Shipping E-Brief Winter 2015

SHIPPING E-BRIEF
WINTER 2015
CONTENTS
SHIPPING
Bill of lading “law and arbitration” clause incorporates charterparty court jurisdiction provision 2
Court grants anti-suit injunction in respect of some but not all cargo claims 3
General Average – dealing with the costs of a hijacking 5
When does an indorsee of a bill of lading have title to sue the carrier? 6
Delayed delivery: the right to cancel shipbuilding contracts 8
Beware the pitfalls of inconsistent dispute resolution clauses 9
When an English jurisdiction clause in a bill of lading will be deemed exclusive 10
Who pays the Suez Canal fees? 12
Consecutive time charters – check your contract terms 13
Court sets aside arbitration award for serious irregularity 14
SHIPPING LEGISLATION AND REGULATION
An update on the IMO’s proposed Polar Code 15
The entry into force of the Nairobi Convention on Wreck Removal: is it a big deal? 17
Global anti-corruption update January 2015 – what’s new? 18
NEWS AND EVENTS
Who’s Who Legal: Transport 2015 names Ince & Co lawyers as leading practitioners for Aviation and Shipping 20
Ince & Co advised Bahri on the transfer of 20 vessels from Vela, as part of a merger worth US$1.3 billion 20
Ince & Co advises PVM Group and its sellers on completion of sale to Tullett Prebon PLC 21
Ince & Co’s Beijing office has moved 21

02 SHIPPING
E-BRIEF, WINTER 2015
SHIPPING
Bill of lading “law and arbitration” clause incorporates
charterparty court jurisdiction provision
Caresse Navigation Ltd v. Zurich Assurances MAROC and
others (Channel Ranger) [2014] EWCA Civ 1366
The Court of Appeal in this case has considered whether
reference in a bill of lading to the incorporation of a “law and
arbitration clause” was effective to incorporate a law and
court jurisdiction (not arbitration) clause in a charterparty.
This dispute concerns a claim for cargo damage of around
US$1 million under a bill of lading on the Congenbill 1994
standard form. The appeal was against a Commercial Court
decision upholding an anti-suit injunction made on the basis
that the bill of lading did incorporate an English law and court
jurisdiction clause referred to in the charterparty. The Court
of Appeal dismissed the appeal and upheld the Commercial
Court’s decision.
The Commercial Court decision was reported in the Ince
January 2014 Shipping E-Brief.
The background facts
The Respondent Owners commenced proceedings in the
English Commercial Court seeking a declaration of non-
liability regarding salt-water damage to the cargo at the
discharge port in Morocco. The cargo insurers (Appellants in
the current proceedings) challenged the English Court’s
jurisdiction and commenced proceedings in Morocco against
the Owners in relation to the cargo damage.
The Owners were granted an anti-suit injunction by the
Commercial Court restraining pursuit of the Moroccan
proceedings by the cargo insurers.
The Congenbill 1994 bill of lading contained the following
typed clause: “All terms, conditions, liberties and exemptions
including the law and arbitration clause, are herewith
incorporated.” The terms of the governing voyage
charterparty, however, provided that it would be governed by
the exclusive jurisdiction of the English courts and did not
provide for arbitration.
The Commercial Court decision
The Commercial Court held that the provision in the bill of
lading expressly seeking to incorporate an arbitration clause
from the charterparty was sufficient to incorporate the English
High Court jurisdiction clause in that charterparty. The Court
took the view that this issue was one of construction of the
terms of the contract, rather than one of incorporation, and
that the real question was what the parties reasonably
understood by the words “law and arbitration clause”. The
Court held that the only clause that the parties could have
intended to refer to by the words “law and arbitration clause”
was the court jurisdiction clause in the relevant charterparty,
rather than to incorporate an arbitration clause “if any”.
Construing the clause in this way did not offend against the
need for clarity and certainty in the construction of these
types of clauses.
The Commercial Court therefore held that the Defendant
cargo insurers were bound by the English law and court
jurisdiction clause in the charterparty and granted the anti-
suit injunction to restrain the proceedings that the Defendants
had commenced in Morocco.
The cargo insurers appealed the Commercial Court’s decision
to the Court of Appeal.
The Court of Appeal decision
The Court of Appeal agreed with the Commercial Court’s
reasons and dismissed the appeal. The Court of Appeal
reiterated the Commercial Court’s view that the question in
this case is not one of incorporation of terms but of construing
the meaning of the words used in the bill of lading. In addition,
the words in the bill of lading must be read as a whole in their
context. The argument put forward by the Appellant cargo
insurers that the meaning of the words in the bill of lading is
“arbitration clause if any” was found to be wholly
uncommercial since the original parties to the bill of lading are
taken to have known of the terms of the charterparty and that
it did not contain an arbitration clause. The reference to an
arbitration clause in the bill of lading was therefore not
inconsistent with the incorporation of the charterparty’s court
jurisdiction clause. The Court of Appeal confirmed that, in its
view, this finding did not run contrary to the need for clarity
and certainty when incorporating terms into bills of lading
since the clause in the charterparty was one that was usual in
the trade.
Notably, the Court of Appeal also referred to The Merak
[1965] (relied upon by the Appellant cargo insurers in the
present case) in which the Court of Appeal by a majority found
that they could not correct an error in the bill of lading terms
that referred to the incorrect clause number of the arbitration
clause in a charterparty. The Court of Appeal in the present
case commented that the approach of the Court in The Merak
to the interpretation of contractual terms was “old-fashioned
and outdated”. In view of subsequent important decisions on
the construction of contracts, the Court suggested that if the
same case were to be decided today, it is very likely that it
would be decided differently.
Comment
English law has long recognised the principle that general
words of incorporation in a bill of lading only incorporate those
provisions in the charterparty that are directly relevant or
“germane” to the shipment, carriage, discharge and delivery of
the cargo, and not ancillary charterparty terms such as
arbitration and jurisdiction clauses. This case falls outside this
general principle since, rather than general words being used,
there was a specific reference in the bill of lading to one kind
of charterparty ancillary provision, being the “law and
arbitration clause”. This reference was sufficient to
incorporate the charterparty court jurisdiction (rather than
arbitration) clause since the terms used were usual in the
shipping trade and it was clear that the parties were aware
that there was no arbitration clause in the charterparty and
therefore intended to incorporate the court jurisdiction clause.

03SHIPPING
This case is a further reminder that, for certainty and to avoid
potential disputes, parties should use clear and specific words
of incorporation in a bill of lading and as far as possible refer to
the correct law and jurisdiction clause(s) in the appropriate
charterparty.
Pavlo Samothrakis
Solicitor, Dubai
pavlo.samothrakis@incelaw.com
Rania Tadros
Partner, Dubai
rania.tadros@incelaw.com
Court grants anti-suit injunction in respect of some but not
all cargo claims
Golden Endurance Shipping SA v. RMA Watanya SA and others
(Golden Endurance) [2014] EWHC 3917 (Comm)
This dispute related to cargo claims brought under three bills
of lading. One issue was whether the claims were subject to
London arbitration and/or English court proceedings and/or
Moroccan court proceedings. The Commercial Court decision
held that the claims under one bill were subject to London
arbitration and granted an anti-suit injunction in respect of
Moroccan court proceedings brought in breach of the
arbitration agreement. In respect of the claims under the
other two bills, the Court held that these could be pursued in
the English courts, but refused to grant an anti-suit injunction.
The result is that, unless the parties come to some agreement,
there will be three sets of proceedings in respect of cargo
claims arising out of the same voyage: London arbitration,
English court proceedings and Moroccan court proceedings.
Clearly not ideal.
The Golden Endurance loaded a cargo of wheat in Gabon, Togo
and Ghana for discharge in Morocco. The cargo arrived in a
damaged condition, the ship was arrested and the Owners had
to put up security in Morocco and become involved in the court
proceedings there. However, the charterparty provided for
English law and London arbitration. The bills were based on
the Congenbill form. So the Owners applied to the English
Commercial Court for an anti-suit injunction which, in this
context, meant an order from the English Court that cargo
interests were not allowed to pursue the substantive claims in
Morocco. The Owners wanted the cargo claims to be decided
in London, where the Hague Rules would apply, rather than in
Morocco where the local court would apply the Hamburg Rules.
Anti-suit injunctions can no longer be obtained if the court
proceedings are within the EU, but they can still be obtained
where cargo interests have commenced proceedings outside
the EU. Readers may well ask themselves why a Moroccan
cargo claimant, holding a bank guarantee that responds to a
decision of the Moroccan Court, would take any notice of an
order from the English Court. The answer to this is that to
ignore the order is a very serious thing. Were the directors of
that company to come to the UK, they could be fined and
imprisoned for contempt of court. Furthermore, many cargo
claims are, as in this case, brought by subrogated cargo
insurers who in turn may come to the UK on business and/or
place their reinsurance here and/or have assets in the UK. So
anti-suit injunctions can be effective but, if you want to obtain
one, you must act quickly and be sure not to submit to the
jurisdiction of the local courts, save under protest. Legal
advice should be obtained promptly.
The facts of this case gave rise to some interesting findings by
the Court, some of which may be useful for dealing with other
cargo claims and some of which relate solely to the business
of obtaining anti-suit injunctions.

