Inter Club Agreement Counter Security

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The owners initiated arbitration proceedings against the charterers and applied, pursuant to Section 48 (5) (b) of the Arbitration Act 1996, for a special provision for the provision of the provision of counter-safety. Freight interests have filed a lawsuit against Head Owners, which claim $900,000 in damages. After the threat of arrest, the Club for Head Owners took the form of a letter of commitment to ensure safety. Under the subsection (b) above, charterers who are requested to obtain counter-protection are in turn entitled to insist on mutual counter-security of the owners. This is the case, even if the claim is made under the bill of lading of the owners and will still only go down the charter chain. This decision was quite divisive and clearly contradicts what the ID intended to do in the development of the 2011 revision. Two subsequent arbitrations on this particular point did not follow the previous decision, so the case is undecided. Once again, clubs try to be pragmatic in this regard and generally recommend to their members that when a charter party has an ICA clause, it should be considered to involve the entire ICA, including safety and scheduling rules. However, the text of the specific charter party must naturally be taken into account, so that each case must be assessed on its individual merits.

Although the London arbitration award is not legally binding, it represents a positive development for charterers. At the same time, it appears that caution should be exercised when parties wish to include the ICA mechanism in their contracting part, and each party should carefully consider the extent to which this mechanism should be integrated, particularly with regard to the guarantee of counter-security. Notes: The above clause dates from the 2011 version of the ICA. Prior to 2011, there was no English legal authority on whether a party had the right to guarantee a right before the right to the underlying cargo was settled. This situation was found to be unsatisfactory by the SdA, as it resulted in unnecessary costs to the parties, not least because there were often legitimate doubts that charterers could no longer be exchanged until a freight fee was paid and, as such, could no longer be considered owners. As has already been said, the IG Group has responded to this development by advising its members to amend their ICA clause in their chartered parts. The amended clause contains such language to ensure that it encompasses the charterers` request for counter-security: the court found the charterer correct when it stated that the charter party had included only the parts of the ICA 2011 that were accused of sharing and settling claims. The Charter did not contain section 9 of the ICA 2011, which deals with the right to security of claims. As a result, the owner was not allowed to face the counter-security until the underlying cargo demand had been paid and paid. Accordingly, the aforementioned safeguard clause was included in the 2011 version of the ICA to clarify that if a party is to provide security to a third-party freight applicant, that party was entitled to a counter-guarantee of an equivalent amount from the other part of the charterer.

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