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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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Friday, 12 April 19
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- Indika Energy - Indonesia
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- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- Australian Coal Association
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- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Marubeni Corporation - India
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- Therma Luzon, Inc, Philippines
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- London Commodity Brokers - England
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- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
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- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
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- New Zealand Coal & Carbon
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- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
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- Oldendorff Carriers - Singapore
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- Central Electricity Authority - India
- Xindia Steels Limited - India
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- Economic Council, Georgia
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- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
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- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- OPG Power Generation Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Eastern Energy - Thailand
- Dalmia Cement Bharat India
- Kepco SPC Power Corporation, Philippines
- White Energy Company Limited
- Makarim & Taira - Indonesia
- International Coal Ventures Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
- Deloitte Consulting - India
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- Rio Tinto Coal - Australia
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
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- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Manunggal Multi Energi - Indonesia
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- Parry Sugars Refinery, India
- Maheswari Brothers Coal Limited - India
- Parliament of New Zealand
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- Electricity Authority, New Zealand
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- Indian Energy Exchange, India
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- Bangladesh Power Developement Board
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- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- SMC Global Power, Philippines
- Kobexindo Tractors - Indoneisa
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Sarangani Energy Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
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- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- Timah Investasi Mineral - Indoneisa
- Mjunction Services Limited - India
- Indian Oil Corporation Limited
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- Semirara Mining Corp, Philippines
- Planning Commission, India
- SMG Consultants - Indonesia
- ICICI Bank Limited - India
- Electricity Generating Authority of Thailand
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- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- Thai Mozambique Logistica
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