Time Bars and Letters of Indemnity – Guidance from the Court of Appeal

The Court of Appeal handed down its judgment in Glencore Agriculture BV v Navig8 Chemicals Pool Inc [2018] EWCA Civ 1901 on August 21st, 2018. Shipping law firm MFB said in a summary of the case that the judgment would provide useful guidance on the interaction between time-bars in charterparties and the wording of a Letters of Indemnity (LOIs).

Glencore Agriculture BV provided two LOIs addressed to Navig8 Chemical Pools Inc  dated 6th and 13th April 2016, requesting that delivery be made to the nominated receiver without production of bills of lading. The LOI’s were signed by and on behalf of Glencore and Navig8, and were governed by English law and the jurisdiction of the English High Court. They were on the standard International Group form.

In the lower court before Justice Baker Glencore had argued, based on Clause 38 of the applicable voyage charterparty, that the period of validity of the LOI’s was three months from the date of issue and that they had expired in July 2016 without any claim being made by Navig8 before time expired.

The Glencore LOIs mentioned neither the voyage charter nor its terms but Glencore submitted that Clause 38 should be read into the LOI’s, the effect of which was to bar Navig8’s claims.

Justice Baker ruled that the time bar clause in the voyage charterparty did not apply to the LOI’s. In doing so he also said that the first line of Clause 38 meant that it covered deliveries effected during that three month period and should not be interpreted as a time-bar. Glencore appealed the decision.

Court of Appeal

  1. The higher court said that the material rights and obligations in Clause 38 should not be transposed into the LOIs for various reasons including that: the Glencore LOIs contained a provision that limited Glencore’s liability, with no reference to external terms that might affect the time limit of that liability;
  2. the voyage charter and Glencore LOIs were “distinct agreements with separate and discrete rights and obligations” with disputes under the former to be resolved by arbitration and disputes under the latter to be resolved by the High Court. Any dispute as to the meaning and effect of Clause 38 was to be resolved by arbitration;
  3. Glencore entered into the LOIs on the terms of the International Group form, without any reservation or reference to the voyage charter or its provisions;
  4. the Glencore LOIs set out self-contained obligations and rights and it was common ground that they could be relied on by third parties who would be unaware of Clause 38.

The Appeal Court found for Navig8 on the point, concluding that Clause 38 was not incorporated into the LOIs.

The Court of Appeal then gave some brief consideration to the effect of Clause 38, if it had been incorporated into the LOI.

Navig8 maintained that Justice Baker’s analysis had been correct on this point and that the period during which the requested delivery of the cargo must take place, without original bills of lading, was three months from the date of delivery. The Court of Appeal disagreed. It said that the clause provided a primary, but unilaterally extendable, time limit for the making of claims.


MFB concluded that the Courts recognized that LOI’s were important commercial instruments that needed to be interpreted in a straightforward way. This judgment reinforced that principle. A charterparty term needed to be expressly incorporated into an LOI if it was to take effect.

MFB, formerly known as More Fisher Brown, is a specialist shipping law firm,