We received an excellent response to our first conference on the European Oil Barge Trade. Sixty delegates came to listen to our expert speakers who presented carefully researched papers on many different aspects of the barge market. The conference dinner held on board the M/V “Henry Hudson” provided guest with excellent views as it toured the impressive port of Rotterdam. The conference highlighted several contentious areas and confirmed that a lot of work still needed to be done if the objective of reducing the number of disputes in barge chartering and trading was to be achieved. With this in mind, we will shortly publish our first Asdem Barge Newsletter. This will highlight industry initiatives and proposals which, we hope, will have a positive effect on this important and growing area of shipping and trading.
We have often been asked whether there are many significant differences between English and American maritime law. The answer is that there are surprising few and this particular case, Kingsbury Navigation Ltd. v. Koch Shipping Inc. (The “Sea Dancer”) 14 June 2012 US District Court (SDNY) , may help to explain why. This was an appeal by owners, Kingsbury Navigation, against the arbitration award. The charter party included a New York arbitration clause with disputes to be determined under US law. However the court held that reliance on English judgments in maritime matters by US arbitrators was not unreasonable or, as claimed by the owners, a manifest disregard for US law. The panel majority, there being one dissenting arbitrator, had relied on an earlier US Second Circuit opinion in Senator Linie GMBH & Co. KG v. Sunway Line Inc., 291 F.3d 145, 170 (2d Cir. 2002) that “in matters of commercial law our decisions should conform to the English decisions, in the absence of some rule of public policy which would forbid” and “reaffirm our earlier decisions in recognizing the importance of international uniformity in the laws governing maritime trade.
Briefly, the facts of the dispute between Kingsbury Navigation and Koch Shipping were as follows. Due to a far longer than anticipated delay before Koch discharged the cargo, the owners had lost an exceptionally lucrative next fixture. The charterers had paid USD 827,117 in demurrage, detention and interest, but the owners alleged that they had also suffered a financial loss as a result of the charterers’ deliberate use of the vessel as floating storage in breach of the terms of the charter party. They claimed a further USD 2,025,639 in lost profit stemming from the cancellation of the follow-on fixture. The panel majority had accepted that Koch had detained the vessel so that they could more profitably market the cargo. However, it did not accept that the owners were entitled to their claimed loss of profit.
The arbitrators considered that the losses failed the forseeability test which had first been accepted in the English courts in Hadley v. Baxendale, 9 Exch. 341 (1854). This case, which has certainly stood the test of time, established that “only losses reasonably within the contemplation of the parties or foreseeable at the time the agreement was entered into may be recovered”. The arbitrators recognised this case as “the guiding light under both English and American law in determining what damages may be recovered in the case of breach of charter”. The majority panel further relied on the more recent English case of Transfield Shipping Inc. v. Mercator Shipping Inc. (“The Achilleas”)  2 Lloyd’s Rep 275 and  1 AC 61 that “extreme rate volatility... is an unusual occurrence and may be considered as not within the contemplation of the parties at the time of contracting.” The arbitrators concluded that Kingsbury had fixed the lucrative follow-on charter at the top of a volatile market with “tight and inflexible” laydays “before it could be certain of Koch’s discharge schedule.”
The judge in the US District Court concluded “that the loss of profit suffered by Kingsbury were not the type of damages that could reasonably have been contemplated by the parties.” The judge was satisfied that the arbitrators had not exceeded their authority by relying on English case law and confirmed the majority panel’s arbitration award in favour of the charterers.
We covered the High Court judgment in the case of Carboex SA v. Louis Dreyfus Commodities Suisse SA  EWHC 1165 in News Update No. 47. This case related to four vessels chartered under an amended American Welsh Coal Charter form which were delayed in discharging coal at Ferrol in north-west Spain due to the effects of a strike. It is a useful example of how the courts interpret the wording of an exception clause. The ship owners’ appeal against the High Court decision has now been dismissed by the Court of Appeal in Carboex SA v. Louis Dreyfus Commodities Suisse SA  EWCA Civ 838.
