A lawyer's paradise - or a nightmare?

THE situation continues to arise with some frequency as Conline bills are still widely used, and nvocc carriers (charterers) seem to enter their names (as well as sometimes further co-ordinates) on the front of those bills ever more frequently. The Conline form contains two clauses which jointly create uncertainty and/ or doubts, and furthermore have the potential to cause minor chaos in Netherlands jurisdiction.

At the heart of the matter is the Principal Place of Business Clause, which in itself has been the subject of some considerable debate and criticism, and which is a variation of the Jurisdiction Clause and the Identity of Carrier (IOC) Clause. Those parts of the wording that (jointly) give rise to so much vagueness and dispute may be summarised as follows:

Article 3 Conline Bill of Lading (Jurisdiction)

"Any dispute arising under this bill of lading shall be decided in the country where the carrier has his principal place of business ."

Article 17 Conline Bill of Lading (Identity of Carrier)

"The contract evidenced by this bill of lading is between the merchant and the owner of the vessel named herein and it is therefore agreed that said shipowner only shall be liable for any damage or loss due to any breach or non-performance of any obligation arising out of the contract of carriage." Each of these clauses has caused enough trouble in its own right. But the combination of the two - in particular where a charterer/ nvocc issues an unamended Conline bill and prints its co-ordinates on it so that there are at least two parties that can be regarded as the carrier - constitutes a lawyer's paradise or nightmare, depending which side you're on. Also, under the present Netherlands National Code of Civil Proceedings, there is effective mandatory jurisdiction by statute for the Netherlands courts where there is a claim by a third party bill of lading holder in case of incoming traffic under a bill of lading into Netherlands jurisdiction. This effectively does away with the Principal Place of Business clause. The situation becomes even more complicated where there is incoming traffic into Netherlands in a situation where the defendant is domiciled in a country that is a signatory to the European Convention for the Mutual Recognition and Enforcement of Judgments' (EEX). That convention has its own provisions for conferring jurisdiction insofar as relevant for carriage by sea. It recognises the possibility of choice of forum clauses in contracts and sets a number of conditions precedent that do not, however, go quite as far as Article 629 of the Netherlands Code of Civil Proceedings. Following the general doctrine where there is a conflict between the two, the provisions of EEX take precedence. The picture becomes even more blurred in the event of a vessel arrest. Although EEX itself indicates that it does not infringe on the provisions of other conventions that deal with jurisdiction concerning specific issues, there has long been an absence of case law clarifying whether the arrest convention's provisions would qualify as such. There has been at least one fairly recent Netherlands precedent published confirming that they would.

The identity of carrier clause

The Netherlands Act on Private International Law pertaining to Carriage by Sea of 1993 indicates that the question of which party an action should be pursued against should be looked at in accordance with the law of the country of contractually agreed discharge, irrespective of a conceivable choice of law that the parties may have made contractually. This results in Netherlands national law being applied in a great many cases, This produces some interesting results. Article 461 of Book 8 of the New Netherlands Civil Code defines who can be regarded as carrier(s) under a bill of lading. It states that the party who signed the bill of lading (or on whose behalf the bill of lading was signed) and/ or the party whose form was used for the bill of lading, is to be regarded as the carrier, whatever the rest of the article says.

The article then identifies other carriers. Frequently, more than one party can simultaneously be regarded as a carrier, and Article 442 explicitly states that they shall all be jointly liable vis-a-vis the bill of lading holder. For an IOC clause to be upheld when it points towards a bareboat charterer, the identity of that bareboat charterer must come from the bill of lading itself. Thus the classic demise clause is generally held to be void, whilst an IOC clause specifically naming the owner (as in the Conline bills of lading) is generally held to be valid.

The tale of the Karl Liebknecht

Once upon a time there was a hard-working Chinese exporter of groundnuts. He produced generous crops and sold his produce to many countries, including the Netherlands. He sold his goods CIF and therefore had to provide a contract of transport as well as goods-in-transit insurance.

He was not only hard working but also shrewd. He discovered that the terms of the contract obliged him to provide a contract of transport, to be evidenced by shipped-on-board bills of lading, but said nothing as to the quality of the transporting vessel. He therefore looked for the cheapest carrier. He opted for a carrier who did business from Hong Kong (although it later turned out that he was registered in the Federal Republic of Germany) who offered remarkably cheap rates.

It later transpired that the carrier (a nvocc/chartered owner who issued Conline bills of lading, merrily printing his name as well as the place of registry of his head office on the front of the bills) was able to offer cheap rates by chartering Russian rustbuckets totally unsuitable for the carriage of groundnuts. But the Chinese merchant/ exporter, against presentation of bills of lading and an insurance certificate, obtained payment of the purchase price, and the groundnuts were shipped to destination in these vessels.

