It is common practice in the international maritime transport of goods for shipping lines to offer their own general conditions of contract, and for the rest of the actors in the sector to adhere to them. Therefore, the consignees, receivers of the goods carried under the bill of lading (B/L), do not in practice have the capacity to negotiate the terms of these documents; but by acquiring the bill of lading, they succeed to the shipper’s rights and obligations. The clauses conferring jurisdiction to resolve possible disputes that may arise between the parties are also included in these general conditions.

Law 14/2014, of 24 July, on Maritime Navigation (LMN), has tried to protect these consignees by drafting articles 251 and 468 of the LMN. Article 251 of the LMN provides that the acquirer of the bill of lading is also the acquirer of all the rights and actions of the transferor over the goods, except for those referring to jurisdiction and arbitration agreements, which should be adjusted to the provisions of Article 468 LMN, which establishes that clauses of submission to foreign jurisdiction or arbitration abroad that have not been negotiated individually or separately will be null and void.

This is the issue raised in our post ‘Scope of the international jurisdiction clause in Bills of Lading’ of 14 May 2024. Following the judgment of 25 April 2024 of the Court of Justice of the European Union (CJEU) in cases C-345/22 to C-347/22, resolving the questions referred to in a preliminary ruling by the Provincial Court of Pontevedra, it is now the turn of the mentioned court to deliver its judgment.

Since the adoption of the LMN, the Provincial Courts have interpreted differently the reference made by the CJEU in the case of ‘Coreck Maritime GmbH v Handelsveem BV and others (C-387/98)’ to the ‘applicable national law’ of the State hearing the dispute in relation to the enforceability of these clauses against third parties:

• The law governing the substantive validity of the jurisdiction agreement, which according to Article 25(1) of the Brussels I bis Regulation is the law of the State whose courts have been designated by the parties, including the rules of private international law (cf. Article 20 of the Regulation).

• The national law which, according to the rules of private international law of the forum, governs the legal relationship whose succession is in dispute.

• The lex fori (the domestic law of the State before whose courts the action is brought).

In this respect, and as the CJEU did in its response to the questions raised, the Provincial Court of Pontevedra is clear in stating that ‘when Community case law refers to domestic law to judge on the transfer of rights in the security, that domestic rule is not necessarily Art. 251 LMN, but the reference must be understood as being made to the rules of private international law’. Therefore, according to the Provincial Court of Pontevedra in its ruling, we must look for the applicable conflict rule. In accordance with the facts in dispute, whether applying the Rome I Regulation or art.10.3 Spanish Civil Code (even in application of arts. 100, 102 and 165 of Law 19/1985 of 16 July 1985 on Exchange and Cheque), conflict rules lead to the same point, and not to Spanish law; in the contested case it would be Peruvian substantive law that would be applicable to the enforceability of these clauses. However, in these cases, the parties did not prove the content and validity of the foreign law, so the court understood that it should refer to domestic law according to the general rules contained in art.33.3 of Law 29/2015, of 30 July on International Legal Cooperation in Civil Matters. It is thanks to the lack of proof of foreign law that the Provincial Court of Pontevedra applies the Maritime Navigation Act. This was essential for the Court of Justice of the European Union to be able to rule on the second question, i.e. whether inserting additional validity requirements for the effectiveness of jurisdiction clauses in bills of lading is contrary to the Brussels I bis Regulation.

And in this sense, the Provincial Court of Pontevedra upholds the thesis of the CJEU, when it rules: the principle of the primacy of EU law makes it necessary to invalidate the last paragraph of the provision, which provides for an exception to full subrogation in respect of jurisdiction and arbitration clauses. Excluding that rule, Community legislation and case law must be applied, which admits the provision of the plaintiff’s consent in the form in which it is set out in the title (cf. art. 35.1 [sic] of the Brussels I bis Regulation), thereby overriding the requirement that the recipient addressee, holder of the knowledge, express its consent individually and separately’. In other words, EU Member States cannot add in their substantive law additional requirements to those foreseen by Art. 25(1) of the Brussels I bis Regulation.

Thus, the Provincial Court of Pontevedra affirms the effectiveness against third parties of the clauses conferring jurisdiction contained in the B/L and declares the lack of jurisdiction of the Spanish courts to hear the dispute, in favour of the court of the United Kingdom specified in the clause. Therefore, the clause will be enforceable against the third party holder of the B/L provided that it has been recognised as valid in the relationship between the shipper and the carrier that concluded the contract and that the third party has been subrogated to all the rights and obligations of one of these original parties, in accordance with the applicable national law, determined by virtue of the rules of private international law of the Member State hearing the dispute. Where the clause grants jurisdiction to the courts of an EU state, the manner in which consent is given is not governed by national law as long as it departs from the formal and substantive validity requirements of Art. 25 BIT-bis).  The LMN, as currently drafted, will only become operational when the Brussels I bis Regulation or an international treaty standard does not apply.

