Incorporation of Bulk Terminal Terms into Charter. Effect on Laytime and Demurrage Regime.

In London Arbitration 15/21 the Tribunal considered the effect, if any, of the incorporation into the fixture of what were referred to as UBT (United Bulk Terminal) Rules, which were rules imposed contractually by the berth operators on users of the berth. These provided:

 “2.2 NOTICE OF READINESS

In the case of an Ocean Vessel to be loaded, issuance of the Notice of Readiness shall mean that the Ocean Vessel (1) has obtained all requisite governmental approvals, inspections and clearances, including, but not limited to, those required by the US Customs Service and the Immigration and Naturalization Service; and (2) is located at the Berth or Closest Available Anchorage (as defined in section 2.5 below); and (3) is ready and suitable in all respects to receive the Cargo in all holds to be loaded; and (4) has confirmed with the Terminal that the Cargo is to be loaded to Vessel is in storage at the Terminal or, if Cargo is to be direct transferred, is in barges in the Terminal’s fleet; and (5) has determined that the Cargo is in a condition satisfactory to the Vessel Party and all regulatory authorities for shipment. Notice of Readiness shall be considered invalid unless the aforementioned five conditions are met…”

By contrast the recap setting out the fixture provided

“- SHOULD THE BERTH BE OCCUPIED OR SHOULD THE VESSEL BE PREVENTED FROM PROCEEDING TO THE BERTH AFTER HER ARRIVAL AT OR OFF THE PORT NOTICE OF READINESS MAY BE TENDERED BY TELEX, FAX WWWW (an acronym for “wibon, wccon, wifpon, wipon”, ie “whether in berth or not, whether customs cleared or not, whether in free pratique or not, whether in port or not”).

– AT BOTH ENDS PORT LAYTIME SHALL COMMENCE TO  COUNT 12 HRS AFTER VALID NOR IS TENDERED UNLESS OPERATIONS SOONER COMMENCED.  IN CASE SOONER COMMENCED, ACTUAL TIME USED TO COUNT.”

Clause 6 of the charter in effect confirmed what was agreed in the recap.

Owners gave notice of readiness at the port of Davant on the Mississippi on arrival at the South West Anchorage, having to wait there due to congestion at the berths. The tribunal held that there was no requirement in the contract for the vessel to have passed any inspections, etc before giving a valid notice of readiness. Nor was there any requirement in the contract that notice be accepted by the charterers or their agents. Similarly it contained no requirement that notice be given within the laycan.

Under English law was that where an incorporated document conflicted with the terms of the primary agreement entered into by parties, the conflicting terms had to give way to those in that primary agreement with which they were inconsistent, as had been held in a similar case The Linardos [1994] 1 Lloyd’s Rep 28.

Accordingly the aspects of the UBT Rules relied on by the charterers conflicted with the terms of the fundamental agreement as found in the recap, and reinforced by the incorporated charter terms. As in The Linardos, the UBT Rules were designed to govern contractual relationships between the terminal and users of the berth so, when reading them into a charterparty, great caution had to be exercised in interpreting them in the charterparty context so as to ensure that only those provisions in the Rules that were truly relevant to and compatible with the charter agreement were given effect to.

In the light of the charter provisions agreed in the recap, the vessel was entitled to give notice of readiness at the Southwest Pass as that was the nearest available anchorage off the port at the time she arrived there, and the UBT Rules did not affect that position. Accordingly the owners’ demurrage claim succeeded, and they would be awarded the claimed amount of US$109,495.83 plus interest and costs.

Charterers orders to wait off berth not an extra contractual service; time falls within the laytime and demurrage regime.

London Arbitration 14-21 involved a claim by owners that time spent waiting on charterer’s orders following tender of NOR at the discharge port was a non-contractual service which should be remunerated by way of quantum meruit. This would be at the demurrage rate and would include bunkers consumed while waiting.

