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SEVENTEENTH ANNUAL INTERNATIONAL MARITIME

LAW ARBITRATION MOOT COMPETITION 2016

IN THE MATTER OF AN ARBITRATION HELD IN EXETER

Claimant: Respondent:

Zeus Shipping and Trading Company, Hestia Industries,

with its seat in Poseidon, 200 Beta Street. with its seat in Hades, 100 Alpha Street.

MEMORANDUM FOR THE RESPONDENT

TEAM NO. 13

Margarita Bitel

Marta Kaźmierska

Maxime Kohl

Umit Suleyman Onan

Ylonka Polder

Erasmus Universiteit Rotterdam, the Netherlands.

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TABLE OF CONTENTS

LIST OF AUTHORITIES .......................................................................................................... 4

A. CONVENTIONS ................................................................................................................... 4

B. CASES ................................................................................................................................... 4

C. BOOKS .................................................................................................................................. 6

D. ARTICLES ............................................................................................................................ 6

LIST OF ABBREVIATIONS .................................................................................................... 7

I. STATEMENT OF FACTS ..................................................................................................... 8

A. THE PARTIES ...................................................................................................................... 8

B. THE CHARTERPARTY ....................................................................................................... 8

C. PERFORMANCE OF THE CHARTERPARTY .................................................................. 8

II. SUMMARY OF THE ISSUES ........................................................................................... 10

III. ISSUE OF JURISDICTION AND APPLICABLE LAW .................................................. 11

A. THE ARBITRATION AGREEMENT SHALL BE GOVERNED BY WESTERN

AUSTRALIAN LAW .............................................................................................................. 11

B. THE ARBITRATION CLAUSE HAS BEEN FRUSTRATED .......................................... 12

C. ALTERNATIVELY, SHOULD THE TRIBUNAL DECIDE THE ARBITRATION

CLAUSE REMAINS IN FORCE, THE DISPUTE ON FRUSTRATION FALLS OUTSIDE

OF ITS SCOPE ........................................................................................................................ 13

1. The Tribunal shall find that the Parties agreed on the narrow application of the

arbitration clause ............................................................................................................... 13

2. The issue of frustration is not a dispute arising “under the Charterparty” .................... 15

C. THIS TRIBUNAL HAS JURISDICTION TO HEAR THE CLAIM FOR A SALVAGE

AWARD ................................................................................................................................... 16

D. THIS TRIBUNAL HAS NO JURISDICTION TO HEAR THE CLAIM FOR A

CONTRIBUTION IN GENERAL AVERAGE ....................................................................... 16

V. THE CHARTERPARTY IS FRUSTRATED ..................................................................... 17

A. THE DELAY IS SIGNIFICANT ENOUGH TO FRUSTRATE THE COMMERCIAL

PURPOSE OF THE CHARTERPARTY ................................................................................. 17

B. FURTHER PERFORMANCE OF THE CHARTERPARTY IS ILLEGAL ...................... 18

C. THE FORCE MAJEURE CLAUSE IS NOT APPLICABLE ............................................. 19

1. The Force Majeure clause does not cover the situation which has arisen .................... 19

2. The Force Majeure clause does not cover 1-year delay ................................................ 20

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V. THE RESPONDENT'S DEFENCE TO THE CLAIM FOR DEMURRAGE .................... 21

A. THE RESPONDENT IS NOT LIABLE FOR DEMURRAGE .......................................... 21

B. THE RESPONDENT IS ENTITLED TO DESPATCH MONEY ...................................... 22

VI. THE RESPONDENT'S CLAIM FOR SALVAGE AWARD............................................ 23

1. The Vessel was in peril at the moment of rendering assistance by the Respondent .... 23

2. The Respondent had no contractual duty to render assistance to the Vessel given that

the towage service contract between the Parties ceased ................................................... 24

3. The fact that the Vessel was carrying the Respondent's cargo does not preclude the

Respondent from claiming a salvage award ..................................................................... 25

4. The Vessel and the cargo have been successfully saved by the exertions of the

Respondent ........................................................................................................................ 26

VII. THE RESPONDENT'S DEFENCE TO THE CLAIM FOR CONTRIBUTION IN

GENERAL AVERAGE ........................................................................................................... 26

1. Given that the Charterparty had been frustrated before the general average act

occurred, the Claimant cannot claim a general average contribution ............................... 26

2. Should the Tribunal find that the Charterparty was not frustrated, the peril which gave

rise to the general average act was caused by the fault of the Claimant ........................... 27

VIII. PRAYER FOR RELIEF .................................................................................................. 28

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LIST OF AUTHORITIES

A. CONVENTIONS

Salvage Convention 1989

The York Antwerp Rules 1994

International Arbitration Act 1974 (Australia)

International Arbitration Act 1996 (UK)

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York

Convention)

Voylay rules 1993

B. CASES

UNITED KINGDOM

Sulamerica CIA Nacional de Seguros SA and others v. Enesa Engenharia SA and

others [2012] EWCA Civ 638

Hirji Mulji v. Cheong Yue Steamship Co. [1926] A.C. 497

Heyman v. Darwins Ltd [1942] A.C. 356

Harbour Assurance Co. (UK) Ltd v. Kansa General International Insurance Co.Ltd [1993]

1 Lloyd’s Rep 455 Fiona Trust and Holding Corp v. Privalov [2007] UKHL 40

Samick Lines Co Ltd -v- Owners of The Antonis P Lemos HL [1985] AC 711

Overseas Union Insurance Ltd v. AA Mutual International Insurance Co Ltd [1988] 2

Lloyd's Rep

Gibraltar v Kenney [1956] 2 Q.B. 410

The Wilhelmine [1842] 1 N.o.C

The Charlotte [1848] 3 Wm. Rob.

