England and Wales High Court of Justice, 25 July 2018, Sea Master Shipping Inc v. Arab Bank (Switzerland) Ltd, [2018] EWHC 1902 (Comm)

A FOB buyer of goods, Agrobusiness, chartered a vessel owned by Sea Master Shipping Inc (“Owner”) and resold the cargo on the CIF terms. The charter contained a LMAA arbitration clause, clause, which covered “any dispute arising out of or in connection with this Contract”. Several bills of lading covered the cargo, each incorporating the arbitration clause set up in the charter party. Agrobusiness found a new buyer during the transportation, and they agreed on a different discharge port not provided for in the original bills of lading. Its bank, Arab Bank Ltd (“Bank”), held the original bills as security for the money advanced to Agrobusiness for the purchase of the cargo. Two new bills of lading were issued and consigned to the order of the Bank.

The latter filed a request for arbitration relating to certain original bills of lading. The Owner brought a counterclaim in respect of the demurrage and/or damages for detention under the second switch bill. The arbitral tribunal dismissed the counterclaim on the grounds of lack of jurisdiction as the Bank was not party to the arbitration agreement. As a result, the Owner challenged the award before the High Court of Justice on the basis of section 67 of the Arbitration Act 1996.

For the High Court of Justice, the question of whether the arbitral tribunal has jurisdiction depends upon a finding of whether the Bank as a lawful holder of a bill of lading, which has rights of suit under the Carriage of Goods by Sea Act 1992 in respect of the contract of carriage contained in or evidenced by a bill of lading which contains an arbitration clause, is bound by that arbitration clause and consequently, assumes liabilities within an arbitral jurisdiction, or whether the Bank is party to the second switch bill. It finds that the first approach is right and concludes that Owner succeeds on its claims under section 67 of the Arbitration Act 1996.

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