The Tribunal rejected the claim. Laytime had already started to run when the charterers ordered the vessel to wait off berth. This was not a non-contractual order as in The Saronikos [1986] 2 Lloyd’s Rep 277 and Glencore Energy UK Ltd v OMV Supply & Trading Ltd [2018] 2 Lloyd’s Rep 223. The charterers were entitled to use the whole of the agreed laytime, whether  by holding the ship off the berth, or by berthing her and not working her for some time, or by berthing her and working her immediately. Once laytime had started to count the charterers were entitled to use it in full. Even if owners had been right, they would not have been entitled to anything for bunker consumption. Assuming the demurrage rate was to be taken as a genuine pre-estimate of damages for detention, it had to follow that running expenses, including bunker costs, were to be taken as included in the agreed rate.

Smart claims for bill of lading freight by owners.

If an owner’s bill of lading incorporates the freight provisions of a time charterer’s voyage charter, can owners intervene to require payment of the freight to themselves rather than to the time charterer? That was the issue recently before Butcher J in Alpha Marine Corp v Minmetals Logistics Zhejiang Co Ltd (MV Smart) [2021] EWHC 1157 (Comm) (05 May 2021).


Claim were made by owners against charterers in respect of the loss of the vessel for breach of the safe port warranty. the Tribunal found that the Charterers had provided a safe port warranty in respect of Richards Bay and that there were some shortcomings in the running of the port. However, the Master had been negligent in his handling of the Vessel and it was this that caused the grounding of the Vessel. Owners had issued bills of lading which stated ‘freight as per charter’.  After the vessel was lost the Owners gave notice to the bill of lading holder, the voyage charterer to pay full freight to them. At that time only a sum in respect of bunkers was due to Owners.  Charterers claimed damages in respect of losses sustained as a result of owners’ intervention in respect of freight due under the bill of lading through the incorporation of the terms of the voyage charter. They also claimed in tort on the basis of procuring breach of contract by the voyage charterer and/or knowingly and/or unlawfully interfering with the Voyage Charter. The Tribunal found that Owners were not entitled to revoke Charterers’ right to obtain the bill of lading freight or to direct it be paid to the Owners. This is because the Charterparty contained an implied obligation that Owners would not revoke unless hire and/or sums were due to them under the Charterparty

On appeal, Butcher J considered three possible terms constraining owners’ exercise of their rights to intervene to claim freight under the bill of lading. First, the “all freight” implied term whereby if the Charterers were in default of their obligations under the Charterparty, then the Owners would be entitled to collect the entirety of the freight, even if it exceeded the amount of the Owners’ claim against the Charterers arising out of their default. Second, “All Freight (Sum Identified) Implied Term”) by which the Owners were not entitled to revoke the Charterers’ authority to collect any freight unless a sum was due to the Owners under the Charterparty and the relevant sum was identified at the time of any revocation of the Charterers’ authority; and (3) the “Dollar for Dollar” Implied Term whereby the Owners were only entitled, in the event of a default by the Charterers, to revoke the Charterers’ authority to collect freight in respect to an amount up to, but no more than, the amount due from the Charterers under the Charterparty.

Butcher J rejected the implication of any term.  Owners’ duty to account to the charterer for any excess in the amount of freight collected over the amount due under the charterparty meant that the present charterparty, or other time charters in similar form, did not lack commercial or practical coherence without an implied term restricting the owners’ right to intervene.  If owners claimed freight in excess of sums due to them under the time charter the owners would have to account for the balance to the time charterers, and that was the charterers’ protection.

The Award was set aside insofar as it awarded damages for breach of the implied term found by the Tribunal; and the matter was remitted to the Tribunal for reconsideration of the Charterers’ freight counterclaim on the alternative Tortious Basis, having regard to this judgment.

Deadfreight. Charterer’s nominated berth frustrates owner’s option as to quantity to load.

In London Arbitration 7/21 a vessel was chartered to carry coal. The owners were given the option to load between 27,000 and 33,000 mt of cargo, and the charterers were bound to provide a safe port/berth at the specified terminal. The owners exercised their option to load 33,000 mt

Prior to the fixture being concluded the owners had emailed the charterers’ agents at the loading port and had been advised that the maximum draft at the terminal was in excess of 13 m. The agents indicated that the vessel would berth at a specified berth where the vessel would have had no problem in loading 33,000 mt.

