Our Thanks to Glogos Chartering:
Our Thanks to Glogos Chartering:
Interesting NOR argument lost by Owners (Our Thanks to the Steamship Mutual) :
All-in-all it was a pretty quiet week. This means there really is not much to talk.
Trade has slowed down in the Supramax/Ultramax segment of the North Atlantic this week. Players report very limited cargo offer for late March-early April. The number of vessels open for spot/prompt dates significantly exceeds demand for fleet. The costs of cargo transportation from the regional ports have sagged. This week, prompt rates for a Supramax vessel chartered for grain shipment bss dely USG redel Spore-Japan are voiced by brokers at $17k daily, those for Ultramax carriers – at $18-19k daily. Earlier this week, the contracts for Supramax transportation of petcoke bss dely USG redel India were concluded at $19-20k daily, while the relevant rates now amount to $18-19k daily. Brokers have not reported any voyage-basis deals for shipments of US grain this week, as the difference in ideas has grown significantly. The charterers are confidently lowering the rates, voicing the ideas of $34.5-35/t for transportation of a Supramax-lot of agricultural products from the Gulf of Mexico ports to northern China, while such shipment is quoted by brokers at $36-37/t.
Transatlantic market has also softened amid sharpening imbalance of cargo offer and tonnage supply. Thus, the charterers are ready to pay only $12-13k daily for a Supramax carrier chartered for petcoke shipment bss dely USG redel EMed with prompt laycan dates and about $11-12k daily bss dely USG redel ECSA. The time-charter for Supramax fleet bss dely USG redel Skaw-Passero is quoted by brokers at $13.5-14.5k daily, that for Ultramax vessels – at $14.5-15.5k daily. The situation remains unfavorable for Handysize owners in the region. Given limited number of relevant cargo offers, they have to make concessions. The deals for Handysize fleet bss dely USG redel Skaw-Passero are negotiated at $9.5-11k daily on average. A Handysize vessel can be chartered at $8.5-9k daily bss dely USG redel ECCA. The time-charter for such carriers bss dely USG redel WCCA/WCSA is quoted at about $12k daily.
By contrast, trade is generally brisk in the South America, though the owners of fleet are not able to raise the rates for fronthaul cargo transportation. Given a balance of cargo offer and tonnage supply, the rates are generally stable. The owners of fleet still want to get $13k daily + $300k bb for a Supramax vessel bss dely ECSA redel Spore-Japan and $14-14.5k daily + $400-450k bb for an Ultramax carrier. However, Supramax fronthaul shipments are quoted by brokers at $12k daily + $200k bb, Ultramax ones – at $13k daily + $300k bb. According to sources, prompt deal for an Ultramax ship bss dely ECSA redel Spore-Japan is negotiated at $12.8k daily + $280k bb. Similar contract is negotiated at $13.25k daily + $325k bb. A Supramax vessel has been chartered at $12.25k daily + $225k bb bss dely ECSA redel Spore-Japan.
The time-charter for Supramax fleet bss dely ECSA redel Skaw-Passero is quoted by brokers at $12-13.5k daily, that for Ultramax carriers – at $14-14.5k daily. The deal for an Ultramax ship bss dely ECSA redel Skaw-Passero has been signed at $14k daily. The time-charter for Supramax carrier bss dely ECSA redel Med is negotiated at $12.5-13k daily. The contract for a similar vessel bss dely ECSA redel Continent has been concluded at $12k daily. A Supramax carrier has been chartered at $12.5k daily bss dely ECSA redel WMed. The rates for a 57,000-dwt ship bss dely ECSA redel Med are negotiated at $14-14.5k daily. Closer to the end of the week, Supramax owners have started to raise their ideas for transatlantic shipments to $15-16k daily bss dely ECSA redel Med and sometimes even managed to reach such level for spot dates. Thus, the deal for a Supramax vessel bss dely ECSA redel Med with late March laycan dates has been signed at $15k daily. Trade has slowed down slightly in the Handysize segment this week, while the relevant rates have largely stabilized after last week’s increase. According to brokers, the time-charter for Handysize fleet bss dely ECSA redel Skaw-Passero is quoted at $10.5-12k daily on average. Such vessel can be chartered at $10-11k daily for cargo transportation within the South American ports. The rates for Handysize carriers bss dely ECSA redel WCSA amount to $14-14.5k daily.
