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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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Sunday, 26 January 14
FREIGHT RATES FALL FURTHER ON LACK OF CARGOES - SOLYM CARRIERS
COALspot.com: The freight market has continued to soften further this week with BDI down by 12.31 pct. BDI was closed at 1,246 points week ended 24 ...
Friday, 24 January 14
US COAL PRODUCTION UP 3.9% ON WEEK IN WEEK ENDED SATURDAY - EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.1 million short tons (mmst) of coal in ...
Friday, 24 January 14
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The dry bulk market has been faltering since the start of 2014, struggling to hold its ground as low seasonal demand has hindered further growth in ...
Thursday, 23 January 14
PANAMAX : THIS WEEK THE ACTIVITY CAME DOWN DRAMATICALLY - FEARNRESEARCH
Handy
With the Chinese New Year approaching the activity and rate levels are sliding in both hemispheres. Rates in the Atlantic have knocked off so ...
Thursday, 23 January 14
30 DAYS LEFT TO REGISTER FOR PACIFIC BASIN COAL CONFERENCE
COALspot.com: (Press Release) : IHS Inc. (NYSE: IHS), the leading global source of information and analysis, will host the Pacific Basin Coal Confer ...
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- Eastern Energy - Thailand
- SMC Global Power, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
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- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Planning Commission, India
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- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Maheswari Brothers Coal Limited - India
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- VISA Power Limited - India
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- The Treasury - Australian Government
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Directorate Of Revenue Intelligence - India
- India Bulls Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Australian Coal Association
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- Straits Asia Resources Limited - Singapore
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- PTC India Limited - India
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Coastal Gujarat Power Limited - India
- Parliament of New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Port Waratah Coal Services - Australia
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Baramulti Group, Indonesia
- Bhoruka Overseas - Indonesia
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Petron Corporation, Philippines
- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- Simpson Spence & Young - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- Salva Resources Pvt Ltd - India
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Indian Energy Exchange, India
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
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