The plaintiff, Crosby Molasses Co Ltd (Crosby), purchased blackstrap molasses and cane juice molasses (fancy molasses) from ED & F Man Liquid Products LLC (the charterer) in 2020. The charterer and Scot Stuttgart SA, the owners of the MT Scot Stuttgart, then entered into a charterparty on the IMOL 78 standard form to transport the molasses. The molasses was loaded onto the ship in Guatemala. Two bills of lading were issued by the owners, one in respect of the blackstrap molasses (bill no 1) and the other in respect of the fancy molasses (bill no 2). Crosby was the consignee under bill no 1 and the endorsee of bill no 2.

The bills of lading purported to incorporate the charterparty and referred to an arbitration clause contained in the charterparty. The charterparty clause provided for arbitration in New York. Crosby alleged that the cargoes arrived in Saint John, New Brunswick, in a damaged condition, due to contact with epoxy flakes in the ship's tanks. Crosby commenced four actions, on its own behalf and on behalf of the subrogated underwriters. The owners sought a stay of proceedings in favour of arbitration in New York.

The Associate Judge held that the arbitration clause, which included a 90-day time bar for claims, conflicted with the Hague Rules and the Hague-Visby Rules, and was thus 'null and void', and not binding on Crosby. The Associate Judge also considered s 46 of the Marine Liability Act, SC 2001, c 6 (the Act) which provides as follows:

(1) If a contract for the carriage of goods by water provides for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if the contract had referred the claim to Canada, if

(a) the actual port of loading or discharge, or the intended port of loading or discharge under the contract, is in Canada;

(b) the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or

(c) the contract was made in Canada.

The Associate Judge found that s 46 of the Act applied. She referred to Mazda Canada Inc v Cougar Ace (The) 2008 FCA 219 (CMI1104) and T Co Metals LLC v Federal Ems (Vessel) 2012 FCA 284 (CMI1152). She held that the owners were 'caught' by s 46 of the Act, and that arbitration in New York was not available to them. The Associate Judge then addressed the issue of granting a stay on the basis of forum non conveniens pursuant to s 50(1)(a) of the Federal Courts Act, RSC 1985, c F-7. She found that the owners had failed to establish that New York was 'clearly' the more appropriate jurisdiction and dismissed their motion for a stay of proceedings. The owners appealed to the Federal Court.

Held: The appeal is allowed in part and the finding of the Associate Judge with respect to the enforceability of the arbitration clause in bill no 2 is reversed. Otherwise, the findings of the Associate Judge are maintained.

Two issues arise: first, whether there is an enforceable arbitration agreement that is binding on the parties to arbitrate in New York; and second, if so, whether the current proceedings should be stayed in favour of arbitration.

The arbitration clause is found in cl 25 of the charterparty. The Conditions of Carriage on the reverse of each bill purport to incorporate the 'Law and Arbitration Clause'. The Associate Judge, referring to The Rena K [1979] 1 All ER 397 (QB) (CMI2198), found that the arbitration clause was prima facie incorporated in both bills of lading.

Bill no 1 refers to a charterparty dated 15 February 2016. That is not the date of the relevant charterparty. The Associate Judge considered the equitable doctrine of rectification and relevant jurisprudence. She declined to apply the remedy. She found that there was no evidence before her about the terms of that charterparty and concluded that bill no 1 did not contain a binding arbitration clause. There is no reviewable error in her finding.

In respect of bill no 2, the Associate Judge apparently proceeded on the basis that only one contract was before her. This was in error. Each bill of lading is a separate contract for the carriage of the cargoes. Each bill of lading is also evidence of that contract of carriage. The incorporation of the arbitration clause in bill no 2 accords with the applicable jurisprudence and is reasonable.

