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Friday, 14 August 15
CONDITIONS AND COMPLEXITIES IN A TRIPARTITE AGREEMENT: BE SPECIFIC! - INCE & CO
 KNOWLEDGE TO ELEVATE
A tripartite agreement reached between the Owners, the Shippers and the Receivers provided that demurrage be paid to the Owners in the event that the Owners were found not liable for cargo contamination by an arbitration tribunal. The tripartite agreement was not specific as to which arbitration involving which parties would trigger the obligation for demurrage to be paid. The Court held that a party’s obligations under the tripartite agreement could not be triggered by an arbitration when that party was not part of the arbitration reference.
The circumstances and the judgment highlight the importance of specificity when drafting settlement agreements. This is especially the case where there are contingencies for future events and where more than two parties are involved.
The background facts
A cargo of wheat was purchased by North Star Co ICC (the “Receivers”) from Casillo Commodities Italia SpA (the “Shippers”). By a voyage charter dated 12 March 2012 between Seaglance Maritime (the “Owners”) and the Shippers/Charterers, the Owners agreed to carry the cargo from Paranaguá, Brazil to Benghazi, Libya on board the M/V Proikonissos (the “Vessel”).
Discharge commenced at Benghazi on 2 June. On 3 June, traces of soya bean and soya bean meal were discovered in the cargo and the Libyan authorities at Benghazi refused to allow the remaining cargo to be discharged.
The Shippers agreed to pay US$33,000 in additional freight to the Owners, in consideration for carrying the remaining cargo from Benghazi to Tripoli, Libya to complete discharging. However, on arrival at Tripoli, the Libyan authorities refused to allow the sampling or discharging of the remaining cargo.
The Owners, Shippers and Receivers entered into discussions to decide where to discharge the remaining cargo. During these discussions, the Owners commenced arbitration against the Shippers under the voyage charter, and against the Receivers under the bill of lading. The discussions resulted in a written agreement between the Owners, Shippers and Receivers dated 27 June (the “Tripartite Agreement”).
The Tripartite Agreement
The Tripartite Agreement provided that the Vessel would sail to Malta to discharge the remaining cargo in consideration for a further lump sum freight of US$23,000, and for the applicable bills of lading to be returned and reissued, as appropriate. The Vessel sailed to Malta and successfully completed discharge of the remainder of the cargo on 3 July. Disputes arose concerning liability for the cargo contamination and demurrage.
The Tripartite Agreement expressly defined the “Dispute” to be the dispute as to responsibility for the cargo contamination.
As the Dispute was unresolved at the time the Tripartite Agreement was drafted, it provided for specified contingencies in the event that the Owners were or were not found liable in relation to the Dispute. The contingency in question was applicable to the laytime and demurrage payable to Owners:
“Clause 4:
… (a) If Seaglance [Owners] are found by an English Arbitration tribunal to be liable in relation to the Dispute it is agreed that laytime under the Charterparty will be deemed to have been interrupted when discharging was interrupted in Benghazi, and will re-start at 0800 the working day after tendering NOR.
(b) If Seaglance [Owners] are found by an English Arbitration tribunal not to be liable in relation to the Dispute, it is agreed that the Vessel will be deemed to have been on demurrage from the expiry of laytime at Benghazi (with the exception of 1.5 days steaming time from Benghazi to Tripoli and 16 hours steaming time from Tripoli to Malta regardless of the actual steaming time) which demurrage will be earned day by day or pro rata at the rate of US$11,250 per day without any exception whatsoever until completion of discharging. Such demurrage to be paid as per clause 60 of the Charterparty.
(c) If the Dispute is resolved by negotiation then the question of whether (a) or (b) above applies will be determined in accordance with the dispute resolution provisions of this Agreement.”
The Tripartite Agreement did not provide for circumstances in which there were multiple arbitrations. More specifically, the Tripartite Agreement did not state by which tribunal Owners were to be found liable or not in order to trigger clause 4.
Arbitration proceedings
In the arbitration commenced by the Owners against the Shippers, each party appointed an arbitrator but no further substantive steps were taken.
However, in the arbitration commenced by the Owners against Receivers, the Tribunal was fully constituted and the matter proceeded to a hearing. This was unknown to the Shippers. The Owners sought a declaration from the Tribunal that the Owners were not liable in respect of the cargo contamination.
The Receivers initially argued that the Owners were liable for the cargo contamination but, shortly before the hearing, agreed to withdraw their defence and counter-claim, and wrote to the Tribunal to that effect. The Tribunal proceeded to issue an award declaring that the Owners were not liable for the alleged cargo contamination.
The Owners sought to use this award to claim demurrage in the agreed amount of US$ 218,936 from the Shippers pursuant to clause 4(b) of the Tripartite Agreement. The Shippers disputed that the award was applicable to clause 4(b) and refused to pay the demurrage claimed.
The question put to the Court was whether an award issued in the arbitration between the Owners and the Receivers was capable of triggering the obligations under clause 4(b) as between
Owners and Shippers.
