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General words of incorporation can incorporate an arbitration clause
save in exceptional two-contract cases
The vessel "Athena" was owned by the claimant, Sea Trade Maritime
Corp. Its management was delegated to a Greek company, who, in turn,
appointed a New York agent to obtain war risks insurance. To this end,
the vessel was insured with the defendant mutual association, Hellenic.
Hellenic's rules provided that the parties, "…hereby submit[s]
to the jurisdiction of the High Court of Justice of England in respect
of any dispute or difference between the Owner and the Association arising
out of or in connection with these Rules or out of or in connection
with any contract between the Owner and the Association" (Rule
44.1). The next clause, Rule 44.2, provided that either party , "…may,
by giving written notice of the election to the other, elect to have
such dispute or difference referred to arbitration in London…".
In 1997 a claim was presented to Hellenic, in respect of damage alleged
to have been caused by Tamil Tigers when the ship was docked in Sri
Lanka. Sri Lanka was, however, an "additional premium area"
and Sea Trade had failed to give proper notice that the Athena was going
there.
In 1999 Hellenic made a discretionary payment of US$ 3.4m but Sea Trade
then brought an action in Greece to recover the full claim and damages
- an extra US$ 3.5m.It also brought proceedings in New York. Hellenic
obtained a stay of the New York proceedings in favour of London, relying
on Rule 44.2.
At arbitration Sea Trade unsuccessfully contended that the tribunal
had no jurisdiction and an award was made on preliminary issues. There
then followed an application to set aside the award and to appeal, with
preliminary issues as to whether:
• The arbitration clause in Rule 44.2 had been incorporated; and
• The English jurisdiction clause in Rule 44.1 was an exclusive
clause (it was accepted by both parties that the insurance was governed
by English law).
The court held that:
• In principle, English law accepted incorporation of standard
terms by the use of general words, particularly where the terms were
readily available and the question arose in the context of dealings
between established players in a well-known market. This was the case
whether or not the term was an arbitration clause. A stricter rule would,
however, be applied in charterparty and bills of lading cases because
the other party might have no knowledge, or ready means of knowledge,
of the relevant terms and the terms of an arbitration clause might require
adjustment if they were to be made to apply to the parties to a different
contract.
• As a matter of construction the arbitration clause in the Rules
had been incorporated into the insurance. The words of the original
contract were that the insurance was offered in accordance with Hellenic's
Rules.
• Sea Trade was granted permission to appeal on the question whether
Rule 44.1 is an exclusive English jurisdiction clause. Despite the fact
that there was a mutual elective arbitration clause for arbitration
in London under Rule 44.2, Rule 44.1 was not an exclusive jurisdiction
clause, in the opinion of Langley J.
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