thannual international maritime law arbitration … · ch law reports chancery charter charter...

17THANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT, 2016

NATIONAL UNIVERSITY OF JURIDICAL SCIENCES

TEAM NUMBER: 2

MEMORANDUM FOR HESTIA INDUSTRIES

ON BEHALF OF AGAINST

HESTIA INDUSTRIES ZEUS SHIPPING AND TRADING COMPANY RESPONDENTS CLAIMANTS

TEAM

SAMARTH SHARMA, ISHITA MISHRA, PRAKHAR KAINTURA, AKSHITA JHA

-Table of Content-

i TEAM 2 -

TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

TABLE OF CONTENTS

Questions Presented ...................................................................................................................................... iv

List of Abbreviation ....................................................................................................................................... v

Index of Authorities ..................................................................................................................................... vii

Statement of Facts ....................................................................................................................................... xvi

Arguments Advanced .................................................................................................................................... 1

1. The arbitral tribunal does not have jurisdiction to determine the issue of frustration of the charter

party. ............................................................................................................................................................. 1

1.1. Australian law is the law governing the arbitration agreement. .................................................... 1

1.2. The phrase ‘arising under’ precludes this Tribunal from adjudicating over the issue of

frustration. ................................................................................................................................................. 2

1.2.1. Parties’ intension to narrowly interpret Clause 30. ................................................................ 2

1.2.2. Frustration is not a dispute contemplated for reference under Clause 30. ............................. 2

1.2.3. Limited scope of reference ‘arising under this Charter party’. .............................................. 3

1.2.4. Potential credible intervention by the Courts of Poseidon ..................................................... 4

2. THERE WAS FRUSTRATION OF CHARTERPARTY IN THE PRESENT CASE .................................................... 5

2.1. Frustration of the Charter party had occurred. .............................................................................. 5

2.2. In Addition, Hestia is not liable for any breach of its obligations under nomination of unsafe

port or transporting cargo of a dangerous nature ...................................................................................... 7

-Table of Content-

ii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

2.2.1. There was an express safe port warranty in the Charter party. .............................................. 7

2.2.2. The Port of Hades as nominated by Hestia was not politically unsafe. ................................. 7

2.2.3. Alternatively, Hestia could not have foreseen the unsafe circumstances of the Port as the

Port was safe at the time of nomination as it was an abnormal occurrence .......................................... 8

3. LAYTIME WAS NEVER EXCEEDED AND NO DEMURRAGE ACCRUED. ........................................................ 9

3.1. Laytime was never exceeded as ship had crossed the territorial waters of Hades. ....................... 9

3.2. Alternatively, the ship had finally sailed from the Port of Hades ............................................... 11

3.3. Alternatively, laytime shall cease to continue due to unjustified deviation by Zeus for which

Hestia is entitled to damages. ................................................................................................................. 12

3.3.1. Zeus is liable for unjustified deviation from the usual course of the voyage under the

Charterparty ........................................................................................................................................ 12

3.3.2. Hestia is entitled to claim damages from Zeus for breach of Charterparty due to unjustified

deviation. ............................................................................................................................................. 13

4. ALTERNATIVELY, HESTIA DOES NOT HAVE ANY LIABILITY FOR DEMURRAGE OR DAMAGES AS THE

FORCE MAJEURE CLAUSE UNDER CLAUSE 19 OF THE CHARTERPARTY WAS IN APPLICATION ....................... 16

5. HESTIA IS ENTITLED TO THE SALVAGE REWARD BECAUSE IT SUCCESSFULLY PROVIDED ASSISTANCE TO

ATHENA WHEN IT WAS IN DANGER. ............................................................................................................. 17

5.1. There was a salvage operation and Zeus is liable to pay the salvage reward .............................. 17

5.1.1. MV Athena was in danger due to the breakage of propeller shafts. .................................... 18

5.1.2. The element of voluntariness was present in the act of salvage. .......................................... 19

5.1.2.1. The act was not under an already existing contractual obligation. ................................... 20

-Table of Content-

iii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

5.1.2.2. No self-interest of Hestia involved. .................................................................................. 21

5.1.3. The salvage operation was successful. ................................................................................. 22

5.2. In Arguendo, Hestia will be entitled to the reward based on the general principles of contracts 23

Prayer ............................................................................................................................................................ 25

-Questions Presented-

iv TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

QUESTIONS PRESENTED

1. Whether the arbitral tribunal has jurisdiction to try this dispute between the Claimant and the Respondent?

2. Whether this is a case of frustration of charter party in the present case and is Zeus is entitled to damages

from Hestia for breach of charter party obligations?

3. Whether the laytime had exceeded due to which demurrage had accrued and Hestia is liable to pay the

demurrage to Zeus?

4. Whether the assistance provided by Hestia is a salvage operation and will Hestia entitled to a salvage

reward?

-List of Abbreviations-

v TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

LIST OF ABBREVIATION

AB QB Alberta Court of Queen’s Bench

All ER All England Law Reports Art Article

Bing NC Bingham New Cases

Bundle IMLAM Moot Scenario 2014

Ch Law Reports Chancery

Charter Charter Party

Charterer, Hestia Hestia Industries

Cl. Clause

CLJ Cambridge Law Journal

Com Cas Company Cases (England)

EAA English Arbitration Act, 1996

EWCA (Civ) Court of Appeal (Civil Division)

EWHC England and Wales High Court

i.e. That is

KB Law Reports King’s Bench


vi TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

LR Ex Exchequer

LRPC Privy Council Appeals

Lloyd’s Rep Lloyd’s Law Reports

Lush. Lushington

Owner, Zeus Zeus Shipping and Trading

¶ Paragraph

§ Section

SDNY United States District Court for the Southern District of New York

TLR Times Law Reports

UKHL United Kingdom House of Lords

-Index of Authorites -

vii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

INDEX OF AUTHORITIES

CASES

A

Aircraft Recovery, L.L.C., v. Abandoned Aircraft, 54 F.Supp.2d 1172, 1179 (1999). ................................. 22

Alghussien Establishment v. Eton College, [1988] 1 WLR 587 ................................................................... 17

Ansett Australia Limited v. Malaysian Airline System Berhad, [2008] VSC 109 .......................................... 3

Arsanovia Ltd &Ors v. Cruz City Mauritius Holdings, [2012] EWHC 3702 ................................................. 1

Atlantic Oil Carriers v. British Petroleum Co., [1957] 2 Lloyd’s Rep.55, 95 ............................................... 12

Atlasnavios Navegacao, LDA v. The Ship "Xin Tai Hai" (No 2), [2012] FCA 1497 ..................................... 5

B

Bank Line v. Arthur Capel & Co., [1916] 2 A. C. 397. ................................................................................... 4

Baxter’s Leather Co. v. Royal Mail Co., [1908] 1 K.B. 796 ......................................................................... 21

Bensaude v. Thames and Mersey Marine Insurance Co., [1897] AC 609 ....................................................... 4

Bensuade & Co v. Thames and Mersey Marine Insurance Co, [1897] 1 QB 29,31 ........................................ 7

C

C v. D, [2007] EWHC 1541 ............................................................................................................................. 2

Cape Flattery Ltd v. Titan Maritime LLC, 607 F.Supp.2d 1179, 1181 (D. Hawai'i 2009). ............................ 4

Cape Lambert Resources Ltd v. Mcc Australia Sanjin Mining Pty Ltd, [2013] WASCA 66 ......................... 5

Cheall v. Association of Professional Executive Clerical and Computer Staff, [1983] 2 AC 87 .................. 17

Codelfa Construction Pty Ltd v. State Rail Authority of NSW, [1982] HCA 24 ............................................ 4

Comandate Marine Corp v. Pan Australia Shipping Pty Ltd, (2006) 157 FCR 45 .......................................... 4

Compania Naviera Maropan S/A V. Bowaters Lloyd Pulp & Paper Milld Ltd, [1955] 2 QB 68 ................. 20

Credit Suisse First Boston (Europe) Ltd v. MLC (Bermuda) Ltd, [1999] Lloyd's Rep 767 ........................... 5


viii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

D

Dahl v. Nelson, (1881) 6 App Cas 38 .............................................................................................................. 4

Dampskibsselskabet Norden A/S v. Beach Building & Civil Group Pty Ltd., [2012] FCA 696. ................... 2

Davis Contractors Ltd. v. Fareham Urban District Council, [1956] AC 696 .................................................. 4

Davis v. Fareham, U..D.C., [1956] A.C. 696 ................................................................................................... 7

Deutsche Bank AG v. Tongkah Habour Public Company Ltd, (2011) EWHC 2251 (QB) ............................ 5

E

Empresa Ecportadora De Azucar v. Industria Azucarera Nacional (The Playa Larga), [1983] 2 Lloyd’s

Rep.171 ........................................................................................................................................................ 7

Ethiopian Oilseeds & Pulses Expert Corp v. Rio Del Mar Foods Inc, (1990) 1 Llyod’s Rep 86 .................... 4

Ex parte McNally, (1999) 198 CLR 511 ......................................................................................................... 4

D

Fat Amplin Steamship Co Ltd v. Anglo-Mexican Petroleum Products Co Ltd, [1916] 2 AC 397, 405 ......... 7

