In view of the foreign jurisdiction clause contained in a bill of lading, the petitioner, a Russian Steamship concern, objected to the jurisdiction of the Court of Small Causes, Madras to try the suit brought by the respondent for damages for short delivery. That court, however, in the first instance by one of its Judges overruled the preliminary objection and with this conclusion, the New trial Judges, functioning under the procedure provided under the provisions of the Presidency Small Cause Courts Act, concurred. The defendant canvasses the correctness of the view.
I have no doubt that, on the facts of this case, the only conclusion of the courts below could rightly arrived at, in the circumstances, is the one which they did. The contract to carry a considerable number of electrolytic zinc ingots from Odessa to Madras Port was entered into in Russia in June 1965. When the goods arrived at this end by Mozdock in July, they were found to be short of their number shipped, with the result the respondent instituted the suit on the small cause side for recovery of Rs. 358-13 inclusive of the loss of the proportionate transit and customs charges. The bill of lading was a printed document which, among other things, contained on the front page a clause. “The shipper, the receiver of goods and the holder of the bill of lading as well as any other person interested hereby expressly accept and agree to all printed written or stamped provisions, terms and reserves of this bill of lading, including those on the back hereof.” On the back of the document there were two stipulations:
“26. All claims and disputes arising under and in connection with this bill of lading shall be judged in the U.S.S.R
27. All questions and disputes not mentioned in this bill of lading shall be determined according to the Merchant Shipping Code of the U.S.S.R”
So, it is clear that the parties entered into a binding contract as between them and that the Russian courts should adjudicate the disputes arising under and in connection with the bill of lading and that the questions and disputes not mentioned in the bill of lading should be determined according to the Merchant Shipping Code of the U.S.S.R At the moment this court is not so much concerned with the law that should govern the contract but with the jurisdiction of the Small Cause Court at Madras.
It is strongly urged that the clear stipulations in the bill of lading, which amount to a contract between the parties and which require all claims and disputes arising under and in connection with the bill of lading to be adjudicated in the U.S.S.R should be respected and the parties by their own choice should be directed to adhere to that. Attention is also invited to S. 28 of the Indian Contract Act to say that the Contract is not hit at by it. That is of course correct, for, the parties thereby were not restricted absolutely from enforcing their rights under or in respect of the contract by the usual legal proceedings in the ordinary tribunals. On the question of the jurisdiction of the Small Cause Court, however, I think the circumstances of this case do not warrant driving the plaintiff to resort to the Russian courts.
The parties who make their choice of the Tribunal, should normally be bound by their contract. That should especially be the case as to the choice of the law applicable to the contract. But it seems to ate that enforcement by the Indian courts of the choice of a foreign tribunal cannot be ruled as imperative; but it should depend on the balance of convenience in particular circumstances and the exigencies of justice. The law has been fairly accurately stated by Cheshire in his Private International law, 6th Edn. page 222:
“As distinct from the express or implied choice of the proper law, the express choice of a foreign tribunal is not absolutely binding. In accordance with the excellent principle that a contractual undertaking should be honoured, there is indeed, a prima facie rule that an action brought in England in defiance of an agreement to submit to arbitration abroad will be stayed (The Cap Balance, 1913 page 130), but nevertheless the court has a discretion in the matter and where the parties are amenable to the jurisdiction, as for example, where the defendant is present in England. It will allow the English action to continue if it considers that the ends of justice will be better served by a trial in this country (The Athanee case(1) The Fehmarn(2) Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd.(3).”
In a case of foreign jurisdiction clause, the question is not so much of freedom of contract and the parties being bound by their choice as of expediency in the light of what may be called the rule of balance of convenience and the ends of justice in the case on hand. Referring to the Fehmarn case the Athenee the Fehmarn Cheshire seems to apprehend that unless the discretion of the court in favour of allowing the English action to continue is exercised sparingly, there is a danger that foreign merchants will loose faith in the efficacy of arbitration clauses. It may be that, according to Cheshire, that case went to the verge of the law. While courts are certainly expected to use their discretion judicially and on proper grounds keeping in view the balance of convenience and the cads of justice, the exercise cannot be guided by the prospect of the danger apprehended by Cheshire. The consideration is more from the stand point of justice than to ignore the necessary to hold the parties to the contract as to the forum for adjudication.
The Fehmarn case is near to this case, for, it was concerned with a foreign jurisdiction clause identical to what appears in this case. It applied the rule of ends of justice to sustain an English action notwithstanding the foreign jurisdiction clause binding between the parties to the dispute. The view was also based on the balance of convenience. The Court of Appeal in Mackender v. Feldia A.G(4) declined the English jurisdiction. But in doing so it was obviously led by the peculiar facts of the case. The defendants there had already started proceedings in accordance with the foreign jurisdiction clause which did not appear to be unjust or inconvenient to the parties and the stakes involved were considerable unlike in this case. Lord Denning M.R, however, recognised:
“But although there is jurisdiction to give leave, it is a matter of discretion as to whether it should be granted.”
He also says later on in his judgment:
“The foreign jurisdiction clause is a positive agreement by the underwriters that the policy is governed exclusively by the Belgian law. Any dispute under it is to be exclusively subject to Belgian jurisdiction. That clause still stands and is a strong ground why discretion should be exercised against leave to serve out of the jurisdiction.”
This observation taken by itself may possibly give the impression that his decision was solely rested on it. But obviously the observation was made in the course of repelling an argument that certain non-disclosure on the part of the assured struck out the whole contract. I should think rather that the decision of the Master of Rolls was induced not solely by the consideration of giving respect to the contract entered into by the parties but also the other circumstances, particularly the pendency of the defendants suit in the Belgian court and also the fact that a large stake was involved in the dispute.
It did not also appear that there were circumstances which would make it unfair or inconvenient to the plaintiffs in England to face the Belgian court. Diplock L.J in dealing with the question whether an agreement which would be illegal under the English law is void under the contract, observed,
“The prima facie rule of English conflict of laws more liberal in this respect than many Continental systems is that the proper law of a contract is that system of law which the parties themselves agreed shall regulate the legally enforceable rights and duties to which their agreement gives rise.”
But having said that, he went on to say:
“The Belgian courts are not only a convenient forum for its resolution; they are the forum to which both parties agreed to submit”.
That gives the basis of his decision. In my view Manckender v. Feldia A.G, is not against the proposition that local enforcement of a foreign jurisdiction clause is discretionary. The Court of Appeal in that case definitely found the Belgian Courts were the convenient forums for the parties. Reference was made before me to Messrs. L.T Societies Lakshminarayana v. G.G.D.I, Esportazions v. Messrs. Lakshminarayana, and N.G Insurance Co. of India v. A.S.A Kampagni, but each of them was decided on its facts relating to the balance of convenience and ends of justice. These cases have all kept in view that proposition in approaching the particular circumstances and in giving effect to or not the foreign jurisdiction clause:
In the instant case, I have no hesitation in taking the view that the balance of convenience as well as the ends of justice tend towards sustaining the jurisdiction of the court of Small Causes to entertain and dispose of the suit. The claim is so small that it would be unrealistic and unfair to drive the respondent to resort to the Russian Court. The New trial Judges have narrated that the petitioner has their local accredited agents in Madras. Further there seems to be no insuperable difficulty in collecting the necessary facts and the law applicable to enable the disposal of the suit at Madras.
The petition is dismissed with costs.
V.C.S