MEMORANDUM FOR INFERNO RESOURCES SDN BHD · C.A. Court of Appeals . TEAM 07| MEMORANDUM FOR INFERNO RESOURCES SDN BHD v STL Shipping and Trade Law § Section ⁋ Paragraph ... Five

18TH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT, 2017

THE WEST BENGAL NATIONAL UNIVERSITY OF JURIDICAL SCIENCES

TEAM NO. 07

MEMORANDUM FOR INFERNO RESOURCES SDN BHD

ON BEHALF OF AGAINST

FURNACE TRADING PTE LTD. INFERNO RESOURCES SDN BHD

CLAIMANTS RESPONDENTS

AND

ON BEHALF OF AGAINST

FURNACE TRADING PTE LTD. IDONCARE BERJAYA UTAMA PTY. LTD.

CLAIMANTS RESPONDENTS

TEAM

SARTHAK SOOD ● AMAN GOYAL ● PRADYUMNA SONI ● URVI PATHAK

TEAM 07| MEMORANDUM FOR INFERNO RESOURCES SDN BHD

i

TABLE OF CONTENTS

Table of Contents __________________________________________________________ i

Questions Presented _______________________________________________________ iii

Abbreviations ____________________________________________________________ iv

Index of Authorities _______________________________________________________ vi

Statement of Facts __________________________________________________________ 1

Arguments Advanced _______________________________________________________ 3

I. THE TRIBUNAL DOES NOT HAVE THE POWER AND/OR THE JURISDICTION TO ORDER SALE

OF CARGO ________________________________________________________________ 3

A. The cargo neither is nor forms a part of the subject-matter of the dispute ________ 3

B. The Claimant does not have any contractual relationship with the shipper ________ 4

i. The Claimant does not have any contractual relationship with the shipper _____ 4

ii. The Claimant does not possess an equitable right under the head-owner’s lien

Error! Bookmark not defined.

iii. Rights to freight and damages for detention are compensable by damages _____ 5

iv. Claimant’s contractual rights are “alleged property” at best ________________ 6

C. Granting this interim order would amount to final relief ______________________ 7

D. The measure sought is not the best method of preventing the alleged harm _______ 8

II. IT IS NEITHER NECESSARY NOR JUST FOR THIS INTERIM MEASURE TO BE GRANTED ____ 9

A. Warehousing is a better alternative to prevent the alleged harms _______________ 9

i. Warehousing the cargo is sufficient to prevent the alleged harms ____________ 10

ii. Warehousing adds no excessive burden on the Claimant or the Respondent ___ 10

B. The Respondent will suffer great harm if this measure is granted ______________ 11

C. Allowing the Claimant to deduct from the proceeds of sale the expenses incurred in

selling would prejudice the arbitration ______________________________________ 11


ii

III. THEREFORE, THE RESPONDENT SUBMITS THAT SUCH A MEASURE SHOULD NOT BE

GRANTED AS IT PREJUDICES THE ENTIRE ARBITRATION PROCEEDINGS.DAMAGES FOR

DETENTION DO NOT ARISE AFTER BUSAN IS NOMINATED AS AN ALTERNATIVE PORT ______ 12

A. The Claimant could have complied with the nomination of busan _____________ 13

i. Busan was a reasonable recourse in the prevailing circumstances ___________ 13

ii. Busan was a safe port ______________________________________________ 14

B. The Claimant should have fulfilled its duty to mitigate the damages by going to Busan

14

IV. THE CLAIMANT DOES NOT HAVE A VALID AND ENFORCEABLE LIEN OVER THE CARGO _ 15

A. The Claimant does not have a valid lien over the cargo for the alleged damages for

detention _____________________________________________________________ 16

i. The lien clause in the Voyage Charter Party does not provide for ‘damages for

detention’ explicitly ___________________________________________________ 16

ii. The damages cannot be included within ‘demurrage’ in the lien clause _______ 16

B. The Claimant does not have a valid lien on the cargo for freight ______________ 17

C. In any case, a lien cannot be exercised at the current position of the vessel ______ 18

Prayer ___________________________________________________________________ 20


iii

QUESTIONS PRESENTED

I. Whether the Tribunal has the jurisdiction and/or power to issue an order for the sale of

the cargo on board MV Tardy Tessa pendente lite?

II. Whether it is just and necessary for the cargo to be sold pendent lite?

III. Whether the Claimant is entitled to freight and damages for detention under the Charter

Party?

IV. Whether the Claimant is entitled to a valid and enforceable lien over the cargo?


iv

ABBREVIATIONS

Cl. Clause

SCMA Singapore Chamber of Maritime

Arbitration

IAA International Arbitration Act (Chapter

143A), 1994

Art. Article

Model Law UNCITRAL Model Law on International

Commercial Arbitration, 1985

AA Arbitration Act, 1996

Edn Edition

opl Outside Port Limits

SLR Singapore Law Reports

SGHC Singapore High Court

W.L.R. Weekly Law Reports

Lloyd’s Law Rep. Lloyd’s Law Reports

Q.B. Queen’s Bench

C.A. Court of Appeals


v

STL Shipping and Trade Law

§ Section

⁋ Paragraph

Vessel M.V. Tardy Tessa

Desponent Owners/Time Charterers/Claimant Furnace Trading Pte Ltd

Voyage Charterers/Respondent Inferno Resources Sdn Bhd

Shippers Idoncare Berjaya Utama Pty. Ltd.

