#5211 - Egon Oldendorff V. Libera Corporation Service - Conflict of Laws BCL

Egon Oldendorff v. Libera Corporation

Facts

The plaintiffs are a German commercial partnership with unlimited liability based in Lübeck. The defendants are a Japanese corporation based in Kure, near Hiroshima. This action was commenced by the plaintiffs by writ endorsed with points of claim issued Feb. 22, 1994. The plaintiffs claim damages for breach of an agreement said to have been made for a 10-year charter to the plaintiffs of two Panamax bulk carriers to be built for the defendants in Japan.

It is common ground that the parties in March, 1993 reached an agreement which provided for the charter of two such Panamax vessels (and also for the plaintiffs as charterers to have a purchase option) subject to conditions. The parties are however at issue whether the conditions were satisfied or waived. The agreement was recorded in fax messages sent by brokers, Tokyo Shipbrokers Ltd. ("TSL"), to the defendants on Mar. 19 and to the plaintiffs on Mar. 22, 1993. TSL are an English company, but the present matter was dealt with through their Japanese office by a Mr. Susumu Suzui who has over 20 years of shipbroking experience. It is now common ground that TSL's role was purely as an intermediary.

The two conditions in the agreement read as follows:

Sub owners finally signing newbuilding contracts with owners' board approval declarable latest 15th April 1993, cob Japan. [and]

Moa to be mutually agreed and attached to c/p. . .

Incorporation of the London Arbitration Clause: The plaintiffs, as TSL envisaged might be the case, preferred to use their own recent fixture of Chemi Ocean, and sent TSL a copy accordingly on Mar. 22, 1993. This was in turn copied to the defendants and was then used in discussions on charter-party details. The Chemi Ocean charter was also on the NYPE form but with the arbitration clause amended to provide for London arbitration, as follows:

17. That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to as per Clause 75.

75. Any dispute arising under the Charter to be referred to arbitration in London. One arbitrator to be nominated by the Owners and the other by the Charterers, and in case the arbitrators shall not agree then to the decision of an umpire to be appointed by them...

Holding

The starting point is on any view art. 8(1) of the Rome Convention. It provides:

1. The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Convention if the contract or term were valid.

If the Arbitration clause was incorporated, the law applicable would have been English law.

The plaintiffs say that the law which would govern the contract, if validly made, would be English law. The agreed form of charter-party incorporated a London arbitration clause, providing for disputes to be resolved by arbitrators conversant with shipping matters. The inference in all the circumstances is, they say, that the parties intended English law to govern.

This particular clause provided for arbitration in a third party country, with a well-known and well-established system of marine arbitration, before arbitrators conversant with shipping matters. I find unconvincing the suggestion that what was contemplated was that the arbitration tribunal should apply a foreign law, whichever party's, to resolve disputes entrusted to them in these circumstances.

Is the application of English law displaced by Art. 10(2)?

The basic question remains: does it appear from the circumstances that it would not be reasonable to determine the effect of the defendants' conduct in accordance with English law, either in considering whether any contract at all was agreed or in considering whether any contract which may have been agreed contained a valid arbitration clause? Clearly this question cannot be answered from the viewpoint of Japanese law. Nor ex hypothesi can it be answered from the purely domestic viewpoint of the law which would otherwise govern under art. 8(1). It can only be answered by the Court before which it comes adopting a dispassionate, internationally minded approach.

The contractual divide between the two parties to any contract was located between Germany and Japan. Neither party could a priori assume that the other knew of or accepted the law of the first party's own country. The fact that Mr. Suzui was based and active in Japan appears to me of no great significance, when it is common ground that his only role was purely as an intermediary who had no authority to represent either party or do more than pass on communications which he had received. In so far as Mr. Suzui took the initiative, as he did in referring as a possible basis for "details" to the prior Mitsubishi charter-party (already in the defendants' possession) and in sending a copy to the plaintiffs, it is of some interest that that charter too contained an English arbitration clause. Mr. Suzui's written communications with both parties (and indeed all communications directly inter partes) were in English, and he used phrases which are familiar in international shipping and have, not surprisingly, been interpreted and given a clear meaning in English law. The plaintiffs when they produced a form of charter-party for use in the negotiation of details produced a charter-party in English subject to English arbitration. The charter-party was clearly produced in order to be studied.

I have already stated that the natural (and uncontradicted) inference is that it was studied; and that the reason why the arbitration clause was not...