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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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- Kideco Jaya Agung - Indonesia
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- The University of Queensland
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- Eastern Coal Council - USA
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
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- Deloitte Consulting - India
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- VISA Power Limited - India
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- GN Power Mariveles Coal Plant, Philippines
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- SMG Consultants - Indonesia
- Anglo American - United Kingdom
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- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
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- Altura Mining Limited, Indonesia
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
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- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
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- New Zealand Coal & Carbon
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- Oldendorff Carriers - Singapore
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- Commonwealth Bank - Australia
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- Attock Cement Pakistan Limited
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- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Trasteel International SA, Italy
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- Kaltim Prima Coal - Indonesia
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
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- Kumho Petrochemical, South Korea
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- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Eastern Energy - Thailand
- Indian Oil Corporation Limited
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
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- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Parliament of New Zealand
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- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
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- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Makarim & Taira - Indonesia
- Independent Power Producers Association of India
- Jaiprakash Power Ventures ltd
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- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
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- Bayan Resources Tbk. - Indonesia
- Siam City Cement PLC, Thailand
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- Ministry of Transport, Egypt
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- European Bulk Services B.V. - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Africa Commodities Group - South Africa
- The Treasury - Australian Government
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- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
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- Tamil Nadu electricity Board
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- AsiaOL BioFuels Corp., Philippines
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Meralco Power Generation, Philippines
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Australian Coal Association
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- PetroVietnam Power Coal Import and Supply Company
- Iligan Light & Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- CIMB Investment Bank - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- Cigading International Bulk Terminal - Indonesia
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
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