NEW DECISION ON THE SCOPE OF THE RECAST BRUSSELS REGULATION 2020

NEW DECISION ON THE SCOPE OF THE RECAST BRUSSELS REGULATION

The recast brussels regulations was held not to apply why the shipowner could not rely on its english jurisdiction clause in its sea waybill The Danish Eastern Division of the High Court recently upheld a decision from the Copenhagen City Court where the City Court found that the Recast Brussels Regulation did not apply between a freight forwarder and a Danish shipowner since the freight forwarder’s and the shipowner’s legal relationship did not have “international character”.

This meant that the shipowner could not rely on an agreed jurisdiction clause according to which the courts in England had exclusive jurisdiction.

Written by Christian Schaap, attorney at NJORD Law Firm. csc@njordlaw.com

FACTS OF THE CASE In accordance with a framework agreement a Danish buyer instructed a Danish freight forwarder (”the Freight Forwarder”) to transport goods from Shanghai to Copenhagen (the Freight Forwarder acted as a contracting party and not as an intermediary). The Freight Forwarder entered into a contract for the performance of the sea carriage from Shanghai to Copenhagen with a Danish shipowner (”the Shipowner”). The Freight Forwarder and the Shipowner had a longstanding trade relation and had contracted several sea carriage agreements similar to the agreement at hand.

In connection with the booking of sea transport the Shipowner referred to its standard terms and conditions just as the sea waybills issued by the Shipowner to the Freight Forwarder included the following text on the front of the sea waybills: ”This contract is subject to the terms, conditions and exceptions, including the law & jurisdiction clause ..”. Further, a (deep) link to the terms and conditions of the Shipowner was included in the text on the sea waybills.

During the carriage to Denmark the ship encountered rough weather and lost several FCL containers in the Mediterranean Sea. The Danish buyer and its cargo insurance raised a claim in damages amounting to the value of the lost cargo against the Freight Forwarder at the Danish courts. The Freight Forwarder issued a thirdparty notice against the Shipowner and thus involved the Shipowner in the case.

The Shipowner’s principal claim was for the dismissal of the case against the Freight Forwarder since the Shipowner did not find that the Danish courts had jurisdiction to hear the Freight Forwarder’s claim. The Shipowner referred in this regard to the jurisdiction agreement entered into with the Freight Forwarder, from where it followed that the English courts had exclusive jurisdiction to hear the alleged claim of the Freight Forwarder. .

THE PARTIES’ ARGUMENTS The Freight Forwarder relied on the jurisdictional default position in Section 310, (1)(1 and 4) of the Merchant Shipping Act according to which the Danish courts will have jurisdiction if the defendant (the Shipowner) has it head office in Denmark and/or if the agreed or actual place of delivery is in Denmark. Both these conditions were satisfied in this matter.

The Shipowner relied on the exception to Section 310(1), which is found in Section 310(5) of the Merchant Shipping Act. From this exception it follows that a party cannot rely on Danish jurisdiction as per Section 310(1) if a different jurisdiction follows from the Recast Brussels Regulation.

It follows from Article 25 of the Recast Brussels Regulation that if the parties have agreed that a court of a member state are to have jurisdiction to settle a given dispute, such court shall have exclusive jurisdiction unless the parties have agreed otherwise. Based on Article 25 in the Recast Brussels Regulation the shipowner submitted that the English courts had exclusive jurisdiction to hear in the matter between the Freight Forwarder and the Shipowner.

Therefore, it was decisive whether Recast Brussels Regulation applied between the Freight Forwarder and the Shipowner.

THE RECAST BRUSSELS REGULATION IS ONLY APPLICABLE TO CASES CONTAINING AN “INTERNATIONAL ELEMENT” It does not follow directly from the Recast Brussels Regulation that it only applies in cases, which have “international character /an international element”.

