1

SEVENTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION

MOOT COMPETITION 2016

IN THE MATTER OF AN ARBITRATION HELD IN EXETER

Claimant/Owner Respondent/Charterer

/Counter-Defendant AND /Counter-Claimant

Zeus Shipping and Trading Company Hestia Industries

MEMORANDUM FOR THE CHARTERERS

TEAM Nº.17

Belén Combarros Gómez

Tania Dias Do Vale

Elia Raboso Pantoja

Stephanie Restrepo Ramírez

Sara Soto Velasco

Carmen Zulueta Solera

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LIST OF ABBREVIATIONS ............................................................................................... 4

LIST OF AUTHORITIES: BOOKS .................................................................................... 5

LIST OF AUTHORITIES: CASES AND ARBITRAL AWARDS ................................... 6

LIST OF AUTHORITIES: LEGISLATION ...................................................................... 8

STATEMENT OF FACTS .................................................................................................... 9

PART ONE: JURISDICTION ............................................................................................ 11

I. THIS TRIBUNAL DOES NOT HAVE JURISDICTION TO HEAR THE MERITS

OF THE CLAIM................................................................................................................ 11

A. The Respondent considers this contract frustrated............................................ 11

B. Frustration is not a dispute that arises under the contract and, consequently, the

Tribunal cannot hear any dispute regarding frustration of the contract. ................... 11

C. The Respondent contends that the courts of Poseidon are the ones which have

jurisdiction to hear the merits of the case ................................................................. 14

II. THIS TRIBUNAL HAS JURISDICTION TO DECIDE ON THE COUNTERCLAIM

FOR A SALVAGE REWARD .......................................................................................... 15

A. Jurisdiction of the arbitration tribunal to discuss counterclaims ....................... 15

B. Independency and legal standing of the counterclaim proceedings .................. 16

C. Arbitral resolution as a custom in matters of salvage ....................................... 16

PART TWO: MERITS ........................................................................................................ 18

I. THE CHARTERPARTY IS FRUSTRATED AND DEMURRAGE DOES NOT

ACCRUE ........................................................................................................................... 18

II. ALTERNATIVELY, THE CONTRACT WAS FRUSTRATED AT THE MOMENT

HESTIA COMMUNICATED THIS FACT BY 30 APRIL 2015 ..................................... 20

III. ALTERNATIVELY, DEMURRAGE IS NOT DUE ............................................... 22

A. Demurrage is not due under Clause 10 of the Charterparty .............................. 22

B. Alternatively, if the Tribunal considers that the Athena did not leave the

Loading Place, such a fact is under the Claimant’s liability ..................................... 24

IV. HESTIA IS ENTITLED TO CLAIM SALVAGE REWARD ................................. 26

A. The International Convention on Salvage 1989 applies to the case ................. 26

B. Right to claim salvage reward ........................................................................... 26

C. Services provided to the Athena do constitute salvage ..................................... 28

a. Services were rendered to a legally recognized subject of salvage. ................. 28

b. Services rendered are proven to be successful ................................................. 28

c. The vessel was indeed in real danger ................................................................ 29

d. Services rendered were in fact voluntary.......................................................... 30

D. Hestia is entitled to claim special compensation............................................... 30

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a. The existence of an environmental threat ...................................................... 31

b. The non-satisfaction of the costs of salvage .................................................. 31

E. Hestia does not have to contribute to the payment of salvage reward .............. 31

PART THREE: PRAYER FOR RELIEF ......................................................................... 34

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LIST OF ABBREVIATIONS

Cargo 260.000m3 Liquefied Natural Gas produced from

Hades Shale Gas

Charterer/Respondent/Hestia Hestia Industries

Charterparty The Charterparty Agreement between Hestia Industries

and Zeus Shipping and Trading Company on 21 July

2014

COLREG Convention on the International Regulations for

Preventing Collisions at Sea, 1972

Hades Port of Cargo loading

Hestug

IMDGC

Tug company owned by Hestia Industries

International Maritime Dangerous Goods Code

ICS 1989

LOF Agreement

International Convention on Salvage 1989

Lloyd’s Open Form Agreement

Master Captain Yi, Master of the H Max LNG Carrier, the

Athena

Owner/Claimant/Zeus Zeus Shipping and Trading Company

Vessel H Max LNG Carrier; the Athena

ICS 1989 International Convention of Salvage, 1989

UNCLOS United Nations Convention on the Law Of the Sea,

1982

WWD Weather Working Days

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LIST OF AUTHORITIES: BOOKS

Ambrose C., Maxwell K. London Maritime Arbitral Arbitration 2nd Edition, Sweet &

Maxwell, 2002.

Cromie, S., “International Commercial Litigation”, 2nd Edition, 1997

Davis, M., Shipping Law, 2nd Edition, Sydney, 1995

Hill, C., “Maritime Law”. Informa Law from Routledge, 6th Edition, 2003

Reeder, J., “Briece on Maritime Law of Salvage”, Sweet and Maxwell, 5th Edition,

2011

Scrutton on Charterparties and Bills of Lading, Sweet & Maxwell, London, 2011

Treitel, G., Frustration and Force Majeure, 3rd Edition, Sweet & Maxwell, 2014

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LIST OF AUTHORITIES: CASES AND ARBITRAL AWARDS

Actis Steamship Co Ltd v. The Sanko Steamship Co Ltd (The Aquacharm) [1982] 2 Lloyd’s

Rep 237 ................................................................................................................................ 32

Bonython v Commonwealth of Australia (1950) 81 CLR 486 ................................................. 15

Duncan v. Dundee Shipping Co. (1878), 5 R. 742 .................................................................. 32

E.L. Oldendorff v Tradax Export (The Johanna Oldendorff) [1974] AC 479 ......................... 22

Fairfield Lease Corporation v. Romano’s Auto Service et Al. 4 Conn. App. 495 (1985)...... 16

Five Steel Barges(1890) LR 15 PD 142 .................................................................................. 32

Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad

[1998] 196 CLR 161 ............................................................................................................ 32

Hain Steamship Company Ltd v Tate & Lyle Ltd [1936] 2 All ER 597 .................................. 26

Hertz Corp. v. Friend 559 U.S. 77 (2010) ............................................................................... 14

International Navigation Co. v. Atlantic Mutual Ins. Co supra [(D. C.) 100 F. 304] .............. 32

Inverkip Steamship Co Ltd v Bunge & Co [1917] 2 KB 193 (CA) .......................................... 23

Jackson v Union Marine Insurance (1873) LR 10 CP 125 ..................................................... 20

John Russell and Co Ltd v Cayzer, Irvine & Co Ltd [1916] 2 AC 298 ................................... 14

Kopitoff v Wilson [876] l QBD 377 ........................................................................................ 32

Larrinaga Steamship Co v Société Franco-Américane des Phosphates de Medulla [1923] All

ER Rep 1 .............................................................................................................................. 20

Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119 ........................................ 19

MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] EWHC 283 (Comm) 14

National Carriers Ltd v Panalpina (Northern) Ltd ................................................................. 13

North River Freighters Ltd. V President of India [1955] 2 Lloyd's Rep 668 .......................... 23

Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 Q.B. 226. 61.......... 21

Ocean Tramp Tankers Corpv V/O Sovfracht (The Eugenia) [1964] 2 Q.B. 226 61 ............... 21

Per Willies in MacAndrew v Chappie (1866) L.R. 1 C.P. 643 ................................................ 26

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Playa Larga v I Congreso del Partido [1983] 1 AC 244 ........................................................ 19

Super Servant Two” [1990] 1 Lloyd’s Rep. 1 ......................................................................... 20

Swire Pacific Offshore Services Ltd v MV 'Roxana Bank [2004] ZASCA 75 ......................... 27

The Charlotte, 3 W. Rob 68 (1848), 71 ................................................................................... 29

The E.U., A. C., 7 June, 1853, I.E & A. R. 263 ....................................................................... 28

The Good Friend [1984] 2 Ll. Rep 586 .................................................................................. 32

The Loyal (1913) 204 F. 930 ................................................................................................... 32

The New Australia [1958] 2 Lloyd’s Rep 35 ........................................................................... 30

The Panthom [1866] LR. 1 A&E. 60 ....................................................................................... 29

The Royal Princess [1853] A.C. .............................................................................................. 32

The Sandefjord [1953] 3 Lloyd’s Rep 557 .............................................................................. 27

The Sanderjord [1953] 3 Lloyd’s Rep. 557 ............................................................................. 27

The Sava Star [1995] 2 Lloyd’s Rep. 134................................................................................ 27

Tojo Maru v. N.V. Bureau Wijsmuller, [1972] AC 242 ........................................................... 28

Voth v. Manildra Flour Mills Pty. Ltd. (1990) 171 CLR 538 .................................................. 14

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LIST OF AUTHORITIES: LEGISLATION

English Arbitration Act 1996

Convention on the International Regulations for Preventing Collisions at Sea, 1972

International Convention on Salvage, 1989

United Nations Convention on the Law of the Sea, 1982

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STATEMENT OF FACTS

1. The Claimant, Zeus Shipping and Trading Company, is a shipping company and

is the owner of the vessel the Athena. The Respondent is a company who is a new

producer of Liquefied Natural Gas.

2. On 21 July 2014, the Claimant entered into a Voyage Charterparty for the carriage

of the Cargo on the vessel from the Port of Hades to the Port of Poseidon.

3. The Athena leaved Poseidon and arrived to Hades Port on 3 October 2014, where

protests were taking place. Notwithstanding, that the Claimant was aware of such

protests, they commenced with cargo loading.

4. On 6 October 2014, cargo loading was completed.

5. The following day, 7 October 2014, at 9:00 am the Athena sailed from Hades.

Later on the same day, when the Athena was already outside Hades territorial

waters, Captain Payne intercepted the vessel. The Master unilaterally decided to

return to Hades Port.

6. On 10 October, the Respondent became aware through their online ship tracking

portal that the Athena had returned to its berth at Hades. The Respondent

requested the Claimant to provide an explanation to the deviation in the adventure.

7. On 22 October 2014, the Respondent advised the Claimant that if the Cargo was

not delivered to Poseidon by 2 November 2014, the Claimant would be liable for

its losses. Since the Cargo was of relevant value for the Respondent, if it was not

delivered on time, the latter would certainly suffer significant losses.

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8. By 30 April 2015, the Claimant had not delivered the Cargo to Poseidon.

Therefore, the Respondent informed the Claimant that the Charterparty was

frustrated.

9. Considering the Charterparty frustrated, the Respondent started the search for an

alternative vessel suitable for carrying the Cargo.

10. By 6 October 2015, the delivery had not been fulfilled and, yet, the Claimant

informed that the Athena had left the Loading Place, even though the Respondent

had correctly informed that the Charterparty was frustrated.

11. President Simmons resigned. As a result, on 5 October 2015, the vessel was

released by the Coast Guard. The Claimant, as the owner of the Athena,

contracted towage services with Hestug, a company controlled by the Respondent

and within its same corporate group.

12. On 6 October, Hestug, a company owned by the Respondent, provided towage

services to the Athena. Shortly after the Athena set sail, her propeller shaft broke

leaving her adrift in an uncontrolled manner. As a consequence thereof, the

Respondent, through its affiliated Hestug, had to perform a salvage operation.

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PART ONE: JURISDICTION

I. THIS TRIBUNAL DOES NOT HAVE JURISDICTION TO HEAR THE

MERITS OF THE CLAIM

1. The Respondent argues that this tribunal (the “Tribunal”) does not have jurisdiction to

hear the merits of the claim done by the Claimant because: (A) The Respondent

considers this contract frustrated; (B) Frustration is not a dispute that arises under the

contract and, consequently, the Tribunal cannot hear any dispute regarding it; (C) The

Respondent contends that the Tribunals of Poseidon are the ones that have jurisdiction

to hear the merits of the dispute.