The Associate Judge did not stop at the question of incorporation, and proceeded to consider whether the arbitration clause was enforceable against Crosby. She found that the 90-day time bar for commencing arbitration proceedings offended the provisions of the Hague and Hague-Visby Rules by shortening the time limit available to resolve disputes. She found that this short time bar could not have been intended to bind third parties such as Crosby. She rejected the owners' submissions that the time bar was a matter best left to the arbitral panel. She found that a time bar was 'integral' to the arbitral process and that it was impossible to ignore or sever it. She therefore found the arbitration clause unenforceable against Crosby.

In finding the arbitration clause to be unenforceable against Crosby on the basis of the time bar, the Associate Judge reached an unreasonable conclusion, by ignoring the purpose and effect of the paramount clause in the charterparty and applicable jurisprudence. Although the paramount clause means that the time limits in the Hague or Hague-Visby Rules apply, that clause can be accommodated by requiring the owners to file an undertaking not to enforce the time bar in the arbitration clause, as happened in Iberfreight SA v Ocean Star Container Line AG (1989) 104 NR 164 (FCA). In Arc-en-Ciel Produce Inc v BF Leticia (Ship) 2022 FC 843 (CMI1884) this Court, when granting a stay of proceedings, ordered the defendant to file a written undertaking not to enforce any time bar or raise it as a defence if proceedings were commenced in the US District Court for the Southern District of New York.

The next issue for consideration is s 46 of the Act. The factors that trigger the application of s 46(1)(a) of the Act are met here: the bills of lading are contracts of carriage of goods by water, the contracts provide for the adjudication of arbitration of claims arising under the contract in a place other than Canada, ie in New York, and the intended and actual port of discharge of the molasses cargoes is St John, New Brunswick, which is in Canada. Accordingly, notwithstanding any arbitration clause incorporated into the bills of lading, Crosby is entitled to institute judicial or arbitral proceedings in a court or tribunal in Canada that is competent to determine the claim. As stated in Cougar Ace [69], a foreign arbitration clause is not enforceable in Canada when s 46 of the Act applies. In The Federal Ems, the Federal Court of Appeal said:

[69] Pursuant to article 8(1) of the Commercial Arbitration Code, included as Schedule 1 to the Commercial Arbitration Act, Canadian courts 'shall' stay proceedings in the presence of a valid and enforceable arbitration clause. Obviously, when section 46 of the Act applies, the arbitration clause is not enforceable in Canada (see article 1(3) of the Commercial Arbitration Code).

[70] Nevertheless, the Court should be prudent in construing subsection 46(1), as one should not too readily assume that Parliament has limited the effect of arbitration clauses in respect of disputes that have traditionally been the subject of arbitration, like charter party disputes.

The arbitration clause, once incorporated into bill no 2, is an agreement to arbitrate. Article 8 of the Commercial Arbitration Code applies. Does s 46 of the Act, together with art 8 of the Commercial Arbitration Code, prevent the Court from staying the action in favour of arbitration in Canada? The Federal Ems opened the door to that possibility. Referring the matter to arbitration in Canada would also give effect to the terms of the arbitration clause as a means to resolve disputes between the parties. To achieve that result, the present judicial proceedings could be stayed.

Had the owners requested arbitration in Canada, the Court would have been required to weigh the propriety of rewriting the charterparty to provide for arbitration in Canada. However, that is not the situation, and Crosby has chosen to enforce its rights under s 46 of the Act. The Court is bound to follow the statute. There is no way 'around' s 46, and no basis in law for the Court to refer the matter to arbitration in New York. It remains open to the parties to seek arbitration in Canada, should they choose to do so. Should Crosby seek arbitration in Canada, it will be on condition that the owners waive any time bar defence and file a written undertaking to do so with the Court.

Finally, there is the disposition of the forum non conveniens issue by the Associate Judge. This issue required the exercise of discretion, and discretionary decisions are entitled to a high degree of deference. This Court is not persuaded that the owners have shown any reviewable error in the manner in which the Associate Judge dealt with the issue of forum non conveniens.