Charterparty Indemnity Clauses and Injunctive Relief

Author: Lara Hicks
In: Article Published: Tuesday 07 April 2020




  • This judgment was handed down remotely on 26 March 2020 by Mr Justice Henshaw, pursuant to the Covid-19 Protocol.
  • The case concerned the interpretation of an indemnity clause in an amended Shellvoy6 form Charterparty and whether the Claimant time charterers should be granted injunctive relief, in the form of security to be provided by the Defendant voyage charterers, so as to enable release of the MT “Miracle Hope” (the “Vessel”), which was under arrest in Singapore.
  • Consequently, the case addressed the American Cyanamid principles, as set out by Lord Diplock as far back as 1975.

The Pivotal Facts

  • On 26 April 2019 the Claimant time chartered the Vessel from her Owners, Ocean Light Shipping Inc.
  • On 21 August 2019 the Claimant voyage chartered the Vessel to Clearlake USA Inc (“CUSA”), by a fixture recap incorporating an amended Shellvoy 6 form (the “Charterparty”). On the same date, CUSA voyage chartered the Vessel to Petroleo Brasileiro SA (“Petrobas”) on terms materially similar to those in the Charterparty, including an indemnity clause which was the subject of the present application.
  • The relevant bills of lading evidenced title to a million barrels of crude oil cargo, pursuant to a trade by Petrobas to Hontop Energy (Singapore) Pte Ltd (“Hontop”), financed by Natixis.
  • The cargo was loaded in Brazil and destined for discharge in the Far-East.
  • The indemnity clause in the Charterparty, clause 33(6) read as follows:

“(6) Notwithstanding any other provision of this Charter, Owners shall be obliged to comply with any orders from Charterers to discharge all or part of the cargo provided they have received from Charterers written confirmation of such orders.

If Charterers by telex, facsimile or other form of written communication that specifically refers to this clause request Owners to discharge a quantity of cargo either:

(a) without bills of lading and/or….

then Owners shall discharge such cargo in accordance with Charterers’ instructions in consideration of receiving the an LOI as per Owners’ P & I Club wording to be submitted to Charterers before lifting the “subs”...[Emphasis pursuant to the Charterparty; 'the an' in Charterparty]

(i) Charterers shall indemnify Owners, and Owners’ servants and agents in respect of any liability loss or damage of whatsoever nature (including legal costs as between attorney or solicitor and client and associated expenses) which Owners may sustain by reason of delivery of such cargo in accordance with Charterers’ request.

(ii) If any proceedings is commenced against Owners ….in connection with the vessel having delivered cargo in accordance with such request, Charterers shall provide Owners…on demand with sufficient funds to defend the said proceedings.

(iii) If the vessel or any other vessel or property belonging to Owners should be arrested or detained, or if the arrest or detention should be threatened, by reason of discharging in accordance with Charterers’ instructions as aforesaid, Charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such vessel or property and Charterers shall indemnify Owners in respect of any loss, damage or expenses caused by such arrest or detention whether or not the same may be justified.


(vii) This indemnity shall be governed and construed in accordance with English law and each and any dispute arising out of or in connection with this indemnity shall be subject to the jurisdiction of the High Court of Justice in England.”

  • No Club letter of indemnity (LOI) wording was provided to or requested by CUSA or the Defendant before the “subs” were lifted i.e. before the Charterparty became an unconditional binding contract.
  • Nonetheless on 14 October 2019 an email was sent to the Claimant by a Mr Mike Chee using the email address requesting a copy of Owners templates for a LOI wording for discharge of the cargo without presentation of Original Bills of Lading.
  • The same clearlakeshipping email address was used a few days later when writing in the name of the Defendant and giving discharge instructions.
  • The Claimant responded the same day attaching LOI wording.
  • On 30 October 2019 Mr Chee emailed the Vessel’s Master and the Claimant – utilising the Defendant’s email address again – providing Discharge Orders which included Remarks to Owners as follows:

“1. LOI INVOCATION: Charterer’s Petrobas, hereby request Owners to discharge their cargo as per this Voyage Orders without presentation of Bill of Lading. In lieu of an LOI Charterer’s hereby invoke Part II, clause 33 (6) of the Charterparty …”

  • The Discharge Orders were accompanied by an email which read:

“Dear Capt Satish

We, Clearlake Shipping Pte Ltd, hereby invoke Clause 33 of relevant CP to discharge as per below orders from Charterers w/o prod of OBL”

