London Arbitration 3/24
In March 2022, a vessel sustained propeller damage on the way to its first load port, leading to the charter party cancellation through force majeure. Charterers did not initiate arbitration proceedings until over a year later in April 2023. The dispute focused on whether arbitration proceedings were time-barred. Charterers contended that the one-year time bar did not apply due to circumstances surrounding the voyage’s cancellation.
Clause Details
The vessel began its voyage on February 28, 2022 to the first load port after completing its prior commitments. On March 16, 2022, the owners informed the charterers of propeller damage in the ship, invoking force majeure. The owners chartered the subject vessel to the charterers under a booking note of 5 October 2021 which included the following clause 21:
“Any disputes arising under this Charter … shall be referred to arbitration in England under English law. Any possible alleged claim against the Operator shall be instituted by lawsuit before latest within one year after the end of the voyage. Otherwise, the claim or claims to be null and void.”
Clause 21 requires a single arbitrator, but as per the parties’ agreement, three arbitrators were agreed upon but only two were deemed necessary, as both arbitrators agreed in the subject of award. The parties agreed that the tribunal should determine the question: “Whether any claim brought by the charterers in this arbitration is time-barred”.
Charterer’s Claims
It was agreed by both parties that the vessel had started the voyage to the loading port. The Charterer claimed that any breach under clause 21 should be treated as such, however, since the vessel was not in a voyage, but rather, in a termination voyage, the clause should not be appliable. The Tribunal eventually agreed that the wording under clause 21 is wide enough that breaches do not have to be only under clause 21. The key was that the vessel had started the voyage to port, applying a time-limit to any claim.
Defining “Lawsuit”
The charterer also claimed that both first and second sentence in clause 21 contradicted each other in the meaning of “Lawsuit” as it is different from the arbitration requirements in the first sentence. This again was ruled against, as it was concluded that “lawsuit” in clause 21 is interpreted broadly enough to cover arbitration.
In Syska v Vivendi Universal SA [2008] 2 Lloyd’s Rep 636, the judge said that he could see no good reason why “lawsuit” should not be regarded as including arbitration. The term could extend beyond a court action. In The Merak [1964] 2 Lloyd’s Rep 527, a case on the Hague Rules, Sellers LJ in the Court of Appeal said that he could see no good reason for giving the word “suit” the limited meaning which had been advanced.
It was clear that there was no inconsistency between the two parts of clause 21 and that the charterers’ claim was time-barred.
Purpose of Arbitration
The charterer’s third argument was that arbitration was the standard method for resolving disputes in shipping contracts giving both parties mutual rights, and obligations. However, the tribunal disagreed, implying that the parties could and can indeed agree or add such terms, as evidenced by the agreement’s clear wording.
Award
The claims brought forward by the charterer were deemed invalid and time-barred. The charterer had to pay their own costs and the owner’s costs. Additionally, the charterer had to cover the cost of the award and pay interest on these costs at 7% per year from the award date until reimbursement.