Fencott v. Muller, (1983) 152 CLR 570 .......................................................................................................... 4

Fillite (Runcorn) ltd v. Aqua-Lift (1989) 26 Const LR 66 ............................................................................. 4

Fiona Trust & Holding Corp v Privalov, [2007] 4 All ER 951. ...................................................................... 3

Flakt Australia Ltd v. Wilkins & Davies Construction Co Ltd, [1979] 2 NSWLR 243 .................................. 3

G

Galoo Ltd v. Bright Grahame Murray, [1994] 1 WLR 1360 ......................................................................... 20

Geipel v. Smith (1872) L.R. 7 Q.B. 404 .......................................................................................................... 4

Gold Group Properties v. BDW Trading, [2010] 1 Lloyd’s Re.p 529 ............................................................. 7

Government of Gibraltar v. Kenney, [1956] 2 QB 410 ................................................................................... 4


ix TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

Gunton v. Richmond LBC, [1980] ICR 755 .................................................................................................. 18

H

Habas Sinai v. VSC, (2013) EWHC 4071 ....................................................................................................... 1

Hain Stemship Company Ltd v. Tate & Lyle Ltd, [1936] 2 All E.R. 597 ..................................................... 19

Harbour Assurance Co (UK) Ltd v. Kansa General International Insurance Co Ltd, [1993] QB 701 ............ 1

Heyman v. Darwins, [1942] AC 356 ............................................................................................................... 4

Hirji Mulji v. Cheong Yue Steamship Co Ltd, [1926] A.C. 497 ..................................................................... 4

Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha, [1962] 2 QB 26, 66 ......................................... 18

J

Jackson v. Union Marine Insurance Co Ltd, (1874) LR 10 CP 125 ............................................................ 6, 7

Jones v. Sea Tow Services Freeport NY Inc., 30 F.3d 360 (2d Cir. 1994) .................................................... 22

Joseph Constantine Steamship Line Ltd v. Imperial Smelting Corp Ltd, [1942] AC 154, 164 ...................... 6

K

K/S Penta Shipping v. Ethipian Shipping Lines Corp. (The Saga Cob), [1992] 2 Lloyd’s Rep. 545 ........... 10

Klöckner Pentaplast Gmbh & Co Kg v. Advance Technology, (H.K.) Company Limited, HCA1526/2010 . 1

Kodros Shipping Corp v. Empresa Cubana de Fletes (The Evia) (No. 2), [1982] 2 Lloyd’s Rep. 307 .......... 7

L

Lavabre v Wilson, (1779), 1 Doug KB 284. .................................................................................................. 17

Leeds Shipping Co. Ltd. v. Societe Francaise Bunge, [1958] 2 Lloyd’s Rep. 127 ....................................... 10

Lesotho Highlands Development Authority v. Impregilo SpA, [2005] 3 All ER 789 .................................... 1

M

Metrocall Inc. v Electronic Tracking Systems Pty Ltd, (2000) 52 NSWLR 1. ............................................... 3

Metropolitan Water Board v. Dick, Kerr & Co Ltd, [1918] AC 199, 131 ...................................................... 7


x TEAM 2 -


Mitchell, Cotts & Co. v. Steel Bros & Co Ltd., [1916] 2 KB 610 ................................................................. 12

Monarch Steamship Co Ltd v. Karlshamns Oljefabriker, (A/B) [1949] AC 196 .......................................... 20

N

National Carriers Ltd v. Panalpina (Northern) Ltd, [1981] AC 675, 700 ........................................................ 6

O

Origin Energy Resources Limited v. Benaris International NV &Anor [2003] AURELawJl 10…………....5

Overseas Union Insurers Ltd v. AA Mutual International Insurance Co ltd, (1998) 2 Llyod’s Rep 63 ......... 4

P

Paharpur Cooling Towers Ltd v. Paramount (WA) Ltd, [2008] WASCA 110 ............................................... 5

Patrinovic & Co Ltd v. Mission Francaise des Transports Maritimes, (1941) 71 LI L Rep 208 ................. 15

Photo Production Ltd v. Securicor Transport Ltd, [1980] AC 827, 849 ....................................................... 18

Price v. Livingstone, (1882) 9 Q.B.D. 679 .................................................................................................... 15

R

Rinehart v. Welker, [2012] NSWCA 95, 120,122 ........................................................................................... 5

Roelandts v. Harison, (1854) 9 Ex. 444 ......................................................................................................... 15

Roelandts v. Harrison, (1854) 9 Ex. 444 ....................................................................................................... 15

S

Secunda Marine Services Ltd. v. Liberty Mutual Insurance Company, (2006) NSCA 82 ............................ 23

Secunda Marine Services Ltd. v. Liberty Mutual Insurance Company, 2006 NSCA 82 (2006-06-30). ....... 24

Smith v. G.W.Ry, [1922] A.C. 178 ............................................................................................................... 21

Sulamerica Cia Nacional de Seguros SA v. Enesa Engenharia SA, [2012] EWCA Civ 638 .......................... 1

T

Tanning Research Laboratories Inc v. O’Brien, (1990) 169 CLR 332 ............................................................ 3


xi TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

Tatem v. Gamboa, [1939] 1 K.B. 132. ............................................................................................................. 7

The Auguste Legembre, (1902) P 123 ........................................................................................................... 24

The Aztecs, (1870) 3.Asp M.L.C. 326 ........................................................................................................... 23

The Duke of Manchester, (1847) 6 Moo.O.C.90,99 ...................................................................................... 24

The Evia, (No. 2) ........................................................................................................................................... 11

The Five Steel Barges, (1890) 15 PD 142 ..................................................................................................... 28

The Flore, (1929) 34 LlL Rep 172 ................................................................................................................. 24

The Geertje K, [1971] 1 Lloyd’s Rep.285,287 .............................................................................................. 23

The Glasidale, (1945) 78 Ll.L.Rep.477 ......................................................................................................... 22

The Glenbeg, (1940) 67Ll.L.Rep.94. ............................................................................................................. 23

The Hestia, [1895] P.193 ............................................................................................................................... 23

The Homewood, (1928) 31 L1.L.Rep.336, 339 ............................................................................................. 25

The Le Jonet, (1872) L.R. 3.A.&E. 556 ........................................................................................................ 22

The Minehaha, (1861) 15 Moo.(P.C.) 133 ..................................................................................................... 23

The Moorcock, (1899) 14 PD 64 ................................................................................................................... 17

The Mount Cynthos, (1937) 58 Ll.L.Rep.18,24-5 ......................................................................................... 21

The Neptune, (1824) 1 Hagg. 227 ................................................................................................................. 23

The North Goodwin, (No.16) 1980 ................................................................................................................ 22

The Phantom, (1866) L.R. 1 A & E. 58,60 .................................................................................................... 23

The Princess Alice, 1849 3 W Rob 138, 139 ................................................................................................. 22

The Sabine, (1879)101 U.S. 384 .................................................................................................................... 21

The Saratoga, (1861) 2 Gallison 164 ............................................................................................................. 22

The Sava Star, [1995] 2 Lloyd’s Rep. 134,141. ............................................................................................. 21


xii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

The Silver Sky, (1981) 2 Lloyd’s Rep 95 ..................................................................................................... 15

The St.Patrick, (1930) 35 L1L.Rep.231 ......................................................................................................... 25

The Suevic, [1908] P.154,159-160 ................................................................................................................ 23

The Troilus, (1950) P 92 [1950] 1 AII ER 103 .............................................................................................. 21

Thompson v. ASDA-MFI Group plc, [1988] 1 Ch 241, 266 ......................................................................... 17

U

United States Shipping Board v. Bunge y Born, 23 L1 L Rep 257 (HL) ...................................................... 17

V

Vertex Data Science Ltd v. Powergen Retail Ltd, 2006 2 Llyod’s Rep 591 ................................................... 5

Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474

(1989) ........................................................................................................................................................... 1

W

Walter Rau Neusser Oel und Fett AG v. Cross Pacific Trading Ltd, [2005] FCA 1111 ................................. 3

Woodside Energy Limited v. Benaris International NV & Anor, [2002] TASSC 50 ..................................... 5

STATUTES & RULES

Baltic Code 2003 ............................................................................................................................................ 14

Carriage Of Goods by Sea Act ......................................................................................................................... 2

IMDG Code, International Maritime Organization, available at

http://www.imo.org/en/Publications/IMDGCode/Pages/Default.aspx (last seen at 19/04/2016). ............. 12

International Arbitration Act 1974 ................................................................................................................... 2

Voylayrules 1993 ........................................................................................................................................... 14

Books


xiii TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

ALEX BAYKITCH, ARBITRATION LAW OF AUSTRALIA: PRACTICE AND PROCEDURE, 43 (2013) ....................... 3

CHITTY ON CONTRACTS, 1565,1566 (Hugh Baele edt. 28th.ed. 2012). .......................................................... 22

COGHLIN WILFORD, et al. , TIME CHARTERS, 200 (5th ed. 2003). .................................................................. 11

EDWARD V. LEWIS, PRINCIPALS OF NAVAL ARCHITECTURE, Vol II,1242 (1988) .......................................... 23

FRANCIS D.ROSE, KENEDDY AND ROSE THE LAW OF SALVAGE, 159 (The Hon. Sir David Steel, Richard AA.

