The dispute arose under an ASBATANKVOY charter party, wherein the Charterers alleged that the Owners had engaged in the conversion of cargo, specifically by utilising a portion of it as bunkers. This necessitated a detailed analysis of the vessel's fuel consumption during the voyage, as well as an evaluation of the energy efficiency of the engine(s).
The engine logs were thoroughly examined, as is customary in cases involving the analysis of bunker consumption.
As found, given the inaccuracies contained in the logs, which open all log entries to considerable doubt, the ship's cargo figures were unreliable and that the shore figures must control. It became clear at an early point in the arbitration that the logs were inaccurate and that crude oil had entered the engine space and bunker tanks, Owner did not present anyone from the vessel to offer any explanation. In these circumstances, the inaccuracies in the logs could not be overemphasised.
As the court said in The Silver Palm, 94 F.2d 754 (9th Cir. 1938) at p. 762:
“Once you find there has been tampering with a log, as I have had occasion to say before in other cases, the court at once looks with suspicion at the whole matter.”
Fuel consumption
The analysis of the fuel consumption on the voyage was the point under discussion here. That was relevant since considering the bunker consumption at sea with the bunker reserves could identify if the cargo was converted to bunkers. The engine consumption, distance of the voyage, and RPM were considered on each voyage, so the average consumption per day was calculated. Both parties relied on expert evidence to calculate the vessel’s energy requirements.
The primary issue was the total amount of IFO the vessel actually consumed during the voyage. It seemed clear that at approximately 87 or 88 rpm, it required about 7 metric tons per day for auxiliary equipment. The owner took the position that an additional 42 tons would be required to run the main engine at that rpm. The charterer contended that the consumption of the main engine had to be much higher.
In both voyages, independent bunker surveys were used to calculate actual consumption.
According to the Owners’ expert, his calculation was based on the vessel's performance curves published by the engine manufacturer. Based on that, the power developed at 85 RPM was 12800 BHP and specific consumption 154 G/BHP/HR, giving 47.308 MT/ DAY but an allowance must be made for heavy oil use and normal fouling. A reasonable estimate would be 2.5 + 2.5 percent giving an expected consumption of about 49.0 long tons/ day (Forty-nine long tons was equal to about 50 metric tons).
The panel found the above as the most persuasive evidence. Based on this analysis, it dealt only with the main engine and did not encompass any additional fuel required for the auxiliary machinery. It was also clear that this estimate of main engine consumption was very conservative and was based on 85 rpm which was slightly less than the actual rpm of the vessel during the voyage. It only gave a 2 1/2% allowance for the use of heavy fuel. The performance curves were developed using a fuel with calorific value of 10.25 Kcal/kg which was higher than that of the fuel actually consumed during the voyage. Owner's and Charterer's experts used a calorific value of 9.6 or 9.8 Kcal/kg. It was clear, therefore, that the 2 1/2% allowance would not cover the difference in fuels. Moreover, a 2 1/2% allowance for a normal fouling must be considered conservative. Most importantly, no allowance was made in the calculation for the vessel's age. The vessel was almost 10 years old and a 10% increase in fuel consumption based on age alone, could be considered reasonable.
The panel considered the Owners’ evidence and found that the main engine had to consume at least 50 metric tons per day. Another 7 metric tons would be required for the auxiliary machinery. When this total consumption of 57 tons per day (well over 60 tons if an allowance was made for age) was compared with the average consumption of 44 listed in the logs, or even the 47 tons per day based on inventory, it was clear that a large discrepancy existed. Over a voyage of 25 days the discrepancy between the average daily consumption listed in the logs and what the vessel must have consumed was well over 300 tons. Given this discrepancy there can be no doubt that the vessel must have burned cargo to supplement its bunker consumption.
SMA, published in 1986 (M/T TRISUN)
Editor’s Comment: there appears to be no published London Arbitration awards dealing with performance curves. Therefore, seeing how other arbitrators approached this matter in different jurisdictions was interesting. In practice, the points raised in challenging performance curves were largely consistent, with the exception of considerations related to calorific value ( this point was not raised), but even if, it requires expert evidence( a similar observation that can be found on the publications article " vague terms remain in speed and consumption clauses" (f199d9_34c597db0f884a1d925467ec69312357.pdf)
The foregoing highlights several challenges inherent in analyses based on past records or sea trials. Even by applying the cubic law, using the reported bunkers/ speed on each voyage on a diagram, it could be easily observable that there was something wrong with the masters' reported bunkers.
Discrepancies and inaccuracies in the engine logs have raised concerns about their reliability, thereby casting doubt on the validity of the entire dataset. Notably, The Silver Palm has been cited in other SMA awards. Similar cases also demonstrate that engine logs may, in certain instances, be deemed unreliable (this will be discussed in another post).
When available and subject to no dispute, official bunker surveys remain the primary reference point for determining actual consumption ( a usual clause stating the results will be "binding" cannot be ignored; it would also cause double dipping by amending the redelivery bunkers for hire purposes and not the arrival bunkers for performance analysis). On another note, deductive reasoning is frequently employed to establish the accuracy of these surveys, particularly in cases of discrepancies between ships and surveyors' figures. This often involves working backwards to assess daily consumption as a means of validating the survey results ( this was also applied in two unreported arbitrations). A similar approach was adopted here, having the consumption at sea as a common ground based on the surveys, working on whether the vessel’s reported “daily” consumption was in line with the engines’ specifications. It was not. Thus the vessel consumed a portion of the cargo for bunker purposes.