Head Owners Imlam Consignorist GmbH


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INDEX OF AUTHORITIES

Cases

Anglo-Polish Steamship Line v Vickers Ltd (1924) 19 Ll L Rep 121 (KB) ______________ 10

Brace v Calder [1895] 2 QB 253 (CA) __________________________________________ 15

British Westinghouse Co v Underground Railway [1912] AC 673 (HL) ________________ 14

Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555 (CA) _________________________ 4

China National Foreign Trade Transportation Corp v Evlogia Shipping Co SA of Panama (The

Mihalios Xilas) [1979] 1 WLR 1018 _________________________________________ 18

Clink v Radford & Co (1891) 1 QB 625 (CA) _________________________________ 16, 17

D Amico Shipping Italia SP v Endofa DMCC [2016] EWHC 2223 (Comm) ____________ 15

Dunkirk Colliery Co v Lever (1878) 9 Ch D 20 (CA) ______________________________ 14

Dunlop & Sons v Balfour Williamson & Co (1892) 1 QB 507 (CA) ___________________ 17

Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311 _________________ 4, 18

Frederick Crombie Gardiner and Others (Owners of s Lismore) v Macfarlane, M'Crindell, &

Company (1889) 16 R 658 (Court of Session) _______________________________ 16, 17

GigSky APS v Vodafone Roaming Services (QB, 16 October 2015) __________________ 4, 6

Homburg Houtimport BV v Agrosin Pvt Ltd (The Starsin) [2003] 1 Lloyd’s Rep 571 (HL) __ 5

Jamal v Moolla Dawood [1916] 1 AC 175 (PC) __________________________________ 14

Kodros Shipping Corporation v Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736

(HL)___________________________________________________________________ 14

Maldives Airports Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 4494, 6,

11

Manchester Trust Ltd v Furness Withy & Co [1895] 2 QB 539 (CA) ___________________ 5


vii

Miramar Maritime Corporation v Holborn Oil Trading Ltd (The Miramar) [1983] 2 Lloyd’s

Rep 319 (CA) ____________________________________________________________ 4

Payzu Ltd v Saunders [1919] 2 KB 581 (CA) ____________________________________ 15

Shipping Services Ltd v European Container KS [2013] 2 CLC 800 (QB) _______________ 4

Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep 605 (CA) _____ 15

Stelios B Maritime Ltd v Ibeto Cement Co (The Stelios B) (2007) 711 LMLN 2________ 9, 10

The Berkshire [1974] 1 Lloyd’s Rep. 185 ________________________________________ 5

Uzinterimpex JSC v Standard Bank Plc [2008] 2 Lloyd’s Rep 456 (CA) _______________ 15

Wehner v Dene Steam Shipping Co [1905] 2 KB 92 (KB) ___________________________ 17

Zim Integrated Shipping Services Ltd v European Container KS [2013] 2 CLC 800 (QB) ___ 6

Arbitral Awards

London Arbitration 12/91 (1991) 304 LMLN 6 ___________________________________ 18


London Arbitration 15/15 (2015) 934 LMLN 9 ____________________________________ 4


Treatises

Alan Redfern and others, Law and Practice of International Commercial Arbitration (4th edn,

Sweet & Maxwell 2004) ____________________________________________________ 3

Ali Yesilirmak, Provisional Measures in International Commercial Arbitration (Kluwer Law

International 2005) ______________________________________________________ 6, 7

D Mark Cato, Arbitration Practice and Procedure: Interlocutory and Hearing Problems (3rd

edn, Lloyd’s Commercial Law Library 2002) __________________________________ 12


viii

Gary Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014)

_____________________________________________________________________ 3, 10

Harvey McGregor, McGregor on Damages (19th edn, Sweet & Maxwell 2016) _________ 15

John Schofield, Laytime and Demurrage (5th edn, LLP 2005) _______________________ 16

Julian Cooke and others, Voyage Charters (4th edn, Informa Law 2014) ____________ 14, 17

Richard Aikens and others, Bills of Lading (2nd edn, Informa Law 2016) _______________ 5

Robert Merkin, Arbitration Law (Lloyd’s of London Press 2014) ____________________ 4, 6

Sir Guenther Trietel and FMB Reynolds, Carver on Bills of Lading (3rd edn, Sweet & Maxwell

2011) ___________________________________________________________________ 5

Guidelines

International Arbitration Practice Guidelines, Applications for Interim Measures _____ 3, 7, 8

Articles

Christopher Huntley, ‘The Scope of Article 17: Interim measures under the UNCITRAL Model

Law’ [2005] 9 Vindobona Journal 1 ___________________________________________ 3

Gabriel Moens and Sam Luttrell, ‘Interim Measures of Protection under the Arbitration Rules

of the Australian Centre for International Commercial Arbitration’ [2010] 6 Asian Intl Arb

J 74 ___________________________________________________________________ 11

Julian Lew, ‘Commentary on Interim and Conservatory Measures in ICC Arbitration Cases’

[2000] 11(1) ICC Ct Bull 23 _______________________________________________ 6, 7


1

STATEMENT OF FACTS

THE CHARTERPARTY CHAIN

Imlam Consignorist GmbH (“the owner”) and Furnace Trading Pte Ltd (“the Disponent

owner”) entered into a Time Charterparty for 2 years for the use of the vessel, “Tardy Tessa”.

The disponent owner further sub-chartered the vessel to Inferno Resources (“the charterer”) for

a voyage from Australia to China for a shipment of coal. The vessel was to stop at Singapore,

and the charterers were to declare discharge port when the vessel passes Singapore for

bunkering. Freight was to be paid within five banking days after completion of loading and

signing of B/L and receipt of the owner’s freight invoice or before breaking bulk in any case.

PAYMENT OF FREIGHT AND NOMINATION OF DISCHARGE PORT

The vessel reached Singapore for bunkering. There was a slight delay in nominating a port and

the charterers requested to divert the vessel to Busan, South Korea due to congestion at Chinese

ports. The request was not accepted and the disponent owner asked the charterers pay freight

and to make a legitimate disport nomination urgently. The charterers requested the disponent

owner to remain patient as they also were yet to receive legitimate disport nomination or freight

from their sub-charterers which are also the shippers on the B/L.

