Force Majeure Clauses

by phil19. September 2013 11:45
I came across an article a couple of weeks ago in Tanker Operator http://www.tankeroperator.com/ViewNews.aspx?NewsID=4664 ‘World’s “Hot Spots” Cause Havoc’.  The article relayed the report from McQulling Services which indicated that continued unrest in Egypt could affect tanker demand if there was disruption to the Suez Canal.  The article also mentioned disruption in Libya, Iraq and Syria and whilst such disruption may lead to more demand in tankers I got thinking about Force Majeure clauses and how this will affect Owners and Charterers who may currently be delayed in one of today’s how spots. The suppliers – most oil contracts have Force Majeure clauses which protect the suppliers for specified events such as those we are seeing in these areas.  A feature of these clauses is normally the need to ‘declare’ Force Majeure’ which is effectively a notice to buyers that they will be relying on the FM clause when it comes to such matters as demurrage.  In most cases the FM Clause will state that demurrage is not payable for as long as loading is prevented by one of the causes specified. The Buyers – as we can see the buyers are unlikely to collect any demurrage for these periods of delay and as they would have chartered a vessel to load the cargo they may have a liability to the Owners for these delays and this will be governed by the charter party. The Charter Party – most charter parties have clauses similar to Force Majeure clauses but there are a number of differences.  The Causes - They will all mention the causes of delays to which the clause applies and these may be similar to some of those found in Oil Contracts, but watch out for the differences.  Where FM is declared by a supplier under the Oil contract the FM clause in the charter party will not automatically apply unless the charter party clause specifically mentions the same type of delay. Time Counting – Where the FM clause in the charter party does apply then normally the delay will count at half the time or will be paid at half the demurrage rate.  This, of course, leaves Owners earning less than they had forecast. As you can see from the above there are no winners in situations like these with the Charterers and the Owners sharing the cost of these delays on a 50/50 basis. Frustration may be a remedy but if you are considering this then I would urge legal advice as a wrongful termination could be expensive.  A contract can only be terminated on the basis of frustration if it becomes impossible to perform, not if it just becomes more expensive to perform. Mutual Cancellation – this is the best way to bring a close to any agreement and if both parties agree to terminate the charter party then there can be no claim for wrongful termination. Have you had some bad experiences or maybe some good experiences with Force Majeure situations?  Want to add you views on this subject?  Please add your comments here. If you would like to be notified when new posts are added to this blog please subscribe here

