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Introduction

On 30 July 2025, Henshaw J handed down the High Court’s judgment in Sino East Transportation Ltd v Grand Amazon Shipping Ltd (the “Grand Amanda”) [2025] EWHC 1990 (Comm). The judgment provides guidance regarding the scope of the implied indemnity for following charterers’ employment orders, the applicability of the ICA in cargo claims, and the meaning of “act” under article 8(d) of the ICA.

Facts

• On 1 April 2014, Grand Amazon Shipping Ltd (“Owners”) chartered the M/V Grand Amanda (the “Vessel”) to Sino East Transportation Ltd (“Charterers”) for a trip to carry lawful and harmless cargoes from the East Coast of South America to the Far East (the “Charterparty”). The Charterparty consisted of a recap and an amended NYPE 1946 form with rider clauses. On 3 April 2014, Charterers sub-chartered the Vessel for the carriage of soybeans in bulk from Uruguay and Argentina to China.
• On 27 May 2014, the Vessel completed loading a cargo of soybeans in bulk at Montevideo, Uruguay (the “Uruguayan Soybeans”). The Vessel subsequently proceeded to Bahia Blanca, Argentina, and loaded a second cargo of soybeans in bulk (the “Argentinian Soybeans”). A clean bill of lading on CONGENBILL 2007 form was issued for each of the cargoes. The bills of lading incorporated the Hague/Hague Visby Rules and the Charterparty’s law and arbitration clause.
• During the voyage, the Uruguayan Soybeans were found to show signs of discolouration, mould, and self-heating. It was later found at discharge – on 20 July 2014 at Zhoushan, China – that the Uruguayan Soybeans were mildewed, discoloured, caked and blackened. The Argentinian Soybeans were later discharged on 25 July 2014 at Jiangyin, China in good order and condition.
• On 2 September 2014, cargo interests brought proceedings against Owners in the Wuhan Maritime Court (the “China Proceedings”) on account of the damage to the Uruguayan Soybeans. Owners and their P&I insurer, The Swedish Club, decided to defend the claim on its merits in China, rather than challenge jurisdiction or take steps in England.
• On 31 August 2018, a favourable judgment was granted to cargo interests in the China Proceedings, for a sum roughly 20% less than originally claimed. Owners were held liable on the basis of their failure to adequately care for the Uruguayan Soybeans. The Wuhan Maritime Court were not convinced that the damage was caused by inherent vice.
• Owners commenced arbitration against Charterers, arguing that they were entitled to recover their exposure and legal costs incurred in the China Proceedings.

Key Terms of the Charterparty

• The key terms of the Charterparty were as follows:
• Clause 6 of the recap provided that the Charterparty was to provide for carriage “with harmless lawful cargoes”.
• Clause 8 of the NYPE Form provided that “…the Captain (although appointed by Owners), shall be under the orders and directions of the Charterers as regards employment and agency…”.
• Clause 43 of the Charterparty provided that “liabilities for cargo claim shall be borne by Owners and the Charterers in accordance with NYPE Inter-Club Agreement 1996 or latest updated version” (the “ICA”).
• Clause 12 of the Recap identified destinations to which the Vessel could not be ordered to trade. The People’s Republic of China was not a prohibited destination.
• Clause 82 of the Charterparty set out a list of cargo exclusions. Neither the Uruguayan nor the Argentinian Soybeans were prohibited cargoes.

The Arbitration 

Owners’ Case

• Owners argued that they were entitled to recover their losses in the China Proceedings from Charterers, on the following grounds:
• the agreed allocation of liability under the ICA; or in the alternative
• under the implied indemnity as a consequence of the Master following Charterers’ employment orders (see Clause 8 of the Charterparty).

