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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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Friday, 21 March 14
MERCURIA ANNOUNCES ACQUISITION OF J.P. MORGAN PHYSICAL COMMODITIES BUSINESS
COALspot.com: Mercuria Energy Group announced that it has reached a definitive agreement with J.P. Morgan Chase & Co. to acquire its physica ...
Thursday, 20 March 14
CAPESIZE: WEST AUSTRALIA TO CHINA RATES HAVE CLIMBED BACK TOWARD USD 11 PMT - FEARNRESEARCH
Handy
From a slight improvement in the Atlantic to a more mixed picture this mid week. North Atlantic rounds showing softening signs whereas S ...
Wednesday, 19 March 14
INSTEAD OF DECIDING WHETHER THE GLASS IS HALF FULL OR HALF EMPTY, I AM CURRENTLY GLAD THERE IS WATER IN THE GLASS - EVA TZIMA
By Eva Tzima
Research Analyst
Intermodal Research & Valuations
Right when you think that you have all your facts straight, right wh ...
Wednesday, 19 March 14
EUROCOKE SUMMIT 2014
Press Release: ThyssenKrupp, Steel Institute VDEh, SSI and more headline Smithers Apex’s Eurocoke Summit
The leading coke, coal and s ...
Wednesday, 19 March 14
DRY BULK MARKET REBOUND LEADS TO MORE NEWBUILDING ORDERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The steady rise of the dry bulk market, as evidenced by the return, yesterday, of the Baltic Dry Index above the 1,500-point mark (1,518), is fu ...
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- Tamil Nadu electricity Board
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- Borneo Indobara - Indonesia
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- Siam City Cement - Thailand
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- LBH Netherlands Bv - Netherlands
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- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Renaissance Capital - South Africa
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- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
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- Posco Energy - South Korea
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- London Commodity Brokers - England
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- Kaltim Prima Coal - Indonesia
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- PTC India Limited - India
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- Semirara Mining and Power Corporation, Philippines
- Australian Commodity Traders Exchange
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- Wilmar Investment Holdings
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- Romanian Commodities Exchange
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- Indian Oil Corporation Limited
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- Orica Mining Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indogreen Group - Indonesia
- Aboitiz Power Corporation - Philippines
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
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- Riau Bara Harum - Indonesia
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- White Energy Company Limited
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- CIMB Investment Bank - Malaysia
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- Pendopo Energi Batubara - Indonesia
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- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
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- Miang Besar Coal Terminal - Indonesia
- Ministry of Transport, Egypt
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- The Treasury - Australian Government
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- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
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- Chamber of Mines of South Africa
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- Wood Mackenzie - Singapore
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- New Zealand Coal & Carbon
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- The University of Queensland
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- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Larsen & Toubro Limited - India
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- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
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- Cement Manufacturers Association - India
- GAC Shipping (India) Pvt Ltd
- Indian Energy Exchange, India
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- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
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- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
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- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
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- Savvy Resources Ltd - HongKong
- Kobexindo Tractors - Indoneisa
- Sical Logistics Limited - India
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- Energy Link Ltd, New Zealand
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- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- CNBM International Corporation - China
- Iligan Light & Power Inc, Philippines
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