London Arbitration 13/23 

Shortly before its arrival at the Panama Canal in May 2021, complications arose on a time charter due to the unfortunate death of the vessel’s master. The vessel was placed on hold until PCR test results were available, delaying transit through the Panama Canal and prompting claims by Charterers of off-hire and detention.

The disagreements regarding the final hire accounts were submitted to arbitration under the LMAA Small Claims Procedure (SCP). The vessel, contracted under a charterparty evidenced by a fixture recap email and an amended NYPE form, transported fertilizer from Europe to the west coast of South America.

Background

The disputes arose from the vessel’s master tragically passing away just before reaching the Panama Canal in May 2021. Despite the master submitting pre-arrival information on May 22 for a confirmed transit on May 28, his illness prompted the vessel’s deviation to Puerto Rico. Amid the backdrop of the COVID-19 pandemic, the agents advised reporting the situation to Panamanian authorities, anticipating quarantine and PCR tests for the crew. 

The master’s death led to the vessel being placed on hold until PCR results were available, requiring amendments to the transit forms. Despite efforts, the vessel couldn’t transit on the scheduled morning of May 28 and arrived at Cristobal on May 28. The crew underwent PCR tests, and the owners obtained a negative COVID-19 certificate for the deceased master from Puerto Rican authorities. The agents, pressed by the owners, sought to lift the hold, but the release required negative PCR results for the crew. After the crew’s negative tests, the vessel was released by the Health Department on May 28 and the Panama Canal Authority on May 29. The vessel resumed its transit through the canal on May 31, weighing anchor at 08.45 and commencing transit at 16.27 on the same day.

The charterers’ claims focused on overpaid hire and off-hire, with most of the claim, $85,537.30, primarily comprised of off-hire costs for the period from the vessel’s arrival in Panama until it resumed transit through the canal.

Charterparty terms

The recap included the following provisions:

“HIRE: USD 28,000 INCL. OVERTIME PER DAY OR PRO RATA ADDRESS COMMISSION: 3.75 PCT TO CHTRS (DEDUCTIBLE FROM HIRE …

– IN PORT: IDLE: ABT 3.0MT HFO (380 CST) + ABT 0.1MT MGO (DMA).”

The charterparty included the following clauses:

15. That in the event of the loss of time from deficiency and/or default and/or strike of crew and/or of men … or by any other cause preventing the full working of vessel, the payment of hire shall cease for the time thereby lost …

38. Certificates/Vaccinations – Owners are obliged to deliver and maintain throughout the currency of this Charter Party the vessel, her crew and anything pertaining hereto supplied with up to date and complete certificates (including Oil Pollution Certificates), approvals, equipment and fittings enabling the vessel and her crew to trade within the trading limits … Officers and crew to comply with vaccination and sanitary regulations in all ports of call and corresponding certificates to be available on board, enabling the vessel to obtain radio free pratique.

If requested, Owners to provide Charterers with copies of any certificates/approvals.

Any time lost and all proven and directly related expenses resulting from Owners’ non-compliance with the above to be for Owners’ account and may be deducted from hire.

55. Off Hire – … in the event of loss of time … caused by sickness of or accident to the crew … or capture/seizure or threatened detention by any authority/legal process … the hire shall be suspended from the time of inefficiency until the vessel is again efficient in the same and equidistant position in Charterers’ option and voyage resumed therefrom. All extra expenses incurred including bunkers consumed during a period of suspended hire shall be for Owners account …

58. Panama/Suez Canal – Owners warrant that the vessel is fitted for the transit of the Suez and Panama Canal in loaded and/or ballast condition and complies with all and any regulations of the relevant canal authority and shall not be subject to any conditions of transit not customarily required by the relevant canal authority whether pursuant to their regulations or otherwise.

Should the vessel not comply with all warranties contained in this clause and/or any regulations or conditions of transit laid down by the relevant authority, Charterers may suspend hire for all time lost and Owners to pay all expenses arising as a consequence of Owners’ failure to comply with the warranty.”

The charterers argued that the vessel should be considered off-hire due to the delay caused by the master’s death, subsequent quarantine requirements, and the need for PCR tests. They relied on the clauses above, especially Clause 58, to assert breach of warranties related to the vessel’s ability to transit the Panama Canal.

The Decision

The arbitrator rejected the charterers’ claims, providing the following key findings:

Arrival Deadline and Pre-Booking Extension: The owners claimed the vessel missed the original arrival deadline, and the charterers argued they could have extended it by paying a fee. The arbitrator found that there was a mechanism for extending the arrival deadline, the payment of an additional charge, and the vessel’s arrival after the original deadline did not automatically mean a four-day wait.  It was also clear that extending the reservation was not an option due to the ship being held by authorities until all crew members (including the captain who passed away) received satisfactory PCR test results.  

Clause 58 Panama Canal: The charterers argued that the owners breached two separate warranties under Clause 58 related to the vessel’s compliance with canal authority regulations. The first warranty was that the ship would adhere to all regulations mandated by the governing canal authorities for its passage. The second stipulated that the ship would not be subjected to any unusual conditions of transit that were not typically imposed on other vessels passing through the canal by the relevant canal authority.  

The owners clarified that the warranties provided in clause 58 pertained solely to the fittings of the vessel and its compliance with the regulations of the relevant canal authority at the time of charterparty or delivery to the charterers. They stated that the requirement for the crew to undergo PCR tests had no bearing on the vessel’s fitness for canal transit or its compliance with the regulations of the canal authority. In fact, the vessel had already complied with all requirements by undergoing the PCR tests, as directed by the Health Authority and the Panama Canal Authority.

The arbitrator found that Clause 58 primarily concerned the vessel’s fittings and suitability for canal transit, and was thus not applicable to the COVID-19-related issues, specifically the requirement for negative PCR tests, arising from the master’s death.

Clause 38 Certificates / Vaccinations: The charterers claimed non-compliance with sanitary regulations, leading to off-hire. The arbitrator clarified that Clause 38 focused on certificates, approvals, and vaccinations relevant to the vessel’s service, and PCR tests were not covered.

Clause 15 Payment of Hire: The charterers invoked Clause 15, claiming off hire due to administrative restraints imposed by authorities. The owners claimed that the requirement to perform PCR tests did not fall within this provision. They referred to Rix J in Andre & Cie SA v Orient Shipping (Rotterdam) BV (The Laconian Confidence) [1997] 1 Lloyd’s Rep 139 at page 151 col 1 and defended their position that the events at Cristobal did not fall within the off-hire guidelines.

The owners admitted that in the case of Sidermar SpA v Apollo Corporation (The Apollo) [1978] 1 Lloyd’s Rep 200, a delay in berthing that occurred due to previous illnesses on board resulted in an off-hire event. However, in that particular case, the off-hire clause included the phrase “any other cause whatsoever”, which allowed the charterers to declare the vessel off hire. This phrase is absent in the current case, making it impossible for the charterers to place the vessel off hire.  The arbitrator agreed with Owners, stating that the events did not fall within the listed causes in Clause 15, so off-hire could not be applied.

Clause 55 Off Hire: The charterers argued off hire under Clause 55, which addressed detention by authorities. The arbitrator found that the vessel was not captured or seized, and the requirement for PCR tests did not constitute detention.

Award

The charterers failed to establish a basis for off-hire under the relevant charterparty clauses. The owners were successful in defending the claims, and the charterers were ordered to pay all costs. The arbitrator assessed and awarded costs at the maximum level permitted under the LMAA SCP.