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Demurrage

BIMCO Pushing the (port) Boundary

by phil19. September 2013 11:19
There was an important announcement last week from BIMCO when they published ‘Laytime Definitions for Charter Parties 2013 (Laytime Definitions)’ which they have produced together with the Comité Maritime International, the UK Chamber of Shipping and FONASBA and the document has been endorsed by each of the mentioned organisations.  The definitions together with the Special Circular explaining the new definitions can be found here https://www.bimco.org/~/media/Chartering/Special_Circulars/SC2013_08.ashx These definitions are intended to replace and update the ‘Charter Party Laytime Definitions 1980’ and the ‘Voyage Charter Party Laytime Interpretation Rules (Voylayrules) 1993’ which the BIMCO circular admits neither got wide support in the market.  As a tanker man I don’t think I have ever seen reference to these terms in a charter party – any dry cargo readers out there care to comment on dry fixtures? What caught my eye was the definition of ‘Port’ which reads; 1.   PORT shall mean any area where vessels load or discharge cargo and should include, but not be limited to, berths, wharves, anchorages, buoys and offshore facilities as well as places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn no matter the distance from that area This language is similar to the 1980 Definitions which stated that PORT includes ‘…the usual places where ships wait their turn or are ordered or obliged to wait for their turn no matter the distance from that area’ and is similar to Voylayrules which states that Port shall also include ‘the usual places where vessels wait for their turn or are ordered or obliged to wait their turn no matter the distance from that area.’  All of these phrases appear to be designed to allow the Notice of Readiness to be tendered before the vessel arrives at the port and extends the boundaries beyond the legal, fiscal or administrative area as mentioned in the circular which goes beyond current thinking in our courts as I understand it.  The circular mentions in the commentary that they wanted to reflect the wider concept of the port as given in ’The Johanna Oldendorff (1973)’.  I don’t have the full judgement* of that case but looking at the often quoted comments I can see that Lord Reid gave us the Reid test where he stated that ‘Before a ship can be said to have arrived at a port she must, …. have reached a position within the port…’   my emphasis. I think it is an admirable effort to update these Definitions and I can understand the need to eliminate or reduce the number of disputes we see in this business but I cannot see that adopting this definition of port will do so.  The courts have not given such a wide meaning in the past and the real difficulty is that every port is different and to make such general rules will only confuse matters more in my opinion. I can think of an example when this definition could lead to a dispute: In times of severe weather conditions, such as the hurricane season in the US, it is impossible for vessels to reach their destination and they may be ‘ordered’ to remain several hundred miles away from the port for safety reasons.  Using the ‘Port’ definition above would allow an Owner to tender a valid Notice of Readiness at that waiting place.  In my opinion that would be wrong and takes away the obligation for the Owner to navigate the vessel to the agreed destination. On balance I think I prefer today’s legal interpretation but with additional clauses added for specific situations such as the river clauses we see added to charter parties which allow NORs to be given earlier that would normally be permitted. I had a quick look at the websites of the groups putting this together and who they represent: BIMCO https://www.bimco.org/  – ‘global membership of stakeholders… including shipowners, operators, managers brokers and agents’ CMI http://www.comitemaritime.org/Home/0,271,1132,00.html – ‘The voting Members of the Comité Maritime International are national (or multinational) Associations of Maritime Law FONASBA https://www.fonasba.com/  – ‘.. provides a united voice for the world’s shipbrokers and agents’ UK Chamber of Shipping http://www.ukchamberofshipping.com/  – ‘.. represent around 80 shipowners’ ‘Many professional organisations with a maritime interest, including legal or financial firms, are part of the UK Chamber membership.’ ‘We also offer associate membership to a wide range of companies that provide services to UK shipping. These include local shipping associations, P&I clubs, recruitment and technology firms.’ This got me thinking - Where are the Charterers?   I don’t know if any charterers were invited to participate in this exercise but without their input I wonder if this latest initiative will end up like the previous versions and be largely ignored by the industry. Tell me what you think of the latest Definitions.  Let me know your view of the Port definition in particular – is it worth adding to your charter parties?  Are the Definitions likely to be taken up by the industry? * P.S. Thanks to a kind person I was speaking to this week I now have a full copy of the ’The Johanna Oldendorff (1973)’ judgement and I'm off to read all 28 pages! If you would like to be notified when new posts are added to this blog please subscribe here

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Demurrage

How is the Demurrage Rate Agreed?

by phil4. July 2013 13:55
I am often asked how a demurrage rate is determined in a charter party.  I reply that it is similar to fixing the freight rate but there are some differences. How is the freight rate agreed?  This is determined by two factors; the size of the vessel and the state of the market. Most freight rates are quoted as a percentage of the flat rate per tonne of cargo as determined by Worldscale for their standard vessel.  The standard vessel is 75,000 DWT so all things being equal a charter of a 75,000 DWT vessel should command Worldscale 100 (WS100), or 100% of the freight rate calculated by Worldscale.  Of course this will rarely happen as the rate is influenced by the market so if there are few cargoes but lots of available ships the rate is likely to be a lot lower than WS100.  Conversely if there are lots of cargoes and few ships the rate will exceed WS100. Economies of scale.  On top of this ‘market’ factor there is an element of the economies of scale so if the fixture is for a 270,000 DWT vessel it follows that the dollar cost per tonne of cargo will be less than that for a 75,000 DWT vessel on the same voyage.  As a result the fixture will be concluded at less than W100.  It works the other way round for smaller vessels. What has this got to do with demurrage rates?  Well the same principles apply in that the demurrage rate, usually agreed at a fixed value per day or pro rata is a reflection of both the market and the economies if scale.  The demurrage rate for a VLCC of 270,000 DWT is unlikely to be almost  four times that of a 75,000dwt tanker because of the economies of scale although it could happen if the market is tight in one sector of the market compared to another. Whilst the freight rate is subject to spikes up and down according to market influences demurrage rates follow the same pattern but the spikes are smoother and they don’t hit the extreme top and bottom as seen in freight rates.  This is illustrated by today’s market. I understand that the freight rate today for a VLCC is approaching  W45 – and I believe this gives the Owner a daily return of about USD22,000 per day.  However the demurrage rate for a VLCC fixed today is around USD34,000 per day.  Obviously the Owner must deduct the cost of idling bunkers to get a proper comparison with the freight rate return per day but it is clear from these numbers that the demurrage rate is better for the Owners. I find it interesting that while Charterers are happy to take the freight rates as low as the market gives them they appear not to insist on reducing the demurrage rates to a comparable level.  This is good news for Owners in this bleak market and even at its recent low point when freight was giving a return of only USD3,000 or 4,000USD per day the demurrage rate did not drop below USD20,000 per day. The converse of this is also true in that when the freight market hits a high the demurrage rate lags behind the daily return achieved by the freight.  In such cases the Owner hates getting delayed at any ports as he wants to get on and earn the next freight. Back to today’s market - the Owner is earning more on demurrage than he is on freight and he must be praying for delays in port to earn demurrage and boost his earnings. What is your experience of the relationship between freight and demurrage rates?  Do you have an alternative viewpoint?  Do my numbers add up? Let us know what you think by posting your comments here.  

