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TEAM CODE: GR

3RD NATIONAL LAW UNIVERSITY ODISHA INTERNATIONAL MARITIME


ARBITRATION MOOT, 2016

BEFORE
AN
ARBITRAL TRIBUNAL IN LONDON

RADANI PVT. LTD.


(CLAIMANT)
V.
LAFAYETTE COMPANY LIMITED
(RESPONDENT)

MEMORIAL FOR RESPONDENT

TABLE OF CONTENTS

TABLE OF CONTENTS..........................................................................................................I
TABLE OF ABBREVIATIONS...........................................................................................III
INDEX OF AUTHORITIES.................................................................................................VI
STATEMENT OF JURISDICTION....................................................................................IX
STATEMENT OF FACTS......................................................................................................X
ISSUES RAISED..................................................................................................................XII
SUMMARY OF ARGUMENTS........................................................................................XIII
ARGUMENTS ADVANCED...................................................................................................1
I.

THAT

THE ARBITRAL TRIBUNAL HAS JURISDICTION TO TRY THE PRESENT

CASE........................................................................................ 1

A. That the Arbitration Act, 1996 is the Substantive Law governing the parties
arbitration agreement..........................................................................................................1
B. That the substantive law governing the underlying contract is Indian law.................2
a.

Two Indian parties cannot contract out of the substantive law of India..................2

b.

Closest and Most real connection............................................................................2

C. That the principle of competence-competence as under section 30 of the arbitration


act, 1996 will apply.............................................................................................................3
a.

That the invocation of arbitration in the instant case is out of scope of the

arbitration agreement......................................................................................................4
b.

That the invocation of arbitration is against the public policy of india...................6

II. THAT

THE RESPONDENT IS JUSTIFIED IN DEDUCTING HIRE FOR THE LOSS

CAUSED DUE TO THE CRANE ACCIDENT...............................................8

A. That the vessel was unseaworthy at the beginning of the voyage...............................8


B. That there exists a common law right to equitable set-off..........................................9
III. THAT

THE LIABILITY TO INCUR COSTS OF SANDBLASTING IS ON THE

RESPONDENT............................................................................ 12

A. That the Vessel was on off-hire during sandblasting and the Respondent are liable
for hire-payment for the said period.................................................................................12
IV. THAT

THE OWNERS HAD COMMITTED A REPUDIATORY BREACH BY

WITHDRAWING THE VESSEL...........................................................18

V. THE

RESPONDENT IS ENTITLED FOR DAMAGES DUE TO THE BREACH OF THE

CHARTER PARTY

THEREOF............................................................19

A. That the Claimant liable to refund the Advance hire paid.........................................20


B. That the Claimant is liable to refund the value of bunkers ROB:.............................20
C. That the Claimant is liable to compensate for the loss of fixture:.............................21
PRAYER............................................................................................................... 23

TABLE OF ABBREVIATIONS
/sec

Section

A.C

Court of Appeal

ACC

Account

ADDCOM

Adjust Commission

All ER

All England Reporter

App. Cas

Law Reports, Appeals Cases

ATDNSHINC

Any Time Day / Night Sundays


and Holidays Included

CHOPT

Charterers Option

C/P

Charter Party

COB

Close Of Business

CLR

Commonwealth Law Reports

DD

Dated

DD

Dry Dock

DLOSP

Dropping Last Outward Sea Pilot

Ed.

Edition

ETA

Estimated Time of Arrival

EWHC

High Court of England and Wales Decisions

FONASBA

The Federation of National Associations of


Ship Brokers and Agents

GA

General Average

HL

House of Lords

HRS

Hours

HSFO

High Sulphur Fuel Oil

HyBl

Henry Blackstone's Common Pleas Reports

IFO

Intermediate Fuel Oil

ILOHC

In Lieu Of Hold Cleaning

INCLOT

Including Overtime

JJ

Justices

KB/QB

Kings Bench/ Queens Bench Division

L.J

Lord Justice of Appeal

Ll. L. Rep

Lloyds List Law Reports

Lloyds Rep

Lloyds Reports

LMAA

London Maritime Association of Arbitrators

LMLN

Lloyds Maritime Law Newsletter

LQR

Law Quarterly Review, UK

L.R. (vol. no) Exch

Law Reports, Exchequer

LSFO

Low Sulphur Fuel Oil

LT

Local Time

MDO

Marine Diesel Oil

MGO

Marine Gas Oil

MOL

More Or Less

MT

Metric Ton

NOR

Notice Of Readiness

NYPE 93

New York Produce Exchange Form, 1993


4

OWS

Owners

PCT

Percent

PDPR

Per Day Pro Rated

PMT

Per Metric Ton

QC

Queens Counsel

ROB

Remaining On Board

S.C.

: Decisions of the Court of Sessions (Scotland)

SA

Shipping Agency

UKHL

United Kingdom House of Lords

USD

United States Dollar

WLR

Weekly Law Report

INDEX OF AUTHORITIES
CASES
Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd, [1959] AC 133----------------8
BR Herman and Mohatta v. Asiatic Steam Navigation Co. Ltd., AIR 1941 Sindh 1461------20
British Westinghouse Co. v. Underground Electric Railways of London Ltd., [1912] AC 673
----------------------------------------------------------------------------------------------------------21
Compania Sud America de Vapores v. Shipmair BV, [1977] 2 Lloyds Rep. 289--------------11
Czarina ex rel Halvanon Ins. v. W.F. Poe Syndicate, 358 F.3d 1286, 1291 (11th Cir. 2004)- - -5
Federal Commerce and Navigation Ltd. v. Molena Alpha Inc., [1978] 2 Lloyds Rep. 132-10,
11
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (U.S. S.Ct. 1995)------------------5
Golden Strait Corpn. v. Nippon Yusen Kubishika Kaisha, [2007] UKHL 12-------------------21
In Raynes v. Ballantyne (1898) 14 T.L.R. 399------------------------------------------------------15
Leon Corporation v. Atlantic Lines Navigation Co. Inc. [1985] 2 Lloyds Rep. 470-----------11
M Andrew v. Adams [(1834) 1 Bing NC 29: 3 LJCP 236]----------------------------------------20
Metal Distributers (UK) Ltd v ZCCM Investment Holding Plc [2005] EWHC 156------------4
Monarch Steamship Co. Ltd.v. Karlshanns Oljrfabriker, [2000] 2 All ER----------------------21
Moschi v. Lep Air Services Pvt. Ltd., [1973] AC 331----------------------------------------------21
Nejapa Power Co. LLC v. CEL, 19 ASA Bull. 796--------------------------------------------------5
Paola Dalesion [1994] 2 LR 366-----------------------------------------------------------------------5
Riverstone Meat Co Ltd v Lancashire Shipping Co Ltd [1961] 1 ALL ER 495------------------9
Roose Indus. Ltd v. Ready Mixed Concrete Ltd, [1974]2 NZLR 246-----------------------------5
Ruxley Electronics & Construction Ltd.v. Forsyth, [1996] AC 344------------------------------21
SL Sethia Liners Ltd. v. Naviagro Maritime Corp., [1981] 1 Lloyds Rep. 18------------------10
Societe Empresa de Telecomunicaciones de Cuba SA (ETECSA) v Telefonica Antillana SA
and SNC Banco Nacional de Comercio Exterior, Paris Cour d'Appel--------------------------5
Sorabji Dadabhai v. B.N. Rly. Co. Ltd., AIR 1936 Pat 393----------------------------------------20
Sunley & Co. Ltd.v. Cunard White Star Ltd., [1940] 1 KB 740----------------------------------21
Swiss Bank Corp v Novorossiyska Shipping [1995] 1 Llyods Report 202 (QB)---------------5
Sylvia Shipping Co Limited v Progress Bulk Carriers Limited, [2010] EWHC 542 (Comm)22
TDM Infrastructure Private Limited v. UE Development India Private Limited, (2008) 14
SCC 271-------------------------------------------------------------------------------------------------2
6

The Aquacharm [1980] 2 Lloyds Rep. 237---------------------------------------------------------17