THE EXERCISE OF LIEN AND TERMINATION OF THE CHARTERPARTY

The disponent owner warned the charterers that they were preparing to impose lien over the

cargo as per terms of the charterparty due to non-payment of freight and non-nomination of

discharge port. The very next day they served the notice of lien on the charterer. Furthermore,

a notice of lien on sub-freights was tendered on the shippers. The charterers nominated Ningbo

in China as the discharge port. For freight, they claimed they were unable to pay the same, but


2

promised to make payment at the disport after the discharge of cargo. The reason cited for the

inability to pay the freight was that they had not been paid freight by their sub-charterers. The

disponent owner considered this as a repudiatory breach and terminated the charterparty.

The charterers considered the notice of termination to be wrongful as they had always been

ready and willing to perform the Charterparty. They considered the disponent owner to be in

repudiatory breach of the Charterparty and sought damages from them.

THE CLAIMS AND THE ARBITRATION PROCEEDINGS

The disponent owner served arbitration notices to the charterer and the shipper claiming various

damages and costs which the charterer and the shipper refuted. The disponent owner were also

made aware of the grim conditions of the cargo and the crew on board the vessel which is

drifting in high seas. Subsequently, the disponent owner made an application to consolidate the

two arbitrations and an interim relief to sell the cargo on board.

These proceedings for the grant for interim relief are being brought for the tribunal’s reference.


3

ARGUMENTS ADVANCED

I. THE TRIBUNAL DOES NOT HAVE THE POWER AND/OR THE JURISDICTION TO ORDER

SALE OF CARGO.

1. The Tribunal, the Respondent argues, should not grant the interim order for sale of

cargo on-board the vessel as none of the three requirements for grant of interim measures are

fulfilled by the facts culminating in the present hearing.1 It is the Respondent’s assertion that

Tribunal does not have the power to grant an interim measure for sale of cargo, neither is the

grant of this interim measure just and reasonable,2 nor does the Claimant have a prima facie

case on merits.3

2. The Tribunal does not have either the power or the jurisdiction to grant an order of sale

of the cargo because the cargo is not the subject-matter of the dispute [A], and the Claimant

does not have any contractual relationship with the shipper [B]. Furthermore, granting this

order would amount to final relief [C]. Lastly, the measure sought is not the ideal method of

preventing the alleged harm [D].

A. THE CARGO NEITHER IS NOR FORMS A PART OF THE SUBJECT-MATTER OF THE

DISPUTE

3. Under §12(1)(d), the power of the Tribunal to grant an interim measure for sale is

restricted to property that “is or forms part of the subject-matter of the dispute”. The

Respondent contends that this phrase should be given a narrow interpretation lest the tribunals

abuse this provision.4 Therefore, the exercise of the power under §12(1)(d) ought to be

1 Gary Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014) 2467; International

Arbitration Practice Guidelines, Applications for Interim Measures Art 2(1) 5. 2 Memorandum [II]. 3 Memorandum [III and IV]. 4 Christopher Huntley, ‘The Scope of Article 17: Interim measures under the UNCITRAL Model Law’ [2005] 9

Vindobona Journal 1.


4

restricted to either property with disputed ownership, or defects which constitutes the substance

of the dispute.5

4. The cargo in the present case does not form the subject-matter of the dispute. The

dispute is regarding Charter Party obligations to pay freight, and to nominate a discharge-port.

It stems neither due to defect in cargo, nor due to its ownership. The Respondent, therefore,

submits that the Tribunal does not have the power to order sale of cargo, as it does not constitute

the subject-matter of the dispute.

B. THE CLAIMANT DOES NOT HAVE ANY CONTRACTUAL RELATIONSHIP WITH THE

SHIPPER.

5. The meaning of the word “property” in §12(1)(d) can be extended to contractual rights.6

However, only those contractual rights can qualify as “property” which, if lost, would not be

adequately remediable by way of damages.7

6. The Respondent, therefore, submits that the Claimant has no contractual connection

with the shipper (i), the Claimant does not possess an equitable right under the headowner’s

lien (ii), loss of rights to freight and damages for detention are compensable by way of damages

(iii), and in any case, any contractual right which the Claimant may seek to preserve is at best

an “alleged property” which cannot be preserved by an interim order (iv).

i. The Claimant does not have any contractual relationship with the shipper.

7. The shipper should be assumed to be the cargo owner as it retains the three B/Ls.8 Thus,

to claim a right to lien over the cargo, the Claimant must have some contractual relationship

5 Alan Redfern and others, Law and Practice of International Commercial Arbitration (4th edn, Sweet & Maxwell

2004) para 7.26. 6 Shipping Services Ltd v European Container KS [2013] 2 CLC 800 (QB); Cetelem SA v Roust Holdings Ltd

[2005] 1 WLR 3555 (CA); Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311. 7 Maldives Airports Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 449; GigSky APS v Vodafone

Roaming Services (QB, 16 October 2015); Robert Merkin, Arbitration Law (Lloyd’s of London Press 2014) para

14.61.3, 14.61.4. 8 London Arbitration 15/15 (2015) 934 LMLN 9.


5

with the shipper.9 The Respondent argues shipper is not a party to the Voyage Charter Party

between the Claimant and the Respondent,10 and the Claimant is not a party to the B/L contract.

The carrier, in this case, is the head-owner.

8. There are two major indicators which lend weight to this assertion-

The identity of the carrier is intrinsically linked to the person signing the B/Ls, and the

source of such person’s authority to sign the same.11 The head-owner is invariable

identified as the carrier where the Master signs the B/Ls, like in this case.12 This is so

because it is assumed that he source of the Master’s authority is the head-owner.