A. The Respondent considers this contract frustrated.

2. Although this will be a matter dealt in detail below, the Respondent can reveal at this

point that the events that took place during the contracted voyage were enough to

render the contractual obligation impossible to perform and to frustration of the

contract (see below Part II: Merits).

3. Consequently, the Respondent considers that either party is discharged from any

obligation occurred after the frustrating event, such as the demurrage alleged by the

Claimant.

B. Frustration is not a dispute that arises under the contract and, consequently, the

Tribunal cannot hear any dispute regarding frustration of the contract.

4. The Claimant and the Respondent agreed on an arbitration agreement in clause 30 of

the Charterparty subscribed by them, upon which the Claimant bases the jurisdiction

of the Tribunal.

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5. However, the Respondent made clear to the Claimant that it considered the contract

frustrated1. The Claimant’s rights depend on the contract being frustrated or not, as

frustration extinguishes the contract subscribed by the parties and the parties’ rights

and obligations.

6. It is a well-established principle of law that the scope of an arbitrator's jurisdiction

and powers in a given case depend upon the terms of the arbitration clause in the

contract signed by the parties. That is to say, upon its proper construction in all the

circumstances2. The question whether a particular dispute falls within an agreement to

arbitrate depends primarily upon the construction of that agreement and upon the

attitude that the parties took while reaching the agreement.

7. Particularly, the agreement constructed in clause 30 of the Charterparty was modified

and drafted in a narrow way, as it only includes disputes arising “under the contract”.

8. The Claimant amended the clause upon request of the Respondent3 from the former

“any dispute arising out of or in connection with the contract” to the current “any

dispute arising under this contract”. Therefore, the intention of the Respondent was

clearly to diminish the scope of the arbitration clause as a non-negotiable

modification, since it was company policy regarding dispute resolution provisions in

the contract4. Indeed, the Respondent expressly stated that no issues relating to the

existence of the contract itself could be arbitrated and that demurrage, as an example,

could have arisen “under” the contract.

9. The clause “out of or in connection to the contract” is wider than “under the

contract”, as it very widely incorporates a difference or dispute in relation to "any

1 Moot Case, p. 25 2 Ambrose, Maxwell: London Maritime Arbitration, 2nd Edition, London, 2002 3 Moot Case, p. 27 4 Moot Case, p. 25

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thing or matter arising out of” as well as "under" the agreement. For its part, the

phrase “under the contract” only covers matters that arise of the contract itself.

10. Therefore, the proper construction of the clause, which was the only general clause

modified in the contract, and of the will of the parties, require giving the above-

referred expression the appropriate narrow meaning that does not include frustration

of the contract and, as a consequence, this Tribunal cannot hear the merits of the

Claimant’s claim.

11. On this behalf, the Respondent reminds the Tribunal that Lord Simon considered in

National Carriers Ltd v Panalphina (Northern) Ltd5 that frustration of a contract

“takes place when there supervenes an event (without default of either party and for

which the contract makes no sufficient provision) which so significantly changes the

nature -not merely the expense or onerousness- of the outstanding contractual rights

and/or obligations from what the parties could reasonably have contemplated at the

time of its execution that it would be unjust to hold them to the literal sense of its

stipulations in the new circumstances; in such case the law declares both parties to be

discharged from further performance.”

12. In other words, frustration arises by an external event, without any of the parties’

intervention. It would be unreasonable to consider a tribunal competent to hear of an

event unrelated to the contract, when the tribunal has been given arbitral jurisdiction

by a clause that limits its power to matters that arise under the contract. In such a way,

an arbitral tribunal acting outside its power boundaries may put in danger the

arbitration award and thus, the resolution of the conflict. Consequently, frustration is

not included in the scope of the arbitration agreement and this Tribunal cannot hear

the merits of the Claimant’s claim.

5 National Carriers Ltd v Panalphina (Northern) Ltd [1981] 1 All ER 161

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13. Conversely, demurrage is a subject that must be resolved after frustration. As a

consequence thereof, the eventual liability for demurrage of the Respondent proceeds

if the Charterparty is not frustrated.

14. In this regard, in MSC Mediterranean Shipping Company SA v Cottonex Anstalt6 it is

admitted that in an event of frustration the Shipper would be discharged from its

obligations to pay demurrage. Consequently, before the liability for demurrage of the

charter is determined, the Tribunal that holds jurisdiction to hear the merits of the case

must determine whether the Charterparty was frustrated or not.

C. The Respondent contends that the courts of Poseidon are the ones which have

jurisdiction to hear the merits of the case

15. Since this Tribunal does not have jurisdiction to hear on the merits of the case, the

Respondent contends it is a matter that should be heard at in court. If so, the Claimant

would be the defendant in the court process. As a result, the Respondent declares, the

suitable courts are the ones of Poseidon, according to the common law conception,

that a defendant can only legally be served if it is present within the jurisdiction7.

16. The Claimant holds its domicile, or place of operations, or “nerve centre”8, in

Poseidon, as it is proven by the letters sent by Hestia9. Thus, this requirement would

be fulfilled. This confirms the general rule that exercise of jurisdiction depends on

service of originating court process10. Nevertheless, the Respondent considers that this

choice of jurisdiction will not fail under the “clearly inappropriate forum” test

established by Voth v. Manildra Flour Mills Pty. Ltd.11 as Poseidon is the place where

6 MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] EWHC 283 (Comm) 7 Cromie Stephen: International Commercial Litigation, 2nd Edition, 1997 8 Hertz Corp. v. Friend 559 U.S. 77 (2010) 9 Moot case, pp. 2, 25, 28, 59, 61, 65, 73 10 John Russell and Co Ltd v Cayzer, Irvine & Co Ltd [1916] 2 AC 298 at 302 11 (1990) 171 CLR 538

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the contract was made12. As a result, it is where it has “the closest and most real

connection” 13. Therefore, the Court of Poseidon hold the jurisdiction to hear this case.

