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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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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

Vessel’s slow steaming resulted in numerous claims & counterclaims

Performance dispute- bunkers- alleged engine issues- slow steaming- entangled ropes- performance analysis- bunker quantity dispute

The vessel departed from the loading port, and the charterers observed she was slow steaming en route. At the intermediate port, the charterers supplied the vessel with bunkers. Due to slow steaming (suspecting fouling), the charterers arranged for an underwater inspection, which revealed entangled ropes in the propeller and the diver removed the ropes. The vessel then resumed her sea passage to the discharge port and delivered the cargo.

The charterers brought an underperformance claim. The owners denied that the vessel underperformed, submitting a performance report from their appointed Weather Routing Company (WRC) that indicated no good weather conditions were present during the voyage and the report produced no performance results. Furthermore, the owners argued that the bunkers supplied by the charterers were off-spec, leading to deficient performance. They also contended that the vessel was not on an “even keel” during the voyage, which was a condition in the performance warranty.

Upon redelivery, the vessel had less bunker quantity than stipulated, and the owners claimed the price difference between the Charter Party (CP) rate and local market prices for the short quantity (“about”= 5% applied). The charterers rejected the owners’ arguments, asserting that the bunkers were not off-spec and that this was not verified by an independent laboratory. They also stated that the owners’ laboratory analysis did not show any significant operational difficulties with burning these bunkers. Additionally, the charterers argued that the entangled rope in the propeller was the owners’ responsibility and contributed to the slow steaming. They insisted that the bunker shortfall resulted from the owners’ breaches and should be their liability. Furthermore, the charterers contended that the WRC report from the owners did not apply the agreed benchmark conditions for measuring performance and should be ignored as evidence. Lastly, the charterers claimed losses due to subsequent delays at the discharge port, because of the Vessels delayed arrival.

In conclusion, both sides presented several claims and counterclaims regarding the vessel’s deficient performance. The core question remains: who was responsible for the vessel’s deficient performance (affecting also the other claims), and how should the loss be quantified (even if there was no good weather)? a WRC report is not sufficient to resolve such claims.

Claims for demurrage and loss of profits after cancellation

Introduction

Loading and the supply of cargo was being delayed because of complications with opening a Letter of Credit for the purchase of the intended cargo, which Charterer stated it was working to put in place. In addition to the demurrage due, Owner asserted a claim for profits that it would have earned had Charterers performed its obligations under the charter party.

Notice of Readiness

Owners did not submit a copy of a Notice Readiness (NOR) that Owner states was tendered upon vessel’s arrival at the Southwest Pass anchorage. However, Owner’s chartering manager, in a signed Declaration stated the NOR was given at 1110 on February 14, that laytime began 12 hours later at 2310 that day and that the vessel went on demurrage at 0640 on February 16. In a statement dated March 6, 2014, signed both by Mr. X and Owner’s CEO, Mr. Y, Owner confirmed the same times for the NOR and commencement of laytime. Owner’s Amended Submission also states that time on demurrage began at 0640 on February 16. Owner’s laytime calculations and demurrage invoices, however, record time on demurrage beginning 24 minutes later, at 0704 on February l6. This latter calculation reflected allowed laytime based on a cargo intake of 31,900 MT. Given that the charter provided for a cargo of 31,500 MT, 10% more or less in Owner’s option, the panel accepted as correct, the calculation of allowed laytime based on an assumed intake 31,900 and. therefore, accepts that demurrage began at 0704 on February 16, as reflected in Owner’s laytime statement. The panel also accepted that an NOR was tendered at 1110 on February 14, given the numerous references to it in documents sent to Charterers in the period before the charter cancellation, none of which Charterer disputed.

Demurrage ends

The panel did not accept that the vessel remained on demurrage following Owner’s cancellation of the charter. Neither the provisions of the charter nor any applicable principles concerning the computation of demurrage known to the panel, justify the continuation of demurrage beyond the cancellation of the contract.

