UNIVERSITAS PADJADJARAN Team 21 MEMORANDUM FOR … · UNIVERSITAS PADJADJARAN Team 21 MEMORANDUM...

THE 17TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2016

UNIVERSITAS PADJADJARAN

Team 21

MEMORANDUM FOR THE RESPONDENT

TEAM

FAUZI MAULANA HAKIM

JODY RIYADI KUNTO

MUHAMMAD NUR MAHATMANTA

VALDY ADHA FIREZA

AGAINST

Zeus Shipping and Trading Company

CLAIMANT

ON BEHALF OF

Hestia Industries

RESPONDENT

MEMORANDUM FOR RESPONDENT

i

TABLE OF CONTENTS

TABLE OF CONTENTS ...................................................................................................... i

LIST OF ABBREVIATIONS ............................................................................................... iii

QUESTIONS PRESENTED ................................................................................................. iv

INDEX OF AUTHORITIES ................................................................................................. v

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

ARGUMENTS

I. THIS TRIBUNAL DOES NOT HAVE THE JURISDICTION TO

RESOLVE THIS DISPUTE .................................................................................. 2

A. Frustration disputes are not within the scope of the arbitration

agreement........................................................................................................... 2

i. The phrase ‘arising under’ must be interpreted narrowly......................... 3

ii. The 16 July 2014 correspondence must be used in the

determination of the scope of the arbitration agreement ......................... 4

iii. Even if the correspondence is considered a pre-contractual

negotiation, it must still be taken into account in determining the

scope of the arbitration agreement .......................................................... 5

B. Other claims concerning contractual obligations are impossible to

resolve without first determining CHARTERPARTY’s frustration ................. 7

II. ALTERNATIVELY, IF THIS TRIBUNAL DOES HAVE THE

JURISDICTION TO RESOLVE THE DISPUTE, THE SALVAGE

CLAIM IS ADMISSIBLE ...................................................................................... 7

A. Salvage is covered by the arbitration agreement ........................................... 8

B. RESPONDENT has the rights to salvage rewards ............................................. 8

C. The salvage claim should be arbitrated in this proceedings for the

sake of both parties’ convenience .................................................................... 9

III. RESPONDENT IS NOT LIABLE TO PAY FOR DEMURRAGE ................... 10

A. VESSEL had left PORT area and was not in demurrage ................................. 10

IV. RESPONDENT DID NOT BREACH CHARTERPARTY ................................ 11

A. RESPONDENT did not provide dangerous cargo .............................................. 11

B. Alternatively, a breach of dangerous cargo warranty has been

waived by CLAIMANT ........................................................................................ 12

i. There exists no absolute obligation for RESPONDENT to inform

CLAIMANT


ii

.................................................................................................................... 12

ii. CLAIMANT has waived his right by accepting CARGO ................................. 13

C. PORT nominated by RESPONDENT was not unsafe ......................................... 14

D. Alternatively, a breach of the safe port warranty has been waived

by CLAIMANT ..................................................................................................... 15

V. CLAIMANT HAS BREACHED CHARTERPARTY ........................................ 15

A. MASTER has breached its obligation to not deviate ....................................... 15

B. CLAIMANT provided an incompetent and negligent MASTER ....................... 16

i. MASTER was incompetent ........................................................................... 16

ii. The act of deviation amounts to negligence by MASTER ............................ 17

VI. CHARTERPARTY WAS FRUSTRATED .......................................................... 17

A. The force majeure clause does not prevent the application of the

doctrine of frustration ...................................................................................... 17

B. The purpose of CHARTERPARTY includes the discharging date ................... 18

C. The presiding events frustrates CHARTERPARTY ........................................... 20

i. The detention acted as a supervening illegality that frustrated

CHARTERPARTY ........................................................................................... 20

ii. Alternatively, the delay frustrated CHARTERPARTY .................................... 21

VII. RESPONDENT IS ENTITLED TO SALVAGE REWARD ................................. 22

A. The elements of salvage were fulfilled ............................................................ 22

i. VESSEL was in a state of uncontrolled drifting, and thus qualifies

as subject matter for the first criteria of the test ....................................... 23

ii. The element of danger was fulfilled by VESSEL’s broken propeller

shaft ........................................................................................................... 23

iii. The voluntary element was fulfilled by the services rendered by

RESPONDENT .............................................................................................. 24

iv. The salvage service bears success ............................................................ 24

B. RESPONDENT has no fault in regards to VESSEL’s broken propeller

shaft

............................................................................................................................ 25

PRAYER FOR RELIEF........................................................................................................ 25


iii

LIST OF ABBREVIATIONS

CLAIMANT Zeus Shipping and Trading Company

RESPONDENT Hestia Industries

CHARTERPARTY The charterparty dated 21 July 2014

VESSEL The Athena

CARGO 260,000m3 of Liquefied Natural Gas

produced from Hades Shale Gas

PORT Port of Hades

MASTER Capt. Marcus Yi

COASTGUARD Coastguard of Hades


iv

QUESTIONS PRESENTED

I. Does this tribunal have the jurisdiction to settle the frustration dispute?

II. Does this tribunal have the jurisdiction to hear RESPONDENT’S counter claim

concerning salvage?

III. Was RESPONDENT in breach of contract and is liable to pay for damages in

relation to the detention of VESSEL?

IV. Was CHARTERPARTY frustrated?

V. Is RESPONDENT entitled to salvage reward?


v

INDEX OF AUTHORITIES

CASES

Acetylene Co. of G .B. v Canada Carbide Co. [1922] 8 Ll.L.Rep. 456.................................. 18

Admiralty Commissioners v. Valverda (Owners) [1938] A.C. 173 ......................................... 22

Bank Line v Arthur Capel [1939] AC 345 ............................................................................... 21, 22

Bremer Handelsgesellschaft m .b.H .vVandenAvenne-Izegem P .V .B .A [1977] 1

Lloyd’s Rep. 133 ...................................................................................................................... 18

British Movietonews Ltd v London & District Cinemas Ltd[1952] AC 166 ........................... 19

Davis Contractors v Fareham Urban District Council [1956] AC 696 .................................. 19

Davis v Garrett [1830] 6 Bing 716, Court of Common Pleas .......................................... .15, 16

Fillite (Runcorn) Ltd v Aqua-Lift Ltd [1989] CLR 66 ............................................................. 4

Gold Group Properties v. BDW Trading [2010] B.L.R. 235 .................................................. 18

Great Circle Lines Ltd. v. Matheson & Co. Ltd., 681 F.2d 121 .............................................. 3

Greenshields, Cowie & Co v Stephens & Sons [1908] AC 431............................................... 13

Heyman v. Darwins, Ltd., [1942] A.C. 356 (H.L.) .................................................................. 6

Hildron Finance v. SunleyHoldings [2010] EWHC 1681 ....................................................... 18

Hillcrest Homes Ltd v Beresford &Curbishley Ltd [2014] EWHC 280 (TCC) ....................... 3

Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28 ........ 6

K/S Penta Shipping v Ethiopian Shipping Lines Corp(The Saga Cob) [1992] 2

Lloyd’s Rep. 545 ...................................................................................................................... 14

Kingston v Preston [1773] KB 99 English Report 437............................................................ 12

London Arbitration 21/01 (LMLN 574) .................................................................................. 13

Manifest Shipping Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] 1

Lloyd’s Rep 389 HL ................................................................................................................ 17

Metropolitan Water Board v Dick Kerr and Co. [1918] A.C. 119 .......................................... 18

Mitchell Cotts v Steel [1916] 2 K.B. 610 .......................................................................... .11, 13

National Carriers LTD v Panalpina (Northern) [1981] AC p. 700 ........................................ 19

Premium Nafta Products Ltd and others v Fili Shipping Company Ltd [2007] UKHL

40.............................................................................................................................................. 3, 8

ProForce Recruit Ltd v. Rugby Group Ltd [2006] EWCA Civ 69 (CA) ................................. 6

