SIXTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2015

Melbourne

Claimant Respondent Western Tankers Inc LDT Pte

MEMORANDUM FOR THE RESPONDENT Team NO.12

Pablo Fraile Maqueda

Mihail Petrov Imante Sakalyte Maria Samara

Fiona Jennifer Unz

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TABLE OF CONTENTS

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

LIST OF ABBREVIATIONS ......................................................................................................... 8

STATEMENT OF FACTS ............................................................................................................. 9

PART ONE: JURISDICTION ...................................................................................................... 11

I. THE LONDON ARBITRATION TRIBUNAL IS NOT A COMPETENT FORUM ............. 11

A. LACK OF MUTUAL CONSENT FOR THE ARBOITRATION IN LONDON ............ 12

B. THE JURISDICTION CLAUSE IS NOT PART OF A FINAL CONTRACT ................ 13

C. THE RESPONDENT IS A VICTIM IF UNCONSIABLE DEALING........................... 14

II. THE ARBITRATION TRIBUNAL HAS NO DISCRETION TO DECIDE THE FRAUD

ISSUE ........................................................................................................................................... 15

A. ONLY THE CASES "ARISING OUT OF THE CHARTER-PARTY ARE SUPPOSED

TO BE DECIDED BY THE ARBITRATION TRIBUNAL. ................................................ 15

B. THE SEAT OF A DISPUTE SHALL BE SINGAPORE ARBITRATION ..................... 16

PART TWO: MERITS ................................................................................................................. 17

I. PIRACY..................................................................................................................................... 17

A. THE CONTRACT HAS BEEN FRUSTRATED ............................................................. 17

B. THE VESSEL SHOULD BE CONSIDERED OFF HIRE ACCORDING TO THE OFF-

HIRE CLAUSE OF SHELLTIME 4 ..................................................................................... 18

C. THE CLAIMANT HAS BREACHED ITS CONTRACTUAL OBLIGATION

REGARDING THE PROVISION OF A SEAWORTHY VESSEL ..................................... 19

D. THE CLAIMANT IS PRECLUDED FROM INVOKING A BREACH OF THE TRADE

LIMITS .................................................................................................................................. 22

E. THE RESPONDENT IS UNDER NO OBLIGATION TO INDEMNIFY THE

CLAIMANT WITH RESPECT TO ANY DAMAGES ........................................................ 24

II. TORT OF FRAUD ........................................................................................................... 25

A. ALL REPRESENTATIONS MADE BY THE RESPONDENT WERE TRUE AND

HONEST ............................................................................................................................... 26

B. ASA2 IS NOT, AND HAS NEVER BEEN, THE AGENT OF THE RESPONDENT .. 26

III COUNTERCLAIM .................................................................................................................. 28

A.THE CLAIMANT PROVIDED AN UNSEAWORTHY VESSEL .................................. 28

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B.THE CLAIMANT BREACHED ITS DUTY AS BAILEE ............................................... 29

IV. PRAYER FOR RELIEF ......................................................................................................... 30

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LIST OF AUTHORITIES: BOOKS

American Arbitration Association, Handbook on Commercial Arbitration (2nd, AAA, 2010)

Blackaby N., Partasides C., Hunter M., Redfern A., Redfern and Hunter on International Arbitration (5th, Sweet&Maxwell, London 2009) Born G. B., International arbitration: Law and Practice (1st, Kluwer Law International, The Netherlands 2012) Coghlin T., Baker A. W., Kenny J., Kimball J, Belknap Jr. T.H., Time Charters (7th, Informa Law , London 2014) Force R., Yiannopoulos A. N., Davies M., Admiralty and Maritime Law (1st, Beard Books, Washington, D.C. 2006) Girvin S. D., Carriage of Goods by Sea (1st, Oxford , 2011) Merkin R., Flannery L., Arbitration Act 1996 (5th, Informa Law from Routledge, New York 2014) Palmer N., Palmer on Bailment (3rd, Sweet & Maxwell, 2009) Rossman V. R., Moskin M., Commercial Contracts: Strategies for Drafting and Negotiating (2nd, Wolters Kluwer, 2014) Rubino-Sammartano M., International arbitration: Law and Practice (2nd, Kluwer Law International, London 2001) Todd P., Maritime Fraud and Piracy, (2nd edition, Informa, 2010) Wilson J., Carriage of Goods by sea, (7th Edition, Pearson Education Limited, 2010)

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LIST OF AUTHORITIES: CASES

A. Agrosin Private Ltd. and others (The Starsin) [2003] 1 Lloyd’s Rep 571 Attorney General for Belize v. Belize Telecom [2009] 1 WLR 1988 B. British Mutual Banking co. v. Charnwood Forest Railway co [1887] L.R. 18 Q.B.D. 714 C. Commercial Union Corporate Member Limited and Anor v American Home Assurance [2004] EWHC 1234 Comm) Compagnie Tunisienne v Compagnie d’Armement Maritime [1970] 2 Lloyd’s Rep. 99 E. East West Corp v DKBS 1912 & AKTS Svendorg [2003] QB 1509, at 28 (Mance I.J). F. Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All E.R. 630 J. Judgments - In Re B (Children) (Fc) Appellate Committee Lord Hoffmann Lord Scott of Foscote Lord R [2008] UKHL 35 H. Halcyon Steamship v. Continental Grain (1943) 75 Ll.L.Rep. 80 Hyundai Merchant Marine Company Limited v Americas Bulk Transport Limited [2013] EWHC 470 G. Golden Oceanv. Salgaocar Mining [2012] 1 Lloyd’s Rep. (C.A.) 542 L. Lexi Holdings v Pannone & Partners [2009] EWHC 2590 London Arbitration 20/86 (LMLN 184) M. Manifest Shipping Co Limited v. Uni-Polaris Insurance Co Ltd [2003] 1 AC 469 [112], [116] McFadden v Blue Star Line, [1905] 1 KB 697 M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). N. National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 Northern Cal. Newspaper Guild Local 52 v. Sacramento Union, 856 F.2d 1381, 1383 (9th Cir. 1998) O. Osmium Shipping Corporation v Cargill International SA (“Captain Stefanos”), [2012] EWHC 571 P. Pacific Basin IHX Ltd v Bulkhandling Handymax AS [2011] EWHC 2862 S. Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 Steel v State Line Steamship Co [1877] 3 App Cas 72, 86. Siboti K/S v BP France SA [2003] EWHC 1278

