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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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- Orica Australia Pty. Ltd.
- Videocon Industries ltd - India
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- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
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- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
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- Independent Power Producers Association of India
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- Deloitte Consulting - India
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- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
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- Coal and Oil Company - UAE
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
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- Eastern Energy - Thailand
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- Bukit Makmur.PT - Indonesia
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- Australian Coal Association
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- SMG Consultants - Indonesia
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- Therma Luzon, Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Uttam Galva Steels Limited - India
- Romanian Commodities Exchange
- Kohat Cement Company Ltd. - Pakistan
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Leighton Contractors Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Sical Logistics Limited - India
- ICICI Bank Limited - India
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Indian Oil Corporation Limited
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Business Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
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- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
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- CIMB Investment Bank - Malaysia
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
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- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
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- Bukit Asam (Persero) Tbk - Indonesia
- White Energy Company Limited
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- Commonwealth Bank - Australia
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Vizag Seaport Private Limited - India
- Wilmar Investment Holdings
- Kapuas Tunggal Persada - Indonesia
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
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- Altura Mining Limited, Indonesia
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- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
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- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Dalmia Cement Bharat India
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- Minerals Council of Australia
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Standard Chartered Bank - UAE
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
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- Chamber of Mines of South Africa
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- Gujarat Sidhee Cement - India
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