Category: Charterparties

Delay due to COVID 19 tests on crew and off-hire.

London Arbitration 13/23 involved an off-hire claim was made by time charterers in respect of a period of delay in transiting the Panama Canal due to the vessel’s quarantine pending the results of PCR tests on the crew. Shortly before the vessel’s arrival at the Panama Canal the Master fell ill on May 24 2021 and the vessel deviated to the nearest port in Puerto Rico to land the master ashore. The next day the master died with the vessel then having an eta at Cristobal for transiting the canal on the morning of 28 May. A test was taken on the deceased master which came back negative and the crew took PCR tests but not until these came back negative was the vessel allowed to come out of quarantine, and the vessel ultimately started its transit of the Panama Canal at 16.47 on 31 May 2021.

Charterers advanced their claim by reference to four clauses, and all were unsuccessful.

1.  cl.15. That in the event of the loss of time from deficiency and/or default and/or strike of crew and/or of men … or by any other cause preventing the full working of vessel, the payment of hire shall cease for the time thereby lost …”

Although in The Apollo [1978] 1 Lloyd’s Rep 200 a delay in berthing awaiting free pratique caused by previous illnesses on board was found to be an off-hire event, the off-hire clause there had included the term “any other cause whatsoever” and it was on the basis of that wording that the charterers had been found able to place the vessel off hire. Here, there was no cause within the terms of clause 15.

2. cl. 38. Certificates/Vaccinations

Owners are obliged to deliver and maintain throughout the currency of this Charter Party the vessel, her crew and anything pertaining hereto supplied with up to date and complete certificates (including Oil Pollution Certificates), approvals, equipment and fittings enabling the vessel and her crew to trade within the trading limits … Officers and crew to comply with vaccination and sanitary regulations in all ports of call and corresponding certificates to be available on board, enabling the vessel to obtain radio free pratique.

If requested, Owners to provide Charterers with copies of any certificates/approvals.

Any time lost and all proven and directly related expenses resulting from Owners’ non-compliance with the above to be for Owners’ account and may be deducted from hire.”

This clause was concerned with the kind of certificates, approvals and vaccinations that the owners would be able to procure, arrange or ensure had been obtained in advance to be maintained on board for the purposes of the service, rather than the more transitory PCR tests in issue, the need for which only arose as a result of the master’s unexpected death during the course of the voyage and which were necessarily only valid for a limited period of time.

PCR tests obtained before the vessel set out on the voyage would have been of no assistance by the time the vessel reached Panama as the requirement of the Panamanian authorities was for tests to be undertaken on arrival. The vessel complied with the authorities’ requirements in producing the negative PCR test results for the crew and there was no question of any non-compliance by the owners under the clause.

3. cl.55. Off Hire

“… in the event of loss of time … caused by sickness of or accident to the crew … or capture/seizure or threatened detention by any authority/legal process … the hire shall be suspended from the time of inefficiency until the vessel is again efficient in the same and equidistant position in Charterers’ option and voyage resumed therefrom. All extra expenses incurred including bunkers consumed during a period of suspended hire shall be for Owners account …”

The requirement for the crew to provide satisfactory PCR test results did not amount to a detention or threatened detention of the vessel.” Detention”  involved something more than mere delay and required some element of restriction and restraint that was clearly not present here.

4. cl.58. Panama/Suez Canal

“Owners warrant that the vessel is fitted for the transit of the Suez and Panama Canal in loaded and/or ballast condition and complies with all and any regulations of the relevant canal authority and shall not be subject to any conditions of transit not customarily required by the relevant canal authority whether pursuant to their regulations or otherwise.

Should the vessel not comply with all warranties contained in this clause and/or any regulations or conditions of transit laid down by the relevant authority, Charterers may suspend hire for all time lost and Owners to pay all expenses arising as a consequence of Owners’ failure to comply with the warranty.”

