Global Maritime Investments Ltd v STX Pan Ocean Co Ltd

A charterparty tax clause requiring reimbursement of US gross transportation tax applies to tax levied on income attributable to transportation under the particular charterparty between the parties. It does not require a sub-charterer to reimburse tax levied on hire payable under a higher charter. Nor does it ordinarily extend to reimbursement of another party’s reimbursement, which is distinct from tax itself.

Where a contract contains a specific allocation of liability for the tax, general provisions concerning usual or mandatory expenses and implied indemnities cannot be used to produce a different allocation. A trade association circular may form part of the contractual background and identify the commercial risk addressed, without being treated as an authoritative statement of the tax’s actual legal incidence.

The judgment concerned three arbitration appeals arising from a chain of July 2007 charters of the vessel Dimitiris L. Sea Rose Marine, the head owner, paid US gross transportation tax of $134,400 after the vessel called at United States ports. STX Pan Ocean reimbursed Sea Rose and recovered the sum from Global Maritime. Global Maritime then claimed against Navios, and Navios against Sangamon.

The tribunal in the Pan Ocean arbitration held Global Maritime liable to reimburse STX Pan Ocean. In the related arbitrations, a majority held that Global Maritime and Navios were not entitled to recover down the chain. The central issue was the construction and effect of identical clause 112, read with the contractual background and alternative expense and indemnity provisions.

1. Disposition. Global Maritime’s appeal in the Pan Ocean arbitration was allowed. Its and Navios’s appeals in the related arbitrations were dismissed.
2. The BIMCO circular was admissible as part of the relevant background. It was reasonably available to parties trading to the United States and identified the risk which clause 112 was designed to address. It was not treated as an accurate or conclusive statement of the actual incidence of US gross transportation tax.
3. Clause 112 required reimbursement of tax levied on income attributable to transportation under the charterparty between the claimant owner and the respondent charterer. In a sub-charter, tax levied on hire received under the head charter was not tax levied on income under the sub-charter. The construction contended for by the disponent owners was strained and unnatural.
4. The clause did not extend to reimbursement of a reimbursement. Tax and an obligation to reimburse another person for tax were different matters, and reimbursement itself was not something levied on income. The clause therefore allocated the burden to the immediate charterer only, without cascading liability down the chain.
5. Clauses 2 and 111, dealing generally with usual expenses and mandatory port expenses, could not be used to recover US gross transportation tax. Clause 112 specifically addressed that tax, so the general provisions yielded to the specific provision.
6. No implied indemnity arose from the charterers’ orders to trade to the United States. US gross transportation tax was an ordinary expense or risk of trading to the United States, and the parties had specifically dealt with that risk in clause 112. The owners had accepted the risk to the extent that clause 112 did not permit recovery.
7. The court cautioned that the precedential value of an arbitration appeal may be limited where the tribunal has made no findings about the actual incidence of the tax or the parties’ knowledge of it.

The judgment determined appeals from three arbitration awards. The Pan Ocean tribunal held Global Maritime liable to reimburse STX Pan Ocean. In the Global Maritime and Navios arbitrations, a majority held that the disponent owners were not entitled to reimbursement down the charter chain. The High Court allowed the appeal concerning the Pan Ocean award and dismissed the two related appeals.