We have recently been consulted by ship owners about an additional chartering clause that states not only that until free pratique has been granted all time will count for the owner, but also that a valid NOR cannot be tendered before free pratique has been received. There are a number of ports around the world where free pratique may not be granted before or on arrival. Owners are discovering to their cost that by accepting this clause they may be unable to claim for any waiting time prior to berthing and that they must retender their NOR after receiving free pratique to ensure that laytime commences. Owners should therefore consider the implications before agreeing to this clause if there is any chance that they may have to berth at ports where granting free pratique prior to arrival is not possible. Free pratique has always been considered by the courts to be a mere formality, provided, of course, that it is granted (see News Update no.8). It is therefore difficult to see what charterers are trying to achieve with such stringent clauses other than a sharp reduction in their demurrage bills. Clauses which give the master the opportunity to protect the owners’ interests are more reasonable. For example, BPVOY4 cl. 6.3.4 states that if free pratique is not granted within 6 hrs of the NOR, the master must issue a letter of protest otherwise laytime will only begin when free pratique has been granted.
Compared with the number of dry cargo cases, there have been relatively few oil-related English court decisions that have had any impact on the way that demurrage is calculated. However, the recent judgment of the High Court in The “Nikmary” has produced a number of judicial conclusions of particular interest.
This part of the dispute concerned the vessel’s acceptance after two earlier attempts to clean the cargo tanks to the satisfaction of the charterers. The relevant additional clause of the Asbatankvoy charter party stated “all time until connection of hoses, after vessel has been passed as clean to the satisfaction of jointly appointed inspectors, shall not count as laytime, or if on demurrage as time on demurrage.” The final inspection was carried out by three inspectors appointed separately by the owners, by the owners’ P & I Club and by the charterers. Nevertheless, the judge concluded that this was not an inspection by “jointly appointed inspectors”. Therefore the charterers could not rely on their inspection clause and laytime commenced 6 hrs after the tanks were accepted, not at the time of connection of hoses which occurred some 28 days later. The decision on this point is, we understand, to be appealed by the charterers.
The reason for the long delay before berthing was that after the vessel had missed its scheduled loading window, the prime suppliers insisted on loading all the other cargoes that they had planned to load during the month before loading the “Nikmary”. The judge ruled that if the delay had been the result of berth congestion, the charterers would have been able to rely on the last sentence of clause 6 “…any reason over which the charterer has no control such delay shall not count as laytime.” This was because the charterers’ warranty in clause 9 of Asbatankvoy to provide a berth “reachable on arrival” had been deleted. This was the conclusion to be drawn from the case of the “Laura Prima”  where “reachable on arrival” was included in the c/p and the “Notos”  where there was no such warranty. However, in this case the charterers had foregone their opportunity to cancel the charter and they were therefore under an absolute obligation to provide a cargo for the vessel. The delay after accepting the vessel for loading was not berth congestion which was outside their control, it was the charterers’ failure to provide a cargo for the ship. Therefore they could not rely on the last sentence of clause 6 of Asbatankvoy.
The owners were entitled to claim for additional bunkers consumed during the deviation but not for diesel oil that would have been used when waiting at anchor in port and for which the owners were adequately compensated in the demurrage rate used to calculate the cost of the additional sailing time.
The ship owners claimed that the reason for the delay to discharge was that only one shore line had been provided rather than the two they had requested. The judge ruled that the charter party did not give the owners the right to demand two lines. The owners’ obligation was either to discharge the cargo within 24 hours or to maintain 100 psi at the ship’s manifold and they had achieved neither. The number of lines had no bearing on the performance of the vessel’s pumps.
The vessel maintained an average back pressure of only 3.6 kg/cm2 and discharge took 50 hrs 45 mins to complete. The judge accepted the charterers’ evidence based on the tanker pumping performance formula that the discharge would have taken 12 hrs 28 mins less if the c/p warranty of 100 psi (approx. 7kg/cm2) had been maintained. He agreed to deduct this excess time from the owners’ claim. As far as we are aware, this is the first occasion where this formula has been used in court to determine the time lost due to inefficiency of the ship’s pumps. (If you do not have a copy of this formula, you can download a copy of our pumping performance spreadsheet from the "Downloads" section of our website).
Because the vessel was lying at an open sea berth (see News Update no.10 for a definition of an open sea berth), the charterers had to pay for tugs and launches that had to remain in attendance throughout the discharge. The charterers claimed that they had incurred additional charges as the discharge had taken longer than it would have done had the vessel maintained the warranted pumping pressure. This was not contested by the owners and the judge agreed to reduce the owners’ claim accordingly.
In the recent high court case Kronos Worldwide Ltd. v. Sempra Oil Trading (The “Spear 1”)  the buyers claimed demurrage for delays at the loadport due to non-availability of cargo. The sellers only asked for the letter of credit to be opened some 7 days after the vessel had arrived at the loading port. The buyers opened their l/c the same day. However the sellers claimed that the buyers were in breach of the contract term that required the l/c to be opened “promptly”. This they said was a condition precedent and because the buyers had not opened their l/c before the expiry of the laycan, they were not obliged to deliver the cargo until it was opened. The judge disagreed with the sellers. The obligation to pay demurrage according to the charter party terms was separate from the parties’ contractual position under the sales contract regarding the opening of a letter of credit. It was irrelevant that laytime had started to run before the l/c had been opened. On this basis, the buyers were entitled to recover all the demurrage incurred at the loading port.
See the Court of Appeal decision in News Update No.25 that reversed this decision.
It is very common in certain parts of the world for delays after berthing to occur while awaiting clearances by coast guards, immigration, customs or health authorities. Although these delays usually do not amount to more than 2 hours they have often generated a lot of argument between owners and charterers. Asdem has had to resolve a number of such disputes. Our view is that charterers must contract out of their absolute obligation if they want to avoid liability for specific delays to the ship. John Schofield in his excellent reference book “Laytime and Demurrage” (4th Edition) sets out the general principles in Chapter 1. In paragraph 1.17, where he describes the nature of charter parties which have a fixed period of laytime, he writes: “However, in the absence of modifying provisions, the incidence of risk in this type of charter as between the ship owner and the charterer lies entirely with the charterer.” He quotes the case of Postlethwaite v. Freeland (1880) 5 App Cas 599 where the judge described the undertaking by the charterer to load within a fixed period of time as: “An absolute and unconditional engagement, for the non-performance of which he is answerable, whatever may be the nature of the impediments which prevent him from performing it and which cause the ship to be detained in his service beyond the time stipulated.”
Lord Diplock referred to this in The Johanna Oldendorff  2 Lloyds Rep 285 “In the case of maritime carriage this rule (as to absolute liability) was subject to the exception that performance was excused if it were prevented by Act of God or of the King’s enemies or by inherent vice in the goods carried. At a very early date it became usual to incorporate in charterparties express exceptions for other maritime perils, and in modern charterparties these have been extended to strikes and other hindrances to performance which take place on land.”
If charterers need such a clause, they could do worse than copy the particularly comprehensive clause 14(c)(v) of ExxonMobilvoy2000 which states that time does not count as laytime or demurrage if it is spent or lost “by reason of local law or regulations, actions or inaction by local authorities (including, but not limited to, Coast Guard, Naval, Customs, Immigration or Health authorities), with the exception, however, of port closure due to weather and/or sea conditions”.