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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, 28 July 15
INDONESIA DELAYS PLAN TO RAISE COAL ROYALTIES AMID PLUNGING PRICE - JP
The government will postpone a plan to increase royalty payments from coal miners as they are already burdened with the commodity’s plunging ...
Tuesday, 28 July 15
API 5 FOB NEWCASTLE COAL SWAP LOST M-M AND GAINED W-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery down $ 1.15 per MT (-2.51%) month over month to US$ 44.62 per mt. The swap ...
Monday, 27 July 15
KOMIPO INVITES BIDS FOR TOTAL 545,000 MT OF COAL FOR BORYEONG POWER PLANT
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to purchase total 545,000 Metric Tons (MT) of coal ...
Monday, 27 July 15
CFR SOUTH CHINA COAL SWAP WEAK M/M; FIRM W/W
COALspot.com: API 8 CFR South China Coal swap for Q3’ 2015 delivery declined US$ 0.92 (1.77%) per MT month over month.
A commodity swap ...
Sunday, 26 July 15
INDO-INDIA OCEAN COAL FREIGHT RATES REMAIN STEADY
COALspot.com: The freight market continued lost steam towards end of the week and all indices were showing downward trend.
The BDI was up by 3 ...
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Energy - Thailand
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- Kideco Jaya Agung - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- Bukit Makmur.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Mjunction Services Limited - India
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- India Bulls Power Limited - India
- MS Steel International - UAE
- PTC India Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
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- Sindya Power Generating Company Private Ltd
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Essar Steel Hazira Ltd - India
- Wilmar Investment Holdings
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
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- Karbindo Abesyapradhi - Indoneisa
- Aboitiz Power Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Singapore Mercantile Exchange
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- Orica Mining Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- San Jose City I Power Corp, Philippines
- ASAPP Information Group - India
- Bhatia International Limited - India
- Wood Mackenzie - Singapore
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- Riau Bara Harum - Indonesia
- Standard Chartered Bank - UAE
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Indian Oil Corporation Limited
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- The University of Queensland
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- Parry Sugars Refinery, India
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Goldman Sachs - Singapore
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- Ambuja Cements Ltd - India
- Petron Corporation, Philippines
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- Leighton Contractors Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- Energy Development Corp, Philippines
- Australian Coal Association
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- ICICI Bank Limited - India
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