London Arbitration 3/23

A vessel was chartered to travel from Thailand to the Nacala-Cape Town range using the NYPE 1946 form. A disagreement arose between Charterers and Owners regarding the final hire statement. Charterers claimed that the master had overestimated the bunker requirements, while Owners contended that the Charterers’ breach had caused the excess bunkers on redelivery and counterclaimed for damages.

Clause 40 of the charterparty stated that the vessel should redeliver with approximately the same bunker quantities as on delivery, which were roughly 420 mt IFO and 50 mt MGO. However, the vessel was delivered with higher quantities, almost 453 mt IFO and slightly over 53 mt MGO. The redelivery quantities were significantly higher at 660.448 mt IFO and 60.159 mt MGO.

Master’s Bunker Estimates

Charterers argued that the master had overestimated bunker requirements, constituting a breach of the charter. Owners claimed the master’s calculations were accurate, and any excess bunkers were due to the Charterers’ breach of their Clause 40 obligations. Owners further asserted that Charterers had waived any breach or were estopped from alleging this breach.

The tribunal examined the case and considered several factors. It noted that the master used a safety margin in his calculations, which represented approximately 20% of the fuel needed for the entire voyage, including port time, and about 27% of the amount needed for sailing time. This margin was determined to be reasonable. Additionally, the master’s estimate for sailing time was nearly exact, while the Charterers’ estimate for in-port time understated the actual by 6 days.

The tribunal ruled there was no breach on the part of the master since his calculations were reasonable and aligned with Charterers’ estimates. This was supported by the fact that Charterers had ordered an additional 50 mt IFO for anticipated delays in discharging beyond what they had given to the master.

Since the master did not breach the charter, the waiver/estoppel claim made by Owners was no longer valid. The tribunal acknowledged the possibility that the excess redelivery quantity could be attributed to a potential overstatement of consumption figures from the charterparty, but since neither party raised this issue, the tribunal did not investigate it further.

Determining Excess Bunker Prices 

The tribunal held that Charterers’ redelivery with excess bunkers constituted a breach of the charterparty, entitling Owners to damages. However, it rejected Owners’ argument that Charterers aimed to profit from the excess bunkers.

Due to the highly volatile nature of bunker prices, the tribunal had to establish the appropriate prices for calculating the value of the excess bunkers. Owners advocated using the differences between charterparty and Singapore invoice prices, while Charterers argued for using the prices applicable at Durban, the nearest bunkering port to the redelivery location.

Damages had to be calculated based on placing Owners in a similar position they would have been had the breach not occurred. The tribunal found that determining this position was highly speculative. Factors such as the vessel’s subsequent employment, potential ballasting to another port, or entering into a new time charter complicated the calculation. To provide a principled approach, the tribunal considered the relative size of the redelivery quantity.

The tribunal decided that if the redelivery quantity was relatively small or the shortfall substantial, the prices applicable at the nearest bunkering port would likely apply. Therefore, the tribunal used the Durban prices to calculate damages, which amounted to US$367 for IFO and US$685 for MGO.

In light of these decisions, the tribunal urged the parties to seek an agreement on the final balance and retained jurisdiction in case further disagreement arose.