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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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Monday, 20 January 14
SUB-BIT INDONESIA COAL SWAP SEEN LOWER IN 2ND HALF OF 2014
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery lost $ 0.78 pmt month on month on Friday 17 January 2014. T ...
Monday, 20 January 14
THE CFR SOUTH CHINA COAL MARKET APPEARS TO HAVE LOST DIRECTION
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery lost 4.25 percept month on month and closed at US$ 79.48 per mt as ...
Sunday, 19 January 14
FREIGHT MARKETS SEE CONTINUED WEAK PERFORMANCE
COALspot.com: The market has continued to soften particularly in the far East/SE Asia sector.
The BDI was down 6 pct week on week, the index was ...
Friday, 17 January 14
US COAL PRODUCTION DOWN WEEK ON WEEK: EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.3 million short tons (mmst) of co ...
Friday, 17 January 14
DRY BULK MARKET ENDS DECLINE, BOUNCES BACK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It's been a rough start to the New Year for the dry bulk market, which was supposed to be on the verge of rallying to new heights this year, on the ...
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- CNBM International Corporation - China
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- Gujarat Electricity Regulatory Commission - India
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- Parliament of New Zealand
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- Indonesian Coal Mining Association
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
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- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Essar Steel Hazira Ltd - India
- Minerals Council of Australia
- Coal and Oil Company - UAE
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Interocean Group of Companies - India
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- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
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- White Energy Company Limited
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- Attock Cement Pakistan Limited
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- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
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- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
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- San Jose City I Power Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Africa Commodities Group - South Africa
- MS Steel International - UAE
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- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- Central Java Power - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Renaissance Capital - South Africa
- Planning Commission, India
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- Parry Sugars Refinery, India
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- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- VISA Power Limited - India
- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Wilmar Investment Holdings
- Barasentosa Lestari - Indonesia
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Singapore Mercantile Exchange
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
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- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Jorong Barutama Greston.PT - Indonesia
- PowerSource Philippines DevCo
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- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Australian Coal Association
- Thiess Contractors Indonesia
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- India Bulls Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
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- Binh Thuan Hamico - Vietnam
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- Manunggal Multi Energi - Indonesia
- The University of Queensland
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
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