NYK Bulkship (Atlantic) NV v Cargill International SA

An off-hire proviso covering an event occasioned by an act, omission or default of the charterers or their agents may apply to sub-charterers, sub-sub-charterers or receivers performing delegated charterer responsibilities. The precise contractual relationship is not decisive.

However, the relevant conduct must occur in the course of performing the delegated task. A merely causal connection is insufficient. The words “occasioned by” require a relationship broader than effective cause but narrower than but-for causation, assessed by commercial common sense.

The claimant owners appealed under section 69 of the Arbitration Act 1996 against the majority decision of an arbitral tribunal concerning an off-hire clause in a time charter of the vessel Global Santosh.

The vessel and cargo were mistakenly arrested in Nigeria following a demurrage dispute between parties further down the contractual chain. The charterers withheld hire under the arrest and detention provision. The issues were whether the relevant sub-charterers or receivers were the charterers’ agents, whether their conduct occurred while performing delegated charter obligations, and whether that conduct occasioned the arrest.

1. Construction of the proviso. The proviso was not confined to persons specifically instructed by the charterers to perform charterer responsibilities. Sub-charterers, sub-sub-charterers and receivers to whom charterer responsibilities had been delegated or sub-delegated could be agents for the purpose of the proviso, irrespective of whether the contractual relationship described them as contractors or independent contractors.
2. The relevant act, omission or default had to occur in the course of the delegate’s performance of the delegated task. A mere causal link between a delegate’s conduct and the arrest was insufficient. The purpose of the proviso was to attribute responsibility to charterers for conduct occurring in the performance of responsibilities they had delegated.
3. Transclear’s arrest of the cargo and, mistakenly, the vessel was not conduct undertaken while performing a responsibility delegated by Cargill. The tribunal was therefore wrong to reject the claim solely because Transclear was a subcontractor rather than an agent, but it was right to reject the claim because there was no evidence that Transclear was performing Cargill’s obligation to discharge.
4. IBG’s failure to unload within the lay days occurred in the course of performing its delegated obligation to discharge. Its subsequent failure to pay demurrage or provide security also occurred in the course of that task, because the obligation included meeting necessary expenses required to remove obstacles resulting from its failure to unload.
5. “Occasioned by” imported causation broader than effective cause but narrower than but-for causation. The question was whether, as a matter of commercial common sense, the relevant conduct caused or brought about the arrest. It was plainly arguable that the failures to unload, pay demurrage or provide security caused the demurrage claim, the court application and the mistaken arrest.
6. Under section 69(7) of the Arbitration Act 1996, the causation issue was remitted to the tribunal. The tribunal was particularly well placed, as commercial shipping arbitrators, to determine causation by commercial common sense.

• Arbitral tribunal: The majority rejected the owners’ claim that the arrest fell within the off-hire proviso.
• High Court (Commercial Court): On an appeal under section 69 of the Arbitration Act 1996, the court corrected the tribunal’s reasoning on agency, upheld its conclusion concerning Transclear on a different basis, and remitted causation concerning IBG’s conduct to the tribunal.