Search Results

“..it was trite law that where a charter provided a performance warranty the first step was for the tribunal to establish how the vessel performed in good weather conditions as defined in the charter. If a vessel underperformed by one knot in good weather, it would probably continue to underperform by the same margin in bad weather and charterers should be compensated for that bad weather underperformance as well as the good weather underperformance..” ( London Arbitration 24/19) This post has been slightly amended in the subsequent guidebook: “Speed and Consumption Claims: A practical perspective and statistics”- Please refer there. Speed and Consumption claims continue to be a much-extended area of dispute between owners and charterers, with most cases being resolved amicably or by arbitration as per the charter party terms. Based on extensive experience in handling speed and consumption claims for Owners or Charterers, some of the issues that arise are: Whether the Charterers are allowed to make a deduction from hire either as an express right or as an equitable right: At the end of the charter; During the performance of the charter: Having produced only an interim report; Having produced a non-compliant report with the CP terms. Waiting the final report from the weather routing company; Having not particularized their claim i.e. based on mere assertions. Whether the meaning of the language is open to question. Should a literal or a purposive approach to contractual interpretation be adopted and the threshold required implying terms into the contract. The line between the distinct principles of interpretation and construction discussed. Whether to force the provisions of the charter party into the straitjacket of the concepts of reasonableness and fairness. The touchstone and the limits of commercial common sense considered Whether the terms contain ambiguities, wrong words or syntax – poor quality of drafting; thus raising issues of textual or contextual interpretation, construction or rectification. Deletion of words, Contra Proferentem , and pre-contractual negotiations considered. The admissibility of extrinsic evidence is discussed. Whether the terms of the recap can be reconciled with the terms of the proforma or other documents being incorporated by reference; and the terms that prevail in case of inconsistencies. The maxim “ specialibus generalia non derogant ” considered. Whether the arbitration decisions set a precedent for matters that the Courts have not decided in the efforts to maintain commercial certainty and continuity. Absent precedent, whether the parties can rely on articles published by legal authors or arbitrators in the UK or other countries discussed. Whether the vessel’s performance is warranted: If it is not, i.e.” WOG”, then other potential remedies available are discussed. Authorities, arbitration awards, and principles considered. If it is warranted, then when the warranty applies. Case law was discussed and evidence sought to prove her previous performance. Whether the loss is too trivial and merits no consideration ( De minimis ). Whether proof of actual weather conditions should be taken from the deck logs or the weather routing reports. Whether (i) the findings of the weather routing company are binding the parties; (ii) the weather routing clause provides a complete code to resolve the dispute or oust the arbitration clause; (iii) the arbitration instigated prematurely (damages as a remedy); (iv) there is no ‘dispute’ to be referred under the arbitration clause; and (v) the ingredients of waiver or estoppel established after the nomination of a non-agreed weather routing company, i.e. excluded by the express terms of the CP. Whether the parties should agree to certain instructions to be given to another routing company (when the clause is construed as an expert determination provision) to evaluate performance and the same to be binding. Distinction between binding data and methodology discussed along with authorities of general application. Whether the performance report applied the contractual yardstick by which the vessel’s performance is to be measured. Common issues are: Weather factor; positive and adverse currents; Meaning of adverse influence of swell or currents or weather; Wave height, swell, DSS3 or significant wave height; No Impediments, even keel, deep water, water temperature, bunker quality; Sufficient sample of good weather between noon reports or sample for the whole voyage. Whether the Charterers can bring a claim when the ship encountered only ‘bad weather’ or ‘near good weather’. Other potential remedies discussed. Mixed points of principle and authority considered. Whether the Charterers are allowed to bring a claim for underperformance when the vessel’s hull became fouled. Principles of contract interpretation discussed to determine liability. Legal and evidential burden discussed – expert opinion sought. Whether the master failed to follow Charterers’ orders in relation to the speed & consumption or to prosecute the voyage with utmost despatch. Case law and evidence considered- expert opinion sought. Whether the vessel was unseaworthy; engine or technical issues affecting her performance. Evidential and legal burden considered. Discussion on ‘superficial inspection’, disclosure of documents and onboard surveys. The distinct availed remedies of damages and off-hire considered. Whether the ship is allowed to reduce speed when transiting through high risk areas or passing canals or complying with orders or directions of local authorities. Evidence sought to be adduced and relied on by the parties. Whether the vessel’s underperformance caused by Charterers’ breach to supply the vessel with bunkers of improper quality (off spec). Evidence considered. Whether the ‘minimum performance rule’ in a damages claim applies when Charterers bring their claim under separate breaches of contract. Authorities discussed; evidential and legal burden considered. Whether the Charterers are entitled to request- and the Owners to deny- further disclosure of documents. Application for disclosure before serving submissions. Whether the tribunal can allow this application under the rules. Note: The above list is not exhaustive.

