The Legal Effect Of The Arbitration Clause Of The Charterparty Incorporated To The Bill Of Lading

With the development of globalization in international trade, world economyand shipping, the disputes generated from which has increased significantly andnearly every dispute thereof is related to the bill of lading. The Charterparty and thebill of lading being crucial legal documents in voyage charter shipping, it is commonto incorporate the Charterparty clauses into the bill of lading. However, for longneither theorists nor practitioners have agreed on the effect of such incorporationclause. This article will discuss the effect of the arbitration clause incorporated in thebill of lading based on analysis of relevant theories, referring to foreign cases andstudies on Chinese legislation and practice.Arbitration has become the most important dispute resolution in internationalmaritime activities because of its flexibility, independency and certainty. In voyagecharter, the shipper usually incorporates the clauses when issuing the bill of lading toavoid being binded by different legal documents in one voyage. Therefore, the bill oflading usually incorporates the arbitration clause in the Charterparty. However, due tothe special nature of the bill of lading and the arbitration clause being a standard termwhich relates to an uncertain party, the effect of incorporating the arbitration clauseinto a bill of lading has always been controversial.As to this issue, this article analyzes the incorporation clause first. U.K. and theU.S. utilize totally different standards in determining the effect of the incorporationclause. Under U.S. law, mere general incorporation clause is enough to incorporatethe arbitration clause successfully. English law does not recognize generalincorporation. Under English law, to successfully incorporate the arbitration clause to the bill of lading, the incorporation clause must specially refer to the arbitration clause.When the arbitration clause incorporated into the bill of lading conflicts with otherterms of the bill of lading, Judges and arbitrators have started to investigate theparties’ true intent at the time they entered into the agreement and to coordinate theeffect of all terms in the bill of lading as much as possible.After being incorporated, the arbitration clause has become a part of the bill oflading. As long as the bill of lading holder acknowledges the content of the arbitrationclause incorporated into the bill of lading, the arbitration clause legally binds theholder. As to the insurance subrogation claimant who stands at the same legal positionas the bill of lading holder, the arbitration clause binds him too.This article sorts out the relevant laws and regulations in China in the last part ofthis article and selects five typical official replies of the Supreme People’s Court tothis issue in the past10years. The articles points out that there is a significant blankin the legislation to this issue and the standard applied by the Supreme People’s Courtis confusing. Based on this article’s finding and China’s legal practice, this articleproposed advice to China on this issue: first, Chinese law shall follow the moderntrend in international shipping, recognizing the effect of arbitration incorporated intoa bill of lading. Second, the legislation shall improve its standard in determining theeffect of the arbitration clause incorporated into the bill of lading. Third, the SupremePeople’s Court shall strictly implement the report system in enforcing foreignarbitration awards. Fourth, the Supreme People’s Court shall unify the determiningstandards.