The Grand Amanda: The Implied Indemnity Revisited

On 30 July 2025, Henshaw J delivered the High Court’s judgment on an appeal brought under section 69 of the Arbitration Act 1996.

The decision which deals mainly with the principle of the implied indemnity, offers a detailed analysis of the authorities on the subject, including the leading authority of The Island Archon [1994] 2 Ll. Rep. 227 in the Court of Appeal.

The case involved a claim under a charterparty in the NYPE 1946 form from the Owners of the ‘Grand Amanda’, a bulk carrier chartered to load soya beans in bulk from Montevideo, Uruguay and Bahia Blanca, Argentina to China, against the Charterers. The cargo was discharged in China between the 20 July and 12 August 2014. Owners sought an indemnity of US$6,030,603.53 in respect of losses and expenses incurred by Owners, who were held liable in Chinese Court proceedings in a claim from the receivers in respect of cargo loaded in Montevideo, which was found damaged.

The Arbitration proceedings

Charterers first argued that Owners’ choice to defend the cargo claim before the Chinese Court without filing anti-suit injunction in England, by virtue of the incorporation of the jurisdiction clause incorporated into the bills of lading, was unreasonable. The Tribunal rejected the argument holding that an injunction would not have practically assisted Owners.

Finding that the cause of the damage was due to inherent vice, the arbitrators found for the Owners on the ground of an implied indemnity after having concluded that the Inter-Club Agreement (“ICA”), which was otherwise incorporated in the charter, did not apply. In that regard, it was ultimately common ground between the parties that the ICA did not apply as the cargo liability had been determined by a court judgment and not by agreement to settle (as per Clause 4(c) and in particular the requirement that “the claim has been properly compromised or settled and paid”).

The Tribunal held that the risk of a cargo liability for inherent vice or for a foreign court imposing liability wrongly was not risks the Owners had agreed to bear under the charter and that Owners were entitled to an implied indemnity. 

Interestingly, even if the ICA were to apply, the arbitrators stated that the result would have been the same – i.e. as Charterers’ act was to load the specific lawful, harmless and permitted cargo, which was affected by inherent vice, that was sufficient to hold Charterers liable under Clause 8(d) of the ICA for 100% of the cargo claim.

Charterers’ application for permission to appeal was granted by Baker J only on whether the Tribunal erred in law in upholding Owners’ implied indemnity claim, considering that the issue in question was of general public importance. The judge considered that the Tribunal’s Reasons may have been contradictory, in that it appeared to accept that the cargo was lawful and permitted but also said that it was “outside the limits of the Charterparty”, and secondly, and more importantly, that the arbitrators might have misunderstood The Island Archon.

The High Court proceedings

Charterers’ arguments

In summary, Charterers put forward the following arguments:

1. Owners, in a true construction of the charter, had agreed to bear the risks involved with carrying a lawful, harmless, and permitted cargo within the trading limits of the charter;
2. The general implied indemnity does not apply where a risk has not changed between the time the contract is formed and the time of the loss and where the terms of the bills of lading are no more onerous than those envisaged by the charter;
3. On commercial considerations the risk in question should be considered an Owners’ risk; and
4. There should be no difference between cases where the cargo claim arose due to inherent vice and where it did not. “In either case the owner has accepted the risk of cargo claims consequent on carrying lawful, permitted, harmless cargo to a port within the bounds of the charterparty”.

Owners’ arguments

In response, Owners argued that: 

1. Charterers were seeking to appeal a finding of fact;
2. The Tribunal had correctly analysed the authorities on implied indemnity;
3. This risk was not one Owners had agreed to bear and that the terms of the charter support their case that this risk was one for Charterers; and
4. The implied indemnity still applies in cases where the ICA does not.

The High Court’s judgment

As Henshaw J noted, the crucial questions remained whether Owners had agreed to bear the risk of facing a liability in foreign courts in respect of a cargo affected by inherent vice, and whether the loss was caused by complying with the Charterers’ orders. 

Starting off by analysing the relevant authorities on the implied indemnity, the judge upheld the Tribunal’s decision by finding that the implied indemnity can arise in situations where the cargo is lawful and permitted yet nonetheless gives rise to a loss, and also that the arbitrators had correctly understood and applied The Island Archon. In respect of the latter case, it was held that the owners were entitled to an indemnity, since their loss arising from cargo shortage or damage, was effectively caused by the charterers’ (lawful) order to discharge cargo in Iraq, and the loss arose from a risk which the owners had not agreed to bear.

Addressing Charterers’ argument that The Island Archon decision was based on a change in circumstances between the time of the charterparty and the time of the loss—a factor not applicable in the present case and therefore precluding any implied indemnity—Henshaw J disagreed. He held that the decision did not support the proposition that owners “have implicitly agreed to bear all risks that do not arise from an external change of circumstances after the date of the charterparty”.

Henshaw J also rejected Charterers' argument that where an order is lawful, the implied indemnity is not engaged in respect of risks that are foreseeable. The judge held that while foreseeability may be a relevant factor, it is not determinative. Most losses arising from charterers' orders could be considered foreseeable, but that alone does not bar reliance on the implied indemnity.

In his detailed judgment, Henshaw J carefully considered the parties’ arguments and accepted, at [122], that “the risk of a microbiologically unstable cargo resulting in damage and liability arises directly out of the orders of charterers, who have discretion over the particular cargo selected for shipment and the selection of ports of loading and discharge”. 

As Owners had no control over those decisions, the judge agreed with the Tribunal that it was the shipment of such a cargo that caused the loss in question. Neither the interpretation of the contractual terms nor commercial considerations were in aid of Charterers and since there was no break in the chain of causation, Owners were to succeed under the implied indemnity.

Comments and take-away points

This is a positive decision for shipowners and serves as a reminder that the doctrine of the implied indemnity may be an available tool against a charterer. The implied indemnity is, however, not without limits, so careful consideration of both the contractual terms – whether (i) an owner has agreed to accept  a specific risk, and (ii) a liability is “an ordinary cost or risk associated with the performance of the chartered service” – and the facts of each case cannot be overstated.

Conversely, this case is another example where thoughtful and bespoke drafting of charterparty clauses may prevent costly disputes and offer contractual certainty. 

Interestingly, this case reinforced the need for clarity and led to the latest amendment of the ICA by the IG Clubs [London IGPI Circular], where it is now clear that a claim can be “settled” for the purposes of Clause 4(c) by a decision of a Court or Tribunal. Although, the intention of the IG Clubs has always been that the term “settled” encompassed a court judgment or arbitration award, express confirmation is always welcome.