London Arbitration 16/23
Owners of a vessel chartered on an amended NYPE 1946 form sought compensation for market rate differences on bunkers at redelivery. The arbitration also dealt with crew changes, off-hire, and time spent on sub-chartering.
The charter, spanning “abt 5 months to MAX 7 months inchopt [in charterers’ option],” led to disagreements on final hire balances. Owners pursued arbitrations by appointing an LMAA Full Member as the sole arbitrator under the LMAA Small Claims Procedure 2021 (SCP). Both parties were represented by London solicitors. The proceedings were conducted through document submissions.
Initially, the owners sought US$83,785.38, later amending their claim to US$44,067.87, plus interest and costs, following receipt of US$39,717.51. The primary point of contention involved bunkers on redelivery, where the vessel was allegedly short of 109.632 mt VLSFO and 50.995 mt LSMGO. The owners contended that this breach entitled them to compensation for market rate differences at the place of redelivery.
Clause 10 of the fixture recap provided as follows:
10. Bunker Clause
Vessel to be delivered with about: Abt 800–900 mt lsfo Abt 100 mt lsmgo
Bunkers on redelivery to be abt same qty as on dely
Prices both ends: usd 340 pmt lsfo usd 350 pmt lsgo.
Clause 41 of the pro forma charterparty provided:
Clause 41. Bunker Clause
Bunkers on delivery expected to be about xxx metric tons vlsfo, about xx metric tons lsmgo. Bunkers on redelivery about same quantities as bunker on delivery, bunker price to be USD xx per metric ton for vlsfo and USD xx per metric tons for lsmgo at bends.
Should the difference between bunker on delivery and bunker on redelivery exceed 5%, Charterers shall compensate Owners losses due to such difference if any.
Bunkers at Redelivery
Owners argued that together these clauses obligated the charterers to redeliver with the same bunkers, allowing a 5% margin, and with compensation for the losses due to the differences between charter and market prices. The charterers countered, asserting there was no obligation to redeliver with the same number of bunkers at the start of the voyage. They were instead to use reasonable efforts to redeliver the vessel with “about” the same quantity, and any differences in bunkers were to be paid based on the prices stated in Clause 10 of the recap “price both ends” even if over the 5% margin.
The arbitrator ruled that Clause 10 required charterers to redeliver the vessel with about the same quantity of bunkers as on delivery and that Clause 41 provided for a 5% margin to this amount. Further, the price for bunkers would be determined based on market differentials, but was limited to the shortfall exceeding 5%., resulting in an award that was less than the owners claimed.
Off-Hire During Crew Change
The second dispute related to an alleged off-hire due to a crew change. The vessel was off-hire for one day due to a crew disembarkation arranged by the owners. The charterers sought an additional day’s off-hire and damages, claiming time spent awaiting the new crewmember’s Covid-19 test results delayed, bunkering, and the departure of the vessel. Charterers asserted this put Owners in breach of Clause 8 utmost dispatch obligation.
The owners argued against off-hire beyond the initial day, asserting the vessel was doing what was required while waiting for bunkers. Owners further asserted that the only reason the vessel had not proceeded with the voyage was because the charterers ordered it to wait at anchorage for bunkers.
The arbitrator dismissed the charterers’ claim, stating the vessel remained efficient and the charterers failed to establish a breach.
Port Clearance and Time Spent Sub-Chartering
The final dispute involved time spent by the vessel in a sub-charterer’s service after delivery. The owners claimed the issue was presented in arbitration, while the charterers contended it was “parked” pending resolution by sub-charterers. Owners claimed Charterers had chosen to repay the deduction of $39,717.51, rather than attempt to justify it and Owners claimed interest on this late payment.
The arbitrator sided with the owners, affirming the issue’s arbitration presentation and awarded interest on the late payment.
Award
The owners were awarded US$35,957.49 with 4.5% interest compounded quarterly for compensation on the bunkers after redelivery. They also received compound interest on US$39,717.51 at the same rate. Costs of £5,000 were awarded due to both parties exceeding the LMAA SCP limit. Additionally, charterers were required to reimburse owners £4,000 with 4.5% interest compounded quarterly from SCP fee payment.