 Charterers’ Case

• Charterers’ defence to liability under the ICA was as follows:
• Firstly, Charterers said that the requirements in Clause 4(c) of the ICA had not been met – i.e. the claim had not “been properly compromised or settled and paid”; and
• Secondly, if Clause 4(c) of the ICA did apply, then under Clause 8(d), the correct apportionment of liability was 50% between Owners and Charterers.
• Charterers’ defence to Owners’ implied indemnity claim was as follows:
• Firstly, there was no implied indemnity for ordinary trading risks which Owners agreed to bear and were remunerated for by way of hire. Charterers relied on paragraph [11] of The Kos [2012] 2 A.C. 165.
• Secondly, this was not a case where the cargo itself caused damage but where liability had been wrongly imposed in the China Proceedings. This was not the natural or ordinary consequence of the loading of a cargo affected by an inherent vice, and therefore no liability could be imposed on them.
• Thirdly, the risk of an adverse judgment from the Chinese Courts was one which Owners must have known about when the Charterparty was fixed. Charterers referred to The Island Archon [1994] 2 L.L.R. 227.

The Tribunal’s Findings

• Owners’ claim under the ICA failed. The Tribunal found:
• Clause 4(c) of the ICA was not satisfied where a cargo claim is established by an award or judgment, rather than by “consensual settlement”.
• However, had the ICA applied, Charterers would have been 100% liable for the cargo claim and the associated costs. Under 8(d) of the ICA, the critical question was causation. The Tribunal said, for the purposes of 8(d) of the ICA the shipment of an unstable cargo which gave rise to cargo claims constituted an “act” of the charterers. This finding, they said, was consistent with the Court of Appeal’s decision in The Yangtze Xing Hua [2018] 1 L.L.R. 330.
• Owners’ claim under the implied indemnity succeeded. The Tribunal found:
• Owners’ liability to cargo interests in respect of the cargo damage was not an ordinary cost or risk associated with the performance of the chartered service. It was therefore not a risk which Owners agreed to bear.
• Owners’ losses fell squarely within the scope of the implied indemnity – it arose directly from Charterers’ orders (i.e. to load and discharge a self-heating cargo).
• Charterers were therefore found liable to indemnify Owners for the losses which Owners had suffered as a result of the China Proceedings.

High Court proceedings

• Charterers appealed the award under section 69 of the Arbitration Act 1996. The appeal was granted on the basis of the following question of law:
• “Where liability is wrongly imposed on an owner by a foreign court following shipment of a lawful harmless and permitted cargo that is affect by inherent vice, can the owner recover that liability from a time charterer under the general implied indemnity?”

The parties’ arguments

• In brief, Charterers’ arguments were:
• The express terms of the Charterparty made detailed provisions which cargoes were outside the bounds of the Charterparty. Soybeans were not prohibited cargoes. China was not a prohibited destination.
• The ICA provides a complete code for the allocation of responsibility for cargo claims.
• Following The Island Archon, where there has been no change of risk between entering the charterparty and the time of the loss, and where liability under the bills of lading is no more onerous than that of the charterparty, the implied indemnity should not operate.
• There should be no difference in principle between situations where the cargo has suffered from an inherent vice or where it has not.
• In response, Owners’ arguments were:
• the Tribunal’s analysis of The Island Archon was correct.
• the risk which caused Owners’ loss was not an ordinary trading risk that Owners had agreed to bear, nor did the express terms of the Charterparty point to this being for Owners’ risk.
• The incorporation of the ICA did not preclude an implied indemnity in cases where the ICA did not apply.

Judgment

• Henshaw J dismissed the appeal. The key aspects of his judgment are as follows.

Is the implied indemnity limited to matters outside the express terms of the Charterparty? 

• Henshaw J disagreed with Charterers’ submission that it would be unusual for Owners to claim an implied indemnity as a way of circumventing the “sophisticated” contractual terms which set out the risks each party is to bear. Owners had not agreed to bear the risk of i) loading a cargo of soybeans; and/or ii) discharging in China, simply because there was no express prohibition in the Charterparty to load soybeans and/or discharge in China.
• Citing The Georges Christos Lemos [1991] 2 L.L.R. 107 and The Island Archon, Henshaw J stated that the justification for the implied indemnity is the freedom granted to the charter to give directions as to the employment of the ship. Clauses expressly prohibiting cargoes and particular ports are unlikely to be comprehensive, and in any event, implied indemnity claims do not have to be limited to matters which are outside the scope of the express terms of the Charterparty. Henshaw J referred to a passage in Time Charters (7^th ed., 2014), para 19.30:

“an order to load a particular cargo has been held to be an order regarding employment. If the order to load that cargo causes loss to the owners, then the right to indemnity from the charterers arises”. 

