This was an appeal from the decision of the Full Court of the Federal Court of Australia in Carmichael Rail Network Pty Ltd v BBC Chartering Carriers GmbH & Co KG (The BBC Nile) [2022] FCAFC 171 (CMI2013).

The appellant, Carmichael Rail Network Pty Ltd (Carmichael), applied to restrain proceedings brought otherwise than in an Australian court in connection with damage to a consignment of goods carried by the first respondent, BBC Chartering Carriers GmbH & Co KG (BBC), from Whyalla, South Australia, to Mackay, Queensland, on the BBC Nile. Carmichael argued that on a proper construction of the Carriage of Goods by Sea Act 1991 (Cth) (the Act), it had a statutory right to an anti-suit injunction against BBC. Pursuant to s 7(2) of the International Arbitration Act 1974 (Cth), BBC applied for a stay of Carmichael's Australian proceedings against it for breach of art 3 of Sch 1A to COGSA 1991 [which give domestic effect in Australia to a modified version of the Hague-Visby Rules, referred to as the Australian Rules] and in bailment and negligence.

Carmichael was granted an interim injunction restraining BBC from taking any further steps in the London arbitration it had commenced, or from commencing any other arbitration in relation to the subject matter of the Australian proceedings until both interlocutory applications had been determined. However, the Full Court held that the Australian proceedings must be stayed in favour of London arbitration, and that the interim injunction must be discharged. Carmichael appealed to the High Court of Australia.

Held: Appeal dismissed.

This case concerns the proper construction of art 3.8 of the Australian Rules, incorporated into Australian law by s 8 of the Act. By s 10(1) of the Act, the Australian Rules apply to a contract of carriage of goods by sea from a port in Australia to another port in Australia (as in this case). Article 3.8 provides that any 'clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to ... goods ... or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect'. The issue for the High Court was whether the English arbitration and choice of law clause in the relevant bill of lading was void under art 3.8.

The High Court held that Carmichael's appeal failed because: (a) for the purpose of deciding BBC's application for a stay (and, accordingly, Carmichael's application to restrain the continuation of the arbitration), art 3.8 of the Australian Rules, on its proper construction, operates on the ordinary civil standard of proof - on the balance of probabilities - and not on a lesser standard such as a mere possibility, a real risk, a reasonably arguable case, or a prima facie case; (b) art 3.8 of the Australian Rules is to be applied in the circumstances at the time the court decides their application, which, in this case, included BBC's undertaking to, and the declaration made by, the Full Court that the Australian Rules applied to the relevant bill of lading; and (c) Carmichael has not proved on the balance of probabilities that the arbitration clause in the bill of lading relieves BBC from liability or lessens such liability within the meaning of art 3.8 of the Australian Rules.

Although by s 8 of the Act the Australian Rules, including art 3.8, have the force of law in Australia, the Australian Rules form part of an international Convention. The Australian Rules also give effect to Australia's accession to the international instruments specified in s 7(1) of the Act, and therefore are to be interpreted in accordance with the Vienna Convention on the Law of Treaties 1969, including art 31.1 that requires interpretation 'in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose'. Article 31.3.c of that Convention also requires construction of a treaty to take into account '[a]ny relevant rules of international law applicable in the relations between the parties'.

In the Common Law world, the standard of proof for civil proceedings is on the balance of probabilities, in contrast to the criminal standard of proof of beyond reasonable doubt. In Civil or Continental Law systems there has traditionally been a single standard of proof, commonly formulated as the 'full conviction' (or 'personal conviction', or 'near certainty') standard. Further, the commonly applied standard of proof in international tribunals is the 'preponderance of evidence' standard (a standard at least as onerous as 'on the balance of probabilities'). Within this overarching conceptual context of the applicable standard of proof in civil proceedings, references to a clause 'relieving' a carrier from liability or 'lessening such liability' are to be understood as referring to facts able to be found with the requisite degree of confidence, at least on the preponderance of the evidence. They are not to be understood as meaning some lesser standard, however it might be formulated, still less mere speculation based on unknown and unpredictable future contingencies.

The last sentence of art 3.8, that a benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability, does not assist Carmichael's argument. This sentence deems a benefit of insurance clause to engage art 3.8 whether or not it can be said that such a clause is one 'relieving the carrier ... from liability' or 'lessening such liability'. Carmichael relied on the travaux préparatoires of the Hague Rules to support its argument. The travaux record that a question was raised whether a benefit of insurance clause, explained to be a clause entitling a 'shipowner having met [their] liability ... to take over any insurance the cargo owner may have effected on [their] cargo', was a clause within the meaning of art 3.8. The travaux state that '[w]e are all quite clear that we mean to prohibit such a clause'. This indicates only that it was intended to deem such a clause to be within the scope of art 3.8, and does not advance Carmichael's case.

