Asil Gida v. Cosco Qingdao
Note: to access a summary of the further award in this case, dealing with the merits of Owners' claim for an indemnity, click here
This award concerned a motion brought by Charterers to dismiss Owners’claim for an indemnity for cargo claims for which they had been held responsible at the discharge port in China. Charterers claimed that the doctrine of issue preclusion or collateral estoppel should be applied, in order to prevent the Owners from re-opening the question of their liability for the cargo claims, on the grounds that the Chinese court had already determined it. Having examined the background to and circumstances of the Chinese court ruling, the tribunal determined that it would not be appropriate to apply the doctrine in this case. The motion was therefore dismissed and the arbitration ordered to proceed to the examination of the merits of Owners’ claim.
DMC Category Rating: ConfirmedFacts
The Owners of the ship "Mustafa Nevzat" time-chartered her to the Charterers, Cosco Qingdao, under a time-charter on the New York Produce Exchange Form (1946), dated 25 June 1999, for worldwide trading. By a charterparty dated 12 April 2000, the time-charterers sub-chartered the ship on the Norgrain 1973 (Amended 1974) Form for a voyage with a cargo of soyabeans in bulk from Brazil to one or two safe ports North China, later named as Tianjin and Zhangjiagang. The ship completed loading at Itacoatirara in Brazil on 9 May 2000, with 53,232 tonnes of soyabeans in bulk in all seven holds. The ship, which was built in 1995, was fitted with "natural" ventilation openings, one fore and one aft on each of the two hatch cover panels at each hatch.
On arrival at Tianjin on 21 June 2000, the surface of the cargo was found mildewed and rotten and, on completion of discharge, the receivers claimed that approx. 24% of the cargo for that port had sustained damage ranging from 30 to 80%. The ship was arrested on 13 July and subsequently released when security was posted for US$1.57 million approx. Receivers then commenced proceedings against the Owners on 11 August 2000 and, on 18 July 2001, the Tianjin Maritime Court entered judgment against the Owners for US$740,000 approx. The court held that the damage was not due to the inherent vice of the cargo (too high a moisture content upon loading) but to the Owners’ failure to ventilate the hatches appropriately.
Further similar damage was evident at the second port of discharge, Zhangjiagang. The receivers there also commenced a court action against the ship and Owners. However, Owners were able to stay that action, pending arbitration in London.
In the present arbitration, Owners claimed an indemnity from the time-charterers for the damages awarded against Owners by the Tianjin Court and for any amounts for which Owners might be held responsible in the London arbitration. The Charterers then brought a motion before the arbitrators to dismiss the Owners’ claim on the grounds of "issue preclusion" or "collateral estoppel". That doctrine would have precluded Owners from arbitrating (re-litigating) the issue of the cause of damage to the Tianjin cargo, since the Tianjin Maritime Court had already concluded that the cause of the damage to the goods was not the inherent vice of the cargo but the failure of the Owners properly to ventilate the cargo to avoid the risk of sweat damage. Against this, the Owners argued that the principle should not be applied in this case, partly because a number of the elements necessary for the application of the doctrine were not present in this case; partly because the courts of the People’s Republic of China (‘PRC’) do not apply the doctrine in litigation in the PRC with respect to issues previously determined in other cases in the PRC.
The tribunal also found authority for the position under New York law that:
The panel accordingly concluded that "an arbitration panel in the U.S should not apply the doctrine of issue preclusion to prevent the arbitration/rearbitration of an issue determined in a foreign court or arbitration (between two parties, one of whom is different than one of the parties in the U.S action) when the courts or arbitration bodies of or in the foreign nation do not themselves apply the doctrine in cases or proceedings in their own courts or arbitrations with respect to issues previously litigated there."
The tribunal then examined in detail the proceedings in the Tianjin Court and concluded:
The Tribunal then went on to hold that it would be inappropriate for the panel to apply the doctrine on the facts of the case in the light of the evidence that the doctrine was not applied by the courts of the PRC.
Finally, the tribunal was "not at all satisfied" that the issues in the Tianjin proceedings were identical to the issues in the arbitration and, as a result, a further pre-requisite for the application of the doctrine remained unsatisfied.
Accordingly, the tribunal denied the Charterers’ motion and ordered the arbitration to proceed to a consideration of the merits of the Owners’ claims.
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