17th annual international maritime law arbitration moot …

17TH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT, 2016

NATIONAL LAW SCHOOL OF INDIA UNIVERSITY

TEAM NO. 14

MEMORANDUM FOR HESTIA INDUSTRIES

ON BEHALF OF AGAINST

HESTIA INDUSTRIES ZEUS SHIPPING AND TRADING COMPANY

RESPONDENT CLAIMANT

TEAM

ADITYA D’SOUZA● ANIRUDDH NIGAM● ASHWIJ RAMAIAH● NIKITA GARG

TEAM NO. 14 MEMORIAL FOR THE RESPONDENT

TABLE OF CONTENTS

ABBREVIATIONS ........................................................................................................................ ii

INDEX OF AUTHORITIES ............................................................................................................ v

QUESTIONS PRESENTED .......................................................................................................... xii

STATEMENT OF FACTS .............................................................................................................. 1

ARGUMENTS ADVANCED ........................................................................................................... 3

I. The Arbitral Tribunal does not have the jurisdiction to determine the frustration issue . 3

[A] The wording of the arbitration clause implies exclusion of the frustration issue .... 3

[B] The parties’ intention to exclude the frustration issue from the scope of the

arbitration clause is clear ............................................................................................... 4

II. The Charterparty is frustrated due to inordinate delay ................................................... 5

[A] The Force Majeure clause in the Charterparty does not preclude the remedy under

frustration ....................................................................................................................... 6

[B] The Charterparty has been frustrated ....................................................................... 7

III. In any event, RESPONDENT is not liable to pay demurrage ......................................... 11

[A] The Athena had left the loading place ................................................................... 11

[B] In any case, demurrage did not accrue .................................................................. 14

IV. The RESPONDENT is entitled to a salvage reward ........................................................ 18

[A] The elements constituting salvage are satisfied .................................................... 18

[B] The assistance to the Athena does not fall within the scope of a towage contract 22

PRAYER .................................................................................................................................... 25


ii

ABBREVIATIONS

AC Appeal Cases

AIR All India Reporter

ALL ER All England Reporter

ALR Australian Law Reports

App cas Law Reports Appeal Cases

Asp. M.L.C. Aspinall’s Maritime Law Cases

B&S Best and Smith’s Reports

BCC British Company Law Cases

BLR Business Law Reports

C.Rob Christopher Robinson’s Reports

CLAIMANT Zeus Shipping and Trading Company

CLC Company Law Cases

Comc.Cas Company Cases

Comm Arb Commercial Arbitration

Edn. Edition

EWCA Civ. Court of Appeal of England and Wales

Decisions (Civil Division)

EWHC High Court of England and Wales

F 2d Federal Reporter (Second Series)

F. Supp 2nd Federal Supplement (Second Series)

FCA Federal Court of Australia

FCR Federal Court Reports


iii

Frustration Doctrine of Frustration of Contract

H&N Hurlstone and Norman’s Exchequer Reports

Hag. Adm Haggard’s Admiralty Reports

HLNG Hades Liquefied Natural Gas

ICC International Criminal Court

Inc. Incorporated

K.B. Law Reports, King’s Bench

L.R.I.A Law Reports Indian Appeals

LJQB Law Journal, Queen’s Bench

Lloyd’s Rep. Lloyd’s Reporter

LMLN Lloyd’s Maritime Law Newsletter

Ltd. Limited

Lush Lushington’s Admiralty Reports

Moo. PC Moore’s Privy Council Cases

NSWCA New South Wales Court of Appeal

NSWLR New South Wales Law Reports

NZLR New Zealand Law Review

P Law Reports Probate

P.D. Piske Din shel Bet Hamishpat Haelyon

QB Queen’s Bench

QBD Queen’s Bench Division, Law Reports

Qd R Queensland Reports

RESPONDENT Hestia Industries

SA South African Law Reports


iv

SC Session Cases, Decisions of the Court of

Sessions (Scotland)

SC (HL) Session Cases (House of Lords) (Scotland)

SCC Supreme Court Cases (India)

Sec. Section

SGCA Singapore Court of Appeal

Sing HC Singapore High Court

Swa Swabey’s Admiralty Reports

SWAB Swabey’s Admiralty Reports

UKHL UK House of Lords

UKPC United Kingdom Privy Council Cases

UN United Nations

VSC Supreme Court of Victoria

W. Rob William Robinson’s Admiralty Reports

WASCA Western Australia Court of Appeal

WLR Weekly Law Report


v

INDEX OF AUTHORITIES

CASES

Aldebaran Maritima v. Aussenhandel (The Darrah), 1977 AC 157 ........................................ 13, 14

Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488 ............................................ 4, 6

Bank Line Ltd v. Arthur Capel & Co. [1919] A.C. 435, 455-456. .............................................. 7, 8

BTR Engineering (Australia) Ltd v Dana Corporation [2000] VSC 246. ....................................... 4

Budgett v Binnington, 1891 1 QB 35; ........................................................................................... 15

Burges v. Wickham, (1836) 3 B & S 669. ....................................................................................... 9

Cantiere Navale Triestina v. Soviet Naphtha Export Agency (The Dora) 1925 2 KB 172 .......... 15

Cape Flattery Ltd v Titan Maritime LLC607 F.Supp.2d 1179 (2009) ............................................ 4

Cero Navigation Corp v. Jean Lion (The Solon), 2000 CLC 593. ................................................ 16

Davis Contractors Ltd v. Freeham Urban District Council [1956] AC 696. ................................... 8

E.L. Oldendorff & Co v. Tradax Exports SA (The Johanna Oldendorff), 1974 AC 479 ........ 14, 15

Edwinton Commercial Corp v. Tsavliris Russ Ltd (The Sea Angel) [2007] EWCA Civ 547. 8, 10

Electricity Generation Corporation v. Woodside Energy Ltd & Ors [2014] HCA 7. ..................... 8

Empresa Exportadora De Azucor v. Industria Azucarera Nacional SA (The Playa Larga)

[1983] 2 Lloyd's Rep. 171. ........................................................................................................... 7

Ethiopian Oilseeds and Pulses Export Corp v Rio del Mar Foods [1990] 1 Llyod’s Rep 86 ...... 4, 6

Fillite (Runcorn) Ltd v Aqua Lift 45 BLR 27.............................................................................. 4, 6

Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 ......................................................... 5, 6

Geipel v. Smith (1872) LR 7 QB 404 ...................................................................................... 11, 12

Gem Shipping Co of Monrovia v. Babanaft (The Fontevivo), 1975 1 Lloyds Rep 339; .............. 15

Harris v. Best, Ryley & Co, 1892 68 LT 76 .................................................................................. 18


vi

Heyman v Darwins [1942] AC 356 ............................................................................................. 4, 5

Hudson v Bilton, 1856 26 JLQB 27............................................................................................... 13

IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 .......................... 4

ICC Case No.7929, XXV Y.B. Comm. Arb. 312, 317 (2000) ........................................................ 4

In re Kinoshita & Co 287 F 2d 951 (2d Cir (NY) 1961) ................................................................. 6

Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd’s Rep 62 .................. 4

International Sea Tankers v. Hemisphere Shipping Co, (The Wenjiang) (No.2) [1983] 1

Lloyd's Rep. 400 ........................................................................................................................ 11

Islamic Republic of Iran Shipping Lines v. Ierax Shipping Co of Panama (The Forum

Craftsman), 1991 1 Lloyds Rep 81 ............................................................................................ 16

Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 125. ................................................. 6

Kissavos Shipping Co SA v. Empresa Cubana de Fletes (The Agathon) [1982] 2 Lloyd's Rep.

