EIGHTEENTH ANNUAL INTERNATIONAL M L A M 2017...eighteenth annual international maritime law...

EIGHTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2017

MEMORANDUM FOR RESPONDENT

NALSAR UNIVERSITY OF LAW

TEAM 16

ON BEHALF OF: AGAINST:

INFERNO RESOURCES SDN BHD FURNACE TRADING PTE LTD.

AND IDONCARE BERJAYA UTAMA PTY. LTD.

IN THE MATTER OF AN ARBITRATION UNDER THE INTERNATIONAL

ARBITRATION ACT (CAP 143A, REV ED 2002) AND THE SINGAPORE

CHAMBER OF MARITIME ARBITRATION RULES

COUNSEL

SWINI NIPUNA SAMIHA PRAKHAR

KHARA VARMAN GOPAL GUPTA

TEAM 16 MEMORANDUM FOR RESPONDENT

I

TABLE OF CONTENTS

List of Abbreviations ............................................................................................................ III

Index of Authorities .............................................................................................................. IV

STATEMENT OF FACTS..............................................................................................................1

I. This Tribunal Does Not Have The Jurisdiction And/Or Power To Grant Liberty To

The Claimant To Sell The Cargo On Board The MV Tardy Tessa Pendente Lite. ........... 2

(A) This Tribunal does not have the Jurisdiction to Hear the Proceedings. ...................... 2

(i) Singapore Is Not The Proper Seat Of Arbitration ................................................... 2

(B) In the alternative, This Tribunal Does Not Have The Jurisdiction To Order The Sale

Of Cargo................................................................................................................................. 4

(i) The Arbitration Clause Is Not Wide Enough To Cover This Dispute. .................... 5

(ii) In the alternative, if The Agreement Is Wide Enough To Cover The Sale Of

Cargo, There Is A Compelling Reason To Disregard It. ................................................... 6

II. The Respondent Is Not Liable To The Claimant For Detention And/Or Other

Damages Under The Voyage Charterparty. .......................................................................... 7

(A) There is No Repudiatory Breach Due to Non-Payment of Freight. ............................ 7

(B) The Claimant Has Not Mitigated The Losses. ............................................................ 8

(i) Claimant Has Stated False Reasons To Prevent The Discharge At Busan, South

Korea. ................................................................................................................................. 9

(ii) Claimant Has Unreasonably Not Accepted The Repudiation. .............................. 10

(C) The Freight Has Not Been Earned. ........................................................................... 11

III. The Claimant Is Not Entitled To Exercise Any Lien Over The Cargo. ................. 12


II

(A) Claimant Is Not Party To The Contract Of Carriage And The Claim For Lien Is

Unreasonable........................................................................................................................ 13

(B) The Claimant does not have the physical possession of the cargo............................ 15

(C) No Lien can be Exercised on the way to Discharge Port. ......................................... 17

(D) The Claimant is not entitled to any lien over sub freight .......................................... 18

(i) No Amounts Due Under the Time Charterparty ................................................... 18

IV. It Is Not Just Or Necessary For This Tribunal To Allow The Sale Of Cargo

Pendente Lite ........................................................................................................................... 19

(A) Claimant‟s Application Fails the International Standard for Interim Relief. ............ 20

(i) Prejudgment of Merits. .......................................................................................... 21

(ii) Claimant‟s Actions Do Not Favour Claims Of Urgent Need On Their Part ......... 22

(iii) No Irreparable Harm Will Be Caused To The Claimant If Relief Is Not Dealt .... 23

(B) Additionally, it would not be justified to make an order on costs ............................ 23

(i) Granting Security For Costs And/or Claims Inevitably Places A Unilateral Burden

On The Respondent.......................................................................................................... 24

(ii) There Is No Considerable Threat To The Enforcement Of The Award. ............... 25

Request for Relief ................................................................................................................... 26


III

LIST OF ABBREVIATIONS

BBB Before Breaking Bulk

Claimant Furnace Trading Pte Ltd.

Disponent Owner Furnace Trading Pte Ltd.

IAA International Arbitration Act, 2009

Headowners Imlam Consignorist GmbH.

Master Master of M.V. Tardy Tessa:- Tan Xiag Ming

Moot Problem International Maritime Law Arbitration Moot,

2017 Moot Scenario

Parties Claimant and Respondent

Respondent Inferno Resources Sdn Bhd.

SCMA rules Singapore Chamber of Maritime Arbitration,

2015

Shipper Idoncare Berjaya Utama Pty Ltd.

Time Charterer Furnace Trading Pte Ltd.

Time Charterparty Time Charterparty between Imlam Consignorist

GmbH and Furnace Trading Pte Ltd.

dated 15th

February, 2016.

UNCITRAL Model Law The United Nations Commission on

International Trade Law Model Law on International

Commercial Arbitration, 1985.

Vessel M.V. Tardy Tessa

Voyage Charterer Inferno Resources Sdn. Bhd.

Voyage Charterparty Voyage Charterparty between Furnace Trading

Pte Ltd. and Inferno Resources Sdn. Bhd.

dated 1st September, 2016.


IV

INDEX OF AUTHORITIES

CASES

Afovos Shipping Co SA v R Pagnan and Fratelli, [1980] 2 Lloyds Rep 469 8

Asfar v Blundell [1896] 1 Q.B. 123 12

Atlanta Shipping Corp. v Chemical Bank (631 F. Supp. 335 (S.D.N.Y. 1986) 25

Bank Mellat v HellinikiTechniki [1973] 1 W.L.R. 468 25

Baumwoll Manufactor Von Carl v Furness [1893] AC 8 13

Behring International, Inc. v Iranian Air Force 475 F. Supp. 396 (D.N.J. 1979) 21

Brandeis Goldschmidt Co Ltd v Western Transport Ltd [1981] QB 864. 16

Bristol Airport plc v Powdrill [1990] 2 WLR 1362 19

British Westinghouse Electric v Underground Electric Railways Co of London

Ltd [1912] A.C. 673 9, 22

C v D, [2007] EWCA Civ 1282 3

Cammeby’s Management Company, LLC v Affiliated FM Insurance Company

No. 13-cv-2814 (S.D.N.Y. Sept. 16, 2014) 3

CJSC Golden East Company and CJSC Vostokneftegaz Company v. Mongolia,

UNCITRAL, Order on Interim Measures dated 2 September 2008 20

CLEA Shipping Coporation v. Bulk oil International Ltd. (“ The Alaskan

Trader”) [1983] 2 Lloyd‟s Rep. 645 9

CompaniaNaviera General S.A. v Kerametal Ltd. (The Lorna I) [1983] 1 Lloyd‟s

Rep. 373 12

CoppéeLavalin v Ken- Ren [1994] 2 Lloyd's Rep. 109 25

Dunham-Bush Industry SdnBhd v KLN Container Line Ltd HCAJ 60/2015 19

East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111 3

Fiona Trust & Holding Corporation and others v Privalov and other [2007] 2 All 6, 19


