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Friday, 17 July 15
DO CANCELLATION RIGHTS UNDER VOYAGE CHARTERPARTY SURVIVE RE-NOMINATION OF LOAD PORT? - INCE&CO
 KNOWLEDGE TO ELEVATE
Do cancellation rights under voyage charterparty survive re-nomination of load port?
St Shipping & Transport Inc v. Kriti Filoxenia Shipping Co SA [2015] EWHC 997 (Comm) (MT Kriti Filoxenia)
The Commercial Court has considered whether cancellation provisions in the BEEPEEVOY3 charterparty form were applicable in the event of re-nomination of a load port by charterers under the charter. In this case, the Charterers re-nominated the load port which the Owners were not able to reach by the cancellation date. The Charterers cancelled the charterparty. In arbitration proceedings, the Tribunal found that the cancellation provisions were not applicable where the Charterers had exercised the contractual option to re-nominate a load port. The Charterers appealed the decision to the Commercial Court, which upheld the findings of the Tribunal and dismissed the appeal.
The background facts
This case concerned a voyage charterparty under the BEEPEEVOY 3 standard form. The key clauses in the charterparty provided as follows:
“17.… If it appears to Charterers that the Vessel will be delayed beyond the Cancelling Date Charterers may require Owners to notify Charterers of the date on which they expect the Vessel to be ready to load whereupon Charterers shall have the option to cancel this Charter…
24.… If after any loading or discharge port or place has been nominated Charterers desire to vary such port or place, Owners shall issue such revised instructions as are necessary at any time to give effect to Charterers’ revised orders and any period by which the steaming time taken to reach the alternative port or place exceeds the time which should have been taken had the Vessel proceeded thither directly shall count as laytime or, if the Vessel is on demurrage, as demurrage.”
The vessel proceeded to a nominated load port within the range provided for under the charterparty. The Charterers then nominated an alternative load port under clause 24. The Owners could not reach that load port by the cancellation date and the Charterers cancelled the charterparty in reliance upon clause 17. The Owners denied that the Charterers had a right to cancel and accepted the cancellation as a repudiation of the charterparty. The dispute went to arbitration.
The arbitration award
The Tribunal found in favour of the Owners and held that the cancellation provisions in clause 17 did not apply where the Charterers exercised the liberty given under clause 24 to re-nominate the load port. The Tribunal further held that, even if the cancellation provisions did apply, the Charterers may not cancel where the re-nomination was made at a time when the estimated time of arrival for the re-nominated port was after the cancellation date under the charterparty. The Charterers appealed to the Commercial Court.
The Commercial Court decision
When it came to construing the words in clauses 17 and 24 of the charterparty, the Court took as its starting point the ordinary and natural meaning of the words used in those clauses as they would be understood by reasonable charterers and owners in the context in which the agreement was made. The Court highlighted the importance of the fact that the parties to a charterparty were involved in a venture which required a degree of co-operation in order to work successfully. Regarding clause 17, the cancellation clause, the Charterers’ ability to cancel necessarily entailed that the Charterers would do what is necessary on their part to enable the vessel to achieve that cancellation date and not impair the
Owners’ ability to comply with that date
The Court also looked at the reasons why it is in the interests of both sides to agree a cancellation date. At common law, subject to the express terms of a charterparty, both parties are bound by the contract until the delay is such that it frustrates the commercial purpose of the venture. Agreeing a cancellation date provides certainty to both parties in that it avoids disputes as to when that delay has frustrated a contract, which is a matter of fact in each case.
The Court referred to the “broad commercial interpretation” it has previously taken in the construction of these types of clauses, in order to achieve the parties’ commercial objectives. In this regard, the Court examined the commercial considerations which underlie the re-nomination clause. For the Charterers, the main advantage of this clause is to have greater flexibility to revise their orders so as to tailor their shipping arrangements according to their cargo arrangements. On the other hand, absence of the load port re-nomination provision would be advantageous to the Owners since it would give them the certainty of an irrevocable nomination. The Court also noted the commercial value of the cancellation clause from the Charterers’ perspective. On balance, the Court placed more importance on the Owners’ concerns of losing the certainty of an irrevocable nomination, whilst at the same time remaining exposed to the Charterers’ right to cancel.
The Court also noted that clause 24 made no express reference to the cancellation rights under clause 17. The Court recognised that the BEEPEEVOY 3 charterparty, being a standard form, is a document drafted with considerable care. Had the draftsmen of this form intended for the clause 17 cancellation rights to apply to a re-nomination of the load port under clause 24, express words would have been used to that effect and would have provided for how such rights would apply and in what circumstances. No such words were present in this case.
The appeal was therefore dismissed.
Comment
This case serves as a useful reminder of the English Court’s approach to the interpretation of charterparty provisions and, in particular, to consideration of the interplay between a cancellation clause and a load port re-nomination provision under a voyage charterparty. This decision also highlights the Court’s commercial approach to such issues, in particular its reference to the Charterers’ duty to co-operate with the Owners and to do what is necessary to enable the vessel to achieve the cancellation date if they wish to be able to rely upon the cancellation clause.
Source: INCE&Co
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- Siam City Cement - Thailand
- Parliament of New Zealand
- PTC India Limited - India
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- Posco Energy - South Korea
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Eastern Energy - Thailand
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
- Kapuas Tunggal Persada - Indonesia
- Cement Manufacturers Association - India
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- TeaM Sual Corporation - Philippines
- Bharathi Cement Corporation - India
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
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- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- The University of Queensland
- SMG Consultants - Indonesia
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Kepco SPC Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- Electricity Authority, New Zealand
- Simpson Spence & Young - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Uttam Galva Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Indika Energy - Indonesia
- Merrill Lynch Commodities Europe
- Indonesian Coal Mining Association
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Medco Energi Mining Internasional
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bahari Cakrawala Sebuku - Indonesia
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Aditya Birla Group - India
- Chettinad Cement Corporation Ltd - India
- Ministry of Finance - Indonesia
- White Energy Company Limited
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
- Meenaskhi Energy Private Limited - India
- Latin American Coal - Colombia
- Marubeni Corporation - India
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Heidelberg Cement - Germany
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Commonwealth Bank - Australia
- Interocean Group of Companies - India
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- New Zealand Coal & Carbon
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- European Bulk Services B.V. - Netherlands
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Coastal Gujarat Power Limited - India
- Planning Commission, India
- Attock Cement Pakistan Limited
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Georgia Ports Authority, United States
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Anglo American - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Sojitz Corporation - Japan
- Romanian Commodities Exchange
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Essar Steel Hazira Ltd - India
- Australian Commodity Traders Exchange
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