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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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Thursday, 16 July 15
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- VISA Power Limited - India
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Intertek Mineral Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Indonesian Coal Mining Association
- Samtan Co., Ltd - South Korea
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Iligan Light & Power Inc, Philippines
- London Commodity Brokers - England
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- Tata Chemicals Ltd - India
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- SMC Global Power, Philippines
- Riau Bara Harum - Indonesia
- Malabar Cements Ltd - India
- CIMB Investment Bank - Malaysia
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Meralco Power Generation, Philippines
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Chamber of Mines of South Africa
- Sree Jayajothi Cements Limited - India
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Minerals Council of Australia
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Ambuja Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- Antam Resourcindo - Indonesia
- Bhoruka Overseas - Indonesia
- India Bulls Power Limited - India
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Dalmia Cement Bharat India
- Planning Commission, India
- OPG Power Generation Pvt Ltd - India
- Medco Energi Mining Internasional
- Central Java Power - Indonesia
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Electricity Generating Authority of Thailand
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Australian Coal Association
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