London Arbitration 26/19

by · Published · Updated

CHARTER PARTY – SPEED AND CONSUMPTION CLAIM – WHETHER CHARTERER ENTITLED TO MAKE DEDUCTION FROM HIRE – WHETHER VESSEL UNDER PERFORMED

After Charterer filed a claim against shipowner for speed and over consumption as well as deduction of hire based on a report made by an independent weather bureau, the Tribunal was left to determine if the claim was unreasonable or if the shipowner had failed to make correct claims about the performance of their vessel. 

  • Clause 46- Deductions

“Charterers are entitled to deduct sufficient hire payments only from the value of bunkers on redelivery.  owners expenses [are] covered by owners with agents directly unless Owners request Charterers to do so, in which case such amount to be deducted from next hire payment.”

  • Clause 67- Weather Routing

“The charterers may supply an independent weather bureau a dive to the Master, during voyages specified by the Charterers and the Master shall comply with the reporting procedure of the weather bureau… Alternatively, Charterers have the option to instruct the master to report daily to a weather bureau during the execution of sea voyages. The weather bureau will subsequently produce a performance analysis report.”

  • Clause 74 – Vessel Description

“– SPEED/CONSUMPTION ARE ABOUT, UNDER GOOD WEATHER CONDITION’ I.E. THE WINDS NOT EXCEEDING BEAUFORT 4, NO DECK CARGO, NO SWELL, NO ADVERSE CURRENTS, THE SEA STATE UP TO DOUGLAS SEA SCALE 3 (MAXIMUM 1.25M).

THE WORD ABOUT IN SPEED/CONSUMPTION REFERS TO AN ALLOWANCE OF +/- 0.5 KNOTS ON SPEED AND +/- 5% ON BUNKER CONSUMPTION RESPECTIVELY BOTH ALWAYS IN VESSEL’S FAVOUR. ANY GAIN ON TIME AND/OR CONSUMPTION TO BE SET OFF AGAINST LOSS OF TIME AND/OR CONSUMPTION – IF ANY.

– ABOUT 12.00 KNOTS ON ABOUT 22.0 MTS IFO B- PLUS 0.1MT OF MGO ABOUT 12.00 KNOTS ON ABOUT 25.0 MTS IFO L- PLUS 0.1MT OF MGO

– ABOUT 12.50 KNOTS ON ABOUT 24.0 MTS IFO B- PLUS 0.1 MT OF MGO ABOUT 12.50 KNOTS ON ABOUT 27.0 MTS IFO L- PLUS 0.1MT OF MGO

– ABOUT 13.50 KNOTS ON ABOUT 28.0 MTS IFO B- PLUS 01MT OF MGO ABOUT 13.50 KNOTS ON ABOUT 31.00 MTS IFO L-PLUS 0.1MT OF MGO

IN PORT: 5 MTS FOIL – 0.1 MTS MGO PD.”

A conflict occurred when under an amended NYPE 1993 form charterer made deductions from hire basis speed and consumption and basis a report from an independent weather bureau charterer had hired for the duration of the charter party. The shipowner countered that the deductions were in violation of clause 46, and also claimed that the ship had not underperformed. In short, the shipowner claimed the USD 7K that had been deducted from hire by the charterer. 

The charterer stated that clause 46 would allow them to deduct from hire the value of the bunkers remaining on board the ship. The charterer’s original statement suggested that clause 46’s sole purpose concerned the value of the bunkers on redelivery. This statement was an attempt to manipulate the clause in their favor. Because of this, they were found to be in violation of clause 46 for unlawful deductions from hire. 

However, the clause did not prevent the charterer from going after an independent damages claim; although they could not pursue a performance and consumption claim based on the terms laid out in the charterparty. The weather bureau was hired to work with the terms set in the charterparty and provide an accurate and professional assessment of the speed and fuel consumption of the vessel during the voyage.  To determine how lawful the merits were for the charterer’s performance claim, the owner had to ascertain the speed and consumption criterion and the benchmark weather conditions. 

Clause 74 imparted that a ladened ship would sail at a speed of 13.5 knots on an IFO daily consumption rate of 31 tonnes. The shipowner warranted that the ship would sail at the minimum average speed of 13 knots consuming at most 32.55 tonnes daily in good weather. These measurements were considered the yardstick for how the vessel’s performance was measured in good weather. “Good weather” was defined by clause 74 as “winds not exceeding BF4, no deck cargo, no swell, no adverse currents, and sea state up to DSS3”. 

However, the charterer, with the Panel agreeing, noted that the term, “no swell” was impossible given swell is always present in the ocean. Therefore, no swell was to be taken out with adverse swell being the only swell that could affect performance, so only that was to be measured for the assessment. The new definition, laid out by the tribunal, was the same with the only change being no adverse swell. 

The charterer stated that the independent weather bureau that they hired was going to provide a performance analysis using its own data. This evaluation would be crucial for the shipowner. The weather bureau’s report did not reference or take into account previously stated benchmark conditions. There was a high chance that the bureau did not consider these conditions at all when making their report. Their procedures were not consistent with the charterparty’s agreement and was in all, noncompliant. This report claimed that over four hours of time was lost on the vessel’s voyage from Recalada to Kuwait because the vessel was lacking in speed, while also claiming that the vessel over-consumed by seven tonnes of fuel oil. The charterer was persistent that the weather bureau was providing a correct analysis of the ship’s performance. The tribunal disagreed with charterer and found that the bureau’s report could be disregarded as their assistance was non-contractual. The tribunal found that the bureau was noncompliant and their report did not support a violation of clause 74. The Panel ruled in favor of the owner with charterer being directed to pay owner’s original USD 7K claim.