London Arbitration 6/23
A vessel was chartered to carry part cargo of steel pipes from Turkey to Futuna Island, in the French Pacific Ocean Islands, with other cargo to be loaded and discharged at additional ports and under different fixture arrangements. An engine breakdown off Mauritius required lengthy repairs and was complicated by shortages due to the COVID-19 pandemic. It was nearly a year before the vessel arrived at the discharge port. By that time, entry requirements to the port had changed and the vessel was not permitted to berth. The vessel was quickly rerouted to Fiji and incurred demurrage of US$37,317.71 while awaiting discharging operations to commence. Charterers refused to pay, claiming the delay was the owners’ fault, and arbitration proceedings began.
The Voyage
The charterparty agreement allowed three days in total for loading and discharging. Loading operations in Turkey used 21 hours and 50 minutes of laytime, leaving about 2 days for discharging operations.
Since the vessel carried cargo for both East and West Africa, she sailed through Gibraltar instead of the Suez Canal. She then encountered more than a month delay while discharging at Beira. A new cargo was then fixed from Durban to Hobart, Tasmania. Five months into the voyage, the vessel had only made progress to Port Louis in Mauritius.
Shortly after departing Port Louis, the main engine had to be shut down, and complications with high exhaust temperature caused damage to the exhaust valve seat surfaces. The vessel was towed to Reunion for repairs, which took four months to complete. The COVID-19 pandemic was blamed for the delay, for spare parts and labor were in short supply.
Change of Discharge Port
The vessel was intended to arrive at the discharge port five months after leaving Turkey, however the delays pushed her arrival back an additional six months. During this time, conditions at the port had declined, leading to new regulations restricting the size of vessels that would be allowed entry. This, combined with seasonal conditions, meant the port authority refused to grant her permission to berth. The decision was quickly made to divert the ship to Lautoka in the Fiji Islands to discharge, leaving receivers less than a day to prepare.
Demurrage Incurred
With the quick arrival of the vessel at the new discharging port, receivers had several issues to work through, and discharge was delayed. Charterers claimed the delay was attributed back to the engine repairs and claimed the owners did not keep charterers and receivers adequately informed of the repairs. Owners asserted a repair that took five months to complete could not be attributed to a simple engine breakdown and demanded the vessel be evaluated for seaworthiness from the start of the voyage. They requested main engine and journal logbooks for one year prior and up to the date of the breakdown.
Owners stated the vessel was and continued to be seaworthy and claimed no engine problems existed prior to loading in Turkey nor in the five months that followed the repairs. Based on this statement, charterers ceased requests for the logbooks.
The Decision
The arbitrator had to decide if the charterers’ claim that the delay was the owners’ fault was valid. While such repairs typically did not take five months to complete, the COVID-19 pandemic did significantly contribute to the supply of parts and labor, and thus had to be counted as a factor in the delay. All of the vessel’s P&I documents were in order, the engine performed normally at the load port, and five months after the repairs were completed.
The arbitrator noted that the same principles that are used to apply laytime, also apply demurrage once laytime runs out. (John Schofield, Laytime and Demurrage, 8th Edition, 2021, paras 4.29 and 6.101) Although both owners and charterers addressed the general principles of demurrage, neither mentioned the conditions relating to fault on the part of the owners, either actual or for the purposes of the charter. Charterers were not challenging laytime, only demurrage.
Since the vessel had undergone repairs, a valid NOR was tendered at Lautoka. Although delayed, discharge commenced as expected, and charterers accepted that time was being counted towards laytime. Thus, if laytime was able to run, the arbitrator reasoned, there was no reason why demurrage should not start once laytime expired. (Laytime and Demurrage, para 4.36)
Thus, the loss of time was not recoverable under the doctrine of “fault,” and the demurrage claimed by the owners was recoverable in full.
Charterers were ordered to pay demurrage due, US$37,317.71, plus interest and costs.