Source: https://asdem.com/posts/issue-61
Timestamp: 2018-11-17 07:18:09
Document Index: 70613006

Matched Legal Cases: ['art 2', 'EWCA ', 'ART 36', 'art 36', 'art 36', 'art 36', 'art 36']

BP Shipping's long-awaited new charter party, BPVOY5, has now been published. We believe the time taken to ensure that the charter party is as clear and up-to-date as possible was certainly worth the wait.
All aspects of current legislation have been covered. For example, Part 2 now includes new clauses to cover Compliance (cl.2) and Ethical Policy and Anti-Corruption (cl.3). Other clauses have been made much clearer and clauses that relate to each other have been referenced so they can easily be referred to, unlike some other c/p's. In some areas there is a more balanced approach which should appeal to owners. For example, in the pumping clause, although the vessel has to perform at its maximum safe rate, the minimum rate is now an average of 100 psi throughout the bulk discharge.
There are, of course, a number of areas that owners need to look at carefully, such as the revised requirements for letters of protest when free pratique is required at a port but has not been issued by the time the vessel arrives (cl.10.5) and Certificates of Compliance issued at US ports (cl.10.6). We believe there are several charterers who are keen to adopt these new terms.
PUMPING CLAUSES
Asdem has promoted the pumping performance formula as the best way to settle pumping disputes since our 5th Demurrage Conference in 2001. This formula has now been recognised in BPVOY5, clause 14.5, as the method to calculate any under performance by a ship's pumps during discharge. Details of how the formula works and a spreadsheet example can be found in the "Resources" section of the Asdem Website.
FREIGHT COST DISPUTE
London Arbitration 4/16 946 LMLN 4
This year there have been few published arbitrations relevant to the tanker market. This dispute over the correct calculation of freight is therefore, perhaps, worth looking at. The arbitration award was decided on the interpretation of just a couple of words. The vessel had been chartered under a BPVOY3 c/p to carry a cargo of fuel oil from Rijeka in Croatia to a range of ports with an addendum giving charterers the option for 1/2 safe ports Adriatic Sea excluding Yugoslavia and Albania. Freight was written in typical broker's shorthand to mean "Worldscale 275 with minimum flat rate loadport/Augusta to apply basis 1 loadport/1 disport, plus a minimum of USD 0.50 on the basis of 1 loadport/2 disports".
The vessel loaded at Rijeka and discharged at Trieste and Venice. There was subsequently a dispute over the correct calculation of freight costs. Owners claimed USD 6.61 per mt. This was the rate from Rijeka to Augusta of USD 5.41 plus USD 1.20 (the difference between Rijeka/Trieste/Venice USD 5.30 and Rijeka/Trieste USD 4.10).
The charterers claimed that since the flat rate Rijeka/Trieste/Venice of USD 5.30 was less than the freight for Rijeka/ Augusta of USD 5.41 which was the minimum agreed freight for 1 loadport/1 disport, the additional freight cost for the second discharge port should be limited to USD 0.50 as set out in the freight clause.
The arbitration panel agreed that the wording of the freight clause was far from clear. However, they decided that the use of the word "minimum" twice in the freight clause was sufficiently significant to enable them to reach the correct interpretation of how freight should be calculated. The basic freight cost would always be a minimum of loadport to Augusta even if the actual voyage was shorter. If there were two discharge ports, the freight cost to the second discharge port would be a minimum of USD 0.50. The owners had correctly calculated the additional freight to the second disport as USD 1.20. Their calculation of the rate to be charged for the voyage of USD 6.61 was therefore correct.
WAITING FOR BUSES – "LNGVOY"
By Phil Stalley, HubSE Ltd.
There is a saying that in London you can wait ages for a bus then three come along at once. It's the same for charter parties. We have waited ages for a new c/p and this year there will be three new ones to my knowledge. Roger comments elsewhere in this newsletter on BP's latest charter party BPVOY5. There's a group working on a new c/p, yet to be named, for European barges to replace the TTB rules and you can hear more about this at the next Barge Conference in June. And last month BIMCO and the International Group of Liquefied Natural Gas Importers (GIIGNL) published "LNGVOY".