Loss of profits

The panel found that Owner’s claim for lost profits in the amount of $225,574 was insufficiently supported to warrant an award. The panel accepted that Charterer’s failure to supply a cargo was a fundamental breach of the charter party and that this breach gave Owners the right to claim for damages reasonably owing from this act by Charterer. Based upon the documents submitted, the panel was unable to conclude what would have been the specific amount of profit, if any, that Owner would have made if the charter party had been properly performed. The panel did not find the data on voyage costs, such as the time charter hire payable to the head owner, or port disbursements, bunker costs, etc., detailed enough to calculate whether or not the voyage would have been profitable. In addition, details on the ballast voyage expenses were not provided, which the panel needed to appraise the total commercial undertaking. As a consequence, the panel could not calculate the specifics of Owner’s claim and thus was unable to determine whether Owners indeed would have made a profit had the cargo been supplied and the voyage been performed.

New York-Three arbitrators 2014

Comment

It demonstrates how the panel addressed the issue of the missing NOR and their reasoning behind accepting that the NOR was submitted at 11:10 AM on February 14. The lack of adequate evidence and explanation was detrimental to the Owners’ loss of profit claim. Regarding the termination point of demurrage, a similar perspective has been adopted by other tribunals in London.

Please note: Readers are encouraged to visit Jus Mundi (https://jusmundi.com/en) for further information and a comprehensive understanding of the tribunal’s decision.

Hull Fouling Dispute in West Africa

Context and Diver’s Inspection

A significant point of contention was the impact of a brief shifting period between two loading ports on activating the hull fouling clause. The diver’s inspection of the underwater area, including the propeller, hull, and rudder, highlighted the challenges faced in assessing such conditions, particularly in the demanding environments of West Africa.

Dispute Overview

The core issue was whether this shifting period interrupted or reset the 20-day timeframe required to trigger the hull fouling clause. This clause would mandate that the charterers be responsible for cleaning the vessel before it departed from the loading port. The diver’s inspection was crucial in determining the state of the vessel’s underwater components, which directly influenced the dispute’s outcome. Entangled ropes at the propeller added another layer of complexity, potentially impacting the vessel’s performance.

Legal and Operational Considerations

The underperformance claim had to be evaluated against other charter party provisions regarding hull fouling liabilities due to prolonged stays at the port. The key considerations included:

Interpretation of the Hull Fouling Clause:

Impact of the Shifting Period:

  • Determining if the brief movement between ports constituted a significant interruption that reset the hull fouling period.
  • Assessing the extent of hull fouling based on the vessel’s prolonged stay at these ports, with high sea water temperature.
  • Assessing its implications on the vessel’s performance and charterers’/ Owners’ responsibilities.

Evidence from Diver’s Inspection:

  • The diver’s findings on the condition of the propeller, hull, and rudder provided evidence for the dispute. However, there were some conflicting and unclear points about the condition of the hull and the extent of fouling. Another issue was whether the diver’s report was to be considered as conclusive evidence binding the parties. It was not. The report was challenged on various grounds.

Conclusion

The dispute required a detailed analysis of the hull fouling clause’s wording and the diver’s inspection report. Ultimately, the decision hinged on whether the brief shifting period was considered an interruption significant enough to reset the 20-day period, thereby affecting the charterers’ liability for cleaning the vessel before departure from the loading port.

In some instances, the diver’s report may not sufficiently establish the extent of fouling (for different reasons). In such cases, additional evidence can be crucial in determining the extent and nature of the fouling. Closely examining the engine parameters from the vessel’s logs and independent performance reports on the voyage can be helpful.

Calculating dead freight claim following repudiation

London Arbitration (LMAA, Sole arbitrator 2012)- Repudiation and calculation of net deadfreight claim

The Carrier’s dead-freight invoice (US $231,869.26) represented gross dead-freight US $249,000 less stevedoring US $17,130.26. The Carrier stated that the amount said to be stevedoring also incorporated the port expenses that would have been incurred had the cargo have been loaded. The Merchant maintained that the figure was too low and that the Carrier had not included the notional port expenses in their calculation of net dead-freight. To illustrate its point, the Merchant submitted a copy of an invoice for pilotage for the “vessel [Redacted]” at Houston in February 2010 in the amount of US $6,148.89, observing that there would have been other expenses, such as wharfage, payable for a call at Houston to load the cargo under the booking note.