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Sulamérica Cia Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] 1 Lloyd’s Rep. 671 T. Telecom Italia v. Wholesale Telecom Corp 248 F.3d I109 (lIth Cir. 2001) The Aquacharm [1980] 2 Lloyd’s Rep. 237; The Georges Christos Lemos [1991] 2 Lloyd’s Rep. 107 The Berge Sund [1993] 2 Lloyd’s Rep. 453 (C.A.) The Eurasian Dream [2002] 1 Lloyd's Rep 719 The Eurus [1996] 2 Lloyd’s Rep. 408 The Chemical Venture [1993] 1 Lloyd’s Rep. 508 The Kanchenjunga [1990] 1 Lloyd’s Rep. 391 (H.L.) The Komninos S [1991] 1 Lloyd’s Rep. 370 The Nogar Marin [1988] 1 Lloyd’s Rep. 412 The Parouth [1982] 2 Lloyd’s Rep. 351 The Susex Oak [1949] 83 Ll.L.Rep. 297 Tonicstar Limited (Operating as Lloyds Syndicate 1861) v American Home Assurance Company TTMI Sarl v Statoil ASA [2011] EWHC 1150 27 W. Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) (No.1) [2002] EWHC 762 White v. White and the Motor Insurers Bureau [2001] UKHL 9

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LIST OF AUTHORITIES: INTERNATIONAL CONVENTIONS, RULES AND

STATUTES

International

The Statue of the Republic of Singapore of International Arbitration Act New York Convention Act Domestic Arbitration Act 1996

LIST OF AUTHORITIES: OTHERS

BMP4 Best Management Practices for Protection against Somalia Based Piracy (Version 4 – August 2011), Suggested Planning and Operational Practices for Ship Operators and Masters of Ships Transiting the High Risk Area, http://www.mschoa.org/docs/public-documents/bmp4-low-res_sept_5_2011.pdf?sfvrsn=0 Joint War Committee, 'Hull War, Piracy, Terrorism and Related Perils Listed Areas' [2013] JWLA/021 Farnsworth E. A., ‘Disputes over Omission in Contracts’ (1968) 68 Columbia Law Review 860 Gabriel P., “Burden of Proof and Standard of Proof in Civil Litigation” [2013] 25 SAcLJ 130 Williams D., “The impact of piracy: On- hire or off- hire?”, The Standard Bulletin, Piracy Special Edition, September 2011, 10

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LIST OF ABBREVIATIONS

Arbitration Act 1996 : Arbitration Act 1996 (UK) c 23

BMP : Best management practice

ETA : Estimated time of arrival

GPS : Global positioning system

MT : Metric tonnage

OPL : Outer port limit

STS : Ship to ship cargo transfer

ST4 : Shelltime 4 Form

UTC : Universal time coordinates

WAF : West Africa

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STATEMENT OF FACTS

1. On 22 May 2014 Bill from IMWMB (Brokers) contacted Charles from LDT Pte (Respondent)

and offered to find a vessel for LDT Pte. Following the negotiations it was agreed that LDT Pte

will charter the vessel “Wester Dawn” (Vessel) under a time charter (Charter- party).

2. The Respondent informed the Broker that his company did not want the charter party to include a

London arbitration clause but the Broker did not communicate this wish to Western Tankers Inc

(Claimant).

3. The charter- party was signed on the Shelltime proforma on 26 May 2014 for 3 months +/- 30

days from 04-06 June 2014. The charter party was for the carriage of cargo jet and gasoil from

Singapore.

4. Pursuant to that agreement a voyage order was issued by the Respondent that included among

others information about the disport agents (Agents) identified as Atlantic Service Agency and

the contract information with the agents in the form of an e-mail. The voyage orders also

included a provision that provides that the Master (Master) was to follow only the orders of the

Respondent and to disregard any orders from third parties as well as to inform the Respondent if

he receives any such orders from third parties.

5. In Singapore the vessel was supplied with 950mt bunker fuel, which is enough for voyage to

discharge port plus bad weather reserve system and equipment of vessel for anti-piracy measures

were not upgraded due to delay on equipment freight to Singapore.

6. The vessel was loaded with 30 000 metric tons of cargo jet and 72 199 metric tons of gasoil and

bills of lading (Bills of lading) were issued. On 8 June 2014 vessel departed from Singapore for

Luanda with ETA given as 3 July 2014. On 25 2014 June the Master informed the Respondent

that he would reduce speed due to insufficient bunkers.

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7. On 28 2014 June the Respondent informed the Master that bunkers would be provided at

discharge port and that orders will follow in due course. On 28 June 2014 the Master received an

e-mail from persons claiming to be from Atlantic Service Agency (ASA2) (ASA 2). The e-mail

used for this communication differed from the e-mail provided in the voyage orders.

8. ASA2 informed the Master that the Respondent had passed control of the vessel to them and

provided the coordinates of the discharge port. It also confirmed that it was instructed to supply

300mt of bunkers.