Ralliv CompaniaNavieraSota y Aznar [1920] 2 KB 287.................................................... 7, 20

Reardon Smith Line v Black Sea and Baltick General Insurance [1939] AC 562, HL ........... 16


vi

Rio Tinto Co v Seed Shipping Co [1926] 24 LIL Rep 316 ...................................................... 16

Société Co-opérative Suisse v La Plata (1947) 80LlLR 530 .............................................. 7, 20

Tele2 International Card Company SA v Post Office Ltd [2009] all ER (D) 144 ................... 13

The Agathon[1982] 2 Lloyd’s Rep. 211 (C.A.) ....................................................................... 21

The Aldora[1975] 1 Lloyd’s Rep 617 ...................................................................................... 24

The Athanasia Comninos[1990] 1 Lloyd’s Rep 277, QB ................................................. .11, 13

The Chrysalis [1983] 1 Lloyd’s Rep. 503 ................................................................................ 21

The Eastern City [1958] 2 Lloyd’s Rep 127 ............................................................................ 14

The Eugenia [1964] 1All ER 161 ............................................................................................ 19

The Evia (No. 2) [1983] 1 A.C. 736 ......................................................................................... 14

The Gas Float Whitton (No. 2) [1897] AC 337, HL ................................................................ 23

The Greek Fighter [2006] 2 C.L.C. 497 .................................................................................. 11

The Johanna Oldendorff [1973] 2 Lloyd’s Rep 285 ................................................................ 10

The Kanchenjunga [1990] 1 Lloyd’s Rep 391 ......................................................................... 15

The Kyla [2013] 1 Lloyd’s Rep. 565 ............................................................................... 18

The Livettia[1883] 8 P.D. 24.................................................................................................... 9

The Lucille [1984] 1 Lloyd’s Rep. 244 .................................................................................... 14

The Mahia [1955] 1 Lloyd’s Rep 264...................................................................................... 13

Brass v Maitland [1856] 6 El & Bl 470; 119 ER 940 ............................................................. 12, 13

The Palmyra [1872] 1 Asp. Mar. Law. Cas. 182 ..................................................................... 9

The Phantom [1866] LR 1 A&E 58 ......................................................................................... 22

The Reward [1841] 1 W Rob 174 ............................................................................................ 23

The Sava Star [1995] 2 Lloyd’s Rep 134................................................................................. 23

The Stork [1955] 2 QB ............................................................................................................. 15

The Troilus [1951] AC 820 ...................................................................................................... 22

The Wenjiang (No 2) [1983] 1 Lloyd’s Rep. 400 .................................................................... 20

TheKenmure Castle [1882] 5 Asp. Mar. Law. Cas. 27 ............................................................ 9

Trivat Shipping &Investmen BV v Associated Transport Line Inc (The Trinity Square)

– Michael K Hope, Arbitrator, (1999) 517 LMLN 3(3) .......................................................... 17

STATUTES & CONVENTIONS

Australian Coast Guard Bill 2001 ........................................................................................... 16

UK Arbitration Act 1996 ......................................................................................................... 2


vii

BOOKS/ARTICLES/PAPERS

Alan Redfern et.al, Law and Practice of International Commercial Arbitration, 4thed

(London: Sweet & Maxwell, 2004........................................................................................... 3

Aleka Madaraka-Sheppard, Modern Admiralty Law with Risk Management Aspects

(London: Cavendish Publishing Limited, 2001)

...................................................................................................................................... 2

1, 22, 23

Arthur Taylor Von Mehren, Academie de Droit International de la Haye

(MartinusNijhoff Publishers, 2003) ......................................................................................... 7

Ewan McKendrick, Force Majeure and Frustration of Contract, 2nd ed. (New York:

Informa Law from Routledge, 2013) ....................................................................................... 17

Felix Parka, Jurisdiction and Arbitration Clauses in Maritime Transport Documents ............ 7

Geoffrey Brice and John Reeder, Brice on Maritime Law of Salvage, 5thed (London:

Sweet & Maxwell, 2011) ......................................................................................................... 9

Geoffrey Gibson, The Arbitrator’s Companion (Sydney: Federation Press, 2001) ................ 2

Horacio A. GrigeraNaón, Choice-of-law Problems in International Commercial

Arbitration, (Tübingen: J.C.B. Mohr, 1992) ............................................................................ 7

Jan Klaabers, International Law, (Cambridge University Press, 2013) .................................. 12

Jean-François Poudret and SébastienBesson, Comparative Law of International

Arbitration, (London: Sweet & Maxwell, 2007) ..................................................................... 4

John Wilson, Carriage of Goods by Sea, 7th ed (London: Pearson, 2010) ........................ 7, 19

Julian Bailey, Construction Law (London: Routledge, 2011) ................................................. 2

Julian Cooke et al., Voyage Charters, 4th Ed (Abingdon: Informa Law from

Routledge, 2014) ...................................................................................................................... 11

L. I. De Winter (1968) Excessive Jurisdiction in Private International Law.

International and Comparative Law Quarterly ........................................................................ 7

M. Wolff, Private International Law (Oxford: Clarendon Press, 1950) ................................. 7

Paul Volken & Andrea Bonomi, Yearbook of Private International Law, (Munich:

Selliers, 2009) .......................................................................................................................... 7

Simon Baughen, Shipping Law, (London: Routledge Cavendish, 2009) ................................ 24

Simon Rainey QC, The Law of Tug and Tow and Offshore Contracts (New York:

Informa, 2011) ......................................................................................................................... 22


viii

Verónica Ruiz Abou-Nigm, The Arrest of Ships in Private International Law (Oxford:

Oxford University Press, 2011) ............................................................................................... 7

Yvonne Baatz, Maritime Law, Third Edition, (New York: Informa Law from

Routledge, 2014) .................................................................................................................... .25


1

STATEMENT OF FACTS

1. On 1 July 2014, Hestia Industries (RESPONDENT) sent a correspondence containing a request

for a proposal to Zeus Shipping and Trading Company (CLAIMANT) to charter a vessel to ship

260,000m3 of HLNG (CARGO).

2. On 14 July 2014, CLAIMANT replied, stating that it had purchased the Athena (VESSEL) and was

willing to charter it on a per voyage basis. CLAIMANT then sent a proposed form of the contract.

3. On 16 July 2014, RESPONDENT stated that it would like to amend the arbitration clause,

indicating that it would not arbitrate disputes that relate to but do not arise out of the terms of

the charterparty.

4. On 20 July 2014, a group called Save Hades Group made a statement to The Hades Advocate, a

publicly available publication, that ‘they are planning significant protests around the

commissioning of the Hestia HLNG plant’ and that they were adamant in their efforts to stop

HLNG exports.

5. On 21 July 2014, CLAIMANT sent the finalised charterparty containing an amended arbitration

clause. Both parties then agreed on the terms of this finalised contract as the charterparty

(CHARTERPARTY).

6. On 3 October 2014, VESSEL arrived at PORT of Hades (PORT). Captain Marcus Yi (MASTER)

of VESSEL then sent a notice of readiness to RESPONDENT. The next day, a huge protest erupted

at PORT. Loading continued amid the protests. VESSEL set sail at 09.00 A.M on 7 October 2014.

7. On the same day, a coup occurred in Hades. The coup was followed by an order from the new

president, Jacqueline Simmons, ordering VESSEL to return to PORT. On 8 October 2014, the

Hades coastguard (COASTGUARD) issued a memorandum stating that they had successfully

intercepted VESSEL and ordered it to return to PORT on the basis that VESSEL was obligated to

comply by virtue of their use of the Hades flag. It is unclear whether or not VESSEL was

actually outside Hades territorial limit. VESSEL was then detained by the Government of Hades.


2

8. On 15 April 2015, CLAIMANT sent an invoice for demurrage, requesting payment in the amount

of US$9,200,000 to RESPONDENT. RESPONDENT denied liability, claiming that CHARTERPARTY

was frustrated, therefore absolving RESPONDENT of liability. On 30 September 2015, President

Simmons, the President of Hades, resigned.

