London Arbitration 17/17 [(2017) 978 LMLN 3]
Posted on 19th March 2018 at 15:47
Packed with common charterparty matters, London Arbitration 17/17 [(2017) 978 LMLN 3] is a reminder to look ahead during the CP negotiation stage.
The issue was whether on assessment of a detention claim, owners should give credit for what would have been commission on demurrage, which (as often) was being used as the means to calculate unliquidated damages. The Tribunal held that they should, as they would have received a demurrage payment net of commission. However, the facts presented several other issues, and though none seems to have definitively arisen, any might have.
The vessel was prompt fixed to carry pyritic ash from Rotterdam to Turkey, and after uneventful loading she proceeded as ordered to Iskenderun. The NOR tendered there was invalid as not within port limits, but the charterer/receivers accepted that the vessel had arrived and was ready to discharge as soon as they were: the berthing delay was because the sale had not been concluded.
After a six week wait the vessel was ordered back westward to nearby Mersin. Owners complied, though it is unclear what was said about freight and other sums, and after further delays discharge was completed about five weeks later.
It is hard to suppose that arbitration went ahead over commission of less than $25,000, but equally so to look at the case note what issues were taken and maintained. Perhaps it was a mix of concession and progressively focussed dispute.
A claimed defective NOR that does not start laytime is a contest almost as old as demurrage itself, yet the charterers seem to have conceded invalidity as due only to their failure to accommodate unloading - for which a contractual receiver is usually a prerequisite. Berthing according to documented discharge readiness is commonplace, and the vessel likely found herself near the end of a long queue, for which the charterers had no answer. Nevertheless, this aspect seems to have been considered to at least some extent by the Tribunal, suggesting that the operational communication was not as tight as it might have been.
There was no disport range, as the CP was confined to “1-2 safe berths Iskenderun.” The order to Mersin was therefore invalid. It was not open to the charterers to give it, yet the owners complied. The case note tells us that the charterers had not agreed to pay the additional freight (ditto presumably the extra bunkers and any other cost, if for instance the additional transit might have hampered a subsequent fixture), but it seems unlikely that the owners proceeded in silence. However, these matters cannot have been conclusively agreed, hence presumably the reference to arbitration.
One would need to see the whole fixture to determine if the above was a safe berth warranty, or was somehow narrowed to the exercise of due diligence, but this significant issue with possibly major consequences is surprisingly often overlooked. And it is unknown what, if any, provision there was about the safety of the uncontractual Mersin or any berth there.
The short case note presents as good an outfit of key charterparty points as one could want, and prompts a very quick review.
NOR is such a key trigger that tender and the consequence of anything preventing that should be covered by express terms, settled on the chartering desk at the forward-looking negotiation stage, rather than by ad hoc response during the voyage.
Care should be taken with “safe” port and berth, especially when seeking to follow last-done terms or using the familiar algebraic 1SB, 1SP. That and similar shorthand can mask the serious issues raised, and can in some cases amount to an unintended warranty.
Plainly a sole discharge port might prove non-viable in some way, and while it will never be possible to cover all eventualities, and disport options will be reflected in the freight, working in a suitable alternative might here have cost considerably less than a detention claim exceeding US$ 0.5m.
Some trades contemplate various (and even contra-rotation) port calls more than others, as cargo might be lifted from multiple loadports, some perhaps commingled, and all then sold to several receivers, maybe after an interim discharge and even backloading. Options can be pre-set against commensurate freight, or covered by terms that cater for any likely necessary diversion, with provisions that measure and price the extra distance, bunkers and waiting time and any related additional berthing, shifting or other increased costs.
Such arrangements have occasioned specific clauses, which dictate what might happen and address it. Though not suitable for all trades, their principle of thought in advance is readily transferable. Parties might save a great deal by even a few moments’ pre-fixture pause to consider some of the more regular cost and liability triggers and check and amend their terms accordingly. Preparation is better than arbitration.
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