London Arbitration 9/23
After a vessel completed a voyage under a time-charter, disputes arose regarding the final hire accounts. The arbitration was referred to a sole arbitrator under the LMAA Small Claims Procedure 2017 (SCP). The owners claimed a balance of hire totaling US$49,423.30. The charterers maintained that they were owed damages of US$62,876.66 due to a speed and consumption issue and counterclaimed for the difference of US$16,170.82.
The arbitrator observed discrepancies between the parties’ final hire statements that were not included in the arbitration submissions. These discrepancies were due to redelivery timing, delivered MGO quantity, and a claim for off-hire due to alleged main engine maintenance. Since these were outside the scope of the arbitration, and in the interest of fairness, the arbitrator adjusted the owners’ claim to US$48,651.43, using the charterers’ assumptions.
The arbitrator focused on two aspects related to his authority over the charterers’ counterclaim: whether the counterclaim should be time-barred and how to resolve the speed and consumption allegations.
The owners contended that the charterers’ counterclaim was time-barred because they failed to deliver their defense submissions within the SCP’s stipulated time frame. Their position was based on the language of subparagraph 5(g) of the SCP which stated:
(g) Any extension to the above time limits must be applied for before expiry of the existing time limit. If a party fails to deliver the appropriate letter of submission within the time limit set, the arbitrator, on the application of the other party or of his own motion, will notify the defaulting party that unless the outstanding communication is received within a fixed period (maximum 14 days) he will proceed to the award on the basis of the submissions and documents before him to the exclusion of all others. In the case of failure to serve a letter of claim the arbitrator may make an award dismissing the claim. The time allowed by the arbitrator’s notice, added to any extension of time previously agreed between the parties in respect of the same letter, shall not in total exceed 28 days. Any letter of submission submitted by the defaulting party subsequent to expiry of the time limit set by the arbitrator’s notice shall not be admissible.”
Since the clause utilized the words “must be”, the owners asserted the requirement was mandatory, and thus the counterclaim should be time-barred.
The arbitrator rejected the owners’ argument, stating that provisions which could severely limit claims must be unmistakably clear. Although subparagraph 5(g) outlined what would happen if a submission was late, it did not address a case in which there was insufficient time for it to occur. Absent a clear time-barring clause, the counterclaim was allowed to proceed.
Speed and Consumption Claim
Clause 57, Evidence of Performance, of the charterparty formed the basis of the owners’ speed and consumption claim and stipulated speed and consumption tolerances. [Editor’s Note: The full text of Clause 57 is located at the end of this summary.] The clause also referenced the usage of an independent weather routing service to settle performance disputes:
In the event of a dispute over a breach of speed and consumption warranty in this Charter Party, a mutually agreed weather routing company to be appointed to analyse the vessel’s performance whose findings will be final and binding.
The arbitrator noted that the full text of clause 57 (below) was poorly written and advised the parties to amend it before any future fixtures.
Clause 57 Evidence of Performance
About means (+/- 0.5 knots) on vessel’s speed and (+/- in metric tons equivalent to 5%) on vessel’s consumption. The vessel to maintain speed and consumption as described in this Charter Party during the whole Charter period, subject to weather conditions. Speed and consumption warranty is based on performance in odd weather conditions. For the purpose of the Charter Party good weather conditions are to be defined as wind speed not exceeding Beaufort Scale Force 4/Douglas Sea State 3.
The actual route taken by the Vessel shall be used as the basis of any calculation of the Vessel’s performance under this Charter Party.
Owners and Charterers agree that evidence of the weather, sea state and other factors affecting the vessel’s performance shall be taken from the vessel’s log book unless such data is substantially contradicted by the ‘final report’ of an independent weather routing service supported by data obtained from a weather authority that is a member of the World Meteorological Organisation.
Charterers are to supply an independent weather routing service to the vessel’s Master. The weather routing company is to calculate the vessel’s performance using the above criteria and in accordance with internationally accepted methods of calculation. In the event of a dispute over a breach of speed and consumption warranty in this Charter Party, a mutually agreed weather routing company to be appointed to analyse the vessel’s performance whose findings will be final and binding.
Charterers are to use … [three routing services were identified]
The wording ‘with no adverse currents or negative influence on swell’ is not to be construed to mean that if there is negative influence of swell or adverse current the speed/consumption warranty does not apply, it means negative currents and swells must be taken into account like wind force and sea state as described.”
Since the counterclaim stemmed from a dispute over speed and consumption warranties, the arbitrator determined that his authority did not extend to this matter. Instead, the dispute had to be referred to a mutually agreed routing company for resolution. Should the routing company find performance shortcomings, the charterers could then proceed with their counterclaim, potentially seeking an award based on the routing company’s findings.
Despite his inability to decide on the charterers’ counterclaim at the moment, the arbitrator reserved the right to do so later if necessary. He granted the owners’ claim, reduced provisionally to US$48,651.43, and issued an award for payment of that sum along with interest. The charterers were also instructed to cover their costs and the owners’ costs.