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Fichte & Co have been recently solicited by a UK based P&I Club to represent their member (a shipowner) in a cargo claim brought by the receiver’s underwriter based in the UAE, before the Dubai High Court. Fichte & Co have succeeded to obtain a favorable judgment on March 21, 2010 dismissing the case for the non competence of the Court, due to the existence of an arbitration clause in the charter party as referred to in the bill of lading.
The judgment is to be considered in the UAE Court practice as having ironed out the previous classical position of the Courts, jealous of their jurisdiction whenever a reference to arbitration or foreign jurisdiction is raised by a party during the proceedings. The classical reasoning is usually based on reasons of compliance with rules of sovereignty of the State, but the UAE Court practice further applaude classical shields raised by the holder of the bill of lading of not taking into consideration the reference to arbitration on the back of the bill of lading as being illegible for being written in small printed letters!
English solicitors may be unfamiliar with such defense, for under English law such clause would be considered to be part of the contract where the incorporation clause refers specifically to the arbitration clause contained in the charter party. Unlike the English system however, the UAE law and Court practice do not reserve expressly the concept of incorporation of terms separately: in practice, the party interested in enforcing the arbitration clause has to refer to a section in the domestic law related to general rules governing arbitration which themselves refer to the intention of the party which cannot be hindered by one party seeking Courts to resolve the dispute.
The reported judgment of the Dubai High Court has referred to few cases upholding the reference to arbitration as mentioned on the back of the bill of lading. The Court has considered that the reference to arbitration in the bill of lading as stated in the charterparty is enforceable against the carrier, the shipper and the receiver as far as it does not contradict with any specific stipulation in the bill of lading itself. Moreover, the judge has considered that the receiver in a contract of carriage is bound by the arbitration clause as stated in the charterparty in case it has been referred to through the bill of lading, and that the transfer of rights to the transferee, i.e. the receiver’s underwriter, operates as per the agreed conditions between the contracting parties.
It is noticeable that the incorporation of terms as per English law is approached by the UAE Court practice through the reference to "transfer of rights", thus requiring the knowledge of the party to whom the rights have been transferred. The proof of knowledge varies according to the circumstances of the case and the reference by the parties to both sides of the bill of lading, thus expecting the proof of knowledge to be easier in cases where the claimant holder of the bill of lading is the endorsee of the bill of lading.
Prior to this judgment, the Supreme Court of Abu Dhabi has brought comfort to carriers by binding the holder of the bill of lading with respect to the arbitration clause mentioned on the back of the bill of lading, however, this was based on new legal grounds. The case in brief was a claim brought by a consignee (the Claimant) against the owners of a vessel (the Defendant), asking the Court to order the Defendant to pay Dhs. 2,704,952.47 plus interest, representing the total value of the damaged cargo carried by the Defendant. The Claimant commenced proceedings based on the endorsement of two bills of lading in its favour.
The Claimant’s main argument is that its right to recover for the damaged cargo is based on the bill of lading and that the arbitration clause should have been agreed by Claimant in the charterparty and not via an endorsement on the back of the bill of lading. The Supreme Court has upheld both decisions of the First instance and the Court of Appeal considering the holder of a bill of lading, upon presentation of the bill of lading, as having interest in the same; and that the Claimant stands in a position similar to the shipper, thus bound to all clauses in the bill of lading, including the charterparty as referred to in there. The Supreme Court has accordingly considered that the Claimant’s relationship with the Defendant is governed solely by the bill of lading, and the Claimant has to comply with the arbitration clause in the charterparty as referred to it in its copy of bill of lading.
It is clear that the incorporation of terms is not determined by the UAE Courts per se; the Courts’ practice has impliedly adhered to the concept of incorporation as recognized in English law without further express definitions. The UAE Courts have even reached extremes by assimilating receivers having the locus standi of shippers and this can be marked as an unprecedented judicial approach. In most cases, claimants who are based in the UAE take advantage of the unstable position of the UAE Courts with respect to enforcing the arbitration clause on the back of a bill of lading. These claimants file cases in the UAE against foreign carriers; the aim being to sue the carrier for less cost, efforts and mostly by attempting to bring the carrier to the claimant’s ground in the UAE, before the UAE Courts, and then start bargaining for a potential settlement. The old/overruled UAE Courts decisions were indirectly encouraging such claimants to file unwarranted claims and therefore rendering the UAE a jurisdiction of convenience by admitting its jurisdiction despite the clear reference to arbitration on the back of the bill of lading. That is why it would be beneficial to the UAE legal system to address the topic either through the elaboration of a new concept by the Court decisions, similar to the one of incorporation of terms under English law, or through the enactment of law with clear conditions related toward the acceptance of the incorporation with requirements such as the questions of description and consistency under the English law.
