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These were two separate motions to stay an action for damage to a cargo of methanol carried from British Columbia to Japan in the Panamanian tanker Kinugawa. The defendant, Tokyo Marine Co. Ltd., sought to arbitrate in London, as provided in the contract of affreightment (COA), dated February 24, 1994. The defendant, Fontaine Navigation S.A., sought to litigate in Japan, as provided in the bill of lading. While the COA provided for issuance of bills of lading in the form annexed to the contract, no bill of lading was ever annexed. An unsigned Tokyo Marine Co. Ltd. bill of lading, dated August 7, 1995, was subsequently issued. The bill of lading required that any disputes be subject to the jurisdiction of the Tokyo District Court and that if there was a conflict with the charter party (COA), the jurisdiction clauses in the bill of lading would prevail.

The Court refused to send the parties to the COA to arbitration in London. The Court's interpretation of art. 8 was that the existence of a dispute was required in order to refer the parties to arbitration and that a court was entitled to consider this prerequisite in applying art. 8.

In this case, the plaintiff argued that the defendant Tokyo Marine had no defense to the contamination claim. The Court accepted this and concluded that a party cannot give notice of arbitration unless there is a disputed claim, and a court will not order a stay of an action in favour of arbitration if there is no genuine dispute. While the Court noted that the arbitral tribunal was entitled to determine its own jurisdiction under art. 16, a court was also entitled to make this determination in applying art. 8.

The Court also held that Tokyo Marine was estopped from invoking the arbitration clause because of a letter of undertaking it had signed in favour of the plaintiff agreeing to litigation in Canada. Similarly to parties to a jurisdictional clause, parties to a contractual arbitration clause may recast their dispute resolution mechanism to supersede arbitration with litigation.

Litigation in the Tokyo District Court was not an option for Tokyo Marine Co. Ltd., because there was no evidence that it was a demise charterer of the Kinugawa, which is a requirement to qualify as a carrier under the bill of lading and thereby fall within the Tokyo District Court jurisdiction clause in the bill of lading.

London arbitration was not an option for Fontaine Navigation S.A. because, although the COA was in the guise of a charter party and was incorporated into the bill of lading, the Tokyo jurisdiction clause in the bill of lading clearly overrode the arbitration provision in the COA. Having signed the letter of undertaking, however, the defendant was also precluded from invoking the forum selection clause.

The motions were denied.

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