The Supreme Court has today handed down its much anticipated judgment in NYK Bulkship (Atlantic) NV v Cargill International SA. By a majority of four to one (Lord Clarke dissenting), the Supreme Court has allowed Cargill's appeal and reversed the decision of the Court of Appeal. It held that the vessel was off-hire throughout the period of an arrest by a sub-contractor aimed at securing a claim against its counterparty under a sale contract because the "carve-out" favouring Owners in clause 49 of the NYPE form did not apply.

The judgment

The Supreme Court said that the arrest had not, in the circumstances, been "occasioned by any personal act or omission or default of the Charterers or their agents" under clause 49 because there was no "sufficient nexus" between the arrest and the function which the sub-contractor was performing as "agent" of Cargill. The Court of Appeal had, in the view of the Supreme Court, been wrong to approach the issue by asking in whose "sphere of responsibility" the matters leading to the arrest fell.

In a detailed dissenting judgment, Lord Clarke would have held that the vessel was on hire during the period of the arrest because it was clearly linked to Cargill's discharge functions delegated to the sub-contractors.

The Court of Appeal decision raised important questions as to the meaning of charterers' "agents" in clause 49 of the NYPE form and the ramifications on other NYPE clauses of a wide definition being applied to "agents". Today's decision will be welcomed by charterers who had previously faced the uncertain prospect of having to pay hire if a vessel was arrested by anyone on what the Court of Appeal had referred to as "their side of the line". But Owners will naturally be disappointed that they may not receive hire if their vessel is arrested for reasons which have nothing to do with them.

A more detailed analysis will follow on today's judgment and its implications.