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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, 11 August 15
GLOBAL PRODUCTION OF CRUDE STEEL REACHED A NEW ALL-TIME HIGH OF 1,661M TONNES IN 2014 - VDKI
COALpot.com: Global production of crude steel reached a new all-time high of 1,661m tonnes in 2014, said German Coal Importer Association, in its l ...
Tuesday, 11 August 15
2016 CFR S.CHINA COAL SWAPS CLOSED SLIGHTLY HIGHER THAN 4Q 2015 CLOSING PRICES; BUT NOT SIGNIFICANT
COALspot.com: API 8 CFR South China Coal swap for 4Q’ 2015 delivery declined just US cents 10 (0.20%) per MT month over month.
A commodi ...
Monday, 10 August 15
SOUTH KOREAN UTILITY KOMIPO INVITES BITUMINOUS COAL BIDS FOR BORYEONG POWER PLANT
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender for 560,000 Metric Tons (MT) of 4,600kcal/kg NAR c ...
Sunday, 09 August 15
THE PANAMAX MARKET HAS REMAINED WEAK THIS WEEK
COALspot.com: The freight market continued to be buoyant with cape index pushing the BDI.
The BDI was up 10.49% and closed at 1200 points on 7 ...
Friday, 07 August 15
COAL PRICE DEVELOPMENTS CAN ONLY BE DESCRIBED, SUCCINCTLY AS "OVERSUPPLY MEETS SUBDUED DEMAND" - VDKI
Coal Outlook 2015 – International
Regarding the outlook for global coal trading, two questions arise: firstly, “ whether the years of ...
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- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
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- Energy Link Ltd, New Zealand
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- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Bharathi Cement Corporation - India
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Altura Mining Limited, Indonesia
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Lanco Infratech Ltd - India
- Global Green Power PLC Corporation, Philippines
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
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- Merrill Lynch Commodities Europe
- Bhatia International Limited - India
- Ministry of Finance - Indonesia
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- Economic Council, Georgia
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- Siam City Cement - Thailand
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- IEA Clean Coal Centre - UK
- Planning Commission, India
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Star Paper Mills Limited - India
- Savvy Resources Ltd - HongKong
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- Riau Bara Harum - Indonesia
- Indogreen Group - Indonesia
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- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
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- PTC India Limited - India
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- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- Directorate Of Revenue Intelligence - India
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Essar Steel Hazira Ltd - India
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Metalloyd Limited - United Kingdom
- Global Business Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- White Energy Company Limited
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Coastal Gujarat Power Limited - India
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vijayanagar Sugar Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- GVK Power & Infra Limited - India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Mercator Lines Limited - India
- Ministry of Mines - Canada
- Tata Chemicals Ltd - India
- Carbofer General Trading SA - India
- Electricity Generating Authority of Thailand
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- McConnell Dowell - Australia
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indonesian Coal Mining Association
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- SMC Global Power, Philippines
- Electricity Authority, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Parry Sugars Refinery, India
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Electricity Authority - India
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- The Treasury - Australian Government
- Thai Mozambique Logistica
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Parliament of New Zealand
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- Tamil Nadu electricity Board
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- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
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