The “SONGA WINDS” – Latest Ruling on P&I Club Letters of Indemnity

Chartering, Disputes, Legal, P and I Clubs — By on March 2, 2018 at 11:38 AM

The decision delivered today by the High Court in Songa Chemicals AS v Navig8 Chemical Pool Inc (2018) constitutes the latest ruling on P&I Club Letters of Indemnity (LOIs) for delivering cargo without the production of original bills of lading, and follows on the footsteps of a number of  previous judgments on the subject[1]. The key question in this instance concerned whether delivery against such an LOI was made to a party identified as a receiver under the LOI, in accordance with its terms; a negative answer would invalidate the LOI. Clyde & Co (Fanos Theophani (Partner), James Kennedy (Senior Associate) and Derek Birch (Junior Associate)) acted for the successful shipowners, Songa Chemical SA, in this matter.


It is not uncommon for shipowners to be asked to deliver cargo without the presentation of original bills of lading. In those circumstances, and in order to protect their position, shipowners usually have recourse to LOIs. Under the current P&I standard form LOI, shipowners are requested to deliver the cargo to a named receiver, at a specified location, without the production of the original bills of lading. The wording of the standard form LOI provides that the receiver should be a named receiver (X) “or…such party as you believe to be or to represent X or to be acting on behalf of X“, and contains the following instructions with regard to the location of delivery: “[insert place where delivery is to be made]”.

In the case of The Bremen Max[2], it was previously held, that any liability under the LOI indemnity provisions was conditional upon delivery having been made to the receiver as defined in the LOI delivery request, although, at the time, the standard form simply identified the receiver by name. The current, extended definition of “receiver” was introduced later to the standard form, in response to the Bremen Max decision.


In the present case, The “SONGA WINDS”, an oil and chemical tanker owned by the claimant, Songa Chemical SA (Songa), was time chartered, under a pool agreement dated 27 November 2013, to the defendant, Navig8 Chemical Pool Inc. (Navig8) on terms based on the Shelltime 4 form.

On 2 February 2016, Navig8 fixed the vessel on the Vegoilvoy form to Glencore Agriculture BV (Glencore) to carry sunflower seed oil from Ilychevsk, Ukraine, for delivery at safe ports in the New Mangalore/Kakinada range in Glencore’s option. Glencore was seeking to fulfil a contract to sell 6,000 m.t. edible grade sunflower seed oil in bulk to Ruchi Agritrading (Pte) Ltd (Agritrading), a subsidiary or affiliate of Ruchi Soya Industries Ltd (Ruchi). Under the sale contract, property would remain with Glencore until payment. Bills of lading consigned to order were issued, dated 13 March 2016, naming Ruchi as the notify party. Navig8 appointed Interocean Shipping India Pvt Ltd (Interocean) to act as agent at the discharge ports.

Following shipment, around 21 March 2016, the sale contract between Glencore and Agritrading was replaced by two contracts on materially back-to-back terms, whereby Glencore agreed to sell 6,000 m.t. to Aavanti Industries Pte Ltd (Aavanti), and Aavanti agreed to sell 6,000 m.t. to Agritrading. c. 4,000 m.t. were delivered to Ruchi at New Mangalore and c. 2,000 m.t. were delivered to Ruchi at Kakinada.

Delivery was made without presentation of the original bills of lading, but against LOIs on the International Group standard form, as follows:

  1. The AAVANTI LOIs:  Aavanti issued two LOIs to Glencore, dated 22 March 2016, requesting delivery without the presentation of bills of lading to Ruchi (or to such party as Glencore believed to be, to represent, or to be acting on behalf of Ruchi). One requested delivery “at the port of MANGALORE, INDIA“; the other, “at KAKINADA, INDIA“.
  2. The GLENCORE LOIs: Glencore issued two LOIs to Navig8, dated 6 and 13 April 2016, requesting delivery without the presentation of bills of lading to Aavanti (or to such party as Navig8 believed to be, to represent, or to be acting on behalf of Aavanti). Both requested delivery “at New Mangalore or Kakinada, India“.
  3. The NAVIG8 LOIs: Navig8 was deemed to have issued LOIs to Songa, on terms identical to the GLENCORE LOIs, requesting delivery without the presentation of bills of lading to Aavanti (or to such party as Songa believed to be, to represent, or to be acting on behalf of Aavanti).

Societe Generale (SocGen) had financed the purchase by Aavanti, and, as neither SocGen nor Aavanti received payment for the cargo, from either Agritrading or Ruchi, SocGen initiated arbitration proceedings against Songa claiming damages for misdelivery under the bills of lading. SocGen argued that it was the lawful holder of the bills of lading, and cargo delivery should therefore have been made to SocGen, not Ruchi. In response, Songa launched a claim against Navig8 under the NAVIG8 LOIs, and Navig8, in turn, presented a claim against Glencore under the GLENCORE LOIs, both claimants seeking to argue that the LOIs were triggered  by the deliveries to Ruchi.


The named receiver under both the GLENCORE and NAVIG8 LOIs was Aavanti; and the cargo was delivered to Ruchi. The main issues facing the Court in establishing whether delivery, for the purposes of the LOIs, had taken place were as follows:

  1. Was Ruchi representing or acting on behalf of Aavanti?
    The Court answered in the positive relying on the full facts and the well documented communications expressing Aavanti’s wishes and intentions that Ruchi should take delivery for Aavanti, despite not having received payment from Ruchi. The Court acknowledged a standing practice between Aavanti and Rushi of delivery of cargo to Rushi taking place without the presentation of bills of lading and even payment of the cargo. The Court concluded that the cargo was delivered to Aavanti within the meaning of the NAVIG8 and GLENCORE LOIs.
  2. If not, did the shipowner believe that Ruchi was representing or acting on behalf of Aavanti?
    This question of belief was designed to be addressed to the carrier, that belief being found in practice “in the mind of the master of the carrying vessel at the discharge port”. The Court was unable to answer on the evidence and declined to comment.
  3. If not, was delivery deemed to have been made by virtue of clause 4 of the LOI?
    Clause 4 states:” If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility, or another ship, lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the party to whom we have requested you to make such delivery.”
    The Court found that there was no requested delivery at a bulk liquid terminal or facility and so Clause 4 did not apply.

The Court concluded that there was no prospect of defeating the claim that Ruchi represented or was acting on behalf of Aavanti, so that delivery of the cargo without the presentation of the original bills of lading was made to the correct party, in accordance with the terms of both LOIs. The indemnification provisions were engaged, with Navig8 under an obligation to indemnify Songa in respect of SocGen’s claim, and Glencore under an obligation to indemnify Navig8 for the same.

The decision, although very fact sensitive, nevertheless provides useful clarification and guidance on the construction and operation of the International Group Standard LOI wording following the Bremen Max ruling.

[1] The Laemthong Glory (2005) 1 Lloyd’s Rep 632,688 – The Bremen Max (2009) 1 Lloyd’s Rep 81 – The Zagora (2017) 1 Lloyd’s Rep 194

[2] The Bremen Max (2009) 1 Lloyd’s Rep 81

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