In the short term, negative trends may be preserved in the North Atlantic amid a shortage of new spot/prompt requests. Brokers also report gradually growing number of vessels competing for April shipments; thus, the rates may come under strong pressure unless the corresponding cargo traffic perks up.
Supramax/Ultramax rates may go up in the South Atlantic if the relevant cargo offer grows. Handysize market is also likely to strengthen. Given limited number of vessels open in West Africa, the Shipowners will most likely manage to raise the rates.
Excel Document of Various Fixtures/Freight Rates Attached herewith: ATLANTIC
(*) Our thanks to our Colleagues CCShipbrokers
A decision of the Court of Appeal in August 2016 has provided clarification on a question which has been troubling carriers and cargo interests alike – when assessing container demurrage claims, is there a cut-off date when the daily demurrage will stop accruing?
Between April and June 2011, MSC contracted with the shipper to carry 35 containers of raw cotton from Bandar Abbas and Jebel Ali to Chittagong in Bangladesh. The containers were owned by MSC and the bills of lading issued by MSC in respect of the cotton, contained a clause providing for 14 days free time at destination, after which the shipper would become liable for demurrage until the containers had been redelivered to MSC. The market price of raw cotton collapsed during the period in question and the receivers refused to take delivery of the cotton. Proceedings between the shipper and the receivers were pending in the High Court in Dhaka, Bangladesh. Meanwhile the containers remained at Chittagong port and the demurrage clock was ticking.
On 27 September 2011, the shipper sent a message to MSC confirming that they no longer had legal title to the cargo. On 2 February 2012, MSC, whilst maintaining that their claim for demurrage was still accruing, offered to sell the containers to the shipper.
In June 2013, MSC commenced an action against the shipper before the High Court in London, claiming a substantial amount of demurrage (USD 577,184 and accruing at a daily rate of USD 840). MSC asserted that the demurrage would continue to run until the containers were redelivered.
The shipper was placed in a difficult position and asserted that MSC’s right to claim demurrage must come to an end once the contracts of carriage had been repudiated, which the shipper asserted was on 27 September 2011 when they informed MSC they no longer had any legal title to the cargo. The shipper argued that either MSC had no legitimate interest in affirming the contracts thereafter and/or that, from that moment in time, MSC came under an obligation to mitigate their loss by purchasing replacement containers.
The trial Judge concluded that the demurrage provision in the MSC bill of lading (tariff schedule) was a genuine pre-estimation of damage and not a penalty clause, which the shipper had contended. The Judge also held that 27 September 2011 was the key date because this was when the shipper confirmed to MSC that it no longer had any title to the goods and would be unable to redeliver the containers within the foreseeable future. It was a repudiation of the contract. In conclusion, demurrage could be recovered from the end of the free period up to 27 September 2011 when the shipper repudiated the contract. It was also held that ordinary principles relating to mitigation of loss do not apply where the parties have agreed a daily rate for demurrage, which was in reality liquidated damages for the detention of the containers.
Court of Appeal
Is the shipper liable to pay demurrage at all?
The Court of Appeal held that a bill of lading claim for demurrage for containers is the same as a claim for liquidated damages under a charterparty for the detention of a carrying vessel beyond the laydays at the port of loading or discharge. Laydays are equivalent to the free time period afforded to cargo interests for container usage after discharge of the containers from the vessel. Therefore, once the free time period has come to an end, demurrage will start to accrue.
When did the commercial purpose of the venture come to an end?
