Validity of Choice-of-Jurisdiction Clauses on Bills of Landing

Santi Zabaleta Llorens.

31/12/2007 International Law Office


Facts

In a judgment of July 5 2007 the Supreme Court confirmed the validity of a choice-of-jurisdiction clause included on the back of a bill of lading.

The decision is based on Article 17.1(c) of the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters - now, Article 23.1(c) of EU Regulation 44/2001.

The appellants cargo insurers sought to reverse a Barcelona Court of Appeal judgment declaring that the Spanish courts did not have jurisdiction to decide on a cargo claim arising from the carriage between two Mediterranean ports of containers loaded with electrical components. The jurisdiction clause included on the back of the bill of lading established the courts of Marseille in France (a contracting state of the Brussels Convention) as competent to decide claims arising in connection with the carriage evidenced by the bill of lading. The assumption - undisputed by the parties - was that all necessary requirements regarding the scope of application of the Brussels Convention were met.

In addition, other previous assumptions of the Supreme Court - declared to be proven by the lower court - were that: (i) it is usual practice in the market to incorporate choice-of-jurisdiction clauses on the backs of bills of lading; and (ii) the parties to the contract of carriage were merchants who knew, or at least ought to been aware, of such usage.

Decision

The appellants reasoned that in order successfully to incorporate a jurisdiction clause into a contract in accordance with the Brussels Convention: (i) the usages in accordance with which the clause is incorporated into the contract should be common practice among the particular parties to the contract at issue; and (ii) the specific trade or commerce to which the wording of the Brussels Convention or EU Regulation 44/2001 refers should be understood in the present case as the particular sector of sea carriage of electrical materials in the Mediterranean. The court dismissed both arguments.

In respect of the first argument, the court considered the development of the concept of 'usage' by the European Court of Justice(1) and concluded that such usage should be widely known in the context of contracts of the same type in the same commercial area, but not necessarily known by the parties to the legal relationship in question. The opposite would be to equate the meaning of usage with that of "practices which parties have established between themselves", a validity requirement of choice-of-jurisdiction clauses already included in Article 17.1(b) of the Brussels Convention.(2)

The court also rejected the appellants' second argument, on the grounds that the interpretation they were seeking of the expression 'particular trade or commerce concerned' would create as many usages as there are different sectors within the field of carriage of goods by sea. This would create significant problems when identifying such usages. Consequently, in the opinion of the court, this interpretation would impede the requirement of ensuring swiftness in international trade and the flexibility with which the European legislature has designed the uniform regime on the forms of valid choice-of-jurisdiction clauses.

Comment

The conclusion to be drawn from this and previous Supreme Court decisions is that the Spanish courts will consider a choice-of-jurisdiction clause included on the back of a bill of lading to be effectively incorporated into a contract of carriage if two important conditions are met: (i) if the relevant issues of fact set out in Article 23.1 of EU Regulation 44/2001(3) apply (ie, these clauses are regularly included in bills of lading and the parties to the contract are merchants who should be aware of such usage); and (ii) EU Regulation 44/2001(4) applies (ie, the forum of choice is in the European Union and at least one of the parties to the contract is domiciled in a member state).

Although the straightforwardness of the current state of the law in this respect is commendable, the issue regarding the situation when dealing with choice-of-jurisdiction clauses in which EU Regulation 44/2001 is inapplicable remains unclear, especially in cases where the choice of jurisdiction is outside the European Union.

In such cases there may not be a clear rationale that would enable a court to apply EU Regulation 44/2001 by analogy. If faced with a choice of forum which would permit the application of carriers' liability exemption clauses with a wider scope than the Hague-Visby Rules, a Spanish commercial court could be inclined to interpret such a jurisdiction clause to be in violation of Article III.8 of the rules. Consequently, the court could consider it to be void and ineffective. This issue will probably give rise to a number of disputes and therefore a Supreme Court decision clarifying this would be welcome.

___________________

Endnotes

(1) Decision C-106/95, MSG, February 20 1997 and Decision C-159/97, Castelleti, March 16 1996.

(2) Article 23.1(b) of EU Regulation 44/2001.

(3) Article 17.1(c) of the Brussels Convention.

(4) Or the Brussels Convention.