The revealing case of the “CV Stealth”
Posted on 13th April 2018 at 10:09
With charterparty chain issues a regular theme, judicial resistance to Arbitration appeals a traditional one and examination of post breach events an emerging one, this decision in ST Shipping & Transport Pte Ltd v Space Shipping Ltd (The "CV Stealth") (No.2)  is an example of all three.
The tale begins with voyage charterers’ illegal attempt to export oil from Venezuela. The facts are mired in a tangle of local criminal and civil law and the procedural history is long and involved, but the essence is that:
(a) the vessel was bareboat chartered from the Owners to Space Shipping Ltd, time chartered from Space to ST Shipping & Transport Pte Ltd and voyage chartered out to AS Capital.
(b) On 4 September 2014 she was ordered to proceed to load. That originated from the voyage charterers, and caused her to be detained in Venezuela until 21 July 2015, and continuing, while the authorities sought to investigate. Wrongdoing by the Owners, Space and ST Shipping was never suggested;
(c) the Arbitrator found ST Shipping liable to Space for the financial consequences of the detention up to 21 July 2015;
(d) ST Shipping’s appeal failed. The judge agreed that the 4 September order was at least an effective cause of the detention. This was a valid factual finding which could not be appealed;
(e) by a second Award the Arbitrator rejected Space’s claim against ST Shipping for (i) trading losses from 21 July 2015 and (ii) expenses due to the detention.
This was because (i) Space would have redelivered the vessel to the Owners on 22 July 2015, so there could have been no trading losses and (ii) though $800,000 was recoverable in principle, Space had to give credit for what would have been a $1.4m drydocking in June 2015;
(f) for a further lengthy period, the Arbitrator later ordered ST Shipping to pay Space hire, as payable to the Owners under the bareboat charterparty, and additional detention expenses.
He ruled that, despite the often contradictory behaviour of the Venezuelan authorities and courts, nothing had changed : the 4 September order was still an effective cause of the detention.
ST Shipping said the Arbitrator had got that wrong. The detention was no longer due to the 4 September order but was caused by the perverse local judiciary, who (all seemed to agree) should long since have released the vessel.
The judge rejected that. The Arbitrator had reached a valid conclusion, and the appeal was another attempt to dress up an impermissible attack on a factual finding as an error of law, but it was nothing of the kind.
Awards are often final - as they are meant to be
It remains true that it is hard to challenge an Arbitration Award. The permission usually needed is difficult to get, and the commercial judges who hear the appeals do not readily interfere. They frequently cite the reasons for what is plainly an established policy, and the fact that we have mentioned this in several recent commentaries highlights rather than dilutes this.
Charterparty claims and later events
Although this largely involved bareboat and time charterparties, similar issues could arise in the common situation of a voyage fixture from time charterers - indeed this whole thing started with an (albeit illegal) order from voyage charterers.
Orders as to the vessel’s employment mostly originate from voyage charterers, and if those are in breach of charter, demurrage and later detention liability can be the first issues.
1. Voyage charterers could face time charterers’ recourse claims for their own losses and liabilities;
2. In response, they might seek to make use of anything that crops up - sometimes by sheer luck - with the passage of time. They could argue that some later event lessens their demurrage or detention liability, or reduces or eliminates a recourse claim, or might do.
Under English law, damages are (a) assessed at the time of the breach (b) restricted by what usually happens, or what the parties must reasonably have reckoned is the probable result of the breach and (c) to put the claimant in the same position as if the fixture had been performed.
Sometimes, though, (c) overrules (a), so things that happened after the breach can be important. The “GOLDEN VICTORY”  heralded a trend of respondents seeking to use later developments to defend claims. These arguments do not always succeed, but the courts increasingly listen to them.
Parties should remember that some locations can be less straightforward than others, and that even routine orders can have lengthy and costly consequences. Recourse will be (a) sought under express or implied charterparty indemnity (b) often difficult to resist under established principles of causation and (c) increasingly met with defences based on what has happened since. If the claim might involve a long time period, both sides should look carefully in case something relevant to damages has happened - or might do.
In all cases, an Arbitration Award will usually prove final.
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