Charterers ordered vessel to load at a different berth where there was a lower maximum sailing draft and failed to change the berth nomination. There was a shortfall of 1,590 mt of cargo.

The tribunal held that the owners were entitled to exercise their option as to cargo quantity unfettered, and the charterers were bound to load whatever amount the owners opted for up to 33,000 mt. If, by their choice of berth, the charterers prevented the vessel from loading that quantity, they put themselves in breach of that obligation. By ordering the vessel to a berth where the draft was so limited as to stop the vessel loading 33,000 mt, the charterers frustrated the exercise of the owners’ option. Charterers were liable to owners in damages for the shortfall in cargo loaded

Off-hire and arrests unconnected with the vessel detained.

On 15 December 2018, while under time charter to Navision the “Mookda Naree” was arrested at Conakry in respect of a claim against sub-sub charterers Cerealis, and remained under arrest for nearly a month. The claim related to an alleged shortage claim against them by SMG in respect of cargo discharged at Conakry from a previous, unrelated vessel. The head charter and the sub-charter were time charters on the Asbatime form with additional clauses. In both cases, additional clause 47 put the ship off hire inter alia upon her being detained or arrested by any legal process, until the time of her release, “unless such … detention or arrest [was] occasioned by any act, omission or default of the Charterers and/or sub-Charterers and/or their servants or their Agents.” Additional clause 86 of the head charter, not included in the sub-charter, provided as follows:

“Trading Exclusions

When trading to West African ports Charterers to provide adequate security guards during port stays in these countries to protect the vessel her crew and cargo.

When trading to West African ports Charterers to accept responsibility for cargo claims from third parties in these countries (except those arising from unseaworthiness of vessel) including putting up security, if necessary, to prevent arrest/detention of the vessel or to release the vessel from arrest or detention and vessel to remain on hire.

…”

By cl.43 the Inter-Club Agreement was incorporated into the head charter.

Owners claimed that the vessel never went off-hire and that Navision was liable in damages for breach of cl.86. It was common ground that in the context of both time charters, Cerealis was a “sub-Charterer” within the clause 47 proviso.

The tribunal heard separate references by the sub charterer against the time charterer, and by the time charterer against the owners. They held that the clause 47 proviso applied, so that the vessel was not off hire after 12:00 hrs on 17 December 2018, because by that time her detention under arrest thereafter was occasioned by Cerealis’ failure promptly to deal with or secure SMG’s claim so as to procure her release.

In the head charter reference, the arbitrators held that the second paragraph of cl.86 applied, and was not limited to claims concerning cargo carried under the head charter. Therefore, the vessel was off -hire for the entire period under arrest.

On appeals by sub-charterers and time charteres against the awards, Andrew Baker J held, [2021] EWHC 558 (Comm) 10.3.21, that the tribunal had correctly concluded that the detention of “Mookda Naree” after 12:00 hrs on 17 December 2018 was occasioned by Cerealis’ failure to act. It ought reasonably to have acted to deal promptly with the claim being made against it by SMG, that being an “act or omission or default of … sub-Charterers” within the meaning of the proviso to clause 47 of both charters. As regards s.86 under the head charter which concerned the award of hire up to 12,00 on 17 December 2018 it was clear that clause 86 was intended to create a different regime to that generally applicable by reason of clause 47. The vessel never went off-hire during the period of the arrest.

The arbitrators had erred in their construction of clause 86 and should have said that SMG’s claim, though it related to a cargo that had been carried to a West African port, was not a cargo claim within clause 86 of the charter between the Owner and Navision because it did not concern “Mookda Naree’s” West African trading pursuant to that charter but a different ship altogether. It was therefore not a claim allocated to be Navision’s full responsibility by clause 86, any more than it would have been a claim to be dealt with under the Inter-Club Agreement pursuant to clause 43 in the absence of clause 86. Navision’s appeal against the award in the head charter reference succeeded to the extent that because the arbitrators misconstrued clause 86 they wrongly held that the ship never went off hire, whereas they should have held that when arrested she went off hire under clause 47 until the proviso bit from 12:00 hrs on 17 December 2018. They had also wrongly held that Navision had a liability for damages to be assessed for breach of clause 86.

