Lianyungang Xiangshun Mineral Resources Co., Ltd v. Ugland Shipping A/S

 

Cite as: Lianyungang Xiangshun Mineral Resources Co., Ltd v. Ugland Shipping A/S, The Supreme People’s Court (4 February 2013), in Fan Yang, Foreign-related Arbitration in China: Commentary and Cases, Part IV

Case identification

  • Date of Decision: 4 February 2013 

  • Court:

    • The Supreme People’s Court

    • The Higher People's Court of Tianjin

  • Arbitral Institution/Tribunal:

    • N/A

  • Case number / Docket number:

    • No. 1 of the Fourth Civil Tribunal of the Supreme People’s Court [2013]

    • No. 5 of the Higher People’s Court of Tianjin [2012]

Classification of issues present

  • Application of the New York Convention: No

  • Key PRC law provision(s) at issue: Article 38 of <Civil Procedure Law of the People’s Republic of China>.

Descriptors: Arbitration agreements; Incorporation of arbitration clauses; Bill of Lading; Reference to arbitration clauses stated at the back of the Bill of Lading; Reference to the charterparty; CONGENBILL 1994  

 

 

 

 

Lianyungang Xiangshun Mineral Resources Co., Ltd v. Ugland Shipping A/S    

A reference to the arbitration clause contained in the Charterparty stated at the back of the Bill of Lading (B/L) was found not sufficient to incorporate the arbitration clause to bind the holder of the B/L. In its Report to the Supreme People’s Court, the Higher People's Court of Tianjin found that the B/L stated on its front side that “to be used together with the Charterparty;” “Freight payable as per Charterparty No.1015NICKEL dated 19 September 2010” and “Please refer to the terms of carriage on the back;” and that on its back it stated “All the terms and conditions, exemptions, including the governing law and arbitration clauses contained in the Charterparty printed on the front of the B/L are incorporated into the B/L.” Based on these facts, the Higher People’s Court of Tianjin was of the view that the holder of the B/L was not a party to the Charterparty and was not bound by the arbitration clauses contained therein. In its Reply, the Supreme People’s Court agreed that the arbitration clauses were not effectively incorporated into the B/L to bind the holder of the B/L.

Case text (English translation)

 (4 February 2013 No. 1 of the Fourth Civil Tribunal of the Supreme People’s Court [2013])

 

The Higher People’s Court of Tianjin:

Your court’s Request for Instructions on a Dispute Over Jurisdiction Regarding a Contract of Carriage of Goods by SeaBetween Lianyuangang Xiangshun Mineral Resources Co., Ltd and Ugland Shipping A/S (No. 5 of the Higher People’s Court of Tianjin [2012]) submission has been received. Upon deliberation, our reply is as follows:

It is in our court’s opinion that although the back of the bill of lading (“B/L”) stipulates that the arbitration clause contained in the Charterparty printed on the front of the B/L shall be incorporated in the B/L, the said incorporation clause at the back of the B/L does not bind the holder of the B/L. No stipulations that the arbitration clause contained in the Charterparty to be incorporated in the B/L had been provided at the front of the said B/L. The stipulation that “Freight payable as per Charterparty No.1015NICKEL dated 19 September 2010” would not constitute effective incorporation of the arbitration clause contained in the Charterparty into the B/L to bind the holder of the B/L. Accordingly, Ugland Shipping A/S failed to prove that an arbitration agreement existed between itself and Lianyuangang Xiangshun Mineral Resources Co., Ltd. [Therefore,] Ugland Shipping A/S’s dispute on jurisdiction lacked factual support.

[Our court] agrees with your court’s opinion. This is a dispute over a contract of carriage of goods by sea, which shall be specifically governed by the maritime courts. Considering that the port of discharge in question is situated within the Tianjin Maritime Court’s jurisdiction, the Tianjin maritime court shall have jurisdiction over this case.

It is so replied.

Enclosed:

Request for Instructions on the Dispute over the Contract of Carriage of Goods by Sea between Lianyungang Xiangshun Mineral Resources Co., Ltd and Ugland Shipping A/S

(21 November 2012 No. 5 of the Higher People’s Court of Tianjin [2012])

 

The Supreme People’s Court:

In the dispute over a contract of carriage of goods by sea between Lianyuangang Xiangshun Mineral Resources Co., Ltd (hereafter “Xiangshun”) and Ugland Shipping A/S (hereafter “Ugland Shipping”), Ugland Shipping filed an appeal to our court against Civil Ruling No. 515-1 of the Tianjin Maritime Court regarding jurisdiction. When filing the appeal case, our court discovered that the case is a foreign-related case regarding the determination of the validity of an arbitration clause. The Tianjin Maritime Court failed to make a report [to our court] pursuant to the Notice of the Supreme People's Court on the Disposal of the Relevant Issues concerning the Foreign-Related Arbitration and Foreign Arbitral Matters by People's Courts (No. 18 of the Supreme People's Court [1995]). Therefore, our court hereby reports the relevant facts of the case for your court’s instructions.

