Ocean Tramp Tankers Corp. v. V/O Sovfracht (The Eugenia)

On July 26, 1956, the government of Egypt nationalized the Suez Canal. Shortly after, the United Kingdom and France began to build up military forces in Cyprus to the north in a position to potentially seize the canal and make it impassable to traffic. In late August, a Russian trading company, V/O Sovfracht (plaintiff), entered into negotiations with Ocean Tramp Tankers Corp. (Ocean) (defendant) for the chartering of the vessel the Eugenia. Sovfracht sought to transport iron and steel from the Black Sea to India. Both Sovfracht and Ocean considered the possibility that the Suez Canal would be closed, and each suggested terms to deal with that risk. Sovfracht and Ocean could not come to an agreement and concluded the bargain without any express clause to deal with the matter. The charter contained a war clause that prohibited navigating the vessel into any zone of danger due to the threatened act of war or hostilities. The charter also required that the Eugenia only go to India via the Black Sea. Eventually, the Eugenia departed, and when it reached the Suez Canal, the Suez Canal had inevitably become a dangerous war zone. Nonetheless, charterers permitted the Eugenia to enter the canal. The Egyptian government blocked the canal by blowing up bridges, trapping the Eugenia in the canal. Sovfracht claimed that the charterparty had been frustrated by the blocking of the canal. Ocean denied that it had been frustrated and treated Sovfracht’s conduct as a repudiation. Ocean entered into a new charterparty directly with the original sub-charterers at a new, high freight. The Eugenia arrived in India and discharged the cargo between April and May 1957. Ocean sought to claim hire to cover the period in the canal. Sovfracht disputed the claim because they believed the charter was frustrated. An arbitrator and judge held that Sovfracht was in breach of the war clause by allowing the Eugenia to go into the canal. An arbitrator held that the charterparty was not frustrated, and a judge held that it was.