The Tribunal held that the clause was clearly concerned with the fittings of the vessel and its suitability for transit of both the Panama and Suez Canals. It did not contain a provision and code dealing with the (ultimately unjustified) concerns about Covid-19 that arose following the death of the master.

Accordingly the vessel had not gone off-hire.

Fit for 55. Two more EU laws for shipping to think about.

Two more ‘Fit for 55’ measures that will affect maritime transport have now reached the legislative finishing line with approval by the Council on 25 July 2023. The new rules will be published in the Official Journal of the European Union and enter into force 20 days after publication.  

  1. FuelEU Maritime

FuelEU Maritime sets maximum limits on the yearly greenhouse gas intensity of the energy a ship uses, covering CO2, methane and nitrous oxide emissions over the full lifecycle of the fuels and applies to all commercial vessels of 5,000 gross tonnes with exemptions for naval vessels, fishing vessels, and ships using non-mechanical propulsion. It covers all energy used on board when the ship is at the port, all energy used on voyages between EU ports and 50% of the energy used on voyages departing from or arriving at an EU port. The reduction schedule from a 2020 baseline is -2 per cent from 2025; -6 per cent from 2030; -14.5 per cent from 2035; -31 per cent from 2040; -62 per cent from 2045; -80 per cent from 2050. Offsetting emissions credits are given to those ship owners who use renewable fuels of non-biological origin (RFNBO) from 2025 to 2034, and a 2 per cent renewable fuels usage target as of 2034 will be set if the Commission reports that in 2031 RFNBOs amount to less than 1 per cent in fuel mix. There are also similar provisions to those in the ETS regarding evasive container transhipments from ports less than 300 nautical miles from an EU port, with the Commission to provide the first list of such ports before 31 December 2025.

From January 2030, container ships and passenger ships at EU ports will also have to connect to the onshore power supply and use it for all energy needs while at berth at quayside in TEN-T core and comprehensive network ports or use alternative zero-emission technologies. From January 2035, this will apply to container ships and passenger ships at quayside in all EU ports where the quay is equipped. Whether this onshore power supply will be provided from green sources remains to be seen.

The responsibility for compliance lies with the “company”, defined in the same way as the ‘shipping company’ in the amend MRV Regulation and the amended ETS Directive. Shipping companies must submit to verifiers a standardised emissions monitoring plan for each of their vessels by 31 August 2024. Their records must contain the ‘well to wake’ emissions factors for each type of fuel used at berth and sea. At the end of April each year, shipping companies must submit their data, including that already reported for MRV regulation. There are harmonised penalties for non-compliance with the requirements on both the greenhouse gas intensity content and the connection to onshore electricity. The Regulation provides for a voluntary pooling mechanism under which ships will be allowed to pool their compliance balance with one or more other ships, thereby making it the overall pool that has to meet the greenhouse gas intensity limits on average.

FuelEU Maritime also recognises the polluter pays’ principle, providing in Article 23(8):
“The company shall remain responsible for the payment of the FuelEU penalties, without prejudice to the possibility for the company to conclude contractual agreements with the commercial operators of the ship that provide for the liability of the commercial operators to reimburse the company for the payment of the FuelEU penalties, when the responsibility for the purchase of the fuel or the operation of the ship is assumed by the commercial operator. For the purposes of this paragraph, operation of the ship shall mean determining the cargo carried, the route and the speed of the ship.”
There is a similar provision in Article 23(9) with regard to contracts with fuel suppliers. Unlike the costs of surrendered ETS allowances in the revised ETS Directive, there is no provision for any statutory right of pass-through from the company to the time charterer of penalties in Article 23(8) and (9).

