Arrested development - Dealt with a number of disputes

Arrested development
Canadian arbitration

THIS Canadian arbitration, before a sole arbitrator in Montreal, dealt with a number of disputes under a voyage charter on the NYPE 1946 form covering a cargo shipment from Montreal to Cuba.

A clause in the charter party required the charterer to put the owner in funds for 25 days' hire, plus the estimated cost of bunker consumption, plus ballast bonus, in part prior to the vessel's departure from Montreal, and the balance before its entry into Cuban territorial waters. The clause also provided that any time lost due to delay in payment was to be for charterer's account, and that the vessel was to remain on hire. It noted that the charterer understood that the vessel would not enter Cuban territorial waters until the owner had received notice from the charterer's bank confirming the irrevocable transfer of funds, or the balance of funds in the owner's account.

Although the first instalment had not been received, the owner allowed the vessel to sail from Montreal. By the time the vessel had arrived off Montreal, the charterer had still paid nothing, so the owner instructed the vessel to wait outside territorial waters.

Payment was received after some days, whereupon the vessel proceeded to discharge at Cienfuegos and Santiago. Immediately after completion at Santiago, the vessel was arrested by the charterer as security for various claims against the owner. The owner, for its part, relied on Clause 18 of the NYPE form, which provided, "...charterer to have a lien on the ship for all monies paid in advance and not earned."

It was necessary first to establish the state of accounts between the owner and the charterer at the time of the arrest.

The arbitrator found that the owner was entitled to stop the vessel as and where it did, and had acted reasonably in so doing. There was therefore no interruption of hire. Overall, said the arbitrator, the correct statement of accounts at the time of arrest showed a small balance in favour of the owner. The arrest was therefore improper, and the charterer had to reimburse the owner for its reasonable legal costs in relation to freeing the vessel.

The loss of time caused by the arrest fell to be considered under the offhire clause and, under the NYPE wording, the arrest did not fall within the enumerated events and was not caught by the words 'or by any other cause preventing the full working of the vessel'. The arbitrator added that, even if the word 'whatsoever' had been added, the event causing the loss of time was the charterer's unjustified action, which fell outside the scope of the clause. Accordingly, the vessel remained onhire for the period of the arrest.
(Lloyd's Maritime Law Newsletter)

Off-colour cargo
Fireman's Fund Insurance Company v Stolt Tankers Inc/Stolt Parcel Tankers Inc

THIS arbitration was initiated by Fireman's Fund Insurance Company, which pursued a subrogated claim against Stolt Tankers in respect of damage to a cargo of cumene (a chemical used in the production of certain synthetics such as plexiglass, clear packaging nylon, rubber) carried on board the Stolt Resolute.

In February 1994, Chevron Chemical Co sold a lot of 1,048 metric tons of cumene to Concord Chemical Industrial Co Ltd, Taipei, for $372,365. When the cargo was discharged at Taichung, Taiwan, it showed a significant increase in colour. Concord rejected the cargo as out of specification. In order to minimise damages, Fireman's explored possibilities to recondition the cargo. Concord indicated a reconditioning cost of $204,000, whereas Fireman's, through its agent, Inchcape Shipping Services, obtained a bid from Pure & Purify Chemical Co Ltd to do the reconditioning at a cost of $195,000.

In due course, Concord accepted the cargo and Fireman's paid for the reconditioning. Fireman's sought an award of $225,961, composed of $190,000 in direct damages, $3,113 in laboratory charges and survey fees, plus interest.

The arbitrators heard extensive expert witness testimony with regard to the issue of contamination, the significance of the colour drop, and its effect on the goods produced by Concord. Testimony was also taken from representatives of Pinkerton-Taiwan Ltd, which was employed by Stolt to investigate the activities of Concord and Pure & Purify with regard to the processing of the cargo.

The panel said that the test for determination of cargo damage is the comparison of the sound value of the cargo with the value, if any, assigned to it in its condition at the discharge port or, alternatively, the expenses incurred in mitigation, in reconditioning the cargo to its original undamaged state.

The panel said that the admitted colour drop and the payment to Concord in itself were insufficient to prove Fireman's entitlement to recover from Stolt. Fireman's had in fact failed to carry its burden of proof, and its claim was denied.

The panel declined to award Stolt the $300,000 in punitive damages it claimed against Concord in respect of the reconditioning claim being frivolous and vexatious, and in fact involving fraud and misrepresentation, conspiracy to defraud and misrepresent, felony violations under the US wire fraud statute, and felony violations of the California penal code.

The panel said there whereas punitive damages might be a suitable remedy against Pure & Purify, it did not believe that such a remedy should be applied against Fireman's, whose conduct and action did not justify such.

Geographical rotation
London arbitration

THIS London arbitration had its origins in a charter on the Vegoil form for the carriage of various grades of palmoil and/or coconut oil in bulk on a single voyage from 2-3 safe ports/one safe berth each out of five named ports in the Far East to 2-3 safe ports/one safe berth each out of five named ports in Europe and two safe berths Hamburg.

Clause 8 of the charter provided that the charterer should nominate the ports at least seven days before the vessel's ETA at the first loadport. Clause 7, meanwhile, provided that the rotation between loadports was to be in owner's option, after the ports had been nominated by the charterer.

A number of disputes arose, the first of which related to the effect of the geographical rotation of the loadports on the owner's claim for demurrage. The charterer argued that the delays had been caused by the owner's breach of charter in relation to geographical rotation, and it was that breach which had caused the relevant delay.

At arbitration it was found that the delay had been caused by the charterer's late nomination of the loadports, and by the owner's late nomination of the geographical rotation of the vessel's calls at those ports.

The charterer argued that it had asked for a different rotation, and had made its plans accordingly. The owner, meanwhile, maintained that the delay had been caused by the charterer's failure to nominate the loading programme at the ports within the time frame stipulated in Clause 8.

The owner also pointed out that it had told the charterer that one of the loadports had a draft restriction of eight metres, which necessitated a timely decision by the charterer as to the amounts of cargo to be loaded at each of the ports, in order to enable the owner to comply with its obligation to decide on the geographical rotation of the loadports.

By the time the charterer's final programme had been sent to the owner, the vessel had already loaded the first parcel and was taking on cargo at the second loadport.

Although the charterer maintained that it had disputed its agreement to the rotation eventually performed, the arbitrators pointed out that this reasoning ignored the fact that it was the owner's contractual right - and not the charterer's choice - to nominate the rotation in accordance with Clause 7. Moreover, the charterer had in fact agreed the owner's eventual choice of rotation.

The charterer also sought to rely on Clause 17 of the charter, which stipulated 'ETA clause (if applicable)...', maintaining that it enabled it to declare grades/quantities seven days before the vessel's arrival at each port. The owner, however, argued that the term 'if applicable' was a general one used in many of the charterer's contracts, and was not applicable in this case, particularly since there was no other mention of any ETA clause in the charter. The charterer's argument was duly rejected.

The arbitrators found that, since the delay was caused by the charterer's own fault, the charterer was liable for demurrage as claimed by the owner.
(Lloyd's Maritime Law Newsletter)