Hellenic Petroleum Cyprus Limited v. Premier Maritime Limited (Navigas 1) [2015] EWHC 1894 (Comm)

Parties should be very careful when negotiating an agreement to ensure that there are no misunderstandings as to whether a contract has been concluded or not. In this case, it was not clear whether the parties had concluded a long-term charter and therefore, it was not clear whether there was a valid arbitration agreement. That confusion meant that time and costs were wasted seeking an arbitration award only to have it set aside by the English Court.

The background facts

Between March and September 2010, Hellenic chartered Premier’s LPG tanker Navigas 1. Hellenic’s position was that it was an interim arrangement, by way of recaps incorporating the BPVoy 4 form, of indefinite duration. Premier’s position was that the charter was a time charter for a year or, if not, it was a charter for an indefinite duration.

Premier’s case is that the arrangement then changed. That was on the basis of:

  1. a meeting and telephone call on 24 September 2010, in which the parties had reached agreement on a new two and a half year time charter; and
  2. subsequent words and conduct in which Hellenic had agreed the terms of that charter, which included a London arbitration clause.

Hellenic’s case was that there was no such agreement, and that the previous interim arrangement continued until redelivery of the vessel in April 2011.

After re-delivery of the vessel, Premier brought a claim in arbitration against Hellenic, relying on the London arbitration clause and alleging that Hellenic was in repudiatory breach of the two and a half year time charter. Hellenic reserved its position as to the jurisdiction of the arbitrator, on the basis that it had never agreed to the two and a half year charter and therefore had never agreed to the London arbitration clause.

The arbitrator agreed with Premier. He found that the parties had agreed to the London arbitration clause and he therefore had jurisdiction to determine Premier’s claim. He awarded Premier USD 672,685 plus interest and costs.

Hellenic challenged the award in the English Court. It was argued that the terms of the two and half year time charter had never been agreed and therefore the London arbitration clause had never been agreed. On that basis, the arbitrator lacked substantive jurisdiction.

The Commercial Court decision

The Court agreed with Hellenic. It found that no agreement had been concluded, either in principle or on commercial terms. It was found that the parties had entered into an interim arrangement, by way of recaps incorporating the BPVoy 4 form, of indefinite duration. The decision of the Court came down to the strength of Hellenic’s evidence compared to Premier’s evidence. The Court accepted Hellenic’s evidence that:

  1. it was not prepared to commit to a long term time charter unless it had a corresponding supply contract in place, which it did not;
  2. a draft two and a half year charter sent to Hellenic had not been accepted by Hellenic;
  3. the continued use of the vessel on the basis of recaps incorporating the BPVoy 4 form was consistent with continued performance of the existing interim arrangement; and
  4. the proposed two and half year charter represented a different level of financial commitment for Hellenic from the existing arrangement. That level of commitment would have required Hellenic’s board approval, which was neither sought nor given.

Accordingly, the Court preferred Hellenic’s position i.e. that there was no binding two and half year charter and therefore there had been no agreement to the London arbitration clause. The arbitrator had no jurisdiction and the award was set aside.

Comment

It is vitally important for parties to be aware at what point an agreement is or is not reached. If not, the risk is that if and when a dispute arises, time and money is potentially wasted on establishing which agreement – and therefore which law and/or jurisdiction regime – applies to that dispute.