  1. Regulation on the deployment of alternative fuels infrastructure (AFIR). This amends the Directive on the Deployment of Alternative Fuels Infrastructure 2014/94/EU (DAFI) to require Member States to take necessary measures to ensure that minimum shore-side electricity supply for seagoing container and passenger ships is provided in maritime ports by 1 January 2030. Additionally, Article 11 requires Member States to ensure that an ‘appropriate’ number of refuelling points for liquified methane ‘liquefied methane’ are put in place at TEN-T core maritime ports by 31 December 2024. On 19 October 2022, the Parliament proposed adding hydrogen and ammonia to the core network of refuelling points for LNG at maritime ports by 2025 but this does not appear in the final text of the Regulation. Instead Article 14 requires Member States to develop draft a national policy framework for developing alternative fuels for transport, containing various elements, in particular (k) “an overview of the state of play, perspectives and planned measures in respect of the deployment of alternative fuels infrastructure in maritime ports other than for liquefied methane and shore-side electricity supply for use by seagoing vessels, such as for hydrogen, ammonia, methanol and electricity.”

Charterparty Provision Capable of Creating A Claim in “Debt” or A Claim in “Damages”? That is the Question!  

Smart Gain Shipping Ltd v. Langlois Enterprises Ltd (The Globe Danae) [2023] EWHC 1683 (Comm)  

If the charterparty contains a clause that indicates that certain expenses are “always at charterers’ time and expense”, does that create a claim in “debt” for the benefit of the owner or claim in “damages” especially if expenses are incurred after the chartered vessel is redelivered? This is an interesting question as in the latter case, the owner needs to prove its loss to be successful in its claim. This was the main contention in the present case.

Facts can be briefly summarized. The Globe Danae was trip chartered to carry metallurgical coke in bulk to Brazil with an estimated duration of 40 to 50 days. The charterparty contained a “hull fouling” clause (cl 86) which stipulated:  

“Owners not to be responsible for any decrease in speed/increase in consumption of the Vessel whether permanent or temporary cause (sic) by Charterers staying in ports exceeding 25 days’ trading in tropical and 30 days if in non-tropical waters. In such a case, underwater cleaning of hull including propeller etc. to be done at first workable opportunity and always at Charterers’ time and expense. After hull cleaning vessel’s performance warranties to be reinstated.”  

On the instructions of the charterer, the cargo was loaded in India but after rejected by intended buyers, the vessel remained in idle, still laden, in tropical water ports in Brazil for 42 days. After the cargo was delivered and contract came to an end, the owners undertook cleaning of the hull and propeller prior to delivering her to next employment. The owners made a claim against the charterers in the sum of US$ 74,506.70 for the loss of time of 2.29 days spent cleaning. The charterers rejected the claim arguing that their obligation to carry out cleaning came to an end on the redelivery of the vessel, so that the only remedy open to owners was damages and to be successful in that claim they had to prove that they suffered loss of hire as a result of hull fouling. The arbitration tribunal held that the owners’ claim was in debt (not merely in damages) for loss of time and they were successful accordingly. The charterers appealed.

The High Court dismissed the appeal. Sir Ross Cranston stressed that it was important to construe the relevant clause (cl 86) in the charterparty in a manner that would make commercial sense. Considering the fact that the charterparty in question was for a single trip, he indicated that the first workable opportunity to clean the hull of the vessel was likely to present itself after the termination of the charterparty (after redelivery).  On that basis, he reached the conclusion that it must have been the intention of the parties with this clause to create an obligation on charterers to undertake such cleaning at the charterparty rate regardless of when it takes place.

To support this reasoning, he drew support from Damon Compania Naviera v. EAL Europe Africka Lime GmbH (The Nicki R) [1984] 2 Lloyd’s Rep 186. This case concerned a charterparty for a roundtrip from Europe to West Africa which included a similar clause: “Charterers to be responsible for damage to the vessel… done by stevedores … all damages… to be repaired after the completion of the voyage at charterer’s expense but in owner’s time provided that such damage does not affect vessel’s seaworthiness.” Stevedores caused damage on the chartered vessel and after the conclusion of the voyage the charterers arranged for repairs at the discharge port. While the repairs took place, over a period of five days, the owners also carried out repair work on the vessel’s damaged engine. The owners claimed hire for the period of repair. Bingham, J, held that where the damage affected seaworthiness, the charterers were responsible for the time spent on repairs at the hire rate whether or not the charterparty had come to an end. It was also held that there was no deduction for engine repairs given that the claim was in debt, based on period of repairs, not on damages for breach of contract (hence additional repairs were irrelevant). Sir Ross Cranston had no doubt that cl. 86 in the present charterparty was analogous to the one in The Nicki R, except that the issue there was stevedore damage rather than marine growth that necessitated hull cleaning.      

