Bulk & Metal Transport Pte Ltd v Consolidated Grain and Barge Co. dba Consolidated Terminals and Logistics Company (The “Bi Jia Shan”) – SMA 4478 – 22 May 2024
A voyage chartered under an amended GENCON between Bulk & Metal Transport Pte. Ltd (“Owners”) and Consolidated Grain and Barge Co. dba Consolidated Terminals and Logistics Company (“Charterers”) was for the transport of rock salt from Egypt to Louisiana. Owners sought to recover $89,427.58 from Charterers for hold-in tugs and standby pilots during the discharge of rock salt at anchorage at Belle Chasse, Louisiana.
Relevant Clauses
The Parties agreed to a voyage charter under an amended GENCON form for the transport of 56,000 MT from “1 safe berth always afloat Damietta [Egypt]“ to “1 or 2 safe anchorage always afloat LaPlace Mississippi River USA.”
Part II, Lines 53-54 set forth the loading and discharging terms, stating the cargo would be loaded “and taken from the holds and discharged by Charterers, free of any risk, liability and expense whatsoever to the Owners.”
In addition, Rider Clause 23.10 – Owners Responsibility stated
Owners to confirm vessel suitable for all port restrictions at both ends. Owners to satisfy themselves about all restrictions (port/berth/tide/draft/LOA/beam/flag,etc) at all ends.
Owners guarantee safe arrival draft at disports, failing which, any lighterage or consequential expenses to be at Owners risk and account.”
Voyage Details
The Vessel loaded 54,688MT in Damietta, Egypt, as expected and began the voyage without incident. However, on May 1-2, the Safe Navigation Committee of the Board of River Port Pilots Commissions for the Port of New Orleans published a High River Advisories to River Pilots which detailed procedures for when the Mississippi River registered at 15ft or over at the Carrolton Gauge. These guidelines included 1) only using the lower set of dockside buoys, 2) ensuring that while the vessel was anchoring, barge tiers in the area of the headline buoy were no more than 2 barges wide, and 3) requiring vessels to maintain a pilot on board 24/7 until the vessel could stay in position without tug, steering or engine assistance.
Six weeks later, on June 19, Blue Water, the agents at discharge, notified Charterers that all vessels operating in the NOBRA district (New Orleans Baton Rouge Steamship Pilots Association) with a draft of 35ft or greater were required to have a pilot on board at all times. A week later, Agents updated Charterers that the maximum draft at the SW Passage was being reduced to 42ft fresh water, effective June 26, 10:00.
Charterers requested Agents explore Belle Chasse, LA, as an alternative discharging port to the intended port, LaPlace, LA. Agents responded with the required specifications for Belle Chasse and an estimate of $30,000 for pilotage and $29,500 for tugs. On July 5, Charterers notified Owners of the change, and Owners agreed.
The Terminal at Belle Chasse is served by the Crescent River Port Pilots Association, which also received the High River Advisories to River Pilots notification. On July 10, Agents submitted a berth application to the Terminal with the arrival draft 42.9ft and the sailing draft 22ft. The berth application included the terminal tariff which stated in Clause 12:
While lying at the Berth, the Vessel shall use a sufficient number of tugs at the Vessel’s risk and expense, to assure she remains safe and in the berth. The number of tugs to be used will be determined by the size of Vessel and prevailing river and weather conditions at the time. The number of tugs used shall be determined by the Vessel in compliance with requirements of the pilot.”
The tariff also detailed that vessels were required to deposit funds to cover two tugs for berthing and two tugs for departing the berth, plus costs for additional anticipated tug usage as conditions required. A five-percent high water surcharge per tug was also detailed specifically for when the Carrolton Gauge was 15ft or higher.
On July 13, at 20:00, the Vessel arrived at the SW Pass Anchorage. The next day, Agents informed Charterers that the Louisiana Maritime Association had lowered the recommended transit draft to 40ft, effective 08:30. July 16 the Vessel transited to the Boothville Anchorage at Belle Chasse, and by July 17 02:40, she was at the Terminal’s lower buoys with a pilot aboard and two tugs alongside. The Vessel’s arrival draft was 42.979 ft, which exceeded the LMA’s recommended draft by 2.979ft. By July 17 11:42, the Vessel was secured and her notice of readiness accepted.
Operations began July 17 at 14:45, with standby pilots and hold-in tugs with the Vessel until July 19. The presence of the pilots and tugs were contested by the Master, who issued a letter of protest which stated “despite the vessel all mooring lines made fast and both anchor drop under the pilot his professional judgment when mooring at 11421t17/JUL/2019 the pilot required stay on board by themselves and tug service was required by Pilot and port authority for emergency. Vessel and her Owner have not make above requirement. Since all those requirement were ordered by Pilot and port authority”.
The same day at 16:10, Agents notified Owners of the standby pilot on board and the hold-in tug alongside claiming “per Master’s instruction due to vessel swaying in buoys. Master plans on releasing tug and Pilot after some cargo is discharged and vessel stops swaying in buoys.”
Communication between Agents and Owners continued with Owners claiming that they did not know Belle Chasse was under the same Mississippi restrictions as LaPlace. The Master also issued a Master Statement of Fact, which was counter-signed by the current pilot onboard stating “Due to vessel deep draft and very strong current impact despite the vessel all mooring lines made fast but vessel swaying in buoys and can’t discharge cargo operation the pilot required stay on board themselves and tug service was required by Pilot and port authority for emergency Vessel and her Owner have not make above requirement. Since all those requirement were ordered by Pilot due to berthing.” A second Master Fact Statement was issued the next day, stating the same, but this bore the stamp of one pilot “for receipt only” and was verified by two additional pilots. In an email to Owners, the Master confirmed that due to the sway during discharging, the Vessel had to continuously run the engine at dead slow ahead.
