Considerable care should be taken when drafting interim port clauses. This was highlighted by the dispute in the London Arbitration 6/12 858 LMLN 4. Although this was an amended Gencon form charter party for the carriage of a cargo of frozen chickens, as is so often the case, it is the principle which is important rather than the commodity.
The owners had argued that the relevant clause meant that all time at the port counted against the charterers. The charterers disagreed and claimed that the exceptions to laytime and demurrage which applied to the first discharge port also applied to the second port.
The arbitrators concluded that their decision depended on the interpretation of additional clause 46. This clause stated: "Charterers have the option to discharge 2nd port in the Med/Black Sea; if Charterers use this option, then time at 2nd port to count from APS [arrival at pilot station] to DOP [dropping outward pilot], and the extra cost calculated basis time at the demurrage rate plus extra fuel on the main engine, also the port costs at 2nd discharge port to be for Charterers' account".
The arbitrators decided that the natural meaning of the wording was that time ran uninterrupted from APS to DOP. They accepted that the clause would have been clearer if it had said "all time" or "without interruption". However, if the charterers had wanted to ensure they still had the benefit of the exceptions to laytime and demurrage, they could easily have included a reference to clause 21 of the charter which covered these terms.
In the very recent case of Falkonera Shipping Company v. Arcadia Energy Pte Ltd. [2012] EWHC 3678 (Comm), the ship owners' contention that industry regulations prohibited ship-to-ship transfers between VLCC' was rejected in the High Court.
The owners, represented by Embiricos Shipbrokers Ltd., had rejected the charterers' request to carry out STS transfers at Pasir Gudang, Malaysia, between their vessel, the 265,000 dwt M/T "Falkonera", and the 297,000 dwt M/T "Front Queen" and the 275,000 dwt M/T "Front Ace". The owners' argument was that the Oil Companies International Marine Forum (OCIMF) guidelines for STS transfers did not include a procedure for VLCC to VLCC transfers. They argued that the mooring together of two such large vessels of a similar length would produce technically issues which made the practice potentially unsafe. It was not a normal procedure which was why it had not been covered by OCIMF.
The charterers relied on the terms of the charter party, namely clause 8.1 of BPVOY4, which gave them the option to discharge all or part of the cargo to another vessel and also to the specific additional "STS lightering clause" which said that "all tankers and or lightering barges to be used in the transhipment/lightering shall be subject to prior approval of owners, which not to be unreasonably withheld...".
The additional clause and indeed, clause 8.1 of BPVOY4 stated that "all ship-to-ship operations shall be conducted in accordance with the recommendations set out in the latest edition of the ics/ocimf ship-to-ship transfer guide (petroleum)".
The charterers' experts claimed that VLCC to VLCC transfers was a common practice which had been performed by major oil companies around the world without any adverse consequences. The owners of the Falkonera had also rejected a letter of indemnity offered by the charterers to cover any damage to the vessel which might be caused if the transfer went wrong.
The judge found that Falkonera Shipping was in breach of the charter and had acted unreasonably in withholding approval for the STS transfer. Such transfers were not prohibited by the OCIMF guide although there was not a specific section in the guidelines for transfers between VLCC's.
There might have been serious implications for the oil industry, had the judgment gone the other way.
Article provided by Phil Stalley, Demurrage Consultant
I am often asked what remedy an Owner has if a vessel is delayed at a load or discharge port after hoses have been disconnected. It is common knowledge that most charter parties cover delays in providing documentation at the load port by re-starting time after a delay of two or three hours and finally ending time when documentation is completed. Each charter party says something slightly different so you need to be careful about the wording.
A frequent question that comes up is where a vessel is prevented from sailing because of bad weather and I was alerted to a case where there had been a delay of four days bad weather. Unfortunately laytime and/or demurrage ends at the time that hoses have been disconnected or documents have been delivered so there is not much an owner can do in this case. These delays are considered to be at the risk of the Owner, along with similar delays such as awaiting daylight, tide, tugs or pilots.
What about detention? The delays mentioned above cannot be considered to be detention but where a vessel has been delayed by charterers, the owners may have a case for claiming the time as detention. An example of this may be where the Charterer has not sold the cargo and asks the vessel to remain in port for further instructions. If the port authority detains the vessel for any reason, such a delay is unlikely to qualify as a claim for detention against the charterers.
