QCR Spring 2018: LOIs revisited
Songa Chemicals AS v Navig8 Chemicals Pool Ltd  EWHC 397 (Comm)
The Songa Winds is an oil and chemical tanker owned by Songa Chemical AS (“Songa”) who had pursuant to a pool agreement time chartered her to Navig8 Chemicals Pool Inc (“Navig8”).
The dispute arose out of a chain of letters of indemnity (LOIs) issued by Glencore to Navig8 and in turn by Navig8 to Songa seeking discharge of cargo without production of the original bills of lading. The wording of the LOIs was in the standard form approved by the IG P&I Clubs which stipulated that the owners should deliver the cargo to a named receiver or “… such party as you believe to be or to represent the named receiver or to be acting on behalf of the named receiver”.
Both sets of LOIs instructed the recipients to deliver to Aavanti. It was common ground between the parties that delivery had been effected to Ruchi Soya Industries Limited, Aavanti’s buyer. The bank, SocGen, who had financed Aavanti's purchase claimed to be the lawful holder of the bills of lading. As a consequence Songa called upon the LOIs which it had received from Navig8, and Navig8 did the same up the LOI chain against Glencore. Glencore denied that the LOIs it had issued to Navig8 had been engaged, a position adopted down the line by Navig8.
The Court concluded on the facts that Ruchi represented or was acting on behalf of Aavanti, so that delivery of the cargo without the presentation of the original bills of lading was made to the correct party, in accordance with the terms of both LOIs. The indemnification provisions were therefore engaged, with Navig8 under an obligation to indemnify Songa in respect of SocGen's claim, and Glencore under an obligation to indemnify Navig8 for the same. Where Aavanti had not been paid by Ruchi, there was contemporaneous evidence that as between those parties, prior payment was not necessarily the practice. The facts pointed to Ruchi having claimed delivery of the cargo on behalf of Aavanti.
Obiter, if Ruchi had not taken delivery on behalf of Aavanti, the reference in the standard form LOI to a "belief" that the actual recipient was acting on behalf of the intended receiver meant the belief of the person by whom the delivery in question was made, namely the carrier, but in practice the master.
The Court also granted Navig8 summary judgment on a separate issue that arose solely between it and Glencore, holding that an argument advanced by Glencore that Navig8’s claim under the Glencore LOIs was time-barred had no prospect of success at a trial.
This is the latest judgment in a series of cases (most recently The Bremen Max  1 Lloyd’s Rep 81 and The Zagora  1 Lloyd’s Rep 194) considering the construction and operation of the international P&I Clubs’ standard form for letters of indemnity for delivering cargo without the production of the original bills of lading.
The decision, although very fact sensitive, nevertheless provides useful clarification and guidance on the construction and operation of the International Group Standard LOI wording following the Bremen Max ruling.
Please find a link to the UK P&I Club’s Circular 18/10 issued shortly after the Bremen Max decision:
Source UK P&I
You may also be interested in:
QCR Autumn 2018: LOIs issued for discharge of cargo absent the original bills of lading - Whether obligations and rights contained in the LOIs are subject to the limitation provisions of the voyage charter
Glencore Agriculture BV v Navig8 Chemicals Pool Inc  EWCA Civ 1901 on August 21st, 2018
IG Letters of Indemnity
Members are often asked to accept letters of indemnity (LOIs) from their shippers or charterers in return for the delivery of cargo without presentation of original bills of lading, the delivery of cargo at a port other than that named in the bill of lading (or both) and in various other circumstances.
On 27th April 2020, the English High Court (Mr Justice Teare) gave guidance on the requirements imposed by International Group LOI wordings and the position of intermediate parties in an LOI chain, in circumstances where an LOI is given to enable cargo to be delivered without production of the original Bill of Lading.
On 21 February, the English High Court in an unreported judgment of HARMONY INNOVATION SHIPPING v CARAVEL SHIPPING  2 WLUK 370 ordered charterers to provide security for the release of a ship under an LOI given to enable cargo to be delivered without production of the original bills of lading.