Cargill Incorporated, Ocean Transportation v. Triorient LLC (The “Josco Huizhou”) – SMA No. 4416, 11 Nov 2020


After awaiting Charterer’s cargo for ~2+ months and not receiving a satisfactory answer as to when it would be provided, Owner terminated the Charter, claiming that the Charterer was in breach and repudiation of the agreement. The Owner then brought a case to arbitration, once the Charterer did not respond to the claims that were submitted to them regarding the incident.

[dropcap]A[/dropcap] Charter Party was in place to ship a cargo of iron ore concentrate from Topolobampo, Mexico, to China. The vessel arrived at the load port, and tendered NOR on March 3, 2020, and then re-tendered on March 6, 2020. Much time passed, and on May 11, 2020, Cargill Incorporated, Ocean Transportation (Hereafter referred to as “Owner”), provided correspondence to Triorient LLC (Hereafter referred to as “Charterer”), asking when the cargo would be available. When the Charterer did not supply a reasonable response to the Owner, the Owner claimed a few days later, on May 18, 2020, they would be terminating the Charter, arguing the Charterer was in Breach and Repudiation of the agreement.

On June 30, 2020, the Owner claimed compensation totaling $1,450,052.78, covering the demurrage that accrued on the vessel, the loss of earnings on a substitute fixture, and underwater cleaning costs, which they claimed was caused by the hull’s fouling, due to the long wait time at the load port. When payment was not received by July 10, 2020, the Owner decided to bring the case to Arbitration.

Although multiple attempts were made by the Owner to get the Charterer’s input, and counter arguments for this case, the Charterer never responded, and the case proceeded using only the Owner’s submissions.

The arbitration panel examined emails that were dated April 3, and 6, 2020, the Owner provided, that were from the Charterer, where the Charterer suggested that there were “force majeure situations” that were occurring. Within the emails, the Charterer stated that the Department of Commerce’s server was hacked on February 24, 2020, and even though it had been resolved at the time of the vessel’s arrival at the load port, they alleged that the incident was still delaying the issuance of export permits. Also, the Charterer cited COVID 19 in the emails as well, stating that the government had issued a declaration, that limited or stopped mining, and that had limited production at a concentration plant. This declaration took effect on March 20, 2020, and was to last onward into the future.

In order for the Charterer to prove that Force Majeure was legitimately declared, they would have needed to prove that the Force Majeure events had indeed occurred, and that their failure to deliver a cargo under the Charter was directly caused by these events. As the Charterer did not submit any arguments to the arbitrators communicating their position, the panel decided that it would be pure speculation on their part, if they were to take into account whether the Force Majeure declaration was justified.

The panel ruled that the Charterer clearly breached its obligations under the Charter to provide a cargo for the vessel, and that given the Owner did wait over two month’s for the Charterer to supply said cargo, the Owner was unequivocally justified in cancelling the Charter. The arbitrators also decided that the Owner had supplied the proper documentation to substantiate its claim.

The arbitrators awarded the Owners the demurrage that was due, minus the address commission, and brokerage commission that was not deducted, and stated that the loss of profit damages, and claim for hull cleaning that arose due to the long delay, were both found to be accurate. The panel then awarded the $ 1,414,066.89 to the Owner, plus interest, attorney fees, and arbitrator’s fees.

The Panel’s statement on the loss of profit was, “As a measure of these damages, Cargill postulates, as a market rate, the income it received on a subsequent fixture.  Cargill earned $ 8,759 per day on that fixture, $ 7,391 less than the $ 16,150 per day that would have been realized under the 43 day Triorient charter, resulting in a loss of earnings in the amount of $ 317,813…we accept that the calculation of damages for lost earnings should be made on this basis.”