The charterers failed to prove a vessel’s “operational fault” to avoid liability for paying demurrage. Even if the vessel was not prosecuting the voyage with reasonable dispatch, and the vessel lost a berthing slot any delay thereby caused would be “completely unquantifiable”. The charterers cannot recover damages by refusing to pay demurrage.
*For LMAA published awards on breach of the pumping warranty, check pages 47-50 of this free guidebook: https://www.charterpartydisputes.com/a-snapshot-guide-to-laytime-demurrage-a-tribute-to-maritime-arbitrators-prokopios-krikris
The background
By two charter parties adopting the terms of the ASBATANKVOY form, the vessel was chartered for the carriage of Fuel Oil from Shuaibah, Kuwait, to Fujairah, UAE. Part of the cargo was discharged at the terminal, and other by STS transfer. The owners claimed demurrage under both charter parties for US$27,694.44 (1.384722 days demurrage) and US$47,609.33(2.11597 days demurrage). The charterers denied liability.
Consequently, the disputes were referred to arbitration in London, and each party appointed an arbitrator.
The parties’ submissions
Charter party I
Charterers argued that the vessel took more time to discharge two parcels of cargo by STS. As said, the STS was ordinarily faster compared to discharging to shore, given no pressure was required, and yet the vessel took longer to discharge a smaller amount of cargo by STS than when the vessel discharged at the terminal. The pumping warranty of 24 hours in clause 9 indicated how quickly the vessel could discharge at the terminal and stood no reason that the vessel should be able to discharge quicker than 24 hours by STS transfer. As this did not happen, it indicated that there must be an operational fault, and the charterers should not be liable for the demurrage claimed.
Owners rejected the charterers’ comments on delayed STS operation. First, there was no restriction for discharging time and average pressure at the ship’s manifold during the STS operation. Second, the discharge rate reduction during STS compared to that in the terminal was due to the different cargo hoses in size, i.e., 2×10″ (and not2x12″ as before at the Terminal). The discharge rate during STS is affected by the cargo hoses and the capability of other vessels to accept cargo discharged into different tanks by lower pressure and topping off each time the change of tank. The charterers were responsible for providing appropriate cargo hoses to minimise the delay.
Charter party II
The charterers contended that the vessel took more than 24 hours to discharge at both the terminal and by STS transfer. The warranted pressure was 100 PSI (equivalent to 7 Bar or kg/cm2), and the ship could not maintain 7 Bar based on the pumping record. The lowest recording was 3.0 Bar. Therefore, owners breached the pumping warranty under clause 9, and charterers should not be liable to pay demurrage.
In addition, the charterers submitted that the vessel also took an extraordinarily long time to discharge by STS transfer. In support of their case, the charterers said that the vessel discharged 59,618.75 MT at the Terminal in 44 hours 24 and discharged 24,590,626 MT to the “[REDACTED]” in 17 hrs 41 by way of STS transfer. That produces an average discharge rate of 1,339.75 (terminal) and 1,336 mt per hour (STS).
Charterers asked the owners to increase the discharge rate to 2500 cm PHRS, of which the vessel was capable, and owners failed to do so.
Lastly, the charterers argued that the NOR was tendered the next day due to the vessel’s technical breakdown at Fujairah. As a result, the vessel lost her slot and had to wait at the anchorage instead of going straight to berth on arrival. Because of this, the vessel was delayed in berthing for 10 hrs due to congestion, the Charterers said. Accordingly, they should not be liable for this waiting time and hence the demurrage claimed.
Owners submitted that during discharge at the terminal, they had accepted a slight reduction in the average pressure (6,164 kg/sq cm as against 7 kg/sq cm). Applying an accepted formula reduced their demurrage claim accordingly. The charterers did not challenge this.
Concerning the STS discharge rate, the owners said it was 6.35 kg/sq cm, and there was no restriction in the charter party for discharging time or average pressure. The STS operation was performed with 1x 10” due to the lightering vessel’s problem in the pumproom, which could not accept 2x 10” hoses. As owners said, this provided an answer to the charterers’ complaint that the discharge rate was not increased following their instructions to do so.
For the alleged delay in tendering NOR, the owners’ position was that as per charter party, the laytime starts 6 hours after tendering the NOR, and there was no provision permitting any deduction as regards the commencement of laytime.
In further submissions, the charterers maintained after disclosing expert opinion that there was an inherent problem with the vessel that affected the overall discharge rate during STS operation and denied that this was caused by the number or size of the hoses.
Expert evidence
The charterers adduced expert opinion evidence to support that STS operations are usually faster, and this delay was due to a vessel’s fault. Charterers’ expert opined that- as a general statement– the STS transfer, when started and subject to weather conditions, will take less time as compared with an equal quantity and type of cargo being discharged through a pipeline at the shore terminal given the back pressure that will restrict the rate of discharge.
Owners’ appointed expert disagreed with the general statement about STS operations and said it all depends on the facts pertaining to each operation. The smaller vessels will likely have smaller manifolds, and smaller hoses will be used than the mother ship when discharging into a shore terminal. The cross-sectional size of the hoses will have a marked effect on the flow rate and the overall discharge time.
The decision
Charter party I
Held, that although the Charterers alleged an “operational fault” by the vessel by inference from the comparative length of time the STS operation took as against the terminal discharge, they were unable to support this by any specific proof. The slower STS discharge was explicable by a discrepancy in the diameter of the flexible hoses and manifolds on the receiving vessels. The Charterers neither disputed this as a matter of principle nor that it had not happened in practice.
Charter party II
The tribunal rejected the charterers’ submission on fault as this was considered in the owners’ reduced demurrage claim already.
Regarding the loss of the discharge berth slot, as she “did not maintain speed during steaming”(charterers’ laytime remark):
Held, that even assuming that the alleged slow steaming was caused by a breach of charter for which the Owners are not protected by an exception in the charter such as the exercise of due diligence, the Charterers cannot recover damages in the shape of refusing to pay demurrage that had accrued. Delay in giving the NOR, even if correct, did not affect the resulting demurrage claim.
The tribunal expressed the view that the Charterers would fare any better if they sought and succeeded in revering damages for the alleged breach in the vessel, not prosecuting the voyage with reasonable dispatch. The owners could not fairly be taken to have assumed responsibility for the Charterers’ alleged loss of a berthing slot when the contract was entered into any delay thereby caused would be “completely unquantifiable” as the result of any such breach( The”Achilleas” [2008] UKHL 48, applied)- [ Author’s comment: similar view expressed in London Arbitration 8/05; charterers unsuccessfully defended a demurrage claim on the grounds of breach of speed warranty causing delayed arrival at disport since this loss was not reasonably foreseeable].
Final Award, 22 December 2009.
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