Galaxy Special Maritime Enterprise (the claimant) was the owner of the Olympic Galaxy. The vessel was carrying a cargo of some 61,160 mt of wheat owned by Prima Ceylon Ltd (the respondent). The Olympic Galaxy ran aground while under pilotage off Sri Lanka. The ownership of the Olympic Galaxy changed during the voyage and before the grounding. The bill of lading provided that general average (if any) should be settled according to the York-Antwerp Rules 1974 as amended in 1990.

The claimant argued that the respondent was liable to contribute to general average and/or salvage charges and was liable to pay the sum to be certified in due course by average adjusters as the contribution due from the cargo-owner.

The respondent contended that there was no contract of carriage between itself and the claimant, because the ownership of the Olympic Galaxy had changed during the voyage after the issue of the bills of lading by or on behalf of the previous owners. Thus, the relationship between the parties was neither governed by the law of any carriage contract nor the law of a subsequently agreed Lloyd's Average Bond (LAB), which was English law. In particular, since there was no contract between the parties, there was no room for any incorporation of the Hague Rules. The respondent was, therefore, entitled, as a matter of the general law of general average, to rely on the claimant's default in relation to the grounding and the claimant could not rely on art 4.2.a of the Hague Rules.

The claimant submitted that: first, even if there was no carriage contract, it was the bailee or sub-bailee of the cargo; second, the bailment would be governed by English law and would be subject to Hague Rules; third, an important feature of English law was its accession to the Salvage Convention 1989 and s 224 of the Merchant Shipping Act 1995 (UK) whereby the shipowners were deemed to have the actual authority of the cargo-owners to enter into salvage agreements on their behalf.

At first instance Colman J held that the claimant was making its claim under or pursuant to the LAB and that the LAB was governed by English law. Jurisdiction was therefore established and the English proceedings should not be set aside. The respondent appealed.

Held: Appeal allowed.

It would be inappropriate for the Court to express any view about the merits of the parties' above-mentioned submissions. The central point was that even if the LAB was itself governed by English law, the claims and cross-claims for general average contribution and indemnity for being exposed to general average or salvage claims should be determined by Sri Lankan law where the adventure ended, with or without the incorporation of the Hague Rules.

Colman J was wrong to hold that the proceedings should continue in England. Even if it were correct that English law applied to the general average claims, it did not necessarily follow that the disputes should be determined in England. The Sri Lankan courts were well used to applying English law. The claimant did not suggest that the courts of Sri Lanka either would not apply English law, or would not be capable of applying it. In such circumstance, English law would not be the decisive factor.

The English proceedings should be set aside to enable the Sri Lankan proceedings to determine the rights and liabilities of the parties.