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“Charter Party Disputes” celebrates its first anniversary with positive reviews

Prokopios Krikris
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“Charter Party Disputes” celebrates its first anniversary with positive reviews

“Charter Party Disputes” celebrates its first anniversary with positive reviews. The website builds on the practice of resolution of charter disputes by negotiation or arbitration. It results from years of extensive research and practical application of LMAA awards in negotiating hundreds of charter party disputes while working as a claims handler for Owners or Charterers.

That prompted me to launch this emerging website on 2021 that is regularly updated and strives to touch on all categories of charter disputes. It also keeps me motivated and determined to engage further in the field of ADR.

2021-2022

This year, the site features more than 50 posts with commentaries on LMAA awards, settled cases by negotiation, four articles were published on I-LAW/ MRI (speed claims, deviation, laytime, bunkers), and two free guidebooks were shared on laytime (A Tribute to Maritime Arbitrators) and underperformance claims (with observations from charter negotiations to dispute settlement), and video presentations (YouTube).

What next?

The site will focus on practical observations from settled cases by negotiation before or during the arbitration proceedings. That adds to the practice of avoiding, managing and resolving charter disputes commercially. For example, “practical issue 1” discusses the parties’ disagreement on laytime calculations (reversible or non-reversible ?) and whether similar issues could be avoided. While “practical issue 2” reflects the challenging process of resolving a dispute by negotiation.

Below is a short video presentation of the site, including testimonials: https://www.youtube.com/watch?v=edjkYPzXYUY&feature=share

Speed & Consumption Claims- “Optimum Voyage” presentation

Prokopios Krikris
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Speed & Consumption Claims- “Optimum Voyage” presentation

Glad to announce that I conducted a presentation for Optimum Voyage (www.optimumvoyage.com), an established weather routing company, on speed & Consumption claims, with an extensive analysis of published LMAA decisions, including debatable issues in the charter negotiations or the WP settlement negotiations between the parties & their representatives.

I thank Optimum Voyage for the invitation to discuss the present & future challenges in speed and consumption claims and their genuine feedback on their applied methodologies to objectively assess the vessel’s performance. 

Below is a short video presentation highlighting only some of the topics discussed:https://www.youtube.com/watch?v=VEeuBkfwVxQ

Speed & Consumption Claims presentation, London Arbitration decisions, Prokopios Krikris

The background sound comes from a video the master presented to justify the slow steaming because of the adverse weather or, as an experienced engineer arbitrator wrote decades ago, “The said momentum is lost by having to ride the waves” C. Barclay (1974).

Linkedin post: https://www.linkedin.com/feed/update/urn:li:activity:6931223921312559104/

A Snapshot Guide to Laytime & Demurrage -A tribute to Maritime Arbitrators-Prokopios Krikris

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A Snapshot Guide to Laytime & Demurrage -A tribute to Maritime Arbitrators-Prokopios Krikris

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40 years published London Maritime Arbitration Awards (1980-2020)- A Tribute to Maritime Arbitrators

Laytime and Demurrage disputes have been the subject of litigation or arbitration for decades. So, legal literature is abundant, along with case law and arbitration awards on this complex topic.

From 1980 to 2020, interesting cases have come before London Maritime Tribunals, and their decisions offer helpful guidance on many points that regularly provoke heated debate in the shipping industry. Undoubtedly, the Maritime Arbitrators’ expertise and support remain invaluable to the shipping industry, including their essential function to participate in the rule of law.

In less than 55 pages, this snapshot guide cites about 270 awards for bulkers, tankers and sale contracts; it refers to about 840 issues discussed in these decisions. Therefore, the user can easily find whether a case has been already determined by a London Tribunal and consider this award (if needed) when a similar dispute arises. However, any decision should be read together with other decisions on equal points, case law and commentaries in law textbooks.

For your reference, most of these decisions refer to disputes that arose under the below amended or standard form of contracts:

  • Bulkers: GENCON, SYNACOMEX,NORGRAIN, etc.
  • Tankers: ASBATANK, SHELLVOY, BPVOY, VEGOIL, EXXONVOY,etc.
  • Sale Contracts: FOB, CIF, etc.

I hope that you find this snapshot guide practical and valuable.

