Category: Maritime Articles

Commentary on the maritime industry, demurrage discussions, and industry professional interviews.

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Demurrage Exposure – Port Charters Converted to Berth Charters!

A golden rule when assessing a contract is to read the contract as a whole and give meaning to all clauses in conjunction with each other. A recent NY Arbitration, SMA 4272, combined with an older award, SMA 2477, shows how simple phrasing, reinforced via a lack of options and market constraints, can overwhelm other charter terms and convert a port charter to a berth charter.
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BPVOY5 Has Arrived…

As of 21 March 2016, BP Shipping Ltd. has released BPVOY5; the long-awaited successor to the 1998 BPVOY4 charter party. There have been quite a few changes made to the 18-year-old boilerplate. Most of these changes, however, are essentially updates to outdated language and none seem to be especially onerous. Here are a few that stuck out to us (both inside demurrage and out).
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Industry-Accepted NOR Procedure Tested by Oiltanking Texas City

Tendering a valid NOR for Oiltanking Texas City just got a little harder to do thanks to a recent change of policy for the 555,000 cbm storage facility. On Wednesday, 13-Jan-2016 an Oiltanking representative released a new “Oiltanking Texas City’s ‘NOR’ Acceptance Procedure” that is in direct opposition to the current NOR tender policy for the Houston / Texas City area.

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What Exactly is “Detention”?

Detention accrues when a ship is delayed outside of the scope of laytime and demurrage, which is directly attributable to fault of the Charterer. Some examples of Charterer’s fault includes failure to have cargo ready when the Vessel arrives within laydays, failure to give voyage orders, delay in paying freight causing Owner to impose a cargo lien, and unreasonable departure delays in releasing the Vessel after laytime ceases to run.
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Distinguishing “Laycan” And “Expected Ready”

It is important to understand that the chartering terms, "Laycan" and "Expected Ready", relate to the same general subject but are separate and distinct obligations. Laycan stands for laydays commencement and cancelling; it specifies the earliest date on which laytime can commence and the latest date, after which the charterer can opt to cancel the charter party. It is Owner’s obligation to present the vessel ready to load within this window (and, likewise, the charterer is obligated to provide cargo). Conversely, the Expected Ready term narrows the vessel’s anticipated load readiness to a specific date within the Laycan. It is a good faith representation by the owner to the charterer in which charterer relies for scheduling purposes and sales contract obligations. As such, the Expected Ready term adds value.
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Notice of Readiness Can Be Tendered…Where?

When determining the validity of a vessel's notice of readiness (NOR), one must consider the terms of the contract and the facts surrounding the event. In the first instance, the fundamental requirement of a valid Notice of Readiness is that the Vessel must be ready in all respects to work the cargo i.e. legally, physically and geographically. The basis of our discussion herein will focus on what constitutes the Vessel fulfilling the geographic readiness obligation, including the nuances of calling at river ports.
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When a Contract is Silent

Contracts are negotiated by parties to suit their individual commercial purposes and should be written with a keen eye to avoid ambiguity that could give rise to disputes down the road. Not only must each clause be clearly drafted but all the terms of the contract must be considered in their entirety and be capable of working harmoniously together in order to give meaning and effect to all the terms. Despite this being widely recognized, it is not always accomplished. And, inadvertently, contracts can be silent on some points subsequently triggering disputes.
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Demurrage is Not an Indemnity

Oftentimes, demurrage claims issued by commercial trading partners under contracts of sale are disputed and a copy of the ship owner’s demurrage claim is requested, allegedly to support the merit of the claimant’s invoice. However, unless the stipulation to provide the Owner’s claim is expressly required within the contract terms, it is unnecessary to be disclosed as demurrage is not considered an indemnity (compensation for a loss suffered). Contrary to popular belief that a party cannot benefit by demurrage, English law holds that there is an absolute obligation to pay demurrage incurred under the terms of a sales contract. There is nothing to prevent a profit from being made on a legitimate demurrage claim [Houlder Brothers Co. Ltd. V. Commissioner of Public Works [1908] AC 276].
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Securing Assets for Maritime Claims in N.Y.: Pre- and Post-Judgment

For centuries, physical assets such as ships, cargoes, bunkers, and bank accounts have been seized to satisfy maritime commerce debts, before a judgment is rendered, whenever those assets were found within the court’s jurisdiction. Since maritime transactions are oftentimes international and transitory in nature, securing assets from a defendant can be achieved by the plaintiff appealing within the court’s jurisdiction and showing that the asset, whether it be a ship or cargo, is within the jurisdiction and that the defendant is not. In those cases, the attachment is granted. In turn, the defendant must appeal to the court to have the attachment vacated. If the plaintiff prevails, the value of the seized asset is secured.
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