9. VESSEL was released on 5 October 2015 and planned to set sail, but required tugboats in order

to do so. MASTER was advised to use Hestug, a company owned by RESPONDENT, for the

services required. It was later revealed that that VESSEL’s propellers were damaged, and

VESSEL was then assisted by Hestug.

10. On 6 October 2015, CLAIMANT sent another invoice in an amount of US$17,900,000 on the

basis of 358 days of demurrage. RESPONDENT further denied liability.

11. On 16 November 2015, CLAIMANT proposed commencing arbitration to resolve the disputes

regarding CHARTERPARTY. RESPONDENT replied it was of the opinion that the CHARTERPARTY

had been frustrated. RESPONDENT further claimed that it was nonetheless entitled to a salvage

reward for Hestug’s act of rescuing VESSEL.

I. THIS TRIBUNAL DOES NOT HAVE JURISDICTION TO RESOLVE THIS

DISPUTE

1. RESPONDENT does not deny that this tribunal has the power to rule on its own jurisdiction

based on the competence-competence principle1 and shall act ex aequo et bono under clause

30 (d)(i). 2

A. Frustration disputes are not within the scope of the arbitration agreement

2. The scope of a tribunal’s jurisdiction is defined in the arbitration agreement agreed upon

between the parties.3 In the present case, CHARTERPARTY clause 30 states, “Any dispute

1 UK Arbitration Act 1996 S30(1)(c) 2 Facts, p. 46; S 46(b) UK Arbitration Act 1996; Geoffrey Gibson, The Arbitrator’s Companion (Sydney:

Federation Press, 2001), p. 23; Julian Bailey, Construction Law (London: Routledge, 2011), p. 1694 3 Alan Redfern et.al, Law and Practice of International Commercial Arbitration, 4thed(London: Sweet &

Maxwell, 2004), p. 85; p. Margaret L. Moses, The Principles and Practice of International Commercial

Arbitration (New York: Cambridge University Press, 2008), p. 17, 107


3

arising under this contract shall be referred to arbitration in London by a tribunal of 3

arbitrators in accordance with the Arbitration Rules of the Maritime Law Association of

Australia and New Zealand.”

i. The phrase ‘arising under’ must be interpreted narrowly

3. CLAIMANT may argue that under the Fiona Trust case, the phrase ‘arising under’ has a broad

meaning and thus covers all disputes including frustration.

4. RESPONDENT acknowledges that Fiona Trust introduced the presumption that any rational

businessmen would want to settle all disputes in a single proceeding. 4 This case also

denounced any distinction attributed to the wording of the arbitration clause. Consequently,

under this holding, both ‘arising out of’ and ‘arising under’ would be deemed to be

synonymous in its scope.

5. However, it must be borne in mind that arbitration is based on consent,5 thus the above-

referenced ‘presumption of one-stop arbitration’ can be set aside if both parties are agree to

it.6 In Hillcrest Homes v Beresford & Curbishley Ltd, 7 the usage of the phrase ‘arising

under’ in the contract’s adjudication clause and the concurrent use of the phrase ‘arising out

of’ in the arbitration clause was deemed to be enough to prove that both parties wished to

distinguish the scope of the phrases. Further, the case stipulates that the intention to

distinguish the two phrases permits the phrase ‘arising under’ to be interpreted narrowly,

because the parties clearly intended the phrases to have different meanings.

6. This approach is applicable to the present case. Prior to the agreed CHARTERPARTY,

CLAIMANT first proposed a charterparty with an arbitration clause utilising the phrase

‘arising out of’.8 It was subsequently deliberately changed after RESPONDENT’s wish to

4Premium Nafta Products Ltd and others v Fili Shipping Company Ltd [2007] UKHL 40 per Lord Hoffman 5Great Circle Lines Ltd. v. Matheson & Co. Ltd., 681 F.2d 121; 6 Alan Redfern et.al, Law and Practice of International Commercial Arbitration, 4thed(London: Sweet &

Maxwell, 2004), p. 156 7Hillcrest Homes Ltd v Beresford &Curbishley Ltd [2014] EWHC 280 (TCC) 8 Facts, p. 20


4

narrow the scope of the clause9 to ‘arising under’. 10 This serves as evidence that both

CLAIMANT and RESPONDENT recognized that the phrase ‘arising under’ has a narrower scope

than ‘arising out of’, thus nullifying any ‘presumption of one-stop arbitration’ implicated by

Fiona Trust. Consequently, ‘arising under’ should be interpreted narrowly.

7. In view of this narrow interpretation, the arbitration agreement of CHARTERPARTY is not

broad enough to cover disputes that do not concern contractual obligations created by or

incorporated in the contract. 11 The frustration dispute questions the contract’s validity.

Therefore, it does not concern any contractual obligations and hence takes the matter outside

of the scope of the arbitration clause.

8. Moreover, the very basis of CLAIMANT’s amendment of the wording of the arbitration clause

is the intention of RESPONDENT to narrow the terms of arbitration. It would be extremely

unjust for CLAIMANT to deem the phrases as interchangeable because this would undermine

the amendment itself.

9. In light of the above, RESPONDENT pleads that the phrase ‘arising under’ must be deemed to

have a narrow interpretation.

ii. The 16 July 2014 correspondence must be used in the determination of the scope of the

arbitration agreement

10. The parties in an arbitration agreement have the freedom to exclude certain disputes that

they do not want to arbitrate.12 RESPONDENT expressly stated that it was not prepared to

arbitrate ‘disputes that relate to but do not arise out of the terms of the charterparty’ in its

correspondence dated 16 July 2014.13 It has been submitted that CLAIMANT amended the

arbitration clause on the basis of RESPONDENT’s wish to narrow it. It would therefore be

9 Facts, p. 25 10 Facts, p. 45 11Fillite (Runcorn) Ltd v Aqua-Lift Ltd [1989] CLR 66 12 Jean-François Poudret and SébastienBesson, Comparative Law of International Arbitration, (London: Sweet

& Maxwell, 2007), p. 265 13 Facts, p. 25


5

unequitable for the scope of the arbitration agreement to be determined without considering

the explicit exclusion of certain disputes referenced in the correspondence. This is

particularly so since the usage of ‘arising under’ was born under the contents of the

correspondence.

11. It is submitted here that the frustration dispute ‘relate[s] to but do[es] not arise out of the

terms of’ CHARTERPARTY, and hence should be excluded by RESPONDENT as referenced in

the above indicated correspondence. The scope of ‘relate[s] to but do[es] not arise out of

the terms of’ can be safely said to be synonymous with the scope of ‘arising under’.14 This is

because CLAIMANT deliberately changed the arbitration clause to read ‘arising under’ after

receiving RESPONDENT’s correspondence, proving that it deemed that the exclusion of

disputes that ‘relate to but do not arise out of the terms of’ CHARTERPARTY can is reflected

by the amendment of the arbitration clause to using ‘arising under’. Accordingly, it is clear

from the above that the phrase ‘arising under’ does not cover frustration disputes.

12. If CLAIMANT argues otherwise, it would be doing so in bad faith since the amendment was

only purported to be made to fulfill both parties’ needs. If CLAIMANT did not agree with the

intention and therefore consequence of the amendment that frustration was excluded from

arbitration, CLAIMANT should have expressed its discontent of the exclusion. In fact, it did

not do so.

13. RESPONDENT therefore pleads that the correspondence makes clear that the amendment

implies that the clause necessarily excludes frustration disputes.

iii. Even if the correspondence is considered a pre-contractual negotiation, it must still be taken

into account in determining the scope of the arbitration agreement

14. RESPONDENT is aware of the fact that the correspondence existed prior to the execution of

the contract. However, even if the correspondence is to be considered as pre-contractual

14 Paragrapah 6 of this memorandum


6

negotiation, its status as such does not alter the fact that it still plays a major role in

determining the scope of the terms of arbitration.

