UNIVERSITAS GADJAH MADA TEAM NO. 20

Transcription

1 17 TH I N T E R N A T I O N A L M A R I T I M E L A W A R B I T R A T I O N M O O T, 2016 UNIVERSITAS GADJAH MADA TEAM NO. 20 MEMORANDUM FOR CLAIMANT ON BEHALF OF ZEUS SHIPPING AND TRADING COMPANY CLAIMANT AGAINST HESTIA INDUSTRIES RESPONDENT COUNSELS EDWIN GIOVAN SANTOSO TIURULI SITORUS GISELLA ARDEN SAMUDIONO REYNARD KRISTIAN ANGELINA EMBUN PRASASYA SANDI HALIM

2 TABLE OF CONTENTS TABLE OF CONTENTS... i LIST OF ABBREVIATIONS... iii TABLE OF AUTHORITIES... iv STATEMENT OF FACTS... 1 JURISDICTION... 3 I. THIS TRIBUNAL POSSESSES JURISDICTION TO DETERMINE THE PRESENT CASE... 3 A. The Power To Determine The Jurisdiction Of The Disputes Shall Be Held Only By This Tribunal... 3 B. The Present Claims Submitted By Claimant Are Admissible... 5 MERITS... 8 II. CLAIMANT IS NOT LIABLE FOR ANY ALLEGATION OF INCOMPETENCE AND NEGLIGENCE OF THE MASTER OF MV ATHENA... 8 A. Upon Following Coast Guard's Order, The Master of MV Athena Is And Has Always Been Competent... 8 B. In Any Event, Article IV Rule 2 (a) Of The Hague- Visby Rules Limit Claimant's Liability Arising From Master's Negligence III. RESPONDENT IS LIABLE OF THE DEMURRAGE CLAIM DUE TO THE OPERATION OF FRUSTRATION A. The Altered Regulation Did Not Frustrate The Charterparty B. The Protracted Delay Did Not Frustrate The Charterparty C. Rather Than Frustration, The Delay Only Resulted To The Suspension Of Performance D. Respondent Should Have Foreseen And Shall Be Held Liable For The Event IV. CLAIMANT IS ENTITLED FOR THE PAYMENT OF DEMURRAGE A. Demurrage Accrued After The Exhaustion Of The Laytime B. Under The Charterparty, Respondent Is Liable For Demurrage Amounted To US$ 17.9m C. In Any Event, Respondent Could Not Exclude Its Liability To Pay Demurrage Due To The Delay MEMORANDUM FOR CLAIMANT Page i

3 DEFENSE TO COUNTERCLAIM V. RESPONDENT IS NOT ENTITLED TO THE SALVAGE AWARD A. Respondent Rescued Its Own Cargo B. Claimant Is Not Responsible For The Operation Of Salvage C. In Any Case, According To Clause 21 Of The Charterparty, Respondent Shall Pay Salvage PRAYER FOR RELIEF MEMORANDUM FOR CLAIMANT Page ii

4 LIST OF ABBREVIATIONS / AMSA Art Case Files Claimant HVR i.e. Navigation Act NOR p./pp. Respondent The Cargo The Charterparty The Coast Guard The Master The Vessel This Tribunal UNCLOS Paragraph/Paragraphs Australian Maritime Safety Authority Article IMLAM Moot Problem 2016 Zeus Shipping and Trading Company The Hague-Visby Rules That is The Commonwealth of Australia Navigation Act 2012 Notice of Readiness Page/pages Hestia Industries 260,000m 3 Liquefied Natural Gas produced from Hades Shale Gas The Amended Charterparty Hades Coast Guard Captain Marcus Yi MV Athena Arbitration Tribunal seated in London United Nations Convention on the Law of the Sea MEMORANDUM FOR CLAIMANT Page iii

5 TABLE OF AUTHORITIES CASES LAW AND ARBITRAL AWARDS Page Adler v Dichinson and Another (The Himalaya) [1954] 2 Llyod's Rep Aggeliki Chairs Company Maritime SA v Pagnan SpA (The Angelic Grace) 5 [1995] 1 Lloyd s Rep 87 Aldebaran Compania Maritima SA v Aussenhandel AG (The Darrah) [1977] 16 AC 157 Argonaut Navigation Co Ltd v. Ministry of Food [1948] 81 Ll L Rep Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB Canada Steamship Lines Ltd v The King [1952] AC Cantiere Navale Triestina v Handelsvertretung der Russe Soviet Republik 18 Naphtha Export [1925] 21 Llyod's Rep. 204 (CA) Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 5 45 Cupit v McClanahan Contractors, Inc., [5th Cir. 1983] 1 F.3d Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 7, 8, 13,14, 15 E. L. Oldendorff & Co. GmbH v Tradax Export S.A. (The Johanna 19 Oldendorff) [1974] AC 479 Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & 14, 16, 17 Towage) Ltd (The Sea Angel) [2007] EWCA Civ 547 Ellis Shipping Corp v Voest Alpine Intertrading (The Lefthero) [1991] 2 18 Lloyd s Rep 599 Empresa Exportadora De Azucar v. Industria Azucarera Nacional (The Playa 8 Larga) [1983] 2 Lloyd s Rep. 171 Esso Petroleum Co Ltd. v Hall Russell & Co Ltd. (The Esso Bernicia) [1989] 12 1 Llyod's Rep 8 Fiona Trust & Holding Corporation & Ors v Yuri Privalov & Ors [2007] 5, 6 EWCA Civ 20 Gold Group Properties v BDW Trading [2010] B.L.R Hadley v Clarke [1799] 101 ER MEMORANDUM FOR CLAIMANT Page iv