V

ER (Comm) 1053

Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy

Resources, intervener) [2015] SGHC 311 19

Gator Shipping Corp v Trans-Asiatic Oil A/S (The Odenfeld) [1978] 2 Lloyd‟s

Rep. 357 9

Gilleison v Middleton [1857] 2 C.B. (N.S) 134 13

Havbulk I v Korea Shipbuilding & Engineering. [1987] 2 Lloyd's Rep. 445 25

ICC case 7544, Yesilirmak 24

ICC case no 9324, ICC Bulletin 103 (2000) 104 7

ICC Case No. 8786,11(1) ICC Ct. Bull.81,83-84(2000) 23

ICCCaseNo.8113,11(1)ICCCt.Bull.65(2000). 21

International Bulk Carriers (Beirut) S.A.R.L. v. Evlogia Shipping Co. S.A., and

Marathon Shipping Co. Ltd (The MihaliosXilas) [1978] 2 Lloyd‟s Rep. 186 17

K. Karunanidhi v R. Renganathan AIR 1973 Mad 443 21

Kaverit Ltd v Kone Corp [2009] 4 SLR 628 6

Kuwait Rocks Co v AMN Bulkcarriers (The Astra) [2013] EWHC 865 (Comm) 7

Leeds Shipping v Societe Francaise Bunge [1958] 2 Lloyd‟s Rep 127 (CA) 10

Limerick S.S Co v Coker [1916] 33 T.L.R. 103 13

Maffezini v Kingdom of Spain , ICSID, 13.11.2000, Case no. ARB/97/7 24

Manchester Trust v Furness, Withy & Co [1895] 2 Q.B. 539. 14

MB Pyramid Sound N.V. v Briese-Schifforts GmbH & Co Kg [1995] C.L.C. 886 13

Michenson v Begbie [1829] 6 Bing. 190 13

MJS Recycling Inc. v. Shane Homes Limited, 2011 ABCA 221 7, 21

Molthes v Ellermans Wilson Line [1927] 1 K.B. 710 13


VI

NAI case no. 1694, XXIII YBCA 1998 24

Ng Swee Hua v Auston International Group Ltd [2009] 4 SLR 628 3

Occidental Petroleum Corporation and Occidental Exploration and Production

Company v. Republic of Ecuador, ICSID Case No. ARB/06/11 20

Ocean Marine. Navigation Ltd v Koch Carbon Inc (The Dynamic) [2003] 2

Lloyd‟s Rep.693 9

Oilex A.G. v. MM Mitsui & Co. 669 F. Supp. 85 (S.D.N.Y. 1987) 25

P. T. Tri-M.G. Intra Asia Airlines v Norse Air Charter Limited [2009] SGHC 13 3

Porzelack KG v Porzelack U.K. Limited [1987] 1 WLR 420 21

Quiborax S.A., Metallic Non Minerals S.A. and Allan FoskKaplún v Plurinational

State of Bolivia, ICSID Case No. ARB/06/2 23

Rals International Pte Ltd v Cassa di Risparmio di Parma e Piacenza SpA [2016]

5 SLR 455 6

Sandeman v Scurr [1866] L.R. 2 Q.B. 86 (CA) 13

Schuster v McKellar [1857] 7 E. & B. 704 13

Sintrans Asia Services Pte Ltd v Inai Kiara SdnBhd , Civil Appeal No. W-

02(NCC)(A)-1539-09/2014 26

Smidt v Tiden [1874] LR 9 QB 446 14

Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd. [2015]

EWHC 718 (Comm) 8

Sulamerica CIA Nacional de Seguros SA and others v Enesa Engenharia SA and

others [2012] EWCA Civ 638 3

Tage Berglund v. Montoro Shipping Corpn. [1968] 2 Lloyd‟s Rep 563 (QB) 10

Tear v Freebody (1858) 4 CBNS 228; 140 ER 1071 16


VII

Tenax Steamship Co v Owners of the Motor Vessel Brimnes [1974] EWCA Civ

15 8

The Asia Star [2010] S.G.C.A 12 22

The Hector [1998] 2 Lloyd‟s Rep. 287 13

The Patria [1871] L.R. 3 A. & E 436 13

The Rewia [1991] 2 Lloyd‟s Rep. 325 13

Thune and Roll vs. London Properties Limited and Others, [1990] 1 W.L.R.562 25

Turner v Haji Goolam [1904] A.C. 826 13

VagresCompaniaMaritima SA v Nissho-Iwai American Corpn, (The Karin

Vatis) [1988] 2 Lloyd‟s Rep 330 12

Wagstaff v Andersen [1880] 5 C.P.D 171 13

Wastwater S.S Co v Neale [1902] 86 L.T. 266 13

Wehner v Dene S.S Co [1905] 2 K.B. 92 13

STATUTES

International Arbitration Act, 2009 2

SCMA rules (3rd

edn., 2015) 2

Singaporean Evidence Act 1893 4

The Hague-Visby Rules,1924 11

OTHER AUTHORITIES

CaslavPejovic, The Identity of Carrier Problem Under Time Charters, 31 J.

Mar. L. & Com. 379, (2000) 14

Colin Y. C. Ong, M. P. O'Reilly, Costs in International Arbitration, 83,

(LexisNexis, 2016) 21

Gary Born , International Commercial Arbitration, 925; Sébastien 7


VIII

Besson, Arbitrage International et Measures Provisoires 68 et seq

Gerard McMeel, The Construction of Contracts: Interpretation, Implication and

Rectification (2nd

Edn, Oxford University Press 2011) 4

Howard M. Holtzmann and Joseph E. Neuhaus, A Guide to the UNCITRAL

Model Law on International Commercial Arbitration: Legislative History and

Commentary, Kluwer Law International 1989 24

John Savage and Emmanuel Gaillard, Fouchard Gaillard Goldman on

International Commercial Arbitration, Kluwer Law International (1999) 21

Julian D. M. Lew, Loukas A. Mistelis, and Stefan Michael Kröll, Comparative

International Commercial Arbitration, Kluwer Law Arbitration, 2003 19, 20

Julian D.M. LEW, Commentary on Interim and Conservatory Measures in ICC

Arbitration Cases, 11(1) ICC Bulletin 23 (2000) 7

Mark Dodd, Enforcing foreign arbitral awards in Malaysia, LexisNexis Dispute

Resolution, 9th

June 2016. 26

Mauro Rubino-Sammartano, International Arbitration Law and Practice (3rd

Edn, Juris Publishing, 2014) 20

Nigel Blackaby, Constantine Partasides, Alan Redfern, and J. Martin Hunter,

Redfern and Hunter on International Arbitration ( 6th

Edn, Oxford University

Press, 2015) 20

Norman J. Lopez, BES’ Chartering Shipping Terms (11th

Edn.) 16

R. Colinvaux, Carver’s Carriage by Sea, §707 13th edn. 1982 14

Ronald Bernstein, John Tackaberry, Arthur L. Marriott, and Derek Wood, The

Handbook of Arbitration Practice (Sweet & Maxwell, London, 2014) 20

Sir Bernard Eder, Scrutton on Charterparties and Bills of Lading (22nd

edn. Sweet

& Maxwell 2011)

7, 9, 13,

14, 15


IX

Stephen Colbran Security for Costs of Arbitration Proceedings in England, New

Zealand and Australia, 240 21

William C. Brown, The Due Process Challenge to Possessory Lien Enforcement,

10 Tulsa L.J. 415, 426 (1975) 15


1

STATEMENT OF FACTS

1. Furnace Trading Pvt Ltd is a company based in Singapore who chartered the vessel

Tardy Tessa from Imlam Consignorist GmbH under a Time Charterparty for a period

of two years. The Claimant sub chartered the vessel to Inferno for the carriage of

84,000 MT of Australian Steam Coal.

2. The Respondent entered into a Bill of Lading contract with Idoncare Berjaya Utama

Pty Ltd. The Bill of Lading states that “freight payable as per Charterparty dated” but

allegedly, the Claimant is unable to identify a Charterparty.

3. The vessel, M.V. Tardy Tessa was carrying coal from Australia to China. The

discharge port had to be selected from a list of eight previously nominated ports as

specified in the Voyage Charterparty i.e. Dalian, Jinzhou, Yingkou, Yantai, Qingdao,

Shanghai, Tianjin, Ningbo. Due to congestion at Chinese ports, the Respondent called

port of discharge at Busan, South Korea. The Respondent requested the Claimant to

discharge at Busan but the request was denied due to the zombie outbreak in Busan.

The Respondent reassured the Claimant about the safety of the port as the Korean

military had secured the area and other vessels of the Respondent had safely called

port in Busan without any issues, despite this the request was denied. Subsequently,

the Respondent nominated Ningbo as the final port of discharge which was again not

accepted by the Claimant.

4. The payment of freight was not done by the Respondent due to them not receiving

freight from Idoncare. However, they had assured the Claimant that the payment

would be done at discharge. However, the Claimant unjustifiably terminated the

Charterparty and now the vessel along with the cargo has been is adrift OPL of

Singapore, to the best of the Respondent‟s knowledge.


