Valid and enforceable

FOR many years, the French courts were regarded as particularly favourable for cargo interests. This was also the case when it came to ship arrest and jurisdiction clauses in bills of lading. For years, the trend in French cases was to consider jurisdiction clauses, provided on the back of bills of lading, as not binding on shippers and consignees as it was not proven by the owners or carriers that the clause was known and accepted by them. The test was quite tough and it was often requested, to make the clause binding on shippers, that the latter signed the bill of lading or that they otherwise expressly approved it. It also had to be proved that the clause had been accepted by the cargo interests at the time of the formation of the contract of carriage, at the latest. Such proof, however, is often difficult to provide.

The test was even more difficult where enforceability of the clause against the consignee was concerned. Carriers had to prove that the consignee had formally and expressly accepted the clause at the time of delivery of the cargo at the latest, otherwise there was no point enforcing the clause. Cargo claimants were then free to pursue their action before the French courts not designated on the bill of lading, assuming, of course, that the French courts could justify their competence under the law applicable to the contract of carriage.

It should be pointed out that the question of the validity and enforceability of the jurisdiction clauses inserted in bills of lading was very much considered by the courts of France irrespective of the law governing the contract of carriage. The courts tended to appreciate such validity and enforceability by reference to their own internal law system, which gave rise to some criticism.

Although they are still fairly reluctant to apply jurisdiction clauses designating foreign courts, and to decline jurisdiction, the French courts are today influenced by the position adopted by the European Court of Justice. This very recent evolution is quite significant, notwithstanding the slowness of the process and the ambiguities of the new law.

In a judgment delivered on July 12, 2001, the Supreme Court of France held that the validity and enforceability of a jurisdiction clause had to be considered by reference to the law governing the contract and not necessarily by reference to French law. The case dealt with a bill of lading providing that the contract of carriage of goods was subject to the law of Singapore. As that law is quite clear as regards the enforceability of jurisdiction clauses against consignees, the Supreme Court decided that it should apply to the action brought by them.

At the same time, in a case involving a carriage between New Zealand and France, operated under a P&O Nedlloyd bill of lading providing for the application of Dutch law and a clause giving jurisdiction to the courts of Rotterdam, the Court of Appeal of Rouen held that the validity and enforceability of the clause against the cargo underwriters, subrogated to the rights of the French consignee, had to be decided by reference to the law governing the contract, i.e., Dutch law.

The reasoning of the court is of particular interest. To confirm the application of Dutch law to the contract, the court referred to Article 3 of the Roma Convention 1980, which provides that the contract is governed by the law chosen by the parties. It also referred to Article 8 of the same convention which says that the existence and validity of the contract, or of any provisions of it, are decided upon the law applicable to the contract should the contract be valid.

The French judges held that the clause was binding on the consignee under Dutch law and that, in any event, the validity and enforceability of the clause had to be considered pursuant to Article 17 of the Brussels Convention 1968 which relates to jurisdiction clauses and provides that the consent of the parties may be understood either from the agreement itself or implied from usage in the business concerned.

To justify that the Rotterdam jurisdiction clause was binding on the consignee, the Court of Appeal of Rouen relied upon a decision of the European Court of Justice of March 16, 1999, according to which the consent to the clause is presumed insofar as the behaviour of the parties concerned is consistent with the usage of the international business in which they trade and that such usage is known or deemed to be known by the parties.

The Court of Rouen came to the conclusion that the consignee, in its well- established role as a meat importer, was used to doing international business and to being involved in the carriage of goods by sea, and accordingly that he knew and approved the content of the jurisdiction clause in the bill of lading. As a consequence, the Court of Appeal declined French jurisdiction and the consignee was invited to pursue the claim before the competent court of jurisdiction as designated on the bill of lading.