Shaw eds. 6th ed. 2002). ............................................................................................................................. 24

GARY B.BORN, INTERNATIONAL COMMERCIAL ARBITRATION, KLUWER ARBITRATION, 1317-50 (2nd ed.

2014) ............................................................................................................................................................. 3

GEOFFREY BRICE, BRICE ON MARITIME LAW OF SALVAGE 43 (John Reeder ed. 5th ed. 2011). ..................... 24

INSTITUTE OF MARITIME LAW, MARITIME LAW, 154 (2nd ed. 2011). ............................................................... 7

JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT ,ANSON’S LAW OF CONTRACTS, 487 (29th ed.2010)

...................................................................................................................................................................... 6

JOANNA STEELE, BENTLEYS, STOKES AND LOWLESS, CHARTERER’S LIABILITY FOR UNSAFE PORTS - A

COMPARISON OF ENGLISH AND SCANDINAVIAN LAW, VICTOR BOGESJÖ, LUND UNIVERSITY (2014) ............. 11

JOHN LIVERMORE, TRANSPORT LAW IN AUSTRALIA, 62 (2nd ed., 2014) ........................................................ 12

JOHN SCHOFIELD, LAYTIME AND DEMURRAGE,379 (1986). ........................................................................... 17

KIM LEWISON, THE INTERPRETATION OF CONTRACTS, 18.01-22 (5th ed. 2011). .......................................... 3, 5

LEKA MANDARAKA-SHEPPAD, MODERN MARITIME LAW : MANAGING RISKS AND LIABILITIES, 522 (2013) . 18

MARGARET L. MOSES, THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 19,

(2012). .......................................................................................................................................................... 1

MARITIME LAW, SWEET AND MAXWELL, 2nd ed., ............................................................................................. 7

MUSTILL & BOYD, COMMERCIAL ARBITRATION 109, 114, 121 (2014) ............................................................ 3

RHIDIAN THOMAS, THE EVOLVING LAW AND PRACTICE OF VOYAGE CHARTERPARTIES, 176 (2009) ............ 12


xiv TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

STEPHEN D.GIRVIN, CARRIAGE OF GOODS BY SEA, 321 (2011) ....................................................................... 9

STEWART C.BOYD CBE Q.C., STEVEN BERRY, ANDREW S.BURROWS Q.C., HERMARD EDER, DAVID FOXTON

AND CHRISTOPHER F.SMITH, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING, 122 (21st ed. 2008).

.................................................................................................................................................................... 10

WILLIAM STATSKY, LEGAL THESAURUS DICTIONARY,796 (2001) ................................................................. 21

JOURNAL ARTICLES

Jeffrey W. Yeats, Clearing Up the Confusion: A Strict Standard of Abandonment For Sunken Public

Vessels, University of San Francisco Maritime Law Journal, 1999- 2000 ................................................ 22

P Gross, Competence of Competence (1992) 8(2) ARB. INTL. 205 .................................................................. 1

Siyuan Wang & Theo Notteboom, Current Issues in Shipping, Ports and Logistics, 143 (2011) ................. 14

TREATIES

International Salvage Convention ............................................................................................................ 25, 22

United Nations Convention on Law Of the Sea, (1982) 1833 UNTS 3 ........................................................ 14

OTHER AUTHORITIES

MAN Diesel and Turbo, Propulsion Trends in LNG Carriers, available at

http://marine.man.eu/docs/librariesprovider6/technical-papers/propulsion-trends-in-lng-

carriers.pdf?sfvrsn=16 (last seen at 19/04/2016) ....................................................................................... 14

Mogens Schrøder Bech, Facilitation of the Way ahead for LNG and the EU perspective, Danish Maritime

Authority, accessible at

http://www.golng.eu/files/Main/news_presentations/Stavangerfjord%20LNG%20Mogen%20Bech%201

60913%20%5BRepareret%5D.pdf (last seen at 19/04/2016). ................................................................... 13


xv TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

Newell D. Smith, The Law of Salvage (February 5th 1994), http://www.mikkelborg.com/files/salvage.pdf

(last visited Aug. 20, 2009) ........................................................................................................................ 22

Pacific NorthWest LNG, LNG Shipping, available at

http://www.pacificnorthwestlng.com/media/PNW_fs%20LNG%20Shipping_V%2018%200.pdf, last

seen at 19/04/2016 ...................................................................................................................................... 13

-Statement of Facts -

xvi TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

STATEMENT OF FACTS

Claimant is Zeus Shipping and Trading Company who is the owner of the ship “MV Athena” (the “Ship”) and is

based in Poseidon. The Respondent is Hestia Industries, who is a new producer of Liquefied Natural Gas (“LNG”)

based in Hades. On 22 July 2014, the Claimant as “Owners” and the Respondent as “Charterers” entered into an

agreement for the hire of the Ship for the transport of LNG produced from Hades Shale Gas from Hades to

Poseidon for a period of 30 days (the “Charterparty”).

A day before the Charterparty was signed, it was reported in a Hades based newspaper that environmental

objectors were planning significant protests over the export of HLNG from Hades. Upon arrival of the Ship at the

Port of Hades, protests were held which gave rise to a flashpoint of political and public anger in Hades. This lead

to the Opposition Leader of Hades to seize control of the parliament while being backed by the Hades military,

and it was reported that she had instructed the Hades Coast Guard to intercept the Ship and have it return to the

port. The Ship was subsequently intercepted on the 7th October 2014 as it was on its voyage course to Poseidon

and directed to return to the Port of Hades, which the Ship Master complied with. The Ship was stranded at the

port until 20th September 2015 when upon resignation of the new President, the Ship was released by the Coast

Guard. While stranded at the Port of Hades, the Ships propellers were tampered which subsequently broke as the

Ship set sail from the Port. It was then guided to open waters by tugs which belonged to Hestug, a company

owned by Hestia. Subsequently dispute arose between the parties and they referred to arbitration as per Cl 30 of

the Charterparty. Zeus has claimed demurrage amounting to US$ 17.9m and has contended that the Ship never left

the Port of Hades which Hestia has denied and further contended that the Charterparty was frustrated as a result of

the delay in performance. Further, Hestia objected to the jurisdiction of the arbitral panel to determine the claim

regarding frustration of Charterparty and Claimant’s demurrage pleading. Hestia has also counterclaimed a

salvage reward from Zeus.

- Prayer-

1 TEAM 2 - MEMORANDUM FOR HESTIA INDUSTRIES

ARGUMENTS ADVANCED

1. THE ARBITRAL TRIBUNAL DOES NOT HAVE JURISDICTION TO DETERMINE THE ISSUE OF

FRUSTRATION OF THE CHARTER PARTY.

1. While accepting the Tribunal’s right to rule on its own jurisdiction, the Charterers submit that the claim

of frustration is beyond the scope of the arbitration agreement under Clause 30 (‘Cl’) of the Charterparty. It

is submitted that, first, laws of Western Australia (‘Australian Law’) govern the arbitration agreement

[1.1.] and, second, the phrase ‘arising under this Charter party’ precludes the Tribunal from adjudicating

over the claim of frustration [1.2].

1.1. Australian law is the law governing the arbitration agreement.

2. It is submitted that Australian law (in pari material with Poseidon) has been identified by the parties as

the law governing the Charterparty.1 There is a strong presumption in favour of the law of the substantive

contract to also act as the law governing the arbitration agreement.2 In Arsanovia v Cruz City

(‘Arsanovia’)3, it was held that an express choice of law governing the substantive contract is a strong sign

of the parties' intention to apply the same system of laws to govern the underlying contract and arbitration

agreement. Here, the parties had identified Indian law to govern the underlying contract and London as

seat. The Court held this stating of London as seat insufficient to preclude the express choice of Indian law

to govern the underlying contract. The approach used by courts in cases like C v. D4 cannot be applied here

as in this case, like in Arsanovia, the parties have deliberately chosen the governing law of their contract.5

1 Page 46, clause 31 of Bundle. 2 Sulamerica Cia Nacional de Seguros SA v. Enesa Engenharia SA, [2012] EWCA Civ 638; Klöckner Pentaplast Gmbh & Co Kg v. Advance Technology, (H.K.) Company Limited, HCA1526/2010; Habas Sinai v. VSC, (2013) EWHC 4071. 3 Arsanovia Ltd &Ors v. Cruz City Mauritius Holdings [2012] EWHC 3702 (Comm). 4 C v. D, [2007] EWHC 1541 (Comm). 5 Page 46 of Bundle.

-Prayer -

2 TEAM 2 -


London has only been identified as the venue and the same is reflected in the Charterers’ and Owners’

communication both in the pre and post amendment arbitration clauses.6

1.2. The phrase ‘arising under’ precludes this Tribunal from adjudicating over the issue of

frustration.

3. It is submitted that the phrase ‘arising under this Charterparty’ precludes this Tribunal from determining

the claim of frustration as first, parties’ intention to narrowly interpret Cl 30 [1.2.1], second, frustration is

not a dispute contemplated for reference under Cl 30 [1.2.2], third, limited scope of reference ‘arising

under this Charterparty’ [1.2.3] and, fourth, potential intervention by the courts of Poseidon [1.2.4].