211.............................................................................................................................................. 11

Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The Evia) (No.2) [1983] 1

A.C. 736 ..................................................................................................................................... 11

Kronos Worldwide Ltd v. Sempra Oil Trading SARL, 2004 1 Lloyds Rep 260 .......................... 14

Lang v. Anderdon, 1824 3 Barn j&C 495................................................................................13

Larsen v. Sylvester, 1908 99 LT 94. .............................................................................................. 16

Leonis Steamship Co v. Rank, 1908 1 KB 499 ............................................................................. 14

LMLN 18 – 10 July 1980............................................................................................................... 15

London Arbitration 2/84 - LMLN 113, 1 March 1984. ................................................................. 10

London Arbitration 5/90 – LMLN 274, 5 May 1990..................................................................... 14

Mishara Construction Company Inc v. Transit-Mixed Concrete Corp 310 N.E.2d 363. .............. 10

Mobil Shipping and Transportation Co v. Shell Eastern Petroleum (The Mobil Courage),

1987 2 Lloyds Rep 655. ............................................................................................................. 18


vii

National Carriers Ltd v. Panalpina (Northern) Ltd [1981] A.C. 675 ............................................... 8

Nereide SPA de Navigazione v. Bulk Oil Intl (The Laura Prima), 1982 1 Lloyds Rep 1 ............. 19

Nicholson v. Leith Salvage and Towage Co. Ltd. 1923 S.L.T 229 ............................................... 26

North River Freighters v. HE President of India (The Radnor), 1956 1 QB 333 .......................... 13

Novorossisk Shipping Co v. Neopetro Co (The Ulyanovsk), 1990 1 Lloyds Rep 425. ................ 18

Paper Products Pty Limited v Tomlinsons (Rochdale) Ltd & Ors (1993) 43 FCR 439 .................. 4

Photo Productions v. Securicor, 1980 AC 827 .............................................................................. 16

Pioneer Shipping Ltdv. BTP Tioxide Ltd. (The Nema)[1981] 2 Lloyd’s Rep 239. ...................... 12

Port Line Ltd v. Ben Line Steamers Ltd [1958] 2 Q.B. 146 .......................................................... 11

Postlewaith v. Freeland, 1880 5 App Cas 599 ............................................................................... 15

Rinehart v Welker [2012] NSWCA 95 ........................................................................................ 4, 5

Sailing Ship Garston & Co v. Hickie, 1885 15 QBD 580. ............................................................ 13

Sametiet M/T Johs Stove v. Istanbul Petrol Rafinieri (The Johs Stove), 1984 1 Lloyds Rep 38 .. 16

Samick Lines Co Ltd v Owners of the Antonis P Lemos [1985] AC 711 ................................... 4, 6

Seacrystal Shipping v. Bulk Transport (The Kyzikos), 1987 2 Lloyds Rep 122........................... 15

Sig Bergesen v. Mobil Shipping &Transportation Co (The Berge Sund), 1993 Lloyds Rep

453.............................................................................................................................................. 15

Sinclair v. Cooper 108 U.S 352. .................................................................................................... 27

Sir Lindsay Parkinson and Co Ltd v. Commissioners of Works [1949] 2 K.B. 632 ....................... 7

Sun Fire Office v. Hart, 1889 14 App Cas 98 ................................................................................ 17

TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Limited [2009] VSC 553 ....... 4

The Aboukir (1905) 21 T.L.R 200. ................................................................................................ 25

The Agamemnon arbitration – 1974; LMLN 143 – 25 April 1985 ............................................... 14

The Albion (1861) Lush. 282......................................................................................................... 21

The August Korff [1903] P. 166 .................................................................................................... 23


viii

The Aztecs (1870) 3 Asp. M.L.C 326. ........................................................................................... 21

The Batavier (1853) 1 Spinks E. & A. 169 .............................................................................. 21, 26

The Bengloe (1940) 67 Lloyd’s Rep. 307 ..................................................................................... 21

The Beulah (1842) 7 Jur. 207 ........................................................................................................ 25

The Charlotte (1848) 3 Wm. Rob. 68 ............................................................................................ 21

The Clan Colquhoun (1936) 54 Lloyd’s Rep. 221. ....................................................................... 24

The Domby (1941) 69 Lloyd’s Rep. 161. ...................................................................................... 25

The Earl of Eglington (1855) Swa. 7. ............................................................................................ 22

The Ella Constance (1864) 33 L.J Adm. 189 ................................................................................. 21

The Ellora (1862) Lush. 550 ..................................................................................................... 21,26

The Fontevivo, 1975 1 Lloyds Rep 339......................................................................................... 17

The Fountain (1866) L.R 1A. & E. 58. .......................................................................................... 21

The Galatea (1858) Swab. 349; ..................................................................................................... 25

The Glaucus (1948) 81 Lloyd’s Rep. 262 ................................................................................ 21, 26

The Glenbeg (1940) 67 Lloyd’s Rep. 437 ..................................................................................... 25

The Glenfruin (1885) 10 P.D 103 .................................................................................................. 23

The Homewood (1928) 31 Lloyd’s Rep. 336 ........................................................................... 25,27

The I.C. Potter (1870) L.R. 3 A. & E. 292..................................................................................... 26

The India (1842) 1 Wm Rob 406. .................................................................................................. 23

The Industry (1835) 3 Hag. Adm. 203 ........................................................................................... 22

The Laomedon (1925) 23 Lloyd’s Rep. 230. ................................................................................. 23

The Liffey (1887) 6 Asp. M.L.C. 255............................................................................................ 22

The Liverpool [1893] P. 154. ......................................................................................................... 26

The Lomonosoff (1920) 5 Lloyd’s Rep. 276 ................................................................................. 22

The Makedonia [1958] 1 Q.B. 365 ................................................................................................ 22


ix

The Minnehaha (1861) 15 Moo. P.C. 133. .................................................................................... 26

The Miranda (1872) L.R 3 Ad. & E. 561....................................................................................... 23

The Mobil Courage, 1987 2 Lloyds Rep 655 ................................................................................ 18

The Mount Cythos (1937) 58 Lloyd’s Rep. 18 .............................................................................. 21

The Princess Alice (1848) 3 W. Rob. 138 at 139. ......................................................................... 27

The Reward (1841) 1 W. Rob. 174 at 177. .................................................................................... 27

The Sava Star [1995] Lloyd’s Rep. 161. .................................................................................. 22, 23

The Savona[1900] P. 252. .............................................................................................................. 12

The Strathvaner (1875) 1 App. Case. 58PC ................................................................................... 21

The Theseus (1925) 23 Lloyd’s Rep. 136 ...................................................................................... 23

The Thomas Allen (1886) 12. App. Cas. 118 .......................................................................... 21, 26

The Toju Maru [1972] AC 242 ...................................................................................................... 23

The Tramp [2007] 2 Lloyd’s Rep. 363. ................................................................................... 21, 26

The Trevorian (1940) 66 Lloyd’s Rep. 45 ..................................................................................... 25

The Troilus [1951] A.C. 820.................................................................................................... 21, 26

The Uranienborg [1948] 1 All E.R ................................................................................................ 24

The Valiant [1921] P. 312. ............................................................................................................. 24

The Werra (1886) 12 P.D. 52................................................................................................... 21, 26

The White Star (1866) L.R 1A. & E. 68 ........................................................................................ 21

The William Beckford (1801) 3 C. Rob. 355 ................................................................................ 22

Total Transport Co of Panama v. Amoco Transport Co (The Altus), 1985 1 Lloyds Rep 423. .... 15

Vinava Shipping Co. Ltd v. Fineluet A.G.(The Chrysalis) [1983] 1 Lloyd's Rep. 503 ................ 11

Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 ................... 5

Watson v. Firemen’s Fund Insurance Company [1922] 2 K.B 335............................................... 21

William Alexander v. Akt Hansa, 1920 AC ............................................................................15


x

BOOKS

A.M. Sheppard, MODERN MARITIME LAW AND RISK MANAGEMENT, (2nd edn., 2009). ................ 20

Alan Redfern et al, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, (4th

edn, Sweet and Maxwell 2004) . .................................................................................................. 4

McKendrick, FORCE MAJEURE AND FRUSTRATION OF CONTRACT, ( 2nd edn., 1995) .................. 11

Carver, CARRIAGE OF GOODS BY SEA, (4th edn., 1905). ................................................................ 13

CHITTY ON CONTRACTS, (32nd edn., 2015); ................................................................................... 17

D. Davies, COMMENCEMENT OF LAYTIME, (4th edn., 2006). ................................................... 14, 15

F.D. Rose, KENNEDY & ROSE: LAW OF SALVAGE, (6th edn, , 2001). ....................................... 20, 22

Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION (Vol. 1, Wolters Kluwer 2009) . .. 4, 6

J. Cooke et al, VOYAGE CHARTERS, (3rd edn., 2007). ................................................................... 13

J. Schofield, LAYTIME AND DEMURRAGE, (6th edn., 2013); ............................................... 14, 16, 19

J. Wilson, CARRIAGE OF GOODS BY SEA, (2008); .......................................................................... 13

L. Gordon, P. Hillenius et al, SHIPBROKING AND CHARTERING PRACTICE, (2004) ....................... 13

Pollock and Mulla, THE INDIAN CONTRACT ACT, 1872, Vol.1, (9th edn., 2013) ............................ 7

Treitel, FRUSTRATION AND FORCE MAJEURE, 13-012, (2nd edn., 2004)....................................... 10

TREATISES

UN Convention on the Law of the Sea 1982. ................................................................................ 18

ARTICLES

K. Li and H. Zheng, Enforcement of Law by the Port State Control, 35(1), MARITIME POLICY

AND MANAGEMENT,(2008). ........................................................................................................ 14

STATUTES

Navigation Act 2012. ..................................................................................................................... 18

Customs Act 1901 .................................................................................................................... 17, 18

Port Authorities Act (WA), 1999. .................................................................................................. 15


xi

The UK Standard Conditions for Towage and Other Services, 1986.................................... ..24


xii

QUESTIONS PRESENTED

I. Whether the arbitral tribunal has the jurisdiction to determine the dispute regarding

frustration of the Charterparty?