The resolution of the question undoubtedly limits the application of Article 251 of the LMN.

In the case at hand, which occurred in pre-Brexit times, the UK was still a member state of the EU, so the form of consent was that of Art.25 RBI-bis, as it is to any jurisdiction clause in favour of European courts. However, after Brexit, the jurisdiction clause in favour of UK courts, which is very common, would no longer be subject to the aforementioned European regulation and could therefore be subject to the regime of the Maritime Navigation Act. Without its individual and separate negotiation it would not be recognised, like any other clause in favour of non-European courts or arbitration clauses.

THE COURT OF JUSTICE OF THE EUROPEAN UNION RULES THAT SPANISH LAW CANNOT IMPOSE GREATER REQUIREMENTS FOR THE VALIDITY OF INTERNATIONAL JURISDICTION CLAUSES INSERTED IN BILLS OF LADING IN FAVOUR OF EUROPEAN COURTS

EXTRACT: The recent Judgment of the Court of Justice of the European Union (CJEU) rules that the Spanish Law requirement of a separate and individual negotiation of jurisdiction clauses in favour of European courts contained in a Bill of Lading contradicts European Regulations and adds that Spanish courts should not apply the Maritime Navigation Act in those cases as it would be in breach of the European Union Regulation 1215/2012, better known as the Brussels Ia Regulation.

CONTENTS:

The validity and application of jurisdiction clauses inserted in bills of lading has always been a subject of controversy in Spanish litigation relating to matters of carriage of goods by sea.

With regard to jurisdiction clauses that confer jurisdiction to courts of European Union member states, to which the European Union Regulation 1215/2012, better known as the Brussels I bis Regulation, applies, jurisdiction clauses were generally accepted by Spanish courts until the Maritime Navigation Act 14/2014 came into force.

Article 468 of the Maritime Navigation Act requires that, without prejudice to the provisions of the international conventions in force in Spain and the rules of the European Union, jurisdiction clauses must always be negotiated individually and separately for them to be considered valid. In addition, Article 251 of the Maritime Navigation Act provides that the acquiring part of a bill of lading acquires the document with all its rights and actions except for the international jurisdiction and arbitration clauses.

Having said that, the Brussels Ia Regulation regulates jurisdiction within the European framework without establishing the requirement of separate and individual negotiation, although it does establish that the effectiveness of the jurisdiction clause depends on the national law of the member state. Furthermore, it adds that jurisdiction clauses must be considered as an independent agreement to other clauses of the contract.

After a certain evolution of case law in Spain, in cases where the dispute was between the original parties to the Bill of Lading contract (generally the shipper and the carrier), the courts granted validity to those clauses in favour of courts in EU member states. The reason? Because the Brussels Ia Regulation prevailed over article 468 of the Maritime Navigation Act and therefore different requirements to those required by the supranational regulation were not required.

However, there have been several Spanish courts that have not given validity to jurisdiction clauses in favour of courts of the European Union member states when the dispute arose between the legal holder of the Bill of Lading, a non-originating party to the contract, and the carrier. The reason? This condition of independent and individual negotiation of jurisdiction clauses is not met when a third party acquires the Bill of Lading, not having been a contractual party to the original contract of carriage, and when acquiring the Bill of Lading does so without international jurisdiction or arbitration clauses as it is provided for by Art.251 Maritime Navigation Act.

These regulations and their provisions taken together have created several doubts for the Spanish courts which have been reflected in repeated lawsuits before the Courts. Consequently, on 16 November 2022, the Appeal Court of Pontevedra referred a question to the Court of Justice of the European Union (hereinafter referred to as CJEU) for a preliminary ruling in order to clarify the following aspects:

1) Whether the enforceability of the jurisdiction clauses to a third party, not party to the original contract, must be analysed in accordance with the law of the Member State to which the parties have conferred jurisdiction.

2) Whether inserting additional validity requirements for the effectiveness of jurisdiction clauses inserted in bills of lading is contrary to the Brussels Ia Regulation.

On 25 April 2024, the CJEU delivered its judgment in the cases C-345/22 to C-347/22 on the questions referred to it.

