Ince & Co Shipping E-Brief Autumn 2014 The Shipping E-brief is a quarterly publication providing you with key information on legal decisions and developments in shipping and related business areas. Sign up here to receive the E-Brief by email each quarter Our Autumn 2014 edition of the Shipping E-Brief is full of articles dealing with topical shipping issues. You can also subscribe to our podcasts with iTunes http://incelaw.com/en/knowledge-bank/publications/shipping-ebrief-autumn-2014

1. SHIPPING E-BRIEF
AUTUMN 2014
CONTENTS
SHIPPING
Does a LOU arbitration agreement for the underlying cargo claim completely replace the
bill of lading arbitration clause? 2
More pitfalls for owners looking to terminate for unpaid hire 3
Commercial Court confirms traditional understanding of “as is where is” in ship sale and purchase contract 5
Hong Kong ship arrest: enforcing a maritime award via the backdoor? 6
Can a LNG cargo be injurious to the vessel? 7
Implied duty of cooperation in shipbuilding and offshore construction contracts – a change in the law? 8
Collisions and reserve ships: liner operators beware! 9
Evidence not before tribunal shut out by Court on appeal 10
Court upholds English contract termination clause that is invalid under foreign insolvency law 11
BIMCO’s new charterparty clause for electronic bills of lading 13
English Commercial Court enforces obligation to resolve disputes by friendly discussion prior to arbitration 14
NEWS AND EVENTS
Ince & Co recognised by Legal 500 2014 16
Ince & Co promotes corporate specialist Matthew Stratton to partner 16
Ince & Co recruits Philippe Ruttley as Head of EU and Competition Law 17
Ince & Co has been named In-House Community Firm of the Year 2014 for Hong Kong: Maritime & Shipping 17

2. 02 SHIPPING
E-BRIEF, AUTUMN 2014
SHIPPING
Does a LOU arbitration agreement for the underlying cargo
claim completely replace the bill of lading arbitration clause?
Viscous Global Investments Ltd. v. Palladium Navigation
Corporation (Quest) [2014] EWHC 2654
In the context of cargo claims brought under four bills of
lading, the Commercial Court has recently considered whether
an arbitration provision in a Club Letter of Undertaking (LOU)
had entirely replaced the arbitration agreement in the bills of
lading. If it had not, the Cargo Interests may have been faced
with a time bar argument in respect of some of their claims.
Luckily for them, the Court found in their favour.
The background facts
The dispute arose out of a shipment of a cargo of bagged rice
from Thailand to Nigeria pursuant to four Congenbill 1994 bills
of lading.
There was a head time charterparty, a sub-trip time charterparty
and a sub-sub voyage charterparty. The first two charterparties
provided for LMAA arbitration in London, with the LMAA Small
Claims Procedure (SCP) to apply to claims of less than
US$100,000. The sub-sub voyage charterparty provided for
Singapore arbitration. All three charterparties were governed
by English law. Each bill of lading incorporated the “Law and
Arbitration Clause” of the “Charterparty, dated as overleaf”,
but no charterparty was actually identified (by date).
Cargo damage was alleged upon discharge, and the Cargo
Interests sought security from the Owners for their claims
under the bills of lading. The Owners’ P&I Club issued a LOU
which, among other things, confirmed the Owners’ agreement
that the Cargo Interests’ claims (to which the LOU would
respond if they succeeded) would be referred to LMAA
arbitration in London before three arbitrators and that English
Law would apply (including the Hague-Visby Rules and the
English Carriage of Goods By Sea Act 1992). The Cargo
Interests commenced arbitration under the standard LMAA
Terms, but no references were made under the SCP.
The Owners argued that the commencement of arbitration was
invalid because the Cargo Interests should have commenced
four separate arbitrations (not one) of which some should have
been under the SCP (before a sole arbitrator) because the claim
values under some of the bills of lading were apparently less
than US$100,000; and so the arbitrators had no jurisdiction to
decide the claims in this arbitration (and the Cargo Interests
were time-barred from commencing new arbitration
proceedings to correct this). The Owners argued this on the
basis that (1) the head time charterparty’s law and jurisdiction
provisions had been incorporated into the bills of lading; and (2)
its SCP provision for claims for less than US$100,000 survived
the LOU – which amended the bills of lading’s arbitration
provision in some limited respects but left the SCP provision
intact.
The Cargo Interests argued that the LOU’s arbitration provision
had replaced the bills of ladings’ arbitration provision entirely.
The Tribunal’s decision
The majority arbitrators held that they had jurisdiction to hear
a bill of lading claim for more than US$100,000, but (as the
Owners were arguing) no jurisdiction to hear a claim for less
than this sum. That said, they could not say which claims they
could hear because the Cargo Interests had not set out the
claim amount under each bill of lading.
The minority arbitrator held that the Tribunal had jurisdiction to
decide all of the bill of lading claims (as the Cargo Interests were
arguing).
The Commercial Court decision
The Court agreed with the Cargo Interests that the LOU’s
arbitration provision had replaced the bills of lading’s arbitration
provision entirely such that the arbitration had been validly
commenced. The Court’s reasoning was as follows:
1. There was no reason in principle why this should not be
the case, and the authorities relied upon by the Owners to
the contrary did not directly apply here. The LOU’s
arbitration provision operated comfortably as a new and
free-standing agreement which was comprehensive –
dealing with the (London) seat of the arbitration; the
(LMAA Terms) arbitration procedure; the number of
arbitrators (three, appointed in the usual way); the time for
appointing the second arbitrator (14 days); and the law
governing the dispute (English law, including the Hague-
Visby Rules and the Carriage of Goods by Sea Act 1992).
2. This was also the natural meaning of the LOU’s arbitration
provision.
3. With this in mind, there was no apparent reason why the
parties should not have intended this. On the contrary,
there were good reasons why they should:
i. the arbitration agreement would in this way be found
in one document (the LOU) rather than two (the LOU
and the bill of lading/head charterparty clause);
ii. the parties knew that some of the modest claims
would be less than US$100,000 and would therefore
have mentioned the SCP in the LOU if they intended
it to apply;
iii. it made no sense for them to have been agreeing to
four arbitrations under different LMAA procedures;
and
iv. it was in fact arguable that the voyage charterparty’s
Singapore arbitration provision actually applied
instead of the head charterparty’s London/SCP
arbitration provision – as to which any dispute was
removed if the LOU’s arbitration provision replaced
it entirely.
Comment
The Court would seem to have made a common-sense decision
giving effect to the words used in the LOU and, apparently, to
what the parties would have intended.
Whilst not relevant to the decision reached, the Court’s
comment in passing that the Owners “may well be right”,
subject to some scope for disagreement, that the head time