15. Interpretation of a contract can be acquired when the relevant background knowledge of the

parties forming the contract is known. Such knowledge can only be reasonably acquired

from an investigation of the context surrounding the formation of the contract.15 As a part of

the contract, terms regarding arbitration must also be interpreted in light of the

circumstances in which they were made. 16 Pre-contractual negotiations serve a role in

interpretation of a contract; they provide background knowledge to the interpreter so that he

could understand it as the parties had at the time of the execution of the contract. In a case of

ambiguity, pre-contractual negotiations have proven to be very helpful in determining the

true intention of the parties.17

16. RESPONDENT therefore confidently submits that the fact that the scope of the phrase ‘arising

under’ is in dispute clearly means that there is ambiguity of interpretation of the arbitration

clause which will not be resolved without consulting the context of its drafting, id est, the 16

July 2014 correspondence. The content of the correspondence was also subsequently agreed

upon by both parties in the form of the amended version of the arbitration clause.18 This

clearly indicates the unified intention of both parties contained within it. The above provides

further support for the contention that the correspondence must be reviewed.

17. Thus, even if this tribunal considers the correspondence to be a pre-contractual negotiation,

it does not change the fact that it weighs heavily on the determination of the scope of the

arbitration clause as argued above.

15Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28 per Lord Hoffman;

Spectra International v. Tiscali UK, [2002] All E.R. (D) 209. 16Heyman v. Darwins, Ltd., [1942] A.C. 356 (H.L.) 17Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; ProForce Recruit

Ltd v. Rugby Group Ltd [2006] EWCA Civ 69 (CA) 18 Facts, p. 25, 27


7

B. Other claims concerning contractual obligations are impossible to resolve without first

determining CHARTERPARTY’s frustration

18. If CHARTERPARTY was indeed frustrated, both parties’ contractual obligations would be

discharged. Consequently, if CHARTERPARTY ceased to exist, there can be no contractual

claims.

19. RESPONDENT does not deny that it agreed to arbitrate demurrage disputes. However, the fact

that frustration cannot be settled in this tribunal necessarily results in the impossibility of

settling demurrage disputes in this tribunal until that issue is settled. The question of whether

or not CHARTERPARTY was frustrated must first be resolved in the court of Hades by virtue

of the principle of actor sequitur forum rei.19

20. Moreover, RESPONDENT would like to remind this tribunal that there are actually cases that

found events, and not the delay caused by the event, as the cause of the contract’s

frustration. 20 Following this, there remains a possibility, no matter how small, that the

contract was frustrated before demurrage even began to accrue. Due to such, CLAIMANT may

not argue that the alleged date of frustration is 30 April 2015 and the obligation to pay for

demurrage prior to that date still stands.

21. Therefore, any contractual claims cannot be heard in this tribunal prior to the determination

of the frustration issue.

II. ALTERNATIVELY, IF THIS TRIBUNAL DOES HAVE JURISDICTION TO

RESOLVE THIS DISPUTE, THE SALVAGE CLAIM IS ADMISSIBLE

19 M. Wolff, Private International Law (Oxford: Clarendon Press, 1950) at 62-63; Arthur Taylor Von Mehren,

Academie de Droit International de la Haye(MartinusNijhoff Publishers, 2003) at 181; Paul Volken& Andrea

Bonomi, Yearbook of Private International Law, (Munich: Selliers, 2009) p. 345; Verónica Ruiz Abou-Nigm,

The Arrest of Ships in Private International Law (Oxford: Oxford University Press, 2011) p. 170; John Wilson,

Carriage of Goods by Sea, 7th ed (London: Pearson, 2010), p. 318; Felix Parka, Jurisdiction and Arbitration

Clauses in Maritime Transport Documents, at. 7; Horacio A. GrigeraNaón, Choice-of-law Problems in

International Commercial Arbitration, (Tübingen: J.C.B. Mohr, 1992) p. 59; L. I. De Winter (1968) Excessive

Jurisdiction in Private International Law. International and Comparative Law Quarterly, 17, p. 718. 20Ralliv CompaniaNavieraSota y Aznar [1920] 2 KB 287; Société Co-opérative Suisse v La Plata (1947)

80LlLR 530.


8

22. As an alternative, this submission should only be taken into consideration in the event that

the first submission is rejected by this tribunal.

A. Salvage is covered by the arbitration agreement

23. RESPONDENT submits that there is no plausible reason why the arbitration clause would

cover frustration disputes but not salvage claims and thus CLAIMANT cannot argue that the

salvage dispute cannot be settled in this proceedings.

24. CLAIMANT’s arguments would be contradictory if it pleads that frustration falls within the

scope of the arbitration clause while at the same time, it excludes salvage. A broad

interpretation of an arbitration clause, as CLAIMANT submits, would cover all disputes

between the two parties. CLAIMANT’s broad approach in interpreting the arbitration clause

must result in the arbitration of the salvage issue. RESPONDENT would also like to remind

this tribunal that CLAIMANT submits that the phrase ‘any dispute’ used in the arbitration

clause can cover non-contractual claims. According to this submission, the salvage claim

should be heard regardless of whether it is governed by CHARTERPARTY or not.

25. In addition, the principles in Fiona Trust, which is at the core of CLAIMANT’s arguments,

stipulate that only the strongest evidence of a purpose to exclude a claim can prevail over

‘one-stop arbitration’.21 RESPONDENT never explicitly and intentionally excluded salvage

disputes from the arbitration clause. With CLAIMANT’s approach, there is no reason why

salvage can be excluded since there is no unequivocal evidence of the intention to exclude

salvage claims. Any argument by CLAIMANT to the contrary would further contradict its own

arguments.

26. Therefore, in the event that frustration will be heard in these proceedings, it follows that this

tribunal shall also resolve the salvage claim.

B. RESPONDENT has the rights to salvage rewards

21Premium Nafta Products Ltd and others v Fili Shipping Company Ltd [2007] UKHL 40


9

27. RESPONDENT submits that it has the rights to salvage rewards and CLAIMANT’s argument that

CLAIMANT it is not liable to pay salvage rewards to RESPONDENT since the service was

rendered by Hestug and the two are different legal entities cannot subsist.

28. It must be underlined that RESPONDENT owns the tugs that rendered assistance to VESSEL.22

Modern approach instructs that the owners of salving vessels are entitled to three-quarters of

the total salvage rewards,23 which means that Hestug should only be entitled only to the

remaining quarter. Under these circumstances, even if Hestug is considered as a subsidiary

of RESPONDENT, hence a separate legal entity, RESPONDENT still has the rights to the

majority of the salvage reward.

29. Moreover, the aim of salvage proceedings itself is only to obtain a declaration that

RESPONDENT is entitled to a reward, irrespective of the amount.24 RESPONDENT’s right to the

three-quarter portion is undisputed proof that RESPONDENT has the right to enforce the

salvage claim.

C. The salvage claim should be arbitrated in this proceeding for the sake of both parties’

convenience

30. RESPONDENT pleads that it would be inconvenient for CLAIMANT to commence two

proceedings and to divide the amount of salvage reward that must be paid. CLAIMANT’s own

contention of a ‘presumption of one-stop arbitration’ should apply to this matter, for the

principle would be undermined by inconsistent holdings in different tribunals, i.e. if

CLAIMANT is required to pay the three-quarter portion of the reward in this proceeding and

only the remaining quarter in another.

31. Moreover, whether or not the service rendered by RESPONDENT was indeed a “salvage” for

the purposes of the statute must be resolved in this very proceeding. Matters concerning the

22 Facts, p. 73 and 77 23The Livettia[1883] 8 P.D. 24; TheKenmure Castle [1882] 5 Asp. Mar. Law. Cas. 27 per Sir R. Phillimore;

The Palmyra [1872] 1 Asp. Mar. Law. Cas. 182 at 183; Geoffrey Brice and John Reeder, Brice on Maritime

Law of Salvage,5thed(London: Sweet & Maxwell, 2011), p. 59 24 Procedural Orders No. 2, point 2


10

division of salvage rewards are considered only a technicality, and should not be

complicated.