1.2.1. Parties’ intension to narrowly interpret Clause 30.

4. It is submitted that this Tribunal is precluded from arbitrating claims of frustration under Cl 30.7 The

phrase ‘arising under’ has to be interpreted in a narrower fashion vis-à-vis ‘arising out of’.8 Through the

letter dated 16th July9 the Charterers have made clear to the Owners that there are a host of disputes that

may arise out of the charter party that they are not prepared to arbitrate. Consequently, the Owners

amended the arbitration clause from ‘arising out of’ to ‘arising under this.’10 The Charterers have through

their communication tried to establish classes of disputes that cannot be determined by the Tribunal. The

Court has to give effect to the restrictive language in an arbitration agreement.11 It is argued that the

Charterers communication with the Owners while negotiating the Charterparty reflects their intention to

exclude a dispute like frustration within Cl 30.

1.2.2. Frustration is not a dispute contemplated for reference under Clause 30.

6 Pages 20, 25 of Bundle. 7 Page 45 of Bundle. 8 GARY B.BORN, INTERNATIONAL COMMERCIAL ARBITRATION, KLUWER ARBITRATION, 1317-50 (2nd ed. 2014); MUSTILL & BOYD, COMMERCIAL ARBITRATION 109, 114, 121 (2014); KIM LEWISON, THE INTERPRETATION OF CONTRACTS, 18.01-22 (5th ed. 2011). 9 Page 25 of Bundle. 10 Page 45 of Bundle. 11Walter Rau Neusser Oel v. Cross Pacific Trading Ltd, [2005] FCA 1111; Tanning Research Laboratories v. O’Brien, (1990) 169 CLR 332 at 344-45, 351-52; Flakt Australia Ltd v. Wilkins & Davies Construction Co Ltd, [1979] 2 NSWLR 243 at 250.

-Prayer -

3 TEAM 2 -


5. It is submitted that under the International Arbitration Act (‘IAA’),12 controversies covered refer to the

contractually identified subject matter that has been arrived at by parties through consensus ad idem.13

Some issues may form a part of the overall dispute but fall beyond the arbitration agreement.14 Frustration

also forms a class of such disputes.15 Frustration does not emerge from the contract but rather from the

uncertain events which the parties have not contemplated whilst the contract was made. 16 Frustration has

been held as an arbitrable dispute in the obiter of Heyman v Darwins17 and the same has been adopted by

Australian courts in the cases of Codelfa Construction18 and Comandate Marine19as ratio. However, in

these cases the arbitration clauses used were ‘arising out of’ and not ‘arising under.’ Therefore it is

submitted that their ruling on the arbitrability of frustration claims is distinguishable from our case.

1.2.3. Limited scope of reference ‘arising under this Charter party’.

6. It is also asserted that the arbitration clause in our case was composed of the terms ‘arising under’ and

not ‘out of’ and consequently has to be interpreted narrowly.20. This distinction has been upheld in the

Cape Flattery Ltd v. Titan Maritime LLC case.21 The Courts held that the phrases ‘arising out of’ or ‘in

connection with’ embrace claims relating to the formation, extent and scope of the contract.22 The terms

‘arising under’ only cover controversies till the extent of contractual claims.23 The Courts of Western

Australia have also narrowly constructed the scope of an ‘arising under’ arbitration clause with some

12 IAA at § 7. 13 Flakt Australia Ltd v. Wilkins & Davies Construction Co Ltd, [1979] 2 NSWLR 243; ALEX BAYKITCH, ARBITRATION LAW OF AUSTRALIA: PRACTICE AND PROCEDURE, 43 (2013). 14IAA at § 7(2)(b); Re Wakim: Ex parte McNally, (1999) 198 CLR 511 at 585-86. 15 Page 25 of Bundle. 16 Bank Line v. Arthur Capel & Co., [1916] 2 A. C. 397; Geipel v. Smith (1872) L.R. 7 Q.B. 404; Bensaude v. Thames and Mersey Marine Insurance Co. [1897] AC 609; Hirji Mulji v. Cheong Yue Steamship Co Ltd [1926] A.C. 497. 17 Heyman v. Darwins, [1942] AC 356. 18 Codelfa Construction Pty Ltd v. State Rail Authority of NSW, [1982] HCA 24. 19 Comandate Marine Corp v. Pan Australia Shipping Pty Ltd, (2006) 157 FCR 45 at 90; 20 Supra Note 18. 21 Cape Flattery Ltd v. Titan Maritime LLC, 607 F.Supp.2d 1179, 1181 (D. Hawai'i 2009). 22Id.; Government of Gibraltar v. Kenney, [1956] 2 QB 410. 23 Fillite (Runcorn) ltd v. Aqua-Lift (1989) 26 Const LR 66; Ethiopian Oilseeds & Pulses Expert Corp v. Rio Del Mar Foods Inc, (1990) 1 Llyod’s Rep 86; Overseas Union Insurers Ltd v. AA Mutual International Insurance Co ltd, (1998) 2 Llyod’s Rep 63 at 68.

-Prayer -

4 TEAM 2 -


claims being arbitrated, while others being litigated.24 In the present case the arbitration clause has been

formulated in a similar fashion and to only cover disputes ‘arising under.’25 Consequently the Courts of

Poseidon have jurisdiction over the claim of frustration of Charterparty.26 Hence, it is submitted that the

arbitration clause has been formulated in a similar fashion and to only cover disputes ‘arising under.’

Consequently, the Courts of Poseidon have jurisdiction over the claim of frustration of Charterparty27

1.2.4. Potential credible intervention by the Courts of Poseidon.

7. The Charterers submit that the claim of frustration can be looked into by the Courts of Poseidon even if

certain remedies are reserved for tribunals, courts can and are allowed to entertain the same.28 There is

often a presumption for a one-stop arbitration clause29 still the same is not absolute and through adverse

inference parties can weigh against the same (as is shown by the communication between parties in our

case).30 This presumption is evaluated on the basis of facts and intention of the parties.31 In the present

case, the Charterers expressly excluded all disputes that do not arise under the Charterparty.32 Hence, it is

submitted that the courts of Poseidon have jurisdiction to determine this claim.33

8. Therefore, the Respondent submits that in the present case, the Tribunal is precluded from determining

the claim of frustration under this arbitration agreement.

24 Paharpur Cooling Towers Ltd v. Paramount (WA) Ltd, [2008] WASCA 110 at [45]. 25 Page 45, clause 30 of Bundle. 26 Page 73 of Bundle. 27 Id. 28 Vertex Data Science Ltd v. Powergen Retail Ltd, 2006 2 Llyod’s Rep 591. 29 Fiona Trust & Holding Corp v. Privalov, [2007] 4 All ER 951.; Credit Suisse First Boston (Europe) Ltd v. MLC (Bermuda) Ltd, [1999] Lloyd's Rep 767; Deutsche Bank AG v. Tongkah Habour Public Company Ltd, (2011) EWHC 2251 (QB); KIM LEWISON, THE INTERPRETATION OF CONTRACTS, 18.01-22 (5th ed. 2011). 30 Page 25 of Bundle. 31 Fiona Trust & Holding Corp v. Privalov, [2007] 4 All ER 951.; Paharpur Cooling Towers Ltd v. Paramount (WA) Ltd, [2008] WASCA 110; Rinehart v. Welker, [2012] NSWCA 95, 120,122; Cape Lambert Resources Ltd v. Mcc Australia Sanjin Mining Pty Ltd, [2013] WASCA 66. 32 Page 25 of Bundle. 33Atlasnavios Navegacao, LDA v. The Ship "Xin Tai Hai" (No 2), [2012] FCA 1497.

-Prayer -

5 TEAM 2 -


2. THERE WAS FRUSTRATION OF CHARTERPARTY IN THE PRESENT CASE.

9. It is submitted first, that the frustration of Charterparty had occurred due to the excessive delay in the

length of the performance of the Charterparty [2.1]; and second that Hestia is not liable for breach of any

Charterparty obligations relating to unsafe port nomination or transportation of dangerous cargo [2.2].

2.1. Frustration of the Charter party had occurred.

10. It is submitted that there was frustration of the Charter party in the present case due to the excessive

delay caused by the deviation of the ship MV Athena back to the Port of Hades.

11. The appropriate test to determine whether a contract has been frustrated is that of a ‘radical change in

the obligations of the parties under the contract.’34 It requires the happening of a supervening event,

without default of either party for which the contract makes no sufficient provision, which the parties could

not have contemplated at the time of its execution, which significantly changes the contractual rights of the

parties such that it would be unjust to hold them to the literal sense of the contractual obligations in the new

circumstances.35 Further, the doctrine of frustration is not of supervening impossibility, but rather of an

unexpected occurrence where the performance would be, radically different from stipulated performance.36

It requires for the commercial purpose of the adventure for which the Charterparty provides to become

impossible.37 Frustration has been held to occur in the maritime context if the ship is seized38.

