London Arbitration 3/13

The vessel was chartered on the NYPE 1996 form, which incorporated the Inter Club Agreement (ICA). Following discharge of a cargo of bagged wheat flour, cargo interests alleged that the cargo was damaged and in part shortlanded, and claimed against Charterers for US$187,000.60. US$134,222.54, i.e. 72%, of the claim related to short delivery. Charterers settled the claim for US$90,000, i.e. 48% of the total claim.

Charterers claimed a 50% ICA contribution from Owners in the sum of US$32,240.05, in relation to what they said was the shortage element of the settlement. This sum was half of 48% of the proportion that US$134,222.54 bore to the total claim. Owners argued that in determining the sum to be apportioned 50/50, different weight should be given to different heads of claim. For example, it should be assumed that cargo interests would accept little to no compromise on claims for torn and empty bags.

Owners made two other key arguments:

1. The claim was not made under a “contract of carriage … which was authorised under the charterparty” as required by the ICA, because the bills had not been issued in conformity with mates’ receipts. As such, the ICA did not apply.

The mates’ receipts were endorsed: “SHIP’S RK: QUALITY UNKNOWN, SAID TO BE, SAID TO WEIGH; QUANTITY AS PER SHORE TALLY”. The bills contained the printed words “weight, measure, numbers, quality, contents and their condition … are to be considered unknown.” Owners said that the bills were not authorised, because they did not incorporate the express endorsement on the mates’ receipt.

2. There was no claim, because the only explanation for the shortage alleged was that the cargo in question had never been shipped. The ICA could not apply, because there could be no “cargo claim” for loss of cargo which was not shipped.

Tribunal’s findings

Charterers’ claim succeeded.

Cargo interests and Charterers had agreed a lump sum settlement, which did not take account of the respective merits of the different heads of claim. It was impossible to infer that anyone gave more weight to any particular aspect of the claim. Charterers’ approach to apportionment was therefore accepted. If they were entitled to succeed, it was for the full amount of their claim.

Owners’ argument that the bills were not authorised was not a commercial approach, considering the words used in the mates’ receipts and bills of lading. The ICA was a commercial agreement designed to cut across fine legal arguments. The practical effect of the words in both documents was the same. The phrase “quantity as per shore tally” added nothing to the mates’ receipts, and its absence from the bills did not make them unauthorised. The bills were, therefore, authorised within the meaning of the ICA.

The courts have generally found that in order for there to be a cargo claim, cargo must have been shipped. The tribunal expressed surprise at this, saying that if it had been interpreting the ICA without the aid of judicial authority, it would not have regarded it as a requirement that cargo actually had been shipped. However, the tribunal did not have to reach a final decision on the issue as it found that there were other explanations for the shortage claim. It was correct to accept the mates’ receipts as sufficient evidence of loading to shift any burden of proof to the contrary to owners. It was certainly not right to infer that the cargo had not been shipped.


This decision is an example of the broad-brush approach which tribunals will take to the ICA. They prefer to focus on the commercial aim of the Agreement, i.e. to enable parties to apportion cargo claims between them without having to go into the finer legal details and incur the associated costs.

The decision also shows that the question of whether cargo must have been shipped in order for a cargo claim to arise is still open to debate.