London Arbitration 10/23

A vessel was chartered for the transport of bulk wheat from a Black Sea port to a Turkish port under an amended SYNACOMEX 2000 form. A disagreement arose due to the charterers’ failure to fulfill the contractual voyage, leading the charterers to claim US$90,829.99 in damages for a repudiatory breach.  Since the claim was under US$100,000, the LMAA small claims rules were applied. A sole arbitrator was appointed since the parties could not agree on one.

Background Facts

The charterers frequently shipped wheat cargo from the same terminal. This charterparty closely resembled one for a similar voyage to Turkey. In the earlier voyage, when the vessel arrived at the discharge port, the charterers instructed the owners not to unload the cargo until payment was received from the receivers. Ultimately, the discharge took place after substantial delays.

The owners had asked for advanced payment of demurrage charges for this earlier voyage, based on the first charterparty terms.  The charterers declined to do so, and the issue remained unresolved.  When discharge on this earlier trip was complete, the charterers inquired about the estimated time of arrival (ETA) of the vessel at the grain terminal for the loading process under the charterparty. The owners did not respond.

Issues arose when the charterers learned the owners had fixed the vessel for an entirely different voyage from Turkey to Spain. In communications, the charterers raised concerns about the owners’ ongoing demands for the previous demurrage charges and the lack of response from the owners on the ETA to the load port. Finally, the charterers informed the owners they were forced to find an alternative vessel to load the cargo of the second shipment. The charterers further outlined that the owners’ actions had led to increased transportation costs, totaling US$40,829.99, and additional expenses due to storage and delayed delivery.

The Charterers’ Claims

The charterers asserted the owners had a repudiated breach of the charterparty and claimed damages based on higher freight rates for an alternative vessel (“Vessel B”). They also sought compensation for costs due to delayed delivery and cargo storage. The owners admitted their breach but denied the charterers had suffered any losses.

The Decision

The arbitrator determined that the charterers had not taken the customary steps to mitigate losses caused by the breach, instead taking a more passive approach. While the charterers claimed that “Vessel B” fulfilled the voyage in question, this proved problematic since Vessel B was chartered before the breach and was not secured as a substitute after the breach.  Thus, the claim for damages based on the difference between “Vessel B’s” rate and the charterparty rate was invalid.

Similarly, the charterers’ claim for storage costs and penalties was similarly flawed. The charterers’ contradictory statements about cargo storage and “Vessel B’s” performance made it difficult to establish a logical connection between the alleged breaches and the claimed damages.

The arbitrator dismissed the charterers’ claims in their entirety.  The charterers were ordered to pay both their costs and costs incurred by the owners plus interest.