A subsequent section of the travaux records Sir Norman Hill stating that a benefit of insurance clause was not one found in any British bills of lading but was 'used very largely in the United States and ... very great exception has been taken [to it]'. Mr Louis Franck then said that 'as far as I am concerned and continental jurisprudence will be concerned, that clause would be considered as being void under paragraph 8, because it certainly is lessening and diminishing the liability which is on the shipowner'. Mr Franck also said '[t]here is no doubt that the general principle would already cover it, but the observation ... was that as in the [United States] there has been doubt on that, we ought to apply the old saying: "Things which go without saying go even better if you mention them", and that is the reason for it'. If anything, this exposes the existence of real doubt about the status of a benefit of insurance clause under art 3.8 - a clause unused in Britain, a source of very great exception (inferentially, to shippers/cargo owners) in the United States, and a clause accepted to lessen a carrier's (shipowner's) liability in Continental countries - and the intention to remove that doubt by a deeming provision.

Further, Carmichael's argument - that, as a benefit of insurance clause is 'intrinsically conditional' (in that whether the clause would lessen the carrier's liability depends on the carrier succeeding in obtaining an indemnity from the shipper's insurer), it means that art 3.8 applies to future contingent possibilities (in contrast to future probabilities) - is misconceived. Mr Franck explained in the travaux that the reason such a clause was treated in Continental law as lessening the carrier's (shipowner's) liability was the right it gave the carrier to seek indemnity from the shipper's (cargo owner's) insurer under a policy of insurance paid for by the shipper, not the carrier. That is, the relevant right is a presently existing right to claim indemnity, the purpose and effect of which is to lessen the carrier's liability.

The Hague Rules were developed and adopted because carriers (shipowners) enjoyed a far stronger bargaining position than shippers (cargo owners) which they had historically exploited. Courts ensure that the Rules are not avoided or evaded. That does not mean, however, that the Hague Rules are to be construed as liberally as possible in favour of shippers (cargo owners) and against carriers (shipowners). The Hague Rules embody a compromise about the allocation of risk for cargo damage. This is reflected in the Rules themselves, which contain provisions benefiting both shippers (cargo owners) and carriers (shipowners). Further, they are intended to provide a transparent, certain, and predictable set of provisions which cannot be excluded by contract, as is apparent from the breadth of art 2 of the Rules.

This is supported, rather than denied, by Lord Diplock's reasoning in The Hollandia [1983] 1 AC 565, 575 (CMI597). In accepting that a choice of forum clause could engage art 3.8, Lord Diplock explained:

[I]t is, in my view, most consistent with the achievement of the purpose of the [Carriage of Goods by Sea Act 1971 (UK)] that the time at which to ascertain whether a choice of forum clause will have an effect that is proscribed by article III, paragraph 8 should be when the condition subsequent is fulfilled and the carrier seeks to bring the clause into operation and to rely upon it. If the dispute is about duties and obligations of the carrier or ship that are referred to in that rule and it is established as a fact (either by evidence or as in the instant case by the common agreement of the parties) that the foreign court chosen as the exclusive forum would apply a domestic substantive law which would result in limiting the carrier's liability to a sum lower than that to which [they] would be entitled if article IV, paragraph 5 of the Hague‑Visby Rules applied, then an English court is in my view commanded by the Act ... to treat the choice of forum clause as of no effect. (emphasis added)

Far from the purpose of the Hague Rules being advanced by construing art 3.8 as engaged by facts not agreed, admitted, or proved to at least the ordinary civil standard of proof, the Hague Rules' purpose of providing a transparent, certain, and predictable set of provisions would be undermined. The spectrum of mere possibility and surmise is endless. A provision that is engaged by future unknown and unpredictable possibilities (as opposed to found future probabilities) is a provision without boundaries, is incapable of rational application, and would travel well beyond the balance struck between carriers and shippers under the Hague Rules.

The risk or possibility that the English arbitrators might not treat the undertaking and the declaration by consent as BBC agreeing with Carmichael that art 3.2 of the Australian Rules, as applied in Australia, applies in the arbitration does not involve a lessening of BBC's liability within the meaning of art 3.8. The risk falls far short of the arbitration involving, on the balance of probabilities, a lessening of BBC's liability other than as provided for in art 3.2 of the Australian Rules, as applied in Australia. The position under Australian law as to the correct interpretation of art 3.2 remains undecided. The risk to Carmichael is thus no different before the English arbitrators or the Federal Court of Australia. This also answers the risk or possibility that the English arbitrators might construe the paramount clause in the bill of lading as applying only arts 1 to 8 of the Hague Rules to the arbitration, as well as the undertaking and declaration.

The reasoning in Sky Reefer (1995) 515 US 528, 536 (CMI1456), that the costs and inconvenience of the shipper (cargo owner) in undertaking arbitration in another country do not provide a principled basis for determining any relieving or lessening of a carrier's liability, is persuasive. Article 3.8 is directed to the carrier's liability being relieved or lessened 'otherwise than as provided in these Rules'. It is not directed to the mechanisms under which the Hague Rules may be enforced, or the costs and burdens in seeking their enforcement. Even if the expense to, and 'practical burden' on Carmichael might be greater by reason of the arbitration in London than it would be if, instead, Carmichael's proceeding in the Federal Court of Australia were permitted to proceed, there are no meaningful criteria by which it can be said that such greater cost in fact relieves or lessens BBC's liability otherwise than in accordance with the Australian Rules. For example, what percentage cost increase will suffice before it can be said that liability is lessened or relieved?