On July 19 at 11:45, the maximum draft at the SW Pass was increased to 43ft. The hold-in tug was released, and the standby pilot disembarked. Discharging operations were completed without incident. As the Vessel prepared to depart on July 22, Agents notified Owners it was holding the Vessel’s documents until the estimated costs of the standby pilots and hold-in tugs, approximately $112,800, were paid.
Owners contested these fees, denying any obligation or responsibility for the decision to utilize the pilots and tugs or the associated costs. Agents maintained their position and on July 28 notified the head owners that there was a lien on the vessel. By August 7, the actual fees for the pilots and tugs were determined to be $89,427.58. On August 8 Owners paid the full amount to Agents.
Discussion
Owners claimed Charterers were liable for the costs associated with the tugs and standby pilots utilized during discharge at the anchorage in Belle Chasse because the Charterparty did not contain express provisions for these costs. They argued that the anchorage was unsafe, and thus, Charterers breached their obligation to provide “1 or 2 safe anchorage always afloat LaPlace Mississippi River USA.”
Owners relied on the U.S. Supreme Court’s decision in Citgo Asphalt Ref. Co. v. Frescati Shipping Co. (The Athos I), 140 S. Ct. 1081 (2020). In that case, the Court held that similar language in a voyage charterparty constituted an absolute warranty of safety; however, the Court also stated that “charterers remain free to contract around unqualified language that would otherwise establish a warranty of safety, by expressly limiting the extent of their obligations or liability” (180 S. Ct. at 1093).
The Panel concluded that the Charterparty contained express language limiting the Charterers’ liability; therefore, the disputed sum remained with the Owners. As to the Owners’ claim that Belle Chasse anchorage was unsafe, the Panel relied on the definition provided by Sellers, L.J. in Leeds Shipping Co., Ltd v. Société Française Bunge (The Eastern City) [1958] 2 Lloyd’s Law Rep. 127, which stated:
[A] port will not be safe unless, in the relevant period of time, the ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship…” (Id. at 131).
The Eastern City established the precedent for determining what constitutes a safe port or berth and the case has been widely referenced in English and US courts and arbitrations. Owners’ assertion that the need for standby pilots and tugs at the anchorage was because the port was unsafe was counter to The Eastern City definition. The Panel emphasized that the use of tugs did not automatically imply the port was unsafe, but rather, the tugs were used as a matter of safety and good seamanship.
Supporting the Panel’s decision was the English case, Cosmar Compania Naviera S.A. v. Total Transport Corp. (The Isabelle), [1982] 2 Lloyd’s Rep. 81, which ruled the use of tugs could be considered part of good seamanship and did not automatically mean the Charterers were in breach of the warranty of safety. Additional support for their position was found in The Safe Port/Safe Berth Warranty and Comparative Fault [by Armand M. Paré, Jr.], 45 J. Mar. L. & Com. 141, 142 (2014)(citing The Eastern City), The Maria G.L., SMA No. 2506 (1988), and The Caribbean Nostalgia, SMA No. 1788 (1983).
Although the Panel examined other SMA awards that ruled such charges were for the Charterers’ account, these arbitrations did not refer to The Eastern City, which this Panel decided was essential to their ruling.
In addition, Rider Clauses 21 and 23.10 imposed obligations on the Owners to “… guarantee safe arrival draft at disports, failing which, any lighterage or consequential expenses to be at Owners risk and account”. The Panel found that Owners were responsible for complying with these obligations. Evidence from June 26, 2019, announced the maximum draft at the SW Passage would be reduced to 42ft, and July 14, 2019, when it was further reduced to 40ft. Despite this, the vessel’s draft exceeded the maximum by 0.979ft. The Panel held that the hold-in tugs and standby pilots were the direct and consequential expenses incurred because the Vessel exceeded the maximum draft at the time.
In addition, the July 17 message from Agents to Owners noted that the Vessel had a hold-in tug alongside and a standby pilot on board “per Master’s instruction due to vessel swaying in buoys. Master plans on releasing tug and Pilot after some cargo is discharged and vessel stops swaying in buoys.” The Panel concluded that this was evidence that the pilot believed 1) the swaying of the vessel was due to her arrival with too deep a draft and 2) after discharging a portion of the cargo, the draft issue would be resolved, and the tugs and pilots could be released.
The Master’s Fact Statement, dated July 18, 2019, corroborated this, stating: “Due to vessel deep draft and very strong current impact despite the vessel all mooring lines made fast but vessel swaying in buoys… tug service was required by Pilot and port authority for emergency“. Further illustrating that the excess draft directly necessitated the extra tugs and pilot assistance.
Decision
Per Rider Clauses 21 and 23.10, it was Owners’ responsibility to ensure compliance with all relevant restrictions and guarantees related to the vessel’s draft. The Panel ruled Owners had not satisfied this obligation and thus were in breach of the Charterparty. Consequently, the cost of the tugs and pilots were deemed consequential expenses resulting from this breach.
Award
Owners’ claim for reimbursement of $89,427.58 for the use of hold-in tugs and standby pilots during cargo discharge at Belle Chasse was denied. Charterers were awarded $51,000, which comprised $26,000 for the reimbursement of arbitration panel fees and $25,000 to cover 50% of their attorney fees and costs.