Most bills of lading contain a jurisdiction clause. These clauses derive their validity from the parties’ agreement, and courts generally respect such contractual arrangements. “If the parties decided that the dispute will be heard in an English court, or that the dispute will be arbitrated in France, or that the dispute will be heard anywhere in the world but under Polish law, I – says the court – will want to honor the parties’ agreements.” Only in exceptional circumstances will the court deviate from the parties’ agreement. Israeli case law has established that these are rare cases, such as instances where adherence to the jurisdiction clause would result in the plaintiff being unable to obtain a fair trial due to racial or religious discrimination, or when the claim is likely to be dismissed in that forum due to statute of limitations.
Such jurisdiction clauses create significant burdens for Israeli importers seeking to sue maritime carriers for cargo damage. Filing a claim in an English court requires hiring English legal counsel and arranging travel for the importer and witnesses to England. These substantial costs may make filing a claim against the maritime carrier financially unfeasible. Israeli importers typically try to file their claims in Israel. When maritime carriers move to dismiss these claims based on foreign jurisdiction clauses, importers often challenge the applicability of these clauses through various legal arguments. For instance, the importer may argue, in appropriate cases, that the wording of the jurisdiction clause is too ambiguous and does not mandate referral to a foreign forum, or that the clause does not explicitly appear in the bill of lading but only contains an insufficient reference to general terms appearing on the carrier’s website, or that the font of the letters in the bill of lading is too small (an argument generally not accepted).
Israeli importers or their insurers (in subrogation claims) may argue that the jurisdiction clause in the bill of lading constitutes an unfair term in a standard form contract and should therefore be voided.
Section 3 of the Standard Form Contracts Law, 5743-1982, stipulates that “The court and the tribunal shall annul or change, in accordance with the provisions of this law, a condition in a standard form contract which – in view of all the terms of the contract and other circumstances – involves deprivation of customers or an unfair advantage to the supplier likely to lead to deprivation of customers (hereinafter – an unfair term).”
Case law has established that courts may annul or modify contract terms that either deprive customers of their rights or give suppliers unfair advantages likely to lead to customer deprivation. The mere possibility of deprivation is sufficient grounds for the court to exercise its discretion to annul or modify such terms. Section 4 of the law lists several conditions presumed to be unfair. Section 4(9) of the law establishes a presumption that “a condition that stipulates on a legal provision regarding jurisdiction or grants the supplier an exclusive right to choose the place of jurisdiction or arbitration where a dispute will be resolved” is an unfair term. Furthermore, Section 5(a) of the law states that “a condition in a standard form contract that negates or restricts the customer’s right to appeal to judicial courts – is void.”
In a recent case (Civil Case 18195-11-18 Peirot Hamoshav (Ben Yosef) Ltd. et al. v. Idan Hadash Marine Insurance Agency from Agricultural Insurance Group, Tel Aviv Magistrate’s Court, decision dated November 4, 2023), the court examined a jurisdiction clause comprised of two parts. The first part of the clause, in clear and explicit language, granted exclusive jurisdiction to the courts in New York, USA for all matters related to shipments to and from the USA under this bill of lading. The second part, pertaining to shipments to all other parts of the world, made jurisdiction dependent on the identity of the party initiating proceedings. If it was the merchant, or any other person or legal entity, jurisdiction was exclusively vested in the London court. However, if it was the carrier, he had the option to decide, at his absolute discretion, whether to file their claim in the London court or in another appropriate court in the merchant’s place of business.
The court ruled that this was an unfair term:
“In the circumstances of this case, obligating the Israeli company to litigate in the London court under English law constitutes a barrier that prevents it from exercising its rights against the maritime carrier, contrary to the right granted to the carrier to approach multiple venues according to the merchant’s place of business. Therefore, it is appropriate to determine that this is an unfair term, resulting in the nullification of the clause or at least applying the presumption of an unfair term that provides an unjust advantage to the maritime carrier, given the power imbalance between it and the plaintiff as a family customer, and it should be voided, or at the very least, modified to allow the plaintiff as a merchant to file its claim in an appropriate court according to its place of business. Consequently, the Israeli court has jurisdiction as the plaintiff’s place of business.”
The court clarified that “had the maritime carrier not allowed itself such an unfair advantage in the wording of the bill of lading under its control, there would be no grounds for any claim if the exclusive jurisdiction was set for both parties solely in London. Hence, the argument regarding the jurisdiction clause being an unfair term should be accepted, leading to the rejection of the motions filed by the applicants to dismiss the claim outright or stay the proceedings.”
In contrast, shortly before this decision, on August 8, 2023, the Tel Aviv Magistrate’s Court issued a ruling in Civil Case 63821-01-23 Nimrod-Yetzur (1979) Ltd. v. Clal Insurance Company Ltd. et al., under the circumstances of that case, rejected the claim of an unfair term.
The court determined that according to Supreme Court precedent, “in deciding on the invalidity of a jurisdiction clause, the court must consider, inter alia, two factors: first, the reasonable expectation that an exclusive jurisdiction clause would be found in the bill of lading; and second, whether the contract is between equal parties, distinguishing between contracts between equal parties such as large economic companies and business entities that calculate their steps based on information and rational considerations, or agreements made between private consumers and international companies.”
The court noted that “it is reasonable to assume and expect that international maritime transport companies would stipulate one place as an exclusive jurisdiction clause in their bills of lading. Case law has recognized this interest as legitimate.”
Additionally, the court stated that “it cannot be ignored that the plaintiff is a serious commercial company, routinely engaged in importing shoes. It can be assumed that this is not its first engagement in agreements to import shoes from China or other countries via maritime transport. This status of the plaintiff reduces the power disparities between it and each of the defendants… and even allows for the determination that it is expected to know or assume that the terms of transport for the goods it imports include an exclusive foreign jurisdiction clause.”
Accordingly, under the circumstances of that case, the court rejected the claim of an unfair term.
The content is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis.
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