The Court of Appeal then considered whether by 27 September 2011, the commercial purpose of the adventure had been frustrated. The Court concluded that a delay until 27 September 2011 (just 3 months after discharge of the containers) was not sufficient time to frustrate the commercial purpose of the venture. Instead, it held that 2 February 2012 (a further 4 months), when the carrier offered to sell the containers to the shipper to resolve the dispute, was the date at which the commercial purpose of the adventure had become frustrated. By that point, keeping the contract of carriage alive no longer served any legitimate commercial purpose.
The Court of Appeal recognised that a repudiatory breach of contract does not automatically discharge both parties from further performance of the contract: it is left to the innocent party to decide whether to treat the repudiatory breach as ending the contract. However, the Court noted that any proposition that demurrage charges can continue indefinitely until containers are redelivered does not take into account the commercial purpose of the adventure. For this reason, the Court of Appeal found that the option of affirming the contract after a repudiatory breach, no longer remained open to the carrier once the commercial purpose of the venture had been frustrated. Instead, from this point the carrier must accept the shipper’s failure to redeliver the containers as a repudiatory breach of contract, and seek damages for its loss from that point in time.
The Court held that MSC was able to recover demurrage for the detention of the containers up to 1 February 2012 and damages in respect of the loss of the containers calculated by reference to their value on 2 February 2012.
The crux of the Court of Appeal’s judgment is to place a limitation on a carrier’s right to recover container demurrage in this sort of case, namely up to, but not beyond the date on which the commercial purpose of the venture has been frustrated. After that point, the carrier can still claim damages, but will be subject to the normal obligation to mitigate loss.
The Court of Appeal rejected the application of the “no legitimate interest” doctrine on the facts of this case. The Court concluded that as at 2 February 2012, the commercial purpose of the venture had been frustrated and the carrier no longer had any legitimate commercial interest in keeping the contract alive. The carrier was, therefore, taken to have accepted the repudiation of the contract on that date. This arguably involves something of a departure from the traditional view that repudiation of the contract does not bring the contract to an end, unless the repudiation is accepted by the innocent party.
The Court of Appeal did, however, confirm the first instance Judge’s decision in principle, that the obligation to mitigate loss does not apply to a claim for demurrage because it is a claim for liquidated damages. The obligation to mitigate loss only applied as from 2 February 2012 when the Court decided that MSC should have mitigated their loss by purchasing replacement containers, the cost of replacement containers being the maximum additional loss recoverable by way of damages.
In conclusion, a carrier cannot simply claim demurrage indefinitely until its containers are redelivered, as MSC had argued. There will come a point at which the adventure is frustrated and the contract repudiated, and at this moment the right to claim demurrage will come to an end. The precise moment when a contract is repudiated is very fact specific, so caution should be exercised in every case.
Source: Clyde & Co, with our thanks
As published by Lawyers HFW (PDF format):
Here is the full report in PDF format (in Greek and English Languages):
WORTH READING BY ALL THOSE INVOLVED IN BUNKERS (BUYERS OR SELLERS):
After the financial collapse of OW Bunker Group on November 7, 2014, numerous claims by physical suppliers in risk to remain unpaid due to their counterparty’s bankruptcy, have been brought in different jurisdictions worldwide. Consequently, Owners and Charterers are currently exposed to competing claims for unpaid bunkers both by OWB or their assignees ING and by physical suppliers, with the possibility of arrests. Our firm recently handled claims brought by the physical supplier SEKA against the Owners of the vessels CE/BREEZE and PANAGIA ARMATA in personam (since maritime liens and subsequent in rem proceedings are not recognized under Greek law) and the judgments –which are believed to be the first- found in favor of Owners.
In October 2014, Owners instructed the Piraeus office of OW Malta to provide the vessels with certain quantities of bunkers and OW Malta confirmed the order which resulted to a contract for the sale of the agreed bunkers, through the exchange of the relative documents (sale confirmation and invoice coupled with OW standard terms and conditions). Since OW Malta operated as a trader and did not possess physical premises for the storage of bunkers, it instructed SEKA to physically supply the agreed bunkers to the said vessels. The purchase of the bunkers was completed through the respective exchange of documents (purchase confirmation, bunker sale confirmation and invoice together with SEKA’s standard terms and conditions which did not include a retention of title clause). Following OW’s filing for bankruptcy, SEKA asked for direct payment of the price from Owners, by forwarding them the relevant invoice addressed to the Owners and/or Managers and/or Charterers and/or Master and/or OW Malta.