Tritonia Shipping Inc. v South Nelson Forest Products Corp. [1966] 1 Llyods Report 114---5
Whistler International v. Kawasaki Kisen KaishaThe Hill Harmony [2001] 1 Lloyds Rep.
147------------------------------------------------------------------------------------------------------14
Whitfield v. de Laurent & Co. Ltd., [1920] 29 CLR 71 at 77-------------------------------------21
Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277- 19
STATUTES
The Arbitration Act 1996--------------------------------------------------------------------------------1
The Arbitration and Conciliation Act 1996---------------------------------------------------------1, 3
BOOKS
A. REDFERN & M. HUNTER (EDS.), LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL
ARBITRATION OF LAWS (14th ed. Kluwer International, 2006)-----------------------------------2
ANSONS LAW OF CONTRACT, 511(Oxford, 29th Edn. 2010)---------------------------------------19
AVTAR SINGH ON LAW OF CARRIAGE, AIR, LAND AND SEA, 27 (4th Ed., Eastern Book
Company, 2003 )---------------------------------------------------------------------------------------8
GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (1st ed., Kluwer Law
International 2009)-------------------------------------------------------------------------------------1
GEORGEIOS I. ZEKOS, INTERNATIONAL COMMERCIAL AND MARINE ARBITRATION, 203
(Routledge-Cavendish, 2008)------------------------------------------------------------------------4
PAYNE AND IVAMYS CARRIAGE OF GOODS BY SEA (13th Ed., Buttersworth, 1989)-----------15
POLLOCK & MULLA ON THE INDIAN CONTRACT AND SPECIFIC RELIEF ACT, 1156 (14th Ed.,
Lexis Nexus Updated, 2013)------------------------------------------------------------------------19
RUSSELL ON ARBITRATION, 80 (23rd Ed. Thomson Reuters, 2009)---------------------------------2
TIME CHARTERS 4 (7th ed , Informa Law from Routledge Llyods Shipping Law Library,
2014)---------------------------------------------------------------------------------------------------18
ZHENG SOPHIA TANG, ROUTLEDGE RESEARCH IN INTERNATIONAL COMMERCIAL LAW, 96 (1st
Ed., Routledge, 2014)----------------------------------------------------------------------------------7
REPORTS
UNCITRAL Model Law On International Commercial Arbitration, 1985------------------------1
TREATIES
7

The Rome Convention, 2009-------------------------------------------------------------------------2, 3

STATEMENT OF JURISDICTION
The Claimant hereby invokes the arbitration clause given in the Charter-party dated 12 th
September, 2012 which states that
GA/ Arbitration in London as per the Arbitration Act, 1996. Unless otherwise agreed,
Arbitral Tribunal to have three members
The present Tribunal has jurisdiction under Section 30 of The Arbitration Act, 1996, which
states,
(1) unless otherwise agreed by the parties, the arbitral tribunal may rule on its own
substantive jurisdiction, that is, as to
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement.

STATEMENT OF FACTS
1. The Respondent, Radani Pvt. Ltd., entered into an agreement with the Claimant,
Lafayette Company Limited, on 12th September, 2012 to hire the Vessel at the hire rate of
USD 10,000 per day prorated payable every 15 days in advance for a period of 36 months
(3 years). The Master of the Vessel is Capt. Mishra. The Charter Party as concluded was
in the form of the New York Produce Exchange (NYPE 1993) form with suitable
amendments.
2. For her 7th voyage, the Vessel was ordered to proceed to load cargo of Nickel ore from
Tawi Tawi, Philippines. Before the loading commenced, there was a technical
malfunction in the Vessels cranes. The Master rectified the said issue by calling crane
experts and getting them repaired. However, while loading, the jib of crane no. 3 broke
and fell on hatch no. 4, making it inaccessible. As a result of this, cargo could not be
loaded in hold no. 3 and 4.
3. Via communication between the parties dated 3 rd March, 2013, the Respondent has said
that all spaces in the Vessel was not available to the Respondent owing to the crane
incident, as a result of which the Respondents are unable to earn freight. Furthermore, this
also makes them liable for claims by sub-charterers. They have therefore sought to
deduction from the Charterers as the accident was directly attributed to them.
4. By the mail dated 24th November, 2013, the Respondents instruct the Vessel to proceed to
West Coast India for loading cargo of Iron Ore.
5. However, by correspondence dated 24th November, 2013, the Claimants informed that
they have deviated the Vessel for the purpose of hold cleaning. An independent expert
inspected the Vessel and viewed that loading of back to back cargoes have damaged the
Vessel considerably and therefore, sandblasting is required to restore its seaworthiness.
The Claimants contend that the Vessel is to be treated as on-hire during the period of
sandblasting, and the cost of sandblasting (USD 1.13 million) is to be paid by the
Respondent.
6. Via communication dated 16th December, 2013, the Respondent denied and disputed that
the Vessel will be considered to be on-hire during the period of sandblasting.
Furthermore, they are not liable for the cost of Sandblasting for the reasons:
All cargoes carried was within the permissible limits of the CP.
All cargo was accepted by the Master without any objection.
The crew onboard was provided with all cleaning material and should have
maintained the Vessel.

10

Sandblasting was an extreme step taken in the circumstances. Ordinary cleaning

would have sufficed.


7. By mail dated 9th January, 2014, the Respondents provide that they will be making
subsequent deductions for mitigating the losses incurred due to their actions of taking the
Vessel out of the service of the Respondents.
8. By the mail dated 12th January, 2014, the Claimants withdraw the Vessel for payment of
full hire.
9. The Respondents, by the mail dated 23rd January, 2014 accepted the withdrawal of the
Vessel and seek refund of the following:
Advance hire paid.
Value of Bunkers ROB which as per Masters message is IFO 100 MT & HSFO
450 MT.
Loss of Fixture.
10. By the correspondence on 25th January, 2014, the Respondents apprise the Claimants that
the withdrawal of the Vessel amounts to repudiatory breach and entitles them to terminate
the Charter Party.
11. On 23rd December, 2015, the Claimants invoked arbitration for the settlement of issues.
12. By mail dated 6th January, 2016, the Respondents allege that the invocation of arbitral
proceeding is unlawful being contrary to the Public Policy of India.
13. However, notwithstanding the above, they appoint Mr. Julian Dave as their arbitrator and
have expressly reserved their right to challenge the jurisdiction of the arbitrator and the
validity of the arbitration.

11

ISSUES RAISED
I.

WHETHER

THE

ARBITRAL

TRIBUNAL

HAS

JURISDICTION

TO

TRY

THE

II.

PRESENT CASE?
WHETHER THE RESPONDENT IS JUSTIFIED IN DEDUCTING HIRE FOR THE

III.

LOSS CAUSED DUE TO THE CRANE ACCIDENT?


WHETHER THE LIABILITY TO INCUR COSTS OF SANDBLASTING IS ON THE

IV.

RESPONDENT?
WHETHER THE OWNERS HAD COMMITTED A REPUDIATORY BREACH BY

V.

WITHDRAWING THE VESSEL?


WHETHER THE RESPONDENT IS ENTITLED FOR DAMAGES DUE TO THE
BREACH OF THE CHARTER PARTY THEREOF?

12

SUMMARY OF ARGUMENTS
I.

WHETHER

THE ARBITRAL TRIBUNAL HAS JURISDICTION TO TRY THE PRESENT

CASE?

The Arbitral Tribunal does not have the jurisdiction by virtue of Section 30 (c) of the
Arbitration Act, 1996 (UK) to try the present case as the matters referred to it are outside the
scope of the arbitration agreement as the matters relating to sandblasting is not under the
charter party and is thus outside its scope. Moreover, invocation of such arbitration is against
Public Policy of India as it relies on claims not contemplated for between the parties.
II.

WHETHER

THE

RESPONDENT

IS JUSTIFIED IN DEDUCTING HIRE FOR THE LOSS

CAUSED DUE TO THE CRANE ACCIDENT?

The Charterers have deducted hire-payment as they suffered loss of freight owing to the crane
accident, the liability of which falls on the ship owners. As a result of their failure to provide
for a seaworthy ship, full and complete cargo could not be loaded and shipped which led to a
loss of freight entitling the Charterers to deduct hire.
III.

