Eitzen keeps its victory

Eitzen Chemical has successfully batted back an effort by a charterer and insurer seeking to overturn an arbitration decision, in part, because of an arbitrator’s brain tumour.
An Eitzen Chemical chemical tanker

An Eitzen Chemical chemical tanker

US District Judge William Pauley, of the US federal court in New York, confirmed the award and rejected arguments by Zurich American Insurance and chemicals charterer Vinmar that the chairman of the arbitration panel, Donald Szostak, should have disclosed his medical condition.

As TradeWinds has reported, Zurich and Vinmar have been battling to force Norway’s Eitzen to pay $1.74m over alleged damage to a 3,500-tonne parcel cargo of acrylonitrile shipped on a 2008 voyage of the shipowner’s 46,000-dwt Siteam Explorer (built 2007) from Houston to Ulsan.

More than 40 days after discharge, as the chemicals sat in shore tanks awaiting a buyer, tests showed discolouration of the cargo, even though pre-loading and post-loading tests showed no appreciable colour change. Zurich paid out $4.1m for the lost value of the cargo after it was finally sold amid a market in decline.

The Society of Maritime Arbitrators (SMA) panel voted 2-to-1 in favour of Eitzen.

Zurich and Vinmar’s Kennedy, Lillis, Schmidt & English lawyers argued that Szostak’s failure to disclose his inoperable brain tumour amounted to corruption that gave the court the power to overturn the decision.

However, Pauley questioned whether SMA rules required disclosure and wrote that even if the tumour impaired brain function, that would fall well outside the definition of corruption.

No guarantee of perfection

The judge said that there is no guarantee that an arbitrator is free of any conditions that could impact his abilities.

“Any number of matters – brain tumours, substance issues, marital problems, lack of sleep – might affect an arbitrator’s concentration or faculties,” he wrote. “Parties are entitled to unbiased and uncorrupted arbitrators, not perfect arbitrators.”

Pauley also rejected the cargo interests’ argument that the arbitration panel showed “manifest disregard for the law” in handing a victory to the Norwegian chemical tanker owner.

Szostak, a former president of Navios Corporation who has at least 47 published arbitration decisions to his name since the 1980s, died in January.

A lawyer for Zurich and Vinmar could not be immediately reached for this story.

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Eitzen Chemical headquarters