3. 03SHIPPING
E-BRIEF, AUTUMN 2014
charterparty’s arbitration provision would initially have been
incorporated into the bills of lading (rather than the voyage
charterparty’s arbitration provision) might be questioned in
future cases; there is both textbook authority and case law to
the effect that if there is a sub-voyage charterparty, the
arbitration provision in that sub-charterparty (not that of the
head time charterparty) is incorporated into the bill of lading,
consistent with the bill of lading’s phrase “freight payable as
per cp dated [ ]”.
Victoria Waite
Solicitor, London
victoria.waite@incelaw.com
Evangelos Catsambas
Partner, Piraeus
evangelos.catsambas@incelaw.com
More pitfalls for owners looking to terminate for unpaid hire
Januzaj v. Valilas [2014] EWCA Civ 436
It is a debatable point whether or not the obligation to pay hire
under a time charter is a condition of the contract or not,
notwithstanding the obiter comments of Mr Justice Flaux in
the Astra [2013] EWHC 865 (see the Shipping E-Brief July
2013). Making payment under a commercial contract is said to
be “not of the essence of the contract” and therefore not a
condition. The significance is that a breach of condition allows
the innocent party to terminate the contract in addition to
claiming damages. Otherwise, he may be limited to his
damages claim but unable to terminate the contract unless the
failure to make payment, or indeed making repeated late
payment under an instalment contract, amounts to a
repudiatory breach of the contract.
The traditional view is that, in order to terminate a time
charter and claim damages for losses suffered following a
failure to pay hire, the charterer’s conduct must be shown to
be (i) repudiatory in the sense that the breach deprives the
owner of substantially the whole benefit of the charter; and/or
(ii) renunciatory in the sense that it evinces an intention on the
charterer’s part no longer to perform the charter at all or to
perform the charter in a manner substantially inconsistent
with his contractual obligations.
It will very much depend on the facts and circumstances in any
given case whether the non-payment or late payment of hire
instalments under a time charter amounts to a repudiatory
breach. This often requires the owner to make a difficult
decision as to whether the charterer’s failure to pay a number
of hire instalments, or paying them late, entitles him, the owner,
to terminate the charter. If the owner “calls it wrong”, he can
find himself in repudiatory breach for wrongful termination and
facing a claim for damages from the charterer.
Januzaj v. Valilas is not a shipping case but deals with general
principles concerning the law on repudiation. It arguably
introduces a further potential pitfall for owners seeking to rely
on multiple failures to pay hire, or repeated late payments of
hire, in order to demonstrate repudiatory conduct on the part
of a charterer.
The background facts
The Claimant was a dentist operating his practice from the
Defendant’s premises. The Claimant had agreed to pay the
Defendant half his earnings from his practice in return for use
of the premises. The Claimant’s earnings came from the UK’s
National Health Service (the “NHS”) under an arrangement
whereby the Claimant was paid in advance in equal monthly
instalments for his work. If, at the end of the year, the Claimant
had not done sufficient work, then any over-payment of his
advance earnings had to be refunded to the NHS.
A dispute arose between the Claimant and Defendant, as a
result of which the Claimant stopped any further payments to
the Defendant. The Claimant was particularly concerned that
the Defendant would not return his half of any advance

4. 04 SHIPPING
E-BRIEF, AUTUMN 2014
payments if a refund became due to the NHS. The Claimant
failed to make three monthly payments to the Defendant
between August and October. In November, the Defendant
terminated the agreement on the basis of the Claimant’s
repudiatory breach of contract.
The Court decisions
At first instance, the Court found that the agreement had been
terminated wrongfully and awarded the Claimant damages.
The majority of the Court of Appeal upheld this decision on
the basis that, on the facts, the Defendant should have been
aware that the Claimant was only intending to pay late as
opposed to evincing an intention not to pay at all. By contrast,
the dissenting judgment concluded that the failure to make
three payments in a row was a repudiatory breach.
In the context of time charter hire disputes
The onus will be on an owner to demonstrate that he has been
deprived of substantially the whole benefit of his time charter
and/or that the charterer does not intend to make any further
hire payments in the future. Furthermore, The Brimnes [1972]
2 Lloyd’s Rep. 465 made it clear that even persistent late
payment of hire instalments will not necessarily amount to a
repudiation of the charter.
One of the majority appeal judges in Januzaj v. Valilas
suggested that, in determining whether the number of missed
or late payments was repudiatory, regard had to be given to the
length of the contract as a whole. There is, however, previous
case law to the effect that, in deciding whether repeated late
payments are repudiatory, it will not simply be a question of
looking at the number of payment instalments required over
the whole of the contractual period and comparing that number
with the number of occasions on which payment has not been
made or has been made late. It is also necessary to look at the
type of contract in question.
Januzaj v. Valilas was very much decided on its own facts. In
that case, the dentist who missed three monthly payments had,
in previous years, always managed to complete the requisite
amount of work he had to perform for the NHS over the course
of the year and so no refund to the NHS had ever been
necessary. The majority of the Court of Appeal concluded that
the Defendant should, therefore, have known that the Claimant
would complete all his NHS work in the relevant year also, so
that no refund would have been required and the Claimant
would eventually have paid the Defendant all that was owing to
him, albeit somewhat late. That was not sufficient to amount to
repudiatory conduct.
In a time charter context, however, and in a challenging
economic climate, it will often not be at all clear to an owner
that he will eventually get his money, albeit late. Charterers
may be on the brink of insolvency and may be looking to
negotiate a reduced hire rate rather than comply with their
original contractual obligations. There may also be a history of
repeated defaults on the part of the charterer that can render
his behaviour repudiatory as a whole. Nonetheless, Januzaj v.
Valilas gives an owner faced with a defaulting charterer some
cause for concern that he will be jumping the gun if he
chooses to terminate where a charterer has missed a few hire
payments. Is it relevant to consider the length of the charter
when deciding whether several unpaid instalments is
repudiatory? Are those payments just late or is the charterer
not going to pay at all?
Comment
Given the Court of Appeal decision in Januzaj v. Valilas, an
owner will need to be cautious about terminating for late
payments of hire and there remains uncertainty over exactly
how many non-payments will be sufficient to justify a decision
by the owner to terminate the charter. Defaulting charterers
often suggest to owners that they intend to pay outstanding
hire in the future. Such a defaulting charterer, faced with an
owner who chooses to terminate the charter as a result, may
now argue that the outstanding payments were merely late or
that only a few non-payments of hire in the context of a
long-term charter is not repudiatory.
David Richards
Senior Associate, London
david.richards@incelaw.com
Paul Herring
Partner, London
paul.herring@incelaw.com