II. THIS TRIBUNAL HAS JURISDICTION TO DECIDE ON THE

COUNTERCLAIM FOR A SALVAGE REWARD

17. It is to be understood that the counterclaim arisen by the Respondent is not in the

nature of defence, but an independent claim. As stated by the Respondent in its letter

of 23 November: “Hestia is entitled to salvage reward and will claim such reward as

part of any proceedings brought in court or by way of arbitration”.

18. The Respondent upholds:

a. The jurisdiction of the arbitration tribunal to discuss counterclaims;

b. The independency of their counterclaim regardless of the main claim of the

Claimant which cannot be subject to arbitration;

c. The resolution through arbitration of matters relating to salvage as a custom in

transnational law and relationships arising from international transactions;

d. The survival of the arbitration clause through the doctrine of separability confers the

tribunal powers to decide on grounds on equity.

A. Jurisdiction of the arbitration tribunal to discuss counterclaims

19. Article 21 (c) of the MLAANZ rules of Arbitration gives the tribunal power to regard

“the exchange of statements of contentions of fact and law in relation to claims,

defences, set-offs or cross-claims”. This clause gives the tribunal jurisdiction to

arbitrate counterclaims, even if neither the Claimant nor the Respondent did write

down such consent expressly, regardless of who stated it.

12 Moot Case, p. 73 13 Bonython v Commonwealth of Australia (1950) 81 CLR 486

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B. Independency and legal standing of the counterclaim proceedings

20. It is of importance to stress the independency14 of both the answer to the main claim

and the counterclaim, even when this one could arise from the same legal situation as

the original claim. “[A] counterclaim is a cause of action existing in favor of the

defendant against the plaintiff and on which the defendant might have secured

affirmative relief had he sued the plaintiff in a separate action”15.

21. Finally, the Respondent expressed their will to raise a counterclaim in its letter of 23

November, in their Answer to the Notice of Arbitration sent by the Claimant. Also,

they expressed their intentions of bringing forth this counterclaim be it by court or

way of arbitration. As the Claimant initiated the arbitration procedure in accordance

with article 9 of the MLAANZ rules, the Respondent brings forth the counterclaim in

this same arbitration procedure, even if it denies the jurisdiction of the Tribunal over

the main claim.

C. Arbitral resolution as a custom in matters of salvage

22. According to Article 38(c) of the Statute of the ICJ, within the sources of

transnational law is included international custom.

23. The Respondent stresses the customary approach through arbitration in matters

regarding salvage to decide controversies, as it is the resolution procedure to which

the LOF Agreement is subject. In all of its versions since the start of its adoption by

parties undertaking in salvage operations, it has always submitted to arbitration under

English Law to determine the rewards.

24. Also, other Open Forms carried by countries that did not want to apply English civil

14 PRYLES, Michael and WAINCYMER, Jeffrey. “Multiple Claims in Arbitrations Between the Same Parties”,

ICCA Publications, 2008. 15 Fairfield Lease Corporation v. Romano’s Auto Service et Al. 4 Conn. App. 495 (1985)

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law when solving controversies within their territories or involving national

businesses (such as the Turkish, Japanese, Chinese and Russian forms), have based on

the LOF. Even if they did not copy all the provisions, they did preserve the arbitration

clause as the way to solve controversies in salvage.

25. Even in the exclusive context of European legislation, the Brussels I Regulation

provides in its article 23.1 the submission to other forms of conflict resolution where

the parties agree to do so "in international trade or commerce, in a form which

accords with a usage of which the parties are or ought to have been aware and which

in such trade or commerce is widely known to, and regularly observed by, parties to

contracts of the type involved in the particular trade or commerce concerned". The

Respondent holds this to be a case where custom should be applied to decide over

jurisdictional matters regarding salvage.

26. The preference of the arbitration resolution responds as well to a will to reduce

transaction costs when fixing the rewards of the salvors.

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PART TWO: MERITS

I. THE CHARTERPARTY IS FRUSTRATED AND DEMURRAGE DOES

NOT ACCRUE

27. In case the Tribunal finds that it has jurisdiction to decide the claim made by the

Claimant on its merits, the Respondent contends that demurrage does not accrue on

the basis of frustration. In National Carriers Ltd v Panalphina (Northern) Ltd Lord

Simon of Glaisdale provided a very accurate definition of the doctrine of frustration

and stated:

28. “Frustration of a contract takes place when there supervenes an event (without

default of either party and for which the contract makes no sufficient provision) which

so significantly changes the nature (not merely the expense or onerousness) of the

outstanding contractual rights and/or obligations from what the parties could

reasonably have contemplated at the time of its execution that it would be unjust to

hold them to the literal sense of its stipulations in the new circumstances; in such case

the law declares both parties to be discharged from further performance.”

29. The Respondent defends that the events that took place during the time the contract

was in place, were so outstandingly unexpected, that no one could have reasonably

expected or foreseen them, and therefore take action in order to prevent the damage

that this contractual relation would suffer.

30. The Respondent considers that those unforeseeable events were the coup d’Etat by the

former President Jacqueline Simmons and the following issue of the Presidential

Decree, with the clear instructions of bringing back the MV Athena to Hades.

31. Information or news that were publicly available around the time before the coup

d’Etat, did not provide any sign that anyone in Hades was expecting a coup d’Etat

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that would take place inside the Parliament. There is no evidence that the State was

suffering such difficult hardships that it made it possible that someone consider

setting aside their democratic principles and successfully attempting to gain the

control of the country by the use of force. If the previous Hades government was not

able to foresee, and therefore prevent the coup d’Etat of Jacqueline Simmons, it

cannot be expected that Charterers would have.

