Rhine Shipping DMCC v Vitol S.A.

An express charterparty indemnity covering arrest or detention may extend to detention of a vessel caused by the arrest of property on board it. The relevant question is the ordinary meaning and commercial purpose of the clause.

A warranty that specified vessel-related entities are free from legal issues capable of affecting performance may be breached without proof that the particular later steps were foreseeable. Internal accounting entries within one legal entity are not contractual hedges and do not reduce recoverable loss. Loss caused by market movements was neither too remote nor outside the charterer’s assumed responsibility on the evidence.

The claimant, as disponent owner, claimed agreed demurrage under a voyage charter. The defendant counterclaimed damages arising from delay to the vessel after Ghanaian third parties arrested property on board in support of claims against a connected bareboat charterer.

The counterclaim alleged breach of an express warranty and of clause 13, which required indemnification for arrest or detention. The issues included whether the warranty covered the connected charterer, whether the vessel would have obtained a 6 May bill of lading but for the detention, whether internal risk-management entries reduced loss, and whether the claimed market loss was too remote.

1. Liability. Clause 13 was engaged. Although the property, rather than the vessel, was arrested, the vessel was detained by the Ghanaian authorities and prevented from continuing its voyage. The wording and commercial allocation of risk did not require the vessel itself to be the primary object of the arrest.

2. The warranty used descriptive categories rather than confined definitions. Al-Iraqia was fairly described as a manager because it had commercial involvement in the vessel’s operation. It also fell within the broad description of disponent owners, or alternatively owners, in the context of the charter.

3. The word “may” imposed a low threshold. The warranty required an existing encumbrance or legal issue capable of possibly affecting performance, not a particular degree of probability, foreseeability or knowledge. The London arbitration against Al-Iraqia therefore engaged the warranty because it could affect the charter’s performance and in fact did so.

4. On causation, the court rejected the attempt to introduce an unpleaded positive case about hypothetical third-party conduct. Applying the loss-of-chance approach recognised in Allied Maples and Assetco, the evidence established that the vessel would have loaded in time for a 6 May bill of lading. Any contrary possibility was speculative and warranted no discount.

5. The internal Swaps were accounting arrangements between portfolios within Vitol, not contracts with separate legal entities. They merely transferred risk internally and did not improve Vitol’s financial position. Benefits arising from unrelated physical transactions were res inter alios acta and were not to be brought into account.

6. External hedging undertaken in consequence of breach may reduce loss, but that principle did not apply to these internal arrangements. The increased cargo price was within reasonable contemplation. The exceptional assumption-of-responsibility qualification in The Achilleas was unsupported by evidence of a market understanding excluding such liability.

7. Clause 13 was a self-standing indemnity. Its reference to “any damages, penalties, costs and consequences” was not confined by contractual remoteness rules. The conclusion depended on the wording and context of this clause and did not establish a general rule for all indemnities.

8. Disposition. Rhine was liable under both the warranty and clause 13 for US$3,692,106.72, comprising the increased cargo price and the Mercuria loss, plus interest. The parties were directed to draw up an order addressing that liability and the agreed outstanding demurrage balance.