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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, 28 February 14
PTBA TO INCREASE ITS COAL TERMINAL'S LOADING CAPACITY TO 25 MILLION TONS PER ANNUM BY JULY 2014
COALspot.com: PT. Bukit Asam (PTBA), the Indonesian government owned coal miner operates several coal mining units in Sumatera as well as in Kaliman ...
Friday, 28 February 14
U.S PRODUCED 1.9% LESS COAL WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.8 million short tons (mmst) of coal in ...
Friday, 28 February 14
DRY BULK MARKET SLOWLY BUT STEADILY FINDS ITS FOOTING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market, hit by the low seasonal demand which is a typical characteristic of the first quarter of each year, is beginning to emerge from ...
Thursday, 27 February 14
PANAMAX : MARKET CONTINUED TO DECLINE IN THE ATLANTIC
Handy
The Atlantic handy/supra market experienced a downward trend this week but not a dramatic one. TA rates are down around USD 800 w-o-w lead b ...
Thursday, 27 February 14
SHIPPING LOANS WORTH $5 BILLION HAVE CHANGED HANDS OVER THE PAST YEAR, AS FUNDS INVEST IN SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Funds investing in shipping has been the "talk of the town" over the past couple of years, as institutional investors, private equity and ...
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- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Edison Trading Spa - Italy
- Gujarat Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Orica Mining Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Star Paper Mills Limited - India
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Ind-Barath Power Infra Limited - India
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Price Waterhouse Coopers - Russia
- The University of Queensland
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Mercator Lines Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- The Treasury - Australian Government
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- Madhucon Powers Ltd - India
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Sical Logistics Limited - India
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- Lanco Infratech Ltd - India
- Australian Commodity Traders Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- Medco Energi Mining Internasional
- Commonwealth Bank - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Planning Commission, India
- Merrill Lynch Commodities Europe
- Alfred C Toepfer International GmbH - Germany
- Globalindo Alam Lestari - Indonesia
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- Sarangani Energy Corporation, Philippines
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Singapore Mercantile Exchange
- Interocean Group of Companies - India
- PTC India Limited - India
- Bukit Makmur.PT - Indonesia
- South Luzon Thermal Energy Corporation
- Tamil Nadu electricity Board
- Kalimantan Lumbung Energi - Indonesia
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
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