Arbitration- Clause 2 NYPE and Suez Canal Tug Cost

Summary prepared by Prokopios Krikris, FCIArb, Arbitrator

In this LMAA arbitration, one of the issues in dispute concerned the cost of a stand-by tug at the Suez Canal. The vessel was unable to pick up one of the mooring boats and, as a general rule, transit was not permitted unless the vessel was escorted by a tug for safety reasons. The Charterers argued that the cost of the tug did not fall within the scope of clause 2 of the NYPE form, as it did not constitute a usual expense.

The Charterers’ defence was based primarily on the contention that the Owners had failed to deliver the vessel in an efficient condition and properly fitted for the service. Furthermore, the Owners had warranted that the vessel would comply with the requirements of the Suez Canal and that its equipment would remain in proper working order.

The Owners, on the other hand, sought to transfer liability to the Charterers, asserting that the difficulty did not arise from the crane’s lifting capacity but rather from the slings provided for the mooring boats, which could not pass over the vessel’s rails without modification. On that basis, the Owners held the Charterers liable for all port and canal expenses pursuant to clause 2 of the charterparty.

Both parties relied upon documentary evidence, requiring the tribunal to undertake a detailed examination of the material submitted. However, neither party produced direct evidence of the events at the Suez Canal. [Editor’s note: the parties relied on survey reports and a volume of documents that would likely exceed the ambit of the SCP].

The tribunal ultimately held that the vessel did not comply with the Suez Canal Rules of Navigation and that the Owners were in breach of the charterparty. It further concluded that the cost of the stand-by tug could not be regarded as a usual expense within the meaning of clause 2.

Editor’s Note: The leading textbooks provide a concise analysis of clause 2 of the NYPE form. Reported LMAA awards addressing this issue are limited, as reflected in the decisions published in LMLN ( see e.g. London Arbitration 15/04). Relevant analysis can be found in published SMA awards. No further information can be provided for this award.