2

ARGUMENTS ADVANCED

I. THIS TRIBUNAL DOES NOT HAVE THE JURISDICTION AND/OR POWER TO

GRANT LIBERTY TO THE CLAIMANT TO SELL THE CARGO ON BOARD THE MV

TARDY TESSA PENDENTE LITE.

The Tribunal does not have the jurisdiction and/or the power to allow the Claimant to

sell the cargo on board. This is because (A) the Tribunal does not have the jurisdiction

to hear the proceedings and (B) the Tribunal does not have the jurisdiction to order

the sale of cargo pendente lite.

(A) THIS TRIBUNAL DOES NOT HAVE THE JURISDICTION TO HEAR THE PROCEEDINGS.

Pursuant to s. 16(1) of the International Arbitration Act, 20091 (hereinafter IAA) and

Rule 20(a) of the SCMA rules2, which encapsulate the Kompetenz-Kompetenz

principle which is widely accepted in international arbitration, signifies that this

tribunal has the power to determine its own jurisdiction.

However, the Tribunal does not have the jurisdiction to hear the proceedings because

Singapore is not the proper seat of arbitration.

(i) SINGAPORE IS NOT THE PROPER SEAT OF ARBITRATION

1. The Tardy Tessa is adrift OPL of Singapore, the vessel is under the Singapore flag

and has been chartered to the Respondent through a Voyage Charterparty. This

tribunal derives its jurisdiction from Clause 29 of the Voyage Charterparty.3 This

corresponds to Box 30 of the Coal-Orevoy Charterparty form. Box 30 requires that

parties nominate either Clause 26(a), 26(b) or Clause 26(c) of the dispute resolution

Clause overleaf, depending on which the arbitration would be conducted in London,

New York, or the seat of the parties‟ choice respectively. If 26(c) is chosen, the

parties must indicate their chosen seat of arbitration. Clause 26 also contains the

1 S.16 (1), International Arbitration Act, 2009.

2 Rule 20(a), SCMA rules (3

rd edn., 2015).

3 Email dated 1/07/2016, Moot Problem p. 23.


3

proviso that if Box 30 is not appropriately filled in, 26(a) will apply by default. The

Law and Dispute Resolution Clause is extremely widely drafted, allowing for such an

interpretation. “Law” clauses in contracts determine the substantive law of the

contract and are generally separate from the “Dispute Resolution” Clause,4 even

otherwise, the clause contains separate references to the law to apply to the contract

and arbitration. The law applying to the contract is often different from the law

applying to the arbitration for various reasons.5 The substantive law of the contract

cannot be Singapore law and arbitration as per SCMA rules, but only Singapore law.

Further, the parties have failed to nominate which sub-clause will apply, nor have

they nominated the seat of arbitration. In this case, it would seem that Clause 26(a)

would apply by default.

2. Further, it cannot be held that this was a mutual mistake or a mere typographical

error. The Claimant must prove, by clear and convincing evidence, that the final,

written agreement between the parties “reflected the objectively manifested intent

of neither party to the agreement.”6 because of the widely-drafted arbitration Clause

and lack of conclusive evidence, there is a heavy presumption that a deliberately

prepared and executed written instrument manifests the true intention of the parties.7

3. In order for the Tribunal to correct a mistake by construction, two tests must be

satisfied: firstly, there must be a clear mistake on the face of the instrument;8

secondly, it must be rectified in order to maintain consistency within the contract.9

This second requirement is not satisfied, as there are no references to other forms of

4 Sulamerica CIA Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] EWCA Civ

638; P. T. Tri-M.G. Intra Asia Airlines v Norse Air Charter Limited [2009] SGHC 13.

5 C v D, [2007] EWCA Civ 1282.

6 Cammeby’s Management Company, LLC v Affiliated FM Insurance Company No. 13-cv-2814 (S.D.N.Y.

Sept. 16, 2014. 7 Ibid.

8 East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111 at 112.

9 Ng Swee Hua v Auston International Group Ltd [2009] 4 SLR 628.


4

arbitration in the contract. If arbitration were to be held in London, that would not

affect any other provisions of the contract. Additionally, Section 95 of the

Singaporean Evidence Act reads that “When the language used in a document is on its

face ambiguous or defective, evidence may not be given of facts which would show its

meaning or supply its defects,”10

and thus it is submitted that, the Tribunal should be

reticent to supply missing words into the Clause.11

4. This is facilitated by the fact that SCMA explicitly provides for a choice between

Singaporean Law or English Law as lex arbitri in its Model Clauses, showing that in

choosing the SCMA, there is a clear possibility that it was the intent of the parties that

English Law should apply, especially given the fact that Clause 26(a) seems to apply

to the arbitration.

5. Thus, it is submitted that the law of the contract refers to Singapore Law and disputes

will be resolved by arbitration as per the SCMA rules. Therefore, the arbitration

should be properly referred to London, albeit applying SCMA rules. The parties

intended for London arbitration, but under the SCMA rules, and therefore, it is

submitted that this Tribunal does not have the jurisdiction to hear this dispute.

(B) IN THE ALTERNATIVE, THIS TRIBUNAL DOES NOT HAVE THE JURISDICTION TO

ORDER THE SALE OF CARGO.

The Tribunal does not have the jurisdiction to order the sale of cargo because (i) the

arbitration clause is not wide enough to cover this dispute, (ii) there is a compelling

reason to disregard the arbitration clause if it covers this dispute.

10

S. 95, Singaporean Evidence Act 1893. 11

Gerard McMeel, The Construction of Contracts: Interpretation, Implication and Rectification (2nd

Edn,

Oxford University Press 2011) at p 486.


5

(i) THE ARBITRATION CLAUSE IS NOT WIDE ENOUGH TO COVER THIS DISPUTE.

6. The Clause 26(a) of the Voyage Charterparty states that the arbitration will be

referred to in London and Clause 26 (c) states that any dispute arising out of and in

connection with the Charterparty shall be referred to arbitration in a mutually agreed

place. Albeit, the Clause 26(a) is determined not to be applicable to the arbitration, it

is submitted that the Tribunal cannot determine by construction that Clause 26(c) is.

7. However, the dispute resolution Clause may be read alone, as is often the default case

for other standard form Charterparties.12

Read alone, the dispute resolution Clause

reads, at its widest interpretation, “Singapore law and arbitration as per SCMA rules.”

Normally, parties should draft an arbitration clause so that arbitration is made

mandatory for all disputes arising out of and in connection with the contract.

However, the lack of modifying terms “all disputes,” or “any disputes,” before the

term “arbitration” and the absence of modifiers like “in connection to” brings up the

question of what disputes are arbitrable. Generally, the modifiers mentioned above

allow the Tribunal to arbitrate over a wide variety of issues arising incidental to the

contract. However, without them, the Tribunal should interpret it to mean only all

disputes arising out of the contract.

8. The right to sell cargo on which lien has been exercised is extra-contractual. There

exists no right to sale of such goods unless expressly agreed to in the contract. Albeit,

the clause is interpreted to include all disputes arising in connection with the contract,

the test set out to determine whether a dispute falls within the ambit of such a clause

is as follows: “A dispute meets the test set by the submission if either claimant or

defendant relies on the existence of a contractual obligation as a necessary element to

12

See GENCON, CONGENBILL, etc.


6

create the claim, or to defeat it.”13

The claim to sell the cargo has not been created by

any reliance on a contractual obligation, because while the Claimant relies on a

contractual obligation (i.e. the Respondent‟s obligation to pay freight) to make the

lien claim, the sale claim does not arise from any contractual obligations. Therefore, it

is submitted that the arbitration clause is not wide enough to cover this dispute.

(ii) IN THE ALTERNATIVE, IF THE AGREEMENT IS WIDE ENOUGH TO COVER THE SALE

OF CARGO, THERE IS A COMPELLING REASON TO DISREGARD IT.

9. Certain precedents14

have led to the establishment of the presumption that the parties

being associated with such business, intend to submit all disputes to arbitration.

