Interruption of demurrage due to ‘fault’ of shipowner?

London Arbitration 6/23 involved potential interruption to demurrage due to what charterers claimed was the fault of the shipowner. The vessel was chartered for a voyage from Turkey to Futuna Island in the French Pacific Ocean carrying  part cargo of steel pipes. Other cargo was loaded and discharged at additional ports as part of the same voyage but under different fixture arrangements. Five months after loading in Turkey the vessel reached Port Louis in Mauritius. Shortly after sailing, the main engine had to be shut down due to excessive exhaust temperatures and the activation of the oil mist detector alarm. The high exhaust temperatures caused defects to the exhaust valve seat surfaces, which were beyond the capability of the crew to repair. The vessel was towed to Reunion for repair. These took four months, which was longer than expected. The Covid-19 pandemic, which affected the availability of spares and labour at the time, was offered as an explanation.

In the meantime new regulations had been introduced at Futuna under which the vessel’s dimensions would not allow it to meet the new requirements. The receivers were forced to agree that the vessel would discharge at an alternative port in Fiji. However, the short space of time between the decision to change discharge ports and the vessel’s arrival at the actual discharge port presented problems to the receivers and contributed to discharge not starting more promptly. Charterers raised a defence to owners’ demurrage claim saying that the delay in discharge that this problem could be traced back to the engine failure and was exacerbated by a failure by the owners to keep them and the receivers more closely advised about progress of the repairs.

The arbitrator found that the fault alleged by the charterers could not have been the engine condition prior to loading in Turkey as there were no engine problems for a further five months into the voyage. The repairs took an unusually long time but took place in the middle of the pandemic which affected availability of spares and personnel. By the time the discharge port had been changed to Lautoka, it seemed that all the vessel’s faults had ceased to exist and the owners were able to tender a valid notice of readiness. Discharge was able to commence reasonably shortly thereafter and the charterers accepted that it did until laytime ran out. It followed that if laytime could run, there was no reason why demurrage should not commence once it expired and consequential loss of time was not recoverable under the doctrine of “fault”. Owners were therefore able to recover their demurrage in full.

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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 seven editions (soon to be eight) 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, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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