As regards to the first question, the CJEU recalls that the Brussels Ia Regulation does not expressly stipulate whether a jurisdiction clause may be transferred to a third party who succeeds, in whole or in part, to one of the contracting parties. In fact, the enforceability of the jurisdiction clauses against the third party does not relate to the substantive validity of the clause, but to its effects. The CJEU concludes that “the enforceability of a jurisdiction clause against the third-party holder of the bill of lading containing that clause is not governed by the law of the Member State of the court or courts designated by that clause. That clause is enforceable against that third party if, on acquiring that bill of lading, it is subrogated to all of the rights and obligations of one of the original parties to the contract, which must be assessed in accordance with national substantive law as established by applying the rules of private international law of the Member State of the court seized of the dispute.”

In other words, as the Court ruled in Coreck Maritime GmbH v Handelsveem BV and others (C-387/98), in order to determine whether the third-party holder of the bill of lading succeeds to the contract, the law of the State which is applicable according to the laws of conflict shall be applied. In Spain, the rules of private international law are set forth in EU Regulation 593/2008, known as Rome I -which is arguably not applicable to negotiable instruments to the extent that the obligations arise out of their negotiable nature – and in article 10 of the Spanish Civil Code. The latter establishes that the applicable law according to which subrogation (and the rest of the merits of the case) will be assessed will be the law agreed by the parties, or in the absence thereof, by the law of the country where the Bill of Lading was issued, or, should Rome I be considered applicable, the law of the country where the carrier has its habitual residence, provided that the place of receipt or the place of delivery, or the habitual residence of the sender, is also located in that country or the law of the country where the place of delivery agreed by the parties is situated. Therefore, in most cases, the applicable law will rarely be Spanish law, although the circumstances of each case will have to be considered.

However, even if Spanish law were the applicable law, in the answer to the second question raised regarding the consistency between European law and the national law requiring that jurisdiction clauses must be individually and separately negotiated as a prerequisite for them to be considered valid, the CJEU agreed with the Advocate General’s conclusions. This is, that the Spanish law “has the effect of circumventing Article 25(1) of the Brussels Ia Regulation, as interpreted by the case-law of the Court of Justice”.

Taking this statement into account, the Court inevitably holds that Article 25(1) of the Brussels Ia Regulation is not compatible with the national legislation which declares jurisdiction clauses null and void t when they have not been individually and separately negotiated by the third party legal holder of the Bill of Lading. Therefore, following the principle of primacy and in order to guarantee the effectiveness of the European Union rules, even in the event that Spanish law is the substantive law applicable to the substance of the dispute, when the Brussels Ia Regulation is applicable, the Spanish Courts must refrain from applying the provisions of the Maritime Navigation Act that require individual and separate negotiation of the rules of jurisdiction in order to consider them validly enforceable against third parties legal holder of the Bill of Lading.

In conclusion, when it is agreed that the competent Court to hear the dispute will be a Court of the European Union, this jurisdiction clause will be directly applicable before third party holders of the bill of lading, regardless of whether or not there has been an individual and separate negotiation of these jurisdiction clauses.

It should also be noted that, although the cases which gave rise to the questions referred for a preliminary ruling contained clauses in favour of the London courts, these cases were subject to European law. The fact is that the cases under consideration in the question referred for a preliminary ruling correspond to those in which the plaintiffs brought their actions during the transitional period of Brexit, and prior to the definitive separation of the United Kingdom, before 31 December 2020. Currently, a jurisdiction clause in favour of the courts of the United Kingdom is no longer a clause in favour of the courts of a member state of the European Union, and therefore the Brussels I Regulation does not apply. Consequently, in those cases where Spanish law is applicable to hear the merits of the case, all the provisions of the Maritime Navigation Act would apply and jurisdiction clauses that have not been individually and separately negotiated may be considered null and void.

In short, in order to determine whether jurisdiction clauses in favour of the courts of a member state of the European Union are applicable in Spain, the laws of the state that will rule on the merits of the case must be applied. Therefore, if Spanish law were to be applied to the resolution of the merits of the case, this same rule would also apply to determine the enforceability of the jurisdiction clauses of a bill of lading against third parties. However, this statement must be understood with all due caution since, even if Spanish law were applicable, by prevalence of the Brussels Ia Regulation the requirement that the jurisdiction clauses have to be individually and separately negotiated in order to be enforceable against a third party would not apply and therefore the jurisdiction clauses agreed in the bill of lading would be valid, even if there had been no such negotiation, as long as they comply with the requirements of formal and material validity demanded by the Brussels I bis Regulation.