INTRODUCTION

I am honoured to be asked to deliver this address in memory of Cedric Barclay. I did not know Mr Barclay personally but from all accounts, and the material I have read, he can truly be described as a great maritime arbitrator.

He would certainly appear to have been a man of extraordinary all round talent who served maritime arbitration with distinction for many years. I have read that the reported references to his awards in the Law Reports, in a period of fifteen years, numbered 139, with as many as fifteen in judgments by Lord Denning – a real testimony to his quality and popularity as arbitrator.

Cedric Barclay had the unique qualities of wit and wisdom necessary to dispense justice in any forum. He also had "hands on" experience of the shipping business and founded a shipping line.

I cannot claim this pedigree but I have practised in the maritime area for my whole profession life and having moved from the cut and thrust of the Bar, I now find real challenge and attraction deciding the increasing number of maritime cases which are coming before our courts.

ARBITRATION IN THE ASCENDANT

As we survey the scene at the end of the twentieth century, private justice in the form of arbitration and mediation is very much in the ascendant. The worldwide trend, whether in legislation, or in the general approach of the courts, is to support arbitration by limiting challenges to awards and holding parties to the promise to arbitrate which they have made in their contract.

Arbitral centres around the world are acutely conscious of the need to offer fair, streamlined process, and efficient procedures to justify the faith placed in them by courts and legislatures.

While uniformity of approach is a long way off, many countries have now adopted legislation based on the UNCITRAL Model Law on International Commercial Arbitration, which will enhance the course of certainty and quality in arbitration.

New Zealand, by way of example, has followed this trend and passed legislation in the form of the Arbitration Act 1996 which has the effect of strengthening arbitration’s standing. Times have changed. Not long ago arbitration law was arcane and the courts often not particularly supportive. Now the wheel has, or may be turning.

The international developments are extremely positive. It is a great advantage to the international maritime community that we have such a focus on arbitration and efficient resolution of disputes.

SOME CONCERNS

However, I entertain some concerns at the way in which the passion for arbitration, and the drive to enforce arbitration clauses, may lead to an approach which favours enforcement of bill of lading arbitration clauses against third parties in all circumstances, without necessarily analysing and drawing a distinction between the way in which the third party is to be bound.

In the case of assignment of a bill of lading where the assignee has the ability to ascertain the terms of the bill, and to discover the existence of an arbitration clause, it is difficult to say that the assignee should not be bound.

It is harder to justify binding a third party to a bill of lading, where by virtue of sub-bailment principles a shipper finds that his freight forwarder has contracted ocean carriage on a bill of lading which includes an arbitration clause.

In this kind of case, it is unlikely in the extreme that the shipper has even heard of, let alone understood, the concept of authority and sub-bailment, and it can be said that there is no, or much less opportunity for the shipper to know in advance the proposed carriage terms.

Recent dicta, particularly those of Lord Goff in The Mahkutai,¹ suggest a willingness on the part of the Courts to move towards a general approach supporting the binding nature of bill of lading terms on the grounds of commercial pragmatism rather than established technical exceptions to privity.

Such a general approach, while commercially sensible, raises the same concerns in relation to third parties if it is to be applied to bill of lading arbitration clauses.

This trend may serve the greater good of streamlining maritime dispute resolution. However, it may present the danger that, in some cases, third parties may find themselves bound by arbitration provisions and denied access to the courts without having had any real input to the agreement to arbitrate.

An influencing factor in all this is the cost of achieving justice for the parties. The dollars are a real issue to a small trader at the bottom of the South Pacific who may have to arbitrate in a distant expensive arbitral forum. They are also significant for an owner in the context of the cost of resolution in different jurisdictions as opposed to a streamlined process in one centre under its bill of lading clause.

I believe that the problems can be overcome with a little flexibility and foresight. First let us survey the positive developments in arbitration.

THE INTERNATIONAL TRENDS

The trends are well established. You may be familiar with the general increase in international dispute resolution, much of it by way of arbitration. I understand that large firms in major centres around the world have teams of lawyers (often with a significant Kiwi component) devoted to this work. They are specially trained and experienced in international arbitration in any of the major centres that deal with this work.

