Background
The parties entered a Contract of Affreightment (COA) dated 21 May 2020 for the carriage of fertiliser cargoes from Sillamae, Estonia to ports in Brazil and North America between May and November 2020. The COA provided for three guaranteed shipments, with a fourth at Charterers’ option, and established a detailed notification regime under which Charterers would declare a laycan, Owners would then nominate a performing vessel and narrow the laycan, and Charterers would confirm approval. The first two shipments were performed without giving rise to claims.
On 25 September 2020, Charterers (EuroChem) validly declared a laycan of 12–15 October 2020 for the third shipment. Owners (Transatlantica) failed to nominate a vessel by the contractually required date and on 7 October 2020 nominated M/V Friedrich Schulte with an ETA of 5–10 November — nearly a month outside the declared laycan. Owners expressly acknowledged they had no vessel available for October. Charterers immediately reserved all rights and, on 9 October 2020, voyage-chartered the substitute vessel M/V Abtenauer at market rates substantially above the COA rate to carry the October cargo. Separately, the parties subsequently agreed that the Friedrich Schulte would carry a cargo in November 2020, described in correspondence as the “3rd voyage under COA,” loading at Sillamae on 22–27 November 2020.
In a London Maritime Arbitrators Association (LMAA) arbitration, Charterers claimed the freight differential between the Abtenauer market rate and the COA rate (US$382,410) plus additional storage costs (€4,036.80) arising from Owners’ failure to provide a vessel for the October laycan. The Tribunal awarded those sums. Owners counterclaimed unpaid freight and demurrage on the Friedrich Schulte shipment and were awarded US$227,523.25, producing a net award in Charterers’ favour of approximately US$154,886.75 plus €4,036.80 and interest. Owners appealed to the Commercial Court under section 69 of the Arbitration Act 1996, arguing the Tribunal had committed an error of law.
The Court’s Holding
Mr Justice Henshaw dismissed the appeal, holding that the Tribunal had made no error of law. The judge identified the central flaw in Owners’ argument as a mischaracterisation of what the Tribunal had actually found and awarded. Owners contended that the Tribunal treated the Friedrich Schulte voyage as late performance of the third COA obligation and yet ignored its value when assessing damages — thereby conferring a windfall by, in effect, giving Charterers four shipments at COA rates when they were entitled to only three. The judge rejected that framing: the Tribunal awarded damages for non-performance of the specific October shipment required by Charterers’ 25 September 2020 declaration, not for late performance. The Friedrich Schulte voyage performed a separate, newly agreed contractual obligation; it did not satisfy or cure the breach arising from the October laycan that was never honoured.
The court held that Charterers’ email of 7 October 2020 constituted a clear and effective reservation of rights. When the parties subsequently arranged the Friedrich Schulte shipment on COA terms, that agreement did not — without express words to that effect — amount to a waiver of Charterers’ accrued claim. The Tribunal’s description of the Friedrich Schulte voyage as “the third shipment under the COA” was a factual/numerical observation, not a finding that the October obligation had been discharged. Owners bore the risk of that characterisation: if they intended the Friedrich Schulte to operate as a compromise extinguishing Charterers’ claims, they were obliged to say so expressly and obtain agreement.
The judge further noted that the permission-to-appeal grant by Jacobs J had proceeded on the assumption that the third shipment had been “performed, albeit late,” but on closer examination that premise was incorrect. Because the underlying premise of the Owners’ appeal was legally and factually wrong, the entire argument built on it — that the damages award created a windfall equivalent to four COA shipments — fell away.
Key Takeaways
- An owner who fails to nominate a vessel for a declared laycan commits a breach of the COA at the point of failure; a charterer’s contemporaneous reservation of rights is legally effective and is not waived merely by the parties later agreeing a substitute shipment on COA terms.
- Accepting a later shipment described as being “under the COA” does not, without more, extinguish accrued rights for a prior breach; clear and unequivocal agreement is required before a court or tribunal will treat such acceptance as a waiver of the damages claim.
- The proper characterisation of a damages claim — non-performance versus delayed performance — governs the applicable measure of loss; where the Tribunal correctly identifies the claim as one for non-performance, the value of a separately agreed later shipment is not a benefit to be set off against those damages.
- On a section 69 Arbitration Act 1996 appeal, reframing a factual characterisation issue as a question of law will not succeed; the appellate court examines what the Tribunal actually found, not what the appellant says it should have found.
Why It Matters
This decision provides important practical guidance for owners and charterers operating under contracts of affreightment with declared laycan regimes. It confirms that when an owner is unable to meet a declared laycan and a charterer expressly reserves its rights before procuring a substitute vessel, the owner cannot subsequently escape damages exposure simply by performing a later shipment on COA terms and arguing the breach was merely one of delay. Parties who wish a substitute or delayed shipment to settle all outstanding claims must negotiate and document an express release of accrued rights at the time.
The judgment also serves as a useful reminder of the limits of section 69 appeals. The court will not disturb a reasoned arbitral award merely because the losing party can frame its disagreement in legal language; where the true issue is whether the Tribunal correctly identified the nature of the charterers’ claim, that is a question of mixed fact and characterisation on which the Tribunal’s conclusion commands respect. Owners and their advisers should therefore scrutinise the factual premise of any proposed law appeal before committing to litigation.