You can see the Snapshot Guide here.

The awards are published in Lloyd’s Maritime Law Newsletter, Informa Group Ltd

London Arbitration- deductions for underperformance and stevedore overtime expenses

Prokopios Krikris
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London Arbitration- deductions for underperformance and stevedore overtime expenses

Disputes arose under an amended NYPE 1993 form and came before two LMAA arbitrators for determination. The Owners claimed a balance of US$238,077.18 due to them, and the Charterers claimed a balance in Charterers’ favor of US$245.99. In their Defence submissions, the Charterers attached a hire invoice for US$39,008.29 due to Owners and paid that amount.

This decision supports some of the observations made in another post here: Speed & Consumption- in good faith- deductions from hire – Charter Party Disputes

Deductions

The Charterers’ deductions from hire related to alleged underperformance and overconsumption of bunkers together with an alleged stevedore overtime claim in the sum of US$34,852.83.

Underperformance claim

The Charterers’ hire statement served with their Defence Submissions included deductions from hire as a result of alleged underperformance evidenced by a [X] Performance Report Damietta to Becancour for a period of 6.06208333 days (6.0621 days). The IFO overconsumption figure for Damietta to Escoumains was 25.52mt, and the MGO consumption figure for the same period was 0.77mt.

The Owners’ RFI served on 16 September 2021 asked, inter alia, for the Charterers to state precisely the basis on which the Charterers assessed the loss of 6.0620833 days, whether any account had been taken of agreed off-hire or deliberate slow steaming in determining periods of “good weather” as defined in the Charterparty and whether it was the Charterers’ case that AIS alone was capable of assessing and quantifying the alleged underperformance of the vessel. In particular, the Owners asked whether four specific periods of time between 9 and 28 October had been assessed as “good weather“.

The Owners also asked whether any deduction in relation to the calculation of 6.0620833 days differed from the same amount included in “Off-hire” in the Charterers’ hire statements and/or the “Off-hire Schedule AIS” and, if so, to explain in what respect and on what basis such sums for hire for 6.0620833 days remained separately deductible or for the Owners’ account.

The Owners requested similar clarification in relation to the calculation of consumption of IFO and MGO and whether account had been taken of any agreed off-hire or deliberate slow steaming in determining the periods of “good weather”.

Despite an extension of time for the Charterers to respond, followed by the tribunal’s order for a response failing which a final and peremptory order would follow, the Charterers did not reply.

The Disponent Owners sent the following message to the Owners, Charterers and the Tribunal:

“Dear Sirs

The purpose of the RFIs was to require Charterers (and Sub-Charterers by service down the chain) to properly evidence and quantify the indemnity claim (and defence of sub-charterers) that Vessel underperformed and overconsumed during the period of the sub-charterparty. The RFIs also required proof of loss of the stevedore overtime expenses claimed at Becancour.

Alleged Underperformance/overconsumption

The Sub-Charterers relied upon weather routing reports prepared by [X], but as Owners pointed out in their submissions, the reports used periods when the Vessel was off-hire to count as “good weather”. As these cannot be used as evidence to support any contention that the Vessel underperformed or overconsumed, the Charterers and Sub-Charterers were requested to provide further information on the basis of which they were entitled to claim the damages sought. Any claim for damages must relate to the warranted capabilities of the Vessel and so can only be assessed according the contractual yardstick agreed by the parties.

If the Sub-Charterers are not prepared to, or cannot, provide proper evidence of any loss suffered as a result of any alleged underperformance or overconsumption then the appropriate sanction is that the defence of Sub-Charterers in relation to underperformance/overconsumption (and by extension the indemnity claim against Owners by Charterers) must be struck out.

Stevedore Overtime Expenses

Sub-Charterers were requested to provide information regarding timings of the Vessel at Becancour in relation to other vessels and discharge at Becancour in order to evidence the losses allegedly sustained. They were also requested to provide further information on the alleged breach by Charterers/Owners that would entitle to claim any damages at all.

If Sub-Charterers (and by extension Charterers) are unable to provide information to support or evidence any alleged loss, then again the appropriate sanction would be that that part of the defence by Sub-Charterers (and by extension the indemnity claim against Owners by Charterers) be struck out.

……..

