"…bills of lading very often contain a provision that freight is payable as per a charterparty. That may direct payment to a charterer. In such a case, ordinarily, the nominated recipient is, as between the owner and the shipper, the agent of the owner, and the authority of such agent can be countermanded by the owner provided that this is done before the shipper makes payment as initially directed."
Charterparties, Bills of Lading and Club LOUs
When can an owner revoke a charterer’s authority to collect bill of lading freight? (The Smart)
In circumstances where a bill of lading contained a provision that freight was payable “as per charterparty”, the Commercial Court has rejected arguments that a term should be implied into the relevant charterparty that the owner could not revoke the charterer’s authority to collect freight, even if the charterer was not in default. Noting that a term may only be implied on the basis of either business necessity or obviousness, the Court held that the charterparty did not lack commercial or practical coherence without the implied term, and it was not clear that both parties would have thought such a term was so obvious it went without saying. The obligation on the owner to account to the charterer for the surplus of any freight due, after deducting amounts due to them, meant that the owner’s right to intervene to collect bill of lading freight did not interfere with the charterer’s employment of the vessel or deprive it of the benefit of the vessel’s earning capacity.
Was arrest of vessel occasioned by charterer so as to activate proviso to off hire clause? (The Mookda Naree)
Construing the proviso to an off hire clause, the Commercial Court has upheld the decision of an arbitration tribunal that a vessel was on hire in circumstances where she had been arrested in order to secure a claim asserted against a sub-charterer in relation to a cargo carried on an entirely unrelated vessel. Following The Global Santosh, the Court held that it was necessary for the owner to show that the case fell within the proviso, which stated that the vessel would be off hire in the event of arrest or detention “unless such … detention or arrest [was] occasioned by any act, omission or default of the charterers and/or sub-charterers”, but the sub-charterer’s failure to promptly deal with or secure the unrelated claim in order to obtain the vessel’s release could naturally and fairly be characterised as a failure to act or an omission.
Is an invalid nomination a breach of condition entitling a party to terminate? (The Tai Hunter)
The risks of premature termination have been demonstrated in a case concerning an obligation to nominate a vessel under a sale contract. The Commercial Court held that an arbitral tribunal had been entitled to conclude that where an initial nomination was unreasonably ambitious rather than manifestly false, and the buyer still had time to make a valid nomination before the end of the delivery period, the initial nomination was not a breach of condition entitling the seller to treat the contract as having come to an end. The Commercial Court also rejected arguments that a failure to provide a copy of the charterparty for the initial nomination was a breach of condition, commenting that it would clearly be illogical to hold that a buyer could be in breach of condition for failing to promptly provide a copy of a charterparty relating to what might turn out not to be the effective nomination.
Shipper not responsible for “clean on board” representation in draft bill of lading (The Tai Prize)
The Court of Appeal has rejected arguments that, by tendering a draft bill of lading for a cargo of damaged soyabeans which contained the words “clean on board” and “shipped in apparent good order and condition”, a shipper and/or charterers were making a representation as to the condition of the cargo observable prior to loading. Instead the words were merely an invitation to the master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo. Further, while on the facts as determined by an arbitrator, the bill of lading was accurate because damage to the soyabeans was not reasonably visible to the master at loading, even if the bill of lading had been inaccurate, the charterer would not have been obliged to indemnify owners for a subsequent cargo claim. Imposing liability in such a way would be contrary to the scheme of the Hague Rules.
"A statement as to the apparent order and condition of the cargo refers only to its external condition as that appears on reasonable examination by or on behalf of the master in the circumstances prevailing at the load port."
Speed and performance representations (The C Challenger)
Rejecting arguments that a charterer was induced to enter into a charterparty for a VLCC on the basis of fraudulent misrepresentations as to the vessel’s fuel consumption, the Commercial Court has commented that the offering of a speed and consumption warranty, particularly a continuing warranty, should not of itself be held to involve an implicit representation as to the vessel’s current or recent performance. In this case, while the Court concluded that on the evidence the owners had misrepresented the vessel’s recent average speed and performance and that there was no reason why that data had ceased to be broadly representative of the vessel’s performance, the representations were not made fraudulently, and they had not induced the charterer to enter into the charterparty. Further, the charterer had affirmed the charterparty, and so had lost any right to rescind.
