Laytime not a general exception

Laytime not a general exception
London arbitration

THIS London arbitration dealt with a dispute over the calculation of laytime/demurrage at loadport in connection with the carriage of a sugar cargo.

The vessel was chartered on the Sugar Charterparty form as amended. While the ship was at the roads waiting for a berth there was a three-day strike. The charterers sought to exclude that time, whereas the owners said it should be counted.

The charterers relied on Clause 28 of the charter, which provided, "Strikes or lockouts of men, or any accidents or stoppages on railway and/or canal, and/or river by ice or frost, or any other force majeure causes including government interferences, occurring beyond the control of the shippers, or consignees, which may prevent or delay the loading and discharging of the vessel, always excepted."

The charterers argued that it was the intention of those who drafted the Sugar Charterparty form and, by extension, the intention of parties contracting on the basis of it, that it should be available to affect the calculation of laytime where appropriate.

It was held at arbitration that the charterers' difficulty lay in a line of cases referred to by the owners in their submissions, from which it seemed to be clear that Clause 28 was insufficiently precise to be read so as to apply to laytime.

The cases in question were the Forum Craftsman (1991, 1 LLR 81) the Lefthero (1992, 2 LLR 109) and the Kalliopi (1988, 2 LLR 101), which was followed in the first of those cases and approved by the Court of Appeal in the second.

It was appreciated that that conclusion might run counter to a widely held commercial view regarding the operation of Clause 28 of the Sugar Charterparty. But the fact was that the Court of Appeal had decided what the position was in English law a number of years ago, and if the market did not like that then the answer was to change the wording of the standard form, or to add on appropriate rider clauses.

Even without the benefit of the cases on which the owners relied, the tribunal would have come to the same conclusion, simply because, if an exceptions clause was to apply to laytime, that intention had to be made quite clear, or at least clearer than it could possibly be said to be on the basis of Clause 28.

Accordingly, the owners' claim for demurrage succeeded in full.

(London Maritime Law Newsletter 481)

Agreement to amend
SKS IBI Ltd v OMI Petrolink Corp

THIS dispute before arbitrators in New York arose under a charter party on the Asbatankvoy form and turned upon a claim for balance of charter party hire payment.

The charter was between SKS IBI Ltd of Bermuda, as owner, and OMI Petrolink Corp, as charterer, of the SKS Banner. OMI chartered the vessel to lighter a cargo of crude oil from the Settebello at a lightering position off Galveston, Texas, and then to carry same to Convent, Louisiana.

The vessel delivered to OMI at the Galveston lightering station on December 17, 1992, and loaded its cargo on December 17 and 18 before sailing for Convent. Enroute it encountered fog and was delayed for about five days before reaching the lightering station on Christmas Day. It completed discharge and sailed under OMI's orders towards its redelivery point (1340hrs, Southwest Pass, December 26).

The vessel interrupted its downriver passage to anchor at Burnside Anchorage at 1435hrs on December 26, in order to receive new DnV registry documents, required to be on board before December 31, and was ready to resume its voyage at 2100hrs on December 26.

Pilot and tugs arrived but had to be dismissed due to developing fog, which prevailed until 0900hrs on December 29. The passage was again interrupted, with the vessel having to anchor from 1125hrs to 1400hrs on December 29 to effect radar repairs. The vessel recommenced its voyage at 1410hrs on December 29, but at 1750hrs that day had to anchor at the AMA Anchorage due to dense fog.

OMI proposed, and SKS accepted, redelivery of the vessel to take place at AMA effective 1720hrs on December 30, and the redelivery was accomplished accordingly.

SKS maintained that the modified Asbatankvoy form governing the voyage served as a time charter rather than a voyage charter, burdening OMI with the risks of delay except those offhire periods for SKS's business and for radar failure - a total of 10hrs 59mins.

OMI, meanwhile, argued that SKS had ignored its charter obligations in failing to maintain all necessary documentation so as not to delay the voyage, and had ignored OMI's explicit sailing instructions by diverting the vessel to Burnside Anchorage to remedy that deficiency. It maintained that SKS's intentional delay at Burnside caused the vessel to miss a clear weather window during the period of severe fog, and that without this delay the vessel would easily have made the downriver voyage fog-free to its redelivery point.