32. Nevertheless, while the coup d’Etat would not have prevented the vessel from

leaving, the Presidential Decree and the subsequent arrest by the Coast Guard,

effectively did prevent it. This sequence of events, including a government order with

its executive force, must be considered, not only an event external to the contract and

the parties, but also a sufficient cause of frustration on grounds of the impeding

effects that it has had in the proper performance of the contract.

33. Several cases, such as Playa Larga v I Congreso del Partido16 and Water Board v

Dick, Kerr & Co. Ltd17 confirm that a contract can be frustrated by an external action

arising out of a government. In the second case, frustration was also based on the fact

that the delay caused by the government intervention was of such a nature, that if the

contractual obligation had been resumed afterwards, it would have been a completely

different contract.

34. Here, the delay and the need to receive the cargo on the 2 November, rendered the

contract worthless, and for Hestia, to continue the contractual obligation after the MV

Athena was released was impossible, as it can not consider the contract to be the

same, since the conditions had completely changed. For that reason, Hestia made it

16 Playa Larga v I Congreso del Partido [1983] 1 AC 244 17 Metropolitan Water Board v Dick, Kerr & Co. Ltd [1918] AC 119

20

clear, that the cargo was of “significant value” and should be at Poseidon on the 2

November.

35. In both cases, the Presidential Decree and the order of the Coast Guard, the reason for

not being able to perform the contractual obligations was an external factor, and thus,

it was a cause of frustration of the contract.

36. In this way, the effect of frustration or serious breach brings the contract to an end,

that is to say, frustration kills the contract and discharges the parties from further

liability under it18, implying that the contract itself is dissolved19.

II. ALTERNATIVELY, THE CONTRACT WAS FRUSTRATED AT THE

MOMENT HESTIA COMMUNICATED THIS FACT BY 30 APRIL 2015

37. Even if a reasonable forecast of the probabilities at the time when the event first

occurred did not lead to the conclusion that its effect on the contract will be so radical

as to lead to its frustration, the contract may become frustrated at a later stage when it

emerged that the effect of the event upon the contract is likely to be more severe than

originally elucidated. In those circumstances delay or disruption which has already

occurred can be brought into account20.

38. There was no provision in the Charterparty about the rights the parties held in case of

a coup d’Etat. Nevertheless, even if there existed a provision for that purpose, this fact

will not entirely exclude the doctrine of frustration when the performance is

sufficiently disrupted by the cause.

39. In the case that the tribunal finds that, in a first stage, there were little chances for a

coup d’Etat to happen and the subsequent arrest by the Coast Guard, Charterers sent

18 The “Super Servant Two” [1990] 1 Lloyd’s Rep. 1 at p.8, by Bingham LJ 19 Lord Atkinson, Larrinaga Steamship Co v Société Franco-Américane des Phosphates de Medulla [1923] All

ER Rep 1 20 Jackson v Union Marine Insurance (1874) LR 10 CP 125

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an email on the 30 of April to the Owners informing that the contract was frustrated

by delay resulting from temporary impossibility.

40. The length of the delay necessary to bring about frustration depends on the

circumstances of the cases, being an essential condition to assess whether the ship

arrived at the discharging port in time for it. In Jackson v. Union Marine Insurance21

the court held that the delay was so long that it put an end to the commercial purpose

of the Charterparty, as it took eight months to end the journey. Thus, it is likely that in

cases where prompt performance is essential, delay of considerably less that the

experienced in this case would be sufficient to cause frustration.

41. Cases like Trade and Transport v. Iino Kaiun Kaisha Ltd. (The Angelia)22and Ocean

Tramp Tankers Corp v V/O Sovfracht (The Eugenia)23 show that a good indicator to

consider if the delay is sufficient to frustrate the contract is the length of the delay

compared with the entire length of the chartered service, being the delay in our case

more that 6 times the length that the parties anticipated in the Charterparty.

42. Indeed, the delay caused was of such nature that the parties could not continue with

the business that they had already fixed and, consequently, the Respondent tried to

seek offers from the market to find a vessel to transport the HLNG from Hades to

Poseidon.

43. Moreover, the cargo was of such a significant value that Hestia would suffer

significant losses should the cargo not be delivered on time and nonetheless the

Respondent be under an obligation to continue with the Charterparty’s performance.

In light of all the said circumstances, and particularly of both the extension of the

delay and the terms of the contract, such performance would be such a radically

21 Ibid. 22 Trade and Transport v. Iino Kaiun Kaisha Ltd. (The Angelia) [1972] 2 Lloyd's Rep. 154 23 Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 Q.B. 226. 61

22

different adventure from that which was initially contemplated by the parties that the

Charterparty could not remain on foot24.

44. Consequently, the contract was frustrated by reason of the delay not later than the 30

April 2015 at the time the Respondent informed about this situation to the Claimant.

As a result thereof, and if any demurrage was due, no demurrage should be deemed

accrued after 15 April 2015.

III. ALTERNATIVELY, DEMURRAGE IS NOT DUE

A. Demurrage is not due under Clause 10 of the Charterparty

45. In Clause 9 (c)(i) of the Charterparty, the Claimant and the Respondent agreed upon

10 WWD SHINC days as the laytime permitted to load the Cargo onto the Athena25.

The aforementioned laytime was not to be counted before 0700 hours of 1st October

201426. The cargo was loaded on time and before the laytime was exhausted on 6

October, and the Athena sailed from the Loading Port the following day. When the

vessel sailed from Hades on the 7 October27, laytime stopped to run, which implies

that demurrage cannot longer be claimed as it is calculated “over and above the lay-

days” at the loading port, as stated in Clause 10 of the Charterparty28.

