This was an appeal against David Steel J's decision that an English law and London arbitration clause in the charterparty of the vessel, the Epsilon Rosa, was incorporated into the relevant bill of lading, and the anti-suit injunction which he granted to restrain the appellant, Welex AG (Welex) from proceeding with its claim against the respondent, Rosa Maritime Ltd (Rosa), in Poland.

Steel plates were made in Ukraine by Ilyich Iron & Steel Works, the shippers named in the bill of lading. The plates were sold to Welex, a Swiss company, through two German companies, Korympic and Liberty. Welex's contract with Liberty made in early 2001 was for delivery CFR free out Szczecin, Poland. The contract permitted the sellers to tender bills of lading incorporating the terms of any charterparty without any obligation to provide a copy of the charter.

The cargo was found to be damaged on arrival. Welex argued that the damage was caused during the voyage by sea water entering the holds through defective hatches. Welex claimed the USD 550,000 price reduction which it had to give to its buyer because of the poor condition of the steel plates.

Although Welex had made a claim against Rosa, it did not at that time or in the following months ask to see the charterparty to which the bill of lading which it was holding referred. Rosa subsequently sold the vessel to Alexia Navigation Ltd (Alexia). Both Rosa and Alexia were Maltese companies with the same address and both were managed by Epsilon from Cyprus.

The vessel was arrested in Portugal in July 2001 as security for Welex's cargo claim. The proceedings were taken by Welex against both Rosa and Alexia because under Portuguese law a cargo claim creates a maritime lien over the ship. Welex clamed that as a condition of maintaining the arrest it was ordered to start proceedings on the merits in respect of the claim within 60 days of the date of arrest. Such a condition is required by arts 7.2 or 7.3 of the Arrest Convention 1952. It was common ground, however, that the Portuguese Court did not say whether the proceedings should be in court or by way of arbitration or in which jurisdiction they should be taken.

On 31 July, Alexia applied to lift the arrest on the basis that the Portuguese Court had no jurisdiction, because Welex's contract of carriage incorporated the terms of the charterparty which provided for London arbitration and was subject to English law. On 18 September the Portuguese Court rejected Alexia's application, finding that it was competent to order the vessel's arrest although it had no jurisdiction to decide the main dispute on the merits. The Court also pointed out that Alexia was not a party to the contract of carriage.

In the meantime, on 4 September, Welex started proceedings in Poland against both Rosa and Alexia. There is also a maritime lien under Polish law. These proceedings are currently the subject of an anti-suit injunction. It is apparent from what happened in the Portuguese proceedings that Welex must have been aware, at least by 31 July 2001, that it was being contended that its contract with Rosa was subject to English law and London arbitration. Upon learning of these Polish proceedings, Rosa's English solicitors wrote to Welex, complaining that the proceedings were in breach of the charterparty and notifying initiation of a London arbitration.

In the arbitration, Rosa admitted liability for damage caused to the steel plates by seawater. Consequently, the issue between the parties concerned the extent of preshipment damage sustained. It was conceded that an English maritime arbitration was best suited to address this question. However, Welex feared that arbitrating the dispute in London could jeopardise the security of the vessel under arrest in Portugal.

Held: Appeals dismissed.

Both the recap telex and the standard terms constituted a charterparty, and the English law and arbitration clause was effectively incorporated into the bill of lading.

Regarding the anti-suit injunction, the Court applied The Angelic Grace [1995] 1 Lloyd’s Rep 87 and Donohue v Armco [2001] UKHL 64. These cases established that if contractual parties had mutually agreed to grant exclusive jurisdiction to a particular court for resolving disputes between them, and a claim falling within the scope of that agreement was initiated in a different forum, English courts would exercise their discretion to ensure compliance with the contractual arrangement. This could be achieved by either suspending proceedings in England or restraining proceedings in the foreign jurisdiction, with the purpose of upholding the contractual agreement. This would hold true unless the party pursuing the claim in the non-contractual forum could show strong reasons why it should be allowed to proceed in that forum: see The Eleftheria [1969] 1 Lloyd's Rep 237.

The Court acknowledged that a valid justification for departing from an exclusive jurisdiction clause could arise from the concern of being deprived of security - a concern that Welex maintained. However, the Court held that the starting point was that the party suing in a non-contractual forum must show strong reasons for doing so, or otherwise risk being subjected to an injunction against such actions, as in this case. Welex had brought the risk on themselves. The Portuguese Court did not prescribe the proceedings which had to be brought within 60 days. If Welex had initiated arbitration in London the whole dispute would have been resolved ages ago. Instead it made no enquiries about the terms of the charterparty until after it had started proceedings in Poland. For these reasons, the risk that Welex will lose its security is not determinative.