Deviation And The Right To Rely On Contractual Time Bars

Dera Commercial Estate v. Derya Inc (MV Sur) [2018] EWHC 1673 (Comm)

The English Court has recently handed down a judgment considering whether parties are able to rely on contractual time bars, such as Article III Rule 6 of the Hague Rules, in circumstances where owners have ordered the vessel to deviate without the agreement of charterers.

The judgment also gives useful guidance on the principles applicable to s. 41(3) of the Arbitration Act 1996 (the "Act") and the power conferred on an arbitral tribunal to dismiss a claim (or counterclaim) for "inordinate" or "inexcusable" delay.

The background facts

Dera purchased a cargo of Indian maize to be carried from ports in India to be discharged in Aqaba, Jordan. The cargo was loaded on board the vessel and bills of lading were issued, incorporating the Hague Rules and providing for disputes to be settled in accordance with English law and London arbitration.

The vessel arrived at Aqaba in August 2011 and the Jordanian customs authorities took samples for analysis. Following the analysis, the Jordanian customs authorities issued a letter, in September 2011, indicating that the cargo was damaged, would not be permitted to enter Jordan and must be returned to its country of origin.

Accordingly, Dera commenced proceedings against the Owners in Jordan claiming US$8 million for cargo damage and Derya (the "Owners"), in turn, commenced LMAA arbitration in London by appointing an arbitrator. The Owners' P & I Club put up a letter of undertaking (the "LOU") in connection with all disputes and differences arising under the bills of lading for the sum of US$9 million.

The Owners focused on arranging for the cargo to be re-exported and urgent applications were made to the Jordanian Court for an order, obliging Dera and the Jordanian customs authorities to grant the permissions necessary for the Vessel to sail from Aqaba to another port to discharge the cargo. Notwithstanding that the application had been dismissed and applications made for the appropriate authorities to reconsider the decision, the Owners instructed the vessel to sail from Aqaba to Turkey without first obtaining the Jordanian customs authorities', or Dera's, permission to leave the port. The Vessel sailed on 8 November 2011.

No formal procedural steps were taken in the arbitration by either side until March 2015, when the Owners served particulars of their claim seeking, among other things, a declaration of non-liability for the cargo...

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