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 (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.

Cosipa 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 Canadian Marine Liability Act, SC 2001, c 6 (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, Cosipa 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.

At first instance, the Prothonotary dismissed the third party's application to stay the proceedings (see CMI437). Cosipa appealed.

Held: Appeal allowed.

The following three issues need to be addressed:

• Is Cosipa's position correct that the contract of carriage between the parties is still the charterparty because, even though bills of lading were issued, as they never Cosipa's hands, they cannot act as a contract of carriage but serve merely as receipts?
• Is Cosipa’s position correct that the LOI is an amendment to the charter party?
• Finally, does the term 'contract for the carriage of goods' in s 46 of the MLA exclude charterparties?

As to the first issue, the Prothonotary concluded that the contract between the parties was found primarily in the charterparty rather than in the bills of lading. The Court agreed with that finding. Second, the Prothonotary agreed with Cosipa that the LOI constituted an amendment to the charterparty rather than a separate agreement. The Court accepted this finding.

As to the third issue, the statutory interpretation of the expression 'contract for the carriage of goods by water' in s 46 of the MLA, the Court held that the ordinary meaning of the expression could support the inclusion of charterparties. However, Cosipa relies in part on a comparison of s 46 of the MLA with art 21 of the Hamburg Rules, which are included as a Schedule to the MLA. It is clear that Schedules to an Act are considered internal to that Act and can be looked at and relied upon for statutory interpretation purposes. There is a distinction, however, that needs to be made between scheduled material which is part of the enactment, scheduled material not made part of the enactment, and scheduled material set out for convenience only. In the first case, the material is interpreted as an integral part of the enactment and has the same force as the remainder of the legislation. In the third case, the material is not part of the enactment.

Thus, the Hague-Visby Rules, which, pursuant to s 43 of the MLA (stating that these Rules have the force of law in Canada), are of the first type of scheduled material, and can be considered as part of the Act. The Hamburg Rules, however, are not yet in force in Canada (in fact, Canada has not even signed the Convention), and as a consequence, the Schedule can be considered as being of the third type described above. In essence, they are non-existent in terms of legal effect. Yet they are nonetheless indicative of the contents of future legislation, should they ever be proclaimed in force. The Schedule containing the Hamburg Rules is, for interpretation purposes, external to the Act. Section 46 of the MLA has been enacted and its wording adheres very closely to art 21 of the Hamburg Rules. The Court cannot rely on the remainder of the Hamburg Rules, which are external to the Act, to interpret s 46, nor can it ignore the fact that the wording of s 46 is taken directly from art 21 of the Hamburg Rules.

Both the Hague-Visby Rules and the Hamburg Rules exclude charterparties, the only exception being with regard to bills of lading issued to third parties pursuant to a charter party (ie, to parties other than the two parties who entered into the charter party). Such a case does not present itself in this instance since the bills of lading stayed in the hands of Cosipa, the charterer, rather than being passed on to a third party. Thus, the bills of lading acted as mere receipts.

The Hague-Visby Rules (Sch 3 to the MLA) state in art 1.b that 'contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by water, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter-party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. In art 5 they provide that '[t]he provisions of these Rules shall not be applicable to charter-parties, but if bills of lading are issued in the case of a ship under a charter-party they shall comply with the terms of these Rules'.

The Hamburg Rules (Sch 4 to the MLA) state in art 2.3 that the 'provisions of this Convention are not applicable to charter-parties. However, where a bill of lading is issued pursuant to a charter-party, the provisions of the Convention apply to such a bill of lading if it governs the relation between the carrier and the holder of the bill of lading, not being the charterer.'

Section 46 of the MLA also states that it includes contracts to which the Hamburg Rules do not apply, but the Hague-Visby Rules are not excluded. The scheme of the Act, including the incorporation of the Hague-Visby Rules, strongly suggests that the expression 'contract for the carriage of goods' in s 46 is meant only to apply to charterparties where there is a 'bill of lading or any similar document as aforesaid issued under or pursuant to a charter-party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same' (Hague-Visby Rules, art 1.b).

Accordingly, on this reading, s 46 of the MLA is not applicable.

