Case number: 43
Article number: sales convention / 7(2)
Thessaurs issue:
Country of decision: United Kingdom
Year of decision: 1992
Type of decision: Judicial decision

Case 43: MAL 7(2) MAL
Hong Kong: High Court of Hong Kong (Mayo J.) 8 September 1992
Hissan Trading Co. Ltd. v. Orkin Shipping Corporation
Published in English: 1992, Hong Kong Law Digest, H8

(Abstract prepared by Kaplan J.)

The plaintiff, sub-charterer, filed an action against the defendant, ship-owner, for loss of cargo occasioned by the vessel's
sinking. The claim was made under a bill of lading subject to Japanese law, which incorporated the arbitration clause of a
charter-party to which neither the plaintiff nor the defendant were parties. The bill of lading itself contained an exclusive
jurisdiction clause in favour of the Tokyo District Court. At the commencement of the action the plaintiff obtained an injunction
against the defendant with regard to the proceeds of the insurance policy on the vessel.

The defendant applied for a stay of court proceedings on the ground of the arbitration clause, alternatively on the basis of the
exclusive jurisdiction clause, contained in the bill of lading. The defendant also sought to have the injunction set aside.

The court found that, since the bill of lading was not signed by both parties, there was no written agreement to arbitrate
contained in a document signed by both parties, as required by article 7(2) MAL. The correspondence between the parties
was held to be insufficient as article 7(2) MAL precluded the adoption of memoranda being relied upon, which were issued
after the conclusion of the agreement to arbitrate [see, however, A/CN.9/SER.C/ABSTRACTS/2, case 44]. In addition, the
court could not apply the relevant arbitration clause, even if it were a written agreement in the meaning of article 7(2) MAL,
since it was not clear whether the parties had agreed to resolve their disputes through arbitration or through court proceedings
before the Tokyo District Court. In order to apply the arbitration clause the court would have to manipulate the language of the
agreement of the parties in a substantial and, thus, impermissible way. The court dismissed the application for a stay of
proceedings.

The court dismissed also the defendant's application to have the injunction set aside. The court held that there was sufficient
evidence that the main asset of the defendants, the proceeds of the insurance policy on the vessel, might be dissipated, as the
defendant was a one-ship-owning Panamanian company which was unlikely to continue trading after the vessel had sunk.