WHETHER

THE LIABILITY TO INCUR COSTS OF SANDBLASTING IS ON THE

RESPONDENT?
The Respondents are in no way liable for damaging the holds of the Vessel as they
completely relied on the scrutiny of the Master. The Master of the vessel has issued a NOR
before every voyage which signify that the vessel was completely ready so as to afford the
Respondents complete control of every portion of the vessel available for cargo. The issuance
of NOR shows that the holds of the vessel are fit to load cargo. The deviation of the Vessel
was not out of necessity and under unavoidable circumstances but because the Claimants
have been negligent in the performance of their liability in maintenance of the Vessel.
Further, the Claimants have not provided any notice for dry docking for the period of
sandblasting. This stands in contravention to the terms of the Addendum. Also, and the need
to jointly appoint surveyors is to avoid unprejudiced opinions. The Charterers consent was
not obtained for the inspection by an independent expert. Furthermore, in any event which
prevents the full working of a vessel, the payment of hire shall cease for the time thereby lost.
IV.

WHETHER

THE

OWNERS

HAD

COMMITTED

REPUDIATORY

BREACH

BY

WITHDRAWING THE VESSEL?

13

The Charterers have wrongfully withdrawn the vessel vide letter dated 12 th January, 2014
citing withholding of hire by Charterers which entitles them to withdraw. However, as
already proved above, the Charterers were justified in deducting hire as the Charterers had
incurred losses on freight due to the crane as well as the Owners had wrongfully deviated the
vessel contrary to the Charterers directions and prevented full working of it, which in turn
entitles the Charterers the right to withhold hire in cases of such unjustifiable deviations.
V.

WHETHER

THE RESPONDENT IS ENTITLED FOR DAMAGES DUE TO THE BREACH OF

THE CHARTER PARTY THEREOF?

The Respondent has asked for the refund of the following:


a. Advance hire paid- The advance hire can be calculated by multiplying the number of
days for the voyage with the rate of hire. That would amount to USD 50,000 (5 x
10,000).
b. Value of Bunkers ROB which as per Masters message is IFO 100 MT & HSFO 450
MT- The Bunker Clause in the Fixture note provides for the price of HSFO to be 600
PMT and the Bunkers Clause (Clause 9) in the addendum provides for the price of
IFO to be 650 PMT. The value of IFO will be USD 65,000 (650 x 100) and the value
of HSFO will be 270,000 (450 x 600). So the total value of bunkers would amount to
USD 335,000 (65,000 + 270,000).
c. Loss of Fixture- The amount can be calculated by multiplying the cargo capacity of
the Vessel (35,000 MT) with the freight rate (7.50 PMT) prescribed. The Respondent
is entitled to receive USD 262,500 (35,000 x 7.50).

14

ARGUMENTS ADVANCED
I.

THAT

THE ARBITRAL TRIBUNAL HAS JURISDICTION TO TRY THE PRESENT

CASE?

A.

That the Arbitration Act, 1996 is the Substantive Law governing the

parties arbitration agreement.


Per the arbitration clause in the Charter party dated 12 th September, 2012, GA/ Arbitration in
London as per the Arbitration Act, 1996. Unless otherwise agreed, Arbitral Tribunal to have
three members. The forum selected is London. Both International and domestic arbitrations
seated in England, Wales, or Northern Ireland are governed by the Arbitration Act 1996 (UK),
which provides a detailed statement of English Arbitration law.1 Section 2 of the Arbitration
Act reads the provisions of this Part shall apply where the seat of arbitration is in England
and Wales or Northern Ireland.
Choice-of-law issues play an important role in international arbitration. It is necessary to
distinguish between four laws which potentially affect an international arbitration agreement:
(a) the substantive law governing the parties underlying contract;
(b) the substantive law governing the parties arbitration agreement;
(c) the law applicable to the arbitral proceedings (the lex arbitri); and
(d) the conflict of law rules applicable to select each of the foregoing laws.2
Via the selection of the arbitration clause, the parties have expressly chosen English law as
the lex arbiti. The principle of party autonomy with regard to choice of law is wellrecognised.3

1 Section 2, The Arbitration Act 1996.


2 GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION 181 (1st ed., Kluwer Law
International 2009).
3 UNCITRAL Model Law On International Commercial Arbitration, 1985 (amended
2006), Article 19.
1

Somewhat self-referentially, it must be noted that Section 1 of the Arbitration Act, 1996 states
as a general principle that parties should be free to agree how their disputes are resolved,
subject only to such safeguards as are necessary in the public interest.4
In the instant case, the parties have expressly chosen Arbitration Act, 1996 as the curial law to
be applied, but have not expressly chosen the governing law to be applied to the arbitration
agreement, nor the substantive law to be applied to the matrix contract. In light of the
aforementioned background, the law governing the arbitration agreement is UK Arbitration
Act, 1996.
B.

That the substantive law governing the underlying contract is Indian law.

a. Two Indian parties cannot contract out of the substantive law of India
Section 28 of the 1996 Act5 is imperative in character in view of Section 2(6) thereof, which
excludes the same from those provisions which parties derogate from (if so provided by the
Act). The intention of the legislature appears to be clear that Indian nationals should not be
permitted to derogate from Indian law. This is part of the public policy of the country.6
In the instant case, both the parties are from India having their registered offices in India and
central management and control is exercised in India. As per the law mentioned in TDM
Infrastructure case7, when both the companies are incorporated in India, and have been
domiciled in India, the arbitration agreement entered into by and between them would not be
an international commercial arbitration agreement. Since both the parties are Indian they
cannot deviate from Indian substantive law. Thus the law governing the matrix contract is
Indian Law.
b. Closest and Most real connection
Applicability of Rome Convention

4 Section 1, The Arbitration and Conciliation Act, 1996.


5 Section 28, The Arbitration and Conciliation Act, 1996.
6 TDM Infrastructure Private Limited v. UE Development India Private Limited, (2008) 14 SCC 271.
7Ibid.
2

The rules of the Rome Convention apply whenever there is a choice to be made between the
laws of different countries, even if the parties and the laws concerned are those of countries
which are not signatories to the Rome Convention 8. Essentially the Rome Convention
provides that where the parties have not chosen an applicable law a contract is governed by
the law of the country with which it is most closely connected. 9While the Rome Convention
rules do not apply to arbitration agreements 10, they do apply to the determination of the
proper law of the matrix contract.11The proper law of the arbitration agreement12 is
determined according to the general principles13 for ascertaining the proper law of the
contract.14The governing law of any law contract entered into on or after 17 th December, 2009
Regulation 593/2008 dated 17th June 2008 (The Rome I Regulation).

This is a test coined to decide the laws to be applied to International Arbitration which states
that the law which has the most real and closest connection with the dispute shall be the law
to govern it.
Article 4 of the Rome Convention15 states that the contract shall be governed by the law of
the country with which it is most closely connected. In clause 4 of Article 4 16 the presumption
8 Article 1(1) of The Rome Convention, 2009.
9 Article 4(1) of The Rome Convention, 2009.
10 Article 1(2) (d) of The Rome Convention, 2009.
11RUSSELL ON ARBITRATION, 80 (23rd Ed. Thomson Reuters, 2009).
12Gary B. Born, supra note 2 at 432-434.
13 Ibid at 434.
14 A. REDFERN & M. HUNTER (EDS.), LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL
ARBITRATION OF LAWS (14th ed. Kluwer International, 2006).
15 Article 4 of The Rome Convention, 2009.
16Ibid.
3

is that contract for the carriage of goods in such a contract if the country in which at the time
the contract is concluded, the carrier has his principal place of business is also the country in
which the place of loading or the place of discharge or the principal place of business of the
consignor situated, then the contract is most closely connected with that country.
In the instant case the nature of the contract is that of contract of carriage of goods and all the
criteria aforementioned have been satisfied hence it is presumed that the country with which
the contract has most real connection is India. As a result substantive law of India shall apply.
C. That the principle of competence-competence as under section 30 of the
arbitration act, 1996 will apply.
The competence-competence doctrine provides, in general terms, that international arbitral
tribunals have the power to consider and decide disputes concerning their own jurisdiction.
The doctrine is closely related to the allocation of competence to consider and decide
jurisdictional disputes between arbitral tribunals and national courts.17
Section 30 of the Arbitration Act, 1996 is with regard to the competence of the arbitral
tribunal to rule on its own jurisdiction. Under subsection (1), unless otherwise agreed by the
parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement.18
a. That the invocation of arbitration in the instant case is out of scope of the
arbitration agreement
As already established above, the curial law governing the arbitration agreement in the instant
case is UK Arbitration Act, 1996, and thus any jurisdictional challenges have to be made
under the grounds mentioned in Section 30 of the Act. Section 30 (c) provides for challenge
on the ground that the matters that have been submitted to arbitration have to be in
accordance with the arbitration agreement.

