London Arbitration 8/25

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A vessel was chartered under an amended NYPE 1946 form for a period of five to seven months. Upon delivery, the vessel was ordered to load at Nanjing, China. However, the port authority rejected the vessel’s entry because eight new crew members had joined in Korea without valid PCR certificates obtained within three days prior to boarding, as required under China’s Ministry of Transport Notice No. 78. The vessel deviated to Busan, Korea, to obtain the required certification before returning to Nanjing.

The charterers sought US$294,379.88 in damages, or alternatively, recovery of overpaid hire, bunker costs, and other expenses, arguing the vessel was not “in every way fitted for the service” upon arrival. The owners denied liability, arguing that quarantine compliance fell under the charterers’ responsibility per a clause of the charterparty, and that PCR certificates were not “international certificates” required under the contract.

The Panel found in favor of the charterers:

  • The requirement for PCR certification was a well-known and foreseeable condition for vessels trading to China since December 2020. The owners had failed to ensure that the on-signing crew complied with these requirements.
  • The charter party, even incorporating the BIMCO Crew Change Clause, did not override the owners’ obligation to deliver a vessel legally ready to trade. That clause applied only to quarantine-related delays during the charter, not for deficiencies prior to delivery.
  • The PCR tests were not “international certificates” under the charter party, but the vessel’s failure to meet Chinese entry regulations meant it was not legally fit for service under lines 21–24 of the charterparty (i.e., not “in every way fitted for the service”).
  • Drawing on The Madeleine and The Derby, the tribunal reiterated that legal and regulatory compliance at the first port of call was part of a vessel’s fitness for service.
  • The charterers had no practical choice but to instruct the vessel to proceed to Busan, which they did under protest. The time lost (8.375 days), bunker costs, and related expenses were a direct result of the owners’ breach.
  • The alternative claim in off-hire was not required to be resolved, but the tribunal noted the deviation fell within the clause 15 catch-all provision: “any other cause preventing the full working of the vessel.”

Charterers were awarded US$284,958, plus interest and costs. The owners were held responsible for failing to ensure that the vessel and crew complied with known, local regulatory requirements upon delivery, making the vessel unfit for service at its first loading port.

NOTE: This case was unsuccessfully appealed in Bunge SA v Pan Ocean Co Ltd (The “Sagar Ratan”) [2025] EWHC 193 (Admiralty)