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Demurrage

Asdem International Conference on Tanker Demurrage

by phil27. June 2013 20:33
In May I attended the 11th International Conference on Tanker Demurrage and here is my account of what what went on.  I have attended almost all of these conferences since they started and I think this was one of the best amongst them for the content and quality of speakers.   David Clark, lawyer at Waltons and Morse, opened the first day with a paper on ‘Interim Port Clauses and STS Clauses’.  This was a great run through the history and background to theses clauses and David pointed out the nuances of the different clauses and the implications of certain words.  David’s presenting style makes a subject like this easy to understand and I’ve already had to take a look at it as I’ve since been asked a question on an STS Clause.   Next up was Yvonne Baatz, Professor of Maritime Law at the University of Southampton, with the subject ‘Update on Time Bars – The effect of recent cases’.  Yvonne is very easy to listen to as she commands attention at every point during what could have been a dry subject.  Yvonne took us through the landmark cases and brought us up-to-date with the latest cases where I am left with an impression that the courts could be softening their stance on Time Bars.  Wouldn’t it be great to get a case than finally nails this down and stops people playing games in this area, mind you what would we find to argue about instead?   Nick Austin, partner at Clyde & Co, took the podium after lunch and although he claimed to be nervous to follow Yvonne – he was a former student of Yvonne’s – he didn’t show it as he took us through ‘Oil Sales Contracts – Can you always recover your charterparty demurrage?’  I could have answered the question before he stood up – it’s NO!  Thankfully Nick gave us a much more detailed and eloquent answer.   Casper Cleemann, General Manager Eitzen chemical A/S was up next with ‘The challenges to ship owners in the trends of modern charterparties’.  You can always rely on Casper to give his paper with a generous helping of humour and he didn’t disappoint this time, although his message was serious and often critical of charterers in their quest to reduce and/or delay the payment of demurrage.   After the tea break a mock arbitration followed with Andrew Wilding, Managing Director Asdem Asia Pte, on one side of the argument up against Sarah Hunt, lawyer at Holman Fenwick Willan Geneva, on the other.  They pitted their wits and were out to persuade the arbitrator who was none other than Roger Sepkes, Managing Director Asdem Ltd.  My only experience of arbitration has been one where it was decided on papers only.  In this instance where the arguments were presented orally it struck me that it was a very formal procedure and one where a lot of facts and information is presented and this must be a real challenge for an arbitrator to assimilate.   Dinner that evening was held at the May Fair Hotel and I was pleased to hear Martin Wisdom, partner at Arbis, give the after dinner address.  As it was Asdem’s 25 year birthday it was fitting that Martin gave a potted history of Asdem and offered his congratulations to Roger Sepkes and his team for their contribution to the industry.   Next day first up was Simon Rickwood, Senior Demurrage Negotiator BP Oil International Ltd, who spoke on the subject ‘Virtual Readiness’.  Simon delivered a very interesting paper on the slowing down of vessels when it is known that there will be a delay in berthing and discharging the cargo.  The principle is that the Owners position on demurrage is protected and counted as if it had arrived at the earlier time and the savings on bunkers are shared between the Owners and Charterers.  This is a commendable initiative in this age of global warming but it is still in its infancy and there are a number of questions unresolved, such as, what happens if the vessel breaks down on passage?   Kevin Jandora, Principal Coordinator at LEAP, gave us an update on ‘LEAP’s GTCs for trading contracts and barges’.  LEAP is a collection of companies working on a set of terms that will be made available for trading which will give all parties standard laytime and demurrage terms, amongst other things.  I won’t say too much here - see my update in the latest Asdem Barge Newsletter where I gave a review of the LEAP Workshop held on 8th May, the day before this conference.   Andrew Wilding, Managing Director Asdem Asia, was on the platform again today, this time giving us his paper on ‘Beware the pitfalls in the wording of Exceptions and Interruption Clauses’.  This was a very informative session and I can see that there was much more material in his paper than there was time to cover and this is certainly another paper I want to read again.   After lunch there chap named Phil Stalley (who? I can hear you ask!) spoke on ‘Demurrage – Tricks of the Trade’.  In this session I went through some of the tricks played by all parties in this game of demurrage to either avoid paying demurrage or to maximise recoveries.  I had a lot of fun putting this paper together and I’m sure there were a few tricks that I missed out or maybe I’m not aware of.   The conference was rounded off by Jeremy Davies, Partner Holman Fenwick Willan Geneva, who treated us to another one of his workshops where we worked through some case studies.  As usual it was thought provoking and Jeremy was able to divide the audience on a few points, but put over in Jeremy’s entertaining style.   All in all it was a very good two days and I always come away thinking that it’s a shame we have to wait two years before the next one.   Were you at the conference?  What did you think of it?  Let us know what you think here.

