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LAYTIME AND DEMURRAGE LAYTIME AND DEMURRAGE RECENT CASESRECENT CASES

IstanbulIstanbulApril 22, 2008April 22, 2008

William J. HonanWilliam J. HonanHolland & Knight LLPHolland & Knight LLP

22

Clause 5, Part II, ASBATANKVOYClause 5, Part II, ASBATANKVOY

5.5. LAYDAYS. Laytime shall LAYDAYS. Laytime shall not commence before the date not commence before the date stipulated in Part I, except with stipulated in Part I, except with Charterer's sanction . . . Charterer's sanction . . .

33

Clause 6, Part II, ASBATANKVOYClause 6, Part II, ASBATANKVOY6.6. NOTICE OF READINESS. Upon arrival at NOTICE OF READINESS. Upon arrival at

customary anchorage at each port of loading or discharge, customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt commence upon the expiration of six (6) hours after receipt of such notice, or upon the vessel's arrival in berth . . . of such notice, or upon the vessel's arrival in berth . . . whichever first occurs. However, whichever first occurs. However, irrespective of whether irrespective of whether the berth is reachable on arrival or notthe berth is reachable on arrival or not where delay is where delay is caused to Vessel getting into berth after giving notice of caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no readiness for any reason over which Charterer has no control, such a delay shall not count as used laytime control, such a delay shall not count as used laytime or or demurrage. In any event, Charterer shall be entitled to six demurrage. In any event, Charterer shall be entitled to six hours notice of readiness at loading and discharging ports, hours notice of readiness at loading and discharging ports, even if the vessel is on demurrage.even if the vessel is on demurrage.

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Issue No. 1Issue No. 1

1.1. If a vessel arrives prior to If a vessel arrives prior to commencement of the laydays commencement of the laydays and is ready to load, is the vessel and is ready to load, is the vessel under an obligation to give its under an obligation to give its notice of readiness?notice of readiness?

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Issue No. 2Issue No. 2

2.2. If the vessel gives its If the vessel gives its notice of readiness prior to the notice of readiness prior to the commencement of laydays, does commencement of laydays, does the six hour free period begin the six hour free period begin running upon the giving of the running upon the giving of the notice of readiness or at notice of readiness or at midnight of the first midnight of the first laydaylayday??

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Issue No. 3Issue No. 3

3.3. Does the giving of an Does the giving of an early notice of readiness require early notice of readiness require the charterer to commence the charterer to commence loading immediately (or at least 6 loading immediately (or at least 6 hours afterwards)?hours afterwards)?

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Issue No. 4Issue No. 4

4.4. If the charterer upon If the charterer upon receipt of the early notice of receipt of the early notice of readiness, orders the vessel to a readiness, orders the vessel to a berth, can the vessel refuse?berth, can the vessel refuse?

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Issue No. 5Issue No. 5

5.5. If the charterer orders the If the charterer orders the vessel to its berth upon receipt of vessel to its berth upon receipt of the early notice of readiness and the early notice of readiness and begins loading the vessel, all begins loading the vessel, all before the commencement of the before the commencement of the laydays, does the time used prior laydays, does the time used prior to the first to the first laydaylayday count as count as laytime?laytime?

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Mr. Justice LangleyMr. Justice Langley’’s Holdings Holding1. "[Laytime] never started at all, 1. "[Laytime] never started at all,

with the consequence not only that the with the consequence not only that the owners have earned no demurrage, owners have earned no demurrage, but also that they are obliged to pay but also that they are obliged to pay the charterers the charterers despatchdespatch money for the money for the whole of the laytime."whole of the laytime."

2. Charterer2. Charterer’’s awareness that s awareness that discharge had commenced without discharge had commenced without protesting or reserving its rights was protesting or reserving its rights was not itself a not itself a ““sufficient happeningsufficient happening”” to to cause laytime start.cause laytime start.

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““NorthgateNorthgate””: Clause 6: Clause 6

Vessel is to give its NOR upon Vessel is to give its NOR upon arrival at the inner anchorage at arrival at the inner anchorage at SepetibaSepetiba but may give its NOR at but may give its NOR at the outer anchorage if space is the outer anchorage if space is unavailable in the inner unavailable in the inner anchorage.anchorage.

