UK: Shipping Newsletter - July 2014

Expert legal advice in uncertain waters

Written by legal experts, Clyde & Co's Shipping Newsletter is a regular publication which covers recent legal developments within the sector.

In this issue:

  • "LNG GEMINI""Cargoes Injurious to the Vessel" charterparty clause examined – American Overseas Marine Corporation v Golar Commodities Limited "LNG GEMINI" [2014] – by Hatty Sumption and Dolly Brown
  • "BULK URUGUAY" – Charterers fail to establish anticipatory breach of contract – Geden Operations Ltd v Dry Bulk Handy Holdings Inc. (The "BULK URUGUAY") [2014] – by Iain Rowlands
  • General average adjustments: Importance of LOU security wording – St. Maximus Shipping Co. Ltd v A.P. Moller-Maersk A/S [2014] – by Chris Moxon
  • The "ASTIPALAIA" – VLCC loss of earnings following a collision – Owners of the ship "ASTIPALAIA" v Owners and/or demise charterers of the ship "HANJIN SHENZEN" [2014] – by Victoria MacGregor
  • Port terminal and shipowners dispute liability for crane damage – Terminal Contenitori Porto di Genova Spa v China Shipping Container Lines Ltd [2014] – by Jason Barnes
  • UAE – Ship arrests in the UAE and recent developments – by Khurram Ali

What's new?

  • Fulton Shipping Inc. v Globalia Business Travel S.A.U. (The "NEW FLAMENCO") – by Elizabeth Turnbull and Marcia Perucca
  • Court of Appeal ruling in The "FALKONERA" – by Hatty Sumption and Peter Ward
  • Court of Appeal defines scope of "Charterers' agent" in an off-hire clause – by Ed Webb-Mills and Dolly Brown
  • China's new Enterprise Income Tax regulation and its impact on international transportation business – by Ik Wei Chong, Samuel Yang and Kirsty Gow
  • China: Validity of mortgages established on vessels owned by company in bankruptcy – by Ik Wei Chong and Leslie Shen
  • China: Financial leasing contracts in China – an update – by Ik Wei Chong and Leslie Shen
  • Sanctions update: EU and US announce new measures – by Michael Swangard and Doug Maag
  • Record US sanctions penalties against BNP Paribas – by Doug Maag
  • Ukraine sanctions: EU lists two Crimean companies and 13 further individuals – by Michael Swangard and Rupert Gordon

The "LNG GEMINI" – "Cargoes Injurious to the Vessel" charterparty clause examined

Hatty Sumption and Dolly Brown

In the context of an LNG timecharter, the Commercial Court considered in American Overseas Marine Corporation v Golar Commodities Limited "LNG GEMINI" [2014] the interpretation of an Injurious Cargoes clause commonly found in the standard Shelltime form.

The clause in question reads as follows:

Clause 30

"No acids, explosives or cargoes injurious to the Vessel shall be shipped and without prejudice to the foregoing any damage to the Vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers' account."

The claimants, American Overseas Marine Corporation (AOM) were the managing owners of the vessel "LNG GEMINI". Golar Commodities Limited (Golar) had the vessel on timecharter for 60 days (15 days more or less, with two charterers' options to extend the hire for further such periods).

Golar ordered the vessel to proceed to and load a full cargo at the Cameron Terminal in Louisiana, USA, intended for carriage to Senboko, Japan. Difficulties were experienced during loading in the form of over-pressurisation suspected to arise from sediment in the cargo. Debris was found clogging filters in the terminal's loading arms. However, discharge in Japan proceeded without incident and no debris was found. The vessel performed several other voyages over the course of the timecharter, subsequent to the operations at Cameron, during which at various times debris was found in the vessel's spray pump strainers.

AOM subsequently took the vessel to a repair yard to undertake pre-planned works, where debris was found in all of the vessel's tanks. AOM claimed that this was sediment from the "Cameron cargo" and that it had damaged the vessel's tanks and pumps. They claimed from Golar the cost of expenses associated with and time spent on undertaking repairs and cleaning tanks at the repair yard on the basis that the Cameron cargo had been an "injurious cargo" for the purposes of clause 30.

In spite of the fact that clause 30 was in the same terms as clause 28 of the standard Shelltime form, there did not appear to be authority on the meaning of "injurious to the vessel".

On the facts, AOM were not able to prove to the Court's satisfaction that any of the damage observed at the repair yard had been caused by the Cameron cargo, or that the repairs and tank cleaning were necessary as a result of the carriage of that cargo. AOM therefore sought to argue that a cargo could be "injurious to the Vessel" without actually causing damage on the basis that if such cargo necessitated cleaning of the vessel's tanks, it would be "injurious" to the purpose of the vessel as an instrument of trade. In the alternative, a cargo could be "injurious" even if it didn't actually cause damage if it was of a kind that had a tendency or propensity to cause damage.

The judge rejected the first argument and said that Clause 30 was directed solely to physical damage. The clause expressly covered two types of cargo which might cause physical damage to the vessel, acid and explosives, and the inference was that it also covered other cargoes that also might cause physical damage. The clause was then concerned with repairs, which connoted physical damage, and only provided an indemnity for time spent to carry out repairs, not for time lost by other reasons, such as cleaning of tanks.