The Mount Cynthos [1937] 58 Lloyd’s Rep. 18

The Suevic [1908] 148

The Princess Alice [1848] 3 W. Rob. 138

The Glaucus [1948] 81 Lloyd’s Rep. 262

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The Reward [1841] 166 E.R. 538

The Leon Blum [1915] 90

Goulandris Bros. Ltd v. B. Goldman and Sons Ltd at 95

The Waterloo [1820] 2 Dods. 433

The Lomonosoff [1921] P. 97

The Le Jonet [1872] L.R. 3 A. and E. 556

The Lea 24 F. 47 [1884]

Tempus Shipping Co v. Louis Dreyfus and Co [1931] 1 K.B. 195

Castle Insurance v. Hong Kong Shipping Co [1984] A.C. 226

Owners of the S.S. Melanie v. Owners of the S.S. San Onofre [1925] A.C. 246

The Sava Star [1995] 2 Lloyd’s Rep. 134

The Breydon Merchant [1992] 1 Lloyd’s Rep. 373

The Westburn [1986] 8 Asp. M.L.C 130

The Madras [1898] 8 Asp. M.L.C 397

The Glenberg [1940] 66 Lloyd’s Rep. 437

The Homewood [1928] 31 Lloyd’s Rep 336

ED&F Man Sugar Ltd v. Unicargo Transportgesellschaft GmbH [2013] EWCA Civ 1449

Pacific Phosphate Co Ltd v. Empire Transport Co Ltd (1920) 4 Ll.L.Rep. 189

Leonis Steamship Company Ltd v. Rank Ltd [1908] 1 KB 499

Svenssons Travaruaktiebolag v. Cliffe Steamship Co Ltd (1931) 41 Ll L Rep 262

Argonaut Navigation Co Ltd v. Ministry of Food (1948) 82 Ll L Rep 223

The Playa Larga [1983] 2 Lloyd’s Rep 171

Ethiopian Oilseeds v. Rio del Mar [1990] 1 Lloyd’s Rep 86

UNITED STATES OF AMERICA

Mason v. The Blaireau 2 Cranch 240 [1804]

AUSTRALIA

ACD Tridon Inc v. Tridon Australia Pty Ltd [2002] NSWSC 896

Codelfa Construction Pty Ltd v. State Rail Authority of NSW [1982] HCA 24; (1982) 149

CLR 337

Transfield Philippines Inc v. Pacific Hydro Ltd [2006] VSC 175

Francis Travel Marketing P/L v. Virgin Atlantic Airways Ltd [1994] ATPR 41-332

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C. BOOKS

Baykitch A. Arbitration Law of Australia: Practice and

Procedure (1st edition, Juris Publishing

2013)

Cooke J., Cornah R. Lowndes and Rudolf: The Law of General

Average and the York-Antwerp Rules (13th

edition, Sweet & Maxwell 2007)

Cooke J. and others Voyage Charters (4th edition, Informa

2014)

McKendrick E. Force Majeure and Frustration of Contract

(2nd edition, Informa 2014)

Merkin R. Arbitration Act 1996 (2nd edition, LLP

Professional Publishing 2000)

Reeder J. Brice on Maritime law of salvage (4th

edition, Sweet and Maxwell 2003)

Rose F. D. Kennedy and Rose: Law of Salvage (17th

edition, Sweet & Maxwell 2008)

Schofield J. Laytime and Demurrage (6th edition,

Informa 2011)

St John Sutton D., Gill J. and Gearing M.

Russell on Arbitration (24th edition, Sweet

& Maxwell 2015)

D. ARTICLES

Gelinas P.A. “Arbitration clause: achieving

effectiveness” (1998) 9 ICCA Congress

Series 47

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LIST OF ABBREVIATIONS

IAA International Arbitration Act

p. Page

UK United Kingdom

USA United States of America

V. Versus

NOR Notice of Readiness

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RESPONDENT'S ARGUMENTS

I. STATEMENT OF FACTS

A. THE PARTIES

1. The Claimant is Zeus Shipping and Trading (further referred to as “the Claimant”), owner of

the “Athena” (further referred to as the “Vessel”). The Respondent is Hestia Industries (further

referred to as “the Respondent”), a company located in Hades that liquefies Hades Shale Gas

since 2010 (both later referred to as the “Parties”).

B. THE CHARTERPARTY

2. On 21 July 2014, the Respondent as “Charterers” and the Claimant as “Owners” entered into

an agreement for the hire of the Vessel (further referred to as “the Charterparty”) for a voyage

from the port of loading (Hades) to the port of discharge (Poseidon). The Charterparty was

preceded by correspondence between the Parties in which additional agreements have been

made (further referred to as “the Correspondence”).

3. The Charterparty is the standard voyage charter of the Claimant as amended by the parties in

their correspondence.

C. PERFORMANCE OF THE CHARTERPARTY

4. On 3 October 2014, the Vessel arrived at Hades in accordance with the Charterparty. On the

same day, the Master tendered a Notice of Readiness (further referred to as “NOR”) and

commenced loading. The loading of the cargo was delayed by the protest in the port of loading.

The Vessel completed loading on 6 October 2014. She loaded approximately 260.000 m³ of

Respondent’s cargo. After completion of loading, the Vessel had to wait for customs and port

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clearance and subsequently sailed for Poseidon. As a consequence, the Vessel completed

loading and left the port limits before the laytime was exhausted.