04 SHIPPING
1. There was an argument about whether the charterparty
needed to be signed in circumstances where the
Charterers asked the Owners to sign and return the
charterparty. The Court confirmed that it did not need to
be signed.
2. The shipper must have been using fake Bimco bills of
lading because one of the bills that was signed by the
Owners’ agents at the load port was a curious mix of
Congenbill 1978 and 1994. Older readers will remember
that the main reason for the change from 1978 to 1994
was that the 1978 version did not expressly say that it
incorporated the arbitration clause from the charterparty
and that, without these express words, the English court
would not bring the arbitration clause into the bill. The
other two bills that were issued were 100% Congenbill
1978. The outcome of this was that only the first bill (we
will call this the 1994 bill) incorporated the arbitration
clause from the charterparty, the other bills just
incorporated the English law clause.
3. The fact that the 1994 bill incorporated the arbitration
clause made it easy for the Court to grant an anti-suit
injunction in respect of this bill.
4. With regard to the 1978 bills, the Judge agreed that the
English Court was a more appropriate forum than the
Moroccan Court to decide the case because the parties
had chosen English law and the Owners would be unjustly
deprived of the benefit of their bargain if the claims were
not allowed to proceed in the UK (because the Moroccan
court would apply the Hamburg Rules).
5. The Court had the jurisdiction to decide whether the
Owners were liable for the cargo claim, but that did not
mean the Court could necessarily grant an anti-suit
injunction because the anti-suit was not of itself a
contractual claim that was subject to English law. The
Judge decided, however, that he could grant the anti-suit
injunction because it was “ancillary” to the English
contractual claim.
6. Nonetheless, the Judge refused to grant the anti-suit
injunction because an English law clause did not, unlike an
English jurisdiction clause, trump other competent
jurisdictions. This notwithstanding that he recognised that
two sets of proceedings, one in London and one in
Morocco, might lead to inconsistent judgments in respect
of claims under the 1978 bills.
7. Finally, the Judge touched upon an argument by cargo
interests that the phrase “or corresponding legislation”,
which is found in all Congenbills, could mean the Hamburg
Rules. The Court’s provisional view was that this argument
did not work, but the Judge said the point required further
investigation.
Comment
For our shipowner clients and their P&I insurers, this case is a
good reminder that, whenever you face a cargo claim at the
discharge port despite an English law and jurisdiction clause in
the bill of lading, you should consider whether an anti-suit
injunction from the English Court might assist. In addition, just
as you take care over the wording of your charterparties, take
care as regards the wording of the bills of lading you sign. The
Owners’ position would have been very much better in this
case had the 1994 version of the Congenbill been used rather
than 1978.
This case also helps to clarify a couple of legal issues relating
to the jurisdiction to grant anti-suit injunctions. First, no
separate jurisdictional gateway is required, provided the
injunction is ancillary to claims where English jurisdiction is
established – in this case, the application for a declaration of
non-liability for the cargo claim. Second, in the absence of an
exclusive English jurisdiction clause, an anti-suit injunction will
not be granted merely because the local court will apply the
Hamburg Rules, rather than those applying under the proper
law of the contract, in this case the Hague/Hague Visby Rules.
Margot Wastnage
Solicitor, London
margot.wastnage@incelaw.com
Ted Graham
Partner, London
ted.graham@incelaw.com

05SHIPPING
General Average – dealing with the costs of a hijacking
Mitsui & Co Ltd & others v. Beteiligungsgesellschaft LPG
Tankerflotte MBH & Co KG (Longchamp) [2014] EWHC 3445
(Comm)
The recent judgment in the Longchamp has overturned
accepted industry thinking in how bunkers and crew wages are
dealt with in a hijacking. Not only has it wrong-footed lawyers,
but it flies in the face of the written and considered views of
the Advisory Committee of the Association of Average
Adjustors and opens up interesting questions on other heads
of claim not considered in the judgment.
The Judge was asked to consider whether a number of items
(familiar to anyone who has dealt with a Somali hijacking case)
were recoverable in General Average (“GA”). These included:
media response services, crew wages, bunkers and telephone
charges. The hijacking took place in January 2009, lasted just
under two months and resulted in a ransom of US$1.85 million.
The total amount of expenses in issue was a modest
US$181,604, reflecting the short duration of the hijacking.
Of these, the most controversial were the bunkers and crew
wages.
After capture, the vessel’s Master was directed to sail the
vessel to the Somali coast, to what the Advisory Committee
referred to as a “pirates’ lair” which, in their view, was not a
port of refuge in the sense understood under the York
Antwerp Rules (“YAR”). Their rationale was that the lives of
the crew were at the complete mercy of the pirates and the
dangers threatening the vessel were at their maximum. Any
vessel anchored off Somalia in the control of pirates remains in
the grip of an insured peril.
The negotiations began with the pirates demanding US$6
million and the Owners countering with their own opening of
US$373,000. The pirates’ arbitrary opening was matched by a
figure set by the Owners at an amount giving rise to the
impression of accounts being emptied. The “target settlement
figure” was said to be US$1.5 million, which put it at what
must have been the lower end of the pirates’ own expectation
of an acceptable settlement range; that is, the range of figures
where both sides can be happy with the result, which is often
referred to as the “market rate” – a concept roundly
condemned by the Judge. The figures are important in the
context of the dispute and argument that arose between the
parties on “substituted” expenses.
Substituted expenses
Under Rule F of the YAR, a substituted expense is only allowed
in GA if, amongst other things, there was a hypothetical
alternative course of action which, had it been adopted, would
have involved expenditure claimable in GA. The expense is
allowed where it appears more economical than the
alternative expense and, in the event that the substituted
expense turns out to be more expensive, it is capped at the
lower alternative amount.
Having concluded that bunkers, like wages, were an expense,
the Court considered whether the saving between the ransom
initially demanded and the ransom ultimately paid was real, in
circumstances where no owner would ever pay the original
demand made. The final hurdle for the Claimants was to prove
that the expenditure was “reasonably ... incurred”. That was
not the same, the Judge held, as the ransom being
“reasonable” which, he said, was “...rationally misconceived”.
There is no such thing it seems as a “reasonable ransom”.
Surprisingly, however, he also found against the assertion
made that it was inevitable that the amount of ransom would
be reduced by the process of negotiation. Such was the
unpredictability of the pirates, it seems, that this was not
certain. Pirates are not necessarily rational in many things but
it seems improbable that any owner has ever paid a ransom
that exceeded the initial demand and certainly not one that
was for more than the value of the vessel.
Whereas the Judge found that the US$6 million could have
been “reasonably incurred”, the Association had said that the
only “reasonable” ransom was the one actually agreed and
paid. The Court’s conclusion meant that the starting point for
the calculation of the substituted expenses was the opening
demand of the pirates, not the actual amount paid. It would
therefore follow that in any normal piracy hijacking situation,
where there would normally always be a saving between the
original demand and the amount paid, then the costs and
expenses incurred during the negotiation (including those not
directly incurred to secure the release of the vessel) are
recoverable in GA. In this case, that also included the media
communication costs and the telephone charges claimed.
It follows that those costs, which are claimed as substituted
expenses, are capped at the difference between the starting
point of the pirates’ ransom demand and the final amount
paid. One can foresee a situation where that figure may be
exceeded and the cap comes into play.
Comment
In the end, the Judge seems to have been guided by principles
of equity and accordingly it was right, in his view, that natural
justice requires that all should contribute to such substituted
expenses. In this case, the amounts in issue were small.
However, in the larger, more drawn out hijackings involving
higher value tankers that lasted over ten months, the cost of
wages and bunkers could have been as much as US$2 million
and there are several claims and adjustments that have not
been settled that may yet need to be reconsidered.
Having opened the door on such expenses, particularly bunkers,
the decision raises another interesting possibility that was not
considered by the Judge. There were vessels where pirates
burnt the bunkers on board and then, when these were
exhausted, burned cargo to avoid the need for a bunker resupply.
This happened in circumstances where the negotiation process
was completely controlled by owners, leaving charterers and
cargo unable to influence or contribute to the strategy being
followed. In the interests of equity, it will be interesting to see
whether these costs can also be brought into GA.

06 SHIPPING
This case is going to appeal.
David Richards
Senior associate, London
david.richards@incelaw.com
Stephen Askins
Partner, London
stephen.askins@incelaw.com
When does an indorsee of a bill of lading have title to sue
the carrier?
Standard Chartered Bank v. Dorchester LNG(2) Limited (Erin
Schulte) [2014] EWCA Civ 1382
The Court of Appeal has recently given judgment concerning
the application of s.5(2)(b) of the Carriage of Goods by Sea
Act 1992 (“COGSA”) and, in particular, the circumstances in
which an indorsee in possession of a bill of lading has title to
sue under the bill.
The underlying transaction in this case was a sale by Gunvor
International BV (“Gunvor”) to United Infrastructure
Development Corporation (“UIDC”) of a cargo of gasoil. That
sale was secured by the transfer of a letter of credit (the “LC”)
confirmed by Standard Chartered Bank (“SCB”). Having
shipped the cargo on the Erin Schulte (“the Vessel”), Gunvor
presented the documents, including bills of lading indorsed to
SCB, required under the LC to SCB on 4 June 2010. SCB
wrongly rejected the presentation and refused to pay. In the
meantime, the Vessel was ready to discharge and, to avoid
delays, Gunvor arranged for a letter of indemnity (“LOI”) to be
issued to the carrier to permit discharge of the cargo without
presentation of the bills of lading, which were still held to
Gunvor’s order by SCB.
Gunvor ultimately commenced proceedings against SCB and,
following service of those proceedings, SCB agreed on 7 July
2010 to pay the full amount claimed by Gunvor plus interest
and costs.
As a result of confirming acceptance of amendments to the LC
with the issuing bank that had not been agreed by Gunvor,
SCB, having paid Gunvor, had no recourse against the issuing
bank. Accordingly, SCB issued proceedings against the
Owners of the Vessel (“Owners”), the Defendants in these
proceedings, alleging that, by virtue of the indorsement and
transfer of the bills to SCB, SCB had become the lawful
holders of the bills within the meaning of s.5(2)(b) of COGSA
and thus had title to sue. They claimed the full value of the
cargo on the basis of an alleged mis-delivery by Owners.
SCB alleged that despite their rejection of the presentation,
they had become the lawful holders of the bills of lading within
the meaning of s.5(2)(b) of COGSA upon presentation. This
required SCB to show that they had possession of the bills “as
a result of the completion, by delivery of the bill, of an
indorsement of the bill”.
So far as relevant to the appeal, SCB argued that they became
lawful holders of the bills at two alternative moments in time:
1. When, on 4 June 2010, the bills were physically received
by them as part of the documentary presentation under
the LC (“the 4 June point”); or
2. When, on 7 July 2010, SCB paid the sums claimed by
Gunvor in the proceedings they commenced (“the 7 July
point”).

