London Arbitration 1/24
A vessel chartered under an amended Norgrain agreement was to transport dense grains from Paranagua, Brazil, to China. The discharge points were initially Zhoushan and Taixing but were later changed to Tianjin. Disputes arose over outstanding freight charges and despatch claims.
Background Events
The vessel was chartered under an amended Norgrain form for the carriage of 60,000 metric tons, with a potential variation of 10% more or less at the owner’s discretion. The cargo could comprise heavy grains, soya beans, sorghums (HSS), or bulk beans. Loading would occur at one of several ports in Brazil, with Paranagua specified as a potential departure point. The voyage was destined for one or two ports in China.
The fixture recap included the following provisions regarding discharge ports and freight payable:
…DISPORT 1/2 SBS EACH 1/2 SPS CHINA … USD 1.75 PMT EXTRA ON ENTIRE CARGO FOR … TAIXING …DECLARATION OF SOLE/1ST DISPORT AND CGO BREAKDOWN PER PORT, TO BE DONE 10 DAYS PRIOR VSL PASSING SINGAPORE. CHRTRS AGREE TO DECLARE DISCH PORT ASAP ONCE THEY KNOW…
FRT RATES – ALL BSS 60,000/10 / N. CHINA 1/1: USD 35.50 PMT BSS LOADING SANTOS… ADD USD 2.50 PMT IF LOADING PARANAGUA SOCCPEAR 1/1… FREIGHT DEEMED EARNED ON SHIPMENT DISCOUNTLESS AND NON-RETURNABLE VESSEL AND OR CARGO LOST OR NOT LOST.”
The vessel finished loading in Paranagua on June 6 and sailed for China the next day, with bills of lading indicating “CHINA PORT(S).” On June 20, the cargo receivers chose Zhoushan for lightering and Taixing for the final discharge. The charterers informed the owners, who invoiced US$131,154.90 on June 26.
On July 3, the cargo receivers changed the discharge port to Tianjin. The charterers notified the owners immediately, leading to disputes over the additional freight for Taixing. They agreed to hold the disputed amount in an escrow account managed by the charterers’ lawyers in Hong Kong. On July 19, the charterers deposited US$131,154.90 into this account.
The vessel arrived in Tianjin on July 22, began discharging cargo on July 28, and finished by August 2.
Additional Freight
The owners argued that the charterers’ June 20 message nominating Zhoushan and Taixing as discharge ports was binding and could not be changed later. They cited legal principles from Voyage Charters (4th Edition, 2014, paras 5.20 to 5.22) and the writing of Judge Diamond QC in Bulk Shipping AG v IPCO Trading SA (The Jasmine B) [1992] 1 Lloyd’s Rep 39, which stated:
In the absence of any special provision in the charterparty the effect of the nomination of the loading or discharging port by the charterer is that the charterparty must thereafter be treated as if the nominated port had originally been written into the charterparty and that the charterer has neither the right nor the obligation to change that nomination.”
According to the owners, the July 3 message nominating Tianjin was invalid because the final discharge ports had already been set on June 20. Therefore, they claimed the instruction to proceed to Tianjin breached the charterparty.
The charterers, however, argued that the purpose of the initial nomination was to guide the vessel and avoid deviation and that changes were reasonable before final discharge ports were declared, given the bills of lading only referenced “CHINA PORT(S).” They disputed the additional freight for Zhoushan and Taixing since the vessel did not go to those ports but instead to a port with no extra freight charges. Their challenge was differentiating this case from established precedents like The Jasmine B, which required either a special provision allowing port changes or proof of estoppel or waiver.
The charterers argued that declaring discharge ports before passing Singapore did not foresee changes to a valid nomination. However, the tribunal found the nomination provision standard and binding, with no right to alter a valid nomination. Thus, the charterers bore the risk of any post-nomination changes by their subcontractors.
Furthermore, the charterers argued that the owners had agreed to allow discharge at Tianjin, waived any breach, or were estopped from claiming the freight held in escrow. Additionally, they claimed that insisting on the freight for Zhoushan and Taixing would result in unjust enrichment for the owners.
Held: The tribunal found the June 20 nomination of Zhoushan and Taixing was valid and binding, effectively writing these ports into the charterparty. The fact that the voyage to Zhoushan and Taixing was not performed did not result in unjust enrichment for the owners. The freight was paid at the contractual rate for the nominated voyage and was deemed earned on shipment. The owners’ rights to the nominated ports and the corresponding freight were thus upheld despite the charterers’ arguments about variation, estoppel, and waiver. The owners were entitled to the amount in escrow for the Zhoushan and Taixing nomination.
Despatch Claim
The dispute over despatch at Paranagua hinged on whether May 31, Corpus Christi Day, was a public holiday, impacting laytime. The recap specified that laytime would stop at 17:00 before a public holiday and resume at 08:00 the day after.
The owners claimed May 31 was not a public holiday in Brazil, noting its absence from the BIMCO calendar. The charterers, however, cited the website of the Brazilian Embassy in London, which listed Corpus Christi as one of the “public holidays observed throughout Brazil.”
The tribunal accepted the Brazilian Embassy’s website as evidence confirming Corpus Christi as a public holiday for laytime purposes, regardless of its omission from the BIMCO calendar.
Award
The tribunal determined that the owners were entitled to freight of US$131,154.90, while the charterers were entitled to despatch of US$40,566.92. Consequently, the owners were awarded a net balance of US$90,587.98, with interest accruing from 30 days after the final discharge.
Since the charterers succeeded in their despatch claim but not in their freight claim, the tribunal decided they should bear 90% of the owners’ costs related to the proceedings. This cost allocation reflected the outcomes and the time spent on each issue during the arbitration.