5. However, on the same day the Vessel sailed for Poseidon a military coup was perpetrated,

which led to the appointment of the new president of Hades, Ms. Simmons. She appeared to be

a vocal opponent of the Respondent’s cargo and illegally instructed the Hades Coast Guard

(further referred to as “Coast Guard”) to intercept the Vessel. Subsequently, on 7 October 2014,

the Vessel was intercepted by the Coast Guard and directed to return to the port of Hades

immediately. There was no legal basis for the Vessel to return to the port.

6. The Respondent was notified about this fact by the letter of 15 October 2014, more than one

week after the incident occurred. In this letter the Claimant emphasized that the Respondent

was responsible for the interception and pointed out that demurrage would accrue. By the letter

of 30 April 2015 the Respondent rightfully argued that the Charterparty was frustrated. The

Claimant however did not restrain from sending several invoices for demurrage.

7. On 5 October 2015 it became clear that the Vessel had been released by the Coast Guard and

was preparing to leave the port of Hades. The Vessel sailed for Poseidon with assistance of tugs

on 6 October 2015. After release of the towlines it appeared that the Vessel could not sail under

her own steam and assistance of tugs was necessary to prevent the Vessel from sinking. In the

port of refuge it was discovered that the Vessel was unseaworthy, because its propellers had

been tampered while being in port.

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II. SUMMARY OF THE ISSUES

8. As a consequence of the abovementioned facts, the Respondent asks the Tribunal to consider

the following matters with regard to the case at hand:

a. The arbitration agreement shall be governed by Western Australian law;

b. This Tribunal does not have jurisdiction to determine the claims regarding frustration and

demurrage, since these disputes are not subject to arbitration in accordance with the arbitration

agreement in the Charterparty;

c. If the Tribunal finds that they have jurisdiction to determine the claim regarding demurrage,

the Respondent is not liable for demurrage under the Charterparty;

d. If the Tribunal finds that they have jurisdiction to determine the claim regarding frustration,

the Charterparty between the parties was frustrated;

e. The Respondent is entitled to a salvage award;

f. If the Tribunal finds that they have jurisdiction to determine the claim regarding general

average, the Respondent does not have to contribute in general average.

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III. ISSUE OF JURISDICTION AND APPLICABLE LAW

A. THE ARBITRATION AGREEMENT SHALL BE GOVERNED BY WESTERN

AUSTRALIAN LAW

9. The arbitration agreement shall be governed by the substantive law of the contract. The Court

of Appeal established a three-stage conflict-of-law test in Sulamerica1 which emphasizes i)

whether the parties have made an explicit choice of law, ii) whether the parties have made an

implied choice of law and iii) which law has the most real and closest connection with the

arbitration agreement. In Sulamerica2 the Court of Appeal also emphasized that in absence of

an explicit choice of law governing the arbitration agreement, there should a presumption that

the substantive law shall govern the agreement. This view was preferred over a presumption

that the law of the seat shall apply. The parties did not make an explicit choice of law to govern

the arbitration agreement, but agreed that the Charterparty shall be governed by the laws of the

State of Western Australia. The latter can be seen as an implicit choice that Western Australian

law will govern the arbitration clause. In the Respondent’s Correspondence of 16 July 2014 the

Respondent proposed to narrow the arbitration agreement. This proposal is only valuable based

on a Australian interpretation, since the agreement is interpreted more broadly under English

law.3 Furthermore, in Francis Travel Marketing P/L v. Virgin Atlantic Airways Ltd.4 the

governing law of the arbitration clause was found to be the same as the law governing the

substantive contract containing the arbitration clause. Furthermore, the arbitration agreement

1 Sulamerica CIA Nacional de Seguros SA and others v. Enesa Engenharia SA and others [2012] EWCA Civ

638. 2 Sulamerica CIA Nacional de Seguros SA and others v. Enesa Engenharia SA and others [2012] EWCA Civ

638. 3 Ethiopian Oilseeds v. Rio del Mar [1990] 1 Lloyd’s Rep 86. 4 Francis Travel Marketing P/L v. Virgin Atlantic Airways Ltd. [1994] ATPR 41-332.

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has its most real and closest connection with Western Australian law because it is the applicable

law to the Charterparty and mirrors the domestic law of both parties.5 Consequentially, the

arbitration clause shall also be governed by Western Australian law.

B. THE ARBITRATION CLAUSE HAS BEEN FRUSTRATED

10. The Respondent’s position is that the Charterparty has been frustrated by the 30th April

2015. The Tribunal should find that the arbitration clause, as a part of the Charterparty, has also

been brought to an end and consequently, the Tribunal lacks jurisdiction to hear any of the

disputes arising between the Parties.

11. Doctrine of separability of the arbitration clause should not be applicable in the case of the

Respondent. It was held in Hirji Mulji6, that frustration of the contract leads to the frustration

of the arbitration clause and deprives a tribunal of competence to rule on any dispute.

12. It is of great importance that, even though the opposite view was expressed by the judge in

Heyman v. Darwins7, Hirji Mulji remains a good law in Australia. The decision was made by

the Privy Council, making it applicable in the Commonwealth. The opinion on the issue of

frustration of the arbitration clause and its separability from the main contract in Heyman v.

Darwins, and later in Codelfa8, was presented solely as obiter dicta and therefore not binding

on later jurisprudence. Therefore, the Tribunal should follow ratio decidendi of the Hirji Mulji

case and conclude that the arbitration clause was brought to an end together with frustration of

the Charterparty.