However, the Singapore Court of Appeal clarified that if there was a compelling

reason to displace such assumed intention, then the presumption could be rebutted and

the agreement would not apply.15

Here, the reason is that the claims in question refer

to the rights of a third party (the Headowners), who wanted any disputes arising in

connection to their rights to be submitted to litigation, not arbitration.

10. This arbitration has been referred to by a clause contained in the Voyage Charterparty,

which only the Claimant and the Respondent are party to. However, the Claimant is

attempting to exercise a lien on cargo and sub-freight with the using the rights of the

Headowners, (who are third (non-signatory) parties to the arbitration) under the

Clause 23 of the Time Charterparty as the Voyage Charterparty contains no provision

for exercising lien on sub-freight, and also because they require the Headowners‟

assistance in exercising lien over the cargo as it is the Headowners who are in

physical possession of the cargo.16

13

Kaverit Ltd v Kone Corp [2009] 4 SLR 628. 14

Fiona Trust & Holding Corporation and others v Privalov and other [2007] 2 All ER (Comm) 1053. 15

Rals International Pte Ltd v Cassa di Risparmio di Parma e Piacenza SpA [2016] 5 SLR 455. 16

Time Charterparty, Clause 23, Moot Problem, p. 10.


7

11. Any determination with regard to whether or not the lien is exercisable would amount

to the determination of the rights of a third party (the Headowners), which an Arbitral

Tribunal has no authority to do,17

and a sale order would amount to ordering a third

party to do an act, which is also extra-jurisdictional.18

Hence, there is a compelling

reason why the presumed intention of the parties to submit all disputes to arbitration

should be rebutted.

II. THE RESPONDENT IS NOT LIABLE TO THE CLAIMANT FOR DETENTION AND/OR

OTHER DAMAGES UNDER THE VOYAGE CHARTERPARTY.

The Respondent here is not liable to the Claimant for detention or other damages as

(A) there is no repudiatory breach due to non-payment of freight (B) the Claimant has

not mitigated the losses (C) the freight has not been earned by the Claimant.

(A) THERE IS NO REPUDIATORY BREACH DUE TO NON-PAYMENT OF FREIGHT.

12. The Claimant states that the Respondent by not paying the freight has repudiated the

contract and therefore, the Claimant is entitled to receive damages from the

Respondent. Repudiatory breach is a breach of contract wherein (i) when the

performance is due the defendants‟ failure to perform the contract or, (ii) when before

the time the performance is due the defendants inform that they will not be able to

perform the contract and the Claimant accepts such repudiation.19

In English law, an

essential clause of the contract is called a condition and an innominate term can take

the form of a condition or a non-essential clause (warranty), depending on the case.

When a clause is an innominate clause then the failure to comply to such clauses does

not automatically terminate the contract.20

Further, time based payments can be

17

MJS Recycling Inc. v. Shane Homes Limited, 2011 ABCA 221. 18

Julian D.M. LEW, Commentary on Interim and Conservatory Measures in ICC Arbitration Cases, 11(1) ICC

Bulletin 23 (2000) 25 with further references; Gary Born , International Commercial Arbitration, 925; Sébastien

Besson, Arbitrage International et Measures Provisoires 68 et seq; see also ICC case no 9324, ICC Bulletin 103

(2000) 104. 19

Sir Bernard Eder, Scrutton on Charterparties and Bills of Lading, 386, (22nd

edn. Sweet & Maxwell 2011). 20

Kuwait Rocks Co v AMN Bulkcarriers (The Astra) [2013] EWHC 865 (Comm).


8

considered to be a condition only if it has been made clear that time is an essential

part of the contract and is a condition.21

Renunciation on the other hand is the express

statement by the Respondent about their inability to perform a contract.

13. Here, the Respondent in their communication to the Claimant nowhere mention that

they will be unable to pay the freight due but only state that they will be able to make

the payment at a later date.22

Even repeated lateness of payment is not sufficient to

establish Charterers‟ unwillingness or inability to comply with the Charter.23

Clause

19 of the Voyage Charterparty states that even though the freight is bound by a certain

time period it remains silent on whether time is an essential aspect and the effects of

the violation of the same. Therefore, since there has been no renunciation by the

Respondent stating their unwillingness to perform the contract and it has not been

stated anywhere that the time period of the payment of such freight is the essential

part of the contract, therefore the freight clause is an innominate term. Thus, it is

submitted that there has been no repudiatory breach for non-payment of freight by the

Respondent.

(B) THE CLAIMANT HAS NOT MITIGATED THE LOSSES.

14. The Respondent had requested the Claimant to let them call port at Busan, South

Korea as the Chinese ports were congested and therefore the Respondent could not

call port at the places agreed in the Voyage Charterparty. The Claimant denied the

request and stated that Busan was hit by a zombie outbreak. The Respondent had

assured the Claimant that Busan was a safe port as the South Korean army had cleared

the area and Respondent‟s own ships had called port there and were safe. The

21

Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd. [2015] EWHC 718 (Comm). 22

E-mail dated 21/10/2016, Moot Problem, p. 68. 23

Afovos Shipping Co SA v R Pagnan and Fratelli, [1980] 2 Lloyds Rep 469; Tenax Steamship Co v Owners of

the Motor Vessel Brimnes [1974] EWCA Civ 15.


9

Claimant still refused the request and stated that Busan was not a permitted port in the

Head Time Charterparty.

15. A Claimant is under the duty to mitigate its loss i.e. damages will not be awarded for

losses that could reasonably have been avoided.24

An Owner cannot claim damages

for detention of his ship, if by taking a certain reasonable course he could have

avoided such detention.25

Also, repudiatory breach is a breach of contract wherein

(i) when the performance is due the defendants fail to perform the contract or, (ii)

when before the time the performance is due the defendants inform that they will not

be able to perform the contract and the Claimant accepts such repudiation.26

When

such a repudiation happens then the Claimant has the right to either accept or reject

such repudiation.27

However, such right can be fettered in extreme cases, wherein

damage would be an adequate remedy and where an election to keep the contract alive

would be wholly unreasonable.28

In Clea Shipping Corp v. Bulk Oil International Ltd

(The Alaskan Trader)29

it was held that there is a point where a line between merely

unreasonable and wholly unreasonable has to be drawn. The Claimant here has not

mitigated the losses by (i) stating false reasons to deny the request to discharge at

Busan and (ii) by unreasonably not accepting the repudiation.

(i) CLAIMANT HAS STATED FALSE REASONS TO PREVENT THE DISCHARGE AT BUSAN,

SOUTH KOREA.

16. According to the email sent on 16th

October 2016 the Respondent had informed the

Claimant about their inability to call port on one of the agreed discharge ports due to

24

British Westinghouse Electric v Underground Electric Railways Co of London Ltd [1912] A.C. 673; The Asia

Star [2010] S.G.C.A 12; [2010]. 25

Supra n.19 at 381-399. 26

Ibid. 27

Gator Shipping Corp v Trans-Asiatic Oil A/S (The Odenfeld) [1978] 2 Lloyd‟s Rep. 357; Ocean Marine.

Navigation Ltd v Koch Carbon Inc (The Dynamic) [2003] 2 Lloyd‟s Rep.693 at [23]. 28

Ibid. 29

CLEA Shipping Coporation v. Bulk oil International Ltd. (“The Alaskan Trader”) [1983] 2 Lloyd‟s Rep. 645.


10

congestion at Chinese ports. The Claimant did not accept the breach and stated that

the said port i.e. Busan, South Korea was not in the permitted range of the

Charterparty between the Claimant and the Headowners. However, Cl.1 (b) of the

Head Time Charterparty states that Tardy Tessa can be employed at any safe ports

between Asia and Australia.30

(ii) CLAIMANT HAS UNREASONABLY NOT ACCEPTED THE REPUDIATION.