12. In the present case there was a supervening event in the form of the deviation which happened due to

the Coast Guard’s order to the ship MV Athena to return back to the Port of Hades. This supervening event

34 JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT ,ANSON’S LAW OF CONTRACTS, 487 (29th ed.2010). 35 National Carriers Ltd v. Panalpina (Northern) Ltd, [1981] AC 675, 700. 36 Joseph Constantine Steamship Line Ltd v. Imperial Smelting Corp Ltd, [1942] AC 154, 164; Jackson v. Union Marine Insurance Co Ltd, (1874) LR 10 CP 125. 37 Davis v. Fareham, U..D.C., [1956] A.C. 696; Empresa Ecportadora De Azucar v. Industria Azucarera Nacional (The Playa Larga), [1983] 2 Lloyd’s Rep.171; Gold Group Properties v. BDW Trading, [2010] 1 Lloyd’s Re.p 529 at para. 3. (VC 696). 38 Tatem v. Gamboa, [1939] 1 K.B. 132. INSTITUTE OF MARITIME LAW, MARITIME LAW, 154 (2nd ed. 2011).

-Prayer -

6 TEAM 2 -


leads to a significant change in the contractual rights of the parties under the Charter party. The parties had

contracted for a voyage Charter party under which Zeus being the ship owner had to provide a suitable

LNG tanker that could transport HLNG and Hestia being the charterers were to provide the ship with the

goods that would be transported.39 Under this Charter party, the voyage was supposed to be for a one

month but the actual time that the ship took to leave the Port of Hades was over twelve months.40 Such an

event of deviation that lead to an inordinate delay in the delivery of cargo can be said to put an end to the

commercial sense of the parties’ undertakings. A delay of over twelve times the contracted voyage duration

can reasonably be presumed to cause significant changes in the circumstances, at the time of formation of

the Charter party, in which the transaction would have been profitable. The Charter party was for the

delivery of HLNG which was of significant value to Hestia, and Hestia would have suffered significant

losses should the cargo not be delivered on time. In these circumstances, there was no reason for Hestia to

go ahead with the performance of the Charter party. Thus the Charter party was frustrated by 15th October

2014 as by this date it became reasonably foreseeable to the parties that there would be inordinate delay.

13. Further, this delay could not have been reasonably expected by the parties at the time of formation of

the Charter party. The parties could not have known about the circumstances that such an occurrence such

as a Coast Guard order requiring the ship to return to the Port of Hades would take place. The newspaper

The Hades Advocate on 20th July had reported that environmentalist groups were planning protests against

the export of Hades41, but such a report regarding protests cannot be sufficient to foresee such a

circumstance under which the parties would have foreseen the intervention by the Hades Coast Guard. Any

such presumption regarding returning of the ship back to the Port would be too remote.

14. Thus it submitted that the Charter party was frustrated in the present case.

39 Page 29 of Bundle. 40 Page 68 of Bundle. 41 Page 52 of Bundle.

-Prayer -

7 TEAM 2 -


2.2. In Addition, Hestia is not liable for any breach of its obligations under nomination of

unsafe port or transporting cargo of a dangerous nature.

15. It is submitted first, that there was an express safe port warranty in the Charter party [2.2.1]; second,

that the Port of Hades as nominated by Hestia was safe [2.2.2]; and third, alternatively that events at the

Port of Hades were an abnormal occurrence which Hestia could not have foreseen [2.2.3].

2.2.1. There was an express safe port warranty in the Charter party.

16. The duty for the nomination of the Loading Place under Box 5 of the Charter party lay on the Charters

as per Clause 1 of the Charter party.42 Thus the obligation for the nomination of the loading place was

provided for in the Charter party to lie on the charters, Hestia Industries.

17. In the present case, the nomination of Hades as the Load Port was done by the Charterers Hestia in their

Request for Proposal directed towards Zeus on 1 July 2014.43 Accordingly the final Charter party was

drafted by Hestia under which Clause 5 or the Loading Place waselected by Hestia as “1 safe port,

Hades”.44 The use of the words “Safe” in Box 5 of the Charter party by Hestia shows their absolute

intention that the warranty of safety implied by them is an express safety warranty.45 Thus Hestia had

fulfilled its obligation to nominate a safe port and provide an express safety warranty when it used the word

“safe” with regard to the Port of Hades in the Charter party Box 5.

2.2.2. The Port of Hades as nominated by Hestia was not politically unsafe.

18. It is argued that the port of Hades was not politically unsafe and thus Hestia was not in breach of its

safe port nomination. In the case of the The Eastern City46 it was held that,

42 Page 31 of Bundle. 43 Page 1 of Bundle. 44 Page 29 of Bundle 45 STEPHEN D.GIRVIN, CARRIAGE OF GOODS BY SEA, 321 (2011). 46 Leeds Shipping Co. Ltd. v. Societe Francaise Bunge, [1958] 2 Lloyd’s Rep. 127, 131.

-Prayer -

8 TEAM 2 -


“A port will not be unsafe unless, in the relevant period of time, the particular ship can reach, use it

and return from it without, in the absence of some abnormal occurrence, being exposed to danger

which cannot be avoided by good navigation and seamanship.”

19. In the present case, the Port of Hades was not politically or otherwise unsafe as there was no such legal

danger to the ship regarding its deviation or detention. The mere reporting of planning of protests in the

Hades Advocate cannot be said to have regarded the Port of Hades as being unsafe. Further, there was no

such proper legal order that was sanctioned by the President of Hades or any other authority of Hades that

the ship MV Athena would be detained if it entered the Port of Hades. Thus it cannot be regarded that the

Port of Hades was unsafe in any manner for the ship MV Athena and thus Hestia was not in breach of its

obligations when it nominated Port of Hades as a safe Loading Place under the Charter party.

2.2.3. Alternatively, Hestia could not have foreseen the unsafe circumstances of the Port as the Port

was safe at the time of nomination as it was an abnormal occurrence.

20. It is argued alternatively that Hestia could not have reasonably foreseen or known about the unsafe

conditions of the Port of Hades as the events at the Port of Hades were an abnormal occurrence.

21. If the set-up of the port is good but nevertheless the ship suffers damage owing to some isolated,

abnormal or extraneous occurrence, unconnected with the set-up, then the charterer is not in breach of his

warranty.47 The test has been laid down as in The Saga Cob that whether a reasonably careful charterer

would on the facts known have concluded that the port was prospectively unsafe.48 In the present case, the

newspaper The Hades Advocate had reported on 20th July 2014 that certain environmental objectors such

as James Parker of the Save Hades Group were planning significant protests around the commissioning of

47 COGHLIN WILFORD, et al. , TIME CHARTERS, 200 (5th ed. 2003). 48 K/S Penta Shipping A/S v. Ethiopian Shipping Lines Corporation (The Sage Cob), [1992- 2 Lloyd’s Rep. 545. See also INSTITUTE OF MARITIME LAW, MARITIME LAW, 152 (2nd ed. 2011).

-Prayer -

9 TEAM 2 -


the Hestia HLNG plant.49 This is the only instance which talks about any such form of opposition to the

export of HLNG. Further, in the present case the sudden overthrow of the Hades Government by the

Opposition Leader of Hades, Jacqueline Simmons backed by the Hades military lead to the later deviation

and detention of the ship MV Athena by the Coast Guard.50 It would be unreasonable to state that such

political events as the overthrowing of the government were not an abnormal occurrence and that they were

foreseeable and could be expected. Thus, events such as the overthrowing of the Government are not

events that happen frequently and cannot be deemed as a characteristic of the port.

22. Thus such events which lead to the eventual deviation and arrest of the ship were an abnormal

occurrence which could not have been reasonable foreseen by Hestia, and thus Hestia is not liable for

unsafe port nomination under the Charter party.

3. LAYTIME WAS NEVER EXCEEDED AND NO DEMURRAGE ACCRUED.

23. It is submitted that, first, laytime had never exceeded and no demurrage accrued as the ship had crossed

the territorial waters of Hades by the time it was intercepted by the Coast Guard [3.1], second,

alternatively, that the ship had finally sailed from the Port of Hades and had no intention of returning back

to the port [3.2]; and third, alternatively, Zeus is liable for unjustified deviation and is thus not entitled to

demurrage and instead Hestia can claim damages for breach of Charterparty obligations [3.3].

3.1. Laytime was never exceeded as ship had crossed the territorial waters of Hades.

24. It is submitted that laytime never exceeded the contracted time as the ship crossed the territorial waters

of Hades by the time the Hades Coast Guard intercepted the ship.

49 of Bundle. 50 Page 55 of Bundle.

-Prayer -


25. Laytime is defined as the period of time agreed between the parties during which the owner will make

and keep the ship available for loading or discharging without payment additional to the freight.51 In the

present case, the Charterparty Clause 9(c) (i) had fixed the laytime to 10 WWD SHINC to commence from

when the Notice of Readiness (NOR) is tendered until the ship leaves the Loading Place.52 The Loading

Place as defined in Box 5 of the Charterparty was “1 Safe Port, Hades”.53 In the present case the Master of

the Ship MV Athena had tendered a NOR on 3 October 2014 at 09:15 a.m.54 Thus, this is the time when the

ship was deemed to have arrived and when laytime is said to have commenced as per Clause 9(c) of the

Charterparty and would continue until the ship leaves the Port of Hades.

