ITIC interventions show power of ship arrest

The latest Claims Review produced by the International Transport Intermediaries Club (ITIC) provides evidence that, although ship arrest should in many respects be considered a last resort in the dispute resolution process, it remains a powerful weapon by which to influence settlement.

In one case reported by the club, a ship agent arranged for the towage of an oil major’s rig through the Suez Canal. The oil major considered the cost to be high and refused to pay for the service. After several unsuccessful attempts to resolve the matter and to secure payment, the agent contacted ITIC to pursue the debtor. Initially, ITIC’s messages met with no response. Although the oil major was the registered owner of several oil rigs and drilling ships, these units are usually very difficult to arrest because of their lengthy stays at sea and the infrequency with which they call at port. Accordingly, the club located a sister rig that was due to arrive in Durban for repairs. After co-ordinating efforts with its local correspondent, with the agent and with South African lawyers, ITIC arrested the sister rig in Durban, pursuant to the maritime lien created by the unpaid Suez Canaldues. Within twelve hours, the debt had been paid in full.

In another case, a shipbroker member of ITIC had been involved as a co-broker in chartering a ship with another broker, who was not an ITIC member and who, during the negotiations, added 2.5 per cent commission into the charter party, which already contained the industry standard 2.5 per cent commission clause - thus making 5 per cent total commission payable. This was done without the consent of ITIC’s member.

The owner did not object at this stage and the fixture was completed. But, once the brokers started invoicing for 5 per cent commission, the owner took exception and argued that it had only agreed to 2.5 per cent commission for division, and not 2.5 per cent for each broker. The owner then stopped paying all commission. Both brokers maintained that 5 per cent in total was agreed in the charter party, even though it was not the standard amount.

When no further commission payments were made, ITIC’s member agreed to support the co-broker in arbitration proceedings, although it was not in fact expecting more than 1.25 per cent in commission. Lawyers retained to represent both brokers then arrested the owner’s ship in New Zealand and security was awarded in the arbitration proceedings. The arbitration progressed very slowly over a number of years, with the owner accusing the co-broker of dishonest behaviour throughout the fixture. As the matter approached a hearing in London, ITIC’s member repeated its preference to settle, and the club managed to negotiate a settlement on its behalf for the 1.25 per cent commission it was initially expecting.

In a third case, ITIC was thwarted in its efforts on behalf of an Egyptian ship agent to arrest a ship for unpaid bills, because the vessel was not trading to any favourable arrest jurisdictions. As a result, ITIC then attempted a Rule B attachment in New York. Within a relatively short time it managed to attach roughly half the outstanding debt, before discovering that the owners were on the verge of bankruptcy and, on that basis, the sum attached was reluctantly accepted in full and final settlement.

For a copy of the ITIC Claims Review, editors should email: chris@merlinco.com

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.

26th May 2009
ITIC Press Release PR0409