London Arbitration 7/23
A vessel was chartered on the NYPE form with amendments for a time charter to transport bulk coal from Richards Bay in South Africa to one safe port, India or Pakistan. The arbitration centered on the charterers’ failure to redeliver the vessel at the agreed location, Gadani, Pakistan, per the terms of the charterparty agreement. Claims for reimbursement of crew war-risk bonuses (US$27,420), lost earnings from a follow-on fixture (US$160,000), and waiting time (US$93,623) were also put forward.
Although the charterparty prohibited sub-charters, the charterers proceeded to do so. The sub-charterers directed charterers to discharge the coal via ship-to-ship transfer while at anchorage at Gadani, Pakistan. The vessel sustained significant damage while conducting these discharging operations and the charterers acknowledged the repairs were their responsibility. However, repair at Gadani was not feasible, so the charterers redirected the vessel to Khor Fakkan for repairs.
Upon completion of the repairs, the vessel was ordered to Fujairah for bunkering, following which the charterers redelivered the vessel to the owners. The owners contended that they incurred losses from the charterers’ breaches related to sub-chartering, the unsafe discharging operation, and the choice of redelivery location.
Reimbursement of Crew War-Risk Bonus
The owners contended that they were entitled to reimbursement for war-risk bonus payments made to the crew due to the charterers’ instructions to sail to Khor Fakkan and Fujairah. They cited three provisions of the charterparty:
Clause 35 – Applicable Piracy Clauses
(ii) If the Owners become liable under the terms of employment to pay to the crew any bonus or additional wages in respect of sailing into an area which is dangerous … then the actual bonus or additional wages paid shall be reimbursed to the Owners by the Charterers;
Clause 61 – BIMCO Standard War Risks Clause 1993
(5) If the Owners become liable under the terms of employment to pay to the crew any bonus or additional wages in respect of sailing into an area which is dangerous … then such bonus or additional wages shall be reimbursed to the Owners by the Charterers …
As to bonus/overtime to crew paid by Charterers, same should be subject to the payment standard of flag or nation of Vessel.
Charterers contested the validity of this claim, maintaining that the owners failed to establish any legal obligation to pay the crew these additional bonuses.
The tribunal concluded that the claim lacked substantiated evidence of customary or necessary practices. Thus, the charterparty provisions were not applicable in this instance, and the claim was dismissed.
Sub-Chartering and Unsafe Discharging Operations
The owners sought to strengthen their claim for the losses due to the failure to redeliver the vessel per the charterparty. They argued that these losses directly resulted from the charterers’ breach in sub-chartering the vessel against the charterparty terms. Additionally, the owners contended that the unsafety of the discharging operation, which they claimed violated the charter, contributed to their losses.
The tribunal held that the losses suffered by the owners could not be attributed substantially to the vessel’s non-redelivery at Gadani, the manner in which the discharge operation was conducted, or even the sub-chartering breach. These factors merely provided the circumstances that led the charterers to redirect the vessel to Khor Fakkan and Fujairah. The fundamental cause of the owners’ losses, the tribunal determined, was the charterers’ breach of their obligation to redeliver the vessel as outlined in the charterparty.
The charterparty, however, imposed no specific timeline for redelivery and only required the vessel to be redelivered in good order at the agreed location. Clause 4 of the charterparty, as modified by the fixture recap provided for:
…. hire to continue until the hour of the day of her re-delivery in like good order and condition, ordinary wear and tear excepted, to the Owners … on [from the recap: ‘dlosp 1 sp india or 1 sp pakistan in chopt, atdnshinc’] unless otherwise mutually agreed.”
Thus, the vessel’s hire would persist until her re-delivery to the owners at the agreed-upon location, in a satisfactory condition, with normal wear and tear accounted for, unless a different arrangement was mutually reached.
The charterers were bound by their commitment to repair the damages incurred during the discharge operation. Given that Gadani was unsuitable for effective repairs, the charterers had the right to direct the vessel’s repair to an alternate location. Furthermore, the charterers retained the option to return the vessel to Gadani post-repairs and redeliver it without violating the charterparty’s provisions. Such actions were deemed valid and consistent with the agreement.
The tribunal concluded that the alleged losses incurred by the owners were considered unforeseeable consequences of the breaches they had alleged. Thus, the tribunal concluded that, in this context, the actual cause of the owners’ losses was the charterers’ failure to uphold the specified redelivery location, as per the charterparty agreement.
Loss of Follow-On Fixture
Most of the owners’ claim pertained to losing a follow-on fixture. They argued that had the vessel been redelivered at Gadani, they would have secured a lucrative follow-on fixture. The tribunal analyzed the nature of the loss and the causative factors, referring to Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)  2 Lloyd’s Rep 275 regarding redelivery at the wrong time.
The tribunal agreed with the charterers that the same principles must apply to redelivery in the wrong place and referred to Cooke J’s judgment in Maestro Bulk Ltd v Cosco Bulk Carrier Co Ltd (The Great Creation)  1 Lloyd’s Rep 315 at para 66:
It is the very nature of the follow-on fixture, when compared with an hypothetical follow-on fixture, which gives rise to notions of unquantifiability, unpredictability, uncontrollability and disproportionality at the date of the charter, even if the figures can be quantified ex post facto.”
The tribunal stated that follow-on fixtures were subject to unpredictable and uncontrollable market factors at the time of the charter agreement and ruled that the loss of a follow-on fixture was not a direct result of the breach of redelivery location.
Considered next was the owners’ claim for compensation due to nearly six days’ waiting time at Fujairah. This claim was closely intertwined with the claim for the lost follow-on fixture. The tribunal ruled that the waiting time claim effectively duplicated the lost fixture claim and could not be recovered as a separate claim.
The tribunal ruled that the primary cause of the losses suffered by the owners was the failure of the charterers to redeliver the vessel at the agreed location. The owners’ claim only succeeded for US$21,175.50, plus interest, the balance due based on the hire, which owners would have earned from the trip from Fujairah to Gadani at the charterparty rate of US$16,500 per day. All other claims were dismissed.