Ultimately, this was yet another charterparty case that turned on the construction of a clause in the contract. Few would suggest that the solution reached is not in line with commercial realities. The judgment also serves as a reminder that any clause in a charterparty (particularly in a time and trip charterparty) stating that liability for a particular event/occurrence is “always at charterer’s expense” is likely to extend charterer’s exposure to expenses incurred even after redelivery as a clause of that nature is likely to be construed as one that capable of creating a claim in “debt” rather than a claim in damages.            

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.

Voyage charter. Liability of disponent owner for delays caused by arrests of bunkers on board pursuant to arbitrations unconnected with the vessel.

Rhine Shipping DMCC v Vitol SA [2023] EWHC 1265 (Comm) involved a counterclaim by Vitol under a voyage charter with Rhine for breach of the charter by way of delay to the Vessel in proceeding to one of the load ports resulting from an arrest by third parties of the bunkers and stores on board at one of the loading ports, in Ghana. The vessel was on bareboat charter to Al-Iraquia who had time chartered it to Rhine with whom it was connected. Delay  resulted from the detention of the vessel for some days as security which was alleged to have led to delays in loading the vessel at its next load port in Congo with the result that Vital had to pay an increased price of US$3,692,106.72 to the seller of the cargo loaded there. The arrest in Ghana did not concern the vessel in the voyage charter between Rhine and Vitol. It concerned claims by six vessel owners under other charters with Al-Iraquia.  Vitol claimed under an indemnity clause in the charter and also for breach of warranty that at the date of the charter the vessel was free of encumbrances and legal issues that could affect the performance of the charter.

(1) The indemnity.

Clause 13 provided: “Third Party Arrest

In the event of arrest/detention or other sanction levied against the vessel through no fault of Charterer, Owner shall indemnify Charterer for any damages, penalties, costs and consequences and any time vessel is under arrest/detained and/or limited in her performance is fully for Owner’s account and/or such time shall not count as laytime or if on demurrage, as time on demurrage.”

Although the arrest was of the property on board, not of the Vessel, the vessel was detained as the inevitable consequence of the property on board being arrested, in the sense of being constrained or prevented from freely continuing on its voyage. Clause 13 imposed no additional requirement that the detention be “levied against” the vessel in any sense other than that the vessel was detained.

A further issue arose as to whether the indemnity was subject to the rules on remoteness of loss

that apply to a claim in damages. Given his finding in relation to the breach of warranty claims, that the losses claimed by Vitol were not too remote to be recoverable as damages for breach of contract, the amount recoverable here did not turn on this issue. However, Simon Birt KC set out his view that nothing in the terms of the indemnity to suggested that it intended to incorporate the rules on remoteness of damage for breach of contract. If, as a result of a detention, for example, the charterer had suffered a penalty, there would be no reason to conclude that fell outside the scope of the indemnity, even if unforeseeable. He emphasised  that his conclusions were based on the terms of clause 13 and the facts and circumstances of this case and did suggest that an express indemnity in any contract will always be interpreted to include losses that would fall outside the remoteness rules for breach of contract, nor did they deal with anything in relation to the scope of the implied indemnity under a time charter.

(2). The breach of warranty.

