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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, 09 September 15
FOB INDONESIA COAL SWAP LOSE GROUND ON SLOWING DEMAND
COALspot.com: Indonesian coal swap for delivery 4Q 2015 declined month on month and week over week.
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Tuesday, 08 September 15
FOB RICHARDS BAY COAL SWAPS CONTINUE TO SHOW DECLINING TREND
COALspot.com: API4 FOB Richards Bay Coal swap for delivery 4Q' 2015 declined week over week and month over month.
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Tuesday, 08 September 15
GANGAVARAM PORT IN INDIA DISCHARGES RECORD 112,599 MT OF STEAM COAL IN 24 HOURS
COALspot.com: Gangavaram Port, an all weather, multipurpose port with water depth up-to 21 meters, capable of handling fully laden Super Cap ...
Monday, 07 September 15
THE MINE OF THE FUTURE WILL HAVE ONLY TWO EMPLOYEES, A MAN AND A DOG - SCOTT MCGOWAN
"The Technology and Innovation in Mining 2015" production team at Information Exchange Group interviewed Scott Mcgowan, Director, Global ...
Monday, 07 September 15
FOB NEWCASTLE COAL SWAP FOR Q2' 16 DELIVERY CLOSED US CENTS 25 LOWER COMPARED TO Q4' 15
COALspot.com: API 5 FOB Newcastle Coal swap for 4Q’ 2015 delivery declined $0.73 per MT (-1.68%) month over month to US$ 42.65 per mt. The sw ...
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- Central Electricity Authority - India
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- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
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- Georgia Ports Authority, United States
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- The University of Queensland
- Eastern Energy - Thailand
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- CNBM International Corporation - China
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- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
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- Siam City Cement PLC, Thailand
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- Wood Mackenzie - Singapore
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- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Planning Commission, India
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
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- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indian Energy Exchange, India
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- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Interocean Group of Companies - India
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- Mintek Dendrill Indonesia
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- Carbofer General Trading SA - India
- Siam City Cement - Thailand
- Economic Council, Georgia
- Karaikal Port Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Borneo Indobara - Indonesia
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Global Coal Blending Company Limited - Australia
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
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- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
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- Asmin Koalindo Tuhup - Indonesia
- Power Finance Corporation Ltd., India
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- AsiaOL BioFuels Corp., Philippines
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Chettinad Cement Corporation Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
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- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- Ambuja Cements Ltd - India
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- Essar Steel Hazira Ltd - India
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- Neyveli Lignite Corporation Ltd, - India
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
- Indonesian Coal Mining Association
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- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- GMR Energy Limited - India
- Xindia Steels Limited - India
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- Bhoruka Overseas - Indonesia
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
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- Singapore Mercantile Exchange
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- Independent Power Producers Association of India
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