Thyssen Canada Ltd (the plaintiff) agreed to purchase 18,000 mts of hot-rolled coils from Ferrostaal. The Mariana was chartered to Hawknet on a standard form charterparty. The vessel was then instructed by Hawknet to sail to Constanza, Romania, to load the plaintiff's cargo for Canada. Two bills of lading were issued. The first bill, dated 31 May 1998, was for 513 coils of steel. The second, dated 8 June 1998, was for 298 coils of steel. On 9 June 1998, a fire broke out on the Mariana. The plaintiff alleged that the steel coils were damaged during the fire and the ensuing firefighting operation. On 28 October 1998, the plaintiff filed a statement of claim for the damage to the cargo. The owner of the Mariana, Mariana Maritime SA (the defendant), filed a motion for an order referring the parties to arbitration in London and staying the proceedings in Canada.

The plaintiff submitted that: first, the claim against the defendant arose out of the obligations assumed by the defendant pursuant to the bills of lading, or in tort by reason of the negligence of the defendant, its master, servants or agents; second, the claim was not a dispute arising out of the charterparties; third, there was no arbitration agreement between itself and the defendant; fourth, the front of the bill of lading contained no special typewritten words to identify the relevant charterparties. The plaintiff pleaded and relied upon the Hamburg Rules, as applied by force of law in Romania, as the contracting State at the port of loading. Both arts 21 and 22 of the Hamburg Rules allow for hearing of the case at the port of discharge.

The defendant suggested that the contract between the plaintiff and itself was contained in the second bill of lading. Clause 1 of the second bill provided that '[a]ll terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated'. The defendant submitted that: first, there were two charterparties concerning the Mariana and both of these charterparties were expressly made subject to English law and London arbitration; second, it was clear under both Canadian and English law that the holder of a bill of lading which specifically incorporated the arbitration clauses in a charterparty was bound thereby even if the bill of lading did not identify the relevant charterparty; third, even if the plaintiff established that the Hamburg Rules were in force in Romania, the country of shipment, the bill of lading called for an application of the Hague Rules.

Held: Judgment for the defendant. Proceedings stayed in favour of London arbitration.

In order to determine the existence of an arbitration agreement, the Court has to address the following questions: first, do the bills of lading incorporate an arbitration clause; second, is there a contract between the plaintiff and the defendant contained in the bill of lading?

Despite the fact that the Hamburg Rules might have the force of law in Romania, art 22 of the Hamburg Rules indicates that:

1. Subject to the provisions of this article, parties may provide by agreement evidenced in writing that any dispute that may arise relating to carriage of goods under this Convention shall be referred to arbitration.

2. Where a charter-party contains a provision that disputes arising thereunder shall be referred to arbitration and a bill of lading issued pursuant to the charter-party does not contain a special annotation providing that such provision shall be binding upon the holder of the bill of lading, the carrier may not invoke such provision as against a holder having acquired the bill of lading in good faith.

The wording of cl 1 is determinative in concluding that there is an agreement to refer disputes to arbitration and that it supersedes the application of the Hamburg Rules.

The absence of typewritten words is not an obstacle to the incorporation of the charterparties into the bill of lading. Therefore, even if the charterparties are not mentioned in the bill of lading, this Court can decide that they are incorporated, pursuant to cl 1 of the same bill of lading, and this bill of lading can be read as if the charterparties were mentioned in it. Therefore, cl 1 of the bill of lading has the effect of incorporating the arbitration clause included in the charterparties relating to the bill of lading.

It is clear that the holder of a bill of lading which specifically incorporates the arbitration clauses in a charterparty is bound by this arbitration clause. The bill of lading calls for the application of the Hague Rules. Under Canadian law, the term of the contract prevails. For those reasons, the action is stayed and the parties are at liberty to institute arbitration proceedings in London.

[For the unsuccessful appeal to the Federal Court of Appeal, see Thyssen Canada Ltd v Mariana (The) (CMI1003).]