NYPE Interclub Agreement: beware conflicting time bars

Where there are different claim time limits in the same charterparty, which limit should the parties adhere to?

MH Progress Lines SA v Orient Shipping Rotterdam BV / Nordana Project & Chartering (The “Genius Star 1”) [2011] EWHC 3083 (Comm) (Teare J.)

Where there are different claim time limits in the same charterparty, which limit should the parties adhere to?

This decision of the Commercial Court, on appeal by owners from a London maritime arbitration award, concerned head and sub time charterparties on the NYPE 1946 form. The vessel had loaded a cargo of wind turbine parts for carriage from Germany to the USA, which suffered damage in transit in September 2006.

Charterers (the bill of lading carrier) settled the incoming cargo claim in February 2008 and then sought an indemnity from owners under the Interclub Agreement (ICA) incorporated into the charter, under which claims are to be settled between owners/charterers on the broad brush basis provided in the ICA. 

Charterers did not commence proceedings with 12 months of final discharge, and only notified the claim in writing 14 months later, in January 2008. Owners therefore claimed the indemnity was time barred by reason of clause 39 which stated:

“Any claim must be made in writing and the claimant’s arbitrator appointed within 12 months of final discharge and where this provision is not complied with the claim shall be deemed to be waived absolutely barred.” 

Charterers however contended that as this was an indemnity claim under the ICA, that only its time/notification provisions were relevant:

(2) The terms of this Agreement shall apply notwithstanding anything to the contrary… in particular the provisions of clause 6 (time bar) shall apply notwithstanding any provision of the charterparty…

(6) Recovery under this Agreement… shall be deemed to be waived and absolutely barred unless written notice of the cargo claim has been given… within 24 months of the date of delivery of the cargo…”

Teare J upheld the award. In so doing he rejected owners’ reasoning as to why clause 39 applied, namely that (1) only clause 39  dealt with commencement of proceedings (the ICA dealt instead with claim notification), and (2) otherwise a statutory time bar of six years would apply which was “incongruous” and unlikely to reflect the parties’ intentions.  

Instead, the approach was what the reasonable person, having the parties’ knowledge, would take the provisions to mean in the context of a cargo claim. Here, the ICA dealt expressly what would happen if there was a conflicting time bar; the ICA provision “shall apply”. The two clauses could be read together without conflict such that the “any claim” in clause 39 was subject to the provisions of the ICA which expressly dealt with any conflict.

The approach was also consistent with ICA authorities e.g. The “Strathnewton” [1983] 1 Lloyd’s Rep 219, which  provided that the ICA had its own claims mechanism and was intended to cut across any allocations and functions of the Hague Rules, including the one year time bar.   

Whilst it is prudent for claims handlers always to err on the side of caution in protecting time limits/obtaining appropriate time extensions, this decision reinforces the understanding that where the NYPE charter incorporates the ICA, as is usual, that more flexible provisions apply to indemnity claims. This makes commercial sense, particularly to allow opportunity for late arriving claims, just before the one year expiry, to be passed on in time.

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