5. 05SHIPPING
E-BRIEF, AUTUMN 2014
Jamila Khan
Partner, Piraeus
jamila.khan@incelaw.com
Commercial Court confirms traditional understanding of
“as is where is” in ship sale and purchase contract
Michael Hirtenstein & Others v. Hill Dickinson LLP [2014]
EWHC 2711 (Comm)
It will be recalled that in the case of Dalmare SPA v. Union
Maritime Ltd (Union Power) [2012] EWHC 3537 (Comm), the
Commercial Court, albeit in obiter comments, expressed the
surprising and contentious view that the words “as is where is”
were likely not sufficient to exclude from a sale contract the
implied terms of satisfactory quality and fitness for purpose
under s.14 Sale of Goods Act 1979 (“SGA”).
Those terms will be implied into sale of goods contracts
(including ship sale contracts) entered into in the course of a
business, but their inclusion is excluded if a term in the contract
is inconsistent with the implied term (s.55 SGA). In Union
Power, the Court commented that, if it had been required to
decide the point, it would have found the words “as is” were not
inconsistent with the implied terms to the extent of excluding
them, that they were sufficient only to exclude a right to reject
the goods, and would not exclude a claim for damages for
breach of the implied terms.
This decision was surprising, given that market understanding
has long been, in the context of ship sale and purchase and
otherwise, that the terms “as is” or “as is where is” require a
buyer to take a ship in the condition and state in which she is to
be found at the point in time defined in the contract, all faults
included, without any warranty as to quality or condition (see
The Morning Watch [1990] and The Brave Challenger [2003]).
Such a meaning would appear manifestly inconsistent with the
inclusion of the s.14 implied terms.
The decision in Union Power therefore had potentially wide-
ranging implications, notwithstanding the obiter nature of the
comments.
Michael Hirtenstein & Others v. Hill Dickinson LLP
In Hirtenstein, the Court has now endorsed the traditional
meaning of the words. The case arose following the purchase
of a luxury yacht that suffered a major engine breakdown only
an hour after delivery under the sale contract. The sale, on an
amended MYBA form MOA, was on terms that she was sold
“as is where is” save for certain specific warranties.
In this case, the parties all appeared to have a common
understanding as to what “as is where is” means: that the yacht
was to be purchased in her existing condition, be that good or
bad, with no recourse against the Seller for any subsequently
discovered faults. The Court further commented that it “would
regard that phrase as self-explanatory. It clearly signified that
the buyer would acquire the Yacht in whatever condition the
boat was at the time of purchase with no right to complain
subsequently...”.
The Court further dealt with the notion put forward in Union
Power that the words “as is” do not by themselves exclude the
implied terms but could only exclude a right of rejection,
commenting that “Drawing such a distinction between the
right to reject and the right to damages and treating the words
‘as is’ as excluding the former but not the latter seems to me
most unlikely to reflect the expectations of ordinary business
people or to be an interpretation that would occur to anyone
other than an ingenious lawyer.”
Comment
The case therefore supports the view that the terms “as is” or
“as is where is” are terms of art when it comes to contracts for
the sale of goods, that such terms are inconsistent with any
further right of recourse in respect of the condition of the
goods, and that they are therefore inconsistent with the
implication of warranties under s.14 SGA. That said, Union
Power is still authority for the (also perhaps surprising)
proposition that the words “as she was” in s.11 of the
Norwegian Sale Form (“NSF”) 93 are not the same as “as is
where is” and do not of themselves exclude the SGA implied
terms. Therefore, anyone selling a vessel on that form of MOA
must include a specific term excluding statutory or other
implied terms, such as is found in NSF 2012 and the standard
amendment to the MYBA form. We suggest it would also be
good practice to include an explicit exclusion of warranties in
any contract intended to be on truly “as is where is” terms.

6. 06 SHIPPING
E-BRIEF, AUTUMN 2014
Hong Kong ship arrest: enforcing a maritime award via the
backdoor?
Handytankers KS v. Owners and/or demise charterers of M/V
Alas (subsequently renamed Kombos) [2014] KHCFI 1281
In a potentially very significant recent judgment, the Hong Kong
High Court has upheld the arrest of a vessel despite the Plaintiff
already having obtained an arbitration award. The Admiralty
Court effectively ruled that a ship can still be arrested despite
the existence of an arbitration award, provided that the claim
out of which the award originates properly invokes the in rem
jurisdiction of the Court. The arrest was allowed to stand
because the cause of action in rem remains alive so long as the
arbitration award in personam against the owners of the ship
remains unsatisfied.
The background facts
The Kombos was chartered by the Plaintiff to PT Arpeni
Pratama Ocean Line Tbk (“APOL”) under a Shelltime 4
charterparty (the “Charterparty”) for five years. The
Charterparty contained an LMAA arbitration clause, pursuant
to which the Plaintiff brought proceedings in London for
damages for breach of the Charterparty and unpaid hire due
under it. A final award in the region of US$9 million for
damages and unpaid hire (the “Award”) was made in favour of
the Plaintiff in March 2013.
In April 2014, the Plaintiff invoked the Hong Kong Court’s in
rem jurisdiction by arresting the Dewi Umayi (the “Vessel”)
owned by APOL. The arrest papers made two important points
clear to the Court. First, the arrest of the Vessel was sought for
the purpose of providing security for the anticipated judgment
in rem in the arrest action, not as a means of enforcing the
Award. Second, the claim as pleaded in the endorsement to the
writ was one falling under section 12A(2)(h) of the High Court
Ordinance (the “Ordinance”), namely a claim arising out of any
agreement relating to the use or hire of a ship.
The judgment
Counsel for the Defendant sought to argue that the arrest was
fundamentally in the nature of an application to enforce the
Award. He continued that this was an abuse of process as, in
Hong Kong, there was no head of Admiralty jurisdiction that
permitted an arrest to enforce an arbitration award in such
circumstances. Counsel for the Defendant also submitted that
the arrest procedure was not available once a plaintiff’s claim
had crystallised in the form of a judgment or arbitration award.
The Court agreed that there is no head of Admiralty
jurisdiction in Hong Kong for the enforcement of arbitration
awards. Section 12A(2) of the Ordinance does not cover a
claim arising out of “an arbitration agreement”. However, the
Court went on to state that it was reasonably clear from a
number of judgments of the English and Hong Kong courts
that the Court would have in rem jurisdiction if the claim were
based on the original cause of action under the charterparty.
This is because the cause of action in rem, being different in
character from a cause of action in personam, does not merge
in the judgment in personam. Instead, it remains available to
the person who has it as long as, and to the extent that, the in
personam judgment remains unsatisfied.
Consequently, the Court ruled that as the Plaintiff’s claim was
pleaded as one for damages arising under a charterparty, it was
in substance and in form a claim “arising out of any agreement
relating to the use or hire of a ship”. Section 12A(2)(h) of the
Ordinance was thereby invoked. It was perfectly legitimate for
the Plaintiff to arrest the vessel and keep her arrested as
security in respect of any judgment that it may obtain after a
hearing in the in rem proceedings.
Comment
This judgment does not go so far as to amend the law regarding
the grounds for arrest in Hong Kong. A plaintiff cannot arrest a
vessel to enforce a claim based on an unsatisfied arbitration
award; this would require an expansion of the jurisdictional
heads under section 12A of the Ordinance. In addition, any
applicant in Hong Kong would need to ensure that it did not fall
foul of provisions of the Foreign Judgments (Restriction on
Recognition and Enforcement) Ordinance.
However, provided that the underlying cause of action does fall
within Section 12A of the Ordinance, and is correctly pleaded,
then it may now be possible to arrest a ship in Hong Kong
despite the existence of an arbitration award. Whilst not
directly being an arrest to enforce the award, that may well in
effect be the result of such an arrest.
It is unclear at the time of writing whether this case will be
appealed. However, for now it remains the decision of the
Admiralty Court and presents an opportunity for those holding
unsecured arbitration awards of an appropriate maritime
flavour to pursue enforcement, or enhance settlement leverage
via a route previously considered to be unavailable.
Rory Macfarlane
Partner, Hong Kong
rory.macfarlane@incelaw.com

