Safe port

Safe port
Partederiet For Primo v Crispin Co Ltd

THE disputes which formed the subject of this New arbitration arose under an Asba 11 form of tanker charter party. The vessel was to load at one or two safe ports Argentina, not south of River Plate, with option for discharge at various worldwide ports.

The charterer issued voyage orders for the vessel to load a part-cargo alongside at La Plata, part at the anchorage and the balance at Loading Zone Charlie. The vessel, the Primo, duly arrived and tendered at La Plata.

When the La Plata nomination was made, the owner expressed concern about the safety of the port and indicated that the vessel would encounter substantial manoeuvring difficulties because of its beam and draft and the operation of its variable pitch propeller.

The Primo was an 81,000-ton double hulled tanker remeasured to 59,999 tons. The master refused to enter the port until he was reassured how the main engine would be run in the channel and what assistance he could expect from the accompanying tugs. The charterer explored various solutions to going alongside, but none proved workable.

The charterer decided to cancel because of the refusal to enter La Plata, but the master then relented and agreed to go in, under protest, using the main engines and accompanied by three tugs. According to the master, the vessel touched bottom on its way in, although the onboard pilots and the charterer denied this. In any event, no damage was done, nor was anything reported to the local authority.

After completing loading, the vessel sustained a 26hr 10min delay awaiting sufficient high water before sailing to the lightering zones. The owner claimed $209,938, principally in respect of demurrage, the basis of which was the time lost between the vessel’s NOR tender and the date it moved into port. The charterer, meanwhile, counterclaimed $3.18m for alleged damages. The principal issue was whether La Plata was a safe port for the Primo given the prevailing conditions.

The panel unanimously concluded that the master had acted reasonably in refusing to enter La Plata, and that his subsequent decision to enter under protest did not alter that conclusion. It was noted that, while questions of safety are matters of fact, the criteria and guiding principles for determining whether or not a port is safe are matters of law. The charterer argued that vessels similar in size to the Primo regularly called at La Plata, but the panel noted that the vessels which generally call at La Plata are medium-size bulk carriers and that the Primo was well in excess of that category. It was also noted that the owner had legitimate concerns about the reduced effectiveness of the propeller blades being two-thirds above water, an inability to use the third tug because of the narrowness of the channel, the planned use of the main engine to maintain control, and the squat the vessel would experience navigating the channel. The charterer was directed to pay the owner the sum claimed.

Arbitrators: Lloyd Nelson, Jack Berg, Donald Laing Jr (chairman). Appearances: John Koster, Healy & Baillie, for Partrederiet For Primo; Richard Zimmerman for Crispin Co.

Society of Maritime Arbitrators (SMA) Award Service (Ref 3335)

Time bar

THIS was a dispute between the insurers and the carrier of three containers of fabrics shipped from Kobe to Hong Kong. On arrival of the containers at the place designated for devanning in Hong Kong, the cargo in one container was found to be in a damaged condition. It was concluded that water had entered the container through five holes in its roof.

Despite requests for an amicable settlement and for an extension of the time limit, the carriers maintained a total repudiation of liability and refused to grant an extension of the time limit to permit such amicable negotiation. The cargo underwriters then served a formal notice of claim, in accordance with Japanese law, which had the effect of suspending the time limit for six months beyond the time bar date.

It was accepted that the claim was subject to a nine-month time limit, effective from the date of delivery. As the cargo was collected from the carrier’s terminal on April 9, 1992, the time limit expired on January 9, 1993, and was extended for six months until July 9 by virtue of the underwriter’s formal notice of claim, even though the carriers had not agreed to voluntary extension of the time limit. The arbitration was commenced on July 9, 1993.

The arbitrators said that, according to the bill of lading, it was clear that the time available for the underwriters to file an application for arbitration was nine months after delivery of the cargo by the carriers. In accordance with the Civil Code of Japan, this nine-month term should have started on the next day, i.e., April 10,1992, and expired on January 9, 1993. Such time is often deemed as a time bar under the Civil Code, and it was in this context that the arbitrators considered the case.

The Civil Code says that a claim notice will not interrupt a time bar without application for arbitration or court action within six months. This six-month period is to start when the claim notice has been served on the other party.

The evidence in this case showed that a claim notice was served on January 8, 1993, by fax, and on January11, by registered mail. Thus, only the faxed notice - which was served before the expiry of six months - was effective, and the six-month term was deemed to start on January 9, 1993, and expire on July 8.

The arbitrators found that the underwriters had requested an extension of time from the carriers, but that the carriers had refused the application. As the underwriters filed the application for arbitration on July 9, after the expiry of the time bar, the underwriters had lost their claim.

Arbitrators: Kenichi Shinya, Masaru Shimizu, Osamu Shirouzu.