17 Gary B Born supra note 2 at


18 Section 30, The Arbitration Act, 1996.
4

A party is entitled to object to a tribunal assuming jurisdiction over a dispute which falls
outside what the parties have agreed in their arbitration to refer,19 and it is therefore important
to consider the scope of the arbitration agreement and whether the dispute which has arisen
falls within its terms on a true construction of that agreement.20
An agreement to arbitrate can either be contained in a contract to be activated where a dispute
arises under that contract or it can be reached after a dispute has arisen between the parties.
Arbitrations are associated with disputes arising under or in connection with contracts and
with dispute resolution under statute.21
An arbitral tribunal may validly resolve only those disputes that the parties have agreed that it
should resolve. This rule is an inevitable and proper consequence of the voluntary nature of
arbitration. It is the parties who give to a private tribunal the authority to decide disputes
between them, and the arbitral tribunal must take care to stay within the terms of its mandate.
The rule to this effect is expressed in several different ways. Sometimes, it is said that an
arbitral tribunal must conform to the mission entrusted to it, or that it must not exceed its
mandate, or that it must stay within its terms of reference, competence, or authority. A
challenge to the jurisdiction of an arbitral tribunal may be partial or total. 22 A partial
challenge raises the question of whether certain (but not all) of the claims or counterclaims
that have been submitted to the arbitral tribunal are within its jurisdiction. A partial challenge
is usually dependent on whether the particular matters referred to arbitration fall within the
scope of the arbitration agreement. It can therefore be seen that if a tribunal does exceed its
jurisdiction, its award will be imperilled, and may be set aside or refused recognition and
enforcement in whole or in part by a competent court.
National laws and the international conventions on arbitration emphasise how important it is
that an arbitral tribunal should not exceed its jurisdiction. In French law, for example, an
award may be challenged where the arbitral tribunal wrongly upheld or declined
19Russell, supra note 11 at 70.
20Metal Distributers (UK) Ltd v ZCCM Investment Holding Plc [2005] EWHC 156.
21GEORGEIOS I. ZEKOS, INTERNATIONAL COMMERCIAL AND MARINE ARBITRATION , 203
(Routledge-Cavendish, 2008).
22 Redfern, supra note 14 at Chapter 5
5

jurisdiction.23Internationally, the New York Convention provides that recognition and


enforcement of an award may be refused on proof that [t]he award deals with a difference
not contemplated by or not falling within the terms of the submission to arbitration, or it
contains decisions on matters beyond the scope of the submission to arbitration.24
In Paola Dalesion25 the clause referred to disputes arising under a bill of lading and the
court held that the clause did not apply in the instant case to an action, which was
independent of the contractual issues between the parties. It is elementary that arbitration is
simply a matter of contract between the parties; it is away to resolve those disputes but only
those disputes that the parties have agreed to submit to arbitration. 26Arbitration is a
creature of contract and thus the powers of an arbitrator extend only as far as the parties have
agreed they will extend.27
Among other prerequisites, an arbitral tribunal has jurisdiction only in case the dispute is
within the scope of the arbitration agreement.28
A number of national courts and arbitral tribunals have upheld arbitration clauses that contain
no express reference to the scope of arbitrable disputes. 29 For example, an English Court
rejected the argument that a charter party clause providing arbitration to be settled in
London30 was invalid because it did not specify the scope of arbitrable disputes. The Court
reasoned that the provision any dispute under this charter party to be settled in London.
23Societe Empresa de Telecomunicaciones de Cuba SA (ETECSA) v Telefonica
Antillana SA and SNC Banco Nacional de Comercio Exterior, Paris Cour d'Appel.
24Redfern, supra note 14 at Chapter 5.
25Paola Dalesion [1994] 2 LR 366.
26First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (U.S. S.Ct. 1995) .
27Czarina ex rel Halvanon Ins. v. W.F. Poe Syndicate, 358 F.3d 1286, 1291 (11th
Cir. 2004).
28Judgment of 3 October 2000, Nejapa Power Co. LLC v. CEL, 19 ASA Bull. 796, 798 (Swiss Federal
Tribunal)(2001).

29Gary B Born, supra note 2 at 662, 663.


6

Another English Court reached the same conclusion with respect to a clause providing
arbitration in London- English law to apply31. Swiss, German and New Zealand authorities
adopt the same sensible presumption that an arbitration clause in or attached to a contract
governs disputes that arise in connection with that agreement.32
In the instant case also, the Arbitration clause does not expressly mention the scope of the
arbitration agreement. Relying on the aforementioned background, as the facts of this case
are similar too, it shall be construed that this arbitration clause governs the disputes that arise
in connection with this agreement.
The matters submitted before this arbitral tribunal are:
1

Deduction for loss of freight owing to the crane accident

Cost of Sandblasting

Payment of hire during Sandblasting

Losses arising out of sandblasting

As is evident from the claims stated above, substantial part of the issue deals with
sandblasting. Sandblasting is an extra-ordinary cleaning done on the vessel by the Owners.
Such a type of action is not contemplated for in the charter party between the parties. Arising
out of contract or in connection of the contract means that the claim made must have some
reference to any of the terms of the contract. Sandblasting, being an extra-ordinary type of
cleaning was never comprehended by the parties while making a contract. As established in
the above mentioned cases, in such arbitration agreements only the disputes arising under the
contract will be within the scope of the arbitration agreement and all other matters, being
outside the scope of the arbitration agreement, is outside the jurisdiction of the Tribunal by
virtue of Section 30 (c) of the Arbitration Act, 1996.

30Tritonia Shipping Inc. v South Nelson Forest Products Corp. [1966] 1 Llyods
Report 114 (English Court of Appeal).
31Swiss Bank Corp v Novorossiyska Shipping [1995] 1 Llyods Report 202 (QB).
32Roose Indus. Ltd v. Ready Mixed Concrete Ltd, [1974]2 NZLR 246.
7

The weight of authorities on the subject of scope of arbitration agreement show that it is
essential that an arbitral tribunal shall, within its competence-competence principle, give up
jurisdiction over a dispute where it has no jurisdiction over the matter. Thus, in the instant
case, since the substantial part of the claim relates to sandblasting, which is outside the scope
of the contract and thus outside the scope of the arbitration agreement.
b. That the invocation of arbitration is against the public policy of india
As already established invocation of arbitration as in the present case is outside the scope of
the contract. Such a reference of arbitration is opposed to public policy of India, as in the
instant case, Sandblasting was done unilaterally by the Claimant, who is demanding money
for the same from the Respondent. There is no term in the concluded CP between the parties
which gives such a right to the Claimant. If two parties have a concluded contract, one party
performs obligations outside the terms of the contract, independent of the contract, without
the consent of the other party, such a claim cannot be said to be under or in connection with
the contract and such claims, if enforced are against public policy of India. Such unilateral
alteration of material terms of the contract is violation of the cardinal principle of consensus
ad idem on which the Indian Contract Act, 1872 is based. Moreover, if an award is made on
the basis of this claim, then it will amount to undue hardship on the Respondent and unjust
enrichment of the Claimant. Such unjust enrichment is against the public policy of India.
Thus invocation of arbitration for these disputes is against public policy of India.
Although arbitral tribunals are not obliged to consider the law of the enforcement jurisdiction,
from a pragmatic perspective, arbitral tribunals would consider the risk of refusal to
recognize and enforce arbitral awards. 33
The law of the enforcement court thus will have practical effect which obliges arbitrators to
take it into consideration. However, the law of the enforcement court may not be relevant if
the parties agree to voluntarily enforce the awards or if the awards can be enforced in more
than one jurisdiction. Furthermore, a tribunal can only consider the law of the enforcement
court after it can reasonably predict which party is likely to win and which country is likely to
be the place of enforcement.34
33 Garby B Born, supra note at 1084-1085.
34ZHENG SOPHIA TANG, ROUTLEDGE RESEARCH IN INTERNATIONAL COMMERCIAL LAW , 96 (1st
Ed., Routledge, 2014).
8

