On 14 May 2019, the English Commercial Court once again reminded commercial parties that they will be held to their contract. In Boskalis Offshore Marine Contracting B.V and Atlantic Marine & Aviation LLP, the court held that a party who failed to challenge an invoice within the agreed time period had to pay the invoiced amounts, totalling €1,475,029.29 and £42,683.04.

Dispute background

The vessel owner, Atlantic Marine and Aviation LLP ("Atlantic") chartered its vessel to Boskalis Offshore Marine Contracting BV ("Boskalis") on the BIMCO Supplytime 2017 Form. Clause 12(e) of the contract stated:

Clause 12 (e)

"(e) Payments - Payments of hire, fuel invoices and disbursements for the Charterers' account shall be received within the number of days stated in Box 24 from the date of receipt of the invoice. Payment shall be received in the currency stated in Box 20(i) in full without discount or set-off to the account stated in Box 23… If payment is not received by the Owners within five (5) Banking Days following the due date the Owners are entitled to charge interest at the rate stated in Box 25 on the amount outstanding from and including the due date until payment is received.

If the Charterers reasonably believe an incorrect invoice has been issued, they shall notify the Owners promptly, but in no event no later than the due date, specifying the reason for disputing the invoice. The Charterers shall pay the undisputed portion of the invoice but shall be entitled to withhold payment of the disputed amount…"

Atlantic commenced an arbitration against Boskalis for the payment of invoices that were outstanding after the contractually agreed time period, namely 21 days after receipt of the invoice.

Atlantic contended that clause 12(e) meant that payment had to be made in full without set off, or disputed within 21 days from the receipt of an invoice.

Boskalis argued that clause 12(e) restricted the rights and remedies ordinarily available it. Boskalis further argued that the clause was ambiguous and insufficiently clear to have the effect argued by Atlantic.

The arbitral Tribunal originally found in favour of Atlantic’s interpretation and concluded that Boskalis had failed to serve a notice disputing any part of Atlantic's invoices therefore they were immediately due and payable.

If Boskalis wished to avoid their obligation to pay Atlantic Marine’s invoices within 21 days from receipt of an invoice…they had to notify Atlantic Marine within 21 days from receipt of the invoice that they believed that an incorrect invoice has been issued…;and

The consequence if Boskalis failed to notify Atlantic Marine within the relevant period…that they believed that an incorrect invoice had been issued is that they came under an obligation to pay Atlantic Marine the amounts invoiced which they had not disputed within the relevant period.”

Boskalis’ Appeal of the Tribunal's Awards

Boskalis appealed the Tribunal’s findings under section 69 of the Arbitration Act 1996. Boskalis argued that the Tribunal’s interpretation of clause 12(e) meant that a failure to challenge an invoice within 21 days would result in the loss of any substantive defence otherwise available to it, with limited prospects of recovering any sums overpaid as a result.

Commercial Court’s Appeal Ruling

The Commercial Court dismissed Boskalis’ appeal ruling that the wording of clause 12 (e) was clear and unambiguous and that Boskalis are in fact precluded from raising a defence which was not done timeously and the subject of a valid notice.

Points to note

  • A key advantage of arbitration is the finality of the award. While s69 of the Arbitration Act 1996 is the most commonly relied upon ground for appealing an arbitral award, in practice it is the most difficult to ultimately succeed on. This judgment is another example of how difficult it is to successfully overturn an arbitral award under s69.
  • The court once again recognised that the parties to the contract were commercial parties of equal bargaining position and that limiting a party's rights is an integral part of pricing and risk allocation. The court confirmed that the ordinary meaning of clause 12(e) simply required prompt payment or alternatively prompt identification of any issue preventing payment by Boskalis. The court refused to agree with Boskalis' argument that the clause should be construed narrowly simply because it limited a commercial party's rights.
  • Parties need to identify and remember when it must comply with its obligations by or risk facing potentially extremely negative results. As this case confirms, giving notice at the correct time and in the correct form is of paramount importance.