Validity of jurisdiction clauses on bills of lading hard to gauge

Bills of lading are the most important documents in the carriage of goods by sea. Once the consignor ships the cargo and the carrier receives it or loads it on board, the carrier issues the bill of lading, which becomes evidence of the contractual relationship for the carriage of the goods.

Bills of lading – characteristics

A bill of lading will normally have two sides, with the front recording information on the parties, the cargo and the voyage, and the back setting out the carrier’s standard contract terms, which usually include a jurisdiction clause. The clauses relating to cargo loading and unloading, transport and delivery are directly linked to the contract for the carriage of goods that the bill of lading serves to evidence, while the jurisdiction clauses on the bill of lading are supplementary and separate.

The jurisdiction clauses on a bill of lading serve as the agreement on jurisdiction in the maritime domain. The way in which decisions about their effect are taken is fundamentally different from that of general agreements on jurisdiction.

To date there are no express provisions in PRC law addressing the issue of determination of the validity of jurisdiction clauses on bills of lading. Taking a broad view of the rulings and judgments of PRC courts during different periods, there have been four main grounds on which the jurisdiction clauses on bills of lading have been determined to be invalid.

Sufficient prominence

First, jurisdiction clauses are standard terms preprinted on the bill of lading by the carrier. If the clauses are printed on the back of the bill of lading in small print, in English, and there is no conspicuous indication to draw the attention of the concerned party, such clauses are likely to be invalid.

The Zhejiang Higher People’s Court made such a ruling when examining an appeal against jurisdiction by Preford Limited of Hong Kong. However, some opinions hold that regardless of the size of the font, so long as jurisdiction clauses are present, this is sufficient to determine that the carrier has reasonably brought them to the attention of the other party.

Connection with the case

Second, the validity of the jurisdiction clause on the bill of lading may be denied on the grounds that the foreign court specified as having jurisdiction has no actual connection with the dispute in the case. For example, in the case of China Insurance Company (Hong Kong branch) v P&O Nedlloyd of the Netherlands and Fujian Guantou Maritime Transport Corporation, the carrier, P&O Nedlloyd, held that, pursuant to the clauses on the back of the bill of lading, any dispute should be heard by a court in Rotterdam. The Xiamen Maritime Court held that the Rotterdam court was only the court of the place of domicile of one of the defendants. As Rotterdam was not the place of departure, place of transshipment or destination of the goods or the place where the maritime accident occurred, it had no actual connection with the dispute. Accordingly, it rejected the opposition to jurisdiction. Other PRC maritime courts and higher courts (appeals courts) have also issued similar rulings.

These rulings not only emphasize that jurisdiction must have an actual connection with the facts of the dispute, but further deny the connection between a defendant’s domicile and jurisdiction. There are, however, exceptions. For example, CMA CGM of France raised an objection to the jurisdiction of PRC courts in several cases in which it was the defendant. Its grounds were that the terms on the front of the bill of lading provided that in the event of any dispute, the court in Marseille, France, would have jurisdiction. The maritime courts of Ningbo, Xiamen, Dalian and Tianjin that accepted these cases all held that, firstly, as CMA CGM had indicated the jurisdiction clauses on the front of the bill of lading in red, distinguishing them from the other clauses, it had taken reasonable steps to draw the attention of the plaintiffs, thus satisfying the requirements of the PRC Contract Law in respect of standard clauses.

Secondly, Marseille was the place of registration of the defendant, CMA CGM, and the parties had agreed on the selection of the Marseille court as the competent court, thus satisfying the provisions of article 244 of the PRC Civil Procedure Law (1991). Additionally, French courts had previously acknowledged the jurisdiction clauses on COSCO bills of lading, thus complying with the principle of reciprocity. On this basis, the courts upheld CMA CGM’s opposition to jurisdiction.

Negation of liability invalid

Third, the PRC Maritime Law specifies that terms of bills of lading that could reduce or negate the carrier’s liability are invalid, and certain courts hold the opinion that this provision also applies to jurisdiction clauses. However, there are also opinions that hold that the PRC Maritime Law is a substantive law and, as such, does not apply to jurisdiction clauses, which are procedural in nature. Also, in the hearing of jurisdiction disputes, the substantive issue of whether the liability of the carrier is reduced or released does not arise.

Mutual recognition

Fourth, the PRC court will only recognize the jurisdiction of the foreign court specified on the bill lading if the party opposing jurisdiction submits evidence showing that the foreign court concerned has previously acknowledged jurisdiction clauses on bills of lading that designated a PRC court as the competent court. An example would be the jurisdiction opposition cases mentioned above, in which CMA CGM was involved. The principle of reciprocity is a basic principle of international law, and reference may be made to it when handling questions of
jurisdiction.

No uniformity

In summary, there is no uniformity in the judgment criteria applied by PRC courts in determining the validity of jurisdiction clauses in bills of lading, and the formulation of relevant legislation or the rendering of clear judicial interpretations by the Supreme People’s Court is still awaited.

Fu Benchao is a presiding judge in the fourth civil adjudication division of the Shandong Higher People’s Court. Yu Feng is a senior partner at Dacheng Law Offices.