1111

Judge Judge SiberrySiberry said:said:

. . . , I consider that is a matter of . . . , I consider that is a matter of commercial practicality, such an commercial practicality, such an intended recipient of the NOR must intended recipient of the NOR must have implied authority to waive a have implied authority to waive a condition as to the commencement condition as to the commencement of laytime.of laytime.

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He continued:He continued:. . . if Charterer did not communicate the . . . if Charterer did not communicate the Northgate charter terms to the Terminal/MBR Northgate charter terms to the Terminal/MBR and/or give specific instructions that NOR and/or give specific instructions that NOR was not to be accepted from the other was not to be accepted from the other anchorage unless the vessel was compelled anchorage unless the vessel was compelled to wait there because the inner anchorage to wait there because the inner anchorage was congested, it seems to me that they was congested, it seems to me that they [i.e., the Charterer] took the risk that the [i.e., the Charterer] took the risk that the Terminal/MBR would accept a NOR that could Terminal/MBR would accept a NOR that could have been rejected under the Northgate have been rejected under the Northgate Charter and thereby waive Charterers' right Charter and thereby waive Charterers' right to invoke the invalidity of that NOR.to invoke the invalidity of that NOR.

1313

Clause 6, Part II, ASATANKBOYClause 6, Part II, ASATANKBOY

Upon arrival at customary Upon arrival at customary anchorage at each port of . . . anchorage at each port of . . . discharge, the Master shall discharge, the Master shall give the Charterer . . . notice give the Charterer . . . notice . . . that the Vessel is ready . . . that the Vessel is ready to discharge . . . .to discharge . . . .

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The arbitrators said:The arbitrators said:

In the tribunal's view "anchorage" in In the tribunal's view "anchorage" in clause 6 could not be read too literally. clause 6 could not be read too literally. The situation in the waters off Lagos was The situation in the waters off Lagos was notorious . . . . To deprive an owner of notorious . . . . To deprive an owner of the right to give a valid notice of the right to give a valid notice of readiness under the readiness under the AsbatankvoyAsbatankvoy form form of charter in such circumstances seemed of charter in such circumstances seemed to the tribunal wholly unreasonable and to the tribunal wholly unreasonable and not what the parties could have not what the parties could have intended.intended.

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““AgiosAgios DimitriosDimitrios””: : Clauses 23(b) and 25Clauses 23(b) and 25

Clause 23(b)Clause 23(b)

At loading At loading port(sport(s) when tendering notice of readiness, ) when tendering notice of readiness, Vessel's cargo holds and hatch covers shall be clean, Vessel's cargo holds and hatch covers shall be clean, dry of loose rust and otherwise ready and suitable to dry of loose rust and otherwise ready and suitable to receive the intended cargo.receive the intended cargo.

Clause 25Clause 25

Crew and mechanical failure Crew and mechanical failure –– time lost at loading time lost at loading and/discharging and/discharging port(sport(s) which can be reasonably ) which can be reasonably attributed to crew and/or ship's mechanical failure, attributed to crew and/or ship's mechanical failure, shall not be counted as laytime or time on demurrage.shall not be counted as laytime or time on demurrage.

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““NikmaryNikmary”” Facts SummaryFacts SummaryThe vessel arrived at the port of The vessel arrived at the port of SikkaSikka to load a cargo of to load a cargo of gasoilgasoil on on December 2 and proceeded immediately to its berth.December 2 and proceeded immediately to its berth.

The vessel's tanks were inspected on December 3rd by an independThe vessel's tanks were inspected on December 3rd by an independent ent surveyor appointed by the charterer and were rejected.surveyor appointed by the charterer and were rejected.

The supplier, Reliance Petroleum Limited, was prepared to supplyThe supplier, Reliance Petroleum Limited, was prepared to supply the the cargo on December 3rd.cargo on December 3rd.

The vessel's crew cleaned the holds and, on December 5, the two The vessel's crew cleaned the holds and, on December 5, the two surveyors, one appointed by the owner and the other appointed bysurveyors, one appointed by the owner and the other appointed by the the charterer passed the holds and the vessel gave its valid NOR to charterer passed the holds and the vessel gave its valid NOR to the the receiver.receiver.

No cargo was forthcoming and, on December 9, Reliance notified tNo cargo was forthcoming and, on December 9, Reliance notified the he charterer that due to its other commitments, the charterer that due to its other commitments, the ““NikmaryNikmary”” would not would not be loaded until the end of the month.be loaded until the end of the month.

