Rate this article:  

By William J. Honan III, Haight Gardner Holland & Knight, New York

In a matter that was concluded recently, the charterer - an oil trader - complained that the vessel's delay in arriving at the discharge port was due to the negligent or purposeful misrepresentation of the vessel's condition and location at the time of the making of the voyage charter. As a result of the vessel's late arrival, the charterer evidently suffered severe losses under its supply contracts with its purchasers as the price of oil fell precipitously between the expected arrival date at the discharge port and the actual arrival date.

The charter form was ASBATANKVOY and the arbitration provision provided that "any and all differences of whatsoever nature arising out of this Charter" were to be resolved by arbitration in New York.

The charterer, however, did not commence an arbitration against the shipowner in New York. Instead, it filed a lawsuit in the federal court in Texas against the vessel's commercial manager and against its technical manager alleging that both were responsible for the misdescription of the vessel's location and condition at the time of fixing. Charterer believed, with some basis, that a district court judge in Texas would be more likely to look favourably on its claims than would commercial arbitrators in New York. Charterer's loss of a similar claim against a different shipowner in a New York arbitration the year before reinforced that view.

The shipowner did two things: (i) through its FD&D Club, it commenced an arbitration against the charterer in New York seeking to recover unpaid freight and to obtain a declaration that the charterer's claims of negligent or purposeful misrepresentation had no legal basis and (ii) filed a motion in the Texas court seeking to stay the lawsuit pending a resolution of the arbitration. The Texas judge refused to stay the charterer's suit. Indeed, he set an early trial date which pre-dated that of the arbitration.

Faced with two proceedings on the same claims, a charterer-oriented trial judge and problems with their defence, the vessel's managers settled with the charterer on the eve of the trial. The settlement, in which the shipowner participated, also resolved the charterer's claims in the New York arbitration.

To avoid this kind of difficulty, it is suggested that a similarly situated shipowner, if it has a claim and expects a charterer to claim against it, try to resolve the matter quickly and, if unsuccessful, commence arbitration proceedings promptly. In this case, the shipowner waited almost a year to commence arbitration proceedings and did so only after the charterer had filed suit.

A shipowner might also include a provision in the charter that would discourage an aggrieved charterer from forum shopping:

"Charterer's claims against the vessel's commercial and technical managers shall be settled by arbitration in accordance with Clause 24, Part II of the Charter. That arbitration can be consolidated with an arbitration in which the Owner and Charterer are parties at the request of either the Owner or the Charterer".

There is some question whether this clause would be enforceable because the vessel's managers would not be parties to the contract. Nonetheless, the owning interests would be in a better position to stay a lawsuit against the vessel's managers if such a clause were incorporated in the charterparty.

Gard News is published quarterly by Assuranceforeningen Gard, Arendal Norway.