Implication of terms following change in Baltic Exchange benchmark (The New Hydra)
The daily indexes provided by the Baltic Exchange are used across the maritime sector to set contract rates, enabling parties to share the risks and benefits of large movements in the market. However, problems can arise where changes are made to the relevant benchmarks. In this case, a time charter on an amended NYPE form provided that hire payable on a cape size bulk carrier of just under 180,000 tonnes was to be calculated by reference to the four Baltic Cape Size Time Charter routes published by the Baltic Exchange, plus 4% for size adjustment. In 2013, when the fixture was concluded, the relevant benchmark was a 172,000 tonnes ship, but in 2015 the benchmark changed to a 180,000 tonnes ship. The Commercial Court accepted that in those circumstances hire was to be calculated by reference to the new benchmark, and that in order to avoid a windfall for the owners, a term could properly be implied to reduce the size adjustment to a “reasonable size adjustment”, ensuring that the charterparty would continue to operate for the period intended by the parties.
Ad hoc agreement to arbitrate consolidated claims contained in letter of undertaking (The Majesty)
Emphasising that in determining whether a notice of arbitration is valid, it is appropriate to take a broad, flexible and non-technical approach, the Commercial Court has rejected a challenge to the jurisdiction of a London arbitral tribunal in relation to a damaged cargo claim. While the relevant bills of lading provided for disputes valued at under US$100,000 to be conducted in accordance with the LMAA small claims procedure, a letter of undertaking issued on behalf of the owner’s P&I club treated the loss as of one indivisible cargo. The Court therefore considered that the letter of undertaking was an agreement to consolidate all the claims in respect of the entire cargo before a London arbitration tribunal. Although the notice of arbitration had not been particularly felicitously worded and sought to keep all bases of appointment open, it was nevertheless valid.
Casualties and Arrests
Supreme Court provides guidance on application of Collision Regulations (The Ever Smart and Alexandra 1)
In the first appeal in a collision action to come before it, the Supreme Court has provided important guidance on the application of the “crossing rules” set out in the International Regulations for Preventing Collisions at Sea 1972, emphasising the cardinal importance of the rules to the safety of navigation. The collision took place between an outbound large container vessel and an inbound VLCC within the pilot boarding area, just outside the entrance/exit channel to the port of Jebel Ali. The Supreme Court confirmed that, while the inbound vessel was not on a steady course, the crossing rules nevertheless applied, and also concluded that while the channel was a “narrow channel” for the purpose of the rules, where an approaching vessel is intending and preparing to enter a narrow channel, as in this case, the narrow channel rules will not override the crossing rules.
"The international character of the Collision Regulations and the safety of navigation mean that they must be capable of being understood and applied by mariners of all nationalities, of all types (professional and amateur), in a wide range of vessels and in worldwide waters."
Know your debtor: Ship arrests for claims against bareboat charterers (The Columbus and Vasco Da Gama)
In this decision by Admiralty Registrar Davison, in a case in which WFW acted for the successful shipowner, the Admiralty Court has helpfully confirmed that claims against bareboat (demise) charterers can only be enforced against the ship in respect of which the claim arose if the charter remains in place when proceedings are commenced. Such claims cannot, therefore, be brought against the sale proceeds of a ship that has been judicially sold. Once the charter comes to an end or is terminated and the ship is redelivered to the owner (or, in the case of a court sale, is delivered to the successful bidder), claims for which the bareboat charterer (i.e. rather than the owner) is liable in personam may no longer be enforced in rem against the owner’s ship (or, in the case of a court sale, the sale proceeds paid into court).
Are claims for interest on bunkers claims in rem? (The Columbus and Vasco Da Gama)
Noting that the words “in respect of” in section 20(2)(m) of the Senior Courts Act 1981 are “wide words which should not be unduly restricted”, the Admiralty Registrar has found that claims for interest on bunkers, together with an administrative fee on overdue amounts and a contractual indemnity for costs, could be regarded as claims “in respect of goods or materials supplied to a ship for her operation and maintenance”, and thus as statutory maritime claims enabling an in rem action to be brought. The Admiralty Registrar commented that if it were held that the price for the bunkers was within section 20(2)(m), but the contractual consequences of non-payment were not, then a bona fide supplier of necessaries to a ship would need to bring both an in rem claim against the ship and an in personam claim against the operator, which in his view would make no sense at all.
