National Union vs. Stolt-Nielsen

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA/AMERICAN INTERNATIONAL UNDERWRITER (PHIL.) INC., petitioners, vs. STOLT-NIELSEN PHILIPPINES, INC. and COURT OF APPEALS, respondents. United Coconut Chemicals, Inc. (SHIPPER) shipped 404.774 metric tons of distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. (CARRIER), from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam, Netherlands, covered by a Tanker Bill of Lading. The shipment was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of Pittsburg (INSURER), through its settling agent in the Philippines, the American International Underwriters (Philippines), Inc. It appears that the Bill of Lading issued by the CARRIER contained a general statement of incorporation of the terms of a Charter Party between the SHIPPER and Parcel Tankers, Inc., entered into in Greenwich, Connecticut, USA. Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it was found to be discolored and totally contaminated. The claim filed by the SHIPPER-ASSURED having been denied, the INSURER indemnified the SHIPPER and thereafter proceeded with its claim against the CARRIER. Before the trial court, the CARRIER moved to dismiss or suspend the proceedings on the ground that the RTC had no jurisdiction over the claim the same being an arbitrable one. It further claimed that as subrogee of the SHIPPER-ASSURED, the INSURER is subject to the provisions of the BIll of Lading, which includes a provision that the shipment is carried pursuant to the terms of the Charter Party between the SHIPPER-ASSURED and Parcel Tankers, Inc. providing for arbitrator. The INSURER opposed the dismissal/suspension on the ground that it was not legally bound to submit the claim for arbitration inasmuch as the arbitration clause provided in the Charter Party was not incorporated into the Bill of Lading, and that the it is only RTC initially denied the Motion but subsequently reconsidered and suspended the proceedings. On appeal before the CA, the said court set aside the ruling of RTC and ordered the INSURER to refer its claim for arbitration. Hence, this petition. ISSUE: Whether the the terms Charter Party, particularly the provision on arbitration, are binding on the INSURER HELD:

Petition DENIED. Since the right of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which includes by reference the terms of the Charter Party, necessarily a suit by the INSURER is subject to the same agreements It is settled law that the charter may be made part of the contract under which the goods are carried by an appropriate reference in the Bill of Lading. This should include the provision on arbitration even without a specific stipulation to that effect. The entire contract must be read together and its clauses interpreted in relation to one another and not by parts. As the respondent Appellate Court found, the INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the existence of the charter party due to an appropriate reference thereof in the bill of lading and, by the exercise of ordinary diligence, it could have easily obtained a copy thereof either from the shipper or the charterer." We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration clause. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified, because as subrogee, it stepped into the shoes of the SHIPPER-ASSURED and is surrogated merely to the latter's rights. It can recover only the amount that is recoverable by the assured. And since the right of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which includes by reference the terms of the Charter Party, necessarily a suit by the INSURER is subject to the same agreements. Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction. Republic Act No. 876 (The Arbitration Law) also expressly authorizes arbitration of domestic disputes. Foreign arbitration is a system of settling commercial disputes of an international character was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state. It has not been shown that the arbitral clause in question is null and void, inoperative, or incapable of being performed. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading. In fine, referral to arbitration in New York pursuant to the arbitration clause, and the suspension of the proceedings, pending the return of the arbitral award, is indeed called for.