46. Furthermore, since the Charterer holds an obligation to nominate a safe port or berth

to load, as stated in the introduction of the Charterparty, the Respondent asserts that

the berth is the Loading Place29. Lord Diplock in E.L Oldendorff v Tradax Export30

dealing with the “adventure contemplated by a voyage charter” identified the four

successive stages of a voyage charter and, in particular, that the place of arrival at the

24 Moot case p. 65 25 Moot Case, p. 34 26 Moot Case, p. 33, Clause 4 27 Moot Case, p. 54 28 Moot Case, p. 36 29 Moot Case, p. 31 30 The Johanna Oldendorff [1974] AC 479

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discharge port is “the point both geographically, and in time, when the voyage stages

end and the loading or discharging operation begins”. Applying this logic, the berth

should be considered as the exact loading place.

47. There are essentially two different types of voyage charter – namely a berth charter

and a port charter. The distinction is important for determining when the loading

voyage ends. A berth is a specific place within a port. It is the place where the vessel

actually loads and discharges. Under the terms of a berth charterparty, the loading

voyage does not end until the vessel is actually in the berth where it will load the

cargo. Therefore, the berth is the agreed destination and the vessel will be an arrived

ship then she is securely moored there. In the case of North River Freighters Ltd. V

President of India31 Jenkins LJ made it clear that laytime in a berth Charterparty could

not commence until the vessel has arrived at its particular berth as specified in the

Charterparty. In this case, the contract shall be considered as a berth Charterparty.

48. As a consequence, when the vessel left the berth, and therefore, the loading place,

laytime is considered to stop counting and demurrage is prevented form accruing. As

stated in Inverkip Steamship Co Ltd v Bunge & Co32, demurrage can be characterised

as an agreement as to liquidated payment for loss arising out of extension of time for

loading or discharging beyond laytime stopped to run when the Athena left the berth

as confirmed in the Statement of Facts33 and in the emails between the Claimant and

the Master from 8 October 201434, were they confirmed that the vessel sailed out from

Hades territorial waters. This implies that the Claimant has no right to demurrage, as

31 [1955] 2 Lloyd’s Rep 668 32 [1917] 2 KB 193 (CA), Michael John Wells, Demurrage and the Availability of General Damages, [2008]

ANZMLJ 8. 33 Moot Case, p. 54 34 Moot Case, p. 58

24

it is only payable over and above the laytime, as established in Clause 10 of the

Charterparty35.

49. Alternatively, and even if the berth is not considered to be the Loading Place, but the

Hades Port should be taken as a whole to be such place, the Athena also left the Port

area. The vessel was outside Hades territorial limits when she was intercepted by the

Coast Guard, and the Claimant is stopped from contending otherwise36.

50. In summary, the right to claim demurrage foreseen in Clause 10 of the Charterparty is

admissible for those situations in which the vessel remains at the loading place over

and above the agreed laytime period. In this case, the Athena clearly left the loading

place, which is the berth, when she started to sail on 7 October at 090037 or, if it is

Hades Port, when reaching the outer limits of its territorial waters. When the vessel

does not longer remain within the Loading Place, laytime stops to run and demurrage

does not accrue. As a consequence, the Claimant is not entitled to any claim for

demurrage.

B. Alternatively, if the Tribunal considers that the Athena did not leave the Loading

Place, such a fact is under the Claimant’s liability

51. Even if the Tribunal considers that the vessel did not leave the Loading Place, and

therefore, laytime continued to run and when it was exhausted, demurrage started to

accrue, demurrage is not due by the Respondent; since the Claimant refused to

properly perform the obligations of the contract. Thus, due to the breach of the

contract made by the Claimant, the Respondent does not owe any demurrage.

35 Moot Case, p. 36 36 Moot Case, p. 58 37 Moot Case, p. 54

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52. Claimant breached the obligations under the Charterparty to sail with due dispatch,

and the fact that the vessel did not leave the loading place could have been avoided if

the Claimant had sailed at a reasonable speed and with due diligence. Had the

Claimant sailed at a reasonable speed. The Athena would have been in fact beyond the

reach of the authorities of the new government, preventing this conflict. By virtue of

this behaviour, the Claimant is not entitled to any demurrage claim.

53. Here, the Respondent remarks upon the space of time the Athena took to cross Hades

territorial waters, which constitute 12M38, since she left the Port at 090039 on 7

October 2014 and was intercepted by the Coast Guard late that same day40. Thus, this

signifies that if sailing at a regular speed, the vessel in all day long could have reached

the outer limits of Hades Port sufficiently far not to be intercepted by Hades Coast

Guard.

54. Additionally, all vessel operators should operate their vessel in accordance with the

‘Safe Speed’ requirement in Rule 6 of COLREGs41 where some factors are

established. Even if taking all these circumstances into account, it is unreasonable that

a vessel takes more than four hours to reach the outer limits of a port. The Athena

even doubled this length, which proves that they did not navigate as expected.

55. Moreover, the Respondent does not owe demurrage because the Master, Captain

Marcus Yi, was not under a compelling need or duty to return to Hades Port once the

Athena was already outside territorial waters, and if he did so, it was at his and the

Owner’s risk.

38 UNCLOS, Article 3 39 Moot Case, p. 54 40 Moot Case, p. 57 41 Convention on the International Regulations for Preventing Collisions at Sea, 1972

26

56. The Master was not obliged to follow the Coast Guard orders under the law because

such orders came from a non-legitimate authority. This unjustified deviation from the

route is considered to be a fundamental breach of the contract and enables the party

affected to treat the breach as a repudiation bringing the contract to an end42. Thus, the

party affected is entitled to declare itself as no longer bound by any of the terms of the

Charterparty, as Lord Atkin stated in Hain Steamship Company Ltd v Tate & Lyle

Ltd43. Alongside this, the deviation caused an unreasonable delay in the performance

of the Charterparty. Such delay deprived the charterer of the whole benefit of the

contract and frustrated the object of the charterer in chartering the ship44, entitling the

Respondent to treat the contract as repudiated. Furthermore, this clearly displays that

if a deviation from the adventure occurs, the obligation to pay demurrage is revoked.

