Readers will recall from Reed Smith's recent blog that concerns have been raised regarding common Inter-Club Agreement (ICA) incorporation clauses.
A London Tribunal, in a recent arbitral award in which Reed Smith acted, held in favour of Reed Smith's client that a traditional ICA incorporation clause incorporated the entire ICA, including clause 9 (i.e. the entitlement to security).
The subject incorporation clause wording was found by the Tribunal to be "almost identical" to the wording of the clause in the well-known Court of Appeal decision in the Strathnewton (D/S A/S Idaho v Peninsular and Oriental Steam Navigation Co. (The "Strathnewton") [1983] 1 Lloyd's Rep. 219 (C.A)). For ease of reference, we set out that clause:
'Cargo claims under this Charterparty to be settled between Owners and Charterers under the Inter Club New York Produce Exchange Agreement.'
The Tribunal concluded that the wording was, as in The Strathnewton, sufficient to incorporate the ICA in its entirety. Given that the subject incorporation clause referred to the latest amendments of the ICA, this was found to incorporate ICA clause 9 and hence the requirement that Charterers provide Owners with security (the other requirements of the clause were met). The Tribunal therefore regarded the wording of the clause in London Arbitration 18/18 as distinguishable.
The findings of the Tribunal are encouraging for parties seeking to rely on the security provisions of the ICA and who have an incorporation clause similar to that in the Strathnewton. That said, the prudent shipowner is still recommended to incorporate the International Group recommended ICA clause where possible to avoid argument on this point.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