Regard must also be had to the law of the place or places where recognition and enforcement
of the award will be sought.35 Relying on the aforementioned principle, an arbitral tribunal
should be mindful of the law of the forum where enforcement will be sought. Since both the
parties in the instant case are companies registered in India, India will be the forum for
enforcement. Even if an award is made on these disputes, the same will be unenforceable in
India as it is opposed to Public Policy of India.
Thus, owing to the fact that the claims made in this case are outside the scope of the
arbitration agreement, the tribunal has no jurisdiction. Moreover, even if an award is in fact
made on the basis of these claims, it will not be enforced in India.

35Russell, supra note at 89.


9

II.

THAT

THE RESPONDENT IS JUSTIFIED IN DEDUCTING HIRE FOR THE LOSS

CAUSED DUE TO THE CRANE ACCIDENT

A. That the vessel was unseaworthy at the beginning of the voyage


Article III, Rule 1 of the Indian Carriage of Goods by Sea Act, 1925 states the following:
Responsibilities and Liabilities
The carrier shall be bound, before and at the beginning of the voyage, to exercise due
diligence to-a

make the ship seaworthy;

properly man, equip and supply the ship, make the holds, refrigerating and cool
chambers, and all other parts of the ship in which goods are carried, fit and safe for
their reception, carriage and preservation.

Clause 31 of the Addendum provides:


a

Clause Paramount:

This bill of lading shall have effect subject to the provisions of the carriage of goods by sea
of the United States, The Hague Rules, The Hague Visby Rules, as applicable ,or such other
similar national legislation as may mandatorily apply by virtue of origin or destination of the
bills of lading, which shall be deemed to be incorporated herein and nothing herein
contained shall be deemed a surrender by the Carrier of any its rights or immunities or an
increase of any of its responsibilities or liabilities under said applicable act. If any term of
this bill of lading be repugnant to said applicable act to any extent, such term shall be void to
that extent, but no further.
The national legislation referred to in this clause shall be the Indian Carriage of Goods by Sea
Act, 1925 by virtue of Section 2 of the Act which states that the rule set out in the Schedule
of the Act shall have effect in relation to and in connection with the carriage of goods by sea
in ships carrying goods from any port in India to any other port whether in or outside India.

10

If a charter party contains a Clause Paramount it becomes bound by the provisions of the
Carriage of Goods by Sea Act. 36 These provisions are designed for bills of lading, but the
parties to a Charter may also add their option, invite their application by an express
declaration to that effect.37
Clause 6 of the Addendum provides:
Owners to Provide:
The owner shall provide and pay for insurance of the vessel except as otherwise provided,
and for all provisions, cabin, deck, engine room and other necessary stores, including boiler
water; shall pay for wages, consular shipping and discharging fees of the crew and charges
for port services pertaining to the crew, shall maintain the vessels class and keep her in a
thoroughly efficient state in hull, machinery and equipment for and during the service, and
have a full complement of officers and crew.
With regard to the rule stated above, it is the responsibility of the ship owners to exercise
due diligence to assure a seaworthy ship before and at the beginning of the voyage.
Where the ship owner got his ship repaired from a competent and reputed firm of repairers,
but a fitter of the firm negligently misplaced some inspection covers, which caused water to
enter and damage the cargo, the ship owner was held liable. 38 In the instant case, the crane
was repaired by crane experts on 1 st March, 2013, and on the very same day, the jib of the
crane broke and fell on hatch no. 4 making it inaccessible. As a result of this, cargo could not
be loaded in hold no. 3 and 4. The Vessel here is therefore unseaworthy before the beginning
of the Voyage as it is not efficient enough to load and carry the prescribed full cargo. The
Owners duty to provide for a seaworthy ship is not complied with, and is therefore liable for
the accident arising from the unseaworthiness of the Vessel.
Clause 13 of the Addendum provides:
Spaces Available:
36 AVTAR SINGH ON LAW OF CARRIAGE, AIR, LAND AND SEA, 27 (4th Ed., Eastern Book
Company, 2003 ).
37 Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd, [1959] AC 133.
38 Riverstone Meat Co Ltd v Lancashire Shipping Co Ltd [1961] 1 ALL ER 495.
11

The whole reach of the Vessels holds, decks, and other cargo spaces (not more than she can
reasonably and safely stow and carry) , also accommodations for super cargo, if carried
shall be at the Charterers disposal, reserving only proper and sufficient space for the Vessels
officers, crew, tackle, apparel, furniture, provisions, stores and fuel.
In the present case, owing to the crane accident, all spaces on the ship were not accessible to
the Charterer. By the mail dated 1st March, 2013 it is clear that holds no. 3 & 4 were left
unloaded, making it unseaworthy. It has already been established that it is the responsibility
of the Owner to maintain the seaworthiness of the ship. The Owner has therefore, failed to
fulfil this responsibility.
B. That there exists a common law right to equitable set-off.
Although the general rule is that the charterers are not entitled to deduct from hire claims for
damages arising under the charter (for example in respect of damage to cargo), they may set
off against hire a claim for damages where the owners breach of charter has deprived them
of the use of the ship or prejudiced them in their use of the ship. This right is an application
of the principle of equitable set-off.39
It is to be remembered that although a right of set- off is a defence, with all the legal
consequences which follow from it, in practice the exercise of a right of deduction or set- off
is essentially a provisional act. It decides nothing finally. For the exercise of the right does
not prevent either party from subsequently proving his claim or cross- claim, and so does not
affect the final resolution of the fundamental dispute. Furthermore, the exercise of a right of
deduction or set- off is essentially an act of self- help; it requires no order of the Court or
arbitrators for its enforcement. If a party exercises it, however, he must have justification for
doing so; and in theory he should be able to prove, at the time of its exercise, that he has that
justification.40
Where the charterers have the right to make a deduction from hire, they can make their
deduction from any subsequent hire payment. They may do so even though the amount of the
deduction has not yet been ascertained by arbitration or agreed with the owners. An argument
39Federal Commerce and Navigation Ltd. v. Molena Alpha Inc., [1978] 2 Lloyds Rep. 132 at 140-141
[Hereinafter The Nanfri].

40SL Sethia Liners Ltd. v. Naviagro Maritime Corp., [1981] 1 Lloyds Rep. 18 at 26.
12

by the owners to the contrary was rejected.41 Charterers are not in default if in respect of a
permitted deduction they withhold any sum which they claim bona fide and assess on a
reasonable basis. If the charterer quantifies his loss by a reasonable assessment made in
good faith and deducts the sum quantified then he is not in default. The shipowner cannot
withdraw his ship on account of non-payment of hire nor hold him guilty at that point of any
breach of contract.42
The Charterers are entitled to quantify their loss by a reasonable assessment made in good
faith and deduct the sum so quantified from the hire. 43 The word reasonable must be read
to include actual loss caused, as well as other damages the innocent party may have suffered.
So although the law on the subject cannot be seen as fully settled, the weight of authority
supports the view that the charterers are not in breach if they deduct on the basis of a
reasonable assessment made in good faith.44
In The Leon45, the Judge elaborated on this view by saying that equitable set-off should be
allowed where the charterer had been denied the use of the ship in circumstances which did
not fall within the off-hire clause.
In some of the early cases it was suggested that a right of equitable set- off would arise only
where the charterers were deprived of the ships services altogether. However, that idea has
been rejected.46 The Charterers suffered a loss for the period of 5 days when the vessel was
off-hire. To make up for the loss suffered by them, the Charterers made an adjustment hire,
following a period of off-hire. Their action appears to be justified, and hence must stand.

