When, on the ground that the contract is subject to an arbitration clause incorporated from a charter-party, one party to a bill of lading applies to the court to stay an action brought against him by the other party to the bill, he only rarely does so because he prefers to arbitrate than to litigate. The usual reason is because, when the application is made, the time has expired by which the other party must start any arbitration proceedings. Success in staying the court proceedings thus means a complete defeat of the claim. It is for this reason, and not because of any intrinsic merit in the process of arbitration, that disputes as to whether an arbitration clause in a charter-party has or has not been incorporated into the bill of lading arise with such regularity.

The question whether a bill of lading incorporates as one of its terms an arbitration clause from a charter-party depends upon the intention of the parties to the bill of lading. Their intention is to be ascertained from the words used in the bill of lading; those words are, after all, what they agreed. However, what has recently been stressed by the Court of Appeal in Skips A/S Nordheim v. Syrian Petroleum Co. (The Varenna)1 is that words of incorporation must be read in the light of the earlier authorities on the subject. However tempting it may be to apply “robust commonsense” to decide the meaning of an incorporation clause in the bill of lading, that temptation must be resisted for it may well lead to error. It led the arbitrators and Staughton, J., into error in Astro Valiente Compania Naviera S.A v. Government of Pakistan, Ministry of Food and Agriculture (The Emmanuel Colocotronis) (No. 2)2 an error now corrected by the Court of Appeal in The Varenna.

In The Emmanuel Colocotronis the incorporation clause included the following words “… all other conditions, exceptions, demurrage, general average and for disbursements as per above-named charter party”. The charter-party was on the Baltimore Berth Grain form C which provided that the bills of lading should contain certain clauses, including the arbitration clause. The approach of Staughton, J., was stated near the beginning of his judgment: