Category: laytime

Port Nominations Final and Irrevocable And What About the Role of the BIMCO Calendar in Laytime Calculations?

London Arbitration 1/24

The vessel was chartered on an amended Norgrain form for carriage of 60,000mt (10% more or less in owners’ option) HSS (heavy grains, soya beans, and sorghums) in bulk from a range of ports in Brazil to 1 2/ ports in China. After loading the cargo in accordance with the charterparty terms in Paranagua the chartered vessel sailed on 6 June. 

On 20 June, the receivers nominated Zhoushan (where the vessel was to lighten) and Taixing (to discharge the balance of the cargo) as discharge ports. On 26 June, owners submitted an invoice to the charterers for US$ 131, 154.90 calculating the freight on the rates agreed in the charterparty for Zhoushan and Taixing. On 3 July, the receivers changed the discharge ports and declared Tianjin instead of Zhoushan and Taixing.  

The owners insisted that the freight had to be paid in accordance with the original nomination. The charterers argued that they were entitled to nominate Tianjin and pay the freight according to the rate specified in the charterparty for that port (which was lower than the freight allocated for ports originally nominated). The owners agreed to proceed to Tianjin following mutual consent to set up an escrow account held by the charterers’ lawyers in Hong Kong into which the charterers paid the disputed freight on 19 July.           

The charterers raised two arguments:

  1. Given that the charterparty required the nomination of discharge port(s) before passing Singapore and the bills of lading issued identified discharge ports merely as “China Port(s)”, it was reasonable and foreseeable to expect changes prior to the time and point at which the final port(s) were to be declared; and
  2. If they were wrong on (a), the owners in any event agreed to vary the charterparty to permit discharge at Tianjin and therefore had waived the charterers’ breach, and were, accordingly, estopped from claiming the freight held in escrow.       

The tribunal rejected both of the arguments of the charterer. On (a) the tribunal referred to the well-known judgment of Judge Diamond QC in The Jasmine B [1992] 2 Lloyd’s Rep 39, where he said:

In the absence of any special provisions in the charterparty, the effect of the nomination of the loading or discharging port by the charterer is that the charterparty must thereafter be treated as if the nominated port had originally been written into the charterparty and the charterer has neither the right nor the obligation to change that nomination.

On that premise, the crux of the matter was whether there was any special provision in the charter conferring any right on the parties to change a nomination validly made. The tribunal was of the view that charter terms that required characters to declare discharge port(s) as soon as they know of them and in any event 10 days before passing Singapore, were standard nomination clauses and they were not in any way “special” in the sense contemplated by Judge Diamond QC. 

The alternative argument of the charterers (b) also failed as it was clear from the exchanges between the parties that owners at all times expressly insisted that the charterers had no right to nominate Tainjing and they would proceed there under protest, reserving all rights to receive freight on the basis that Zhoushan and Taixing were discharging ports. The escrow agreement eventually concluded was a clear indication that owners had no intention to waive their rights to freight being calculated on the basis that discharge ports were Zhoushan and Taixing.

There was also a dispute as to the amount that charterers were entitled to as despatch at Paranagua. On the statement of facts, 31 May was identified as a public holiday (Corpus Christi Day). The owners submitted that 31 May was not a public holiday in Brazil as it did not appear as such in the BIMCO Calendar. The charterers responded by providing evidence from the website of the Brazilian Embassy in London which described Corpus Christi as one of the “public holidays observed throughout Brazil”. The tribunal accepted this evidence put forward by the charterers and held that it made no difference that the holiday was not listed in the BIMCO Calendar. 

The decision illustrates once again that port nominations are normally final and irrevocable and once a nomination is validly made, all consequences stipulated in the charterparty would follow including the calculation of freight based on the original nomination. It makes no difference that the voyage for which additional freight was claimed was never performed. This would not give rise to any unjust enrichment of the owners at the expense of the charterers. It is simply the result of treating the contract existing on the premise of the original nomination. 