Kind regards

“

Held,

Liability

In the absence of any response from the Charterers and in their breach of the tribunal’s final and peremptory order resulting in the striking out of those parts of the Charterers’ claims identified in the Disponent Owners’ email, the Owners’ claim for unpaid hire in the sum of US$150,354.23 succeeds in full.

Costs

Since the Owners have succeeded with the most part of the claim, the tribunal found no reason to depart from the normal rule that costs should follow the event. The hourly rates ranging from £185 to £285 were reasonable and lower than those charged by many solicitors’ firms in the maritime field.

Award accordingly.

Issued 4th of May 2022.

Note: This website removes the names of the parties involved in this or other awards. The reader can find more details on Jus Mundihttps://jusmundi.com/en/.These awards mostly come into the public domain through enforcement under the NYC 1958.

London Arbitration- unpaid admitted demurrage amount

Prokopios Krikris
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London Arbitration- unpaid admitted demurrage amount

The vessel was chartered on an amended NORGRAIN Form to carry soya beans in bulk from Paranagua to Rizhao. Disputes arose between the parties and were referred for determination to a sole arbitrator under the LMAA Terms.

Owners served their Claim Submissions that included an email from the Charterers confirming the Owners’ laytime calculations. However, Charterers had not served their Defence Submissions within 28 days or requested any extension of time. Therefore, on 10 October, following the Owners’ request for an order to serve their Defence, the arbitrator asked the Charterers to respond within two days, explaining why they had not served their Defence and how soon they could do so. On the same day, the Charterers asked for an extension of seven days to serve their Defence. Meantime, the Charterers admitted the Owners’ claimed amount and said that this delay was due to “great losses in crops, economic recession, so businesses meant to be very difficult”. Also, the Charterers said that they did not see the non-payment of the balance as a dispute so the parties to resolve it in Arbitration, and this matter could be resolved amicably and proposed payment of this balance in “3 equal parcels” or earlier via freight rate adjustment if the parties fixed another voyage.

Subsequently, on 7th November, the Charterers served their Defence and acknowledged the balance due to the Owners. They said they never refused to pay and repeated their offer for payment in “3 equal parcels”. This prompted a response from the Owners’ London solicitors on 11th November, requesting that the arbitrator proceeds to an award given the admission of the sums claimed. On 3Oth  November, the arbitrator confirmed his intention to proceed to an award.

On 16th December, the Owners’ solicitors advised the arbitrator that the Owners received a payment on account from the Charterers and requested the arbitrator not proceed to an award pending receipt of the balance as promised by February. On 15th March, the Owners’ solicitors requested the arbitrator to proceed to an award, and the arbitrator asked for clarifications from the Owners regarding the applicable interest for the paid sum (on account) and their costs. Then, the arbitrator asked the Charterers to make any comments on the sums now claimed by the Owners.

The arbitrator held that the Charterers were very open in admitting the sum claimed as being due. They wished, though, to find a way of paying this by installments was not an answer to the Owners’ claim. The payment of USD 200,000 obviously reduced the balance due but left an undisputed amount of USD 99,847.34 outstanding. Consequently, the Owners were entitled to an Award for that sum plus interest and costs and interest on the late payment of USD 200,000.

Award accordingly.

Issued 27 March 2017

This website removes the names of the parties involved in this or other awards. The reader can find more details on Jus Mundihttps://jusmundi.com/en/.These awards mostly come into the public domain through enforcement under the NYC 1958.

LIST OF 890 PUBLISHED LMAA AWARDS, 1979-2022

Prokopios Krikris
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LIST OF 890 PUBLISHED LMAA AWARDS, 1979-2022

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I am pleased to present the third guidebook published for free as part of a series of “Snapshot Guides” on charter disputes that I write.

Given my daily involvement with charter disputes and the parties’ extensive reference to LMAA Awards during settlement negotiations, I started in 2015 to prepare for convenience a list of the summaries that I update annually with new decisions and a brief description or keywords for quick reference material. To prepare this list, the short observations and statistics, I read all the published summaries from 1979, refreshing my knowledge and learning more as few summaries went unnoticed or involved uncommon issues.

