BPVOY 5 now in force.

BPVOY5 which is designed for use by BP as charterers came into force on 21 March 2016. The main changes from BPVOY 4 are:

  • an onerous compliance clause in cl 2.2 obliging owners to “comply with all applicable requirements stipulated in respect of zones and/or areas regulated by regional and/or national and/or international authorities.”
  • Clause 9 cuts back any safe port warranty by providing “Charterers do not, in any part of this charter or otherwise howsoever, warrant the safety of any port unless Charterers fail to exercise due diligence to ascertain the vessel can lie safely afloat.” The clause also provides that “Where the Vessel has to (a) take additional measures to keep her safely alongside and/or (b) has to move from a particular location within the port, Charterers will reimburse 50% of additional costs directly incurred by the Owners. If the Vessel has to move from a particular location within the port, Charters will reimburse 50% of the cost of bunkers consumed in shifting from that location and back to any other location.”

To the list of scenarios in cl. 11(4) that count as one half laytime or demurrage is added:

“closure of, or any restriction of operation at, any port of terminal by order of any local authority”, and all delays are now qualified so that they only count as half laytime or demurrage if the delay could not have reasonably have been prevented by charterers or owners

  • Under cl.13 ship to ship transfers are now expressly permitted and Charterers are to provide and pay for all necessary equipment and may at their expense engage supervisors to attend on board the vessel, including a mooring master, to assist the STS Operation.
  • A new exception to laytime and demurrage appears in cl. 15(2). If tanks are inspected and rejected, time used for gas-freeing shall not count towards laytime or demurrage, and laytime or demurrage shall not commence or recommence, until such tanks have been re-inspected, approved by Charterers’ inspector, and re-inerted. Charterers shall reimburse Owners for bunkers consumed for gas-freeing/re-inerting.
  • Under cl. 26 charterers are permitted to order the Vessel to discharge and backload a full or part cargo, with freight to be calculated in accordance with Worldscale for the whole voyage, and all time used in backloading to count as laytime or demurrage, with charterers reimbursing additional port costs and bunkers.
  • Clause 27 provides for a virtual arrival scheme whereby charterers may instruct owners to proceed at a set speed, such that the vessel will reach the discharge port at a particular date and time. Extra passage time is to count as laytime and demurrage.
  • Clause  30  allows for electronic Bills of Lading  to be transmitted using the ESS-Databridge, as an eDoc.
  • Clause 31 provides for blending and commingling. Charterers warrant that any cargoes to be blended shall be stable and compatible and no precipitation of solid deposits in cargo tanks, pipes, pumps or valves will occur;

Charterers shall return to Owners for cancellation all three Bills of Lading issued in respect of the cargoes being blended and Owners will issue replacement Bills of Lading stating the place and date that the blending took place and the nature of the original cargo, the original quantity, and the date and place of loading.

Charterers will be deemed to indemnify Owners against any liability, loss, damage of expense arising out of the blending, commingling and additives, but not if the damage or expense could have been avoided by the exercise of due diligence.

Charterers’ liability is limited to no more than twice the CIF value of the cargo at the discharge port on completion of the discharge. Owners have three years from disconnection of the hoses at discharge port within which to issue a written notice of a claim.

Clause 59 allows charterers to carry up to 15 drums of cargo additive. Time used to load or discharge such drums shall count as laytime or demurrage, unless it happens concurrently with loading or discharging of the cargo.

  • Under cl. 42 owners warrant that the vessel is entered in the Tanker Oil Pollution Indemnification Agreement 2006.

Port or berth charter? Effect of ‘time lost’ provision.

In Freight Connect (S) Pte Ltd v Paragon Shipping PTE Ltd [2016] 1 Lloyd’s Rep 184, the Singapore Court of Appeal has recently considered whether owners can recover for time waiting at berth under a voyage charter. A berth charter was initially concluded but due to delays the charterers requested a replacement vessel be provided. The owners offered a replacement fixture which was accepted. The fixture was a port charter with a time lost clause. The vessel suffered delays in berthing at the loading port. The charterers contended that laytime did not start as NOR could not be given until the vessel berthed and that the time lost clause was inoperative until a valid NOR had been given. The Court of Appeal in Singapore has upheld the decision of the High Court in rejecting both arguments. The second charter was clearly a port charter and in any event the time lost clause operated independently of whether a valid NOR had been given.

Demurrage is not just for ships – and cannot last for ever.

Demurrage is a provision for liquidated damages for breach of the charterer’s obligation to load or discharge the vessel within the agreed laytime. Demurrage provisions are also to be found in carriage contracts in respect of detention of containers supplied by the carrier. In MSC Mediterranean Shipping Company S.A. v. Cottonex Anstalt [2015] EWHC 283 (Comm), we have the first case considering container demurrage, which is of general interest in its treatment of the carrier’s right to keep a repudiated contract alive and continue claiming demurrage.

In the summer of 2011 the carrier made several contracts with the shipper to carry containers of raw cotton by sea from Middle East ports to Chittagong in Bangladesh. However, the goods were never collected and the containers still remain in a yard in the port at Chittagong and the customs authorities have at all material times refused to allow the containers to be released.

The carrier claimed demurrage from the shipper pursuant to cl.14.8 of the bill of lading which provided for a period of free time for the use of containers and providing that the responsibility of the “Merchant”, defined as including the shipper, was “to return to a place nominated by the Carrier the Container and other equipment before or at the end of the free time allowed at the Port of Discharge or the Place of Delivery”. Demurrage on a daily basis was to be payable by the Merchant thereafter in accordance with the carrier’s tariff. As at 1 January 2015 the total demurrage claimed, from the expiry of free time in 2011, exceeded US$1m.

Leggatt J held that the shipper was liable to pay demurrage under cl. 14 (8) and that there was no scope for reducing the amount payable for this breach on the grounds that the carrier had not taken reasonable steps to mitigate its loss. A liquidated damages clause made proof of the claimant’s actual loss unnecessary and irrelevant.

However, demurrage would not run forever. On 27 September 2011 the shipper had committed a repudiatory breach of the contracts of carriage by sending an email to the carrier in which it indicated that there was no realistic prospect of it being to arrange for any of the containers being collected. The question now arose as to whether the carrier should accept the repudiation and sue for damages or whether it could keep the contract alive.

Following a repudiation, the innocent contracting party may decide to keep the contract alive, unless it has no legitimate interest in doing so which will be the case when: (a) damages are an adequate remedy and; (b) maintaining the contract would be “wholly unreasonable”. Here, the carrier had no legitimate interest in maintaining the contract of carriage. It was restricted to a claim for damages, which would be subject to the mitigation principle. If the containers were in its possession it could mitigate by unpacking them. If, as was the case here, the containers were not in its possession, it could mitigate by buying replacements. Had cl. 14 (8) purported to give the carrier an unfettered right to ignore the shipper’s repudiation and carry on claiming demurrage indefinitely, the clause would have been treated as penal and would be unenforceable.