17. The Respondent requested to allow the vessel to discharge at Busan out of necessity

since the Chinese ports were congested and such a situation could not have been

reasonably foreseen by the Respondent. The Claimant stated that the vessel cannot be

sent to Busan as it was under a zombie outbreak and the zombies were arriving from

Seoul onboard a train to Busan.31

The Respondent further assured the Claimant that

Busan was a safe port as the Korean army had secured the area and the Respondent‟s

other time chartered ship had safely called port at Busan.32

Busan cannot be termed as

an unsafe port as other ships of the Respondent had reached the port, used it safely

without in exceptional circumstances being exposed to danger and as in the case of

Tage Berglund v. Montoro Shipping Corpn., fulfilling these conditions was enough to

term a port safe.33

Despite knowing that the congestion at Chinese ports would not

allow the ship to call port, the Claimant did not accept the repudiation of the contract

by the Respondent. This stranded the Tardy Tessa OPL of Singapore, as they could

not call port in China as per the Charterparty and could not go for the alternative due

to the refusal of the breach by the Claimant.

30

Time Charterparty, Clause 1(b), Moot Problem, p. 1. 31

E-mail dated 17/10/2016, Moot Problem, at p. 58. 32


Leeds Shipping v Societe Francaise Bunge [1958] 2 Lloyd‟s Rep 127 (CA); Tage Berglund v. Montoro

Shipping Corpn. [1968] 2 Lloyd‟s Rep 563 (QB).


11

18. The conduct of the Claimant has been wholly unreasonable in this regard as, not only

did they deny the fact that Busan was a permitted port in the Head Time Charterparty,

but also that they unreasonably denied the permission to call port in Busan even after

the reassurances and facts put forward by the Respondent. The Respondent has not

deviated unreasonably since common law and article IV rule 4 of The Hague-Visby

rules allow deviation of the vessel from agreed route in order to save human life.34

The Claimant could have deviated to any port in order to save the life of the diabetic

person and restore survival supplies on board. However, the vessel has been floating

OPL for over ten months. The Claimant could have prevented the loss they incurred

had they acted reasonably. There were no attempts by the Claimant to mitigate the

loss as they have let the vessel stay adrift the Singapore OPL despite the deteriorating

conditions of the crew on board. Had they accepted the repudiation by the Respondent

at the earliest, the Claimant could have discharged and stored the cargo for lien and

employed vessel for other voyage and earnings, thereby limiting the liability of the

Respondent. Therefore, it is submitted that Claimant has breached their duty to

mitigate and cannot claim damages.

(C) THE FREIGHT HAS NOT BEEN EARNED.

19. The Respondent was unable to pay the freight to the Claimant, and the Claimant

considered the non-payment of freight as the repudiatory breach of the contract and

had reserved the right to claim damages. The Claimant has therefore claimed for

damages for the non-payment of freight by the Respondent. However, the Respondent

states that the freight has not been earned by the Claimant as the vessel has not

reached the discharge port yet, and according to the Charterparty the Respondent can

still pay the freight.

34

Art. IV r 4, The Hague-Visby Rules,1924.


12

20. Freight is the reward payable to the carrier for the carriage and arrival of the goods, in

a merchantable condition.35

The Voyage Charterparty in Cl. 19 states that hundred

percent freight is to be paid within five banking days after completion of loading and

signing/releasing Bills of Lading marked „freight payable as per Charterparty‟ and

receipt of Owners‟ freight invoice, but in any case BBB.36

BBB stands for Before

Breaking Bulk, which means the initiation of discharge or opening of the ship‟s

hatches. A liability to pay advance freight does not per se affect the time when freight

is earned. It is simply an obligation to make a payment on account of freight at a time

when it has not yet been earned.37

Clause 19 of the Charterparty further, only states

the manner in which the freight is to be paid and not the obligation to pay the same.38

21. Here, since the discharge has not been started and the Voyage Charterparty states that

the freight is to be paid within five banking days after completion of loading or

signing/releasing Bills of Lading or in any case before breaking bulk. This means that

even after five banking days the freight is not due as the Respondent has the

opportunity to pay the freight. This implies that the freight was not actually earned

and the Respondent still had time to pay the freight. Therefore, there cannot be

damages for the non-payment of freight.

III. THE CLAIMANT IS NOT ENTITLED TO EXERCISE ANY LIEN OVER THE CARGO.

The Tardy Tessa is adrift outside Singapore port limits from 11th

October 2016, the

Claimant had asked to call a discharge port but the requests of discharging at Busan,

South Korea was denied by the Claimant. The Respondent then directed the vessel to

discharge at Ningbo, China but a notice of termination was sent by the Claimant. The

Claimant is not entitled to exercise any lien over the cargo.

35

Asfar v Blundell [1896] 1 Q.B. 123. 36

Charterparty Clause 19, Moot Problem, at p. 22. 37

CompaniaNaviera General S.A. v Kerametal Ltd. (The Lorna I) [1983] 1 Lloyd‟s Rep. 373. 38

VagresCompaniaMaritima SA v Nissho-Iwai American Corpn, (The Karin Vatis) [1988] 2 Lloyd‟s Rep 330.


13

As argued above, claimant has no cause to exercise lien because freight has not been

earned. Further, lien can only be exercised when the freight is due and the carriers

have physical possession of the cargo.39

(A) the Claimant is not a party to the contract

(B)the Claimant cannot exercise lien over the cargo because they do not have the

physical possession of the cargo (C) no lien can be exercised on the way to discharge

port (D) the Claimant does not have a lien over sub-freight.

(A) CLAIMANT IS NOT PARTY TO THE CONTRACT OF CARRIAGE AND THE CLAIM FOR

LIEN IS UNREASONABLE.

22. For the Claimant to exercise valid lien over the cargo there should be a contract

between the Respondent and the Claimant. When the contract is between the

Respondent and the Shipowners then only they can rightfully exercise lien on cargo

and not the Claimant. To determine the parties to the contract it should be noted that

the Bill of Lading is the proof of carriage of contract and the Master signs the Bill of

Lading on behalf of the other party, whoever the other party is the party to the

contract of carriage and has the rightful lien over cargo.

23. Contract of carriage is the contract between the parties to transport cargo from one

place to another40

and Bill of Lading is an evidence of the contract of carriage.41

If the

Charter is not a Demise Charterparty, a Bill of Lading signed by the Master is usually

a contract with the Shipowner.42

A Demise Charter or a Bareboat Charter is when the

Charterers obtain complete control, possession and management of the ship and

39

Supra n.19, at 375-379. 40

Supra n.19, at 200-213. 41

Ibid. 42

Per Walton J., above, at p.126; per Channell J. in Wehner v Dene S.S Co [1905] 2 K.B. 92 at p.98; Baumwoll

Manufactor Von Carl v Furness [1893] AC 8, above; Sandeman v Scurr [1866] L.R. 2 Q.B. 86 (CA); Limerick

S.S Co v Coker [1916] 33 T.L.R. 103 Turner v Haji Goolam [1904] A.C. 826; Molthes v Ellermans Wilson Line

[1927] 1 K.B. 710. See also Michenson v Begbie [1829] 6 Bing. 190; Gilleison v Middleton [1857] 2 C.B. (N.S)

134; Schuster v McKellar [1857] 7 E. & B. 704; Wastwater S.S Co v Neale [1902] 86 L.T. 266; The Patria

[1871] L.R. 3 A. & E 436; Wagstaff v Andersen [1880] 5 C.P.D 171 The Rewia [1991] 2 Lloyd‟s Rep. 325; MB

Pyramid Sound N.V. v Briese-Schifforts GmbH & Co Kg [1995] C.L.C. 886 The Hector [1998] 2 Lloyd‟s Rep.

287.


14

operate it, for example appointing the Master and the crew, as if they are the Owners

("Disponent Owners"). The actual, registered ownership remains with the Owners.

