- Review: the Baltic Exchange at Posidonia
Last week (4-8 June) the world of shipping descended on Greece for the bi-annual Posidonia event. For the Baltic Exchange, it was a busy week, here we review the highlights.
Baltic Exchange Risk Forum
The Baltic Exchange chose the idyllic setting of the Yacht Club of Greece to stage its Risk Forum on the opening day of Posidonia 2018. The programme included discussions around managing risk, the role of FFA’s, democratising investment in shipping and a panel discussion addressing the commercial implications of the 2020 Sulphur Cap.
Speakers included: Mark Jackson, CEO, Baltic Exchange, Duncan Dunn, Director, SSY, Marc Pauchet, Senior Research Manager, Maersk Broker, John Kartsonas, Managing Partner, Breakwave Advisors, in addition to Theofanis Anastasiadis Projects Manager Starbulk, Brian Nixon, Managing Director, Lavinia Bulk Ltd. and Angelica Kemene, Head of Market Analysis & Intelligence, Optima Shipbrokers.
Pictures of the event are now live via the Baltic Exchange Flickr account and can be viewed here.
The Baltic Exchange reception at the British Ambassador’s residence
Baltic Exchange chairman, Duncan Dunn welcomed esteemed guests and fellow Baltic members to the Baltic Exchange reception at the British Ambassador’s residence on 5 June.
The Baltic chairman spoke of the developments at the Baltic Exchange while paying special attention to the strong relationship the Baltic holds with Greece, stating:
“The relationship between the Baltic Exchange and Greece is one based on traditions and long-standing ties. Greek shipowners, based in London and Athens, have long been the backbone of the Baltic Exchange. Posidonia for us is very much a celebration of those ties, and I am delighted that so many members of the shipowning community are with us here tonight.”
Pictures are now available via the Baltic Flickr account and can be viewed here.
Posidonia Cup: Baltic Exchange crew take to Faliro Bay
The Baltic Exchange took part in the bi-annual Posidonia Cup on Friday 1 June, competing in the Classic Boat division. Congratulations to crew members Alexandros C. Kedros (yacht owner), Philip Bacon (skipper), Yiannis Kontoyiannis, Mike Crago, Owen Bolton, James Walters who finished second with a finish time of 17:24:18. To see pictures from the race, click here.
- Fehr Tennis Cup
On 27 June the Baltic Exchange will be holding the annual Fehr Cup at Surbiton Racket & Fitness Club.
Tennis, Pimms, summer lunch with strawberries and cream, this fantastic networking opportunity for tennis players of all levels is a must in the shipping social calendar. Taking place on the grass courts of Surbiton and including lunch and tea in the clubhouse, the tournament is split into two parts after an initial stage which gives, more social players an afternoon of relaxed open competition in the American Tournament, while the pros peel off to dual for the big ‘Fehr Cup’ prize.
Entry, including lunch and refreshments, is £70 per pair.
For more details, please email:
Catharine Bacon – firstname.lastname@example.org
Perry Perera – email@example.com
- Baltic Exchange Training Courses – June 2018
The Baltic Exchange is now taking bookings for its training courses in London and Singapore during June.
The courses offer high-level training to shipping, financial and commodity professionals. Courses taking place in June include:
Freight Derivatives & Shipping Risk Management (25-26 June, Singapore)
Delivered over two days by experts in the areas of shipping and commodity risk management, the Shipping Risk Management course aims to raise market awareness of risks involved in shipping businesses and how various physical and derivatives instruments can be used to control such risks efficiently and effectively. Participants will learn how to analyse and measure the impact of financial risks involved in shipping investment and operations, and how to select and execute effective strategies to minimise or eliminate such risks, stabilise their cash flow and maximise the return on investment more efficiently.
Advanced Freight Modelling and Training (27-28 June, Singapore)
This advanced two day module focuses on modelling freight rate dynamics and pricing options on freight. It discusses issues which are relevant to shipping market practitioners such as constructing forward curves on freight, modelling freight rate volatility as well as hedging and trading strategies using freight options. The course aims to provide delegates with both a theoretical foundation as well as practical hands-on experience.
Shipping Economics & Investment (18-19 June, London)
The course aims to provide delegates with both a theoretical foundation as well as practical hands-on experience on modern shipping economics and investment. It provides delegates with the essential knowledge of shipping economics, operations and investment management. The programme covers the microeconomic structure of the shipping markets including freight, second-hand, newbuilding and scrap markets and presents how these shipping markets interact.
For more information or to book onto one of these courses, click here.
- All in the timing
Hyundai Merchant Marine (Hyundai) was in the middle of a short charterparty chain when the Head Owners of the MV “K AMBER” refused voyage orders to East African ports in 2010. The sub‑charterers, Island View Shipping (IVS) commenced arbitration against Hyundai for damages which they claimed initially as US$687,722. Hyundai claimed an indemnity from the Head Owners.
The story explained
The arbitrations did not proceed concurrently although the tribunals in each were the same, and the Court was only concerned with the IVS/Hyundai arbitration.