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Demurrage

Can we Learn Something from the Dry Cargo Trade

by phil1. May 2013 13:43
Wibon, wipon and 'time lost waiting for berth' My background is very much in the tanker world but I have become more conversant with dry cargo in recent years since some of the lectures I do cover both sides of the business. Clearly a lot of the case law we work from in the tankers comes from dry cargo cases. My impression has always been that tanker laytime and demurrage clauses have always been more detailed than those in the dry cargo world and I believe our dry cousins could make use of some of the clauses we apply in our business such as early loading clauses. However I have been reading Donald Davies' book Commencement of Laytime and I think I have found something from the dry trade which could be useful in tankers. Wibon is the acronym for Whether in Berth or Not and is added to berth charter parties so that, in the case of berth congestion, a master may tender an NOR on arrival at the port as opposed to the berth. We don't see berth charters although many people believe Shellvoy6 to be a berth charter. Wipon is the acronym for Whether in Port or Not and is added to port charters to allow NOR to be tendered where a vessel is unable to enter a port by reason of berth congestion. ‘Time lost waiting for berth to count as loading or discharging time’ is added to some charters and I understand it means that where a vessel cannot enter a port and tender a valid Notice of Readiness time will still count against the charterer for this delay. I have written on my blog about the problems in tendering an NOR where the vessel has been instructed to wait at a place outside the port and adding wipon or the ‘time lost’ clause could cover these problems without Owners having to revert to claiming damages for detention in these cases. Would these words solve these problems or would there still be more arguments?  I’m sure there would still be arguments as the parties would need to establish the reason why a vessel could not enter the port to ‘arrive’ and tender a valid NOR.  As an example a vessel held outside a port because of bad weather could not expect such waiting time to count as laytime or demurrage using these clauses.  What happens if it is a combination causes preventing the vessel from entering? If owners chose to wait outside to save port dues then again these words, in my view, would not give the Owners any protection. As noted on my blog there are specific ‘River’ clauses that allow NORs and/or time to start before the vessel has reached the destination but do you think Wipon and Tim Lost would cover these cases instead? What do you think about these words and phrases?  Do you already use them and can you share your experiences?  Do you have any other views, perhaps as a charterer who would not be so keen on this solution?      

