Saturday, June 22, 2024

Whether currents to be factored in to calculate loss

It has recently become a frequent issue during settlement negotiations of performance claims whether currents must be factored in to calculate loss when the performance warranty mentioned nothing about currents. The parties relied on performance reports issued by their appointed weather routing companies to defend or pursue the claim. The applied methodology in the reports was different in some cases.

The scope of this post is to share some practical observations from handling or negotiating claims and not to answer the below questions. However, a proper answer to these questions may assist the parties during settlement negotiations.

For example, the minimum good weather speed was 12.00 kts. The charter party warranty speed was in good weather up to and including BF 4 and DSS 3 (Significant wave height 1.25 meters).

  1. The starting point was to consider whether the vessel performed as described, i.e., did she attain the minimum good weather speed 12.00 kts? If the vessel performed, shall the currents be factored in to produce a loss technically? i.e. does this comply with normal rules on damages or does it bring the claimant to a better financial position? Will a tribunal award damages when no “actual” damages exist?
  2. The next point was, should the currents be factored in when the vessel did not perform? Say the ship performed at 11.00 kts (facing adverse current -0.30 kts). Shall the speed applied for loss calculation be 11.30 kts? if not, will that lead to over-compensation? Will a tribunal award “more” damages or be cautious not to “over-compensate”? Does this methodology comply with the minimum performance rule?
  3. Does The Divinegate offer any guidance on the point or not? Some say it provides guidance, but others say it does not because it deals with another issue; “no adverse current” was part of the warranty, whereas here, the warranty mentioned nothing about currents.
  4. If the Divinegate does not directly address this point, does it still guide the parties to the point regarding “over-compensation” addressed above?
  5. In case the vessel did not perform, will a tribunal consider other methods in calculating loss? See, for example, the recent awards London Arbitration 23/21 and 15/23 that the slip was considered. In London Arbitration 2/24, the tribunal (specialist arbitrator) would consider the slip in case he found that the ship underperformed. However, because the ship performed that was the end of the issue (does this answer the question 1 above?). In another unpublished award, the tribunal also held that if the ship performed, no matter whether this was with the assistance of currents or not, that was the end of the issue.

The list of the questions is not exhaustive.

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