The arbitration panel unanimously found that a charter breach had occurred the moment the vessel interrupted its voyage from Convent to Southwest Pass. It was held that SKS had an obligation to advise OMI more specifically of its intention and seek its approval to anchor at Burnside.

But SKS argued that the parties' agreement to amend the original redelivery terms took precedence over the breach of contract, and the panel majority (Mr Jacobson dissenting) agreed.

The majority noted that, had OMI all along intended to offhire the vessel with effect from it sailing from Convent, it had the opportunity and the obligation to so advise SKS at the time it proposed to renegotiate the redelivery terms. No such reservation was made or discussed.

The majority pointed out that the agreement to revise the place and time of redelivery was proposed by OMI and accepted by SKS and was an entirely separate agreement which almost certainly would not have come about had OMI made its intentions known to SKS at the time. Instead, nothing of the sort was discussed and only when the vessel was redelivered under the mutually revised terms did OMI profess to hold SKS accountable for the prior breach.

The majority found that the parties' agreement to amend redelivery implied that a valid charter was still in place. It was that charter which the parties negotiated to amend, as there would have been no reason to make changes if OMI had already contemplated then and there that it would consider the vessel redelivered upon sailing from Convent.

The majority held that the redelivery agreement constituted an accord and satisfaction which substituted any or all prior claims and negated OMI's right to claim for prior breach of contract. The exceptions were the two offhire periods for the exchange of the vessel's documents and the radar repairs.

In his dissenting opinion, Mr Jacobson said it was objectionable for SKS to have deliberately ignored an explicit, valid instruction for the sole purpose of furthering its own business interest, simultaneously placing the financial risk of its action with OMI.

Arbitrators: Lawrence J Jacobson, Klaus C J Mordhurst, Svend H Hansen Jr (chairman). Appearances: John C Koster, Healy & Baillie, for SKS; Geoffrey J Ginos, John G Taylor, Burlingham Underwood , for OM I.

Society of Maritime Arbitrators Award Service (Reference 3414)

Unsuitable berth
Sanderling Maritime Ltd v Akzo Salt Incorporated

THIS New York arbitration involved a shipowner's claim for deviation expenses arising out of an aborted discharge operation, and a counterclaim by the charterer for additional costs and lost profit as a result of the deviation.

Under a Stemmore (1976) charter party, Sanderling Maritime Ltd chartered the Griffin to Akzo Salt Incorporated to lift a full cargo of about 25,000 metric tons of bulk salt from Caleta Patillos in Chile to the US. Akzo guaranteed a depth of 35ft salt water, and Sanderling agreed not to exceed a draft of 35ft.

SMA Award Service (Reference 3439)

Akzo nominated Searsport as the discharge port, but this was initially rejected by Sanderling because Searsport had a 75ft beam restriction whereas the Griffin had a beam of 82ft 8in. But Sanderling accepted Searsport after Akzo assured it that the Sprague Terminal at the port was known to accept vessels with larger beams.

The Griffin loaded its salt cargo without incident and duly sailed for Searsport, berthing at the Sprague Terminal. Shortly thereafter it was discovered that the gantry would not reach the outboard compartments of holds 2 and 3. Akzo contended that this was because of an unexpected 6ft-to-7ft-wide space on deck along the centreline between hold 2 and 3. In addition, although the vessel was on an even keel and within the 35ft salt water draft limits, it was alleged by Sanderling that the forepart of the vessel could not be brought closer than about two metres off the dock at low water.

The terminal would not proceed with the discharge operation until a solution to the problem could be found. It duly claused the notice of readiness to the effect that the vessel did not meet the specifications necessary for discharge, and that it would not accept any responsibility for potential demurrage or port diversion charges.

In the event, Akzo instructed the vessel to proceed to Port Newark for discharge, which operation was accomplished without further incident.

Sanderling contended that Akzo had directed the ship to an unsuitable berth and was therefore responsible for the additional costs incurred by Sanderling in proceeding to and discharging at Port Newark.

Akzo, meanwhile, denied that the Seaport berth was unsuitable and contended that Sanderling was to blame for the problems there, and for the additional costs associated with moving the discharge to Port Newark, because it had foreknowledge of the limitations at the Sprague Terminal and the unseaworthiness of its vessel.