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Demurrage

It’s a big week Next Week!

by phil1. May 2013 13:36
I remember how difficult it is to get out of the office but if you can spare the time there are two events next week that are well worth attending.  No let me be clearer – why don’t you make time to attend and you can hear the latest thinking and join in the debates. Thursday 9th and Friday 10th – 11th International Conference on Tanker Demurrage This event is staged every two years so miss it next week and you will have to wait 24 months before you can go again.   As always it’s a good line up of speakers and topics although they have let someone call Phil Stalley talk again this year – I’m not sure about that! Take a look at the Asdem website here http://www.asdem.co.uk/products.asp?category=2013%20Conferences%20and%20Seminars&product=11th%20International%20Conference%20on%20Tanker%20Demurrage  to see the full line up.  I am particularly looking forward to hearing Yvonne Baatz speak this year.  Yvonne is a very engaging speaker who is easy to listen to and makes any difficult subject easy to understand.   Yvonne hasn’t appeared at this conference for a number of years so get along to hear her paper if you can as there’s no guarantee she’ll be there in two years’ time. My topic this year is ‘tricks of the trade’, a bit of a contrast to my presentation four years ago when I presented the Code of Practice for Claims.  Come along you may learn some new tricks, or if you have a favourite trick why not share it us during the time for questions! Wednesday 8th May – LEAP’s 2013 European Barge Workshop Just like buses, we wait for a demurrage event and three days come along at once.  There is a very good reason why these have come along together.  Kevin Jandora, Principal Coordinator, is speaking at the Asdem conference and as he is based in New York he has taken the opportunity to get a group of people together to talk about European Barges.  He will be speaking about the Barge Contract at the Asdem conference but on 8th may there is more opportunity to get involved in all manner of discussions about barge demurrage, barge operations and the work happening in and around the barge business.  Also, Kevin will be raising awareness of a new LEAP working group that is developing a 'best practice' barge receipt and timesheet template for the ARA market that would capture all of the information necessary for demurrage claims in that market. ESS, http://www.essdocs.com who are working on electronic nominations, will be there and I am excited to represent HubSE to present our ideas on collaboration with ESS to make life in the barge world more streamlined.  Come along and hear how you might save time and effort. Remember you don’t have to be a member of LEAP to come along to this day, although if your company is a member the cost of the day is a little cheaper. To read more and to register check out this link http://www.energyleap.org/2013/03/2013-meeting-europe-may-8-2013-london/ I look forward to seeing you at either or both these events next week, sign up now – it is not too late.  

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Demurrage | European Barges | Information

Is the 24 hour Pumping Clause Dead?

by phil22. March 2013 13:04
WARNING – I have rewritten this post – my original was based on ExxonMobil VOY2012 version 1.0. The latest and only official version of ExxonMobil VOY2012 is version 2.0 dated March 21 2012 which I’ve only just discovered myself. There’s not a great deal of difference between the two but the pumping clause is slightly different. We are all used to seeing pumping clauses which oblige the vessel to discharge within 24 hours or maintain 100psi. These clauses have been around for as long as I can remember and all follow a familiar theme, i.e. the vessel must do one or the other to protect the Owners demurrage claim. If the vessel discharges within 24 hours then the pumping time counts as laytime or demurrage. If the vessel takes longer than 24 hours to discharge but maintains 100 psi at the manifold then again time counts. So if the vessel discharges within 24 hours and does not maintain 100psi the Owner is home and dry? Not if you’ve fixed on ExxonMobil VOY2012 as an Owner was telling me at LTOPS earlier this year. His vessel discharged well within 24 hours but Charterers claimed excess pumping based on the wording of Clause 18 which reads: Owner warrants that Vessel shall discharge entire cargo (be it one or more grades)by maintaining the maximum safe psi pressure at Vessel’s rail that the Vessel can discharge at, but always at a minimum of 100 psi, during the entire period of discharge provided shore facilities permit. All time lost as a result of Vessel being unable to discharge its cargo in accordance with the pumping warranty shall not count as laytime….’ ExxonMobil have dropped the 24 hours part of this clause altogether and it is now a pressure warranty only. This clause mentions the words ‘maximum safe psi pressure’ and similar wording can be found in other charter parties such as BPVOY4. I can understand this from a charterer’s point of view as I have heard of a case where a vessel was discharging at 100psi with two pumps. The shore requested an increase in pressure but the master refused to start another pump on the basis that he was already meeting the 100psi part of the pumping warranty. Adding words like maximum safe pressure allows the charterers to justify a higher pressure as long as it is safe, but this is the first clause I’ve seen that penalises Owners that discharge a cargo in less than 24 hours. What if the vessel is pumping at full capacity but there is no shore restriction and therefore there is minimal back pressure – the wording of this clause appears to allow charterers to claim excess pumping even though 100 psi is a physical impossibility. What do you think of this clause? Have you had arguments over this? Have you got any other pumping clause stories to share? Please add your comments here.

