Caveats, Courts & Charter Parties: Who Really Decides the Security Form?

 ⚖️ Caveats, Courts & Charter Parties: Who Really Decides the Security Form?

❓Three Questions to Spark Curiosity:

• Can a caveat alone give one party the power to decide what form of security is “good enough”?
• Will Nigerian courts honor an arbitration clause in a bill of lading?
• What risks do shipowners face if local courts override international arbitration clauses?

 

📜 Clause Breakdown: What It Really Means

📌 The Clause in Focus:

"Absent the provision of cash security or a guarantee that is close to that, we agree it seems very unlikely the filing of a caveat would entitle the party doing so to unilaterally determine the form of security without any argument from the party seeking it. However, if the point has not already been addressed, it would be useful to know what form of security would be considered sufficient by the court."

🔍 Interpretation:

• A caveat (in admiralty terms) acts as a warning that a claim may be pursued against a vessel.
• This clause clarifies that unless a party offers cash security or a comparable guarantee, merely filing a caveat does not give the claimant the right to dictate the form of security without input from the opposing party.
• The clause rightly questions: What exactly counts as "sufficient security" in the eyes of a local court?

 

🌍 Jurisdictional Twist: What Happens in Nigeria?

"The second issue is whether the Nigerian court would uphold the arbitration clause if a claim is made under the bill of lading..."

• Nigeria is a party to the New York Convention, which typically supports the enforcement of international arbitration clauses.
• However, in practice, local courts may entertain bill of lading claims irrespective of arbitration clauses if:
• The clause is not clearly incorporated.
• Local interests (e.g., cargo claimants) push for jurisdiction.
• The clause implies that if arbitration is valid, the caveat becomes irrelevant — but if it is not, the claim could proceed in Nigerian courts despite international agreements.

 

⚠️ Common Pitfalls to Avoid:

• Assuming caveats give leverage: Without offering reasonable security, claimants can’t control the narrative.
• Ignoring local court behavior: Even with international law backing, Nigerian courts (and others) may entertain cases they arguably shouldn’t.
• Poorly worded arbitration clauses: Ambiguity or lack of incorporation into the B/L can give local courts wiggle room.

 

🔧 Practical Tips for Operators, Managers, Owners & Charterers:

For Owners:

• Always seek clarity on the form of acceptable security before proceedings escalate.
• Prepare standby security (like P&I Club LoU or cash security) to avoid prolonged disputes.

For Charterers:

• Ensure arbitration clauses are mirrored in bills of lading to avoid jurisdictional confusion.

For Legal & Ops Teams:

• Monitor local legal trends, especially in countries with a track record of asserting jurisdiction despite arbitration agreements.
• Include choice of law and jurisdiction provisions that are robust and enforceable.

 

✅ Actionable Next Steps:

1. Review your charter party and B/L templates — Is the arbitration clause clear and enforceable in your key trading regions?
2. Consult P&I Clubs on security format preferences — LoUs, bank guarantees, or other forms may be jurisdiction-specific.
3. Track caveat filings and respond quickly — Early legal input can prevent unilateral actions.

 

🧭 Conclusion & Call-to-Action:

In today’s legal and operational landscape, a caveat isn't a trump card — and arbitration clauses are only as good as their enforceability in real-world jurisdictions. Understanding how courts like Nigeria’s interpret these clauses can protect your vessel, your claim, and your bottom line.

👉 Like this post?
💬 Got an experience dealing with caveats or security disputes? Share it in the comments!
🔔 Don’t forget to subscribe to ShipOpsInsight for more legal insights made simple for shipping professionals.

 

⚠️ Disclaimer:

This blog post is for informational purposes only and does not constitute legal advice. Readers are advised to consult their legal counsel or P&I Club for specific guidance on disputes, jurisdictional risks, and enforcement of arbitration clauses.