Rhine Shipping DMCC v Vitol S.A. (The “Dijilah”) – EWHC (Comm Ct), 26 May 2023

Disponent Owners chartered the tanker “Dijilah” from West Africa to China, then faced legal issues over sanction compliance by the commercial operator/owner. Property seizure by financiers caused delays, leading Charterers to pay an extra USD 3.7 million for cargo, but they gained USD 2.9 million internally. Disputes ensued as Owners claimed demurrage charges, countered by Charterers citing losses from the delay.


The tanker “Dijilah” faced complications during a voyage from West Africa to China carrying crude oil. Disponent Owners chartered the vessel using an amended BPVOY4 form, subject to English law and jurisdiction. The vessel was initially under a bareboat charter to Al-Iraqia, however they faced issues related to sanctions compliance as the vessel’s commercial operator.  This led Owners Nera and their financiers to initiate arbitration and attempt to terminate the bareboat charters. 

Charterers, dealing with an index-linked pricing mechanism, bought and resold the cargo, adjusting prices based on loading and delivery dates. The arrest of property on board by financiers delayed the vessel at the second load port, Congo. Charterers adjusted internal hedging, resulting in a USD2.9m gain but incurred an extra USD3.7m due to the delay. Demurrage ensued, prompting Owners to claim, with Charterers counterclaiming for delay-related losses.

Indemnity Claim

The first question was whether the circumstances of the vessel’s delay in Ghana, caused by the arrest of property on board, triggered the Clause 13 indemnity.  Clause 13 read as follows:

In the event of arrest/detention or other sanction levied against the vessel through no fault of Charterer, Owners shall indemnify Charterer for any damages, penalties, costs and consequences and any time vessel is under arrest/detained and/or limited in her performance is fully for Owner’s account and/or such time shall not count as laytime or if on demurrage, as time on demurrage.

In the event of arrest/detention or other sanction levied against the vessel through no fault of Charterer, Charterer shall be entitled, in Charterer’s option, to terminate the Charter. Termination or failure to terminate shall be without prejudice to any claim for damages Charterer may have against Owner.”

The Judge concluded that the indemnity was applicable because the vessel’s detention resulted directly from the arrest of the property on board, preventing it from proceeding to Congo.


The warranty stated the following:


This led to two issues for consideration:

(1) Did Al-Iraqia fit the criteria outlined in the clause, specifically falling under the descriptions of “managers” or “disponent owners”?

Here the Court ruled the term “managers” was broad, and evidence indicated Al-Iraqia was engaged in the vessel’s commercial management, aligning with its role as the “commercial operator” in the voyage charter. Therefore, the Judge deemed Al-Iraqia fittingly described as “managers.” 

Additionally, though not crucial to decide, the Judge also found that Al-Iraqia could reasonably be labeled as “disponent owners,” indicating any party providing a vessel under a charter arrangement, not being the registered owner. Alternatively, Al-Iraqia could be fairly described as “owners” since it had possession of the vessel through its personnel on board.

(2) Whether, during the time of and just before securing the voyage charter, Al-Iraqia was “clear of any burdens or legal matters that might impact the vessel’s approvals or the execution of the charter”?

The Judge found there was evidence of a legal problem involving Al-Iraqia during the time the voyage charter was agreed, notably the London arbitration. This issue had the potential to impact the execution of the voyage charter, which indeed happened. The Judge also clarified that, in terms of fulfilling a voyage charter, it didn’t matter whether the claims leading to the property arrest were ultimately proven valid or not.

Thus, the Judge ruled Owners were in breach of the warranty.

Internal Hedging

Based on the evidence, the Judge acknowledged that the alleged USD3.7 million loss resulted from the arrest-related delay. However, Owners contended a reduction of USD2.9 million due to gains from Charterers’ internal hedging. The Judge rejected this, stating these gains shouldn’t be considered as they weren’t part of separate contractual dealings. Charterers’ internal swaps were part of a risk management process, unrelated to specific trades, to identify net pricing risk exposure across various transactions. The decision on external hedging was separate from individual trade management. The Judge emphasized that internal swaps, being non-binding arrangements, merely shifted risk within Charterers’ portfolios, not compensating any loss. Referring to Lord Sumption in Swynson v Lowick Rose, [2017] UKSC 32, [11], benefits from other transactions couldn’t be brought into account to reduce the loss as they were unrelated to Owners’ rights and obligations.


Here, Owners argued two points: (1) that the loss wasn’t the kind the parties reasonably expected when contracting, and (2) even if it fell within the expected types of losses, Owners didn’t assume responsibility for this specific type of loss. 

(1) Reasonable Contemplation

Owners argued that Charterers’ loss wasn’t reasonably expected, as Charterers exposed themselves by using different pricing terms in contracts and ineffective risk hedging. However, the Judge disagreed, noting expert evidence recognizing the typical nature of pricing terms and internal hedging processes. The Judge concluded that Charterers’ claimed loss was customary for a charter like this one, falling within the parties’ reasonable contemplation when contracting. 

(2) Assumption of Risk

The Judge emphasized that recoverable losses are typically those within parties’ reasonable expectations. While specific factors may alter this assumption, Owners failed to present evidence for their case. Owners didn’t argue a market understanding that a shipowner isn’t liable for the claimed loss, nor did they assert that oil price movements were beyond their responsibility. The Judge reasoned that even if quantifying or predicting market movements was challenging, a carrier, given reasonable knowledge, assuming responsibility for delays but neglecting to manage loss exposure to crude oil price fluctuations, was not exempt from liability for such losses.

Scope of Recovery under Clause 13

While the decision on whether the loss was too remote was not necessary, the Judge expressed views. Referring to the “Eurus” [1998] 1 Lloyd’s Rep. 351 (C.A.), Halsbury’s Laws of England (4th Ed), p 360, col 2, and Wood v Capita Insurance [2017] UKSC 24, he stated that the relevance of rules on remoteness of loss to an indemnity depended on the contract’s construction. In this case, the broad scope of the indemnity, its potential activation without breach of contract, the parties’ recognition of its seriousness, and the absence of indications tying it to rules on remoteness led the Judge to conclude that Clause 13’s indemnity was not restricted by rules on remoteness of damage.


The High Court ruled in favor of Charterers, acknowledging their right to indemnity for consequences and damages due to a significant loss caused by a delay in vessel loading from property arrest on board. The court found the loss of profit from the delay wasn’t too remote and fell within Owners’ assumed responsibilities. Additionally, the court excluded considerations of gains from Charterers’ internal hedging. In a side remark, the court noted that the indemnity for consequences wasn’t bound by typical rules on the extent of losses. Overall, Charterers prevailed in their claim against Owners.