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Demurrage

KPIs – be careful what you wish for

by phil17. January 2013 14:01
It’s that time of the year when we look back on 2012 and start thinking about our targets for 2013. Management are very keen on giving everyone Key Performance Indicators which are often used to determine pay and bonuses. KPIs drive behaviours so be careful what you wish for. Several years ago there was a story in the papers about the train operators in the UK. The train operators were set targets on punctuality and if a certain percentage of trains had been late the UK regulators would impose financial penalties on the operating companies. It was alleged at the time that when management thought that trains would be delayed they simply cancelled the service altogether. Cancelled services did not form part of the KPI and the train operators kept within the target set. KPIs in the demurrage world can also change behaviours and here are my ideas on this. Aged Claims. You may have a target to reduce the age profile of the claims you have outstanding on your books. This is a good target as I believe there are still too many claims sitting around the industry and we are complacent about that. How often have you heard people say “it wasn’t old, we have only had the claim three months”. If you want to reduce the old claims you can easily set a target but that could lead to paying claims at a higher level than you would like, or recovering less that you are entitled to just to get a quick solution, the papers off your desk and meeting the target. Cash Flow. Some companies ensure that they do not settle claims until they have been paid themselves. This may be valid where this is a clear contractual connection which happens in some trading chains. Is this fair for the Owner of a vessel that has been delayed waiting for his cash until the receiver and the supplier have paid the charterer under the oil contracts? I don’t think so and how does that affect your reputation in chartering market? If cash flow on demurrage is that critical in your company perhaps trading oil is not the game for you? If you are just waiting for the comfort of the cash before paying the Owner why not adopt the Code of Practice for Handling Shipping and Contract Claims as found at www.asdem.co.uk in the downloads section. Savings against claimed values – this is a favourite measure taking the difference between the amounts originally claimed against that finally paid out. The danger is pushing this too far. Say in 2012 you have saved x% of the claimed value, your manager is going to stretch you next year and ask for a target of x+2%. How will you meet that target? Well you could get better at your job. Would this bring on another 2% saving or are you at the top of your game already? If you are the only way to go is to start inventing deductions and hope that your claimants give up and concede the point just to get settlement. Does this improve your credibility or your company’s reputation? Of course if your charterers are fixing ships from the quality Owners that aim to get their claims right first time you may struggle to save any money at all. I don’t think many demurrage analysts need to be incentivised to reduce claims in this way, after all, isn’t this the fun of the game? Don’t we all love showing off how much we have saved through our good investigation, our knowledge of the contracts and our negotiation skills? What do you think of KPIs? What’s your favourite? Have you seen examples of unintended consequences? Please add your comment here.

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Demurrage

One safe berth, London or London, one safe berth

by phil30. November 2012 15:25
It was in the case of the Finix [1975] 2 Lloyd’s Rep 415 where the judge decided that if a charter party described the loading or discharging ports as “One safe berth, London” the charter party is a berth charter whereas the words “London, one safe berth” means that the charter party is a port charter party. Of course it matters whether the charterparty is a berth or port charter party as this dictates where the vessel may tender its Notice of Readiness and who takes the risk of delays prior berthing.  In a berth charter party the NOR can only be tendered at the berth unless there is congestion or a lack of cargo.  As such the Owner, under a berth charter takes the risk of delays such as tide and bad weather.   As seen in the case of the Happy Day an NOR given at the anchorage under a berth charter party is not valid. I don’t know what charter party form the Finix was fixed on but I assume it was a form where the words in the body of the charter gave no indication of whether it was a berth or port charter. The Finix is often mentioned on a course where I am one of the speakers and I occasionally have a debate with the other speakers regarding the phrases “One safe berth, London” and “London, one safe berth”.  There is a view that these phrases change a charter party to a berth or port charter party irrespective of what the printed words say in the body of the charter party. I don’t subscribe to this view as I believe the Finix judgement is there as guidance when there are no other clues.  Where the body of the charterparty clearly states where NOR can be tendered then the words “One safe berth, London” or “London, one safe berth” cannot overrule this.  To interpret these words in any other way would, I think, cause chaos in the business as I suspect such care is not normally taken over recaps in the tanker world. Where I think it could cause charterers a real problem is the use of either phrase where the body of the charterparty states that charterers will exercise due diligence in nominating a safe port.  The use of these phrases could be argued to bind the charterers to an absolute warranty of providing a safe berth which is a higher hurdle than exercising due diligence, but that is a different matter. What do you think about these phrases?  Do they change the body of the charterparty?  Have you come across other phrases in recaps which cause confusion or conflict?  Share your thoughts and experiences by posting your comments here.