II. Whether the Charterparty was frustrated due to inordinate delay?

III. Whether the RESPONDENT is liable to pay demurrage?

IV. Whether the RESPONDENT is entitled to a salvage reward?


1

STATEMENT OF FACTS

THE PARTIES AND THE CHARTERPARTY

On 21st July, 2014, Hestia Industries (“RESPONDENT”), agreed to charter the Athena, a Hades

flagged vessel, from Zeus Shipping and Trading Company (“CLAIMANT”), by way of a negotiated

Voyage Charterparty. The object of the Charterparty was to deliver 260,000m3 of Liquified

Natural Gas based in Hades (“HLNG”), which was expected to be delivered by 2nd November,

2014. All disputes arising under the contract were to be submitted to arbitration in London

pursuant to Clause 30 of the Charterparty (“arbitration clause”). This clause was amended, as the

RESPONDENT wanted to exclude certain disputes from the scope of the arbitration clause. The

Athena arrived at the port of Hades on 21st July, 2014 amidst violent protests led by the

opposition leader Jacqueline Simmons who turned the export of HLNG into a political issue.

THE MILITARY COUP

The Athena arrived at the Port of Hades and accordingly, issued a Notice of Readiness on 3rd

October, 2014. Despite temporary interruptions, the cargo was loaded onto the ship by 6th

October, 2014. On 7th October, 2014, the Athena finally sailed from the Port of Hades after

obtaining the requisite clearances. A Statement of Facts to the same effect was issued. On the

same day, in an unexpected turn of events, Jacqueline Simmons seized control of the Parliament

through a military coup d’état. She instructed the Hades Coast Guard to intercept the Athena and

order it to return to its berth. The Athena was intercepted outside the territorial limits of the Port

of Hades. After temporary resistance, the Master of the Athena obliged with the orders of the

Coast Guard and the Athena returned to its berth in the Port. There was no communication

between the RESPONDENT and the Master during this chain of events.

THE DEMURRAGE CLAIM


2

The Athena was detained at the Port of Hades till 6th October, 2015. The CLAIMANT contended

that the Athena had not left the loading place, and hence demurrage for a period of 358 days was

payable. The RESPONDENT initially denied this claim, arguing that the vessel was intercepted

outside the territorial limits of the Port of Hades. On 30th April, 2015, the RESPONDENT

communicated that the delay in the performance of the contract was so radically different from

what they had initially contemplated that the Charterparty had been frustrated.

THE SALVAGE CLAIM

On 5th October, 2015, the Coast Guard freed the Athena to leave the port of Hades. However, the

propellers of the vessel were tampered with and shortly after setting sail under its own steam,

both the propeller shafts broke. At this point, tugs belonging to Hestug that had guided the Athena

to open waters rendered timely assistance to the vessel. Interestingly, Hestug was owned by

Hestia Industries. The RESPONDENT claims salvage reward for this operation.

THE DISPUTE

The CLAIMANT referred the dispute to arbitration, claiming demurrage under the Charterparty.

However, the RESPONDENT contends that the Charterparty had been frustrated. Consequently, the

arbitral tribunal’s jurisdiction to hear the issue on frustration is also disputed.

The RESPONDENT also filed a counterclaim, seeking a salvage reward for services rendered during

the salvage operation carried out by Hestug. Both parties have appointed their arbitrators, and

mutually agreed on the competence of the tribunal to rule on its own jurisdiction. The Tribunal

has invited written submissions from both parties, and scheduled oral arguments from 3-8 July,

2016.


3

ARGUMENTS ADVANCED

I. THE ARBITRAL TRIBUNAL DOES NOT HAVE THE JURISDICTION TO DETERMINE THE

FRUSTRATION ISSUE

1. The CLAIMANT referred the dispute regarding the demurrage claim to arbitration on 16th

November, 2015.1 The RESPONDENT contends that the Charterparty had been frustrated. It is well

settled that the determination of the scope of an arbitration clause depends upon the interpretation

of its wording and the intention of the parties to it.2 Therefore, it is submitted that frustration does

not fall within the scope of the arbitration clause as: first, the wording of the arbitration clause

implies its exclusion [A]; and secondly, the parties’ intention to exclude frustration from the

scope of the clause is clear [B].

[A] THE INTERPRETATION OF THE WORDING OF THE ARBITRATION CLAUSE IMPLIES

EXCLUSION OF THE FRUSTRATION ISSUE

2. It is an established position of law that the phrase “dispute arising under the contract”

implies a narrow scope of the arbitration clause.3 In B.T.R. Engineering (Australia) Ltd.,4 it was

held that this phrase covers only those disputes, which are derived from or are dependent on the

contract.5 A dispute is understood to be derived from or be dependent on a contract if its outcome

is governed or controlled by the contract.6

1 Correspondence between Zeus Shipping and Trading Company and Hestia Industries, Page 72 of The Bundle. 2 Interim Award in ICC Case No.7929, XXV Y.B. Comm. Arb. 312, 317 (2000); Heyman v. Darwins [1942] AC

356; Alan Redfern et al, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 154, (4th edn, Sweet

and Maxwell 2004). 3 Paper Products Pty Limited v. Tomlinsons (Rochdale) Ltd & Ors (1993) 43 FCR 439; Cape Flattery Ltd v. Titan

Maritime LLC607 F.Supp.2d 1179 (2009); IBM Australia Ltd v. National Distribution Services Ltd (1991) 22

NSWLR 466; Ashville Investments Ltd v. Elmer Contractors Ltd [1989] QB 488; Samick Lines Co Ltd v. Owners of

the Antonis P Lemos [1985] AC 711; Ethiopian Oilseeds and Pulses Export Corp v. Rio del Mar Foods [1990] 1

Lloyd’s Rep 86. 4 BTR Engineering (Australia) Ltd v. Dana Corporation [2000] VSC 246. 5 Overseas Union Insurance Ltd v. AA Mutual International Insurance Co Ltd [1988] 2 Lloyd’s Rep 62; Fillite

(Runcorn) Ltd v. Aqua Lift 45 BLR 27; Paper Products Pty Limited v. Tomlinsons (Rochdale) Ltd & Ors (1993) 43

FCR 439; TCL Airconditioner (Zhongshan) Co Ltd v. Castel Electronics Pty Limited [2009] VSC 553. 6 Rinehart v. Welker [2012] NSWCA 95.


4

3. In the present instance, the outcome of the dispute on frustration depends on whether

there was an inordinate delay in the delivery of cargo on account of the coup d’état in Hades.

This change in the political conditions of Hades is a supervening event that is not governed or

controlled by the Charterparty. Therefore, it is submitted that the dispute cannot be taken to be

derived from or be dependent on it. Consequently, the dispute on frustration does not fall under

the Charterparty but outside the scope of the arbitration clause.

[B] THE PARTIES’ INTENTION TO EXCLUDE THE FRUSTRATION ISSUE FROM THE SCOPE OF

THE ARBITRATION CLAUSE IS CLEAR

4. In order to determine the parties’ intention with respect to the scope of an arbitration

clause, the circumstances in which the clause comes into existence must be taken into

consideration.7 It is submitted that in the present instance, the specific correspondence between

the parties, prior to the execution of the Charterparty is indicative of their intent to exclude

frustration from the scope of the arbitration clause.

5. The arbitration clause in the letter dated 14th July, 2014 provided for “any dispute

arising out of or in connection with this contract, including any question regarding its existence,

validity, or termination” to be referred to arbitration in London.8 However, pursuant to the

RESPONDENT’S request to include only those disputes that arise out of the terms of the

Charterparty,9 Clause 30 was amended to provide only for “disputes arising under the contract”

to be referred to arbitration in London.10

6. The phrase “arising out of or in connection with” has been interpreted to encompass a

wider range of disputes as compared to the phrase “arising under the contract”.11 Thus, it is clear

7 Heyman v. Darwins [1942] AC 356; Fiona Trust & Holding Corp v. Privalov [2007] UKHL 40;

Walter Rau Neusser Oel und Fett AG v. Cross Pacific Trading Ltd [2005] FCA 1102. 8 Clause 30, Voyage Charterparty, Page 20 of The Bundle. 9 Correspondence between Hestia Industries and Zeus Shipping and Trading Company, Page 25 of The Bundle. 10 Clause 30, Voyage Charterparty, Page 45 of The Bundle. 11 G.B. Born, INTERNATIONAL COMMERCIAL ARBITRATION, Vol 1, 1094 (Wolters Kluwer 2009); Ethiopian Oilseeds

and Pulses Export Corp v. Rio del Mar Foods [1990] 1 Llyod’s Rep 86; Ashville Investments Ltd v. Elmer


5

that this change indicates an intention to exclude certain disputes from the jurisdiction of this

tribunal. Moreover, since disputes regarding ‘termination’ were specifically omitted in the

amended clause,12 it is submitted that frustration forms a part of the excluded disputes. This is

because it is a question relating to the termination of the Charterparty.13

7. Admittedly, the presumption of one-stop arbitration laid down in Fiona Trust,14 seeks to

provide for arbitration of all disputes at one forum. However, the specific correspondence in the

present case and the subsequent change in the wording of the clause sufficiently rebut this

presumption. Hence, it is clear that the parties did not intend to submit all their disputes to the

same forum. Consequently, their intent to exclude frustration from this tribunal’s jurisdiction

must be given effect by referring this dispute to the courts of Poseidon.