07SHIPPING
The 4 June point
The Judge at first instance held that SCB became the lawful
holders of the bills upon their presentation on 4 June.
As to the question of completion by delivery of the
indorsement, the Judge accepted that delivery of an indorsed
bill of lading requires the requisite intention on the part of the
deliveror and deliveree to give and accept delivery. However,
he went on to conclude that there is no requirement to
consider the contractual position as between the deliveror
and deliveree of the bill of lading, i.e., in this case, the
contractual position as between the bank and the beneficiary
of the LC. It was, in the Judge’s view, irrelevant that SCB had
received the documents for checking and, upon completion of
those checks, had declined to accept them.
By contrast, the Court of Appeal noted that there was a
striking difference between the treatment of consignees and
indorsees under COGSA and stated that “delivery” was an
essential element in assessing whether the indorsee had
become the lawful holder of the bills. The Court concluded
that the completion of an indorsement by delivery for the
purposes of s.5(2)(b) of COGSA requires the voluntary and
unconditional transfer of possession by the holder to the
indorsee and an unconditional acceptance by the indorsee.
The fact that SCB declined to accept the unconditional
presentation and held the bills to the order of Gunvor’s bank
meant that the indorsement was not completed by delivery on
4 June 2010.
The 7 July point
The Court of Appeal held that the Judge had been right to
proceed on the basis that Gunvor’s claim to recover the face
value of the credit properly sounded in debt rather than in
damages. It followed that there was a corresponding
obligation on Gunvor to transfer the documents, including the
bills of lading, to SCB, since presentation and transfer of the
documents was a condition of the existence of the debt.
As to whether there had been a completion by delivery of the
indorsement of the bills, the Court of Appeal held that, by
accepting payment of the face value of the LC, Gunvor
necessarily accepted that SCB was entitled to “take up” the
documents. Accordingly, there was, at the time of the
settlement, an unconditional transfer of the documents
sufficient to render SCB the lawful holder of the bills of lading
for the purposes of s.5(2)(b) of COGSA.
Comment
This decision confirms that s.5(2)(b) of COGSA distinguishes
between a consignee in possession of a bill and an indorsee in
possession of a bill; in the former case, physical possession is
sufficient to confer rights of suit upon the holder, whereas in
the latter case there must be an unconditional transfer and
acceptance of the bill.
However, the decision on the 7 July point leaves a beneficiary
faced with a wrongful rejection of documents, which include a
bill of lading, presented under a letter of credit on the horns of
a dilemma. In these circumstances, the beneficiary may only
maintain a claim in debt against the bank if it is willing to
transfer the documents against payment; in other words, leave
the bill(s) of lading with the bank.
In the meantime, the beneficiary will thereby prevent itself
from safely taking any steps to mitigate the separate losses to
which it may be exposed by way of demurrage by instructing
the discharge of the cargo against a LOI. In the meantime, the
cargo will need to remain on the vessel until the position is
resolved as between the LC bank and the beneficiary, which
could take months or years, during which time the vessel
cannot be employed.
Ince & Co LLP represent the Owners in this litigation. An
application for permission to appeal to the Supreme Court is
pending.
Carl Walker
Solicitor, London
carl.walker@incelaw.com
Stuart Shepherd
Partner, London
stuart.shepherd@incelaw.com

08 SHIPPING
Delayed delivery: the right to cancel shipbuilding contracts
Zhoushan Jinhaiwan Shipyard v. Golden Exquisite Inc. [2014]
EWHC 4050 (Comm)
A recent decision in the Commercial Court offers helpful
guidance to both shipyards and buyers facing and considering
possible cancellations of shipbuilding contracts due to delayed
delivery.
The Court heard appeals from four arbitration awards in
relation to disputes regarding the interpretation of four
shipbuilding contracts between a Chinese shipyard (the
“Yard”) and four buyers (“Buyers”, all part of the same group).
The contracts were materially identical and, in each case, the
Buyers relied on a contractual right to cancel the contract for
delayed delivery of the vessel.
In arbitration, the Tribunals found that the Buyers’
cancellations were valid. The issue on appeal was whether the
Buyers had lawfully cancelled the contracts, or whether, as the
Yard alleged, cancellation was unlawful because the Buyers
had themselves caused part of the delays to the delivery of the
vessels.
Right to cancel
The contracts provided the Buyers with the right to cancel the
contracts in the following circumstances:
>> Under Article III.1(c): after 210 days of “non-permissible
delays” to the contractual delivery date; and
>> Under Article VIII.3:
i. after 225 days of “permissible delays”, which were
specific causes beyond the Yard’s control and which
were enumerated in Art VIII.1; and
ii. after 270 days of combined “permissible” and
“non-permissible” delays.
The Buyers gave notice of cancellation of the contracts more
than 270 days after the contractual delivery date, and claimed
a refund of the instalments paid. If, as the Buyers claimed, the
contracts were cancelled under Article III.1(c), the Yard would
also have to pay interest. There would be no obligation to pay
interest if the contracts were cancelled under Article VIII.3.
After the Buyers gave notice of cancellation, the Yard alleged
that the Buyers were in breach of Article IV of the contracts,
which provided for inspection of the vessel by a supervisor
appointed by the Buyers. Although the Yard had not previously
issued any notice of such delays under the contracts, the Yard
alleged that the Buyers were in breach of their obligation to
“...carry out inspections in accordance with the agreed
inspection procedure and schedule and usual shipbuilding
practice...”. The Yard alleged that the Buyers’ supervisors had
worked insufficient hours, imposed extra-contractual
requirements and taken unreasonable amounts of time to
return crucial documentation.
The Yard therefore sought a finding that on a true
construction of the contracts, the delays caused by these
so-called “Buyers’ breach delays” of at least 90-100 days each
should not count towards the delay thresholds relied upon by
the Buyers. If the days lost to “Buyers’ breach delays” did not
count towards the thresholds, the Buyers’ cancellation of the
contracts was premature and unlawful.
If the Yard was correct that the cancellations were unlawful,
the Buyers would have been in repudiatory breach of the
contracts, and the Yard would have been entitled to keep the
instalments paid and re-sell the vessels, crediting the Buyers
only with the balance of the proceeds of sale after the Yard
had recouped its expenses.
The Commercial Court decision: types of delay
The Court rejected the Yard’s arguments and found in favour
of the Buyers. The Court found that there were only three
types of delay provided for in the contractual scheme:
i. Permissible delays: delays defined in Article VIII.1 and
deemed to be outside the control of the Yard. They
allowed the Yard an extension of time for delivery of the
vessel and, if they persisted, gave the Buyers a right to
cancel the contracts and recover the instalments (without
interest).
ii. Non-permissible delays: delays which did not allow the
Yard any extension of time for delivery but which, if they
persisted, allowed the Buyers to cancel the contracts and
recover the instalments of the price paid with interest.
iii. Excluded delays: delays excluded from consideration when
determining whether the Buyers were entitled to reduce
the contract price or cancel the contract because of
delayed delivery, but which delays may, under the terms of
the contract, have allowed the Yard an extension of time
for delivery of the vessel.
The Court rejected the Yard’s argument that the “Buyers’
breach delays” constituted a separate, fourth category of
delays.
The Court found that the wording of Article IV did not contain
any provision that permitted the time for delivery to be
extended because, as a matter of contractual interpretation,
the Buyers’ supervisor had no power to delay the construction
of the vessel: in fact, the Yard was not required to wait for the
Buyers’ supervisor to attend tests and carry out inspections.
“Buyers’ breach delays” were not, therefore, excluded delays.
“Buyers’ breach delays” also did not fall within the scope of
Article VIII.1, and so were not permissible delays, and did not
allow the Yard an extension of time for delivery. Even if
“Buyers’ breach delays” were permissible delays, the Yard’s
failure to comply with the contractual requirement to give
notice meant that the Yard could not rely on these delays to
claim an extension of time for delivery. The delays were
therefore non-permissible delays that did not allow the Yard
an extension of time for delivery.

