#5107 - Armar Shipping V. Caisse - Conflict of Laws BCL

Armar Shipping v. Caisse

Facts

By a time charterparty dated February 6, 1973, the plaintiffs, Cypriot shipowners, chartered a vessel to a Cuban company. The charterparty included a London arbitration clause and a provision that general average would be settled and adjusted in London according to the York-Antwerp Rules 1950. Under the charter party, parcels of sugar were shipped at Havana for carriage to Santander, Spain, and Mostagenem, Algeria.

The bills of lading did not incorporate the charterparty terms. Clause 10 of each provided that general average should be adjusted, stated and settled, according to the York-Antwerp Rules, except rule XXII, at such port or place as might be selected by the plaintiffs. It was not contended that the proper law of the bills of lading was English law. During the voyage, the vessel grounded off Santander. The plaintiffs contended that they thereby incurred sacrifices and expenditures of a general average nature in order to enable the voyage to be completed. At Mostagenem, a Lloyd's average bond in English was signed by the master of the vessel on behalf of the plaintiffs and by the defendants, an Algerian company, as insurers of the Algerian consignees, the defendants adding a reservation in French. It was not disputed that the defendants, who had not been parties to the bill of lading, thereby became parties to the contract contained in the bond. The bond contained no express provision as to the law that was to govern the contract contained in it, nor any provision for arbitration in London or submission to the jurisdiction of the English courts.

Adjustment of the general average in London: Subsequently, pursuant to clause 10 of the bill of lading, the plaintiffs arranged for general average to be adjusted in London, and the adjustment was published in London on February 14, 1977, showing that a contribution was due to the plaintiffs from cargo. They issued a writ against the defendants in England claiming 52,420.18 as their contribution. Robert Goff J. granted leave ex parte to serve notice of the writ on the defendants out of the jurisdiction.

Question

The question here was whether the adjustment of the general average in London could be taken into account as one of the factors to decide the law applicable to the claimant’s claim.

Holding

That argument is founded on the basis that an important factor — the plaintiffs say that it is a decisive factor — is the place where the average is to be adjusted. If the Lloyd's average bond had provided, expressly or by clear and unambiguous implication, that the general average adjustment was to take place in London, I should have thought that that might well have been decisive. But this contract, in my opinion, did not so provide, either expressly or by clear implication.

Counsel for the defendants submits, with what seems to me to be unanswerable legal logic, that there must be a proper law of any contract — a governing law — at the time of the making of that contract. If, as is the case here, at the time when the contract was made, the question remained undecided whether the average adjustment was to be in England or in the United States or in Germany or somewhere else, then the fact that it was subsequently decided by one of the parties that the venue should be England cannot be a relevant factor in the ascertainment of the proper law at an earlier date. As a matter of legal logic, I find insuperable difficulty in seeing by what system of law one is to decide what, if any, is the legal effect of an event which occurs when a contract is already in existence with no proper law: but, instead, with a “floating” non-law.

Under the terms of this Lloyd's average bond contract, things had to be done by the parties forthwith and disputes under...