6 Hirji Mulji v Cheong Yue Steamship Co. Ltd. [1926] AC Horlock v Beal [1916] AC Islamic Republic of Iran Shipping Lines v Ierax Shipping Co. [1991] 1 Lloyd s 17 Rep. 81 Kissavos Shipping Co SA v Empresa Cubana de Fletes (The Agathon) [1982] 15 2 Lloyd s Rep 211 (CA) Kruse v Questier & Co. Ltd. [1953] 1 Q. B Lauritzen A.S. v Wijsmuller B.V. (The Super Servant Two) (1990) 1 Llyod s 7 Rep 1 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC , 15 Navico A.G. v Vrontados Nafiki Etairia P.E. [1968] 1 Lloyd s Rep. 20 Nile Co. v H. & J.M. Bennett (Commodities) [1986] 1 Lloyd s Rep Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd 6 [1988] 2 Lloyd's Rep 63 Palmco Shipping Inc v Continental Ore Corp (The Captain George K) [1970] 14 2 Lloyd's Rep 24 Papera Traders Co. Ltd. & Ors v Hyundai Merchant Marine Co. Ltd. & Anor 8 [2002] EWHC 118 Premium Nafta Products Limited et al v Fili Shipping Company Limited and 4 others [2007] UKHL 40 President of India v Lips Maritime Corporation [1988] AC 395 per Lord 18, 19 Brandon of Oakbrook Storer v Manchester City Council [1974] 1 W.L.R Svenssons Travaruaktiebolag v Cliffe Steamship Co Ltd [1931] 41 Ll L 17 Rep267 Swiss Bank Corporation v Novorossiysk Shipping Co (The Petr Shmidt) 4 [1995] 1 Lloyd s Rep 202 Tatem v Gamboa [1939] 1 KB Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC Ullises v Fal (The Greek Fighter) [2006] EWHC Union of India v E B Aaby's Rederi A/S [1975] AC MEMORANDUM FOR CLAIMANT Page v

7 BOOKS Ambrose, Clare and Maxwell, Karen. London Maritime Arbitration (Informa, 3 rd ed, 2009) Cooke, Julian et. al., Voyage Charter (Informa Law from Routledge, 4 th ed, 2014) D. Dewell, James The Law of Salvage (1912) The Yale Law Journal, Vol. 21, No. 6 Güner-Özbek, Meltem Deniz The Carriage of Dangerous Goods by Sea (Springer, 2008) p. 163 Mckendrick, Ewan, Force Majeure and Frustration of Contract (Informa Law from Routledge, 2 nd ed, 2013) PAGE 4 8,19, 20, , 21 7 JOURNALS & ARTICLES PAGE Collins, Michael, 'The Master's Right to say 'no' to Charterer's orders' (1979) 11 MARIUS Number 39 Hague Visby Rules 14 Jillions, Andrew, 'Commanding The Commons: Constitutional Enforcement 9 and The Law of The Sea' (2012) Global Constitutionalism Vol. 1 Issue 3 Nov 2012 Konstantinos, Bachxevanis, 'The Distinction Between 'crew negligence' and 10 'crew incompetence' and the consequence thereof' (2011) Reed Smith LLP.s Robinson, G.H. Admiralty Law of Salvage (1938) Cornel Law Review vol 21 1 Shalev, Gabrielle, Control Over Exemption Clauses: A Comparative 19 Synthesis, Boston College Intenational and Comparative Review, 1977 STATUTES PAGE Australian Navigation Act Pilotage Act United Nations Convention on the Law of the Sea 10, 11 MEMORANDUM FOR CLAIMANT Page vi

8 STATEMENT OF FACTS THE PARTIES 1. Zeus Shipping and Trading Company ( Claimant ), a company located in Poseidon, owns the MV Athena ( the Vessel ). Hestia Industries ( Respondent ), the producer of Liquefied Natural Gas ( LNG ) based on Hades. THE CHARTERPARTY 2. On 14 July 2014, Claimant provided its own voyage charter ('the Charterparty'), in which Respondent requested an amendment of the arbitration clause, i.e. clause 30 of the Charterparty. The amendment included the change of dispute settlement forum reference to arbitrate disputes in London, which arise out of the provisions of the Charterparty. 3. On 20 July 2014, Save Hades Group was planning significant protest towards the HLNG. 4. Both Claimant and Respondent agreed to be bound by the amended Charterparty, for the shipping of 260,000m 3 HLNG ('the Cargo') on 21 July 2014, from Port of Hades to Port of Poseidon. The Vessel was registered in Hades and carried Hades flag to show Claimant s commitment to the development of the Hades Shale Gas Industry. THE ARREST 5. On 20 September 2014, the Vessel sailed from Port of Poseidon and arrived at Port of Hades on 3 October A day after the arrival of the Vessel, huge protest was arisen at the Port of Hades due to the export of HLNG. 6. On 7 October 2014, the coup led by the opposition party, has taken over Hades government and declared to stop the HLNG production as their first act. The Coast Guard arrested the Vessel during her effort to leave the Hades due to the Cargo s presence, resulting the return of the Vessel to the Port of Hades. MEMORANDUM FOR CLAIMANT Page 1

9 7. Hades did not give permission to non-hades flagged vessels to come across the port. THE DEMURRAGE 8. By Claimant s letter dated on 15 October 2014, the Vessel had not left the Port of Hades, subsequently, laytime continued to proceed and when it exhausted, demurrage would accrue at the sum of US $50,000/day. 9. Pursuant to the Charterparty, in respect of 358 days, Claimant is entitled for demurrage a total of US$17.9m after the ship s able to continue the voyage due to the resignation of the President Simmons. Respondent, however, denied the liability of demurrage provided by the Charterparty. THE SALVAGE 10. On 6 October 2015, after the Vessel released by the Coast Guard, the propeller shafts were broken on the voyage. The tugs owned by Respondent, which provided tug service to Claimant, and reconnected the tow of the Vessel. THE ARBITRATION PROCEEDINGS 11. On 16 November 2015, referred the dispute to clause 30 of the Charterparty and appointed an arbitrator. 12. A week after, Respondent claimed the question of frustration and salvage should be determined by the courts of Poseidon in accordance with Western Australia law instead of arbitration in London. MEMORANDUM FOR CLAIMANT Page 2

