In the previous edition of this News Update, we said that the definitive answer to this question would have to wait until the Court of Appeal considered the High Court judgment in the case of Tidebrook Maritime Corporation v. Vitol SA. “The Front Commander”, [2006] 682 LMLN 1. This case concerned the interpretation of an Asbatankvoy charter party which included various additional clauses. The particular clause in dispute read: “The vessel shall not tender notice of readiness prior to the earliest layday date specified in this charter party and laytime shall not commence before 0600 local time on the earliest layday unless the charterer consents in writing.”
The charterers had confirmed by email that they wanted the vessel to berth and commence loading before the first day of laydays. Nevertheless, the judge in the High Court had agreed with the charterers’ argument that because they had not specifically agreed in writing that laytime would commence early, laytime did not commence until 0600 on the first day of laydays. The Court of Appeal has now reversed this decision. Lord Justice Rix offered eight reasons to support the court’s conclusions and in doing so has clarified an area in charter parties that had not been previously investigated in such detail. By ordering the vessel to berth and load early, the charterers had waived their right to insist that laytime would not commence before the first day of laydays. Even though the charterers had not specifically given their consent in writing, Lord Justice Rix commented, “Laytime is the time agreed for loading and discharging. In the absence of clear contrary expression, why should the charterers load in free time?” There was no obligation on the charterers to load a vessel that arrived before the commencement of laydays, but if they did, they could not normally expect to use the vessel without paying for it. The main purpose of a notice of readiness in the context of a charter party was the triggering of laytime, subject to any allowed notice period. In this case, laytime counted from all fast at the berth.
Another case mentioned in the last News Update was “The Azur Gas” (SHV Gas Supply and Trading SAS v. Naftomar Shipping and Trading Co. Ltd.) [2005] 680 LMLN 1. This was a CIF contract with a loading laycan. The judge concluded that the contract did not contain a guaranteed loading period. “Laycan” was a charter party term that defined the period in which the ship had to arrive at the loadport. This was not the same as a shipment period. We now have another High Court decision that says exactly the same thing, this time in an FOB contract, ERG Raffinerie Mediterranee SpA v. Chevron USA Inc. (The “Luxmar”) [2006]. The delivery clause in the sales contract for 30,000 mt of gasoline included the phrase “Buyer will narrow such period to a two day laycan latest by 21/05/2004 C.O.B. Italian time.” Chevron narrowed the laycan to 29/30 May and the vessel arrived at the loadport, Priolo, on 28 May. Because of technical problems the cargo was not available. By 3 June, the price of gasoline had fallen considerably and the cargo was still not ready. Chevron, the buyers, then unilaterally terminated the contract. ERG claimed USD 3.4 million in damages based on the subsequent lower resale value of the cargo and the cost of lost production. The court concluded that the two-day laycan did not imply an obligation to load the ship either within the laycan or even within a reasonable period. The buyers were required to present their vessel for loading within the agreed laycan. The obligation on the sellers was to load the vessel within the agreed laytime allowance and to pay demurrage if they failed to do so. Chevron were only entitled to cancel the contract if the contract had been frustrated. This position had not been reached and therefore they were liable to ERG for damages for wrongfully terminating the contract. Chevron’s only remedy was a counterclaim for demurrage for the delay to their vessel.
It is a pleasure to be able to recommend the 4th Edition of Donald Davies’ very well-organised and readable “Commencement of Laytime”. Donald is now semi-retired but he has been a lawyer, a master mariner and a most able arbitrator. He has used all this experience to expand his book through each edition into what has become unarguably the most comprehensive reference work on the complex issues that can surround the commencement of laytime. It will be of invaluable assistance to every demurrage analyst and, indeed, to anyone who has to deal with questions relating to who pays when a ship is waiting at a port. There is a useful section on sales contracts which will not be found elsewhere. Even at £180, every demurrage department should have a copy. It is published by Informa Law (law.enquiries@informa.com).
The High Court case of Exfin Shipping (India) Ltd. v. Tolani Shipping Co. Ltd. [2006] has confirmed that failure to pay an agreed demurrage claim constitutes a dispute that the claimant can take to arbitration when the charter party includes the clause “Any dispute arising under this charter to be referred to arbitration in London…”. The charterers had agreed the demurrage claim and admitted that they had not paid it by the date stipulated in the c/p (30 days after discharge). Not surprisingly, the arbitrator had awarded the ship owners their claim plus interest and costs. The High Court judge agreed and awarded the owners their further costs.
The correct interpretation of who pays for costs and time at additional ports under Interim Port Clauses has recently given us several headaches. The intention of such clauses is that they entitle charterers to opt to load or discharge at more ports than were originally provided for in the charter party agreement. However, although these clauses may say that the charterers pay for all additional costs, this may not be entirely accurate. See for example “Charterers shall pay for any interim Load/Discharge port(s) at cost. Time for additional steaming, which exceeds direct route from first loadport to furthest discharge port, shall be paid at demurrage rate plus bunkers consumed, plus actual port costs, if any.”
On the basis that time at an interim port counts as laytime or demurrage as it would at any other port, the charterers will have the advantage of the 6 hour NOR allowance and the exceptions in the charter party. This will include time for shifting to the berth, adverse weather etc., unless the clause makes it very clear that all such time is for the charterers’ account. See this alternative clause that covers time at the port:
“Time to count from arrival at pilot station at interim load/discharge port until dropping last outward pilot interim load/discharge port, i.e. no allowance for notice time or deduction for shifting even from anchorage to first berth and no deduction for time lost due to tide, sea and weather conditions. Deviation and time used to be calculated at demurrage rate per day pro rata plus cost for additional bunkers consumed as per masters telex statement.”
This clause is clearer about allocating time at the interim port, but is vaguer on the question of how any deviation is to be calculated.