Loading in fact did not commence until January 3.Loading in fact did not commence until January 3.

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““NikmaryNikmary”” Clause 30(c)(v)Clause 30(c)(v)Owner shall indemnify Charter for Owner shall indemnify Charter for

all direct and/or indirect costs and all direct and/or indirect costs and consequences as a result of the Vessel consequences as a result of the Vessel not being clean to the satisfaction of not being clean to the satisfaction of jointly appointed inspector and . . . all jointly appointed inspector and . . . all time until connection of hoses, after time until connection of hoses, after the Vessel has been passed as clean to the Vessel has been passed as clean to the satisfaction of jointly appointed the satisfaction of jointly appointed inspector shall not count as laytime or, inspector shall not count as laytime or, if on demurrage, as time on if on demurrage, as time on demurrage. demurrage.

1818

ChartererCharterer’’s Duty to Provide Cargos Duty to Provide Cargo

A voyage charterer owes an A voyage charterer owes an absolute and nonabsolute and non--delegable duty to delegable duty to provide cargo for loading andprovide cargo for loading and

Charter exceptions will normally be Charter exceptions will normally be read as protecting a charterer only read as protecting a charterer only in respect of its duty to load, and in respect of its duty to load, and not as covering its duty to provide not as covering its duty to provide a cargo.a cargo.

1919

Clause 23Clause 23

23. Charterers shall be discharged 23. Charterers shall be discharged and released from all liability in respect of and released from all liability in respect of any claim for demurrage which Owners any claim for demurrage which Owners may have under this Charter unless a may have under this Charter unless a claim in writing has been presented to claim in writing has been presented to Charterers together with supporting Charterers together with supporting documentation substantiating each and documentation substantiating each and every constituent part of the claim within every constituent part of the claim within 90 days of the completion of discharge of 90 days of the completion of discharge of the cargo carried hereunder.the cargo carried hereunder.

2020

Owner argued:Owner argued:1.1. the absence of the vessel officer's the absence of the vessel officer's

signature was of no relevance; indeed, it was signature was of no relevance; indeed, it was prepared to sign the pumping logs anytime.prepared to sign the pumping logs anytime.

2.2. the Charterer was shown to have the Charterer was shown to have received pumping logs signed by its own received pumping logs signed by its own representative within the 90 day period.representative within the 90 day period.

3.3. even if the discharge port demurrage even if the discharge port demurrage was time barred, due to the absence of a was time barred, due to the absence of a signed pumping log, the Owner should be able signed pumping log, the Owner should be able to recover the demurrage that it incurred at to recover the demurrage that it incurred at the load port.the load port.

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Mrs. Justice Mrs. Justice GlosterGloster held:held:1.1. There as a significant commercial There as a significant commercial

purpose in requiring a signature of a vessel's purpose in requiring a signature of a vessel's officer for someone should be identified that is officer for someone should be identified that is willing to confirm its accuracy.willing to confirm its accuracy.

2.2. The Charterer should have the The Charterer should have the documents in one package and should not have documents in one package and should not have to review its own files or make its own to review its own files or make its own investigation.investigation.

3.3. Clause 23 refers to a single claim and Clause 23 refers to a single claim and there is no suggestion that part of a claim would there is no suggestion that part of a claim would be permitted if the Owner's submission was be permitted if the Owner's submission was defective.defective.

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Clause 20.1, BPVOY 4Clause 20.1, BPVOY 420.1 Charterers shall be discharged 20.1 Charterers shall be discharged

and released from all liability in respect of and released from all liability in respect of any claim for demurrage, deviation or any claim for demurrage, deviation or detention which owners may have under detention which owners may have under this charter unless a claim in writing has this charter unless a claim in writing has been presented to charterers, together been presented to charterers, together with all supporting documentation with all supporting documentation substantiating each and every constituent substantiating each and every constituent part o the claim within ninety (90) days of part o the claim within ninety (90) days of the completion of discharge of the car go the completion of discharge of the car go carried hereunder. carried hereunder.