II. THE CHARTERPARTY IS FRUSTRATED DUE TO INORDINATE DELAY

8. Immediately after seizing control of the parliament on 7th October, 2014, President

Jacqueline Simmons ordered the Athena to be intercepted and brought back to its berth at

Hades.15 The Athena was finally allowed to set sail on 6th October, 2015.16 It is submitted that

this inordinate delay in the Athena delivering the HLNG (hereinafter “cargo”) frustrates the

Charterparty because; first, despite the express force majeure provision in the Charterparty the

RESPONDENT can claim remedy under the doctrine of frustration of contract [A]; and secondly,

the delay in delivering the cargo frustrates the Charterparty. [B].

Contractors Ltd [1989] QB 488; Fillite (Runcorn) Ltd v. Aqua Lift, 45 BLR 27; Samick Lines Co Ltd v. Owners of

the Antonis P Lemos [1985] AC 71; In re Kinoshita & Co 287 F 2d 951 (2d Cir (NY) 1961). 12 Clause 30, Voyage Charterparty, Page 45 of Bundle. 13 Jackson v. Union Marine Insurance Co Ltd (1874) LR 10 CP 125. 14 Fiona Trust & Holding Corp v. Privalov [2007] UKHL 40. 15 The Hades Advocate, Page 55 of the Bundle. 16 Correspondence between Zeus Shipping and Trading Company and Hestia Industries, Page 69 of the Bundle.


6

[A] THE FORCE MAJEURE CLAUSE IN THE CHARTERPARTY DOES NOT PRECLUDE THE

REMEDY UNDER FRUSTRATION

9. The parties have inserted an express force majeure clause in the Charterparty to address

delays encountered by the parties for different reasons.17 It is submitted, that despite this express

clause the RESPONDENT can claim remedy under frustration because; first, the delay did not occur

in a foreseeable degree of severity [i]; secondly, the RESPONDENT has the option of independently

claiming remedy under frustration [ii].

i. The delay did not occur in a foreseeable degree of severity

10. It is submitted that even if the parties have inserted a force majeure clause in the

Charterparty to address extraneous events, such events should occur in a reasonably foreseeable

degree of severity.18 Therefore, even if an extraneous event is expressly included in the force

majeure clause of the Charterparty it will not be covered by this provision if it occurs at an

unreasonable degree.19 In the instant case, due to the political upheaval in Hades, the delivery of

cargo got delayed by over a year.20 In a commercial contract concerning delivery of goods and

services, a delay of a year from what was ordinarily contemplated by the parties is an

unreasonable delay.21 Thus, even if the Charterparty provided for delay, an inordinate delay of

over a year does not fall within the scope of the provision.22

ii. The RESPONDENT has the option of independently claiming remedy under frustration

11. It has been held in the Bank Line Ltd Case23 that if an event covered under the force

majeure clause occurs, then the clause provides an express option to terminate the performance of

outstanding obligations without having to show that its object is frustrated. However, this does

17 Clause 19, Voyage Charterparty, Page 39 of The Bundle. 18 Empresa Exportadora De Azucor v. Industria Azucarera Nacional SA (The Playa Larga) [1983] 2 Lloyd's Rep.

171. 19 Bank Line Ltd v. Arthur Capel & Co. [1919] A.C. 435. 20 Correspondence between Zeus Shipping and Trading Company and Hestia Industries, Page 69 of The Bundle. 21 Pollock and Mulla, THE INDIAN CONTRACT ACT, 1872, 156, Vol.1, (9th, edn., 2013). 22 Sir Lindsay Parkinson and Co Ltd v. Commissioners of Works [1949] 2 K.B. 632. 23 Bank Line Ltd v. Arthur Capel & Co. [1919] A.C. 435.


7

not preclude the right of the party to independently claim remedy under frustration.24 Therefore, it

is submitted that the RESPONDENT's omission to exercise their right under the force majeure

clause does not preclude them from independently claiming remedy under frustration.

[B] THE CHARTERPARTY HAS BEEN FRUSTRATED

12. It is submitted that the inordinate delay in delivering the cargo frustrates the Charterparty

because: first, the delay radically changes the nature of outstanding rights of the RESPONDENT

from what they had reasonably foreseen at the time of entering the Charterparty. [i]; secondly, the

RESPONDENT had not assumed the risk of inordinate delay [ii]; and thirdly, the acts that led to the

delay could reasonably be speculated to render delivery of cargo impossible [iii].

i. The delay radically changes the nature of outstanding rights of the RESPONDENT

13. If an extraneous event occurs which radically changes the nature of outstanding rights

and/or obligations from what the parties had reasonably contemplated at the time of entering into

the contract, then such event frustrates the contract.25 It was expressly held in the Electricity

Generation Corporation Case26 that the rights and obligations of the parties in a commercial

contract should be constructed considering the language used by the parties, the surrounding

circumstances known to them and the commercial purpose or objects to be secured by the

contract at the genesis of the transaction.27 In the instant case, it is submitted that the

RESPONDENT had contemplated that the Charterparty conferred them with the right to have the

cargo delivered by 2nd November, 2014.

14. In the proposal, the RESPONDENT expressly mentioned that they expected the cargo to be

delivered by 2nd November, 2014.28 The CLAIMANT may argue that the proposal is an extrinsic

24 Bank Line Ltd v. Arthur Capel & Co. [1919] A.C. 435. 25 National Carriers Ltd v. Panalpina (Northern) Ltd [1981] A.C. 675; Davis Contractors Ltd v. Freeham Urban

District Council [1956] AC 696. 26 Electricity Generation Corporation v. Woodside Energy Ltd & Ors [2014] HCA 7. 27 Edwinton Commercial Corp v. Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007]

EWCA Civ 547. 28 Proposal of Hestia Industries to Zeus Shipping and Trading Company, Page 2 of The Bundle.


8

evidence which cannot be relied upon to construct the terms of the Charterparty. However, where

the contract is silent on a matter on which a term is normally implied by law, extrinsic evidence

can be used to support such implication.29 In mercantile contracts, there is a presumption that

parties entered into the agreement presuming that the contract concerning delivery of goods

would be completed within a reasonable period of time.30 Hence, the proposal can be used to

establish that the CLAIMANT contemplated the completion of the contract by 2nd November, 2014.

15. It is submitted that delivery of cargo after an inordinate period of one year is radically

different from the object with which the RESPONDENT entered the Charterparty because: first, the

RESPONDENT cannot fulfil their objects if the cargo is not delivered expeditiously [a]; and

secondly the delay would significantly reduce the profits of the RESPONDENT [b].

a. THE RESPONDENT CANNOT FULFIL THEIR OBJECTS IF THE CARGO IS NOT DELIVERED

EXPEDITIOUSLY

16. At the genesis of the Charterparty, the RESPONDENT was financially strained and was not

inspiring confidence in the market.31 Moreover, cost and time overruns of its gas plants were

eroding its cash reserves.32 Therefore, it is submitted that Hestia expeditiously needed to export

HLNG to reinvigorate itself economically. These facts indicate that the commercial object of the

RESPONDENT was to have the cargo delivered expeditiously. Delivering the cargo after an

inordinate delay of one year does not fulfil any of these objects. Hence, the delay in delivering

the cargo makes the Charterparty radically different from the object with which the RESPONDENT

had entered into it.

29 Burges v. Wickham, (1836) 3 B & S 669. 30 Arthur Norrington v. James A Wright (1885) 115 US 189. 31 The Hades Advocate, Page 26 of The Bundle. 32 The Hades Advocate, Page 26 of The Bundle.


9

b. THE DELAY WOULD SIGNIFICANTLY REDUCE THE PROFITS OF THE RESPONDENT

17. It is submitted, that even if the Athena was technologically equipped to minimize losses,

she was still not capable of completely preventing loss of the cargo.33 Therefore, a significant

delay in the delivery would lead to a considerable loss in the quantity of cargo, thereby reducing

the profits contemplated by the RESPONDENT. It has been held in the London Arbitration 2/8434

that economic repercussions due to delay is a serious criterion to determine if there has been a

commercial frustration of contract. Hence, the delay drastically reduced the profits of the

RESPONDENT thereby defeating the primary object with which they had entered into the

Charterparty.

ii. The RESPONDENT had not assumed the risk of inordinate delay

18. A party to the contract cannot claim remedy under frustration if the party had assumed the

risk of the supervening events.35 A party is presumed to have assumed a risk only if the event was

a naturally foreseeable consequence of the transaction entered into by the parties.36 It is an

established position of law that a high standard has to be met to fulfil the test of foreseeability.37

It was held in Mishara Construction Company38 that for the purpose of frustration, an event is

said to be foreseeable if a person of ordinary intelligence would see a ‘real possibility of

occurring’.

