London Arbitration 9/11 – Lloyd’s Maritime Law Newsletter 31 October 2011

Laytime and demurrage disputes continue to arise frequently between owners and charterers. A recent London arbitration, LMLN 9/11, illustrates some of the issues that can arise. As ever, clear contractual wording is the key to avoiding these disputes.

The charterparty provisions

This dispute concerned a vessel that was chartered on the Gencon form for the carriage of 35,000 mt of iron ore fines in bulk from Haldia and Krishnapatnam, India, to Luoyuan, China. The charterparty provided as follows:

“L/port: 1/2 sba(s) 2sp Haldia + Krishnapatnam India.
D/port ½ sb (s) one China port incl Y’river Pico.
L/rate: 7000mt pwwd shinc with 12 hrs tt each load port.
Dis/rate: 12,000 mt pwwd shinc with 12 turntime.
Demurrage rate US$27,000 pd or pro rata for all time lost/half dispatch money pd or pro rata for laytime saved at bends.
NOR to be tendered during office hr 0900-1700, Mon to Fri and 0900-1200h on Sat, WWWW – at bends.
At loading and disch port, laytime shall commence to count 12 hours after NOR has been tendered unless sooner commenced. If used, actual time used to count as laytime.
Shifting between loading/discharging berths to be for Charterers time risk and expense.
Shifting from layberth or customary waiting anchorage to first loading/discharging berth to be for Owners time risk and expense.”

A number of demurrage issues arose, which the tribunal dealt with as follows:

The tribunal’s findings

1. Issues at the loadport

The vessel arrived at the usual waiting place of Haldia and tendered her NOR on 26 June. She waited at the anchorage until 3 July, when she proceeded to her berth. In the morning of 4 July, she was all fast and loading of the first part of her cargo,18,500 mt of iron ore fines, commenced. Loading was completed on 8 July and later on that day, the vessel sailed for Krishnapatnam.

The vessel arrived at Krishnapatnam, her second load port, on 11 July and tendered her NOR there on arrival. She was shifted to her berth later that day. Loading commenced at 1330 and was completed at 0600 the following morning, 12 July. A pilot then shifted her out to anchorage for topping off of the cargo, completing loading operations at the anchorage on 14 July. A further 18,500 mt had been taken on at Krishnapatnam and the vessel sailed late on 14 July.

A number of issues arose out of the events at the loadport:

(a) One or more NOR?

The issue arose whether the owners were required to provide a NOR at Krishnapatnam, the second load port. The owners argued that they were not required to, even though they had done so; the charter did not expressly provide for a NOR to be tendered on arrival at the second load port and accordingly, they argued that time started to count on arrival. They relied on the decision in Burnett Steamship Co Ltd v Olivier & Co Ltd (1934) 48 Ll L Rep 238, which laid down the common law principle that an NOR need only be given at the first load port.

The charterers, on the other hand, said that owners had to give the NOR at Krishnapatnam and that laytime started to run 12 hours thereafter. They submitted that Krishnapatnam was very far from Haldia and that to predict the vessel’s ETA, a point which the court in Burnett considered important, was therefore difficult. In the alternative, they said that the vessel did tender an NOR on arrival at Krishnapatnam and that amounted to a waiver of any right by the owners not to tender an NOR at the second load port.

It was held by the tribunal that they were bound to follow the decision in Burnett which they considered was good law. The charterers’ waiver argument was further rejected; the Master had no authority to vary the charter and, in any event, none of the elements of waiver were present.

(b) One or more laytime calculation?

There was an issue whether, at the two loading ports, laytime was to run continuously (as owners contended) or separately (as the charterers submitted) based on the amount of cargo loaded at each port.

The tribunal held that where, as in this case, there are consecutive ports of loading but only a single laytime rate was provided, the rule was that, in the absence of an express provision to the contrary, there was to be a single laytime calculation.

The upshot of this was that if the allowed laytime was already exhausted at the first port such that the vessel was on demurrage on sailing, time counted at the second port from arrival. In this particular case, the tribunal found that the vessel went on demurrage on 2 July, in other words when she was still at the Haldia anchorage. Since the vessel was therefore already on demurrage on arrival at Krishnapatnam and no NOR was required there, demurrage commenced accruing on completion of the draft survey (in accordance with a specific clause in the charter) and ran uninterrupted until completion of the final draft survey.

2. Issues at the discharge port

The vessel arrived at the nominated port, Luoyuan, on 30 July and tendered her NOR. According to the vessel’s statement of facts she was then left “awaiting berth due to No 8 typhoon Fung Wong influence until 2 August 24.00 hours.” In the event, she eventually started discharging in the afternoon of 4 August, completing on 7 August.

A number of issues arose, one of which was when time started to count. The owners said that it started 12 hours after tendering the NOR; the charterers contended that time did not start to count until considerably later because conditions until 2400 hours on 2 August meant that the period prior to that did not qualify as “weather working days.”

The charterers placed reliance on the statement of facts, arguing that this was conclusive. The owners disputed this and argued that, regardless of what was in the statement of facts, there was no bad weather after the vessel arrived at Luoyuan. They adduced a weather report obtained from the Meteorological Office of a nearby port which stated that there were no severe weather conditions during the relevant period.

The tribunal held that, in the absence of a contractual provision to the contrary, the statement of facts was not conclusive evidence of a course of events and it was always open to parties to prove that an entry was incorrect. The tribunal therefore went on to consider the Meteorological Report relied on by the owners and found that this showed, on the balance of probabilities, that there was no bad weather prevailing at Luoyuan during the relevant period. The charterers were seeking to rely on an exception to the running of laytime and the burden of proof was therefore on them. In the tribunal’s view, the charterers had failed to discharge that burden.

Ted Graham
Jonas Adolfsson