Global Coastal Freight Index (as at 15.02.2016)

 

With our thanks and appreciation to Anna Bavbekova
Sales manager, International Seaborne Market:
here is the report in PDF format:

Global Coaster Freight Index as at 15.02.2016

 

 

Global Coastal Freight Index (as at 8.02.2016)

 

With our thanks to ISM, here is the report in PDF format:

CFI

 

 

ISM WEEKLY GLOBAL FREIGHT REPORT AS AT 18.01.2016

 

Not pretty (in fact awful) reading if you happen to be a Ship-owner or Operator of Dry Cargo Ship(s) !..

With our thanks to ISM (International Seaborne Market).

Here is the full report:

ISM_weekly_2016_01_18

 

 

 

Ukraine: Loading operations at anchorage – A report worth reading by Owners, Charterers & Traders

 

During recent years, a large number of cargo operations have been carried out while vessels are at anchorages in the
Ukraine, and this has continued to be an increasing trend.

In particular, at the Port of Kerch a significant proportion of all cargo operations are carried out at anchorage, and on occasion, even beyond Port limits. There also appears to be an increasing amount of cargo operations carried out at anchorages at Odessa, Yuzhny and other Ukrainian ports.

Here is the full PDF report (With our thanks to the Skuld P&I Club)

Cargo_operations_at_anchorage_Ukraine

 

 

Nigeria ban on 113 Tankers: Potential legal implications for vessels calling Nigeria ports.

 

Interesting article issued by Tatham Macinnes LLP of the UK (and with our Thanks to them):

Please open this PDF:

Tatham Macinnes LLP

 

 

 

Demurrage time bar: Crucial to comply with documentary requirements

Kassiopi Maritime Co v. Fal Shipping Co Ltd (M/T Adventure) [2015] EWHC 318 (Comm)

In this case, the vessel Owners failed to provide the Charterers with all documents in support of their demurrage claim within the 90-day time period provided under the charter-party. Their claim was dismissed and they were time-barred from recovering demurrage from the Charterers.

The background facts

The vessel was chartered under a voyage charter-party on an amended BPVoy4 form dated 15 June 2011. The Owners brought a substantial claim for demurrage as a result of delays at the load port of Sitra, Bahrain, and the discharge port, Port Sudan. A formal demurrage claim was submitted to the Charterers by email on 5 August 2011. The email attached a number of documents.

The Charterers disputed that demurrage was due to the Owners on the basis that the demurrage claim had not attached all of the necessary documents and that, because the 90-day period provided under the charter-party within which to submit those documents (and the claim) had elapsed, the Owners’ demurrage claim had become time-barred.

The charter-party provisions
The charter-party contained the following provisions:

19.7No claim by Owners in respect of additional time used in the cargo operations carried out under this Clause 19 shall be considered by Charterers unless it is accompanied by the following supporting documentation:
………….

19.7.3 Copies of all other documentation maintained by those on board the Vessel or by the Terminal in connection with the cargo operations.
….

20.1Charterers shall be discharged and released from all liability in respect of any claim for demurrage, deviation or detention which Owners may have under this Charter unless a claim in writing has been presented to Charterers, together with all supporting documentation substantiating each and every constituent part of the claim, within ninety (90) days of the completion of discharge of the cargo carried hereunder.

The arbitration award

The Tribunal ruled that the Owners’ claim was time-barred. The Owners had failed to provide the Charterers with the documents required under clauses 19.7.3 and 20.1.

In particular, the Tribunal ruled that the port log, time sheets and a manuscript note from the Master showing that he had received free pratique by VHF at Port Sudan should have been provided, being documents that would have been kept on board (per clause 19.7.3). The Tribunal also ruled that the Owners should have disclosed upfront all the documents they would be required to disclose in an arbitration in support of their demurrage claim.

The Commercial Court decision

The Owners’ appeal was dismissed by the Commercial Court. The Judge was slightly more sympathetic to the Owners than the Tribunal had been. He agreed, however, with the Tribunal that the claim was time barred.

In particular:

1. The Judge disagreed with the Tribunal that the Owners had to disclose upfront all documents that they would be required to disclose in an arbitration or court case. This would impose a far-reaching and potentially unworkable obligation on the Owners. It would require them to undertake a detailed search for documents, in the context of disclosure, which was beyond what was being contemplated by the clause. The scope of disclosable documentation in arbitration or court proceedings is determined by the parties’ pleadings that identify the issues in dispute. Undertaking that type of disclosure before a claim had been formulated and formally commenced would be a heavy burden to impose upon the Owners.