As its name implies "LNGVOY" is a voyage charter party for use in the LNG trade and is a big improvement on "GIIGNL LNGVOY" which was published in 2012. LNGVOY is describes as "the first definitive voyage charter party" but as I can no longer see "GIIGNL LNGVOY" on the GIIGNL website I assume that the earlier form has been abandoned.
As the blurb says, this c/p has been designed for the "the expanding LNG spot market" where, traditionally, the LNG business has been run on long term Time or Bareboat Charters. It's hard to get out of the Time Charter habit and I see the words 'deliver' and 'delivered' appear in the Clause 10 of the Laycan clause. Having said this, I like this form. There are a number of clauses which deal with the specifics of the LNG trade such as boil-off, cooling down and quantity and price of heel and these all seem sensible to me, not that I'm an expert in the LNG trade.
I think it has a refreshingly simple NOR clause (Clause 9) where the NOR must be tendered 'upon completion of mooring' or customary anchorage if berth is not available'. It also states that if the port authorities prohibit the vessel from proceeding to the berth or customary anchorage' then the NOR can be tendered at a place as close thereto as the Vessel can safely get'. Most of the laytime and demurrage provisions are fairly straightforward, with not as many exceptions as we would find in modern oil c/p's but it is written very clearly.
Now to the interesting piece. In the LNG world it is critical for the vessel not only to arrive at the loadport on time but, because stocks need to be carefully managed, it is also very important to arrive at the discharge port on time. LNGVOY has an interesting concept of a Delivery Window' to deal with this where the owners are obliged to adjust the speed to ensure the vessel meets this date. If it is late then time will start when the vessel is all fast, with the Owners bearing the delay prior berthing. I may have missed it but I cannot see that the Owner is relieved of this obligation even if the vessel was delayed by bad weather or safe navigation requirements. In practice I would imagine that any delay in berthing would be minimal unless the buyers have brought in another cargo specifically to replace the late cargo. I find this concept interesting.
It is increasingly common for CIF/CFR sales in the oil trade to incorporate a delivery window at the discharge port and the oil company/trader currently takes the risk of the vessel arriving at the destination on time. I wonder how long it will be before someone tries to introduce this concept into a voyage charter for the oil business.
The decision of the Court of Appeal in (1) PST Energy 7 Shipping LLC and (2) Product Shipping & Trading S.A. v. (1) O.W. Bunker Malta Ltd and (2) ING Bank N.V. [2015] EWCA Civ 1058 concerned a contract for the sale of bunkers agreed by OW Bunkers Malta (OWBM) with the owners of the vessel "Res Cogitans". Following delivery, the vessel was permitted to consume the bunkers for propulsion but the sellers nevertheless retained the property in them until payment. The bunkers were duly consumed and the case concerns the nature of the obligation to make payment in such circumstances. The decision is important as it clearly has wide reaching consequences for the petrochemical industry where products are sold on credit terms, together with a retention of title (ROT) clause with a right to use the goods pending payment.
In this matter, and as is usual in bunker sales, there was a chain of contracts involving a physical supplier Rosneft, from whom OWBM purchased the stem. Rosneft were in turn claiming payment from OWBM but as the OW group was in severe financial difficulties, Rosneft feared that they might not get paid. As the Rosneft terms also stated they retained property until payment they indicated they would also seek payment directly from the vessel. The owners of the vessel did not object to paying but facing the prospect of having to pay twice they commenced legal proceedings seeking a declaration they were not liable to pay the direct supplier OWBM (presumably leaving them free to pay Rosneft without fear of having to pay twice).
Based on previous authority, both the High Court and the Court of Appeal in England decided that consumption of the bunkers extinguished property in them. The contract was not one for the sale of goods in which property must pass in order to bring an action for payment but was a contract for consumption and this had occurred giving rise to straight forward obligation to pay a debt.
This decision was not in accordance with the parties' intentions when drafting the contract as they had characterised it as a contract for sale of goods. The courts appear to have reached a technically correct conclusion based on the consequences of combining a retention of title clause with a right to consume. The case is now on its way to the Supreme Court. If the decision is not reversed, it seems likely that the standard industry forms will have to be amended to make it clear that the permitted consumption of bunkers and other products during the credit period is not intended to take the transaction outside the scope of the Sale of Goods Act.
