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Oil Tanker’s Detention Triggers High Court Arbitration Dispute

The whole point of commercial arbitrations is to achieve final resolutions with which all parties must abide, whether or not they are happy with the result. The High Court made that point as it considered the unfortunate case of an oil tanker which had been detained at a Venezuelan port for almost 18 months.

The tanker was due to load cargo at the port when it was boarded by a large group of investigators, including six members of the Venezuelan National Guard. A lengthy inquiry ensued into alleged forgery of a document and unauthorised oil exports. The vessel’s detention was approved by a Venezuelan court.

There was no suggestion that the owner of the vessel, its charterer, or its crew had been involved in any wrongdoing. However, the detention had been continued as a precautionary measure pending a criminal investigation into the activities of a third party. The detention caused substantial losses – hire charges on the vessel were $14,500 a day – and an arbitrator was called upon to decide where they should fall.

The arbitrator ruled comprehensively in favour of the vessel’s owner on the basis that the charterer had, albeit inadvertently, instructed her master to take steps which exposed her to seizure by rulers or governments, within the meaning of the contract. In rejecting the charterer’s challenge to his conclusions, the Court found that they involved no error of law.

The arbitrator had reached clear findings and the charterer’s case was, in truth, an example of a disappointed party trying to dress up an appeal against findings of fact as one which turned on questions of law. The parties had chosen the arbitrator themselves and were bound by his findings, which could not be challenged in court, even on grounds that they were unsupported by the evidence or that they contained internal inconsistencies.