Monaco: What Constitutes A "Similar Amendment" Under The Interclub Agreement?

Agile Holdings Corporation v. Essar Shipping Ltd (M/V Maria) [2018] EWHC 1055 (Comm)

On appeal from an arbitration award, the Court has construed the scope of the words "similar amendment" in the Interclub Agreement ("the ICA") and found that, in this case, there was no such amendment making the Master responsible for cargo handling and restricting the Charterers' liability to a 50% indemnity for a cargo claim.

The background facts

The Owners of the vessel "Maria" time-chartered her to the Charterers under a modified NYPE 1946 form. During loading operations in Trinidad, the cargo of direct reduced iron was observed to be on fire. Loading was paused and the appointed supercargo inspected the holds. Concluding that the fire was extinguished, he ordered that loading recommence. In fact, the cargo remained on fire throughout the voyage and, upon discharge, the Cargo Interests brought a claim against the Owners.

The Owners commenced arbitration against the Charterers, seeking a declaration that the Charterers would indemnify the Owners against any liability to the Cargo Interests. They relied on clause 8(b) of the ICA to argue that the Charterers were liable to provide the Owners with a 100% indemnity. Clause 8(b) provides as follows:

Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of cargo:

100% Charterers

unless the words "and responsibility" are added in clause 8 [of the NYPE 1946 form] or there is a similar amendment making the Master responsible for cargo handling in which case:

50% Charterers 50% Owners (...)

The words "and responsibility" had not been added to clause 8. Instead, Clause 49 of the charterparty provided as follows:

Stevedore Damage

The Stevedores although appointed and paid by Charterers/Shippers/Receivers and or their Agents, to remain under the direction of the Master who will be responsible for proper stowage and seaworthiness and safety of the vessel (...)

The Charterers argued that this constituted a "similar amendment" under clause 8(b) of the ICA, making the Master responsible for cargo handling and that the Charterers were only liable to provide a 50% indemnity. In arbitration, the Tribunal agreed with the Charterers. The Owners appealed.

The Commercial Court decision

The Court agreed with the Owners that clause 49 was not a "similar amendment" that made the Master responsible for cargo handling. Rather, the word "similar" suggested an amendment that was of the same kind or effect as the words "and responsibility".

The Court also agreed that a "similar amendment" was an amendment that required a total transfer of responsibility for cargo handling to owners and not merely a transfer of some of the cargo handling responsibility. That was in line with the drafting of the ICA, which was designed to apply a simple mechanism for apportioning liability.

It was then common ground between the parties that the transfer of responsibility set out in clause 49 did not transfer full responsibility for cargo handling to the Owners, but only involved a "partial transfer of cargo handling responsibilities" back to them.

The Court also dismissed the Charterers' attempt to argue at the appeal hearing that the Tribunal had not been asked to determine the question of "similar amendment" in the first place and, therefore, no appeal could be brought on this point. The judge, who had granted leave to appeal on a point of law under s.69 of the Arbitration Act 1996, had done so after hearing full oral submissions. The Court would be very reluctant to overturn such a ruling and there were strong policy reasons for not allowing threshold issues to be reargued at the appeal hearing stage.

Comment

This decision sets out what will constitute a "similar amendment" to an NYPE 1946 charterparty in order to displace the usual owner-friendly position under the ICA. This clarification is to be welcomed, as it reduces the scope for uncertainty and the expensive legal disputes that can arise as a result.

The case also serves as a reminder that respondents to an application for leave to appeal an arbitration award should make their arguments comprehensively at the application stage, as they are unlikely to be able to make (or remake) threshold arguments at the appeal hearing itself.

02.10.2018

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