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Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
 KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred should be able to be passed down a charterparty chain. A technical issue will not be allowed to prevent such liability for costs being passed down a charterparty chain. This is illustrated by the recent case outlined below:
Occidental Chartering INC. V Progress Bulk Carrier Ltd (2012) EWHC3515
Background facts
This case involved a chain of charterparties.
- Precious Garnets Ltd (PG), Head Owners time chartered the MV Chada Naree to the Disponent Owners Occidental Services Corporation (OSC).
- OSC did not enter into a charterparty but instead re-let the vessel to a company within its corporation known as Occidental Chartering Inc (OCI).
- OCI time-chartered this vessel onto Progress Bulk Carriers (PBC).
- PBC in turn, sub-chartered this vessel onto CNAN.
At all times, the charterparties including the re-let agreement between OCI and OSC, were on material and identical terms. CNAN during the proceedings became divested of all its assets.
PG, Head Owners, commenced arbitration proceedings against OSC for a claim in damages against them for a breach of a safe port warranty obligation under the head charter. This claim succeeded in favour of the Head Owners and therefore passed down the charterparty chain including all legal costs initiated for recovery. During the entire arbitration proceedings there was no issue or dispute about the relationship between OSC and OCI as the arbitrators did not appear to draw a distinction between the two.
However, when the awards were handed down there were typographical errors on the written awards. The main issue arose in connection to the award between OCI and PBC. The party named as the claimants on this award was OSC and not OCI. This error lead to a technical dispute having to be resolved. It is noted that a distinction needs to be drawn between the initial claim for damages and the claim for recovering costs in pursuing the matter. The claim for damages to the vessel was not disputed. However, OCI's recoverability of costs from PBC was.
Position of the parties
The distinction between OCI/OSC was not foreseen at the time of the initial arbitration but PBC contended that OCI was not party to the charterparty chain and thus the recoverability for costs claim could not be passed down the chain via the Head Owners. PBC therefore argued that OCI had not incurred any liability for costs which could be claimed against themselves.
The Tribunal's award
The Tribunal was persuaded in favour of PBC's arguments and it published a second award which held that OCI were not entitled to recover the costs incurred in the head arbitration between OSC and PG.
Judgment by the Commercial Court of Appeal
OCI was granted leave to appeal the second award. The fundamental issue before Mr Justice Teare was to decide whether it is possible for a party to recover costs for a claim to which it had not been liable to pay to a third party. This case was fact specific and the judge felt that the Tribunal had not fully considered the background to the award i.e. that during the initial arbitration all parties had the intention of treating OCI and OSC as one.
Comments
The Appeal reaffirms the standard position that where there is a claim successfully being passed down through a chain of charterparties and where there was a break in the chain, this would not necessarily prevent the liability for costs from being passed down the chain. OCI was therefore entitled to recover all costs incurred from PBC including Head Owners legal costs, the legal costs of OSC for defending the matter as well as OCI's legal costs in pursing it in terms of the appeal.
Advice
If engaged in chartering, and using a possible "in-house" re-letting it is important to check that contractual chains are fully maintained, and there is an unbroken link down to the further sub-charterers of the vessel. That way, if a liability needs to be passed on the contractual chain, the risk of a "liability gap" are mitigated.
Furthermore it must be remembered that costs liabilities can only be passed on in successful claims, or face the situation similar to the Vakis T [2004] 2 Lloyd's Rep. 465 where it was not possible to recover costs up the line when the main claim itself was unsuccessful.
Source: Skuld / Hellenic Shipping News
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Wednesday, 26 March 14
NEWBUILDING ORDERING ACTIVITY PICKS UP PACE ON IMPROVING DRY BULK MARKET CONDITIONS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The gradual improvement of the dry bulk market, as expected for some time now, is urging shipowners to increase their newbuilding ordering activ ...
Wednesday, 26 March 14
LARGE AMOUNT OF VESSELS CHARTERED TO HAUL IRON ORE CARGOES TO CHINESE BUYERS THIS WEEK - COMMODORE RESEARCH & CONSULTANCY
COALspot.com: Through the first three days of this week, 18 dry bulk vessels have been chartered to haul spot iron ore cargoes to Chinese buyers ...
Wednesday, 26 March 14
JOIN IN THE CLEAN COAL CASE STUDY WITH SINOPEC!
Produced by CDMC Events, The 13th Clean Coal Forum 2014 will be held on June 12,13, 2014 in Beijing, China. We are glad to invite Experts ...
Tuesday, 25 March 14
INDONESIAN SUB-BITUMINOUS COAL SWAP FOR Q2 DELIVERY CLOSED $ 57.40 PMT W/E 21 MARCH 2014
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 gained this pa ...
Tuesday, 25 March 14
NEWCASTLE COAL EXPORTS JUMP 29.16% TO 2.79 MMT WEEK ON WEEK
COALspot.com: In the week ended 24 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2.79 ...
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- Mercuria Energy - Indonesia
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- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
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- Jorong Barutama Greston.PT - Indonesia
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- Bulk Trading Sa - Switzerland
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- Electricity Authority, New Zealand
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- Videocon Industries ltd - India
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- The State Trading Corporation of India Ltd
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- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- San Jose City I Power Corp, Philippines
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- Medco Energi Mining Internasional
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- Marubeni Corporation - India
- Economic Council, Georgia
- Gujarat Electricity Regulatory Commission - India
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Karaikal Port Pvt Ltd - India
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- The University of Queensland
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- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- Lanco Infratech Ltd - India
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- SMG Consultants - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
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- Mintek Dendrill Indonesia
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- Siam City Cement - Thailand
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- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Salva Resources Pvt Ltd - India
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- ASAPP Information Group - India
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- Parliament of New Zealand
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- Wilmar Investment Holdings
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- White Energy Company Limited
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- Global Business Power Corporation, Philippines
- Bangladesh Power Developement Board
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- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
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- Sindya Power Generating Company Private Ltd
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- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
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- Planning Commission, India
- Petron Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- Alfred C Toepfer International GmbH - Germany
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
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- Renaissance Capital - South Africa
- Attock Cement Pakistan Limited
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- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
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- Kobexindo Tractors - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- Bhatia International Limited - India
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- Goldman Sachs - Singapore
- PTC India Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
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- Neyveli Lignite Corporation Ltd, - India
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- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Australian Coal Association
- Kumho Petrochemical, South Korea
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