found that the
additional language required to do so would be “too big, or
too much at variance with the language in fact used by the
legislature”, noting (at [103]):
However regrettable or absurd the apparent overlooking of
inter-State contracts for carriage of goods by sea is in s 11 of
COGSA, the will of the Parliament as expressed in that law does not
allow the Court to stretch that legislative expression far beyond
the text of the Act.
Comment
The decision in Carmichael v BBC has
disrupted the traditional application of the mandatory jurisdiction
conferred on Australian Courts by section 11 of the COGSA, by
providing a carve out for inter-State bills of lading only. It
remains to be seen whether amendments to the COGSA will be made in
order to rectify the legislative ‘gap’ which has
resulted in this unusual decision. In the meantime, in the wake
of Carmichael v BBC, parties to inter-State bills of
lading will be free to arbitrate disputes in their chosen forum,
without being forced to litigate before Australian
Courts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
