Bill Of Lading May Contain Arbitration Clause: Sc

The Supreme Court last week overruled the Calcutta High Court and allowed the appeal of the owners of the vessel, Baltic Confidence, against the State Trading Corporation (STC) raising the question whether an arbitration clause could be incorporated in the bill of lading.

The ship was carrying 12,000 metric tonne of Canadian yellow peas from Vancouver to Kolkata for STC, the holder of the bills of lading. The goods arrived in a damaged condition at the harbour and the damage was estimated at more than $1,384,620. STC filed a suit against the ship owners. They retaliated by filing an application under the Arbitration and Conciliation Act 1996 for staying the proceedings in the suit and for referring the dispute to arbitration in terms of the Charter Party Agreement. The stay application was rejected by the high court. Therefore, the ship owners appealed to the Supreme Court and won its case with costs.

 

The Division Bench comprising Justice AP Misra and Justice DP Mohapatra stated in the judgment that the issue was whether the arbitration terms of the Charter Party Agreement, which was incorporated in the conditions in the bills of lading, bound the parties to the agreement. The Charter Party Agreement stated that the party would be governed by the English law and any dispute arising out of the charter would be referred to arbitration in London. The relevant condition in the bills of lading stated that