10 ARGUMENTS JURISDICTION I. THIS TRIBUNAL POSSESSES JURISDICTION TO DETERMINE THE PRESENT CASE 1. Claimant affirms that both parties previously have consented and intended to settle the disputes using the arbitration clause under the Charterparty. 1 In order to establish the ground for this Tribunal to hear the merits of present, Claimant submits that; the power to determine the present dispute shall only be held by this Tribunal [A], and the present claims submitted by Claimant are admissible [B]. A. The Power To Determine The Jurisdiction Of The Disputes Shall Be Held Only By This Tribunal 2. Claimant contends that this Tribunal indeed has a decisive power to exercise the present dispute, as the parties have expressed their agreement for London as the valid seat and forum of arbitration (i), and there is nothing in the Charterparty that provides the courts of Poseidon to be the seat of forum (ii). i. The parties have expressed their agreement for London as the valid seat and forum of arbitration 3. Both parties previously have agreed that the Charterparty contains a clause to appoint arbitration in London. 2 Pursuant to clause 30 of the Charterparty, it stipulates that: "any disputes arising under this contract shall be referred to arbitration in London". It is unquestionable that the forum of arbitration must be seated in London where the parties mutually drafted in the Charterparty. 4. In order to determine the validity of the arbitration, this Tribunal shall perceive the parties presumed intentions. 3 In the Petr Shmidt, the arbitration clause in London is 1 Case Files, p. 72; The Charterparty, clause 30 (a). 2 The Charterparty, clause 30 (a). 3 Clare Ambrose, Karen Maxwell (London Maritime Arbitration, Informa, 3 rd ed, 2009) p. 30. MEMORANDUM FOR CLAIMANT Page 3

11 stated in their contract, which held that the clause was sufficiently certain to give effect to the parties intention and was therefore capable of being enforced This Tribunal shall find that the intention of the parties is reflected in their agreement, 5 which can determine the kind of disputes or claims they intended to submit. 6 Since, an arbitration agreement that provides a tribunal chosen by the parties, expresses their intention. 7 Thus, this Tribunal shall conceive that the parties have confidence in their chosen place of arbitration in the contract at the first place. 8 Claimant therefore submits that the arbitration clause evinces the parties true intention. Since, it is the agreement that the parties specifically included in the Charterparty, resulting this Tribunal to have jurisdiction to determine the parties disputes. ii. There is nothing in the Charterparty that provides the courts of Poseidon to be the seat of forum 6. Respondent unreasonably contends that the courts of Poseidon, instead of this Tribunal, shall exercise the frustration and demurrage claims. However, Respondent submits that the place where the contract was concluded will be the most appropriate seat to determine the issues. 7. The court in Poseidon does not have any jurisdiction to exercise the preference due to the power vested to this Tribunal. Since, the arbitration seated in London is clearly specified in the arbitration clause, 9 which determines it to be the correct forum to hear the dispute. The parties intention can only be found by their outward expression, which is conveyed in the concluded contract. 10 However, there is no reference at any part of 4 Swiss Bank Corporation v Novorossiysk Shipping Co (The Petr Shmidt) [1995] 1 Lloyd s Rep 202, p Premium Nafta Products Limited et al v Fili Shipping Company Limited and others [2007] UKHL Premium Nafta Products Limited et al v Fili Shipping Company Limited and others [2007] UKHL Premium Nafta Products Limited et al v Fili Shipping Company Limited and others [2007] UKHL Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488, p The Charterparty, clause 30 (a). 10 (Lord Denning) Storer v Manchester City Council [1974] 1 W.L.R MEMORANDUM FOR CLAIMANT Page 4

12 the Charterparty to the courts of Poseidon as a seat of dispute settlement forum. Therefore, Respondent's intention to settle the dispute in the courts of Poseidon, due to the place of the contract was made, shall not prevail. 8. Had Respondent intended to exclude certain claims to be outside of this Tribunal s jurisdiction, 11 Respondent should have put clear language in the arbitration agreement. Since, the commercial purpose of the contract indicates that the parties intended to establish a presumption of one-stop method of adjudication, whereby all matters in dispute would be determined together. 12 This presumption was also pointed out in the Fiona Trust, which contemplated the parties would intend for all disputes arising out of the parties relationship to be decided by the same tribunal unless the language clearly excludes certain subject matter from the arbitration s jurisdiction Consequently, this Tribunal shall hear this present case submitted by Claimant based on an evident arbitration agreement contained in the Charterparty, and Respondent's unreasonable preference of other dispute settlement forum shall not be awarded. B. The Present Claims Submitted By Claimant Are Admissible 10. To demonstrate that the claims are indeed admissible, Claimant submits that; the phrase arising under has a wide scope to encompass frustration and demurrage claims (i), and the frustration issue falls under the force majeure clause of the Charterparty (ii). Lastly, the frustration has been contemplated under the Charterparty thus Tribunal has the power to determine the present case (iii). 11 Case Files, p Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; (Rix J) Aggeliki Chairs Company Maritime SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd s Rep 87 (CA) 91 col Fiona Trust & Holding Corporation & Ors v Yuri Privalov & Ors [2007] EWCA Civ 20, 17. MEMORANDUM FOR CLAIMANT Page 5

13 i. The phrase arising under has a wide scope to encompass frustration and demurrage claims 11. Respondent submits that the phrase arising under under the Charterparty is not sufficient to hear the claims submitted by Claimant, especially the frustration issue and it follows, the demurrage issue. 14 However, Claimant contends that the phrase arising under in the amended arbitration clause shall be construed liberally with the phrase of the pre-amended arbitration clause. 12. This Tribunal shall discern that the phrase any disputes arising under in clause 30 of the Charterparty must include all related claims under the Charterparty, including frustration and following by demurrage claims. The word arising under has a wide scope to encompass all of the issue under the Charterparty, 15 unless there is an intention in the clause to refer only specific issue to be submitted before this Tribunal. 16 Consequently, the question whether the contract has been frustrated is also within the scope of that phrase under the arbitration clause Further, Respondent itself unequivocally admitted that Respondent was prepared to arbitrate the dispute concerning demurrage before this Tribunal in its correspondence with Claimant. 18 Thus, Respondent s latest intention to bring the demurrage issue before the courts of Poseidon 19 is inconsistent with its previous statement. Additionally, there is no ground to decline this Tribunal to hear demurrage issue, as the Charterparty clearly governs the demurrage matter as well Case Files, p Fiona Trust & Holding Corporation & Ors v Yuri Privalov & Ors [2007] EWCA Civ 20, ; (Lord Salmon) Union of India v E B Aaby's Rederi A/S [1975] AC 797, p Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd's Rep 63, Kruse v Questier & Co. Ltd. [1953] 1 Q. B. 669; Hirji Mulji v Cheong Yue Steamship Co. Ltd. [1926] A. C Case Files, p Case Files, p The Charterparty, clause 10. MEMORANDUM FOR CLAIMANT Page 6

