T Co Metals LLC (the plaintiff) sued the vessel Federal Ems as well as its owners (the defendants) for damage to a cargo of cold rolled steel coils in Canada. The defendants commenced a third party action against Companhia Siderurgica Paulitsa-Cosipa, who were the voyage charterers of the vessel in Canada. The Canadian third party action was based on two grounds: (1) cl 5 of the charterparty relieved the defendants of and imposed on the third party the risks and liabilities for everything relating to the loading and good condition of the cargo; and (2) the third party had issued a letter of indemnity (LOI) in favour of the defendants confirming that the third party would indemnify the defendants for all cargo damage caused by the packing of the cargo in plastic sheeting. 

The third party attempted to rely on the law and jurisdiction clause in the charterparty (which called for arbitration in New York) and argued that s 46(1) of the Marine Liability Act (MLA), which has the effect of removing the Canadian court's discretion to stay proceedings by reason of a forum selection clause, was not applicable in this case. Section 46(1) of the MLA is similar to art 21 of the United Nations International Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules) and by reason of such similarity, the third party argued that the MLA does not apply to charterparties because art 2.3 of the Hamburg Rules states that the Hamburg Rules do not apply to charterparties. 

Held: The third party's application to stay the proceedings was dismissed.

The Court held that, although there was a similarity between s 46(1) of the MLA and art 21 of the Hamburg Rules, the MLA is still applicable to charterparties. This is because if the Canadian Parliament had wanted to exclude charterparties from s 46(1) of the MLA, they would have included in the MLA a provision which is similar to art 2.3 of the Hamburg Rules. The fact that there was no such provision similar to art 2.3 of the Hamburg Rules was included, strongly suggests that the MLA is applicable to charterparties. 

The Court went on to consider the issue of whether the third party action should be stayed based on the doctrine of forum non conveniens. In assessing the factors for and against the stay, the Court found that there were more factors in favour of having the dispute resolved in Canada. Such factors in favour of Canadian jurisdiction included: (1) the fact that the evidence in relation to the use of plastic sheeting for the cargo as well as the cargo damage was situated in Canada; (2) there were no other proceedings pending between parties in other jurisdictions; and (3) it would be more cost-effective to have the entire dispute between the plaintiff, the defendants and the third party resolved at a single time and in a single jurisdiction as opposed to a multiplicity of proceedings which carries the risks of contradictory judgments. 

[For the successful appeal to the Federal Court, see T Co Metals LLC v Vessel Federal Ems (CMI1152).]