US Gross Transportation Tax – charterparty chain – reimbursement by charterers required by special BIMCO clause not passed down the line to final charterer.
The head charter and three sub-charters of the vessel were all on amended NYPE forms with the following relevant terms:
“2. That whilst on-hire – the Charterers shall provide and pay for all the fuel except lubrication oil. Port charges, Canal Dues/ Tolls, Agencies, Commissions, Consular Charges (except those pertaining to the Crew), and all other usual expenses except those before stated …
8. That the captain shall prosecute his voyage with the utmost despatch, and shall be under the orders and directions of the Charterers as regards employment and agency…
64. Any taxes on hire earned under this Charterparty or its sub-hires or sub-freights, freight or cargo to be for Charterers’ account except for taxes if any levied on charter party hire by the Nation of the vessel, Flag or Ownership.
111. Mandatory Port Expenses/Services. Any mandatory expenses/ port charges including but not limited to immigration, tally clerks, watchmen and garbage removal to be for Charterers’ account.
112. US Tax Reform 1986 clause. Any US Gross Transportation Tax as enacted by the United States Public Law 99 – 514 (also referred to as the US Tax Reform Act 1986), including later changes or amendments, levied on income attributable to transportation under this Charter party which begins or ends in the United States, and which income under the laws of the United States is treated as US Source Transportation Gross Income, shall be reimbursed by the Charterers.”
The head owner paid the US Treasury an aggregate sum in respect of USGTT in respect of the vessel’s calls to 3 US ports during the charterparty, New Orleans, Bridge Port and Baltimore. Head owners were reimbursed by head charterers who attempted to pass the liability down the line.
This gave rise to two arbitrations. The first tribunal (Aikman and Oakley) was called upon to decide head charterers’ claim for reimbursement against the first sub-charterer. The second tribunal (Aikman, Gault and Buchan) had to decide the first sub-charterers’ claim against the second and third sub-charterers.
The first tribunal decided that head charterers were entitled to reimbursement. The second tribunal, on the other hand, with Aikman dissenting, held that there was no obligation on the first sub-charterers to reimburse head charterers. By inconsistent awards, first sub-charterers were accordingly held liable up the chain but not entitled to pass the liability down the chain.
In each arbitration, the unsuccessful party appealed which led to a generic case for the disponent owners being argued against the charterers before Christopher Clarke J.
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