The appellant, Thyssen Canada Ltd, arranged for 18,000 mt of steel coils to be shipped in two shipments on the Mariana from Romania to Windsor, Ontario. Two bills of lading were issued for the two shipments, naming the appellant as the consignee and Metalexportimport SA, a Romanian steel supplier, as the shipper. Both bills of lading contained a clause incorporating all terms and conditions of a charterparty, including the law and arbitration clause. However, the bills of lading did not identify a specific charterparty. In this regard, there were two charterparties. The first was a time charter between the owner of the Mariana, Mariana Maritime SA (the respondent), and Hawknet Ltd. The second was a voyage charter between Hawknet Ltd and Metalexportimport SA. Both charterparties provided for arbitration in London and English law to govern. The cargo was damaged by a fire and the appellant commenced an action in Canada claiming damages against the respondent. The Canadian proceedings were stayed in favour of London arbitration (see Thyssen Canada Ltd v Mariana (The) (CMI979)). The appellant appealed.

Held: Appeal dismissed. Proceedings continued to be stayed and dispute to proceed to arbitration in London.

The issues before the Court were whether: (1) the arbitration clause applied since it did not expressly refer to disputes arising under a bill of lading; (2) the voyage charterparty was unenforceable because the shipowner was not a party to the charterparty; (3) the failure to identify the charterparty on the bills of lading resulted in an uncertainty of terms such that the arbitration clause was unenforceable; and (4) art 22 of the Hamburg Rules, which is in force in Romania, applied to provide a choice of forum for arbitration to the appellant.

On the first issue, the Court held that there is no need for an arbitration clause to expressly refer to disputes in the bill of lading. There are three conditions for an arbitration clause to be incorporated into a contract of carriage evinced by the bill of lading. First, the bill of lading must make specific reference to the incorporation of the arbitration clause in the charterparty. Second, the arbitration clause must be worded so as to make sense in the context of a bill of lading. Third, the arbitration clause must not contradict the express terms of the bill of lading. These factors were all present and the arbitration clause was deemed to be successfully incorporated into the bill of lading.

Turning to the second issue, there is no requirement for the respondent shipowner to be a party of the voyage charterparty. The respondent is already part of a contract of carriage as evinced by the bill of lading which has incorporated the terms, including the arbitration clause, of the voyage charterparty. The respondent and the appellant are therefore bound by these terms.

With regard to the third issue, there was no uncertainty because the contract of affreightment was the voyage charterparty and the relevant charterparty would therefore be the voyage charterparty. Further, the face of the bill of lading states 'freight payable as per Charter-party dated ...' - hence it is clear that the relevant charterparty is a voyage charterparty because freight as opposed to hire is payable under a voyage charterparty. In any event, this issue was moot because both charterparties provided for arbitration in London and English law to govern. There was thus no uncertainty even if the specific charterparty was not identified. The appellant also raised an alternative argument that it could not be bound by the arbitration clause of which it had no knowledge when it accepted the bill of lading. This argument failed because the Court found that the appellant was familiar with the exigencies of this particular market and was aware that in such trades, parties would need to use contracts which cannot reasonably be expected to be read until a loss arises.

In relation to the fourth issue, the appellant’s reliance on art 22 of the Hamburg Rules was misconceived because: (i) it was contrary to the choice of law provision in the contract of carriage to which the appellant was privy; and (ii) under arts 7.2 and 8.1 of the Commercial Arbitration Code in the Commercial Arbitration Act, RSC 1985 c17 (the Act) (based on the UNCITRAL Model Law on International Commercial Arbitration 1985), the Court is not required to make determinations as to the proper law of a particular contract. Instead, the Court is only concerned as to whether: (i) the arbitration clause was effectively incorporated into the bills of lading; and (ii) the arbitration clause was null and void, inoperative or incapable of being performed. In this regard, the arbitration clauses were validly incorporated into the bills of lading and they were enforceable. In light of the above, the Court was required to grant a stay and direct that the matter be referred to arbitration at London for the arbitral tribunal there to determine the proper law of the contract.