UK: Tribunal Rules On Incorporation Of Arbitration Agreement Into A Charterparty And Owners’ Entitlement To Demurrage

The vessel in question was chartered by way of a fixture recap. Owners brought a claim for demurrage against Charterers. Charterers argued that the charter did not contain a valid arbitration agreement/clause, and that although they had agreed to pay freight, they had not agreed to be liable for demurrage.

Incorporation of arbitration agreement

The fixture recap stated, inter alia: "Attached chrts's rider clauses with owner's amendments to apply". Charterers argued that the parties had not agreed an arbitration clause, although the rider clauses provided for English law and arbitration in London. Charterers did not dispute that they were a party to the charter, or the accuracy of the fixture recap. As such, the Tribunal was satisfied that the charterparty contained a valid arbitration agreement.

Charterers had also argued that for there to be a valid arbitration agreement, the charterparty had to be signed by both parties. This was incorrect. Under English law, contracts and arbitration agreements do not need to be signed (s.5 Arbitration Act 1996, which states that an agreement in writing falls within the Act "whether or not it is signed by the parties"). Further, s.6(2) of the Act states that where there is a "reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause", then such "constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement".

Here, the fixture recap referred to the rider clauses, which provided for English law and London arbitration. The Tribunal was satisfied that the parties had agreed to refer disputes to arbitration in London in accordance with English law.

Charterers' liability for demurrage

The fixture recap stated, inter alia: "Demurrage: USD 13,500 pdpr". The rider clauses, incorporated into the recap as per the wording above, also made clear provision for demurrage. As such, Charterers' argument that they were not liable for demurrage failed.

Owners' entitlement to demurrage

The vessel tendered NOR at 18:20 on 9 January, and hoses were connected at 19:40. Charterers loaded a cargo of straight phenol, instead of hydrated phenol as provided in the fixture recap. The cargo had to be hydrated once fully loaded. This was carried out under the supervision of Charterers' and Shippers' surveyors, who disembarked at 18:00 on 10 January.

The fixture recap allowed Charterers to hydrate the cargo at their risk and expense. Further, Charterers had sent Owners an email stating that "all shifting costs and shifting time to anchorage will be for our account, as hydration is being done at anchorage. Time will count in charterers account till the time ullaging sampling of the hydrated phenol is completed by surveyor. We request you to complete hydration process asap".

On the basis of these two points, the Tribunal held that laytime ran from when the hoses were connected (19:40 on 9 January) to when the surveyors disembarked (18:00 on 10 January). Taking into account the time used at both the loading and discharge ports, this entitled Owners to demurrage. Owners were also entitled to recover additional expenses incurred.

Comment

This case highlights one of the fundamental points in the contractual interpretation of charterparties: if a charterparty is concluded primarily by a fixture recap, any rider clauses or other clauses referred to in the recap will be incorporated into the charterparty.

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.

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