M.H. Progress Lines SA v. Orient Shipping Rotterdam BV (Genius Star 1)  EWHC 3083 (Comm)
The new Inter-Club Agreement ("ICA") 2011 came into effect on 1 September 2011. The dispute in this case required the court to consider the interplay between the previous version, ICA 1996, and an amended Centrocon arbitration clause, where both were incorporated into the time charterparty and where they potentially conflicted. Nonetheless, the decision of Mr Justice Teare remains relevant because the wording of the ICA 1996 provisions in question remains unaltered in ICA 2011.
The ICA regime is a means of apportioning liability for cargo claims arising out of or under the NYPE or Asbatime standard form time charterparties, where the parties have expressly incorporated ICA into the terms of their charter. ICA 1996 amended and replaced ICA 1984. Arguably the most fundamental change was the addition of clause (2) ICA 1996, which provides that:
"The terms of this Agreement shall apply notwithstanding anything to the contrary in any other provision of the charterparty; in particular the provisions of clause (6) (time bar) shall apply notwithstanding any provision of the charterparty or rule of law to the contrary".
Clause (6) ICA provides that
Recovery...by an owner or charterer shall be deemed to be waived and absolutely barred unless written notification of the cargo claim has been given to the other party to the charterparty within 24 months of the date of delivery...or the date the cargo should have been delivered, save that, where the Hamburg Rules...are compulsorily applicable...the period shall be 36 months
Both clauses (2) and (6) have been incorporated into the new ICA 2011.
The background facts
The Genius Star 1 charter was on an amended NYPE 1946 form and provided that ICA 1996 should apply to all cargo claims. Clause 39(2) of the charter (an amended Centrocon arbitration clause) provided that
"Any claim must be made in writing and the claimant's arbitrator appointed within 12 months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred".
The sub-charterers settled a cargo claim advanced by cargo interests and sought to recover the settlement amount from the charterers who, in turn, sought to pass the claim up the chain to the owners. Both the sub-charterers and charterers notified their claim within 24 months of delivery in accordance with clause (6) ICA 1996, but failed to commence arbitration proceedings within 12 months in accordance with clause 39(2) of the charter. The owners argued that the claim was time-barred.
The arbitrators in the first instance and subsequently the Commercial Court on appeal had to decide whether or not the one year time limit in clause 39(2) applied to cargo claims which were to be settled and apportioned in accordance with ICA 1996. Both held that the one year time limit did not apply and that the charterers and sub-charterers had the benefit of the usual six year limitation period for bringing claims in contract.
The Commercial Court decision
In the absence of any previous decisions on the construction of ICA 1996, the judge made reference to an earlier, unreported decision in 1990, the Mary Elle. In that case, the charter contained an amended Centrocon arbitration clause requiring proceedings to be commenced within three months. The court held that this should prevail over the 24 month ICA 1984 time bar and that the claim was therefore time-barred. That decision was, however, distinguishable because ICA 1984 did not contain an equivalent of clause (2) ICA 1996.
The owners argued that clause (6) ICA is not a limitation period to which clause (2) ICA applies. Clause (6) requires written notification of the claim, not the commencement of legal proceedings and is therefore an additional requirement to any statutory or contractual time bar. By contrast, clause 39(2) of the charter was a contractual time bar with which sub-charterers were also obliged to comply. In other words, the owners contended that the two provisions were not "contrary" within the meaning of clause (2) ICA.
The sub-charterers argued that clause (2) ICA applies to any time bar in the charter that might appear to be in conflict with clause (6) ICA, including a Centrocon arbitration clause. The judge agreed and held that both clause (6) and clause 39 (2) provided for time bars, namely a requirement which, if not complied with, results in the claim being waived and absolutely barred. As the requirement in each case was different (one requirement being notification of the claim within 24 months and the other being the commencement of proceedings within 12 months), clause 39 was "contrary" to clause (6) within the meaning of clause (2) ICA.
In the judge's view, the reasonable man would read clause (2) ICA as meaning that the time bar at clause (6) ICA should apply notwithstanding clause 39(2). The judge referred to the Court of Appeal decision in the Strathnewton  1 Lloyd's Rep 219 and agreed with the decision in that case that the ICA terms "cut across the liabilities and defences set out in the other terms of the charterparty" including "the liabilities and defences of the Hague Rules when incorporated into the charterparty". The decision in the Strathnewton related to ICA 1984 but remained relevant to the interpretation of ICA 1996, particularly in view of the wording added at clause (2) ICA 1996.
The practical consequences of the judge's ruling were that the sub-charterers, having notified their claim within the 24 months allowed by clause (6) ICA, would then have a further four years to commence proceedings in accordance with the six year statutory limitation period. This was the same view the arbitrators had taken and neither they nor the judge considered that this would lead to an uncommercial result. Rather, the court's view was that apportionment under ICA 1996 is intended to be a mechanical exercise and once a claim had been notified, commencement of arbitration or court proceedings would usually be unnecessary. In particular, the judge stated that the purpose of the 24 month time bar (or 36 months where the Hamburg Rules apply) at clause (6) ICA is to give an owner or charterer a further year to notify its intention to seek apportionment after the one year Hague/Hague-Visby Rules limitation period (for third party bill of lading holders to bring their cargo claim under the bill) has expired.
This was a practical and commercial decision by the judge in circumstances where the owners were aware of the claim in question but sought to rely on technical time bar arguments to avoid liability. It also provides a welcome clarification of the applicable time limits in respect of claims brought under ICA 1996 which, it is submitted, will apply equally in respect of claims brought under ICA 2011.
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