London Arbitration 21/19

The subject vessel was chartered under a contract of affreightment to load 60,000 mt of coal from a terminal on the Mississippi for transport to Mexico.  On August 25, she tendered NOR (notice of readiness) and time started to count at 22:20 when loading commenced.  The laytime allowance was 48:50 hours, however, a tropical storm/hurricane was headed for the Gulf Coast.  By 9:30 on August 26, the US Coast Guard predicted within 48 hours gale force winds would reach the Southwest Pass and set “port condition X-ray” with “port condition Yankee” expected by August 26 at 13:00.

The vessel continued loading and estimated cargo operations would cease on August 27 at 17:00, with a planned departure time of 19:00.  No shutdown of the terminal was anticipated since the landfall of the storm was uncertain at the time.  

Shortly thereafter, the terminal decided to order the vessel off the berth and called for pilot services to arrive by 16:00 on August 26.  When the pilot arrived early, cargo operations halted by 15:30, and the vessel shifted to anchorage 30 minutes downriver. 

By August 26 17:30, the vessel was safely at anchorage.  At noon on August 28, the USCG “Closed the port to all movements” via a COTP order.  The hurricane made landfall the morning of August 29 hitting west of the Southwest Pass. The vessel was unable to rebirth for a month, finally returning on September 26.  Loading was completed on September 28 at 10:35, and she sailed by 12:45 the same day.

The relevant charterparty clauses included:

 44. Exceptions to laytime and demurrage 

Time elapsed in the following circumstances shall not count as laytime or time on demurrage:

44.2 if the berthing, loading or discharging does not start or is delayed or suspended due to fire or bad weather (including but not limited to floods, rain, frosts, fog, snow, hail, storms, high winds, ice, perils of the sea or other waters) or for other reasons not attributable to Charterers or their shippers/receivers; time to count once vessel is on demurrage, but per mainterms loading/discharge on WWD basis so time lost due to weather conditions not to count as laytime used.

44.17 Any time lost due to a Force Majeure Event.

50. Force Majeure 

50.1. … ‘Force Majeure Event’ means any event or circumstance whatsoever occurring after the date of this Charter Party which is beyond the reasonable control of the party affected (the ‘Affected Party’), that prevents, restricts or delays such party’s performance under this Agreement… events or circumstance constituting Force Majeure Event shall include without limitation the following: 

a) fire, flood, lightning, storm, typhoon, tornado, tidal waves, low water, drought, earthquake, landslide, perils of the sea, soil erosion, subsidence, washout, epidemic or other acts of God; … 

50.3 … The Affected Party shall use reasonable endeavours to mitigate and overcome the effects of the Force Majeure Event…

50.5 For the purposes of Clause 50.1, an event or circumstance shall not be considered to be a Force Majeure event in relation to a party unless: 

b) in the case of the Charterer, it is beyond the reasonable control of the Charterer, its affiliates, the operator of the relevant port and any servant or agent of the Charterer.

Key Issues

The tribunal identified two key issues:

1) Was time still running once the vessel was ordered off the terminal on August 26 at 15:30, and 

2) What obligations did the charterer have to minimize the effects of the hurricane on the vessel, and were those obligations fulfilled? 

44.2 Exceptions for Bad Weather

The owner had kept time running after the vessel vacated the terminal, however, Charterer argued laytime should have stopped based on the exceptions detailed in clauses 44.2 and 44.17 which specifically cited cessation of cargo operations due to bad weather and “…reasons not attributed to the Charterers or their shippers/receivers.”  

Charterer countered clause 44.2 covered the stoppage of cargo operations due to bad weather, including the hurricane.  Owner continued to object, claiming Charterer had  “…to show that time was lost directly due to bad weather…[and] would not include time lost due to the anticipation of bad weather.”

The arbitrators considered the precedent set by The Maria G [1958] 1 Lloyd’s Rep 616, Gebr Broere BV v Saras Chimica SpA [1982] 2 Lloyd’s Rep 436, and Watts v Mitsui [1917] AC 227, as well as referencing the following paragraphs from Schofield’s Laytime and Demurrage:  

“4.170 … The question would… be how imminent must adverse weather be to make the present weather itself be considered adverse. Common sense would suggest that the answer will vary with different types of adverse weather. Thus with rain or snow… it is unlikely that the weather would be considered adverse until it actually started raining or snowing… When this happened the hatches could be quickly closed and cargo operations suspended. 

