The Commercial Court Considers Various Issues Relating To The Conclusion Of Binding Contracts Of Carriage And The Commencement Of Arbitration Proceedings

Finmoon Limited and OOO Megafruit v. Baltic Reefers Management Ltd and ors [2012] EWHC 920 (Comm)

In this case, the Commercial Court looked at the parties' long-standing chartering arrangements and at the way bills of lading were issued to determine what types of contractual relationship they intended to create between them. In doing so, the court held that a binding contract of affreightment ("COA") came into existence by virtue of the parties' conduct. Mr Justice Eder also recognised the practise of surrender, cancellation and reissue of bills of lading, confirming that the re-issued bills were still effective to transfer rights of suit to the consignee. Finally, the court adopted a broad and flexible approach with regard to whether or not the claimants had effectively commenced arbitration proceedings. It confirmed – in line with the decision in The Voc Gallant in 2009 - that so long as it is objectively clear that a communication is intended to refer a dispute to arbitration and to require the relevant steps to be taken, then it will generally be considered to have complied with the necessary formalities and to have validly commenced arbitration.

The background facts

The claimants chartered weekly reefer tonnage pursuant to a COA to carry shipments of "green bananas" during the winter 2006/2007 season. The original COA was signed by the defendants, Baltic Reefers Management ("BRM"), as "owners". Tonnage continued to be provided into the 2007 summer season "as per present COA until next one is finalised" and on into the winter 2007/2008 season without a formal extension to the 2006/2007 COA or a replacement COA being drawn up.

BRM was the manager of a fleet of vessels pursuant to SHIPMAN agreements with each of the individual owners. They were instructed to nominate vessels from their managed fleet to perform under the COA each week, but were neither the legal nor the beneficial owner of any of the performing vessels.

The bills of lading were issued at the loadport identifying the fruit sellers as shippers. After receiving payment, the sellers returned the loadport bills to the ships' agents marked "NULL AND VOID". BRM's agents would then be instructed to prepare fresh bills at the discharge port and provide these to the claimants as the named consignees.

During the winter 2007/2008 season, 12 cargoes of bananas were damaged. The claimants notified their claims to BRM and the individual owners of the vessels by reference to both the COA...