14 14. In conclusion, it follows that by reason of the words disputes in clause 30, the parties must have intended that any disputes and claims arising under this contract should be brought before this Tribunal. Consequently, this Tribunal shall conceive that the phrase arising under has competent scope to hear all the present claims submitted by Claimant. ii. Nevertheless, the frustration issue has been contemplated under the Charterparty 15. In order to determine whether this Tribunal has jurisdiction to hear frustration issue, this Tribunal shall firstly discern whether the Charterparty governs the frustration issue. 16. Normally, frustration occurs whenever there is an occurring circumstance that is radically different from that which was undertaken by the contract, 21 as well as unforeseeable or supervening event. 17. Since, the presence of a force majeure clause may be relied upon as evidence that the parties have made express provision for the alleged frustrating event or at least that the event was one which was within their reasonable contemplation at the time of entry into the contract. 22 Therefore, the question of frustration issue can be disputed before this Tribunal, through force majeure clause of the Charterparty, which gives a power for this Tribunal to exercise the question of frustration, and therefore the question of demurrage. 18. Even if this Tribunal still contends that the force majeure clause under the Charterparty is not sufficient to incorporate the frustration issue, and opines that this issue is outside the scope of contract. This Tribunal shall hear the question of frustration issue, without election of either party, as a result of an extraneous event outside the control of either 21 (Lord Radcliffe) Davis Contractors Ltd v Fareham Urban District Council [1956] A.C. 696, Ewan Mckendrick, Force Majeure and Frustration of Contract (Informa Law from Routledge, 2 nd ed, 2013) pp. 34-5; J. Lauritzen A.S. v Wijsmuller B.V. (The Super Servant Two) (1990) 1 Llyod s Rep 1. MEMORANDUM FOR CLAIMANT Page 7

15 party and beyond the scope of the express terms of the contract. 23 Consequently, the frustration issue shall be still determined by this Tribunal. II. MERITS CLAIMANT IS NOT LIABLE FOR ANY ALLEGATION OF INCOMPETENCE AND NEGLIGENCE OF THE MASTER OF MV ATHENA 19. In this present case, Respondent alleged that the delay of the Vessel's voyage was caused by the Master's incompetence and negligence. 24 Claimant asserts that it has indeed provided a competent Master throughout the voyage in order to fulfill the obligation manifested in the Charterparty. 25 The Master's decision of returning back to Port of Hades indicated his competency, because he was following the order from Hades' authorized Coast Guard [A]. As another option to limit its liability, Claimant has the right to invoke article IV rule 2 (a) of HVR [B]. A. Upon Following Coast Guard's Order, The Master of MV Athena Is And Has Always Been Competent 20. In the middle of the Vessel's en route, Hades Coast Guard intercepted her. 26 The Master's decision to return to Port of Hades reflected compliance to Navigation Act 2012 mandated under the Charterparty (i). At last, under justification of UNCLOS Hades' government had the authority over the Vessel (ii). 23 Julian Cooke et al, Voyage Charters (Informa Law from Routledge, 4 th ed, 2014) p. 696; Davis Contractors v Fareham U.D.C. [1956] A.C. 696; Empresa Exportadora De Azucar. Industria Azucarera Nacional (The Playa Larga) [1983] 2 Lloyd s Rep. 171; Horlock v Beal [1916] A.C. 486, 492; Nile Co. v H. & J.M. Bennett (Commodities) [1986] 1 Lloyd s Rep. 555, 581; Gold Group Properties v BDW Trading [2010] B.L.R Case Files, p. 65 (c). 25 Papera Traders Co. Ltd. & Ors v Hyundai Merchant Marine Co. Ltd. & Anor [2002] EWHC Case Files, pp MEMORANDUM FOR CLAIMANT Page 8

16 i. The Master was not in the position to decline Coast Guard's order 21. Upon the promulgation of the Charterparty, clause 17 has explicitly incorporated the Navigation Act as the prevailing regulations. 27 Pursuant to article 248 (1) of the Navigation Act, AMSA has the power to detain a vessel. 28 Similarly, coastguard has interdiction powers if a ship is suspected of illicit trafficking once a ship has entered territorial waters and regardless of the flag it flies. 29 The Coast Guard who intercepted the Vessel ultimately because of the Cargo, which has been prohibited to be exported, 30 further proven by the direct appreciation for the interception act. 31 The Master was then under obligation to comply with the order of the Coast Guard. Therefore, failure to obey Coast Guard's order as authorized officials of Hades' government would contradict the Act. 22. Further, clause 17 of the Charterparty also obliged the Vessel "[...] to comply with all the requirements and regulations for all ports and countries of call under Charterparty [...]", including Hades. Hence, there was no option for the Master other than to accept the authority of Hades' government. 23. Referring to clause 19 of the Charterparty, "Nothing herein contained shall exempt the Shipowners from liability with any Government, State, or Provincial Regulations [...]", 32 it is then clear that in any event the Master must comply government's regulations. The Coast Guard who ordered the return was merely enforced the prevailing decree over the 27 The Charterparty clause 17 (a) (i), Case Files p The Commonwealth of Australia Navigation Act 2012, Chapter 8 Part 3 Article 248 regulates the detention powers owned by the Australian Maritime Safety Authority (AMSA), which in technical enforcement conducted by its appointed inspectors, may detain a vessel and may also bring it, or cause it to be brought, to a port, or to another place that AMSA considers appropriate, if [...] (b) AMSA reasonably suspects that the vessel has been, is or will be involved in a contravention, either in or outside Australia. 29 Andrew Jillions, 'Commanding The Commons: Constitutional Enforcement and The Law of The Sea' (2012) Global Constitutionalism Vol. 1 Issue 3 Nov., 2012, p Case Files, p Case Files, p Case Files, p. 40. MEMORANDUM FOR CLAIMANT Page 9

