Issue 52


There have been three court hearing for this case, two of which we have previously reported. As these are somewhat confusing, here is a summary which may be helpful:

  1. The first hearing, KG Bominflot Bunkergesellschaft Fur Mineralole mbh & Co KG v. Petroplus Marketing AG (The "Mercini Lady") [2009] EWHC 1088 (Comm) involved the trial of two preliminary issues. The first issue was whether an FOB seller had any obligation to ensure that product remained on specification for the duration of the voyage. The answer given by the judge was "yes". The second issue was whether the sale contract, which included Petroplus GTC's, excluded the 1979 Sale of Goods Act implied term that goods sold should be of "satisfactory quality". The judge's answer was "no".
  2. This was appealed to the Court of Appeal, "Mercini Lady"[2010] EWCA 1145, which effectively reversed the judge's finding on the first issue but not the second. The C of A held that where there was a provision for a final and binding determination, there could be no room for any continuing warranty as to quality. However, the Court also said that if the product was not stable at the time of shipment, such that it would be bound to deteriorate, the seller could still be liable if the product did deteriorate between load port and discharge port. This does depend on the "satisfactory quality" condition implied by the Sale of Goods Act not being excluded in the sales contract.
  3. The third outing was to the High Court without Petroplus being present as the company had already gone into liquidation, KG Bominflot v. Petroplus Marketing AG (The "Mercini Lady") (No 2) EWHC 3009 (Comm). At this hearing Bominflot adduced expert evidence to the effect that the product was indeed unstable on loading and therefore, even though it was on specification on all the usual parameters, it was bound to deteriorate quickly and was therefore not of satisfactory quality. The judge agreed and held that Petroplus was in breach of contract. The difference in value between sound and unsound gasoil was determined as being USD 2.1 million. Petroplus was also held liable for USD 649,350 in additional freight costs, USD 374,386 in demurrage and USD 110,000 inspection, testing and broker's commission.

We are grateful for Jeremy Davies, Senior Partner at Holman Fenwick Willan, Geneva Branch, for his assistance in clarifying the various issues involved in these cases.


We observed in Newsletter No. 44 that arbitrators had taken a strict line when dealing with emailed NOR's. As the charter party had not specifically allowed emails, copies of emailed NOR's were not valid as supporting documents. Copies of the NOR certificates should have been presented.

The majority of the arbitrators in a recent dispute took a different view but they were overruled in the recent case of Trafigura Beheer BV v. Ravennavi SpA (The "Port Russel") [2013] EWHC 490 (Comm) . The charter party was BPVOY3 which says in clause 19(a), "Such Notice of Readiness may be given either by letter, facsimile transmission, telegram, telex, radio or telephone..."

The arbitrators had determined that emailed NOR's were contractually permissible on the grounds that the drafters of BPVOY3 in 1990 had listed all the then available methods of communicating NOR's and would certainly have included emails if they had been available at that time. They took the view that the list of methods was therefore not exhaustive and that just because emailing NOR's was not mentioned in cl.19 it did not mean that they were not acceptable.

The judge in the High Court took the opposite view and allowed the appeal by the charterers. He said that the language in cl.19(a) was prescriptive and clearly defined the various ways in which the NOR could be given. The word "may" defined what was permissible. The clause listed six methods of tendering notice. There would be little point in enumerating six different methods of communication if any method of giving notice was permissible. The judge observed that the c/p had been amended to allow demurrage claims to be presented by email. Clause 19(a) could have been similarly amended.


We have had to deal with a number of issues relating to the cost of Additional War Risk premiums as well as the cost of Kidnap & Ransom Insurance and additional guards. Disputes over what costs should be paid and when the additional insurance should begin and end usually arise from the loose drafting of the additional clauses incorporated into charter parties. However, the owners are normally able to recover most of their costs. This was not the case in London Arbitration 4/13 871 LMLN 2.

The owners relied primarily on the Bimco Piracy Clause for Time Charter Parties 2009 which states "(d) Costs... (iii) If the underwriters of the Owners' insurances require additional premiums or additional insurance cover is necessary because the Vessel proceeds to or through an Area exposed to risk of Piracy, then such additional insurance cost shall be reimbursed by Charterers to the Owners." The owners said that the additional insurance for kidnap and ransom and for loss of hire was additional insurance cover which had been necessary in the circumstances .The vessel had traversed the Gulf of Aden where there was a genuine risk of piracy. They further relied on the terms of the mortgage on the vessel under which they were obliged to keep it insured against "usual marine risks" and according to their insurance brokers the additional insurance cover was for the usual marine risk in a piracy area and was necessary.

The arbitrators decided otherwise. They held that although the insurance may have been entirely reasonable from the owners' and the mortgagees' point of view, this did not make it "necessary" in the ordinary meaning of the word. The tribunal considered that "necessary" implied an element of obligation or inevitability. The fact that insurance may have been desirable or reasonable because it was required by the vessel's underwriters or mortgagees was not sufficient to make it necessary.

Whether one agrees or disagrees with the arbitrators' award, it is clear that the wording of clauses for Additional War Risk, K & R and other related insurance and costs need to be reviewed carefully to ensure they accurately cover the intentions of both owners and charterers.


Article provided by Phil Stalley, Demurrage Consultant

In March I wrote a blog ( about the changes to the pumping clause in ExxonMobil VOY2012 where, in an interesting move, the pumping clause has been changed so that it is now incumbent on Owners to maintain 100 psi at the manifold. The 'or' part of the clause, the requirement to discharge within 24 hours, has been dropped.

Even today the mechanics of pumping is poorly understood and I feel that this clause in the wrong hands could lead to a lot more pumping disputes in the future. How will charterers respond when the vessel discharges in double quick time but makes very little back pressure because the shore facilities are very good, for example where there are large diameter shorelines over a short distance?

With a conventional 24 hour/100 psi clause I still hear of issues like the request to deduct two hours stripping after a bulk discharge where the vessel maintained 100 PSI. When will people understand that the last one or two tanks will need to be stripped when the bulk of the cargo has been discharged? It is impossible to maintain the pressure for the last part of the discharge.

Dropping the 24 hour requirement means that every discharge will need to be looked at when the pressure falls below 100psi. I am reminded of my time at BP when every discharge was assessed by a technical team. In BEEPEEVOY2 83 clause 15 the rating of the pumps was assessed alongside the facilities provided by the shore. The move to 24hours/100psi in BEEPEEVOY3 cut down the work considerably.

Pumping disputes reached their peak many years ago and I believe this was caused by a couple of factors. One was the changing nature of the trade. Where once we loaded a VLCC with one or possibly two grades of crude, we were often loading four grades. The old VLCCs were not designed for this kind of operation. This was coupled with the introduction of Crude Oil Washing, which diverted some of the pumping power to drive the COW machines. This coincided with a period of poor freight rates that led to cost cutting and a lower level of maintenance on equipment such as pumps.

A more modern fleet has meant that pumping disputes are much less frequent, but will the poor freight market, which does not appear to be improving, lead to poor maintenance and an increase in pumping disputes? I hope not. Let me know what you think. Add your comments to my blog at – look for "Asdem Newsletters" in the category list on the right hand side.

Tags: awrp-not-recoverable---london-arbitration-413-871-lmln-2


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