SEKA’s case against Owners is that it supplied bunkers to the vessels under a contract entered into through the Owners’ authorized agent, OW Malta. The basis of this argument lies in the fact that SEKA’s invoices are addressed both to OW Malta and the Owners and that SEKA’s standard terms identify as jointly and severally liable for the payment both the party that gave the order and the one for whose the benefit the order was made.
SEKA also supports that even if OW was not an authorized agent of the Owners to conclude the bunker sale agreement, both the vessel port agents who contacted SEKA for the arrangements of the supply and the chief engineer who signed the Bunker Delivery Receipt (BDR) in so doing, acted as agents for the purchase of the bunkers binding the Owners.
The Owners’ primary basis for disputing liability was that no contract has ever been concluded between them and SEKA directly. The contracts for the bunkers were separate and distinct as between Owners and OW Malta and OW and SEKA. OW was a separate legal entity that contracted on its own name and for its own account operating as a fuel trader giving credit to buyers. Owners also contended that a unilateral identification of their liability against SEKA in SEKA’s invoice or its standard terms is not binding on them, since they were notified later -SEKA’s invoice has been sent to them after OW bankruptcy- and they have not accepted these terms since they were not party to the contract between OW and SEKA.
Furthermore, in compliance with ING’s request, acting as assignee of OW entities, Owners have already paid the OW invoice price for the bunkers supplied to their vessels directly to ING, having OW’s consent.
Owners further argued that simple signing of the BDR by their chief engineer as well as their agent’s actions for the bunker supply are not enough to prove the conclusion of a contract on behalf of the Owners.
Finally, Owners in support of their above arguments mentioned that OW Bunker deliveries involved a variety of physical bunker suppliers operating in Greece and therefore they were not aware of the physical supplier that would provide the bunkers at the agreed date (i.e. SEKA, EKO or others).
Piraeus First Instance Court Decision
The claims were brought in security measures proceedings and the judgments have been handed down on December 2015 for CE BREEZE and January 2016 for PANAGIA ARMATA. The judge rejected SEKA’s case and found in favor of Owners. Particularly, the court held that in the said case two separate and distinct agreements have been made, one between OW Malta and Owners and another one between OW Malta and SEKA. In arriving at its decision, the court appears to have taken into consideration that these two contracts include different terms as to the purchase price, credit period, jurisdiction and applicable law and the mere sending of the invoice to the Owners or the signing of the BDR by the chief engineer does not establish liability of the Owners. The court also held that OW did not act as agent of the Owners and had no authority to enter into an agreement on their behalf, but as a separate entity acting in its own name.
This decision is in line with the longstanding recognition of privity of contract by Greek case law and protects Owners from unexpected exposures to physical suppliers’ demands for payment, especially in cases where they have already paid off the price either to OW or ING. Hearings in the merits of the case are expected to take place this year, where a binding authority will be issued. However, considering other jurisdictions as well (see the Valero decision of the United States District Court for the Eastern District of Louisiana, Belgian court case) such claims (either on a maritime lien basis in rem or in personam proceedings) will hardly succeed due to the absence of contractual relationship between Owners and physical suppliers. Meanwhile, the shipping industry remains on hold for the RES COGITANS outcome, the hearing of which in the Supreme Court tοοκ place in late March 2016.
Source: HSN & Karmela Mavrochi, Partner, Costas Georgopoulos & Partners. Attorneys-at-law) 6.4.2016
The new rules will become mandatory world-wide as from 1st July 2016.
Here are the Guidelines for understanding and implementing the SOLAS Container Weight Verification Requirements as issued by the World Shipping Council.