Mercuria Energy Trading PTE v Raphael Cotonor Investments Ltd [2023] EWHC 2978 (Comm)
Is a failure to obey charterers' voyage orders subject to the Hague Rules/ USCOGSA negligent navigation defence?
This was the issue which Sir Nigel Teare had to decide in an appeal under section 69 of the Arbitration Act 1996, in Mercuria Energy Trading PTE v Raphael Cotonor Investments Ltd [2023] EWHC 2978 (Comm).
His answer? A firm "Yes"- the negligent navigation defence did apply to protect owners where the Master failed to comply with voyage orders, and negligently anchored in the wrong place.
The dispute arose under a voyage charterparty for the carriage of 80,000 mt of fuel oil. Following loading of the cargo in Singapore, Charterers ordered the m/t AFRA OAK ("Vessel") to "proceed to Spore EOPL for further orders. Discharging plan still not yet known" ("Voyage Order"). Instead of anchoring safely in international waters, the Vessel anchored in Indonesian territorial waters.
This happened in February 2019 - just as the Indonesian Navy launched a crack-down on vessels anchoring in its waters. The Navy detained the Vessel - and she remained under detention for over 9 months.
The lengthy detention of the Vessel gave rise to substantial claims and counterclaims by the Owners and Charterers respectively. All of these claims and counterclaims were dismissed by the Tribunal - including Charterers' counterclaim founded on the Master's failure to comply with the Voyage Order, which was a breach of the obligation to comply with Charterers' employment orders.
The precise basis on which this claim was rejected was opaque, and was the subject of argument before the Court. Sir Nigel found that, on a proper construction of the Award, the Tribunal had held that Owners were in breach of the requirement to follow Charterers' employment orders, but that Owners could rely upon the negligent navigation" defence [38]. The key finding of the Tribunal supporting this defence was that the Master "attempted to comply with the orders given but by simple oversight in the course of navigation anchored the vessel where he should not have done".
Charterers appealed the finding that Owners could rely upon the negligent navigation defence. The question of law was as follows:
"Did the Tribunal err in finding that the negligent navigation defence in Section 4(2)(a) of the US COGSA 1936 (which mirrors Art IV.2(a) Hague Rules) affords a defence to a breach of an employment order in the absence of a good reason for departing from that order?
On the basis of The Hill Harmony [2001] 1 AC 638, Charterers argued as follows:
- There is a distinction between an order as to employment and an order as to navigation;
- Where a vessel fails to follow an employment order, it matters not whether the reasons for failing to follow this order were "navigational", since the character of that decision is always one of employment;
- As such, the Tribunal erred in finding that the Master's oversight in attempting to comply with the voyage orders was an "act of navigation".
Sir Nigel found that The Hill Harmony did not stand for the proposition contended for by Charterers.
Whilst a choice not to comply with employment orders cannot (without more) be described as negligent navigation, the Hill Harmony did not go further than this [66]. The finding of the Tribunal that the Master's oversight in anchoring in Indonesian Territorial waters was a "navigational" one was a finding they were entitled to make, and there could be no appeal against those findings [72]. It is ultimately a question of fact whether a failure to follow an employment order was an act of navigation or not [78]. In this case the Tribunal had found it was, and that was the end of the matter.
He accordingly dismissed the Charterers' appeal.
The case is an important one, as it clarifies (and arguably expands) the scope of the incorporated Hague/ USCOGSA negligent navigation defence in the charterparty context. It illustrates that a very experienced Admiralty judge was not prepared to limit, in any material way, the owners' traditional protection against the negligence of their Master.
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