Arbitration- Vessel failed 3 hold inspections

Summary prepared by Prokopios Krikris, FCIArb, Arbitrator

The vessel failed three inspections conducted by X Surveyors at the loading port. The Owners, however, produced their own inspection report, which stated that following the initial rejection of the cargo holds, they were cleaned overnight and rendered fit and ready for loading. The Charterers’ primary position was that the vessel was not delivered until the holds passed inspection. In the alternative, they contended that the vessel remained off hire from the time of the first rejection until the holds were subsequently accepted, several days later by several surveyors.

The dispute was referred to a sole arbitrator under the LMAA Small Claims Procedure, appointed by agreement between the parties.

In light of the conflicting evidence presented, the arbitrator was required to determine both the status of the survey company and the evidential weight of the inspection reports. The Charterparty stipulated that the shippers’ officially appointed surveyors were to inspect the holds. The Owners argued that X Surveyors were not the shippers’ formally appointed representatives. They further maintained that the inspection which ultimately led to acceptance of the holds had been carried out by multiple surveyors, each acting on behalf of different shippers under separate Bills of Lading.

The arbitrator adopted a broad interpretation of the term “shipper,” noting that there were multiple shippers involved and that a party could qualify as a shipper of cargo even if it was not expressly named on a Bill of Lading. Despite the Charterers’ various attempts to clarify the position, the arbitrator remained uncertain as to on whose behalf the surveyors had attended the vessel.

In addition, the arbitrator found that the surveyors’ reports were deficient in content, failing to identify the instructing party and recording only that the holds had been rejected due to the presence of cargo residues, without specifying the precise areas of concern.

Ultimately, the Charterers were unable to persuade the arbitrator that, under the terms of the Charterparty, the vessel’s holds were not clean during the period between the Notice of Readiness and the third inspection.

Editor’s note: The arbitrator undertook a careful examination of the evidence. The outcome was highly fact-specific. No further information can be provided for this award.