32. For these reasons, RESPONDENT submits that for the sake of convenience of both parties, the

salvage claim should be resolved in this proceeding and further that RESPONDENT and

Hestug should be seen as one entity.

III. RESPONDENT IS NOT LIABLE TO PAY FOR DEMURRAGE

35. CLAIMANT contends that VESSEL went into demurrage on 13 October 2014. RESPONDENT, in

defence, argues that (A) at this date VESSEL had left PORT and VESSEL should not be

considered to be in demurrage.

A. VESSEL had left PORT area and was not in demurrage

39. RESPONDENT argues that VESSEL had left PORT area in order for loading to be deemed

complete. Any return of VESSEL to PORT is therefore CLAIMANT’s liability.

40. In lieu of setting the limits of the port using a geographical approach, 25 The Johanna

Oldendorff case provides that port limits can be defined using a legal approach based on

whether the vessel was under the control of the charterers during loading. The geographical

position is of secondary importance.26

41. In the present case, MASTER continuously corresponded with CLAIMANT during the act of

loading. 27 After being unjustifiably redirected by COASTGUARD, it was CLAIMANT who

questioned the actions of MASTER.28 This is clear evidence that VESSEL was under the

control of CLAIMANT upon loading, and after loading of CARGO had finished. Without being

under RESPONDENT’S control, VESSEL cannot be considered to be in demurrage.

25The current case bears difficulty due to a lack of admiralty charts: Facts, p. 62 26 The Johanna Oldendorff [1973] 2 Lloyd’s Rep 285 27Facts, p. 53 28Facts, p. 58


11

42. Moreover, the multiple parties involved in the events of this case have deemed VESSEL to be

out of PORT as it had already reached open waters. Both CLAIMANT29 and its MASTER

30 were

under the assumption that VESSEL was outside of PORT limits. COASTGUARD themselves, as

port agents, resorted to using VESSEL’s Hades flag to redirect VESSEL To Hades.31 This is a

clear indication that the parties understood that VESSEL was outside of PORT limits and

therefore the tribunal should find for the purposes of this inquiry that VESSEL left PORT. Due

to this fact, VESSEL cannot be deemed to be in demurrage.

IV. RESPONDENT DID NOT BREACH CHARTERPARTY

42. RESPONDENT defends its position that it never breached CHARTERPARTY. Accordingly, it is

not liable for any losses or damages arising from any Charterparty-related events arising

from a breach.

A. RESPONDENT did not provide dangerous cargo

43. RESPONDENT contends that it did not provide dangerous cargo and is thus not liable for any

damages arising thereof.

44. A cargo may be considered legally dangerous when it is unlawful and might subject the

vessel to delay.32 Generally, the same principles apply to legally dangerous cargo as they do

to physically dangerous cargo,33 including the obligation of the shipper to inform the carrier

of the dangerous cargo.34

45. In the context of this case, such an obligation to inform relates to whether CARGO was lawful

or not. RESPONDENT asserts that from the formation of CHARTERPARTY to the time of

loading, CARGO did not infringe upon any regulations in the state of Hades. The information

29Facts, p. 63 30Facts, p. 62 31Facts, p. 62 32Julian Cooke et al., Voyage Charters, 4th Ed (Abingdon: Informa Law from Routledge, 2014), p. 180, citing:

Mitchell Cotts v Steel [1916] 2 K.B. 610. 33The Greek Fighter [2006] 2 C.L.C. 497 34The Athanasia Comninos[1990] 1 Lloyd’s Rep 277, QB


12

regarding CARGO as being controversial35 cannot be evidence that it was in fact unlawful. As

such, RESPONDENT had no obligation to inform CLAIMANT of its factually lawful Cargo.

46. CARGO’S status might arguably have changed to unlawful when VESSEL returned to PORT

along with it. However, VESSEL’s return to PORT was a result of the deviation of MASTER36

and therefore exempts RESPONDENT of all liability arising from such breach due to the

principal of reciprocal obligations. This principle dictates that a violation of a contract from

one party can excuse a subsequent breach from the other, if the latter obligation is dependent

on the fulfillment of the former.37 In the current case, MASTER’s breach of deviation would

excuse RESPONDENT from its failure to declare the unlawful CARGO. It should therefore be

said that RESPONDENT is not liable.

B. Alternatively, a breach of dangerous cargo warranty has been waived by CLAIMANT

47. In the event that RESPONDENT is deemed to have breached the dangerous cargo warranty,

RESPONDENT insists that it did not know that its cargo would be considered dangerous and

thus did not have the obligation to inform CLAIMANT. Further, RESPONDENT argues that

CLAIMANT knew of the nature of CARGO and by accepting such, waived its rights to

damages.

i. There exists no absolute obligation for RESPONDENT to inform CLAIMANT

48. There is a lack of decisive authority in making absolute the obligation of notifying the

carrier of the dangerous nature of the cargo in the event that the carrier knew of the danger

or if the shipper did not know that its own cargo was dangerous. While the court in Brass v

Maitland did rule in favor for the shippers, the decision only applies to physically dangerous

cargo. 38 Crompton J dissented in that case, noting that it seemed to be unfair to hold

35Facts, p. 52 36Paragraph 61-63 of this memorandum 37Kingston v Preston [1773] KB 99 English Report 437 38 Brass v Maitland [1856] 6 E & B 470, 119 ER 940


13

carriers liable for “not communicating what he does not know”.39 This idea was then applied

in the case of Mitchell, Cotts v Steel concerning legally dangerous goods, not unlike the case

at hand.40 In that case, the court ruled in favor of the carrier.

49. Thus, based on the above and according to the precedent of Mitchell, Cotts, there exists no

absolute obligation to inform the carrier on the status of legally dangerous cargo if it is in a

reasonable position to acknowledge such a fact by itself.

ii. CLAIMANT has waived his right by accepting CARGO

50. As it has been established that the obligation to notify is not absolute,41 RESPONDENT’s

liability for such a notification only persists until the carrier does or should reasonably know

of the cargo being dangerous.42 Upon receiving knowledge of such a fact, the carrier may

then refuse to carry CARGO, or waive the right to refusal. Such a waiver would mean that the

carrier accepts CARGO, and resigns the right to damages resulting from its legally dangerous

status43 and thus, RESPONDENT no longer has an obligation to notify.

51. Upon arrival at PORT, MASTER was alarmed by protests that “relate to shipper and imminent

cargo”. This protest was an attempt to stop the loading of CARGO. The protests are clear

evidence that CARGO attracted ire and risked detention to VESSEL. Despite protests and

complaints, CLAIMANT advised MASTER to commence loading.44 The instruction to load

CARGO amid clear objections should be deemed a waiver of the status of CARGO by

CLAIMANT.

52. Alternatively, if the statement itself does not amount to a waiver, then the act of CLAIMANT

in proceeding with the loading process amounts to a waiver by conduct, 45 and novus actus

39Brass v Maitland [1856] 6 E & B 470, 119 ER 940 40Mitchell, Cotts v Steel Borthers & Co Ltd [1916] 2 KB 610, 614 41Argumen Atasnya 42The Mahia [1955] 1 Lloyd’s Rep 264; Brass v Maitland [1856] 6 El & Bl 470; 119 ER 940. 43London Arbitration 21/01 (LMLN 574); Athanasia Comninos [1990] 1Lloyd’s Rep 227. at 284; Greenshields,

Cowie & Co v Stephens & Sons [1908] AC 431 44Facts, p. 53 45Tele2 International Card Company SA v Post Office Ltd [2009] all ER (D) 144


14

interveniens.46 Therefore, it must be said that CLAIMANT had in fact waived their right to

refuse CARGO, along with rights to damages arising from the status of CARGO as

controversial.

