NATIONAL UNION FIRE INSURANCE COMPANY OF

PITTSBURG v.
STOLT-NIELSEN PHILIPPINES, INC.
GR No. 87958 April 26, 1990
By Kylie Dado
FACTS:
United Coconut Chemicals = SHIPPER
Stolt-Nielsen = CARRIER
National Union Fire Insurance = INSURER
o Agent in PH: American Intl Underwriters

SHIPPER shipped 404.774 metric tons of distilled C6-C18 fatty

acid on board MT Stolt Sceptre, a tanker owned by the
CARRIER from Bauan, Batangas consigned to Nieuwe Matex in
Rotterdam, covered by Tanker Bill of Lading B/L No. BAT-1.
o Insured under a marine cargo policy with INSURER, a
non-life American insurance corp through its settling
agent in PH, American Intl Underwriters-PH
o It appears that the B/L 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 USA.
Upon receipt of the cargo by the CONSIGNEE in Rotterdam, it
was found to be discolored and totally contaminated.
Claimed filed by the SHIPPER with the CARRIER having been
denied, INSURER indemnified the SHIPPER.
As subrogee of the SHIPPER, INSURER filed a suit against the
CARRIER before the RTC-Makati for the recovery of sum w/
interest.
o CARRIER moved to dismiss/suspend the proceedings on
the ground that RTC had no jurisdiction over the claim
being an arbitrable one. INSURER is subject to the
provisions of the B/L, which included a provision that the
shipment is carried under and pursuant to the terms of
the Charter Party between the SHIPPER and Parcel
Tankers providing for arbitration.
o INSURER opposed the dismissal/suspension saying
that it is not legally bound to submit the claim for

arbitration as the arbitration clause provided in the

Charter Party was not incorporated into the B/L, and
that the arbitration clause is void for being
unreasonable and unjust.
RTC: denied the Motion but subsequently reconsidered and
deferred resolution on the Motion to Dismiss/Suspend
Proceedings until the trial on the merits.
Carrier -> CA (PI/TRO) seeking the annulment of RTCs order.
CA: INSURER is ordered to refer its claims for arbitration and
directed the respondent Judge to suspend the proceedings
pending the return of the arbitral award.
ISSUE: Are the terms of the Charter Party, particularly the
provision on arbitration, binding on the INSURER?
INSURERs POSTURE: No because as insurer, it is subrogee
only w/ respect to the B/L thus only the B/L should regulate the
relation among the INSURER and the CARRIER, and in order to
bind it, the arbitral clause in the Charter Party should have
been incorporated into the B/L
SC: Yes, it binds the INSURER.
Clearly, the B/L 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 B/L. 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.
In cases where a B/L has been issued by a carrier covering
goods shipped aboard a vessel under a charter party, and the
charterer is also the holder of the B/L, the B/L operates as the
receipt for the goods, and as document of title passing the
property of the goods, but not as varying the contract between
the charterer and the shipowner. The B/L becomes, therefore,
only a receipt and not the contract of carriage in a charter of
the entire vessel, for the contract is the Charter Party and is
the law between the parties who are bound by its terms and
condition provided that these are not contrary to law.

Therefore, 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 SHIPPERASSURED and is subrogated merely to the latters
rights.

Stated otherwise, as the subrogee of the SHIPPER, the

INSURER is contractually bound by the terms of the Charter
party. Any claim of inconvenience or additional expense on its
part should not render the arbitration clause unenforceable.