5 Facts, page 79. 6Hirji Mulji v. Cheong Yue Steamship Co. [1926] A.C. 497 7Heyman v. Darwins Ltd [1942] A.C. 356 8Codelfa Construction Pty Ltd v. State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

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C. ALTERNATIVELY, SHOULD THE TRIBUNAL DECIDE THE ARBITRATION

CLAUSE REMAINS IN FORCE, THE DISPUTE ON FRUSTRATION FALLS

OUTSIDE OF ITS SCOPE

13. Should the Tribunal find that the arbitration clause remains in force, the issue of frustration

of the Charterparty is not covered by its terms and as a result the Tribunal is not competent to

decide on the demurrage claim. In order for the Tribunal to be able to rule on the demurrage

claim of the Claimant and its alleged amount, the Tribunal shall first determine whether there

was an existing valid contract in force. Nevertheless, the Tribunal lacks jurisdiction to decide

since the Parties agreed to narrow the application of the arbitration clause (1), which

consequently does not encompass the subject matter of frustration of the Charterparty (2).

1. The Tribunal shall find that the Parties agreed on the narrow application of the

arbitration clause

14. The approach argued by the Claimant as to the wide interpretation of the arbitration clause

cannot be implied in the case of the Respondent. An important exception to the rule of a broad

interpretation restricts its application when the parties clearly excluded certain subject matter

from the scope of arbitral jurisdiction9.

15. In the correspondence dated 16th July 2014, the Respondent requested to replace wording

used in the arbitration clause in order to limit its scope. The same letter provided the Claimant

with an explanation of reasoning and motivation of the Respondent for such a decision. The

Claimant consequently agreed on these terms by preparing and signing the re-negotiated

Charterparty. In the arbitration clause of the 21st July 2014, the Parties agreed to refer to the

9 Fiona Trust and Holding Corp v. Privalov [2007] UKHL 40 [13], [15]; Premium Nafta Products Ltd & others

v. Fili Shipping Company Ltd & others [2007] UKHL 10, Gelinas, ‘Arbitration clause: achieving effectiveness’

(1998) 9 ICCA Congress Series 47 [56].

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arbitration solely the disputes arising “under” the Charterparty as opposed to the disputes

arising “out of or in relation” to it (as first drafted in the Charterparty on 14th July 2014).

16. The interpretation of an arbitration clause in Australian law is governed by the usual rules

on contract’s interpretation10 which tend to ascertain the intention of the Parties11. In this case,

the intention to limit the scope of the clause was clearly stated by the Respondent and agreed

on by the Claimant. If the parties deliberately chose such a narrow construction of the clause,

that should not be disregarded by the Tribunal12.

17. In addition to this, the Claimant’s argument as to the use of words “arising out of” in the

Correspondence dated 16th July 2014 is unfounded in law. The circumstances surrounding the

agreement may be used as a ground for interpretation of the contract if its language is

ambiguous, nevertheless it is not admissible if it contradicts wording of plain meaning used in

the contract13. Therefore, the wording used in the Correspondence from 16th July 2014 cannot

undermine the wording agreed on by the Parties afterwards in the legally binding clause 30.

18. Moreover, it is clear that in the Correspondence the Respondent’s Managing Director, not

aware of linguistic nuances and its legal consequences, used the expression “arising out of”, not

in the legal sense but merely of the natural meaning of the words used. In certain context the

expression “arising out of” may be of limited scope equivalent to the expression “arising under”

and not that of the wider expression “connected with” when used in its ordinary sense14.

10 Walter Rau Neusser Oel und Fett AG v. Cross Pac. Trading Ltd, XXXI Y.B. Comm. Arb. 559, 564 Australian

Fed. C. 2005) (2006) 11 Gary B. Born, International Commercial Arbitration volume 1 (Wolter and Kluwers) 1063; ACD Tridon Inc v.

Tridon Australia Pty Ltd [2002] NSWSC 896, [119]; Transfield Philippines Inc v. Pacific Hydro Ltd [2006]

VSC 175, [61]. 12 ACD Tridon Inc v. Tridon Australia [2002] NSWSC 896, [121]. 13 Codelfa Construction Pty Ltd v. State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337[352] 14 Samick Lines Co Ltd v. Owners of The Antonis P Lemos HL [1985] AC 711.

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19. In conclusion, in order to reflect Parties clear intention to limit the scope of the arbitration

agreement, the Tribunal should interpret clause 30 in a narrow sense as applicable only to claims

arising under the Charterparty.

2. The issue of frustration is not a dispute arising “under the Charterparty”

20. An arbitration clause referring to the Tribunal disputes arising “under the contract” covers

solely controversies with regards to the rights and obligations created by the contract itself15.

However, the Charterparty does not provide with any provision regulating the issue of

frustration of the contract. Therefore the dispute on frustration cannot be regarded as arising

under any provision of the Charterparty. The only clause dealing with a termination of the

Charterparty is clause 19 which allows the Parties to terminate the contract in case of a Force

Majeure Event. Nevertheless, clause 19 is not applicable in this case (see infra).

21. Additionally, if the Tribunal decides to apply Codelfa16 on the question of separability of

the arbitration clause, the judge confirmed that frustration of the contract is not a dispute arising

“under” it. Frustration can be covered by an arbitration clause referring disputes “arising out of

the contract”, which is wider than “arising under the contract” used in the Respondent’s case.

Wording “arising under”, as opposed to “arising out of or in relation to” is restricted to

interpretation of the contractual provisions and cannot cover existence of the Charterparty.

Should the Tribunal decide the arbitration clause is governed by English law, the Respondent’s

position remains the same17.

22. In conclusion, the Parties did not intend to refer to the Tribunal disputes on frustration of

the Charterparty. For this reason, the Tribunal shall have no jurisdiction to decide on the case.

15 Overseas Union Insurance Ltd v. AA Mutual International Insurance Co Ltd [1988] 2 Lloyd's Rep [63], [67] . 16 Codelfa Construction Pty Ltd v. State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337[366] 17 Robert Merkin, Arbitration Act 1996 (LLP Professional Publishing 2000 32; Harbour Assurance Co. (UK)

Ltd v. Kansa General International Insurance Co.Ltd [1993] 1 Lloyd’s Rep 455.