17 Vessel that carried the Cargo. The Master's decision to return was aiming to respect the legitimate authority. 24. On top of that, the fulfillment of law compliance was undeniably elucidated in the Charterparty thus failure to comply with those clauses would result on violation. Again, the Master's competence has been proven when the Master did exactly as what an ordinary competent master in that position and in those circumstances would have done. 33 ii. The Vessel was under the authority of Hades 25. It is disputable whether the Vessel has left Hades' territory. 34 Claimant submits that for both of the possible avenues, Hades' government had full authority over the Vessel. First, when it is found that the Vessel still sail inside Hades' territorial sea, Hades' government as the coastal State has the right of protection. 26. Pursuant to article 25 of UNCLOS, 35 the right of protection justified any necessary step taken by coastal State over the Vessel, which is not innocent. A passage would not be considered as innocent when it loads or unloads the commodity in contrary with laws and regulations of the coastal State. 36 Loading and taking out the Cargo from Hades were contradicting Hades' prevailing laws and regulations Further, Hades as coastal State extends full sovereignty over its territorial sea should be taken into deliberation as this rule also serves as a customary international law. 38 In the event that the Vessel still sail inside Hades' territorial sea, Hades' laws and regulations 33 Bachxevanis Konstantinos, 'The Distinction Between 'crew negligence' and 'crew incompetence' and the consequence thereof' (2011) Reed Smith LLP.s. 34 Case Files, p Laws of the State of Western Australia govern the Charterparty as the parties' choice of law. UNCLOS then as an international convention would apply in the jurisdiction of its Member States, including the Commonwealth of Australia. Further, UNCLOS is being one of the international conventions implemented by the Australian Navigation Act 2012, which has been incorporated in the Charterparty. 36 UNCLOS, article 19 (g). 37 Case Files, p UNCLOS, article 2, 3. MEMORANDUM FOR CLAIMANT Page 10

18 would be enforced on board. The abovementioned article and customary rule proves that the interception and order to return back of the Coast Guard was indeed a legitimate order from Hades as the coastal State. 28. For second possibility, Respondent is in the position that the Vessel has left Hades' territorial waters thus should not oblige the order to return. 39 However, in international maritime practice the maintenance of order amongst Vessels rests primarily on the flag state. 40 Hades is the flag state of the Vessel. 29. Pursuant to article 94 (1) of UNCLOS, concerning the obligations of the flag State, that every State is effectively to exercise its jurisdiction and control in administrative, technical, and social fields over ships flying its flag. As a result of that, since the Vessel was carrying Hades' flag and registered lawfully under Hades' law, the government of Hades has the right to exercise its control and order. 30. These two arguments shall emphasize that nothing might refrain MV Athena from complying the Hades' law that insisting its return to Port of Hades. The Master then, has no other choice than complying the order. B. In Any Event, Article IV Rule 2 (a) Of The Hague- Visby Rules Limit Claimant's Liability Arising From Master's Negligence 31. Master acts as a representative of ship owner on board. 41 The Master then shall not act in contrary to ship owner's intention. However, in this present case, the correspondence conducted between ship owner and the Master proves that Claimant has no control towards the Master's decision of returning back to Port of Hades Case Files, p The International Law Commission (ILC) emphasized the role of flag states in maintaining order on the high seas in "Report of the ILC on the Work of its Seventh Session 23 April-4 July 1956" (1956) 2 Yearbook of the ILC 279. The exclusive authority of flag states is made evident in United Nations Convention on the Law of the Sea, article Michael Collins, 'The Master's Right to say 'no' to Charterer's orders' (1979) MARIUS Number 39, p Case Files, p. 58. MEMORANDUM FOR CLAIMANT Page 11

19 32. Pursuant to clause 8 of the Charterparty, the parties were in agreement to incorporate the HVR into the Bills of Lading thus rendering the application of these rules. Article IV rule 2 (a) implied the dismissal of liability for carrier and ship, in this case both are Claimant, when "loss or damage arising or resulting from act, neglect, or default of the master [...] in the navigation or in the management of the ship." For the reason that the return was not under Claimant's control, Claimant would have the right to invoke these rules, as to limit its liability caused by the Master's act during the navigation of the Vessel. 33. In its deliberation, this Tribunal shall firstly consider Claimant's disagreement for the Master's act to return. 43 Claimant never employed the Master to take an act of return as response of any interception thus the Master's decision to return fell outside his scope of employment. In Cupit v. McClanahan 44, when the vessel's master exerts almost exclusive control over the vessel and negligence act has happened then ship owner cannot be held to be in privity and knowledge of any incident. It is then clear that the Master's decision to return was on his own behalf, thus the following impacts of his decision should be considered to be his own responsibility. 45 The Master's own negligence arising from his act then shall not make ship owner liable In conclusion, the Vessel's return to Port of Hades was justifiable under the Charterparty and thus the Master's acts reflected Claimant's obligations construed in the Charterparty. Alternatively, as consequence of the absence of Claimant's control for the return, Claimant refused to recognize the Master's incompetence and negligence, unless the 43 Case Files, p Cupit v McClanahan Contractors, Inc., [5th Cir. 1983] 1 F.3d Adler v Dichinson and Another (The Himalaya) [1954] 2 Llyod's Rep Esso Petroleum Co Ltd. v Hall Russell & Co Ltd. (The Esso Bernicia) [1989] 1 Llyod's Rep 8; Pilotage Act 1987, s. 16. MEMORANDUM FOR CLAIMANT Page 12