19. In the instant case, the RESPONDENT could foresee delays on account of strikes and

protests.39 However, the cause of the delay was not the violent protests. The reason for the delay

was that the Athena was stranded at its berth at the port of Hades by the express order of

President Jacqueline Simmons who seized control of the parliament by a military backed coup

33 Correspondence between Zeus Shipping and Trading Company and Hestia Industries, Page 3 of The Bundle. 34 London Arbitration 2/84 - LMLN 113, 1 March 1984. 35 Mishara Construction Company Inc v. Transit-Mixed Concrete Corp 310 N.E.2d 363. 36 Treitel, FRUSTRATION AND FORCE MAJEURE, 13-012, (2nd edn., 2004). 37 Edwinton Commercial Corp v. Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007]

EWCA Civ 547. 38 Mishara Construction Company Inc v. Transit-Mixed Concrete Corp 310 N.E. 2d 363, 367 (1974). 39 The Hades Advocate, Page 26 of The Bundle.


10

d’état. An inordinate delay caused by a sudden military coup d’état was not reasonably

foreseeable by the RESPONDENT. Therefore, it is submitted that the RESPONDENT had not

assumed the risk of inordinate delay in having the cargo delivered.

iii. The delay could reasonably be speculated to render delivery of cargo impossible

20. A contract is frustrated if the parties could reasonably speculate that the facts giving rise

to the delay is likely to eventually make the performance of the contract impossible.40 Therefore,

inordinate delays caused by civil wars and internal civil strife have usually been considered as

frustrating events.41

21. In the instant case, President Jacqueline Simmons expressed her resolve to prevent the

export of shale gas oil.42 This intention was evident from her previous conduct as well.43 Further,

the RESPONDENT communicated to the CLAIMANT that it is likely that the vessel would be kept at

the port of Hades and the HLNG would be diverted to emerging energy sectors in Hades.44 All

these facts indicate that it was impossible to deliver the cargo.

22. The fact that the Athena was eventually allowed to deliver the cargo is immaterial. It was

held in the Pioneer Shipping Ltd Case45 that whether the delay is such as to frustrate the contract

must be determined by an informed judgment based upon all the evidence of what has occurred

and what is likely thereafter to occur. The parties are entitled to act on the basis of such informed

judgment.46 The fact that the events subsequently did not manifest in the manner as reasonably

speculated by the parties is immaterial to determine if the contract has been frustrated.47 In this

case, the events unfolding in Hades gave rise to a reasonable speculation that it is impossible to

40 Geipel v. Smith (1872) LR 7 QB 404; Port Line Ltd v. Ben Line Steamers Ltd [1958] 2 Q.B. 146. 41 Howard and McKendrick, FORCE MAJEURE AND FRUSTRATION OF CONTRACT, ( 2nd edn., 1995); Kissavos

Shipping Co SA v. Empresa Cubana de Fletes (The Agathon) [1982] 2 Lloyd's Rep. 211; Kodros Shipping Corp of

Monrovia v. Empresa Cubana de Fletes (The Evia) (No.2) [1983] 1 A.C. 736; International Sea Tankers Inc v.

Hemisphere Shipping Co. Ltd. (The Wenjiang) (No.2) [1983] 1 Lloyd's Rep. 400; Vinava Shipping Co. Ltd v.

Fineluet A.G. (The Chrysalis) [1983] 1 Lloyd's Rep. 503. 42 The Hades Advocate, Page 55 of The Bundle. 43 The Hades Advocate, Page 52 of The Bundle. 44 Correspondence between Zeus Shipping and Trading Company and Hestia Industries, Page 60 of The Bundle. 45 Pioneer Shipping Ltdv. BTP Tioxide Ltd. (The Nema) [1981] 2 Lloyd’s Rep 239. 46 Geipelv. Smith(1872) LR 7 QB 404. 47 The Savona [1900] P. 252.


11

deliver the cargo. Hence, it is submitted that the Charterparty is frustrated even if eventually the

cargo was allowed to be delivered.

III. IN ANY EVENT, RESPONDENT IS NOT LIABLE TO PAY DEMURRAGE

23. The Athena was intercepted by the Coast Guard outside the territorial waters of Hades

and ordered to return to the Port of Hades.48 CLAIMANT contends that the ship had not “left the

loading place” and hence laytime continued to run. RESPONDENT submits: first, that the Athena

had left the loading place [A]. Consequently, laytime does not run. Secondly, in any case,

demurrage has not accrued and RESPONDENT is not liable to pay [B].

[A] THE ATHENA HAD LEFT THE LOADING PLACE

24. It is submitted that the Athena had left the Loading Place as per the Charterparty, and

hence loading was complete for two reasons. First, the Ship had finally sailed from the Port of

Hades [i]. Secondly, in any case, the ship was outside the limits of the Port of Hades and can be

considered a “departed” ship [ii].

i. The Ship had finally sailed from the Port of Hades

25. It is submitted that the words “left the loading place” should be interpreted to mean

“finally sailed from the loading place”. The principle of risk allocation in a demurrage contract

imputes risk onto the charterer for the loading process.49 The final sailing of the vessel from the

Port would end any control over the process that the charterer can exercise, as the vessel has

“begun her voyage in a state of complete readiness”.50

48 The Hades Advocate, Page 62 of The Bundle. 49 Aldebaran Maritima v. Aussenhandel (The Darrah) 1977 AC 157; North River Freighters v. HE President of India

(The Radnor) 1956 1 QB 333; J. Wilson, CARRIAGE OF GOODS BY SEA, 70, (2008); L. Gordon, P. Hillenius et al,

SHIPBROKING AND CHARTERING PRACTICE, 243 (2004); J. Cooke et al, VOYAGE CHARTERS, 415 (3rd edn., 2007). 50 Thompson v. Gillespy 1855 24 LJQB 340; The Darrah 1977 AC 157; Carver, CARRIAGE OF GOODS BY SEA, 220,

(4th edn., 1905).


12

26. The phrase “final sailing” in a commercial contract is satisfied by the ship breaking

ground on the voyage in a state of complete readiness51. In the instant case, the Athena had

embarked on her voyage into the high seas. The Statement of Facts mentions that the ship had

finally sailed from the Port of Hades.52 The veracity of the Statement of Facts has not been

contested by the CLAIMANT. It is during the voyage that she was pursued and subsequently

detained by the Coast Guard.53 Therefore, no control over her movement or activities could have

been exercised by the RESPONDENT. Consequently, no risk can be allocated on the RESPONDENT

for this stage.

ii. In any case, the ship was outside the limits of the Port of Hades

27. RESPONDENT submits that in any case, the ship should be considered a departed ship for

two reasons. First, the test for “departed” ship is the same as the test for “arrived” ship.

Secondly, the Reid test is not satisfied.

a. THE TEST FOR “DEPARTED” SHIP IS THE SAME AS THE TEST FOR ARRIVED SHIP

28. It is submitted that the phrase “left the loading place” must be interpreted as a corollary of

the phrase “arrived at the loading place”. The allocation of risk on the charterer commences

when the ship is considered an “arrived ship”.54 Consequently, the risk on the charterer must

cease when the ship “leaves the loading place”. Therefore, the principles which determine the

arrival of a ship must govern its departure.

51 Thompson v. Gillespy 1855 24 LJQB 340; Lang v. Anderdon 1824 3 Barn j&Cress 495; Hudson v. Bilton 1856 26

JLQB 27; Sailing Ship Garston & Co v. Hickie 1885 15 QBD 580. 52 Statement of Facts, Page 54 of The Bundle. 53 The Hades Advocate, Page 62 of The Bundle. 54 The Darrah, 1977 AC 157; Leonis Steamship Co v. Rank 1908 1 KB 499; E.L. Oldendorff & Co v. Tradax Exports

SA (The Johanna Oldendorff) 1974 AC 479; J. Schofield, LAYTIME AND DEMURRAGE, 82 (6th edn., 2013); D.

Davies, COMMENCEMENT OF LAYTIME, 1 (4th edn., 2006).


13

29. The test to establish whether a ship can be considered to have arrived at a port is the Reid

test, which states that a ship must first, be within the port area and second, at the immediate and

effective disposition of the charterers.55

b. THE REID TEST IS NOT SATISFIED

30. It is submitted that in the instant case, the Reid test is not satisfied. First, the Athena was

not within the limits of the Port. The Athena was outside the territorial and administrative limits

of the Port of Hades.56 The ship was intercepted on the high seas in rough weather conditions.

