AMBIGUOUS AND ‘HIDDEN’ JURISDICTION CLAUSE CAN LEAD TO ANTI-SUIT INJUNCTION AND SUBSTANTIAL SALVAGE REWARD

 

Introduction

Salvage rewards awarded in judicial (and arbitral )procedures in England and Wales are substantially higher in comparison with courts in continental Europe, even though the same criteria are applied.[1] London has a reputation for being favourable to salvors. It is therefore not surprising that if after a salvage operation with a useful result, the parties involved cannot agree upon the amount of the salvage reward, the salvors will want to submit their dispute to the courts of England and Wales (or to arbitration in London). Owners are – for the opposite reason – not keen to submit any dispute to the Courts of England and Wales (or to arbitration in London). Nowadays, Dutch salvors frequently include ‘hidden’ jurisdiction clauses in Certificates of Safe Delivery, thereby attempting to make the courts of England and Wales competent to hear the matter and thus trying to secure a substantial salvage reward. This article mainly focuses on the consequences that may result from such a ‘hidden’ jurisdiction clause, in particular the anti-suit injunction, whereby this is considered from a Dutch law perspective.[2]

 

Background

The most widely used salvage contract on a no-cure, no-pay basis in the marine industry is the Lloyd’s Open Form of Salvage Agreement (“LOF”). On 1  June 2024, the Lloyd’s Salvage Arbitration Branch launched an updated edition of the LOF.[3] The LOF stipulates that the remuneration shall be determined by arbitration in London. Owners and their insurers are known with the consequences of the said arbitration clause and often refuse to sign an LOF.

The same applies to other agreements that include a dispute settlement provision that leads to jurisdiction of the Courts of England and Wales (or to arbitration in London). In case of provided salvage services, and without agreeing upon a dispute resolution provision, jurisdiction can often be found in another jurisdiction than England and Wales.[4]

As salvors are aware that Owners and their insurers may refuse to submit possible disputes to the Courts of England and Wales or to arbitration in London – provided that this is clearly communicated – salvors tend to include such a clause in a standard Certificate of Safe Delivery without making Owners and their insurers in any way aware of the inclusion of such a clause. Immediately after the vessel is delivered safely to its Owners, the Master of the vessel is informed by the salvor that the Certificate of Safe Delivery must be signed for administrative purposes. The Master may feel compelled and/or pressured to sign such a Certificate of Safe Delivery. Three cases are currently known to us, in which a Certificate of Safe Delivery was signed and included an ambiguous and ‘hidden’ jurisdiction clause. We suspect that this is just the tip of the iceberg. The jurisdiction clause reads as follows: ‘Any dispute arising out of the services performed by the tug will be settled in London, in accordance with English law.’[5]

This clause is ambiguous. It does not mention whether the dispute must be submitted to the courts of England and Wales or to arbitration. Neither does it refer to London as the exclusive jurisdiction.

Such a clause is ‘hidden’, because it is very unusual for a Certificate of Safe Delivery to contain such wording. A Certificate of Safe Delivery is usually just a record of the completion of the salvage services. However, such a ‘hidden’ clause may have potentially major consequences for Owners, such as an anti-suit injunction order granted by the courts of England and Wales.[6]

 

Anti-suit injunctions in the United Kingdom

The Recast Brussels Regulation is the core instrument unifying private international law at the European Union level.[7] It offers a unified set of rules on international jurisdiction and on the recognition and enforcement of judgments in the EU. One of these rules stipulates that where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established. If Owners bring legal proceedings in the Netherlands first, any other court should stay its proceedings. However, the United Kingdom left the European Union on 31 January 2020 and the Recast Brussels Regulation remained applicable in and for the United Kingdom until the end of the transition period on 31 December 2020. Subsequently, the salvor may now commence proceedings in the Courts of England and Wales as well, despite the fact that legal proceedings were brought in the Netherlands first by Owners. In addition, the salvor may also request an anti-suit injunction against the debtor. Such an order may be granted by the courts of England and Wales and reads as follows:

“The First Defendant is hereby restrained from (in any manner and in any jurisdiction) advancing, commencing, pursuing, continuing, maintaining or assisting in any proceedings, suit or other form of claim (whether legal, arbitral or otherwise) against the Second Claimant relating to the Disputes otherwise than by way of proceedings in London.”

If this order is disobeyed a party may be held to be in contempt of court and may be fined or have its assets seized.

Pursuant to a judgment of the Court of Justice of the European Union of 7 September 2023 , Charles Taylor Adjusting, C590/21, ECLI:EU:C:2023:633, anti-suit injunctions undermine access to justice for persons on whom such injunctions are imposed. As such a Member State (such as the Netherlands) may refuse to recognise and enforce a judgment of a court or tribunal of another Member State on the ground that it is contrary to public policy, where that judgment impedes the continuation of proceedings pending before another court or tribunal.[8]

However, an anti-suit injunction usually has a deterring effect on a party against whom such an injunction is imposed. For Owners it means that vessels e.g. should no longer call ports in the United Kingdom and/or outside the European Union in order not to leave those vessels exposed to an arrest.

 

Comments

Owners and their insurers should be warned. To avoid being involuntarily tied to a jurisdiction or arbitration clause, no documents should be signed by Owners, unless one fully understands and accepts the consequences of such a clause.[9] Owners do good to make their Masters and chief officers who sign certification of safe delivery aware of this.

 

For more information, please contact:

DAAN KOMEN

Telephone          : +31 10 217 77 20

Mobile                 : +31 6 37 47 05 56

Email                     : komen@caland.nl

Whilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not be considered as legal advice and no rights can be derived from it.

 

[1] The United Kingdom and many countries in continental Europe are a party to the International Convention on Salvage, 1989 (https://verdragenbank.overheid.nl/en/Verdrag/Details/003805).

[2] Special compensation remunerations are beyond the scope of this article.

[3] https://www.lloyds.com/resources-and-services/salvage-arbitration-branch/forms-documents.

[4] In which jurisdiction the case can be brought to court is beyond the scope of this article.

[5] The legal effect of such a clause in accordance with English law is beyond the scope of this article. However, the key question appears to be whether a Certificate of Safe Delivery amounts to a binding jurisdiction agreement. This may include consideration of: (1) whether it was intended to be a legally binding agreement; (2) whether the Master had authority to enter into a jurisdiction agreement; and (3) whether it amounts to a jurisdiction agreement and, if so, what its terms are.

One may also ask whether the Courts of England and Wales should refuse to exercise its jurisdiction on the basis that England and Wales is not the appropriate forum. There is little or no connection between the dispute and the jurisdiction of the courts of England and Wales other than the terms of the Certificate of Safe Delivery.

[6] In the matter at hand the High Court of Justice, Business and Property Courts of England and Wales, Admiralty Court (KBD) (https://www.judiciary.uk/courts-and-tribunals/kings-bench-division/work-3/).

[7]Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation) [2012] OJ L351/1.

[8] Case C-590/21 Charles Taylor Adjusting [2023].

[9] It is a common misconception that a signed document would be required for a salvor to claim a salvage reward.