Detention damages. At net or gross demurrage rate?

In London Arbitration 17/17 the tribunal had to decide on what compensation the owners were available in respect of detention at the discharge port. The vessel was chartered for a voyage from Rotterdam to 1-2 safe berths, Iskenderun.  NOR was tendered outside Iskenderun and was therefore invalid. The vessel was unable to enter the port because charterers, who were the owners of the cargo, had been unable to complete their on-sale of the cargo. Six weeks later the charterers ordered the vessel to proceed to another port in Turkey, Mersin.

 

Owners had agreed to the direction to discharge at Mersin and were entitled to compensation by way of detention from the time laytime would have commenced, had the Iskenderun NOR been valid,to completion of discharge at Mersin. The usual method of calculating damages for detention would be the applicable net demurrage rate plus the cost of bunkers for periods the vessel was underway. Here owners claimed only damages for detention, but at the gross demurrage rate.

 

The tribunal held charterers could offset their allowed laytime at the discharge port against their liability in detention once the vessel reached Mersin, even though Mersin was not a permitted discharge port under the charter. The owners were entitled to compensation for their actual loss and if that was based on the demurrage rate, it would be based on the net rate, after deduction of 4% brokers’ commission, and not the gross rate, as owners had claimed. This was so even though the charter did not provide for commission on detention claims.

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to five editions and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment. He has also written and taught extensively on commercial law, trusts and environmental law. Simon will be a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he will teach on both the LLM (Carriage of Goods by Sea, Land and Air and Oil and Gas Law) and LLB programmes at Swansea.

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