From the so-called Jernard Report, which is an explanatory report to the original Brussels Convention 1968, it follows that the Brussels Convention applies: ”[…] where an international element is involved […] the international element in a legal relationship may depend on the particular facts of the proceeding of which the court is seised…”

Page 8 of the report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters by Mr. P. Jernard

The European Court of Justice has previously rendered a decision on the scope of application of the Brussels Regulation 1968, in the so-called Owusu-case. From this case it follows that a legal relationship must have an international element/international character before the Brussels Regulation 1968 is applicable.

In the Owusu-case a lessor had rented his holiday villa in Jamaica to Andrew Owusu. Owusu suffered a personal injury as a result of the rented property during the stay. Consequently, Owusu, who was an English citizen domiciled in England commenced legal proceedings against the lessor who was also domiciled in England. The European Court of Justice held that the case had international character even though the claimant and the defendant were both domiciled in England, including because the events at issue [the personal injury] occurred in another state – Jamaica.

The Danish Eastern High Court has previously considered when a legal relationship has international character. It did so in a case from 2017 between the bankruptcy estate of O.W. Supply & Trading A/S and a Danish shipowner. In this case the Danish shipowner tried to rely on the Brussels Regulation and on an English jurisdiction agreement. Even though both O.W. and the shipowner were Danish companies, the Eastern

High Court found that the relationship between O.W. and the shipowner was an international legal relationship since the business of the shipowner “… to a significant extent concerns international matters and international contracting parties…”.

With reference to the two cases mentioned above, including the remarks in the Jernard Report, the Shipowner submitted that the case with the Freight Forwarder had international character; since it concerned an international carriage by sea, since the business of the Shipowner was international (international shipping); since the place of the harmful event (the loss of the goods) was outside Danish territory (the Mediterranean Sea); since the seller, the Chinese company, had entered into a contract of carriage with the Freight Forwarder’s Chinese subsidiary company, which on behalf of the Freight Forwarder had issued a house bill of lading where the Chinese seller was inserted as shipper; and finally since the Shipowner’s Chinese subsidiary company had issued the sea waybills to the Freight Forwarder and signed these as agent for the Shipowner.

The Freight Forwarder on the other hand claimed that the case did not have international character; since the Freight Forwarder and the Shipowner were Danish and both were domiciled in Denmark; since the Danish buyer and its insurance company are Danish companies; since it did not concern a transport which solely should take place in other countries than Denmark and since nothing linked the case to England.

THE DECISION OF THE CITY COURT OF COPENHAGEN After the cut-off date in the case for new submissions and for the filing of new exhibits, the Freight Forwarder brought forward a new submission to the Copenhagen City Court, where the Freight Forwarder rejected that the

jurisdiction agreement was incorporated between the shipowner and the Freight Forwarder. The Copenhagen City Court decided to cut off this submission.

The Copenhagen City Court should therefore only decide whether the Recast Brussels Regulation was applicable, i.e. whether the case had international character. The Copenhagen City Court found that the case did not have international character as the court stated: “The fact that the Shipowner’s general condition on jurisdiction and choice of law refers to the English High Court of Justice in London and English law does not entail that this case is to be considered international.

The fact that the transport commenced in Shanghai does also not entail that this case is to be considered international for the purpose of the application of the Recast Brussels Regulation.”

The Shipowner was granted permission to appeal the decision and appealed the decision to the Danish eastern division of the High Court.

THE DECISION OF THE EASTERN HIGH COURT Before the Eastern High Court and in accordance with the rules in the Danish Administration of Justice Act, the Freight Forwarder was permitted to bring the submission, where the Freight Forwarder rejected that the jurisdiction agreement was binding on the Freight Forwarder, as it had not been successfully incorporated into the contract.

The Eastern High Court found that the jurisdiction agreement had been incorporated and was binding on the Freight Forwarder, including because of the parties’ trade history where the Freight Forwarder booked the carriage using an online system subject to a service contract, which referred to the Shipowner’s jurisdiction clause and because of the reference in the sea waybills to the same jurisdiction clause, and finally because the parties were professional parties. This is consistent with a

similar dispute presented in a case before the Maritime and Commercial Court in January 2018.

