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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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Tuesday, 20 December 16
TRADE HAS FELT ITS BUMPS AND SHAKES THIS YEAR - GEORGE LAZARIDIS
Trade has felt its bumps and shakes this year, as growing populist protectionist and nationalist movements in the Western world start to take hold. ...
Tuesday, 20 December 16
TURNAROUND IN CHINESE ECONOMY HAS INTENSIFIED RECENTLY, SAYS COMMODORE RESEARCH
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Monday, 19 December 16
U.S. WEEKLY COAL PRODUCTION DOWN 3.1% PERCENT WEEK ON WEEK
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Monday, 19 December 16
THE FREIGHT MARKET WAS CONTINUING TO SOFTEN
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Thursday, 15 December 16
SUPRAMAXES ARE ACHIEVING AROUND HIGH USD 7K FOR INDO/CHINA COAL ROUNDS - FEARNLEY
Supramax
Pacific has been relatively quiet this week, with some softening signs.
Supramaxes are achieving around high USD 7k for Indo/China ...
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- Marubeni Corporation - India
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- Mercuria Energy - Indonesia
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- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
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- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
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- Kepco SPC Power Corporation, Philippines
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- Australian Coal Association
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- CIMB Investment Bank - Malaysia
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- VISA Power Limited - India
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- Alfred C Toepfer International GmbH - Germany
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- Power Finance Corporation Ltd., India
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- Indo Tambangraya Megah - Indonesia
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- Medco Energi Mining Internasional
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Rashtriya Ispat Nigam Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meralco Power Generation, Philippines
- GVK Power & Infra Limited - India
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Barasentosa Lestari - Indonesia
- Larsen & Toubro Limited - India
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
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- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- Planning Commission, India
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- CNBM International Corporation - China
- Bhatia International Limited - India
- London Commodity Brokers - England
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- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- Trasteel International SA, Italy
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- Intertek Mineral Services - Indonesia
- Vizag Seaport Private Limited - India
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- Manunggal Multi Energi - Indonesia
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- Meenaskhi Energy Private Limited - India
- Riau Bara Harum - Indonesia
- Bukit Makmur.PT - Indonesia
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- Africa Commodities Group - South Africa
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- Semirara Mining and Power Corporation, Philippines
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- Independent Power Producers Association of India
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- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Tata Chemicals Ltd - India
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Straits Asia Resources Limited - Singapore
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
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- Renaissance Capital - South Africa
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- Carbofer General Trading SA - India
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Orica Australia Pty. Ltd.
- PNOC Exploration Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
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- Energy Link Ltd, New Zealand
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- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
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- Globalindo Alam Lestari - Indonesia
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- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Samtan Co., Ltd - South Korea
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