09SHIPPING
Wai Yue Loh
Partner, Beijing
waiyue.loh@incelaw.com
Ajay Ahluwalia
Solicitor, Beijing
ajay.ahluwalia@incelaw.com
At the time of the notices of cancellation, the Buyers had the
right to cancel the contracts under both Article III.1(c) and
Article VIII.3. The Buyers were entitled to cancel the contract
under Article III.1(c), obtain a refund of paid instalments and
claim interest at the rate of 5% per annum.
Comment
The decision presents valuable assistance to parties
considering or facing possible cancellations under shipbuilding
contracts. Parties should be wary of stretching the meaning of
the contractual terms: the Court described the Yard’s
arguments as “untenable” and cautioned against an over-
reliance on “commercial common sense” to justify
interpretations that were “inconsistent with the language of
the contract”.
As a practical tip, parties with genuine concerns over issues
causing delays to the construction of the vessel should issue
notices of delay under the contract to ensure they are not
precluded from relying on such delays at a later stage.
Beware the pitfalls of inconsistent dispute resolution
clauses
Transgrain Shipping BV v. Deiulemar Shipping SpA & Another
(Eleni P) [2014] EWHC 4202 (Comm)
Parties should be very careful to ensure that no competing
dispute resolution clauses are contained in the same contract.
In this case, two competing arbitration clauses meant that it
was unclear whether a time bar provision applied to a claim
under the charterparty. The parties had to go to court to
establish which arbitration clause applied.
Head Owners time chartered the vessel to Disponent Owners,
who chartered the vessel to Charterers who sub-let the vessel
to sub-Charterers. The various charterparties were on back-to-
back terms, save for the period and rate of hire.
Each charterparty provided for arbitration in London, but there
were two sets of arbitration terms incorporated into each
contract that were inconsistent with each other. One set of
terms (“clause 75”) contained a specific time bar in which claims
had to be made within 13 months of the vessel redelivery. The
other set of terms, the BIMCO arbitration clause, did not
contain any specific time bar.
In the circumstances, if clause 75, which contained the 13
month time bar, did not apply, the Charterers would have been
unable to rely on that time bar in order to defeat a US$5.56
million claim that Head Owners had sought to introduce into the
arbitration after 13 months of the vessel’s redelivery, following
the bankruptcy of the Disponent Owners.
In arbitration proceedings, the Tribunal made a decision that
called into question whether the applicable arbitration regime
was clause 75 or the BIMCO arbitration clause. An application
was made to the Commercial Court to set aside the Tribunal’s
decision.
Since the parties could not have intended both clauses to apply,
the Court had to decide which clause applied. The Court
concluded that the BIMCO arbitration clause applied.
The Court relied on the following reasons:
1. The Court was not persuaded that clause 75 had been
specifically negotiated between the parties, such that it
should take precedence over the BIMCO arbitration
clause. Whilst clause 75 was specifically referenced
throughout each charter, about 70 other clauses were
also referenced. If the parties had deliberately chosen
clause 75 over the BIMCO arbitration clause, the Court
would have expected the parties to have deleted all
references to the BIMCO arbitration clause throughout
the charters. They did not do so.

10 SHIPPING
2. Both clauses allowed for arbitration under a specific set of
rules – the LMAA arbitration rules. Those rules
recommend the use of the exact BIMCO arbitration clause
that had been included in the charters. The Court was
therefore persuaded that the BIMCO arbitration clause is
an “industry standard” clause and, given that the parties
had contemplated that the arbitration would be conducted
by members of the LMAA, they probably intended that the
BIMCO arbitration clause was the applicable clause.
3. The BIMCO arbitration clause is in two parts. The second
part deals with mediation. Mediation is now a well-
accepted alternative to litigation and arbitration. The Court
stated that it expected commercial parties to value the
benefits of a mediation and to include a clause that allowed
for mediation.
The Court went on to say that the question as to whether the
parties had agreed on the 13 month time limit for claims (even
in circumstances where the BIMCO arbitration clause was
applicable) was a matter for the Tribunal to rule on.
Comment
It is vitally important for parties to check that only one dispute
resolution clause is incorporated into their contracts. If there is
more than one – and they are inconsistent – costs are likely to
be incurred in order to sort out which clause is applicable
before the parties can turn to actually resolving the differences
that exist between them.
Ian Cranston
Partner, Monaco
ian.cranston@incelaw.com
Ruth Monahan
Solicitor, Monaco
ruth.monahan@incelaw.com
When an English jurisdiction clause in a bill of lading will be
deemed exclusive
Compania Sud Americana de Vapores SA v. Hin-Pro
International Logistics [2014] EWHC 3632 (Comm)
The facts of the underlying dispute in this case are less
interesting than the Court’s findings that the English law and
jurisdiction clause in the bills of lading was an exclusive
jurisdiction clause and consequently that a permanent anti-suit
injunction should be granted in relation to proceedings brought
by cargo interests in China under the bills. Of particular
relevance in the Court’s opinion was the fact that, in agreeing to
English law as the governing law of the bills, the parties should
also be taken to have intended that the English courts should
have exclusive jurisdiction. This is a particularly interesting
decision, given that the jurisdiction clause in question provided
for other courts to have jurisdiction in certain circumstances.
The original claim was one for mis-delivery of goods. Hin-Pro, a
Hong Kong freight forwarder, alleged that the carrier, CSAV,
wrongly delivered cargo without production of original bills of
lading in various ports in Venezuela. The shipments in question
were all from China to Venezuela and on CSAV bills. The bills
were straight bills naming CSAV’s Venezuelan agents, Raselca,
as consignee. Only some, not all, the bills named Hin-Pro as
shippers. Nonetheless, Hin-Pro claimed to be an original party
to the contract of carriage contained in each bill (which
numbered about 70 in total).
In Chinese proceedings brought by Hin-Pro, CSAV contended
that, under Venezuelan law, cargo had to be delivered to the
storage provider authorised by the Venezuelan Government in
almost all cases and that CSAV were therefore legally obliged
under Venezuelan law to deliver the goods to the authority
which then had sole control over the goods. The bills they
issued specifically provided for this eventuality and CSAV said
that the goods had all eventually been on-delivered to the
buyers by their local agents. Indeed, no claim had been brought
by any of those buyers.
CSAV subsequently sought and obtained both an anti-suit
injunction and a worldwide freezing order against Hin-Pro from
the English Commercial Court. The matter then came back
before the Court, which was asked to make the anti-suit
injunction permanent and to award CSAV damages in respect
of Hin-Pro’s breaches of the jurisdiction clause in the bills.
Clause 23 of the CSAV bills provided as follows:
“Law and jurisdiction.
This Bill of Lading and any claim or dispute arising
hereunder shall be subject to English law and the
jurisdiction of the English High Court of Justice in London.
If, notwithstanding the foregoing, any proceedings are
commenced in another jurisdiction, such proceedings shall
be referred to ordinary courts of law. In the case of Chile,
arbitrators shall not be competent to deal with any such
disputes and proceedings shall be referred to the Chilean
Ordinary Courts.”

11SHIPPING
Reema Shour
Professional Support Lawyer, London
reema.shour@incelaw.com
Max Cross
Partner, Hong Kong
max.cross@incelaw.com
The Judge considered whether or not, by this clause, the
parties had agreed to the exclusive jurisdiction of the English
Court, with the result that the proceedings in China amounted
to a breach of contract. He decided that they did, because
English law was the mandatory governing law of the bills and
the parties must therefore also have intended that the English
courts should have exclusive jurisdiction. In his view, the
English courts would be seen by the parties as best able to
apply the provisions of English law which the parties agreed to
be applicable in the circumstances. On the Judge’s
interpretation of the clause, it was not simply an agreement to
submit to the English Court’s jurisdiction, which could be read
as allowing proceedings to be brought elsewhere, but actually
required that claims and disputes arising under the bills be
determined in accordance with English law by the English
Court.
The Judge also commented on the fact that the second and
third sentences of the clause provided for different courts to
have jurisdiction in different circumstances. He said that the
clause as a whole had to be seen in light of the clause
paramount in the bills, which provided for the application of
the Hague Rules, save in three situations:
1. Where, as a matter of English law and the English COGSA
1971, the Hague-Visby Rules are compulsorily applicable;
2. Where there are shipments to and from the US, in which
case US COGSA is to apply; and
3. Where the bill of lading is subject to legislation which
makes the Hamburg Rules compulsorily applicable.
The Judge concluded that the second and third sentences of
the jurisdiction clause were intended to provide for the
situation where proceedings are brought elsewhere than in
England. Notwithstanding the choice of English law and
English jurisdiction, therefore, US COGSA or the Hamburg
Rules might apply in certain circumstances (e.g. Chile, where
CSAV is incorporated, applies the Hamburg Rules, which
contain their own jurisdiction provision). The second and third
sentences of the clause provided, therefore, a fall-back
defence, in the event that the English law and jurisdiction
clause proved ineffective in some foreign courts. The third
sentence was, however, (based on evidence put before the
Court) ineffective as a matter of Chilean law. So any
proceedings begun in Chile against CSAV would have been in
breach of clause 23 and, similarly, the Chinese proceedings
were also in breach of the exclusive English jurisdiction clause.
The Judge held that there was a good arguable case that
fraud was being perpetrated in relation to the Chinese
proceedings and he made the anti-suit injunction permanent.
He also awarded CSAV damages for breach of the exclusive
jurisdiction clause in the amount of any sums awarded to
Hin-Pro in China.
Comment
Although the word “exclusive” did not appear anywhere in the
English law and jurisdiction clause in the bills of lading, the
Court still came down in favour of exclusive English Court
jurisdiction. This was not a foregone conclusion, however, and,
for the avoidance of doubt, it is always worth specifying
expressly that a particular jurisdiction should be “exclusive” if
that is what the parties want.
It should be noted that Hin Pro did not participate in the
proceedings and the Court did not therefore have the benefit
of any submissions which they might otherwise have made.