(Tokyo Marine Arbitration Commission [TOMAC] award)

Cancellation clause
Canadian Ultramar Ltd v Esso International Shipping (Bahamas) Co Ltd

THIS arbitration arose under an Exxonvoy form of tanker voyage charter party between Ultramar as the time-chartered owner of the Eirini L, and Esso as charterer. Ultramar contended that Esso had wrongfully cancelled the charter, and that as a consequence Ultramar had sustained damages of $110,770 based on what the vessel would have earned in performing the cancelled voyage, less what was earned in mitigation.

Esso chartered the vessel for the carriage of a part-cargo of crude from West Africa to Italy. Ultramar then approached Esso for additional employment of the vessel after discharge in Italy, and, with the vessel enroute to Italy, a fixture was concluded for two voyages from Sidi Kerir to Europe. Esso subsequently sought a mutual cancellation when it transpired that the vessel would not be able to meet its first ETA at Sidi Kerir.

Ultramar denied that it had agreed to mutual cancellation and, faced with the fact that Esso had fixed another vessel for the two Sidi Kerir voyages, then sent the vessel to Norway to carry its own cargo to Quebec. Ultramar then held Esso responsible for losses sustained as a result of the cancellation. Esso claimed that the vessel had not tendered a valid NOR within the agreed laydays and exercised its option to cancel the charter party.

The panel noted that the charter required the modification, waiver or discharge of any term to be in writing and signed by the party to be charged therewith. No such writing existed here with respect to the cancellation clause. On the contrary, although Ultramar had repeatedly sought a written extension of the cancellation date, Esso had unequivocally refused to give one. Nonetheless, Esso had committed itself to an informal extension of the cancelling date, although the parties disagreed about the length of the extension. The cancellation date was enforceable despite the clause requiring modification to be in writing, if Ultramar relied upon the extension to its detriment.

While Esso had no right to cancel the charter, it could effectively revoke its informal extension of the cancelling date since Ultramar had not relied on the extension to its detriment.

The panel rejected Ultramar’s contention that Esso had agreed to an open-ended extension, under which it was obliged to load the vessel whenever it arrived at Sidi Kerir. Instead, it was found that Esso had extended the cancelling date, and that the vessel would not have arrived at Sidi Kerir by 1600hrs on the extended date, or even by 2400hrs that day.

Esso had effectively extended the cancelling date, and the owner had a full 24 hours on the cancelling date to make a timely arrival. But under Clause 12 of the Exxonvoy 90 form the vessel had to tender notice by 1600hrs local time on the cancelling date. The panel said that, if an extension beyond the time stipulated in the charter party. i.e., from 1600hrs to 2400hrs, was intended, it was up to Ultramar to prove this fact. And Ultramar had failed to do so.

Even though Esso had been convinced that the vessel would not make its cancelling date or its revised cancelling date, it was not free to cancel the charter without a mutual cancellation in advance of the cancellation date. And the panel found that Esso had not carried its burden of establishing such a mutual cancellation, and its cancellation was therefore premature, placing Esso in breach of the charter.

This, however, was not the end of the matter. The panel found that, absent the cancellation, the vessel would have arrived at Sidi Kerir in advance of its cancelling and extended cancelling dates, and its late arrival would doubtless have resulted in cancellation. The panel found that, although Esso’s cancellation was premature, Ultramar’s claim for damages was after all trumped by the cancelling clause. Ultramar’s claim for damages was therefore denied.

Arbitrators: Raymond Connell, Mary Reilly, Manfred Arnold. Appearances: J Lincoln Hallowell, Bleakley Platt & Schmidt, for Ultramar; Donald Burke, Cardillo & Corbett, for Esso.

SMA Award Service (Reference 3366)

Shut-out cargo

THIS dispute arose under the terms of a NYPE charter party for the carriage of a cargo of crated plywood on a tweendecker from Indonesia to Taiwan. A total of 7,124 cu m of cargo was to be loaded, and the master said his vessel had never loaded more than 6,625 cu m of Indonesian plywood before. The charterer pointed to other, similar vessels which it had chartered to successfully carry this amount of cargo.

When the vessel came to load, 431 crates were shut out because the vessel’s draft had already been exceeded. The charterer claimed damages and deadfreight.

The arbitrator found that the master was justified in shutting out the cargo because of his concern about the draft, metacentric height and stability of the vessel. It was noted that the master had shut the cargo out in consideration of the safety of the vessel and that, according to surveyors’ reports, loading any further cargo would have risked sinking the vessel.

The arbitrator said the vessel was at its loading limit, and that, although Clause 8 of the NYPE form provides that charterers are to load, stow and trim the cargo at their expense under the supervision of the captain, the gist of this provision was the recognition of the master’s discretion with regard to safety and the seaworthiness of the vessel.

The loss suffered by the charterers was not the result of a breach of contract by the shipowner, but rather it arose as a result of a failure on the part of the charterers to consider navigational safety and the master’s judgment in securing same. The charterers’ claims were dismissed as groundless.

