LONDON ARBITRATION 11/24 – DELAYS AFTER COMPLETION OF LOADING AND DELAYS IN GETTING DOCUMENTS ON BOARD
We referred to this arbitration Award in our recent webinar. (link and title).Whilst it is a dry cargo charter dispute, it does raise several issues which can help with our laytime and demurrage analysis in the energy landscape and specifically delays after completion of loading.
THE OWNERS AND CHARTERERS DUTY OF COOPERATION UNDER A VOYAGE CHARTER
Owners and Charterers have a duty to cooperate in the performance of a voyage charter. This duty of cooperation is a common law obligation. It is a duty whichis fundamental. Itunderpins the entire performance of the voyage charter.The essence of the obligation is that each party must do what is necessary on their part so that the voyage can be performed. THE ATLANTIC SUNBEAM (1973).
These duties extend to the bill of lading HALCYON SS. CO. V. CONTINENTAL GRAIN (1943). Duties are to be performed within a commercially reasonable time.
LONDON ARBITRATION 11/24
This dispute involved a claim for demurrage under an AMVOYFORM voyage charter with the following additional clauses
9. TIME COUNTING AT LOAD/DISCH
LOADING
LAYTIME SHALL COMMENCE AT 0800 HRS THE NEXT WORKING DAY AFTER PRESENTATION OF VALID N.O.R., IF NOTICE TENDERED DURING THE OFFICIAL WORKING HOURS OF THE PORT FRI7/MON8 ALWAYS EXCL EIU ...
TIME TO STOP COUNTING UPON COMPLETION OF LOADING
...
CHRTRS HAVE 3 HOURS FREE TIME AFTER COMPLETION OF LOADING FOR SIGNING AND BRINGING CARGO DOCS (INCL PHYTO CERT) ON BOARD. ALL TIME LOST FROM COMPLETION OF LOADING UNTIL CARGO CLEARED FROM THE CUSTOMS AND DOCS BROUGHT ON BOARD (EXCEPT MENTIONED 3 HOURS) TO COUNT IN FULL WITHOUT ANY EXCEPTIONS AND TO BE ADDED TO TIME USED AS LAYTIME
13. DEMURRAGE/DESPATCH
USD 30,000 PDPR/HDLTSBENDS
ONCE ON DEMM ALWAYS ON DEMM CLS TO APPLY BENDS".
Loading commenced on a Friday afternoon. It was completed at 21:40 on Saturday 29/10. On Sunday 30/10, certain documents came on board. These documents did not include the phytosanitary certificate. This was because there was an issue over the quantity of cargo loaded. This delayed the issue of the bill of lading until 21:00 on 31 October. Until the bill of lading was issued, no phytosanitary certificate could be issued. The phytosanitary certificate was issued and the cargo cleared at 16:40 on 1 November. All the documents did not come on board until 02:10 4/11. The delay in them coming to the vessel was caused by bad weather.
THE DECISION
The Tribunal held that since loading was completed at 21:40 on 29 October, the three-hour period of grace granted to the charterers for the provision of documents expired at 00:40 on 30 October. Therefore, time counted from then until 02:10 on 4 November. Time counted for 121.5 hours. This meant that demurrage was earned for 40.5 hours.
The Tribunal stated that the clause as carefully formulated, and its provisions were ‘clear’. The charterers were held strictly liable for the delay.
COMMENTARY
This Award is a decision on a specific form of clause. There is no discussion of the Masters actions and the fault principle in the report of the award other than to say the Master was not in breach of its obligations. The facts on which this comment is based are not available.
2
USING A GANGWAY AS A DATA POINT FOR STARTING LAYTIME OR TIME ON DEMURRAGE
The modern form voyage charterparties use the expression ‘gangway down’ or ‘gangway in place’ to create a contractual data point for the start of time. The Asdem Advisory has on several recent occasions been asked its opinion on which gangway is being referred to by these clauses.
A reference to ‘gangway down’ is a reference to the ship’s gangway. Gangway down in the Statement of Facts signals the end of the operation of lowering it. See EXXONMOBILVOY 2012 Clause 13 (a).
POINT TO NOTE: SOLAS regulations apply.
