Arbitration- Vessel’s Fuel Overconsumption in Port

When the Vessel was redelivered, the head Time Charterers deducted USD 138,757.58 from the Owners. This amount corresponded to the sum that the sub-Charterers had previously deducted from the head Charterers, citing excess fuel consumption during two port stays at Hampton Roads.

There were no charter party warranties as to “in port” fuel consumption. Sub-Charterers conducted two surveys and studies of the Vessel during the period with two different surveyors. Reports based upon those surveys were presented to Owners complaining about the alleged port over-consumption.   Coast Guard regulations required vessels at anchor in this busy port area to keep their main engine at standby status because of the exposed weather conditions prevailing and crowded traffic lanes and anchoring grounds. Such standby status necessitates that the main engine be kept warm.

The Sub-Charterers complained that the Owners failed to operate the vessel in a prudent and cost-efficient manner during these anchorage periods. They also readily admitted that no contract clause exists that warrants or limits specific consumptions in these circumstances, nor provides any form of remedy for these occasions.

Sub-Charterers relied, therefore, upon the general premise (quite thoroughly supported by the panel) that parties to a contract owe a basic duty to each other of reasonable and economic performance, especially by Owners when they are using Charterer's fuel.

They claimed that, rather than operating the diesel generators, the Owners deliberately used the more costly boilers and steam-driven turbo generators for electrical supply and steam-operated freshwater generators in port to save money for themselves and saddle the Sub-Charterers with these costs.

Owners argued that the U.S. Coast Guard regulations required the Vessel to maintain the main engine on a standby status. According to the design and normal functioning of this vessel, which could only be accomplished by heating the main engine with its cooling water, which could only be done by steam heat.

As the panel held, the charter party does not contain any warranty prescribing limits on other than maneuvering and steaming fuel consumption, nor a remedy for excess in-port fuel consumption. Under similar cases, other arbitral panels have judged each case on its own merits and awarded what was reasonable in the circumstances.

While Sub-Charterers speculated that Owners chose to operate the Vessel in a manner to their own best interests, Owners cited regulatory and technical reasons for the particular operations.

Charterers take the vessel as it is within the parameters and specifications they negotiated. They do not have the right to require the vessel to be redesigned or re-built to meet some specs they would have preferred to see incorporated in the hull and machinery. In the event such an option was desirable for Sub-Charterers' purposes, the time to voice this was before the contract was consummated, not after some of the normal functions of the vessel are found to be somewhat different from some other vessel.

Having regard to all the factors in this matter, the panel Majority found the Sub- Charterers claim unreasonable and without merit.

Editor’s Note: The panel reviewed the facts rather than dismissing the claim for lack of warranty. Excess bunker claims often arise at anchorages (see, e.g., Chittagong), where the main engine may be used, but such use and related consumption are not automatically justified. Off-hire bunker surveys have sometimes shown gaps between reported and actual standby consumption (Charterers asserting a breach of clause 11 of the NYPE). A similar issue can occur in transit when higher RPMs are maintained despite reported bad weather—would a tribunal reach the same view i.e. "other arbitral panels have judged each case on its own merits and awarded what was reasonable in the circumstances"?

SMA 2331