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Petroleo Brasileiro S.A. v E.N.E. Kos 1 Limited

2nd May 2012

This appeal to the Supreme Court concerned the rights of an owner of a time-chartered ship after the ship has been lawfully withdrawn for non-payment of hire and, specifically, the owner’s right to remuneration whilst awaiting discharge of cargo by the charterer. In finding that the owner could recover the market rate of hire from the charterer pursuant to the customary indemnity in respect of ‘consequences of complying with charterer’s orders’, the majority “stretch[ed] the application of the express charter indemnity beyond any previous decision” (per Lord Mance, dissenting on this point). The Supreme Court also held that the owners could recover in bailment, pursuant to the principles set out in the decision of the House of Lords in The Winson. It did not matter that the owners had themselves created the non-contractual bailment by voluntarily electing to terminate the charter. The decision therefore reinforces the practical importance of the law of bailment in this field.

The full judgment can be found here.