The Bill of lading is ambiguous as to the fact which Charterparty is to be applied.43

However the contract may be with the Owners even though the Charter contains a

clause that the captain shall sign Bills of lading as agent for the Charterers.44

English

law adopts a different approach: the Master does not enter into a direct relationship

with the Charterer, but is put under the Charterer‟s orders on the basis of the

stipulations contained in the Charterparty.45

Accordingly, the fact that the

employment clause provides that the Master will sign Bills of lading as presented by

the Charterer does not mean that the Master is acting as the Charterer‟s agent. Instead,

the Shipowner contracts through the Master with the shipper for the benefit of the

Charterer.46

24. In the given situation, the Head Charterparty is a Non-Demise Charterparty,47

which

means that the Claimant is not in complete control, possession, and management of

the ship. Even though the Master is under the control of the Claimant for the purposes

of employment and agency,48

given that the Charterparty is not a Demise Charterparty

the Master is essentially the employee of the Headowners so, the Headowners are the

party to the contract of carriage as the Master signed the Bill of lading, which is the

evidence of contract of carriage, on behalf of the Owners. Further, the demand for lien

would result in the further delay in the delivery of goods, and since the discharge port

had been announced by the Respondent, i.e. Ningbo, the reasonable action would be

to proceed to Ningbo rather than exercising lien over the cargo as the warehousing

43

Smidt v Tiden [1874] LR 9 QB 446; R. Colinvaux, Carver’s Carriage by Sea, §707 13th edn. 1982. 44

Supra n.19, at 375-379, Manchester Trust v Furness, Withy & Co [1895] 2 Q.B. 539. 45

CaslavPejovic, The Identity of Carrier Problem Under Time Charters, 31 J. Mar. L. & Com. 379, (2000). 46

Ibid. 47

Charterparty Clause 26, Moot Problem, p. 10. 48

Charterparty Clause 8, Moot Problem, p. 3.


15

costs will only add to the already increasing costs. Under doctrine of mitigation the

Claimant should reasonably minimize the losses that they might incur.

25. Therefore, the signing of Bill of lading by the Master on behalf of the Owners shows

that the Claimant is not a party to the contract of carriage which means that the

Claimant does not have a right to exercise a rightful lien over the cargo of the

Respondent.

(B) THE CLAIMANT DOES NOT HAVE THE PHYSICAL POSSESSION OF THE CARGO.

26. The lien on cargo is a possessory lien.49

At common law possessory lien was a

judicially created creditor‟s remedy, generally defined as the right “in one man to

retain that which is in his possession belonging to another till certain demands of him

in possession are satisfied.”50

Possessory lien is different from contractual security

interest in two ways. First, possessory lien arises automatically by operation of law in

specified default situations and is therefore not dependent upon any consensual

agreement by the parties. Second, a possessory lien exists only so long as the creditor

retains physical possession of the property.51

27. The Tardy Tessa is on the OPL of Singapore, and has been adrift since 11th

October

2016,52

the Claimant had sent the notice of lien even after the discharge port was

called, and the vessel was requested to be directed to Ningbo, China which was one of

the ports specified in the Voyage Charterparty.53

The Claimant does not have the right

to exercise lien over the cargo because of two reasons.

28. First, there is no actual physical possession of the goods. The Tardy Tessa being adrift

in the outer port limits of Singapore is not in possession of the Claimant. The physical

49

Supra n.19, at 375-379. 50

William C. Brown, The Due Process Challenge to Possessory Lien Enforcement, 10 Tulsa L.J. 415, 426

(1975). 51

Ibid. 52




16

possession of the cargo means that the detention and control, of anything. Cl. 26 of

the Head Time Charterparty states that nothing stated in the Charterparty is to be

construed as the Demise of the Vessel to the Charterers that is the Claimant. A

Demise Charterparty or a „Bareboat‟ Charterparty is when the Charterers obtain

complete control, possession and management of the ship and operate it, for example

appointing the Master and the crew, as if they are the Owners.54

Given that the

Charterparty between the Owners and the Claimant is a Non-Demise Charterparty55

it

means that the Master and officers remain the employees of the Owners. Further, the

Master being the employee of the Owners would exercise lien on behalf of the

Owners and not the Claimant. Therefore, the Claimant does not have any physical

possession of the cargo under the Non-Demise Head Charterparty and do not have the

right to exercise lien on cargo.

29. Second, even if there is a physical possession of cargo it is not rightfully obtained.

The Claimant has given the notice of lien when Tardy Tessa is OPL of Singapore.56

Singapore is not one of the pre-decided discharge ports.57

A carrier loses its lien on

any goods that it unjustifiably refuses to deliver.58

Wrongful retention of goods with

the intention of setting up a lien is both a detinue and a form conversion.59

Here, the

Claimant is not the carrier and is not having the physical possession of the cargo but

even if it does have the physical possession it has not been rightfully obtained, as the

goods are voluntarily not being delivered even after the Respondent had asked the

Claimant to discharge the cargo at Busan, South Korea due to congestion in the

54

Norman J. Lopez, BES’ Chartering Shipping Terms (11th

Edn.) 14. 55




Tear v Freebody (1858) 4 CBNS 228; 140 ER 1071. 59

Ibid; Brandeis Goldschmidt Co Ltd v Western Transport Ltd [1981] QB 864.


17

Chinese Ports.60

The Claimant had denied the permission to discharge at Busan

claiming that Busan was not in the permitted range under the Charterparty between

the Claimant and the Headowners.61

However, Cl. (1) (b) of the Head Time

Charterparty states that the vessel can be employed for all lawful trades between safe

ports and safe places within Asia and Australia.62

Further, the Claimant stated that

Busan was not a safe port due to zombies arriving from Seoul on a train to Busan, and

even after the reassurance from the Respondent about the stable situation of Busan as

the Korean military had secured the area and a few vessels under the Respondent had

called Busan without any issues,63

the Claimant had not allowed the vessel to move

towards Busan. This makes the possession obtained by the Claimant wrongful and the

cargo has been unjustifiably refused to deliver the cargo. Since the possession is

wrongful, the Claimant has no right to claim lien over the cargo.

(C) NO LIEN CAN BE EXERCISED ON THE WAY TO DISCHARGE PORT.

30. The Claimant has sent a notice of lien to the Respondent claiming the non-payment of

freight, as the vessel Tardy Tessa has been adrift in the outer port of Singapore. The

Singapore port is a bunkering port which is on the way to the eight pre-decided

Chinese ports as per the Charterparty.

31. The Owners cannot exercise a lien on the way to the discharge port.64

Singapore being

the bunkering port65

it is not possible for the Claimant to exercise lien over the cargo

before it reaches the discharge port and hence the lien, if exercised, will not be valid.

60



Charterparty Clause (1)(b), Moot Problem, p. 1. 63

E-mail dated 16/10/2016 & 17/10/2016, Moot Problem, p. 60. 64

International Bulk Carriers (Beirut) S.A.R.L. v. Evlogia Shipping Co. S.A., and Marathon Shipping Co. Ltd

(The MihaliosXilas) [1978] 2 Lloyd‟s Rep. 186. 65



18

(D) THE CLAIMANT IS NOT ENTITLED TO ANY LIEN OVER SUB FREIGHT

Owners claim sub-freight receivable by the Charterers in respect of the deck cargo as

an account of profits. The Sub-Charterers Inferno Resources Sdn Bhd have not paid

freight to the Claimant as stated, in their email dated 15th

October 2016,66

that they

have not received payment from their Charterers i.e. the shippers Idoncare Berjaya

Utama Pvt Ltd.

The Claimant by the virtue of the sub-freights clause in the Charterparty,67

claims that

they have a right over the sub-freights. The claim does not hold ground because as

argued above, freight has not been earned and, no amounts are due to the Headowners

under the Time Charterparty.

(i) NO AMOUNTS DUE UNDER THE TIME CHARTERPARTY

32. The Claimant would like to exercise lien over the sub-freights for the freight due to

them in the given situation. The Headowners act on behalf of the Claimant and

exercise lien for the benefit of the Claimant under cl.23 of the Time Charterparty

which empowers the Headowners to exercise lien on sub-freights but this cannot be

done because clause 23 of the Time Charterparty states that the Headowners have the

right over the sub freights only for the amounts due under the Time Charterparty.

According to the e-mail dated 1st November 2016 the hire was being paid to the

Headowners on time, further the Headowners had provided the Claimant with only

the assistance which is within the boundaries of the Head Charterparty.68

Hence the

Headowners cannot have any claim over the sub freights since no sums are due under

the Head Charterparty.

