An Introduction To The Hong Kong Basic Law
Stay of Proceedings - Application of Warsaw Convention, Choice of Law and Forum Considerations
Ship Finance: Financing of Hong Kong Flag Vessels
Security for Costs
Changes to the HK Arbitration Rules
Establishment of Trading Offices in Shanghai
Stay of Proceedings -
Application of Warsaw Convention, Choice of Law and Forum Considerations
(DFS Trading Limited v Swiss Air et Al - 7th January 1997)
The Hong Kong High Court demonstrated earlier this year the care it will take when considering express choice of law clauses and the application of an international convention when deciding whether to maintain jurisdiction or stay proceedings in favour of another.
The Facts
The 1st Plaintiff ("P1") and 2nd Plaintiff ("P2") were, respectively, a Swiss shipper and Hong Kong consignee of goods air freighted from Switzerland to Hong Kong. The goods were discharged into an airport terminal warehouse pending final delivery. Whilst in the warehouse, the goods were wrongly released to a third party who had presented a shipment release form taken from the 5th Defendant ("5D")'s offices. The contracts of carriage were evidenced by 4 airwaybills issued by the 4th Defendant ("4D"), a Swiss carrier, and named P1 as shipper and P2 as consignee. Proceedings were commenced against three other defendants although it appears the action was only being pursued against 4D and 5D, its Hong Kong subsidiary.
The Arguments for a Stay
After 4D and 5D were served, 4D applied to stay the Hong Kong proceedings in favour of Switzerland. 4D argued: (1) the contracts of carriage were governed by the General Conditions of the Swiss Freight Forwarders Association ("GCSFFA") which provided for Swiss exclusive jurisdiction and Swiss Law; (2) the cargo was stolen after being discharged from the aeroplane, and thus the contract of "carriage by air" had already concluded. As Article 18 of the Warsaw Convention ("WC") defined "carriage by air" as being the period when the cargo was in the charge of the carrier, this period had ended and so the WC did not apply.
If 4D was correct and the WC did not apply to the carriage contract, the implication was that the Plaintiffs could not rely on Article 28 to permit them to bring the claim "at the place of destination" (Hong Kong) and the contracts were therefore subject to Swiss exclusive jurisdiction as provided for in the GCSFFA terms.
The court found that the carriage contracts were clearly governed by the WC by virtue of the Carriage by Air (Overseas Territories) Order 1967. Although the airwaybills expressly incorporated the WC they made no express reference to Swiss law or jurisdiction. The court also agreed that Article 18 of the WC, while presenting a possible defence, did not exclude the application of the WC as a whole. Therefore the Plaintiffs could rely on Article 28 to bring an action at the destination. While not strictly relying on Article 32 of the WC, the court noted that it could solve the difficulty caused by the GCSFFA terms providing for Swiss jurisdiction, as it renders null and void any agreement seeking to exclude the WC jurisdictional rules.
Having been unsuccessful in obtaining a stay on contractual grounds, 4D tried to argue "forum non conveniens". However the Court was not satisfied that 4D could show that Switzerland was a "natural or appropriate forum for trial" ("Spiliada Maritime Corporation v Cansulex Ltd"). Whilst the contract was entered into in Switzerland, the alleged breach clearly occurred in Hong Kong and the witnesses were in Hong Kong. Also, as there were three other defendants, the court wished to avoid a multiplicity of trials in different jurisdictions. To stay the proceedings in respect of 4D ran the risk of a different decisions in the two countries which would increase costs and inconvenience.
4D's application for a stay of the Hong Kong proceedings was dismissed.
Point to note
This decision highlights a claimant's alternatives when selecting jurisdiction under the WC. Article 28 offers four alternatives: where (1) the carrier is ordinarily resident (2) the carrier has its place of business (3) the carrier maintains an establishment through which the contract was made; and (4) the cargo was destined.
Having determined that the operation of the WC permitted the plaintiffs to commence proceedings in Hong Kong, the only potential basis for a stay was on "forum non conveniens" grounds. As the facts bear out, this ground failed. What is interesting is that the Hong Kong court was prepared to follow the English Court of Appeal decision in "Milor S.R.L & Ors. v British Airways P.L.C." (1996) which held that where the Plaintiff makes a choice of venue or forum under Article 28, the court should not interfere by imposing an alternative venue. If this court of appeal decision remains good law (as the court here was prepared to find), it indicates that in contracts of carriage where the Warsaw Convention applies, and more particularly Article 28, the prospects of bringing a successful application for stay on forum non conveniens grounds has been effectively curtailed.
|