Furthermore, there are no indications in the signature-box which could suggest that the

Master was acting as the agent for the Claimant while signing the B/Ls.13

The B/Ls have been printed on the head-owner’s forms.14

9. Lastly, the Tribunal should not refer to terms of any Charter Party as a matter of policy

because it is highly likely that the shipper is unaware of the same.15

10. The Respondent, therefore, submits that the Claimant has no contractual relations with

the shipper, and consequently, it cannot claim to have a right of lien over the cargo.

ii. Rights to freight and damages for detention are compensable by damages.

9 Miramar Maritime Corporation v Holborn Oil Trading Ltd (The Miramar) [1983] 2 Lloyd’s Rep 319 (CA). 10 Clause 3, 4, Fixture Recap, Page 20 of Bundle. 11The Berkshire [1974] 1 Lloyd’s Rep. 185; Richard Aikens and others, Bills of Lading (2nd edn, Informa Law

2016) para 7.61. 12 Sandeman v Scurr (1866-67) LR 2 QB (QB); Manchester Trust Ltd v Furness Withy & Co [1895] 2 QB 539

(CA); Sir Guenther Trietel and FMB Reynolds, Carver on Bills of Lading (3rd edn, Sweet & Maxwell 2011) para

4.038. 13 Homburg Houtimport BV v Agrosin Pvt Ltd (The Starsin) [2003] 1 Lloyd’s Rep 571 (HL); Bill of Lading 1/1,

Page 41 of Bundle. 14 Bill of Lading 1/1, Page 41 of Bundle. 15 Manchester Trust Ltd v Furness Withy & Co [1895] 2 QB 539 (CA); Sir Guenther Trietel and FMB Reynolds,

Carver on Bills of Lading (3rd edn, Sweet & Maxwell 2011) para 4.046.


6

11. The only such contractual rights the loss of which cannot be remedied by way of

damages attract the power of the Tribunal under §12(1)(d).16 Damages are an adequate remedy

in case of loss of freights and damages for detention, as the losses are readily calculable.17

Furthermore, loss of freight and damages for detention does not give rise to any ancillary losses,

like goodwill.

12. Therefore, the Respondent submits that loss of rights to freight and damages for

detention is readily remediable by way of damages.

iii. Claimant’s contractual rights are “alleged property” at best.

13. An order under §12(1)(d) can only be passed for the preservation of a “property”, and

not “possible property” or “alleged property”.18 In this case, the Tribunal has to determine

whether the Claimant has a valid and enforceable lien.19 This makes lien an “alleged” or a

“possible” contractual right, as its validity and enforceability are yet undetermined. As such,

to be able to grant an interim measure for sale under §12(1)(d), the Tribunal would have to first

determine the very questions under dispute before the Tribunal. The Respondents submit that

the Tribunal should refrain from granting an interim order which requires determination of an

issue on merits.20 An interim hearing, such as this one, takes place at a stage where the Tribunal

has not had the opportunity to accept and peruse any evidence, and hear any of the arguments

of the parties. In the present case, for example, the identity of the owner of the cargo is as yet

undetermined, and is unclear whether there was any Charter Party arrangement between the

16 Maldives Airports Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 449; GigSky APS v Vodafone

Roaming Services (QB, 16 October 2015); Robert Merkin, Arbitration Law (Lloyd’s of London Press 2014) para

14.61.3, 14.61.4. 17 Maldives Airports Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 449. 18 Zim Integrated Shipping Services Ltd v European Container KS [2013] 2 CLC 800 (QB). 19 Notice of Arbitration V 18(2), Page 74 of Bundle. 20 Ali Yesilirmak, Provisional Measures in International Commercial Arbitration (Kluwer Law International

2005) 181; Julian Lew, ‘Commentary on Interim and Conservatory Measures in ICC Arbitration Cases’ [2000]

11(1) ICC Ct Bull 23 30.


7

Respondent and the shipper.21 These considerations may be important in determination of

merits. Therefore, making such an interim order which requires a determination of merits may

be inequitable.

C. GRANTING THIS INTERIM ORDER WOULD AMOUNT TO FINAL RELIEF

14. The Respondent submits that allowing the Claimant to retain proceeds from sale of the

cargo would tantamount to final relief to the prejudice of the Respondents.

15. Tribunals should not grant interim measures akin to final relief in order to preserve the

interim nature of the measure, and not alter status quo.22 It denies parties proper opportunity of

hearing and might act to the detriment of opposing party.23

16. The Claimants have sought an order allowing them to sell the cargo on-board the vessel,

and retain the proceeds after deducting the cost incurred in facilitating the sale. This interim

relief is akin to final relief for two reasons-

First, the Claimants, as final relief, have sought freight, damages for detention and other

damages, all in the form of monetary payments.24 Furthermore, in the remedies sought

by it in the notices for arbitration, the Claimant has made a request for “such order for

the preservation… or sale of the Cargo as may be necessary.”25

Second, if allowed to retain the proceeds from sale, the Claimants would be able to

derive utility out of it till final determination on merits. This is because money is

fungible.26 The Claimants might invest the sum, utilise it to pay hire to the head-owner,

or even make purchases out of it. In doing all of this, the Claimants would be deriving

21 Notice of Arbitration IV 10, Page 72 of Bundle. 22 International Arbitration Practice Guidelines, Applications for Interim Measures Art 4(1)(iii) 13; Ali

Yesilirmak, Provisional Measures in International Commercial Arbitration (Kluwer Law International 2005) 183,

185; Zim Integrated Shipping Services Ltd v European Container KS [2013] 2 CLC 800 (QB). 23 Julian Lew, ‘Commentary on Interim and Conservatory Measures in ICC Arbitration Cases’ [2000] 11(1) ICC

Ct Bull 23 30. 24 Arbitration Notice V 18(1, 2, 3), Page 74 of Bundle; Arbitration Notice V 18(1, 2, 3), Page 80 of Bundle. 25 Arbitration Notice V 18(5), Page 74 of Bundle; Arbitration Notice V 18(9), Page 81 of Bundle. 26 Fancois Bourguignon and Mark Sundberg, ‘Aid Effectiveness: Opening the Black Box’ [2007] 97 American

Economic Review 316.


