2011 Inter-Club Agreement, Recent Arbitration Award - Worldwide

The Club has been recently advised of an arbitration award which concerns obtaining counter-security pursuant to Clause (9) of the 2011 Inter-Club Agreement (ICA).

The LMAA arbitration tribunal found that the 2011 Interclub NYPE Agreement (and its provisions for providing counter security) was not fully incorporated into the subject charterparty.

Clause 35 of the charterparty read as follows:

QUOTE

Owners guarantee that the vessel is entered and shall remain entered in a P&I Association for the duration of this charter. Entry shall include, but not be limited to, ordinary cover for cargo claims. In the case of damage to and/or loss of cargo carried on the vessel in which Owners and/or Charterers' liability could be involved under the terms of this Charter Party, as the case may be, the Owners and/or the Charterers shall on request grant reasonably time extension for commencement of suit in each and every occurrence. Such extensions shall not prejudice the ultimate responsibility of both parties. Liability for cargo claims, as between Charterers and Owners, shall be apportioned/settled as specified by the Interclub New York Produce Exchange Agreement effective from 1996 and its subsequent amendments.

UNQUOTE

The charterers rejected the Owner's request for counter-security as the words used in clause 35 only incorporated those parts of ICA 2011 which related to apportionment and settlement of claims, and did not provide any basis for applying clause (9) (which deals with the provision of counter-security).

The tribunal agreed with the charterer that as a matter of strict construction, clause 35 of the charterparty only related to apportionment and settlement of cargo claims and did not include the provision of security. It did not provide any basis for applying clause (9) of ICA 2011 which dealt with security for claims, and did not incorporate the full text of ICA 2011. 

Permission to appeal was refused by the High Court.

The International Group is currently reviewing the wording of its recommended clause to incorporate the ICA into NYPE and Asbatime charterparties.