Oceanografia v. DSND Subsea

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Oceanografia SA DE CV v DSND Subsea AS (The "Botnica")
English High Court: Queen’s Bench Division: Commercial Court: Aikens J: [2006] EWHC 1360 (Comm): 12 June 2006
Michael McParland, instructed by Waltons & Morse, for the appellant, Oceanografia
Claire Blanchard, instructed by Ince & Co. for the respondent, DSND


The Court held that although the terms of this charterparty required the signature of both parties for it to become effective, the charterer had, by its conduct, clearly chosen to waive its right to rely on the signing provision. The charterparty, including the arbitration clause, was, therefore, binding on both the parties.

DMC Category Rating: Confirmed

This case note is based on an Article in the August 2006 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers, DLA Piper. DLA Piper is an International Contributor to this website.

Oceanografia, a Mexican company operating off-shore oil platform services in the Gulf of Mexico, wanted to charter the MSV Botnica from DSND, a Norwegian company, to enable it to fulfil a contract for the Mexican State oil company. DSND chartered its vessels from the Finnish Maritime Administration (FMA), usually for 224 days of the year so that they could return to Finland for the winter for ice-breaking duties. Oceanografia, however, needed to provide its oil platform services for 807 calendar days, starting on 16 October 2001. Negotiations proceeded on the basis that it was not certain that FMA would give its consent to the head charter being extended over the winter months. By the end of August, DSND had signed the charterparty terms and (so the judge held) it was understood that Oceanografia would sign the charter once the wording of a surety bond had been agreed with the bonding company. In the event, the surety bond was never issued and Oceanografia never signed the charterparty terms.

Nevertheless, it made a mobilisation payment to DSND on 13 September and the vessel arrived in the Gulf and went on hire on 9 October 2001. By 16 November, however, it was clear the FMA would not agree to an extension. DSND notified Oceanografia and confirmed that demobilisation would have to start on 15 December. On 20 December, the parties signed an off-hire statement: "The vessel has completed her services according to a charter agreement dated 28 August and is off-hire from the agreed handover time above".

Oceanografia did not pay sums due under the charterparty and DSND began arbitration proceedings. The first issue was whether the tribunal had jurisdiction since the charterparty containing the arbitration agreement had never been signed by Oceanografia.

The arbitrators held that the terms of the charterparty required the signature of both the parties to become binding, but that Oceanografia had waived its right to rely on this requirement and so was bound by its terms, including the arbitration agreement. Oceanografia appealed under section 67 of the Arbitration Act 1996.

The "signing subject"
The judge agreed with the arbitrators. Clause 18.1 of the charterparty provided that the "offer for the MSV Botnica is subject to the signing of mutually agreeable contract terms and conditions". Although it was clear on the evidence that the terms had been agreed (apart from the surety bond), the proper construction of this clause meant there could be no binding contract until both parties had signed.

The judge acknowledged that it was rare in the shipping world for there to be a "signing subject" of this sort, but the clear and obvious meaning of the words was that there would not be a binding contract until that "subject" had been fulfilled.

Oceanografia had, however chosen to waive its right to rely on the signing requirement and so was bound by the charterparty and the arbitration clause.

A waiver by election requires a party to choose between two inconsistent or mutually exclusive courses. The party making the waiver must have sufficient knowledge of its right and make a clear and unequivocal representation (whether express or implied) that it does not intend to rely on that right.

In this case, the judge was satisfied that these conditions were met. Oceanografia had made a clear choice between two inconsistent courses - insisting on the requirement for signature, or abandoning the requirement so that there was a valid and binding contract. It was clear from the evidence that Oceanografia understood at the time that it had a right to refuse to sign the charter terms, but its conduct was a clear and unequivocal representation that it had chosen not to rely on that right. Both parties had continued as if the charterparty was binding on them - even to the extent of an off-hire agreement in accordance with its terms. The arbitrators, therefore, had jurisdiction to hear the dispute.

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