 

I. Parties

Plaintiff: Lianyuangang Xiangshun Mineral Resources Co., Ltd. Domicile: Room 206, Block B, DaLuQiao International Building, HaiTang Road, LianYun District, Liangyungang, Jiangsu Province.

Defendant: Ugland Shipping A/S. Domicile: J.M. Uglands vei 20, 4878 Grimstad, Norway.

 

II. Facts of the Case and the trials in the Tianjin Maritime Court

Xiangshun filed a claim in the Tianjin Maritime Court, submitting that on 14 November 2010, 56,800 wet tons of nickel were loaded on Ugland Shipping’s vessel MV ISABELITA in Kolonedale Port, Central Sulawesi, Indonesia for its voyage No. 03L. A clean bill of lading (“B/L”) numbered KLN/CHN-101001 was issued. Subsequent to Xiangshun’s receiving the full set of the B/L, Ugland Shipping failed to deliver the goods in time at the “Port of Tianjin, China,” being the port of discharge stipulated in the said B/L. Xiangshun demanded Ugland Shipping’s compensation for all losses and costs incurred.

During the period for the submission of defences, Ugland Shipping disputed the Tianjin Maritime Court’s jurisdiction. Ugland Shipping submitted that the B/L Xiangshun relied on was drafted in CONGENBILL 1994 format. Clear notification clauses and incorporation clauses were provided in the said B/L, with stipulations of the date which the [said clauses were] incorporated in the said B/L. Accordingly, the arbitration clause contained in the Chaterparty in question was effectively incorporated in the B/L. Xiangshun shall resolve the dispute by arbitration pursuant to the arbitration clause contained in the Chaterparty. [Therefore, Ugland Shipping] requested the court to dismiss Xiangshun’s claims.

Upon review, the Tianjin Maritime Court found that this case was a dispute over a contract of carriage of goods by sea, and Xiangshun was the holder of the original B/L. The B/L in question was drafted in CONGENBILL 1994 format. The front page of the B/L stipulates that “For Conditions of Carriage See Overleaf.” Clause 1 at the back page of the B/L stipulates, “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.” The clauses of the said B/L are standard terms drafted by the carrier in advance. Since the holder of the bill, Xiangshun, was not the charterer, to make the arbitration clause contained in the Charterparty binding to the holder of the bill, clear stipulations that the arbitration clause contained in the Charterparty to be incorporated in the B/L shall be made on the front page of the B/L, with specific indications which differ from other clauses that attracts the other party’s attention. Here, the standard terms and conditions stipulated at the front and back of the bill regarding incorporation do not constitute an effective incorporation of the arbitration clause contained in the Charterparty in the B/L, and is not binding to the holder of the bill. Therefore, Ugland Shipping’s grounds supporting its argument that [Xiangshun] shall resolve the dispute by arbitration pursuant to the arbitration clause contained in the Chaterparty are not established. Considering that the Port of Tianjin, China, the port of discharge in question, is situated within the Tianjin Maritime Court’s jurisdiction, the Tianjin Maritime Court shall have jurisdiction over this case. Pursuant to article 38 of the Civil Procedure Law of the People’s Republic of China, [the Tianjin Maritime Court] dismissed Ugland Shipping’s dispute on jurisdiction.

 

III. The opinions of our court

When filing the appeal case, our court [found] that on 14 November 2010, Hong Kong Hongxin Shipping Limited represented the captain of the vessel MV ISABELITA to issue a B/L numbered KLN/CHN-101001, stipulating that the consigner was PT. Pan China Indonesia, the port of loading was Kolonedale Port, Central Sulawesi, Indonesia and the port of discharge was the Port of Tianjin, China. The front page of the said B/L stipulates that “To be used with Charter-parties;” “Freight payable as per Charterparty No.1015NICKEL dated 19 September 2010” and “For Conditions of Carriage See Overleaf.” Clause 1 at the back page of the B/L stipulates, “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.”

Upon review, it is in our court’s opinion that considering that Xiangshun was the holder of the bill instead of a party to the Charterparty in question and that the front page of the said B/L stipulates that “To be used with Charter-parties” and “Freight payable as per Charterparty No.1015NICKEL dated 19 September 2010,” it did not, [however] expressly provide that the arbitration clauses contained in Charterparty No. 1015NICKEL shall be incorporated in the B/L in question. Therefore, [these provisions] do not generate the legal effect causing the arbitration clause contained in the Charterparty to be incorporated in the B/L in question, and so the said arbitration clause does not bind Xiangshun. Hence, no consensus was reached between Xiangshun and Ugland Shipping as to the arbitration clause in question. Ugland Shipping’s dispute on jurisdiction lacked factual and legal grounds. Considering that the port of discharge in question is situated within the Tianjin Maritime Court’s jurisdiction, the Tianjin Maritime Court shall have jurisdiction over this case.

Please reply whether the above opinions are correct.