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C. THIS TRIBUNAL HAS JURISDICTION TO HEAR THE CLAIM FOR A SALVAGE

AWARD

23. The use of the words “disputes arising under this contract” shall be interpreted as including

a claim for salvage award. Under both English18 and Australian19 law the arbitration agreement

is defined as an agreement to submit arbitration to present or future disputes, whether they are

contractual or not. The parties did include a general average agreement in clause 21 of the

Charterparty. This agreement must be interpreted as including a claim for salvage, as salvage

is allowed in (and therefore indirect part of) general average. Therefore, the salvage issue is

within the scope of the arbitration agreement.

24. Alternatively, if the Tribunal finds that clause 21 does not include a claim for salvage award,

the dispute is a non-contractual dispute arising under the Charterparty. The salvage operation

is closely related to the Charterparty, as it is a direct result of the performance of it. Because

of this close connection between the salvage operation and the Charterparty, the dispute can be

considered as a dispute arising under this contract.

D. THIS TRIBUNAL HAS NO JURISDICTION TO HEAR THE CLAIM FOR A

CONTRIBUTION IN GENERAL AVERAGE

25. In accordance with article 21 of the Charterparty the parties agreed that all the claims for

general average are to be settled in Tolar. The phrase “to be settled in Tolar” should be

interpreted to mean that the adjustment is to be made in Tolar, and Tolar is the place whose

tribunals are to have jurisdiction over any disputes regarding general average. This

interpretation provides for determining disputed claims in general average as well as the

18 Article 6(1) IAA 1996. 19 Article 16(1)(2) IIA 1974; option 1, article 7(1) UNCITRAL Modal Law.

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adjustment hereof in one place and thus reflects the parties' intention to concentrate all the issues

with regard to General Average in Tolar.

V. THE CHARTERPARTY IS FRUSTRATED

26. The Respondent claims that the Tribunal does not have jurisdiction due to frustration of the

arbitration clause.20 Nevertheless, in case the Tribunal decides that the clause remains in force

and that it is competent to decide on frustration, the Respondent argues that he is not liable for

demurrage because of the frustration of the Charterparty. Further to and in the alternative of

Respondent’s statement that the Vessel did leave the port of Hades, the Respondent claims that

the Charterparty was frustrated by reason of delay. Therefore, the Tribunal shall find that the

Charterparty had been frustrated due to an excessive delay (A). Additionally, the Charterparty

can be held frustrated because further performance of the Charterparty is illegal in light of

presidential decree (B). Moreover, the force majeure clause is not applicable in underlying case

(C).

A. THE DELAY IS SIGNIFICANT ENOUGH TO FRUSTRATE THE COMMERCIAL

PURPOSE OF THE CHARTERPARTY

27. Although loading was completed on 6 October 2014 and the Vessel was due to arrive at the

port of Poseidon no later than 2 November 2014, the Vessel has been detained at Hades for over

a year, because of a negligent action of the Master, which was the decision to return to the port

of Hades. This delay, which is in excess of six times the length of time that was contemplated

for the whole voyage, is sufficiently serious to frustrate the commercial adventure because it

renders the adventure absolutely nugatory. Moreover, in addition to the detention of the Vessel,

the propeller shafts of the ship were damaged. This damage requires repairs, which will further

increase the delay.

20 See paragraph 10-12

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28. In assessing the delay, regard must be had to the to the commercial purposes of the parties.21

Therefore it is important to heed the fact that this cargo is of important value to Respondent and

that Respondent will suffer significant losses in case the cargo is not delivered on time.22

29. Also, the likely duration and effect of the alleged frustrating event must be assessed at the

time of occurrence.23 The exact length of the detention by the port authorities was not clear.

However, the Claimant took the disturbingly rumour that the Hades government wanted to keep

the Vessel at Hades, and use the HLNG in emergency energy sectors, into account. Therefore,

the Claimant pointed out that one could anticipate a long delay in this case.24 Moreover, an

article in the Hades advocate on 7 October 2014 made clear that President Simmons had stated

that her “first act as President has been to instruct the Hades Coast Guard to intercept the

Athena and have it return to port”. Subsequently, the article pointed out a formal statement of

the leader of Hades military, General Makepeace, in which he expressed his support for

stopping HLNG production.25 Therefore, a reasonable forecast of the probabilities at the

moment of interception must have lead to the conclusion that the effect on the contract is so

radical that it will defeat the commercial object of the adventure and therefore leads to its

frustration.

B. FURTHER PERFORMANCE OF THE CHARTERPARTY IS ILLEGAL

30. Dissociated from the delay, the Charterparty can be regarded as frustrated due to a

supervening illegality, if the presidential order can be qualified as legally valid. Under the

21 Julian Cooke and others, Voyage Charters (Lloyd's of London Press 1993) 468. 22 Facts, page 61. 23 John Schofield, Laytime and Demurrage (6th edn, Informa law from Routledge, 2011) 461. 24 Facts, page 60. 25 Facts, page 55.

