OT Africa Line Ltd. v. Magic Sportswear Corp.

In Arbitration/Jurisdiction Clauses in Maritime Law on (Updated )

This was a subrogated action by cargo insurers for damages for the short shipment of goods carried from New York to Liberia under a bill of lading that was issued in Canada. The freight was also payable in Canada and the Defendant carrier, although not a Canadian resident, had offices in Canada. None of the Plaintiffs resided in Canada. The bill of lading contained a jurisdiction clause granting exclusive jurisdiction to the High Court of England. One month after the Plaintiff commenced this proceeding in the Federal Court of Canada, the Defendant commenced proceedings in England for a determination that it was not liable to the Plaintiff and it obtained an interim ex parte anti-suit injunction against the Plaintiff. This was later transformed into a regular anti-suit injunction (reported at [2004] EWHC 2441) which was confirmed by the English Court of Appeal (reported at [2005] EWCA Civ 710). A later petition to appeal to the House of Lords was dismissed. Meanwhile, the Defendant brought this application in the Federal Court of Canada to stay the Federal Court action on the basis of the jurisdiction clause in the bill of lading and on the basis of the doctrine of forum non conveniens.

At first instance, the Prothonotary dismissed the motion. The Prothonotary held that where the conditions of s. 46 of the Marine Liability Act were met the court had no discretion to stay proceedings on the basis of a jurisdiction or arbitration clause in a bill of lading. However, the Prothonotary also held that s. 46 did not prevent the court from granting a stay on the basis of forum non conveniens. The Prothonotary considered the relevant factors and held that Canada, not England, was the most convenient and appropriate forum in the circumstances. Accordingly, the Prothonotary dismissed the application for a stay.

The decision of the Prothonotary was appealed and the appeal is reported at 2004 FC 1165. The appeal Judge ultimately found that he was in agreement with the Prothonotary as to the effect of s. 46 of the Marine Liability Act and dismissed the appeal.

On further appeal to the Federal Court of Appeal, the Court of Appeal agreed with the lower courts that s. 46 of the Marine Liability Act did not require the Federal Court to take jurisdiction without regard to whether it was the more convenient forum. The Federal Court and Federal Court of Appeal still retained a broad jurisdiction to stay proceedings under s. 50(1) of the Federal Act. The Federal Court of Appeal, however, departed from the reasoning of the lower courts on the issue of whether the Orders and Judgments of the English courts were relevant to and should be included in a forum non conveniens analysis. The Court of Appeal considered that they were relevant and should be taken into account in the interests of international comity, to avoid parallel proceedings and to avoid inconsistent results. The Court of Appeal further held that the jurisdiction clause in the contract of carriage was a relevant factor to be taken into account in the forum non conveniens analysis noting that s. 46 did not declare such clauses to be null and void. The Court of Appeal then considered and weighed the various relevant factors and concluded that the factors connecting the dispute to Canada were relatively minor whereas those connecting it to England were much more significant. The Court of Appeal therefore concluded that English courts were a more convenient forum and granted the stay.

It is important to note that the Court of Appeal in this matter was particularly influenced by the facts that the Plaintiffs and the goods were not Canadian. At para. 88 of the Reasons, the Court of Appeal said in obiter that, when the Plaintiffs or the goods were Canadian, it was inclined to think that the jurisdiction clause and the assumption of jurisdiction by the English courts were factors that should be given no weight, as otherwise the policy of s. 46 would be frustrated.