9. On 3 July 2014 the Master informed the Respondent of their ETA to discharge port and that the

300mt of bunkers that would be supplied were not enough for laden passage north to MEDI. On

the same day the Master informed the Claimant of their ETA to discharge port and informed that

he would not be supplied with enough bunkers for laden passage north to MEDI. Later on the

same day the Claimant informed the Respondent that the payment for the second hire period was

due as of that day and asked for information regarding payment method.

10. On 4 July 2014 the Respondent contacted the Master to inform him that bunkers would be

provided and to inform the Master to continue to liaise with the agent and to keep the Charterer

informed. On the same day the Master contacted the Claimant to inform him that he had reached

the discharge port but there were no tankers in the area. According to their radar there were 2

small fishing boats 5 miles from them and nothing else in 12-mile radius. Later on the Master

contacted ASA2 to inform that he had reached the discharge port. Finally on that day the

Respondent informed the Claimant that the vessel was considered off hire for failure to contact

with receiver.

11. On 17 July 2014 the Master contacted the Claimant and the Respondent to inform them that the

vessel was back under his control after a pirate attack. According to the Master the pirates had

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stolen about 28 000 metric tons of gasoil and due to no instructions of Charterer and no bunkers

the vessel was proceeding to Cape Town for assistance.

12. According to the Master the vessel was damaged as a result of the pirate attack. Only one radar,

GPS and management system was working and the rest of the bridge equipment was damaged.

The Main deck hose crane was unserviceable and the starboard-side accommodation ladder was

buckled.

PART ONE: JURISDICTION

13. The arbitral tribunal in London in which these proceedings were initiated has the inherent power

to rule only on its own jurisdiction and it should declare itself incompetent to hear this dispute in

light of the following reasons: I. the London arbitration court is not a competent court and/or II.

the London Arbitration Tribunal does not have discretion to rule on fraud issues.

I. THE LONDON ARBITRATION TRIBUNAL IS NOT A COMPETENT FORUM

14. The Respondent argues that the London Arbitration Tribunal is not a competent forum because

(A) There is lack of mutual consent for the arbitration in London, (B) The jurisdiction clause is

not part of a final contract because a valid arbitration agreement is dependent on convergent

intentions of the parties and (C) The Respondent is a victim of unconscionable dealing.

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A. LACK OF MUTUAL CONSENT FOR THE ARBITRATION IN LONDON

15. It is a basic principle regulating the validity of an arbitration clause that both parties must have

intended in the terms of such clause. 1 The Arbitral Tribunal shall find that the consent is

essential while deciding on validity of arbitration clause. Without it, it is submitted that there is

no valid arbitration.2 With regard to that and as was stated in the Siboti K/S v BP France SA3

case of high importance, the court has to find a way to determine the intentions of the parties and

it is necessary to have regard to the individual context.

16. Even though Clause 46 of the Shelltime 4 Form contains an arbitration clause determining

arbitration in London according to English Law, the Respondent submits that this clause was not

part of the contract, as it is a requirement for the validity of an arbitration agreement that both

parties intended on its terms.

17. According to correspondence dating from 23 June 2014 (UTC+8) it is clear that it was never the

intention of the Respondent to pursue arbitration in London. The Claimant should have had

knowledge of the Respondent’s intention of not submitting any dispute to arbitration in London

because this was communicated to the Brokers and he was deemed to transmit this information

to the Claimant. Since IMWMB was the agent of the Claimant, knowing that the Respondent did

not want arbitration in London, this knowledge also bounds the Claimant.4 By initiating legal

proceedings in an arbitral tribunal in London, the Claimant failed to comply with the intentions

of the parties demonstrated during negotiations. Moreover, the close relation between the Broker

1 M. Rubino-Sammartano, International arbitration: Law and Practice (2nd, Kluwer Law International, London 2001) 56 2 N. Blackaby, C. Partasides, M. Hunter, A. Redfern, Redfern and Hunter on International Arbitration (5th, Sweet&Maxwell, London 2009) 18 3Siboti K/S v BP France SA [2003] EWHC 1278 4 G. B. Born, International arbitration: Law and Practice (1st, Kluwer Law International, The Netherlands 2012) 96

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and the Claimant is further evidenced by admission of solid personal relation with the Claimant

employees5 and by informal communications with them.6

18. Consequently, the Clause 46 of the Shelltime 4 Form cannot be relied upon because of the fact

that it is invalid, as it does not respect the parties’ meeting of the minds. A similar situation was

dealt with in Hyunday Merchant Marine Co Ltd v Americas Bulk Transport Ltd7case where it

was submitted that if there is no consensus there could be no arbitration agreement, even if the

fixture recap contained an arbitration agreement.

B. THE JURISICTION CLAUSE IS NOY PART OF A FINAL CONTRACT

19. When ascertaining the proper seat of arbitration, tribunals will give greater weight to the terms

drafted by the parties than to the terms of a standard form contract used.8 It is submitted that an

arbitration clause must be treated as an indication, to be considered together with the rest of the

contract and relevant surrounding facts, having to give way where other indications are clear.9

These clear indications are to be found, as mentioned above, in the correspondence between the

Respondent and the Broker.10

20. It is common practice in the commercial industry that parties conclude a contract by an exchange

of emails.11 The terms of the contract are then recapitulated and the parties usually intend to be

bound by the contract as soon as they agree on the terms, even if a formal charter is not drawn