The high seas cannot be considered the “usual waiting place” of vessels at the Port of Hades.57

Therefore, the Athena was not within the commercial limits of the Port of Hades.

31. In any case, the control element of the Reid test which determines port limits is not

satisfied. In the instant case, no authority was exercised by the port state over the vessel. The

direction of the Coast Guard was not in the nature of port state control.58 Further, the Coast Guard

cannot be considered a “port authority” under the Port Authorities Act as it is not a body

established under the Act.59 Therefore, the Athena cannot be said to be within the limits of the

Port of Hades.

32. Secondly, the vessel was not at the immediate and effective disposition of the charterers.60

The immediate and effective disposition test requires the vessel to be “ready to comply with the

orders of the Charterer”.61 The Athena was not at the disposal of the Charterers at the time of her

interception, or for the period of her detention. In the instant case, no order regarding the

55 The Johanna Oldendorff 1974 AC 479; Kronos Worldwide Ltd v. Sempra Oil Trading SARL 2004 1 Lloyds Rep

260; D. Davies, COMMENCEMENT OF LAYTIME, 11, (4th edn., 2006); J. Schofield, LAYTIME AND DEMURRAGE, 90, (6th

edn., 2013). 56 E-Mail correspondence between the Master of the Athena and Zeus Ship Operations, Page 58 of The Bundle. 57 Per Lord Diplock in The Johanna Oldendorff 1974 AC 479; London Arbitration 5/90 – LMLN 274, 5 May 1990;

J. Schofield, LAYTIME ANDDEMURRAGE, 96 (6th edn., 2013); The Agamemnon arbitration – 1974; LMLN 143 – 25

April 1985. 58 K. Li and H. Zheng, Enforcement of Law by the Port State Control, 35(1), MARITIME POLICY AND MANAGEMENT,

61, 63 (2008). 59 Sec. 4, Port Authorities Act (WA), 1999. 60 The Johanna Oldendorff 1974 AC 479. 61 LMLN 18 – 10 July 1980; D. Davies, COMMENCEMENT OF LAYTIME, 38, (4th edn., 2006); Seacrystal Shipping v.

Bulk Transport (The Kyzikos) 1987 2 Lloyds Rep 122.


14

movement of the ship could be given by the Charterers to the Athena. There was no channel of

communication between the Master and the Charterers.62 The Master was the only one exercising

control over the voyage.63 Therefore, the Athena cannot be said to have been at the disposition of

the Charterer. Consequently, the process of loading for the purposes of laytime calculation has

ended.

[B] IN ANY CASE, DEMURRAGE DID NOT ACCRUE

33. In any case, it is submitted that laytime does not run and demurrage has not accrued for

the period of detention till 6th October, 2015. The general rule applicable to contracts of

demurrage is that laytime stops running if an interruption has been excepted for by the parties, or

if there is fault of the shipowner.64 In the instant case, both of these conditions are satisfied. First,

the Force Majeure clause applies and covers the detention of the vessel [i]; and secondly, the

detention of the vessel is the fault of the Shipowner [ii].

i. The Force Majeure clause in the Charterparty applies

34. It is submitted that the exception clause in the Charterparty exempts the RESPONDENT

from liability in the instant case because: first, the exception clause applies mutually; secondly,

the exception clause applies to provisions of demurrage; and thirdly, the situation is covered by

the exception clause.

62 Correspondence between Hestia and Zeus, Page 59 of The Bundle. 63 E-Mail correspondence between the Master of the Athena and Zeus Ship Operations, Page 58, The Bundle. 64 Cantiere Navale Triestina v. Soviet Naphtha Export Agency (The Dora) 1925 2 KB 172; Gem Shipping Co of

Monrovia v. Babanaft (The Fontevivo) 1975 1 Lloyds Rep 339; Postlewaith v. Freeland 1880 5 App Cas 599;

Budgett v Binnington 1891 1 QB 35; William Alexander v. Akt Hansa 1920 AC 88; Sig Bergesen v. Mobil Shipping

and Transportation Co (The Berge Sund) 1993 2 Lloyds Rep 453; Total Transport Co of Panama v. Amoco

Transport Co (The Altus) 1985 1 Lloyds Rep 423.


15

a. CLAUSE 19 APPLIES MUTUALLY

35. Clause 19 of the Charterparty exists for mutual benefit. Clause 19 begins with the phrase

“neither party”, signifying that the provisions of the clause are intended by the parties to apply to

the rights and obligations of both the parties.65

b. CLAUSE 19 APPLIES TO PROVISIONS OF LAYTIME AND DEMURRAGE

36. Clause 19 applies to provisions of demurrage and laytime. CLAIMANT may argue that

generally worded clauses do not apply to demurrage claims.66 The rationale behind this

proposition was that “an ambiguously worded clause is no protection from a breach of

contract”.67 However, in the instant case, the exceptions clause does not operate to protect the

RESPONDENT from the consequences of the breach of his primary obligation to load. It is

submitted that the exception clause operates to extend the time for performance of the primary

obligation of loading.68 In the instant case, the exception clause is activated while laytime is

running, and not after laytime has ended. Therefore, there has been no breach of a contract since

the performance of the primary obligation has been extended.69 Consequently, the ambiguous

wording of the clause does not render it inapplicable to provisions of demurrage.

c. THE INSTANT CASE IS COVERED BY THE EXCEPTIONS CLAUSE

37. It is submitted that the instant situation is covered by Clause 19, and therefore, the

RESPONDENT cannot be held liable for demurrage.

38. First, Clause 19(d) specifies “intervention of sanitary or customs authorities” as a

situation that falls within force majeure events.70 The Coast Guard, in the instant case, was acting

as a customs authorities to prevent the export of a “prohibited good” under Hades Customs

65 Clause 19, Voyage Charterparty, Page 39 of The Bundle. 66 Sametiet M/T Johs Stove v. Istanbul Petrol Rafinieri S/A (The Johs Stove) 1984 1 Lloyds Rep 38. 67 Photo Productions v. Securicor 1980 AC 827; Cero Navigation Corp v. Jean Lion (The Solon) 2000 CLC 593. 68 Islamic Republic of Iran Shipping Lines v. Ierax Shipping Co of Panama (The Forum Craftsman) 1991 1 Lloyds

Rep 81; J. Schofield, LAYTIME AND DEMURRAGE, 220, (6th edn., 2013). 69 The Forum Craftsman 1991 1 Lloyds Rep 81; Larsen v. Sylvester 1908 99 LT 94. 70 Clause 19(d), Voyage Charterparty, Page 40, The Bundle.


16

Law.71 The declaration of the President amounts to a ban on the export of HLNG. The Coast

Guard detained the vessel to prevent its export. Therefore, the actions of the Coast Guard were in

the capacity of a customs authority, and have been excepted for.

39. Secondly, in any case, Clause 19(d) must be interpreted to include the current situation.

The instant situation is usually classified as the “restraint of princes” exception. Applying the

principle of ejusdem generis to the phrase “other similar cause” in Clause 19(d), the exception of

restraint of princes can be included within the exception clause.72 The relevant sub-clause deals

with situations of hostile armed intervention to performance of duties under the Charterparty. The

genus in this clause is the use of force to prevent the performance of obligations under the

Charterparty. The specific situation of a “restraint of princes” is a species of the same genus, and

can therefore be interpreted into the exception clause.73 Consequently, the instant case is covered

by the exception clause.

ii. In any case, it was the Shipowners fault

40. In any case, it is submitted that the detention of the ship was the fault of the Shipowner

for three reasons.

a. THE SHIPOWNER IS RESPONSIBLE FOR THE ACTS OF THE MASTER

41. The Master of the Ship was employed by the Shipowner. He was acting on behalf of the

Shipowner.74 Further, the Shipowner exercised control over the service conditions of his master.75

This indicates that the relationship between the Master and the Shipowner is covered by vicarious

liability.76 Therefore, the Shipowner can be held liable for the actions of the Master.

71 Sec. 4, Customs Act 1901. 72 CHITTY ON CONTRACTS, 956 (32nd edn., 2015); Sun Fire Office v. Hart 1889 14 App Cas 98. 73 The Fontevivo 1975 1 Lloyds Rep 339. 74 Mobil Shipping and Transportation Co v. Shell Eastern Petroleum (The Mobil Courage) 1987 2 Lloyds Rep 655. 75 E-Mail Correspondence between Master of the Athena and Zeus Shipping Operations, Page 58 of The Bundle. 76 Harris v. Best, Ryley & Co 1892 68 LT 76; The Mobil Courage 1987 2 Lloyds Rep 655; Novorossisk Shipping Co

v. Neopetro Co (The Ulyanovsk) 1990 1 Lloyds Rep 425.