Securing a security: implying limits in a guarantee (The Anbar and Hillah)
In an interesting decision concerning the implication of terms into guarantees, which may raise alarm bells for some parties in the maritime sector, the English Commercial Court has considered the circumstances in which a party may be able to obtain security for claims against a guarantor, concluding that owners were not prevented from seeking the arrest of a vessel owned by the guarantor of obligations under bareboat charters. In doing so, the court rejected the guarantors’ attempts to draw an analogy with arresting a P&I Club’s assets, commenting that “there is no reason of principle why such security would not be available”, but that practicalities rather than legal principles may deter such a course of action. The decision also provides useful guidance on the factors to be considered when identifying “the question” to be answered when granting permission to appeal.
"It may well be true that one would not seek security against a P&I Club; but that would not be because one could not (subject to the relevant legal and procedural hurdles for the relevant form of security in the relevant forum). It is because it would be rare to feel it was necessary."
General Average and Marine Insurance
Cargo owners’ liability to pay general average for ransom payment (The Polar)
In an important case which considered several novel points of law, the Commercial Court has held that cargo owners were liable to pay general average in respect of a ransom payment following the hijack of a vessel in the Gulf of Aden. Noting the principles applicable to the incorporation of terms in a charterparty into bills of lading, the Court held that provisions in the charterparty requiring the charterer to bear additional expenses caused by the avoidance of war risks, as well as additional insurance premiums for transiting the Gulf of Aden, contradicted the provisions in the bills of lading requiring the cargo owners to pay freight “as per charter party”. While a separate “insurance code” had been agreed between the charterers and owners which meant that charterers’ liability in general average for piracy losses was precluded, that “code” had not been incorporated into the bills of lading.
Commercial Court considers construction of exclusion under charterers’ marine liability policy (The Huanghai Glory)
Construing the terms of a charterers’ marine liability policy, the Commercial Court has found that a time charterer was entitled to an indemnity in relation to damage resulting from a cargo of steel shifting in heavy weather. The defendant insurer had denied liability on the basis of an exclusion clause which provided that the charterer would not be entitled to recover if “the claim arose out of or consequent upon the Insured Vessel carrying illegal goods… or the Assured recklessly or intentionally employed or caused the Insured Vessel to be employed in an unlawful or unduly hazardous or improper trade or voyage or that the Cargo carried and/or the method of its securing … during the voyage was unduly hazardous, patently inappropriate or improper”. However, noting that an exclusion provision within a contract of insurance must be construed in a manner that is consistent with, and not repugnant to, the purpose of the insurance contract, the Court considered that the stipulation in the exclusion that the assured had to act “recklessly or intentionally” applied both where the vessel was employed in an unlawful or hazardous way, and where the method of securing was unduly hazardous or improper.
Hongfa Shipping Co Ltd v MS Amlin Marine NV  EWHC 999 (Comm)
Were repairs to yacht reasonable under marine insurance policy? (The Queen B Speed)
In a claim for the reasonable costs of repairing a yacht following a grounding incident in the Bosporus Strait, the Commercial Court has found that a claimant was entitled to recover nearly all of its actual costs of repairing the yacht under an insurance policy, holding that the damage to the yacht had been caused by the incident, and that the repair costs were reasonable. The defendant insurers’ argument that repairs to drive units and propellers could and should have been repaired more cheaply using facilities and labour located in Turkey, rather than by the original manufacturers, was not supported by evidence.
"Clear words would be required to impose upon the bill of lading holding a liability not only to pay freight but also to pay the additional insurance premium as the price for the carriage for his cargo."
What ship dues can be a port charge? (The Columbus and Vasco Da Gama)
In an interesting decision concerning two cruise ships in the CMV group which were laid over at the Port of Tilbury during the Covid-19 pandemic, it has been held that the port was entitled to increase charges for ship dues on reasonable notice. It was initially agreed that the port would charge a weekly rate of £3,000 per vessel. However, following the collapse of CMV, the port notified the vessel owners that unless otherwise agreed, it would proceed to charge the “published tariff”. This meant an “eye-watering” increase to the weekly rate of just under £90,000 and £100,000. The Admiralty Registrar considered that the port’s notification operated as a notice to vary charges pursuant to the Port of Tilbury’s General Trading Regulations 2005, which required reasonable notice to be given but did not require that charges be varied by an amount which was reasonable. The port was free to charge such ship dues as it thought fit and while its overall recovery might be disproportionate to the services provided, the Admiralty Registrar noted that there was no residual jurisdiction to moderate such a claim.
