An interesting reminder in the multi-layered relationships of the maritime supply chain that care needs to be taken to attend in a timely fashion to securing recourse in all jurisdictions in which a dispute might be brought.

The Facts

An NVOC (Herport) issued bills of lading in Hong Kong for carriage of cargo on 'MOL Comfort' from Hong Kong to Le Havre. Ocean bills were issued (by NYK) also in Hong Kong, indicating Herport as the shipper. The ship fractured amidships in the Indian Ocean, split into two halves and drifted for several days before sinking together with all goods on board. Cargo interests and their insurers claimed against Herport under the NVOC bills; Herport issued a third party indemnity notice against NYK.

The NVOC bills provided for Hong Kong law and exclusive jurisdiction, whereas the ocean bills provided for Japanese law and jurisdiction in the Tokyo District Court in the following terms (the "NYK provision"):

(a) The contract evidenced by or contained in this bill of lading shall be governed and construed by Japanese law except as may be provided for herein, and (b) notwithstanding anything else contained in this bill of lading or in any other contract, any and all actions against the carrier in respect of the goods or arising out of the carriage shall be brought before the Tokyo District Court in Japan to the exclusion of jurisdiction of any other courts whilst any such actions against the merchant may be brought before the said Court or any other competent court at the carrier's option.

NYK applied to the Hong Kong court to refuse leave to Herport to issue and serve a third party notice out of the jurisdiction, and for a declaration that the court had no jurisdiction over NYK. Apart from the express nature of the NYK provision, the ocean carrier relied on the fact that there were already two legal proceedings in Tokyo in relation to the casualty. 

Herport contended that the NYK provision was not a valid exclusive jurisdiction clause, because it applied only to claims under Japanese law, it did not apply to indemnity claims and it did not apply to actions "commenced, initiated or originated by Herport".  There was therefore a burden on NYK to show, as in any stay application based on forum non conveniens, that there was a more appropriate forum than Hong Kong.

The Judgment

The judge made some reference to Hong Kong precedent which interprets this type of jurisdiction clause liberally, before finding that there was no ambiguity in the NYK provision. The wording in the NYK provision "any and all actions against the carrier" was conclusive. The judge characterised Herport's contentions as "convoluted" and "wholly devoid of merit". In particular, he was unimpressed with the contention that the NYK provision did not apply to actions "commenced, initiated or originated by Herport" - firstly because it was wrong and secondly because this action was initiated by Herport. 

The burden was therefore on Herport to show strong reasons why the NYK provision should be ignored.  Herport attempted to do this by stating that it would suffer a juridical disadvantage under Japanese law because its claim was timebarred.

Again relying on Hong Kong precedent, the judge found that "strong reasons" in this context had to be factors not within the reasonable contemplation of the parties at the time the agreement was made. The fact that Herport could be faced with proceedings in Hong Kong, but would have to proceed against NYK in Tokyo, was an entirely foreseeable situation of its own making. There was, for example, no evidence that Herport would have been unable to find a carrier from Hong Kong to France which would have accepted Hong Kong jurisdiction. The judge therefore found that Herport had failed to show strong reasons as required, and declared that his court had no jurisdiction.

This decision was inconvenient for Herport because, as stated above, it was out of time in Tokyo.  However a point, clearly not addressed in the Hong Kong proceedings, is whether time in Tokyo could have been extended under Article 3 (6 bis) of Hague-Visby Rules, to which both Japan and Hong Kong are signatory. As is well known, 6 bis essentially allows indemnity proceedings to be brought within three months of settlement of the claim in respect of which indemnity is sought.

The conclusions

Although relying to a large extent on Hong Kong precedent, this judgment is generally consistent with English law, in particular as far as concerns the definition of forum non conveniens. 

There is an obvious lesson for forwarders and NVOCs about the importance of protecting time in all potential jurisdictions, but this is complicated by the operation (or otherwise) of 6 bis in this case, as mentioned above.

Hong Kong High Court 
LI LIAN INTERNATIONAL LTD & Others v HERPORT HONG KONG LTD & Another [2019] HKCFI 826

­­­­

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
 
We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club