Issue 34


The recent High Court case of Lia Oil SA v. Erg Petroli Spa, “The Liano” [2007] highlights the importance of complying with both contractual and statutory time bars. It illustrates the difficulties claimants may face if they wait too long to commence a court action or arbitration to recover their disputed claims. Discharge had been completed in June 1999 and the court accepted that Lia Oil had submitted a correctly documented demurrage claim to Erg Petroli. Erg Petroli had also received the claim within the time bar period in the sales contract, “100 days from the b/l date”. However, Lia had not commenced court proceedings to recover their disputed claim until December 2005, almost six and a half years later. Unfortunately, this was too late because the Statute of Limitations allows only 6 years from the event, i.e. completion of discharge in this instance, in which to institute a court action or arbitration under English Law to recover contractual claims. Lia’s claim was therefore time-barred.

Nevertheless, Lia contended that they should still be entitled to recover USD 9,500 of their original claim for USD 60,000. They argued that in May 2000 Erg Petroli had acknowledged that this amount was payable according to their own calculations. On this basis, the 6-year time limit should only run from this date. However, the court held that Erg Petroli’s acknowledgement of the amount due could not be considered an implied promise to pay it. The 6-year time bar would only run from the later date of May 2000 if at that time Erg Petroli had clearly acknowledged their indebtedness and legal liability to pay USD 9,500. The conclusion is that a claimant should not expect a counterparty’s calculation of the amount due to be considered legally binding unless there has been an offer to pay a specific amount and an acceptance of it by the claimant.


The Lia Oil v. Erg Petroli case also covered a separate dispute on a vessel “The Kogalym”. Lia Oil had claimed demurrage for a delay at the discharge port that arose because the cargo was found to be off-specification. The parties had agreed to retest the cargo and that all time for retesting would be for the account of Lia Oil, the sellers. Furthermore, “should the cargo be found to be on-specs laytime will run upon berthing”. However, the cargo was found to be “off-spec” and Erg Petroli subsequently agreed to accept the cargo at a discount of USD 1.50/mt with “other terms and conditions unchanged”.

The vessel berthed 6 days after arrival at Santa Panagia. Erg Petroli rejected Lia Oil’s demurrage claim for USD 63,000 on the grounds that since the cargo was off-spec, either laytime did not commence at all or at best it could only commence on berthing. The judge rejected these arguments. The parties had made an agreement as to when laytime would commence if the vessel was on-spec, but had been silent about what would happen if the cargo was found to be off-spec. If it were off-spec, Erg Petroli would have had the right to reject the cargo but they didn’t do so. They chose to renegotiate the contract and accepted a discount with all other contract terms remaining unchanged. There was no need to imply any terms in to the sales contract as it was already a fully workable agreement. Laytime therefore commenced in accordance with the original terms, i.e. 6 hours after the vessel tendered notice of readiness at Santa Panagia, and Lia Oil were entitled to recover their demurrage claim plus interest.


Under the terms of the oil companies’ charter parties, charterers do not guarantee that the port or the berth will be safe. They only agree to use their best endeavours to ensure its safety. However, Asbatankvoy Clause 9 states that the charterers warrant that the vessel will load or discharge at any safe place or wharf which the vessel “can proceed thereto, lie at and depart from always safely afloat”. A recent High Court case, Independent Petroleum Group Ltd. v. Seacarriers Count Pte Ltd (“The Count”) [2006] All ER (D) 149, is a good example of why charterers should be wary of such a guarantee. On the day of her arrival at Beira in Mozambique, the M/T “Count” was prevented from sailing to the berth by the grounding of another vessel, the M/T “British Enterprise” in the entrance channel to the port. After being refloated, the “British Enterprise” ran aground a second time. This delayed the berthing of the M/T “Count” by 5 days. It seems that the sandbanks had shifted and as a result the navigation buoys were out of position. After completion of discharge, the M/T “Count” was again unable to sail because another vessel, a container ship, had run aground on entering the port and was blocking the channel. The owners claimed damages for detention for the 4-day delay before the M/T “Count” was able to sail from the port. The arbitrators had found in favour of the owners and on appeal the High Court judge agreed with the arbitrators. The basis for the decision was not that the navigation buoys were out of position, but that there was not an adequate procedure in place at the port for monitoring the changing depths in the channel. There was a continuing risk to all vessels that used the approach channel and accordingly Beira should be considered a port that would unsafe to nominate. This was the case even though the M/T “Count” had never encountered any specific difficulty and the danger had only been temporary. After considering the effects of the safe berth warranty with the obligation, also in clause 9, to procure a berth “reachable on arrival”, one can only wonder why so many charterers still persist in chartering on the Asbatankvoy form.


In a recent Asdem Arbitration the “reachable on arrival” warranty in clause 9 of Asbatankvoy was relied upon by the owners who claimed damages for detention when their vessel was unable to enter the official limits of the port. The vessel had been prevented from entering the port by a combination of high winds, the refusal of the pilot to come out to the ship and the presence of several small fishing vessels sheltering from a storm in the narrow approach channel. The conclusion was that although a vacant berth was available, the charterers remained in breach of the “reachable on arrival” warranty for failing to procure a berth that the vessel could safely reach on arrival at the port. This was the case, even though the vessel was not an “arrived ship” as described by Lord Reid in The Johanna Oldendorff [1973] . However, the vessel had arrived in the commercial or popular sense detailed by Mr. Justice Roskill in The President Brand [1967]. In that case the charterers were in breach of a “reachable on arrival” provision in their charter party because the vessel’s draft was too deep to cross a sand bar in the approaches to the port of Maputo. The vessel was prevented from entering the port for four days and the owners were able to recover damages for detention for this period. Laytime, of course, did not run until the vessel entered the port and tendered a valid Notice of Readiness.


In the arbitration referred to above, the charterers had raised the defence of “perils of the sea” as described in clause 19 of Asbatankvoy. Although Clause 19, General Exceptions, cannot be used as a defence against a demurrage claim, it could be used to refute an owner’s claim for detention. However, the conclusion in this arbitration was that the high winds, rough seas and the presence of small fishing vessels did not amount to a peril of the sea.

Most of the law on “perils of the sea” relates to damage to the vessel or to the cargo. Perils of the sea are the most important risks that ship owners insure against in their hull policies. In insurance, the loss must be of a fortuitous nature and must be due to an extraordinary occurrence with the sea, such as the stress of winds and waves or navigational mishaps such as collisions or groundings. If the vessel had been damaged or run aground on her way to the berth, it would be entirely logical to classify the event as a peril of the sea. However, it was not possible to conclude that the prevailing conditions which prevented the vessel entering the port amounted to an extraordinary or fortuitous event. This type of dispute does not occur very often because under most oil companies’ charter party forms, unlike Asbatankvoy, the risk of reaching the port rests firmly with the ship owner.


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