ShippingJune 2013THE “ASTRA”APPEAL STATUS AND UPDATEFurther to our April 2013 Briefing regardingMr Justice Flaux’s decision in Kuwait RocksCo v AMN Bulkcarriers Inc (The mv Astra) EWHC 865 (Comm) we now provide anupdate on the status of that decision. It wasoriginally held (in obiter) that the obligationupon a charterer to make punctual payment ofhire in clause 5 of the NYPE 1946 form charteris a contractual condition, a breach of whichentitles an owner to terminate the charter andclaim damages for future loss of earnings.The charterers have not obtained leave to appealthe High Court’s decision. Therefore, until there isa clear and binding decision on point, Mr JusticeFlaux’s conclusions regarding the status of theclause 5 obligation to pay hire is the most relevantand up-to-date authority in this area. As such, itmay well be considered persuasive by other HighCourt Judges and arbitrators, although they arenot obliged to follow the decision on the basis thatMr Justice Flaux’s conclusions were obiter.At first blush it would seem that the decision inthe Astra provides clarity in respect of acharterers’ failure to pay hire. However, on closerinspection it arguably creates potential uncertaintyin two main respects.First, as mentioned above, the status of the clause5 obligation to pay hire was not a ground of appealfrom the original tribunal’s decision and thereforeMr Justice Flaux’s conclusions are obiter. If MrJustice Flaux’s approach is followed, an ownerwho does not terminate in a prompt mannerfollowing a single missed payment of hire wouldbecome exposed to arguments that they haveaffirmed the contract due to delay. This createsa quandary for owners who, following a paymentdefault by charterers, must decide whether toterminate or not in the face of uncertainty as towhether the decision in the Astra will be followed.
Secondly, it is now arguable that adeduction from hire may be a breachof condition and therefore repudiatory.All may turn on whether or not thededuction was valid. If the ownerterminates and the deduction is laterfound to be valid then the owner willhimself be in repudiatory breach andliable in damages to the charterer.If the owner terminates and thededuction is later found to be invalidthen the charterer will be liable indamages to the owner. As a result,the consequences of a charterermaking deductions from hire are nowpotentially very serious if an ownerdecides to press the issue.Therefore, it would seem that MrJustice Flaux’s attempts to bringsome clarity, could actually have theunintended effect of creating furtheruncertainty due in part to the obiternature of the decision.The eventual impact of the Astradecision is potentially ground-breaking,however, it remains to be seen whetherit will be followed either at first instancelevel or in the appeal courts andfurther decisions on the point will beclosely watched.Lawyers for international commerceHOLMAN FENWICK WILLAN LLPFriary Court, 65 Crutched FriarsLondon EC3N 2AET: +44 (0)20 7264 8000F: +44 (0)20 7264 8888hfw.com© 2013 Holman Fenwick Willan LLP. All rights reservedIn the meantime, parties will need toconsider payment of hire issues in anew way. It may lead charterers seekingamendments to their standard formcharters aimed at revising provisionsregarding payment of hire and changingthe contractual regime to provide betterprotection when making deductionsfrom hire.Whilst the Astra judgment is ofsignificant potential benefit to owners,in the short term at least, owners mayface a dilemma as to whether or notto rely upon the Astra to terminate acharter following a single paymentdefault by charterers and claimprospective damages or follow theprevious conflicting authorities.For further information, please contactRory Butler, Partner, on +44 (0)207264 8310 or email@example.com,or Menelaus Kouzoupis, Associate,on +44 (0)20 7264 8482 or firstname.lastname@example.org, or your usualHFW contact.Whilst every care has been taken to ensure the accuracy of this information at the time of publication, the informationis intended as guidance only. It should not be considered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal detailsor change your mailing preferences please contact Craig MartinShould you have any questions inrelation to this case, please contactPaul DeanLondon PartnerT: +44 (0)20 7264 email@example.comGuillaume BrajeuxParis PartnerT: +33 (0)1 44 94 40 firstname.lastname@example.orgJeremy DavisGeneva PartnerT: +41 (0)22 322 email@example.comDimitri VassosPiraeus PartnerT: +30 210 429 firstname.lastname@example.orgHugh BrownDubai PartnerT: +971 4 423 email@example.comPaul AstonSingapore PartnerT: +65 6305 firstname.lastname@example.orgPaul HatzerHong Kong PartnerT: +852 3983 email@example.comNicolas PoynderShanghai PartnerT: +86 21 5888 firstname.lastname@example.orgRobert SpringallMelbourne PartnerT: +61 (0)3 8601 email@example.comNic van der ReydenSydney PartnerT: +(0)2 9320 firstname.lastname@example.orgHazel BrewerPerth PartnerT: +61 (0)8 9422 email@example.com