17

b. THE MASTER WAS AT FAULT FOR THE DETENTION OF THE VESSEL

42. It is submitted that the Master was not obligated to comply with the direction of the Coast

Guard. The Commander of the Coast Guard was not authorised to detain the vessel as per Hades

law.77 Further, he was also not authorised to seize goods without a warrant by the Comptroller

General under Sec. 203 of the Customs Act.78

43. In any case, an “officer of the customs” can detain a vessel only after refusing an

application for clearance under the Customs Act and after seeking certification from the Master

of the vessel.79

44. Therefore, even if the order of the President is considered to be a Presidential decree, the

detention of the vessel must be executed via competent authorities as per Hades law.80 The

exercise of flag state jurisdiction over the vessel is circumscribed by the domestic laws of the

State.81 The order of detention of a vessel is not a “legislative instrument”.82 Therefore, the

President’s control over the legislature does not justify the directions given to the Coast Guard.

The executive power of the President cannot be exercised without due process laid down by the

law. The Master was consequently under no obligation to comply with the orders of an

unauthorised body.

45. Additionally, there was no threat to the life of the crew or the property on board the

Athena which justified the deviation. The Hades Coast Guard was understaffed and ill-

equipped.83 It posed no risk to the people or the property on the Athena. Further, the Coast Guard

77 Sec. 4, Customs Act 1901. 78 Sec. 203, Customs Act 1901. 79 Sec. 203, Customs Act 1901. 80 Sec. 185(3), Customs Act 1901. 81 Art. 194(2)(b), UN Convention on the Law of the Sea 1982. 82 Sec. 246, Navigation Act 2012. 83 The Hades Advocate, Page 62 of The Bundle.


18

was not authorised to use any sort of force under the Customs Act.84 Therefore, the “liberty to

deviate” clause cannot be invoked by the CLAIMANT.85

c. THE EFFECTIVE CAUSE OF THE DELAY WAS THE MASTER’S ACTION

46. It is submitted that the effective cause of the delay was the Master’s compliance with the

orders of the Coast Guard. The test to determine fault in cases of delay is the “proximate cause”

test.86 In the instant case, the proximate cause of the delay was the Master’s action. The chain of

events could have been altered had the Master acted with care and not complied with the

unauthorised actions of the Coast Guard. But for his actions, the vessel would not have been

detained. Therefore, the proximate cause of the delay is the compliance with the Coast Guard’s

orders. Consequently, fault for the detention of the ship lies with the Shipowner.

IV. THE RESPONDENT IS ENTITLED TO A SALVAGE REWARD

47. The tugs owned by Hestug guided the Athena to open waters and released the towlines.

The propeller blades of the Athena were tampered with, resulting in the breakage of both the

propeller shafts.87 The tugs rendered assistance to the vessel88 and claimed a salvage reward

before the arbitral tribunal. It is submitted that such a claim is valid because: first, the elements

constituting salvage are satisfied [A]; and secondly, the assistance to the Athena does not fall

within the scope of a towage contract and is a salvage service [B].

[A] THE ELEMENTS CONSTITUTING SALVAGE ARE SATISFIED

48. The constitutive elements of a salvage claim are, that there should be [i] a recognised

subject of salvage, [ii] which is in a position of danger, [iii] the salvage service must be rendered

84 Sec. 203, Customs Act 1901. 85 Clause 19, Voyage Charterparty, Page 40 of The Bundle. 86 Nereide SPA de Navigazione v. Bulk Oil International (The Laura Prima) 1982 1 Lloyds Rep 1; J. Schofield,

LAYTIME AND DEMURRAGE, 113, (6th edn., 2013); LMLN 489 – 4 August 1998. 87 The Hades Advocate, Page 71 of the Bundle. 88 The Hades Advocate, Page 71 of the Bundle.


19

by a ‘volunteer’ and [iv] is successful in preserving in preserving the subject.89 It is submitted

that in the instant case, the above mentioned elements are satisfied, thereby constituting a

salvage.

i. There is a recognised subject of salvage

49. Maritime law of salvage recognises as its subject, the property in danger which is usually

a ship or the cargo on board.90 In the instant case, the Athena, being a HLNG Carrier falls within

the definition of a “recognised subject of salvage”.

ii. The Athena is in a position of danger

50. It is submitted that the standard of danger is that it should be real and sensible,91 and not

necessarily immediate or imminent.92 It is sufficient that at the time the assistance was rendered,

the subject matter had encountered any misfortune which might possibly expose it to loss or

damage, if the service was not rendered.93

51. In the instant case, both the propeller shafts broke which rendered the Athena without any

means of propulsion. Admittedly, there was no immediate or imminent danger to the Athena

because the loss of the propellers would only have rendered the ship without propulsion power,

resulting in the ship drifting. However, it has been held that loss of propulsion power

significantly impedes the manoeuvring ability of the ship. For all intents and purposes, the ship is

immobilised. In addition, the loss of propulsion power might expose it to loss or damage if the

service is not rendered. These circumstances amount to danger, satisfying the requirement for

salvage.94

89 F.D. Rose, KENNEDY & ROSE: LAW OF SALVAGE, 1, (6th edn., 2001). 90 A.M. Sheppard, MODERN MARITIME LAW AND RISK MANAGEMENT, 643, (2nd edn., 2009). 91 Watson v. Firemen’s Fund Insurance Company [1922] 2 K.B 335. 92 The Aztecs (1870) 3 Asp. M.L.C 326. 93 The Charlotte (1848) 3 Wm. Rob. 68; The Strathvaner (1875) 1 App. Case. 58PC; The Mount Cythos (1937) 58

Lloyd’s Rep. 18; The Albion (1861) Lush. 282; The White Star (1866) L.R 1A. & E. 68; The Ella Constance (1864)

33 L.J Adm. 189; The Bengloe (1940) 67 Lloyd’s Rep. 307; The Fountain (1866) L.R 1A. & E. 58. 94 The Tramp [2007] 2 Lloyd’s Rep. 363; The Batavier (1853) 1 Spinks E. & A. 169; The Ellora (1862) Lush. 550;

The Thomas Allen (1886) 12. App. Cas. 118; The Werra (1886) 12 P.D. 52; The Glaucus (1948) 81 Lloyd’s Rep.

262; The Troilus [1951] A.C. 820.


20

52. The CLAIMANT may submit that loss of propulsion does not amount to danger if the ship is

in a “safe place”. However, it is submitted that the open sea does not constitute a “safe place”.

This is because a ship without propulsion drifting in the open sea is exposed to the vagaries of

nature.95 It was held in The Troilus that the ship was not in a safe place even while docked in an

unsheltered harbour because it would be exposed to the vagaries of nature.96 Thus, the Athena,

was not in a “safe place” when salvage services were rendered to it. Consequently, it was in a

position of danger, requiring salvage services.

iii. The tugs are ‘volunteers’ and fall within the classification of salvors

53. A party’s entitlement to a salvage reward depends upon whether he rendered the service

in respect of which he claims “voluntarily”, i.e. the service should not have been rendered by

virtue of a pre-existing legal obligation, particularly a contractual or public duty.97 It is submitted,

that that the tugs, owned by Hestia Industries were volunteers and had neither contractual nor

statutory obligations to render assistance to the vessel in peril.

54. The owner of a salving tug is entitled to claim salvage in respect of a salvage service

provided by his ship.98 The reward is earned by the ship and prima facie payable to its owner.99

Thus, the owners of the salving tug, Hestia Industries is entitled to salvage reward.

55. Admittedly, salvage by the cargo owners had an element of self-interest and self-

preservation. However, cargo owners fall within the domain of “volunteers” and can claim a

salvage reward.100 It is the policy of law and to the benefit of both the maritime community and

the environment that salvage services should be encouraged.101 To deny salvage remuneration to

persons otherwise entitled to it because they are cargo owners would be against public policy.

95 The Troilus [1951] A.C. 820. 96 The Troilus [1951] A.C. 820. 97 F.D. Rose, KENNEDY & ROSE: LAW OF SALVAGE, 237 (8th edn., 2013). 98 The Makedonia [1958] 1 Q.B. 365. 99 F.D. Rose, KENNEDY & ROSE: LAW OF SALVAGE, 214 (8th edn., 2013). 100 The Sava Star [1995] Lloyd’s Rep. 161. 101 The Industry (1835) 3 Hag. Adm. 203; The William Beckford (1801) 3 C. Rob. 355; The Earl of Eglington (1855)

Swa. 7.


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Further, it has been held that the motive of the salvor is irrelevant.102 Traditionally, where ship

and cargo were salved by a vessel in the same ownership as the salved vessel, the shipowners

were entitled to salvage against the owners of her cargo.103 Therefore, the reasoning of self-

interest and self-preservation is negated. Consequently, there is no reason for a cargo owner to

not claim salvage against a ship carrying his cargo.

