Arnold Van Steenderen, Van Steenderen Mainport Lawyers, Rotterdam
A Himalaya clause is a contractual provision intended to confer a benefit on an entity that is not a party to that contract.[1] The name of the clause is derived from the English case of Adler v. Dickinson, in which the English court decided that it was possible for the P&O Liner “Himalaya” to incorporate into its ticket conditions a clause excluding its employees from liability.[2] Outside of common law jurisdictions the effectiveness of such a clause is widely accepted as well.[3] The clauses are (almost without exception) included in Bills of lading issued by carriers of goods by sea, but may also be found in charterparties.
In the context of carriage of goods by sea, a contractual carrier regularly does not in fact carry the goods by sea, but instructs other carriers to do this (e.g. when a NVOCC[4] is instructed to transport goods, this will necessarily be the case). The main aim of a Himalaya clause is to ‘wholly exempt a contractual carrier’s or other contracting party’s servants, agents or subcontractors from liability under a contract and / or to confer on such servants, agents and subcontractors all the rights, limits, defences and exemptions from liability enjoyed by the contractual carrier under that contract’.[5] However, another (often equally important) aim of a Himalaya-clause may be to channel litigation by making sure that claimants will always be bound to a jurisdiction or arbitration clause in the Bill of Lading issued by the contractual carrier, regardless of whether claimants sue the contractual carrier or the actual sub-carrier of the goods. This renders resolution of disputes more convenient and predictable. However, it is a matter of interpretation whether the Himalaya clause actually confers the right to invoke an arbitration clause in the contract on a sub-carrier. Diligent drafting of a Himalaya clause is therefore important. In a recent case before the Rotterdam Court, the importance of including an express provision to the effect that sub-carriers may invoke an arbitration clause is highlighted.
Court of Rotterdam, 18 March 2015 (“Rio Taku”)[6]
Westfalia Marketing B.V. (the Netherlands, hereinafter: “Westfalia”) had received the Bill of Lading as consignee of a shipment of avocados from Callao, Chile to Rotterdam, The Netherlands on board of the m/v “Rio Taku”. LCL Group (Chile, hereinafter: “LCL”) was the contractual carrier, issuing the Bill of Lading, whereas Mitsui O.S.K. Lines (Japan, hereinafter: “Mitsui”) had actually carried the avocados to Rotterdam. Westfalia proceeded to sue LCL as well as Mitsui before the Court of Rotterdam. In the proceedings, Westfalia asserted that LCL and Mitsui wereliable for damage to the avocados on delivery in Rotterdam and based its claim versus Mitsui on tort law.
However, in the Bill of Lading an arbitration clause in favour of arbitration in London was included:
“39. ARBITRATION CLAUSE
Any dispute arising out of or relating to this Bill of Lading shall exclusively be referred to Arbitration in Londen (sic) before a panel of three Arbitrators, one Arbitrator to be nominated by the Carrier and the other by the Merchant, and a third by the two so nominated. (…) The proper and exclusive law of this Bill of Lading shall be English law.’
Mitsui therefore argued that the Court of Rotterdam did not have jurisdiction to hear the case against it. Mitsui asserted that Westfalia was also bound by the arbitration clause in the Bill of Lading issued by LCL because the Bill of Lading also contained an Himalaya clause, which read:
“4. SUB CONTRACTING
4.2. Every Employee, agent, sub-contractor and independent contracter (sic) of the Carrier (…) shall be a beneficiary of this Bill of Lading and shall be entitled to all defences, liberties, exemptions and immunities from and limitations of liability which the carrier has under the provisions of this Bill of Lading and under any other applicable national law and as such may protect themselves against any liability whether or not arising out of negligence on the part of such persons, companies or other entities, and in entering into this contract, the Carrier, to the extent of these provisions, does so not only on its own behalf but also as agent and trustee for each of the persons, companies or other entities described above, all of whom shall be deemed parties to the contract evidenced by this Bill of Lading.”
In the quoted Himalaya clause, jurisdiction and arbitration are not explicitly mentioned. Mitsui would, however, be entitled to “all defences, liberties, exemptions and immunities form and limitations of liability”. Does this also mean that Mitsui under these circumstances can successfully invoke the arbitration clause?
The Court of Rotterdam ruled that the clause merely confers upon Mitsui the right to invoke substantive defences. This means that the arbitration clause is not valid between Mitsui and Westfalia as an arbitration clause does not benefit merely one party. It is a mutual agreement under which both parties agree which tribunal shall have jurisdiction. Westfalia may therefore sue Mitsui before the Court of Rotterdam because Mitsui cannot invoke the arbitration clause (and this court was competent to hear the case based on ruled of Dutch private international law).[7]
Many common law lawyers will recognize that in its judgment, the Court of Rotterdam followed the ruling of the Privy Council in The Makhutai.[8] In that case a sub-charterer tried to rely on a jurisdiction clause conferring jurisdiction on the Indonesian courts. However, the Privy Council ruled that the Himalaya clause at hand, given its function ‘to prevent cargo owners from avoiding the effect of contractual defences made available of the carrier by suing in tort persons who perform contractual services on the carrier’s behalf’, did not cover jurisdiction clauses.[9] An arbitration clause is also not such a contractual defence.
The Rio Taku case once more underlines the importance to explicitly include the right of sub-carriers to enforce an arbitration clause in the Bill of Lading. The BIMCO Himalaya model clause, for example, explicitly addresses the issue of arbitration:
“Without prejudice to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty contained herein (other than Art III Rule 8 of the Hague/Hague-Visby Rules if incorporated herein) and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Carrier or to which the Carrier is entitled hereunder including the right to enforce any jurisdiction or arbitration provision contained herein shall also be available and shall extend to every such Servant , who shall be entitled to enforce the same against the Merchant.”
We expect the Court of Rotterdam would have no problem in assuming jurisdiction in the case at hand, if a BIMCO Himalaya clause would have been included in the Bill of Lading issued by the contractual carrier.
NOTES:
[1] As defined by BIMCO in its Special Circular, no 6., 17 September 2010, available at https://www.bimco.org/Chartering/Special_Circulars.aspx.
[2] Adler v. Dickinson, The Himalaya [1954] 2 Lloyd’s Rep 267, [1955] 1 QB 158.
[3] Albeit different legal theories justify the effectiveness of Himalaya clauses, eg. by agency or by a general accepted stipulation in favour of a third party.
[4] Non Vessel Operating Common Carrier.
[5] BIMCO, Special Circular, note 1.
[6] Rechtbank Rotterdam, 18 March 2015 (ECLI:NL:RBROT:2015:2617).
[7] The Court of Rotterdam ruled that European private international law with regard to jurisdiction was not applicable in this case, as both defendants, LCL and Mitsui, did not have domicile within the European Union. For EU law on the binding nature of jurisdiction clauses in bills of lading, see i.a. ECJ 9 November 2000, C-387-98 (Coreck/Handelsveem).
[8] It is even clear that The Court of Rotterdam literally translated and adopted part of the reasoning in The Makhutai, especially with regard to the nature of an arbitration clause not only benefiting one party, but conferring mutual rights on both parties to a contract.
[9] Under common law, the outcome may be different when the sub-carrier would invoke a jurisdiction or arbitration clause in its own contract with the carrier and would qualify as a sub-bailee. The sub-carrier may invoke the terms of the contract of sub-bailment, which may contain an arbitration clause. See K H Enterprise v Pioneer Container, The Pioneer Container 1994 [AC] 324. Under Dutch law this could be more problematic.