shipping and arbitration: insights from the black sea countries

SHIPPING AND ARBITRATIONINSIGHTS FROM THE BLACK SEA COUNTRIES

SPECIFICS OF PERFORMANCEIN BLACK SEA REGION

By Andrey PerepelitsaSenior lawyer, ACIArb

• Black Sea is one pool of emerging economies• Much paperwork, sometimes bureaucracy• Split of commercial and administrative

functions is different in every country• Local regulations• Geographic & climate conditions

Charter Parties in Azov-Black Sea

REGIONAL FEATURES

• Short shoulder of the voyage• Shippers/Receivers impact on the voyage• Specific charter party clauses

Charter Parties in Azov-Black Sea

CONTRACT FEATURES

SHORT VOYAGE SHOULDER

1 GSPB AAAA AZOV

1 GSPB AAAA EGYPT

100 PCT FRT LESS

COMM TO BE PAID

WI 3 BD AFTER S/R

BS/L BUT IN ANY

CASE BBB INTO OWS

NOMINATED BANK

ACCT

FROM: CHARTERER BA

NK

TRANSACTION REFERE

NCE

==================

==========

20: SENDER REFEREN

CE

PAY123456789

32A: VALUE DATE

29.05.2014

33B: CURRENCY/AMOU

NT

USD 50000.00

50K: INSTRUCTING P

ARTY

CHARTERER

54A: RECEIVER’S CO

RRESPONDENT

CHASUS33

59: BENEFICIARY

SHIPOWNER

70: REMITTANCE INF

ORMATION

FREIGHT M/V SHIP

71A: DETAILS OF CH

ARGES

OUR

(-) END OF MESSAGE

Charter Parties in Azov-Black Sea

CLIMATE

Ice Occurrence In Black Sea And Azov Sea

83-157 daysDecember to April

86-142 daysDecember to April

General Ice Clause – Prior to Loading

18(a) In the event of the loading port being inaccessible by reason of ice when the Vessel is ready to proceed from a last port or at any time during the voyage or on the Vessel's arrival or in case frost sets in after the Vessel's arrival, the Master for fear of being frozen in is at liberty to leave without cargo, and this Charter Party shall be null and void.

Charter Parties in Azov-Black Sea

LOCAL REGULATIONS

72hours

72hours

SSHEX

24hours

+++

72hours

PROHIBITION to ENTER the PORT

from the HARBOUR MASTER

VALID for 72 HOURS

LOCAL REGULATIONS

PORT RULES of GEORGIA - 2012

Article 10. Ships Enter to the Port

The entry of the ship to or departure out of the port takes place at any time during a 24 hour day except in the event of bad weather and certain circumstances justifying the prohibition of the entry and departure of ships to and out of the port.

BE CAREFUL!

Charter Parties in Azov-Black Sea

SPECIFIC CLAUSES

“WRONG” CLAUSE

• GENCON 1994• Cargo: fertilizers• Factory break down• Not possible to supply the cargo• Date of supply -

unknown

ADDITIONAL CLAUSEStrike and Force Majeure

Fire, strikes, labour disturbances, lock-outs, requisitions, intervention of authorities, accidents, tidal wave, flood, fire, lightning, explosion, earthquake, storms, land slides, interruption of facilities of transportation or communication, navigation accident, breakdown of production or forming plant, equipment or facilities

affecting production, production capacity or transportation of cargo or production, failure of the railroad to furnish railroad cars, railroad washouts, breakdown of

equipment or facilities at loading port, denial of export or import licenses, Acts of God, Acts of Governments, blockade, war, riot, insurrection, wrecks, epidemics,

quarantine, or any other unforeseen event, cause or causes of any nature, whether similar or dissimilar to any of those herein before enumerated beyond the

reasonable control of the parties are excepted and neither of the parties including Shippers/Receivers shall be liable for any loss or damage resulting from any such

excepted causes. The time lost by reason of such excepted causes mentioned above in this clause shall not count as laytime or time on demurrage either at port of loading, port of

discharge or both.

• Vessel delay in port for 5 days• Charter-party terminated (by frustration)• Extra operational expenses• Costs of idle ballast voyage• No compensation from the

