This was an appeal under s 69 of the Arbitration Act 1996 (UK) concerning the Tribunal’s award in favour of Grand Amazon Shipping Ltd (the owners) against Sino East Transportation Ltd (the charterers) for an indemnity of USD 6,030,603.53. The dispute arose from the carriage of soyabeans from Uruguay and Argentina to the PRC, which suffered damage due to inherent vice. Although the Hague/Hague-Visby Rules and US COGSA art 4.2.m exclude liability for inherent defects, the PRC courts held the owners liable, and the owners' P&I insurers paid the judgment and defence costs.

The charterparty, incorporating the NYPE Form and the 1996 Inter-Club Agreement (ICA), allocated cargo claims: vessel unseaworthiness or navigation faults were 100% the owners' responsibility, while claims arising from loading, stowage, or handling were 100% the charterers' responsibility. Clause 8 of the NYPE Form required the owners to act under the charterers' orders. The Tribunal found the loss was outside the owners' liabilities.

The appeal raised the question of whether a shipowner can rely on an implied indemnity when a foreign court wrongly holds it liable for damage to a lawful and harmless cargo that was, in fact, affected by inherent vice. The charterers argued the charterparty and ICA allocated such risks to the owners, whereas the owners maintained the Tribunal correctly applied the law, holding the loss outside ordinary trading risks and within implied indemnity.

Held: Appeal dismissed.

The Tribunal found that the loss of the cargo resulted from the charterers' orders to carry it to the PRC, and that the owners' liability for the damage was neither an ordinary risk of the chartered service nor one they had expressly or impliedly agreed to bear, placing the loss within the implied indemnity. The Tribunal correctly applied Triad Shipping Co v Stellar Chartering Brokerage Inc (The Island Archon) [1994] 2 Lloyd's Rep 227, noting that the risk was not notorious at the time of contracting, and emphasised that implied indemnity applies even to lawful cargo, as supported by Royal Greek Government v Minister of Transport (The 'Ann Stathatos')(1950) 83 Ll L R 228. The relevant charterparty cll (6, 12, 43, 45, 82), as well as COGSA and ICA did not assign liability for this cargo to the charterers. Under the Hague/Hague-Visby Rules arts 3.3 and 4.2.a, the owners' obligations differ from the charterers' discretion over cargo and ports.