C. PORT nominated by RESPONDENT was not unsafe

53. RESPONDENT notes that box 9 of CHARTERPARTY includes a warranty that the nominated

port is safe. However, liability of such a nomination is only limited only to prospective

safety at the time of nomination.47 Accordingly, RESPONDENT argues that PORT was safe at

the time of the nomination.

54. Other parties mere dislike of VESSEL or its purpose does not render a port unsafe PORT.48

Such discontent cannot be reasonably assumed to impose any real risk to VESSEL. Similar

opinions from other parties are to be assumed with every charterparty.

55. Furthermore and in any event, the detention that occurred cannot be said to be a

manifestation of the risks that existed at the time of nomination of the port. The news report

stated only that the protesting parties “would not rest until exports have been ceased”.49 This

is not a threat, and it could not reasonably be inferred that such report threatened detention.

Additionally, at that time, these parties were not representative of the Government of Hades.

On the other hand, the detention was by the Government of Hades itself. The risks existing

at the time of nomination had no relation to the actual detention. The detention of VESSEL by

the government of Hades was beyond any anticipatory measure at time of nomination. As

such, the event is considered abnormal and unexpected, and it does not amount to a breach

of warranty.50

46 The Stork [1955] 2 QB at p 77 47K/S Penta Shipping v Ethiopian Shipping Lines Corp(The Saga Cob) [1992] 2 Lloyd’s Rep. 545; The Evia (No. 2)

[1983] 1 A.C. 736 48Facts, p. 52 49Facts, p. 52 50The Lucille [1984] 1 Lloyd’s Rep. 244; The Eastern City [1958] 2 Lloyd’s Rep 127 at p 131


15

56. Additionally, if it is deemed that VESSEL had in fact left PORT, then a breach of safe port

warranty did not take place. A safe port warranty only applies from the moment when

VESSEL arrives until it leaves the port. In this case, the action of VESSEL in returning back to

the original PORT amounts to a deviation by MASTER.51

D. Alternatively, a breach of the safe port warranty has been waived by CLAIMANT

57. In the event that RESPONDENT is deemed to have nominated an unsafe port, it contends that

CLAIMANT had waived its rights to damages from such a breach.

58. If a shipowner acknowledges that a port was inherently unsafe but nevertheless proceeds in

entering the port, such action amounts to a novus actus interveniens, or a breaking of the

chain of causation. Such a waiver prevents the shipowner from claiming damages due to

entering an unsafe port.52

59. Any sources that CLAIMANT may use as a basis for deeming PORT unsafe, such as the readily

accessible news reports53 or the apparent protests,54 were or must have been acknowledged

by CLAIMANT in this case.55 At any time prior to loading, CLAIMANT had the choice of

refusing the nominated PORT by not proceeding.56 However, such a right was not exercised

and CLAIMANT instructed MASTER to proceed to PORT, amounting to a novus actus

interveniens. Indeed, in this case, RESPONDENT was not privy to any information that

CLAIMANT was not.

60. Hence, RESPONDENT is not liable for the choice of CLAIMANT to proceed despite having

knowledge that PORT was unsafe.

V. CLAIMANT HAS BREACHED CHARTERPARTY

A. MASTER has breached its obligation to not deviate

51Davis v Garrett [1830] 6 Bing 716, Court of Common Pleas 52The Stork [1955] 2 QB at p 77 53Facts, p. 26 54Facts, p. 52 55Procedural Order, point 1 56The Kanchenjunga [1990] 1 Lloyd’s Rep 391


16

61. RESPONDENT contends that after VESSEL completed its loading and left PORT,57 MASTER

deviated from RESPONDENT’S instructions by returning to PORT58 and allowing VESSEL to be

seized.59

62. Contract law implies a duty for MASTER to proceed without unnecessary deviation in the

usual and customary course between ports.60 To intentionally stray from that customary

course without justification is an act of deviation, which is a clear breach of contract.61

63. In the current case, MASTER has breached his implied obligation when he returned VESSEL

back to PORT after he had left it. This act was clearly deliberate by MASTER, as he knew he

had the choice to proceed but chose to redirect VESSEL back to PORT. Further, he did so

without assuring that the order from the coast guard itself constituted as a valid application

of a regulation of the Hades’ Government. Thus, since the act clearly constitutes a deviation,

it amounts to a breach of contract.

B. CLAIMANT provided an incompetent and negligent MASTER

64. RESPONDENT argues that (i) MASTER provided by CLAIMANT was incompetent in

commanding VESSEL, leading to the deviation that has become the basis for this lawsuit.

Moreover, (ii) the act of deviation by MASTER was negligent.

i. MASTER was incompetent

65. The correspondence on 8 October 2014 shows that MASTER lacked knowledge on whether

or not the coast guards had the authority to give such order to him. Such lack of knowledge

evidences incompetence.

66. In general, coast guards do have the power to seize a vessel, but only when it pertains to the

laws of the commonwealth.62 While COASTGUARD’s order was based on the President’s

57 Facts, p. 65 58 Facts, p. 59 59 Facts, p. 60 60Reardon Smith Line v Black Sea and Baltick General Insurance [1939] AC 562, HL; Davis v Garrett [1830] 6 Bing

716, Court of Common Pleas; 61Rio Tinto Co v Seed Shipping Co [1926] 24 LIL Rep 316


17

instruction, questions still arise as to whether such an order could justify COASTGUARD’s

action63 and according to the case of the The Star Sea, a lack of such a vital knowledge

amounts to incompetence, especially if it leads to damage to the vessel.64

67. In the current case, due to MASTER’s lack of knowledge regarding the validity of such order,

VESSEL was detained based on an unjustifiable order. Thus, RESPONDENT contends that this

deviation and the resulting detention was caused by the incompetence of MASTER.

ii. The act of deviation amounts to negligence by MASTER

69. The Trinity Square case held that deviation is to be deemed as an act of negligence.65

Accordingly, the act of deviation in this case, which was specifically caused by MASTER’s

incompetence, should also be deemed as an act of negligence.

VI. CHARTERPARTY WAS FRUSTRATED

70. RESPONDENT contends that CHARTERPARTY was frustrated. In doing so, it submits that (A)

the presence of the force majeure clause does not prevent the application of the doctrine of

frustration, (B) the discharge date was fundamental to CHARTERPARTY and that further, (C)

CHARTERPARTY was frustrated due to the late delivery.

A. The force majeure clause does not prevent the application of the doctrine of frustration

71. RESPONDENT submits that a force majeure clause can be relied upon as evidence that the

parties have expressly prepared a provision to cover events that might radically alter a

contract. However, it argues that the doctrine of frustration can still be applied in case

certain events take place which are outside the contemplation of the parties at the creation of

the contract.

72. Events such as detention can only frustrate a contract when it is unforeseeable.66 Force

majeure clauses instead cover events that might otherwise cause the frustration of the

62Australian Coast Guard Bill 2001, art. 5 (a) & (i) 63 Facts, p. 74 64Manifest Shipping Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] 1 Lloyd’s Rep 389 HL 65 Trivat Shipping & Investmen BV v Associated Transport Line Inc (The Trinity Square) – Michael K Hope,

Arbitrator, (1999) 517 LMLN 3(3).


18

contract, rendering such events as foreseeable.67 However, a narrow interpretation must be

made towards this clause. This implies that while a force majeure clause might deal with a

general nature of a frustrating event, it does not eliminate the probability that an event

covered by such a clause might still frustrate a contract. Frustration is when the event

fundamentally alters the contract to such an extent that it is beyond the contemplation of the

force majeure clause as an expressed term allocating risk and responsibility.68

73. Applying the above, Respondent asserts that the detainment of VESSEL was not an event that

was contemplated in the form of provision within the force majeure clause. Following this,

it is perfectly possible for the detainment to frustrate the contract notwithstanding the

existence of the force majeure clause.