7. 07SHIPPING
E-BRIEF, AUTUMN 2014
Can a LNG cargo be injurious to the vessel?
American Overseas Marine Corporation v. Golar Commodities
Ltd (LNG Gemini) [2014] EWHC 1347
In this case, the Court was asked to consider the meaning of the
words “injurious to the Vessel” in a time charter provision that
was in the terms of clause 28 of the standard Shelltime form,
and on which there appeared to be no relevant authority.
The background facts
The Owners of a LNG carrier entered into a time charter, clause
30 of which was headed “Injurious Cargoes” and provided as
follows:
“No acids, explosives or cargoes injurious to the Vessel
shall be shipped and without prejudice to the foregoing
any damage to the Vessel caused by the shipment of any
such cargo, and the time taken to repair such damage,
shall be for Charterers’ account.”
The Owners alleged that the Charterers had loaded a cargo of
LNG at the Cameron Terminal in Louisiana that was injurious
to the vessel in that it contained debris, in particular metal
particles. As a result, the Owners contended that the vessel
required major repairs after her cargo pumps and tanks were
found to be contaminated. The Owners eventually accepted
that there was no evidence that any of the debris caused
abrasion or rust or physical damage to the vessel, but argued
that a cargo might be “injurious to the Vessel” within the
meaning of clause 30 without causing any physical damage
to her.
The Commercial Court decision
The Court held that the clause was directed to physical damage,
pointing out that since it expressly covered two types of cargo
that might cause physical damage to the vessel, acid and
explosives, the inference was that it also covered other cargoes
that might cause physical damage. The Court considered that
this interpretation was corroborated because: (i) the clause was
particularly concerned with repairs of damage caused by such
cargoes, and the word “repairs” connoted physical damage; and
(ii) the clause provided for an indemnity for time lost to do
repairs, but not for time lost by the vessel for other reasons,
such as cleaning.
Nevertheless, the Court went on to hold that a cargo could be
“injurious” to a vessel without actually causing damage to her, if
it is of a kind that has a tendency or propensity to cause damage.
On the facts, however, the Court held that the Owners had not
proved that the Charterers shipped a cargo injurious to the
vessel. This was because although some of the particles that
formed part of the debris found in the cargo tanks during the
dry dock in the Philippines were likely to have been from the
Louisiana cargo, the distribution of debris suggested that it was
not predominantly from the Louisiana cargo. Further, as the
vessel had used unusually fine 100 mesh filters in its manifold
(which would block particles of more than 0.149mm), any
Louisiana cargo debris particles that found their way into the
cargo tanks would be ultra small. The Court accepted expert
opinion that the LNG industry did not contemplate that ultra
small particles of up to 0.25mm were going to cause any
damage to the LNG system.
The Court considered it unrealistic to think that the equipment
in the cargo system of a LNG tanker was designed to operate
without any metallic contamination at all, and instead accepted
expert evidence that small metallic particles were unlikely to
cause short-circuiting in LNG or LPG tankers, nor was there
any evidence that the particles would damage the ball
bearings or other parts of the cargo pumps. The cargo system
of an LNG tanker was more robust than argued for by the
Owners, and the Louisiana LNG shipped by the Charterers did
not create potential dangers to the vessel as the Owners
contended, and was not a cargo injurious to the vessel.
Comment
This case provides useful judicial guidance on the scope of
clause 28 of the standard SHELLTIME form. Although the cargo
in question does not have to have caused physical damage to
the vessel, it must be of a kind that has the propensity to cause
damage. A LNG cargo with ultra small metallic particles will not
meet this test.
Aurora Villacellino
Associate, Singapore
aurora.villacellino@incelaw.com
John Simpson
Partner, Singapore
john.simpson@incelaw.com

8. 08 SHIPPING
E-BRIEF, AUTUMN 2014
Implied duty of cooperation in shipbuilding and offshore
construction contracts – a change in the law?
Swallowfalls Ltd v. Monaco Yachting & Technologies S.A.M. &
Anor [2014] EWCA Civ 186
In our Summer 2014 E-Brief, we commented on the case of
Swallowfalls v. Monaco Yachting, in which the Court of Appeal
construed a loan agreement relating to a yacht construction
contract as being “on demand”. The Court also considered
whether there was an implied term requiring the buyer to
cooperate with the builder to agree, propose an alternative
solution or abandon any proposed variation to the contract.
It is common to provide expressly in a construction contract for
the ways in which the parties will cooperate with one another.
Where this is not addressed by the express terms of the
contract, a duty of cooperation may nevertheless be implied in
particular circumstances. The scope of such a duty will depend
on what is reasonable and necessary in the circumstances of
each case and by reference to the terms of the contract. But
how far does this go in a shipbuilding contract?
The background facts
The case of Swallowfalls concerned the construction of a yacht
that was to be paid for by instalments upon the achievement of
particular construction milestones. The Builder had difficulties
performing its obligations and required interim finance from the
Buyer in order to do so, which was provided by the Buyer as
advances on the instalments that would become due under the
contract. Upon completion of each milestone, and the Buyer’s
counter-signature of the corresponding stage certificate, the
outstanding loan amount would be reduced by the amount of
the corresponding instalment.
Disputes subsequently arose and the Buyer claimed the balance
of the loan. The Builder contended that the balance of the loan
that was payable was significantly less than that claimed by the
Buyer because:
1. the Buyer failed to countersign a stage certificate upon the
Builder’s achievement of a milestone, which delayed the
instalment being credited against the loan amount,
resulting in the accrual of additional interest; and
2. the Buyer failed to follow the contractual mechanism for
Buyer-requested variations, which delayed the completion
of milestones and the repayment of the loan.
The Builder argued that it should be implied into the loan
agreements between the Builder and the Buyer that:
1. the Buyer would not prevent the Builder from repaying the
loan, or delay the Builder in repaying the loan by
completing the milestones under the shipbuilding
contract; and/or
2. the Buyer would cooperate with the Builder in the
confirmation of the achievement of milestones under the
shipbuilding contract and, in particular, the counter-
signature of stage certificates.
The Court of Appeal decision
The Court of Appeal did not accept that the first term should be
implied but found that the second term was implied and that
“will do all that is required to make the contract work”. The
Court commented that:
“The second proposed implied term is an ordinary
implication in any contract for the performance of which
co-operation is required. A shipbuilding contract is such a
contract since ... the builder only earns a stage payment
when the buyer’s representative signs a certificate that
the relevant stage or milestone has been achieved. If the
relevant milestone has in fact been reached, the buyer
must so certify as part of his implied obligation to
co-operate in the performance of the contract. Similarly if
the buyer proposes a variation and the builder notifies the
buyer of the impact in price, performance and delivery,
the buyer must co-operate to agree, propose an
alternative solution or abandon the proposed variation. If
this is not spelled out in the contract expressly, a duty to
co-operate in the project will be implied.”
It is not controversial that the buyer should have a duty to
cooperate by countersigning stage certificates upon the
achievement of milestones. If such an obligation was not
imposed, the buyer could suspend payment by refusing to
certify milestones, which is unlikely to have been the intention.
What is more controversial is the comment that if the buyer
proposes a variation and the builder notifies the buyer of the
impact on the price, performance and delivery, the buyer must
cooperate to agree, propose an alternative solution or abandon
the proposed variation and that, if this is not spelled out in the
contract expressly, it will be implied.
In many cases, the builder will be able to continue construction
despite the buyer not having responded to a variation proposal.
Some contracts provide that the builder is required to follow
the buyer’s variation instructions while awaiting a response
(with the time, cost or other consequences being determined
later) or that, if the buyer fails to respond within a particular
period, the proposed variation will be withdrawn. Even in the
absence of such provisions, the builder may be obliged to
continue construction in accordance with the original
specification unless and until any variation is agreed. In all these
cases, an implied duty on the buyer to cooperate by expressly
agreeing, proposing an alternative solution or abandoning the
proposed variation would not appear to be necessary in order
to make the contract workable.
Comment
It appears doubtful that the Court of Appeal was intending to
lay down a general principle that a general duty to cooperate
will be implied in all shipbuilding contracts where the buyer
proposes a variation and the builder notifies the buyer of the
impact on the price, performance and delivery, such that the
buyer must cooperate to agree, propose an alternative solution
or abandon the proposed variation. However, this case could