8

some utility out of the money, which cannot be allowed without a determination of their

claim to the sum being rightfully theirs. This determination can only come with the

final award. But, till such award is made, by allowing the Claimants to keep the

proceeds the Tribunal would be allowing them to utilise the money as if it were

rightfully theirs, even when it is not.

D. THE MEASURE SOUGHT IS NOT THE BEST METHOD OF PREVENTING THE ALLEGED

HARM.

17. Generally, interim measures are sought for and granted to remedy/prevent some

immediate harm which might be incurred by one or all the parties to the arbitration during the

pendency of the proceedings.27 Consequently, the measures granted are specific to the harms

being alleged.28 Therefore, a tribunal should neither grant interim measures which are

incapable of preventing the alleged harm from occurring,29 nor should it grant the requested

measures where better alternatives to deal with the alleged harm are available.30

18. In this case, the harm being alleged, if the interim measure is not granted, is loss of life

and property due to possible self-ignition of the cargo of coal on-board the vessel or capsizing

of the vessel due to strong winds or lack of food, water and medication on-board.31 The

Respondents submit that an order of sale is not adequate to remedy either of the two

possibilities.

19. The key to prevent either scenario from occurring is swift action and affecting a sale is

not the quickest option here. The Respondent urge the Tribunal to consider the logistics

involved in making a transaction for sale of this cargo of coal. The Claimant would first have

27 Gary Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014) 2474-2475. 28 International Arbitration Practice Guidelines, Applications for Interim Measures Commentary on Art 6, ⁋2. 29 International Arbitration Practice Guidelines, Applications for Interim Measures Art 4(1)(ii) 13. 30 International Arbitration Practice Guidelines, Applications for Interim Measures Commentary on Art 6, ⁋2. 31 Email communication as sent to Gordon Grill by Peter Girvin (November 30), Page 37 of Bundle.


9

to engage their brokers to find a viable buyer, after which a deal would have to be negotiated,

that too with extremely eschewed bargaining power. The process may take up to a month.32

20. The seller, in all the urgency, would try to finalise the deal with the first prospective

buyer. However, the choice of buyer would also be important, keeping in mind the choice of

discharge port. Ideally, the port nearest to the vessel’s current location should be chosen as the

disport to save time and reduce the chances of self-ignition.

21. Keeping this analysis in mind, the Respondents submit that an order for sale is not the

ideal solution for the cited harms. The acts of finding a buyer, striking a deal, and delivering

the cargo to a disport which might not be the nearest to the vessel’s current location all serve

to delay the discharge of cargo as the chances of self-ignition increase with every passing day.

The time spent in striking a deal also increases the chances of the vessel giving in to the weather

and capsizing.

22. Therefore, the Tribunal should not grant this interim order as it would be incapable of

preventing the alleged impending harm.

II. IT IS NEITHER NECESSARY NOR JUST FOR THIS INTERIM MEASURE TO BE GRANTED

23. The Respondent submits that it is neither just not necessary to grant the interim measure

for sale of cargo because warehousing the cargo is a better alternative to prevent the alleged

harms than selling the cargo [A], and the balance of convenience lies in favour of the

Respondent [B]. Furthermore, if the Claimant is allowed to deduct the expense incurred in

selling the cargo, it would be to the prejudice of the Respondent [C].

A. WAREHOUSING IS A BETTER ALTERNATIVE TO PREVENT THE ALLEGED HARMS.

32 Stelios B Maritime Ltd v Ibeto Cement Co (The Stelios B) (2007) 711 LMLN 2.


10

24. The interim measure requested for must be necessary to prevent the alleged harms.33 It

is the necessity which justifies the harm which the other party might incur because of the

interim measure. However, in case a more efficient alternative solution is available, the tribunal

should refrain from granting the requested measure. The Respondent, therefore, submits that

warehousing the cargo is better alternative to selling the cargo because it is sufficient to prevent

the alleged harms (i), and it adds no excessive burden on the Claimant (ii).

i. Warehousing the cargo is sufficient to prevent the alleged harms.

25. The Claimant seeks this interim measure to prevent the possible harms which were

mentioned in the Master’s email.34 The Respondent submits that the reason behind all of the

problems is the vessel’s current location. There is an urgent need for the vessel to reach to a

port, and discharge the cargo. The Respondent has already argued that selling the cargo would

take approximately a month,35 during which the vessel and the crew would remain exposed to

all the threats listed by the Master.36 Ordering the vessel to discharge at a nearby port, possibly

Singapore, is quicker alternative. Furthermore, after warehousing, the cargo would cease to be

distressed which would secure its value.

ii. Warehousing adds no excessive burden on the Claimant or the Respondent.

26. Regarding the cost of maintaining the lien, the Respondent has two submissions. First,

that warehousing might actually be cheaper than holding the goods on the vessel.37 Second, the

incident of the cost for maintaining the lien does not fall on the Claimant. It has already been

argued that the Claimant does not have contractual relations with the shipper, and therefore,

does not have a contractual right to lien.38 And furthermore, the lien, in any case, was not valid

33 Gary Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014) 2474. 34 Email communication as sent to Gordon Grill by Peter Girvin (November 30), Page 37 of Bundle. 35 Stelios B Maritime Ltd v Ibeto Cement Co (The Stelios B) (2007) 711 LMLN 2. 36 Memorandum [I.D]. 37 Anglo-Polish Steamship Line v Vickers Ltd (1924) 19 Ll L Rep 121 (KB). 38 Memorandum [I.B.i].


