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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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).
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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
E-mail dated 17/10/2016, Moot Problem, at p. 60. 33
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).
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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
E-mail dated 11/10/2016, Moot Problem, p. 50. 53
Charterparty Clause 16, Moot Problem, p. 21.
TEAM 16 MEMORANDUM FOR RESPONDENT
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
Charterparty Clause 26, Moot Problem, p. 10. 56
E-mail dated 20/10/2016, Moot Problem, at p. 65. 57
Charterparty Clause 16, Moot Problem, p. 21. 58
Tear v Freebody (1858) 4 CBNS 228; 140 ER 1071. 59
Ibid; Brandeis Goldschmidt Co Ltd v Western Transport Ltd [1981] QB 864.
TEAM 16 MEMORANDUM FOR RESPONDENT
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
E-mail dated 16/10/2016, Moot Problem, p. 57. 61
Charterparty Clause 16, Moot Problem, p. 21. 62
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
Charterparty Clause 16, Moot Problem, p. 21.
TEAM 16 MEMORANDUM FOR RESPONDENT
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 15/10/2016, Moot Problem, p. 56. 67
Charterparty Clause 23, Moot Problem, p. 10. 68
E-mail dated 20/10/2016, Moot Problem, p. 36.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
25
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.
TEAM 16 MEMORANDUM FOR RESPONDENT
26
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.
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