A great many shipments took place in this way, with mixed results. There were a number of cases of cargo damage by mould, including a cargo shipped to the Netherlands in July 1991.This cargo was shipped on the Karl Liebknecht from Qingdao to Flushing. Proceedings were commenced before the Rotterdam District Court. One of the defendants, the nvocc/charterer Coreck, challenged the court's jurisdiction The jurisdiction (principal place of business) clause in this case was manifestly unclear. It was held to be null and void because, although the nvocc had issued the bills of lading, printing his own co-ordinates on them, these bills were on unamended Conline forms and therefore contained an identity of carrier clause that might well be valid in that form. So there had to be two defendants before the same court, to prevent conflicting judgments. As a result, it was not even clear whose principal place of business to go for. In addition, it was argued on behalf of the claimants that the manner in which Coreck conducted its operations, in particular its Far East operation, was such as to make it uncertain what Coreck's principal place of business was. It could therefore be argued that the Rotterdam District Court, which had jurisdiction vis-a-vis the Russian shipowner, was also competent vis-a-vis Coreck. But the defendant carrier challenged Netherlands jurisdiction, arguing essentially that the jurisdiction clause was clear, indicating that Hamburg, which was mentioned on the bills, was clearly Coreck's principal place of business. The Rotterdam District Court held, "For a jurisdiction clause to be valid, the bill of lading must indicate - or, alternatively, a third party bill of lading holder like Handelsveem must be in a position to simply establish - which court has jurisdiction over disputes arising from the contract of transport evidenced by it.

"The court holds that the present clause does not meet with that requirement. It does not name the court of a specific country. It refers to the principal place of business of the carrier. The bills of lading name Coreck on one side, from which it might follow that it is the carrier, however the identity of carrier clause on the reverse identifies the shipowner (Sevryba) as carrier. Whose principal place of business is to be taken into account is also dependent on the answer to the question of whether the identity of carrier clause is to be regarded as valid under the law applicable to that question. Because of all of this the bill of lading holder is left in uncertainty and therefore the jurisdiction clause lacks sufficient specificity". The first instance decision was duly appealed by Coreck and confirmed by the Hague Appeal Court. Essentially, the appeal court said that the question of whether Coreck was to be regarded as the sole carrier or whether Sevryba also qualified as a carrier depended on whether or not the IOC clause was upheld, and that in turn depended on which law applied to that question.

The Hague Appeal Court's decision, however, was not the end of the jurisdiction. The case duly went to the Supreme Court of the Netherlands, where the attorney-general held that the first part of Coreck's submission that the jurisdiction clause contained a multiple choice of forum lacked a basis in fact. Coreck had also argued that the condition precedent of clarity, as envisaged by EEX, applied to the relationship between the carrier and the shipper and not to that between the carrier and the third party bill of lading holder, and that actions under that bill of lading would then also be bound by that clarity between shipper and carrier. But the attorney-general did not agree. Quoting from European Court case law, he concluded that the clarity requirement applied not just to the original parties and that the choice of forum was indicated in terms that were clear to outsiders. None of the arguments raised by Coreck, argued the attorney-general, altered the fact that a third party bill of lading holder could not ascertain from the bills of lading themselves which court had jurisdiction.

The Supreme Court agreed with the attorney-general that it was not incomprehensible for the appeal court to have interpreted the choice of forum clause as amounting to a single choice of forum clause, as a consequence of which the appeal court had looked at whether Hamburg (instead of Rotterdam) was the competent forum.

As to the second part of Coreck's objections, the Supreme Court found, contrary to the attorney-general, that a number of prejudicial questions had to be put to the European Court before giving a final ruling on jurisdiction in Karl Liebknecht.

A number of questions remain unanswered. Can it be concluded from the first sentence of Article 17 of EEX that, in the context of European Court precedents, for choice of forum clauses to be valid between the parties, it is a condition precedent that the wording of the clause makes it clear to others - and in particular to the courts - which court has jurisdiction? Or does Article 17, where third party bill of lading holders are involved, also govern the validity of a provision that indicates as a competent court for disputes "under this bill of lading" the court, incorporated in the bill of lading, of the place where the carrier has his principal place of business?

Does the fact that the choice of forum clause in the bill of lading must be deemed valid between the carrier and the shipper then cause the provision to be also valid vis-a-vis every third party bill of lading holder, or is that limited to a bill of lading holder who, when obtaining the bill of lading under the applicable national law, succeeded to the shipper's rights and obligations?

If one is to assume that the choice of forum in the bill of lading is valid between carrier and shipper, can the special circumstances of the particular case then come into play? And, if the contents of the bill of lading do not provide sufficient clarity as to its validity, can one then demand that the third party bill of lading holder familiarise himself with the circumstances of the case? Which national law is then to be applied to the question of whether the third party bill of lading holder succeeds to the rights and obligations of the shipper when acquiring the bill of lading, and what if the question is not yet answered by the national law in question? So it remains for the Supreme Court to settle these issues. Paradise or nightmare?