74. Moreover, the current Charterparty relevantly provides a force majeure clause that states

“the affected party shall give the other party prompt written notice of such cause or causes

and shall take all reasonable steps to minimise any delay so caused”.69 This obligation acts

on both parties, for both parties at that time were under the assumption that the event still

fell within the ambit of the force majeure clause. However, the attempt to free VESSEL

failed. Such failure meant that the event was beyond contemplation of the force majeure

clause because all attempts could not in fact free VESSEL. For this reason, actual frustration

of contract can still take place for the delay that occurred was beyond the delay

contemplated by the force majeure clause.

B. The purpose of CHARTERPARTY includes the discharging date

66The Kyla [2013] 1 Lloyd’s Rep. 565;Gold Group Properties v. BDW Trading [2010] B.L.R. 235 at para. 45 67Bremer Handelsgesellschaft m .b.H . vVanden Avenne-Izegem P .V .B .A[1977] 1 Lloyd’s Rep. 133, at p. 163, per

Mocatta J. 68 Ewan McKendrick, Force Majeure and Frustration of Contract, 2nd ed. (New York: Informa Law from Routledge,

2013), p. 35, citing:Metropolitan Water Board v Dick Kerr and Co. [1918] A.C. 119;Acetylene Co. o fG .B. vCanada

Carbide Co. [1922] 8 Ll.L.Rep. 456. See also: Bunge S.A. v. Kyla Shipping Co. (The Kyla) [2013] 1 Lloyd’s Rep. 565

and Hildron Finance v. Sunley Holdings[2010] EWHC 1681. 69


19

75. It is well established that frustration of a contract is caused by a fundamental obligation

which is altered to such an extent that it is radically different to that which was initially

contemplated at the formation of CHARTERPARTY.70 Accordingly, RESPONDENT contends

that the discharge date was a fundamental obligation, the breach of which necessarily

frustrates CHARTERPARTY.

76. It was established from the outset that RESPONDENT needed CARGO to be discharged by 30

October, 2014 +/- 3 days.71 This should be considered a clear term of the contract by virtue

of both parties being cognizant of the importance of this date, notwithstanding the fact that it

was not included in CHARTERPARTY.72

77. RESPONDENT submits that the discharge date is an implied term. Implied terms can also be a

basis for frustration unless the term itself is unfair to uphold against one party to the

contract.73 In the current case, both parties acknowledged the discharge date as vital to

RESPONDENT as it was communicated at the formation of contract.74

78. RESPONDENT’S assurance of the discharge date was also asserted in the letter which stated

that it would suffer significant losses should the delivery be late. It is evident that a breach of

this timeline would alter the very purpose of why RESPONDENT entered into CHARTERPARTY.

79. Moreover, if this tribunal were to approach frustration using an implied term as a basis, then

it would bear no difference if it approached frustration using a breach of expressed

obligation basis, for both would lead to frustration. British Movietonews Ltd v London &

District Cinemas Ltd case states that if both approaches bear the same results, a difference in

approach would be irrelevant.75 In the case at hand, the discharge date was a clear expressed

70National Carriers LTD v Panalpina (Northern) [1981] AC p. 700; Davis Contractors v Fareham Urban District

Council [1956] AC 696 at p. 728 per Lord Radcliffe; John Wilson, Carriage of Goods by Sea, 7th ed (London:

Pearson, 2010), p. 39 71Facts, p. 2 72 Taylor v Caldwell [1863] EWHC QB J1 73The Eugenia [1964] 1All ER 161 74 Facts, p. 2 75British Movietonews Ltd v London & District Cinemas Ltd[1952] AC 166 p.184.


20

obligation given by RESPONDENT to CLAIMANT at the time of formation of CHARTERPARTY,

resulting in it becoming a fundamental obligation that would allow frustration. If this

tribunal were to deem it as an implied term, CHARTERPARTY would still be found to be

frustrated for the term bears importance to the contract. Therefore, it would be immaterial to

decide on if the term was an expressed obligation or an implied term.

80. Additionally, CLAIMANT would be acting in mala fide if it were to refuse that the discharge

date was fundamental to CHARTERPARTY. It was a reasonable act of good faith when

RESPONDENT accepted CHARTERPARTY not containing the discharge date, for it was assumed

that from previous correspondence, CLAIMANT acknowledged the date as being

fundamental.76

81. Based on the above reasons, a breach of the discharge date clearly alters the very purpose of

CHARTERPARTY, and therefore is a viable basis for frustration.

C. The presiding events frustrated CHARTERPARTY

82. RESPONDENT further contends that the purpose of CHARTERPARTY, established above, was

altered to such an extent that (i) CHARTERPARTY must be deemed to have been frustrated by

a change of law (ii) or alternatively, by the delay.

i. The detention acted as a supervening illegality that frustrated CHARTERPARTY

83. Frustration of a charterparty is possible when the contract is rendered illegal due to a change

in the law, whether it be a change in English law or a foreign country where the events

constituting CHARTERPARTY take place.77 This change in law has effect of immediately

cancelling the contract and all accumulated obligations.

84. In the current case, CHARTERPARTY was rendered illegal due to the direct command from the

President in announcing that VESSEL was no longer allowed to leave PORT. This could very

well be enough to amount to a change of law, as the command specifically targets

76Facts, p. 2 77Ralli v Compania Naviera Sota y Aznar [1920] 2 KB 287; Société Co-opérative Suisse v La Plata (1947) 80LlLR

530.


21

CHARTERPARTY and is a presidential decree, subject to the existing ground norms of the

state of Hades.

85. This change of law clearly does not only institute a temporary delay, for at the time of the

change of law it was unclear as to when, if ever, it would no longer be illegal for VESSEL to

leave PORT. There was even news that PORT authorities would in fact discharge CARGO from

VESSEL, thus supporting the contention that VESSEL would be held at PORT indefinitely.

86. In view of the above, it is clear that Charterparty was frustrated due to impossibility from the

change of law.

ii. Alternatively, the delay frustrated CHARTERPARTY

87. If it is deemed that the order from the president is insufficient to be considered a change of

law, then alternatively, in view of the imperative nature of the date of delivery, RESPONDENT

contends that CHARTERPARTY was frustrated due to the delay caused by the detention.

88. It is aphoristic that a delay could also frustrate a Charterparty.78 In such cases, the actual delay,

as opposed to the event of detention or apprehension causing the delay, is the cause of

frustration. Furthermore, if an event that can at first be said to frustrate the contract is then

waived, it does not rule out the possibility that the same event could at a later time still

frustrate CHARTERPARTY if it causes inordinate delay. In Bank Line v Capel, a requisition of a

Vessel as a frustrating event was waived by the charterer while it sought to free the vessel. The

attempt to free the vessel failed. However, the tribunal held that the charterparty was frustrated

at the time when the effort to free the vessel was unsuccessful and still attributed the

requisition as a factor in the frustration. The reasoning being that the requisition itself caused

uncertainty as to the vessel’s release.

89. The case at hand bears many similarities to the Bank Line v Capel case. The parties initially

waived the detention of VESSEL as consisting of a frustrating event, in particular whilst

78See all relevant cases concerning frustration around the time of the Gulf War: The Agathon [1982] 2 Lloyd’s Rep.

211 (C.A.); The Wenjiang (No 2) [1983] 1 Lloyd’s Rep. 400; The Chrysalis [1983] 1 Lloyd’s Rep. 503


22

CLAIMANT attempted to free VESSEL. When CLAIMANT failed to do so, the situation

changed. The result was uncertainty of whether VESSEL would be operable for both parties.

Indeed, it could not have reasonably been known when VESSEL would actually be released.