After publishing the guidebook “Snapshot Guide to Laytime & Demurrage”, I aimed to publish another guidebook with more categories of charter disputes, i.e. “A Snapshot Guide to Charterparties”. However, the published awards considered disputes under several types of contracts. Therefore I decided to prepare and share this “Snapshot Guide to LMAA Awards” as a list, with awards in chronological order. But, of necessity, I could not include more information about the summaries apart from some keywords, statistics and brief observations.  Therefore, the keywords had to be extremely short, and some aspects were not covered.

Notably, as a conscientious reader of the Lloyd’s Maritime Law Newsletter https://www.lmln.com/, it would not be right for me to lose this opportunity to pay tribute to Michael Daiches, who edited the LMLN and prepared award summaries for 40 years, from 1981-2021.

This guidebook includes statistics and brief observations. As observed, approximately 20-25% of the cases referred to arbitration proceed to an award. Regarding the rest, the parties usually settle the case during the various stages of the reference. Most of the published awards considered disputes that arose under charter parties or bills of lading contracts, and fewer considered disputes under contracts for ship sales, shipbuilding and repair.

Roughly 70% of the disputes that came before arbitrators involved issues of construction or interpretation: by way of remarks, some tribunals commented on the relatively relaxed draftsmanship adopted over the years when it came to construing the contract. 

For the reader’s easy reference, the chart below shows that commonly disputed issues fall into these categories: laytime and demurrage, hire payment, off-hire, cargo claims, arbitration practice, freight and dead freight, speed and performance, and maintenance (mostly the holds condition and cranes) or unseaworthiness, e.g. mainly due to engine damages or other matters, e.g. cracks in the hull or side shell plating, tail shaft damaged, or for crew matters, including consideration of the Hague Rules defences, competing causes of delay- chain of causation, etc. And fewer issues about disbursements, unsafe ports (hull & mooring ropes damaged, actions of pilots and tugs), bunkers, extra insurance, and sales of ship or shipbuilding contracts

Chart showing LMAA Published Awards 1979-2022
LMAA Published Awards 1979 – 2022

Note: this book may be freely distributed online and in print, provided it is in complete form without any amendments and contains all credits as referred to in the guidebook (see copyrights section).

Credit to Lloyd’s Maritime Law Newsletter https://www.lmln.com/ and I-law https://www.i-law.com/ilaw/index.htm

Issue 8: Underperformance- extrapolation is not allowed?

Prokopios Krikris
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Issue 8: Underperformance- extrapolation is not allowed?

Everyone that has access to the circulated vessel’s position list in the market, containing the vessel’s description clause, will observe that more or less the clause includes one of the following terms about “extrapolation”. In the parties’ minds, each term is precise and serves the same purpose: restrict any performance claim (loss suffered by the charterers) to the good weather periods, i.e. any variation of speed and/or consumption from the warranted charter party speed and/ or consumption under good weather conditions should not be applied with all necessary adjustments and extrapolated to all sea passages and in all weather conditions (2nd stage of the Didymi).

  1. EXTRAPOLATION OF “GOOD WEATHER” PERFORMANCE FOR “BAD WEATHER” PERIODS IS NOT ALLOWED.
  2. NO EXTRAPOLATION IS ALLOWED.
  3. EXTRAPOLATION FROM GOOD WEATHER TO ALL WEATHER IS NOT ALLOWED.
  4. NO EXTRAPOLATION OF GOOD WEATHER PERFORMANCE OVER THE ENTIRE VOYAGE OR FOR PERIODS OF BAD WEATHER.
  5. DAYS EXCEEDING THE AGREED ABOVE-MENTIONED GOOD WEATHER CONDITIONS ARE TO BE EXPRESSLY EXCLUDED WHEN THE VESSEL’S SPEED EVALUATION IS CONDUCTED, NO OTHER EXTRAPOLATION WILL BE ALLOWED.