The arbitration panel noted that, from the outset of negotiations, there had been concern about the vessel's beam and cargo hold configuration, and the twin hatches and centreline bulkhead in holds 2 and 3. Early concern about the vessel's beam was documented in the fixture telexes, but the real problem - the inability of the gantry to reach the outboard cargo spaces in holds 2 and 3 - did not arise until the ship arrived at Searsport, even though Akzo maintained that Sanderling knew this but didn't tell Akzo.

The only specific written reference to the centreline bulkhead was in the vessel's description, which stated, "Holds 2 and 3 have a centreline bulkhead with connecting doors for forklift access". The arbitrators noted that, had there been no centreline bulkhead and no port and starboard main deck hatch openings - i.e., had the vessel been a bulk carrier - the problems at Searsport would not have occurred. At the same time, they noted that the hatch, hold and centreline bulkhead configuration of the vessel was not unusual, and that the 6ft-to-7ft aisle along the centreline between the hatches could have been approximately deduced from the dimensions given in the vessel's description.

The arbitrators emphasised that the terminal was prepared to discharge the vessel if possible, and that Sanderling had agreed in the terms of the charter to be responsible for any extra expenses occasioned by inaccessibility of cargo. They were also satisfied that the vessel could not have been discharged safely without turning it a number of times, and ballasting during discharge.

The arbitrators found no evidence to support the allegation by Akzo that the vessel's ballast tanks were unseaworthy, but rather were persuaded that the master of the vessel was concerned that a swinging grab bucket might puncture a tank. Under the circumstances, the master's refusal to ballast during discharge unless relieved of liability for cargo damage was reasonable.

Sanderling maintained that there was less than the guaranteed depth of 35ft at the Searsport terminal, and that the forepart of the vessel could be brought no closer than about two metres from the dock at low water. But the arbitrators were unable to conclude that Akzo had breached its warranty of depth at the berth, or that the vessel was not alongside, thus exacerbating the gantry outreach problem.

Akzo contended that Sanderling was responsible for all consequences of the aborted discharge at Searsport, by virtue of the terms of Clause 29 of the charter party, which stated, "Vessel is guaranteed suitable for grab discharge and is to tender clear of sweat battens. No cargo is to be loaded in deeptanks, bunkers or other compartments not easily accessible to grabs. If cargo is loaded and trimmed in tweendecks, any extra expenses incurred at loading port and discharging port and time lost to be for ship's account, also any extra trimming necessary on account of vessel's construction to be for owner's account and time so occupied to be for owner's account. Any extra expenses and/or loss of time over and above the cost of normal grab discharge incurred at discharging port for cargo not easily accessible to grabs or loaded in the tweendecks is to be for owner's account, also any extra expenses incurred owing solely to vessel's construction."

Sanderling, on the other hand, maintained that the wording of Clause 29 could not be taken to include consequential damages such as those claimed by Akzo.

The panel held that Akzo's claims associated with the aborted discharge clearly fell outside the scope of Clause 29, and that while the clause might apply to expenses and delays incurred at Port Newark for the reasons clearly set forth in its wording, it did not extend to embrace any and all consequences in the broad interpretation which Akzo sought to give it.

The panel did not think that Akzo had acted to mitigate its potential losses following realisation that the Searsport discharge would have to be aborted. It had expressed unsubstantiated concern about the vessel's seaworthiness and had rejected an offer from the Sprague Terminal to arrange for discharge at a terminal in Portland. The panel found that ordering the ship to Port Newark for the reasons given could not be construed as a discharge of Akzo's obligation to mitigate its losses.

By a majority decision (Mr Berg dissenting) the panel concluded that Akzo sent the Griffin to an unsuitable berth when it nominated the Sprague Terminal at Searsport. And, Sanderling not having misdescribed or insufficiently described its vessel to Akzo, Akzo had to bear the responsibility for the aborted discharge.

In his dissenting opinion, Mr Berg noted that, if the Sprague Terminal was an unsuitable berth for the Griffin, it was so because important structural aspects of the vessel's design were improperly described when the charter was negotiated and concluded. The fact was, he said, that the vessel could have been discharged at Searsport with a minimum of shifting. And, in this case, relevant information about the special nature of the vessel's construction and layout which directly impacted on its ability to perform under the charter had not been passed on during the negotiating stage. Mr Berg accordingly disagreed with the majority's decision on liability and damages.