56. Admittedly, cargo owners could possibly owe a duty to the ship owner with respect to the

nature of the cargo and information relating to cargo. However, services performed by cargo

owners, which go beyond those ordinarily expected of cargo owners, such as providing salving

tugs are generally regarded as voluntary services, entitling the cargo owners to a salvage

reward.104 Therefore, in the instant case, the cargo owners by providing salvage service through

tugs perform services beyond that ordinarily expected of cargo owners, making them fall within

the domain of “volunteers”.

iv. The tugs were successful in preserving the subject

57. Salvors are not entitled to any remuneration unless property is saved in whole or in

part.105 Benefit should be conferred on the salved property.106 In the instant case, the tugs

rendered assistance to the vessel, saving millions of dollars worth of cargo and vessel, conferring

benefit on the salved property.107

102 The Liffey (1887) 6 Asp. M.L.C. 255; The Lomonosoff (1920) 5 Lloyd’s Rep. 276. 103 The Miranda (1872) L.R 3 Ad. & E. 561; The Glenfruin (1885) 10 P.D 103; The Theseus (1925) 23 Lloyd’s Rep.

136; The August Korff [1903] P. 166; The Laomedon (1925) 23 Lloyd’s Rep. 230. 104 The Sava Star [1995] Lloyd’s Rep. 161. 105 The Toju Maru [1972] AC 242. 106 The India (1842) 1 Wm Rob 406. 107 The Hades Advocate, Page 71 of The Bundle.


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[B] THE ASSISTANCE TO THE ATHENA DOES NOT FALL WITHIN THE SCOPE OF A TOWAGE

CONTRACT

58. The tugs owned by Hestug guided the Athena to open waters, after which the towlines

were released from the vessel.108 It is submitted that the assistance provided by the tugs is a

salvage service and does not fall within the ambit of the towage service because; first, the towage

contract had ceased to exist [i]; and secondly, in any case, the towage service was converted to a

salvage service by virtue of the existing circumstances [ii].

i. The towage contract had ceased to exist

59. It is submitted, that the duty of the tugs to provide towage services to the Athena had

ceased before the ship was in a position of danger, resulting from the breakage of the propeller

shafts. It has been held that a towage contract starts when the towage connection has been passed

to or from the tug.109 If the tug and the tow are making their way through the water independently

of each other and if no impulsion or traction is being rendered by the towline by the tug to the

tow, the tow is not under towage.110 In light of this interpretation, a towage contract would cease

to exist when the towlines were released from the vessel. In the instant case, the tugs released the

towlines from the vessel, resulting in the conclusion of the contract and consequently any

obligation arising out of it.

60. Additionally, standard commercial practice indicates that the cesser of a towing contract

occurs when (i) either “the final order from the tow to cease holding, pushing, pulling, moving,

escorting, guiding or standing by the tow or to cast off ropes wires or lines have been carried

out”; (ii) or “the towing line has been finally slipped”, whichever is the latter of the two.111 With

108 The Hades Advocate, Page 71 of The Bundle. 109 The Clan Colquhoun (1936) 54 Lloyd’s Rep. 221. 110 The Valiant [1921] P. 312. 111 Clause 1(b)(iv) of the U.K. Standard Conditions for Towage and Other Services, 1986.


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regard to the “final order from the tow”, it has been held that the tug should have reasonably

expected such orders to have been given.112

61. It is submitted that in the instant case, the towing lines were slipped and there was no

further communication from the Master of the Athena, resulting in the conclusion of the towage

contract. In any case, assuming a distress call was made by the Master of the Athena after the

propeller shaft broke, it would not amount to a “final order”. Such a final order is only restricted

to cease ‘holding’, ‘pushing’, ‘pulling’, ‘moving’, ‘escorting’, ‘guiding’ or ‘standing by the

tow’.113 Thus, an order asking the tugs to reconnect the towlines after the propeller shafts broke

for the purposes of salvaging the imperilled vessel does not amount to “a final order”. Therefore,

the towage contract had ceased on the severing of the towlines.

62. Situations in which the towage contract has been abandoned and the tug tows the vessel

back to the place from where the towage began, the tug cannot be denied salvage on the basis that

she was obliged to do so as part of the towage service,114 as in the instant case.

ii. In any case, the elements of conversion from a towage to a salvage service are satisfied

63. To constitute a salvage service by a tug under contract to tow, two elements need to be

satisfied: [a] that the tow is in danger due to circumstances which could not have been reasonably

contemplated; and [b] that risks are incurred or duties performed by the tug which cannot be

reasonably held to be within the scope of the contract.115 It is submitted that in the instant case, in

the event the towage contract subsists after the severing of the towage lines, such a towage

service has metamorphosed into a salvage service by virtue of the supervening circumstances.

64. Additionally, it has been held that when a ship is in a distressed state, a tug, not knowing

of the ship’s state, undertaking to tow that vessel for a certain rate of remuneration, would not be

112 The Uranienborg [1948] 1 All E.R. 113 Clause 1(b)(iv) of the U.K. Standard Conditions for Towage and Other Services, 1986. 114 The Galatea (1858) Swab. 349; The Aboukir (1905) 21 T.L.R 200. 115 The Homewood (1928) 31 Lloyd’s Rep. 336; The Trevorian (1940) 66 Lloyd’s Rep. 45; The Glenbeg (1940) 67

Lloyd’s Rep. 437; The Domby (1941) 69 Lloyd’s Rep. 161.


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bound by that rate, but be entitled to a reward for services in the nature of salvage.116 In the

instant case, the propeller of the Athena was damaged at port, which subsequently rendered the

ship in a distressed state.117 At the time of the towage, the tugs were unaware of the damage to

the propellers. Thus, the RESPONDENT is entitled to a salvage reward.

a. THE ATHENA WAS IN DANGER DUE TO CIRCUMSTANCES WHICH COULD NOT HAVE BEEN

REASONABLY CONTEMPLATED

65. A tug is relieved from obligations under the towage contract by accidents which were not

contemplated under the towage contract.118 Furthermore, it is opposed to public interest to hold

that a tug, having contracted to tow, is bound at all hazards to herself to continue the towage

service, regardless of the contemplation of the parties.119 It is submitted that the loss of

propulsion power of the Athena rendered the ship in a state of danger.120 Circumstances which

could have been reasonably contemplated by the parties include the grounding of the tow121,

deterioration of weather conditions122 and the parting of towing lines.123 In the instant case, the

propellers of the Athena were tampered with, leading to the breakage of the both the propeller

shafts. Therefore, such breakage resulting in danger to the tow cannot be held to be a

circumstance which could have been reasonably contemplated by the parties.

116 The Beulah (1842) 7 Jur. 207. 117 The Hades Advocate, Page 71 of the Bundle. 118 The Minnehaha (1861) 15 Moo. P.C. 133. 119 The Minnehaha (1861) 15 Moo. P.C. 133. 120 The Tramp [2007] 2 Lloyd’s Rep. 363; The Batavier (1853) 1 Spinks E. & A. 169; The Ellora (1862) Lush. 550;

The Thomas Allen (1886) 12. App. Cas. 118; The Werra (1886) 12 P.D. 52; The Glaucus (1948) 81 Lloyd’s Rep.

262; The Troilus [1951] A.C. 820. 121 The Liverpool [1893] P. 154. 122 The I.C. Potter (1870) L.R. 3 A. & E. 292. 123 The Troilus [1951] A.C. 820.


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b. DUTIES PERFORMED BY THE TUG IN SAVING THE ATHENA CANNOT REASONABLY BE HELD TO

BE WITHIN THE SCOPE OF THE CONTRACT

66. A towage has been described as the employment of one vessel to expedite the voyage of

another.124 The scope of the towage contract is confined to vessels that have received no injury or

damage.125 Further, a contract of towage is only to tow the ship and does not include the

rendering of any salvage service.126 It has been held that, in a towage contract, only matters such

as risk of interruption and delay by bad weather, a risk that the hawser may part would fall within

the scope of the towage contract.127 It is submitted that the assistance provided to the tug, in the

form of salvage assistance, subsequent to the breakage of both the propeller shafts is beyond the

scope of the towage contract. Thus, the towage service has metamorphosed into a salvage service.

PRAYER

In light of the above submissions, the RESPONDENT requests the Tribunal to declare:

1. That the Tribunal does not have jurisdiction to rule on the frustration issue.

2. Alternatively, that the Charterparty is frustrated due to inordinate delay.

3. That the RESPONDENT is not liable to pay demurrage.

4. That the RESPONDENT is entitled to a salvage reward.

And it is therefore prayed for the following reliefs:

1. Salvage reward.

2. Other costs or relief as the tribunal may deem fit.

124 The Princess Alice (1848) 3 W. Rob. 138 at 139. 125 The Reward (1841) 1 W. Rob. 174 at 177. 126 Sinclair v. Cooper 108 U.S 352. 127 The Homewood (1928) 31 Lloyd’s Rep. 336.

17th annual international maritime law arbitration moot …

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