International Agreements

Arbitration is a particularly popular method of resolving international disputes in large scale projects. Large and complicated international investment projects, international banking agreements, any number of large scale construction agreements, all regularly provide for resolution in an arbitral forum.

More and more we see academics writing of a new lex mercatoria² (although this concept is something of an elusive will-o’-the-wisp) as the choice of law clauses in these international agreements are denationalised.³ Arbitration is often seen as one of the only ways, in fact, in which these agreements can be put into effect. Arbitration has the necessary flexibility to deal with the dispute in the manner agreed by the commercial parties.

The arbitral resolution of disputes has been treated as a viable and sensitive alternative to long court lists, and the expensive court resolution of disputes in most jurisdictions. Increasingly court rules encourage and facilitate ADR and arbitration. I should say that the case management of disputes in the courts is now offering more streamlined and efficient court adjudication of disputes.⁴

The promotion and recognition of arbitration is, however, based on the concept of agreement between parties. In any consideration of arbitration by the courts or legislature, special prominence has traditionally been given to the fact that the parties have agreed to the bypassing of courts in favour of their chosen arbitrator or arbitrators.

Arbitration clauses are upheld because the parties to them have freely accepted the benefits that arbitration can bring. The parties have accepted any limits that may apply in their chosen alternative forum. This supportive approach is present in the New Zealand cases as it will no doubt be in most jurisdictions of the world.⁵

Enforcement of Awards

Hand in hand with the increasing popularity of arbitration, has come a recognition that the end product of any arbitral process must be efficient enforcement procedures. So internationally we see the increased acceptance of the UNCITRAL Model Law, and acceptance of the New York Convention on the Recognition and Enforcement of Arbitral Awards. In short, we have increasing international uniformity of procedural approach, and also in relation to the enforcement of awards.

Some countries have embraced these developments with more willingness than others. Some Civil Law countries, for instance, make the enforcement of an award based on "no law" possible.⁶ Others show more restraint, and include wider grounds for non-recognition of judgments. New Zealand, as might be expected, sits somewhere in the middle of this spectrum.⁷

Like many small trading nations, New Zealand has been active in accepting international Conventions. Often, our size and political system makes for rapid acceptance of international agreements. I suspect that our size also sometimes means that we cannot play a full international part in every area of the law. On occasions decisions about whether or not to enter into international agreements are made for us, when our major trading partners choose to adopt Conventions.⁸ Overall, I think our record of activity in this area is one to be proud of.

As I have noted, like many other countries, New Zealand now embraces and enshrines the arbitral settlement of disputes. The New Zealand Arbitration Act 1996 provides for mandatory stays of proceedings when an international arbitration clause has been agreed between the parties.⁹ In even the simplest disputes, where a local resolution may well be easy and affordable, parties are held to their agreement to arbitrate, often when this involves an arbitration on the other side of the world.

Overall, I find these developments particularly encouraging. With many arbitral centres committed to ever more streamlined and economic process, the goal of dispensing justice rapidly and efficiently for the maritime community is much more likely to be met.

THE ENFORCEMENT OF ARBITRATION CLAUSES IN THE MARITIME CONTEXT

In the context of maritime law, arbitration has long been favoured as a method of dispute resolution. Most shipping contracts contain some form of arbitration clause usually agreeing to arbitrate any dispute arising under the contract in one of the major centres such as London, New York or Paris. Bills of lading are, as we are all aware, at the centre of the international carriage of goods. Those documents often contain an arbitration or exclusive jurisdiction clause.

For this audience I do not need to give a seminar on the nature of bills of lading. Suffice to say that a bill of lading has unique features which, by their nature, push at the boundaries of the doctrine of privity of contract. Legislation, in the form of the various Bills of Lading Acts,¹⁰ to provide for the legal effectiveness of bills of lading came after merchants had used bills of lading for centuries in a manner which did not follow basic contractual principles but worked in the commercial sense.

The role of the bill of lading and its central position in regulating rights and obligations in the international carriage of goods has seen courts around the world adopting various methods to enforce the rights and obligations contained in the bill of lading by and against third parties. Initially the cases were about exceptions and immunities. The cases have recently extended to terms like exclusive jurisdiction clauses. The same arguments for the enforceability of arbitration clauses have been made before New Zealand courts.

