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ENE Kos 1 Limited v Petroleo Brasileiro SA (the "KOS") [2012] UKSC 17

The Supreme Court handed down its judgment today in the time charter case of ENE Kos 1 Limited v Petroleo Brasileiro SA (the "KOS").

The dispute concerns an owner's right to remuneration in the period after he has withdrawn his vessel from the service of his time charterer for the non-payment of hire. The facts of the case were that the vessel was part laden with cargo at the time of the withdrawal and it took just under 3 days for this cargo to be discharged back ashore. At first instance, Andrew Smith J held that the owners were entitled to remuneration pursuant to the law of bailment (as a right correlative to their obligations to care for the cargo) but he was overturned on this by the Court of Appeal.

The Supreme Court has allowed the owners' appeal and reinstated the order of Andrew Smith J. It has done so on two bases. First, it agreed with Andrew Smith J that the owners were entitled to recover in bailment. The Court held unanimously that the owners were entitled to recover under the principle discussed by the House of Lords in The "Winson" [1982] AC 939 without the owners having to show that there was any element of necessity in their actions. In addition, the Court held by a majority (Lord Mance dissenting) that the owners were entitled to recover under the terms of the indemnity in the charter for complying with the charterers' employment orders.

The case will be of interest to those practising in shipping law and more generally.

Particularly striking is the stark disagreement between the majority (Lords Phillips, Walker, Clarke and Sumption) and Lord Mance over the scope of the owners' right to an indemnity. All of their Lordships recognise that this case goes further than any previous reported decision allowing recovery under such an indemnity. That is one of the reasons for Lord Mance's concern about the decision of the majority.

Andrew W Baker QC and Henry Byam-Cook, both of 20 Essex Street, represented the Respondent Charterers instructed by Thomas Cooper.

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