Article from Phil Stalley, Demurrage Consultant
I don’t think readers of this newsletter need a reminder but the case of ED & F Man Sugar Ltd v Belmont Shipping Ltd [2011] EWHC 2992 (Comm) has prompted me to emphasise the importance of keeping up-to-date with legal cases and developments in the industry. This case was originally an arbitration which charterers won and centred on the validity of the NOR. It was a dry cargo vessel which tendered NOR on arrival 16th September 2009 and again on 19th September. Holds were inspected 18th September and rejected. The vessel was finally accepted as ready to load on 20th September but no further NOR was tendered. The vessel did not berth until 5th October 2009.
Owners maintained that laytime commenced at 1400hrs 16th September on the basis that the original NOR was valid. Charterers argued that “an NOR was good on 21st September 2009 (normal office hours) and laytime commenced at 1400hrs”. No NOR was given on 21st September and so I assume the charterers’ position was that they deemed the NOR valid once the holds had been approved. The arbitrators agreed with the charterers and an award was duly given in their favour. After the arbitration, I suspect, someone in the charterers’ office realised that where an invalid NOR has been tendered, and no valid NOR tendered subsequently, time should not count until commencement of cargo operations in accordance with the judgment in The "Happy Day" (Flacker Shipping Ltd v Glencore Grain Ltd [2002] EWCA Civ 1068).
The High Court was asked to rule whether the arbitrators had a duty to bring to the dispute any points missed by charterers in their submissions. The court rejected the charterers’ application and stated that arbitrators have no obligation to improve the charterers’ case if the charterers have missed a valid point.
I agree with this judgment as it must be up to each side to make their own case and it is a lesson that demurrage negotiators must be aware of the latest case law. I find it hard to believe that anyone in the demurrage industry has not heard of the Happy Day case as this judgment is now some nine years old and I am sure it must get mentioned several times on most demurrage courses! It is important for your negotiators to keep up-to-date with developments in the industry by attending training courses, reading newsletters such as these, following court cases and meeting with your friends, colleagues and adversaries as often as you can.
Article from Elizabeth Nemeth, Lead Negotiator Barge Demurrage, BP Oil International Ltd. London.
One of the many topics we often discuss in the barge demurrage world is the TTB rules. Are they applicable to third party contracts and if so, what clauses can be applied and how can we apply them? What do we mean when we say demurrage calculations are as per TTB rules?
Opinions are varied. While many people are of the view that since it’s a charter party we should only refer to it for laytime and demurrage rates. Others argue that all demurrage clauses included should be considered when calculating demurrage.
Without question, the TTB terms form a charterparty, a contract between charterer and barge owner. It is also true that the demurrage calculations are different from third party demurrage calculations. The free time is given as a whole for both loading and discharging operations and demurrage is calculated for the entire voyage.
Third party contracts on the other hand are port specific, either load or discharge, there is a fixed laytime allowance at each port and demurrage is paid for the applicable port only. The reversibility rule is also present in most contracts or GT&C’s. Regardless of popular belief, the reversibility rule is not a TTB rule. It wouldn’t make much sense in a charterparty as the free time allowance is not applicable to a particular port. Clause 9.4 states that if the free time for loading and discharging has already been exceeded at the load port, time would start running on arrival at the discharge port. Applying this clause to a third party contract would cause a lot of headaches for a CIF buyer.
So how do we apply the demurrage terms to a third party deal? Do we consider only the clauses that we believe are suitable, and if we do, can we still say demurrage as per TTB rules? The reality may be that the traders do not necessarily analyse and discuss the finer details of the TTB terms when they agree a deal and it’s down to the negotiator to make sense of it all. It also may be said that many people in the industry have never properly studied the TTB rules; on many occasions they even refer to certain industry practices as TTB rules and it gives rise to many needless disputes, but that’s a discussion for another time.
The debate about how we apply the TTB rules with regards to third party demurrage calculations is more prevalent since the arrival of the 2010 TTB edition. For a start, there are no rates included; there isn’t even a single reference guiding us to the relevant document with the information. Instead, right at the beginning we are told that the rates need to be agreed separately. Nevertheless, it is a common understanding in the industry that the Federal Law Gazette is the source for information on demurrage rates. But can we still refer to them as TTB rates?
In the new TTB version we also saw the introduction of the single and double hull barges and some new rules on late arrival. With these changes a demurrage claim can be significantly higher than it would have been just a short while ago. The rules on late arrival means that now we are more likely to be liable for demurrage even if the barge missed her ETA.
Although demurrage is a secondary expense to an oil deal, nobody is happy to pay high demurrage costs if they can be avoided. Numerous companies now declare in their contracts that only the demurrage rate and laytime will be as per TTB, and all other demurrage terms and conditions are listed in the agreement or governing GT&C’s. Could this approach be the way forward to resolve the issue on how we apply the TTB rules? Could it be acceptable for all? Could we come to a common understanding on how we all interpret the demurrage terms and conditions? Do we favour rules written down in black and white or do we prefer them “grey” to give an additional opportunity for negotiation? Just a little something to ponder on.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
“Restraint of princes, rulers and people" is a general exception found in a number of tanker charter parties. It is an exception to demurrage only when the charter party expressly states it applies to demurrage. This is why the restraint exception found in CL 19 of Asbatankvoy does not apply to demurrage but could be used as a defence in a claim for damages for detention. See The “Johs Stove” [1984] 1 Lloyd's Rep 38 where the judge said: “I agree with the arbitrator that a general exceptions clause such as cl.19* will not normally be read as applying to provisions for laytime and demurrage, unless the language is very precise and clear.” (*Asbatankvoy)
Most parties give little or no thought to the “restraint of princes” exception when chartering vessels. However, it can be significant when an international crisis suddenly arises. When Iraq invaded Kuwait, the United States responded immediately by blocking the importation of Iraqi and Kuwaiti goods into the United States, activating clauses in charter parties containing this exception. Companies dealing with Iraq, especially those trading crude oils were immediately affected, as was the international trading community for some time after. The regulations against Iraq were similar to US government orders against Libya, Iran and Cuba. We have recently received a number of new enquiries on when the exception applies.