Updated BIMCO versions of TOWCON, TOWHIRE and BARGEHIRE forms. Work in progress on new Force Majeure clause.

BIMCO have released new versions of their TOWCON, TOWHIRE and BARGEHIRE forms. New to TOWCON 2021 are a provision for mid-voyage bunkering on longer tows, and a mechanism for calculating compensation due to slow steaming or deviation. BARGEHIRE 2021 now contains clearer wording relating to off-hire surveys, repairs and redelivery. These have often been a source of dispute in the past.

BIMCO has also announced details of progress on its new Force Majeure clause. It takes the approach that neither party may terminate the contract while the vessel is carrying cargo. It notes that termination by owners with cargo on board will entail their continuing responsibility for the cargo as bailees, with no rights of recourse against charterers for discharge costs.

The new bolt-on to the clause sets out a number of liberties if force majeure prevents the completion of loading, or the departure from the load port, or discharge, for more than 21 days from when force majeure notice was declared. Extra costs incurred thereby should be allocated in accordance with the contract, in particular terms as to allocation of responsibility for loading or discharge, such as FIOST terms.

Any extra costs incurred in exercising any of the liberties should be allocated in accordance with the contract. This will require examining how the responsibility for loading and discharge has been allocated in the underlying contract, for example, if it is on FIOST (Free In Out Stowed and Trimmed) terms.

The BIMCO sub committee also considered how the draft clause would relate to other BIMCO clauses in the same contract such as the war, piracy and infectious or contagious diseases clauses. These allow owners to reject proceeding to a risk area, and if they do, to provide a cost allocation mechanism. By contrast the purpose of the Force Majeure clause is to protect a party from liability in damages in case of force majeure, and as a last resort to allow termination, something complementary to the other BIMCO clauses, and not in conflict with them.

The sub-committee noted that it is for the parties to decide whether a Force Majeure clause belongs in a period time charter, and the triggers for the clause have been set deliberately high. Firstly, the party claiming force majeure must prove the existence of the force majeure event; that the event was beyond its control; that it could not have been foreseen; and that its effects were unavoidable. Secondly, the right to terminate will only be available if performance becomes impossible, illegal or radically different, or substantially affects the whole contract during an agreed number of days.

This second aspect is similar to the doctrine of frustration but BIMCO state that “However, there is an important difference – if a party can bring itself within that termination provision, it will be able to terminate immediately, from day one. Under frustration, the contract would only be considered frustrated and terminated after a very long time compared to the overall contract period. There are two termination provisions in the clause and the other one provides a longstop right to terminate after an agreed amount of time has passed. The number of days will have to be negotiated depending on the contract in question.”

The BIMCO Force Majeure Clause and the additional bolt-on provision will be presented for adoption in May this year.

In Rem Action- Demise Charterer or Not?

‘Statutory liens’ or ‘statutory rights in rem’ come into existence on commencement of in rem proceedings (The Monica S [1967] 2 Lloyd’s Rep 113). In practice, this means that, if a ship is sold to a third party before the jurisdiction has been invoked or if a charter by demise is terminated before such time, then the potential claimant may be unable to benefit from the in rem proceedings and the accompanying right of ship arrest. The most recent judgment of the Admiralty Court in Aspida Travel v The Owners and/or Demise Charterers of the Vessel ‘Columbus’ and The Owners and/or Demise Charterers of the Vessel ‘Vasco Da Gama’ [2021] EWHC 310 (Admlty) highlights that.

In this case, Aspida Travel claimed against the proceeds of sale of the vessels ‘Vasco De Gama’ and ‘Columbus’ in respect of travel agency services for the transport of crew to and from the vessels which took place between 1 January 2020 to 31 July 2020 when the vessels went to lay-up due to the pandemic. At that time the vessels ‘Vasco De Gama’ and ‘Columbus’ were demise chartered to Lyric Cruise Ltd and Mythic Cruise Ltd respectively to whom Aspida provided the relevant services and rendered the resulting invoices. The claim forms were issued on 13 November and 20 November 2020. The basis of the claims was Section 21 of the Senior Courts Act 1981, paragraph 4 of which provides that:

‘In the case of any such claim as is mentioned in section 20 (2) (e) to (r), where –

  • the claim arises in connection with a ship; and
  • the person who would be liable on the claim in an action in personam (‘the relevant person’) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against –
    • that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise; or
    • any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it.’