SHIPPING
12
Who pays the Suez Canal fees?
HBC Hamburg Bulk Carriers GmbH & Co KG v. Huyton Inc
(Glory Sanye) [2014] EWHC 4176 (Comm)
This was an appeal from an arbitration award on a point of
construction in relation to the wording of an addendum to a
charterparty.
The Commercial Court held that the costs of transiting the
Suez Canal arising as a result of amended voyage orders were
for the Charterers’ account, even though the Disponent
Owners would have had to incur them anyway in order to
redeliver the vessel.
The Claimant Disponent Owners (“Owners”), chartered the
vessel to the Respondents for a voyage from Constanza to
Djibouti. The vessel arrived at Djibouti but was unable to
discharge because there were no receivers for the cargo. After
the vessel had spent three months off Djibouti, the Owners
and the Charterers agreed an addendum (“addendum no. 1”)
to the charterparty whereby the discharge port was changed
to Ain Sukhna, Egypt, a port to the south of the Suez Canal.
Addendum no. 1 provided:
“Owners and Headowners to be held harmless and
indemnified against all losses, expenses, damages, risk
whatsoever and howsoever arising including but not
limited to those which may arise from any 3rd
party
including but not limited to Egyptian authority’s rejection
refusal or inability to accept delivery of the cargo or from
charterer’s failure to discharge cargo.”
Later, by a further addendum (“addendum no. 2”), the
discharge port was changed again from Ain Sukhna to
Damietta, an Egyptian port on the Mediterranean coast,
meaning that the vessel would have to transit the Suez Canal
northbound in order to arrive at the discharge port. Materially,
addendum no. 2 provided:
“...the cargo is to be discharged at the port of Damietta
(Egypt) instead of Ain Sukhna (Egypt) and all other terms,
conditions, clauses and paragraphs as per Charter Party
dated 23 October 2009 and addendum no. 1 and
reservations of rights to remain in force.”
Under the head charterparty, a time trip charter, the Owners
had to re-deliver the vessel at Port Said after completion of
the voyage. She would, therefore, have had to transit the Suez
Canal irrespective of the change of discharge port under
addendum no. 2. The head charterparty provided that the
Owners (as charterers under that charter) were responsible
for all canal tolls and, therefore, as between them and the
registered Owners, would have to bear the costs of transiting
the Suez Canal.
In the arbitration, the Tribunal held that the costs of transiting
the Suez Canal were not an expense that the Charterers had
agreed to bear in the addenda on the basis that the Owners
would have had to transit the Suez Canal anyway and:
“in the context, “losses” or “expenses” [in addendum no. 1,
as cited above] must be construed as limited to additional
losses and expenses which would not have been incurred
in any event.”
It was this finding that was the subject of the Owners’ appeal.
The Court found that the commercial aim of the addenda had
been to allow the Charterers to bring the voyage (and
therefore their liability to pay demurrage) to an end and to
allow the Owners to discharge the cargo and redeliver the
vessel. The Court considered both the commercial objectives
of the parties and their background knowledge when they
agreed the addenda. The Court noted that the Owners’
liability under the head charterparty to bear the costs of
transiting the Suez Canal was not within the knowledge of the
Charterers and should not therefore be taken into account
when assessing the scope of the Charterers’ indemnity.
Given the Court’s finding on the facts, the question which it
had to answer was simply whether the expense of transiting
the Suez Canal arose from the Charterers’ failure to discharge
the cargo at Djibouti. The Court found that the Suez Canal
transit would not have been required in order to perform the
original voyage to Djibouti but was required to perform the
amended voyage to Damietta and, as such, the costs of the
transit were ones that the Charterers had agreed to bear. The
appeal was therefore allowed.
Comment
This judgment shows the Court applying the clear wording
used by the parties, since the expense arose from the
Charterers’ failure to discharge the cargo at Djibouti, and that
is what was expressly covered by the indemnity. The decision
also emphasises that the background knowledge against
which contracts will be interpreted is limited to that
knowledge available to both parties.
Daniel Jones
Partner, Hamburg
daniel.jones@incelaw.com
Jonathan Reese
Solicitor, Hamburg
jonathan.reese@incelaw.com

13SHIPPING
Consecutive time charters – check your contract terms
London Arbitration 18/14 – LMLN, 16 October 2014
If the vessel’s hull is fouled during a charter and there is no
opportunity to clean it before delivery under the follow-on
charter to the same charterer, is the owner liable for the
underperformance during the second charter? According to
the Tribunal in London Arbitration 18/14, on the facts of that
case, the Owners were indeed liable.
The vessel was fixed for a time charter trip on the 1946 NYPE
form. Rider clause 128 stated that “Owners not to be
responsible if the vessel under the currency of this charter
party stays at port or anchorage or any other place for more
than 28 days and therefore vessel’s speed, due to bottom
fouling which may have formed to the ship’s hull as a direct
result of such prolonged stay, is reduced and/or consumption
increased. In case of need for underwater cleaning same to be
for Charterer’s account in terms of time and expenses”.
The vessel’s hull became fouled with marine growth as a result
of her spending 48 days waiting, loading and remaining at the
port of Morowali, Indonesia during the first charter.
Towards the end of the prolonged stay, the Owners advised
the Charterers that the hull may have been fouled, that the
prolonged stay clause was activated by this and that the
Owners would be conducting an underwater inspection at the
discharge port (Lianyungang, China). A week later, before
sailing from Morowali, the parties agreed a follow-on
charterparty in direct continuation, on substantially the same
contractual terms.
Following discharge at Lianyungang, an underwater inspection
confirmed that the hull was fouled. However, it was not
cleaned. The vessel sailed in ballast to Indonesia under her
follow-on charter, loaded a cargo of nickel ore and discharged
it at Lianyungang.
The Owners claimed reimbursement of the Charterers’
deduction of (1) US$21,020.10 for the lost time and IFO/MDO
overconsumption during the first charter; and (2) US$12,287.94
for the lost time and IFO/MDO overconsumption during the
second charter. The Owners also claimed US$4,500 in lieu of
hold cleaning on redelivery and US$2,900 for stevedore
damage during discharge under the second charter.
The arbitration award
As for the underperformance during the first charter, the
Tribunal held that this was for the Charterers’ account under
clause 128. Therefore, the Owners’ claim for reimbursement
of the Charterers’ US$21,020.10 deduction succeeded.
As for the underperformance during the second charter, the
Tribunal held that this was for the Owners’ account:
1. There was no basis for the Owners’ argument that the
Charterers were estopped from claiming in respect of the
underperformance on the alleged basis that the second
charter was in direct continuation of the first and there
was no time for the hull to be cleaned.
2. When the second fixture was concluded, the Owners were
aware that the hull may have been fouled during the
prolonged stay. Yet they fixed the vessel on identical terms
to the first charterparty, taking the risk that the vessel
might not be able to meet the (identical) speed and
consumption warranties by reason of the hull fouling.
Indeed, they may even have intended to clean the hull
during the ballast voyage under the second charter (but
did not do so, resulting in underperformance for the
remainder of that charter).
However, the Charterers’ deduction for MDO overconsumption
during the second charter had to be returned to the Owners
because the lack of a reference to MDO consumption in the
charterparty performance description meant that the Owners
had given no MDO consumption description at all. Furthermore,
the lower IFO overconsumption figure reported by the
Charterers’ router prevailed over their own figure, and their
time loss figure had to be reduced to factor in the address
commission. Finally, the Owners’ claim for the US$4,500 and
US$2,900 additional claims succeeded in full.
The Owners therefore recovered US$37,623.28 (80%) of their
US$45,386.86 total claim and were awarded their costs in full.
Comment
When fixing consecutive time charter trips with the same
charterer, the parties should give thought to the terms of the
follow-on charterparty, or agree the further trip as an
extension of the existing charterparty. Otherwise, problems
may arise. An owner should certainly not be quick to assume
that underperformance during a follow-on charter resulting
from a prolonged stay during the preceding charter (for which
the charterer is liable under the first charterparty) will be for
the charterer’s account. On certain facts it may be, but
London Arbitration 18/14 is an example of the owner being
liable for such underperformance.
Evangelos Catsambas
Partner, Piraeus
evangelos.catsambas@incelaw.com
Natalie Nielsen
Trainee solicitor, Piraeus
natalie.nielsen@incelaw.com