41The Nanfri, Supra note 31 at 140.


42 Ibid at 140-141.
43Ibid.
44Supra note 30 at 291.
45 Leon Corporation v. Atlantic Lines Navigation Co. Inc. [1985] 2 Lloyds Rep.
470.
46CompaniaSud America de Vapores v. Shipmair BV, [1977] 2 Lloyds Rep. 289 at 297.
13

Deductions could be made where the Ship owners had wrongfully deprived the Charterers of
the use of the Vessel or had prejudiced them in the use of her.47
Lord Denning, M.R., said, at page 141,
When the ship owner is guilty of a breach of contract which deprives the time charterer of
part of the consideration for which the hire has been paid in advance, the Charterer can
deduct an equivalent amount out of the hire falling due for the next month.
In the present case, the Charterers have deducted hire-payment as they suffered loss of freight
owing to the crane accident, the liability of which falls on the ship owners. As a result of their
failure to provide for a seaworthy ship, full and complete cargo could not be loaded and
shipped which led to a loss of freight entitling the Charterers to deduct hire.

47 The Nanfri, Supra note 31 at 140.


14

III.

THAT

THE LIABILITY TO INCUR COSTS OF SANDBLASTING IS ON THE

RESPONDENT

A. That the Vessel was on off-hire during sandblasting and the Respondent are
liable for hire-payment for the said period
Clause 47 of the Addendum provides:
Hold Cleanliness Clause:
Vessel holds on delivery to be clean swept, washed, dried, free of loose rust scale and
previous cargo residue and ready in all respects to receive Charterers any permissible cargo
to local shippers surveyors satisfaction, failing which vessel to be off-hired from time of
failing inspection and directly related extra expenses incurred thereby until vessel passes reinspection to be for Owners account. In case holds partially pass the hold inspection and
loading does commence. Charterers to pay hire pro-rata until all holds pass the reinspection.
The abovementioned clause of the Addendum has two significant parts:
1

That the vessel holds on delivery should be cleaned in all manners to make it
seaworthy and to pass the inspection of any surveyor.

That the vessel is to be treated as on off-hire for the period of hold cleaning, till the
vessel passes re-inspection and the loading commences. The Charterers are required
to pay hire pro-rata until all holds pass the re-inspection.

In the mail dated 24th November, 2013, the Claimant contends that the holds of the cargo had
been damaged as a consequence of back to back cargoes, affecting the sea worthiness of the
Vessel as a result of which it was deviated to a Chinese Yard for the purpose of cleaning of
holds. In accordance with the mail dated 24 th November, 2013 there had been five back to
back cargoes of, namely:
Iron Ore
Nickle Ore
Cement Clinker
Cement Clinker
Sulphur
15

It is further contended by the Claimant that it was out of grave necessity and under
unavoidable circumstances that the Vessel had to be deviated to the Chinese Yard for the
purpose of Sandblasting.
Clause 70 of the Addendum provides:
Deviation/Put back:
In the event of loss of time either in port or at sea, deviation from the course of the voyage
or putting back whilst on the voyage, caused by sickness of or an accident to or misconduct
by Master/Officer/Crew or caused by stowaway refugee on board the vessel, or breakdown to
vessel (or drydocking or periodical survey) the hire shall be suspended from the time of
inefficiency in the port or at sea, deviation or putting back (except for any Government or
similar authority ordered rescue operation) until vessel become again efficient in the same
position or regain the line of voyage whichever shorter distance for the port where vessel is
originally destined for and the voyage resumed therefrom and all direct proven expenses
incurred including bunkers consumes during such period of suspension shall be for Owners
account.
The abovementioned clause says that all the expenses incurred during the time the vessel is
deviated from its usual and standard route, the liability of the same shall be for Owners
account.
In the present case, the Claimant has exercised their undue discretion in deviating the vessel
without prior notice to the Respondent. They wrongfully claim that the vessel has been
damaged as a result of loading back to back cargoes at the instructions of the Respondent.
However, the Respondent is of the view that:

All cargo carried was within the permissible limits of the c/p

All cargo was accepted by the Master without any objection

The crew onboard was provided with all cleaning material and should have
maintained the vessel

Sandblasting was an extreme step taken in the circumstances. Ordinary cleaning


would have sufficed
16

In the present case, the Master of the vessel has issued a NOR (Notice of Readiness) before
every voyage which signified that the vessel was completely ready so as to afford the
Respondent complete access and control of every portion of the vessel available for cargo.
The issuance of NOR shows that the holds of the vessel are fit to load cargo. In spite of that,
Owners have on their own accord called an independent expert to inspect the vessel.
Clause 8 of the Addendum provides:
Performance of Voyages:
a) The Master shall perform the voyages with due despatch, and shall render all
customary assistance with the Vessels crew. The Master shall be conversant with the
English Language and (although appointed by the Owners) shall be under the orders
and directions of the Charterers as regards employment and agency; and the
Charterers shall perform all cargo handling, including but not limited to loading,
stowing, trimming, lashing, securing, dunnaging, unlashing, discharging and tallying
at their risk and expense, under the supervision of the master.
It is not up to the master to question unduly the orders of the Charterer as to the employment
of the ship. Although the master is obliged to employ his ship in accordance with the orders
of the Charterer, he is not always obliged to obey their orders immediately. One situation in
which the master is not only entitled but may also be obliged to refuse the orders of the
charterers is where these endanger the safety of his ship or her cargo. As Lord Hobhouse said
The master remains responsible for the safety of the vessel, her crew and cargo. If an order
is given compliance with which exposes the vessel to a risk which the owners have not agreed
to bear, the master is entitled to refuse to obey it: indeed, as the safe port cases show, in
extreme cases the master is under an obligation not to obey the order. 48
The Master, being an experienced professional should have knowledge about the nature of
cargoes being loaded and about the structure of the Vessel. The Master was negligent in his
duties when he did not object to the Charterers instruction to load back to back cargoes in the
Vessel. It is reasonable to believe that the Master should have known that the loading of back
to back cargoes will cause structural defects to the Vessel. The Master has also issued NOR
before every voyage which proves that his negligence. He could have very well refused to
48 Whistler International v. Kawasaki Kisen KaishaThe Hill Harmony [2001] 1
Lloyds Rep. 147.
17

obey the orders of the Charterer, had he not been negligent and had he paid attention to the
details of cargoes being loaded. The structural defects in the Vessel and the need for carrying
out sandblasting arose because of the negligence of the Master.
Although the Master is under the orders and directions of the Charterer, the Owner remains
liable for negligence of the master, subject to any exceptions in the charter. A ship which was
under time charter caused damage to the charterers own pier as a result of the masters
negligence. It was held by the House of Lords that (apart from the exceptions clause in the
charter) the owners were liable. Lord Herschell said: The captain was appointed by the
owners, but was to be under the directions of the charterers. The effect of that contract was to
place the vessel at the complete disposal of the charterers within the limits specified in the
charter, and subject to the same limits the master was bound to obey the orders of the
charterer, although no doubt he was still the servant of the shipowner. Consequently, apart
from the clause [the exceptions clause], the owner would be responsible for any negligence
of the master, although the owner had no voice to control the master, who was carrying out
the charterers instructions.49
In cases of emergency, the master may become the agent of the cargo-owner and has the
authority to take some extraordinary measures to preserve the goods or minimise the loss. But
it must not be forgotten that the Master has no authority to take such extraordinary action for
the cargo-owner if the latter or his representative can be communicated with. One such
extraordinary action is to delay and/or deviate from the proper route. 50 In the instant case, the
Master did not obtain the Charterers instruction or consent to deviate from the proper route,
and he had the chance to communicate the Charterer. So, the Masters act of deviating from
the original route is an extraordinary action taken without any authority to do so.

