The Jaq Ravi

How effective is a Letter of Indemnity issued under charterparty terms by a party who is not the charterer?

In Great Eastern Shipping Co Ltd v Far East Chartering Ltd ("The Jaq Ravi") the English Court has addressed the effectiveness of a Letter of Indemnity which was issued by receivers to ensure that cargo could be delivered in the event that original bills of lading had not arrived at the discharge port.

The Jaq Ravi had been chartererd in to carry a shipment of coal from Indonesia to India. That shipment was being carried to fulfil a sale contract between the shippers who were Indonesian and a Swiss Company Visa Comtrade. A subsidiary company of Visa Comtrade – FEC were the named charterer of the Jaq Ravi.

The charterparty provided that if original bills of lading were not available at the discharge port the owners of the Jaq Ravi were to allow discharge the cargo against the charterers Letter of Indemnity (LOI) in the owners PNI club format. The clause also provided that a fax copy of the LOI was to be acceptable and that a copy of the bills of lading were to be attached with the LOI.

On completion of loading in Indonesia five bills of lading were issued on 30 September 2008. The vessel then sailed for India – and arrived at Navlakhi on 12 October. In the interim on 22 August the original buyer Visa Comtrade had on sold the cargo to another company – Binani on CIF terms. The on sale contract provided that in the event the vessel arrived at the discharge port before the buyer had received the bills of lading – the seller Visa Comtrade would make arrangements with the vessel owners to allow unloading against the Buyers – Binani's LOI.

On 6 October the charterers FEC sent a draft LOI which was in the PNI club standard form to Binani to issue. This they duly signed and returned to FEC – agreeing to hold harmless the owners/disponent owners/charterers of the Jaq Ravi in respect of any liability,loss,damage or expense of whatsoever nature which "you" may sustain by reason of delivering cargo in accordance with our request. It is clear from the case report that the owners of the vessel did not see this particular LOI before allowing discharge. It is unclear what they were given a copy of by the charterers pre discharge and whether the charterparty terms had been followed.

The LOI also included an extra clause providing that delivery into barges was to be deemed to be delivery to the party "to whom we have requested you to make such delivery."

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