The plaintiff, 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 defendant, 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 s 11(2) of the Carriage of Goods by Sea Act 1991 (Cth) (COGSA 1991), or by application of s 10(1)(b)(ii), 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 arts 3.1 and 3.2 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 for negligence.

On 16 August 2022, 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.

Held: The proceedings commenced in this Court must be stayed in favour of London arbitration. The interim injunction must be discharged.

The critical provisions of the relevant bill of lading are cll 3 and 4:

3. Liability under the Contract

(a) Unless otherwise provided herein, the Hague Rules contained in the International Convention for the Unification of Certain Rules Relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this Contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply. In respect of shipments to which there are no such enactments compulsorily applicable, the terms of Articles I-VIII inclusive of said Convention shall apply. In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on 23rd February 1968 ('The Hague-Visby Rule[s]') apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading. Where the Hague Rules or part of them or the Hague-Visby Rules apply to carriage under this contract, the applicable rules, or part of them, shall likewise apply to the period before loading and after discharge where the Carrier (or his agent) have custody or control of the cargo. Unless otherwise provided herein, the Carrier shall in no case be responsible for loss of or damage to deck cargo and/or live animals. ...

4. Law and Jurisdiction

Except as provided elsewhere herein, any dispute arising under or in connection with this Bill of Lading shall be referred to arbitration in London. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) terms. The arbitration Tribunal is to consist of three arbitrators, one arbitrator to be appointed by each party and the two so appointed to appoint a third arbitrator. English law is to apply.

COGSA 1991 was enacted following a review of Australia’s marine cargo liability regime. COGSA 1991 replaced the Sea-Carriage of Goods Act 1924 (Cth) with provisions giving effect to the Hague Rules as amended by the Visby and the SDR Protocols. These provisions, referred to as the 'amended Hague Rules', were enacted as Sch 1 to COGSA 1991. COGSA 1991 envisaged the replacement of the amended Hague Rules with provisions that would give effect to the UN Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules), should the Minister so decide after conducting a review. Following that review, the Carriage of Goods by Sea Amendment Act 1997 (Cth) was passed. The Hamburg Rules were not enacted. Rather, the amendments added a Schedule of modifications to the text set out in Sch 1 to the Act. Schedule 1A to COGSA 1991 was inserted by the Carriage of Goods by Sea Regulations 1998 (Cth). Schedule 1A modified the amended Hague Rules to include some of the issues that had been dealt with by the Hamburg Rules, and to situate the Rules clearly in the Australian legal context (the Australian Rules).

Section 8 of COGSA 1991 gives the Australian Rules in Sch 1A the force of law in Australia, subject to s 10.

Section 10 defines the scope of application of the Australian Rules:

(1) The [Australian] Rules only apply to a contract of carriage of goods by sea that:

(a) is made on or after the commencement of Schedule 1A and before the commencement of Part 3 [the proposed application of the Hamburg Rules]; and

(b) is a contract:

(i) to which, under Article 10 of the [Australian] Rules, those Rules apply; or

(ii) subject to subsections (1A) and (2) - for the carriage of goods by sea from a port in Australia to another port in Australia [inter-State carriage]; or

(iii) contained in or evidenced by a non-negotiable document (other than a bill of lading or similar document of title), being a contract that contains express provision to the effect that the [Australian] Rules are to govern the contract as if the document were a bill of lading ...

(1A) If a contract for the carriage of goods by sea referred to in subparagraph 10(1)(b)(ii) is contained in, or evidenced only by, a consignment note, the [Australian] Rules apply to the contract only if paragraph 5 of Article 10 of those Rules so requires.

(2) The [Australian] Rules do not apply in relation to the carriage of goods by sea from any port in any State or Territory in Australia to any other port in that State or Territory [intra-State carriage].

[Emphasis added.]

The effect of ss 8 and 10 of COGSA 1991, together with art 10.4 of the Australian Rules, is that the Rules apply mandatorily by force of statute to a contract for the carriage of goods by sea from one Australian port to another port in Australia, unless those two ports are in the same State or Territory. Article 3.8 of the Australian Rules provides:

Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in the convention, shall be null and void and of no effect. A benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability.

The relevant bill of lading evidences a contract for carriage of goods by sea from Whyalla to Mackay. The port of shipment is in South Australia. The port of discharge is in Queensland. By s 10(1)(b)(ii) of COGSA 1991, the Australian Rules apply to the contract of carriage in the bill.

