Author: Kathleen Haugen

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Maritime Industry News…In Brief

EMISSIONS REGULATIONS  . . .  Hong Kong has announced that its emissions regulations for ocean going vessels will be ready to take effect from July 1, 2015.  The regulation requires fuel sulfur content  not to exceed 0.5 percent while at berth in Hong Kong (except during the first hour after arrival and the last hour before departure).  Breach of this regulation will result in a $25,000 fine and six month jail term for owners and masters.  Records of fuel switching must be maintained for three years. On 1 January 2015, MARPOL Annex VI, Regulation 14.3.4 came into effect, lowering fuel...
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Maritime Industry News…In Brief

ELECTRONIC BILLS OF LADING . . .BIMCO’s new charter party clause for electronic bills of lading provides a contractual solution for the creation, transfer and surrender of electronic bills. The clause states: “(A) AT THE CHARTERERS’ OPTION, BILLS OF LADING, WAYBILLS AND DELIVERY ORDERS REFERRED TO IN THIS CHARTER PARTY SHALL BE ISSUED, SIGNED AND TRANSMITTED IN ELECTRONIC FORM WITH THE SAME EFFECT AS THEIR PAPER EQUIVALENT. (B) FOR THE PURPOSE OF SUB-CLAUSE (A) THE OWNERS SHALL SUBSCRIBE TO AND USE ELECTRONIC (PAPERLESS) TRADING SYSTEMS AS DIRECTED BY THE CHARTERERS, PROVIDED SUCH SYSTEMS ARE APPROVED BY THE INTERNATIONAL GROUP OF...
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What Exactly is “Detention”?

Detention accrues when a ship is delayed outside of the scope of laytime and demurrage, which is directly attributable to fault of the Charterer. Some examples of Charterer’s fault includes failure to have cargo ready when the Vessel arrives within laydays, failure to give voyage orders, delay in paying freight causing Owner to impose a cargo lien, and unreasonable departure delays in releasing the Vessel after laytime ceases to run.
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Distinguishing “Laycan” And “Expected Ready”

It is important to understand that the chartering terms, "Laycan" and "Expected Ready", relate to the same general subject but are separate and distinct obligations. Laycan stands for laydays commencement and cancelling; it specifies the earliest date on which laytime can commence and the latest date, after which the charterer can opt to cancel the charter party. It is Owner’s obligation to present the vessel ready to load within this window (and, likewise, the charterer is obligated to provide cargo). Conversely, the Expected Ready term narrows the vessel’s anticipated load readiness to a specific date within the Laycan. It is a good faith representation by the owner to the charterer in which charterer relies for scheduling purposes and sales contract obligations. As such, the Expected Ready term adds value.
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Notice of Readiness Can Be Tendered…Where?

When determining the validity of a vessel's notice of readiness (NOR), one must consider the terms of the contract and the facts surrounding the event. In the first instance, the fundamental requirement of a valid Notice of Readiness is that the Vessel must be ready in all respects to work the cargo i.e. legally, physically and geographically. The basis of our discussion herein will focus on what constitutes the Vessel fulfilling the geographic readiness obligation, including the nuances of calling at river ports.
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When a Contract is Silent

Contracts are negotiated by parties to suit their individual commercial purposes and should be written with a keen eye to avoid ambiguity that could give rise to disputes down the road. Not only must each clause be clearly drafted but all the terms of the contract must be considered in their entirety and be capable of working harmoniously together in order to give meaning and effect to all the terms. Despite this being widely recognized, it is not always accomplished. And, inadvertently, contracts can be silent on some points subsequently triggering disputes.
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Demurrage is Not an Indemnity

Oftentimes, demurrage claims issued by commercial trading partners under contracts of sale are disputed and a copy of the ship owner’s demurrage claim is requested, allegedly to support the merit of the claimant’s invoice. However, unless the stipulation to provide the Owner’s claim is expressly required within the contract terms, it is unnecessary to be disclosed as demurrage is not considered an indemnity (compensation for a loss suffered). Contrary to popular belief that a party cannot benefit by demurrage, English law holds that there is an absolute obligation to pay demurrage incurred under the terms of a sales contract. There is nothing to prevent a profit from being made on a legitimate demurrage claim [Houlder Brothers Co. Ltd. V. Commissioner of Public Works [1908] AC 276].
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Securing Assets for Maritime Claims in N.Y.: Pre- and Post-Judgment

For centuries, physical assets such as ships, cargoes, bunkers, and bank accounts have been seized to satisfy maritime commerce debts, before a judgment is rendered, whenever those assets were found within the court’s jurisdiction. Since maritime transactions are oftentimes international and transitory in nature, securing assets from a defendant can be achieved by the plaintiff appealing within the court’s jurisdiction and showing that the asset, whether it be a ship or cargo, is within the jurisdiction and that the defendant is not. In those cases, the attachment is granted. In turn, the defendant must appeal to the court to have the attachment vacated. If the plaintiff prevails, the value of the seized asset is secured.
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“Once on Demurrage, Always on Demurrage” ~Not a Fairy Tale~

The maxim “once on demurrage, always on demurrage”, although seemingly an innocent phrase, is not a fairy tale and is in fact, serious business. In order to understand this maxim one must first clearly define demurrage. In a strict sense, demurrage represents liquidated damages for delays associated with loading and discharging beyond the laytime contractually allowed. Applicable case law, both as court cases and in arbitration, holds that demurrage is extended freight and that the risk of circumstances which prevent the loading or discharge of cargo within the stipulated laytime lies unconditionally with the charterers. As explained in M/T “Raphael”, SMA No. 3739 (6/10/02), “this rule of ‘absolute liability’ for payment of demurrage is subject to three exceptions:
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