Held, in agreeing with the Merchant, the figure given by the Carrier as total port and stevedoring expenses which would have been incurred, US $17,130.26, appeared too low. Based on the tribunal’s experience, while that figure was certainly appropriate for stevedoring at Houston, it could not have included port expenses there or at the discharge port. There were, in addition, the stevedoring costs at the discharge port to be taken into account, although these would not have been at the same level as the stevedoring expense at Houston.

The tribunal calculated that the loading and discharging port expenses plus stevedoring at discharge would have been in the order of US $20,000. As no figures in this respect had been put forward by the Carrier, however, and to be as fair as possible to the Merchant, it felt better to take a conservative view and deducted US $25,000 from the amount claimed by the Carrier as dead-freight.

Please note: For further information and a comprehensive understanding of the tribunal’s decision, readers are encouraged to visit https://jusmundi.com/en

Detention claim due to delayed departure from Ice Port

Delayed departure due to ice conditions vs Masters’ unreasonable conduct– whether Owners or Charterers are responsible for the waiting time and extra berth charges

The dispute

The Owners were asserting a claim for detention due to the waiting time to depart the Vessel, coupled with additional berth dues. Their argument hinges on a breach of the warranty to trade the Vessel to ice-free ports. According to the Owners, substantial evidence indicated icy conditions at this port, which caused delays in the Vessel’s departure.

The Parties’ contentions in brief

The Charterers challenged the Owners’ claim on multiple grounds:

  1. Laytime ends upon completion of discharge. Any risk of delay in departure thereafter falls on the Owners.
  2. The Charterers argued that the pictures provided do not show the presence of navigational ice but rather “nilas,” which can be effectively cleared away by tugboats. They contended that substances like nilas do not meet the criteria for ice, thus rendering the port non-ice free.
  3. The Charterers asserted that upon the Vessel’s arrival at the port, the Owners assessed the port condition and chose to proceed for berthing without raising any objections. They argued that the Owners’ subsequent conduct altered the terms of the Charterparty and therefore, they were estopped from bringing this claim now (arguments re variation/ estoppel).
  4. As per the agents, other Vessels departed without encountering any delays. They attribute the delays in departure to the masters’ unreasonable conduct. Additionally, photographic evidence clearly depicts another ship sailing from the port. These vessels were similar in size and type, and no damages were reported.
  5. The Charterers argued that the alleged extra costs did not arise from an independent or additional obligation brokened by them. They contended that the matter was governed by the laytime terms, and that was the Owners’ sole remedy. Even if there was any delay in departure, they asserted it was due to the masters’ failure to depart timely.

The Owners’ replied as follows:

  1. The Owners contended that this was not merely a laytime dispute, but rather a claim for damages for detention and/or quantum meruit.
  2. The Owners asserted that according to published ice charts, there was indeed a presence of ice. They emphasized that the parties explicitly agreed for the Vessel to only call at “ice-free” ports. They argued that there is no technical distinction between thin or thick ice, only whether the port qualifies as ice-free.
  3. The Owners maintained that the conditions at the time of the Vessel’s arrival have significantly changed compared to the ice conditions prior to departure. They denied that the Owners varied the terms of the charter-party. The Owners argued that they reserved their rights to bring a later claim by calling this ice port, thus constituting a breach of the warranted terms. They believed they had a valid claim for damages for detention and/or, alternatively, a quantum meruit claim for performing this extra-contractual service.
  4. The Owners said that they were not aware of the agreed terms or the conditions under which the other ships departed, including whether damages were sustained or not. Regardless, they emphasized that the master, being on the spot, was best positioned to assess the dangers and make the final decision regarding the safety of the Vessel and Crew. They argued that it was not for the Charterers to second-guess the master’s decision taken in the circumstances.
  5. The Owners asserted that the master acted reasonably in the given circumstances. They argued that the extra berth charges arose directly from the Charterers’ breach to call an ice port, and thus, these costs should rightfully be attributed to the Charterers.

Note: These are just observations and not the author’s opinion on the matter.