The judge accepted the alternative argument, but in this case AOM had failed to demonstrate that the debris found in the tanks at the repair yard were from the Cameron cargo, or that it had created a risk of damage to the vessel. The judge further noted that the industry did not appear to share the view that particles in LNG cargo create potential dangers for LNG carriers. When SIGTTO1 recommended that strainers be fitted in the manifolds of those ships, they did this for the purpose of protecting receiving terminals, not the LNG carriers themselves. Accordingly, the Judge held that Golar had not shipped an injurious cargo and they were not in breach of the charterparty. Further, AOM had failed to prove much of its damages claim. AOM's claim was accordingly dismissed.

The "BULK URUGUAY" - Charterers fail to establish anticipatory breach of contract

Iain Rowlands

In the recent case of the "BULK URUGUAY", the Court examined whether anticipatory breach of contract can arise purely on the basis of future performance being made contingent on a third party's conduct.


By way of a time charter entered into on 2 July 2010, the defendant, disponent owners (Owners), chartered the "BULK URUGUAY" to the claimant charterers (Charterers) for a period of about three years.

During the negotiation of the charterparty, Charterers had made it plain to Owners that the ability to transit the Gulf of Aden (GOA) - an area well-known for piracy - without the need to obtain Owners' permission, was of paramount importance as this would result in a competitive advantage over other vessels. Such a clause was included in the final charterparty. In contrast, under the head charter, GOA transit was subject to the consent of the head owners, resulting in Owners' rights and obligations not being back-to-back in this respect.

Shortly after granting permission to transit the GOA on the vessel's maiden voyage, Owners asserted, in correspondence, that the charterparty terms required their permission to be sought each time the GOA was to be transited, and indicated that Owners' position would be dictated by the position taken by the head owners. The Charterers treated the Owners' insistence on prior consent for each occasion as a repudiatory breach which they purported to accept as terminating the charterparty. The Owners, in turn, accepted the Charterers' purported termination itself as a repudiatory breach.


Arbitration was commenced to determine whether the Owners were in anticipatory breach of the charterparty. The majority of the Tribunal found that the Owners were not in repudiatory breach, Charterers were not entitled to terminate and, therefore, the Charterers' purported termination was itself a repudiation which had been accepted by the Owners.

The Charterers appealed2 the decision on the basis that the majority of the Tribunal had made an error of law in determining that the Owners, by their words/conduct, had not evinced an intention not to perform their obligations under the charterparty.

Appeal from the arbitration award

Popplewell J set out that anticipatory breach may consist of one, or both, of two types of conduct. Firstly, renunciation, which comprises words or conduct which clearly evince an intention by a contracting party no longer to be bound by its contractual obligations (the test for this being whether a reasonable person would conclude this to be the case). Secondly, self-induced impossibility, which includes conduct by the contracting party which puts it outside of its power to perform contractual obligations. In each case, the anticipatory breach has to be repudiatory in character, i.e. breach of a condition, or breach of an innominate term which goes to the root of the contract or deprives the innocent party of substantially the whole benefit of the contract.

Popplewell J referred to the comments of Devlin J in Universal Cargo Carriers Corporation v Citati [1957]3 when discussing the relationship between the two types of anticipatory breach and highlighted that the inevitability of non-performance was the common factor which entitled the innocent party to treat the contract as at an end prior to the time for performance. In the case of self-induced impossibility, this meant actual inevitability, while in the case of renunciation, this meant legal inevitability – which is based on what is clearly conveyed by the words or conduct of the contract breaker. Popplewell J went on to stress the high threshold for self-induced impossibility by saying the breach must be inevitable, not very unlikely or uncertain.

Popplewell J made it clear that there was no principle of law whereby there is anticipatory breach purely on the basis that the future performance is made contingent on a third party's conduct.

The Owners' position was not to be understood as being that they would be unable or unwilling to perform their contractual obligations if, and when, Charterers gave an order requiring GOA transit. There was no error of law and the appeal was dismissed. Popplewell J held that the majority had addressed the correct question. The Judge's acceptance that the correct approach was followed resulted in the ground for appeal essentially being one of fact and not law, and, therefore, the decision not being open to challenge on an appeal under section 69 of the Arbitration Act 1996.


Charterers and owners should consider carefully the basis on which they may claim anticipatory breach. Given the high threshold for establishing self-induced impossibility, renunciation is more likely to be the preferred route for a party wishing to demonstrate anticipatory breach.

Popplewell J stressed the analysis will be a question of fact, in each case, but that anticipatory breach will not be established purely on the basis of future performance being made contingent on a third party's conduct. The judge cited the fact that contractual performance is commonly subject to a host of uncertainties and contingencies. A party seeking to rely on a purported repudiation should be able to demonstrate that the words and/or conduct of the other party have evinced a clear intention to no longer be bound by its contractual obligations and a subjective belief that the other party's breach of contract will be inevitable.

To read this newsletter in full, please click here.


1. The Society of International Gas Tanker and Terminal Operators (SITTGO)

2. Geden Operations Ltd v Dry Bulk Handy Holdings Inc (The "BULK URUGUAY") [2014]

3. Lloyd's Rep 174

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jason Barnes
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.