Vitol could also claim their losses by way of a breach of a warranty in the charter  that “at the time of and immediately prior to fixing the charter, the vessel, owners, managers and disponent owners are free of any encumbrances and legal issues that may affect vessel’s approvals or the performance of the charter. Al-Iraqia were held to fall within the warranty by virtue of their description as “managers” within the clause, and, had it been necessary to determine, whether they also fell within the clause as “owners” or “disponent owners” Simon Birt KC would have held that they did fall within that description. At the time of and immediately prior to fixing the charter, Al-Iraqia was not “free of any encumbrances and legal issues that may affect the Vessel’s approvals or the performance of the charter.” When the charter was agreed on 27 March 2020, London arbitration was already on foot in relation to vessels other than the one subsequently arrested in Ghana. The word ‘may’ imposed a low bar and the London arbitration was a legal issue affecting Al-Iraqia at the relevant and it was possible that issue could affect the performance of the Charter, and indeed did so.

The Congo bills of lading were dated 12 May 2020 and Vitol claimed a loss of on the basis that had there been no delay due to the arrest Congo bills of lading would have been dated 6 May 2020 and Vitol would have paid its seller a lower price for the cargo. Rhine put forward three arguments as to why it should not be liable. First, it put Vitol to proof that, even without the arrest in Ghana, the vessel would have loaded at the Congo port in sufficient time to obtain bills of lading dated 6 May 2020 for the cargo loaded there. Second, any loss Vitol had suffered had been reduced by Vitol’s hedging arrangement and so insofar as so reduced it was not recoverable from Rhine. Third, even if Vitol’s loss had not been so reduced in fact, the only loss that was recoverable as not too remote was loss that would still have been suffered if those hedging arrangements had so reduced the loss.

Simon Birt KC rejected all three arguments. First, had there been no delay due to the arrest in Ghana, there was certainly a real or substantial chance that Vitol’s Congo seller or the Congo terminal would have acted in such a way as to lead to the issue of  a bill of lading dated 6 May. There would be no discount to be applied for any “chance” that the bills of lading might not have been dated 6 May. Second, the transactions by which the Swaps were rolled were not external transactions, but were internal to Vitol. The rolling of the internal Swaps by which the pricing risk on the Congo sale contract arising from the delay was transferred between Vitol portfolios, did not make good any loss to Vitol. Unlike an external hedge, one transaction would not have been entered into for the purpose of managing the specific pricing risk arising from an identified risk from an existing transaction. Third, the loss claimed by Vitol was of a type that was usual in respect of a charter such as this, and was reasonably within the contemplation of the parties at the time of contracting. there was no evidence to the effect that there was a “general expectation” in the market that shipowners would not expect to bear this type of loss, such as had been the case in The Achilleas [2009]1 AC 61 (HL).

Coming soon to the UK Supreme Court, and not coming.

UKSC 2022/0009 Herculito Maritime Ltd and others (Respondents) v Gunvor International BV and others (Appellants) “The Polar”      

What is the proper interpretation of a charter agreement and bills of landing (sic) for a vessel, in respect of losses arising out the seizure of the vessel by pirates.

The Court of Appeal decision in December 2021 is noted here. https://iistl.blog/category/admiralty-law-2/general-average/

UKSC 2022/0064       R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and others (Respondents)    

Under Directive 2011/92 EU of the European Parliament and of the Council and the Town and Country Planning (Environmental Impact Assessment) Regulations 2017, was it unlawful for the Council not to require the environmental impact assessment for a project of crude oil extraction for commercial purposes to include an assessment of the impacts of downstream greenhouse gas emissions resulting from the eventual use of the refined products of the extracted oil?

Hearing on 21 June 2023

The case raises similar issues on scope 3 emissions to that in Greenpeace Ltd v (1) Secretary of State for Business, Energy and Industrial Strategy and (2) the Oil and Gas Authority; and Uplift v (1) SSBEIS and (2) the OGA (North Sea oil and gas licensing)

On 26 April 2023 permission was granted to proceed with a Judicial Review of the Government’s decision to launch a new licensing oil and gas round, without taking into account the environmental effects of consuming the oil and gas to be extracted. In the new licensing round fossil fuel companies have submitted submitting more than 100 licences to explore for new oil and gas.