2323

Clause 20.2, BPVOY 4Clause 20.2, BPVOY 420.2 Any other claim against charterers for 20.2 Any other claim against charterers for

any and all other amounts which are alleged to any and all other amounts which are alleged to be for charterers' account under this charter be for charterers' account under this charter shall be extinguished, and charterers shall be shall be extinguished, and charterers shall be discharged from all liability whatsoever in discharged from all liability whatsoever in respect thereof, unless such claim is presented respect thereof, unless such claim is presented to charterers, together with full supporting to charterers, together with full supporting documentation substantiating each and every documentation substantiating each and every constituent part of the claim, within one constituent part of the claim, within one hundred and eight (180) days of the hundred and eight (180) days of the completion of discharge of the cargo carried completion of discharge of the cargo carried hereunder. hereunder.

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““Bow CedarBow Cedar”” Facts SummaryFacts SummaryOn August 27, 2002 at 0130 the vessel tendered its On August 27, 2002 at 0130 the vessel tendered its NOR.NOR.

On September 2, while the vessel waited at the load On September 2, while the vessel waited at the load port, the charterer notified the owner that its attempts port, the charterer notified the owner that its attempts to find a cargo had failed and it was cancelling the to find a cargo had failed and it was cancelling the charter.charter.

On September 3, the owner accepted the On September 3, the owner accepted the charterer'scharterer'srepudiation and, on September 5, the owner chartered repudiation and, on September 5, the owner chartered the vessel to a third party in mitigation.the vessel to a third party in mitigation.

On July 15, 2003 (i.e., over 180 days thereafter), the On July 15, 2003 (i.e., over 180 days thereafter), the owner's Club presented owner's claim amounting to owner's Club presented owner's claim amounting to $547,468 to charterer.$547,468 to charterer.

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““Bow CedarBow Cedar”” JudgeJudge’’s Holdings Holding1.1. The time periods of 90 and 180 days run from The time periods of 90 and 180 days run from

the completion of discharge. With no discharge completion the completion of discharge. With no discharge completion date, the 90 and 180 periods have no date from which to date, the 90 and 180 periods have no date from which to run. The Court was unwilling to imply language such as run. The Court was unwilling to imply language such as "from the completion of discharge or when the completion "from the completion of discharge or when the completion of discharge should have occurred.of discharge should have occurred.““

2.2. A claim for wrongful repudiation is not a claim A claim for wrongful repudiation is not a claim "for "for charterer'scharterer's account under this charter." The Court account under this charter." The Court pointed to a number of provisions in the charter that called pointed to a number of provisions in the charter that called for charterer to pay for certain services or time periods. for charterer to pay for certain services or time periods. There as no similar provision for wrongful repudiation of the There as no similar provision for wrongful repudiation of the charter. The Court stated that time bar clauses, as they charter. The Court stated that time bar clauses, as they prevent the recovery of monies otherwise rightfully due, prevent the recovery of monies otherwise rightfully due, should be construed strictly against the parties which seek should be construed strictly against the parties which seek to invoke them.to invoke them.

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Time Bar General PrinciplesTime Bar General Principles1.1. Contractual time bars are enforced.Contractual time bars are enforced.

2.2. Arbitrators require strict compliance Arbitrators require strict compliance to satisfy contractual time bars. Substantial to satisfy contractual time bars. Substantial compliance probably is insufficient.compliance probably is insufficient.

3.3. Contractual time bars are enforced Contractual time bars are enforced even if there is no dispute concerning the even if there is no dispute concerning the claim in question.claim in question.

4.4. Contractual time bars are construed Contractual time bars are construed strictly against the drafter.strictly against the drafter.

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Time Bar Practice TipsTime Bar Practice Tips1.1. If the Owner:If the Owner:

a)a) seek to eliminate altogetherseek to eliminate altogetherb)b) make the clauses mutually applicablemake the clauses mutually applicablec)c) provide as long a period as possibleprovide as long a period as possibled)d) provide training to the persons handling provide training to the persons handling

claimsclaims

2.2. If the Charterer:If the Charterer:a)a) include all claims not just demurrage and include all claims not just demurrage and

detentiondetentionb)b) draft the clause so as to avoid obvious draft the clause so as to avoid obvious

loopholes loopholes

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LAYTIME AND DEMURRAGE LAYTIME AND DEMURRAGE RECENT CASESRECENT CASES

IstanbulIstanbulApril 22, 2008April 22, 2008

William J. HonanWilliam J. HonanHolland & Knight LLPHolland & Knight LLP