Comment and analysis by Reed Smith lawyers on the latest developments in the shipping industry
The question of whether demurrage liquidates all or just some of the damages arising from a charterer’s breach in failing to complete cargo operations within the laytime will no longer be decided by the UK Supreme Court following a commercial settlement. The parties have therefore consented to the appeal not proceeding.…
Continue Reading The Eternal Bliss – Court of Appeal has the final say
Can Charterers withhold hire without Owners’ consent, even if the vessel was off hire on the hire due date and where they had agreed deductions from hire would not be allowed without Owners’ written agreement?
Key facts
Under a charterparty dated 13 April 2021 on a heavily amended NYPE 1993 form, Bulk Trident Shipping Ltd (”Owners”) trip time chartered the “Anna Dorothea” (the “Vessel”) to Fastfreight Pte Ltd (“Charterers”) for the carriage of a bulk cargo from East Coast, India to China (the “Charterparty”).…
There have been several decisions in 2022 about carrier’s defences to misdelivery claims under bills of lading.
Carriers face misdelivery claims when they deliver cargo without production of original bills of lading, but then someone else claiming to be the ‘lawful holder’ of the bills complains the cargo should have been delivered to them instead. A common scenario is where a bank has financed the import of a cargo, but the finance has not been repaid. The bank then looks to the bills of lading it holds as a form of security. Unfortunately, the bank often finds the financed cargo has already been discharged from the ship (usually under a letter of indemnity) and cannot be traced. The bank finds it has no security for its claim against its defaulting customer, and brings a claim against the carrier for misdelivery under the bills of lading, arguing the carrier should not have discharged the cargo without the production of the original bills of lading. The carrier in turn looks to the letter of indemnity under which it agreed to discharge the cargo without the original bills.…
Continue Reading Misdelivery claims: not an open goal for financing banks
With thanks also to Counsel, Charles Holroyd at 7KBW.
In DHL Project & Chartering Ltd v. Gemini Ocean Shipping Co Ltd 2022-000247 [EWCA], the Court of Appeal, in a judgment upholding the High Court’s judgment of Mr Justice Jacobs, clarified the scope of the separability principle in relation to arbitration clauses in contracts, including the scope of s 7 Arbitration Act 1996.
A “subject” provision in a putative fixture requiring “shipper/receivers approval” was held to be of an unqualified character such that the contract would not become binding unless and until DHL (“Charterers”) lifted the “subject”, which, on the facts, had never occurred. That meant that not only the fixture, but also the arbitration agreement contained therein, was never concluded.…
The question of whether demurrage liquidates all or just some of the damages arising from a charterer’s breach in failing to complete cargo operations within the laytime has divided practitioners and academics for decades and, more recently, the English Court in K Line Pte Ltd v. Priminds Shipping (HK) Co Ltd [2021] EWCA Civ 1712 (The Eternal Bliss). Now, in granting permission to appeal to the shipowners, it is a question which the Supreme Court has said it will answer.…
Continue Reading The Eternal Bliss – Permission to appeal granted by the UK Supreme Court
It is settled law that a carrier who delivers goods without production of the bill of lading is typically liable for any consequential losses suffered by the bill of lading holder. In the course of prosecuting its claim against the carrier, the bill of lading holder may seek to obtain summary judgment without trial on the basis that there is plainly no defence to its claim.
In the recent case of The “STI Orchard” [2022] SGHCR 6 where the plaintiff bank (“Plaintiff”) sought summary judgment against the defendant shipowner (“Defendant”), the General Division of the High Court of Singapore granted the Defendant unconditional leave to defend the Plaintiff’s claim for misdelivery. A key issue identified by the Court was whether the bills of lading were intended to be relied on as security for the Plaintiff’s financing in the underlying transaction.…
Pacific Pearl Co Limited v Osios David Shipping Inc [2022] EWCA Civ 798
The Court of Appeal (“CA”) has overturned the decision of Justice Teare that security tendered under the Admiralty Solicitor Group form ASG 2 (Collision Jurisdiction Agreement) (“CJA”) needed to be subjectively acceptable to the offeree. Instead the CA has determined that it is sufficient that it be objectively acceptable.
The decision followed the earlier ruling by Sir Nigel Teare (as reported in Lloyd’s Law Reports, [2022] 1 Lloyd’s Rep. 261) in an action brought by owners of the Panamax Alexander (“PA”) against the owners of Osios David (“OD”), with whom they collided, alleging breach of the CJA clause C. This clause provides that “Each party will provide security in respect of the other’s claim in a form reasonably satisfactory to the other.”
The owners of the PA proposed security which contained a sanctions clause (the scheme of the ASG 2 is that it is expected to be used with a plain security in the form of ASG 1). This was rejected by the owners of the OD on the basis that it was not reasonably satisfactory to them. In the first instance it was held that such security from a prominent International P&I Club must be objectively reasonable but that there was nothing in the CJA that compelled the recipient to accept it and that they were at liberty to seek better security elsewhere including by arrest.…
Continue Reading Court of Appeal overturns judgement on acceptable security in collision matter
In DHL Project & Chartering Ltd v. Gemini Ocean Shipping Co Ltd [2022] EWHC 181 (Comm), DHL (“Charterers”) succeeded in an application against Gemini (“Owners”) to set aside an arbitration award pursuant to section 67 of the Arbitration Act 1996 (the “Act”).
Mr Justice Jacobs held that a “subject” provision in a putative fixture requiring “shipper/receivers approval” was of an unqualified character. The Court found that the contract would not become binding unless and until Charterers lifted the “subject”, and on the facts, this had never occurred. Accordingly, no arbitration agreement came into existence and the Tribunal did not have substantive jurisdiction when it determined that Charterers had repudiated the charterparty.
Continue Reading To what are “subjects” subject?
Exemption clauses, including those purporting to exclude or limit liability for deliberate and repudiatory breaches, are to be construed by reference to the normal principles of contractual construction. There is no presumption in English law that exemption clauses do not apply to fundamental breaches. Nor is there a requirement for any particular form of words or level of language to exclude liability.…
Continue Reading Exemption clauses subject to contractual interpretation
We have previously dedicated blog posts to so-called “No Oral Modification” or “NOM” clauses. You can find our previous post focusing on the Supreme Court judgment in MWB Business Exchange Centres v. Rock Advertising [2018] UKSC 24 here.
The validity of contractual modifications is a recurring theme in commercial disputes. A recent English Court of Appeal judgment in Kabab‑Ji S.A.L (Lebanon) v. Kout Food Group (Kuwait) [2020] EWCA Civ 6 considered this issue.
The NOM clause in Kabab‑Ji was not unlike clauses often seen in commercial contracts. It read as follows: “The Agreement may only be amended or modified by a written document executed by duly authorised representatives of both Parties”. The contract also imposed good faith and fair dealing obligations on the parties.
In the underlying arbitration proceedings, Kabab‑Ji claimed against KFG, a company which was not (originally) party to the agreement out of which the dispute arose. Kabab‑Ji argued that KFG had become party to the agreement even though the parties failed to follow the NOM procedure for amending the contractual terms.
Continue Reading No Oral Modification clauses
