Attention Carriers - Fill in those blanks!


Published: 29 October 2003

Reviewing the recent US decision: Continental Insurance Co. v. Polish Steamship Co. (The “Ziemia Suwalska”), No. 02-9002 (2 Cir. 2003).

In a recent decision by the US Court of Appeal for the 2nd Circuit, the Court held that inclusion of the date of a charterparty between Owners and Time Charterers was sufficient to incorporate the terms of that charterparty into the bill of lading, including the law and arbitration clause. Taken at face value, the Court’s decision would allow a stay of cargo claims brought in the US in favour of London arbitration. This would improve Members’ claims statistics as a result of significant cost savings for the Association.

In this action, loss and damage allegedly occurred to a cargo of steel coils during ocean transit. The Consignee’s insurers brought a subrogated claim against the vessel in rem and against the owners of the vessel in the US District Court for the Southern District of New York. Owners interpleaded the Charterers to join them as defendants and then filed a motion to have the claim dismissed in favour of London arbitration.

The District Court dismissed the claim in its entirety, finding that the bills of lading incorporated the charterparty arbitration clause, and that the (London) arbitration clause applied to the dispute between cargo interests and the defendants. Cargo interests appealed the District Court’s ruling.

The bill of lading in question was on the standard CONGENBILL form and the date of the charterparty had been filled in on its front. The Court of Appeal stated, "While it would have been preferable to identify the charter party in more detail, i.e. by mentioning the location and parties involved, we find that the specification of the date of the charter party, along with references to the charter parties made on the bill’s face and overleaf, suffice to identify the relevant charter party with the specificity needed to give effect to the intended incorporation."

Cargo interests argued that the charterparty was not adequately specified in the bill of lading because the Charterers were not named in the bills of lading. The Court of Appeal held "the charter party was specifically identified by date, which is all that is required [our emphasis]".

Prior to this decision, the cases in the US regarding incorporation of charterparty terms into a bill of lading distinguished between negotiated and non-negotiated bills of lading (i.e. those which had been negotiated to third parties, and those which were still in the hands of the shippers). This was on the grounds that a shipper is in a far different position than a third party who receives a negotiated bill of lading. The rule of thumb for incorporation of a charterparty into a negotiated bill of lading was that the bill should contain the name and date of the charter party. Since parties in arms length transactions rarely do this, most of the claims remained in the US courts.

In the present case, the Court of Appeal made no such distinction, and appears to have treated a negotiated bill of lading exactly as if it were a non-negotiated bill. This indicates that there may be a new trend by the courts in the US (and certainly by the 2nd Circuit) to dismiss claims under bills of lading in favour of arbitration when the charterparty is incorporated into the bill of lading. The charterparty has to be identified by its date e.g. " as per C/P dd. 29 October 2003".

Most of our Members have London arbitration clauses in their charterparties and, for trade to the US, we advise Members to have both the charterparty and its date incorporated into the bill of lading. For claims brought in the 2nd Circuit (New York, Connecticut and Rhode Island) Members would then be able to file a motion to dismiss in favour of London arbitration. This would make it possible for the Association to handle more claims in-house, thereby keeping legal costs down. There would then also be a corresponding improvement in Members' claims statistics.