London Arbitration 19/97

Set-off - State shipowning organisation claiming unpaid hire - Whether charterers entitled to set-off against claim for hire in arbitration proceedings a debt owed to charterers by another state organisation

The vessel was chartered on the NYPE form as amended. The shipowners were alleged by the charterers to be a state organisation. Only the first instalment of hire was paid by the charterers. The owners made an urgent application for an Interim Award in respect of hire in the sum of US$519,750 in accordance with the principles set out in the Kostas Melas [1981] 1 Lloyd’s Rep 18. The charterers accepted that the hire had been earned, but they said that they had a right of set off. The alleged right of set off arose because the charterers said they were assignees of a debt owed by another state organisation of the same state. The charterers said that all ownership and control of state organisations in the relevant country was vested in the state itself, and accordingly the charterers were entitled to set off the debt owed to them by one state organisation against the sums due in respect of hire to another state organisation.