We have seen parties argue that a reference to gangway in place could be a refence to the ship’s gangway or a shore gangway or both because either can be put ‘in place’ for the access to or from the ship. In the standard form oil voyage charters used day to day, this is a reference to the ship’s gangway (See BPVOY 4/5).
We are aware that some charterers will argue that if a shore gangway is used, this creates the data point from which time counts. This is not correct. It is only when the ship’s gangway is used that it creates this data point under these charters. If the ship’s gangway is not used, this data point is not created. Time counts at All Fast/securely moored. There are compelling commercial reasons for this conclusion from the nature of a voyage charter.
COMMENTARY POINT TO NOTE: SHELLVOY standard form charters and ASBATANKVOY do not make any reference to gangway down or in place.
3
LONDON ARBITRATIONS 1/25, 2/25 and 3/25
In 2024, we saw only three reported arbitration awards of direct relevance to the oil and gas laytime and demurrage landscape. Less than 10 days into the new year 2025, we have 3 awards to report on albeit under the same voyage charter.
These 3 arbitrations concerned claims under a dry voyage charter on the GENCON 1994 form. The vessel concerned was time chartered in to perform the voyage. The time charterers as disponent owners (Owners) of the vessel fixed it to Charterers for a voyage carrying pet coke from Gulf port to India. The Charterers entered a sub voyage charter.
A feature of this charter was the obligation to pay freight upon the fixture being concluded. The Charterers made payment on 10 May. Freight was paid seven days before the vessel reached the load port. The vessel duly proceeded to the load port and tendered its NOR on 18 May. There was no cargo available when the vessel arrived. Ther vessel went on to demurrage on 22 May. Owners repeatedly asked for the charterers to demonstrate that they had a cargo to load but no news was forthcoming. Almost a month later, a cargo had still not been provided by the charterers. They did, however, pay US$ 57,208.59 on account of demurrage on 12 June. The vessel continued to wait. Further demands for demurrage were not met but passed on to sub charterers. The Owners redelivered the vessel under the time charter to its head owners on 26 June. Negotiations over performance with a substitute vessel broke down and on 5 September the charter was formally terminated because of the failure to provide a cargo. The charterers sought to join their sub charterers arguing that the sub voyage charter was a collateral contract. This failed (London Arbitration 1/25).
The owners presented four claims, balance freight, demurrage, time charter hire and damages. These claims were the subject matter of London Arbitration 2/25.
ARBITRATION 2/25
THE CLAIM FOR DEMURRAGE
As far as the claim for demurrage was concerned, the Charterers argued that the Owners had failed in their duty to mitigate the amount of demurrage claimed. The Tribunal said that there was no room for such an argument. The vessel had not simply sat earning demurrage because the owners redelivered it and claimed demurrage only until redelivery. The issue did not arise.
THE CLAIM FOR CHARTER HIRE AS DAMAGES
The Tribunal rejected this claim for damages in addition to demurrage as it would amount to double compensation and was rejected. There was no discussion of The Eternal Bliss (2021) principles in the report of the Award.
Calculation and quantification of claims for freight, demurrage and damages were the subject of Arbitration 3/25
ARBITRATION 3/25
The Owners were awarded:
Damages for breach of charter. This breach was the failure to provide a cargo. Damages were calculated by the Arbitrator as the net loss of profits.
Demurrage.
This was net demurrage, taking account of payments on account address i.e. commissions and brokerage.
An indemnity
US$ 20,000 that had to be paid to Owners under the time charterarising from Charterer’s breach of the Head Voyage Charterparty. It appears this was awarded because the payment was on the balance of probability made to owners.
COMMENTARY
This arbitration reveals the commercial shipping structures that the oil and gas industry uses. There is an interplay between the Time and Voyage charter forms. An interesting aspect to note about this arbitration is the industry resorting to dry cargo form voyage charters for the transportation of the end product of the physical refinery processes in the Gulf ports region to refineries in India.
ASDEM WEBINAR - NOW AVAILABLE FOR VIEWING
COMPLETION OF LOADING AND THE END OF LAYTIME
OR TIME ON DEMURRAGE
Delays after completion of cargo operations and delays after disconnection of hoses
If you would like access to this webinar presentation, please contact us at
info@asdem.com
(Please specify if you would like to view the video presentation or listen to the audio only version)