Both sets of proceedings went very slowly, and eventually the Respondent parties (Head Owners, and Hyundai) applied for the respective Claimant parties’ claims to be dismissed for want of prosecution under section 41(3) of the Arbitration Act 1996, in January 2017.
In between, as the arbitrators and later Sir William Blair sitting as a Judge of the High Court heard, Hyundai had experienced well‑publicised financial difficulties, which led to a period of intense negotiations with creditors in 2016 with a view to restructuring Hyundai’s business. Hyundai, eventually, achieved a successful restructuring in June 2016.
The case is a salutary reminder that once six years have slipped by, a tribunal may take little persuasion that relevant prejudice has been suffered
Prompted by this publicity, in February 2016 IVS demanded security to be put in place for their claim. Security had been requested back in 2011, but Hyundai had not provided it, and IVS did not press the request. They did however insist on security being provided in 2016, when Hyundai was at a particularly sensitive time in those discussions. This course of action proved fateful.
After the security was in place, in September 2016, the arbitrators found no further steps were taken to proceed with IVS’ claim up to the time Hyundai’s application was made. They accepted Hyundai’s argument that during the period from end April 2016 to 20 January 2017 IVS’ objective was obtaining security rather than progressing the arbitration. They found that inordinate and inexcusable delay had taken place, in three periods, and IVS were responsible for it. The first requirement for dismissal under section 41(3) was therefore satisfied.
In the section 41(3) application, Hyundai argued unfairness had been and would be suffered by way of fading memories and loss of records, in particular, in the hands of the Head Owners. Under the head of “discretion”, Hyundai itemised the expense it had to incur in putting up and maintaining the security bond which it provided in September 2016. IVS responded that Hyundai had unreasonably delayed in providing security, and that by providing security Hyundai had induced them to continue the proceedings. In reply, Hyundai referred to the timing of IVS’ security request, contending that it could have had a potentially disastrous effect on the restructuring negotiations if one of its ships had been arrested.
The arbitrators, in a balanced Award dated 27 July 2017, held that the substantial risk of unfairness as regards the deterioration of evidence, which Hyundai had primarily relied on, did not avail Hyundai. However, they went on to find that serious prejudice was made out, in the following terms:
“Serious prejudice is, however, a different matter. We are satisfied that the delay has already resulted in a significant increase in costs in defending the claim. Hyundai have also been obliged to put up substantial security for Island View’s claim in terms of a cash deposit. We consider that this case ought properly to have come before us for a decision in 2013, or perhaps 2014 at the latest. As we suspect that Hyundai would not have been threatened with an arrest of one of their ships prior to their financial difficulties of 2016, we are therefore satisfied that there is a clear causal link between the delay and the substantial financial prejudice Hyundai have incurred in providing Island View with security for their claim. Island View’s demand also came at a most inconvenient time for Hyundai, when they were restructuring their fleet and reorganising their financial affairs. The mere threat of the arrest of one of their ships exposed Hyundai to further prejudice as it might have had a disastrous effect on their restructuring programme. As we are satisfied that the inordinate and inexcusable delay has already caused serious prejudice to Hyundai, we have decided to exercise the power given to us by Section 41(3) of the Act and dismiss Island View’s claim.”
It is to be noted that the jurisdiction to dismiss a claim for want of prosecution under the Arbitration Act 1996 no longer matches the similar jurisdiction in the High Court under CPR Rule 3.4, as the 1996 Act power is based on decisions such as Birkett v. James  AC 297 which followed a more formulaic approach than the current practice in the High Court. The present case is one of surprisingly few authorities on dismissal in arbitration under section 41(3) of the 1996 Act.
Challenging the Award
IVS applied for permission to challenge this Award, both under section 69 (appeal on “error of law”) and section 68 (“serious irregularity”) of the Arbitration Act 1996. They argued that the “increase in costs” as found by the Tribunal was not capable of constituting relevant prejudice; and that the serious prejudice as found by the Tribunal – i.e. an increase in costs, especially relating to the bond provided as security for the claim – had not been argued before the Tribunal and the decision had been reached without giving them a fair opportunity to present their arguments on it.
Permission to appeal on the issue of law was refused by Cockerill J in November 2017, saying the authorities as to non‑trial prejudice are applications of the tribunal’s discretion to the facts, and the Tribunal’s finding in this case fell within the range of permissible solutions open to them. That left the section 68 “serious irregularity” application.
The Court, in a reserved judgment handed down on 24 May 2018, dismissed IVS’ application. The Judge described it as “not an altogether easy case” but came down firmly on the side of Hyundai, mentioning among others the following important considerations:
- Following and applying recent decisions of Tomlinson J in ABB v. Hochtief  2 Lloyd’s Rep 1, and Popplewell J in Reliance & Ors v. Union of India  EWHC 822 (Comm) he held that the “costs” argument was “in play” or “in the arena” before the arbitrators, even though not articulated by a party in the way adopted by the Tribunal. The Judge held that the parties had a fair opportunity to address arguments “on all the essential building blocks in the tribunal’s conclusion”, and the arbitrators were not bound by the head under which the parties raised a point, particularly in the case of an issue such as prejudice.
