Premier (owners) commenced arbitration against Hellenic (charterers) in respect of alleged repudiatory breaches of a charterparty for Premier’s LPG tanker, M/V “NAVIGAS 1”. Hellenic reserved its position as to jurisdiction before the arbitrator, but the arbitrator found in favour of Premier awarding it US$672,685 plus interest and costs.

Hellenic challenged the award under section 67 of the Arbitration Act 1996 on the grounds no arbitration  clause was incorporated into the agreement between the parties and the arbitrator therefore lacked substantive jurisdiction.1

The “interim arrangement”

Hellenic first chartered the vessel from Premier between March and September 2010. Hellenic argued that this was a hybrid arrangement on an interim basis and not a time charter as such because it was of no defined duration.

Premier’s case was that the arrangement was a time charterparty for one year, alternatively for an indefinite duration. It was common ground that the charterparty did not include any form of arbitration clause.

The “new” charter

Premier contended before the arbitrator that: (i) by a meeting and subsequent telephone call on 24 September 2010, the parties reached agreement on a new two-and-a- half-year time charter; and (ii) by subsequent words and conduct, Hellenic agreed the terms of that charter as set out in a draft sent by Premier to Hellenic in September 2010, including a London arbitration clause.

Hellenic’s case was that there was no such agreement either at the meeting or subsequently, but that the previous interim arrangement (without an arbitration clause) continued until redelivery of the vessel in April 2011.

Arbitration

Premier commenced arbitration in reliance on the London arbitration clause in the draft charter Premier sent to Hellenic in September 2010.

The arbitrator found that he had jurisdiction to determine Premier’s claim on the basis that the parties had agreed  the London arbitration clause. Although it was common ground that the arbitration clause was not mentioned, let alone agreed, at the meeting or in the telephone call, the arbitrator found that Hellenic had agreed it because they had not expressly rejected it or put forward any alternative jurisdiction or arbitration clause.

Appeal

The High Court judge held on appeal that no agreement was concluded in principle or on commercial terms at the meeting on 24 September 2010 or in subsequent telephone calls. Accordingly, it followed that Premier’s case that there was a binding long-term charter, and that it was subject to a London arbitration clause, had to fail. The arbitrator had no jurisdiction so the award was set aside.

Since there was no express acceptance of the long-  term time charter, there could only have been a binding agreement if Hellenic had implicitly accepted Premier’s offer by conduct. The legal test was whether Hellenic had accepted the offer with the intention (ascertained objectively) of accepting the offer.

After considering in detail the factual background against which Hellenic came to be contracting with Premier in September 2010, the judge concluded that Hellenic’s conduct was inconsistent with any acceptance of Premier’s draft charterparty or, at best, equivocal.

The judge looked at matters including:

  • The fact that Hellenic had made clear to Premier that it was unwilling to commit to a long term charter unless there was a corresponding underlying sales contract with the LNG supplier, Synergas. Hellenic kept Premier updated on the progress of its negotiations  with Synergas and Premier was aware that those negotiations had broken down at the point when Premier alleged that Hellenic agreed to the time charter.
  • The new time charter contained a daily hire rate of US$500 more than the daily rate under the interim arrangement. This amounted to a significantly different financial commitment which Premier must have appreciated would have been outside Hellenic’s representatives’ authority and would have required board approval. The fact that no such approval was ever sought by Hellenic was telling.

Comment

Although this case does not represent a departure from the legal position prior to its decision, it is a reminder that where a party wishes to argue in the absence of express agreement that a particular contract or term was in fact concluded, the court is likely to consider in depth both  the factual matrix existing at the time of the purported agreement’s negotiation and the subsequent conduct of the parties. If these facts and conduct, when objectively assessed, is inconsistent with agreement having been reached then the court is very unlikely to uphold the terms of the purported agreement.