9. 09SHIPPING
E-BRIEF, AUTUMN 2014
Chris Kidd
Partner, London
chris.kidd@incelaw.com
introduce some uncertainty as to the circumstances in which a
duty of cooperation will be implied and time will tell how it will
be treated by the Court in subsequent cases.
Robin Acworth
Solicitor, London
robin.acworth@incelaw.com
Collisions and reserve ships: liner operators beware!
Darya Bhakti [2013] 2 HKLRD 926
The quantification of damages for the loss of use of a ship
damaged in collision where her owner maintains and substitutes
a reserve ship for his damaged ship came up for determination
recently in Hong Kong, and in the modern day setting of a liner
operation run by a consortium of container ship owners. The
case in question was the Darya Bhakti in the Hong Kong Court
of Appeal.
Reserve ships
Liner operators of container ships are committed to providing
regular services with scheduled sailing times and port
rotations. In order to maintain such services, they must have
similar, and ideally identical, ships available as replacements to
provide cover for those occasions when one of the ships in
service has to be withdrawn for repair. In earlier years, a
suitable replacement ship would often be readily available in
the market for short-term charter but the option of
chartering-in has become considerably more difficult with the
increasing specialization of container ships in terms of their
carrying capacities, speeds and fuel efficiencies. An increasing
number of liner operators today therefore are investing in
reserve ships; that is, a sister ship that is kept deliberately idle
in order to be readily available for use as a replacement when
another of her sisters in service has to be withdrawn for any
reason, such as after collision.
Loss of use
Where a ship is damaged in collision, her owner is entitled to
claim damages for the loss of the use of that ship during the
period it is out of service undergoing repair (the period of
detention). Where the owner has no other ships available and
charters in a replacement ship to substitute for his damaged
ship during the period of detention, he can recover these
chartering-in costs as damages. What is the position, however,
where the owner keeps a reserve ship and elects not to charter
in but to substitute the reserve ship for the damaged ship?
The authorities
Surprisingly, there are very few reported shipping cases that
directly address this issue and such cases as there are date
back to the early part of the last century and involve claims for
loss of use by non-profit making organizations. These cases do
suggest, however, that the owner of a reserve ship trading
commercially for profit is entitled to recover loss of use based
upon the market rate of hire for such a ship at the time of the
collision. As the authors of the leading textbook on collisions
note:
“The case where a sister ship otherwise idle takes the
place of the damaged vessel must be distinguished from
the situation where a stand-by or reserve vessel is
specifically kept for that purpose. Here a claim will lie for
substantial damages for detention...
There is no clear English authority on the measure of
recovery, but US authority tends to give the reasonable
rate of charter hire for the ‘spare boat’.”

10. 10 SHIPPING
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The Darya Bhakti
OOCL’s vessel, OOCL China, was damaged in collision with the
Darya Bhakti whilst on time charter to MISC, following which
MISC stopped paying hire to OOCL. The liner consortium of
which both MISC and OOCL were then members – the Grand
Alliance – substituted the OOCL Japan, another OOCL vessel
and identical sister ship that the members of the Grand Alliance
had been keeping in reserve. OOCL subsequently claimed
damages for the loss of the use of the OOCL China based upon
the lost time charter hire for the period that the OOCL China
was out of service undergoing repair.
The owners of the Darya Bhakti argued that as OOCL had
sub-chartered back some of the slots on the OOCL China from
MISC and had not paid slot charter hire to MISC during the
detention period, and as all of the containers on board the
OOCL China were carried to destination by the OOCL Japan
so that the collision did not cause OOCL to suffer any loss of
freight income, OOCL’s claim for loss of use had to be reduced
accordingly to take account of the “saved” slot charter hire. The
Court at first instance agreed, and this decision was upheld by
the Court of Appeal.
In reaching this conclusion, the Court at first instance appears
to have treated the OOCL Japan as an idle sister ship rather
than as a reserve ship; and the Court of Appeal considered this
approach to be correct, surprisingly concluding that if the
OOCL Japan was a reserve ship, it was a reserve ship of the
Grand Alliance and not a reserve ship of OOCL.
Comment
The decision in this case is a particularly disappointing one, not
only for OOCL but for all liner operators. It is to be hoped that
there will soon be another opportunity for the common law
courts to re-visit this issue of reserve ships and the appropriate
method for assessing loss of use following a collision, but until
then… liner operators beware!
Harry Hirst
Partner, Hong Kong
harry.hirst@incelaw.com
Evidence not before tribunal shut out by Court on appeal
Central Trading & Exports Ltd v. Fioralba Shipping Company
(Kalisti S) [2014] EWHC 2397 (Comm)
When an arbitration award is appealed to the Court on the
grounds that the Tribunal had no substantive jurisdiction, there
is a complete rehearing of the issue of jurisdiction by the Court
and not just a review of the arbitrators’ decision. This means
that the Court effectively starts again and decides the
jurisdictional issue for itself and does not have to give any
particular weight to the arbitrators’ reasoning.
In general, a party is also entitled to put new evidence before
the Court that was not put to the arbitrators. As this recent
appeal decision in a shipping dispute demonstrates, however,
this is not an unqualified right and the Court may, as part of its
case management powers, refuse to allow a party to produce
documents selectively where to do so would prejudice the
other party or where the result would be a breach of the
Court’s rules requiring evidence to be presented in a fair
manner. Parties arbitrating their disputes should, therefore,
keep in mind the importance of complying with the Tribunal’s
orders for disclosure and presenting all relevant evidence to the
Tribunal at the appropriate time. A failure to do so may result in
such evidence being shut out in the event of a subsequent
challenge to the Tribunal’s jurisdiction.
The background facts
The underlying claim was for loss and damage to a cargo of
bagged rice shipped from Thailand to Nigeria. The Defendant
ship-owners disputed the Claimant cargo interests’ title to sue
under the bills of lading (which provided for English law and
London arbitration). A LMAA tribunal decided as a preliminary
issue that the cargo interests had not become holders of the
bills of lading and so did not have title to sue. The cargo
interests appealed this award to the Court on jurisdictional
grounds. A hearing to consider the substantive issue of title to
sue is scheduled for October 2014. In the meantime, the Court
was asked to consider whether the cargo interests are entitled
to submit new evidence in support of their title to sue claim
which was not put to the Tribunal.
The Commercial Court decision
The Court stated that, in a challenge to the arbitrators’
jurisdiction, a party can in general present new evidence that
was not before the arbitrators and that the Court will not
normally exclude evidence that is relevant and admissible simply
because it may cause prejudice to the other party. The Court
would, however, as part of its case management powers,
exercise control over the disclosure of documents and the
service of evidence and would do so in accordance with the
interests of justice and fairness.
In this case, the new evidence on which the Claimant sought to
rely was available to it in the arbitration. Furthermore, the
Tribunal had made an order for full disclosure with which the
Claimant had deliberately failed to comply. The Claimant had
apparently taken the view that it had presented sufficient
evidence to satisfy its burden of proof in the arbitration and
considered that the Defendant had been pressing the Tribunal

