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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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Sunday, 10 January 16
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- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
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- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- Intertek Mineral Services - Indonesia
- Bhushan Steel Limited - India
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- Holcim Trading Pte Ltd - Singapore
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- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
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- Essar Steel Hazira Ltd - India
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Bangladesh Power Developement Board
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- MS Steel International - UAE
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
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- Vijayanagar Sugar Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
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- Aditya Birla Group - India
- PTC India Limited - India
- Cement Manufacturers Association - India
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- Central Java Power - Indonesia
- Posco Energy - South Korea
- Mercuria Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Merrill Lynch Commodities Europe
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- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
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- The State Trading Corporation of India Ltd
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- Commonwealth Bank - Australia
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- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
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- Economic Council, Georgia
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- Neyveli Lignite Corporation Ltd, - India
- Global Business Power Corporation, Philippines
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Oldendorff Carriers - Singapore
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- SMC Global Power, Philippines
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- Bukit Makmur.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Latin American Coal - Colombia
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- Barasentosa Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Binh Thuan Hamico - Vietnam
- Tamil Nadu electricity Board
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- Kepco SPC Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
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- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- ASAPP Information Group - India
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- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
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- Trasteel International SA, Italy
- Vedanta Resources Plc - India
- The Treasury - Australian Government
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- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- IHS Mccloskey Coal Group - USA
- Krishnapatnam Port Company Ltd. - India
- Indian Oil Corporation Limited
- Meralco Power Generation, Philippines
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- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- The University of Queensland
- Kideco Jaya Agung - Indonesia
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
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- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- Lanco Infratech Ltd - India
- Grasim Industreis Ltd - India
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mjunction Services Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Thiess Contractors Indonesia
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
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- White Energy Company Limited
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
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