Gas Natural Aprovisionamientos SDG S.A. v Methane Services Ltd

Under a charterparty substitution clause, an incoming vessel need not be delivered at the precise geographical location where the outgoing vessel was withdrawn, particularly where no next loading port has yet been identified. A contractual positioning provision may operate as an accounting mechanism to prevent financial disadvantage, rather than as an exclusive delivery requirement. Whether a communication amounts to an order to the vessel is predominantly a factual, or mixed fact and law, question. An appeal under section 69 of the Arbitration Act 1996 cannot succeed merely by recasting a factual finding as an error of law.

The claimant charterers appealed under section 69 of the Arbitration Act 1996 against a First Final Award concerning the substitution of the vessel KHANNUR for GIMI under a long-term LNG time charter. The arbitrators held that KHANNUR was validly substituted on 5 June 2007 and remained on hire until 14 July 2007. The appeal concerned three questions: whether the substitute vessel had to be at the outgoing vessel’s geographical position; whether charterers had to give orders while disputing the validity of delivery; and whether a communication requiring a vessel to be ready at Ras Laffan by a specified date constituted an order.

1. Appeal dismissed. The arbitrators’ declarations that KHANNUR was validly substituted on 5 June 2007 and remained on hire until 14 July 2007 were upheld.
2. On the proper construction of the 2004 agreement and clause 59(d), the substitute vessel did not have to be made available at the precise place where GIMI had gone off hire. Requiring that result could produce pointless expenditure and delay. Clause 59(d) operated as a formula protecting charterers against financial disadvantage by reference to the substitute vessel’s position in relation to the next loading port. Where no next loading port had been identified, there was no basis for concluding that charterers would necessarily suffer such disadvantage. The arbitrators were therefore entitled to conclude that delivery at Algeciras was not invalid merely because GIMI had gone off hire at Barcelona.
3. The court rejected the challenge concerning the alleged duty to give orders without prejudice. The arbitrators’ reference to what charterers could have done was not the imposition of a separate legal obligation in a case of disputed delivery. It explained the commercially appropriate response in the circumstances.
4. Whether the charterers’ message of 26 June 2007 amounted to an order was overwhelmingly factual, although technically a question of mixed fact and law. The arbitrators were entitled to find that the message was not an order to KHANNUR. Their conclusion depended on the factual context and did not disclose an error of law. The authorities relied on concerning orders as to a vessel’s employment, including Larrinaga v The Crown and Whistler International Ltd v Kawasaki Kisen Kaisha (The Hill Harmony), concerned different legal characterisation questions and did not govern this finding.
5. It was unnecessary to determine the procedural objections or the parties’ alternative arguments.

• High Court (Commercial Court): Appeal under section 69 of the Arbitration Act 1996 dismissed. The First Final Award of the arbitrators was upheld.