Carmichael submitted that both the choice of law and arbitration provisions in cl 4 of the bill are void as they are contrary to the mandatory law of the forum (ie s 10(1)(b)(ii) and art 3.8) because they have the real potential to lessen BBC's liability. First, an English arbitral tribunal might take the view that the clause paramount in cl 3 meant that only arts 1-8 of the Hague Rules applied, with the consequent applicability of lower limitation amounts than under the Australian Rules. Secondly, even if the tribunal did apply the Australian Rules, there was a real risk that it would apply the English interpretation of arts 3.1 and 3.2 of those Rules, as in Jindal Iron & Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (Jordan II) [2004] UKHL 49, [2005] 1 Lloyd's Rep 57 (CMI627), rather than adopting the dicta of Sheller JA in Nikolay Malakhov Shipping Co Ltd v Seas Sapfor Ltd (1998) 44 NSWLR 371 (CMI2023). Carmichael resiled from an initial submission that the application of the package limitation in art 4.5 might yield a different calculation as between English and Australian law. Thirdly, as an English-seated arbitration, Australian law would need to be proved through evidence, rather than as a matter of argument directed to a court versed in Australian law. Carmichael drew direct support from the decision of the House of Lords in The Hollandia [1983] 1 AC 565, [1983] 1 Lloyd’s Rep 1 (CMI597). Carmichael further argued that the choice of English law meant that an English tribunal would not apply the Australian Rules, relying on Furness Withy (Australia) Pty Ltd v Metal Distributors (UK) Ltd (The Amazonia) [1990] 1 Lloyd's Rep 236, 245.

BBC contended that the first possibility referred to in the clause paramount includes a modified version of those Rules in force at the place of shipment, relying on Yemgas FZCO v Superior Pescadores SA (The Superior Pescadores) [2016] EWCA Civ 101, [2016] 1 Lloyd’s Rep 561 (CMI24). As the Australian Rules are based on the Hague-Visby Rules, they would be regarded as a modified version of the Hague Rules under English law. There is also the possibility that the fourth sentence of the clause paramount incorporates the Australian Rules into the bill of lading contract: compare Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] EWCA 944 (Comm), [2007] 2 Lloyd’s Rep 622 (CMI36).

As both parties agree that the Australian Rules apply, either as a matter of construction of the clause paramount, or by virtue of BBC having proffered an undertaking consistent with Carmichael's position, or because the clause paramount derogates from art 3.8, it is unnecessary and undesirable to reach a conclusion as to the proper construction of the clause paramount under English law. Given the agreement between the parties, it is appropriate for this Court to make a declaration that the Australian Rules apply to the bill of lading, regardless of where, or under what law, the dispute is ultimately determined. That should be a condition attached to a stay of the Australian proceedings. Carmichael's second concern, that the English tribunal applying the Australian Rules would nevertheless interpret those Rules in accordance with English law, also falls away, given the terms of BBC's undertaking.

Nevertheless, Carmichael is concerned that there remains some residual risk that the English tribunal might apply a different version of Australian law. This concern relates primarily to the issue of the FIOST (Free In and Out Stowed and Trimmed) terms on which the goods were shipped. Carmichael, relying on obiter dicta of Sheller JA in Nikolay Malakhov, contended that under Australian law art 3.2 imposes on BBC a non-delegable obligation to load, stow, trim, and discharge the cargo and, accordingly, while it may contract out of the performance of those obligations, it cannot contract out of responsibility for them.

The position in English law, as affirmed in The Jordan II, is that art 3.2 does not define the scope of the carrier’s obligations, but merely defines the terms upon which whatever obligations are undertaken by the carrier are to performed: Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402, [1954] 1 Lloyd’s Rep 321 (CMI2100); affirmed in GH Renton & Co Ltd v Palmyra Trading Corporation of Panama (The Caspiana) [1957] AC 149, [1956] 2 Lloyd’s Rep 379 (CMI2113). Consequently, under English law, a FIOST clause, which specifies the party who has agreed to bear responsibility for the loading, discharging and stowing operations, is not invalid by reason of art 3.8 because its terms are not inconsistent with art 3.2. This view is to be contrasted with the interpretation adopted in the US. In Associated Metals & Minerals Corp v M/V Arktis Sky (The Arktis Sky) 978 F 2d 47 (2nd Cir 1992) (CMI1603), the US Court of Appeals for the Second Circuit held that art 3.2 imposed positive obligations on the carrier, and that any clause which purported to relieve the carrier of responsibility for the consequences of bad loading, stowing, trimming, or discharging would be struck down by art 3.8.

In The Jordan II, their Lordships expressly disclaimed expressing any opinion on the correctness of the interpretation adopted by Devlin J in Pyrene. Their Lordships did, however, note the unequivocal ratio in The Caspiana, and the subsequent acceptance of that authority both in the UK and in other Commonwealth jurisdictions. Professor Stephen Girvin attributes the result in The Jordan II to 'the authorities of nearly 50 years’ standing, by respected English commercial judges, and the principle of certainty in commercial transactions': SD Girvin, Carriage of Goods by Sea (3rd ed, OUP 2022) para 27.44. There has, however, been some academic criticism of the decision. The High Court of Singapore has also distinguished The Jordan II on the basis that it involved clear words which transferred the responsibility for the cargo operations from the shipowner to the defendant. By contrast, in the case before the Court, the fis l/s/d (free in stowed l/s/d/liner out hook) clause was held to be insufficiently clear on its own to transfer the risk of loading operations from the shipowner to the defendant: Subiaco v Baker Hughes [2010] SGHC 265, [2011] 1 SLR 129 (Belinda Ang J) (CMI238).

