Reconciling Competing Time Bar Provisions - A Stroke of Genius?

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Ensuring all possible time limits are protected is every claimant’s s nightmare, but the English High Court may have provided some certainty in this regard for cargo claims pursued under the Inter-Club Agreement 1996, with their recent decision in the case of MH Progress Lines SA v Orient Shipping Rotterdam BV (The “Genius Star 1”) [2011] EWHC 3083 (Comm).

MH Progress, chartered their vessel, the “Genius Star 1”, to Orient under a time charterparty on an amended NYPE 1946 form. Orient re-let the ship for a single trip time charter to Nordana, for the carriage of cargo from Germany to the United States. The cargo was discharged on 19 September 2006, following which a cargo claim arose. Nordana settled the claim and sought an indemnity under the Inter Club Agreement 1996 (“ICA”) incorporated in the sub-charter. Orient passed the claim on the same basis to the owners under the head charter. Both contracts also contained an amended Centrocon time-bar of 12 months from final discharge for all claims.

Back to back arbitrations were commenced but not within 12 months from final discharge. Relying  on the 12 month time limit in the Centrocon clause, and despite notification under the ICA having been given within the  two year time limit applicable to ICA claims for indemnity,  owners asserted that the claim was time-barred.

The Tribunal found in favour of the charterers and the case reached the High Court following an appeal filed by owners seeking to reverse the arbitrators’ decision that the claim(s) were submitted within time, by allowing the time-bar provisions in the ICA to prevail.

The Charterparty provided;

Clause 26

… all cargo claims to be settled as per Nype Interclub Agreement 1996 and any amendments thereto, same as when trading for their own account.

Clause 39

“Any claim must be made in writing and the claimant’s arbitrator appointed within 12 months of final discharge and where this provision is not complied with the claim shall be deemed to be waived absolutely barred.

The relevant provisions of the ICA stipulate;

(2) The terms of this Agreement shall apply notwithstanding anything to the contrary in any other provision of the charterparty; in particular the provisions of Clause (6) (time bar) shall apply notwithstanding any provision of the charterparty or rule of law to the contrary.

(6) Recovery under this Agreement by an Owner or Charterer shall be deemed to be waived and absolutely barred unless written notification of the cargo claim has been given to the other party to the charterparty within 24 months of the date of delivery of the cargo or the date the cargo should have been delivered, save that, where the Hamburg Rules or any national legislation giving effect thereto are compulsorily applicable by operation of law to the contract of carriage or to that part of the transit that comprised carriage on the chartered vessel, the period shall be 36 months. Such notification shall if possible include details of the contract of carriage, the nature of the claim and the amount claimed.

(9) This Agreement shall be subject to English Law and Jurisdiction, unless it is incorporated into the charterparty (or the settlement of claims in respect of cargo under the charterparty is made subject to this Agreement), in which case it shall be subject to the law and jurisdiction provisions governing the charterparty.”

The dispute was one primarily of construction; (a) how to reconcile the conflicting time bar provisions of clause 39 of the charterparty and clause (6) of the ICA 96 and (b) whether the time-bar provisions of clause 39 were  incorporated in the ICA 96 by virtue of clause (9) therein.

On the first point, owners’ counsel argued that the two time-bar clauses were not in direct conflict as they served different purposes. The ICA clause required notification of cargo claims within the prescribed period (in this case, two years), whereas the Centrocon provisions would set out the time limits for commencing arbitration under the charter. Ancillary to this issue was the question of which clause would prevail should a conflict be established. Owners asserted that the Centrocon time-bar should prevail because (i) clause 39 is a rider clause which should logically override any contrary provisions in the standard form of the charterparty, and (ii) that the ICA time limit was restricted to cargo claims, whereas the spectrum of clause 39 was for any and all claims without restrictions.

The judge  found that a conflict did exist between the two time-limit provisions, on which the ICA limit would prevail for cargo claims falling within its scope. The two time-bars, he said, in fact served the same purpose in that they both outlined certain requirements (albeit different in nature), which if not met would cause the claim to be waived. He proceeded with reading the contract as a whole as opposed to giving more gravity to the rider clauses, and on the basis of clause (2) of the ICA (“The terms of this Agreement shall apply notwithstanding anything to the contrary in any other provision of the charterparty; in particular the provisions of Clause (6) (time bar) shall apply notwithstanding any provision of the charterparty or rule of law to the contrary.), concluded that the ICA time-bar should apply. This, he considered, would be the way a reasonable person would understand  the operation of the ICA , assuming he holds the same background knowledge as owners and charterers.

The secondary issue of incorporation of clause 39 into the ICA was resolved in favour of the charterers by reference to the parties’ intentions. It could not possibly have been the intention of the parties to nullify clause (6) by virtue of retroceding clause 39 into the ICA through clause (9). This would defeat the purpose of clause (2).

It is interesting to note that this decision should apply to ICA 2011 cases in the same manner, where the material clauses of the agreement remain unamended.