Cargo retention

THIS New York arbitration arose out of the performance of a tanker voyage charter on the Asbatankvoy form between Cape Tankers Inc, as disponent owner of the Cabo Tamar, and Adam Maritime Corp, as charterer. The charter provided for the vessel to lift a part-cargo of crude oil from Argentina to US ports.

The charter party's cargo retention clause provided, "In the event that any cargo remains on board upon completion of discharge, charterers shall have the right to deduct from freight an amount equal to the FOB port of loading value of such cargo plus freight due with respect thereto, provided that the volume of cargo remaining on board is liquid oil and pumpable by the vessel's pumps as determined by charterer's independent surveyor. Any action or lack of action in accordance with this provision shall be without prejudice to any rights or obligations of the parties."

The vessel loaded a parcel of Santa Cruz crude at Puerto Loyola, then performed an interim voyage with a parcel of Hydra crude loaded at Puerto Rio Cullen and discharged at the Coig Lighterage, and subsequently loaded a second parcel of Santa Cruz.

The vessel arrived at St Croix, and began discharge operations which continued uninterrupted for sixteen hours before being suspended for nine hours for stripping and crude oil washing. Discharge recommenced a few hours thereafter, first with main pumps and then with stripper pumps, until such time as it was unable to discharge further, even using the stripping pump.

The vessel's No 5 centre tank was gauged and sampled, and indicated a quantity of liquid ROB. But the chief officer concluded that sediment and/or sludge had formed ridges on the tanktops, preventing the liquid ROB from reaching the suction valves of the vessel's pumps. Surveyors' reports indicated that the ROB in other cargo tanks, although not at issue in this dispute, was non-liquid.

The vessel shifted to a bunker berth after further efforts to discharge the liquid ROB were abandoned. Transfer of the liquid ROB was only completed after the vessel had left St Croix.

The charterer deducted $80,586 from the charter payment, claiming that it was entitled to the ROB value of 5,013 barrels of oil. The owner, asserting that the ROB was unpumpable slops, disputed the deduction, and claimed $10,348 for the value of the freight it lost on its next employment because of the ROB it had to retain on board.

The arbitration panel noted that, since all surveyors and both parties agreed that the ROB in No 5 centre tank was liquid, the issue boiled down to whether the residue was reachable and pumpable by the ship's pumping equipment. The owner insisted that it was the charterer's burden to show that the ROB could be reached by the ship's cargo pumps and that it was pumpable. The owner, meanwhile, pointed out that the cargo inspector had not noted that the ROB was pumpable, and for a very good reason - cargo surveyors have nothing to do with the operation of the ship's cargo pumping system and cannot logically be charged with an understanding of its functional ability.

The panel noted that it unanimously agreed with the principle set forth in the 1998 arbitration of the Atlantic Emperor (SMA 2504), to the effect that, "A determination of pumpability is an integral factor of a number of … considerations, many of which are tied to the capability of the vessel's cargo handling system. It is for this reason that the major independent surveyors will not issue a certificate stating that a residue is pumpable. The best one can expect is a statement attesting to the fact that the residue is liquid. Practicality and commercial good sense dictate that, once an ROB has been determined to be liquid, it then becomes owner's burden to show why it cannot be discharged."

The panel found that the owner had not shown why the ROB should be considered unpumpable. It was noted that the vessel started stripping the No 5 centre tank ROB into the slop tank some seven hours after discharge had ceased, and roughly four hours before the vessel left St Croix. And there was nothing in the ship's records to indicate that suction was not being achieved when stripping commenced.

It was the panel's view that the owner had a very strict time constraint for its next employment, and was unwilling to delay the vessel's departure and exert all possible efforts to discharge ashore the liquid ROB in the No 5 centre tank

It was held that the ROB was pumpable and was, in fact, pumped into the vessel's slop tanks just a few hours after the vessel disconnected hoses and terminated cargo discharge.

The panel unanimously concluded that the charterer's deduction from freight was proper, and accordingly dismissed the owner's claim.