The main objection to the claims was that they do not meet the requirements of Section 21 (4) of the Senior Courts Act 1981, in that Lyric Cruise Ltd and Mythic Cruise Ltd as the ‘relevant persons’ (i.e. the persons who would be liable in personam on the claims) were the charterers at the time when the cause of action arose, but not the demise charterers at the time when the action was brought. In fact, Mythic Cruise Ltd and Lyric Cruise Ltd terminated their charters on 7 October 2020 and 9 October 2020. As the claims were brought more than a month later, it was held that the third require of the Section 21 (4) of the Senior Courts Act 1981 was not fulfilled. By the time the claims were issued, Mythic Cruise Ltd and Lyric Cruise Ltd were no longer the demise charterers.

Demurrage time bar. Equivalence of requisite documents.

In London Arbitration 1/21 a vessel was chartered on amended Asbatankvoy for a voyage between two Italian port. An addition clause required the claim and supporting documents to be received by Charterers in writing within ninety days of completion of discharge, failing which any claims by owners would be waived and absolutely barred. The clause went on to specify the supporting documents for a demurrage claim. “Insofar as demurrage claims are concerned the supporting documents to be received by Charterers must include a Laytime and Demurrage calculation issued in accordance with the allowances and exceptions provided in this Charter Party. Owners’ invoice, Notices of Readiness and Statements of Facts issued at loading and discharging ports, duly signed in accordance with Clause 17 above. If other Time Sheets or Statements of Facts are separately issued for other cargoes handled at the same port or berth, these documents should also be attached to Owners Laytime and Demurrage calculation.”

Owners sent documents and the claim to charterers within the ninety days, but charterers claimed three documents were invalid.

1. Owners’ demurrage invoice. Owners had submitted their invoice at the bottom of the document headed ‘Time Sheet’ but had not stated on the face of the document that it was an invoice. The Tribunal followed Lia Oil SA v ERG Petroli SpA [2007] 2 Lloyd’s Rep 509 and found that a single document could be both a laytime and demurrage calculation and an invoice.

2. Statement of facts at discharge port. Owners submitted an unsigned Statement of Facts, and a Time Sheet which had all the information expected of a statement of facts which was signed by receivers. The Tribunal accepted the second document as the Statement of Facts for the purposes of the time bar.

3. Port log, discharging log, and pumping log for discharge port. Owners had provided a detailed signed time sheet which was functionally equivalent to a port log and the unsigned statement of fact. They also provided a manifolds pressure log, which provided inter alia, the average discharge rate, the manifold pressure and number of pumps used for each hour of the discharge operation. That document was functionally equivalent to a discharging log and a pumping log.

Owners were obliged to present all supporting documents but Charterers had failed to identify any specific document owners had failed to produce or to produce an equivalent. That part of the challenge failed. Owners’ demurrage claim was not time barred.

Apparent good order and condition: apparent to whom?

Shippers are in the nature of things in a position to know rather more about a cargo they are shipping than the carrier who transports them. This can cause problems, as appears from the Court of Appeal’s decision a couple of days ago in Noble Chartering v Priminds Shipping [2021] EWCA Civ 87. The Tai Prize, a 73,000 dwt bulker owned by Tai Shing Maritime, was voyage-chartered by Priminds from time-charterers Noble to carry a cargo of Brazilian soya beans from Santos to Guangzhou in southern China. They presented clean bills of lading to agents who signed it on behalf of the head owners Tai Shing. On arrival the beans were mouldy and damp; this was due to the fact they had been shipped too wet, something which the master had had no reason to suspect, but which Priminds ought to have realised.

