By way of follow up to our blog on this matter dated 3 May 2016, the Commercial Court heard a further arbitration appeal earlier this month arising out of the detention of the vessel at Puerto la Cruz on 19 September 2014.

The vessel was chartered on an amended Shelltime 4 form, and the vessel remained at Puerto la Cruz at the time judgment was given.

This appeal related to two issues:

  1. Whether the Charterers’ employment order could still be said to be the cause of the continued arrest of the vessel; and
  2. Whether drydocking costs which Owners saved as a result of the vessel being under arrest should be deducted from their claim for damages.

Dealing with each in turn:

Whether the Charterers’ employment order could still be said to be the cause of the continued arrest of the vessel

There was no dispute about what the relevant legal test of causation is: whether the employment order was an effective cause of the continued detention: it need not be the cause (The Kos [2012] AC 164). Once an effective cause is operative it will only be replaced by another intervening cause, so as to render the latter the sole effective cause, if the intervening act constitutes an event of such impact that it “obliterates the wrong doing”.

In relation to the continued detention of the vessel, the issue was whether the arbitrator had asked himself the correct question of law when it came to determining the cause of the continued detention. There had been a number of awards, determining causation for various periods of detention.

The arbitrator had already held in a finding which was not, and could not be, challenged, that the employment order had “causative potency” up to 21 July 2015, and implicitly up to 23 September 2015. The focus was therefore on whether what had happened since was sufficient to break the chain of causation. The Venezuelan law input was that there was no factual or legal basis for the vessel to remain detained, but Charterers failed to show that there was any change in Venezuela or the legal system since the time of detention (or any subsequent relevant date) so there was nothing to which Charterers could point to break the chain of causation as originally established.

The issue related to a factual conclusion reached by the arbitrator, and it was therefore held that the Charterers’ appeal did not raise a question of law which substantially affected the rights of the parties, and so there was no right of appeal.

Whether drydocking costs which Owners saved as a result of the vessel being under arrest should be deducted from their claim for damages

As to the arbitrator’s provisional deduction in respect of saved drydocking expenses, this was a provisional credit, and the position was that if the Owners did afterwards incur the drydocking costs they could go back for a further Award. There were no grounds to challenge this: the arbitrator chose as a matter of case management to defer any final assessment of loss and there could be no legitimate criticism of that approach. The deduction of a provisional sum for potentially saved drydocking expenses was principled and sound.

This is in line with the principle that in an Interim Partial Award an arbitrator may “only award a sum which a party is bound to recover as a minimum in light of the issues which he has decided”.

Although each case will obviously turn on its facts, this case highlight the potential long term exposure for charterers whose employment orders are deemed to be causative of an arrest in a jurisdiction where obtaining a release of the vessel is difficult/impossible.