Internaut v. Fercometal

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Internaut Shipping GmbH and Sphinx Navigation Ltd (Liberia) v Fercometal SARL (‘The Elikon’)
English Court of Appeal: Lord Justices Mummery, Sedley, Rix: [2003] EWCA Civ. 812: 17 June 2003
Simon Bryan, instructed by Ince & Co, for Internaut
Hugo Page QC, instructed by Penningtons, for Fercometal
Arbitration: Arbitration Acts 1950, 1979: demurrage claim under a voyage charterparty: whether the registered or the disponent owner, or both, was a party to the charter: whether an arbitral reference by the "owner" was valid and subsisting

This case related to a claim for demurrage arising under a voyage charter of the vessel ‘Elikon’. The charter, which provided for London arbitration under English law, was made between Fercometal as charterer and "Sphinx Navigation [registered owner], c/o Internaut Shipping [disponent owner]", but the charterparty form was signed as "owner" by Internaut without qualification. Internaut started an arbitration as owner against Fercometal on a demurrage claim, but the points of claim as subsequently served by its lawyers were in Sphinx’s name. The courts had to decide as a preliminary issue the party(ies) to the charter and to the arbitration. The Court of Appeal unanimously upheld a Commercial Court ruling that (i) the signature on the face of a charterparty is determinative as to the "owner" for the purposes of the contract; and (ii) Internaut, but not Sphinx, was a party to (a) the charter, and (b) the original arbitration. It further held that the arbitrators could not permit the points of claim to be amended by substituting Internaut for Sphinx. The Court accordingly held the arbitration to be a nullity so far as it was conducted in Sphinx’s name, but that it survived in respect of Internaut. Its future conduct was matter for the parties’ arbitrators to determine.

DMC Category Rating: Confirmed

Case note contributed by Ann Moore, Law Correspondent for Fairplay International Shipping Weekly and contributor to this website

Sphinx Navigation, registered owner of the ‘Elikon’, timechartered the vessel through Internaut to Primary Industries on 19 December 1994 for one Mediterranean trip. On 27 December 1994 Internaut voyage chartered the balance of the available space to Fercometal to carry 12,000 mt of steel rods from Gdansk to Algerian ports. The Gencon form charterparty was with "Sphinx Navigation c/o Internaut Shipping" However Internaut (a Hamburg-based broker not corporately connected to Sphinx) signed the "owners" box. It described itself as "principal" in fixing the charter, claiming to have agreed a joint venture with Primary to make the best use of the vessel’s capacity and to share the proceeds.

After delays in discharge, Internaut claimed demurrage/damages for delay in discharging against the voyage charterer. This was disputed, and in April 1995 Internaut’s P&I Club, Assuranceforeningen Gard, asked its London solicitor Ince & Co to commence arbitration on behalf of the "owner" under the charterparty. Mr John Schofield was appointed "owner’s arbitrator", while Mr Bruce Harris was appointed for Fercometal. Mr Robert Gaisford was the third arbitrator. A year later Ince served points of claim, but named Sphinx, not Internaut, as "Claimants / Owners".

In 2000 it was established that Sphinx and Internaut had different commercial interests. Ince claimed the word "Sphinx" had been a "mere misnomer". It proposed the matter should be rectified by naming Internaut as a claimant in addition to Sphinx (without removing Sphinx) and the tribunal should be asked to agree such an amendment. At the same time Ince asked Mr Schofield to accept appointment as an arbitrator "on behalf of our clients, Internaut", which he accepted. Lord Justice Rix interpreted this as "relating to entirely a new appointment in a further arbitration, between Internaut and Fercometal". Fercometal now appointed Mr Mark Hamsher in place of Mr Harris.

The arbitrators rejected the application to amend, saying they had no power to make such an order, "which would have the effect of including two different companies as claimants in the capacity of principal parties to the charterparty when only one of them can have been such a party." The Commercial Court was then asked to decide as preliminary issues who was the "owner" under the charter, and thus a party to the contract of carriage; was the original (1995) arbitration valid and subsisting, and had the tribunal got jurisdiction to amend by substituting Internaut for Sphinx?