DEMURRAGE TIME BARS – THE ABQAIQ [2012] REVISITED
We have been instructed on a number of matters recently concerning the documentation of demurrage claims that are subject to the time bar contained at clause 20 of BP VOY 4 charterparty form.
Some of the claims we were asked to look at had one supporting document missing; another claim was notable for being presented without any supporting documentation whatsoever. In each instance the party presenting the claim relied on The Abqaiq [2012] decision as authority for the proposition that supporting documents did not have to provided with the claim if they had been provided already in the course of the charterparty operations.
The intention behind the drafting of Clause 20 was that an owner would present its claim in the form of a "package of documents" "together with" the claim. Recent legal decisions in particular The Abqaiq [2012] (which overruled The Sabrewing [2008] on this point) have nevertheless held that such a "strict" application of the clause is unnecessary and are authority for a more relaxed construction. By concentrating on the "substance" of presentation of documents "together with" the claim rather than its form, provided the necessary essential supporting documents and the claim are submitted within 90 days, clause 20.1 has been satisfactorily complied with.
In The Abqaiq [2012] and the observations of Lord Justice Tomlinson as to what clause 20.1 requires is that claimants provide "documents which objectively [the charterers] would or could have appreciated substantiated each and every part of the claim" and "that they are thereby put in possession of the factual material which they require in order to satisfy themselves that the claim is well-founded." The position of a party who takes the view that you received all the documents in any event is in effect seeking to apply the futility principle: "English law never compels a person to do that which is useless and unnecessary" so that providing a further copy with the claim itself is therefore unnecessary. The issue with this approach is that the application of the futility principle in the context of claims for demurrage where supporting documents are required has been considered extensively in recent case law. Its application was rejected. The Abqaiq [2012] does not overrule these authorities on the futility principle.
Clause 20.1 obliges an owner to provide a claim and supporting documents within 90 days of completing discharge. These are obligations that are performed after discharge not before it. If it were to be said that documents provided before discharge was completed amounted to compliance with this obligation, it would undermine the intention of the clause and the obligations it creates to a point where they become meaningless. In my view neither in The Abqaiq [2012], nor The Adventure [2015] or in the long line of authority which formed the basis on which these two cases were decided stretching back to The Oltenia [1982], has the court said that a party did not have to comply with the requirements of Clause 20.1 and provide a claim for demurrage with supporting documents within 90 days of completion of discharge. My understanding is that Tomlinson LJ who gave the court's judgment in The Abqaiq [2012] discussed examples of how compliance with CL 20.1 might be achieved. Tomlinson LJ was not eliminating the requirement of presentation of supporting documents within 90 days for the purposes of clause 20.1; he was considering how compliance with the requirements of the clause and presenting the claim within the 90-day window stipulated by Cl. 20.1 might be achieved and simply came to the view that documents could be provided separately.
DEMURRAGE CLAIMS AND THE USE OF PART 36 OFFERS TO SETTLE
One aspect of recent volatility in the oil industry is that claims concerning demurrage have become more contentious – even the smallest of claims. We have seen an increasing trend of parties seeking to recover demurrage by engaging lawyers and resorting to the threat of legal proceedings.
The involvement of legal advisors is certainly sometimes necessary and justified. However, lawyers are now often brought in to threaten litigation and one notable development we have seen is the use of devices which increase the threat in litigation by making an offer under Part 36 of The Civil Procedure Rules. Providing the Part 36 offer is made in accordance with the requirements of the rules, then, if at trial a party fails to obtain a judgment which is more than the offer, the court must (unless it is unjust to do so) order that that the party pay the offer or:
An additional 10% of the first £500,000 of damages awarded, plus 5% of damages above £50,000 subject to a limit of £75,000 (and if no damages are awarded, 10% on the amount of costs).
Indemnity costs from the end of the 21-day period after the date of the offer.
Interest on the sum awarded and on the costs not exceeding 10% per annum above base rate.
Whilst some Part 36 offers are a genuine attempt to settle, the use of Part 36 is now "in vogue" and in some respects has simply added to the lawyer's arsenal of things to use to try and scare a counterparty into settling.
Tags: bpvoy5, bpvoy4