When an international dispute arises out of a maritime contract or incident such as a collision, it is necessary to consider at the outset which law applies to the dispute, which tribunal has jurisdiction to determine the dispute on its merits, whether there is any time bar and whether the claimant can obtain security for its claim. Many maritime contracts contain express governing law and jurisdiction clauses. This chapter will consider the extent to which the English courts will give effect to party choice, the limits on that choice as a result of the maritime conventions and what the position is where no choice has been made. First the reason why these issues matter will be explored.
In order to advise a party on their rights and obligations in any situation it is necessary to establish which law governs those rights and obligations. Whether a contract is governed by one law rather than another may mean the difference between total success by the claimant or total defeat if, for example, one law does not recognise a cause of action or provides the defendant with a complete defence, whereas the other does recognise a cause of action and there is no defence.
The issue of jurisdiction may be of great tactical significance as there may be more than one court which has jurisdiction to determine the dispute and then the claimant must make sure that it commences proceedings in the jurisdiction which is most advantageous to it. In maritime disputes there are a number of reasons why one jurisdiction may be more favourable to one party than the other. One of the aims of this chapter when dealing with jurisdiction is to highlight the differences that can occur in one jurisdiction rather than another, due to the different maritime conventions which
States are parties to. This creates an incentive to forum shop. For example, different limits of liability for a cargo claim may apply in different jurisdictions depending on whether the Hague, Hague–Visby or Hamburg Rules apply.
In the future the Rotterdam Rules might apply. A second example is that different tonnage limits may apply depending on which convention on tonnage limitation, if any, applies.
In any case, whether maritime or not, one court may award more interest; award more legal costs; have more favourable procedural rules, for example, in relation to disclosure of documents; proceed to judgment faster, and so on. As we shall see the European rules have sought to harmonise the rules as to how the EU Member States determine the law applicable so that whichever EU Member State court has jurisdiction it should apply the same law thus reducing the incentive to forum shop.
However, the “mandatory overriding provisions” of the law of the forum will still apply and the rules of evidence and procedure of the forum will still apply, so that the jurisdiction will still be very important.
If one jurisdiction is more advantageous to one party, the other party would probably prefer to litigate in the other available jurisdiction and this may create a race between the parties to commence proceedings in the jurisdiction of their choice first. Such races have resulted, for example, in a diver being hired to dive down and pin court proceedings on a ship which had sunk in the territorial waters of Singapore to ensure the jurisdiction of the Singapore court as the tonnage limits were lower there.
If the arbitration award or judgment that a party would obtain in one jurisdiction is significantly different from that which the other party would be liable for elsewhere, it may be very difficult to settle the case until the issue of jurisdiction has been resolved.
It is of critical importance to commence proceedings in the correct jurisdiction against the correct party within any time limit. Many maritime disputes are subject to relatively short time limits. For example, the Hague, Hague–Visby or Hamburg Rules may apply to a bill of lading or may be incorporated voluntarily into a charter party and they have a one- and two- year time bar respectively.
If the bill of lading provides for London arbitration and the Hague–Visby Rules apply mandatorily, the cargo receiver must identify the carrier12and commence arbitration proceedings in London within the one- year time limit, otherwise the carrier is discharged from all liability.
A party must also consider how to secure its claim as soon as any such claim arises.
There is no purpose in expending time, effort and expense in obtaining a favourable court judgment or arbitration award if there are no assets against which to enforce that judgment or award.
Thus the claimant should try to obtain security for its claim right at the outset of the dispute. In a maritime dispute there may be a right to arrest a ship or an arrest may be threatened in order to obtain alternative security in the form of a P&I Club letter of undertaking or bank guarantee. Alternatively if no security is forthcoming there may be a judicial sale of the ship and the proceeds of sale distributed amongst the creditors.
If there can be no arrest, perhaps because the ship has sunk and is an actual total loss, the claimant may be able to find assets such as the proceeds of the hull and machinery insurance or funds in the ship owner’s bank account which can be frozen by means of a freezing injunction.
This chapter will consider first which tribunal, either arbitration tribunal or court, has jurisdiction to determine the dispute on its merits and then how the English court determines which law is applicable to the dispute. The parties may have chosen which tribunal has jurisdiction to determine their disputes. Many maritime contracts provide for arbitration. If there is no agreement to arbitrate, the parties may have agreed on a court to determine their disputes but, if they have not, it will be necessary to consider which court will have jurisdiction to determine the dispute on its merits.