- The Tribunal may have considered that costs of providing security, which Hyundai had set out expressly, could not be recovered as “costs” of the arbitration under the 1996 Act, although IVS had suggested that Hyundai could be compensated for them by that route. This remains an open issue in London maritime arbitration practice. This of itself may have been a reason for the arbitrators to exercise their discretion to dismiss the claim.
- In the Judge’s view, it would be a retrograde step in international arbitration for the Court effectively to rule out the cost of delay as a ground for striking out under section 41(3) on the basis that it could always be compensated for in an order for costs at the end of the day. This statement of principle accords with the underlying object of arbitration expressed in section 1(a) of the Arbitration Act 1996 of resolving disputes without unnecessary delay or expense, and the general duty of the tribunal under section 33(1)(b).
- The Judge referred more than once to the potential effect of IVS’ demand for security on Hyundai’s restructuring, and dismissed IVS’ argument that this concern was speculative and unfounded. In the context of the submissions the Tribunal was explaining how the timing of the request had exerted particular pressure on Hyundai, effectively requiring it to put up security, therefore the points were inextricably linked. The Judge pointed out that Hyundai had reminded the Tribunal in very clear terms of the financial condition of major Korean shipowners at this time, and the fate that occurred to Hanjin Shipping, all of which would be familiar to an experienced maritime tribunal. The Judge considered it was very likely that IVS’ argument would not have made any difference to the Tribunal’s view.
- The Judge referred more than once to the potential effect of IVS’ demand for security on Hyundai’s restructuring, and dismissed IVS’ argument that this concern was speculative and unfounded. In the context of the submissions, the Tribunal was explaining how the timing of the request had exerted particular pressure on Hyundai, effectively requiring it to put up security. Therefore, the points were inextricably linked. The Judge pointed out that Hyundai had reminded the Tribunal in very clear terms of the financial condition of major Korean shipowners at this time, and the fate that occurred to Hanjin Shipping, all of which would be familiar to an experienced maritime tribunal. The Judge considered it was very likely that IVS’ argument would not have made any difference to the Tribunal’s view.
- Taking several factors into account, the Judge held that no injustice had been caused to IVS by the arbitrators not raising the argument expressly with the parties before making their Award, and it could not be said to be likely that the arbitrators, if they had done so and heard further argument, would have reached a different decision.
The actual circumstances of the “K AMBER” decision are exceptional. At one level, six years after the dispute arose, the arbitrators clearly considered the claim was stale, and IVS were responsible for the delay. Nevertheless serious prejudice in the more-usual sense of deterioration of the evidence was not made out by Hyundai. As an exercise of discretion, the case is a salutary reminder that once six years have slipped by, a tribunal may take little persuasion that relevant prejudice has been suffered, and of the Court’s reluctance to second‑guess that decision. IVS were provided the security they demanded from Hyundai; but when the arbitrators’ discretion came into play, in the application under section 41(3), their demand brought IVS more than they had bargained for.
Henry Dunlop is a Partner at global law firm HFW in Hong Kong. Contact him on +852 3983 7799 or by emailing firstname.lastname@example.org.
- Member update: 13 June
The following companies have applied for Corporate Membership:
Company Individual China Economic Information Service Mrs Q Wei Mr J Shi Miss M Wang Ms J Chen Mrs H Li Mr K Wang Ms R Yang Port Qasim Electric Power Company (Private) Ltd. Mr Y Yuan Mr X Wang Mr D Yuan Miss L Hu
The following individuals have applied for Membership of an existing member company:
Company Individual Braemar ACM Shipbroking Ltd Mr W P Gee Barry Rogliano Salles Mr F Gilmour ENGIE Energy Management scrl Ms E Yu Fearnleys A/S Mr T Eia AS Klaveness Chartering Mr M Wattum
The following individual has applied for Retired Membership:
Mr D G De Rosa
Any comments should be passed to Karen Karanicholas by 13 June 2018.
- Member company office space to let: Grosvenor Gardens, LondonBaltic Exchange member company AM Nomikos has 1,066 sq ft of office space for rent in Grosvenor Gardens, LondonThis modern office space is located within a Grade ll listed Victorian building situated next to AM Nomikos’ London offices at the heart of Belgravia, within the Grosvenor Gardens Conservation Area and just a two minute walk from Victoria Station.Having undergone a substantial transformation, the area provides many world-class amenities and transport connections. Elizabeth Street provides a range of boutique shopping and high-end dining and lifestyle opportunities.£71,955 per annum (Assuming £67.50 pst)Est. Service Charge: Approx £11-12,000 per annumEst. Business Rates: £18.70 Per sq ftEst. Insurance premium: Approx £1,500-2,000 per annum24 hour security / Passenger lift / Suspended ceilings / Air conditioning / Kitchenette / Toilets / EPC / Motion sensitive lighting / UnfurnishedContact details:Annette Canbas: email@example.com / 020 7591 1813Katerina Raniou: firstname.lastname@example.org / 020 7591 1800