11. 11SHIPPING
E-BRIEF, AUTUMN 2014
to order it to produce evidence on irrelevant matters. Or, as the
Court put it, “it thought it had done enough to win and was
confident of victory” – a mis-judgment, as it turned out.
Furthermore, the new evidence the Claimant now sought to
present still did not represent full disclosure on title to sue and
basic documents (such as the sale contract for the cargo and
documents relating to the letter of credit to pay for the goods)
remained outstanding.
The Court concluded that it would be unjust to allow the
Claimant to rely on a selection of documents without giving full
disclosure, which it had been ordered to give in the arbitration.
This did not mean the Court was simply following the
arbitrators’ decision that full disclosure should be given; rather,
it had decided for itself that this was not a case where selective
disclosure was appropriate. While the new and selected
documents might make all the difference to the outcome on the
title to sue issue, the Defendant could suffer an irremediable
prejudice as a result of allowing them in. The Claimant was not
therefore allowed to present the new evidence and the hearing
of the title to sue issue would be limited to the material that
was before the arbitrators.
Comment
This is a clear case of the Court refusing an appealing party
“two bites at the cherry”. Arbitrating parties who think they
may subsequently wish to challenge the tribunal’s jurisdiction
should consider carefully the risks of giving limited or selected
disclosure in the arbitration, where this is not done by mutual
consent and with the blessing of the tribunal.
Reema Shour
Professional Support Lawyer, London
reema.shour@incelaw.com
David McInnes
Partner, London
david.mcinnes@incelaw.com
Court upholds English contract termination clause that is
invalid under foreign insolvency law
Fibria Celulose S/A v. Pan Ocean [2014] EWHC 2124 (Ch)
In a significant case regarding the application of the Cross
Border Insolvency Regulations 2006 (“Regulations”), the
English High Court decided it would not intervene to prevent
termination of an English law contract for insolvency even
though such termination was inoperative or invalid under the
foreign law governing the insolvency.
A termination notice was served by a Brazilian party on a
Korean company in administration in Korea. The insolvency
proceedings were recognised in Great Britain under the
Regulations and the Korean administrator asked the English
Court to grant relief under two heads. Firstly under Article
21.1(a) of the Regulations to grant a stay on the
“commencement or continuation of individual actions or
individual proceedings concerning the debtors’ assets, rights,
obligations or liabilities”. Alternatively and secondly, under
Article 21 to grant “any appropriate relief”. After considering
the UNCITRAL Model Law on Cross-Border Insolvency (“Model
Law”) which formed the basis for the Regulations implemented
in the UK, as well as the approaches of the US and Canadian
Courts, the English Court held that it had no power to order a
stay or to restrain the service of a contractual termination
notice on the insolvent company. In doing so, it differed from
the approaches of the US and Canadian Courts.
The background
The Regulations (as based on the Model Law) provide a
framework for the recognition by, and cooperation of, the
English courts in relation to the insolvency proceedings
commenced in foreign jurisdictions. Where “main” foreign
insolvency proceedings are recognised by the English Courts,
the Regulations provide for a stay of proceedings and for
appropriate relief at the request of the foreign insolvency office
holder, for example staying proceedings by a party against the
debtor’s assets.
It is common for contracts to include clauses permitting
termination in certain circumstances, including the insolvency
of one party. Such clauses are commonly referred to as “ipso
facto” clauses.
The background facts
Pan Ocean Co. Ltd (“Pan Ocean”), a shipping company
incorporated in Korea, entered into a carriage of goods contract
with a Brazilian company, Fibria Celulose S/A (“Fibria”) in 2011.
The contract was subject to English law and contained a clause
providing for any dispute to be dealt with by arbitration in
London. The contract also contained an ipso facto clause.
In June 2013, Pan Ocean entered insolvency proceedings in
Korea. The Korean insolvency office holder applied successfully
to the English Court for recognition of the Korean insolvency
proceedings. Shortly afterwards, Fibria notified Pan Ocean that
it was entitled to terminate the contract. Pan Ocean disputed

12. SHIPPING
E-BRIEF, AUTUMN 2014
12
Chloe Townley
Solicitor, London
chloe.townley@incelaw.com
George Kennedy
Consultant, London
george.kennedy@incelaw.com
that Fibria had the right to terminate as a matter of Korean law.
Pan Ocean’s administrator stated that they had the right to
elect to continue or terminate the contract under Korean
insolvency law, and that the administrator elected to continue
the contract. Both parties made separate applications to the
English Court.
Fibria applied for permission, pursuant to the Regulations, to
commence arbitration against Pan Ocean seeking declaratory
relief as to Fibria’s entitlement to terminate the contract.
Pan Ocean’s administrator applied for relief under the
Regulations for a declaration that Fibria was not entitled to
exercise any right of termination under the contract and/or any
such further relief as the Court saw fit. Pan Ocean later applied
for further relief in the form of a request from the English Court
to the Korean Court asking the Korean Court to give its opinion
as to whether the ipso facto clause was void and unenforceable
pursuant to Korean insolvency law.
The Court decision
The Court found in Fibria’s favour and held that it was unable to
order relief to Pan Ocean in the form of “staying proceedings”
since the giving of the termination notice was not considered to
be the commencement or continuation of “proceedings”
pursuant to Article 21.1(a) of the Regulations. Furthermore,
other forms of relief permitted by the Regulations were
restricted to relief that would be available to the Court when
dealing with a domestic insolvency and the Court refused to
apply foreign law (in this case Korean insolvency law). The Court
found it had no power to intervene to prevent the termination
notice, as “any appropriate relief”.
The Court also held that even if it had the power to intervene to
prevent the termination notice, it would not have been
appropriate to do so. The parties had freely chosen English law
as the governing law of their contract (which permitted
termination under the ipso facto clause). The English Court was
not permitted to apply Korean insolvency law to the substantive
rights of the parties under a contract subject to English law.
Comment
This is an important judgment of wider legal and practical
interest to the shipping industry. It is important as it clarifies
how the English courts will treat termination (or so called ipso
facto) clauses, when challenged to render them invalid pursuant
to the laws of other jurisdictions. It is also interesting when
compared with differing approaches in the US and Canada that
have applied foreign insolvency law. Broadly speaking therefore,
this judgment aids those seeking to rely on an ipso facto clause
in an English law contract, irrespective of differing laws in the
jurisdiction of the insolvent party.
The decision will be welcomed by shipowners given the extra
degree of certainty provided where one of the parties to a
contract becomes insolvent. The judgment will have particular
application in the context of shipowners purchasing newbuilds
in the Far East (in particular China and Korea where ipso facto
clauses are apparently invalid). On the basis of this judgment,
buyers are entitled to terminate the shipbuilding contract
pursuant to the ipso facto clause in the event the yard enters
insolvency proceedings. Furthermore, the judgment may aid
buyers demanding payment from Korean Banks under refund
guarantees as it can be argued that the demand’s validity under
English law should be determinative without the need to
consider Korean insolvency law.
This judgment is under appeal.