SHIPPING
14
Court sets aside arbitration award for serious irregularity
Lorand Shipping Limited v. Davof Trading (Africa) B.V. (Ocean
Glory) [2014] EWHC 3521 (Comm)
This case is a rare example of a successful challenge to an
arbitration award on the ground of serious irregularity under
section 68 of the Arbitration Act 1996 (the “Act”).
Section 68 sets out a limited list of irregularities which, taken
alone, might allow very wide grounds of challenge. However,
the requirement to establish “substantial injustice” in relation
to all the grounds imports strict limits to the parties’
prospects of successfully challenging awards.
The Commercial Court held that the Tribunal’s failure to give
notice to the parties that it intended to adopt a course of
action that neither party had advocated, and without giving
them an opportunity to make submissions on the proposal,
constituted a serious irregularity leading to substantial
injustice. The Court granted the order sought by the applicant
Owners and remitted the award back to the Tribunal for
determination of certain disputes.
Disputes arose between the parties to a voyage charterparty
that provided for the shipment of animal feed from Ivory
Coast to Morocco. The vessel lost her rudder and was towed
to Morocco but discharge was significantly delayed and the
condition of the cargo deteriorated as a result.
Pursuant to the terms of the charterparty, the dispute was
governed by English law and was to be referred to London
arbitration. There was a time bar clause under which any
claims had to be lodged within six months of the completion of
discharge.
The arbitration award
Following completion of discharge, the Owners commenced
arbitration proceedings against the Charterers. In a rather
unclear Claim Submission, the Owners sought an interim
award on demurrage and also asked the Tribunal to reserve its
jurisdiction over other disputes and claims, including an
indemnity from the Charterers in respect of any cargo damage
claims that might be brought against the Owners by the cargo
receivers.
The Tribunal made a final award, awarding the Owners
demurrage. Regarding the other potential claims, the Tribunal
declined to reserve its jurisdiction. They based this rejection on:
a. the length of time that had elapsed since the cargo had
been discharged; and
b. the absence of any evidence that claims would be brought
by cargo interests against the Owners.
The effect of the award in the terms issued exhausted the
Tribunal’s jurisdiction. The Tribunal envisaged that if there
were any further claims, then these would be brought in new
arbitration proceedings. But, in the circumstances, this was
not possible. The effect of the contractual time bar was that
the Owners were unable to commence fresh arbitration
proceedings against the Charterers. Therefore, the Owners
were precluded from pursuing indemnity claims.
It was also plain from the arbitration award that the course
adopted by the Tribunal had not been advocated by either
party. Further, neither party had been given the opportunity to
make written or oral submissions.
Owners’ arguments on appeal
The Owners challenged the award for serious irregularity under
section 68. They argued that the Tribunal had failed to comply
with its mandatory general duty under section 33 of the Act to
“act fairly and impartially as between the parties, giving each
party a reasonable opportunity of putting his case and dealing
with that of his opponent”. Rather, the Tribunal had:
a. relied solely on two considerations (the length of time
since the cargo was discharged and the absence of
evidence that cargo interests intended to bring claims
against the Owners) which had not been raised by either of
the parties and which the Tribunal gave the parties no
opportunity to address; and
b. had adopted a course of action that had not been
advocated by either party and without giving the parties
the opportunity to comment. The Owners had asked the
Tribunal to reserve jurisdiction over any other claims
arising under the charterparty; the Charterers had asked
for those claims to be dismissed on their merits. The
Tribunal adopted neither of these courses of action and
followed a path of its own devising.
The Owners submitted that the course of action followed by
the Tribunal constituted a serious irregularity leading to a
substantial injustice under section 68.
The Charterers opposed the Owners’ application, arguing that
the high threshold of serious irregularity leading to substantial
injustice under section 68 had not been met.
The Commercial Court granted the Owners’ application. The
Judge held that:
a. despite the lack of clarity of the Claim Submissions, it was
relatively plain that indemnity claims had been referred to
the Tribunal – or at least that the parties had proceeded on
that basis. The fact that (as the Judge put it) no specific
claims had been quantified was not fatal;
b. where a tribunal wishes to adopt a course not advocated
by either party, it is generally incumbent upon the Tribunal
to give the parties the opportunity to present their views
on that particular course before it is finally adopted. The
Tribunal’s failure to do so amounted to serious irregularity.
In this case, the Tribunal adopted a “halfway house”
approach that had not been advocated by either party.
Where a claim is submitted to a tribunal for determination,
the Tribunal is obliged to determine it one way or the other

15SHIPPING
– it has no power to decline to act. This Tribunal should
either have reserved jurisdiction over further claims (as the
Owners requested), or dismissed those claims on their
merits or on other grounds (as the Charterers requested).
In this case, the Tribunal adopted neither of those courses
of action.
c. The requirement under section 68 to show “substantial
injustice” did not require the Court to be satisfied that the
Tribunal would have reached a different view if it had given
the parties the opportunity to make submissions – it
sufficed that the Tribunal might realistically have done so.
Comment
Although the Ocean Glory application succeeded, the
Commercial Court decision and the comments by the Judge
reaffirm the very high threshold for applications under section
68 of the Act.
The case also serves as a reminder to arbitrators that they
should aim to adopt a course of action advocated by the
parties. In the event that they consider there is a more
practical approach, then this should be put to the parties to
give them a fair opportunity to consider and address it.
Jonathan Elvey
Partner, London
jonathan.elvey@incelaw.com
Despina Plomaritou
Solicitor, Piraeus
despina.plomaritou@incelaw.com
SHIPPING LEGISLATION AND REGULATION
An update on the IMO’s proposed Polar Code
Reduced ice levels in recent years have resulted in increased
maritime traffic in the Northern Sea Route (“NSR”). Whilst the
NSR offers both time savings in terms of voyage duration and
also bunker cost savings, navigating the Arctic presents a
number of challenges for the shipping industry and raises a
number of safety and environmental concerns.
As a result, the International Maritime Organisation (“IMO”)
has produced a draft Polar Code to cover all aspects of
shipping in the Arctic and Antarctic areas. The Polar Code
comprises a set of mandatory safety and environmental
protection regulations, together with non-mandatory
provisions relating to both. In May 2014, the IMO’s Marine
Safety Committee (“MSC”) agreed and approved in principle
the mandatory safety provisions and then formally adopted
them in November 2014. Furthermore, in October 2014, the
IMO’s Marine Environment Protection Committee (“MEPC”)
agreed many of the environmental protection regulations,
which will become mandatory under the International
Convention for the Prevention of Pollution from Ships
(“MARPOL”).
The MEPC is expected to adopt the Polar Code and associated
MARPOL amendments in May 2015. The IMO Council should
then formally approve the final Code, which is expected to
come into force in January 2017.
This article considers why a Polar Code was deemed
necessary and highlights its principal provisions.
The background
The NSR (also known as the North East Passage) runs along
the Russian coast from the Atlantic to the Pacific and has
historically been used for domestic Russian shipping. Reduced
levels of ice in the Arctic Sea in recent times, however, have
resulted in the NSR increasingly attracting international
commercial shipping. While the NSR is only available for part
of the year, namely the period covering late summer and
autumn, nonetheless the number of international commercial
transits has been steadily increasing annually since 2009 and
this general rising trend is expected to continue in the long
term, despite a reported fall in transit permit approvals by the
Northern Sea Route Administration (“NSRA”) in 2014.
In addition to the bunker cost and time savings that the NSR
brings, the risk of piracy for ships travelling via the Gulf of
Aden has proved an additional attraction of the NSR.
Nonetheless, the shipping industry faces a number of
concerns arising out of transits through the NSR. These
include the challenges of harsh and extreme weather
conditions, restricted visibility, poor communications,
unreliable navigational aids, risk of contact with icebergs,
under-developed casualty response infrastructure, potential
remoteness for salvage and clean-up facilities in the event of
an incident, lack of bunkering facilities, and so on.
Furthermore, due to the weather conditions, any wreck

16 SHIPPING
removal in case of a casualty is likely to prove both expensive
and dangerous. If there is a collision or grounding in the NSR,
there may also be a serious risk of oil pollution, which is
especially problematic in the Arctic region because cold
temperatures and ice may make the detection of oil in icy
waters particularly difficult and the spilt oil less easy to contain
and control. This in turn leads to a number of environmental,
as well as safety, concerns. Marine underwriters will also have
to decide how to price and reserve Arctic risks.
While Russia has federal laws regulating vessels transiting the
NSR, the IMO has deemed it necessary to develop a
mandatory international Code. Hence the draft International
Code for Ships Operating in Polar Waters (the “Polar Code”),
which the IMO has been working on since 2009.
The Polar Code
The Polar Code is not a self-standing convention, which would
require a potentially lengthy ratification process before it came
into force. Rather, the mandatory safety regulations of the Code
will be implemented through the International Convention for
the Safety of Life at Sea 1974 (“SOLAS”) and the mandatory
environmental protection regulations will supplement and be
adopted via amendments to MARPOL. The Antarctic area is
already established as a Special Area under MARPOL Annexes I
and V and the Code aims to replicate many of those provisions
for the Arctic area. The Code also comprises non-mandatory
but recommended safety and environmental measures.
A key provision is that all vessels will be required to carry a Polar
Ship Certificate as well as a Polar Water Operational Manual at
all times whilst operating in the polar regions. The Polar Ship
Certificate will classify vessels according to the suitability of
their design for operating in polar waters. Issuing the Certificate
would require an assessment that takes into account the range
of operating conditions and hazards the vessels may encounter
in polar waters. The assessment would include information on
identified operational limitations and plans or procedures or
additional safety equipment necessary to mitigate incidents
with potential safety or environmental concerns.
The Polar Water Operational Manual is designed to provide
the owner, operator and crew of vessels operating in the polar
region with sufficient information about the vessel’s
operational capabilities and limitations to support their
decision-making process.
The combination of these two documents is intended to
provide key information about the vessel’s operational
capabilities and limitations – such as Polar Ship Class and Ice
Class, temperature capabilities, safe ice-going capability and
ice transit capability – as well as the procedures that have to
be followed routinely and in worst case scenarios.
Other noteworthy safety provisions include rules dealing with
stability, ship structure, watertightness, machinery and
operational safety, fire safety, life-saving appliances, navigation,
communications, manning and training, and voyage planning.
As regards the mandatory environmental protection
regulations, these include measures designed to prevent oil
pollution, pollution by noxious liquid substances from ships,
pollution by sewage from ships and pollution by discharge of
garbage from ships. MARPOL Annexes I to V will be amended
accordingly to introduce these regulations.
Some of the non-mandatory recommendations of the Code
include a recommendation to refrain from carrying heavy fuel
oil as cargo or fuel in the Arctic and a recommendation to apply
the standards contained in the Ballast Water Management
Convention, which has not yet entered into force.
Comment
Concerns have been expressed that the Polar Code does not
take account of the fact that conditions in the Arctic are never
uniform and that the Code does not link the ice-classes of
vessels with the actual ice conditions prevailing in the polar
regions. However, it is anticipated that industry standards will
be developed to deal with such concerns. By way of example,
POLARIS (Polar Operational Limit Assessment Risk Indexing
System) has already been developed by the International
Association of Classification Societies (“IACS”) with the help
of Arctic counties, such as Denmark, Finland, Sweden, Russia
and Canada. POLARIS reportedly provides a chart listing the
level of risk against each type of ice condition and how these
apply to the different ice classes of vessel. Other industry
standards are likely to follow.
There have also been criticisms from environmental
organisations that the Code does not go far enough and that it
fails to address certain marine safety and environmental
protection issues. Notwithstanding these criticisms, the Polar
Code is arguably a significant step in ensuring that any safety
and environmental risks presented by increasing Arctic
maritime traffic are both contained and controlled.
Reema Shour
Professional Support Lawyer, London
reema.shour@incelaw.com
Rory Macfarlane
Partner, Hong Kong
rory.macfarlane@incelaw.com
Florian Schacker
Trainee solicitor, London
florian.schacker@incelaw.com

