Is an FOB seller who receives a bill of lading bound by its jurisdiction clause?

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The Maritime and Commercial Court recently examined whether an on-board freight seller (FOB) who received a bill of lading as a receipt for the delivery of goods was bound by the jurisdiction clause of that bill of lading. (1)

Facts

A German ship propeller seller sold three propellers to a South Korean buyer on FOB terms from the Port of Hamburg.

The buyer has entered into a transport contract with a Danish contracting carrier for the transport of the propellers to Busan. The carrier has subcontracted the transport to a shipping company.

The seller hired a local freight forwarder from Hamburg to help organize the delivery of the propellers to the ship. The propellers were to be loaded using a floating crane and the freight forwarder informed the carrier, in an email of November 15, 2018, that:

[f]crane costs in Hamburg are split between the FOB side and the ship side. From the resting place to FOB is for the land side, while the hook-up in the hold of the ships and the return to the resting place is on behalf of the ships side. It is the customs of the port of Hamburg, all carriers are fully aware.

In response, the carrier denied that the buyer would agree to bear part of the floating crane costs. In the opinion of the carrier, all these costs, including the cost of demobilization of the crane, were to be borne by the seller because “the cargo is considered to be reserved under FOB Hamburg conditions, all tariff charges for loading on board by floating crane will be debited from the suppliers side, according to the terms of the contract “.

In December 2018, the carrier forwarded three bills of lading – one for each propeller – to the freight forwarder. The bills of lading indicated that “the trader”, by approving the bills of lading, became bound by their terms, including their jurisdictional clauses which stipulated that disputes arising therefrom were subject to Danish jurisdiction. The bills of lading also stipulated that the trader was further obliged to pay any “duties, duties, taxes and charges” which might be claimed by the carrier.

In the bills of lading, the “ merchant ” was defined as follows:

Wherever the term “merchant” is used in this bill of lading, it will be deemed to include the shipper, receiver, consignee, holder of the bill of lading and owner of the cargo..

The freight forwarder dispatched the bills of lading to the seller and seller’s bank but expressed no opinion on their terms. Subsequently, the propellers were loaded on board the vessel and the carrier claimed payment of € 16,500 (corresponding to the floating crane costs which were the responsibility of the vessel under the floating crane operator tariff). It follows from the tariff that costs were charged to both the FOB side and the ship side when a floating crane was mobilized and demobilized to load the cargo.

In support of its claim, the carrier argued that the seller of the propellers was required to pay all costs associated with their loading on board, including the costs that the floating crane operator had billed to the vessel. However, no evidence was presented that the carrier paid the € 16,500 or was invoiced by the shipping company. As such, the seller refused to pay the amount claimed and the carrier initiated legal proceedings before the maritime and commercial court.

The seller denied that any legal proceedings relating to the claim could be heard in Denmark and argued that it was not bound by the jurisdiction clauses of the bills of lading. The seller further submitted that the costs which had been incurred in relation to the services rendered by the crane operator after the loading of the propellers, in accordance with the FOB clause, were borne by the buyers; thus, the carrier should take such action against the purchaser.

Decision

The court ruled that legal proceedings could be brought against the seller in Danish courts on the basis of the jurisdiction clauses of the bills of lading. The court reasoned as follows:

the [Freight forwarder] a in the name of [Seller] approved the draft B / L standard that the [Carrier] forwarded to [Seller] for approval and no reservations were made in this regard with regard to the scope of the approval. the [Seller] was named “consignor” in the B / L and the court concludes that the [Seller] in this context is bound by the jurisdiction clause of section 3 of the B / L which states that the place of jurisdiction for disputes between the “sender” and the [Carrier] is where the [Carrier] has its main establishment. This applies regardless of whether the [Seller] as shipper by being designated as “shipper” in the B / L also becomes obligated as shipper of the goods.

The court further ruled that the seller was not obligated to pay the amount claimed from the carrier because the carrier had failed to prove that it had paid the amount or invoiced the seller for that amount.

Comment

This decision addresses the issue of whether a shipper who is not a party to a contract of carriage but simply delivers cargo to the vessel that will make the voyage can be legally bound and bound by a jurisdiction clause in an issued bill of lading. by the carrier by receiving the bill of lading as receipt of delivery of the cargo. The decision raises the following questions:

  • Is a shipper (ie FOB seller) included in the definition of “merchant” in a bill of lading that states “merchant” includes the shipper? It can be argued that the term “consignor” refers to the party who concludes the contract of carriage with the carrier (ie the consignor).
  • Does the shipper have a legal obligation to consider whether the terms of a bill of lading (i.e. the clauses of the contract of carriage) can be approved when the bill of lading, with respect to the shipper, is only a receipt for the delivery of the cargo?
  • Does the shipper have the legal power to require that the terms of the bill of lading be changed? Since a bill of lading is a contract between the shipper (i.e. the FOB buyer) and the carrier to which the shipper is not a party, it seems doubtful that a shipper, as a rule , has the right to demand such modifications.

End Notes

(1) Maritime and Commercial Court, January 11, 2021, case BS-23440-2019-SHR.

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