Custom dues or fines
It has been a debated issue whether all dues or fines related to the cargo are subject to the ICA. The minority view is that ICA applies to all cargo dues or fines levied on and paid by the shipowners. The majority view is however that it is only cargo dues or fines levied on the cargo interest, and then in turn pursued against the carrier under the contract of carriage, that are subject to the ICA. The reasoning behind the majority view is that it is only the latter type of claim that can form part of a claim under a contract of carriage.
Does incorporation of the ICA clause lead to swift and fair apportionments between owners and charterers?
The goals of both a swift and fair resolution are in some ways in tension. Swift resolution can result in what might be regarded as an unfair outcome; conversely, if the parties invest time in negotiating a fair outcome, it is likely to take time and generate costs, undermining the ICA’s key objective of efficient dispute resolution. It is a question of balance and proportionality that may be different in each case. Taking these goals separately -
Swiftly apportioned
Owners generally do not pursue claims arising from unseaworthiness and Gard’s experience is that some claims, for example, for straightforward cargo shortage, can be resolved with an exchange of a few e-mails between Clubs’ claims handlers. Equally, security is usually exchanged on a relatively prompt basis, provided the usual requirements for security are met. This allows the parties to focus on resolving the underlying dispute. The fact that Club correspondents are known to the Clubs more widely and are often involved in the negotiation of the incoming cargo claim probably also helps to expedite the resolution of the ICA claim by improving confidence in the level of settlement achieved.
That said, where a claim is of greater financial significance, it is more likely to be scrutinised and
less likely to be swiftly apportioned between the parties.
Fairly apportioned
Can a mechanistic approach to cargo claims ever result in a fair apportionment between owners and charterers? To the extent that the ICA recognizes the general framework of responsibility in a free in/free out charterparty, it is difficult to see how any result would be regarded as unfair. However, there are the inevitable shades of grey where cargo claims arise from causes beyond either party’s control, such as attritional shortage or excess landing claims due to differences in the calibration of shore scales at different ports covered by Clause 8(c). For these claims, responsibility is simply split equally between the parties and the ICA certainly delivers a pragmatic outcome. However, it is less certain that the rough and ready approach would be regarded as fair, particularly in the context of paper shortages which were deemed by the Tribunal in Arbitration 28/17 to form a valid ICA claim even though there is no physical loss of cargo.
Similarly, Clause 8(d) inevitably picks up a wide array of claims due to its catch-all nature and simply splits them equally in circumstances where a less mechanistic approach might result in a perception that the cause of the loss more naturally fell within one party’s sphere of responsibility. For example, it was held by the Tribunal in London Arbitration 10/22 that inherent vice claims are to be split equally between the parties even though charterers would ordinarily be perceived as responsible for the cargo and therefore the risk of quality issues with the cargo which is shipped. It seems unlikely that the owners in that case would regard having to shoulder half of the losses arising from the inherent characteristics of cargo as being a fair outcome. In reality, the true unfairness of shouldering losses arising from inherent vice is most pronounced where the courts hearing the claim do not recognise the defence of inherent vice and neither the owners nor the time charterers have any relationship to the cargo. Whilst it appears that there may be scope to recover contributions under the NYPE form
from time charters, there is usually no recourse against the voyage charterer who supplied the cargo. In such circumstances, the fact that owners and charterers share the pain may not be seen as unfair as both owners and time charterers usually know which trades present a risk of unfair court decisions.
That said, the potentially harsh effects of Clause 8(c) and (d) are mitigated by the exception allocating one of the parties only where there is clear and irrefutable evidence that the claim arises from their act or neglect.
An example of the mitigating effect of this provision is to be found in the case of Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Ltd [2017] EWCA Civ 2107 where the charterers ordered a ship loaded with soyabean meal to wait off the discharge port for four months during which time the condition of the cargo deteriorated so that it was ultimately damaged on outturn. The Tribunal found that the cause of the damage was the inherent nature of the cargo combined with the protracted period of storage onboard the ship. Consequently, the ICA claim fell within Clause 8(d) with the starting point being equal allocation between the parties subject to the exception transferring responsibility to one party. The Tribunal ultimately found that the decision to keep the ship and cargo waiting off the discharge port was an “act” for the purposes of the exception shifting responsibility entirely to the charterers. One of the key points in dispute was whether or not the “act” had to be culpable and the Tribunal’s decision that the relevant act did not have to be culpable was upheld on appeal through to the Court of Appeal. However, it is clear from London Arbitration 19/17 that performance of an existing obligation under the charterparty will not constitute an “act” for these purposes. This decision concerned sweating damage to a steel cargo which the shipowners argued was due to the charterers’ decision to load different cargo at different temperatures at different ports. The Tribunal declined to find an “act” for the purpose of transferring responsibility for the cargo claim to the charterers because
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