17SHIPPING
The entry into force of the Nairobi Convention on Wreck
Removal: is it a big deal?
The Nairobi Convention will come into force in April 2015. It
provides a strict liability regime for the removal of hazardous
wrecks in Exclusive Economic Zones, with states able to
pursue owners for compensation when forced to carry out
remedial measures themselves. Direct action against insurers
is also permitted but the relevant states’ powers are curbed by
the requirement to ensure that measures taken are
proportionate to the hazard. The immediate impact of the
Convention is likely to be limited but it nonetheless represents
a step towards global uniformity in this currently inconsistent
area of law and practice.
Origins and early controversy
The Convention comes into force on 14 April 2015, some
thirty years after the wrecking of the Mont Louis focused
governments’ attention on the lack of a coherent international
system for coping with the aftermath of maritime disasters
that occur within countries’ Exclusive Economic Zones
(“EEZs”) – the area outside a state’s 12 nautical mile territorial
waters, usually extending to 200 nautical miles from a baseline
that generally follows the coastline. In 1984, the Roll On-Roll
Off vessel Mont Louis was carrying an extremely hazardous
cargo of uranium hexafluoride when she collided with the
ferry Olau Brittania and sank off Ostend. The Belgian
authorities were left powerless, as the wreck was just outside
territorial waters. The Nairobi Convention is the result of many
years of hard work by the IMO Legal Committee.
Although the Convention aims primarily to remove the
uncertainty over states’ powers over wrecks within their EEZs,
the seemingly common sense suggestion that it might be
extended to cover territorial waters caused great controversy.
In 2007, Lloyd’s List reported “heated exchanges, which are
rare in the legal committee”, with opposition to the “opt-in”
clause whereby state parties could choose to extend the
Convention’s effect to their territorial waters. Ultimately, the
opters-in carried the day, although, as at 20 January 2015,
only Antigua & Barbuda, Bulgaria, Denmark, Liberia, the
Marshall Islands and the UK (less than half of the current state
parties) have decided to apply the Convention to territorial
waters, where the majority of wrecks of course occur.
Rising wreck removal expenses
The Convention’s potential importance has grown in recent
years because of the significant escalation of wreck removal
costs. It is discomforting that the MSC Napoli and the MV
Rena were both a fraction of the size of the current
generation of giant container ships, yet cost USD135 million
and USD244 million to remove respectively. Environmental
concerns and intervention by local authorities are probably the
key factors: for example, the Italian authorities’ order that the
Costa Concordia be refloated and towed, rather than
dismantled in place, greatly increased the total wreck removal
bill in that case.
How the Convention works
If a ship is involved in a maritime casualty and becomes a
wreck within a state’s EEZ, the master or the ship’s operator
must report it without delay to the affected state. A “wreck”
may include, amongst other things, drifting ships (if measures
are not in hand to assist them) and floating debris. An
assessment by an affected state that a wreck poses a
navigational or major environmental hazard triggers the
Convention’s provisions. Once a hazard is declared, states
have powers to locate and mark wrecks, warn mariners and
“facilitate the removal of wrecks”. Shipowners and their
insurers can take some comfort from the fact that the
Convention provides that owners may contract with
whichever contractor they choose, and that if measures are in
hand then states may do no more than set “a reasonable
deadline in writing” for removal. Non-compliance permits the
state to remove the wreck at the owner’s expense, but only by
“the most practical and expeditious means available”.
Other features
The Convention imposes a strict liability on shipowners for the
costs of locating, marking and removing wrecks, with only the
narrow exceptions of war; natural phenomena of “exceptional,
inevitable and irresistible character”; intentional acts and
omissions of third parties; and negligence of the authorities
responsible for lights and other navigational aids. Although
tonnage limitation regimes will still apply, this will often not
help owners because most states do not include wreck
removal within their limitation regime.
The Convention also provides that all ships over 300 GT must
carry insurance up to the limits of the 1996 Protocol to the
London Convention on tonnage limitation and provides for
direct action against insurers up to this limit. This will allow
states to recover at least some costs even when vessels
belonging to single ship companies with no other assets are
wrecked. Ships must also obtain certificates to prove their
insurance cover and the UK, Germany, Denmark, Liberia and
the Marshall Islands are taking the lead in issuing certificates
to ships flagged in countries that are not parties to the
Convention. The International Group of P&I clubs have all
agreed to issue “Blue Cards”, which demonstrate that ships
have the cover mandated by the Convention and thus allow
them to apply for the required certificate. The International
Group has also signed memoranda of understanding with the
Australian and South African governments, as part of an
outreach programme aiming to raise awareness of the role of
P&I clubs and improve relations with state authorities. As at
20 January 2015, discussions were also ongoing with the US,
Canada, Malaysia, Singapore and EU states grouped together
as the European Maritime Safety Agency.
To balance these heavy obligations placed on shipowners, the
Convention also provides that measures taken by states shall
be proportionate to the hazard, and “shall not unnecessarily
interfere with the rights and interests of other States including
the State of the ship’s registry, and of any person, physical or
corporate, concerned”.

18 SHIPPING
Significance of the Convention
Where it applies, the Convention may lead to owners being
able to take a more assertive approach when faced with a
wreck removal situation. Although questioning the decisions
of state bodies through judicial review or the administrative
courts is often an uphill struggle, the Convention gives clear
grounds for resisting unreasonable actions taken by states.
The strict liability regime may also help to reduce the number
of wrecks that occur in the first place by encouraging states to
provide ports of refuge rather than turn ships away, because
they will be more likely to provide refuge when they are
confident that someone will pay if they do become wrecks.
Currently the Convention’s effect is limited by the small
number of states – fifteen – that have incorporated it into
their law, and by the fact that only six of those have applied it
to territorial waters. Its effect in the short term is therefore
likely to be limited, but greater adoption and “opting-in” by
states to extend its effect to territorial waters, which may
prove to be an attractive step since it gives them an agreed
right of direct action against insurers, could bring much-
needed uniformity and clarity. The delegates at a Salvage and
Wreck Conference in London in December 2014 summed the
situation up well by voting that although the Convention will
not change the situation overnight, it is nonetheless a move
forward and deserves the support of the shipping industry and
the world’s maritime nations.
Kevin Cooper
Partner, London
kevin.cooper@incelaw.com
Martin Laughton
Trainee solicitor, London
martin.laughton@incelaw.com
Global anti-corruption update January 2015 – what’s new?
December 2014 has seen the first three convictions brought
by the Serious Fraud Office (“SFO”) under the Bribery Act
2010, in the Sustainable Growth Group case, involving the
fraudulent selling and promotion of investment products
based on green biofuel. The three individuals were convicted,
amongst other things, of bribing and receiving bribes and the
sentences for the offences relating to bribery were significant,
ranging from four to six years’ imprisonment. Also in
December 2014, the UK Government announced that it
intended to set up a specialist police unit to tackle bribery and
corruption.
With corruption increasingly hitting the headlines (think
GlaxoSmithKline in China and Qatar’s World Cup bid), in early
December 2014, the OECD issued a new report on corruption,
highlighting the scale of bribery worldwide. It finds that
transportation is one of the four sectors most affected by the
issue of bribery.
In addition to highlighting the scale of corruption, the OECD
report concludes that the senior management of corporations
is often either involved in, or aware of, the practice of foreign
bribery. In other words, it “rebut[s] perceptions of bribery as an
act of rogue employees” and places blame more squarely on
the shoulders of corporations and their leaders. According to
the report, in 12% of cases, the CEO was aware of and
endorsed the bribe; in 41% of cases, other members of
management were aware of and endorsed the bribe; and 41%
of cases related to bribes paid in well-developed countries.
These findings underline the relevance of the corporate
offence of failing to prevent bribery, which was introduced in
the UK’s Bribery Act 2010 (“the Act”).
Corporate responsibility under the Bribery Act
Since the entry into force of the Act, much column space has
pointed out the difficulties faced by commercial organisations
trading in developing countries – including in the shipping
sector. The Act created a new form of corporate liability for
failing to prevent bribery for all companies that carry on
business or part of their business in the UK. But the impact of
the Act goes far beyond such companies: even if not subject to
the Act themselves, many companies will trade with, insure or
otherwise be “associated persons” to companies that are
bound by the Act, and those companies that are bound by it
will (if they have done their homework properly) require
compliance with its principles as a matter of contract.
Any company subject to the Act can receive a potentially
unlimited fine if a person associated with it bribes another
person intending to obtain or retain business, or an advantage
in the conduct of business, for that company. It does not
matter if the bribe takes place outside the UK or if the
company had no knowledge of the bribe. This new “failure to
prevent” type of offence is, of course, very far reaching, but it
is a defence for the company to show that it has in place
“adequate procedures” designed to prevent persons
associated with it from acting corruptly. In other words,

