London Arbitration 2/13
The vessel was the subject of a head and sub charter, both of which provided at clause 83 as follows:
“All taxes and/or dues on cargo/freight and/or Charter hire to be for Charterers’ account, except tax and duties levied against the Owners in the country of domicile or ship’s flag.”
Charterers ordered the vessel to the US, as a result of which Head Owners became liable to pay tax on sums received by them.
Disponent Owners claimed for an indemnity against Charterers in the event that they were found liable to pay tax to Head Owners under this claims. They submitted that they were entitled to an indemnity either under this clause, or under clause 8 of the standard NYPE form which provided for the Master to be under the order and directions of the charterer as regards employment. The latter point was made on the basis that Disponent Owners were themselves obliged to indemnify Head Owners against the consequences of the Master complying with their orders.
Disponent Owners’ claim for an indemnity failed.
Due to the nature of the tax, both Head Owners and Disponent Owners were potentially liable to pay tax on relevant hire received. The Tribunal inferred that Disponent Owners had obtained an exemption from liability to pay such tax, otherwise they would have been claiming in respect of their own liability as well as any contingent liability as against Head Owners. As such, there was no tax paid by Disponent Owners which they could claim from Charterers under clause 83.
Clause 83 only imposed liability for taxes borne by the “owner”, not liability for an indemnity which that owner might owe to someone higher up the chain. In the present claim for an indemnity, clause 83 only covered tax on hire payable under the sub-charter. As there was no such tax, there was no claim under clause 83.
The question in respect of the clause 8 implied indemnity claim was whether, as between Disponent Owners and Charterers, the former assumed the risk of being liable for any freight tax which Head Owners might have to pay. The general position in the shipping industry suggested that a tax of this kind was to be regarded as an ordinary expense of trading. It was not exceptional, and Charterers’ orders to trade to the US were simply the occasion for it to be incurred, rather than causing the liability in a legal sense.