London Arbitration 31/32

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The subject vessel was chartered on an amended Gencon 94 form to carry wheat from the Russian Federation to Turkey. She arrived off the discharge port on September 17th, anchored, and tendered notice of readiness. The harbor master ordered the vessel to remain at the anchorage to await cargo samples being taken and analyzed.

The same day, the charterers’ agent told the owners’ operations manager the cargo documents should not be sent to the discharge port agents. They stated that sampling, berthing, and discharging were not to be allowed because the receiver had not yet paid for the cargo.

On 22 September the charterers sent an email to the owners stating: “Please do not allow sampling and discharging. We will revert with additional info”.

The charterers eventually permitted sampling and discharging a week later on September 29th, and discharging was ultimately completed on October 2nd.

Relevant charterparty provisions include:

Laytime allowed for discharge:

“1,000 mt per WWD of 24 consec. Hrs SSHEX Fri 17.00/Mon 08.00, holidays, time not to count, even if used.”

  Regarding the commencement of discharge laytime:

“NOR TO BE TENDERED UPON VSL’S ARRIVAL TO PORT LIMITS AND TO BE ACCEPTED W/I OFFICIAL WORKING HOURS (DAILY 08.00 HRS THROUGH 17.00 HRS, EXCEPT SATURDAY AND SUNDAY W/W/W/W BY VHF//TLX/RADIO/FAX/PHONE E_MAIL AT BE BUT FOR LP … LAYTIME TO COUNT AS PER 02PM/08AM CLAUSE AT L/PORT AND FM 08AM NEXT W/DAY AT D/PORT.”

  Other provisions:

“TIME LOST WAITING FOR CARGO ANALYSES AND/OR LABORATORY TESTING AND/OR IMPORT AND/OR EXPORT FORMALITIES IF ANY TO COUNT AS LAYTIME OR TIME ON DEMURRAGE W/O WEATHER INTERRUPTIONS AND/OR ANY EXCEPTIONS.” (Provision 1)

 “TIME LOST DUE TO CHARTERERS’ INSTRUCTIONS AND/OR FAULT TO BE REIMBURSED BY CHARTERERS AS DAMAGES FOR DETENTION.” (Provision 2)

The owners claimed damages for detention at the demurrage rate under Provision 2 from the tender of NOR on September 17th  until September 29th when the charterers authorized samples to be taken.

The charterers’ claimed only demurrage, not detention, was due for failing to complete cargo operations within the laytime, as recently confirmed in K Line Pte Ltd v Priminds Shipping (HK) Co Ltd (The Eternal Bliss) [2022] 1 Lloyd’s Rep 12.

The arbitrator asked the parties to present their respective laytime statements for demurrage.

The owners presented two laytime statements. One had the vessel on detention from arrival at the discharge port on September 17th until sampling and discharging were permitted on September 29th. With time not counting from 17:00 on October 1st until discharging was completed the next day (2.1424 days). The second had laytime commencing at 08:00 on September 20th and the vessel on demurrage from 13.30 on September 23rd until discharging was completed at 17:00 on October 2nd (9.1318 days) 

The charterers presented three laytime statements. The first had time not counting for “port congestion” until 13:00 on September 29th nor for “weather interruption” (1.9306 days). The second did not have an exception for “port congestion” but had “suspended by duty pilot due to bad weather” on September 21st, 22nd, and 23rd (1.6783 days). The third also had “suspended by duty pilot due to bad weather” but from 08:00 on September 21st until 13:10 on September 22nd (6.5971 days).

The charterer argued that “cargo analyses and laboratory testing” did not include “cargo sampling”, but the arbitrator decided the wording in Provision 1 covered any delay for import formalities after arrival at the discharge port.

The owner’s claim for damages for detention under Provision 2 failed because the time lost waiting for cargo sampling fell under the terms of Provision 1. The charterer argued that “cargo analyses and laboratory testing” did not include “cargo sampling”, but the arbitrator decided the wording in Provision 1 covered any delay for import formalities after arrival at the discharge port.

The owner referenced the Singapore Court of Appeal’s decision in Freight Connect (S) Pte Ltd v Paragon Shipping Pte Ltd [2016] 1 Lloyd’s Rep 184, which held a comment “The court … drew a distinction between a claim for demurrage or detention after the expiration of laytime and a claim for an agreed sum payable upon the occurrence of a specified event, holding that in that case it was the latter” (Laytime and Demurrage, 8 Edition, Informa, 2021). However, the Freight Connect case contained Provision 1, which covered the situation under arbitration.

The Panel did not find an overlap in Provisions 1 and 2, and so the charterer was wrong to argue the congestion was an obstructing circumstance beyond their control. The Panel ruled that once a valid NOR was tendered and took effect, laytime ran continuously against the laytime allowed and congestion was a charterer’s risk.

The Panel also held the time lost on arrival was due to the failure of the charterers to arrange for cargo samples to be taken. Once triggered, laytime ran without interruptions until it expired at 13:30 on September 23rd.  

Thus, the owner’s second laytime statement was deemed correct and demurrage in the sum of US $41,093.10 was due, as well as interest on the demurrage beginning at the time of the award. The panel also ruled the arbitration fees would be split equally between the parties.