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Implementation of "Himalaya clause" by Israeli Court

by Roy Gilad (Grossman Cordova Gilad & Co. Law Offices)

In August 2016, a decision was rendered by the Haifa District court, as Admiralty Tribunal, according to which a foreign jurisdiction clause in a bill of lading applied to a third party that was not a party to the bill of lading.

The clause in the bill of lading expanding the defenses of the carrier to third parties is called the "Himalaya" clause, named for a vessel that was a party to a legal proceeding that discussed this issue at the English court many years ago.

The various bills of lading usually include clauses applying the carrier's defenses to third parties operating on behalf of the shipper in connection with the shipment, such as ship agents and secondary shippers. Along the years, various courts worldwide discussed the question of whether third parties were entitled to enjoy the defenses of the carrier that had issued the bill of lading, including material defenses such as limits of liability and time bar period, and procedural defenses such as foreign jurisdiction clause. The Courts worldwide usually apply the carrier's defenses to third parties related to the carriage, provided the bill of lading specifies a clear clause that so determines.

The matter at hand involved an in rem claim by wood importers against a vessel, submitted to the Admiralty Court in Haifa due to damage caused to wood cargo during marine carriage to Israel. The ship owners had provided guarantee for release of the vessel and submitted a motion for dismissal of the claim due to foreign jurisdiction clause in the bills of lading according to which the cargo had been shipped to Israel.

The ship owners had chartered the vessel to a company that sub- chartered the vessel to another company ("the Sub- charterer"). The Sub- charterer issued the bills of lading for carriage of the cargo to Israel. The ship owners argued that they were entitled to rights that applied to the Sub- charterer according to the bill of ladings of the Sub- charterer, including a jurisdiction clause according to which all claims regarding carriage of the cargo would be heard exclusively by the competent court in London and according to English law.

At the first stage, the court set forth that the jurisdiction clause in the bill of lading had been worded as an exclusive jurisdiction clause referring the parties to the bill of lading to litigation before the court in England. At the second stage, the court discussed the question of whether the jurisdiction clause also applied to the ship owners that were not a party to the bills of lading and were not mentioned therein.

The court examined the terms of the bill of ladings and set forth that the provisions of the bill of ladings applied the defenses of the Sub- charterer under to the bill of ladings also to third parties connected to the carriage, including the ship owners. The court determined that a person establishing a claim against the ship owners based on the bills of ladings issued for the carriage could not argue that the terms such the bill of ladings did not apply to the ship owners. The court also set forth that implementation of the jurisdiction clause on the ship owners could also be based on the "Himalaya clause" in the bill of lading, which applied the defenses of the Sub- charterer to the ship owners as well. In this context, the court set forth that the "Himalaya clause" could also apply to third parties material defenses of the carrier, such as limits of liability and time bar period, and procedural defenses such as a foreign jurisdiction clause.

The court distinguished an old ruling of the Israeli Supreme Court from the early 1970s according to which a bill of lading could not include clauses providing procedural rights to third parties, and determined that this court case did not apply to our case, inter alia, due to the institution of "a contract to the benefit of a third party" in the Israeli Contracts Law from 1973. In addition, the court noted that the ruling presented thereto dealt with petitions of ship agents from Israel to delay proceeding while relying on a jurisdiction clause referring to a foreign court, while this case involved owners of a foreign vessel seeking the enforcement of the jurisdiction clause. The court ruled, in this context, that in contrast to the ship agents in Israel, the foreign ship owners (as the Sub- charterer) had a legitimate interest to concentrate all litigations in one jurisdiction.

Eventually, after examining the terms of the bills of ladings, the court set forth that the terms of the bills of lading provided the ship owners with procedural rights according to the bills of ladings, and thus instructed that proceedings in this case be delayed.

REF: Case no. 36926-08-15 (Admiralty Court in Haifa) CONSTRASTOCK OY v. The Ship Thor Horizon.

October 21, 2016

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