IV. HESTIA IS ENTITLED TO CLAIM SALVAGE REWARD

A. The International Convention on Salvage 1989 applies to the case

57. Pursuant to article 2 of the ICS1989, the aforementioned convention shall apply to

arbitral proceedings relating salvage that are brought in a State party. In consequence,

due to the fact that United Kingdom is a State Party, the ICS1989 provisions apply to

this case45.

B. Right to claim salvage reward

58. It is a well settled principle of salvage that only salvors are entitled to claim salvage

reward. However, recent precedents held that there are not rigid categories of

42 Scrutton on Charterparties and Bills of Lading, 11th Ed, p. 259 43 Hain Steamship Company Ltd v Tate & Lyle Ltd [1936] 2 All ER 597 44 Per Willies in MacAndrew v Chappie (1866) L.R. 1 C.P. 643 at p. 648. 45 United Kingdom is a State Party according to International Maritime Organization documentation on

https://imo.amsa.gov.au/public/parties/salvage89.html

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salvors46. In The Sava Star was held that, given that the ship owner is entitled to claim

salvage reward against the cargo owner, there is no reason for a cargo owner being

banned from claiming salvage against a ship carrying its cargo. Therefore, what must

be looked at instead, is whether the services rendered by the cargo owner are

extraordinary and go beyond to what can be expected, such as the provision of a

salvage tug47.

59. In addition, without prejudice of being preclusive, it can be inferred from case law

that one element in order to be considered salvor is the personal risk exposure taken

under the salvage48. In The Sandefjord49, for instance, a pilot was rewarded with

salvage reward because he put at risk his job and personal reputation. The salvor,

then, has to undertake an extra risk when performing the salvage.

60. In the case at hand, it is a matter of fact that Hestug, the towage company which

rendered the salvage service, is owned by the Respondent50. Because of that, the

Respondent argues that Hestug operates under its direction and authority51 and,

consequently, the tugs employed in the salvage are Hestia’s property.

61. Further, when the tugs performed the salvage, the Respondent undertook a risk as

they had to make and extraordinary effort going out of their way to salve an

endangered vessel, when there is possibility that the services are rendered under a

towage contract. As a result, the Respondent must be considered salvor and therefore

be entitled to claim salvage reward against the Claimant.

46 The Sava Star [1995] 2 Lloyd’s Rep. 134; Swire Pacific Offshore Services Ltd v MV 'Roxana Bank [2004]

ZASCA 75 47 The Sava Star [1995] 2 Lloyd’s Rep. 134; REEDER, J., “Briece on Maritime Law of Salvage”, Sweet and

Maxwell, 5th Ed., 2011 p. 89 48 Also pursuant article 13 of ICS1989 the risk run by salvors or their equipment is taken into consideration in

order to fix the amount of reward 49 The Sanderjord [1953] 3 Lloyd’s Rep. 557 50 Moot Case, p. 71 51 Moot Case, p. 73

28

C. Services provided to the Athena do constitute salvage

62. ICS 1989 defines salvage as: “any act or activity undertaken to assist a vessel or any

other property in danger in navigable waters or in any other waters whatsoever”.

Given that It is well settled that services rendered in order to constitute salvage must

fulfil four requirements52: (a) Services must be rendered to a legally recognized

subject of salvage (b) services rendered must be successful (c) The subject of the

salvage must be in real danger (d) the service must be voluntary

63. The Respondent states that the services rendered on 7 October to the Athena do

constitute salvage and therefore this party is entitled to claim a salvage reward.

a. Services were rendered to a legally recognized subject of salvage.

64. Pursuant to clause 1 of the ICS 1989 the subject of the salvage must be “any ship or

craft or any structure capable of navigation”. It is beyond any doubt that the Athena

is under the scope of what is considered a subject of salvage.

b. Services rendered are proven to be successful

65. On grounds of article 12 of the ISC 1989 no salvage reward is due unless the salvage

operation has had a useful result. In other words, in order to be entitled to claim

salvage property must be saved in whole or at least in part53. Since the Athena and her

cargo were rescued, thereby saving several millions of dollars in property54, it is clear

that the salvage have had a valuable and useful effect55.

52 HILL, C., “Maritime Law”. Informa Law from Routledge ,6th Edition, 2003, p. 312 53 Owners of the Motor Vessel Tojo Maru v. N.V. Bureau Wijsmuller, [1972] AC 242 54 Moot Case, p. 71 55 The E.U., A. C., 7 June, 1853, I.E & A. R. 263

29

c. The vessel was indeed in real danger

66. In the light of Article 1 of the ICS 1989 it is a requirement to consider the operations

performed as salvage that the vessel must be in danger. As for the concept of danger,

it must not be necessarily imminent and absolute, but it is sufficient that at the time

the assistance is rendered the vessel has encountered any damage or misfortune which

might possibly expose her to destruction if the services were not rendered56. Further,

danger must not be necessarily absolute, being for these purposes sufficient a state of

difficulty and reasonable apprehension57.

67. In the present case the Athena was in real danger because she could not navigate as a

result of the breakage of the shaft propellers, leaving her, the crew and the cargo adrift

in open waters, thereby exposing her and her cargo to severe damage, if not

destruction. It is undoubted that the Athena, being adrift and with no chance of

controlling the propellers, could not be able to reach a safe place by herself and

needed the assistance of Hestug58. Furthermore, without no possibility to manoeuvre

with her own means, the vessel would have been exposed to wider damages if the

services were not render. She was in fact under the threat of a real danger stemming

from all the risk involved in the area, which included running aground, crashing

towards the coast or colliding into another vessel as she was near of a port in where

the traffic level is notably higher.

