QCR Summer 2018: Interpretation of “a similar amendment” in clause 8(b) of the Inter-Club Agreement
Agile Holdings Corporation v Essar Shipping Ltd (The “Maria”)  EWHC 1055 (Comm)
The subject vessel was chartered out by claimant disponent owners (“Owners”) to defendant charterers (“Charterers”) on a time charter for a single trip from Tunisia to India via Trinidad. The cargo was a consignment of direct reduced iron ("DRI") which is well known to be highly reactive and combustible in the presence of heat or water.
In the course of loading the cargo onto the vessel by means of a conveyor belt at Port Lisas, Trinidad, the belt was seen to have caught fire. However the appointed supercargo inspected the holds and advised that loading could continue. In fact the DRI continued to burn through the voyage and upon discharge, the cargo interests brought a claim against Owners. Owners commenced arbitration seeking from Charterers a declaration that it was obliged as charterer to indemnify owner against any liability it might be found to have to the cargo interests.
The charter was on the NYPE 46 form. The relevant clauses in the charterparty were:
Clause 8: "… Charterers are to load, stow, and trim, tally and discharge the cargo at their expense under the supervision of the Captain…"
Clause 49: “The Stevedores although appointed and paid by Charterers/Shippers/Receivers and or their Agents, to remain under the direction of the Master who will be responsible for proper stowage and seaworthiness and safety of the vessel…"
The charter incorporated the NYPE Inter-Club Agreement (the ICA) and Clause 8(b) of the same is set out below:
Clause 8(b): Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of cargo: 100% Charterers unless the words “and responsibility” are added in clause 8 [of the NYPE form] or there is a similar amendment making the Master responsible for cargo handling in which case: 50% Charterers 50% Owners.
The decision of the Arbitral Tribunal
The arbitral tribunal found that the words “the Master who will be responsible for proper stowage and seaworthiness and safety of the vessel…" in Clause 49 triggered the first proviso of clause 8(b) of the ICA, and decided that liability should be split 50/50.
Owners appealed the arbitral award under s.69 of the Arbitration Act 1996 on the basis that the Tribunal had erred in law in finding that clause 49 constituted a “similar amendment” for the purpose of clause 8(b).
The High Court’s decision
The High Court overturned the tribunal’s decision.
For a provision in a charterparty to constitute a "similar amendment making the master responsible for cargo handling" so as to trigger the proviso to the ICA Clause 8(b), the provision had to transfer all, and not just some, of the cargo handling responsibilities to the shipowner or master.
“Similar” is intended to connote a provision in the charter party which is of the same kind or is to the same effect as the addition of the words "and responsibility", which is what the amendment must be "similar to".
That distinguishes it from a provision which is the same as "and responsibility" which would just be a repetition.
On that basis, the amendment must have the effect of transferring all cargo handling responsibilities, not just some of them, back to Owners because this is the effect of adding the words "and responsibility" to Clause 8.
The Court held that clause 49 did not transfer responsibility for all cargo handling to Owners. Clause 49 is concerned specifically with one aspect of cargo handling namely stowage and it was probably intended to reverse the effect of the decision in The Imvros  1 All E.R. (Comm) 724 and to make the owner responsible for bad stowage leading to unseaworthiness. Even if it made Owners responsible for stowage generally, transferring responsibility for stowage did not transfer responsibility for other cargo handling responsibilities. Therefore, Clause 49 was not a "similar amendment" within the meaning of the proviso to Clause 8(b).
This decision provides useful clarification on the interpretation of clause 8(b) and again emphasises that the courts would be slow to interfere with the ICA regime.
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Legal Update: 2018 HKIAC Administered Arbitration Rules - in effect from 1st November 2018
The Hong Kong International Arbitration Centre (“HKIAC”) completed a comprehensive revision of its Rules at the end of last year. The 2018 HKIAC Rules, hereafter “the New Rules”, came into effect on 1st November 2018. They are accompanied by a Practice Note on the Appointment of Arbitrators (“Practice Note”) which came into effect on the same day.
The ICA, or to give it its full name The Inter-Club New York Produce Exchange Agreement, is an IG approved clause for the apportionment of cargo claims. It aims to provide a mechanism by which claims can be quickly apportioned between owners and charterers without the need for costly or extensive litigation. It also contains provisions for security and time bars for notification of claims.
The purpose of the ICA is to avoid lengthy and costly litigation on matters of liability and apportionment, and instead seeks to provide a ‘rough and ready’ split of liability between the parties. The Clubs recommend to their Members that they adopt the Agreement for the purpose of apportioning liability for claims in respect of cargo which arise under, out of or in connection with all charterparties on the NYPE Form 1946 or Asbatime Form 1981, whether or not this Agreement has been incorporated into such charterparties. However, unless the ICA is specifically incorporated into the charterparty, it may not be enforceable.