DGM Commodities Corp v Sea Metropolitan SA

On an appeal under section 69 of the Arbitration Act 1996, a voyage charterer may be unable to rely on frustration where the event relied upon was caused by receivers’ failure to discharge cargo. The charterer has a non-delegable contractual duty to discharge. Receivers performing that function are the charterer’s agents or delegates, and their failure to discharge remains attributable to the charterer. The position differs where receivers’ independent conduct, such as arresting the vessel, prevents it from sailing away and falls outside the charterer’s discharge undertaking. Whether frustration is self-induced therefore depends on the proper characterisation of the receivers’ conduct and the relevant cause of delay.

The Charterers appealed under section 69 of the Arbitration Act 1996 against an award of maritime arbitrators. The tribunal had awarded the Owners demurrage for delay at St Petersburg after cargo in the vessel’s hold was contaminated by gasoil and the Russian Veterinary Service suspended its movement.

The Charterers argued that the continuing suspension order frustrated the voyage charterparty, and that the receivers’ insistence on a cash settlement could not be attributed to them. The tribunal rejected frustration, finding that the receivers’ conduct was the effective cause of the order remaining in place. The central issue was whether receivers’ acts or omissions could make an otherwise frustrating event self-induced by the Charterers.

The appeal was dismissed. The tribunal had correctly rejected the frustration argument, although the reasoning required clarification.

1. The tribunal found that the Veterinary Service order prevented discharge throughout the relevant period. The receivers’ unwillingness to procure its lifting, because they insisted on a cash settlement, was the effective cause of the order remaining in place. The tribunal therefore treated the alleged frustrating event as caused by the receivers’ conduct.

2. The relevant conduct was properly characterised as a failure to discharge the cargo. The Charterers owed a non-delegable contractual duty to discharge. Even where the receivers’ stevedores performed that function, they were agents or delegates of the Charterers, who remained responsible under the charterparty.

3. The Charterers’ proposed distinction between conduct relating to discharge and conduct preventing re-export did not assist them. The tribunal found that the order prevented discharge, not re-export, and made no finding that re-export was at any stage the only realistic option.

4. The Adelfa, [1988] 2 Lloyds Rep 466, was distinguishable. It concerned receivers’ arrest of the vessel and a claim for the cost of securing its release so that it could sail away, rather than a demurrage claim arising from failure to discharge. The distinction was between failure to discharge, for which the charterer was contractually liable, and arrest preventing the vessel from sailing, for which the charterer gave no undertaking.

5. The answer to the legally relevant question was therefore yes: where receivers’ failure to discharge causes what would otherwise be a frustrating event, the Charterers cannot rely on that event to escape liability for demurrage. The tribunal’s award was upheld.

• Maritime arbitration tribunal: awarded the Owners US$3,605,630 in demurrage and rejected the Charterers’ contention that the charterparty had been frustrated.
• High Court (Commercial Court): dismissed the Charterers’ appeal under section 69 of the Arbitration Act 1996 and upheld the award.