The decision also confirms that the BIMCO Holiday calendar is a very useful tool that can assist parties in fixing a charterparty, but it is simply guidance and in the absence of the charterparty declaring the dates in the calendar as final and conclusive for laytime calculations, the information provided in the calendar can always be challenged. 

Running of laytime. Charterers’ order owners not to permit cargo sampling or to berth/discharge.

London Arbitration 31/22 is another reminder that once laytime starts it runs continuously unless interrupted by a laytime exception or a laytime definition or through delay due to the fault of the ship owner.

The vessel was chartered on an amended Gencon 94 form to carry wheat from Russia to Turkey. On Friday 17 September the vessel tendered NOR and was ordered by the harbour master to remain at anchor pending authorisation being given for cargo samples to be taken and analysed. The charterers’ agent then told owners’ operations manager not to send cargo documents to the discharge port agents and not to allow sampling, berthing and discharging as the receiver had not yet paid for the cargo. Eventually charterers permitted sampling and discharge on 29 September and discharge completed on 2 October.

As well as the laytime provisions, under which time would have started to run on 20 September, the voyage charter in question had two separate provisions dealing with time lost, and the question was which applied in the circumstances attending the vessel’s delay at the discharge port.

These two provisions were:

“TIME LOST WAITING FOR CARGO ANALYSES AND/OR LABORATORY TESTING AND/OR IMPORT AND/OR EXPORT FORMALITIES IF ANY TO COUNT AS LAYTIME OR TIME ON DEMURRAGE W/O WEATHER INTERRUPTIONS AND/OR ANY EXCEPTIONS.” (Provision 1.)

“TIME LOST DUE TO CHARTERERS’ INSTRUCTIONS AND/OR FAULT TO BE REIMBURSED BY CHARTERERS AS DAMAGES FOR DETENTION.” (Provision 2.)

The owners claimed damages for detention at the demurrage rate under Provision 2 for the period from tender of NOR on 17 September until 29 September when the charterers authorised the taking of samples. The tribunal held that this claim must fail because the time lost waiting for cargo sampling clearly fell under the express terms of Provision 1.  The arbitrator found that time lost on arrival was due to the failure by the charterers to authorise/arrange for cargo samples to be taken, a problem that was caused by lack of payment for the cargo which fell within Provision 1. Provisions 1 and 2 appeared consecutively in the fixture recap and the parties could not have intended there to be any overlap between them, and time lost for reasons covered in Provision 1 could not come within the time lost in Provision 2.

Had the arbitrator found that Provision 2 applied, he would have been inclined to accept charterers’ argument that laytime would have started on 29 September and demurrage would have been unlikely to have accrued. Therefore, the arbitrator might have accepted that, given the evidence of lower demurrage rates in similar charters, damages for detention up to 29 September would have been assessed at a rate lower than the charter demurrage rate.

The owners also presented two alternative laytime statements and the arbitrator held that their second was correct. Under this laytime began at 08.00 on Monday 20 September and the vessel went on demurrage from 13.30 on 23 September until discharging was completed at 17.00 on Saturday 2 October.

The charterers argued that “cargo analyses and laboratory testing” did not include “cargo sampling” but the arbitrator considered that the wording in Provision 1 covered any delay in the import formalities after arrival at the discharge port, including the charterers authorising the taking of samples, analysis, communication of the results and allocation of a berth.

The arbitrator also rejected charterers’ claims that time did not count during ‘port congestion’ nor for ‘weather interruption’, alternatively was suspended by duty pilot due to bad weather. Time lost on arrival was due to the failure by the charterers to authorise/arrange for cargo samples to be taken, a problem that was caused by lack of payment for the cargo which came within Provision 1 and the charterers were wrong to argue that congestion was a circumstance obstructing the sampling/berthing/discharging, which was beyond their control. Once a valid NOR was tendered and took effect, laytime ran continuously against the laytime allowed. Congestion was therefore a charterers’ risk.