26. Under customary international law, the territorial water of a nation state is deemed to not exceed 12

nautical miles measured from the nation’s baseline.55 Thus it can be reasonably assumed that the outer

boundary of the Port of Hades would be within this 12 nautical mile range. In the present case, the ship had

sailed from the Port of Hades at 9:00 AM on 07/10/201456 and was intercepted by the coast guard on the

same day, but sometime late on that day.57 Thus the ship was intercepted after 12 p.m. in the afternoon, at

least 3 hours after it had sailed. The normal industry average speed of a LNG Tanker is deemed to be

between 10-18 knots.58 Thus, it can be reasonably expected that the ship MV Athena in the present case

would have sufficiently crossed the territorial waters of Hades (12 nautical miles) while travelling for over

3 hours at the average minimum speed of even 10 knots, before being intercepted by the Coast Guard.

51 Voylayrules 1993, Baltic Code 2003. 52 Page 34 of Bundle. 53 Page 29 of Bundle. 54 Page 53 of Bundle. 55 Article 3, United Nations Convention on Law Of the Sea, (1982) 1833 UNTS 3. 56 Page 54 of Bundle. 57 Pages 57 and 62 of Bundle. 58 Siyuan Wang & Theo Notteboom, Current Issues in Shipping, Ports and Logistics, 143 (2011); See also, MAN Diesel and Turbo, Propulsion Trends in LNG Carriers, available at http://marine.man.eu/docs/librariesprovider6/technical-papers/propulsion-trends-in-lng-carriers.pdf?sfvrsn=16.

-Prayer -


27. Thus it is submitted that the ship MV Athena can be deemed to have crossed the territorial waters of the

Port of Hades before it was intercepted by the Hades Coast Guard.

3.2. Alternatively, the ship had finally sailed from the Port of Hades.

28. It is submitted in the alternative that laytime had ended and demurrage did not accrue in the present

case as the ship MV Athena had finally set sail from the Port of Hades.

29. A ship is deemed to have finally sailed from her port of loading when she has passed the limits of the

port,59 ready for her voyage with the purpose of proceeding on her voyage and without any intention of

coming back.60 In the case of Patrinovic & Co Ltd v. Mission Francaise des Transports Maritimes,61 the

Court held that the obligation to pay demurrage cannot continue if the ship is taken away finally for her

own purpose under such circumstances as to make it clear that there is no intention whatsoever of her

coming back to the port. Similarly in The Silver Sky62 case, the court ruled that the demurrage shall not

accrue based upon the intention of the ship master of not returning to the port.

30. In the present case, as per the Statement of Facts signed by the Master of the ship MV Athena, the ship

had completed its loading of cargo on 06/10/2014 and the ship was regarded to have sailed from the Port of

Hades on 07/10/2014.63 It was during this voyage from the Port of Hades that the ship MV Athena was

intercepted by the Hades Coast Guard and ordered to return to the Port of Hades.64 Thus the presence of

these facts show clear intention on part of the ship owner and Master that there was no intention of

returning to the Port of Hades once the ship had commenced on the contracted Charterparty voyage from

the Port of Hades towards Poseidon.

59 Roelandts v. Harrison, (1854) 9 Ex. 444, 456. 60 Price v. Livingstone, (1882) 9 Q.B.D. 679. 61 Patrinovic & Co Ltd v. Mission Francaise des Transports Maritimes, (1941) 71 LI L Rep 208. 62 The Silver Sky, (1981) 2 Lloyd’s Rep 95. 63 Page 54 of Bundle. 64 Page 62 of Bundle.

-Prayer -


31. Thus, laytime ended and demurrage did not accrue as the ship MV Athena had no intention of returning

as it had commenced on its voyage and had finally sailed from the Port of Hades.

3.3. Alternatively, laytime shall cease to continue due to unjustified deviation by Zeus for

which Hestia is entitled to damages.

32. It is first submitted that there was unjustified deviation by Zeus due to which Zeus is not entitled to

demurrage [3.3.1]; and second that Hestia is entitled to damages for breach of Charterparty obligation by

Zeus for the unjustified deviation [3.3.2].

3.3.1. Zeus is liable for unjustified deviation from the usual course of the voyage under the

Charterparty.

33. It is submitted that Zeus has breached its obligation under Clause 19 of the Charterparty for unjustified

deviation and is not entitled to demurrage.

34. As per the common maritime law, if there is an unjustified deviation during the currency of the charter,

then demurrage may not be claimable under the terms of the charter and an alternative claim for detention

can only be claimable under the terms of the charter.65 In the case of United States Shipping Board v.

Bunge y Born, the House of Lords held that the ship owner is not entitled to demurrage if deviation arose

from the ship owner’s fault.66 Further, as per the maritime custom, if there is an unjustified deviation

during the performance of the charter, then demurrage may not be claimable under the terms of the

65 JOHN SCHOFIELD, LAYTIME AND DEMURRAGE,379 (1986). 66 United States Shipping Board v. Bunge y Born, 23 L1 L Rep 257 (HL).

-Prayer -


charter.67 Moreover, a party may not rely on its own breach of obligations to bring the contract to an end68

or a party may not take advantage of his or her own wrong.69

35. In the present case, Clause 19 of the Charterparty states that the ship can only be deviated for the

purpose of saving life or property and for no other purpose.70 In the present case, the contracted course of

voyage was from Hades to Poseidon71, but the ship was deviated back to the Port of Hades by the Master of

the ship after it was intercepted and ordered so by the Hades Coast Guard.72 At the time the ship was

deviated from its usual voyage course, there was no such threat or need for the purpose of saving life or

property as has been laid down in the Charterparty. Thus, the Ship Master was negligent in deviating the

ship back to the Port of Hades as against the Charterparty provision. A ship Master is the agent of the ship

owner and thus the ship owner is directly responsible for the ship Masters acts.73 Thus in the present case

the ship owner Zeus is liable for unjustified deviation and is thus not entitled to any demurrage.

36. Thus as it is the unjustified deviation that lead to the delay, Zeus is not entitled to demurrage for

causing the event that lead to the delay.

3.3.2. Hestia is entitled to claim damages from Zeus for breach of Charterparty due to unjustified

deviation.

37. It is submitted that as Zeus is liable for unjustified deviation that lead to the delay in the performance of

the Charterparty, Zeus is responsible for causing the frustrating event and must pay damages to Hestia.

67 JOHN SCHOFIELD, LAYTIME AND DEMURRAGE,379 (1986). 68 Thompson v. ASDA-MFI Group plc, [1988] 1 Ch 241, 266. 69 Alghussien Establishment v. Eton College, [1988] 1 WLR 587; Cheall v. Association of Professional Executive Clerical and Computer Staff, [1983] 2 AC 87. 70 Page 40 of Bundle. 71 Page 29 of Bundle. 72 Page 57 of Bundle. 73 LEKA MANDARAKA-SHEPPAD, MODERN MARITIME LAW : MANAGING RISKS AND LIABILITIES, 522 (2013).

-Prayer -


38. Breach of an essential term known as a condition which goes to the root of the contract74, gives the

innocent party the option of being discharged from further performance of the contract75 and also sue for

damages for breach.76 Whether or not a term is essential to be regarded as a condition depends upon the

intention of the parties which is to be ascertained from their agreement and from the subject matter to

which it relates.77 Whether a term will be classified as a condition depends in part on the Court making

what is on effect a value judgment about the commercial significance of the term in question.78 The

Courtshave at times to give ‘business efficacy’ have implied such terms as are necessary to effect that

result.79 A test was developed Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha80 Ltd that,

“Does the occurrence of the event deprive the party who has further undertakings to perform of

substantially the whole benefit which it was in the intention of the parties as expressed in the

contract that he should obtain as the consideration for performing those undertakings?”

39. In the present case, the voyage of the ship MV Athena was from the Port of Hades till Poseidon.81

Unjustified deviation is treated as a fundamental breach of contract and the charterer has the right to elect

to terminate or affirm the contract.82 Deviation without proper justification for the same from the

contracted voyage route can be regarded as an essential term of the Charterparty as the purpose behind the

parties to that contract is the delivery of the cargo in the contracted time without delay. The cargo was of

significant value to Hestia and Hestia would have had suffered significant losses should the cargo not be

74 Gunton v. Richmond LBC, [1980] ICR 755; See also JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT ,ANSON’S LAW OF CONTRACTS, 529 (29th ed.2010). 75 JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT ,ANSON’S LAW OF CONTRACTS, 140 (29th ed.2010). 76 Id, 141. 77 Id., 140. 78 Id., 146. 79 The Moorcock, (1899) 14 PD 64; JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT , ANSON’S LAW OF CONTRACTS, 152 (29th ed.2010). 80 Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha [1962] 2 QB 26, 66; Photo Production Ltd v. Securicor Transport Ltd, [1980] AC 827, 849. 81 Page 29 of Bundle. 82 Hain Stemship Company Ltd v. Tate & Lyle Ltd, [1936] 2 All E.R. 597.

-Prayer -


delivered on time.83 Thus justified deviation from the voyage route was a condition under the Charterparty

which was breached by Zeus due to the negligence of the Master in following the Coast Guards orders.

