the parties had specifically agreed to load different cargo at different ports. In the tribunal’s view, the word “act” was directed at some specific and definable event or occurrence, not at the charterers’ general compliance with their contractual obligations under a charterparty.
Taking the two cases together, it appears that an act need not be culpable, but must be non-contractual.
Overall, it seems likely that for smaller cases, the ICA is often successful in delivering a swift resolution. However, for higher value claims, the parties will be tempted to explore ways to circumvent the simplistic mechanical approach to claims in the hope that the legal spend will be set off by a reduction in the contribution. Regrettably, this approach undermines the objective of the ICA. Whilst a fair outcome may be desirable, what different parties perceive as fair in any particular case is inevitably subjective. However, whilst difficult to support empirically, it does seem likely that the losses of one case will be offset by gains of another case and that the ICA may be considered fair to the extent that it delivers a more economical outcome for P&I insurers across a portfolio of claims.
Is the purpose of the ICA to avoid costly and protracted litigation met in practice?
The concept of the ICA is certainly simple and to some extent has withstood the test of time, being revised only twice in 1984 and 1996 with the 2011 amendment in relation to counter-security. However, despite the stated purpose of the ICA, the reality is that its effectiveness is heavily reliant on both Club claims handlers and the assureds following the spirit of the agreement.
The number of ICA claims which form the subject of Tribunal awards or judgments seems relatively limited taking into account the vast number of cargo claims which clubs routinely handle and the popularity of the NYPE form as a charterparty. As such, whilst difficult to measure empirically because of the absence of any visibility of unreported ICA claims, the general perception is that
the ICA does provide a swift and effective resolution for many cargo claims. However, where commercial considerations interfere with the expeditious resolution of cargo claims under the ICA, the creativity and inventiveness of the English legal industry has generated a substantial body of law. Fortunately, arbitration Tribunals and Courts generally seem to recognize and give effect to the commercial objective and character of the agreement.
In the 2018 case of the Maria, in which charterers argued unsuccessfully that a partial transfer of responsibility for stowage to the Master constituted a material amendment to the cargo handling responsibilities resulting in a 50/50 split, the Court commented:
The regime created by the ICA was designed to achieve, and has achieved, a clear and certain system for allocating responsibilities as between owner and charterer in the cases to which it applies. Since the only options within clause (8) (b) are 100 per cent charterer, 100 per cent owner or 50/50, it is obviously a very mechanistic and no doubt sometimes arbitrary regime. Which is why it is sometimes criticised. But it has the merit of simplicity, as with motor insurers’ “knock-for-knock” agreements to which it has been compared.
In London Arbitration 10/22, mentioned above, the Tribunal similarly recognised in relation to technical and semantic arguments about which version of the ICA was incorporated into the relevant charterparty that where the Courts had previously used expressions such as “edition”, “versions”, “form”, “predecessor” and “amendment” interchangeably when referring to different versions of the ICA, “it would be a strange
approach...to conclude that commercial parties in the present case intended something stricter.“
Further, in Kamilla Hans-Peter Eckhoff KG v. A.C Oerssleff's Eftf. A/B ("The Kamilla") [2006] EWHC 509 (Comm), owners were appealing against an arbitration award finding them responsible for the losses arising from the authorities’ decision to reject the entire cargo on the basis that the underlying cause was the unseaworthiness of the vessel. However, the Court agreed with the
Tribunal’s findings and observed: “As the courts seem repeatedly to have acknowledged in the various cases in which they have considered the working of the ICA, it is an attempt to cut through the legal and factual problem which arose when interpreting the provisions of the New York Produce Exchange form in the context of liabilities for loss of or damage to cargo and to provide what was described by Counsel for the Charterers as "a form of rough and ready justice".”
The very existence of court judgments on ICA claims suggests that the ICA is perhaps not entirely successful in avoiding protracted and costly litigation. However, reported cases are relatively few and far between and, if nothing else, the ICA probably does reduce the scope for complex legal debate.
Concluding remarks
The ICA is, at times, an imperfect solution aimed at cutting through legal complexities to deliver a pragmatic result. It is perhaps ironic that ICA claims by definition will be dealt with in their initial stages within P&I clubs and yet Tribunals and Courts are having to hold the counterparties to the spirit of the agreement. Instead of questioning whether ICA is fit for purpose, parties should maybe more often ask themselves whether their arguments “fit the purpose” of the ICA. The above comments by arbitrators and judges suggest parties sometimes get it wrong.
Gard recommends all its members to apply and follow the ICA in all cases where it is properly applicable even if the counterparty is not insured by an IG club. Gard’s perception is that the ICA has brought significant costs savings to the membership overall and a cooperative approach avoids parties becoming side-tracked by pointless disputes.
Gard would like to additionally Fredrik Doksrød Olsen, Senior Claims Adviser, Dry Cargo and Louis Shepard, Senior Claims Adviser, Defence Lawyer for their contributions to this article.
This article was first originally on the Gard website and is
republished here with our thanks.
The Report • June 2023 • Issue 104 | 73
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