20 Master held it for himself. Claimant propounds that ultimately it is not liable for any allegation on the Master's incompetence and negligence. III. RESPONDENT IS LIABLE OF THE DEMURRAGE CLAIM DUE TO THE OPERATION OF FRUSTRATION 35. According to Respondent, the Charterparty should be frustrated due to the radically different voyage. 47 However, frustration took place due to what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances. 48 In this case, the frustration was not operative as its purpose to escape the unjust in the new circumstances apparently creates another unjust for Claimant. Claimant had the Vessel detained for almost a year and it makes sense that Respondent in any way should pay the demurrage as one of the performance under the Charterparty. 36. Therefore, Respondent purported that the obligation to pay the demurrage was relieved since the Charterparty had been frustrated. However, the change of regime in Hades did not necessarily render the Charterparty frustrated [A]. The protracted delay did not frustrate the Charterparty [B]. Thus, rather than frustration, the delay only resulted to the suspension of the performance [C]. Lastly, Respondent should have foreseen and shall be held liable for the event [D]. A. The Altered Regulation Did Not Frustrate The Charterparty 37. According to Respondent, the Charterparty was frustrated on 30 April 2015 due to the cause of delay, which was the arrest by the Coast Guard. This position was in flaw since the Master had to serve the rules under Hades' government. The Charterparty had provided that nothing should exclude the obligation to comply with the regulation of 47 Case Files, p Davis Contractors v Fareham Urban District Council [1956] AC 696 (HL), MEMORANDUM FOR CLAIMANT Page 13

21 Hades. 49 The conduct of the Master should be reduced to oblige the regulation, not an excuse to escape demurrage payment by frustration. 38. Further, under clause 9 (e) of the Charterparty, the Interruption of Laytime provides that in event such as arrest and/or interruption, demurrage shall not accrue. This clause shows that the parties had contemplated the possibility of such event to occur. The uprising regime stopped the export of HLNG and consequently the Vessel was arrested. In spite of that, the detention should be construed as the imminent risk undertaken by Respondent when entering the Charterparty. If so, the aforementioned event could not be described as a frustrating event. 50 B. The Protracted Delay Did Not Frustrate The Charterparty 39. Respondent purported that the delay itself sufficed for frustration to be applicable. The allegation was along with the financial consequences for Respondent. However, to invoke frustration, a situation must arise which renders the performance of the Charterparty 'radically different' from that which was undertaken by the contract. 51 Simply because it is more expensive and time consuming 52 to perform, the Charterparty cannot just be rendered as frustrated. Even in Tsakiroglou & Co Ltd v. Noblee Thorl GmbH, 53 a sale contract was not frustrated by the closure of the Suez Canal, even though the freight rate was much higher and it took twice as long to perform the voyage as the ship had to take the route round the Cape of Good Hope. 49 The Charterparty, clause 17, (Lord Simon) National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, Davis Contractors v Fareham Urban District Council [1956] AC 696 (HL), Davis Contractors v Fareham Urban District Council [1956] AC 696 (HL), [1962] AC 93; Palmco Shipping Inc v Continental Ore Corp (The Captain George K) [1970] 2 Lloyd's Rep 21. MEMORANDUM FOR CLAIMANT Page 14

22 40. If the effect of detention by the Coast Guard is purely financial consequences 54 and the voyage is merely more onerous and less profitable for the parties, 55 it will not interrupt the performance of the Charterparty and will not frustrate it. The voyage, even though it was executed longer than what was contracted, has not become 'radically different'. Paying the demurrage in total of US$17.9m is also not one of reason to frustrate the Charterparty. It is not a frustration where the foundation of the contract still stands 56, not merely such as to involve one or other of the parties in increased expenditure in performing its obligations. 57 This is the reason on why the prolonged delay and its effect could not frustrate the Charterparty. C. Rather Than Frustration, The Delay Only Resulted To The Suspension Of Performance 41. The delay, even if it was prolonged, did not give the entitlement for Respondent to frustrate the Charterparty. The Vessel was detained for almost a year. However, this position was not enough to generate frustration since the parties could continue the voyage after the resignation of President Simmons In Hadley v. Clarke 59 a ship detained under an embargo for two years. The Court of King s Bench held that the embargo did not dissolve the contract, but only suspended its performance until the embargo was lifted. It is clear that, in our case, Respondent had no basis to frustrate the Charterparty since the Vessel could, in fact, leave the loading port. 54 Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (Sea Angel) [2007] EWCA Civ (Lord Simon) National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, (Goddard J) Tatem v Gamboa [1939] 1 KB 132, (Lord Radcliffe ) Davis Contractors Ltd v Fareham UDC [1956] AC 696, HL, Case Files, p [1799] 101 ER 1377; Kissavos Shipping Co SA v Empresa Cubana de Fletes (The Agathon) [1982] 2 Lloyd s Rep 211 (CA) where the Charterparty could still be performed after the outbreak of war, as the ship could still continue to discharge her cargo, albeit slowly, thus her Charterparty was not frustrated until December that year, when discharge was completed. MEMORANDUM FOR CLAIMANT Page 15

23 43. In cases of dissolution by frustration, the common purpose of both parties shall be equally dissolved to trigger the frustration. If any part of contractual purpose can be achieved, it is not applicable. Subsequently, all it had to do was to perform the voyage to justify that the Charterparty could still stand and it actually did. D. Respondent Should Have Foreseen And Shall Be Held Liable For The Event 44. Respondent contends that the detention of the Vessel by the Coast Guard was resulted from the Master's negligence. However, Claimant submits that the cause of the delay triggered by the Cargo. It demonstrated Respondent's inaction, as it should have foreseen the risk of the delay at that time The subject matter of frustration is contract, and contracts are about the allocation of risk. New circumstances, which could break a contract, could be invoked as a frustrating event. 61 However, in The Sea Angel, the court dismissed the appeal by the charterer to frustrate the contract whilst the general risk was foreseeable The foreseeable risk was apparent since Hestia Industries intended to build a plant for HLNG for export and has long been a subject to critics, protests and objectors. 63 Respondent went to make a bailment contract with Claimant despite realizing the wide public opposition. Respondent has also been in the business of port management where the huge significant protest took place upon the arrival of the Vessel Ultimately, the coup appeared to have been precipitated by the protest and public anger to the export of HLNG by Hestia Industries. The protest erupted to coup at this scale should be clear for Respondent that the Cargo itself gives the risk, and it is certainly 60 Aldebaran Compania Maritima SA v Aussenhandel AG (The Darrah) [1977] AC 157, Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (Sea Angel) [2007] EWCA Civ Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd [2007] EWCA Civ Case Files, p Case Files, p. 26. MEMORANDUM FOR CLAIMANT Page 16

