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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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Tuesday, 18 March 14
SECOND QUARTER SUB-BIT FOB INDONESIA COAL SWAP LOST 3.27% IN A MONTH
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 gained this pa ...
Tuesday, 18 March 14
NEWCASTLE COAL EXPORT VOLUME FALLS 26.23% WEEK ON WEEK
COALspot.com: In the week ended 17 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2 ...
Monday, 17 March 14
API 8 CFR SOUTH CHINA COAL SWAPS FOR AVERAGE Q2 14 DELIVERIES LOST 2.59% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 2.59 percent month on month and closed at US$ 74.15 per mt as o ...
Sunday, 16 March 14
BDI DOWN ON LOW CAPESIZE ACTIVITY
COALspot.com: The freight market was slightly soft this week with BDI down by 4.28 pct week on week. The BDI closed at 1,477 points and the cape ...
Friday, 14 March 14
DRY BULK MARKET ENTERS RECOVERY MODE, ON INCREASED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has entered and sustained higher ground as of this week, on the back on increased Capesize demand. Although the situation in ...
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- Kepco SPC Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
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- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
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- Sojitz Corporation - Japan
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
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- Coalindo Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
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- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Oldendorff Carriers - Singapore
- Sinarmas Energy and Mining - Indonesia
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- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Mercator Lines Limited - India
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Planning Commission, India
- Formosa Plastics Group - Taiwan
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- Global Business Power Corporation, Philippines
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- Parry Sugars Refinery, India
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- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
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- Eastern Energy - Thailand
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Mintek Dendrill Indonesia
- Thai Mozambique Logistica
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- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
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- Sindya Power Generating Company Private Ltd
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- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
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- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
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- Africa Commodities Group - South Africa
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- Port Waratah Coal Services - Australia
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- Sakthi Sugars Limited - India
- Indian Energy Exchange, India
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- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
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- Gujarat Sidhee Cement - India
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- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
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- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
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- Edison Trading Spa - Italy
- Ministry of Mines - Canada
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- Australian Coal Association
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
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- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- Mjunction Services Limited - India
- Eastern Coal Council - USA
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- Ind-Barath Power Infra Limited - India
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- Globalindo Alam Lestari - Indonesia
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- Kumho Petrochemical, South Korea
- Metalloyd Limited - United Kingdom
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- Jorong Barutama Greston.PT - Indonesia
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- India Bulls Power Limited - India
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- Central Electricity Authority - India
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- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
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