014 National Union Fire Insurance Company V Stolt Nielsen

014 National Union Fire Insurance Company v.
Stolt-Nielsen
GR No. 87958; April 26, 1990
EMERGENCY RECIT: United Coconut Chemicals (SHIPPER) shipped distilled fatty acid on
board MT “StoltSceptre” (CARRIER). The shipment was insured under a marine cargo policy
with National Union Fire Insurance Co (INSURER). Upon receipt of the cargo by the consignee
in Netherlands, it was totally contaminated. Hence, claim was made on the INSURER of the cargo.
The INSURER as subrogee filed a claim for damages against the CARRIER with RTC Manila.
The CARRIER invoked that arbitration must be done pursuant to the Charter. The INSURER
opposed, arguing that the provision on arbitration was not included in the Bill of Lading. SC: 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 and is subrogated merely to the latter's rights.
FACTS:
 On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774 metric tons of
distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen
Philippines Inc., from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at
Rotterdam, Netherlands, covered by Tanker Bill of Lading BL No. BAT-1.
 The shipment was insured under a marine cargo policy with Petitioner National Union Fire
Insurance Company of Pittsburg (hereinafter referred to as INSURER), a non-life
American insurance corporation, through its settling agent in the Philippines, the American
International Underwriters (Philippines), Inc., the other petitioner herein.
 Upon receipt of the cargo by the consignee in the Netherlands, it was found to be
discoloured and totally contaminated. Hence, a claim was made on the Insurer of the cargo.
The insurer as subrogee filed a claim for damages against the carrier with the RTC of
Manila.
 The carrier filed a motion to dismiss on the ground that the case was arbritrable and
pursuant to the charter party as embodied in the bill of lading, arbitration must be done.
The insurer opposed the motion by arguing that the provision on arbitration was not
included in the bill of lading and even if it was included, it was nevertheless unjust and
unreasonable.
 The RTC denied the motion but upon reconsideration, the resolution on the motion to
dismiss was suspended or deferred.
 The carrier then filed a petition for review on certiorari with preliminary injunction/TRO
which was granted by the CA.
ISSUE: Are the terms of the Charter Party, particularly the provision on arbitration, binding on
the INSURER?
HELD: Yes. The pertinent portion of the Bill of Lading in issue provides in part:
xxx [A]ll the terms whatsoever of the said Charter except the rate and payment of freight
specified therein apply to and govern the rights of the parties concerned in this
shipment.xxx
The provision on arbitration in the Charter Party reads:
4. Arbitration. Any dispute arising from the making, performance or termination of this
Charter Party shall be settled in New York, Owner and Charterer each appointing an
arbitrator, who shall be a merchant, broker or individual experienced in the shipping
business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who
shall be an admiralty lawyer. Such arbitration shall be conducted in conformity with the
provisions and procedure of the United States arbitration act, and a judgment of the court
shall be entered upon any award made by said arbitrator. Nothing in this clause shall be
deemed to waive Owner's right to lien on the cargo for freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. 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. 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
subrogated 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. 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.

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