Lloyd's Maritime and Commercial Law Quarterly
US Maritime Law
Robert Force* and Martin Davies**
CASES
276. Aracruz Trading Ltd v Kolmar Group AG 1
Attachment for security—countersecurity—non-frivolous claim—refusal to stay London arbitration
It is not unusual for a shipowner to claim for demurrage and the charterer to counterclaim for damage to cargo. In the present case, both claim and counterclaim arose when buyers at the ports of delivery initially rejected cargo as not meeting contract specifications, resulting in delays in discharge, hence producing claims for demurrage. The charterers claimed that the cargo was degraded by conditions on the vessels. The shipowners obtained orders to attach funds belonging to the charterers in the district. The charterers posted security in the amount of the claims and then demanded countersecurity in the amount of its claims. The merits of the respective claims were not to be decided in the US but in London arbitration. Thus, the actions in the US served only to secure the arbitration award.
Decision: Charterers were entitled to countersecurity; no injunction to restrain the arbitration pending posting of countersecurity.
Held: (1) The court recognised two competing interests when considering whether or not to order countersecurity. On the one hand, a goal of allowing countersecurity is to place the parties on an even footing with regard to security. On the other hand, countersecurity is not intended to deter plaintiffs from seeking to vindicate their claims. Although the rule on countersecurity is phrased in mandatory terms, this language is modified by the phase “unless the court for cause shown, directs otherwise”. After examination of numerous cases, the court concludes that countersecurity should not be denied by examining the merits of the counterclaimant’s case but should be denied only when that claim is “frivolous”. The charterer’s claim was not frivolous.
(2) The counterclaimant requested the court to stay the London arbitration until the countersecurity was posted. The court declines to do so, based on the assumption that the claimants would comply with the court’s order. In the event that they fail to comply, the court would release the security that had previously been posted by the charterer.
* Niels F Johnsen Professor of Maritime Law and Director Emeritus, Maritime Law Center, Tulane University Law School, New Orleans.
** Admiralty Law Institute Professor of Maritime Law and Director, Maritime Law Center, Tulane University Law School, New Orleans. 2015 AMC 679 (D Conn).
1. 2015 AMC 679 (D Conn).
212