Disclosure of available evidence under the Inter-Club Agreement


Published: 5 May 2011

The Inter-Club Agreement (“ICA”) is incorporated in a great many NYPE (including ASBATIME) C/Ps. The ICA allocates liability differently, depending on if it is a shortage claim or a claim arising out of loading, storing, discharge. To allocate a claim correctly under the ICA, it is therefore necessary to know the type of claim and how it was caused.

Skuld recently handled a matter where our members were time-charterers under an amended ASBATIME that was subject to English law and London arbitration, including LMAA small claims procedure for claims under 50,000 USD. The ICA “as amended from time to time” was also incorporated.

The dispute concerned a cargo claim under the ICA incorporated in a C/P and the obligation to disclose the evidence and documentation available when presenting such a claim to an owner or a charterer as the case may be.

The vessel was loaded with a cargo of rice, which was discharged at Dakar in July 2005. A claim for damaged cargo as well as a shortage was presented by cargo underwriters to Owners of the vessel. The claim was at that point estimated to roughly USD 60,000 plus 25% interest and costs. Owners, at the time, had a survey carried out. Shortly after, Owners advised Skuld that the claim should not exceed USD 9,500.00. We agreed that an amicable settlement should be made with cargo interests, but informed Owners that neither claims documents nor survey reports had so far been received. Owners reported the causes to be torn bags, stained bags and (other) shortage.

The claim was ultimately settled by owners for EUR 6,865.59 in addition to incurred costs of EUR 6,468.57.

Between the claim being settled in 2004 and when the claims submissions were filed with a London arbitrator in 2010, Skuld maintained that it would be necessary to see the survey report upon which owners based their claim in its entirety. This was maintained throughout the period since 2004.

Owners took the position that this could not be demanded and that it was against the spirit of the ICA. Throughout the discussions, owners gave different statements as to how the apportionment should be made. Ranging from 50/50 to 100% for charterers’ account, all based on the same undisclosed survey report. After a long period of discussions, owners offered a summary (prepared by themselves) of the surveyors’ statement upon which they claimed that the claim was 100% charterers’ responsibility. Some time later two pages, out of the 92 pages of the survey report, were disclosed.

The survey report was finally included in the claims submission filed by owners in 2010, shortly before the claim would have been time-barred. This was the first chance Skuld had to review it in its entirety. In the claims submission owners argued that there should be a split of 47.4% / 52.6% between the parties. In addition, Owners claimed interest and costs. Members admitted and agreed to the claim as such being divided accordingly (i.e. the “principal”). However, Members denied that they should be liable for interest and costs, as it was not possible to establish that the allocation made by owners was the correct conclusion on the evidence available. Thus, such it was not possible for members to settle the claim until the claims submission made the full survey available.

The Arbitrator took the view that the ICA and the mechanical apportionment that it intends to enable, nonetheless entitles the defendant to establish that the available evidence confirms the allocation claimed by the contracting party. This is confirmed by the wording in the ICA that states that “claims in fact arising out of …”

He further agreed that the basis of the claim had not been established before the full disclosure of the survey report and therefore the claim for interests and costs failed. Owners were awarded the main claim by consent, but had to bear their own legal costs, as well as the small claims fee initially paid by them.

Under the ICA, which is a “rough and ready” allocation scheme for cargo claims, there are still various alternatives how the apportionment should be made, depending on the basis of the claim. Any party becoming liable under the ICA still has the right to satisfy itself that the facts of the matter supports the share it is to be liable for. Therefore, a party claiming under the ICA has the corresponding obligation to disclose such relevant evidence.