And not coming,

The hearing was fixed for 19/20 June but it was announced earlier this week that the case has now settled. https://www.quadrantchambers.com/news/settlement-reached-eternal-bliss

UKSC 2021/0231       Priminds Shipping (HK) Co Ltd (Respondent) v K Line PTE Ltd (Appellant) The Eternal Bliss    

Whether the Charterers are liable to compensate or indemnify the Owners for the cost of settling the cargo claim by way of (a) damages for the Charterers’ breach of contract in not completing discharge within the permitted laytime; and/or (b) an indemnity in respect of the consequences of complying with the Charterers’ orders to load, carry and discharge the cargo.

The answer given by the Court of Appeal was ‘no’. This is now definitive.

Unsafe ports and negligent pilots.

London Arbitration 2/23 involved a claim for breach of the safe port warranty in an amended NYPE 1981 form,  time charter trip to China. The vessel grounded while under pilotage in the port of Chaozhou, proceeding to her discharge berth, and suffered damage to her port side hull structure, resulting in water ingress. The owners claimed that, in breach of the charterparty, the port was unsafe and claimed  the cost of repairs and associated damages in an amount of US$1,158,559.59 plus interest and costs.

The parties accepted that the vessel grounded outside the channel in charted shoal water and that the pilot would have known of the location of the charted shoal water. At the time of leaving the load port, the vessel did not have adequate charts onboard to create a proper passage plan for the discharge port. The tribunal found that the plan must have been defective as it could not have been based on the appropriate channel data at the time the vessel departed the loading port.

The master should have made efforts to obtain the appropriate harbour chart, Chinese MSA Chart 81102. It was ordinary good practice to navigate on the largest scale chart available. The pilot could have taken a copy onboard or a photograph of the chart could have been emailed to the vessel. The tribunal found that the master was negligent in failing to obtain a copy of the chart. The master was therefore not aware that the vessel was standing into danger during her final approach to, and manoeuvres within, Chaozhou harbour and, consequently, failed to query the pilot’s actions or attempt any direct action to prevent the vessel grounding. In failing to effectively monitor the pilot’s conduct of the vessel the master was negligent.

The tribunal concluded that the pilot was negligent in failing to manoeuvre the vessel such that she remained in the deep-water channel at all times. The tribunal found that the cause of the grounding was the negligent navigation of the vessel during her inbound passage to her discharge berth. However, the deep-water channel was safe for the vessel at the material time. The limits of the channel were marked on appropriate navigational charts and were known to the pilot.

The test for competence was whether the pilot was affected by a disabling lack of skill or knowledge, deriving from inherent lack of ability, lack of adequate training, lack of particular knowledge, or a disinclination to perform the job properly: The Eurasian Dream [2002] 1 Lloyd’s Rep 719 per Creswell J. The tribunal found the pilot to have been negligent in misjudging the turn into the port and failing to take appropriate action to correct his error. It was not persuaded that there was any evidence that he was affected by any of the deficiencies in the test above. It found him to be competent. A one-off mistake such as this by a competent pilot was not a defect in the set-up of the port: The grounding did not result from the vessel being exposed to dangers that could not be avoided by good navigation and seamanship. The vessel could and should have been manoeuvred within the deep-water channel but was not. Nor was the grounding the result of an abnormal occurrence,

The tribunal also found that the vessel was unseaworthy at the beginning of her voyage because she lacked the appropriate chart to prepare a berth-to-berth passage plan that was compliant with IMO Resolution A893(21). The defect was capable of being rectified by the master obtaining the required harbour chart before the vessel commenced her inbound passage to Chaozhou. However, the master made no effort to obtain the required chart and commenced the inbound passage without any knowledge of the limits of the deep-water channel.

There was no evidence that the owners exercised due diligence to ensure that the vessel had a compliant passage plan before she departed for Chaozhou. However, the grounding was caused by the vessel’s negligent navigation, specifically the pilot’s failure to ensure that the vessel turned at the required rate to remain in the deep-water channel.

