Arbitration- Hire deductions for Pilotage fees

Summary prepared by Prokopios Krikris, FCIArb, Arbitrator

Disputes concerning pilotage fees have been the subject of determinations in both London and New York arbitrations. A number of these cases are referenced below:

1.    Cost for North Sea Pilotage

Charterers deducted USD 2,878.08 from the hire for North Sea Pilotage fees, asserting that Charterers were only required to pay for “compulsory” pilotage. However, the charter party plainly and without qualification allocated the cost of pilotage to the Charterer. No restrictive or qualifying language lessens Charterers’ responsibility to pay for all pilotage that the Master considered necessary or advisable. The Panel awarded $2,787.08.

The Clause cited was “ 2. That whilst on hire the Charterers shall provide and pay for all of the fuel except as otherwise agreed, Port Charges, boatage on Charterers' business, Pilotages, ...”

SMA 2043

2.    Cost for Several pilotage and related expenses in Northern Europe

The Master requested and obtained pilots on several occasions for trips in the North Sea and Baltic. The amounts in question were not disputed. The Charterer argued that these charges were not customary for vessels of this type and supported its position with letters from agents and the Danish Government, showing that only a small minority of such vessels utilised this type of pilotage. Therefore, such expenses should be for the Owner's account under Clause 2.  Moreover, the Owner had failed to furnish convincing evidence to support its contention that such pilotage was customary and therefore properly chargeable to the Charterer.

The Panel found that these pilotages and related expenses were of a non-customary nature and, therefore, were for the Owner's account. The Vessel should have obtained Charterer's approval before employing pilots that the Owner intended to be for Charterer's account.

The difference of this case from the above SMA 2043 was that Clause 2 included qualifying words: Charterers shall pay for “Customary” pilotages.

SMA 2189

3.    Pilotage costs with Atlantic Pilotage Authority and Laurentian Pilotage Authority

The Pilotage invoices, which the Owner was obligated to pay when the Charterer defaulted, were properly reimbursable, and the Panel awarded $7,740.68 for payment by Owner to the Atlantic Pilotage Authority and $11,144.71 for payment to the Laurentian Pilotage Authority.

SMA 2039

4.    Dardanelles Pilotage fees “compulsory”

Clause 2 of the NYPE 1946 was amended to include “compulsory” pilotage. Owners stated that although not compulsory, any prudent master would use a pilot in the straits, citing a Guide to Port Entry as a recommendation, which stated that pilotage was advisable for this area. They also cited other reasons to take pilotage in this area, to make a case that the word” compulsory” should not be given a narrow meaning. The tribunal rejected the Owners’ position and held that the addition of the word “compulsory” under clause 2 was to cut down the charterers’ obligations; this was also the effect of giving the word its natural meaning. The Owners were liable for these fees.

London Arbitration 10/86

Editor’s comment: The recurring disputes concerning the cost of pilotage services gave rise to the development of Clause 2 of the NYPE 1946, which has since undergone several amendments to incorporate specific qualifications. BIMCO has, in the past, issued a circular advising its members to refrain from using clauses that refer to “customary” pilotage. In a reported case summary, the umpire ruled that the charterer was liable for the cost of the North Sea Pilot under the unamended Clause 2 of the NYPE. Both parties sought to rely on the implied qualification of the term “reasonable”; however, the umpire dismissed this line of argument as an unproductive controversy, noting that the express wording of Clause 2 was determinative. It is not uncommon to exercise caution in implying terms, unless the proposed implication satisfies the established legal tests, for which there is now ample guidance from higher courts.