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Demurrage

Early NORs and the Petr Schmidt revisited

by phil2. November 2012 14:42
I took another look at the case of The Petr Schmidt (note 1) after discussing it with Andrew Keates of Keates Ferris who was chairing a seminar where I presented a laytime and demurrage module. Andrew ran the Petr Schmidt case for the charterers and even after all this time he is still a little disappointed with the outcome and I think I can understand why. For an NOR to be valid the vessel must be in the right place and be legally and physically ready. If an NOR is tendered and one of those conditions is not met the NOR is invalid and a subsequent NOR must be tendered to trigger the commencement of laytime absent any other trigger such as berthing or commencement of cargo. The Petr Schmidt leaves an exception to this rule where the NOR has been tendered earlier than the time specified in the charter party. In the case of the Petr Schmidt the c/p stipulated that NOR must be tendered "within 0600 and 1700 local time".  The NOR was tendered outside these hours, during the preceding evening, and the Court of Appeal ruled that the NOR was correct in every other sense, i.e. the vessel was in the right place and physically and legally ready, and although the Owners had not adhered to the timing of the clause the court deemed the notice to be tendered at 0600hrs the next day which was the earliest opportunity under the charter party. In the case of the Petr Schimdt we get no guidance for the following situations:  Assuming that the vessel was ready in all respects but gave an early NOR, say at 2100hrs the previous evening, that NOR becomes valid at 0600hrs the next day. What happens if the condition of the vessel changes between 2100hrs and 0600hrs the next day?  For example A)     The vessel breaks down at 0100hrs but is repaired at 0500hrs or B)     The vessel breaks down at 0100hrs but is repaired at 1000hrs In each of these cases is the original NOR valid and does it become effective at 0600hrs and 1000hrs respectively, or does a second NOR have to be tendered? Thinking about early NORs there must be some implications in today's trading where in most tanker c/ps there is a clause that states that NOR cannot be given before commencement of laydays. Does the Petr Schmidt make such clauses superfluous? Charterers want control over when the NOR can be tendered as oil is often priced on the Bill of Lading date. What happens if an NOR is tendered ahead of laydays, the vessel is called to berth by an eager loading terminal and the master agrees to load early resulting in an earlier dated bill of lading. Does the Petr Schimdt protect the owners on laytime and demurrage? This is probably irrelevant as an early loading clause is usually added giving the Charterers credit for the period of early loading. What about the pricing?  If the Charterer has to pay more for his oil as a result of the early loading is this a breach of charter on the part of the owners and is the owner liable for damages?  I would think so and any damages suffered by the Charterer would outweigh any demurrage costs by a significant margin.  I base this view on The Ulyanovsk (Note 2) - in this case the Charterers instructed the vessel not to tender NOR or berth on arrival but to await further instruction.  The master ignored the voyage orders and the vessel loaded earlier than the Charterers wanted resulting in a higher price paid for the oil.  Charterers were successful in recovering damages from Owners.  What is your view on early NORs? What is your view on the Petr Schmidt decision? Have you had any interesting disputes on this point? Please add your comments here. Note 1: Galaxy Energy International ltd v Novorossiysk Shipping co (The Petr Schmidt) [1997] 1 Lloyd's Rep 284;  [1998] 2 Lloyd's Rep 1 (CA) Note 2: Novorossisk Shipping v Neopetro Co. (The Ulyanovsk) [1990] 1 Lloyd's Rep 425

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Demurrage

Phil Stalley

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I have been heavily involved in the demurrage industry for many years This blog is somewhere for me to put my ideas to the industry and somewhere for the industry to join in with open discussion on the issues that crop up from time to time. It is intended to be entertaining and informative. Please add your comments and join the debates, but PLEASE BE POLITE to me and your colleagues in the industry

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Phil Stalley is a Director of HubSE Ltd, authors of the world class CMS demurrage claims management system. If you would like to know more about HubSE or CMS then please click on the icon to visit our website or simply email Phil

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