The recent decision in the Zaliv Baikal case serves as a warning on the need for careful drafting and broad consideration when giving options, said C Demurrage in a recent article.
The case of Gard Shipping v Clearlake Shipping Pte should remind parties:
(a) to be clear in their drafting;
(b) to analyse the scope and possible effect of options and,
(c) that the courts will not easily help them avoid a result that they probably did not intend.
A recap with an amended BPVOY4 form provided for loading at Ust-Luga, additional port options and discharge in a range that included Rotterdam. After several interim calls the vessel arrived there on January 26th 2016, tendering NOR such that time started soon after. For their own reasons charterers gave no discharge instructions until March 31st, and owners’ claim for nearly $1m depended on what rate applied to 64.7 days of demurrage.
Ordinary demurrage was $32,500 PDPR, but the owners claimed an enhanced rate under additional clause 11 “…. Charterers [may], at any stage of the voyage, [instruct] the vessel to stop and wait for [orders] for max 3 days … within the ranges agreed. In particular … , Charterers [may] instruct the vessel not to tender [NOR] on arrival at or off any port or place or to delay arriving at any port [or] place until Charterers give the order …. Time to count as used laytime or time on demurrage, if vessel is on demurrage. [All] … bunkers consumed to be for [Charterers’] account.” AC 11 also said that after the first five (not three) days waiting for orders or discharge instructions “at sea” the vessel was to be considered as being used for storage, and the demurrage rate was uplifted by amounts which escalated as more time passed. The judge identified various demurrage regimes, each covering different circumstances and with its own particular trigger.
These included: (a) the interim ports clause, which had been invoked by charterers’ orders to make additional calls; (b) the standard regime, beginning with owners’ tender of NOR, and, (c) AC 11, whose options could only be activated by a positive order from charterers – to stop and wait, not to tender NOR or to delay arrival. But no such order was ever given, so that clause could not apply. Instead, by tendering NOR, owners had themselves engaged the standard demurrage regime, so they could only recover the ordinary rate.
The judge also rejected owners’ attempt to imply a term that would counter that result. C Demurrage observed that AC 11 provided what charterers could do, not what they had to do. But it gave owners no corresponding alternative. Standard storage provisions had been deleted, and AC 11 “was probably meant to allow charterers in some way to hold up discharge (if for whatever reason they had to), but on terms that if this exceeded a certain period they should pay for the time as if the vessel was being used for storage, and at a progressively increasing demurrage rate”.
C Demurrage observed that owners generally tendered NOR as soon as possible, and that it was not likely that AC 11 was intended to allow charterers simply to let that happen and then hold up discharge for as long as they needed, paying only at the ordinary demurrage rate. That however was the result.
C Demurrage said it understood that the decision might be appealed. “Whatever happens, the case is a reminder to parties to examine, pre-charter, the scope and potential effect of options, especially those crafted specifically for the more unusual circumstances. It may sometimes be wise to consider a protective alternative in favour of the party who might otherwise unexpectedly be at a disadvantage if an option is not exercised. ”
To discuss any point or topic in this article; [email protected].