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Web Alert: London Arbitration 19/17: Cargo recovery dispute ends all square

28 July 2017

The tribunal considered the owner's cargo recovery claim from the charterer who was obliged to deal with cargo claims in the first instance and was responsible for stowage under the terms of the charterparty.

The Facts
The subject vessel was chartered on an NYPE time trip charter and loaded a total cargo of approximately 54,000mt of steel coils at Chengsu and Jingtang (China) and Kaohsiung (Taiwan). The cargo was discharged in Antwerp where it subsequently faced two cargo claims for sweat/condensation damage. The principle reason for the wet damage as determined by surveyors was the significant difference in temperature between the load ports in China and Taiwan and a failure to properly ventilate the cargo.

The Owner settled the cargo claims for approximately €78,000 (inclusive of surveyors’ and legal fees) and brought arbitration proceedings against the charterer to recover this sum.

The Claims
The claims were presented under the following three heads:

1. The charterer failed to handle the cargo claims in the first instance in breach of the charterparty. As a result the owner suffered a loss as it was liable to indemnify the head owner.
The tribunal did not accept this argument because, regardless of who handled the cargo claim, liability would rest with the party ultimately responsible under the back-to-back charterparties. In addition, the claims were handled by the owner's P&I Club who held the joint entry, and the owner’s responsibility to head owner would be matched by the charterer under the sub-charter.

2. The claims arose out of the loading / stowage of the cargo by the charterer as it was its decision to load cargo in the same holds in different ports with varying temperatures. As a result the owner is entitled to rely on an implied indemnity for following charterer's orders.
The tribunal rejected this argument as well. It was not proven that the sole cause of the damage was loading the cargo in this way and there was also some criticism about the owner's ventilation of the cargo. In addition, the implied indemnity did not bite because the parties had always contemplated carrying cargo through warmer waters so the risk of cargo sweat was inherent to the particular voyage that the owner agreed to undertake.

3. The charterer should bear 100% of the claim pursuant to para 8 (b) of the ICA as the claims arose out of the loading and/or stowage of the cargo.
This head of claim failed on the facts because the tribunal had found that the cause of the damage was not exclusively due to how the cargo was stowed.

4. The charterer should bear 100% pursuant to para 8 (d) of the ICA because there was clear and irrefutable evidence that the damage was caused by sweat which arose as a consequence of the charterer's orders.
Again, the owner contended that there was clear and irrefutable evidence that the damage was caused by sweating but this was rejected by the tribunal. Even if there was such evidence, the tribunal were reluctant to classify this as an ‘act’ when the loading of this type of cargo on this particular voyage was always in the contemplation of the parties.
The Owner's claim for 100% reimbursement under 8 (d) therefore failed, but it was entitled to a 50% recovery under the first part of 8 (d): ‘all other claims whatsoever’.

This decision shows that tribunals will be reluctant to hold charterers liable for cargo claims just because they were responsible for loading/stowage under a time trip charterparty. The parties will almost always be aware of the type of cargo being carried and the voyage they must undertake, which means that they have consented to the risks inherent to such voyage, subject to any express clauses in the charterparty.