68. Additionally, it is of enormous importance to ascertain the huge danger to which the

Athena was exposed, that she was also carrying Liquefied Natural Gas59, a dangerous

56 The Charlotte, 3 W. Rob 68 (1848), 71 57 The Panthom [1866] LR. 1 A&E. 60 58 HILL, Christopher. “Maritime Law”. Informa Law from Routledge, 6th Edition, 2003. Page 318 ”if the ship

and or its cargo is beyond the point where it is able to safe itself or bring itself to a place of refuge and needs

outside assistance then it is a situation of danger” 59 Moot Case, p. 2

30

cargo which posed a high risk of damage to the port and the environment in case of

accident60.

d. Services rendered were in fact voluntary

By virtue of Article 17 of the ICS 1989, the last condition in order to be entitled to

claim salvage reward is that the service rendered must not be given under an existing

contract. In the present case the services were rendered by Hestug, a tug services

company that were hired by the owner of the vessel in order to perform towage

services at Hades61. However, at the time the salvage took place, the towage services

had been finished. As was held in The New Australia62, the fact that Hestug previously

had carried out towage services it is irrelevant provided that the Athena had set sail by

itself when Hestug returned to render salvage63. In consequence there was not a

towage contract between the parties at the time the assistance was made.

D. Hestia is entitled to claim special compensation

69. The special compensation regulated in Article 14 of the ISC 1989 is to be rewarded,

as an independent award from the main salvage claim, when “the salvor by his

salvage operations has prevented or minimized damage to the environment”.

70. There are two requirements for claiming this special compensation: (A) the existence

of an environmental threat; and (B) the non-satisfaction of salvage costs by the

reward.

60 IMDG Code of International Maritime Organization considers LNG has a dangerous and potentially harmful

nature 61 Moot Case, p. 68 62 The New Australia [1958] 2 Lloyd’s Rep 35 63 Moot Case, p. 71

31

a. The existence of an environmental threat

71. First, there must a threat to the environment. As owner of the cargo, the Respondent

has knowledge of the danger the HLNG entails to the environment that is why he

contracted with the Claimant, whose vessel had the appropriate conditions for

carrying it. When releasing the tow lines, the vessel began to drift in an uncontrolled

manner, which clearly put in danger the safety of the HLGN, posing a threat to the

environment.

b. The non-satisfaction of the costs of salvage

13. Second, the reward given to the salvor should not cover the costs derived from

performing the salving operations. “The special compensation payable by the owner

to the salvor under paragraph 1 may be increased up to a maximum of 30% of the

expenses incurred by the salvor. However, the tribunal, if it deems it fair and just to

do so and bearing in mind the relevant criteria set out in article 13, paragraph 1, may

increase such special compensation further, but in no event shall the total increase be

more than 100% of the expenses incurred by the salvor”.

14. The special compensation should not be regarded as plus, but as an extraordinary

award to help cover the costs of the operation when there may be a threat to the

environment. Since the salvage operation took the vessel to a safe position, it has been

a successful salvage and the Tribunal should take into consideration this fact in case

of denial of a reward.

E. Hestia does not have to contribute to the payment of salvage reward

15. Admittedly, in general terms the cargo and the vessel must proportionately to their

salved values contribute to the salvage expenses in accordance with Article 13.2 of

the ICS 1989.

32

16. However, it is a well settled maritime law principle that the owner of the cargo must

be relieved from such contribution when the salvage were rendered necessary because

of the vessel´s negligence or unseaworthiness64. Furthermore, under these

circumstances it is widely accepted that the owner of the ship cannot claim

contribution to the owner of the cargo65. As a result, the owner of the vessel must pay

the entire salvage expenses66.

17. In the present case, the Respondent states that the Athena was unseaworthy. It is a

firmly established maritime law rule, that for any charterparty, the shipowner

impliedly ensures that the vessel is seaworthy67. Seaworthiness entails that the vessel

is able to withstand those foreseeable perils that she might encounter when

performing the charterparty and being able to keep safe the cargo form them68. On the

other hand if the vessel it is not able to withstand the ordinary perils that she may

encounter during the voyage and keeping the cargo safe thereof she is unseaworthy.

18. In the light of the facts, and given that the shaft propellers broke69, it is clear that the

Athena was unseaworthy. Moreover, the Respondent argues that even if the shaft

propeller breakage was due to a sabotage it is under Zeus responsibility to check the

machinery before setting sail. The mere fact that the Respondent did not realise such

severe breakdown in the machinery of the Athena, prior to set sail, particularly in light

of all preceding difficulties it is a clear indication that the Respondent behave in a

negligent manner. Accordingly, the services rendered were necessary because of

64 Duncan v. Dundee Shipping Co. [1878], 5 R. 742 The Loyal [1913] 204 Fed. 930; Co International

Navigation Co. v. Atlantic Mutual Ins. Co [1900] 100 Fed. 304 65 The Royal Princess [1853] A.C. 66 Duncan v. Dundee Shipping Co. (1878), 5 R. 742 ; Five Steel Barges (1890) LR 15 PD 142 67 Davis, Martin, Shipping Law, 2nd Edition, Sydney, 199, page 236; Kopitoff v Wilson [876] l QBD 377 68 Ibid, p. 237; Actis Steamship Co Ltd v. The Sanko Steamship Co Ltd (The Aquacharm) [1982] 2 Lloyd’s Rep

237; Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad [1998] 196 CLR

161; The Good Friend [1984] 2 Ll. Rep 586 69 Moot Case, p. 71

33

Zeus’s breach. As a result of the above arguments, the Respondent does not have to

contribute to the salvage reward and consequently only the Claimant must bear for the

entire expenses.

34

PART THREE: PRAYER FOR RELIEF

For the reasons set out above, the Respondent requests this Tribunal to:

DECLARE that this tribunal does not have jurisdiction to hear on the merits of the claim

submitted by the Claimant, or

Alternatively,

FIND that the Charterparty between the Claimant and the Respondent has been frustrated,

and demurrage is not due,

alternatively

FIND that the Respondent, according to the Charterparty, is not liable for demurrage as

claimed by the Claimant;

as well as to

DECLARE the Tribunal's jurisdiction to decide on the matter of the counterclaim, and

FIND that the Respondent is entitled to the salvage reward conferred by Article 13 of the ISC

1989 and the special compensation provided for in Article 14.