Over the years we have seen the development of various exceptions to privity of contract:

· the Brand v Liverpool contract, the implied contract which can arise when a party takes delivery under the bill of lading;

· the Himalaya cases, which allow third parties like stevedores to have the benefit of bill of lading exceptions and immunities; and

· latterly the sub-bailment on terms cases, which impose the terms and conditions of the bill of lading on parties who have been held to consent to subsequent bailments of goods.

I should also note the more difficult Elder Dempster decision which has found new life in the current environment, and may allow a party who is not party to the bill of lading to rely on its terms and conditions on a bailment argument.

As I have said, recent decisions seem to be moving away from a strict contractual analysis to one based on the holding and possession of goods on terms contained in a bill of lading. Agreements are being more readily inferred from a party’s conduct in accepting goods covered by a bill.

All the exceptions push at the confines of privity of contract. They bind parties to terms and conditions, and are driven, I would suggest, by the commercial considerations which provide the impulse to make bill of lading provisions binding as widely as possible.

There now appears to be a more general and open movement towards accepting that in the context of a maritime venture, obligations and rights should be binding for reasons of commercial policy, rather than requiring parties to invoke particular legal exceptions to privity. The Courts have not gone that far as yet, and technicalities still decide the cases, but the trend, I would suggest, is clear.

In the recent decision of The Mahkutai,¹¹ we have the most general statement of these developments from the Privy Council yet. In Lord Goff’s opinion:¹²

Though these solutions [ie devices to overcome the doctrine of privity] are now perceived to be generally effective for their purpose, their technical nature is all too apparent; and the time may well come when, in an appropriate case it will fall to be considered whether the Courts should take what may legitimately be perceived to be the final, perhaps inevitable step in this development, and recognise in these cases a fully fledged exception to the doctrine of privity, thus escaping from all the technicalities with which Courts are now faced in English law.

It has to be acknowledged that the focus of The Makhutai is a jurisdiction clause. However, the principles involved seem equally, if not more, applicable to an arbitration clause.

At present, the enforcement of bill of lading clauses is constrained by technical legal argument which seems certain to promote uncertainty, and further legal cost and expense. I think it very likely that the technical construction arguments that succeeded in The Makhutai could well be addressed by carriers reframing their Himalaya clauses.

The answer propounded by Lord Goff, of a general broad exception, has commercial attraction, and it seems certain that it will be pressed upon the Courts around the Common Law world. Such an approach would remove the technical limits on sub-bailment arguments which are exemplified in The Pioneer Container.

A generalised approach of the kind put forward by Lord Goff may catch a wide range of parties, ranging from those who have "bought" the bill of lading, to those who are faced with the bill of lading terms although they do not claim under the particular bill on which a carrier seeks to rely.

I am inclined to support the application of a general principle which sees parties bound by reasonable bill of lading terms where they are seeking to take the benefit of the bill of lading, but any general commercially based exception to privity will naturally be invoked more widely than that.¹³

There now seems a reasonable prospect that the argument will be made that all reasonable bill of lading terms including an arbitration clause¹⁴ should bind any party with an interest in the maritime venture. This, notwithstanding that these parties stand outside the contractual framework, that they do not fall within any established exception in the cases, and they are not within any legislation governing the transferability of the bill of lading.¹⁵

As I observed in the introductory section to this address, there is, I believe, a need to be aware of the fact that if the exceptions keep expanding, and a general approach is adopted, then we may see arbitration clauses enforced against third parties who cannot be said to have truly consented to arbitration, particularly the sub-bailment category. The issue is whether that is satisfactory or whether the overall interests of justice require more flexibility and discretion.

Of course, the consequences of being "caught" by an arbitration clause, in countries that have adopted the New York Convention, will often be a mandatory stay of proceedings. The party so prevented cannot then pursue a claim before its national courts.

This is an area in which care needs to be taken. Courts and legislatures may well find the general commercial arguments in favour of enforcing bill of lading terms seductive, but we must be careful to consider the rights of individual claimants to have access to Courts.¹⁶

I propose to illustrate my concerns on a practical level by referring to a New Zealand case where the carrier sought to stay a claim brought in the New Zealand courts in favour of London arbitration. Such cases may well be reasonably common around the world, although it would appear that they are not frequently litigated.