2. Clause 19.7.3 of the charter-party was limited to contemporaneous records kept by the vessel in connection with cargo operations. In this context, the Judge agreed with the Owners’ submission: the documentation contemplated under the clause involved regularly updated documents, as compared to “one-off” documentation that comes into being solely for the purpose of a demurrage claim, such as a statement of facts. However, the type of documents that had to be submitted at the time of submitting the demurrage claim to the Charterers was a question for the Tribunal.

3. Under clause 20.1, the Owners were to provide “all supporting documentation”, not merely “supporting” or “essential” documentation. What was required was documents which substantiated each and every part of the claim and which provided Charterers with the material required to satisfy themselves that the claim was well-founded. Accordingly, the port logs and timesheets were required to be presented to the Charterers. The email with the Master’s manuscript note regarding the time when free pratique had been granted at Port Sudan was probably a supporting document too, because this information was important to the commencement and proper calculation of the laytime and there was no record of it in the other documentation provided by the Owners. The Owners’ failure to provide these documents to the Charterers within the 90-day time period provided under clause 20.1 meant that the Owners’ demurrage claim was time-barred.

Comment
This case reminds us again of the importance of understanding and fully complying with charter-party terms when presenting a demurrage claim to charterers – or any claim subject to time limits or explicit requirements regarding what needs to be produced and when. The effect of non-compliance may be fatal to owners – who may find themselves unable to recover substantial amounts to which, in all other respects, they have a straightforward entitlement.

Ince & Co 26.5.2015

Is payment of time charter hire a condition? The Astra reconsidered

In Kuwait Rocks Co v AMB Bulkcarriers Inc (The Astra)1, Flaux J determined that the obligation to make punctual payment of hire under an amended NYPE time charter, whether on its own or in conjunction with an anti-technicality clause, was a condition of the contract. The breach of this condition entitled the vessel owners to both withdraw the vessel and claim damages for loss of profit for the remainder of the charter period.
On 18 March 2015, judgment was handed down in Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd2. Popplewell J disagreed with Flaux J’s analysis in The Astra, finding that payment of hire was not a condition of the contract.

The facts of Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd The Claimant Owners had let three vessels to Grand China Shipping (Hong Kong) Co Ltd on amended NYPE 1993 forms. The charters were on materially identical terms. They included provisions allowing Owners to withdraw the vessel “failing the punctual and regular payment of the hire, or on any fundamental breach whatsoever” of the charter, and an anti-technicality provision requiring Charterers to be given a three banking day grace period where there was “a failure to make punctual and regular payment of hire due to oversight, negligence, errors or omissions on the part of Charterers or their bankers”.

The Defendant Guarantor provided guarantees in respect of Charterers’ performance under all three charters. Substantial arrears accrued, causing Owners to withdraw the vessels and terminate the charters. Owners claimed against the Guarantor under the guarantees for (i) the balance due under each charter prior to termination; (ii) damages for loss of bargain in respect of the unexpired term of the charters; and (iii) their costs of arbitration proceedings against Charterers.

The court was required to determine various issues, including whether the Guarantor was bound by the guarantees and the correct method of calculating any damages due for the unexpired charter periods. However, it was the question of whether Owners were entitled to those damages which was the focus of the majority of Popplewell J’s detailed judgment.

The Guarantor’s position was that although Owners had a contractual option to withdraw the vessels, in order to claim damages for loss of bargain there had to have been a breach that gave right to damages for repudiation or renunciation. There had been no such breach. Owners contended that payment of hire was a condition of the charters, such that breach entitled them to damages for loss of bargain. Alternatively, if payment of hire was an innominate term, Charterers’ conduct was repudiatory and/or evinced an intention not to pay hire on time, which constituted a renunciation of the charters.

The question of whether the obligation to pay hire punctually and regularly in advance was a condition of the contract was precisely the one which Flaux J had considered (albeit obiter) in The Astra.
Flaux J’s findings in The Astra The charterparty in The Astra was also on an amended NYPE form. The provisions regarding payment of hire were on materially identical terms to those in the instant case. Flaux J determined that the obligation to make punctual payments of hire, whether on its own or in conjunction with the anti-technicality provision, was a condition of the contract. Breach therefore entitled the owners to withdraw the vessel and claim damages for loss of bargain. His main reasons for reaching this conclusion were:

1. Failure to punctually pay hire was sufficiently serious to allow the owners to terminate, indicating that such failure went to the root of the contract. On that basis, the provision was a condition.
2. In commercial contracts, where time is of the essence (i.e. where something must be done, or payment be made, by a specified time), such a provision is a condition of the contract.
3. Certainty is essential in commercial transactions, and there would be no certainty if the owners could only claim damages after withdrawal where the charterers’ conduct was repudiatory. Proving charterers’ repudiation would not always be straightforward. The charterers also required certainty, in that they should know they would be liable for damages for loss of bargain if the owners withdrew the vessel after their failure to pay hire promptly.
Popplewell J’s findings in Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd Like Flaux J, Popplewell J conducted a thorough review of the authorities on all relevant issues, in particular the classification of contractual terms as conditions and the question and effect of time being of the essence. He concluded that the obligation to pay hire was not a condition of the contract, and so breach alone did not entitle Owners to damages for loss of bargain for the unexpired charter periods.