In June 2002 David Steel J ruled that Internaut, but not Sphinx, was the "owner" under the Gencon charter and a party to the arbitration, and that arbitrators could give permission to amend the original points of claim, substituting Internaut for Sphinx. The original demurrage claim totalled about US$149,000.

1. The arbitration, having commenced in 1995, was subject to the Arbitration Acts of 1950 and 1979, not 1996.
2. Only parties to a contract of carriage can bring arbitral proceedings under an arbitration clause in that contract, or be required to respond to them.
3. How should the identity of the "owner" be determined in the event of inconsistency on the face of the charterparty?
4. If the arbitration commenced in 1995 were valid and subsisting, had the tribunal jurisdiction to amend it by adding or removing a party?

Hugo Page QC for the appellant, Fercometal, argued that taken as a whole, the charterparty pointed to Sphinx being the owner and Internaut (in spite of its signature) merely Sphinx’s agent. According to the evidence, this was the general understanding of Fercometal’s representatives. For Internaut, Simon Bryan submitted the unqualified signature, if not "definitive", had particular significance in the absence of a plain and unambiguous contractual intention that Sphinx was the only party entitled to take the "benefit and burden" of owner under the charter. Secondly, it was clear from the correspondence and documentation, such as freight invoices and correspondence about the disputed demurrage, that Fercometal knew in any event that Internaut was the owner.

Lord Justice Rix gave a judgment with which his colleagues agreed.

Issue 1: who is party to the charter? He held that Internaut’s unqualified signature was "ultimately determinative" of who was the owner, in line with the statement in the standard textbook, Scrutton on Charterparties, that "Where a person signs the charter in his own name without qualification, he is prima facie deemed to contract personally and, in order to prevent his liability from attaching, it must be clear from the other portions of the charterparty that he did not intend to contract personally."

Rix LJ pointed out that Internaut was not described as agent anywhere in the charter, and there was nothing to indicate it signed the owners box "as agent". Rejecting Fercometal’s argument that this suggested the firm was Sphinx’s manager, he said that both a long line of authorities, and the "commercial facts of life", showed Internaut’s liability was firmly established. He cited Lord Millett in the recent House of Lords decision in The ‘Starsin’  "The identity of the parties to a contract is fundamental ... It goes to the existence of the contract itself. If it is uncertain, there is no contract". Extrinsic evidence, as put forward by the appellant, was therefore irrelevant. He held David Steel J was right to hold that Internaut was liable as owner under the charterparty, and as a party to it..

Issue 2: who is the claimant party in the original arbitration? The question of who had invoked arbitration against Fercometal (and had authority to do so), was a "perplexing issue", said Rix LJ. He concluded the authority came via Gard and Ince & Co "from Internaut itself". Sphinx and Internaut were not commercially connected; it was Internaut, not Sphinx, which was a member of Gard; through its joint venture with Primary it was the party with a financial interest in collecting the demurrage claimed, whereas Sphinx’s interest was "wholly covered" by its time charter with Primary, and the documentary evidence seemed to show that Internaut was understood to be the disponent rather than the registered owner.

Rix LJ said he did not believe Fercometal knew that Internaut and not Sphinx was the owner under the charterparty, and he was not satisfied that Ince’s use of Sphinx’s name was "a mere misnomer". He pointed out that "as late as January 2001" Ince was maintaining that Sphinx was "already a party to the arbitration". Naming Sphinx was not a slip of the pen which could be remedied by amendment. The arbitration started as one between Internaut and Fercometal, "but metamorphosed into one between Sphinx and Fercometal" - a "jurisdictional impossibility". Sphinx was not the owner under the charter, and in any case Ince was never instructed by Sphinx, though it claimed Sphinx later ratified the arbitration started in its name. The arbitrators had been right in declining the application to amend. Accordingly, the conduct of the arbitration in Sphinx’s name was a nullity.

Issue 3: Was the original Internaut-Fercometal arbitration still in being, and with what consequences? In spite of the unfortunate consequence that everything done in the arbitration to date had been wasted, the "necessary, proper and ultimately safest course" was to treat it as a valid, unfinished arbitration which was still in being. He concluded that its future conduct was a matter for the two arbitrators appointed to it by the parties, noting that the third might have to be reappointed.

He suggested it was possible that some of the charterer’s costs might in due course be sought from Ince or Sphinx, or both.


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