11

or enforceable, and neither was it reasonably exercised.39 Consequently, even if the lien were

properly exercised, the cost of maintaining it would fall on the head-owner, which he may then

recover from the shipper.

27. Thus, warehousing adds no burden on the Claimant or the Respondent.

B. THE RESPONDENT WILL SUFFER GREAT HARM IF THIS MEASURE IS GRANTED.

28. The Respondent submits that if the order for interim sale is granted, the Respondent

will suffer great harm as it would affect the Respondent’s Charter Party with the shipper. The

sale of cargo might cause the Respondent to break its contract, which would cause great harm

to the Respondent’s reputation. Loss of reputation, it is submitted, is irreparable.40

29. If the cargo on-board the vessel is sold off, the position of the Respondent would be

similar to that of a distributer who is forced to break contracts with third-parties due to the acts

of the manufacturer.41 The Respondent and the shipper contracted with each other to affect the

carriage of the cargo of coal. As the charterer, the shipper would have expected the Respondent

to arrange for a vessel for the carriage the way third parties expect distributers to supply the

goods. Failure of carriage, like failure to supply the goods, adversely affects the reputation of

the Respondent.

30. In light of the fact that a more efficient alternative is available, there is no reason why

the Tribunal should grant the interim measure for sale of cargo.

C. ALLOWING THE CLAIMANT TO DEDUCT FROM THE PROCEEDS OF SALE THE

EXPENSES INCURRED IN SELLING WOULD PREJUDICE THE ARBITRATION.

39 Memorandum [IV]. 40 Maldives Airports Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 449; Gabriel Moens and

Sam Luttrell, ‘Interim Measures of Protection under the Arbitration Rules of the Australian Centre for

International Commercial Arbitration’ [2010] 6 Asian Intl Arb J 74, 88. 41 Gabriel Moens and Sam Luttrell, ‘Interim Measures of Protection under the Arbitration Rules of the Australian

Centre for International Commercial Arbitration’ [2010] 6 Asian Intl Arb J 74, 88.


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31. The Claimant has requested the liberty to “deduct all of its costs” incurred in facilitating

the sale of cargo from the proceeds of sale, and to “retain the balance” pending final

determination of the arbitral proceedings.42 There is a difference in the language, between

“deduct all of its costs” and “retain the balance”. The Respondent argues that the Claimant

seeks an order wherein it gets to retain the expenses it incurs in selling the cargo irrespective

of the final award.

32. Reversibility is an important feature of an interim measure.43 A request for an

irreversible measure cannot be granted. Furthermore, it would amount to reduction in the value

retrieved from the cargo which, in turn, would be to the prejudice of the Respondent

irrespective of the direction of the final award. If the award is in the Respondent’s favour, the

Respondent would receive a lessor sum. If the award is in favour of the Claimant, the

Respondent would either pay a greater sum or receive a lower sum, depending in the quantum

of the award.

33. Therefore, the Respondent submits that such a measure should not be granted as it

prejudices the entire arbitration proceedings.44

III. THEREFORE, THE RESPONDENT SUBMITS THAT SUCH A MEASURE SHOULD NOT BE

GRANTED AS IT PREJUDICES THE ENTIRE ARBITRATION PROCEEDINGS. DAMAGES

FOR DETENTION DO NOT ARISE AFTER BUSAN IS NOMINATED AS AN ALTERNATIVE

PORT

34. The Respondent submits that damages for detention do not arise after Busan is

nominated as an alternative pot of discharge. The Claimant could have complied with the

42 Application for Consolidation and Liberty to Sell Cargo Pedente Lite, Clause 3, Page 90 of Bundle. 43 D Mark Cato, Arbitration Practice and Procedure: Interlocutory and Hearing Problems (3rd edn, Lloyd’s

Commercial Law Library 2002) 239. 44 International Arbitration Practice Guidelines, Applications for Interim Measures Art 5 para 2 15.


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nomination of Busan in the prevailing circumstances [A]; and the Claimant should have

fulfilled its duty to mitigate damages by going to Busan [B].

A. THE CLAIMANT COULD HAVE COMPLIED WITH THE NOMINATION OF BUSAN

35. The Respondent submits that the Claimant could have complied with the nomination

of Busan since it was a reasonable recourse in the prevailing circumstances (i); and Busan was

a safe port (ii).

i. Busan was a reasonable recourse in the prevailing circumstances

25. Firstly, nomination of Busan was not in contravention of the head Time Charter Party

between head owner and the Claimant, unlike what was alleged by the Claimant.45 The head

Time Charter Party stipulates the trading limits for the vessel as Asia and Australia.46 Busan,

being in Asia, is clearly within the prescribed trading limits and thus its nomination is in

consistence with the Time Charter Party.

26. Further, Busan was nominated as a discharge port in light of the unfortunate

circumstance of congestion at Chinese ports.47 The congestion existed without the fault of

either party and it was a reasonable alternative provided by the Respondent to the Claimant.

Had the Respondent waited for congestion to clear out at the stipulated Charter Party ports,48

significant delay could have happened, adversely affecting the interests of both parties. The

Respondent in this circumstance, even proposed to amend the amount of freight and was ready

to pay for the additional expenses incurred.49 Complying with the nomination was also in the

interest of the Claimant as it would have led to successful discharge of its contractual

obligations and simultaneously the vessel would have been freed for future employment.

45 Email communication as sent to Eric Yan by Gordon Grill (October 16), Page 57, 58 of Bundle. 46 Clause 1(b), Charterparty between IMLAM and Furnace Trading, Page 1 of Bundle. 47 Email communication as sent to Gordon Grill by Eric Yan (October 16), Page 5 of Bundle. 48 Clause 16, Fixture Recap, Page 21 of Bundle; Clause 8(c) of Part II of Coal Orevoy, Page 2 of Bundle. 49 Email communication as sent to Eric Yan by Gordon Grill (October 16), Page 58 of Bundle.