Clause 9 of the charter provided "in case of strikes, lockouts, civil commotions... beyond the control of the Charterers which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage, "The Court considered that “such time” referred to time lost provided the strike was the primary cause of the delay. Lord Justice Moore-Blick handed down the Court of Appeal judgment, concluding, “Accordingly, if and to the extent that Carboex can establish that the strike at Ferrol was the effective cause of delay to the discharge of any of the vessels, the time lost will not count against laytime. Whether the strike was the effective cause of delay is a question of fact. The closer the vessel was to the head of the queue when the strike broke out, the easier it is likely to be to establish the causal link, but each case will turn on its own facts. Nonetheless, one cannot exclude in principle the possibility that the necessary causal connection may be established, even in relation to vessels arriving after the strike has ended.” This judgment relied on a number of previous cases stretching back to Leonis Steamship Co. Ltd v. Joseph Rank Ltd (No.2) (1908) 13 Com. Cas. 295.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
Vessels sometimes breakdown whilst performing charters and we are often asked for advice. Generally, time will not count for charterers when a breakdown occurs because there will be a clause in the charter party that expressly states this. Irrespective of what the charter states, time may not run in any event under the general principle that the loss of time caused by the fault of the shipowner does not count. There are limits to the application of this principle and it cannot be used simply to deduct all time lost by a breakdown. One of the most significant limiters is that the delay and the cause of the delay must occur at the same time. The principle only applies when the vessel breaks down on laytime or demurrage.
A breakdown during a voyage that causes delay at the discharge port because of arrival out of schedule is not covered by this principle and demurrage must be paid for additional waiting time. A separate claim for damages might be a possibility.
When the vessel is on laytime or demurrage, time lost because of the breakdown will not count if the charterers are unable to make use of the vessel. For example, if a winch breaks down the vessel may have to go to a repair anchorage. All the time away from a berthing queue would not count because the owners were in breach of the fundamental obligation to make the vessel available for the service required from the vessel. It was required to wait for its berth and it could not.
We were recently asked to advise on a vessel which broke down, was sent for repairs and then returned to the waiting anchorage. A berth was available when the vessel returned to the anchorage but it had to wait for the morning tide. The charterers were reluctant to pay demurrage for additional loss of time waiting for the tide which only happened because the vessel had broken down. If it had not broken down, it would have been discharging. Nevertheless, the owners’ stance was that as soon as the vessel was repaired and back in position waiting to berth, time counted because the immediate cause of the delay was the tide. The previous delay caused by the breakdown was not the direct cause of the delay awaiting the tide and had no relevance.
The owners’ approach is correct. Waiting for a tide was not an exception under the terms of the charter party and therefore owners could claim demurrage. Charterers would only be able to challenge the demurrage if they were able to show that owners were in breach of the charter by failing to maintain the winches properly. They could then claim back the additional time waiting for the tide as damages. The obligation to pay demurrage and then claim it back as damages places the charterer at a disadvantage. Furthermore, it is difficult to establish whether a breakdown was a breach of the obligation to maintain the vessel. Express clauses which clearly state that all time lost directly and as a consequence of a breakdown does not count as laytime or time on demurrage are increasingly common.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
We recently assisted a charterer who denied an owner’s claim for demurrage because the owner did not provide an estimate of the claim within 60 days of discharge. The time bar clause required the owners to submit their claim for demurrage in writing with supporting documents within 90 days after completion of the voyage. The owners were also required to notify the charterers within 60 days after completion of discharge “if demurrage… has been incurred with estimated amount. Charterers shall not be liable for any claim arising as a result of failure to comply with this clause”. The owners had informed charterers within 60 days that there was a claim but had failed to provide an estimate. They had submitted the documented claim with 90 days.
The owners firstly argued that the clause was unclear. The Tribunal decided that the clause was clear in its reference as to what must be done within 60 days and the consequences that would follow if there were a failure to comply with it. The Tribunal decided that this obligation was neither ambiguous nor unclear.
The owners therefore tried to rely on their message notifying charterers of a claim and submitted that it satisfied the 60-day requirement for an estimate. They argued that the mere fact that a notice was given meant there was a claim for demurrage of at least US$1 and this was sufficient to provide the estimate required by the clause. The Tribunal held that it was well established that an estimate (such as an “ETA”) must be given honestly and upon reasonable grounds. Clearly, the absence of any figure by way of an estimate could not possibly satisfy this test. Even if it could be said that the claim was at least US$1, this could not be said to be a reasonable estimate. The consequence was that the owners did not comply with the clause because they gave no estimate at all in their message.
Finally, the owners argued that the charterers lost their right to rely on the clause because they did not tell the owners that they wanted an estimate when they were notified that there was a claim. The Tribunal held that the clause placed an obligation upon the owners and did not place any obligation on the charterers and that it was not their responsibility to ask for an estimate or to remind the owners what they must do to comply with the requirements of the clause. The Tribunal did not accept that the charterers, by saying nothing, had somehow waived their rights. The Tribunal held that the claim was time-barred.