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leadership of President Simmons, the Hades authorities aimed to stop the production and export

of HLNG, which resulted in a Presidential Decree that required the vessel to return to its berth

at Hades. This Decree that was outside the reasonable control of charterers, rendered further

performance under the Charterparty illegal. Therefore, the contract can be regarded as frustrated

by illegality.26

C. THE FORCE MAJEURE CLAUSE IS NOT APPLICABLE

31. In clause 19(d) of the Charterparty, an express provision is made for the occurrence of a

force majeure situation. If the supervening event falls within the scope of this provision, the

Charterparty cannot be held as frustrated. This is due to the fact that the determination of legal

consequences of an event by contractual provisions is preferred over a determination by general

law27, which is the frustration doctrine in this case. However, the mere fact that the Charterparty

contains a force majeure provision does not alter the possibility of frustration, because it does

not apply to the situation that has arisen.28

1. The Force Majeure clause does not cover the situation which has arisen

32. The force majeure clause 19 under the Charterparty does not include “government or

military intervention” which is in fact what has taken place. The words used such as

“mobilization” or “hostility” would not be an accurate description of what has taken place and

would create an ambiguity. The approach of the courts when confronted by a force majeure

clause is to construe it narrowly, meaning that they are not likely to interpret the clause in a way

which was not intended by the parties. If the force majeure clause is interpreted narrowly in this

case, exact wording of the clause 19 under the Charterparty will be followed and it will

strengthen the position of the Respondent against the Claimant.

26 John Schofield, Laytime and Demurrage (6th edn. Informa law from Routledge, 2011) 466. 27 Julian Cooke and others, Voyage Charters (4th edn. Informa law from Routledge, 2014) 699. 28 The Florida [2007] 1 Lloyd’s Rep. 1.

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33. In addition to this, force majeure clauses are construed contra proferentem29, meaning that

if a term under the clause is ambiguous, then the preferred meaning should be one that works

against the interests of the party who provided the wording. In the given scenario, the Claimant

omitted the phrase “government intervention” creating an uncertainty. Therefore, the

Respondent can argue that the event in this case is not covered by this specific force majeure

clause and the Claimant cannot rely on it.

2. The Force Majeure clause does not cover 1-year delay

34. In clause 19 an express provision is made stating that if shipment is suspended for more

than 30 days, any party can terminate the contract by giving a notice within 15 days.

Termination issue was excluded from the scope of the arbitration clause however; the time

period agreed by the parties in relation to termination is an indication that parties’ intention was

not to cover force majeure situations which were excessive. In the given scenario, there is a

delay of approximately 1 year in delivering the cargo to the port of Poseidon. In a very similar

case of The Playa Larga30 Court of Appeal rejected the argument that force majeure clause

applied. A vital factor which persuaded the court to conclude that, a provision of 30 days was

also given and this included only situations of “temporary interruptions.” It was not directed at

events which struck the contract as a whole and rendered further performance by either party

“unthinkable.”31 Furthermore, in the case of Water Board where a performance could not be

completed within 6 years was held to be an excessive delay and the clause could not reasonably

have been intended to cover that. Lastly, in cases of war which can be compared easily with the

given facts, a war at the magnitude of First or Second World Wars would not be covered by a

force majeure clause as well.32 These cases provide a strong basis for the Respondent that if

29 ED&F Man Sugar Ltd v. Unicargo Transportgesellschaft GmbH [2013] EWCA Civ 1449. 30 The Playa Larga [1983] 2 Lloyd’s Rep 171. 31 E. McKendrick, Force Majeure and Frustration of Contract (2nd edition, Lloyds of London Press) p.36. 32 Pacific Phosphate Co Ltd v. Empire Transport Co Ltd (1920) 4 Ll.L.Rep. 189.

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they can show 1 year was excessive for a situation like this, then the event will not be covered

by the specific force majeure clause.

V. THE RESPONDENT'S DEFENCE TO THE CLAIM FOR DEMURRAGE

A. THE RESPONDENT IS NOT LIABLE FOR DEMURRAGE

35. The Respondent argues that the Tribunal does not have the jurisdiction to decide on the

demurrage issue, however if the Tribunal decides that it has the jurisdiction then the Respondent

will not be liable for demurrage.

36. According to clause 9(c)(i) of the Charterparty, laytime started accruing on 3 October 2014

when the Notice of Readiness (“NOR”) was validly tendered by the master of the Vessel and

ended on 12 October 2014. The Respondent and the Claimant agreed on the validity of the NOR

and the lawful commencement of the laytime.

37. Laytime period stopped accruing on 6 October 2014 when the loading operations were

completed. The loading operations involve all that is required to put the cargo in a condition

which it can be carried33 and it can only be complete if the cargo is placed in the vessel that can

proceed on her voyage in safety.34 The Respondent can successfully prove that the loading

operations were in fact completed as there was no information given in the facts which would

suggest anything otherwise. Also, the vessel was allowed to start its journey without any

complications until it was intercepted by the Coast Guards.

38. However, if the Tribunal decides that laytime should stop accruing not on completion of

loading operations but only on leaving of the Vessel from the loading place, then this changes

the end of laytime to 7 October 2014. As a result, the Respondent cannot be liable for demurrage

33 Svenssons Travaruaktiebolag v. Cliffe Steamship Co Ltd (1931) 41 Ll L Rep 262. 34 Argonaut Navigation Co Ltd v. Ministry of Food (1948) 82 Ll L Rep 223, at p. 229.

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due to the fact that the loading operations or the leaving of the Vessel from the port of Hades

took place before the expiry of the laytime period.

39. Even if the Claimant argue that the Vessel was not outside the limits of the loading place

when the military intervened, they cannot be successful in their claim because, firstly, the

Vessel has a high likelihood to be outside the limits of the loading place as it left Hades at 9 am

on 7 October 2014, written in the Statement of Facts signed by Captain Marcus Yi, and the

military intercepted the vessel in the evening of the same day. It is very likely that the Vessel

passed the limits of a “one-city” country i.e. Hades during this period of time. In addition to

this, there is an evidence of the conversation on 8 October 2014 18.00 HST between the

Claimant and the Master where the Claimant clearly states that the Vessel was “outside of

Hades territorial limits and under no obligation to return to the port.”

