Clearlake Chartering USA Inc & Anor v Petroleo Brasileiro SA

Contractual obligations to provide security or defence funds under a letter of indemnity are freestanding obligations. They do not depend on proving actual or threatened loss, or on an unbroken contractual chain. Where charterparty provisions incorporate P&I wording, the wording may be construed with the charterparty clause as a single indemnity arrangement. At the interim stage, a high degree of assurance of success, inadequacy of damages, and the balance of convenience may justify a mandatory injunction requiring performance.

The claimants sought an urgent mandatory injunction requiring Petrobras to provide security for the release of a vessel arrested in Singapore and to fund the registered owner’s defence of misdelivery proceedings. The obligations arose under an amended charterparty clause 33(6), read with International Group of P&I Clubs wording. Petrobras argued that no binding wording had been agreed, that a gap in the charterparty chain prevented recovery, that damages were adequate, and that defence-cost relief was premature. The central issues were whether Petrobras was bound by the relevant wording and whether interim mandatory relief should be granted.

1. Relief granted in principle. Subject to settling the precise wording of the order, the court was willing to grant the mandatory injunction pending a return date.
2. Construction. The amended charterparty clause, read with the relevant P&I wording and sub-clauses (v) to (vii), formed the agreed indemnity. The indemnity arose under the clause itself and did not require a separate letter of indemnity.
3. Binding effect. Petrobras waived any right to receive the wording before lifting the subs. Independently, it received the wording, raised no objection, and later invoked clause 33(6). This supported waiver, estoppel by convention, or agreement by conduct. The court was satisfied to a high degree of assurance that Petrobras was bound by the wording.
4. Freestanding obligations. The obligations to provide defence funds and bail or other security arose when the specified events occurred. They were additional to the indemnity provisions and did not depend on proving actual or threatened loss. The alleged break in the contractual chain therefore did not prevent enforcement.
5. Interim remedy. Damages were not an adequate remedy. The contractual security obligation was intended to secure release of an arrested vessel and preserve its trading use. The balance of convenience favoured relief. A parent-company guarantee was required to fortify the claimants’ cross-undertaking in damages.