i-law

Voyage Charters

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Chapter 62

Breach
23. BREACH. Damages for breach of this Charter shall include all provable damages, and all costs of suit and attorney fees incurred in any action hereunder.

Damages generally

62.1 See for a discussion of the damages recoverable for a breach of the charter.

“all provable damages”

62.2 This phrase does not, it is submitted, require or entitle the tribunal to disregard the ordinary rules of remoteness and causation adopted in assessing damages.

“costs of suit and attorney fees”

62.3 This provision is doubtless aimed primarily at U.S. proceedings. In contracts which provide for English law and jurisdiction, clauses of this nature are unusual, since the court or arbitration tribunal has jurisdiction to make such order for payment of the costs of the proceedings as, in the exercise of its discretion, it thinks fit.1 The discretion is usually exercised by ordering that the unsuccessful party shall pay the costs of the successful party on the “standard basis”, which provides rather less than a full indemnity, but there are many cases where a fair exercise of discretion requires a departure from the usual practice. 62.4 The discretion of the court as to costs under the Senior Courts Act cannot be ousted, and although the similar discretion of arbitrators under the Arbitration Act takes effect subject to contrary agreement between the parties, clause 23 hardly seems specific enough to oust the ordinary discretion of arbitrators as to the incidence (section 61) or amount (section 63) of costs. Indeed, the final sentence of clause 24 of the charter (providing that arbitration awards may include costs, including a reasonable allowance for attorney’s fees) indicates that it was intended that the arbitrators should retain this discretion. Thus, it would be open to the arbitrators, in a proper case, to deprive a successful party of some or all of his costs if he had wasted costs unreasonably. 62.5 Finally, it should be noted that the clause applies only in the event of a breach and, by implication, to damages and costs incurred as a result of the breach by the party alleging it; thus, it has no application to the case where a party successfully defends a claim alleging

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a breach. For this reason, it is unlikely that the provision with regard to costs would be held to infringe section 60 of the Arbitration Act, which provides that an agreement that one party shall pay the costs of the arbitration “in any event” is only valid if made after the dispute in question has arisen.

U.S. Law

62A.1 For discussion of damages generally, see . Under United States law, the prevailing party usually is not awarded its attorneys’ fees absent bad faith or a clause in the contract allowing “fee-shifting.” In The New Way,2 the majority held that this provision referred to actions at law, with clause 24 and its discretionary “may” governing arbitrations under the charter. In an action to confirm an award, however, courts have relied upon this clause to award the party seeking confirmation its attorneys’ fees.3 62A.2 The United States Court of Appeals for the Second Circuit has ruled that arbitrators have power to award attorneys’ fees, even when the arbitration clause does not specifically provide for awards of attorneys’ fees.4 Until that decision, courts had frequently ruled that arbitrators could not award attorneys’ fees unless the arbitration clause expressly gave them this power.5 See generally The Adamastos,6 as an example of a case where arbitrators made an award of attorneys’ fees based on the ruling in Bybyk. See also The Kandalaksha,7 citing Bybyk and Stone & Webster. The holding in Bybyk is now routinely followed.8 62A.3 Section 30 of the SMA Rules specifically provides: “The Panel is empowered to award reasonable attorneys’ fees and expenses or costs incurred by a party or parties in the prosecution or defense of the case.” Nevertheless, arbitrators will exercise their discretion in awarding or denying attorneys’ fees, depending on the facts and circumstances of each dispute. For instance, in The Posidon,9 attorneys’ fees were denied to both parties since they prevailed on some issues and lost on others. In The Genmar Boss,10 the owner was held entitled to reasonable costs incurred collecting freight, including the expense of instructing attorneys in New York, Corpus Christi, and Chicago, but disallowed fees associated with a proceeding to compel arbitration, since at the time the charterer was not in breach of its obligations to appoint an arbitrator under clause 24. In The Fu Ning Wan and Asphalt Summer,11 because respondent in the arbitration failed to appoint an arbitrator, pursuant to SMA Rule 10, claimant appointed an arbitrator on its behalf. The two arbitrators then appointed a third arbitrator, who served as chair for procedural purposes. Pursuant to SMA Rule 30, the panel awarded claimant its attorneys’ fees, as well as arbitrators’ fees and expenses.

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 62A.4 What if the fee of the prevailing party is a “contingency fee”? In The Prince of Tides,12 the claimant cargo owner/insurer had entered into an agreement with its lawyer by which the lawyer was to be paid one-third of the recovery if successful. Noting that “Claimants agreed to forgo a substantial portion of their recovery to compensate their counsel for its time and efforts,” a majority of the panel allowed a recovery of fees to the claimant “on the basis of the estimated time expended in prosecuting this arbitration.”