The Shippers argued that only an arbitration to which the Shippers were a party could be capable of triggering the obligations under clause 4(b). The Owners argued that an award which was solely in relation to the “Dispute”, being the cargo contamination, was enough to trigger the Shippers’ obligations under the clause.
The Commercial Court decision
The Shippers were successful in their application for summary judgment.
The Court held that the Shippers were unlikely to have intended to bind their conditional obligations under the Tripartite Agreement to an arbitration to which they were not a party.
To have intended otherwise would mean that the Shippers would have waived their rights to present their own evidence, to submit their own arguments and, ultimately, forgo any right to control the arbitration.
The Court also found that there were three possible claims contemplated under the Tripartite Agreement:
a claim brought by the Receivers against the Owners under the bill of lading for the contamination of cargo;
a claim brought by the Owners against the Shippers under the charterparty in respect of demurrage; and,
a claim brought by the Shippers against the Owners under the charterparty for the cargo contamination.
Clause 4 dealt only with any laytime and demurrage claim: the second of the three disputes above. The Court held, therefore, that it was only intended to be applicable in respect of a laytime and demurrage dispute rather than all three possible disputes.
Comment
The practical problems regarding the discharge of cargo were resolved on a commercial basis by the Tripartite Agreement. However, some of the provisions in the Tripartite Agreement were found to be ambiguous; this led to confusion and dispute when the time came to enforce its terms.
It is of paramount importance in any agreement, regardless of the complexity, that the exact obligations of each party are expressly stated, and the circumstances under which those obligations are to be performed are clearly set out.
Source: Ince & Co
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Wednesday, 23 September 15
INDONESIA: NEW REGULATION APPLIES FINAL INCOME TAX TO MINERAL AND COAL SALES - FLORENCE GRACIA SANTOSO
To increase state revenue from the mining sector, the Government of Indonesia has imposed a new final income tax on any sale of mineral and coal, a ...
Tuesday, 22 September 15
1Q16 FOB INDONESIA COAL SWAP DECLINED 6.49 PER CENT M-M
COALspot.com: Indonesian coal swap for delivery 4Q 2015 declined month on month and week over week.
The 4Q swap declined $ 2.29 (-5.42%) per t ...
Tuesday, 22 September 15
FOB RICHARDS BAY COAL SWAPS FALL CONTINUES
COALspot.com: API4 FOB Richards Bay Coal swap for delivery 4Q' 2015 declined week over week and month over month.
The 4Q swap was down US$ ...
Monday, 21 September 15
Q4' 15 FOB NEWCASTLE COAL SWAP CLOSED HIGHER THAN Q2' 16 SWAP
COALspot.com: API 5 FOB Newcastle Coal swap for 4Q’ 2015 delivery increased $0.43 per ton (1.01%) month over month to US$ 42.95 per ton. The ...
Monday, 21 September 15
CFR SOUTH CHINA COAL SWAP GAINED WEEK OVER WEEK
COALspot.com: API 8 CFR South China Coal swap for 4Q’ 2015 delivery declined just US$ 0.45 (0.90 %) per ton month over month.
A commodit ...
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- Commonwealth Bank - Australia
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- Agrawal Coal Company - India
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- Economic Council, Georgia
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- Siam City Cement PLC, Thailand
- Minerals Council of Australia
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- PNOC Exploration Corporation - Philippines
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- Parry Sugars Refinery, India
- Coal and Oil Company - UAE
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- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- Chettinad Cement Corporation Ltd - India
- Trasteel International SA, Italy
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- Iligan Light & Power Inc, Philippines
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- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Aboitiz Power Corporation - Philippines
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- CNBM International Corporation - China
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Energy - Thailand
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
- Bhushan Steel Limited - India
- Ministry of Transport, Egypt
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- Sarangani Energy Corporation, Philippines
- The State Trading Corporation of India Ltd
- Standard Chartered Bank - UAE
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- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
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- Price Waterhouse Coopers - Russia
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- Independent Power Producers Association of India
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- The University of Queensland
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- Kartika Selabumi Mining - Indonesia
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- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- Jaiprakash Power Ventures ltd
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- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
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- Indian Oil Corporation Limited
- Bulk Trading Sa - Switzerland
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- Ministry of Mines - Canada
- MS Steel International - UAE
- Siam City Cement - Thailand
- Singapore Mercantile Exchange
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Larsen & Toubro Limited - India
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- Attock Cement Pakistan Limited
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Australian Coal Association
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
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- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
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- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Maheswari Brothers Coal Limited - India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Bhatia International Limited - India
- San Jose City I Power Corp, Philippines
- Indo Tambangraya Megah - Indonesia
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- Semirara Mining Corp, Philippines
- Indika Energy - Indonesia
- Wilmar Investment Holdings
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- IEA Clean Coal Centre - UK
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- Electricity Authority, New Zealand
- SMC Global Power, Philippines
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
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