CL-2024-000292 - [2025] EWHC 1990 (Comm)

GROUNDS OF APPEAL

Leave to appeal was granted under section 69 Arbitration Act 1996 by Andrew Baker J dated 1 November 2024 on the following question of law (the “Ground of Appeal”):-

“Where liability is wrongly imposed on an owner by a foreign court following shipment of a lawful harmless and permitted cargo that is affected by inherent vice, can the owner recover that liability from a time charterer under the general implied indemnity?”

Andrew Baker J gave reasons for his grant of leave to appeal, as follows:-

“(ix)

Question 3 concerns the ground on which the arbitrators upheld the owner’s implied indemnity claim. Their essential reasoning was that on the proper construction of the subject time charter, the owner had not expressly or impliedly agreed to bear the relevant risk. I consider the correctness or otherwise of that reasoning, in the context of facts such as those of the present case, to be a question of general public importance, and in my view the correctness of the arbitrators’ reasoning (and therefore of their decision that the Island Archon claim should be upheld) is open to serious doubt.

(x)

I note in particular that there seems to be both (a) what may be a contradiction in the Reasons, in that the arbitrators appear to accept (or proceed on the basis) that the cargo was a lawful and permitted cargo under the charter, the inherent vice notwithstanding, and yet also say that it was a cargo “outside the limits of the Charterparty”, and (b) what may be a misunderstanding of The Island Archon, which (in relevant respect) did not turn on the near inevitability of a cargo claim under the “Iraqi system”, but on the fact that the existence of that system, and thus the risk of suffering loss under it, was not notorious when the charter was concluded – Evans LJ expressly contemplated that otherwise the result might have been different (ibid at 236 rhc), and an appeal here may provide an opportunity for that to be explored and tested in a case where it will be determinative.”

Leave to appeal was refused on two questions concerning the ICA:-

“(1)

Does the ICA apply or potentially apply to Cargo Claims

(2)

Does the loading of a lawful harmless and permitted cargo that is affected by inherent vice amount to an “act” of the charterers for the purposes of Clause 8(d) of the ICA, such that any cargo claims caused thereby are borne 100% by the charterers rather than 50/50 between the charterers and the owners?”

as to which Andrew Baker J noted that:

“… it was the charterer’s case that Inter-Club Agreement apportionment did not apply so that the owner had no claim under that Agreement and was limited (on the facts of this case) to an Island Archon indemnity claim, which the charterer in turn defended on grounds now giving rise to [the question on which leave was granted]. In fact, according to the award, it was common ground, at all events at the final hearing, that Inter-Club Agreement apportionment did not apply.”