TThe case of Eagle Bulk Pte Ltd (now Star Bulk (Singapore) Pte Ltd) -v- Traxys North America LLC (MV Canary) (2026) EWHC 518 (Comm) highlights that challenges under section 68 of the Arbitration Act 1996 (1996 Act) to arbitral awards, on the basis of serious wrongdoing giving rise to significant injustice, will only succeed in those relatively rare cases in which the tribunal has erred. In its administration of arbitration, the court believes that it is obligated to intervene.
In this case, the defendant charterers chartered the vessel from the plaintiff owners for a voyage to transport a cargo of coke ash from India to New Orleans, USA.
Upon arrival at New Orleans, the ship’s holds and cargo were found to have been flooded with a large amount of water. The unloading of the cargo was disrupted, and a dispute arose between the two parties relating, at least in large part, to which party bears contractual responsibility for the delay and additional expenses resulting from the presence of water in the ship’s holds.
The owners claimed that all water was in the cargo, claiming, among other things, a demurrage fine of approximately $544,350.81.
The charterers argued that the cargo, at the time of loading, did not contain excess moisture. As such, they claimed that water entered the ship’s hold as a result of leaking valves on the ship, and that delays in unloading the cargo were the owners’ responsibility.
The charterers also made a deficiency claim based on the difference in weight between the load recorded as loaded and that recorded by the truck scales after unloading.
The owners applied under section 57 of the 1996 Act to clarify and/or correct the arbitration award. The court did not find any clarification or correction required.
Arbitration procedures
In its decision, the court concluded the following:
· The actual cause of the delay was water entering through leaky and defective valves in the ship’s bilge system. In particular, the court found that there had been entry into custody No. 4.
· Owners were responsible for claiming shortages of goods.
The owners applied under section 57 of the 1996 Act to clarify and/or correct the arbitration award. The court did not find any clarification or correction required.
The owners then applied to the court under s. 68 of the 1996 Law, seeking to appeal the ruling on the grounds of serious irregularities leading to great injustice. They claimed that:
· The court breached its duty under section 33 of the 1996 Act to act fairly and impartially between the parties and to ensure that each party had a reasonable opportunity to present its case and deal with the case of its opponent. The owners claimed that the court decided the case on a point that neither party discussed, in conflict with their common ground and without giving the parties the opportunity to deal with it.
· The court failed to address the main issues presented to it. To prove this appeal, it is necessary to prove that (i) there was a problem, (ii) it was brought before the court, (iii)
The court failed to deal with it and (4) this caused great injustice.
The Commercial Court rejected the owners’ appeals.
Public duty under Section 33 of the 1996 Law
The owners argued that the court had to be satisfied that the water ingress was caused by leaks through defective valves at each of the five stages of the bilge system. If the court could not confirm that the BLV butterfly valves 12 and 13 were defective and leaking, but could instead have been left open, it should have dismissed the tenants’ case.
The owners’ internal defect listings, dated February 2022, mentioned leaks at several non-return and marine valves, but did not refer to BLV 12 or BLV 13 because they relate to non-return valves, not butterfly valves. A separate defect listing dated 9 January 2022 mentioned BLV 12 and 13, but both parties agreed that when read with subsequent listings, the correct conclusion was that these valves were not defective.
This uncontested finding was said to constitute a serious irregularity causing great injustice, because it could have affected the court’s conclusion as to whether the valves were defective.
The owners asserted that the court incorrectly interpreted the February 3, 2022 list of defects as including BLV 12 and 13, although neither party discussed this nor did the court request submissions on that point. This uncontested finding was said to constitute a serious irregularity causing great injustice, because it could have affected the court’s conclusion as to whether the valves were defective. Therefore, the owners wanted to take the question of whether BLV 12-13 was leaky and defective to court.
The court concluded that the owners had not proven any serious wrongdoing, and that they were impermissibly attempting to reopen the court’s factual findings of long-standing defects in the ship’s bilge system and the defects identified, which could have allowed water to enter the ship’s holds.
The court also stated that the court did not rely solely on the February 3 list of defects to find that BLV 12 and 13 were defective; In fact, the court considered multiple defect listings, contemporaneous communications that showed the owners’ employees believed BLV 12 and 13 were defective, and technical evidence consistent with leaking valves.
The court also held that the owners had every opportunity to address the question of whether BLV 12 and 13 were defective and they did so. Furthermore, the court was not bound by the parties’ cases as to what the 3 February list of defects meant, nor did the court act unfairly by not notifying the parties of the interpretation it would place on that document. Even if there were some procedural irregularities in this regard, they would not have caused great injustice, because the court would have reached the same conclusion.
Failure to address key issues
The landlords claimed that the court failed to deal with issues relating to the charter company’s claims for shortages of goods.
The charterers claimed compensation for the shortage of goods based on the loading/unloading weight difference. The owners argued that the loss was only water, not coke, and that the tenants had not suffered any loss anyway because (1) the water would have been pumped regardless and (2) the tenants were paid by commission, without any claim from their receivers.
The court concluded that the court had addressed the real issue – the unjustified deficiency – and was not required to consider the owners’ additional arguments, which did not arise based on the court’s factual findings.
The court found that the owners had failed to prove that the weight difference was due to the removal of water from the ship’s holds: bilge records were incomplete or fabricated, and water ingress was also occurring. With no satisfactory explanation from the owners, the court decided that the deficiency had been proven as a loss of goods.
The court concluded that the court had addressed the real issue – the unjustified deficiency – and was not required to consider the owners’ additional arguments, which did not arise based on the court’s factual findings.
The “case” for the purposes of such a challenge is different from the argument or line of reasoning; It is something that is able to determine the entire claim and which justice requires the court to address it. Failure to provide any sufficient reasons or reasons for making a decision does not mean failure to deal with a problem.
Moreover, a court is not failing to deal with issues if it does not answer every question that could be considered an “issue.” It can “deal” with a case where that issue does not arise in the light of its factual determinations or legal conclusions. It is up to the court to regulate the arbitration award and address the underlying issues as it deems appropriate.
Ultimately, whether there has been a failure by the court to deal with a fundamental issue requires a fair, commercial and rational reading of the award, not an overly critical analysis.
Source: Baltic Exchange, Hill Dickinson