24 visible to Hestia Industries. The omission of Respondent implicated that frustration then was held inapplicable when the event was foreseeable but not foreseen As the result, the misadventure did not frustrate the Charterparty as it was initially foreseeable. As it was held in Ullises v. Fal, 66 Respondent shall be liable if the Cargo gives rise to risk of capture or seizure by government. The risk of detention by the Hades authority was, in general, foreseeable, even if the particular way in which the risk manifested itself was not foreseeable. 67 Thus, the foreseeability of the coup and the risk of the HLNG industry was a major assessment for this Tribunal not to constitute a frustration. IV. CLAIMANT IS ENTITLED FOR THE PAYMENT OF DEMURRAGE 49. Claimant contends that the laytime was indeed expired and demurrage accrued [A]. On its very nature, demurrage is payable as an obligation of Respondent [B]. In any event, Respondent could not exclude its liability due to the delay [C]. A. Demurrage Accrued After The Exhaustion Of The Laytime 50. Respondent breached the allowed laytime. In the present case, the allowed laytime was until 13 October Unfortunately, the Vessel was detained during loading process until 7 October When the vessel is detained beyond the agreed laytime, the charterer is in breach of the charter and the liability of demurrage continue to accrue The loading process finished on 6 October The process of loading includes not only placing goods into the vessel but also securing or other cargo operations necessary to ensure that the vessel can proceed on her voyage. 69 At this point, Claimant submits 65 Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd ( Sea Angel ) [2007] EWCA Civ 547, ( The Greek Fighter ) [2006] EWHC Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd ( Sea Angel ) [2007] EWCA Civ Islamic Republic of Iran Shipping Lines v Ierax Shipping Co. [1991] 1 Lloyd s Rep. 81, Svenssons Travaruaktiebolag v Cliffe Steamship Co Ltd (1931) 41 Ll L Rep 267; Argonaut Navigation Co Ltd v Ministry of Food (1948) 81 Ll L Rep 371, 377; ReElectrical Trades Union of Australia v MEMORANDUM FOR CLAIMANT Page 17

25 that the ultimate stage of the loading operation is when the Vessel leaves the Loading Place and proceed the voyage. Pursuant to clause 9 of the Charterparty, 70 the ultimate loading process finishes when the Vessel has left the Loading Place. However, on 7 October 2014, the Vessel did not complete with the ultimate stage of loading by not leaving the Loading Place. 52. Further, even if the Vessel left the Loading Place, there can be no reason why the temporary absence of the ship from the port should prevent the laytime from continuing to run and the ship going on demurrage. 71 The Vessel started to sail from Hades by on 7 Octover However, at the same day, the Vessel returned back to Hades. 73 This temporary leave 74 would not suffice to relieve the obligation of Respondent to pay the demurrage. 53. In summary, the loading operation includes the Vessel's effort to leave the Loading Place. Hence, the loading process has completed after the Vessel had been released on 6 October Demurrage then, indeed accrued after the laytime was exhausted. B. Under The Charterparty, Respondent Is Liable For Demurrage Amounted To US$ 17.9m 54. Since the laytime was expired, Respondent becomes the subject of a liability in damages by breaching the stipulated laytime. 75 Demurrage clause has provided liability for the Waterside Workers Federation of Australia v By Amendment: ReElectrical Trades Union of Australia, and Amalgamated Metal Workers and Shipwrights Union v the Waterside Workers Federation of Australia, [1982] FCA Case Files, p. 35; as it states that time permitted for loading is until the Vessel leaves the Loading Place [emphasis added]. 71 Cantiere Navale Triestina v Handelsvertretung der Russe Soviet Republik Naphtha Export [1925] 21 Llyod's Rep. 204 (CA). 72 Case Files, p Case Files, p The Vessel left Port of Hades on October 7th, 2015 then sailed back to the same port on the same day; Case Files, p (Lord Brandon) President of India v Lips Maritime Corporation [1988] A.C. 395, 422.; Ellis Shipping Corp v Voest Alpine Intertrading ( The Lefthero ) [1991] 2 Lloyd s Rep 599; [1992] 2 Lloyd s Rep 109 (CA). MEMORANDUM FOR CLAIMANT Page 18

26 breaching the allowed laytime. 76 Respondent, as the subject of the demurrage clause, should respectively pay US$17.9m. As it is contractual, 77 Respondent could not just excuse itself through the frustration claim. The Charterparty is a general rule treated as absolute. 78 Respondent s obligation to secure anything that it warranted should be done has done. In the present case, demurrage as a part of contract should be paid to fulfill the contract. C. In Any Event, Respondent Could Not Exclude Its Liability To Pay Demurrage Due To The Delay 55. Respondent cannot relieve its obligation to pay demurrage under clause 9(e) 79, 18(c) 80 and of the Charterparty. Those clauses stated demurrage not to accrue in the event of delay but they have strict limitations. 82 Respondent could only exclude its liability to pay demurrage when it has taken reasonable step to avoid the delay 83 and the delay was not caused by Respondent itself. 84 Nevertheless, the facts show the contrary. 56. Previously, Claimant has proven that Respondent should have foreseen the supervening event and it did not take reasonable step to avoid the delay. Respondent is liable to give notice in regard of risky the Cargo before the Charterparty concluded. It is deemed to be an absolute contractual duty 85 and shall be exercised as soon as it is aware of the danger. 86 Nevertheless, Respondent did not fulfill that absolute contractual duty. 76 (Lord Brandon) President o f India v Lips Maritime Corporation [1988] A.C. 395, The Charterparty, clause E. L. Oldendorff & Co. GmbH v Tradax Export S.A. ( The Johanna Oldendorff ) [1974] AC 479, Case Files, p Case Files, p Case Files, p Gabrielle Shaley, Control Over Exemption Clauses: A Comparative Synthesis (1977) Boston College International and Comparative Law Review, p Julian Cooke et al, Voyage Charter (4th edition, 2014) p Canada Steamship Lines Ltd v The King [1952] AC Effort Shipping v Linden Management [1998] 1 Lloyd s Rep Meltem Deniz Güner-Özbek, The Carriage of Dangerous Goods by Sea, Hamburg (Springer, 2008) p MEMORANDUM FOR CLAIMANT Page 19