4.171 …Clearly, a typhoon would affect both cargo operations and the safety of the vessel/berth. It is therefore suggested that at the point where good seamanship dictates that cargo operations should cease and the vessel sail, that is the time at which the threat of adverse weather could itself be considered adverse weather…”

The charterer believed paragraph 4.171 on good seamanship supported their position, contending a good seaman would not 1) leave a vessel in a port that was in the path of a hurricane after 2) being ordered off the berth by the port, while 3) being informed port pilots were ceasing operations.

The owner countered the severity of the weather had to be considered in this case, for if the weather was only anticipated, not occurring at the moment, then the order to leave berth was based on safety.  

The tribunal proceeded to examine weather conditions at 15:30 on August 26 when the vessel was ordered off the berth.  At 9:30 that day, USCG issued a “Port Condition X-Ray,” which outlined precautionary measures, but did not require loading to cease.  By 13:00, port conditions were upgraded to “Yankee” which predicted gale force winds within 24 hours, but again, did not require loading operations to cease.

After the terminal instructed the vessel to leave the berth and ordered a pilot to facilitate this, a terminal message was sent stating:

          “Due to Bar Pilots shutting down later tonight anchorages will begin to fill. This leaves [the terminal] no alternative but to vacate the vessel from our berth for the safety of our dock, fleet and terminal.”

This was followed by a second terminal message on August 27 which stated:

          “[The terminal] was forced to cease vessel loading operations at approximately 1200 hours [yesterday] and vacate its berth in anticipation of the vessel anchorages becoming full.”

Considering this, the tribunal ruled the vessel was forced to vacate the berth due to the anticipation of bad weather, not the occurrence of bad weather conditions.  At the time, the hurricane was over 60 hours away, the weather was not threatening, and loading could have proceeded.  While it was true anchorages were filling (and the vessel got the last available spot) the decision to order the vessel off berth was primarily based on ensuring the safety of the barges.

Thus, the bad weather exceptions in the COA were not applicable.

 44.2 Exceptions for Other Reasons

The second exception in clause 44.2 provided the suspension of laytime “for other reasons not attributable to Charterers or their shippers/receivers…”  The tribunal carefully considered Charterer’s assertion that the terminal orders were not attributable to them or their shippers, while also weighing the owner’s position that the terminal was acting on behalf of Charterer.

Discussion ensued debating the definition of the word attributable, whether the charterer, shipper, and terminal were separate, independent entities, and if liability for the vessel as an “arrived ship” at the load port had transferred to the charterer and shippers.

The tribunal agreed with the charterers that the clause 44.2 exception was applicable since cargo operations were delayed/suspended due to the independent actions of the terminal, and thus were not attributable to the charterers, their shippers, or receivers.

Was this Force Majeure?

Clause 44.17 allowed time to be suspended due to a force majeure event with clause 50.1 defining this as “…any event or circumstance whatsoever occurring after the date of this Charter Party which is beyond the reasonable control of the party affected…”  These events included “…fire, flood, lightning, storm, typhoon, tornado, tidal waves, low water, drought, earthquake, landslide, perils of the sea, soil erosion, subsidence, washout, epidemic or other acts of God…” 

Charterers argued the impending hurricane was an “event or circumstance” which was outside of their control, however, the tribunal ruled the same logic for evaluating the bad weather exception had to be applied here; Thus, the anticipation of a force majeure event did not qualify as a force majeure.  Accordingly, clause 50 of the COA was not examined further.

Charterers’ Obligation to Mitigate Effects on the Vessel

The final issue the tribunal examined was what obligations the charterers had to minimize the effects of the hurricane on the vessel, and if these obligations were met.  Since the arbitrators had ruled no force majeure event had occurred, only clause 44.2 was in effect.  The Charterers had successfully demonstrated the loading delay/suspension was not attributable to them, and so the tribunal dismissed there was anything additional the charterers could have done to mitigate the lost time.

Charterers succeeded in showing the delay was not attributed to them and so time stopped counting when the vessel vacated the berth.