This was an appeal from the Commercial Court. In January 1972, Nea Agrex SA (the charterer) chartered the Agios Lazaros from Baltic Shipping Co Ltd (the agent) and Intershipping Charter Co (the owner), for a voyage from Greece to Rotterdam and then to Hamburg with a cargo of oranges. On leaving the harbour, the vessel was involved in a collision and then grounded. Many of the oranges were spoiled. The charterer claimed that this was the fault of the owner because the collision caused the ventilation channels to be blocked. On 28 February 1972, the charterer made a claim against the owner for the loss.

On 20 April 1972, the charterer quantified the claim as GBP 17,641 for the Hamburg consignment and GBP 11,520 for the Rotterdam consignment. The charterer instructed its Greek agent in Piraeus to put in a claim for payment from the owner. The Greek agent passed this to the owner's agent in a letter dated 31 May 1972 saying: 'Please advise your proposals in order to settle this matter, or name your arbitrators. Expecting your reply.' The owner did not reply, nor did its agent. On 16 June 1972, the charterer's agent sent a telex saying: 'We have not received any reply to our letters. Please reply as charterers pressing and they are ready to take steps unless your reply will reach us till June 25.' Again, the owner did not reply. On 8 December 1972, the charterer's agent appointed Mr Clifford Clark as their arbitrator. Mr Clark wrote to the charterer's agent and said:

I look forward to hearing further from you in due course, especially as to whether or not agreement can be reached between the parties appointing me as the sole arbitrator, or, failing this, the name of the arbitrator nominated by the respondents.

The charterer's agent did not follow this up until 19 November 1973, when it gave notice of arbitration, nominating Mr Clark as the charterer's arbitrator. The owner's agent did not reply. On 14 February 1974, the charterer's agent gave the owner 14 days' notice to name its arbitrator. The owner's solicitors said that the claim was time-barred, arguing that time expired one year after the cargo was delivered in February 1972, and therefore the claim was extinguished by February 1973.

The charterparty did not have a time-bar clause. It was a voyage charter on the Gencon form that included a paramount clause incorporating the Hague Rules. Article 3.6 of the Hague Rules says:

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.

The charterparty also included this added clause:

31. New Jason clause, both to blame collision clause, P and I bunkering clause and Chamber of Shipping War Risks clauses Nos 1 and 2 and also Paramount clause are deemed to be incorporated in this charterparty.

At first instance, the Judge held that in cl 31 of the charterparty the phrase 'and also Paramount clause' was ineffective because it was not obvious which clause was to be incorporated, and thus none of the Hague Rules applied, including the time bar. The parties appealed and cross-appealed.

Held: Appeal and cross-appeal allowed.

A 'paramount clause' or 'clause paramount' in shipping contracts primarily applies to bills of lading. In that context its meaning is a clause by which the Hague Rules are incorporated into the contract evidenced by the bill of lading, and which overrides any express exemption or condition that is inconsistent with it. In the context of charterparties, a clause paramount brings the Hague Rules into the charterparty so as to render the voyage(s) subject to the Hague Rules.

At first instance, the Judge said that 'sometimes only the article 4 exceptions are incorporated and sometimes the incorporation of the whole of the Hague Rules is subject to a limitation that they are only to be effective if compulsorily applicable by the law of the place of shipment.'

However, when the paramount clause is incorporated without any words of qualification, it means that all the Hague Rules are incorporated. Therefore art 3.6 is incorporated into this charterparty. This means that the owner is discharged from all liability unless suit is brought within one year after delivery of the goods.

This clause applies to an arbitration, as well as to a suit in a court of law (see The Merak 1965 P 223 (CMI2133)). In order to commence the arbitration there must be a notice in writing served by one party on the other party. It must require the other party to do one or the other of two things. It must either require the other party to appoint an arbitrator or to agree to the appointment of an arbitrator. This was done by the letter of 31 May 1972, which was within the year.

The owner was subject to the time bar, but the charterers commenced arbitration in due time and their claims are thus not barred.