27 Respondent also did not contrive any effort to reduce the risk of delay. Consequently, Respondent cannot arbitrarily excuse its liability to pay demurrage. 57. Further, the delay was caused by Respondent's controversial Cargo. At the time the Charterparty was concluded, there was significant protest against Respondent s Cargo. It means when the parties have agreed to shipping the Cargo, both parties must be ready to bear the risk. Claimant has born the risk by suffered damage due to the detention. Damages for detention are influenced by the freight rate at the time of delay and may be considerably higher than demurrage rate on a rising market. 87 The detention corrupted the margin profit of Claimant whereas it is expected to be ready for another voyage. 88 Thus, Respondent must be responsible for the shared risk by paying demurrage. 58. In conclusion, the laytime was expired and demurrage accrued. Since Respondent was responsible for the delay, Respondent could not relieve its obligation to pay demurrage. DEFENSE TO COUNTERCLAIM V. RESPONDENT IS NOT ENTITLED TO THE SALVAGE AWARD 59. On 7 October 2015, Hestug, a business entity owned by Respondent guided and assisted the Vessel. However, this condition give no justification for Respondent to claim salvage award since in fact, it saved its own Cargo [A]. Further, Claimant is not responsible for the salvage [B]. Consequently, by the virtue of clause 21 of the Charterparty, Respondent shall pay salvage [C]. 87 Julian Cooke et al., Voyage Charter (4th edition, 2014) p Navico A.G. v Vrontados Nafiki Etairia P.E. [1968] 1 Lloyd s Rep. 379, 383. MEMORANDUM FOR CLAIMANT Page 20

28 A. Respondent Rescued Its Own Cargo 60. Saving its own Cargo has made Respondent losing its entitlement for salvage award. It has been known as a general rule that all who are connected with saved vessel are not entitled to salvage. 89 The Vessel and the Cargo are unity venture, 90 since the Vessel is a tanker ship. In the present case, the only way to save the Cargo all along is together with the Vessel. Hence, Respondent is bound to save the Vessel anyway if it did not want to lose its own Cargo. These circumstances reflected a direct connection between Respondent as the owner of to the Cargo to the Vessel. As the result, Respondent cannot receive salvage award because Respondent saved its own Cargo B. Claimant Is Not Responsible For The Operation Of Salvage 61. The liability arising from the operation of salvage is not on Claimant's hands. Claimant contends that it has performed due diligence before the commencement of the voyage to keep the Vessel seaworthy. Seaworthiness is not measured by absolute perfection or by of successful carriage instead, it is measured by reasonable due diligence exercised by the prudent master. 91 On 5 October 2015, the Master has admitted itself that due diligence had been exercised by stating: Vsl [...] are commencing our preparations to sail from Hades. Claimant submits that the Master has performed due diligence through the preparation. Hence, Claimant could not be responsible for the necessity of salvage thus Respondent shall pay salvage. 62. Further, Claimant was not responsible for the broken propeller. Ship owner shall not be liable for the event, which caused by something beyond the ship owner s control. 92 In the present case, it was apparent that the propeller had been tampered with while at 89 James D. Dewell, The Law of Salvage (1912) The Yale Law Journal, Vol. 21, No. 6, p G.H. Robinson, Admiralty Law of Salvage (1938) Cornel Law Review vol 1, p Julian Cooke et al, Voyage Charter (4th edition, 2014) p. 234; Yvonne Baatz, Maritime Law (Informa Law, 3rd ed, 2004) p The Hague Visby Rules, Article IV rule 1; Julian Cooke et al, Voyage Charter (4th edition, 2014) p MEMORANDUM FOR CLAIMANT Page 21

29 Hades. 93 Besides, the condition was also one of the result from the Vessel that had been stranded over a year. These were all indeed beyond Claimant's control. As has been elaborated before that Claimant was not responsible for the delay. 94 The delay was caused by Respondent s controversial Cargo and the Master has no choice than to follow the Coast Guard s instruction. Conclusively, Claimant is not liable for the broken propeller that underlying the salvage operation. Since Respondent is responsible for the risk of the delay, it shall pay salvage. C. In Any Case, According To Clause 21 Of The Charterparty, Respondent Shall Pay Salvage 63. Respondent is liable for the payment of salvage. Pursuant to clause 21 of the Charterparty, when there an event for which Claimant is not responsible, by statute, contract or otherwise, the goods, shippers, consignees or Owners of the goods shall pay salvage. The goods, shippers, consignees or Owners of the goods are referring to Respondent. Previously, Claimant has proven that there is no event for which Claimant is reponsible, thus this clause applied and Respondent shall pay salvage. 64. Additionally, Hestug is owned by Respondent. If it is then entitled to salvage award meanwhile Respondent has to pay salvage, it means that the money will merely be transferred from one of Respondent s pockets to another. Logically, it is no use of claiming and awarding salvage remuneration. After all, Respondent is not entitled to salvage award. 93 Case Files, p Above [21]-[24]. MEMORANDUM FOR CLAIMANT Page 22