Popplewell J disagreed with Flaux J on each of the three points set out above.
1. The provision of a right to terminate on breach of a particular term is not indicative that the term in question is a condition. To have such effect, any agreement between the parties must entitle the defaulting party to treat the contract as repudiated, not simply to terminate. A contractual right to terminate may constitute such an agreement, or it may simply be an option to cancel. On this basis, the fact that the option to cancel is triggered by a breach says nothing about whether the term breached is to be characterised as a condition.
2. The presumption in commercial contracts is that stipulations as to time of payment are not of the essence, unless there is a clear indication to the contrary. The cases which comment on the owners’ commercial interest in punctual advance payment provide a basis for a stringent approach to a contractual option to terminate. However, they provide no additional reason to treat such a term as a condition conferring a right to terminate, which would have very different financial consequences. If owners invoke an option to cancel, they are no longer obliged to fund the operation of the vessel and their interest in punctual payment disappears.
3. It is correct that owners may face uncertainty in having to continue with a charter until such time as they can say that charterers are in repudiatory breach. However, this is no more than any commercial party faces as a result of English law’s requirement that only repudiatory breaches of innominate terms allow a party to put an end to contractual obligations. The principal function of conditions and termination provisions is to ensure certainty so far as the right to terminate is concerned. This can be achieved by an option to cancel without conferring an unmerited right to damages.

Unless and until the question comes before a higher court, it is likely that Popplewell J’s decision will be followed in subsequent cases. He referred in his judgment to a general principle that where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred, if it has been reached after full consideration of the earlier decision.
Payment of hire: where are we now? The issue of whether owners can claim damages is often crucial to their decision as to whether to withdraw a vessel or to continue with a charter. After The Astra, owners were arguably in a stronger position to give a legal basis to a decision to withdraw their vessel from charterers’ service and claim damages for loss of profit after only a few missed or part hire payments, or even a single such payment.
Owners’ position was also strengthened where charterers sought to make deductions from hire, on the basis that the threat of withdrawal and a damages claim could encourage charterers to pay and claim back alleged deductions, rather than deduct them from an initial hire payment. Although the decision in The Astra was not universally welcomed, it was generally seen as providing some long overdue certainty to a controversial area of debate.
The decision in the present case essentially takes matters back to the position before The Astra. Owners are likely to have to prove a repudiation or renunciation by charterers if they wish to claim damages for loss of profit. A mere failure by charterers to pay, and consequential exercise by owners of a right to withdraw, is unlikely to be sufficient. Owners will need to show that charterers have either evinced an intention not to be bound by the charter terms, or have expressly declared that they are or will be unable to perform their obligations in some essential respect. This raises difficult questions such as the number of missed or short hire payments that amount to an “intention no longer to be bound”, and places a higher evidential burden on owners.
The decision in this case does not affect owners’ right to withdraw the vessel from charterers’ service, if the charter gives them that right, nor does it affect their entitlement to claim unpaid hire that has already fallen due. What it will affect is owners’ entitlement to damages for loss of bargain for the unexpired charter period. The temporary strengthening of owners’ position arguably provided by The Astra may now have come to an end.

Source: Reed Smith

Capesize Chartering Ltd: The New ‘BIG’ kid on the bloc ?

Five dry bulk shipping firms, including shipping tycoon John Fredriksen’s Golden Ocean will form a new venture to coordinate chartering services, hoping to reduce costs in a fragmented market, the firms said in a joint statement. The firms, including Golden Ocean, Bocimar International, CTM, Golden Union Shipping and Star Bulk Carriers will form Capesize Chartering Ltd., aiming to start up operations by the second half of February. “The parties operate in the highly competitive and fragmented capesize industry, and neither party owns, controls or manages sufficient capesize vessels to provide competitively priced bids and efficient trading and operations to serve its customers,” the firms said. “The new company will combine and coordinate the chartering services of all the parties,” they said. “For the customers this represents the benefit of a wider geographic area in which vessels can be made available and with shorter spread between loading dates.”