In a more recent decision, on March 21, 2002, the Court of Appeal of Versailles confirmed this evolution. The court was involved in a dispute arising out of a voyage between Marseille and Izmir where the cargo was damaged during discharge in Turkey. The bill of lading designated English law and English jurisdiction and the shippers brought the claim. To decline French jurisdiction, the court adopted a similar approach to that of the Court of Rouen one year earlier and explained further how a usage, to imply the approval of the clause by cargo interests, should be construed.

Firstly, the usage must be observed in the branch of the trade concerned. Secondly, there is usage when the operators who trade in that business regularly apply such a practice, particularly as far as standard contracts are concerned. Lastly, the knowledge and acceptance by the parties of the usage is implied in circumstances of pre-existing contractual relations between them, or when the usage is sufficiently known by professionals in the business concerned to presume that they agreed to it. Having established that the parties were used to doing shipping business together, the court held that, considering the usage, the jurisdiction clause should be regarded as valid and enforceable and the dispute should be heard before the English, as opposed to French, courts.

The French courts could be expected to show more willingness to give effect to jurisdiction clauses against shippers and consignees, particularly when it is proven that the parties concerned are used to doing business in an area which is familiar with maritime shipments and contracts of carriage by sea. That way, cargo interests who are not familiar with the shipping business and who are involved only occasionally or exceptionally with contracts of carriage by sea would still have a chance to negate the binding effect of jurisdiction clauses.
They would argue that they are not supposed to know usage that is very specific to the shipping industry, bearing in mind that the burden of proof of the knowledge and implied acceptance of the usage is on the carriers.

It should be recognised that the recent French decisions which held that usage was making the jurisdiction clause valid and binding were given in respect of claims brought by cargo interests particularly involved in the shipping business and, therefore, aware of relevant usage. These decisions also dealt with European interests and matters subject to the Brussels Convention 1968. It is not certain whether the courts would have taken the same line had the claimants been unfamiliar with or outside the shipping business and involved in it only occasionally. It also raises the question of whether the validity and enforceability of jurisdiction clauses would be less straightforward in cases not involving European interests and European clauses, and, therefore, not within the scope of the Brussels Convention 1968.

It must still be established that the wording of the clause is valid and that it clearly identifies the competent court of jurisdiction. Nevertheless, it is uncertain whether clauses giving jurisdiction to the courts of the 'principal place of business of the carrier' or to such a court at the option of the carrier would remain invalid and not be enforceable under French law. In November 2000, the European Court of Justice held in Coreck Maritime and Handelsveen that the proper circumstances of each case may be used by the judge to identify the competent court or courts.

Lastly, under the current law, it remains unclear whether jurisdiction clauses are enforceable against the bill of lading holder, third-party to the contract. To the extent that Coreck decides a point of general principle, it also decides that 1) for the bill of lading holder, who is subrogated to the rights of the shipper under 'internal law' (unspecified by the European Court), the jurisdiction clause accepted by the shipper binds on him, 2) if the 'internal law' does not invest the bill of lading holder in the rights of the cargo interests, the jurisdiction clause does not bind on him, but for his acceptance of the clause by reference to Article 17 of the 1968 Brussels Convention, i.e., in proving that the clause was either expressly or implicitly agreed considering usage and practice.

It raises the question of how we can refer to usage and practice between a carrier and a bill of lading holder, third-party to the contract, who in essence ignores the carrier, has never dealt with the carrier, and was not even mentioned in the bill of lading. As a number of French authors said following Coreck, the European Court of Justice should be questioned further as regards the construction of Article 17 of the Brussels Convention 1968 (replaced by Article 23 of the European Regulation no. 44/2001 effective since March 1, 2002) and of the right interpretation of the rule laid down in Coreck.

Moreover, it is hardly conceivable that the French courts would agree, despite the very liberal approach towards jurisdiction clauses adopted by the European Court of Justice, to uphold the enforceability of a jurisdiction clause in a contract of carriage against a party which has neither participated in, nor approved, that contract.