Demurrage or detention? Agreement for vessel to wait mid-voyage.

 

What is the nature of a claim for compensation when the parties to a sale contract agree that the vessel shall wait for orders mid voyage? Demurrage, or detention? This was the question that came before the court in Glencore Energy UK Ltd v OMV Supply & Trading Ltd [2018] EWHC 895 (Comm).

Glencore Energy sold oil on cfr terms to OMV Supply & Trading. There was congestion at the discharge port of Trieste and OMV asked Glencore that the carrying vessel should wait offshore until a berth was available, to which Glencore agreed.  On arrival at the waiting area the vessel’s master served NOR. The sale contract provided for 36 hours laytime at disport, commencing 6 hours after tendering of NOR or on commencement of discharge, and provided for demurrage to be paid in accordance with the  actual charterparty rate. The clause also required any claim for demurrage to be received latest 90 days from completion of discharge otherwise it would be deemed to have been waived. The contract also incorporated the BP 2007 General Terms and Conditions for CFR deliveries.

Glencore claimed compensation for the period waiting offshore at OMV’s request by reference to the demurrage rate, as well as for the cost of bunkers consumed there. This was a detention claim on the basis of an implied contract. The claim was submitted outside the 90 day period for submission of demurrage claims and OMV rejected it, arguing that the claim was a claim for demurrage, in that laytime was advanced when the master served NOR on arrival at the waiting area, with the demurrage provisions following mechanically.

Sir Ross Cranston held that the waiting period did not fall within the laytime and demurrage provisions in the sale contract or the incorporated BP terms. The former referred to laytime at disport and the latter defined laytime as time allowed for loading and unloading. The NOR given by the master could not start laytime for a waiting period during which there was neither loading or unloading. Glencore were entitled to compensation for the waiting time at the demurrage rate, together with the cost of bunkers consumed during the waiting time. Their acceptance of OMV’s request gave rise to an implied contract for “delay by agreement” under which the vessel would wait until further orders and Glencore would be remunerated for that service. The claim was one for detention, not demurrage, and accordingly was not within the time bar provisions for demurrage 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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