Pacific Basin IHX Ltd v Bulkhandling Handymax AS

Pacific Basin IHX Ltd v Bulkhandling Handymax AS

The arbitrators erred in law by construing 'may be, or are likely to be, exposed to War Risks' as a serious risk in the sense of an important event, rather than requiring a real likelihood or real danger of exposure to acts of piracy. The proper test is whether, in the reasonable judgment of the owners, there was a real likelihood (real danger) that the vessel would be exposed to acts of piracy. The arbitrators' findings on reasonableness and sufficiency of enquiries were also affected by this error. The court will remit the award to the arbitrators to reconsider the issue applying the correct legal test.

Parties
Claimant: Pacific Basin IHX Limited; Defendant: Bulkhandling Handymax AS
Jurisdiction
England and Wales
Judgment Date
08 November 2011
Procedural Posture
Commercial Arbitration Appeal / Judgment on Appeal From Arbitral Award
Outcome
Award to be remitted to arbitrators for reconsideration applying the correct legal test; no final order until further submissions from parties.
Legal Topics
Interpretation of War Risks Clauses, Deviation in Carriage of Goods by Sea, Owners' Discretion Under Charterparty, Obligations Under Time Charter, Piracy Risks
Commercial Law Maritime Law Arbitration Interpretation of War Risks Clauses Deviation in Carriage of Goods by Sea Owners' Discretion Under Charterparty Obligations Under Time Charter Piracy Risks

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Parties

Pacific Basin IHX Limited

Claimant

Bulkhandling Handymax AS

Defendant

Procedural Posture

Commercial Arbitration Appeal / Judgment on Appeal From Arbitral Award

Legal Issues

  1. 1 Proper construction of 'may be, or are likely to be, exposed to War Risks' in CONWARTIME 1993 clause
  2. 2 Whether owners' judgment to avoid Gulf of Aden was reasonable
  3. 3 Whether owners had a duty to make reasonable enquiries before exercising discretion

Ratio Decidendi

The arbitrators erred in law by construing 'may be, or are likely to be, exposed to War Risks' as a serious risk in the sense of an important event, rather than requiring a real likelihood or real danger of exposure to acts of piracy. The proper test is whether, in the reasonable judgment of the owners, there was a real likelihood (real danger) that the vessel would be exposed to acts of piracy. The arbitrators' findings on reasonableness and sufficiency of enquiries were also affected by this error. The court will remit the award to the arbitrators to reconsider the issue applying the correct legal test.

Court Disposition

Award to be remitted to arbitrators for reconsideration applying the correct legal test; no final order until further submissions from parties.