Issue 42


Following the launch of a Code of Practice for the handling claims at our 9th International Conference on Tanker Demurrage in May 2009 we have been working to obtain its wider acceptance in the oil and tanker industries. At least one major oil company has been keen to endorse it. We appreciate that many oil companies, traders and ship owners already work to standards equal to or even higher than the Code of Practice proposals. Our intention is not to burden such companies unnecessarily but to ensure that companies with exemplary procedures do not have to suffer poor standards and sharp practice from their counterparties. We would therefore like to receive any feedback that companies can give us on the benefit they feel the code can provide. Whilst we recognise that some agreements may need to be kept private and confidential, we would be pleased to publish a list of companies that have agreed, or are willing to agree, any arrangements based on the Code. We have already received reports of barge traders who have used the Code of Practice to agree minimum standards for handling demurrage claims where none have previously existed.


In News Update No. 40 we discussed the possibility of obtaining an attachment of US Dollar funds as they passed, albeit only briefly, through the US banking system. This has now been severely restricted by a recent judgment of the US Court of Appeals for the Second Circuit in the case of Shipping Corporation of India v. Jaldhi Overseas. The court held that the Winter Storm Shipping v. Thai Petrochemical Industries case of 2002 had been "erroneously decided". The judge in that case had held that electronic money transfers passing though intermediary third-party banks were attachable. This latest decision is not entirely surprising given the increasing number of Rule B attachments, nearly 1,000 in four months to the end of January 2009, being sought by maritime plaintiffs. They were threatening to overwhelm the US judiciary as well as undermining the reputation of the US dollar as the main currency for international transactions. This decision will be a disappointment to companies seeking security against possible defaults of arbitration or court awards. Rule B attachments will continue but will only be available to arrest vessels calling at US ports or for an attachment of bunkers or of funds actually held in New York bank accounts.


The High Court case of AET Inc. Ltd. v. Arcadia Petroleum, The "Eagle Valencia" [2008] is an interesting example of the court looking at the charter party as a whole to decide the intentions of the parties rather than dwelling on the wording of a single clause. The charter party was Shellvoy5 with Shell's additional clauses of February 1999. Additional clause 22 stated that if owners failed to secure customs clearance or free pratique within 6 hours of tendering Notice of Readiness, the NOR would not be valid. However, the NOR would still be valid if the authorities granted free pratique or customs clearance after the vessel had berthed.

At Escravos, the health authority boarded the vessel while it was waiting at anchor and granted free pratique about 20 hours after the vessel had arrived and tendered NOR. The charterers argued that the NOR was invalid. The judge accepted that the purpose of clause 22 was to give protection to charterers if free pratique was not obtained. However, he did not believe it was the intention of the parties that the exception to the requirement to obtain free pratique only applied if it was granted at the berth. Furthermore, he considered that if the vessel had tendered an NOR which was in all other respects valid in accordance with the terms of clause 13(1)(a) of Shellvoy5 and was simply waiting for a berth to become available, there might be no adverse effects for the charterers if the vessel was not delayed by the granting of free pratique. The judge was critical of the ambiguity in the drafting of additional clause 22, but on looking at the charter party as a whole, he believed the charterers had been wrong to concentrate on individual words. He saw no reason why the NOR which was valid when tendered would become invalid just because free pratique was granted in the period between 6 hours after the NOR and the time the ship berthed. The charterers had not suffered any loss. The original NOR would remain valid.


The arbitrators had concluded that the charter party was a port c/p, but the judge in the High Court in Neologistics SARL v. Five Oceans Corporation (The "Merida") [2009] was in no doubt that it was actually a berth charter. The charter party provided, in what the judge described as the "opening term": "One good and safe chtrs' berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao". However, the arbitrators had decided that this wording which indicated that it was a berth charter was overridden by Clause 2 of the c/p which referred to a safe port as follows: "The vessel to load at one good and safe port/one good and safe charterers' berths Xingang and to discharge at one good and safe port/one good and safe charterers' berth Cadiz and at one good and safe port/one good and safe charterers' berth Bilbao. Shifting from anchorage/ warping along the berth at port of load and port of discharge to be for owners' account, while all time used to count as lay time".

The vessel had arrived at Xingang on 10 March 2007, tendered NOR and anchored to await the berth. It did not berth until 30 March. The arbitrators, having found that Clause 2 turned it into a port charter, agreed that the owners were entitled to claim demurrage for the waiting time.

The judge, on the other hand, found that clause 2 did not alter or conflict with the "opening term". It only added a safe port warranty. The second sentence of clause 2 did not support either owners' or charterers' arguments as it only defined who would pay for the cost and time of shifting to the berths. The arbitrators had incorrectly interpreted the significance of the shifting provision when they assumed that if shifting time would count as laytime, it meant that the master could tender a valid NOR on arrival and laytime would subsequently be running. The judge said that the shifting provision would have been unnecessary if this had been a port c/p as time would have run for the charterers unless the c/p said otherwise. However, in a berth c/p shifting time would be for the owners' account unless, as here, it specifically stated that it was for the charterers. The owners were not entitled to claim demurrage for the waiting time.


In News Update No.39 we noted that only 13 LMAA arbitrations had been published by Lloyd's Maritime Newsletter in 2008 compared to average of 26 in previous years. Amazingly only one LMAA arbitration was published in 2009. This was despite reports from the LMAA that the number of appointments of maritime arbitrators in 2009 had reached an 11-year high. It seems that the opportunity for the maritime industry to learn anything from London arbitration awards has all but disappeared. It is only on the rare occasion when an arbitration award can be appealed to the courts that we are able to see the arbitrators at work. We accept that it is difficult to persuade the parties to agree to publish the award after the event and lawyers have no incentive to ask their clients. This is why we feel the New York Society of Maritime Arbitrators' procedure, where all arbitrations are published unless the parties agree in advance that they will be kept private, is the only effective way to ensure that the majority of awards see the light of day. At the moment, London arbitration is invisible. Asdem has been directly involved in arbitrations on behalf of clients in 2009 and we admire the arbitrators for their expertise and their well-written awards. We would simply like to see their efforts informing the maritime industry at large.


The answer is that it won't be if you use the words "final and binding" in your arbitration agreement. In the High Court case of Shell Egypt West v. Dana Gas Egypt [2009], the arbitration clause stated that "the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties.". It was argued that the words final and conclusive made it clear that there could be no appeal. Mrs. Justice Gloster disagreed. She considered that the words were insufficient and would not convince a reasonable person that the parties had agreed to exclude the right to appeal under Section 69 of the 1996 Arbitration Act "on a question of law arising out of an award made in the proceedings". She considered that the word "conclusive" added very little. The wording used only indicated that the parties were not entitled to relitigate the issues. If the parties wanted an agreement that the arbitration was absolutely final, they would have to use wording which clearly stated that all rights of appeal to the courts were waived and excluded.


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