Order of the Supreme Court of 19.11.2019, case А40-175069/2018

(Al Khubub LLC v. AGL LLC)

Facts: Al Khubub (charterers, shippers) and AGL (owners, carriers) entered into a voyage charter on a modified GENCON 1994 form for the transport of barley on The Volgo-Balt 106 vessel from the port of Kavkaz to Sevastopol for subsequent transshipment and export to Libya. AGL also acted as a freight forwarder. Al Khubub paid to AGL the freight and cost of loading and storing the barley. In addition to barley from Al Khubub, the ship also carried on board about an equal amount of cargo from another charterer. The master of The Volgo-Balt 106 issued an order bill of lading to the charterers, i.e. the receiver of the barley was determined by the order of Al Khubub.

What happened in Sevastopol is disputed by the parties. The charterers argued that the delay at the port of discharge occurred because the shipowners had not degassed the ship after fumigation at the port of loading. To get the cargo released to it, at the owners’ request Al Khubub paid advance demurrage for delays in Sevastopol, but the owners still did not indicate where the barley was located. In an attempt to determine its location in Sevastopol, the charterers discovered that the barley had been transferred from The Volgo-Balt 106 to another vessel, The Yara J, by order of SSK-Trade (now named as consignee in the copy of the bill of lading covering the barley). The charterers considered that the carrier failed to deliver the cargo to the place agreed in the charter, released it to an unauthorized person (SSK-Trade) and therefore must reimburse the value of the lost barley as damages and return the prepaid freight, demurrage, storage and loading costs. The owners argued that the delay in the transshipment of barley in Sevastopol was due to the fault of the charterers themself: they prohibited the transshipment of cargo to the agreed vessel and did not nominate a new one. According to the owners, the barley was unloaded at the discharge port and lawfully transferred to the warehouse controlled by an operator of a storage facility (SKK-Trade) to be detained by the owners Art. 160(2) MSC (Carrier’s tight to retention of cargo) due to the charterer’s failure to pay the rest of the freight and demurrage.

Moscow Commercial Court: the charterers’ claim allowed. The owners’ demand for advance payment of demurrage is unlawful, since the charter provides an exclusive agreed procedure for collecting demurrage, i.e. following a claim with accompanying documents within 30 days after the end of the voyage. Consequently, the demurrage paid in advance is refundable. The remaining claims for the cargo's value, the costs of storage and loading, as well as the return of freight were also allowed, since the owners breached their obligation to deliver the goods to the authorized consignee (Al-Khubub). The court considered that the barley was not unloaded at the discharge port, but was transshipped to another vessel by order of SSK-Trade - which, together with the issuance of the second bill of lading in favor of SSK-Trade, was also a breach of the charter, since the cargo has been released to an unauthorized person.

9th Court of Appeal: the judgment was reversed and the charterers’ claim denied. The cargo was delivered to the place agreed in the contract of carriage (the port of Sevastopol) for transshipment to another vessel. However, the case file contains a letter from the charterers, in which htheye prohibited the transshipment of barley from The Volgo-Balt 106 due to the fact the barley was not paid for by the buyer. The claimant did not subsequently nominate a new vessel for transshipment. In such a situation, the carrier was entitled under Art. 160(2) MSC to transfer the barley to a shoreside warehouse for storage to SSK-Trade, where it was mixed with identical cargo. Despite the commingling, the cargo was not lost. The carrier is entitled and ready to issue to the charterers the amount of identical cargo agreed in the charter. Consequently, the carrier did not breach the charter and is not obliged to return the freight and the storage and handling costs paid by the charterers.

Advance demurrage is also non-refundable. The charterers did not dispute the fact that the ship remained idle after the owners had submitted a notice of readiness. In addition, by not nominating a new vessel for transshipment, the charterers partially contributed to the delay. Finally, although the charter provided an agreed procedure to recover demurrage, the charterers did not dispute the demurrage calculation made by the shipowner, paid the advance demurrage voluntarily and thus waived their right to invoke the recovery mechanisms agreed in the charter.

Commercial Court for the Moscow Circuit: the judgment was upheld with similar reasoning. The charterers’ argument about the inapplicability of Art. 160(2) MSC on the carrier’s right of retention of cargo until payment was rejected.

Supreme Court: leave to appeal to the Commercial Chamber of the Supreme Court refused with the same reasoning. ■