MediTelegrah

Charterers Liability and P+I cover

 

A Swedish carrier, SES, bareboat chartered a tugboat from its owners SST in Norway. The tugboat was used to transport a carriage of sugar beet, among other things, to a plant in Nykoebing Falster, Denmark. During carriage from the Port of Assens in Denmark to Nakskov, the tug caused damage to a pier in the Port of Assens. SES had taken out charterer’s protection and indemnity (P&I) insurance through a Swedish insurance broker and the cover was provided by Lloyd’s of London. The insurance was subject to English law and it followed from the insurance contract that disputes with the insurer were to be exclusively decided by the High Court in London:
“This insurance shall be governed by and construed in accordance with English law and, in particular, be subject to and incorporate the terms of the Marine Insurance Act 1906 and any statutory modification thereto. This insurance, including any dispute arising under or in connection with it, shall also be subject to the exclusive jurisdiction of the High Court of London.”

SES was subsequently declared bankrupt and legal proceedings – in order to obtain compensation for the damage to the pier – were brought directly by the port against the insurer before the Danish Maritime and Commercial Court pursuant to Section 95 of the Danish Insurance Contracts Act, which provides a right for an injured party to claim directly against the liability insurers of the party which is alleged to be liable for the damage. During the proceedings, the insurer submitted that the Danish court did not have jurisdiction to hear the dispute and referred to the exclusive jurisdiction clause in the insurance contract. In particular, the insurer submitted that the jurisdiction agreement also applied to the claim brought by the Port of Assens. The port disputed that the jurisdiction clause was of any relevance to the proceedings.

Decision
The court found that the jurisdiction clause in the insurance contract did not contradict the mandatory provisions of Articles 8 to 14 of the EU Brussels I Regulation on jurisdiction agreements in insurance contracts, as the insurance contract in question was a liability insurance relating to the financial loss connected with the use or operation of ships and consequently concerned a risk in relation to which Articles 8 to 14 derogated from. Further, the court found that the jurisdiction agreement applied to the proceedings brought by the Port of Assens against the insurer as the port, pursuant to Section 95 of the Insurance Contracts Act, was found to have stepped into SES’s right to insurance coverage. The court stated as follows:
“The legal entity causing damage, SES, has been declared bankrupt and the question, on this basis, is how the Insurance Contract Act, S 95 is to be interpreted … The court finds that S 95, in accordance with its wording and its purpose, must be interpreted to the effect that the party claiming damages steps into the rights of the insured against the insurer, including any possible special terms and conditions applicable between these parties, in this case, the choice of law and jurisdiction agreement providing for jurisdiction in England and Wales. Consequently, the court does not have jurisdiction over this case.”(1)

Comment
The judgment decided on the keenly disputed and important issue of whether a jurisdiction clause in a liability insurance is to be given any effect in proceedings brought by a claimant which is not a party to the insurance contract directly against the liability insurers where such a direct action is permitted pursuant to Section 95 of the Insurance Contract Act. Some legal writers have suggested that the injured party’s right to a direct action is provided for by law and therefore this right cannot be influenced by conditions, including jurisdiction clauses, which have been agreed between the insured and the insurer, as this would be contrary to the principle of privity of contract.

Conversely, other legal writers maintain that an injured party pursuant to Section 95 of the Insurance Contract Act “steps into the shoes of the insured” and therefore the injured party cannot sue the insurer before a venue that is contrary to a jurisdiction clause in the insurance contract. The Maritime and Commercial Court has followed this latter interpretation. The court also apparently assumed that Section 95 of the Danish Insurance Contract was applicable to the claim brought in the international case heard. It is not clear under Danish law whether Section 95 should apply in international cases.

 

Birch Windahl/HSN

More pitfalls for owners looking to terminate for unpaid hire

It is a debatable point whether or not the obligation to pay hire under a time charter is a condition of the contract or not, notwithstanding the obiter comments of Mr Justice Flaux in the Astra [2013] EWHC 865 (see the Shipping E-Brief July 2013). Making payment under a commercial contract is said to be “not of the essence of the contract” and therefore not a condition. The significance is that a breach of condition allows the innocent party to terminate the contract in addition to claiming damages. Otherwise, he may be limited to his damages claim but unable to terminate the contract unless the failure to make payment, or indeed making repeated late payment under an instalment contract, amounts to a repudiatory breach of the contract.

The traditional view is that, in order to terminate a time charter and claim damages for losses suffered following a failure to pay hire, the charterer’s conduct must be shown to be (i) repudiatory in the sense that the breach deprives the owner of substantially the whole benefit of the charter; and/or (ii) renunciatory in the sense that it evinces an intention on the charterer’s part no longer to perform the charter at all or to perform the charter in a manner substantially inconsistent with his contractual obligations.

