Loading illegal cargo by ‘Stealth’. Charterer’s libaility for the wrongs of sub-charterers.

In The CV Stealth [2016] EWHC 880 (Comm) time charterers sought permission to appeal against the award of an arbitrator who had found them liable to the shipowners in respect of the consequences of the vessel’s detention following an attempt by the sub charterer to load a cargo of oil from Venezuela without the necessary export permission. The finding was on the basis of an indemnity under cl. 13 of Shelltime 4 form, off hire under cl. 21, and for breach of cl.28 which provided …  No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments.” The appeal was on the basis that the arbitrator had committed an error of law in not construing cl.28 as having prospective effect at the time the relevant order was given by the charterer. Popplewell J found that the arbitrator had construed the clause prospectively and found that the risk of loading the unauthorised cargo had existed at the date the order was given. He also expressed the view that by analogy with the charterer’s obligation to nominate safe ports, if the risk arises whilst the vessel is en route, the owners would be entitled to refuse to continue to comply with the order, if they were aware of it. In the event of continued compliance, the charterers would be in breach of provided that the risk arose before it became impossible for the charterers to give fresh orders which could be complied with in time to avoid the risk.

Permission to appeal was refused because the statutory criterion in s. 69(3)(a) of the Arbitration Act 1996 was not fulfilled.

The case also raised a procedural issue as to the effect of cl. 41 of the charter which provided “The parties hereby agree that either party may –(a) appeal to the High Court on any question of law arising out of an award;”  The clause  was clearly drafted with the terms of section 69 of the 1996 Arbitration Act in mind. It scope was limited to a question of law whose determination by the Court may serve a useful purpose for the parties, on a question that will substantially affect the right of the parties.

 

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