Naviera Transoceanica and Products Tankers Management Company v PetroChina International (America) Inc. – SMA No. 4464, 29 August 2023

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A voyage charter on an amended ASBATANKVOY form was made for the transport of clean petroleum product (CPP) from Cherry Point, Washington, to a Chilean port of PetroChina’s choice. Owners, Naviera Transoceanica S.A. and Products Tankers Management Co, Inc., initiated arbitration against PetroChina International (America) Inc., seeking a partial final award of $1,412,580.00 in outstanding demurrage, plus interest, costs, and attorneys’ fees. PetroChina disputed the claim, asserting that the vessel failed to meet the charterparty speed and failed to adhere to voyage orders, resulting in a missed discharge window. A payment of $74,400 for undisputed loadport demurrage was rejected by Owners. The arbitrator was appointed on April 27, 2023.

According to the charterparty, the voyage stipulations are as follows:

CP SPEED: ABOUT 12.5 KTSWSNP 

LAYDAYS

COMMENCEMENT: JUNE 28, 2022 (0001 LT)

CANCELLING: JUNE 30, 2022 (2359 LT)

2. WARRANTY CLAUSE

OWNERS GUARANTEE TO THE BEST OF THEIR KNOWLEDGE THAT THE VESSEL IS IN ALL RESPECTS, INCLUDING HER TECHNICAL AND MECHANICAL CONDITION, ELIGIBLE FOR TRADING WITHIN, TO AND FROM RANGES AND AREAS SPECIFIED IN THE CHARTERPARTY…

11. ADHERENCE TO VOYAGE INSTRUCTION CLAUSE OWNERS SHALL BE RESPOSNIBLE FOR ANY DIRECT DELAY, LOSS, DAMAGE, COSTS OR EXPENSE ARISING OUT OF ANY FAILURE TO COMPLY WITH CHARTERERS’ VOYAGE ORDERS. IF AT ANY TIME IT APPEARS TO THE MASTER THAT IT MAY NOT BE POSSIBLE TO COMPLY WITH CHARTERERS’ VOYAGE ORDERS, HE SHALL IMMEDIATELY CONTACT CHARTERERS FOR INSTRUCTIONS.

PetroChina’s opposition presented the vessel’s captain’s record that due to delays at the load port, he ordered the vessel to proceed at max speed to make it to the discharge port within the window. The orders were not followed apparently due to adverse weather and barnacles affecting speed according to the Owner. The captain, however, did not believe this was the case. The vessel  arrived at Quintero, Chile on July 28, 2022, exceeding the anticipated 24-day voyage.

Owners argued that demurrage and unrelated claims (vessel speed and voyage order compliance) should not be set off against any potential claim for vessel delay, emphasizing the independence of freight and demurrage covenants. They contended that Charterer’s claims did not challenge demurrage calculations, misapplication of charterparty clauses, or the vessel’s compliance with its contractual obligation.

Charterer, in response, insisted on the vessel’s failure to meet the charterparty speed, its unfitness for the voyage, and failure to adhere to orders as justifications for withholding demurrage payment. They cited Captain Zhang’s instructions for maximum speed, alleging that Owners’ explanations were insufficient. The Charterer also cited Nimrod Motor Tankers Company, Inc. v. Neste Trifinery Petroleum Services where it was found that the owner’s misrepresentation of the vessel’s speed which caused it to miss the discharge window and incur demurrage, defeated the owner’s demurrage claim.

The arbitrator, evaluating both positions, found that Owners’ request for a partial final award was premature. Despite the Greenstone Shipping Co., S. A. v. Transworld Oil, Ltd. precedent acknowledging the independence of demurrage and unrelated counterclaims, the arbitrator recognized Charterer’s defense concerning the vessel’s performance. Charterer questioned Owners’ compliance with the voyage instructions, and the arbitrator decided there should be proceedings to determine if Owners’ demurrage claim was valid.

Notably, the arbitrator distinguished the case from Nimrod Motor Tankers, emphasizing the need for discovery on the reasons for the vessel’s underperformance. The arbitrator held that Owners’ entitlement to immediate demurrage payment did not override Charterer’s right to discovery, especially in the face of genuine issues regarding causation and liability.

Decision

The arbitrator denied Owners’ application for a partial final award, directing the arbitration to proceed for a comprehensive evaluation of the merits of the Charterer’s claim, including the production of relevant voyage records and a hearing. The decision emphasized that the partial final award did not reflect the arbitrator’s views on the case’s merits, which would be addressed in a final award.