Introduction
In the carriage of goods by sea, the contractual framework is often established under a charterparty, whereas the carriage and delivery of the cargo are effected through a negotiable bill of lading. This dual structure raises, in particular, the question of how certain terms agreed under the charterparty are reflected in the bill of lading and, where the bill of lading is endorsed and transferred to third parties, to what extent such terms are enforceable against the lawful holder of the bill of lading.
In practice, the arbitration agreement agreed under the charterparty may sometimes be expressly set out in the bill of lading; in other cases, it is argued that the arbitration clause forms part of the bill of lading by virtue of an incorporation clause stating that “all terms and conditions of the charterparty are incorporated into the bill of lading.” This article assesses, on the basis of these two typical scenarios, the enforceability of arbitration clauses vis-à-vis the bill of lading holder, within a comparative framework and with a focus on practical implications.
In What Forms Do Arbitration Clauses Appear in Bills of Lading?
The question of whether an arbitration clause is enforceable against the holder of a bill of lading typically arises in practice under three main scenarios.
First, the arbitration clause may be expressly set out in the bill of lading. In that case, since the parties’ agreement on the dispute resolution mechanism is recorded on the face of the bill of lading, the enforceability analysis is primarily conducted by reference to the negotiable nature of the bill of lading and the conditions under which the holder becomes bound upon taking up the document.
Second, the arbitration clause may not appear in the bill of lading itself, but may be alleged to have been incorporated from the charterparty by virtue of an incorporation clause. Bills of lading frequently contain general wording to the effect that “all terms and conditions of the charterparty are incorporated into this bill of lading.” Whether such general incorporation language extends to the arbitration clause must, however, be assessed on a case-by-case basis. This is because an arbitration clause performs a function distinct from substantive carriage terms, and the scope and clarity of the incorporation wording become determinative.
Third, the enforceability analysis may be further complicated where it is unclear which charterparty is being incorporated, or where multiple charterparties exist within the same contractual chain. The absence of identifying particulars—such as the date of the charterparty, the names of the parties, or other distinguishing details—may render the scope of incorporation debatable and may also raise the question of which contract is said to be the source of the arbitration clause.
These scenarios constitute the starting point for determining whether an arbitration clause may be invoked against a bill of lading holder. In particular, where the arbitration clause is not expressly included in the bill of lading, the nature and scope of the incorporation wording, as well as the bill of lading holder’s access to the relevant underlying terms, frequently become decisive in practice.
When Does an Arbitration Clause Bind the Holder of a Bill of Lading under English Law?
Under English law, enforceability vis-à-vis the bill of lading holder largely turns on the clarity of the incorporation wording on the face of the bill of lading. The starting point of the analysis is that it must be ascertainable from the bill of lading itself to what extent charterparty terms have been brought into the bill of lading. In this regard, the UK Supreme Court has emphasised that the bill of lading is the primary reference point, and that whether charterparty terms have been incorporated—and the scope of such incorporation—must be assessed first and foremost by reference to the wording used in the bill of lading (UK Supreme Court, Herculito Maritime Ltd v Gunvor International BV [2024], para. 85).
Against this background, English law draws a practical distinction between specific and general incorporation. Where the bill of lading contains specific wording that clearly refers to arbitration—i.e., wording that can reasonably be read as incorporating the arbitration clause—it becomes easier to conclude that the arbitration clause forms part of the bill of lading. In such circumstances, the arbitration clause need not be transplanted verbatim; rather, the courts accept that the clause may be applied with only such limited adaptation as is necessary to make it workable in the bill of lading context. This reflects the broader premise that, for an arbitration clause to bind a bill of lading holder, the bill of lading should disclose a clear and unequivocal intention to that effect.
Conversely, where the bill of lading contains only general incorporation language—for example, wording to the effect that “all terms and conditions of the charterparty are incorporated into this bill of lading”—English law tends to construe the scope of incorporation more narrowly. The UK Supreme Court has indicated that general words of incorporation are generally expected to bring in only those terms that are germane to the bill of lading’s core functions—such as shipment, carriage, delivery, or freight—whereas dispute resolution provisions (including arbitration clauses) may be treated as ancillary and therefore may not, in every case, fall within the scope of a general incorporation clause.
When Does an Arbitration Clause in a Charterparty Bind the Holder of a Bill of Lading under Turkish Law?
Under Turkish law, the starting point in assessing whether an arbitration clause is binding on the holder of a bill of lading is that the legal relationship between the carrier and the bill of lading holder is primarily governed by the bill of lading text. Accordingly, whether an arbitration clause contained in the charterparty may be invoked against the bill of lading holder depends on (i) how (and whether) the arbitration clause is reflected in the bill of lading and (ii) whether, vis-à-vis the holder, the clause has become binding within the meaning of the applicable statutory framework.
The statutory basis of this approach is expressly set out in Article 1237 of the Turkish Commercial Code No. 6102 (“TCC”). While the provision adopts the bill of lading as the principal instrument governing the carrier–holder relationship, it permits charterparty terms to be asserted against the bill of lading holder only subject to specific conditions. In particular, even where the bill of lading refers to a voyage charterparty, the charterparty terms may be invoked against the new holder only if, upon transfer of the bill of lading, a copy of the charterparty has been presented to the transferee. If this condition is satisfied, the charterparty terms may be asserted against the bill of lading holder to the extent compatible with their nature. This framework also explains why a general reference to the charterparty in the bill of lading may not, by itself, be deemed sufficient: the enforceability of charterparty terms is tied to the holder’s effective access to the charterparty text, thereby promoting legal certainty—particularly for dispute resolution provisions such as arbitration clauses.