Is it an unsafe berth/port? If a vessel cannot sail for four days because of bad weather does this make it an unsafe berth or port? If it were proven to be an unsafe port, the owners might be able to claim damages from charterers. It is very difficult to prove that a port is unsafe as a result of weather and it normally takes a lot more than weather conditions to convince a court that a port is unsafe.
In conclusion, most delays after hoses have been disconnected, apart from cargo documents, are at the Owners' risk. If you have any views or comments to make on this article please go to my blog at www.hubse.com and select "Asdem Newsletters" from the "Live Discussions" menu.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
A fundamental condition for the start of laytime is that the ship must reach the port or berth where it has been agreed in the charter party that the vessel can tender NOR. Once the ship reaches this point, it is known as an "Arrived Ship".
After years of uncertainty, the House of Lords in The "Johanna Oldendorff" [1973] 2 Lloyd's Rep 285 established the definitive test (named the "Reid Test" after Lord Reid) for an Arrived Ship in a port charter: Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached the customary position within the port where she is at the immediate and effective disposition of the charterer. A vessel is presumed to be effectively at the disposal of the charterer when it is at a place where ships usually wait for a berth at that port. If the vessel is waiting elsewhere in the port, the ship owner must prove that it is equally at the effective disposal of the charterer.
The Reid Test continues to apply today. However, when ships are sent by the port authority, coast guards etc to designated waiting areas outside the port – such as the safe waiting area outside the port of Lagos, the South West Pass for ports on the Mississippi or the Wesser Light for ports such as Brake on the River Wesser, owners may incorrectly claim that the ship has arrived because the ship has been ordered to these customary waiting areas. Confusion can be avoided by keeping in mind that there are two different principles recognised by the English Courts, (a) commercial and (b) legal.
The first principle is the commercial concept of Arrival. A ship "Arrives" when it is physically inside the port or is just outside or "off the port", e.g. waiting at an outer anchorage. The courts created the concept of arrival in the commercial sense because certain obligations take effect upon arrival at or off the port, such as the obligation to nominate a berth that is "reachable upon arrival" under an Asbatankvoy charter party. Charter party additional clauses written for certain ports may permit the Master to tender a valid NOR when the vessel reaches a particular place outside the port such as, for example, The Wesser Light Clause and the Chinese River Ports clause.
The second principle is that, under a port charter, to be an "Arrived Ship" in the legal sense the ship must have arrived within the official limits of the port. A ship that "arrives" in the commercial sense, but is not inside the port, is not an Arrived Ship. In The "Johanna Oldendorff" [1973] and The "Maratha Envoy" [1977] 2 Lloyd's Rep 301 the courts did not accept there would a difficulty defining the area of the port.
In the "Maratha Envoy", the owners unsuccessfully attempted to widen the guidelines set out in the "Johanna Oldendorff" case so that a vessel anchored in the usual waiting place would always be considered an arrived ship under a port charter, whether the waiting place was inside or outside port limits. This approach was firmly rejected by the House of Lords.
The certainty that the Reid Test provides is that the vessel must be within port limits to be an Arrived Ship under a port charter. We are aware of two arbitrations that have reached decisions to the contrary; these appear to be wrongly decided.
Article from Andrew Wilding - Managing Director, Asdem Asia Pte. Ltd.
A recent example of the scope of an exception to laytime in a "mechanical breakdowns" clause was considered in ED&F Man Sugar Ltd v. Unicargo Transport Gesellschaft mbH (The "Ladytramp") [2012] EWHC 2879 (Comm).
A fire occurred at the terminal that was to be used by the charterers to load the cargo. The charterers tried to rely on an exception to laytime for "mechanical breakdowns at the mechanical loading plant". The clause made no mention of "fires". The court concluded that fire had destroyed the conveyor belt system linking the terminal to the warehouse used to discharge the cargo and held that the destruction or even the partial destruction of the loading system was not a "breakdown" or a "mechanical breakdown".
The judge referred to Olbena SA v. Psara Maritime Inc. The "Thanassis A" LMLN 68 (1982), in which the court stated that "breakdown of machinery and equipment cannot, even with the most generous of constructions, be regarded as the same as a complete destruction of part of the facility". In its judgment, the court made clear that there is significant distinction between clauses that refer only to "breakdown" and those that refer to "mechanical breakdowns". A mechanical breakdown requires the cause of the loading plant ceasing to function or malfunction to be mechanical. Without the word "mechanical" the cause of a breakdown is immaterial, it could be some external cause or an internal defect. If the machinery does not function or malfunctions, then there is a "breakdown of machinery".