In that case the Maritime and Commercial Court reached the conclusion that the terms in a contracting carrier’s house bill of lading was incorporated in its relationship with the cargointerest as the house bill of lading could be accessed by the cargo-interest through a link in the booking system and as the cargo-interest and the contracting carrier were professional parties and had contracted several times prior to the transport in question.

Before the Eastern High Court the parties agreed that the jurisdiction agreement would take precedence over the mandatory venue rules in the Merchant Shipping Act if the legal relationship between the Shipowner and the Freight Forwarder could be considered international, as this would trigger the application of the Recast Brussels Regulation including Article 25 in the Regulation, cf. Section 310(5) of the Danish Merchant Shipping Act. Just as the City Court of Copenhagen the Eastern High Court found that the legal relationship was not international. The Eastern High Court stated: “According to the submission of evidence the High Court concurs that the transport agreement in question for the carriage of goods from Shanghai to Denmark is not an international legal relationship.

At the assessment the High Court attach importance to the fact that both [the Shipowner] and [the Freight Forwarder] are Danish companies with head office in Denmark and that the place of delivery for the goods is in Copenhagen where the recipient is [a Danish buyer] who is also domiciled in Denmark.

The fact that the place of the harmful event (the loss of the containers) took place outside of Denmark (the Mediterranean Sea), that Chinese companies affiliated with the Freight Forwarder and the Shipowner had been involved in contracting the carriage, included having issued

transport documents “as agents” and the fact that the carriage by sea was from Shanghai to Copenhagen was not sufficient for the Eastern High Court to find the legal relationship of the Shipowner and the Freight Forwarder had international character.

COMMENTS TO THE CASE The concept of “international character / an international element” in the Brussels Regulation 1968 has not been altered in the Recast Brussels Regulation as hence the regulations remain identical in this regard.

Unlike the European Court of Justice’s decision in the Owusu-case and the Eastern High Court’s previous decision from 2017, the Eastern High Court found that this case between the Freight Forwarder and the Shipowner did not have international character. This is despite the fact that legal relationship in the current case between the Freight Forwarder and the Shipowner show resemblance to the legal relationship in the O.W. case from 2017 – a relationship which was found to have international character.

Even though the Owusu-case concerned personal injury whereas the current case concerned loss of goods, this ought hardly to have been decisive in deciding when a legal relationship is international.

With this decision the jurisdiction rules in Section 310 (1 and 4) of the Merchant Shipping Act, which may only be derogated from by way of the exception in Section 310(5) serves as a strong defence in cases such as the present and protects the Danish cargo interest against Danish Shipowners’ foreign jurisdiction clauses. However, some uncertainty may have been created with regard to the application of the Recast Brussels Regulation and in turn when a Shipowner may rely on its foreign jurisdiction clause.

It is expected that foreign shipowners can still rely on jurisdiction clauses, which are agreed with a Danish party, and which gives a court in EU jurisdiction for the dispute as such cases is expected to be considered international by Danish

courts. This would be in line with e.g. the Owusucase. Further this would be consistent with other cases where a party has relied on a jurisdiction clause in a transport documents such as the European Court of Justice’s judgment in case 71/83 (“Tilly Russ”) and the European Court of Justice’s judgment in case C-159/97 (“Castelletti v Hugo Trumpy”).

Worth mentioning is that the Shipowner requested the Eastern High Court for a preliminary reference to the European Court of Justice regarding the scope of application of the Recast Brussels Regulation. However, this request was not followed by the Eastern High Court. Thus, it is uncertain whether the European Court of Justice would have reached the same result as the Eastern High Court. The Shipowner has applied for a third instance permission. If granted the Danish Supreme Court will get an opportunity to consider the question.

> For questions or comments to the above please feel free to contact Christian Schaap here