Ultimately, the construction of the terms of the bill of lading, including the FIOST clause, is a matter for the English tribunal. In the absence of full argument on the construction of those terms, and given BBC's undertaking and its reflection of the common position of the parties, it is academic whether there is, or should be, any different consequence under art 3.2 as between the law of England and that of Australia in respect of the effect of this FIOST clause in the BOL, and which might result in a lessening of BBC’s liability.

Further, it was vaguely suggested by Carmichael that the difference as between the UK Supreme Court in Volcafe Ltd v Cia Sud Americana de Vapores SA (trading as CSAV) [2019] AC 358 (CMI221) and the High Court of Australia in Great China Metal Industries Co Ltd v Malaysian International Shipping Corpn Bhd (The Bunga Seroja) [1998] HCA 65, 196 CLR 161 (CMI1950) as to the correct approach to the burden of proof when considering a claim under art 3.1 would lessen BBC’s liability under the Australian Rules. Again, in the absence of a full hearing on the factual matters underpinning Carmichael's claim, the Court cannot speculate on whether particular findings of fact might raise potential differences as between English law and Australian law as to the approach to arts 3.1 and 3.2.

Carmichael's third concern is that as there will be an English-seated arbitration, Australian law would need to be 'proved' through evidence. While this may increase Carmichael's costs of the arbitration, that is not a matter to which art 3.8 is directed. Article 3.8 is concerned solely with whether a clause, covenant or agreement relieves or lessens a carrier’s liability arising from 'negligence, fault, or failure in the duties and obligations provided' in art 3. Where the relative costs of dispute resolution fall are simply not within the scope of art 3.8.

Section 11 of COGSA 1991 provides:

(1) All parties to:

(a) a sea carriage document relating to the carriage of goods from any place in Australia to any place outside Australia; or

(b) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii), relating to such a carriage of goods;

are taken to have intended to contract according to the laws in force at the place of shipment.

(2) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to:

(a) preclude or limit the effect of subsection (1) in respect of a bill of lading or document mentioned in that subsection; or

(b) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of a bill of lading or a document mentioned in subsection (1); or

(c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of:

(i) a sea carriage document relating to the carriage of goods from any place outside Australia to any place in Australia; or

(ii) a non-negotiable document of a kind mentioned in subparagraph 10(1)(b)(iii) relating to such a carriage of goods.

(3) An agreement, or a provision of an agreement, that provides for the resolution of a dispute by arbitration is not made ineffective by subsection (2) (despite the fact that it may preclude or limit the jurisdiction of a court) if, under the agreement or provision, the arbitration must be conducted in Australia.

The issue is whether inter-State carriage of goods under a bill of lading falls within the scope of s 11(2)(b). Carmichael submitted that a proper reading of the term 'bill of lading' in s 11(2)(b) necessarily includes one that relates to inter-State carriage of goods. Alternatively, Carmichael submitted that it would be appropriate to read additional words into ss 11(1)(a) or 11(2)(b) to fill the apparent gap in those sections.

Section 11(1) is a mandatory choice of law provision for outbound shipments from Australia. It provides that all parties to a sea carriage document (and a non-negotiable document as described in s 10(1)(b)(iii)) relating to the carriage of goods from any place in Australia to any place outside Australia are taken to have intended to contract according to the laws at the place of shipment. In such circumstances, the law of the place of shipment, including the Australian Rules, will apply to the contract of carriage. It is plain that the Australian Rules apply to the inter-State carriage of goods by sea: COGSA 91 ss 8 and 10(1), and art 10.4 of the Australian Rules. Whether it is possible to contract out of the Australian Rules in respect of inter-State carriage is governed by s 11(2). Section 11(2)(a) is directed to outbound carriage from Australia pursuant to a sea carriage document or a non-negotiable document as described in ss (1)(a) and (b). It prohibits contracting out of the mandatory choice of law provision contained in s 11(1). It is irrelevant here. Section 11(2)(b) and (c) prohibit contracting out of the jurisdiction of Australian courts. The question is whether bills of lading generally, and in addition to those documents mentioned in s 11(1), are within the ambit of s 11(2).

Recourse to the legislative history reveals that from the Bill that led to s 11's predecessors in 1904 until the last of the amendments in 1998, there was simply no consideration of making the choice of law and jurisdiction invalidating provisions applicable to inter-State shipments. There is no possibility of finding as a historical fact that Parliament intended such an outcome; it was simply not considered. It is therefore not an available approach to find that the amendments to COGSA 1991 by regulation in 1998 reveal any legislative intention, by leaving s 11(2)(a) and (b) unamended and amending s 11(1)(a), to expand the reference to 'bill of lading' in s 11(2)(a) and (b) from a bill of lading relating to the carriage of goods from a place in Australia to a place outside of Australia to all bills of lading in respect of carriage to and from anywhere.