40. Further, a party can waive their right to comply with a condition and the contract can still be enforced

as if it had been omitted.84 Thus a party can still affirm the contract with knowledge of the breach to treat

the contract as still bending and to rest content with damages, which are available as a remedy in any

event.85 In the present case, Hestia had not accepted the breach of condition by Zeus and had affirmed the

contract and thus can claim damages for the breach.

41. Also, a breach of contract must be the effective cause of the loss as opposed to an event which merely

gives the opportunity for the claimant to sustain the loss.86 Further, damages will not be too remote if they

flow from the normal business position of the parties as the Court will assume that this is known to both of

them.87 In the present case, this breach of Charterparty by Zeus was the effective cause that lead to the loss

to Hestia as it was the negligent action of the ship Master in following orders it was not obligated to that

lead to the ship to deviate back to the Port of Hades, which eventually lead to the delay in the performance

of the Charterparty and loss to Hestia in the non-delivery of cargo to Poseidon. It can be reasonably

assumed that Zeus could have foreseen such a loss to Hestia from the breach arising from the normal

business position as Zeus is a world leader in tanker ships88 and can be regarded to have experience in

previous cargo transport similar to the present case.

83 Page 61 of Bundle. 84 See also INSTITUTE OF MARITIME LAW, MARITIME LAW, 149 (2nd ed. 2011). 85 JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT, ANSON’S LAW OF CONTRACTS, 149 (29th ed.2010). 86 Id; Galoo Ltd v. Bright Grahame Murray, [1994] 1 WLR 1360; Compania Naviera Maropan S/A v. Bowaters Lloyd Pulp & Paper Milld Ltd, [1955] 2 QB 68. 87 Monarch Steamship Co Ltd v. Karlshamns Oljefabriker (A/B) [1949] AC 196; JACK BEATSON, ANDREW BURROWS AND J.CARTWRIGHT ,ANSON’S LAW OF CONTRACTS, 551 (29th ed.2010). 88 Page 3 of Bundle.

-Prayer -


42. Thus it is submitted that Zeus is liable for causing the event that lead to the delay in the performance of

the Charterparty through the negligence of its Master, and thus Zeus is liable to pay Hestia damages for this

breach of a significant condition of justified deviation from the contracted course of the voyage.

4. ALTERNATIVELY, HESTIA DOES NOT HAVE ANY LIABILITY FOR DEMURRAGE OR DAMAGES AS THE

FORCE MAJEURE CLAUSE UNDER CLAUSE 19 OF THE CHARTERPARTY WAS IN APPLICATION.

43. Clause 19 of the Charterparty is titled the force majeure clause which lays down events upon which no

party is liable for any failure of performance of any obligation or delay in performance of any obligation on

their part as laid down in the Charterparty.89 Clause 19(d) of the Charterparty lays down that the term

Force Majeure Event compasses of the events “mobilization, war (declared or undeclared), hostilities, and

barratry of the master and crew or other similar cause”.90 It is asserted herein that such a Force Majeure

Event had occurred and Clause 19 does come under application in the present case and which relieves

Hestia from any liability for demurrage or damages.

44. The duty to show that the loss was not caused by an expected force majeure event in the Charterparty

lies upon the ship owner.91 The term “war” refers to hostile contention by means of an armed force carried

on between nations, states, rulers, citizens in the same nation or state92 and “hostility” refers to an

unfriendly aggression.93 In the present case, the newspaper, The Hades Advocate on 7th October 2014

reported that the Opposition Leader of Hades had seized control of the parliament with the backing of the

Hades military94 and the military coup had been lead by the leader of the Hades military General

89 Page 39 of Bundle. 90 Page 40 of Bundle. 91 Baxter’s Leather Co. v. Royal Mail Co., [1908] 1 K.B. 796; Smith v. G.W.Ry, [1922] A.C. 178 ; See also STEWART C.BOYD CBE Q.C., STEVEN BERRY, ANDREW S.BURROWS Q.C., HERMARD EDER, DAVID FOXTON AND CHRISTOPHER F.SMITH, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING, 218 (21st ed. 2008) 92 WILLIAM STATSKY, LEGAL THESAURUS DICTIONARY,796 (2001). 93 WILLIAM STATSKY, LEGAL THESAURUS DICTIONARY, 375 (2001). 94 Page 55 of Bundle.

-Prayer -


Makepeace.95 This had been the result of a coup which was reported to have been precipitated by the

protest and public opposition to the export of HLNG by Hestia Industries.96 The backing by the Hades

military refers to the presence of an armed conflict which and thus the coup backed by the Hades military

that lead to the overthrowing of the Hades government falls under the term “war”.

45. Thus it is submitted that events that can be termed as a force majeure event have occurred in the present

case and that the force majeure clause is in application and Hestia is thus relieved of its obligations under

the Charterparty to pay demurrage or damages.

5. HESTIA IS ENTITLED TO THE SALVAGE REWARD BECAUSE IT SUCCESSFULLY PROVIDED

ASSISTANCE TO ATHENA WHEN IT WAS IN DANGER.

46. It is submitted that the service provided by Hestia would be regarded as ‘salvage’. Zeus would be liable

to pay salvage reward to Hestia because the vessel was in a state of danger due to the breaking of vital

propeller shafts, the assistance provided was voluntary, was not governed by any pre-existing contractual

obligations or duties and the operation was successful [5.1]. In arguendo, Hestia would be entitled to the

salvage reward or a lump sum based on the general contractual principals of like unjust enrichment and

quantum meriut [5.2].

5.1. There was a salvage operation and Zeus is liable to pay the salvage reward

47. Salvage, as understood by common law, is the amount of compensation that voluntary salvors are

entitled to if they are successful, in whole or in part, in saving an imperiled vessel.97 In order to bring a

claim for salvage compensation before the court, the salvor must establish three elements— first, there

must be ‘marine peril’, second, the salvage service must be conducted voluntarily, and not under any

95 Id. 96 Id. 97Aircraft Recovery, L.L.C., v. Abandoned Aircraft, 54 F.Supp.2d 1172, 1179 (1999).

-Prayer -


preexisting obligation. And third, the salvage service must succeed as a whole or in par, as a result of the

efforts that the salvor expended to salvage the vessel. 98 Only when all three elements are established, is the

claim considered successful.99

48. It is submitted that due to the presence of danger and a voluntary and successful salvage operation, the

life and property of Athena could be saved, therefore. Zeus will be liable to pay the salvage reward to

Hestia. In the present case, the danger arose due to the breakage of propeller shafts[5.1.1] the salvage

operation was voluntary as there was no contractual or other obligation to bind Hestia. Moreover, the

ownership of cargo will not debar Hestia’s claim to the salvage reward[5.1.2] and the salvage operation

was successful in saving the life and property of Athena[5.1.3]. Therefore, the respondents will be entitled

to a salvage reward.

5.1.1. MV Athena was in danger due to the breakage of propeller shafts.

49. Danger, absolute or indirect, is the sine qua non for a salvage operation, i.e. if the property in question

is not exposed to danger, they cannot claim the salvage reward.100. In Secunda Marine Services Ltd. v.

Liberty Mutual Insurance Company,101 the NSCA held that when a ship is in danger due to the breaking of

its propeller shafts and is subsequently towed to safety by a tug, a successful salvage claim arises.102

98 See Newell D. Smith, The Law of Salvage (February 5th 1994); Jones v. Sea Tow Services Freeport NY Inc., 30 F.3d 360 (2d Cir. 1994); Jeffrey W. Yeats, Clearing Up the Confusion: A Strict Standard of Abandonment For Sunken Public Vessels, University of San Francisco Maritime Law Journal, 1999- 2000, page 365. 99 The Sabine, (1879),101 U.S. 384.

100The Geertje K [1971], 1 Lloyd’s Rep.285,287 ; The Phantom (1866), L.R. 1 A & E. 58,60 ; The Aztecs (1870) 3.Asp M.L.C. 326; The Mount Cynthos (1937) 58 Ll.L.Rep.18,24-5 ; The Suevic [1908], P.154,159-160 (Danger is looked upon as an ordinary person with ordinary intelligence). 101 Secunda Marine Services Ltd. v. Liberty Mutual Insurance Company, (2006) NSCA 82. 102 Id.

-Prayer -


50. In the present case, the ship MV Athena had been stranded on the port of Hades for over a year. While

being stranded at the port, the propeller shafts of the ship had reportedly been tampered with.103 Propeller

shafts form that part of the ship, which controls its movement104 and thus are essential for the movement of

the ship.105 Without properly functioning propeller shafts, the ship is incapable of moving or navigating in

open waters.106. Therefore, shortly after releasing the tugs, the vessel began to drift in an uncontrolled

manner107, leaving its body in direct risk of physical destruction, harm to the cargo and thus creating the

possibility of financial harm to the owners. It also created a future harm of collision to the ship as it was not

in control and was drifting aimlessly.

51. These circumstances satisfy the threshold of ‘marine peril’108 which is commonly considered the first

element of a claim for salvage. There can be no doubt that Athena, was in danger. At this time, Hestug,

which was an agency of the Respondent, undertook a salvage operation in respect of the Athena, which led

to the successful preservation of the vessel and its cargo and crew.109 Therefore, the assistance provided by

Hestug would come under the ambit of ‘salvage’. Hence, Hestia will be entitled to a salvage reward on the

basis of the services rendered to Athena at the time of danger.