Arbitrator: Takaya, Shinich

(TOMAC award)

Performing vessel
Duncombe Trading Sa v Winfield Business SA

THIS arbitration was concerned with a claim by the charterer, Duncombe, that the owner, Winfield, had failed to perform its fundamental obligation to nominate a performing vessel, thus causing Duncombe to suffer damages.

Under a Gencon charter, Winfield agreed to supply a vessel to Duncombe for the carriage of frozen poultry/meat products from the US to Russia. In the end, no ship was nominated and Duncombe chose to sell the cargo back to its supplier. It claimed a total of $124,105 made up of lost profit, storage and carrying charges, and sale contract non-performance costs.

The panel concluded that Winfield had failed to perform as required under the charter party and had therefore breached its obligation. It was also found that Duncombe had exaggerated its claim and contributed to the situation by clumsy handling of Winfield’s non-performance.

Although Duncombe did initially cancel the charter party by telex, it rectified the cancellation part of that communication the same day and maintained Winfield’s liability for the default. Subsequent responses by Winfield effectively expressed its intention to perform against an extended cancelling date. Duncombe extended the cancelling date three times but Winfield failed to nominate or produce a vessel.

The panel concluded that Winfield’s position on Duncombe’s cancellation message could not be upheld. The panel also found that Duncombe had overstated its damages, specifically by failing to offer evidence or documentary proof of the period for which carrying charges were paid to its suppliers. That item of its claim was accordingly disallowed.

Arbitrators: John Besman, Lawrence Jacobson, Michael van Gelder (chairman). Appearances: Richard Zimmerman for Duncombe; Andrew Klerk, Frilot Partridge Kohnke & Clements, for Winfield

SMA Award Service (Reference 3361)

Off-spec cargo
Norwegian Gas Carrier AS v Etoxyl CA

THE disputes which formed the subject of this arbitration arose out of a contract of affreightment on a modified Warshipoilvoy form between Norwegian Gas Carriers AS (NGC), as owner of the Norgas Discoverer, and Etoxyl CA as charterer.

The voyage in question involved a shipment of ethylene oxide (EO), a highly volatile chemical product, on the Norgas Discoverer from Texas to Venezuela. The voyage was completed without apparent incident. But an inspection in Venezuela showed the cargo to be discoloured, damaged and off specification. The parties agreed that the safest and most commercially acceptable procedure for delivering the contaminated product ashore was for the EO to remain on board the vessel and for Etoxyl to take delivery of it into its shore tanks after filtering.

This process was time-consuming, and NGC subsequently claimed demurrage of 44 days 17hrs and 42mins. Its total claim was for $834,687. Etoxyl, meanwhile, denied liability and counterclaimed for $299,414 for lost profits, cost of filters, standby fireboat expenses, surveys, value of lost product and other miscellaneous expenses..

The panel majority concluded that Etoxyl had established the good order and condition of the EO on delivery to the vessel in the US and the nature of the damaged product delivered at destination.

NGC insisted that iron/iron oxide was the catalyst for the polymerised material contaminating the EO, and for this reason it looked to the EO producing plant in the US, and to the railcars used to transport the EO to the US port of shipment, as the source of that iron. But the railcar samples and ship samples did not indicate anywhere near the level of iron found in the contaminant at destination, and expert testimony showed that iron/iron oxide is incapable of producing a polymerised material of the molecular weight found in the vessel’s tanks at destination. Indeed, the high molecular weight of the polymerised material supported Etoxyl’s theory that a potassium or sodium-based caustic was the most likely catalyst.

The panel majority found no fault with Etoxyl’s handling of the damaged product at destination. The contaminated EO had to be filtered and disposed of as safely, quickly and inexpensively as possible, and the majority concluded that the discharge procedure met these criteria. Discharging EO ashore directly into Etoxyl’s shore tanks would have contaminated those tanks, materially increased Etoxyl’s damages and raised serious mitigation questions.

The majority denied NGC’s claims for unpaid demurrage and port expenses. Those portions of Etoxyl’s damages directly related to the contamination, with the exception of claims for lost profits and cargo shortage, were accepted by the panel majority. There was no credible evidence to support lost sales or diminished margins.

The dissenting arbitrator, Lloyd Nelson, said the decision to use the vessel for storage during the mitigation process was a reasonable step in mitigation and, "as we all know, mitigation is not an exact science but, when reasonable, should be accepted".

Arbitrators: Lloyd Nelson, Jack Berg, Donald Laing Jr (chairman). Appearances: Donald Kennedy, Jacqueline McGowan, Haight Gardner Poor & Havens, for NGC; Charles Trowbridge, Elena Desantis, Treanor Harvey Sullivan Trowbridge & Mullen, for Etoxyl.

SMA Award Service (Reference 3374)