Anti-suit injunction granted where cargo claims brought in breach of arbitration agreement (Precious Sky, Star Moira and Bulk Poland)
Demonstrating that, while cargo interests may well prefer to bring proceedings in their home court, the English courts will feel no diffidence in granting an injunction to restrain such proceedings brought in breach of an exclusive jurisdiction or arbitration clause, even in circumstances where the foreign court has ordered the arrest of a vessel as security for such claims, in three separate cases the Commercial Court has granted anti-suit injunctions to owners in order to restrain cargo interests from pursuing proceedings in Vietnam and China. In all three cases, a London arbitration clause was incorporated into the relevant bills of lading, and so the cargo interests were bound to arbitrate claims arising out of the carriage of the cargo. While an injunction may be refused if it is not made promptly, in the first case the court considered that any delay was not particularly great, and the Vietnamese proceedings had hardly progressed at all on the merits and so granting an injunction would lead to little waste of judicial resources in the Vietnamese courts. Similarly, in the second case there had been some delay between the time the applicant learnt about the Chinese proceedings and when it made its application, but the delay was not sufficiently serious to refuse relief, and while the Chinese court had accepted jurisdiction, that was not per se a bar to an anti-suit injunction, and it was unlikely that significant cost or judicial resources had been spent to date. Finally, in the third case there had been no delay on the part of the owners in bringing the application, and the Chinese proceedings were not too far advanced.
English court orders anti-anti-suit injunction (The SVS Cochrane)
In circumstances where a bareboat charter contained an agreement to arbitrate in London in accordance with LMAA terms, but in breach of that clause the charterer had commenced foreign litigation and obtained an anti-suit injunction from the foreign court restraining the vessel owner from continuing arbitration, the English court has granted an “anti-anti-suit injunction”, requiring the charterer to discontinue the foreign proceedings. The decision demonstrates that the courts will be willing to take strong action to ensure that parties keep to their contractual bargains.
Are damages available for breach of an equitable obligation to arbitrate? (Frio Dolphin)
Where a party, such as a subrogated insurer or an assignee, derives rights under a contract which contains an arbitration or jurisdiction clause, they will be in breach of an equitable obligation if they seek to enforce rights under that contract in a different forum. In a decision which further demonstrates the English court’s active support for compliance with dispute resolution provisions, the Commercial Court has now confirmed, for the first time, that equitable compensation may be recoverable for such a breach. The case concerned an appeal from an arbitration award where a shipowner had been awarded damages in relation to costs incurred by its manager in Spanish proceedings brought by insurers in breach of a London arbitration clause in the relevant bills of lading. The question of whether the insurer owed an equitable obligation to the ship manager was not open to appeal, although the court commented that while that finding might be an extension of the equitable obligation, it was not an extreme or unlikely one.
Kidnap and ransom insurer obtains post-judgment freezing orders
Where a kidnap and ransom insurer had obtained judgment against an individual associated with the owners and managers of an insured vessel, but the judgment remained unsatisfied, the English court granted a worldwide freezing order against the defendant. The court emphasised that, while the principles applicable to the grant of a freezing order are the same whether the order is granted in support of ongoing litigation or post-judgment, where a judgment has been obtained but remains unsatisfied, a freezing order may be more readily granted, given that it will be easier to infer a risk of dissipation and factors such as delay, the absence of assets in the jurisdiction or the presence of related proceedings in another jurisdiction will have less weight.
Declarations granted in relation to allegations in Greek Extra Judicial Notices
In the context of a bitter dispute between brother and sister shipowners who carried on business together, the Commercial Court has issued declarations concerning allegations made in “Extra Judicial Notices” which were the precursor to the commencement of proceedings in Greece. Although it was held that service of the Extra Judicial Notices did not constitute a breach of an English jurisdiction clause, on the evidence the Court considered that it was appropriate to grant declarations regarding the receipt of financial statements, the approval of management fees, payment of charter hire and entitlement to the proceeds of sale of a bulk carrier. In a subsequent judgment the Commercial Court held that the second defendant, which had applied to amend its defence and rely on additional witness statements on the first day of trial, should pay both the costs of those applications and the costs of the trial on the indemnity basis, noting that the effect of the late applications was to “create chaos” for the claimant in the run up to trial.
Ferand Business Corporation & Ors v Maritime Investments Holdings Limited & Anr  EWHC 40 (Comm)
Ferand Business Corporation & Ors v Maritime Investments Holdings Limited & Anr  EWHC 197 (Comm)