The consignees sued Tai Shing in China and got $1 million (in round figures). Tai Shing claimed in turn from Noble, who settled the claim for $500,000. Noble then claimed this sum from Priminds. They relied on their right of indemnity under the charter and an allegation that a dangerous cargo had been shipped, and also argued that the bill of lading that Priminds had sent for signature had been inaccurate, since a cargo which Priminds had had reason to know was over-wet could not be said to have been shipped in apparent good order and condition. The first two claims were rejected by the arbitrator, and nothing more was heard of them; but the arbitrator allowed the third claim. HHJ Pelling on a s.69 appeal held that she had been wrong to do so (see [2020] EWHC 127 (Comm)). Noble appealed.

The issue was simple. “Apparent good order and condition” means good order and condition “as far as meets the eye” (e.g. Slesser LJ in Silver v Ocean SS Co [1930] 1 K.B. 416, 442). But whose hypothetical eye matters here? The master’s, or that of the shipper presenting the bill? The Court of appeal had no doubt: upholding HHJ Pelling, it decided that it was the former. The master here had had no reason to suspect anything wrong with the soya beans in Santos; Tai Shing had there therefore been entitled (and indeed bound) to sign a clean bill. It followed that the clean bill presented had been correct and not misleading, and equally that Priminds had not been in breach.

The arbitrator’s decision on this had, we suspect, been seen by most as heterodox. We agree, and join what we suspect will be the majority of shipping lawyers in welcoming the Court of Appeal’s decision. It is worth making three points, however.

First, this is actually a hard case, even though it does not make bad law. It is difficult not to have some sympathy for the head owners (and through them Noble). On any normal understanding of the law the head owners, having issued entirely legitimate clean bills, were not liable to the receivers at all. It is perhaps tactful not to inquire too closely into how judgment was given against them for $1 million. Priminds, by contrast, were pretty clearly liable for a breach of contract in shipping wet beans. One can see why the head owners’ P&I Club might have felt sore at becoming piggy-in-the-middle and bearing a loss that by rights ought to have fallen on the shippers who escaped scot-free.

Incidentally, it is worth noting one possibility in this respect. A consignee not infrequently has the option, in a case where it is alleged that a clean bill was improperly issued, to sue either the carrier for failing to deliver a cargo in good condition, or his seller for breach of contract in not shipping it in like good condition. It is in most cases more convenient to sue the carrier, if necessary by threatening to arrest the ship at the discharge port. Nevertheless all may not be lost for P&I interests. It seems at least arguable that they may be able to lay off at least some of the risk by bringing contribution proceedings against the seller as a person who, if sued by the consignee, might also have been liable for the same loss. They do not even have to show that they were in fact liable to the consignee: merely that the claim alleged against them was good in law (see s.1(4) of the Civil Liability (Contribution) Act 1978).

Thirdly, Males J in the Court of Appeal at [57] left open the possibility of the liability of a shipper who presented clean bills when he actually knew of hidden defects in the cargo. This will have to remain for decision on another day. But it is certainly hard to have much sympathy for such a shipper: particularly since there are suggestions that a carrier who knows that a cargo is defective cannot legitimately issue a clean bill merely by looking complacently at impeccable outside packaging and then sanctimoniously turning a Nelsonian blind eye to the horrors he knows lurk beneath it (see e.g. Atkinson J in Dent v Glen Line (1940) 67 Ll.L.L.R. 72, 85).

COVID 19. Lengthy delays for discharge of coal cargoes in two Chinese ports.

COVID 19 has caused numerous delays in loading and discharging at ports throughout the world. Sometimes we have seen total exclusion of ships from specified countries, as with the UK’s exclusion of all ships from Denmark for a time in November due to the ‘covid-mink’ scare, and with the brief exclusion by France of accompanied road freight from the UK shortly before Christmas.  

News has now come in of very serious delays in certain Chinese ports. Two Indian ships carrying coal from Australia are still waiting at anchorage for a very long time. The ‘Anastasia’ with 23 crew members on board arrived off Jingtang in Hebei Province on 13 June and the ‘Jag Anand’ with 16 crew members arrived off Caofeidian port on September 20. On New Year’s day India said it was looking at several options to repatriate the 39 Indian sailors on the two ships, including a crew change at sea or at a Chinese port.