Key takeaways
ICA risk allocation
Based on causation not culpability.
Time bar for claims
This is two years.
ICA revisions
Current version is ICA 2011, as amended in July 2025.
Introduction
The Inter-Club Agreement (ICA) was first introduced in 1970 by the International Group of P&I Clubs and is a longstanding and widely used contractual mechanism for the apportionment of liability for cargo claims between owners and charterers under New York Produce Exchange Form (NYPE) or Asbatime charterparties and/or contracts of carriage authorised under such charterparties.
If incorporated into the charterparty, the ICA operates as a contract between owners and charterers which governs how financial responsibility is shared in cargo claims.
The ICA applies irrespective of the forum or place in which the underlying cargo claim is determined in the contract, for example, whether by English High Court, arbitration, or foreign court, and regardless of any incorporation of the Hague, Hague Visby Rules or Hamburg Rules.
The ICA is intended promote certainty, reduce legal costs and avoid prolonged disputes by replacing a fault-based analysis with simplified contractual risk allocation.
Operation of the ICA
As discussed above, the ICA applies to cargo claims. This includes claims for loss, damage, shortage, overcarriage or delay to cargo, together with associated interest and costs.
In essence, the ICA governs how liability, once incurred or paid, is to be apportioned as between the parties to the charterparty. It does not, however, determine liability.
The core apportionment regime is established, as follows:
claims arising from unseaworthiness or error or fault in the navigation or management of the vessel fall 100% on owners
claims arising from loading, stowage, lashing, discharge, or other cargo handling operations fall 100% on charterers, subject to specified exceptions and
shortage, overcarriage and residual categories are apportioned 50/50 absent clear and irrefutable evidence pointing to one party.
Further, in circumstances where responsibility cannot clearly be allocated within the defined categories, equal apportionment (50/50) applies to the parties.
For completeness, the ICA operates only as between the parties to a single charterparty, but in practice it is frequently applied on a back to back basis down a charter chain, by way of example:
cargo interests recover 100% from disponent owners
under the head charter, the ICA applies on a 50/50 basis and, as a result, disponent owners bear 50% and recover 50% from head charterers
under the sub charter, the same cargo claim is again apportioned 50/50 under the ICA (assuming the ICA is incorporated into the sub-charterparty). The head charterers recover 25% from sub charterers and retain 25% apportionment themselves.
If there is a further charterparty below the sub-charterparty, and the ICA again applies on a 50/50 basis, the exposure can continue to divide, for example, 12.5/12.5 at the next level. This is because the ICA applies separately and mechanically at each contractual level.
This point is dealt with by Clause 7 of the ICA, namely that the amount to be apportioned is the amount in fact borne by the party seeking apportionment, regardless of whether the same claim has been apportioned under another charterparty.
Key cases
The ICA’s importance is reflected in the body of case law that has developed around its scope and operation. Some of these key cases are considered below.
The Strathnewton [1983] 1 Lloyd’s Rep 219
In The Strathnewton, the Court of Appeal considered the relationship between the ICA and the Hague Rules in the context of a time charterparty which incorporated both. In this case, cargo carried under bills of lading was lost and damaged, and the charterers settled numerous claims brought by cargo interests. The charterers then sought to recover those losses from the owners under the ICA. However, the claim was brought more than one year after delivery, and the owners argued that it was time barred under Article III rule 6 of the Hague Rules.
The Court of Appeal rejected that argument and held that the Hague Rules time bar did not apply to claims under the ICA. Instead, the ICA operates as a separate contractual mechanism governing the apportionment of cargo claims between owners and charterers, distinct from the liability regime under the Hague Rules.
In particular, the Court held that once cargo claims had been settled or compromised, the parties could proceed directly to apportionment under the ICA. The decision emphasises that the ICA is a mechanical method of allocating liability and is intended to avoid the complexity that would otherwise arise.
Notably, modern versions of the ICA include a two-year time bar for claims between owners and charterers, running from the date the cargo claim is settled or compromised.
The Yangtze Xing Hua [2017] EWCA Civ 2107
In The Yangtze Xing Hua, the Court of Appeal considered the meaning of the phrase ’act or neglect’ within clause 8(d) of the ICA.
The case concerned cargo damage to soya bean meal after the vessel was ordered by the charterers to remain at anchor for over four months awaiting discharge. The cargo deteriorated during this period and the owners settled a substantial cargo claim, which they then sought to recover from the charterers under the ICA.
At arbitration, the tribunal found that the damage resulted from a combination of the cargo’s inherent characteristics and the prolonged delay. In other words, neither the owners or charterers were necessarily at fault. However, the tribunal held that the charterers’ decision to keep the vessel waiting constituted an act within clause 8(d), namely claims for delay to cargo, and, as a result, pursuant to the ICA, the charterers were liable for 100% of the claim.
The Court of Appeal upheld that approach and confirmed that apportionment under the ICA is based on causation rather than culpability. In particular, there is no requirement for fault or negligence. The phrase ’act or neglect’ therefore does not introduce a requirement of fault.
This decision reinforces the ICA’s function to provide a clear method of apportioning cargo liabilities between owners and charterers.