13. 13SHIPPING
E-BRIEF, AUTUMN 2014
BIMCO’s new charterparty clause for electronic bills of
lading
Is momentum growing for the wider adoption of electronic bills
of lading? Is BIMCO’s new electronic bills of lading clause for
charterparties a big step forward? This article looks at why such
clauses are required and explains how the clause works.
Introduction
The concept of electronic bills of lading has been around for at
least thirty years, but until now they have not been widely
adopted. One of the key obstacles the e-bill has faced is the
sheer success and longevity of the traditional paper bill of
lading. English law as regards the traditional paper bill has
developed over more than 200 years and the upshot is that
people know that paper bills work and can therefore be safely
relied on. Finding an electronic solution acceptable to owners,
charterers, cargo interests, insurers and banks that fulfils all of
the functions of paper bills has proven to be a daunting task.
Nevertheless, e-bills must surely one day replace good old
paper and their time is increasingly coming. With the law still to
catch up and, in the absence of adequate international rules, it
has fallen to the market (perhaps no bad thing) to devise the
necessary legal framework. Two primary alternative systems,
Bolero and essDOCS, now offer subscribers an integrated
contractual solution for the creation, transfer and surrender of
electronic bills.
The BIMCO clause
The new BIMCO electronic bills of lading clause has been driven
by demand from the shipping community for a charterparty
clause clarifying the conditions under which owners will issue
electronic bills. Below we set out (in italics) and explain the
wording of the draft BIMCO clause.
(a) At the Charterers’ option, bills of lading, waybills and
delivery orders referred to in this Charter Party shall be
issued, signed and transmitted in electronic form with the
same effect as their paper equivalent.
Why do charterers and owners need to agree that electronic
bills may be issued?
At present, English law is premised on the issuance of paper
bills. For example, the legislation dealing with the transfer of
rights of suit to third party lawful holders of a bill of lading
(COGSA 1992) only applies to paper bills of lading. As a result,
the consignee under an electronic bill of lading will not, as a
matter of law, obtain rights of suit and will not therefore be able
to pursue a cargo claim against the carrier.
Further, at common law, an electronic bill of lading is incapable
of acting as a document of title, given the rule that a master is
only obliged to deliver goods against the surrender of an
original paper bill of lading.
On this basis an e-bill is not a “bill of lading” as recognised in
English law. This naturally deters people from using e-bills.
Systems such as Bolero or essDOCS endeavour to deal with
this by having the users of e-bills agree between them a set of
rights and obligations similar to those arising under a
conventional paper bill. In other words, Bolero and essDOCS
operate on a contractual basis between those who sign up to
their systems.
To be effective, electronic bills of lading should only be used
where two conditions are fulfilled. First, owners and charterers
must agree to this in the relevant charterparty. Second, all
parties in the cargo chain (shippers, owners, charterers,
consignees etc) must sign up to an electronic trading system
such as Bolero or essDOCS.
Why are charterers given an option to request the issuance
of electronic bills?
Sub-clause (a) gives charterers the right to ask for an
electronic bill to be issued. In other words, the default position
is the conventional paper bill, but the charterer has the option
to ask for an e-bill. This is important because for systems such
as Bolero or essDOCS to work, everyone involved in the cargo
chain must sign up. An “outsider” is therefore not likely to
want an e-bill and it would not be negotiable to the world at
large. A charterer looking to keep his trading options open
must, therefore, be able to use standard paper bills of lading
but he wants the option to use e-bills as an alternative.
(b) For the purpose of Sub-clause (a) the Owners shall
subscribe to and use Electronic (Paperless) Trading
Systems as directed by the Charterers, provided such
systems are approved by the International Group of P&I
Clubs. Any fees incurred in subscribing to or for using such
systems shall be for the Charterers’ account.
Why must owners subscribe to electronic trading systems as
directed by charterers?
As discussed above, any attempt to use electronic bills of lading
outside a contractual circle is currently unfeasible. Sub-clause
(b) therefore sensibly makes clear that owners need to sign up
to the relevant system under which charterers have made a
request for electronic bills of lading to be issued.
Why must the relevant system be approved by the
International Group?
In order to avoid jeopardising P&I cover, it is crucial that the
particular electronic trading system intended to be used is
approved by owners’ insurers. We understand that, at present,
the two solution providers approved by the International Group
are Bolero and essDOCS.
(c) The Charterers agree to hold the Owners harmless in
respect of any additional liability arising from the use of
the systems referred to in Sub-clause (b), to the extent
that such liability does not arise from Owners’ negligence.
What is the purpose of this sub–clause?
Generally speaking, whilst charterers and cargo interests have
been enthusiastic supporters of electronic bills of lading, the
shipowning community has been much more circumspect,

14. SHIPPING
E-BRIEF, AUTUMN 2014
14
Richard Hickey
Solicitor, London
richard.hickey@incelaw.com
Bob Deering
Partner, London
bob.deering@incelaw.com
fearing that the replacement of paper bills might lead to an
unforeseen increase in owners’ liabilities. Sub-clause (c) is
therefore intended to encourage owners to adopt electronic
bills by obliging charterers to hold the owners harmless for any
liabilities that would not have arisen had paper bills been used.
Comment
BIMCO’s new electronic bills of lading clause for charterparties
is only a small part of a bigger picture. Any party thinking of
incorporating the new clause into its charterparties and then
using electronic bills of lading needs to consider carefully a
lengthy list of related issues, including whether electronic bills
of lading are suitable for the trade in question; which paperless
trading system should be adopted; and what the position is
regarding insurance. Nevertheless, the new clause is definitely a
welcome development that should further encourage owners
and charterers to adopt electronic bills of lading.
Ince & Co has advised numerous clients on issues concerning
electronic bills of lading, including the drafting or amendment
of charterparties to address particular issues. For further
information, please contact the authors or your usual contact at
the firm.
English Commercial Court enforces obligation to resolve
disputes by friendly discussion prior to arbitration
Emirates Trading Agency LLC v. Prime Mineral Exports Private
Limited [2014] EWHC 2104
The English courts have previously grappled with the extent to
which agreements to negotiate are unenforceable.
The previous authorities
In Walford v. Miles [1992] 2 AC 128, it was held that an
agreement by the owner of a business to terminate
negotiations to sell the business to a third party in exchange
for the Claimant’s promise to continue negotiations to buy the
business lacked the necessary certainty and was unenforceable.
How would the court police such an agreement?
This thinking underpinned later cases relating to dispute
resolution clauses. In Cable & Wireless v. IBM [2002] EWHC
2059, the Court commented that an obligation to attempt in
good faith to settle a dispute would have been unenforceable
because of an obvious lack of certainty, but the contractual
obligation to attempt in good faith to settle a dispute through
alternative dispute resolution (ADR) was sufficiently certain to
be enforced because the procedure to be followed was that
recommended by the Centre for Effective Dispute Resolution
(CEDR).
Also in Holloway v. Chancery Mead Limited [2007] EWHC
2495, the Court reviewed authorities concerning the
enforceability of ADR agreements and agreements to agree,
concluding that to be enforceable they had to be sufficiently
certain, administrative procedures for selecting a party to
resolve the dispute should be defined, and a process to be
followed should be defined or sufficiently certain.
In Sul America v. Enesa Engenharis [2012] 1 LLR 671, the
Court of Appeal had no doubt that a clause stipulating that
prior to arbitration the parties would seek to resolve disputes
amicably by mediation was enforceable and a clause that did
not set out a defined mediation process or refer to the
services of the specific mediation provider would not amount
to an enforceable obligation to mediate. Also in WAH v. Grant
Thornton [2013] 1 LLR 11, it was held that obligations in the
dispute resolution clause were too nebulous to be given legal
effect as an enforceable condition precedent to arbitration.
To be enforceable, an obligation to attempt to resolve a
dispute amicably before referring to arbitration needed to be:
“(a) A sufficiently certain and unequivocal commitment
to commence a process;
(b) From which may be discerned what steps each
party is required to take to put the process in place;
and which is
(c) Sufficiently clearly defined to enable the court to
determine objectively (i) what under that process is
the minimum required of the parties to the dispute
in terms of their participation in it and (ii) when or
how the process will be exhausted or properly
terminable without breach.”