The “restraint of princes” exception applies to interference by a government that prevents performance of the charter. Examples of this exception are government orders prohibiting or restricting trade (import and export bans), embargoes and blockades. The exception usually states that demurrage is to be shared equally by owners and charterers if government interference occurs. It is not necessary to show actual forcible interference by the government, merely that it is “backed by force” i.e. force would be used if a government order were broken.
This exception does not operate when the restraining order existed, or was known to the parties, at the time that the charter was concluded. Neither does the exception apply to ordinary ship arrests, liens or fines, all of which are the consequences of actions within the control of the carrier. The "restraint" requires that the prohibition is levied directly by a government and that it is involuntary.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
See News Update No. 45 for details of the High Court judgment which has now been successfully appealed by the owners in National Shipping Company of Saudi Arabia v BP Oil Supply Company ("The Abqaiq”) [2011] EWCA Civ 1127. The amount for demurrage was not in dispute, but the charterers’ defence, accepted by the judge in the High Court, was that the owners could not recover demurrage costs which they had originally claimed as additional freight under an additional port clause for a delay to a second berthing at the load port. By incorrectly naming the majority of their claim as freight, the charterers asserted that owners had failed to comply with the time bar clause 20.1 of BPVOY4 which set out how and when claims for demurrage should be submitted.
In reaching its decision that the claim was not time barred, the English Court of Appeal held that the charterers had received, within the 90-day time limit, all the documents that objectively they would or could have needed to substantiate each and every part of the demurrage claim. The charterers were put in the position where they had all the necessary information and documentation to investigate the claim and calculate the amount due. Although the demurrage claim was initially mistakenly drawn up by the owners, that did not stop the owners from putting “a different legal label on part of the claim, the substance of which was presented in time”.
The effect of this decision is that parties will not be precluded from recovering sums, which would otherwise be due to them, by some technical non-compliance with the notification process. In sharp contrast with the decision in The “Sabrewing” Waterfront Shipping Co. Ltd v. Trafigura AG [2008] 1 Lloyd’s Rep. 286, the Court of Appeal clearly felt that an overly technical approach ought to be avoided. However, and notwithstanding the tolerant nature of this judgment, a party will still need to comply with all the requirements of a detailed demurrage/claims time bar clause which sets out exactly when and how the demurrage claim must be made.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
There have been a number of arbitration and court cases on whether or not a demurrage time-bar applies but these decisions become irrelevant if proceedings to recover an unpaid claim are not commenced within the time limit under the Limitation Act 1980.
Under the Limitation Act, court or arbitration proceedings to recover a claim for demurrage must be brought within 6 years of the date when the cause of action arose. After 6 years the claim is time barred as a matter of law even though the 60/90 day contractual time limit for presenting the claim has been complied with.
The decision in Glencore Energy (UK) Ltd v Sonol Israel Ltd [2011] EWHC 2756 (Comm) is an important reminder of the risks that parties run by not commencing claims well within the six-year time limit. Glencore entered into two contracts, dated 15 December 2004 and 10 January 2005, to sell gasoil to Sonol. The two parcels of cargo were delivered by the vessel “Team Anmaj” which completed discharge on 11 January 2005. Glencore sent a demurrage invoice to Sonol on 28 April 2005. The demurrage was not paid and a claim for the unpaid demurrage was issued on 19 April 2011. This was more than 6 years after the cargo had been delivered but slightly less than 6 years from the date when Glencore had originally issued their claim.
The English High Court was asked to decide whether the six-year time limit under the Limitation Act applied from the time when demurrage accrued (in accordance with the President of India v LIPS Maritime Corp [1998] 1 AC 395), or from the date of the presentation of the demurrage claim. The Court held that the cause of action for the six-year limitation period arose the moment when the laydays expired and time on demurrage began and which accrued on a day-by-day basis until completion of discharge. The claim for demurrage was therefore time-barred six years after completion of discharge and not from the date the claim was issued which occurred some months later.
Andrew recently took part in the Laguna Phuket International Triathlon on 27th November 2011. This would not have been unduly remarkable except that only one year ago Andrew underwent heart surgery which entailed a quadruple by-pass. The operation was performed in Kathmandu where his heart problem was diagnosed as critical. The hospital there may not be the most up-to-date but their surgery is certainly effective. Andrew swam 1.8 kilometres, cycled 55 kilometres on a course which included several category 5 hill climbs and then ran 12 kilometres. He completed the event in a very creditable 4 hrs 19 minutes. Andrew is having his certificate and medal framed and will send it to the doctor in Nepal to put on the wall of the hospital ward. Hopefully, it will help someone in the same position to appreciate they can make a full recovery and, most importantly, to let the hospital know what great work they do in very basic conditions.