Category: Maritime Articles

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“Once on Demurrage, Always on Demurrage” ~Not a Fairy Tale~

The maxim “once on demurrage, always on demurrage”, although seemingly an innocent phrase, is not a fairy tale and is in fact, serious business. In order to understand this maxim one must first clearly define demurrage. In a strict sense, demurrage represents liquidated damages for delays associated with loading and discharging beyond the laytime contractually allowed. Applicable case law, both as court cases and in arbitration, holds that demurrage is extended freight and that the risk of circumstances which prevent the loading or discharge of cargo within the stipulated laytime lies unconditionally with the charterers. As explained in M/T “Raphael”, SMA No. 3739 (6/10/02), “this rule of ‘absolute liability’ for payment of demurrage is subject to three exceptions:
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Time Bars Through Time

Common within the maritime industry is the inclusion of a time bar clause within the contract; be it a charter or sales contract. The time-bar clause as it relates to demurrage requires timely receipt of a claim oftentimes within 90 days from completion of load or discharge operations, whichever is applicable, else claim is deemed waived. As time has progressed English arbitration awards and court cases and US arbitration awards have given further insight into the role these contracts play within the industry, the proper interpretation of the commonly used requirements and some hints as to how both charterers and owners should phrase the clauses in order to adequately protect themselves. All of this is discussed below.
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UP CLOSE: ConocoPhillips 2009 Marine Provisions

ConocoPhillips recently issued Marine Provisions for incorporation in commercial sales contracts which became effective January 1, 2009, superseding the September 1, 2008 Marine Provisions and January 1, 2005 Marine Provisions. Whether the seller is the Terminal Party (the party taking delivery from, or making delivery to, a Vessel); or the Vessel Party (the party, in agreement responsible for, taking delivery on, or making delivery from, a Vessel), ConocoPhillips’ new marine provisions are intended to be equitable and are clear when defining the respective parties’ responsibilities and liabilities. This being said, there are a number of intricacies within the provisions. From the perspective of a demurrage analyst, we find the following to be some of the items of note.
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Piracy: Untested Waters?

Perhaps due to November’s capture by pirates of the Sirius Star, a fully laden VLCC captured some 500 nautical miles off the coast of Kenya, the fact that piracy has dramatically increased in the past year has finally entered the vernacular of the mainstream media spurring interest amongst those outside the maritime community.1 This interest has sparked many suggestions and opinions on how to stop piracy, some action towards that goal, concern over piracy’s human and economic costs and how to best resolve the tricky legal issues that can arise.
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Does Time Count While a Vessel Bunkers at a Waiting Anchorage?

In London Arbitration 8/08 we saw the tribunal rule that time during which a vessel bunkers at a waiting anchorage (i.e. charterers’ berth is not available) is to count as laytime or as time on demurrage. In making their ruling, the panel concluded that no time was lost as the vessel would not have been able to attend to the berth even had she not been bunkering nor was the ship’s readiness deemed impaired as she was doing what the charterer had ordered her to do; wait at the anchorage.
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Marine Provisions: Are They Necessary in Commodity Contracts of Sale?

Intrinsic to long-term profitability in the commercial cargo trades is the creation of a comprehensive set of marine provisions. When buying or selling cargoes via marine transport many companies incorporate express demurrage terms defining the assessment of liability basis the type of transaction. These clauses are generally referred to as marine provisions and although some companies may apply these provisions to either sales or purchases, as the seller’s contract is generally the contract that governs the transaction, the majority of provisions are geared towards protecting the seller. Nevertheless, there are also those companies that, when selling, fail to have the foresight to incorporate specific marine provisions into their contracts.
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Weather Delays at an FPSO – Does Time Count?

As with most laytime and demurrage issues, charter party terms and conditions spell out when time starts and stops– but what happens when a Vessel loads at an FPSO (Floating Production, Storage and Offloading vessel)? Although no charter party boilerplate specifically mentions the FPSO operation, this is not an issue because it is generally incorporated by a catch-all phrase like, “…or any other loading or discharging point whatsoever to which Charterers are entitled to order the vessel hereunder” and thus all the laytime and demurrage provisions would apply. Problems can arise, however, when clauses are modified during the fixture negotiation process. In particular, since shipowners oftentimes modify the Conoco Weather Clause1 by stipulating that weather delays count in full at transshipment areas, lighterage, and for STS operations, the question arises whether this implicitly applies to FPSO operations too. Although Owners’ intention is to mitigate adverse weather delays (including wind and swells) that ships are frequently subjected to in these areas of operation at sea, said amendment may not necessarily include delays at an FPSO.
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What’s New in STUSCO’s GT&Cs?

Replacing their “Equiva Trading Company Marine Provisions for Tankers, Tows and Barges Effective December 1, 1998”, Shell Trading (US) Company, STUSCO, recently introduced new General Terms and Conditions (GT&Cs). Intended to be equitable whether selling FOB, CFR, CIF or Delivered, STUSCO’s new GT&C’s is entitled “Shell Trading (US) Company General Terms and Conditions for the Sale and Purchase of Refined Products August 1st 2007”.
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What Constitutes Detention?

Demurrage, as a means to compensate the shipowner for delays to his or her Vessel, is clearly defined within the majority of voyage charters. Not so clearly defined is the payment of detention or how long a Charterer is able to leave a Vessel on demurrage prior to incurring detention. In the below, we will examine the payment of detention while reviewing a couple of examples of the historical precedent (there are many) which work to form the industry’s current perception of detention. Finally, we will review contemporary boilerplates, which, in reacting to the historical precedent attempt to protect the Charterer (and hinder the Shipowner) by defining detention in terms of demurrage.
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What Constitutes a Safe Port / Berth?

Intrinsic within the majority of charter parties is the need for the charterer to provide a safe berth and/or a safe port for the particular chartered Vessel. This is well defined by J. Bond Smith in the “Tulane Law Review” (Vol. 49, No. 4 p. 61).
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