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27. Thus, Busan was a reasonable alternative in the prevailing circumstances.

ii. Busan was a safe port

28. The Respondent submits that Busan was reachable since it was a safe port at the time

of nomination. The charterer’s obligation is to nominate a port which is prospectively safe for

the vessel’s visit, notwithstanding an occurrence of some abnormal future event.50 The

obligation does not refer to the actual operating conditions at the time the order is given, but

those which can be foreseen as existing when the vessel reaches the said destination.51

29. The Respondent had fulfilled its obligation of nominating a prospectively safe port.

Busan was a safe port for the period that the vessel would have gone there. The Korean military

had secured the area and had countered the threat. Several vessels had also called at Busan

without any problems.52

30. Therefore, Busan was prospectively a safe port for the purpose of discharge and the

Claimant could have gone there.

B. THE CLAIMANT SHOULD HAVE FULFILLED ITS DUTY TO MITIGATE THE DAMAGES BY

GOING TO BUSAN

36. The Respondent submits that the Claimant had a duty to mitigate the alleged damages

and should have done so by going to Busan.

37. An innocent party has a duty to take all reasonable steps to mitigate the loss consequent

to a breach of a contract by the other party, and is debarred from claiming any part of the

damage arising as a result of its failure to take such steps.53

50 Julian Cooke and others, Voyage Charters (4th edn, Informa Law 2014) 5.50; Kodros Shipping Corporation v

Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736 (HL). 51 Julian Cooke and others, Voyage Charters (4th edn, Informa Law 2014) 5.50; Kodros Shipping

Corporation v Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736 (HL). 52 Email communication as sent to Gordon Grill by Eric Yan (October 17), Page 60 of Bundle. 53 British Westinghouse Co v Underground Railway [1912] AC 673 (HL); Dunkirk Colliery Co v Lever (1878) 9

Ch D 20 (CA); Jamal v Moolla Dawood [1916] 1 AC 175 (PC); D Amico Shipping Italia SP v Endofa DMCC


15

38. When a party in default provides an offer to an innocent party to mitigate the damages

arisen, the innocent party should accept the offer to minimize the losses.54 The reasonability of

the acceptance is a matter judged on facts;55 this is especially relevant in a commercial context

wherein the objective is to minimize the pecuniary losses and not stand on principle.56

39. A scenario wherein the innocent party does not suffer any pecuniary loss is further

ground for accepting a reasonable offer by the party in breach as a step towards mitigating

losses.57

40. In the present facts, the nomination of Busan is in the nature of an offer to mitigate

further damages which the Claimant should have accepted. Further, since the voyage in

consideration is commercial in nature, the significance of mitigating pecuniary losses is greater.

The Respondent has recognized this and has offered to compensate for additional expenses too,

implying that the Claimant would not have incurred any pecuniary loss in opting for the

alternative.

41. Thus, since the Claimant did not mitigate the damages by accepting the offer of going

to Busan, it cannot claim the damages for detention accruing after that.

IV. THE CLAIMANT DOES NOT HAVE A VALID AND ENFORCEABLE LIEN OVER THE CARGO

31. The Claimant has based its claim of lien on alleged damages for detention and freight.

The Respondent submits that there exists no valid and enforceable lien on the cargo for either

damages for detention [A] or freight [B]. In any case, the lien could not have been exercised at

the current position of the vessel [C].

[2016] EWHC 2223 (Comm); Harvey McGregor, McGregor on Damages (19th edn, Sweet & Maxwell 2016)

para 9-004. 54 Payzu Ltd v Saunders [1919] 2 KB 581 (CA); Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1

Lloyd’s Rep 605 (CA). 55 Payzu Ltd v Saunders [1919] 2 KB 581 (CA). 56 Uzinterimpex JSC v Standard Bank Plc [2008] 2 Lloyd’s Rep 456 (CA). 57 Brace v Calder [1895] 2 QB 253 (CA).


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A. THE CLAIMANT DOES NOT HAVE A VALID LIEN OVER THE CARGO FOR THE ALLEGED

DAMAGES FOR DETENTION

32. The Respondent submits that the Claimant’s contention of a lien on cargo for damages

for detention is unfounded since the lien clause in the Voyage Charter Party does not provide

for ‘damages for detention’ explicitly (i); and the damages cannot be included within

‘demurrage’ in the lien clause (ii).

i. The lien clause in the Voyage Charter Party does not provide for ‘damages for

detention’ explicitly

33. The alleged damages are in the nature of damages for detention, i.e. damages that arise

due to delay of a vessel caused by default of a charterer, and are paid as unliquidated damages.58

They are distinct from demurrage, which is paid as liquidated damages for exceeding the

laytime provided at load and discharge ports.59 The lien clause of the Voyage Charter Party

explicitly provides a lien on the cargo for freight, dead freight, demurrage and general

average.60 Thus, there is no mention of damages for detention as a ground for exercise of lien

in the Charter Party.

ii. The damages cannot be included within ‘demurrage’ in the lien clause

34. The claimant may seek to argue that such damages for detention should be construed

as falling within the ambit of ‘demurrage’ for the purpose of the lien clause. However, if

demurrage is used in a particular sense in one part of the Charter Party, it is to be read in that

strict sense and not be expanded in meaning.61 Further, when there are no fixed demurrage days

58 John Schofield, Laytime and Demurrage (5th edn, LLP 2005) para 8.1. 59 John Schofield, Laytime and Demurrage (5th edn, LLP 2005) para 8.42; President of India v Lips Maritime

