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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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Tuesday, 15 September 15
Q2'16 RICHARDS BAY COAL SWAPS DIP TO $ 51.10 PER TON
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$ ...
Tuesday, 15 September 15
API 5 FOB NEWCASTLE COAL SWAP FOR 4Q' 2015 DELIVERY CLOSED AT $42.71 PER TON ON 11 SEPT, SGX DATA SHOWS
COALspot.com: API 5 FOB Newcastle Coal swap for 4Q’ 2015 delivery declined $0.94 per MT (-2.15%) month over month to US$ 42.71 per mt. The sw ...
Monday, 14 September 15
Q1'16 CFR SOUTH CHINA COAL SWAP DECLINED $1.80 PMT M-M
COALspot.com: API 8 CFR South China Coal swap for 4Q’ 2015 delivery declined just US$ 1.62 (3.21 %) per MT month over month.
A commodity ...
Monday, 14 September 15
MOODY'S LOWERS COMMODITY PRICE ASSUMPTIONS ON MACRO, INDUSTRY FACTORS
COALspot.com: Moody's Investors Service has lowered its base metal price assumptions for 2015-17 as slowing growth in China, lower oil prices, ...
Sunday, 13 September 15
FREIGHT RATES ARE EXPECTED TO BE SOFT NEXT WEEK
COALspot.com: The BDI decreased further by 6.51 per cent or 57 points since last Friday and closed at 818 on 11 September 2015 while the cape index ...
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- Krishnapatnam Port Company Ltd. - India
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- Intertek Mineral Services - Indonesia
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- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- London Commodity Brokers - England
- Gujarat Mineral Development Corp Ltd - India
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- Sree Jayajothi Cements Limited - India
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- Central Electricity Authority - India
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- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
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- White Energy Company Limited
- Cement Manufacturers Association - India
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- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Marubeni Corporation - India
- The State Trading Corporation of India Ltd
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- Petrochimia International Co. Ltd.- Taiwan
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- OPG Power Generation Pvt Ltd - India
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- Parliament of New Zealand
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- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Agrawal Coal Company - India
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- VISA Power Limited - India
- Vizag Seaport Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- The University of Queensland
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Indika Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Directorate General of MIneral and Coal - Indonesia
- Makarim & Taira - Indonesia
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- Medco Energi Mining Internasional
- Ministry of Mines - Canada
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asmin Koalindo Tuhup - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Edison Trading Spa - Italy
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Planning Commission, India
- GVK Power & Infra Limited - India
- India Bulls Power Limited - India
- Siam City Cement PLC, Thailand
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Global Business Power Corporation, Philippines
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- Mintek Dendrill Indonesia
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- Economic Council, Georgia
- TeaM Sual Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
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- Renaissance Capital - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Orica Australia Pty. Ltd.
- ICICI Bank Limited - India
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Indian Oil Corporation Limited
- Commonwealth Bank - Australia
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- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
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- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
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- Aditya Birla Group - India
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- Baramulti Group, Indonesia
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Latin American Coal - Colombia
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- AsiaOL BioFuels Corp., Philippines
- Larsen & Toubro Limited - India
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Ambuja Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
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- Energy Development Corp, Philippines
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