19SHIPPING
companies carrying out business in the UK must ensure that
they have in place adequate procedures to prevent bribery by
persons associated with them, and those that trade with
companies subject to the Act may have a contractual
obligation to comply with its principles.
Are you adequately protected?
In a recent speech published by the SFO, Stuart Alford QC,
SFO Joint Head of Fraud, reminded firms and individuals that
the Act is at the forefront of the SFO’s priorities for
prosecutions. Not many cases have been prosecuted yet, but
this is unsurprising considering that the Act does not have
retrospective effect. In order to reach court, therefore, an
offence must be committed, detected, reported, investigated
and the case prepared. All this will need to have happened
since the Act came into force in 2011 but David Green QC, the
Director of the SFO, has promised that large-scale
prosecutions are imminent.
It is therefore more important than ever to have “adequate
procedures” in place. Some assistance is provided by guidance
issued by the UK’s Ministry of Justice addressing, among other
things, the type of procedures that commercial organisations
should put into place to avoid being found guilty of the offence
of failure to prevent bribery. What this means is that
companies must have in place policies and procedures that are
proportionate to the company’s size and bribery risk, and are
effective. There is no “one size fits all” solution and no place
for an extensive anti-bribery policy that employees and
“associated persons” are unlikely to read. It is necessary to
assess whether the policy is effective and amend it if it is not.
Do employees and associated persons know what it says and
follow it? If not, then the policy certainly needs to be revised.
The best advice is to aim for as short a policy as possible: the
simpler the message, the more likely will it be understood and
followed.
The development of “failure to prevent” offences in the area
of economic crimes
The “failure to prevent” offence, which puts the onus on
companies to reduce the risk of bribery, is a strong tool in the
UK Government’s fight against bribery. With the world
focusing on economic crimes and on the role businesses are
being required to have in preventing such crimes, this type of
offence will most certainly be used more widely. Indeed, in
September 2014, the UK Government announced its intention
to create a new offence of failing to prevent economic crime,
which will be modelled on the Act’s “failure to prevent bribery”
offence. Economic crime has yet to be exactly defined, but it
will likely encompass a wide range of unlawful activities,
including corruption, cyber-crime, money-laundering, insider
trading and fraud.
If this new offence is introduced, it will significantly broaden
the scope of corporate liability for entities carrying out
business in the UK. An “adequate procedures” defence will be
available to companies who can show that they have adequate
procedures in place to prevent the occurrence of the crime,
but the need for wide-ranging revision of compliance policies
can be expected. We shall continue to keep you updated on
developments in this fast-changing area.
Kevin Cooper
Partner, London
kevin.cooper@incelaw.com
Florence Preux
Solicitor, London
florence.preux@incelaw.com

20 SHIPPING
NEWS AND EVENTS
Who’s Who Legal: Transport 2015 names Ince & Co lawyers
as leading practitioners for Aviation and Shipping
This year Who’s Who Legal has conducted research on the
world’s leading shipping lawyers for the first time since 2010
and subsequently combined the findings with in-depth aviation
research, identifying the leading practitioners and firms.
Ince lawyers in China, France, Germany, Greece, Hong Kong,
Monaco, Singapore, United Arab Emirates and the UK are
among those listed as specialists in the aviation, maritime and
shipping legal market.
Shipping law encompasses a range of areas including
insurance, commercial disputes, corporate transactions and
tax, and is dominated by several leading law firms with an
international presence. The directory said “Ince & Co has a
“highly reputable” global shipping practice”.
Ince & Co advised Bahri on the transfer of 20 vessels from
Vela, as part of a merger worth US$1.3 billion
Ince & Co advised The National Shipping Company of Saudi
Arabia (Bahri) in relation to the transfer of 20 tanker vessels
from Vela International Marine Limited (Vela) as part of the
largest merger in the history of the Kingdom of Saudi Arabia
between Bahri and Aramco Vela.
The transaction, which had been on-going for approximately
two years, concluded on 15th December when the ownership
of the final ship was transferred.
Ince & Co assisted with preparing shipping documentation for
each vessel delivery, in addition to arranging registration of a
mortgage for each of the vessels. The deal involved 14 very
large crude carriers (VLCCs), a floating storage VLCC, one
Aframax tanker and four product tankers and resulted in Bahri
becoming the third-largest owner of VLCCs in the world.
Rania Tadros, Managing Partner of the Ince & Co Dubai office,
commented:
“We were delighted to have been able to assist Bahri
successfully with this transaction. This deal represents the
growing stature of both Bahri and Saudi Arabia on the
international shipping stage and we congratulate all the
parties involved. We thank Bahri for giving us the opportunity
to be part of their team.”
Rania Tadros
Partner, Dubai
rania.tadros@incelaw.com

Ince & Co advises PVM Group and its sellers on completion
of sale to Tullett Prebon PLC
Ince & Co advised on the $160 million corporate sale of the
PVM Group, an independent broker of oil instruments, to
Tullett Prebon PLC, one of the world’s leading interdealer
brokers. The transaction completed on November 26, 2014.
The Ince London team was led by corporate partners Stephen
Jarvis and Matthew Stratton and senior associate Mona Patel,
together with solicitors Richard Hyman and Marcus Gwyer, and
trainees Andrew McAdam and Sam Batchelor amongst others.
The team worked alongside Bill Ricquier and Nirev Shah from
Incisive Law LLC, with whom Ince & Co Singapore has a
Formal Law Alliance, and Amaka Edomobi from our Dubai
office.
“It has been a pleasure to work with the team at PVM
throughout the deal. Bringing this major transaction to a close
involved multiple complex legal and logistical issues. We
coordinated legal teams in the US, Singapore, Austria and
Bermuda, and worked closely with them to carry out a major
pre-completion group reorganisation and obtain relevant
regulatory approvals. We also assisted on a placing of shares
on the London Stock Exchange, which were issued in
consideration for the transaction,” said Stephen Jarvis, who
led Ince’s team. “This deal is closely aligned to Ince’s global
strength and our dedicated team of corporate specialists in
the energy and international trade sectors.”
Ince’s corporate and commercial lawyers provide advice on a
wide range of matters including joint ventures, mergers,
acquisitions, disposals and group corporate structures to UK
domestic and overseas companies, whether they are start-ups
or long-established.
Ince & Co’s Beijing office has moved
Ince & Co’s Beijing office has moved with effect from 12
January to:
Ince & Co LLP Beijing Representative Office (UK)
Room 405, 4th Floor
China Central Place Tower 2
No. 79, Jianguo Road, Chaoyang District
Beijing 100025, China
Wai Yue Loh, partner and chief representative of Ince & Co’s
Beijing office said:
“Our relocation highlights the dynamic development of both
our Greater China and Beijing practices. We are very happy to
be moving into this new office and expect to continue to go
from strength to strength.”
Ince & Co’s Greater China practice comprises 11 partners and
more than 28 lawyers based in three offices across Beijing,
Shanghai and Hong Kong.
Stephen Jarvis
Partner, London
stephen.jarvis@incelaw.com
Wai Yue Loh
Partner, Beijing
waiyue.loh@incelaw.com
Ince & Co is a network of affiliated commercial law firms with offices in Beijing, Dubai, Hamburg, Hong Kong, Le Havre, London, Monaco,
Paris, Piraeus, Shanghai and Singapore.
E: firstname.lastname@incelaw.com
incelaw.com
24 Hour International Emergency Response Tel: + 44 (0)20 7283 6999
LEGAL ADVICE TO BUSINESSES GLOBALLY FOR OVER 140 YEARS
The information and commentary herein do not and are not intended to amount to legal advice to any person on a specific matter. They are furnished for information purposes only and free of
charge. Every reasonable effort is made to make them accurate and up-to-date but no responsibility for their accuracy or correctness, nor for any consequences of reliance on them, is
assumed by the firm. Readers are firmly advised to obtain specific legal advice about any matter affecting them and are welcome to speak to their usual contact.
© 2015 Ince & Co International LLP, a limited liability partnership registered in England and Wales with number OC361890. Registered office and principal place of business:
International House, 1 St Katharine’s Way, London, E1W 1AY.

Shipping E-Brief Winter 2015

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Shipping E-Brief Winter 2015

Ähnlich wie Shipping E-Brief Winter 2015 (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Shipping E-Brief Winter 2015