40. Moreover, the fact that the military intervened in the Vessel does not suggest that the Vessel

was still in the administrative limits of Hades, because the Vessel has a Hades flag which gives

right to Hades authorities to intervene with the Vessel even if she is not in the limits of the

country. Therefore, following these arguments, the Respondent cannot be held liable for

demurrage as the laytime did not expire.

B. THE RESPONDENT IS ENTITLED TO DESPATCH MONEY

41. The laytime stopped accruing on 7 October 2014, 5 days before its expiry. The Respondent

is entitled to despatch money for the 5 days which is an agreed amount payable by the Claimant

if the Vessel completes the loading or discharging before the laytime has expired. 35 Despatch

money can only arise when the Charterparty provides for it36 and under Clause 10 of the

35Voylay rules 1993. 36 J. Scofield, Laytime and Demurrage (6th edition, Informa 2011) p. 429.

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Charterparty in question, the despatch money should be calculated at a rate of “one half of the

Demurrage rate per day.” Therefore, the Respondent is entitled to a total of $125.000.

VI. THE RESPONDENT'S CLAIM FOR SALVAGE AWARD

42. The Respondent acting as a volunteer rendered a salvage service to assist the Vessel in

danger in navigable waters to preserve her from loss and successfully contributed to the

preservation of the Vessel and cargo from danger37. Therefore, the Respondent is entitled to

claim a salvage award.

43. In order to satisfy the claim for a salvage award, the following requirements are to be met:

1) the subject of a salvage operation must be in a real or apprehended peril; 2) the salvor must

act as a volunteer; 3) the salvage operation should be successful38.

1. The Vessel was in peril at the moment of rendering assistance by the Respondent

44. Given that the propellers shafts of the Vessel broke shortly after setting sail under her own

steam39, the Vessel and the cargo on board were exposed to risk of loss or damage. Danger of

loss or damage to the subject matter of the service is the very foundation of a claim to salvage40.

Therefore, even though the danger was not imminent, it can be argued that at the time at which

assistance was rendered by the Respondent’s tug, the Vessel encountered a misfortune which

might possibly have exposed it to loss or damage if the service were not rendered41.

37 Salvage Convention 1989, article 12; F. D. Rose, Kennedy and Rose: Law of Salvage (17th edition, Sweet &

Maxwell 2008) 228 38 J. Reeder, Brice on Maritime law of salvage (4th edition, Sweet and Maxwell 2003) 2 39 Facts, page 71 40 The Wilhelmine [1842] 1 N.o.C, 376 at 378 41 The Charlotte [1848] 3 Wm. Rob. 68; The Mount Cynthos [1937] 58 Lloyd’s Rep. 18; The Suevic [1908] 148

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2. The Respondent had no contractual duty to render assistance to the Vessel given that the

towage service contract between the Parties ceased

45. The Respondent was acting as a volunteer. The salvage services were not rendered due to

any pre-existing contractual duty. The towage contract concluded between the Parties ceased

when the Vessel sailed under her own steam42. Towage may be described as the employment

of one vessel to expedite the voyage of another when nothing more is required that the

accelerating of her progress43 and is confined to vessels that have received no injury or

damage44. Where salvage services (which must be voluntary) supervene upon towage services

(which are under contract) the two kinds of services cannot co-exist during the same period of

time. There must be a moment when the towage service ceases and the salvage service begins45.

The Respondent fulfilled his obligation under the towage service contract to tow the Vessel

from the port of Hades at the moment when she was successfully guided to open waters and the

towlines were released from the Vessel. Hence, the contract for towage service ceased after the

disconnection of towlines.

46. If the Tribunal finds that the towage contract did not cease, services rendered by the

Respondent went beyond those contemplated under a towage contract, and, therefore, gave rise

to a salvage award46. In this regard, two elements are to be considered: whether the tow was in

danger because of circumstances that could not reasonably have been contemplated by the

Parties, and whether the risks were incurred or duties performed by the tug which could not

reasonably be held to be within the scope of the towage contract47. In accordance with the facts

of the case the assistance rendered by the Respondent in relation to the Vessel was not

42 Facts, page 71 43 The Princess Alice [1848] 3 W. Rob. 138 at 139-140; The Glaucus [1948] 81 Lloyd’s Rep. 262 at 266 44 The Reward [1841] 166 E.R. 538 at 539 45 The Leon Blum [1915] 90 46 The Homewood [1928] 31 Lloyd’s Rep 336 at 339-340 47 The Homewood [1928] 31 Lloyd’s Rep 336 at 339-340.

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contemplated by the Parties at the moment when the towage contract was made given that the

propeller shafts of the Vessel broke after the towlines had been disconnected. Moreover, the

Respondent's tug was exposed to a greater risks when rendering assistance to the Vessel than it

would have been exposed to by merely guiding the Vessel to open waters, and the assistance

rendered by the Respondent in relation to the Vessel was outside what was necessary in the

ordinary performance of the towage contract48. It can be concluded that the Respondent would

not have consented to render the towage services to the Claimant on initial terms, if he had been

aware of the defect in the Vessel's propellers. Hence, even if the Tribunal decides that the

towage contract did not cease, the towage service was superseded by the salvage operation

when the propeller shafts broke.

3. The fact that the Vessel was carrying the Respondent's cargo does not preclude the

Respondent from claiming a salvage award

47. There are no artificial restrictions on who may or may not be a salvor49. Self-interest on the

part of the Respondent in undertaking the salvage operation is of itself not a bar to recovery50.

Hence, the fact that the Vessel was carrying the Respondent's cargo does not preclude the

Respondent from claiming a salvage award.