15. 15SHIPPING
E-BRIEF, AUTUMN 2014
However, what if the multi-tiered dispute resolution clause
does not require mediation but simply requires that the parties
“shall first seek to resolve the dispute or claim by friendly
discussion”? Is it also no more than an unenforceable
agreement to negotiate?
At least two judges have previously taken that view on similar
clauses. Others have, however, been taking the view that
Walford v. Miles arguably frustrates the reasonable expectation
of parties that the courts will uphold what they have agreed
(see, for example Petromec Inc v. Petroleo Brasilerio [2005]
All ER 209). Likewise, the courts in other countries, notably
Singapore and Australia, have also supported this approach.
Emirates Trading Agency v. Prime Mineral Exports
It appears that the English Commercial Court is also now
willing to apply this reasoning. In this recent case, the Court
considered the following dispute resolution clause:
“….the Parties shall first seek to resolve the dispute or
claim by friendly discussion... If no solution can be arrived
at between the Parties for a continuous period of 4 (four)
weeks then the non-defaulting party can invoke the
arbitration clause….”
The Court held that it was enforceable:
“Such an agreement is complete in the sense that no
essential term is lacking... There would not be an open-
ended discussion concerning each party’s commercial
interests without regard to the rights and obligations
under the LTC [long term contract]. Thus the agreement
has sufficient certainty to be enforceable... Concluding
that the obligation was enforceable would be consistent
with the public policy of encouraging parties to resolve
disputes without the need for expensive arbitration or
litigation...”
More surprisingly, the Court went on to say that the obligation
to seek to resolve disputes by friendly discussions must import
an obligation to seek to do so in good faith. Whilst recognising
that it might be difficult to establish that a party has not acted in
good faith, there might be cases where that can be shown e.g.
where a party refuses to negotiate. The Court did not accept
that good faith is too open ended a concept to provide a
sufficient definition of what such an agreement must involve:
good faith meant “both honesty and the observance of
reasonable commercial standards of fair dealing”.
Comment
How this is to be applied in practice remains to be seen,
particularly in light of the observation in Walford v. Miles that a
party is “entitled to pursue his ... own interest” and to “advance
that interest he must be entitled, if he thinks it appropriate, to
threaten to withdraw from further negotiations or to withdraw
in fact in the hope that the opposite party may seek to reopen
the negotiations by offering him improved terms”.
To introduce an obligation of good faith may be easy to state
but turn out to be unworkable in practice and will almost
certainly introduce uncertainty and difficulties for those
involved in “friendly discussions” and giving effect to multi-
tiered dispute resolution clauses.
We understand that permission to appeal has been refused by
the Court of Appeal.
Chris Kidd
Partner, London
chris.kidd@incelaw.com

16. 16 SHIPPING
E-BRIEF, AUTUMN 2014
NEWS AND EVENTS
Ince & Co recognised by Legal 500 2014
Ince & Co has been awarded the Legal 500 UK 2014 Award
for Transport: Shipping Firm of the year.
The legal referral guide has also recommended Ince & Co as a
top-tier firm for Law Firms in London in Corporate and
Commercial (within M&A: smaller deals, up to £50 million),
Commodities, and Shipping. The guide also recommends the
Firm in 13 other practice areas as well as listing five Ince & Co
lawyers as “leading individuals” and recommending 40 Ince
lawyers throughout the guide’s editorial.
Ince & Co promotes corporate specialist Matthew Stratton
to partner
Recognising our clients’ increasing need for transactional
advice, Ince has promoted Matthew to strengthen its corporate
practice at partner level and build on recent successes.
Matthew has extensive experience of advising clients in energy,
oil and gas, trade, and shipping transactions – as well as working
across each of the firm’s other specialist areas.
“The promotion of Matthew Stratton is a signal of the firm’s
confidence in our corporate capability, and response to
increasing demand from our clients for more complex, cross-
border transactional advice,” says Ince & Co’s Senior Partner,
James Wilson. “Matthew’s promotion fits squarely within our
on-going strategy to provide the premier service required by
our clients in our core sectors of shipping, trade, energy,
aviation and insurance.”
Stephen Jarvis, who heads Ince & Co’s corporate team in
London says: “Our corporate practice is busy. Over the past
year we have been involved in a number of high profile
transactions across the firm’s specialist sectors, including
advising on the recent US$3.4 billion restructuring of Zim
Shipping, and the US$160 million sale of PVM Oil Associates.”
Matthew has been with Ince for three years, having joined as a
senior associate from the corporate department of another
leading London law firm. Matthew specialises in domestic and
cross border mergers and acquisitions, corporate
restructurings, divestments, joint ventures and investment/
agreements.
Matthew Stratton
Partner, London
matthew.stratton@incelaw.com

17. Ince & Co recruits Philippe Ruttley as Head of EU and
Competition Law
Ince & Co is delighted to announce the appointment of new
shipping and aviation partner, Philippe Ruttley, who joins the
Firm’s London office as Head of EU and Competition Law.
Philippe specialises in EU and Competition law and EU
litigation, and also practises EU trade law and EU energy law.
He has worked with many clients in the transport industry,
advising a wide range of shipping and airlines companies on
compliance with EU and Competition law rules, and on
international trade law.
“I am delighted to be joining Ince & Co,” Philippe comments.
“Ince is one of the leading international law firms in the
specialist areas of aviation, shipping, energy, trade and
insurance and reinsurance, with strong global capabilities in a
broad range of services. The Firm has an impressive client
base and a deep pool of talent, and I am excited to be part of
the team.”
Michael Volikas, Global Managing Partner of Shipping at Ince
says: “We are delighted to bring on board this strategic new
hire to further, significantly, our ability to advise clients in these
important areas. Philippe’s sector focus mirrors our own and is
much valued by clients for the added value that it brings. We
look forward to working together with Philippe. Philippe will
also bring his important regulatory and WTO experience for
our energy and trade clients.”
Ince & Co has been named In-House Community Firm of the
Year 2014 for Hong Kong: Maritime & Shipping
Ince & Co is pleased to announce that the firm’s Hong Kong
office has been named Asian-MENA Counsel In-House
community firm of the year for Maritime & Shipping: Hong Kong.
David Beaves, head of our Hong Kong office, says: “We are
delighted to have been named Maritime & Shipping: Hong
Kong firm of the year by In-House Community. This achievement
reflects Ince’s long-standing and special links between the
maritime and shipping industry and Hong Kong, and our
continuing commitment to maintain our position as a leading
maritime law firm.”
Asian-MENA Counsel’s eighth annual “Representing Corporate
Asia & Middle East Survey” measures the views of In-House
Community’s 21,000 individual in-house lawyers with a
responsibility for legal and compliance issues across Asia and
the Middle East.
Philippe Ruttley
Partner, London
philippe.ruttley@incelaw.com
David Beaves
Partner, Hong Kong
david.beaves@incelaw.com
Ince & Co is a network of affiliated commercial law firms with offices in Beijing, Dubai, Hamburg, Hong Kong, Le Havre, London, Monaco,
Paris, Piraeus, Shanghai and Singapore.
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