66



E-mail dated 20/10/2016, Moot Problem, p. 36.


19

IV. IT IS NOT JUST OR NECESSARY FOR THIS TRIBUNAL TO ALLOW THE SALE OF

CARGO PENDENTE LITE

33. The Claimant‟s application for sale of cargo pendente lite reads thus: “The Claimant

be at liberty to deduct all of its costs of and incidental to this application, the

appraisement and sale of the Cargo on a full indemnity basis from the proceeds of

sale of the Cargo.”69

An application to the Tribunal to make an order pendente lite is

an application for interim relief. Such applications generally fall into several broad

categories. The Claimant‟s application falls under the category of measures intended

to provide security for costs and/or claims.70

While paying a guarantee or sum of

money into the court is the traditional form of security, it is by no means the only

kind.71

Security is created where a person (“the creditor” to whom an obligation is

owed) by another (“the debtor”) by statute or contract, in addition to the personal

promise of the debtor to discharge the obligation, obtains rights exercisable against

some property in which the debtor has an interest in order to enforce the discharge of

the debtor's obligation to the creditor.72

Therefore, a contractual lien is in the nature of

security, but normally does not give rise to a right of sale unless expressly provided

by the contract.73

34. While the Respondent disputes the jurisdiction of this Tribunal, they agree that

SCMA rules apply to this arbitration. Rule 33(h) allows the Tribunal a wide

discretionary power to make any orders that it deems does not conflict with the IAA

or the UNCITRAL Model Law. Regardless of the specific wording of the provision

dealing with interim relief, tribunals are expected to grant them only in limited

69

Urgent Applicaiton for Consolidation and Liberty to sell the cargo on board the M.V. “Tardy Tessa” Pendente

Lite, Moot Problem Page 90. 70

Supra n.14, Julian D. M. Lew, Loukas A. Mistelis, and Stefan Michael Kröll, Comparative International

Commercial Arbitration, Kluwer Law Arbitration, 2003. 71

Dunham-Bush Industry SdnBhd v KLN Container Line Ltd HCAJ 60/2015. 72

Bristol Airport plc v Powdrill [1990] 2 WLR 1362. 73

Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy Resources, intervener) [2015]

SGHC 311.


20

circumstances.74

Interim measures are extraordinary measures and cannot be awarded

lightly.75

A Tribunal must act, and be seen to act judicially, following the rules of due

process.76

Moreover, a Tribunal must always be adamant to foster procedural fairness

and proper conduct of arbitration while making procedural orders.77

Thus, as is widely

held78

it should consider the international standards for granting relief. Authorities on

the standards to be followed by an Arbitral Tribunal in determining whether to grant

interim relief suggest that there are three factors that the Tribunal should deliberate

over before making a decision: (a) whether granting the measure would amount to a

prejudgement of the merits (b) whether it is urgent to prevent a foreseeable

aggravation of the situation which will cause serious or irreparable harm to the

Claimant if relief is not granted.79

35. On this basis, the Respondent submits that the Claimant should not be granted relief

because: (A) Claimant‟s application fails the international standard for interim relief

(B) it is not justified for the tribunal to order costs.

(A) CLAIMANT’S APPLICATION FAILS THE INTERNATIONAL STANDARD FOR INTERIM

RELIEF.

The Claimant‟s application fails the international standard for interim relief because

(i) it would unjustifiably prejudge the merits of the case (ii) Claimant‟s actions

74

Supra n.70, p. 601. 75

Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Mongolia,

UNCITRAL, Order on Interim Measures dated 2 September 2008, paragraph 39 (an arbitration under the

UNCITRAL Rules.

76 Nigel Blackaby, Constantine Partasides, Alan Redfern, and J. Martin Hunter, Redfern and Hunter on

International Arbitration ( 6th

Edn, Oxford University Press, 2015). 77

Ronald Bernstein, John Tackaberry, Arthur L. Marriott, and Derek Wood, The Handbook of Arbitration

Practice (Sweet & Maxwell, London, 2014) para. 2- 327; Mauro Rubino-Sammartano, International

Arbitration Law and Practice (3rd

Edn, Juris Publishing, 2014) p. 814. 78

Supra n.70. 79

Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of

Ecuador, ICSID Case No. ARB/06/11.


21

disfavour claims of urgent need on their part (iii) no irreparable harm will be caused

to the Claimant if relief is not dealt.

(i) PREJUDGMENT OF MERITS.

43. Provisional measures must not prejudge the merits of the case.80

While Claimant may

have a prima facie case on merits, the Respondent also has a prima facie case on

merits, given that the Respondent‟s submissions are not “scandalous or oppressive,”81

“clearly hopeless”82

or suffer from some obvious defect.83

Therefore, a prejudgement

of its merits would be unbecoming,84

and therefore must be avoided in the overriding

interest of arbitration.85

44. Such a requirement connotes that measures granted should not cover what is

requested in the main proceedings.86

The Claimant is requesting the Tribunal to order

that their costs be paid before the determination of the award (“The Claimant be at

liberty to deduct all of its costs … from the proceeds of sale of the Cargo).

45. Allowing the Claimant to retain the sale proceeds without returning them to the

custody of the tribunal would (as is usual for costs orders) mean that the Tribunal

deems that the Claimant is due costs from the Respondent even though no liability has

been established, even though the common conception of costs is that costs follow the

event. This would undoubtedly have a preclusive effect on the final decision, because

the Tribunal has indirectly closed its mind to the submission of the Respondent that it

was not in breach of contract.87

80

Partial Awarding ICCCaseNo.8113,11(1)ICCCt.Bull.65(2000). 81

Colin Y. C. Ong, M. P. O'Reilly, Costs in International Arbitration, 83, (LexisNexis, 2016). 82

Stephen Colbran Security for Costs of Arbitration Proceedings in England, New Zealand and Australia, 240. 83

K. Karunanidhi v R. Renganathan AIR 1973 Mad 443. 84

Porzelack KG v Porzelack U.K. Limited [1987] 1 WLR 420. 85

John Savage and Emmanuel Gaillard, Fouchard Gaillard Goldman on International Commercial Arbitration,

para. 188, Kluwer Law International (1999); Art. 18 Model Law. 86

Behring International, Inc. v Iranian Air Force 475 F. Supp. 396 (D.N.J. 1979). 87

Supra n.17.


22

(ii) CLAIMANT’S ACTIONS DO NOT FAVOUR CLAIMS OF URGENT NEED ON THEIR

PART

47. The application to sell cargo pendente lite was filed by the Claimant on 2/12/2016,

and the Tribunal accepted it on 11/12/2016. The Claimant has chosen to wait nearly 8

months till July 2017 to present their case on provisional measures to the Tribunal.

Additionally, they have had ample opportunity to apply to advance the proceedings,

but have made no attempt to do so nor have they made any application to appoint an

emergency arbitrator who could provisionally resolve disputes on interim measures

before the hearing on merits in July, as principally accepted by S 2 of the IAA and not

forbidden by the SCMA rules.

48. Moreover, if the Claimant needed to resolve such health problems, it would have been

open for them to order the Master of the vessel to the nearest port for treatment, as

they have already treated the Respondent to be in breach of contract, and have

“terminated” the Charter party. As demonstrated above, a Claimant has the duty to

mitigate their losses.88

Damages will not be given where the Claimant could have

reasonably avoided the loss.

49. Therefore, any claims of irreparable harm on account of medical conditions should

not be entertained because the Claimant could have easily acted to prevent these

situations from being aggravated. Even if they were adamant on maintaining their

“lien,” loss of life or injury to the crew could have easily been prevented by

evacuation of indisposed crew members and resupply via air or sea. By not acting, the

Claimant has breached their duty to mitigate, and hence, cannot claim that there is an

urgent need for interim relief.

88

British Westinghouse Electric v Underground Electric Railways Co of London Ltd [1912] A.C. 673; The Asia

Star [2010] S.G.C.A 12.