The owners’ claim for loss and damage suffered as a result of the grounding failed.

Safe Port Warranty in Charterparties- London Arbitration 2/23

The chartered vessel (a gearless Panamax bulk carrier) ran aground while entering the port of Chaozhou under pilotage. As a result, she suffered damage to hull structure. The owners claimed the cost of repairs and associated damages in the amount of US$ 1,158.559.59 plus interest and costs on the premise that charterer directed the vessel to an unsafe port in breach of a safe port warranty in the charterparty.


The charterers defended the claim arguing that the vessel was unseaworthy as she lacked the proper charts which prevented the master from preparing an effective berth-to-berth passage plan (The CMA CGM Libra [2021] UKSC 51). On that basis, the charterers argued that unseaworthiness was the effective cause of the loss and as the Hague-Visby Rules were incorporated into the charterparty by a Paramount Clause, they were able to rely on breach of Article III Rule (1) of the Rules as a defence of circuity of action to the owners’ claim for breach of the unsafe port warranty, according to the principle in Post Office v. Hampshire [1980] QB 124.

Was the port unsafe?


There is authority pointing to the fact that a systematic error in the infrastructure of a port could potentially make that port unsafe (The Ocean Victory [2017] UKSC 35)- the pilots employed by a port can certainly be considered part of that port’s infrastructure. It was in essence the submission of the owners that the pilot’s failure to deploy the stern tug in “indirect” mode to bring the stern of the Vessel around to port and her head around to starboard meant that he was incompetent. (according to the owners, this failure demonstrated a disabling lack of skill or knowledge amounting to incompetence in line with the test laid down in The Eurasian Dream [2002] 1 Lloyd’s Rep 719). The tribunal disagreed. After a technical evaluation assisted by expert mariners, it was held that the main fault of the pilot in this case was failure to execute the manoeuvre required to enter into a port (that poses some navigational challenges) correctly. This was deemed to be an isolated error on his part. The pilot worked at Chaozhou for 5 years before this incident, continued working as a pilot there for some five years afterwards, and had not been involved in any other incidents. He had demonstrated the ability to control the Vessel and the tugs in other respects during this incident.


It is not beyond the bounds of possibility that a pilot employed by a harbour authority could be regarded as incompetent but the burden that the owners need to discharge in such a case is a considerable one and unless it can be demonstrated that the pilot in question is recently appointed and no adequate training opportunities are offered to him/her by the harbour authority to familiarise himself/herself with particular navigational challenges the relevant port poses, it is likely that any navigational error of the pilot will be judged as one off as was the case here.

Was the vessel unseaworthy?

The finding on the safety of the port was adequate to dispose the owners’ claim but the tribunal also made the following observations regarding the vessel’s seaworthiness. It was found that the vessel did not have the up-to-date Chinese paper chart on board showing the limits of the dredged deepwater channel. On that basis it was held that the passage plan must have been defective as it could not have been based on appropriate channel data at the time the vessel departed the loading port. The tribunal also found that as a result the Master and deck team failed to alert the pilot to his errors and failed to attempt any action to avoid the grounding. Therefore, it was evident that the vessel was unseaworthy. However, it was held that the unseaworthiness was not an effective cause of the grounding. We can only assume that the tribunal after evaluating the expert evidence concluded that pilot’s negligence was the main effective cause of the grounding- put differently but for the pilot’s negligence the vessel could have still entered the port in a safe manner despite the fact that the passage plan, based on incomplete data, was defective. This is obviously a factual finding, and it is hard for us to comment on without having access to the expert evidence that the tribunal had the chance to see.

That said it would have been very interesting to see how the tribunal would have reacted to the point raised by the charterers: i.e. if the port had been deemed unsafe and unseaworthiness was found to be an effective cause of the loss. In that case, would the charterer be able to avoid liability without having the need to demonstrate that the Vessel’s unseaworthiness was a novus actus interveniens which severed the chain of causation between the unsafety of the port and the grounding? Possibly yes, but that is a moot point which needs to be decided on another day.