90. A judgment on the knowledge of both parties regarding their position should be made

subjectively, at the time when the attempt to free VESSEL failed,79 not according to the facts

availbale at the proceedings. Hence, if the parties reasonably assumed that VESSEL could not

have been freed in order to make the delivery on time, such is enough to frustrate the

contract if the delivery date is a fundamental part of the contract.80 This is irrespective of

whether this belief that the detention would be indefinite was later proven to be erroneous.81

91. Therefore, CHARTERPARTY had been frustrated as a result of VESSEL’s detention, necessarily

causing a delay that would not allow for a punctual delivery of CARGO.

VII. RESPONDENT IS ENTITLED TO SALVAGE REWARD

92. The facts provide that shortly after VESSEL was towed to open waters, both of its propeller

shafts broke,82 and VESSEL was unable to move on its own power. The tugboats owned by

RESPONDENT then rendered a service to assist VESSEL, saving it and CARGO.83 On these

facts, RESPONDENT submits that it is qualified as a salvor and is entitled to salvage reward.

A. The elements of salvage were fulfilled

93. Salvage is a service voluntarily rendered by those under no legal obligation to do so who

relieve property from an impending peril at sea or other navigable waters.84 To properly

deem a service as a salvage operation, four elements must be fulfilled,85 namely: (i) there

should be a recognised subject matter; (ii) the object of salvage should be in danger at sea;

79Bank Line v Arthur Capel [1919] AC 435 per Lord Sumner, p. 454 80In this case, the delivery date is proven to be fundamental. Paragraph 75-81 of this memorandum 81Bank Line v Arthur Capel [1919] AC 435 per Lord Sumner, p. 454 82Facts, p. 71 83Facts, p. 71 84Admiralty Commissioners v. Valverda (Owners) [1938] A.C. 173, 200 per Lord Roche; Aleka Madaraka-Sheppard,

Modern Admiralty Law with Risk Management Aspects (London: Cavendish Publishing Limited, 2001), p. 650. 85 Simon Rainey QC, The Law of Tug and Tow and Offshore Contracts (New York: Informa, 2011), p. 503;

AlekaMadaraka-Sheppard, Modern Admiralty Law with Risk Management Aspects (London: Cavendish Publishing

Limited, 2001), p. 662, 668


23

(iii) the salvors must be volunteers; and (iv) there must be success by either preserving or

contributing to preserving the property in danger. RESPONDENT submits that these elements

have been fulfilled.

i. VESSEL was in a state of uncontrolled drifting, and thus qualifies as subject matter for the

first criteria of the test

94. A vessel drifting in the midst of the ocean is a proper subject matter of a salvage claim.86 As

VESSEL was ‘drifting in an uncontrolled manner’87 prior to being saved by RESPONDENT’s

tugs, undoubtedly the first element was fulfilled.

ii. The element of danger was fulfilled by VESSEL’s broken propeller shafts

95. VESSEL’s broken propeller shafts impaired VESSEL’S ability to move on its own power. This,

ultimately, would lead to VESSEL’s and CARGO’s destruction. Hence the requirement of

danger is fulfilled.88

96. Even if CLAIMANT argues that the danger was not imminent, RESPONDENT pleads that a state

of difficulty and reasonable apprehension is sufficient.89 If the vessel is considered as not

exposed to any imminent danger, its mere suffering of a broken propeller shaft is enough to

deem VESSEL as being exposed to danger.90

97. The above clearly rebuts CLAIMANT’s argument that since VESSEL was not exposed to

absolute danger, this element is not fulfilled. It must not be forgotten that VESSEL’s broken

propeller shafts necessarily prevented VESSEL from manoeuvring from any danger that may

present itself. Without RESPONDENT’s tugboat and help, VESSEL would not have been able to

86The Gas Float Whitton (No. 2) [1897] AC 337, HL per Lord Esher MR; AlekaMadaraka-Sheppard, Modern

Admiralty Law with Risk Management Aspects (London: Cavendish Publishing Limited, 2001), p. 658. 87 Facts, p. 76 88The Troilus [1951] AC 820 89The Phantom [1866] LR 1 A&E 58, p. 60 per Dr Lushington; AlekaMadaraka-Sheppard, LLM, PhD, Solicitor,

Modern Admiralty Law with Risk Management Aspects (London: Cavendish Publishing Limited, 2001), p. 663. 90The Troilus [1951] AC 820; AlekaMadaraka-Sheppard, Modern Admiralty Law with Risk Management Aspects

(London: Cavendish Publishing Limited, 2001), p. 665.


24

return to PORT and receive the service it needed. Hence, VESSEL fulfils the ‘state of

difficulty and reasonable apprehension’ and the element of danger is fulfilled.

iii. The voluntary element was fulfilled by the services rendered by RESPONDENT

98. A tug’s towage service amounts to salvage when the service extends beyond what has been

agreed upon in the service contract. 91 While it may be safely assumed that the initial towage

service to assist VESSEL to sail from Hades is covered by the contract, this obligation cannot

extend to the tug’s service of assisting VESSEL to return to berth. First, VESSEL was in a

distressed state and in no way capable of concluding any towage contract. Second, the

existence of the towage contract is highly questionable as the facts do not show any hint of it

being concluded. If CLAIMANT wishes to prove otherwise, it shall carry the burden of proof.

99. Even supposing there was an actual towage contract, towage service is confined only to

vessels that have not received injury or damage. 92 VESSEL’S damaged propeller shaft when

the service was rendered takes it outside of the scope of the towage contract.

100. In addition, the fact that RESPONDENT owns CARGO on board the salved VESSEL does

not prevent RESPONDENT from being a salvor. The Sava Star case93 clearly indicates that a

cargo owner is to be entitled to salvage reward even if his cargo was on board the salved

ship.

iv. The salvage service bears success

101. Salvage reward is obtainable when there is success by either preserving or

contributing to preserving the property in danger. The facts unequivocally show that the

services rendered by RESPONDENT saved many millions of dollars.94

91The Aldora [1975] 1 Lloyd’s Rep 617, p. 623 92The Reward [1841] 1 W Rob 174 at p. 177 per Dr Lushington. 93 The Sava Star [1995] 2 Lloyd’s Rep 134; AlekaMadaraka-Sheppard, Modern Admiralty Law with Risk

Management Aspects (London: Cavendish Publishing Limited, 2001), p. 674; Simon Baughen, Shipping Law,

(London: Routledge Cavendish, 2009), p. 299; Yvonne Baatz, Maritime Law, Third Edition, (New York: Informa

Law from Routledge, 2014), p. 238. 94 Facts, p. 71


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102. The fulfilment of all the elements of salvage lead to the conclusion that the service

rendered by the tugs of RESPONDENT was indeed salvage.

B. RESPONDENT has no fault in regards to VESSEL’s broken propeller shaft

103. RESPONDENT admits that it is reasonable to exclude from the right to claim salvage

persons who may deliberately create danger in order gain to a salvage reward.95 However, as

RESPONDENT established above,96 the breach CLAIMANT uses as a basis for this principle

does not exist, or, at the very least, had been waived. Following this, CLAIMANT cannot

argue that RESPONDENT would be barred from claiming salvage reward under the basis that

VESSEL’s broken propeller shafts were caused by RESPONDENT’s breach of contract.

104. CLAIMANT’S arguments to bar RESPONDENT from the rights to salvage reward are utterly

rebutted, and RESPONDENT’s rights withstand.

PRAYER FOR RELIEF

By the reasons that have been elaborated above, RESPONDENT respectfully requests this

tribunal to:

DECLARE that this tribunal does not have the jurisdiction to settle the frustration, and

consequently other contractual claims,

or alternatively

DECLARE that salvage claim can be heard in these proceedings

FIND that the contract was frustrated and RESPONDENT is exempted from further liability,

and further,

AWARD salvage reward to RESPONDENT.

95Yvoone Baatz, Maritime Law, Third Edition (New York: Informa Law from Routledge, 2014) p. 237 96 Paragraph 42-60 of this memorandum

UNIVERSITAS PADJADJARAN Team 21 MEMORANDUM FOR … · UNIVERSITAS PADJADJARAN Team 21 MEMORANDUM...

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