Charterparty – Arbitration
Global Maritime Investments Ltd v STX Pan Ocean Co Ltd; Global Maritime Investments Ltd v Navios International Inc; Navios International Inc v Sangamon Transportation Group: Queen's Bench Division, Commercial Court (Mr Justice Christopher Clarke): 8 August 2012
The instant case concerned three separate appeals against two arbitration decisions regarding a charterparty. The claimant in the first and second actions (GMI) was the first sub-charterer. The defendant in the second action and claimant in the third action (NI) was the second sub-charterer. The defendant in the third action (STG) was the third sub-charterer. The defendant in the first action (SPO) was the head charterer.
The material provisions of the charterparties were identical and included clause 112, drafted by the Documentary Committee of The Baltic and International Maritime Council (BIMCO). It provided: ‘Any [United States] gross transportation tax... levied on income attributable to transportation under this Charter party which begins or ends in the US, and which income under the laws of the US is treated as US Source Transportation Gross Income, shall be reimbursed by the Charterers’. Clause 112, when drafted, was recommended in a BIMCO circular (the circular).
The head owner in the chain of charterers paid the United States Treasury a total of $134,400 for US Gross Transportation Tax (USGTT) levied as a result of a vessel’s calls to three US ports during the charterparty period. SPO reimbursed the head owner and subsequently claimed that it was entitled to be reimbursed that sum by GMI. It deducted that sum from money due from it under another charterparty between the same parties. In a subsequent arbitration, the tribunal (the first tribunal) decided that GMI was bound to reimburse SPO and that GMI’s claim for the money failed.
GMI then claimed against NI and NI claimed against STG. In those arbitrations, the tribunal (the second tribunal) decided, by majority, that GMI and NI were not entitled to reimbursement of the sum that GMI had had to pay to reimburse SPO. The majority further held that clause 112 was a complete code dealing with USGTT, and GMI and NI could not recover the amount of the USGTT as one of ‘all other usual expenses’ of a voyage to the US or ‘mandatory expenses’ under other charterparty clauses, or under an implied indemnity. Both tribunals had regarded the circular as an important part of the background against which clause 112 should be construed. GMI appealed against the decisions of both tribunals and NI appealed against the decision of the second tribunal.
The principal issues for determination were: (i) whether the tribunals had been justified in taking the circular into account in construing the charterparty; (ii) whether GMI and NI were entitled to be reimbursed by their successive charterers; and (iii) whether clause 112 exclusively governed USGTT.
The court ruled: (1) In the instant case, the tribunals had not erred in taking the circular into account as part of the relevant background. It had been open to them to find that the circular had been reasonably available to any party to a charterparty involved in trading to the US. The circular had been relevant, not because it was to be taken as an accurate statement of the incidence of USGTT, but because it had indicated the risk with which clause 112 had been designed to deal. Evidence of the aim of the transaction and, in particular, the risk that it had been designed to address had been admissible (see ,  of the judgment). Investors' Compensation Scheme Ltd v West Bromwich Building Society, Investors' Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society  1 All ER 98 applied.
(2) The construction adopted by the first tribunal had been erroneous. The words ‘tax... levied on income attributable to transportation under this charterparty’, where they had appeared in the sub-charters, had not been apt to cover tax levied on income received under the head charter. Clause 112 had dealt with tax levied on hire due under the charterparty with the persons from whom reimbursement had been claimed.
In order for NI and GMI to succeed against STG and NI (respectively), they would need to say that USGTT paid by the head owner had been ‘tax... levied on income attributable to transportation under [the] charterparty’ with STG or NI because it had been the transportation to and from the US ordered by STG and NI which had given rise to the income which had been taxed. That would be a strained and unnatural construction which would involve a fallacy (see - of the judgment). The head owner would be entitled to reimbursement from SPO in respect of the tax it had paid, but no one else would be entitled to reimbursement (see  of the judgment).
(3) The majority of the second tribunal had been correct. The charterparties had contained, in clause 112, specific provisions in respect of the distribution of liability for USGTT. The reasonable reader of the charterparty would not understand that the provisions dealing with expenses generally would be regarded as covering USGTT and producing, in relation to that tax, a different result to that provided for by clause 112, which dealt with USGTT specifically (see  of the judgment). The appeal of GMI in respect of the first tribunal's decision would be allowed and GMI's and NI's appeals of the second tribunal's decision would be dismissed (see  of the judgment).
Henry Byam-Cook (instructed by Holman Fenwick Willan LLP) for SPO; Julian Kenny (instructed by Reed Smith LLP) for STG.