Arbitrators: Jack Berg, Stephen H Busch (chairman), Konstantinois N Livanos Appearances: Kirk M H Lyons, Lyons Skoufalos Proios & Flood, for Sanderling; Lawrence J Bowles and Rahul Wanchoo, Nourse & Bowles, for Akzo.

SMA Award Service (Reference 3411)

Costly overdraft
International Marine Services Inc v Continental Grain Company

THIS New York arbitration arose under a Baltimore Berth Grain Charter (Form C) between International Marine Services (IMS), as disponent owner of the Cypriot-flag bulk carrier Maria A, and Continental Grain Company, as charterer.

The charter called for the vessel to load and carry 25,000 metric tons of bulk wheat from the US Gulf /Mississippi to Algiers. The charter stipulated that the vessel's arrival draft at the Algerian discharge port was not to exceed 32ft salt water, while Clause 34 stipulated, "Lightening, if required, is for charterer's account provided vessel arrives within stipulated draft. Otherwise to be for owner's time, risk and expense."

The vessel arrived at Beaumont, Texas, on January 21, 1994, under instruction from IMS to load 23,000 metric tons of cargo, subject to a discharge port arrival draft of no more than 32ft. For reasons which remained unexplained, the master loaded a total of 24,800 metric tons, yielding a loadport mean arrival draft of 35ft 2in.

Pursuant to Continental's instructions, the vessel proceeded to Algiers where, on February 19, prior to entry, the master advised the local agent that the mean draft on arrival would be 33ft 6in. Upon arrival at Algiers, the master proceeded to anchorage and tendered notice of readiness, which made no mention of the overdraft arrival condition.

On February 21 the agent advised the master that the vessel would not berth sooner than March 7. In the event, from February 21 to March 21, the vessel's berthing prospects were continually postponed, although none of these delays related to the overdraft condition. Indeed, it was not until March 22 that the cargo receivers first complained to Continental that the vessel was over draft.

After an extensive delay at Algiers the vessel was ordered to Oran, where it arrived on April 5, and tendered NoR. It then proceeded to Algeciras for urgently needed supplies, and returned to Oran on April 7. Remaining at anchor until a berth became available on April 28, the vessel finally completed discharge on May 9.

Arguing that the true cause of the delays at Algiers and Oran was not the vessel's overdraft condition but extensive berth congestion, IMS claimed $378,104 in discharge port demurrage and additional freight. While admitting that the vessel had arrived at Algiers drawing more than the represented 32ft, IMS insisted that Clause 34 not only anticipated this condition but limited its responsibility for that breach only to the time and expense of actually lightening the vessel to the stipulated overdraft.

Continental, meanwhile, maintained that the admitted overdraft amounted to a breach of a vital term of the charter party, thereby invalidating the NoR tendered at Algiers. On this basis, it argued, laytime ought not to have started to count until the vessel had cured its breach and actually reached the represented draft.

With regard to the initial delay at Algiers, from February 19 to March 27, the panel found that Continental's argument that the admitted overdraft invalidated the NoR did not apply in circumstances where, as in Clause 34, the parties had anticipated the possibility of vessels arriving overdraft and had fashioned an appropriate remedy for such breach. It was found that time counted for the period through March 27.

With regard to the additional delay at Algiers (March 27 to April 4), the panel found that Algiers did have facilities to first lighten and then discharge the vessel. Notwithstanding the admitted overdraft, the panel found that the cargo receivers had the facility and the obligation to either berth the vessel at Algiers or order it to Oran sooner than April 4. Their failure to do either was wrongful, entitling IMS to count time for the delay against Continental.

Turning to the delay at Oran, the panel noted that the substitution of Oran for Algiers was a direct consequence of the vessel's overdraft condition. It was pointed out that, in cases where, as here, the vessel arrived over draft, Clause 34 clearly allocated "...time, risk and expense" of lightening to the owner. IMS chose to simply remain with arms folded and await the availability of a suitable discharge berth, and it was held that it could not profit from, but should bear the consequences of, its decision not to bring the vessel into compliance with the stipulated draft. Accordingly, IMS's claim for a second discharge port freight was denied.

Arbitrators: Lawrence J Jacobson, Walter Muff, A J Siciliano (chairman). Appearances: LeRoy Lambert, Healy & Baillie, for IMS; Patrick V Martin, Hill Rivkins & Hayden, for Continental.