5 Moot Scenario, 2 6 Moot Scenario, 2-3 7 Hyundai Merchant Marine Company Limited v Americas Bulk Transport Limited [2013] EWHC 470 8 Agrosin Private Ltd. and others (The Starsin) [2003] 1 Lloyd’s Rep 571 9 Compagnie Tunisienne v Compagnie d’Armement Maritime [1970] 2 Lloyd’s Rep. 99; The Parouth [1982] 2 Lloyd’s Rep. 351; The Komninos S [1991] 1 Lloyd’s Rep. 370 10 Moot scenario, 3 11 Golden Oceanv. Salgaocar Mining [2012] 1 Lloyd’s Rep. (C.A.) 542

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up.12 Accordingly, a fixture recap is a binding agreement on the essential terms of a Charter-

party.13 As such, it is evidence of the terms and conditions agreed between the Claimant and the

Respondent. In this sense, as a matter of contract formation, it is notable that the fixture recap

omits 14 any reference to law and litigation. As to the present case, it is clear from the

communication between the Respondent and the shipbroker that if the matter of arbitration had

been discussed with the Claimant the jurisdiction of the London tribunal would have been

rejected. This is clearly confirmed by the intention of the defendant not to pursue arbitration in

London expressed in the exchange of emails and is ultimately evidenced by the omission in the

fixture recap concerning law and litigation.

21. These facts clearly denote lack of agreement between the signatory parties as to jurisdiction.

Because a valid arbitration agreement is dependent on convergent intentions of the parties, and in

the light of the aforementioned it is submitted that the London arbitral tribunal is not competent

to hear this dispute.

C. THE RESPONDENT IS A VICTIM OF UNCOSCIABLE DEALING

22. The Claimant or their representative had the interest of concluding this Charter- party as soon as

possible, as evidenced by the owners’ internal correspondence from the 21st and 23rd of May

and by a newspaper article from 27th May.15 Because of this rush, the parties delayed agreement

on law and litigation clause, as is shown by the omission on the fixture recap.16 The recap, before

the information about and amendments to Shelltime 4, there is a heading “LAW AND

12 T. Coghlin, A. W Baker., J. Kenny,J. Kimball, and T.H., Belknap Jr., Time Charters (7th, Informa Law , London 2014) 13 13 TTMI Sarl v Statoil ASA [2011] EWHC 1150 27; Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) (No.1) [2002] EWHC 762 14 E. A. Farnsworth, ‘Disputes over Omission in Contracts’ (1968) 68 Columbia Law Review 860, 860-861 15 Moot scenario, 5 16 Moot Scenario, 6

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LITIGATION” without information about law and limitation. This means that the parties

intended to make a special agreement on law and litigation, but had not yet done this. The

intention to make a special agreement on law and arbitration implies that the parties did not want

to accept clause 46 of the Shelltime 4. The Claimant started legal proceedings in accordance with

a clause inserted in a standard form which, as a consequence of the fast and unfinished nature of

the negotiations, the Respondent was not aware of and which is, as submitted before, not in

accordance with his intentions. This is a clear example of unconscionable dealing17 and the

Claimant should not be allowed to rely on a non-negotiated clause.

II. THE ARBITRATION TRIBUNAL HAS NO DISCRETION TO DECIDE THE FRAUD

ISSUE

23. Presuming that the London Arbitration Tribunal is a proper venue to resolve the dispute, the

Court is not empowered to decide about this particular case because the Parties bound

themselves

A.ONLY THE CASES “ARISING OUT OF THE CHARTER-PARTY ARE SUPPOSED

TO BE DECIDED BY THE ARBITRATION TRIBUNAL

24. Assuming that London is the seat of arbitration and English Law applies, the claim relating to

fraud is not admissible in this arbitration, because the phrase “disputes arising out of this charter”

does not extend, and was not intended to extend to fraud claims. Numerous decisions have held

that particular tort claims fall outside the scope of the parties` arbitration agreement. 18 In

addition it is well known by parties drafting a contract that the use of “arising out of” creates “the

17 M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). 18 Northern Cal. Newspaper Guild Local 52 v. Sacramento Union, 856 F.2d 1381, 1383 (9th Cir. 1998);

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risk that a court will conclude that the parties did not intend the clause to be broad, in particular,

intended to exclude tort claims, which may be considered to “relate to” the contract but not to

“arise out of” the contract”.19

25. Alternatively, even in case this Tribunal finds that the term “arising out of” includes tort

disputes, the minimum connection test20 would apply to the aforementioned disputes. Thus, if the

tort under consideration constitutes an immediate and foreseeable result of the performance of

contractual duties,21 the dispute would be arbitrable. In the annotated case, a pirate attack in

Luanda was not something likely to happen, as Angola is not included in the “Hull War, Piracy,

Terrorism and Related Perils Listed Areas.” 22

B. THE SEAT OF DISPUTE SHALL BE SINGAPORE ARBITRATION

26. The proper seat of arbitration must be found in accordance with the closest and most real

connection theory.23 Since Singapore is the place of incorporation of the Respondent; the place

of loading of the goods; the place of bunkering; the place of issue of the bills of lading and the

place of last Port State Control inspection of the concerned vessel, it follows that Singapore is

“natural forum” of the dispute and it should be fixed as the seat of arbitration.24

27. The application of a national law to an arbitration agreement makes presumably, in the absence

of an expressed or implied indication of the parties - which is the case - that the place of that