The object of the MLA was to consolidate existing marine liability regimes, as prior to its enactment there existed several instruments relating to marine liability. The object of s 46, according to the legislative summary prepared by the Library of Parliament was to introduce:

E. Part 5 – Liability for Carriage of Goods by Water (clauses 41-46)

The Carriage of Goods by Water Act applies to all international carriage of goods between Canada and other countries which give the force of law to the Hague-Visby Rules embodied in the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, concluded at Brussels on 25 August 1924 and its Protocols of 1968 and 1979. The Act also applies to the domestic carriage of goods by water, but with some modifications. The Act provides for the eventual replacement of the Hague-Visby Rules with the Hamburg Rules, which are embodied in the United Nations Convention of the Carriage of Goods by Sea, 1978, concluded at Hamburg on 31 March 1978. Both of the Conventions apply to maritime claims for loss or damage to cargo and their key elements are basis of liability; limitation of liability; and shipowners' defences. According to departmental sources, the fact that the Hague-Visby Rules, unlike the Hamburg Rules, contain no jurisdiction clause has given rise to some problems where the inclusion of foreign jurisdiction clauses in bills of lading has prevented adjudication or arbitration of any dispute in Canada. Accordingly, an amendment is needed to confirm Canadian jurisdiction in situations where a bill of lading stipulates that disputes must be submitted to foreign courts.

Part 5 of Bill S-2 would re-enact existing provisions of the Carriage of Goods by Water Act respecting the application of the Hague-Visby Rules in Canada (reproduced in Schedule 3 to the bill) and the eventual implementation of the Hamburg Rules (reproduced in Schedule 4 to the bill). The Hamburg Rules would come into force only by an Order of the Governor in Council to bring clause 45 of the bill into effect (clause 131(2)), after which, according to clause 43(4) of the bill, the Hague-Visby rules would no longer apply. However, a new provision, not contained in the Hague-Visby Rules, would be introduced to confirm Canadian jurisdiction in situations where a bill of lading stipulates that disputes must be submitted to foreign courts. According to clause 46(1), if a contract for the carriage of goods by water to which the Hamburg Rules did not apply were to provide for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant could nevertheless institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada; such court or tribunal would have to be competent to determine the claim if the contract had referred the claim to Canada. This would apply where the actual or intended port of loading or discharge under the contract was in Canada; where the person against whom the claim was made resided or had a place of business, branch or agency in Canada; or where the contract was made in Canada. Clause 46(2) stipulates that, notwithstanding clause 46(1), the parties to a contract referred to in the latter sub-clause could, after a claim arose under the contract, designate by agreement the place where judicial or arbitral proceedings could be instituted.

This is clearly not the case here, since the reference to a foreign forum is found directly in the charterparty, negotiated freely by the parties.

The intention of Parliament in enacting s 46 was to put in place a jurisdiction provision similar to art 21 of the Hamburg Rules. The transcript of the evidence given before the Standing Committee on Transport and Government Operations (27 March 2001) and the Legislative Summary of Bill S-2, the MLA, amply support this contention, but they also make clear that the specific intention was to import into the MLA and the Hague-Visby Rules a 'desirable' jurisdictional feature of the Hamburg Rules. Although, as the appellant argues, the intention was to permit the transition to the Hamburg Rules, the Rules are not yet in force (neither is s 45 of the MLA). Thus, it is reasonable to consider that the intent of Parliament was to add to the MLA and the Hague-Visby Rules only s 46. As previously noted, the Hague-Visby Rules also do not include charterparties, unless a bill of lading has been issued regulating the relationship between the carrier and the holder, which is not the case in this instance, as the bill remained with the charterer.

That said, the Prothonotary concluded that 'if Parliament had wanted to clearly exclude charter parties from subsection 46(1), it would have, at some point in time, included in the MLA a provision similar to Article 2(3) of the Hamburg Rules, especially since these rules are still not in force in Canada'. The Court does not agree with this reasoning because, when s 46 of the MLA was enacted by Parliament, clearly the intent was for that section to act as a transitional provision, knowing that the Hamburg Rules would eventually come into force and replace s 46. There was, therefore, no need to enact a provision similar to art 2.3 of the Hamburg Rules to specifically exclude charterparties, because the intent was that they be excluded. The Hague-Visby Rules, in art 1.b defining a contract of carriage, excludes charterparties from the application of those Rules. It would therefore have been redundant to add a provision similar to art 2.3 of the Hamburg Rules.

The Supreme Court of Canada has held on numerous occasions that Parliament and provincial legislatures are presumed to enact legislation that is consistent with international law generally and with Canada’s international obligations. On different occasions, that Court has held that it is reasonable for a tribunal to examine a domestic law in the context of an international agreement in order to clarify any uncertainty. The appellant submits that any doubt should be resolved in favour of upholding Canada’s support for international arbitration agreements, pursuant to the New York Convention. The Court concludes that Canada's being aware of its international obligations when s 46 of the MLA was enacted is an element further supporting the view that s 46 must be assigned a narrow interpretation rather than a broad one that runs counter to the enforcement of the right of the parties to a charterparty to choose their forum.

[For the partially successful appeal to the Federal Court of Appeal, see Canada Moon Shipping Co Ltd v Companhia Siderurgia Paulista-Cosipa (CMI1151).]