When a dispute arises over the vessel’s performance, some weather routing companies will argue that the above wording is not clear enough to change the standard position adopted in the Didymi and recently applied in the Ocean Virgo and the Divinegate. Therefore, they submit a report with extrapolation to all weather and support their position on the following grounds:

  1. Owners focus on the word “extrapolation” but ignore the full clause or what is missing from the wording of the clause.
  2. The wording supports that only extrapolation is not allowed from bad weather periods.
  3. The report does not extrapolate using unknown values, based on the meaning of extrapolation in mathematics “Graph, curve or range of values by inferring un-known values.”
  4. The CP refers only to the first step in establishing a claim, whereas establishing the damages is another step that the CP says nothing about.
  5. Under English Law (The Didymi, as reaffirmed in the Ocean Virgo and recently applied in the Divinegate), it is a fundamental principle that any deficiency of underperformance in good weather to be measured against the entire voyage.
  6. To change a very established legal precedent the parties should have used very clear wording stipulating that the Didymi principle is not to apply, much less any wording no extrapolation of a good weather deficiency against the overall voyage is allowed, which could be challenged.
  7. Owners’ contrary approach raises questions about whether they had described their vessel’s performance in good faith.

As observed, the owners defended these contentions saying that the WRC has mistaken their role and function under the charter party terms. Over-elaboration was unnecessary: the meaning of this word in mathematics was irrelevant, and words should be construed in their context. The purpose of these words was to remove any doubt concerning what was agreed upon. Whether this is now clear or not in the minds of the WRC is neither here nor there.

From the words used by the parties, one had to try to ascertain their mutual intention (not what the WRC thought the terms to mean). Commercial parties, such as the owners and charterers, would understand the words “no extrapolation” in this sense without any room for argument. To argue as the WRC has done, it was to stretch the language beyond its limits to breathe life into this dead claim.

Note: The WRC expressed the view that the wording “the Didymi principle is not to apply” was missing from the CP. However, the parties rarely use this proposed wording in charter parties (as a matter of practice), and if you exclude the Didymi in general, how do you establish a claim? (the 1st stage will not apply as well).

The commercial parties feel confident with simple language, as cited above. Still, there are some instances that the parties later dispute the meaning of the words used after receiving some feedback from a weather routing company. For example, would that require including something like “any variation of speed and/or consumption from the warranted charter party speed and/ or consumption under good weather conditions should not be applied with all necessary adjustments and extrapolated to all sea passages and in all weather conditions (the 2nd stage of the Didymi does not apply)”? Or would that be a linguistic overkill, and the market has not yet shown any need for such detailed wording in the charter parties?

The above is only a brief reference to the parties’ arguments based on my observations in handling claims for owners and charterers.

War risks additional premiums – whether as per London market

Prokopios Krikris
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War risks additional premiums – whether as per London market

The vessel was chartered on an amended NYPE 1946 form for a trip to Hodeidah- an area exposed to war risks. A dispute arose concerning the amount of the extra war risk insurance premium payable by the charterers. Consequently, the parties referred the dispute to arbitration in London.

The owners presented the invoices from their London brokers that calculated the extra premium as 1.5% of the vessel’s value less a 35% discount. The owners said this amount was paid and did not exceed what Lloyd’s of London Underwriters quoted. In addition, the owners referred to another fixture with the charterers concerning another vessel for which the charterers had paid a similar amount. Thus, the owners said that the charterers knew the premiums to pay for this fixture.

The charterers’ case was that the calculation based on 1.5% of the vessel’s insured value was not representative of the vessel’s time in port and was excessive. The owners should have presented a quote (based on the wording “as quoted”) before entering this area, allowing the charterers to challenge the sum quoted by the owners’ insurers. The charterers denied any reliance on the other fixture caused a waiver or acceptance. Lastly, the charterers applied 0.5% less 35% discount and paid that sum to the owners. That was based on the charterer’s brokers’ enquiries for other Yemeni calls.

Held,

The owners have failed to submit documentation or quotations before entering the war zone. If the owners could not comply with the requirements of the clause because they could only offer the documents after the event, the relevant clause required necessary amendments. However, the owner’s failure to follow this process was not enough for the charterers to avoid payment of EWRI. But, importantly, the extra insurance payment should be a London Market rate or a rate not exceeding what was quoted by the London Market at the time. On the evidence, the rate obtained was at the high end of the range, but it fell within the charter party provisions. Therefore, the charterers had to pay the amount claimed by the owners.

Award accordingly.

For a similar issue, see London Arbitration 9/02.

Note: no other information can be provided for this award. The website removes the names of the parties involved in any award.

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