Cargo damage time bar

Cargo damage time bar

THIS arbitration concerned a dispute between Her An Shipping, as the owner of the Lugano Venture, and Alimentos Precocidos Guayana (APG), as the receiver of a cargo of corn shipped on the vessel from the US to Venezuela. The central point of the dispute was whether the receiver's cargo damage claim was time-barred under the charter party's arbitration clause.

The vessel carried a cargo of 12,519, 972 metric tons of white corn from Convent, Louisiana, to Guanta, Venezuela, without incident. Almost immediately after discharge had got under way at Guanta, the local growers' association protested against the importation of the corn and demanded that the authorities investigate the fitness of the cargo for human consumption. While the cargo was still discharging, APG obtained a letter of undertaking (LoU) from the West of England P&I Club, with which the vessel was entered, to pay an amount up to $2m which a competent tribunal in New York might subsequently adjudge to be due by the shipowner to the cargo interests arising out of the alleged cargo damage.

At this point, APG had only complained of high humidity in No 1 hold, some minor wetting in No 2, and some alleged heat damage in No 5. But the complaints were picked up by local newspapers, and thereafter the entire cargo was placed in quarantine by the Venezuelan ministry of health.
With the Venezuelan authorities maintaining that the cargo was unfit for human or animal consumption, and that it should therefore be destroyed, the matter developed into an international issue involving Venezuelan and US government agencies. US interests took the position that the confiscation of the cargo was motivated by political efforts to appease angry Venezuelan growers threatened by competition from exports.

APG was eventually able to sell the cargo as fit for animal consumption, thus reducing its damages to $943,456.

The parties disagreed as to whether the amended Centrocon arbitration clause in the charter party, or the West of England LoU, governed the arbitration. In fact, neither APG nor the owner were signatories to the charter party covering the shipment of corn. The charter was between the time-chartered shipowner and the voyage charterer, and contained the amended Centrocon clause stipulating that any claim had to be made in writing, and the claimant's arbitrator appointed, within nine months of final discharge.

The owner contended that APG's claim was waived and absolutely barred because APG did not request its first extension of time until some forty days after the nine months stipulated in the arbitration clause had elapsed.

APG, meanwhile, argued that its claim did not fall under either the bill of lading or the charter party, but under the West of England LoU, under which it claimed to have six years within which to initiate arbitration.

The panel majority (Ms Bulow dissenting) ruled that APG's claim was time-barred. It was found that the LoU made conspicuous reference to the charter party, and that APG had a full nine months in which to obtain a copy of the charter.

Noting that APG had obtained three extensions of time during which to commence arbitration, the panel majority concluded that, at the time the requests were granted, both parties were probably focusing on the COGSA one-year time limit and neither was aware that the claim had already become time-barred under the Centrocon clause. The majority was satisfied that APG's decision to frame its claim under the LoU and forgo a claim under the contract of carriage was an attempt to circumvent the nine-month time bar under Centrocon.

In her dissent, Ms Bulow noted, among other things, that, "Time bars and statutes of limitation are designed to avoid the introduction of stale claims. The valid reason for this is to prevent the prolonged passage of time which could unfairly hinder the ability of a defendant to resist claims gone stale. In this case...the claim is no way stale by most standards and, if it is, the delay was not all caused by the claimants."

Society of Maritime Arbitrators Award Service (Reference 3468)

Cargo claim or charter breach
Ormet Corporation v Zephros Maritime Agencies Inc

THE disputes which formed the subject of this arbitration arose out of two charter parties between Ormet Corporation, as charterer, and Zephros Maritime Agencies Inc, as agent for Lygnos Brothers Inc, the disponent owner of the Golden Polydinamos, Golden Nagos and Golden Kimisis.

Ormet is in the business of importing alumina in bulk into the US from Jamaica and Surinam. All three vessels loaded cargoes of alumina at Paranam, Surinam, for delivery to Ormet's terminal at Burnside, Louisiana. In each case a deadweight survey was performed at the loadport to determine cargo quantity. On arrival at Burnside, deadweight surveys were again performed on each vessel and each receiving barge to determine the cargo quantity discharged.

Ormet contended that these surveys indicated large differences between cargo quantities loaded and the amounts discharged at Burnside. It claimed for the return of overpaid freight, maintaining that the deadweight surveys - and the bills of lading based on those surveys - improperly reflected the actual cargo quantity loaded.

In short, Ormet argued that the owner had breached the charter parties by failing to provide first-class vessels with correct ballast and constant figures.

The owner pointed out that Ormet did not first demand arbitration until some three to four years after the vessels had discharged at Burnside, and that Ormet's claim was subject to the one-year time bar provision under COGSA by virtue of the Clause Paramount in the charter party. Alternatively, the owner maintained that Ormet's claims should be dismissed pursuant to the doctrine of laches.

Ormet contended that the timeliness of its claim was determined by laches rather than by COGSA. The panel majority (Mr Siciliano dissenting) concluded that COGSA and the one-year time bar were inapplicable, and further that laches should not be applied as there was no proof of inexcusable delay or prejudice.

With regard to the claim itself, Ormet alleged that the vessels provided surveyors with incorrect ballast information for draft survey purposes. It submitted an analysis of cargo outturn for the vessels performing under the charters. It was a comparison of this analysis with Ormet's experience on other vessels in the same trade that prompted its claim. Although there were considerable discrepancies between vessel surveys at loading and vessel and barge surveys at discharge, these did not by themselves establish a basis for owner's liability.

Ormet then attributed the outturn weight discrepancies to improper and incorrect ballast figures given to the surveyors by the vessels' crew. But the arbitrators said that Ormet had not carried its burden of showing that incorrect ballast information had been supplied, that the incorrect figures went to the root of the alleged weight discrepancies, and that the draft surveyor accepted the figures and relied on them.

The panel unanimously found in favour of the owner.

In his part-dissent, Mr Siciliano said, "It offends me to think that cargo interests may circumvent contractual and statutory suit time requirements merely by labelling an obvious cargo claim as a breach of contract claim."