A recent London arbitration, LMLN 27/04, highlighted how difficult it can be to write additional charter party clauses that will cover every eventuality. An “early loading” clause had been added to a Shellvoy5 charter party that gave the charterers the benefit of “time saved”. This was defined as the time from when loading commenced until the commencement of laydays. In the event, the vessel was able to complete loading and sail before the commencement of laydays. The question was whether the charterers were entitled to time saved calculated until the first day of laydays or only until loading had been completed. The arbitration tribunal held that the words “such time saved which counts under the charter party terms” could only apply to periods when laytime was running and that the charterers were not entitled to a credit for any excepted periods when laytime was not running. On this basis, time saved ended when loading had been completed.
The arbitrators remarked that the additional clause was not as clear as it might be. They suggested it would be preferable to adopt a clause, such as ExxonMobil Voy2000 cl.13(b), that referred to adding time to the laytime allowance and also explained how the additional laytime was to be calculated. However, we have seen that even these clauses can cause difficulties when they do not refer to the actual time saved – see our News Update No.21 of January 2003.
We recently had to reach a conclusion about the scope of the Conoco Weather Clause and, in particular, whether this clause applies to delays due to adverse weather when the vessel shifts to a second berth within the port. In the case in question, the vessel was instructed by the charterers to shift to a second berth to complete discharge. However, because bad weather had caused the suspension of the pilotage and towing services, the vessel went to anchor and waited for the weather to improve.
We consulted widely with several senior demurrage managers and with some very experienced maritime lawyers. The lawyers were unanimous in their view that there was no reason why the Conoco Weather clause should only apply to shifting to the first berth. They felt that the clause was sufficiently clear to take precedence over the shifting provision in clause 9 of Asbatankvoy. On the other hand, a number of experienced demurrage analysts had traditionally considered that all time shifting between berths counted in full and that the Conoco clause would not affect this. However, the recent judgement of the Court of Appeal in “The Alfrapearl”, Portolana Compania Naviera Limited v. Vitol SA [2004] makes it clear that if events fell within the half-rate provisions of the Asbatankvoy charter party, they would reduce demurrage to 50% for time lost at a second berth before, during or after berthing. In paragraph 46 of the judgement, Lord Justice Clark said: “Clause 9 provides that where it applies the time consumed shall count as used laytime. The logic of the owners’ submission would I think be that, even though (on my view of the cause of the delay) clause 8 would on the facts of this case have the effect that such time would count as half laytime or half demurrage (as the case might be), the effect of clause 9 is that the whole of the time should be counted as used laytime. That would be a very curious result. As I see it, the position is that the two clauses have very different purposes. Clause 8 provides for the treatment of time in various different circumstances. Thus (in the form in which it was included in this charterparty) it includes provisions for the circumstances in which demurrage is payable and for the circumstances in which time is to count as half laytime or half demurrage is to be payable. It contains no provisions for the payment by the charterers of additional expenses when time is counting as half laytime or when the vessel is on demurrage or half demurrage. The owners are simply left to bear their own expenses but are entitled to demurrage or half demurrage as the case may be.”
One can reasonably infer from these words that delays due to adverse weather during shifting between berths should be calculated at half rate in accordance with the terms of the Conoco Weather Clause.
How much time should a vessel be allowed for stripping and tank draining at the completion of discharge? Although this is a question we have often been asked, there is never likely to be a definitive answer. As an indication, the BPVOY4 charter party allows 2 hours for stripping per segregated grade, provided the vessel has maintained the warranted backpressure throughout the bulk discharge. In London arbitration, LMLN 19/04, the arbitrators said that in their experience stripping took no more than 5 or 6 hours and was often less than this. They also stated that stripping could include 2 to 3 hours of “internal stripping” (when no discharge took place while the oil was been accumulated from the bottom of a ship’s tanks prior to pumping ashore). Having said this, the arbitrators then went on to decide that 17 hours and 50 minutes of discharge at a pressure below the c/p warranted minimum could be considered to be stripping time. The relevant c/p clause stated that the vessel would maintain 100 psi minimum “except stripping and COW”. The owners contended that the extended period for “stripping” was caused by the volatile nature of the Khafji crude which had caused the pumps to “gas up” and also the way that two separate grades had been loaded on to the vessel. Remarkably, the arbitrators decided that because they could find nothing wrong with the ship’s pumps they were unable to conclude with any certainty that the problem did not lie with the cargo itself. They therefore accepted that the period of 17 hrs 50 mins could actually be described as stripping time.
On the face of it at least, this appears a strange decision. The owners guaranteed a minimum back pressure which their vessel was clearly unable to maintain and we would have thought that the onus was on the owners to demonstrate why this was not their responsibility. There appeared to be very little evidence to support their argument that this was a particularly volatile cargo or that the ship’s pumps or lines were not the problem. Charterers can be at a disadvantage in pumping disputes, particularly if they are unable to obtain reliable information about the state of the vessel’s equipment.
34 London arbitrations were published in 2004. Of these, 32 related to disputes between ship owners and charterers. Of these 32 arbitrations, the charterers were successful on only 6 occasions. While statistics can be used to prove almost anything, one might conclude either that it is difficult for charterers to win arbitrations or that they are choosing to fight the wrong cases. It might be that ship owners are unlikely to take charterers all the way to arbitration unless they are sure they have a very strong case.
No one knows how many London arbitrations were decided in 2004 because, unless both parties expressly agree to it, they are never published. The Society of Maritime Arbitrators in New York publishes awards as a matter of course unless, at any time before the issuance of the award, both parties request that the award is not published. Approximately 100 awards are published per year by the SMA. So far over 3850 awards have been published. We would very much like to see the same procedure adopted by the London Maritime Arbitrators Association. We previously expressed our reasons for this in News Update No.15 of January 2001.
We have recently had the pleasure of puzzling over the interpretation of so-called “FOB plus Freight” crude oil contracts. These agreements give traders flexibility with pricing based on the actual cost of freight to the delivery port. However, as one manager from a major oil company said about the loose drafting of these contracts, “These contracts are a nightmare. They appear to mean whatever the traders want them to mean”. Traders should realise that “freight” is simply the cost of transportation. They must ensure that their contracts include proper provisions for demurrage, deviation, time bars etc. For example, if the contract does not include demurrage terms or a demurrage rate, they will not be able to recover any demurrage, see Mallozi v. Carapelli [1976] 1 Lloyd's Rep 407.