19 V. R. Rossman, M. Moskin, Commercial Contracts: Strategies for Drafting and Negotiating (2nd, Wolters Kluwer, 2014), 5-36 20 Telecom Italia v. Wholesale Telecom Corp 248 F.3d I109 (lIth Cir. 2001) 21 American Arbitration Association, 'Ambiguity in “Arising” Phrases: Caution for Drafters of Intended Narrow Arbitration Clauses' in Handbook on Commercial Arbitration (2nd, AAA, 2010). 22 Joint War Committee, 'Hull War, Piracy, Terrorism and Related Perils Listed Areas' [2013] JWLA/021 23 Time Charterers, Supra Note 12, 486; Sulamérica Cia Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] 1 Lloyd’s Rep. 671 24 Tonicstar Limited (Operating as Lloyds Syndicate 1861) v American Home Assurance Company; Commercial Union Corporate Member Limited and Anor v American Home Assurance [2004] EWHC 1234 (Comm); R. Merkin, L. Flannery, Arbitration Act 1996 (5th, Informa Law from Routledge, New York 2014) , 21

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national law is the proper seat of the arbitration.25 Accordingly, Singapore is the proper seat of

arbitration. Furthermore, London Tribunal award will fall into category where enforcement may

be refused to be enforced or set aside. 26

PART TWO: MERITS

I. PIRACY

28. The Respondent submits that no hire is due and no liability for the Respondent may be

established regarding the piracy attack which occurred in the waters of Luanda on the basis of

the following arguments: (A) The contract has been frustrated; (B) The vessel was off-hire

during the period of the detention of the Vessel by the pirates; (C) The Claimant has breached its

obligation regarding the provision of a seaworthy vessel; (D) The Claimant has waived its right

to invoke the breach of trade limits, alternatively the principle of estoppel applies; (E) The

Respondent is under no obligation to indemnify the Claimant for any damages under the Charter-

Party.

A. THE CONTRACT HAS BEEN FRUSTRATED

29. Frustration of a contract as interpreted by courts takes place in case of “an event which so

significantly changes the nature of the outstanding contractual rights and/or obligations from

what the parties could reasonably have contemplated at the time of its execution that it would be

unjust to hold them to the literal sense of its stipulations in the new circumstances”. 27 The

change of the nature of the contract and the cancellation of its commercial purpose are, therefore,

the basic requirements for a contract to be frustrated.28

25 The Statue of the Republic of Singapore of International Arbitration Act (Chapter 143A) 2002 section 5(2) (b) (ii). 26 New York Convention art Article (V) 27 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 28 P. Todd, Maritime Fraud and Piracy, (2nd edition, Informa, 2010), 125

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30. In the present case, the Vessel ceased all communication with the Respondent from 4th July 2014

till 17th July 2014. Given the length of the charter (3 months) and the delay of 13 days, as well

as the total loss of an important part of the cargo (about 28190MT gasoil) , which could not be

delivered to Angola Energy Imports, the vessel was unable to complete her voyage in time and

deliver the agreed quantity of cargo to the consignees. The commercial purpose of the time

charter was, therefore, totally cancelled and the charter- party should be considered frustrated by

the parties.

B. THE VESSEL SHOULD BE CONSIDERED OFF HIRE ACCORDING TO THE

OFF- HIRE CLAUSE OF SHELLTIME 4

31. In any case, even if the charter-party is considered valid during the piracy period, the hire is not

due to the Claimant according to the off-hire clause of the ST4. Specifically, where there is no

express reference to a piracy event in the off-hire clause, the charterer will consider whether the

circumstances fit with any of the other listed off-hire events.29

32. Notably, the clause 21 (c) of ST4 provides that when the vessel deviates from her route or she is

put into a port different than the port to which she is bound to go, then “the vessel shall be off-

hire from the commencement of such deviation until the time when she is again ready” . It is,

therefore, obvious that when the deviation of the vessel is a result of facts that do not relate with

the instructions or the control of the vessel by the charterer, then the vessel shall be off hire.

Therefore, the Respondent is not liable for paying the hire or any additional costs for the period

between 4 July till 17 July, when the vessel had deviated from her destination due to the piracy

attack that took place in the international waters off Angola and lasted for thirteen days.

29 D. Williams, “The impact of piracy: On- hire or off- hire?”, The Standard Bulletin, Piracy Special Edition, September 2011, 10

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33. Additionally, clause 21 (a) of ST4 provides that in any case that there is a loss of time due to any

cause “preventing the efficient working of the vessel” then the vessel shall be considered off hire.

During the period that the piracy took place, the vessel could not efficiently work and perform its

services, due to her detention by pirates. Consequently, even if there is no off- hire event

according to clause 21 (c) of ST4, it should be established an off- hire event due to reasons that

prevented the efficient working of the vessel and caused a significant loss of time. Most

importantly, in “Osmium Shipping Corporation v Cargill International SA” case it was found

that piracy can be an off-hire event and the seizure does not need to be a government authority.30

C. THE CLAIMANT HAS BREACHED ITS CONTRACTUAL OBLIGATION

REGARDING THE PROVISION OF A SEAWORTHY VESSEL

a. The Claimant did not fulfill its obligation to provide anti-piracy- precautions as required

by the Charter- party and by the general practices

34. In the present case, the Charter Party explicitly provides for the seaworthiness obligation under

clause 1, sub- clause (c). At common law the obligation of the owner to provide a seaworthy ship

is absolute. Thus, in the event of a breach, the owner will be liable irrespective of fault. This

obligation does not cover only the physical state of the vessel but also the competence and

adequacy of the crew, the sufficiency of fuel and other supplies, and the facilities necessary and

appropriate for the carriage of the cargo31. Accordingly, under the judgment of McFadden v

Blue Star Line, the test regarding whether a vessel is indeed complying with the requirement of

seaworthiness lies on the criterion of the ordinary careful and prudent owner. More specifically,

30 Osmium Shipping Corporation v Cargill International SA (“Captain Stefanos”), [2012] EWHC 571 31 J. Wilson, Carriage of Goods by sea, (7th Edition, Pearson Education Limited, 2010), 9; Steel v State Line Steamship Co [1877] 3 App Cas 72, 86.

