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Legal Corner

Legal Corner

The importance of context

Legal update from Triton 2-2017

Mixing apples and pears

The early redelivery of a vessel named New Flamenco has triggered a question about mitigation of damages which has been batted about in the English legal system for some time.

The background was as follows: The charterparty for the vessel should have come to an end in 2009, but the charterers redelivered the vessel prematurely in 2007. As a consequence, owners submitted a claim for damages for two years’ lost hire income. However, it transpired owners sold the vessel after the redelivery in 2007 for USD 28 million. Had they sold the vessel in 2009 they would only have received about USD 7 million due to the falling second hand market. Charterers therefore argued that the early redelivery in 2007 created a profit that should be set off against owners’ claim for lost income.

The arbitration tribunal and the courts have been far from consistent in their findings; the arbitrators agreed with charterers’ approach. The High Court did not, and overturned the arbitrators’ award. The Court of Appeal, however, reinstated the arbitrators’ award.

The Supreme Court (Globalia Business Travel S.A.U. (formerly TravelPlan S.A.U.) of Spain (Respondent) v Fulton Shipping Inc of Panama (Appellant)) has now finally decided the matter, essentially saying that the charterers (as well as the Tribunal and Court of Appeal) have been mixing apples with pears. It is not possible to bring the sale into the equation since that had nothing to do with the premature redelivery. Instead, in order for something to be considered as a step of mitigation, which charterers said the sale was, it must be taken solely for the purpose of mitigating the relevant loss - lost income stream - caused by the breach. The case is a reminder that the concept of mitigation – in line with most things in life – is dependent of the context.

Arbitration in context

According to statistics provided by London Maritime Arbitrators Association (LMAA), the number of LMAA arbitrations in 2016 was the lowest since 2007. What happened in 2007 one might ask? Shipping markets more than doubled, fell sharply in 2008 and have since then been low. At the same time, the number of arbitrations during the period 2008-2012 was record high. The LMAA statistics therefore seem to reflect volatility in the shipping markets, and that volatility is now back to the level it was before 2007.

 

 

 Anders Leissner
Director, Corporate Legal & FD&D


Previous Legal Corner articles 

The strive towards clarity - Triton no 1 2017
Use your head - Triton no 3 2016
Leading OW Bunker case finally decided - Triton no 2 2016
Guidelines on place of refuge - Triton no 1 2016
It’s not what you do, it’s how you do it - Triton no 3 2015
Reflections - Triton no 2 2015 
A wreck removal convention ahead - Triton no 1 2015
We need to talk - Triton no 3 2014
What it is all about - Triton no 2 2014
The Shipping Blue(s) - Triton no 1 2014

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