Worldwide Technical Services Co Inc of Houston, Texas, shipped 43 packages of oil well drilling rig equipment on the Happy Pioneer to Palace Hotel Ltd (the plaintiff) in Beijing, PRC, via the port of Tientsin. The vessel did not take the goods to Tientsin as it had undertaken to in the bill of lading, but instead offloaded them in Hong Kong. The plaintiff sued the owners of the vessel (the defendants) in Hong Kong to recover damages which they said they suffered by reason of deviation.

Clause 2 of the bill of lading provided:

The law of the Netherlands in which the Hague Rules, as adopted by the Brussels Convention of 25th August 1924, are incorporated - with the exception of art 9 - shall apply to this contract. The maximum liability per package is NLG 1250-. For goods loaded or discharged at a Belgian port, the rules of art 91 of chapter 2 of the Belgian Commercial Code shall apply. This Bill of Lading is subject to the compulsory provisions of law under which the carriage falls, it being understood that if any stipulation of this Bill of lading is wholly or partly contrary hereto (sic), this Bill of lading shall be read as if such stipulation or part thereof, as the case may be, were deleted.

Clause 3 contained an exclusive jurisdiction clause providing that:

All actions under the present contract of carriage shall be brought before the Court at Amsterdam, and no other Court shall have jurisdiction with regard to any such action unless the Carrier appeals to another jurisdiction or voluntarily submits himself thereto.

The plaintiff commenced an action in Hong Kong despite the exclusive jurisdiction clause in the bill of lading. The defendants applied to have the action stayed.

The plaintiff contended that the defendants were guilty of a fundamental breach of contract, as they had delivered the cargo to Hong Kong and not to Tientsin. Therefore, the defendants had repudiated the contract of carriage, and the plaintiff was no longer bound by the jurisdiction clause in the bill of lading. The plaintiff further contended that the plaintiff had a separate and distinct cause of action in tort. This, the plaintiff argued, was because cl 3 of the bill of lading only covered 'actions' under the contract of carriage, which did not include actions in tort. The plaintiff further submitted that examining the clauses of the bill of lading would show that US law was the proper law of the contract, and that it followed that the whole agreement was null and void, or that cl 2, which made the law of the Netherlands the proper law of the contract was null and void.

The bill of lading provided in Additional Clause F:

Additional Clause F: U.S. Trade, Law of Application. In case the Contract evidenced by this Bill of Lading is subject to the U.S. Carriage of Goods by Sea Act, then the provisions stated in said Act shall govern before loading and after discharge and throughout the entire time the goods are in the Carrier’s custody. The Carrier shall be entitled to the Full benefit of the provisions of Section 4281 to 4286 inclusive of the Revised Statutes of the United States and amendments hereto [sic] also in case the carrying ship is not chartered by demise but on time or voyage charter basis.

Held:  Judgment for the defendants. The Hong Kong action is stayed.

In The Makefjell [1976] 2 Lloyd's Law Rep 29 it was argued that the words 'claim ... arising under this Bill of Lading' did not include claims in tort. Cairns LJ held that, giving a common sense meaning to the words of the clause, they applied to both a claim in tort and a claim in contract. Adopting the approach of Cairns LJ in this case, the jurisdiction clause is wide enough to cover actions in tort.

The plaintiff argued that the proper law of the contract is US law because of the connections which the contract had with the USA and Additional Clause F in the bill of lading. The plaintiff further argued that the US Carriage of Goods by Sea Act (COGSA) applied, because COGSA’s preamble states that 'every Bill of Lading ... which is evidence fo a contract for the carriage of goods by sea to or from ports of the United States in foreign trade, shall have effect subject to the provisions of this Act'. However, while the contract was connected in a number of ways to the USA, these were not of sufficient weight to determine the proper law of the contract.

The plaintiff relied upon the principle in The Morviken [1982] 1 Lloyd's Law Rep 325, which held that the Hague-Visby Rules have, by virtue of the Carriage of Goods by Sea Act 1971 (UK), been given the force of law in England that, whenever there is any inconsistency between the terms of a bill of lading and the Hague-Visby Rules, the Hague-Visby Rules will prevail. The defendant submitted to the contrary that COGSA was not on the same footing as the Hague-Visby Rules, as it is not the law in Hong Kong and cannot be treated as such. While parties can themselves incorporate a foreign Act, or part thereof, into an agreement, a statement in a foreign statute cannot as a matter of law bind the Hong Kong Court to regard that statute as the governing law of the contract.

The plaintiff submitted that s 3(8) of COGSA applied to the contract, which 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 connection with the goods, arising from negligence, fault or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect.

COGSA s 4(5) applies a USD 500 per package liability limitation, which is greater than the maximum damage liability per package of NLG 1250 in cl 2 of the bill of lading. The plaintiff argued that s 3(8) makes the carriage agreement null and void and of no effect, or at the very least makes cl 2 of the bill of lading null and void and of no effect. This being so, the plaintiff argued that it was entitled to sue for damages in tort in any jurisdiction. Alternatively, if cl 2 was null and void, the law of application was US law.

The defendants acknowledge that Additional Clause F makes reference to COGSA, but does not make US law the proper law of the contract. Rather it simply incorporates the relevant provisions of COGSA into the governing law of the contract, which is the law of the Netherlands. This is correct. Additional Clause F in no way affects the fundamental agreement of the parties, which was that the law of the Netherlands would be the law of application.

As the plaintiffs have not proved a strong cause for refusal of a granting of a stay, the action will be ordered to be stayed in Hong Kong.