This case arose from a cargo misdelivery claim in respect of cargoes carried on the Yue You 903 from Dumai, Indonesia, to Huangpu, China. Kai Sen Shipping Co Ltd (Kai Sen) applied for a stay of action in favour of arbitration as required under an arbitration agreement. OCBC Wing Hang Bank Ltd (OCBC), as holder of the bills of lading, denied that it was a party to any arbitration agreement.

The relevant provision of the bills of lading provided as follows: 'This shipment is carried under and pursuant to the terms of the Contract of Affreightment/ Charter Party dated 2nd March 2018 between [Kai Sen] as owner and TWIN WEALTH MACAO COMMERCIAL OFFSHORE LTD As Charterers, and all conditions, Liberties and exceptions whatsoever of the said Charter apply to and govern the rights of the parties concerned in this shipment'.

Clause 36 of the charterparty as referred to in the bills of lading provided an arbitration clause as follows: 'ARB, IF ANY, IN HONGKONG UNDER ENGLISH LAW'.

Held: As the arbitration clause in the charterparty was not incorporated into the bills of lading, the Hong Kong Court has jurisdiction. The summons for stay of proceedings in favour of arbitration is dismissed.

The Court held that the governing law, as stipulated in the purported arbitration agreement under the charterparty, is English law, although the seat of arbitration is Hong Kong. It is therefore English law that should govern the incorporation of an arbitration agreement into the bills of lading. Under English law, specific words of incorporation are necessary to incorporate 'collateral' or 'ancillary' clauses such as arbitration clauses or jurisdiction clauses. Applying English law, the arbitration agreement in the charterparty has not been incorporated into the bills of lading by specific reference. Whether OCBC had knowledge of the terms of the charterparty was irrelevant.

The Court noted that there would be no difference to the result even if Hong Kong law applies to the bills of lading.

Ken Sai further argued that OCBC had submitted to arbitration by giving an Arbitration Notice. That notice expressly referred to cl 36 of the charterparty. Ken Sai accepted the commencement of arbitration. OCBC explained that its reason for commencing arbitration was to beat the limitation period. For a claim in misdelivery of the cargoes under the bills of lading, Ken Sai has a one-year limitation period pursuant to art 3.6 of the Hague-Visby Rules. OCBC was caught in a difficult situation. The bills of lading were issued on 12 April 2018. OCBC did not know when the cargoes were delivered. The limitation period would have expired in April 2019 if the misdelivery occurred in April 2018.

The Court found that commencement of arbitration was plainly OCBC’s act to preserve its claim pending resolution of the jurisdictional dispute rather than a submission to arbitration.