Laytime- Once Starts Can Only Be Stopped in Limited Instances

The MT Stena Primorsk [2022] EWHC 2147 (Comm) 

The vessel was charted for a single voyage (from Bilbao to Paulsboro on the Delaware River) pursuant to the terms of an amended Shellvoy 6 form. A period of 72 hours was allocated as laytime in the charterparty for loading and discharge and 68 hours and 54 minutes of the laytime had been used at the loading port (Bilbao).

The water depth at the intended discharge berth at Paulsboro was 12.19m. The vessel draft was 12.15m but the tide was expected to vary by 1.6m. Accordingly, in line with charterparty provisions, the master submitted a risk assessment and sought a waiver from the technical operators of the under keel clearance policy as stipulated in the charter form. The technical operators granted the waiver for the transit from anchorage and for the berthing. The waiver was issued on the assumption that the vessel’s draft was equal to or less than the draft of the river/berth at high water. The master was also asked to ensure that prompt commencement of discharge was discussed with the terminal officers.

The chartered vessel arrived at the discharge berth on 31 March 2019. The terminal informed the master that unloading needed to be conducted at a reduced rate initially. This could, in master’s calculations, mean that the discharge rate would be less than the rate necessary to maintain a safe under keel clearance. On that basis, the master took the decision to leave the berth (a short while berthing) and return to anchorage.

Another berth became available on 1 April and the master prepared a fresh under keel clearance calculation, and risk assessment and sought another waiver from the technical operators. The technical operators refused to give waiver on this occasion stating that the safety for margin was too small and there were not sufficient controls in place to mitigate the risk of the vessel touching bottom.

The vessel managed to berth only after a portion of the cargo was lightened on 4 April 2019. This caused a further delay and laytime ended on 6 April (10.24). By that time, a further 154.63 hours were used at Paulsboro, bringing the total time used to 226.63 hours. The owners sought demurrage in the sum of US$ 143,153.64. The charterers raised objection to the demurrage claim arguing:

  1. Two incidents (the owner’s decision to leave the discharge terminal within 12 minutes of berthing on 31 March 2019 and the owner’s refusal to comply with the charterer’s request to return to berth at 21.00 on 1 April) had the effect of suspending the running of laytime;
  2. The notice of readiness (NOR) given by the owner upon arrival at Paulsboro was not valid because “free pratique” certificate had not been granted.

His Honour Judge Bird found on both of these points in favour of the owners:                        

  1. The running of the laytime is suspended only when time is lost due to “default on the owner’s part, or on the part of those for whom they are responsible” (The Fontevivo [1975] 1 Lloyd’s Rep 339). This was not the case here as the owner acted in a way permitted and required by the relevant charterparty (the need to operate the vessel safely was explicitly specified in the charter and the contract made clear that under keel clearance was binding and not to be breached without consent). It was also noted that the power to grant or refuse a waiver of the policy was not limited in any way in the charterparty.
  2. The evidence indicated that there was no formal mechanism for the grant of “free pratique” at the discharge port and the port appeared to have operated a free pratique by default system, with decisions communicated if there was disease on board. Accordingly, the NOR had been valid.             

Comment

The running of laytime can only be suspended by express terms of the contract or if there is a “fault” on the part of the owners preventing the loading or discharging operations. It is clear that the “fault” does not need to be an actionable breach of the charterparty, but the present decision (in line with earlier authorities) also makes clear that no fault can be established in cases where the master takes steps that cause delay for safety reasons and such decisions are deemed to be “entirely justifiable” in the circumstances. In the present context, a “capricious refusal” to grant a waiver of keel clearance policy by the operators, for example, could have amounted to a “fault” capable of suspending the running of the clock but that was not the case.

The obtaining of a “free pratique” certificate was a mere formality prior to the commencement of the global pandemic and the finding in this case reflects that position. The matter might be rather different now especially given that some countries have introduced strict quarantining and/or testing requirements for Covid. It is very unlikely that in today’s commercial world we could easily assume that any port operates on a “free pratique” default system. And, in those instances lack of “free pratique“ certificate could prevent the chartered vessel from being regarded as an “arrived ship” which is vital for the commencement of the laytime period.