London Arbitration 17/21

BIMCO HEAVYCON 2007 – NOR VALIDITY – NON PAYMENT OF DEMURRAGE, FREIGHT, BUNKERS, PORT COSTS WAR RISKS – COVID – DETENTION – FRUSTRATION OF CHARTER PARTY – LIEN

London Arbitration 17/21

A heavy-lift vessel was chartered on an amended BIMCO Heavycon 2007 form for a single voyage. On 14 March, the ship arrived at the loading port and presented a notice of readiness to take effect on 15 March. The ship left port on 17 March and began loading on 7 April, as commanded by the sub-charterers. This act was completed by 19 May, and the ship left the following morning. 

On 29 May, the voyage was halted due to non-payment of funds from the Charterer. The ship was anchored and subsequently drifted for 272 days. The daily rate set by Owner was US$45,000, totaling a sum of US$12.24 million in detention charges. 

The Tribunal was then left to deal with several problems on which the Owner and Charterer had filed claims. The first issue was if the charter party was frustrated. The Charterer argued that the C/P was frustrated after travel restrictions had occurred during the beginning of the COVID-19 pandemic. The Charterer had chosen a specific loading procedure that would make it so their employees would have to load and unload the ship, not anyone else. But after 15 March, employees could no longer travel to the disport because of the travel restrictions. Thus, the Charterer argued that the C/P could not be performed. 

The Tribunal rejected this argument. There was no specific method that the charterers needed to use to load and unload their cargo. The Tribunal found that nothing stopped the Charterer from contracting out workers to handle the job. The claim of frustration on the C/P failed. 

Loading operations were the charterers’ responsibility, and the ship was carrying all of the necessary mooring supplies that it was required to take.

The second issue was the validity of the notice of readiness. The Charterer claimed that the documents were invalid as the ship was not ready to load due to deck preparations not being completed and not enough mooring wires. The Tribunal would also reject this issue. The Owner’s only requirement on this front was to clear off and clean the deck before the Charterer went to work, and this requirement was met. Regarding the mooring wires, it was the responsibility of the charterers to give the owners documentation of how the loading would be performed. Loading operations were the charterers’ responsibility, and the ship was carrying all of the necessary mooring supplies that it was required to take. The NOR was valid, and the mooring wire argument failed. 

Other issues, including load port demurrage, freight, and load port bunkers, were all in favor of the Owner. Since the notice of readiness was valid, the owners could receive a load port demurrage sum of US$2,279,968.75. The owners also received a total of US$978,750 after the voyage came to a halt and the rest of the tranche of freight was due. The Owner were able to receive US$133,268 in bunker consumption from 30 March to 19 May.  Generally the demurrage rate is inclusive of bunkers consumed in port.  However, this C/P specifically allowed for Owner to claim demurrage and cost of bunkers consumed. 

In the issues of bunker escalation and post costs, the Owner was victorious once again. Because the frustration argument failed, the Owner was permitted US$35,700 for bunker escalation and another US$37,000 for port costs as allowed in the C/P. The Owner tried to claim expenses from mooring charges; however, the Tribunal would deny these charges as the Tribunal did not feel the C/P allowed for it. 

The eighth issue to be resolved was regarding war risks. The Owner covered primary war risks, but the Charterer was held liable for any additional premiums while in a specific area during the charter. The Owner would only qualify for reimbursement of additional premiums from the Notice of Readiness tender date and time. However, the question was brought up of whether or not the Charterer should pay additional premiums while the ship was stopped or a lien was imposed. The Tribunal found that charterers remained liable for these premiums, and the Owner was subject to reimbursement of US$604,489.28

The last two charges to be resolved were based on stoppage and liens. Clause 12 and 19 of the charter were provided for context. Clause 12 stated that the Owner had the right to stop operations if the Charterer did not pay expenses in time. These delays arising therefrom would then be paid at the rate of demurrage in addition to late payments. Clause 19 stated that Owner was given privy to lien on the cargo.

The Owner properly gave notice to the Charterer before it employed stoppage and liens. The Charterer could have stopped the Owner from this action by paying their dues or communicating with the Owner about them, but Charterer chose to do nothing. The Charterer claimed that there was no expressed demand for payment and that the rights were employed incorrectly, causing the lien to be invalid. Invalid lien breached the agreements of the charter, and if this was the case, the Owner could be prosecuted. 

The Tribunal would dismiss these arguments by the Charterer. The Tribunal found that the owners’ rights were used appropriately under clauses 12 and 19, including placing a lien whilst at sea. The Charterer owed the Owner US$13,012,464.80 

In total, the owners collected over US$17,000,000 plus interest from the charterers.

Print This Article Print This Article