Charterers

LMAASmall Claims Procedure

•The claim – up to agreed sum•Sole arbitrator•Arbitrator may be nominated by

LMAA•Fixed arbitration fee - £ 3,000•Submissions limits •Fast – 2-3 months

ADD TO RECAP: For claims under XXXXX USD LMAA Small Claims Procedure to apply

LMAASmall Claims Procedure

FREQUENT PROBLEMSIN SHIPPING

MARITIME FRAUD

By Alexey RemesloSenior lawyer

DOCUMENTARY FRAUDFake Bill of Lading

GOAL:• RECEIVE CARGO INSTEAD

OF THE REAL OWNERS• RECEIVE MONEY FROM

L/C

AGENCY RELATED FRAUDFake Agency Invoice

VESSEL WAS FIXED THROUGH BROKER

THE SHIPPER SAID TO BE WELLKNOWN ON THE MARKET

BROKER

OWNER

CHARTERER

CHARTERERS APPOINTED THE AGENT AT THE LOADING PORT

ADVANCE D/AUSD ~70 000

3 DAYS OF WAITING…

LOSSES:• $70,000 – FAKE AGENCY• RUNNING COSTS• BALLAST VOYAGE

CARGO RELATED FRAUDDouble cargo sale

SELLER

BUYER

FOB

SELLER

BUYERTERMINAL

BUYERTERMINAL

LAWFUL CARGO OWNER

LOSSES:• ADVANCE PAYMENT• FREIGHT• LEGAL COSTS

CHARTERING FRAUDIntercepted Freight

SHIPOWNER

BROKER

CHARTERER

SHIPOWNER

BROKER

CHARTERERSHIPPER

SHIPOWNER

BROKER

SHIPPER CHARTERER

B/LFreight Prepaid

SHIPOWNER

SHIPPER

B/LFreight Prepaid

LOSSES:• FREIGHT• LEGAL COSTS• DISBURSEMENTS

CHARTERING FRAUDIntercepted Freight + Fake E-Mail

SHIPOWNER

AGENT

SHIPPER CHARTERER

B/LFreight Prepaid

EMAIL WAS RECEIVED BY THE AGENT

AT THE SAME TIMETHE SHIPOWNER’S INBOX HASBEEN SPAMMED

SHIPOWNER

AGENT

SHIPPER CHARTERER

B/LFreight Prepaid

SHIPOWNER

AGENT

SHIPPER CHARTERER

B/LFreight Prepaid

• Business with unknown intermediaries acting for unknown principals can be risky without due diligence and counterparty checks

• Ensure that business is conducted with known or verified counterparties. Local P&I Correspondents, agents etc. may help in confirming whether a particular local party is a known company or whether there are concerns

• Request of unknown counterparties for an advance payment must be considered twice

• Where possible “freight pre-paid” B/Ls should be avoided, especially if the freight has not in fact been pre-paid.

TERMINATION OF CHARTERPARTY

By Andrey PerepelitsaSenior lawyer, ACIArb

CHARTERERS’ QUIZ

02/11 You fix MV “Elf” from Varna to Rostov on Gencon-94 basis with laycan dates November 09-13, and cancelling date November 14

11/11 Owners inform that the vessel delayed in previous voyage and will not be able to arrive within laycan. Owners expect the vessel to be ready on November 15

What options are open to you?How would you respond?

Can you cancel now?

Christie & Vesey v Helvetia [1960]The Madeleine [1967]

There is no anticipatory right to cancel in advance of the specified cancelling date, even though it is clear that the owner will be unable to tender the ship in time.

Cancellation if exercised until the cancellation date constitutes an anticipatory breach and repudiation of the charterparty.

12/11 You agreed to extent laycan and set newCancelling date on November 22

16/11 Owners inform that the vessel is still not ready to load and they cannot guaranteeher readiness before or on November 22

What options are open to you?How would you respond?

Can you cancel now?

22/11 You send the notice of cancellation ofcharter party and seek for another vessel

26/11 New vessel MV “Dwarf” loaded and sailed. However, due to declaration of ice conditions in Azov sea, the vessel spent 5 days waiting for ice convoy and used breaker assistance. These sums were claimed from you by theOwners of MV “Dwarf”.

As a result of these events, total delay in delivery of cargo was more than 2 weeks,and your company has sustained losses as follows:

• Extra freight - USD 10,000• Waiting for ice convoy – USD 5,4000• Ice breaker assistance – USD 1580,00• Penalty claimed from you by consignees for late delivery – USD 12,000

Which (if any) of these sums youcan recover from the Owners?

Hadley v Baxendale [1854]

• Naturally arise from the breach according the usual course of things; or

• Were within the reasonable contemplation of the parties at the time of contracting as the probable result of a breach

DAMAGES RECOVERABLE:

OWNERS’ QUIZ

02/11 Your MV “Elf” arrived to Poti from Varna and started discharging. Next voyage was fixed from Poti to Mersin on Gencon-94 basis with laycan Poti - November 05-11

04/11 Charterers inform that the full cargo is not ready due to factory problems, and will notbe ready within laycan dates. Charterersoffered you to cancel CP.

What options are open to you?How would you respond?

06/11 After discharging, your MV “Elf” tendered NOR in Poti

08/11 Charterers stated that the factory problems are the event of force majeure, and thePerformance of CP must be suspended for the period of force majeure event.Charterers also requested you to wait in Poti until November 14, when production is said to be restored

What options are open to you?How would you respond?

11/11 You send the notice of cancellation ofcharter party. As a result of these events, your company has sustained losses as difference in freight - USD 7,000

May these sums berecovered from the Owners?

THANK YOU !QUESTIONS ?