Monday, November 28, 2022

Demurrage- whether failure to provide cargo and Covid 19 are force majeure

In this arbitration, the owners claimed demurrage and damages in the amount of $1,470,052.78 arising out of an amended C.(Ore) 7 form for the carriage of iron ore concentrate from Topolobambo, Mexico, to China. The dispute came before a panel of three arbitrators under the SMA Rules 2018. Charterers failed to serve their defence, and the panel made its final award on the documents submitted.

The factual background

a. The vessel arrived and tendered NOR at Topolobambo on March 3, 2020, and retendered on March 6, 2020;

b. On May 11, 2020, the owners requested that charterers urgently advise when a cargo would be supplied, observing that the vessel had been waiting since March 3, and reserving the right to declare charterers in repudiatory breach.

c. Charterers failed to provide any satisfactory response to owners’ request;

d. Accordingly, on May 18, 2020, the owners notified the charterers that it terminated the Charter immediately based on the charterers’ breach and repudiation.

e. On June 30, 2020, owners submitted to charterers through its broker a demand, together with supporting documents, for $1,450,052.78 in compensation, including:

• demurrage of $1,111,977.78 for 74.27361 days from the vessel’s arrival on March 3, 2020, to the date it sailed on May 19, 2020;

• alleged loss of earnings of $318,200 on a substitute fixture; and,

• underwater cleaning costs of $39,875 allegedly incurred because of fouling of the vessel’s hull as a result of the long wait at Topolobambo.

f. Owners demanded payment by July 10, 2020, but no payment was received.

Discussion and decision

The panel requested the owners to submit copies of correspondence received from the charterers concerning the reasons for the charterers’ failure to provide cargo. Charterers described as force majeure these alleged situations: (a) delayed issuance of export permits due to previous hacking of the server of the Department of Commerce; and (b) COVID-19, which allegedly led the government to issue a declaration that, from March 30, 2020, onward, limited or stopped mining and also limited production at a concentration plant.

Held,

If charterers had participated in the arbitration and asserted a force majeure defence, it would, under New York law, have had a heavy burden of proof. It would have had to prove by a preponderance of the evidence that the alleged force majeure events actually occurred and that their failure to perform arose or resulted from those events. In fact, charterers chose not to participate and did not submit any evidence regarding these matters. In the circumstances, the attribution of charterers’ breach to events of force majeure would be mere speculation and guesswork in which it would be inappropriate for the panel to engage.

On the documents the owners submitted, they have established their claim. Accordingly, charterers materially breached their obligation under the Charter to provide cargo for the vessel, and after waiting more than two months at the load port, the owners were fully justified in terminating the Charter based on that breach.

The panel accepted the owners’ calculation of the damages for the loss of anticipated profit. The owners applied  $8,759 per day on the next fixture, less $16,150 per day, which would have been realized under the 43-day Charter.

Finally, the panel accepted the owners’ claim for the vessel’s hull fouling due to the prolonged stay that required an underwater hull cleaning at the invoiced amount of $39,875.

Award accordingly.

Final Award, 11 November 2020.

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.

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