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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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- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Interocean Group of Companies - India
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Bhoruka Overseas - Indonesia
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Jaiprakash Power Ventures ltd
- Heidelberg Cement - Germany
- Independent Power Producers Association of India
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Pendopo Energi Batubara - Indonesia
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- OPG Power Generation Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Central Electricity Authority - India
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Altura Mining Limited, Indonesia
- Renaissance Capital - South Africa
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- South Luzon Thermal Energy Corporation
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Savvy Resources Ltd - HongKong
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Minerals Council of Australia
- Indogreen Group - Indonesia
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Posco Energy - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Meenaskhi Energy Private Limited - India
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Leighton Contractors Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Directorate General of MIneral and Coal - Indonesia
- Antam Resourcindo - Indonesia
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Sarangani Energy Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- Mjunction Services Limited - India
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- Energy Link Ltd, New Zealand
- Aboitiz Power Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Latin American Coal - Colombia
- Kalimantan Lumbung Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
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