Corporation (The Lips) [1987] 2 Lloyd’s Rep 311 (HL). 60 Clause 19 of Part II of Coal Orevoy, Page 31 of Bundle. 61 Frederick Crombie Gardiner and Others (Owners of s Lismore) v Macfarlane, M'Crindell, & Company (1889)

16 R 658 (Court of Session); Clink v Radford & Co (1891) 1 QB 625 (CA).


17

mentioned in the Charter Party, but a provision fixing the demurrage rate at either port, the lien

extends to this demurrage, and not to any other damages for detention.62

35. In the present case, demurrage has particularly been used to refer to liquidated damages

arising for exceeding the provided laytime and is not intended to refer to the unliquidated

damages for detention.63 Further, the number of demurrage days have not been specified in the

Charter Party and its rate has been mentioned.64 This provides a specific meaning to the term

which does not extend to unliquidated damages for detention.

36. Boxes 21 and 22 of Part I of the Coal Orevoy read with Clause 20 of the Fixture Recap

specifically provide the demurrage rate on loading and discharging.65 Since the vessel has been

detained at neither the load port, nor the discharge port, the alleged damages arising cannot be

construed as being included within ‘demurrage’ for the purpose of the lien clause.

37. Thus, the claimant does not have a lien over the cargo for damages arising from

detention.

B. THE CLAIMANT DOES NOT HAVE A VALID LIEN ON THE CARGO FOR FREIGHT

38. The Respondent submits that freight has not become payable under the provisions of

the Charter Party. A lien is exercisable only for amounts that have become payable, i.e. after

the obligation to pay has arisen.66 In the present case, the freight clause in the Fixture Recap

stipulates that in any circumstance, freight is to be paid before breaking bulk, i.e. before the

discharge of cargo commences.67 Mere mention of certain conditions prior to discharge does

62 Dunlop & Sons v Balfour Williamson & Co (1892) 1 QB 507 (CA); Frederick Crombie Gardiner and Others

(Owners of s Lismore) v Macfarlane, M'Crindell, & Company (1889) 16 R 658 (Court of Session); Clink v Radford

& Co (1891) 1 QB 625 (CA). 63 Clause 9(e)(i) of Part II of Coal Orevoy, Page 27 of Bundle. 64 Clause 20, Fixture Recap, Page 31 of Bundle. 65 Clause 20, Fixture Recap, Page 31 of Bundle; Boxes 21, 22 of Part I of Coal Orevoy, Page 25 of Bundle. 66 London Arbitration 21/92 (1992) 329 LMLN 6; Wehner v Dene Steam Shipping Co [1905] 2 KB 92 (KB);

Julian Cooke and others, Voyage Charters (4th edn, Informa Law 2014) para 17.31. 67 Clause 19, Fixture Recap, Page 22 of Bundle.


18

not give rise to the obligation at that point. The clause should be read as allowing for the

payment of freight to be made at some time before breaking bulk. A just reading of the clause

would not suggest that before discharge commences, a lien could be exercised for the unpaid

amount.

39. Further, the Respondent reasonably believed this to be intended effect of the clause.

Given that the Respondent neither acknowledged freight as being payable, nor agreed with the

interpretation that the Claimant based its claim on, is testimony to that inference. Thus, a

reasonable construction of the clause would show that as the discharge has not commenced,

the freight has not become payable

40. Therefore, Claimant cannot exercise lien on the cargo for freight.

C. IN ANY CASE, A LIEN CANNOT BE EXERCISED AT THE CURRENT POSITION OF THE

VESSEL

41. The vessel has been opl Singapore since the time the lien was purported to be first

exercised,68 and continues to remain there till date to the best of knowledge of both parties.69

42. A lien is not exercisable mid-voyage, except under special circumstances, wherein it

cannot be effectively exercised, or is bound to be lost, at the discharge port.70 In recognition of

exercise of lien at a place before the discharge port, emphasis has been laid on special factual

circumstances, which render the exercise of lien impossible at the discharge port.71 Further,

such a contention is usually required to be supported or evidenced by opinions of experts on

local law or P&I clubs.72

68 Email communication as sent to Eric Yan by Gordon Grill (October 20), Page 65 of Bundle. 69 Email series as sent to Eric Yan by Gordon Grill (October 12 - October 21), Page 51, 66 of Bundle; Procedural

order 3 of Clarifications. 70 China National Foreign Trade Transportation Corp v Evlogia Shipping Co SA of Panama (The Mihalios Xilas)

[1979] 1 WLR 1018. 71 London Arbitration 12/91 (1991) 304 LMLN 6. 72 London Arbitration 13/87 (1987) 205 LMLN 9; Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC

311.


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43. In the present case, there is nothing to suggest that the exercise of a lien would be

impossible at the discharge port. The Claimant has failed to advance any tenable reason

establishing its belief/knowledge of loss of the alleged right of lien. Mere non-nomination of a

named discharge port for some time is not the same as the right being lost or exercise being

impossible, and does not lead to that inference.

44. Thus, there are no grounds for lien to be exercised at the current position of the vessel.


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PRAYER

In light of the above submissions, the Respondent requests the tribunal to declare that:

1. The Tribunal does not have the power and/or the jurisdiction to issue an order for

interim sale of the cargo.

2. The Claimant is not entitled to appraise and sell the cargo on board the vessel.

3. The Respondent is prima facie not liable to the Claimant for freight, detention and/or

other damages under the Voyage Charter Party.

4. The Claimant is prima facie not entitled to exercise any lien over the cargo and;

5. It is not necessary or just to sell the cargo on board the vessel.

And therefore:

1. Dismiss the claim of interim relief.

2. A declaration that the lien over the cargo is invalid in respect any claims under the

Charter Party.

3. Further or other reliefs.

Documents

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