Clause 67 of the Addendum provides:


Dry Docking Clause
The owners shall have the option to place the Vessel in dry dock during the currency of this
Charter at a convenient time and place, for bottom cleaning and painting and/or repair as
49 In Raynes v. Ballantyne (1898) 14 T.L.R. 399.
50 PAYNE AND IVAMYS CARRIAGE OF GOODS BY SEA (13th Ed., Buttersworth, 1989).
18

required by Class or dictated by circumstances. Payment of hire shall be suspended upon


deviation from Charterers service until the vessel is again placed at Charterers disposal at a
point not less favourable to Charterers than when hire was suspended. The Charterers do
their utmost to accommodate such positioning of the vessel in Farfast in two and a half years
(counting from new building delivery) intervals for dry docking. The Owners shall give the
Charterers approximate 3(three) months notice followed by forty-five (45) days prior notice
of intended dry docking.
Owners will figure out dry docking schedule/plan as soon as possible and to give Charterers
at least four (4) months prior notice of intended dry docking for good cooperation.
In the present case, the Vessel was taken for sandblasting and was in dry docking as can be
seen by letter dated 17th January 2014. For this period of dry docking the notice required in
accordance with Clause 67 was not given by the Owners. Thus this amounts to violation of
the said clause by the owners.
Moreover, this clause clearly states that whilst the vessel is in the dry dock, hire shall be
suspended and the vessel to be treated as off hire. Therefore, the vessel, during the period of
sandblasting as it was in the dry dock, is to be treated as off hire.
Clause 3 of the Addendum provides:
On-Off Hire Survey
Prior to delivery and redelivery the parties shall, unless otherwise agreed, jointly appoint
one (1) surveyor, who shall conduct joint on-hire/off-hire surveys, for the ascertaining
quantity of bunkers on board and the condition of the Vessel. A report shall be prepared on
each occasion and signed by the surveyor and on-hire survey shall be on Owners time and
off-hire survey on Charterers time. Both parties hereto shall equally share the cost and
expense of the said inspection.
The purpose of this clause and the need to jointly appoint surveyors is to avoid unprejudiced
opinions. The Charterers consent was not obtained for the inspection by an independent
expert. The NOR issued by the Master proves that the Vessel was seaworthy and completely
fit to load cargoes; hence, there is no reason for the Owner to call an expert

19

The Claimant in the present case hold the Respondent liable for the costs of sandblasting, as
they claim that the Vessel is to be treated as on-hire during the period of hold cleaning.
However, Clause 17 of the Addendum reads as follows:
Off hire:
In the event of loss of time from deficiency and/or strike of officers or crew, or deficiency of
stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, detention
by the assent of the Vessel, (unless aforesaid events is caused by events for which the
charterers ,their servants, agents or subcontractors are responsible), or detention by average
accidents to the vessel or cargo unless resulting from inherent vice, quality or defect of the
cargo, drydocking for the purpose of the examination or painting bottom, or by any other
similar cause preventing of the full working of the vessel, the payment of hire and overtime, if
any, shall cease for the time thereby lost. Should the vessel deviate or put back during a
voyage, contrary to the orders or the directions of the charters, for any reason other than
accident to the cargo or where permitted in lines 257 and 258 hereunder, the hire is to be
suspended from the time of her deviating or putting back until she is again in the same or
equidistant position from the destination and the voyage resumed there (except for any rescue
operation ordered by any Government or similar authority of its kind). All the bunkers used
by the vessel while off hire shall be for the owners account. In the event of the vessel being
driven into port or to anchorage through stress of weather, trading to shallow harbours or to
reverse or ports with bars, any detention of the vessel and/or expenses resulting from such
detention shall be for the Charterers account. If upon the voyage the speed be reduced by
defect in, or breakdown of any part of her hull, machinery or equipment, the time so lost and
the cost of any extra bunkers consumed in consequence thereof, and all extra proven
expenses may be deducted from the hire.
The abovementioned Clause says that in any event which prevents the full working of a
vessel, the payment of hire shall cease for the time thereby lost. It is well established by a
case law that the incident which gives rise to the forming of an intention in the charterers
mind to off-hire the ship is one which, if the charterers action is to succeed, must prevent the
full working of the vessel.51

51 The Aquacharm [1980] 2 Lloyds Rep. 237.


20

The deviation to Chinese yard to perform sandblasting prevented the working of the Vessel
and hence it is to be treated off-hire as per Clause 17. The Clause further says that hire has to
be suspended during the time the Vessel is deviated from its usual course, and thus, the
Respondent is not liable for payment of hire during this period.
Furthermore, the crew onboard was provided with cleaning material for the maintenance of
the Vessel. If the Vessel was being maintained by the crew regularly, the said damage could
have been avoided. Hence, the Respondent is in no way liable for damaging the holds of the
Vessel as they completely relied on the scrutiny of the Master. And the deviation of the Vessel
was not out of necessity and under unavoidable circumstances but because the Claimant has
been negligent in the performance of their liability in maintenance of the Vessel. This is thus,
in contravention of Clause 70 of the Charter Party and the Vessel shall be taken to be on offhire as per Clause 17.

21

IV.

THAT

THE OWNERS HAD COMMITTED A REPUDIATORY BREACH BY

WITHDRAWING THE VESSEL

The Owner has wrongfully withdrawn the vessel vide letter dated 12 th January, 2014 citing
withholding of hire by Charterer which entitles them to withdraw. However, as already
proved above, the Charterer was justified in deducting hire as the Charterer had incurred
losses on freight due to the crane accident, as well as the Owner had wrongfully deviated the
vessel contrary to the Charterers directions and prevented full working of it, which in turn
gives the Charterer the right to withhold hire in cases of such unjustifiable deviation as per
Clause 70.
As per the instant case, the Owner has repeatedly defaulted in their obligation as provided for
in the Charter party. In the first instance, as explained in the above-stated issue, owing to their
negligence, the Owner did not provide for all the spaces in the ship to the Charterer to load
cargo which resulted in great losses for the Charterer. Secondly, they deviated the Vessel to
conduct hold cleaning which was not necessary as all the necessary due-diligence was
exercised by the Charterers. The Owners, vide mail dated 12 th January, 2014, refused to
follow the instructions to proceed to West Coast India.
By virtue of Clause 8 of the Addendum provided, the Master of the Vessel is obligated to
perform all orders and directions as provided by the Charterer regarding employment and
agency. Employment here, can be defined as,
Employment refers either to the services demanded by the charterers orders, or the
performance by the ship of those services, or to the period of time during which the ship is
engaged in this way. To exploit the earning capacity of the ship, most obviously the
charterers will direct her to undertake particular cargo- carrying commitments. The
charterers orders in that regard are commonly referred to as voyage orders.52
In the present case, vide mails dated 24th November, 2013, and 11th January, 2014, the
Charterer has instructed the Master to sail the Vessel to West Coast India. However, the
Master has failed to oblige to these instructions repeatedly, violating the abovementioned
clause and preventing the full working of the Vessel in accordance with the CP.
52 TIME CHARTERS 4 (7th ed , Informa Law from Routledge Llyods Shipping Law
Library, 2014).
22

Furthermore, the Owner has, by the mail dated 12th January, 2014, withdrawn the Vessel from
the Charter party. Since there have been repeated default on the part of the Owners indicating
their intention not to perform the Charter party as per its terms, the Charterer accepted the act
of withdrawal by the Owners and have demanded immediate refund and claim for damages of
the following, namely:

Advance hire paid

Value of Bunkers ROB which as per Masters message is IFO 100 MT & HSFO 450
MT

Loss of Fixture

Therefore, the Owner wrongfully took the deductions, which were justified on the part of the
Charterer, to be repudiatory breach and has thus withdrawn the Vessel and terminated the
Charter party. This amounts to wrongful termination and an unjustified withdrawal is a
repudiatory breach by doing so, which entitles the Charterer to terminate the Charter party.
The Owner further claims that there is non-performance by the Charterers of their part of the
promise, as the Charterer fails to provide instructions when the Vessel has reached West
Coast India. However, since the Vessel has already been withdrawn and the Charter party
terminated vide mail dated 12th January, 2014, the Charterer is discharged by their liability to
perform. In all previous instances, the Charterer has performed all obligations undertaken in
the Charter party, and hence withdrawing the Vessel and terminating the Charter party can be
considered bad in law as the Owner had no justified right to do so 53. Where a party purports
to terminate by accepting a breach which does not in law justify termination, it risks being
itself in repudiatory breach of contract.54
Thus, the Claimant has committed a repudiatory breach by wrongfully terminating the
Charter party and that entitles the Respondent to terminate the Charter party.