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if such an owner would have considered that i.e. a defect should be made good before sending

his vessel to sea, the ship was not seaworthy.32

35. The Claimant did not fulfill its contractual obligations to take anti- piracy measures, as is

required by the piracy clause that was added as special provision to ST4, sub-clause (1).

Under the aforementioned clause, the Claimant undertakes at all times to “adhere to the

latest version of the best management practices (BMP) (..)”, when the vessel proceeds to an

area where there is a current risk of piracy. The above obligation has been highlighted by

the Court in the Pacific Basin IHX Ltd case33. It was specifically held that the owner must

always judge whether there is a real likelihood that the vessel will be exposed to acts of

piracy and take all the necessary anti-piracy measures. The annotated Vessel was

contracted for navigating through areas of extremely high danger, such as the Malacca

strait. In the light of the above, the piracy measures should be considered as necessary by

any ordinary careful and prudent owner. It may be concluded, therefore, that the Claimant

did not comply with the aforementioned test and therefore breached its obligation to

provide a seaworthy vessel.

36. Additionally, it is proven by the internal correspondence that the Claimant was totally aware

of high risk of piracy that exists in the navigating areas. Specifically, the Claimant had a

correspondence on 27th of May with the master of the vessel, expressing his worries about

the piracy danger that exists in the WAF area and promising that he would arrange for their

Ops and Safety Department to attend the vessel at Singapore to assist in the plan and

upgrade of systems and equipment. Subsequently, on 3rd of June, it was confirmed that the

32 McFadden v Blue Star Line, [1905] 1 KB 697 33 Pacific Basin IHX Ltd v Bulkhandling Handymax AS [2011] EWHC 2862

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vessel would need some specific anti- piracy measures to be supplied locally in Singapore

between 4th and 6th of June 34. However, as it was stated later that day the purchasing

department had some problems with the supply of the anti- piracy equipment and was not

able to provide them. Moreover, the Master failed to take possession of the anti- piracy

items, which had been made available at Durban OPL35.

b. The breach of the obligation to provide a seaworthy vessel led to the damages suffered by the Respondent

37. As a consequence of the failure of the Claimant to provide the required anti- piracy

equipment in Singapore, the master failed to deploy razor wire, and other protective

measures that are required, such as water spray and foam monitors and alarms.36 These

measures are considered vital in combating pirate attacks and have been extensively used

by ship-owners when passing through high risk areas.37 Thus, the lack of such measures is a

decisive factor which led to the event of piracy. Furthermore, due to the piracy attack about

28,190mt of gasoil were discharged from the Vessel while the Respondent was not able to

deliver the amount of cargo that was described in the bills of lading. Hence, the necessary

causation between the breach of the Claimant’s obligation and the damages suffered by the

Respondent is established, rendering the former liable for all costs incurred by the event of

piracy.

34Moot Scenario, Voyage Correspondence, 26-27 35 Procedural Order No 2, Para 17 36 BMP4 Best Management Practices for Protection against Somalia Based Piracy (Version 4 – August 2011), Suggested Planning and Operational Practices for Ship Operators and Masters of Ships Transiting the High Risk Area, http://www.mschoa.org/docs/public-documents/bmp4-low-res_sept_5_2011.pdf?sfvrsn=0 37 ibid

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D. THE CLAIMANT IS PRECLUDED FROM INVOKING A BREACH OF THE TRADE

LIMITS

a. The Claimant has waived the right to invoke a breach of the trade limits by accepting the

Respondent’s orders to Luanda

38. The Claimant alleges that the Respondent has breached its contractual obligations arising

out of the trade limits. However, the voyage correspondence which was notified to the

Claimant reveals that the latter had specific knowledge of the area which was to be

approached by the Respondent. Namely, in the email dated 24 June 2014, the Master of the

vessel precisely mentioned the intention to approach Luanda as an alternative to Durban.38

Notably there was no disagreement or objection voiced by the Claimant at any point.

39. The master and owners may properly refuse an order from the charterers to proceed outside

these limits. In The Sussex Oak 39 case it was held that the master of a vessel is not

compelled to obey orders which the charterers have no power to give. Therefore, if the

owners, with full knowledge of the departure from trading limits, make clear that they have

elected to accept the order to proceed despite that departure, they will probably be held to

have waived their right to refuse further compliance with the order subsequently.40

b. The Claimant is precluded from invoking the breach of trading limits by the principle of

estoppel

40. An estoppel may arise where, because of one party’s conduct in response to a statement or

promise (made by words or conduct) or a shared understanding, it is unfair to allow the

38 Moot scenario, 32 39 The Susex Oak [1949] 83 Ll.L.Rep. 297; Halcyon Steamship v. Continental Grain (1943) 75 Ll.L.Rep. 80 40 The Kanchenjunga [1990] 1 Lloyd’s Rep. 391 (H.L.)

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other party to resile from that statement or promise or understanding.41 More specifically,

the principle of estoppel may be invoked in case a party "reasonably relies on the promise

of another party, and because of the reliance is injured or damaged”.42 Most importantly,

estoppel does not only apply to case of express consent, but includes implied consent as

well.43

41. In the annotated case, the Respondent indeed reasonably relied on the fact that the Claimant

implied their consent to the area of Luanda. As mentioned above, the Claimant did not

voice any objections regarding the navigation of the vessel in the waters of Luanda despite

specific knowledge, thus creating the impression of consent.44 On that basis it is submitted

that the parties amended the original terms of the charter party through their correspondence

so as to include Angola within the permitted trade areas. Consequently and in the light of

the evidence furnished before this Tribunal, the Respondent submits that the Claimant may

not exclude their liability for providing piracy security measures.