Because this is a perennial problem that results to financial exposure[ii]; one ca n refer to the arbitration awards published betw een 1984-2017 and to the leading law textbooks. Pulling the arb itration decisions and the commentaries together, it requires technical ; op erational; and legal knowledge in order to efficiently handle such claims. The technical & operational experience assists the parties to act pro-actively and to minimize disputes. In particular, Owners satisfy their due diligence or absolute- subject to the de minimis rule- obligations: proper maintenance of pumps- as per PMS & makers’ guidelines- as to sustain a plea of latent defect or possible defence under exception or limitation liability claus es or shif t the evidential burden in the proceedings or to avoid breaching the ISM clause (if incorporated) etc.; and proper operational use of cargo pumps i.e., act with reasonable care and skill to prevent defects or breakdowns that will prolong the discharging operation (accrued demurrage claims). Owners cannot succeed if their actions break the chain of causation and result to loss or delay. Because a party cannot take advantage of its own wrongdoing[iii] While Charterers act in such a manner as not to concurrently produce loss or delay. Doing so, it will complicate their defence & counterclaim submissions on issues of burden – liability and quan tum. Unless there is a clear-cut liability issue (i.e., damaged pumps- patent defects), then the facts will be balanced- in the efforts of doing justice on limited evidence; leaving also Charterers exposed to costs. Therefore, this experience assists a party to increase the prospects of successfully defending its position by shifting the evidential burden in the arbitration proceedings -without ignoring where the distinct legal (or persuasive) burden primarily lies; or increase its bargaining power during the settlement negotiations; therefore reaching to a digestible amount[iv] of settlement. Whereas from a legal perspective, it is important to: Apply the separate rules of ‘two logically distinct exercises’ of contractual construction or interpretation to establish a br each of the express or the implied pumping warranty (time or pressure element or both) and quanti fy the loss or delay (demurrage) ; and Consider the nature of the dispute. Slow pumping disputes continue to be a topic of constant debate because of their fact-sensitive nature. This makes each case readily distinguishable and results to lack of precedent[v]. In a slow pumping claim, owners allege terminal restrictions, and Charterers allege defective pumps or improper use. Any success of the dispute will depend on the quality of evidence. Accord ing ly, it requires (i) expert opinion to establish a causal nexus between breach and loss inflicted by concurrent causes that effectively operate to produce the same- at the risk of becoming highly theoretical or technical; and (ii) factual evidence or expert opinion to discharge the legal burden or shift the evidential burden & rebut any presumptions. But if the scales are evenly balanced, the burden cannot be easily discharged. And some cases –depending on the procedural rules- will be pleaded with conspicuous lack of success given the restricted expert evidence and opinion or admissibility, i.e. what if the opinion is highly speculative or imprecise?- This affects the outcome of the case: it will either encourage the parties to compromise or discourage them from commencing proceedings because of (i) the disproportionate costs to the claim; (ii) the uncertainty on the findings of facts on limited evidence or improbable explanations; or (iii) the prevailing source between conflicting evidence or explanations submitted by the parties–the crux of all factual cases. Further, Owners face another high hurdle, which may potentially encourage settlement before commencing proceedings. This is whether a complex factual issue -or dressed up as a question of law or a mixed question of fact and law- can be: properly pleaded to establish a proper defence (Owners’ reply and Defence to Counterclaim submissions) to an alleged breach of the pumping warranty (Charterers’ Defence & Counterclaim), especially when other issues included in the reference; and properly determined-when it falls under the SCP rules- since the submissions must be kept short and with minimum expert evidence or opinion available. However, it is worth bearing in mind that experienced arbitrators can 1) determine factual points even with limited evidence put before them without requiring “to be spoon-fed with detailed arguments”; or 2) decide the issue “based on the balance of probabilities without having regard to the somewhat technical questions that arose when the burden of p roof had to be considered”. Besides, in t he last century, there has been an abundance of maritime cases proving that Judges support arbitrators’ sound commercial sense and experience to determine questions of fact and law; this has also been codified in Arbitration Act 1996. Conclusion Although there are no published London Arbitration awards dealing with breach of pumping warranties after 2017, this is insufficient to establish a proper benchmark or mark the beginning of a new era absent such disputes. Slow pumping claims will undoubtedly continue to provoke concern in the shipping industry because of their complex factual nature. However, given the risk and costs involved compared to the claimed amount, this may encourage settlement and result in fewer awards in the future; depending on the freight market conditions. This refers to the pumping clause agreed in the tanker charter-parties; which usually provides that the ship will either discharge the cargo in certain time i.e. 24 hours or maintain a certa in pressure i.e. 100 psi or 7.0 kg/cm2. Pumping warranty clauses have changed over the years as evidenced from the various forms of charter-parties or published arbitration awards. Either hard negotiation- compromise or commence arbitration in order to recover accrued demurrage amount. Alghussein v Eton College [1988] 1 WLR 587; as a general principle of construc tion with wider application. Or even possibly making a reasonable WPSATC offer that will determine later o n iss u es of costs, if the case proceeds to arbitration. However, if the amount in dispute is moderate, then a re ason able compromise may be desirable. But, at this stage, the published arbitral decisions form the legal background against which the parties are contracting and same will be helpful to a next tribunal to decide similar points of law (construction of pumping warranties), but probably will be unhelpful to decide pure questions of facts- when raised in slow pumping disputes(evidential burden). Arising out mostly under amended standard forms time charter-parties. #Mustread