23

(iii)NO IRREPARABLE HARM WILL BE CAUSED TO THE CLAIMANT IF RELIEF IS NOT

DEALT

50. An arbitral tribunal may order provisional measures only if the requesting party has

substantiated the threat of a not easily reparable prejudice.89

Such irreparable harm

may be defined as harm that cannot easily be remedied by an award of damages.90

51. Here, it is apparent that no such harm will occur. If the cargo is not sold, then what

will likely occur is that its value may decrease, due in part to the projected coal

market, and the distressed nature of the cargo. Such a devaluation would mean that

the cargo would fetch less security to finance the Claimant‟s demand for damages.

However, as will be demonstrated, there is no evidence that the Respondent is in any

financial trouble, and thus would be able to honour any award in the Claimant‟s

favour. Moreover, Idoncare is liable to make a sub-freight payment to the

Respondent, and hence, if this dispute is resolved in the award, there can be no

question of the Respondent‟s ability to finance the award if given. Furthermore, the

Claimant is not in such urgent need of security that not selling the cargo would cause

them irreparable harm. From their regular payment of hire to the Headowners, it is

evident that their financial position is in no way precarious. Even the worst possible

thing that could occur, i.e., the cargo exploding due to heat damage, could be

remedied by an award commensurate with the value of loss caused to the Claimant.

(B) ADDITIONALLY, IT WOULD NOT BE JUSTIFIED TO MAKE AN ORDER ON COSTS

When granting interim relief in general and security for costs and/or claims in

particular the Tribunal unavoidably prejudges the parties‟ positions before having

89

Interim Award in ICC Case No. 8786,11(1) ICC Ct. Bull.81,83-84(2000). 90

Quiborax S.A., Metallic Non Minerals S.A. and Allan FoskKaplún v Plurinational State of Bolivia, ICSID

Case No. ARB/06/2.


24

considered all relevant facts of the case.91

Consequently, granting any interim

measure always requires a „careful balancing of the parties‟ interests with respect to

the requested relief.”92

A creditor‟s normal impatience to see his claim satisfied or at

least secured, or the normal risk that the debtor‟s ability to pay his debts might

deteriorate in the course of the proceedings. It is not sufficient to justify provisional

payment or security measures,93

balancing interests in this case involves denying the

request for costs and claims because (i) granting security for costs and/or claims

inevitably places a unilateral burden on the Respondent (ii) there is no considerable

threat to the enforcement of the award.

(i) GRANTING SECURITY FOR COSTS AND/OR CLAIMS INEVITABLY PLACES A

UNILATERAL BURDEN ON THE RESPONDENT

52. While the Claimant‟s interest here is to ensure reimbursement of its legal costs and/or

claims, the Respondent‟s interest is to ensure that it does not suffer any unnecessary

costs of allowing its shipper‟s cargo to be sold. Therefore, an order for costs and/or

claims only promotes the Claimant‟s interest and may violate the fundamental

principle of party equality in an arbitration.

53. The right to equality is manifested in Art. 18 of the Model Law, and is considered to

be “the heart of the law‟s regulation of arbitral proceedings.”94

This principle, inter

alia, would require that any advance on costs and/or claims be shared equally by the

parties or that the Claimant also provides a guarantee of like amount.95

Therefore,

requiring the Respondent to front the entire costs and/or claims by allowing the

91

ICC Award no. 8113, ICC Bulletin, Vol. 11 no. 1 2000, p. 67; Maffezini v Kingdom of Spain , ICSID,

13.11.2000, Case no. ARB/97/7, p. 19. 92

NAI case no. 1694, XXIII YBCA 1998, p. 104; DELVOLVE, p. 13; BERGER, p. 336. 93

Partial Award in Unidentified ICC Case, cited Schwartz, The Practices and Experience of the ICC Court, in

ICC, Conservatory and Provisional Measures in International Arbitration 45, 61 (1993). 94

Howard M. Holtzmann and Joseph E. Neuhaus, A Guide to the UNCITRAL Model Law on International

Commercial Arbitration: Legislative History and Commentary, Kluwer Law International 1989. 95

ICC case 7544, Yesilirmak.


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Claimant to sell the cargo and retain the proceeds places a unilateral burden on the

Respondent. The Tribunal should not make such a unilateral award because of the risk

that the final decision might not be consistent with the decision reached in this award.

(ii) THERE IS NO CONSIDERABLE THREAT TO THE ENFORCEMENT OF THE AWARD.

54. Where determining this, Tribunals typically consider the financial state of the party

from whom security is requested, the extent to which third parties are funding that

sparty‟s participation in the arbitration and the likely difficulties in enforcing a final

award.

55. In this case, there is no credible evidence that the Respondent is in a precarious

condition, which is required to justify an order on costs and/or claims.96

The Claimant

has failed to demonstrate that the Respondent will almost certainly be unable to fulfill

an award of costs and/or claims against it, which would in turn require a showing that

the Respondent is insolvent,97

which has not been proved. Furthermore, they are not

being funded by any third party. Additionally, insolvency must be distinguished from

cash-flow problems (as in the case of non-payment of freight). While insolvency

indicates a complete lack of financial means, cash flow problems do not. A temporary

lack of means cannot by itself be a ground for granting costs and/or claims.98

As for

difficulties in enforcing a final award, in Coppee- Lavalin SA/NV v. Ken-Ren Chem. &

Fertilizers Ltd.,99

the House of Lords ruled that the fact that a party is domiciled in or

has assets in a state that is not party to the New York Convention (or other agreements

facilitating enforcement of arbitral awards), the case for security of costs and/or

claims is enhanced. However, this is not the case for the Respondent, who is

96

HSU, p. 111 et seq. 97

Oilex A.G. v. MM Mitsui & Co. 669 F. Supp. 85 (S.D.N.Y. 1987) ; Atlanta Shipping Corp. v Chemical Bank

(631 F. Supp. 335 (S.D.N.Y. 1986) ; Havbulk I v Korea Shipbuilding & Engineering. [1987] 2 Lloyd's Rep.

445. 98

WALLER, KERR L.JJ. in Bank Mellat v HellinikiTechniki [1973] 1 W.L.R. 468 Bingham L.J./Leggatt J. in

Thune and Roll vs. London Properties Limited and Others, [1990] 1 W.L.R. 562. 99

LORD WOOLF in CoppéeLavalin v Ken- Ren [1994] 2 Lloyd's Rep. 109.


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domiciled in Malaysia. Malaysia has been known to have taken a pro-arbitration

stance in the enforcement of awards,100

and is a party to the New York Convention.

This is exemplified in Sintrans Asia Services Pte Ltd v Inai Kiara SdnBhd,101

where

the Malaysian Court of Appeal upheld a foreign arbitral award made in Singapore,

identical to the circumstances of this arbitration. Additionally, claims of geopolitical

instability by Claimant are moot as the mere potential risk of non-enforceability of a

future cost award is treated as insufficient grounds. Therefore, it is not just or

necessary for the cargo onboard Tardy Tessa to be sold pendente lite.

REQUEST FOR RELIEF

For the reasons set out above, Respondent requests that the Tribunal:

1. Declare that the Tribunal does not have the jurisdiction and/or power to grant liberty

to the Claimant to sell the cargo on board the MV TARDY TESSA pendente lite.

2. Declare that the Respondent is not liable to the Claimant for detention and/or other

damages under the Voyage Charterparty.

3. Declare that the Claimant is not entitled to exercise any lien over the cargo.

4. Not to allow the claimant liberty to sell the cargo on board the MV TARDY TESSA

pendente lite as it is neither just nor necessary.

100

Mark Dodd, Enforcing foreign arbitral awards in Malaysia, LexisNexis Dispute Resolution, 9th

June 2016. 101

Sintrans Asia Services Pte Ltd v Inai Kiara SdnBhd , Civil Appeal No. W-02(NCC)(A)-1539-09/2014; Court

of Appeal, Malaysia.

EIGHTEENTH ANNUAL INTERNATIONAL M L A M 2017...eighteenth annual international maritime law...

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