Gard Shipping AS v Clearlake Shipping Pte Ltd 
Posted on 19th March 2018 at 15:38
The recent decision in the “ZALIV BAIKAL” is a warning on the need for careful drafting and broad consideration when giving options.
Operational flexibility to match changing commercial requirements is very common in modern carriage contracts. So, in a voyage fixture from x to y, charterers might be allowed to call at one or more interim ports to load and/or discharge, to alter voyage instructions (so transit time similarly increases, and more bunkers are used), or simply to have the vessel stop somewhere and await orders.
Such things enable charterers to make the best use of the vessel, according to logistics like what cargo is to be sourced and delivered where, and wider considerations such as possible lack of port facilities, and even contractual transfer of cargo ownership when the vessel reaches a particular position. Subject to safety and scheduling issues, owners frequently agree options that allow charterers to move or stop the vessel pretty much as they wish, provided increased bunkers and other costs are paid for and additional time is covered at a suitable rate. Voyage charterparties sometimes contain elaborate terms saying what charterers can do and what it will cost them.
This was the case in Gard Shipping AS - v - Clearlake Shipping Pte Ltd  EWHC 1091 (Comm) (the “ZALIV BAIKAL”), where the English High Court gave a decision that should remind parties (a) to be clear in their drafting (b) to analyse the scope and possible effect of options and (c) that the courts will not easily help them avoid a result that they probably did not intend.
A recap with an amended BPVOY4 form provided for loading at Ust-Luga, additional port options and discharge in a range that included Rotterdam. After several interim calls the vessel arrived there on 26 January 2016, tendering NOR such that time started soon after. For their own reasons charterers gave no discharge instructions until 31 March, and owners’ claim for nearly $1m depended on what rate applied to 64.7 days of demurrage.
Ordinary demurrage was $32,500 PDPR, but owners claimed an enhanced rate under additional clause 11 (“AC 11”), which said:
“ …. Charterers [may], at any stage of the voyage, [instruct] the vessel to stop and wait for [orders] for max 3 days … within the ranges agreed. In particular … , Charterers [may] instruct the vessel not to tender [NOR] on arrival at or off any port or place or to delay arriving at any port [or] place until Charterers give the order .... Time to count as used laytime or time on demurrage, if vessel is on demurrage. [All] ... bunkers consumed to be for [Charterers’] account.”
AC 11 also said that after the first five (not three) days waiting for orders or discharge instructions “at sea” the vessel was to be considered as being used for storage, and the demurrage rate was uplifted by amounts which escalated as more time passed.
The judge identified various demurrage regimes, each covering different circumstances and with its own particular trigger. These included (a) the interim ports clause, which had been invoked by charterers’ orders to make additional calls (b) the standard regime, beginning with owners’ tender of NOR, and (c) AC 11, whose options could only be activated by a positive order from charterers - to stop and wait, not to tender NOR or to delay arrival. But no such order was ever given, so that clause could not apply. Instead, by tendering NOR, owners had themselves engaged the standard demurrage regime, so they could only recover the ordinary rate. The judge also rejected owners’ attempt to imply a term that would counter that result.
AC 11 provided what charterers could do, not what they had to do. It gave owners no corresponding alternative. Standard storage provisions had been deleted, and AC 11 was probably meant to allow charterers in some way to hold up discharge (if for whatever reason they had to), but on terms that if this exceeded a certain period they should pay for the time as if the vessel was being used for storage, and at a progressively increasing demurrage rate. Owners will generally tender NOR as soon as possible, and it is not likely that AC 11 was intended to allow charterers simply to let that happen and then hold up discharge for as long as they needed, paying only at the ordinary demurrage rate. That however was the result.
We understand that this decision might be appealed. Whatever happens, the case is a reminder to parties to examine, pre-charter, the scope and potential effect of options, especially those crafted specifically for the more unusual circumstances. It may sometimes be wise to consider a protective alternative in favour of the party who might otherwise unexpectedly be at a disadvantage if an option is not exercised.
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