53 ANSONS LAW OF CONTRACT, 511(Oxford, 29th Edn. 2010).


54 Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1
WLR 277.
23

V.

THE

RESPONDENT IS ENTITLED FOR DAMAGES DUE TO THE BREACH OF

THE

CHARTER PARTY

THEREOF

Damages are the pecuniary recompense given by the process of law to a person for the
actionable wrong that another has done him. 55 Where a contract is broken by one party,
contract is discharged, and the obligations under the contract come to an end; a new
obligation arises for payment of damages. It is the fundamental principle of damages for
breach of contract that these are awarded to place the injured party in the same position in
which he would have been, had he not sustained the injury of which he complains. 56 Hence,
the damages must be commensurate with the injury sustained.57
A. That the Claimant liable to refund the Advance hire paid
The Respondent had paid the advance hire to the Owner for the Vessel to proceed towards
West Coast India. The Vessel was supposed to leave for the West Coast on 23 rd November,
2013 and reach on 27th November, 2013. But instead the Claimant did not act as per the
instructions of the Respondent and deviated from the original route to perform Sandblasting.
The Claimant directed to Vessel to proceed towards West Coast on 17th January 2014 and it
reached on 21st January 2014.
In all contracts by charterparty, where there is no express agreement as to time, it is an
implied condition that there shall be no unreasonable delay in commencing the voyage. The
voyage must be commenced within a reasonable time. This is so because in all seagoing
business expedition is important, for, by delay, the whole object of the voyage may be
defeated. This has been the principle since long and is evidenced by M Andrew v. Adams.
Here a ship, instead of sailing, as agreed, from Portsmouth to St. Michaels for loading a cargo
of fruits for London, she went on an intermediate port and she came to St. Michaels only after
about a month from the date of sailing. The charterer was held entitled to sue for the breach
of the implied warranty of reasonable despatch.58
55 POLLOCK & MULLA ON THE INDIAN CONTRACT AND SPECIFIC RELIEF ACT, 1156 (14th Ed.,
Lexis Nexus Updated, 2013).
56 BR Herman and Mohatta v. Asiatic Steam Navigation Co. Ltd., AIR 1941 Sindh
1461.
57 Sorabji Dadabhai v. B.N. Rly. Co. Ltd., AIR 1936 Pat 393.
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In the instant case, the voyage did not take place as planned, there was a long delay which is
in contravention to Clause 8 of the Addendum. The purpose of the charter party was defeated
by the Claimant. Hence, the Respondent is entitled for refund of the advance hire paid. The
advance hire can be calculated by multiplying the number of days for the voyage with the rate
of hire. That would amount to USD 50,000 (5 x 10,000).
B. That the Claimant is liable to refund the value of bunkers ROB:
The Respondent is entitled for refund of the value of bunkers ROB after the wrongful
termination by the Claimant. As per Masters message, the fuel ROB is IFO 100 MT &
HSFO 450 MT. The Bunker Clause in the Fixture note provides for the price of HSFO to be
600 PMT and the Bunkers Clause (Clause 9) in the addendum provides for the price of IFO
to be 650 PMT. The value of IFO will be USD 65,000 (650 x 100) and the value of HSFO
will be 270,000 (450 x 600). So the total value of bunkers would amount to USD 335,000
(65,000 + 270,000).
C. That the Claimant is liable to compensate for the loss of fixture:
Per Lord Diplock,59
The primary obligations of the party in default to perform any of the promise
made by him and remaining unperformed likewise come to an end as does his right
to continue to perform them. But for his primary obligations there is substituted by
operation of law a secondary obligation to pay to the other party a sum of money to
compensate for him for the loss he has sustained as a result of the failure to
perform the perform the primary obligations.
Countless authorities characterize the object of damages as restitutio in integrum; i.e., the
reparation of loss resulting from the breach of obligation involved. 60 In contract, the classic
formulation is that the victim of the breach is to be put so far as money can do it, in the same
situation, as if the contract had been performed.61

58 M Andrew v. Adams [(1834) 1 Bing NC 29: 3 LJCP 236].


59 Moschi v. Lep Air Services Pvt. Ltd., [1973] AC 331.
60 Whitfield v. de Laurent & Co. Ltd., [1920] 29 CLR 71 at 77.
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The Respondent incurred losses because of the delay caused by the deviation, which has been
proved to be a fault of the Claimant. As a consequence, we were unable to earn freight and
we were exposed to claims from our sub charterers, for which the Claimant has been proved
to responsible.
That lost profits on a sub-charter for a failure to provide the services of the vessel during the
currency of a time charterparty may be recoverable in damages is supported by the leading
textbook on time charters. As stated in Wilford on Time Charters (5th ed.) at para. 4.87:
Where the owners are guilty of only a temporary failure to provide the charterers with the
ship's services, ordinary rules of contractual damages apply to the assessment of the
charterers' loss. The charterers are entitled to compensation to place them, as far as possible,
in the position in which they would have been if there has been no breach of charter. The
charterers can usually recover (so long as care is taken to avoid double-counting): (a)
expenses thrown away during the period in which they are deprived of the ship's services; (b)
loss of profits that they would have earned during the same period; and (c) any consequential
loss of profits during the period following the ship's return to their service: The Derby
[1984] 1 Lloyd's Rep. 635 , per Hobhouse,J., at page 644 (the case went to the Court of
Appeal but on other issues; [1985] 2 Lloyd's Rep. 325 ). So, for example, the charterers may
be entitled to recover the profit that they would have made on a lost sub-fixture: see, for
example, the same case at page 643.62
Thus, the Respondent is entitled to receive compensation for the loss of fixture. The amount
can be calculated by multiplying the cargo capacity of the Vessel (35,000 MT) with the
freight rate (7.50 PMT) prescribed. The Respondent is entitled to receive USD 262,500
(35,000 x 7.50).

61 British Westinghouse Co. v. Underground Electric Railways of London Ltd.,


[1912] AC 673 at 689(H.L.); Monarch Steamship Co. Ltd.v. Karlshanns
Oljrfabriker, [2000] 2 All ER at 897, HL; Sunley & Co. Ltd.v. Cunard White Star
Ltd., [1940] 1 KB 740 at 745; Ruxley Electronics & Construction Ltd.v. Forsyth,
[1996] AC 344 at 353, 365; Golden Strait Corpn. v. Nippon Yusen Kubishika
Kaisha, [2007] UKHL 12 [Hereinafter Golden Victory].
62 Sylvia Shipping Co Limited v Progress Bulk Carriers Limited, [2010] EWHC 542
(Comm).
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PRAYER
In light of the facts stated, issues raised, arguments advanced, and authorities cited, it is
humbly submitted by the Claimant before the Honourable Tribunal to find and adjudge that:
1. This arbitral tribunal does not have the jurisdiction to hear the present matter.
2. The Vessel was unseaworthy at the beginning of voyage, there exists a common law
right to equitable set-off, and the Respondent is justified in deducting hire for the loss
caused due to crane accident.
3. The Vessel was off-hire during the period of sandblasting, the Claimant had
unnecessarily deviated the Vessel for the same, and the liability to incur cost of
sandblasting was not on the Respondent.
4. The Claimant had committed a repudiatory breach by withdrawing the Vessel.
5. The Claimant was liable to refund the advance hire payment, value of bunkers
remaining on board, and loss of fixture.
6. The final total damages would sum up to USD 6,47,500 (50,000+335,000+262,500).

AND/OR
Pass any other order that it deems fit in the interest of Justice, Equity and Good
Conscience.
And for this, the Respondent as in duty bound, shall humbly pray.

Date:
Place:
Counsel(s) for Respondent

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