 ICA: a complete code for cargo claims? 

• Henshaw J disagreed with Charterers’ submission that the ICA provides a “complete code” for the imposition of liability for cargo claims and the assertion that therefore no cargo claim can fall under the implied indemnity.
• Henshaw J pointed out that if the ICA was a “complete code” for cargo claims, then no liability would arise where the conditions in 4(c) of the ICA were not met (i.e. the provision that the ICA will only apply in circumstances where “the claim has been properly settled or compromised and paid”).
• This would have the odd effect of a settled cargo claim resulting in a 100% apportionment against charterers, whereas a judgment in respect of the same cargo claim would result in zero liability.
• Henshaw J determined that where the ICA does not apply (for whatever reason), the other provisions in the charterparty (if applicable) and the ordinary laws apply (as followed in The Benlawers [1989] 2 L.L.R. 51). This includes the implied indemnity.

A change of circumstance: fundamental to successfully claiming an implied indemnity? 

• Henshaw J recognised that there are two main limitations regarding the scope of the implied indemnity (as set out in “The Kos” (No.2) [2012] 2 L.L.R. 292). Firstly, it does not apply where owners, by the terms of the charterparty, consented to bear the loss, damage, or liability in question. Secondly, it applies only where charterers’ orders were an effective cause of owners’ loss.
• Henshaw J subsequently addressed the ruling in The Island Archon. In this case, owners successfully claimed an implied indemnity from charterers for liability they had incurred in Iraqi court proceedings. At the time, it was almost inevitable for vessels visiting Iraqi ports to have bogus cargo claims brought against them. This usually resulted in an adverse judgment from the Iraqi court, irrespective of the actual condition of the cargo (labelled the “Iraqi System”).
• Charterers argued that owners were successful in The Island Archon because the Iraqi System was not notorious at the time the parties entered the charterparty. Owners therefore could not be said to have consented to bear the loss, damage, or liability resulting from the Iraqi System when they agreed to the terms of the charterparty. In support of this contention, Charterers referred to the following passage from Evans LJ in The Island Archon:
• “What risks the shipowner has agreed to bear must depend upon the true construction of the charterparty and therefore upon the situation when the charterparty was entered into. If there had been a finding in the present case that the “Iraqi system” was notorious at the date of the Charterparty in March 1979 then there might be substance in the charterers’ contention that the shipowners’ had consented to bear the consequence of ordering the vessel to discharge at an Iraqi port, which they could have excluded from the agreed limits if they had sought to do so…”
• Citing the above passage, Charterers argued that, in their case, since there was no change in circumstance, Owners could not successfully claim an implied indemnity. Owners had agreed to bear such risks at the time they agreed to the terms of the Charterparty.
• However, Henshaw J disagreed. Whilst Evans LJ said there “might be substance” in such a position, this did not mean that Owners implicitly agreed to bear all risks that do not arise from an external change of circumstances of the Charterparty. According to Henshaw J, the implied indemnity is not limited to “unusual circumstances” and neither is there any rule of law or general principle that Owners are to have assumed the risk arising from “ordinary” cargo claims.

Comment

• This case provides further direction to Owners and Charterers regarding the apportionment of cargo claims under the ICA and the implied indemnity.
• In particular, the judgment clarifies that there does not need to be a change in circumstances between the time the parties agreed to the terms of the charterparty and the time of the loss for owners to successfully claim under the implied indemnity.
• It may also provide some guidance regarding the applicability of the ICA in cargo claims, where the latest amendment of the ICA is not incorporated in the terms of the charterparty. On 14 July 2025, clause 4(c) of the ICA was amended to read: “the claim has been properly settled or compromised and paid. Settled includes but is not limited to, claims adjudicated by any court or tribunal, or those resolved through an amicable settlement between the parties”. Had the amended ICA applied in this case, it is likely there may never have been need for a claim under the implied indemnity.

The full judgment can be read here: Sino East Transportation Ltd v Grand Amazon Shipping Ltd [2025] EWHC 1990 (Comm) (30 July 2025)