E. THE RESPONDENT IS UNDER NO OBLIGATION TO INDEMNIFY THE

CLAIMANT WITH RESPECT TO ANY DAMAGES

42. It is generally accepted that there is no obligation upon the charterers to indemnify the

owner for risks which the owner has contractually agreed to undertake, or which arise from

his own negligence or breach of contract or which are incidental to the service for which the

vessel was required to be available.45 In the present case, the Claimant has not only agreed

to the navigation of the vessel through high risk areas, but also, the latter neglected the

41 Time Charters, supra note 12, 767 42 The Chemical Venture [1993] 1 Lloyd’s Rep. 508 43 Attorney General for Belize v. Belize Telecom [2009] 1 WLR 1988 44 Moot scenario, 32 45 The Aquacharm [1980] 2 Lloyd’s Rep. 237; The Georges Christos Lemos [1991] 2 Lloyd’s Rep. 107

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performance of its own obligations under the charter party, as this was demonstrated in the

previous sections.

43. It has already been established that the Claimant conceded to the navigation of the vessel to

the area of Luanda.46 Therefore, the amended charter party, including the aforementioned

change of trade limits should be taken into consideration. Since the Claimant has agreed to

the navigation of the vessel to the area of Luanda, the risks involved are undertaken by the

latter as constituting risks incidental to the service.47

44. Additionally, provided that the Claimant has breached its own obligation regarding

safeguarding the vessel as established above, there can be no invocation of an implied or

express indemnification clause, since the Claimant has contributed to the loss and/or

damage alleged.48 Specifically, a charterer may only be liable to indemnify the shipowner

against direct consequences of the master obeying its orders.49 In the present case however,

the chain of causation is interrupted by the fault of the Claimant regarding the provision of

anti-piracy security measures.

II. TORT OF FRAUD

45. The Claimant alleges that the Respondent is liable to pay damages to the Claimant arising

from the tort of fraud. The Respondent rejects this allegation because the Claimant does not

have title to claim damages for the tort of fraud. This is because (A) All representations

made by the Respondent were true and honest and (B) ASA2 is not, and has never been, the

agent of the Respondent.

46 See above, para 36 47 The Eurus [1996] 2 Lloyd’s Rep. 408 48 The Nogar Marin [1988] 1 Lloyd’s Rep. 412 49 London Arbitration 20/86 (LMLN 184); The Berge Sund [1993] 2 Lloyd’s Rep. 453 (C.A.),

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A. ALL REPRESENTATIONS MADE BY THE RESPONDENT WERE TRUE AND

HONEST

46. The Claimant does not provide any proof in respect of the accusations made against the

Respondent with regards to dishonest representation. It is a fundamental principle of

English Law in civil cases that the burden of proof lies with the party that makes an

allegation and not vice versa.50

47. The standard of proof applicable is the balance of probabilities meaning that the Tribunal

will assess evidence advanced by each party and decides which case is more probable.

However in the case of question, where a serious allegation of fraud has been made, the

Tribunal needs to take into consideration “that the more serious the allegation the less likely

it is that the event occurred and, hence, the stronger should be the evidence before the court

concludes that the allegation is established on the balance of probability.”51 In conclusion

as the Claimant has failed to fulfill this duty, the court should assume that all the

representations made by the Respondent were true and honest.

B. ASA2 IS NOT, AND HAS NEVER BEEN THE AGENT OF THE RESPONDENT

a. Their own statement cannot create apparent authority

48. The Claimant cannot rely upon ASA2’s own representation to establish the authority of the

latter. According to Freeman and Lockyer v Buckherst when a party has no “actual”

authority, the other cannot rely upon the agent’s own representation to his authority.52

Therefore in order for the Claimant to able to rely on the “apparent” authority of ASA2,

50 P. Gabriel, “Burden of Proof and Standard of Proof in Civil Litigation” [2013] 25 SAcLJ 130 51 Judgments - In Re B (Children) (Fc) Appellate Committee Lord Hoffmann Lord Scott of Foscote Lord R [2008] UKHL 35 52 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All E.R. 630

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where ASA2 has no “actual” authority, he must have received representation from person

or persons who have actual authority. 53 Since the Respondent has never provided

representation as to the authority of ASA2, the Claimant cannot rely on the apparent

authority of ASA2. On the contrary the Respondent has provided the e-mail of his actual

agent in the voyage order and it is not the same as the e-mail of ASA2.54 Nor is there any

evidence that the Respondent subsequently confirm to the Master or the Claimant that the e-

mail of their agent has been changed and the e-mail of ASA2 is the correct e-mail of their

agent.

b. Master did not ascertain the authority of the agent

49. The Master failed to ascertain the authority of the agent which is contrary to the blind-eye

or Nelsonian knowledge theory. According to this theory it is dishonest for a man

deliberately to shut his eyes to facts which he would prefer not to know. On the contrary, he

is under an obligation to inquire into the truth of such facts.55 If he does not do so, he is

taken to have actual knowledge of the facts to which he shut his eyes.

50. It is submitted that the voyage orders provided the correct e-mail of the actual Atlantic

Service Agency and expressed prohibition for the captain to follow orders that were not

from the Respondent or their agents and to communicate such orders to the Respondent.56

This in combination with the fact that the Master was aware of the high risk of piracy in the

region should have created enough suspicious in the Master to enquire about this fact.57

Unfortunately the Master blindly followed the orders of ASA2 and did not contact the

53 Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 54 Moot scenario, 14 55 White v. White and the Motor Insurers Bureau [2001] UKHL 9 56 Moot scenario, 13 57 Manifest Shipping Co Limited v. Uni-Polaris Insurance Co Ltd [2003] 1 AC 469 [112], [116]

27

Charterer to ascertain the authority of ASA2, despite of the presence of the aforementioned

suspicions facts of differing e-mails.