Implied term under time charter. Reinspection of holds following initial failure.

Pan Ocean Co Ltd v Daelim Corporation [2023] EWHC 391 (Comm) (24 February 2023)  DL LILAC, involved an appeal under section 69 of the Arbitration Act 1996 heard by Sir Ross Cranston acting as a High Court Judge. The issue of law was:  

“whether there was an implied term of the subject time charter having the effect that where the vessel was off hire under clause 69 after a failed holds inspection and the Master advised that hold cleaning had been completed and called for a reinspection, the charterer was obliged ‘to have the vessel re-inspected without delay’.”

The case involved a time charter trip in early 2017 on an amended NYPE 1993 form to carry a cargo of urea in bulk. Clause 69 was headed “BIMCO Hold Cleaning/Residue Disposal For Time Charter Parties” and provided:

“Vessel’s holds on delivery or on arrival 1st load port to be clean swept/washed down by fresh water and dried so as to receive Charterers intention cargoes in all respects free of salt, rust scale and previous cargo residue to the satisfaction of the independent surveyor.

If vessel fails to pass any holds inspection the vessel to be placed off-hire until the vessel passes the same inspection and any expense/time incurred thereby for Owners account.”

The charterers deducted US$110,765 in hire and US$16,308 in bunkers arising out of the failure of a cargo holds inspection at Jubail (the loading port).  The holds initially failed an inspection between 0700 and 1230 on 16 February 2017 due to the presence of rust, paint flakes and cargo residue. At 14.30 on 19 February 2017 the vessel was ordered off-berth. An hour later the master notified the agents that the vessel had been cleaned and requested a reinspection. At 22.18 the vessel shifted to the inner anchorage and rebirthed at 20.42 on 3 March 2017. At 0700 on 4 March 2017, the holds were reinspected at 11.00 the vessel passed the inspection

The owners contended that it was an implied term of the charter party that the charterers should carry out any reinspection with reasonable diligence and without any undue delay and the charterers were in breach of that implied term because the reinspection took so long to arrange. They argued further that the charterers were not entitled to treat the vessel as off-hire after 1530 on 19 February because any loss of time after then was caused by the charterers’ breach of their obligation to arrange a reinspection with diligence. The owners also referred in their closing submissions to an arbitration report in Lloyd’s Maritime Law Newsletter (“LMLN”) 17/10 “where the clause used was virtually identical to that adopted in the instant  case.

Sir Ross Cranston concluded that the Award could be read in such a way that the Tribunal did in fact apply the correct legal test for implied terms notwithstanding the reference to “reasonable” in paragraph 25 of the Award. In the opening words of paragraph 25 the Tribunal indicated that it was adopting the owners implied term argument, in which their closing submissions had referred to the “need” for an implied term, and that commercially any other interpretation was not sensible – a reference to the necessity and obviousness benchmarks in Lord Neuberger’s judgment in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742.

Any implied term had to oblige both parties to take reasonable steps to cooperate to organise a reinspection without undue delay. That was all that would be required under the test of necessity for an implied term to protect both parties from delay of the other side and would be consistent with clause 69. The Tribunal was wrong in law to find that the vessel was immediately back on hire once the Master had notified the agents on 19 February 2017 that the holds were ready for reinspection. That was inconsistent with clause 69 of the charterparty, and did not accord with the implied term as found by the Tribunal.

What the Tribunal needed to do was to decide by when the reinspection should have been undertaken had there been compliance with the implied obligation to exercise reasonable diligence to have the vessel reinspected without undue delay. The case wasremitted to the arbitrators todecide what could and should have been done by the parties regarding reinspection, whether either party was in breach in this regard, the relevant timescales (e.g., the time within which the reinspection could have been arranged and completed had there been no breach of the implied obligation), and the financial consequences of any breach.