In practice, the most common scenario is that the bill of lading contains a reference to the charterparty terms and it is argued that the arbitration clause is thereby incorporated into the bill of lading. Although Turkish law generally recognises the formation of arbitration agreements by way of incorporation by reference, the mere existence of a reference does not necessarily suffice, in every case, to bind the bill of lading holder.
This position has been reaffirmed in the case-law of the Court of Cassation. In its decision dated 29 November 2017 (Court of Cassation 11th Civil Chamber, File No. 2016/8794, Decision No. 2017/6687), the Court held that a reference to the charterparty in the bill of lading does not, on its own, render the arbitration clause contained in the charterparty enforceable against the bill of lading holder. The Court further ruled that, for the arbitration clause to be invoked against the new holder, it must be proved that a copy of the charterparty was presented to the bill of lading holder upon transfer. The burden of proof lies with the party seeking to refer the dispute to arbitration based on the charterparty arbitration clause. This approach demonstrates that, under Turkish law, general incorporation language does not automatically make the arbitration clause enforceable against the bill of lading holder; rather, the holder’s effective access to the charterparty (presentation) and the proof thereof assume decisive importance.
Conclusion and Assessment
In the carriage of goods by sea, the enforceability of an arbitration clause vis-à-vis the holder of a bill of lading largely depends on whether the clause is expressly included in the bill of lading and, if not, on the scope and clarity of the incorporation wording by which charterparty terms are said to be brought into the bill of lading. Under English law, the analysis primarily turns on the interpretation of the incorporation clause on the face of the bill of lading. In particular, general words of incorporation are not necessarily construed as extending to ancillary provisions such as dispute resolution clauses, and it is generally accepted that a sufficiently clear indication of intention is required for an arbitration clause to bind the bill of lading holder.
Under Turkish law, the statutory framework governing enforceability is crystallised by Article 1237/3 of the Turkish Commercial Code. Even where the bill of lading refers to a voyage charterparty, charterparty terms may be asserted against the bill of lading holder only if, upon transfer of the bill of lading, a copy of the charterparty has been presented to the new holder. The case-law of the Court of Cassation has further reinforced this approach, holding that a mere reference to the charterparty in the bill of lading does not, by itself, render the charterparty arbitration clause enforceable against the bill of lading holder; where it cannot be proved that the charterparty was presented upon transfer, an objection seeking referral to arbitration should not be upheld.
Against this background, two practical conclusions stand out. First, where it is intended that the arbitration clause should bind the holder of the bill of lading, the incorporation wording should be drafted with sufficient clarity to encompass the arbitration clause, and the relevant charterparty should be identified in a manner that leaves no room for uncertainty. Second, from a Turkish law perspective, it is critical to record and be able to evidence the presentation of a charterparty copy to the transferee at the time of transfer, as this constitutes a decisive threshold for the success of any arbitration objection. In this respect, the enforceability of arbitration clauses in bills of lading is not merely a procedural issue arising at the dispute stage, but forms an integral part of contractual risk management in bill of lading practice.
Frequently Asked Questions
If the arbitration clause is expressly set out in the bill of lading, is it generally considered binding on the bill of lading holder?
Where an arbitration provision is expressly included in the bill of lading, it is generally accepted that the parties’ intention as to dispute resolution is embodied in the bill of lading text. Accordingly, it may be argued that the holder, upon taking up the bill of lading, becomes bound by the arbitration provision. That said, any objections as to the scope, construction, or validity of the clause must be assessed on the facts of the case.
Does a general incorporation clause stating that “all terms and conditions of the charterparty are incorporated” invariably mean that the arbitration clause is also incorporated?
No. Whether general incorporation language extends to dispute resolution provisions such as arbitration clauses must be determined on a case-by-case basis, considering the scope and clarity of the incorporation wording. Given that an arbitration clause serves a function distinct from substantive carriage terms, it may be contentious whether general words of incorporation, without more, are sufficient to incorporate the arbitration clause.
Why is the distinction between general and specific incorporation wording decisive under English law?
Under English law, the analysis essentially turns on the construction of the incorporation clause in the bill of lading. Specific incorporation wording that clearly refers to arbitration may strengthen the argument that the arbitration clause has been incorporated into the bill of lading. By contrast, where only general incorporation wording is used, it may not follow that the arbitration clause is incorporated in every case, and a narrower construction may be adopted.
Under Turkish law, what is the key requirement for invoking a charterparty arbitration clause against the bill of lading holder?
Under Turkish law, even where the bill of lading refers to a voyage charterparty, Article 1237/3 of the Turkish Commercial Code makes the presentation of a copy of the charterparty to the new holder upon transfer a critical element for asserting charterparty terms against the bill of lading holder. Accordingly, enforceability is assessed not only by reference to the incorporation wording but also by reference to whether the presentation requirement has been satisfied.
References
- Arslan, İbrahim / Aydın, Sevgican, “Çarter Partideki Tahkim Klozunun Konişmento Hamiline Etkisi”, Gazi University Faculty of Law Review, Vol. XVII, 2013.
- Jia, Shengnan, Incorporation of Arbitration Clauses under a Charterparty and a Bill of Lading: English and Chinese Law Perspectives, Master’s Thesis, Faculty of Law, Lund University, 2013.
- UK Supreme Court, Herculito Maritime Ltd and others v Gunvor International BV and others [2024] UKSC 2, Judgment dated 17 January 2024.
- Court of Cassation (Yargıtay) 11th Civil Chamber, File No. 2016/8794, Decision No. 2017/6687, dated 29 November 2017.
- Yılmaz, Serpil, “Three Problems Caused by Arbitration Clauses Incorporated into Bills of Lading (Konişmentolara Atıf Yolu ile Dahil Edilen Tahkim Klozlarının Neden Olduğu Üç Sorun)”, Annales, 2016.