Agile Holdings Corp -v- Essar Shipping Ltd (The Maria) [2018] EWHC 1055 (Comm)
Agile Holdings Corporation v Essar Shipping Ltd [2018] EWHC 1055 (Comm) (11 May 2018)
In The Maria, the High Court considered the meaning of the phrase ’similar amendment making the master responsible for cargo handling’ in clause 8(b) of the ICA. The dispute arose because, although the charterparty placed cargo operations on the charterers under the standard NYPE clause 8, an additional clause gave the Master responsibility for proper stowage and the vessel’s safety.
The tribunal held that this amounted to a ’similar amendment’, triggering the 50/50 apportionment under the ICA. However, the High Court disagreed, holding that a partial transfer of responsibility, namely one which was limited to stowage, was insufficient. For the 50/50 apportionment to apply to the owner and charterer, there must be a clause effecting a substantial or complete transfer of cargo handling responsibility to the Master. So, pursuant to the High Court’s decision, the ICA default position applied, and the charterers bore 100% liability for the cargo claim.
The decision is significant because it clarifies that the ICA’s exception in clause 8(b) will be construed narrowly and will preserve the default allocation under the ICA unless clearly displaced by another provision.
This case again reinforces the ICA’s objective of providing a predictable allocation regime, designed to prevent nuanced arguments.
Sino East Transportation Ltd -v- Grand Amazon Shipping Ltd (Grand Amanda) [2025] EWHC 1990 (Comm)
Sino East Transportation Ltd v Grand Amazon Shipping Ltd [2025] EWHC 1990 (Comm) (30 July 2025)
The Commercial Court decision in The Grand Amanda is the most significant recent authority on the scope of the ICA in the context of court judgments and arbitration awards. A detailed article on the decision can be found here: The GRAND AMANDA: Implied Indemnity Scope | Hill Dickinson
Although decided under the ICA 2011 prior to the July 2025 amendment (discussed further below), the case highlights a recurring argument in practice that a cargo claim determined by a court judgment or arbitral award did not fall within clause 4(c) of the ICA because it had not been ’settled or compromised’. In The Grand Amanda, the tribunal accepted that narrow interpretation, with the result that the ICA was held not to apply, although the owners ultimately succeeded under the implied charterparty indemnity.
The Commercial Court upheld the tribunal’s decision on the indemnity and confirmed that the ICA does not operate as an exhaustive code for cargo liabilities. Where the ICA does not apply, owners may still look to contractual or implied indemnities under the charterparty.
The significance of this case is that it highlighted the uncertainty of clause 4(c), which then directly informed the International Group’s decision to amend clause 4(c) in 2025. The July 2025 amendment to the ICA clarified that a claim will be treated as ’settled’ for ICA purposes where liability is determined by a court judgment or arbitration award, and that reasonable defence and settlement costs are recoverable even where a claim is successfully defended, withdrawn, or not pursued.
At the time of writing this article, there are no reported English court or arbitration decisions applying the amended wording in practice.
Amendments to the ICA
Since its introduction in 1970, the ICA has been revised in 1984, 1996, 2011, and most recently in July 2025. The current version is therefore the ICA 2011, as amended in July 2025. A detailed article on the 2025 amendments can be found here: ICA 2025 amendment – position clarified, but perhaps
The 2025 amendments were introduced to address any uncertainty regarding recoverable costs (Clause 3(c)) and the meaning of a claim being ’settled’ (Clause 4(c)).
In particular, pursuant to the amended Clause 3(c), it is now clear that reasonable legal fees, P&I Club correspondent costs and expert costs incurred in defending or resolving cargo claims fall within the ICA, even where the claim is successfully defended, withdrawn, or not pursued. This clarification is intended to clarify that unrecovered defence costs fall within the ICA. The revised clause also maintains and clarifies the current position that costs incurred in pursuing an ICA claim or an indemnity, remain excluded.
Further, Clause 4(c) was amended to clarify that a judgment or award qualifies as a claim that had been ’settled’. This amendment removes the ambiguity exposed in The Grand Amanda.
Version of the ICA
For charterparties entered into on or after 14 July 2025, references to the ICA will ordinarily incorporate the ICA 2011 as amended in July 2025. This means that even without express wording to incorporate the amended version, the latest version will ordinarily apply.
For charterparties concluded before that date, the position depends on the wording of the ICA clause. Where a specific edition of the ICA is identified, that version will generally apply. In circumstances where the charterparty refers to the ICA ’or any amendments thereto’ (or similar wording), the position is less clear. However, on balance, it is likely to be that amendments in force at the time the specific cargo claim arises will apply.
If there is uncertainty as to which version of the ICA applies, owners and charterers may agree to apply the ICA 2011 as amended in July 2025 by agreement once a cargo claim has arisen.
Conclusion
In The Strathnewton, the Court of Appeal confirmed that the ICA operates independently of the Hague Rules, allowing parties to proceed directly to apportionment once cargo claims are settled. In Yangtze Xing Hua, the Court reinforced that liability under the ICA is not based on fault and The Maria confirms that the ICA’s default allocation will only be displaced by clear wording.
More recently, The Grand Amanda exposed areas of uncertainty within the ICA framework. The 2025 amendments to the ICA have responded to some of these existing uncertainties around the ICA regime by clarifying the scope of recoverable defence costs and confirming that claims resolved by judgment or arbitration award fall within the ICA regime.
In essence, these authorities demonstrate that the courts and tribunals will seek to enforce the purpose of the ICA in providing a predictable regime. The 2025 amendments also reinforce that objective.
Find out more about our Shipping expertise here or contact us to discuss how we can help.