It will very much depend on the facts and circumstances in any given case whether the non-payment or late payment of hire instalments under a time charter amounts to a repudiatory breach. This often requires the owner to make a difficult decision as to whether the charterer’s failure to pay a number of hire instalments, or paying them late, entitles him, the owner, to terminate the charter. If the owner “calls it wrong”, he can find himself in repudiatory breach for wrongful termination and facing a claim for damages from the charterer.
Januzaj v. Valilas is not a shipping case but deals with general principles concerning the law on repudiation. It arguably introduces a further potential pitfall for owners seeking to rely on multiple failures to pay hire, or repeated late payments of hire, in order to demonstrate repudiatory conduct on the part of a charterer.

The background facts
The Claimant was a dentist operating his practice from the Defendant’s premises. The Claimant had agreed to pay the Defendant half his earnings from his practice in return for use of the premises. The Claimant’s earnings came from the UK’s National Health Service (the “NHS”) under an arrangement whereby the Claimant was paid in advance in equal monthly instalments for his work. If, at the end of the year, the Claimant had not done sufficient work, then any over-payment of his advance earnings had to be refunded to the NHS.
A dispute arose between the Claimant and Defendant, as a result of which the Claimant stopped any further payments to the Defendant. The Claimant was particularly concerned that the Defendant would not return his half of any advance payments if a refund became due to the NHS. The Claimant failed to make three monthly payments to the Defendant between August and October. In November, the Defendant terminated the agreement on the basis of the Claimant’s repudiatory breach of contract.

The Court decisions
At first instance, the Court found that the agreement had been terminated wrongfully and awarded the Claimant damages. The majority of the Court of Appeal upheld this decision on the basis that, on the facts, the Defendant should have been aware that the Claimant was only intending to pay late as opposed to evincing an intention not to pay at all. By contrast, the dissenting judgment concluded that the failure to make three payments in a row was a repudiatory breach.

In the context of time charter hire disputes
The onus will be on an owner to demonstrate that he has been deprived of substantially the whole benefit of his time charter and/or that the charterer does not intend to make any further hire payments in the future. Furthermore, The Brimnes [1972] 2 Lloyd’s Rep. 465 made it clear that even persistent late payment of hire instalments will not necessarily amount to a repudiation of the charter.

One of the majority appeal judges in Januzaj v. Valilas suggested that, in determining whether the number of missed or late payments was repudiatory, regard had to be given to the length of the contract as a whole. There is, however, previous case law to the effect that, in deciding whether repeated late payments are repudiatory, it will not simply be a question of looking at the number of payment instalments required over the whole of the contractual period and comparing that number with the number of occasions on which payment has not been made or has been made late. It is also necessary to look at the type of contract in question.

Januzaj v. Valilas was very much decided on its own facts. In that case, the dentist who missed three monthly payments had, in previous years, always managed to complete the requisite amount of work he had to perform for the NHS over the course of the year and so no refund to the NHS had ever been necessary. The majority of the Court of Appeal concluded that the Defendant should, therefore, have known that the Claimant would complete all his NHS work in the relevant year also, so that no refund would have been required and the Claimant would eventually have paid the Defendant all that was owing to him, albeit somewhat late. That was not sufficient to amount to repudiatory conduct.

In a time charter context, however, and in a challenging economic climate, it will often not be at all clear to an owner that he will eventually get his money, albeit late. Charterers may be on the brink of insolvency and may be looking to negotiate a reduced hire rate rather than comply with their original contractual obligations. There may also be a history of repeated defaults on the part of the charterer that can render his behaviour repudiatory as a whole. Nonetheless, Januzaj v. Valilas gives an owner faced with a defaulting charterer some cause for concern that he will be jumping the gun if he chooses to terminate where a charterer has missed a few hire payments. Is it relevant to consider the length of the charter when deciding whether several unpaid instalments is repudiatory? Are those payments just late or is the charterer not going to pay at all?

Comment
Given the Court of Appeal decision in Januzaj v. Valilas, an owner will need to be cautious about terminating for late payments of hire and there remains uncertainty over exactly how many non-payments will be sufficient to justify a decision by the owner to terminate the charter. Defaulting charterers often suggest to owners that they intend to pay outstanding hire in the future. Such a defaulting charterer, faced with an owner who chooses to terminate the charter as a result, may now argue that the outstanding payments were merely late or that only a few non-payments of hire in the context of a long-term charter is not repudiatory.

Source: Ince&Co/HSN (13.1.2015)