Facts
- Coast Lines Ltd. (English shipowner) chartered the British-flag vessel Grangefield to Hudig & Veder Chartering N.V. (Dutch voyage charterer) on a Gencon voyage charter executed in Rotterdam.
- The charterparty, in English and referring to pounds sterling, contained an exceptions/indemnity clause limiting owner liability for unseaworthiness unless the owners/managers personally failed to exercise due diligence.
- A bill of lading issued in Rotterdam for about 4,000 tons of bleaching earth to Drogheda imposed greater owner liability for unseaworthiness than the charterparty clause.
- After heavy weather, substantial water ingress damaged the cargo; the cause was a severely corroded bilge pipe, indicating the vessel was unseaworthy at the start of the voyage.
- Cargo interests sued the shipowner in England; the shipowner admitted liability and sought indemnity/damages from the Dutch charterer under the charterparty.
- The shipowner obtained ex parte permission to serve the writ out of the jurisdiction; the charterer entered a conditional appearance and sought to set aside service.
- Dutch law would mandatorily apply the Hague Rules to outbound carriage from Dutch ports, overriding contractual terms reducing owner liability for unseaworthiness; English law would enforce the charterparty clause.
Issues
- Whether the charterparty’s proper law, inferred from its connections, was English law or Dutch law.
- If English law governed, whether the court should exercise discretion to permit service out of the jurisdiction on the Dutch defendant, despite the practical loss of protections available under Dutch mandatory rules.
Decision
- The Court of Appeal held the proper law of the charterparty was English law.
- The court upheld the order permitting service out of the jurisdiction and refused to set aside service.
- The appeal was dismissed.
Legal Principles
- In the absence of an express choice-of-law clause, the proper law is the system with the closest and most real connection to the contract, assessed from connecting factors.
- For charterparties, the law of the flag is a significant connecting factor, and may outweigh the place of signing or loading when other factors point to the same law.
- Contract language, standard form usage, currency, and owner’s domicile are relevant indicators of the parties’ intended or objectively inferred governing law.
- The fact that foreign mandatory rules would invalidate a central term does not, by itself, require selection of the foreign law as the proper law; it may support an inference that the parties did not intend a law that would negate their risk allocation.
- Where a contract is governed by English law, service out may be permitted against a foreign defendant under the procedural gateway for English-law-governed contracts, and the court may exercise discretion to retain jurisdiction even if the defendant loses advantages under its local law.
Conclusion
The court inferred English law as the charterparty’s proper law based chiefly on the British flag, English language and form, sterling references, and English ownership, and it maintained service out on the Dutch charterer notwithstanding that Dutch mandatory Hague Rules would have overridden the disputed liability-limiting clause.