51. According to Mr. Justice Briggs it is well arguable that this theory is applicable in the

context of apparent authority. As a consequence the Master committed negligence when did

not ascertain the reliability of the email he was receiving from ASA2 and therefore the

Claimant is not entitled to damages for a situation that arose exclusively from the inaction

of his servant.58

c. Not within the scope of their employment

52. Alternatively if the Tribunal considers that ASA2 was an agent of the Respondent, the latter

are not liable for the actions of the former because “a principal is not liable in an action of

deceit for the unauthorized and fraudulent act of a servant or agent committed, not for the

general or special benefit of the principal, but for the servants or agent's private ends“59 It is

clear from the facts of the case that the unauthorized and fraudulent acts of ASA2 were only

committed for their own private interests and did not contribute to the general or special

benefit of the principal, on the contrary the principal suffered a substantial loss.

58 Lexi Holdings v Pannone & Partners [2009] EWHC 2590 59 British Mutual Banking co. v. Charnwood Forest Railway co [1887] L.R. 18 Q.B.D. 714

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III COUNTERCLAIM

53. The respondent alleged that the claimant is liable to pay damages because of two main

reasons. (A) The Claimant breached the charter party when it provided and unseaworthy

Vessel and (B) The Claimant breached its duty as bailee in respect of part of the cargo.

A.THE CLAIMANT PROVIDED AN UNSEAWORTHY VESSEL

a. The Master was incompetent when he followed instructions other than those given to the

Vessel by the Respondent.

54. As explained above the voyage orders were clear regarding who the Agent of the

Respondent was and the Master was only authorized to follow the instructions of ASA. In

the The Eurasian Dream the court stated that propensity to casualness, lack of effort and

failure to use ability even though theoretically capable of performing the job properly,

renders a crew member incompetent for the assigned task, duty or role on board the

vessel.60 As stated previously the Master did not exercise the diligence expected in the

situation in light of the circumstances. Consequently the Master can be considered as

incompetent when he followed the orders provided by ASA2 in clear violation of the

Charter party. As a consequence of this, the Vessel was unseaworthy at the beginning of the

voyage what supposes a clear breach of the charter party.

60 The Eurasian Dream [2002] 1 Lloyd's Rep 719

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b. The Master also failed to follow anti-piracy precautions, as required by the Charter party

and/or industry practice relating to West Africa.

55. As it was established above the lack of anti- piracy measures on behalf of the Claimant led

to the piracy event which took place in the international waters off Angola. The fact that the

Claimant did not provide in Singapore the appropriate anti- piracy equipment is considered

a crucial element, which led to the unseaworthiness of the Vessel.

B.THE CLAIMANT BREACHED ITS DUTY AS BAILEE

56. The Charter party concluded between the Claimant and the Respondent is a time charter

party. This agreement should be considered also as a contract for the carriage of goods. It is

clear that the Vessel was put at the disposal of the charterer with the clear purpose of

carrying gasoil from Singapore to Angola.

57. According to Lord Justice Diplock “the contract for the carriage of goods by sea, which is

evidenced by a bill of lading, is a combined contract of bailment and

transportation”.61Therefore, following this passage the Ship-owner was acting as bailee in

respect on the cargo on the vessel. It should be noted that the with regards to the bill of

lading that identified the the Respondent as carrier this is in any event irrelevant, because in

a two-party situation involving only a shipowner and a charterer the legal relationship

between them is controlled by their contract – the charter party.62

61 S D Girvin, Carriage of Goods by Sea (1st, Oxford , 2011) 125 62 R. Force, A. N. Yiannopoulos, M. Davies, Admiralty and Maritime Law (1st, Beard Books, Washington, D.C. 2006) 334

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58. At common law the duties of the bailee are to take reasonable care of the goods and to

redeliver the goods in accordance with the terms of the bailment. Regarding the first duty,

to take reasonable care, this requires ensuring that the goods are protected from damage or

loss.63 The degree of care will vary according to the circumstances and purpose of the

delivery. However at the very least it includes a general duty to protect the goods bailed

against theft.64 The second duty is to redeliver the goods.65 The Master of the vessel has

clearly failed to protect the goods against theft by following orders from a third party,

which lead to the theft. Such actions cannot be reconciled with the voyage orders that

expressly prohibit the Master from following orders of any third party and places an

obligation of the Master to report such orders, which he also failed to do. Additionally the

heightened danger of piracy in the region should have elevated the degree of care of the

Master with respect to any unauthorized orders.

59. 28,500mt of gasoil were removed from the Vessel without the Respondent permission and

the latter or the Bill of lading holder did not receive or take possession of the gasoil

removed. Therefore, the Claimant is liable for value of the cargo removed as it manifestly

breached its duty as bailee.

IV. PRAYER FOR RELIEF

For the reasons set above, the Respondent requests this Tribunal to:

DECLARE that this Tribunal does not have jurisdiction to hear the merits of this dispute;

FIND that the Respondent are not liable for breach of contract and/or tort of fraud; and

63 East West Corp v DKBS 1912 & AKTS Svendorg [2003] QB 1509, at 28 (Mance I.J). See also N Palmer, Palmer on Bailment (3rd, Sweet & Maxwell, 2009) para 20-017 64 Ibid Palmer para 20-018 65 S. D. Girvin, Carriage of Goods by Sea (1st, Oxford , 2011), 127

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AWARD damages to the Respondent and interests on the amounts claimed.