5.1.2. The element of voluntariness was present in the act of salvage.

52. It is submitted that the act of salvage was voluntary and was not governed by any pre-existing

contractual obligations between the parties and hence Hestia is entitled to a salvage reward. The

entitlement of a claimant to a salvage reward depends upon whether he rendered the service in respect of

103Page 71 of Bundle. 104 EDWARD V. LEWIS, PRINCIPALS OF NAVAL ARCHITECTURE, Vol II,1242 (1988). 105Id. 106Id. 107 Page 73 of Bundle. 108 Secunda Marine Services Ltd. v. Liberty Mutual Insurance Company, 2006 NSCA 82 (2006-06-30). 109Page 71 of Bundle.

-Prayer -


which he claims “voluntarily”.110 The term signifies that the service was not rendered due to a pre-existing

contractual obligation or a duty.111

53. Thus, the respondents submit that since there was no salvage agreement or pre-existing contractual

obligation between them and the charterers and the ownership of cargo doesn’t evade the element of

voluntariness, the assistance rendered to MV Athena would be regarded as voluntary.

5.1.2.1. The act was not under an already existing contractual obligation.

54. The contract of towage between Hestia and Zeus included the tugging of the vessel by Hestug and it

ended after releasing the tow lines.112 The services provided by Hestug were outside the ambit of the

contract of towage as the act of salvage was not a part of the contract between the tugs and the owners of

the ship113 of the existing Charterparty. This service exceeded the contracted towage.114 This is clarified by

the fact that the tugs, after completing their jobs had left the vessel and then it began to drift and the tugs

were called again for the salvage operation by the master.115

55. It was held in The Homewood116 ,a case regarding the salvage by tug owners , that for constituting a

salvage service by a tug , the two should be in a danger by the reason of circumstances which could not

reasonably have been contemplated by the parties and the assistance provided by the salvors should not be

in the scope of the contract. 110 The Duke of Manchester (1847), 6 Moo.O.C.90,99, as per Lord Campbell, “The very notion of saving a ship, supposes that the salvor, instead of making executing orders shall perform some extraordinary service and exert himself to the utmost for the safety of life and property”; See also, FRANCIS D.ROSE, KENEDDY AND ROSE THE LAW OF SALVAGE, 159 (The Hon. Sir David Steel, Richard AA. Shaw eds. 6th ed. 2002). 111GEOFFREY BRICE, BRICE ON MARITIME LAW OF SALVAGE 43 (John Reeder ed. 5th ed. 2011). 112 The Princess Alice, 1849 3 W Rob 138, 139; The Neptune, (1824) 1 Hagg. 227. See also, FRANCIS D.ROSE, KENEDDY AND ROSE THE LAW OF SALVAGE, 205. 113The Saratoga(1861) 2 Gallison 164 ; The Minehaha (1861) 15 Moo.(P.C.) 133,152-154. 114 International Salvage Convention, art 12(3), July 14,1996,1953 UNTS 193. 115Page 71 of Bundle. 116The Homewood, (1928) 31 L1.L.Rep.336, 339. Applied in The St.Patrick (1930) 35 L1L.Rep.231; The Glenbeg (1940) 67Ll.L.Rep.94.

-Prayer -


56. Here, the towers and the ship-owners could not foresee that while the ship was at anchor, its propeller

shafts would be tampered with in such a manner that it would be exposed to marine peril while at sea.

Furthermore, the contract was only for towing the ship till the high seas and not beyond. Thus, it is argued

from the side of claimants that the act of salvage was outside the ambit of the existing contract of towage

and hence was voluntary.

57. Therefore, the services provided by Hestug were of voluntary nature and hence they are entitled to the

salvage reward.

5.1.2.2. No self-interest of Hestia involved.

58. It is established that the fact that Hestia was the owner of the cargo doesn’t debar its claim to the

salvage reward. The 1989 Convention of Salvage, which is ratified by Australia, contains no prohibitions

on claims of salvage for one’s own property and sister ships as long as the salvors are not public authorities

nor do they have a contractual or another duty to salvage the vessel.117

It is submitted that only the master and the crew of the ship are under a contractual obligation of assisting

the ship in any peril and hence they cannot claim salvage rewards for these purposes, as they are obliged to

save the vessel from any harm as a part of their job, whereas, the passengers, the cargo-owners and other

salvors, who do not have a pre-existing contractual relationship with the ship-owners are entitled to a

salvage reward.118

117International Salvage Convention, art 8, July 14,1996,1953 UNTS 193. 118International Salvage Convention, art 5, July 14,1996,1953 UNTS 193; See also The North Goodwin (No.16) 1980 ; The Le Jonet (1872) L.R. 3.A.&E. 556; The Glasidale (1945) 78 Ll.L.Rep.477.

-Prayer -


59. In the landmark case concerning the The Sava Star119,Judge Clarke of the House of Lords held that just

because a party has some interest in assisting a ship and they successfully salvage the ship in the need,

without any contractual obligation, they cannot be debarred from getting the salvage reward. This was held

so because when a party is saving the other, putting themselves in danger, they become entitled to a

consideration for their services which saved the life and property of a vessel.

60. Thus, since the duty of the cargo-owner to salvage a vessel in the time of peril doesn’t exist and the

charter-party is already frustrated, the salvage operation was “voluntary” and Hestia will be entitled to a

salvage reward.

5.1.3. The salvage operation was successful.

61. It is submitted that the salvage operation undertaken by Hestug was successful as it helped in saving the

life and property of the vessel, MV Athena.

62. Success is the third essential element of a salvage operation.120 If the salvage of a vessel doesn’t save

the life and property of the vessel or the cargo, the operation is rendered unsuccessful and the salvage

reward could be denied.121

63. It is established by the facts that the salvage operation led by Hestug after the breakage of propeller

shafts of MV Athena.122 And this was a successful salvage operation.123 As a result, it is submitted by the

respondent that all three elements of salvage i.e.danger, voluntariness and success are established in the

present case. Therefore, Hestia will be entitled to a salvage reward from Zeus.

119The Sava Star, [1995] 2 Lloyd’s Rep. 134,141. 120 GEOFFREY BRICE, BRICE ON MARITIME LAW OF SALVAGE,43 (John Reeder ed. 5th ed. 2011) 121 Id. 122 Page 71 of Bundle. 123 Page 77 of Bundle.

-Prayer -


5.2. In Arguendo, Hestia will be entitled to the reward based on the general principles of

contracts.

64. It is submitted that Hestia will be entitled to the salvage reward based on the principal of unjust

enrichment. The principle of unjust enrichment is based upon the fact that when one party, does a lawful

act for the other, without any gratuitous intention or with the intention of getting paid, the former is entitled

to adequate remuneration on the basis of contractual or quasi-contractual obligations.124

65. In the present case, since there was no contractual relation between the claimant and the respondent for

the salvage operation, a quasi-contract will be formed. Thus, the claimants will be entitled to a salvage

reward based on the successful salvage operation carried by them for the benefit of the respondent. If the

respondents do not get the reward, the claimants will be unjustly enriched from the actions of the

respondents. Therefore, it is just for the respondents to be awarded the remuneration for their efforts.

66. In the cases of salvage, when there is no contract to salve the vessel per se, and the salvor successfully

salves a vessel, there is the formation of a quasi-contractual liability and the salvor is entitled to the salvage

reward based on quantum meriut.125

67. It was held in The Troilus126 that in salvage, a duty is imposed by law irrespective of any contract,

express or implied is different from towage which only arises from an implied or express contract.

68. It is argued that in the absence of a salvage agreement, the reward should be valued on the basis of

quantum meriut or the amount of work done by the salvors. The facts of the present case establish that

when the act of salvage was done, there was no agreement which governed the parties. Therefore, the

124 CHITTY ON CONTRACTS, 1565,1566 (Hugh Baele edt. 28th.ed. 2012). 125The Five Steel Barges, (1890) 15 PD 142 and 146. 126The Troilus, (1950) P 92 [1950] 1 AII ER 103.

-Prayer -


claimants will be entitled to the salvage reward on the basis of the work that they did because the “right to

salvage is in no way dependent upon the contract and may exist or frequently does exist , in the absence of

any express contract or of any circumstances to raise an implied contract”.

-Prayer -


PRAYER

For the reasons set out above, the Claimant requests the Tribunal to:

1. Declare that the arbitral tribunal does not have jurisdiction to try this dispute between the Claimant and

the Respondent.

2. Hold that this is not a case of frustration of charter party in the present case and Zeus is not entitled to any

damages from Hestia for breach of charter party obligations.

3. Hold that the laytime has not exceeded due to which demurrage had accrued and Hestia is not liable to

pay any demurrage to Zeus.

4. Hold that the assistance provided by Hestia is not a salvage operation and Hestia is not entitled to any

salvage reward.

5. AWARD any other interests & costs in favour of the Respondent.

Dated this 20th day of April 2016 by the Counsel for Respondent, Hestia Industries

thannual international maritime law arbitration … · ch law reports chancery charter charter...

Documents