48. Firstly, as it was held in The Sava Star51 the cargo owner is entitled to claim a salvage award

for services that go beyond those which would ordinary be expected of a cargo owner such as

the provision of a tug or other salving vessel. Obviously, the assistance rendered by the

48 The Westburn [1986] 8 Asp. M.L.C 130 at 131; The Madras [1898] 8 Asp. M.L.C 397 at 398. 49 The Breydon Merchant [1992] 1 Lloyd’s Rep. 373 at 275. 50 J. Reeder, Brice on Maritime law of salvage (4th edition, Sweet and Maxwell 2003) 66; The Waterloo [1820] 2

Dods. 433. at 437; The Lomonosoff [1921] P. 97 at 102; The Le Jonet [1872] L.R. 3 A. & E. 556; The Lea 24 F.

47[1884]. 51 The Sava Star [1995] 2 Lloyd’s Rep. 134.

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Respondent to rescue the Vessel went beyond that could ordinary be expected of him or that

was required by the provisions of the Charterparty52.

49. Moreover, in accordance with article 12.3 of the Salvage Convention 1989 the salvor is

entitled to a salvage award even though the salved vessel and the vessel undertaking the salvage

operation belong to the same owner. Therefore, there are no grounds to conclude that the cargo

owner salving its cargo on board the ship in distress should be deprived of a salvage award.

Hence, given that the Respondent was personally involved in the salvage operation and the

services went beyond those which would ordinary be expected of a cargo owner, the

Respondent is entitled to a salvage award53.

4. The Vessel and the cargo have been successfully saved by the exertions of the Respondent

50. Given that the Respondent's tug company successfully rescued the Vessel from loss and,

therefore, saved millions of dollars worth of cargo and the Vessel54, the Respondent is entitled

for a salvage award55.

VII. THE RESPONDENT'S DEFENCE TO THE CLAIM FOR CONTRIBUTION IN

GENERAL AVERAGE

1. Given that the Charterparty had been frustrated before the general average act occurred, the

Claimant cannot claim a general average contribution

51. Due to delay, which was in excess of six times the length of time that was contemplated for

the whole voyage, the Charterparty was frustrated on 30 April 2015. Therefore, all the

contractual rights of the parties, including the parties' right to claim general average in

52 The Sava Star [1995] 2 Lloyd’s Rep. 134. 53 Mason v. The Blaireau 2 Cranch 240 [1804]. 54 Facts, page 71. 55 Owners of the S.S. Melanie v. Owners of the S.S. San Onofre [1925] A.C. 246 at 262.

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accordance with article 21 of the Charterparty56, ceased after 30 April 2015. Hence, given that

the general average act occurred on 7 October 2015 that was after the Charterparty had been

frustrated57 and after the respective contractual rights of the parties had ceased, the Claimant

cannot claim a general average contribution.

2. Should the Tribunal find that the Charterparty was not frustrated, the peril which gave rise to

the general average act was caused by the fault of the Claimant

52. According to Rule D of the York-Antwerp Rules 1994 rights to contribution in general

average are not affected when the event which gave rise to the expenditure may have been due

to the fault of one of the parties. However, this shall not prejudice any remedies or defences

which may be open against or to that party in respect of such fault58.

53. Thus, in accordance with paragraph 6, article 19 of the Charterparty “all the above

exceptions [Force Majeure] are conditional on the ship being seaworthy and properly manned

when she sails on the voyage”. Therefore, the Claimant is obliged to provide the Vessel being

seaworthy and properly manned when she sails on the voyage.

54. When the towlines of the tug were released from the Vessel and the Vessel set sail under

her own steam, both propeller shafts broke59. Consequently, this breakage put both the Vessel

and cargo in danger in open waters. Afterwards, the Vessel and the cargo have been salved by

the Respondent's tug company. The breakage of the propellers was caused by the Claimant's

failure to make the ship seaworthy, and the peril which gave rise to the general average act was

caused by the fault of the Claimant.

56 Castle Insurance v. Hong Kong Shipping Co [1984] A.C. 226 at 233. 57 Facts, page 71. 58 York-Antwerp Rules 1994, Rule D. 59 Facts, page 71.

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55. The Claimant is not entitled to recover a general average contribution given that one shall

not recover from any other person in respect of the consequences of his own wrong60. Moreover,

a general average contribution cannot be recovered by the Claimant given that expenditure

incurred by the Claimant in fault is made for the benefit of the Claimant alone and not for the

benefit of the adventure as whole. It follows from the facts that otherwise the Claimant in fault

would have been liable to the Respondent in respect of the loss averted by the general average

act61.

VIII. PRAYER FOR RELIEF

In consequence, the Tribunal shall find that the Respondent acted as a faithful charterer, while

the Claimant’s behavior created more damage. Thus, the Respondent requests the Tribunal to:

FIND that the arbitration agreement shall be governed by Western Australian law;

DECLINE jurisdiction to hear the claim for frustration, demurrage, salvage and general

average;

Alternatively, if the Tribunal finds that it has jurisdiction, the Respondent requests the

Tribunal to:

FIND that the Charterparty was frustrated;

DECLARE that the Respondent has no liability to pay demurrage;

FIND that the Respondent is entitled to despatch;

FIND that the Respondent is entitled to a salvage award;

60 Goulandris Bros. Ltd v. B. Goldman & Sons Ltd at 95; J.Cooke, R.Cornah, Lowndes and Rudolf: The Law of

General Average and the York-Antwerp Rules (13th edition, Sweet & Maxwell) 162. 61 Tempus Shipping Co v. Louis Dreyfus & Co [1931] 1 K.B. 195 at 211.

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DECLARE that the Respondent do not have to contribute in general average.

Dated this 20 April 2016 on behalf of the Respondent.