  • On 13 November 2019 the cargo was discharged in accordance with these Discharge Orders i.e. without production of the original Bills of Lading.
  • On 2 December 2019 the parties agreed an Addendum to the Charterparty, such that “Charterers” pursuant to the Charterparty was to read: Clearlake Shipping Pte Ltd.
  • On 12 March 2019 Natixis, the bank who had financed the cargo purchase, commenced in rem proceedings against the Owners and/or demise Charterers of the Vessel. The Singapore court granted a warrant of arrest over the Vessel the same day.
  • From the application in support of the arrest, it was evident that Petrobas had sold the cargo to Hontop with payments to be made by letter of credit. Natixis paid US$65,134,924.70 to Petrobas against a LOI from Petrobas in lieu of Petrobas presenting the original bills of lading to obtain payment. Hontop did not re-imburse its bank / Natixis and Petrobas endorsed and delivered the original bills of lading to Natixis who then demanded delivery of the cargo from Ocean Light / head owners on the basis that they were the lawful holders of the bills of lading
  • Head Owners did not respond to the delivery demand. The Vessel was thus arrested.
  • It was understood by the Claimant that Natixis had demanded security of US$76,050,000 to secure the release of the Vessel.
  • As head Owners in turn had demanded the Claimant put up the security and the Claimant had been deprived of the use of the Vessel on account of the arrest, it brought the subject application.
  • Prior to doing so the Claimant had called upon the Defendant to put up the security pursuant to the indemnity clause in the Charterparty, they had failured to: (i) do so; and (ii) accept the existence of the relevant indemnity.  

Defendant's Submissions in Resistance

  • The Defendant denied liability on four grounds:

(i) The application was brought against the wrong defendant; the Charterparty described the Charterer as CUSA and not the Defendant and this was the case when the indemnity was invoked. The indemnity was thus provided by CUSA and not Clearlake.

(ii) The indemnity wording was not submitted by the Claimant before the fixture had been concluded / subs lifted but after and thus not in accordance with the requirements of the clause nor the intention of the clause, requiring certainty and the pre-consent of the Charterer.

(iii) A separate LOI was required pursuant to the clause and none had been provided, such that no indemnity was provided by the Defendant/CUSA.

(iv) There was no urgency for the application to have been brought, particularly on such short notice.

  • The court addressed each submission in turn, as follows:

(i) It found that the Addendum was intended to place the Defendant in the shoes of CUSA for all purposes, as otherwise there was little point for the same, as all operational activities including loading had already taken place when the Addendum was entered. Further, the obligations which were the subject of the application (to provide security, defence funds and indemnity), were all required to be performed after the arrest of the Vessel, which post-dated the Addendum.

(ii) This point had no merit; the Defendant had requested the indemnity wording from the Claimant, been provided with it, and had expressly invoked the indemnity thereafter such that it must have consented to it. It achieved the certainty it may have required. The court did not regard it to be an essential condition that wording was provided before subs were lifted as long as all was in place, as it was, by the time of the discharge instructions without the bills of lading. Although not submitted, the court would have found evidence of waiver by the Defendant of any breach by the Claimant.

(iii) Construing the indemnity clause as a whole the court found clause 33 (6) to be an indemnity in itself – no separate LOI was required to activate the same. The conduct of the parties and commercial reality affirmed this finding and the Defendant waived any requirement for the same.

(iv) The Defendant was obliged to provide the indemnity some days before, had failed to do so in a market for crude carriers which was buoyant yet volatile and it was unrealistic to expect the Claimant to provide evidence of actual lost fixtures whilst the Vessel was under arrest. There was thus considerable urgency in bringing the application for the release of the Vessel.

The Legal Principles & Determination

  • It was common ground that the court had jurisdiction to grant an injunction where it was just and convenient to do so.
  • The American Cyanamid Co v Ethicon Ltd [1975] AC 396 principles were duly applied.
  • The court found on the facts that damages would not be an adequate remedy and a cross undertaking in damages would adequately protect the Defendant if the injunction was wrongly granted – such that it should be granted.
  • Although the court did not need to proceed to determine whether the balance of convenience necessitated the grant of the application, as there was no uncertainty as to whether damages would be an adequate remedy, it did nonetheless find in favour of granting the injunction when weighing the risk of prejudice to the respective parties.
  • Accordingly, the Claimant’s application was successful and the injunction was granted.

The full judgment can be read here.




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