40 years published London Maritime Arbitration Awrds (1980-2020)- A Tribute to Maritime Arbitrators Laytime and Demurrage disputes have been the subject of litigation or arbitration for decades. So, legal literature is abundant, along with case law and arbitration awards on this complex topic. From 1980 to 2020, interesting cases have come before London Maritime Tribunals, and their decisions offer helpful guidance on many points that regularly provoke heated debate in the shipping industry. Undoubtedly, the Maritime Arbitrators’ expertise and support remain invaluable to the shipping industry, including their essential function to participate in the rule of law. In less than 55 pages, this snapshot guide cites about 270 awards for bulkers, tankers and sale contracts; it refers to about 840 issues discussed in these decisions. Therefore, the user can easily find whether a case has been already determined by a London Tribunal and consider this award (if needed) when a similar dispute arises. However, any decision should be read together with other decisions on equal points, case law and commentaries in law textbooks. For your reference, most of these decisions refer to disputes that arose under the below amended or standard form of contracts: Bulkers: GENCON, SYNACOMEX,NORGRAIN, etc. Tankers: ASBATANK, SHELLVOY, BPVOY, VEGOIL, EXXONVOY,etc. Sale Contracts: FOB, CIF, etc. I hope that you find this snapshot guide practical and valuable. The awards are published in Lloyd’s Maritime Law Newsletter , Informa Group Ltd

In case of delay before the vessel’s berthing, Owners may argue that they should be compensated based on ‘quantum meruit’ to overcome the usual defences on a damages claim – as usually discussed in similar cases.Compensation by quantum meruit was argued in limited cases: Arb 19/98, Arb 18/17, Arb 12/90, but an extra-contractual service was performed. In the recent London Arbitration 14/21, the Owners’ claim failed *London Arbitration 14/21 can be found on this website https://www.lmln.com/ Lloyd’s maritime law newsletter.

This is a topic of constant debate in the shipping industry. Owners and Charterers agree the mode of freight payment in the Charterparty. However, given the recent reported incidents that fraudsters are intercepting emails ( See K v A [2019] EWHC 1118), Charterers usually request additional information before processing their payments. In a previous arbitration case, the tribunal had to determine “Whether obligation to pay 5 per cent balance of freight conditional on provision of “signed/stamped freight invoice”. Owners claimed for the 5% balance of freight and Charterers said that it was a condition precedent to pay after Owners submit a “signed/stamped freight invoice”. The tribunal considered the fundamental importance of freight payment and said that “such technical arguments were a proposition that required meticulous examination” unless included “words to the effect that the charterers’ liability to pay the balance of freight would only arise provided that the relevant invoice was given to them, or would not arise unless it was given, would be required”. Absent clear provisions then Charterers should be cautious before insisting to add “preconditions” to their payment obligations.

This is an old picture. However, similar weather conditions commonly exist in many trading areas during the winter season. Such weather conditions may affect the laytime or time on demurrage; cause freight/dead-freight claims, and lead the parties to significant disputes. This post merely highlights a previous arbitration decision on the issue of delay caused by frozen ballast water. The rest points will be referred to in another article. In this arbitration decision, the Charterers contended that laytime should not count during a short period of few hours that loading suspended due to frozen ballast. The tribunal rejected the Charterers’ submission; because the Charterers had failed to either bring themselves within the ambit of any exception clause or prove fault on the Owners’ or the ships’ part. So, It requires clear wording to interrupt laytime or time on demurrage when the frozen ballast causes the delay, and it will depend on the evidence available to establish fault on the ship’s part.

The blue line represents the direct route that usually the ships follow for this voyage. In this example, the ship followed the route in the brown line instead of the blue line as to conduct crew changes in Manila. This deviation resulted to time lost and more bunkers being consumed. Similar issues are very common in the shipping industry; especially the last two years due to frequent crew changes given the COVID 19 restrictions. To deal with this issue, the industry has adopted new charter clauses that spell out issues of liability but the there is uncertainty on the methods to calculate the loss; thus leaving exposed the parties to costly disputes. From a practical & a commercial standpoint, this short article (i) considers the complexities to calculate loss; (ii) discusses the various methodologies used to calculate loss; and (iii) highlights the potential difficulties, when using performance models, to assess the theoretical performance on the notional voyage thus arriving at a speculative ‘loss’ figure. O riginal post on maritime-risk-intl.com