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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, 23 June 15
FOB RICHARDS BAY COAL SWAP HAS REMAINED STEADY OVER THE PAST WEEK
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 rose month over month and week over week.
The Q3 swap was up US$ 2.32 ...
Monday, 22 June 15
BORYEONG POWER PLANT TO IMPORT 140K MT OF LCV COAL FOR AUGUST - SEPTEMBER 2015
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to purchase 140K Metric Tons (MT) of LCV coal for ...
Monday, 22 June 15
CFR SOUTH CHINA COAL SWAP: UP MONTH OVER MONTH; DOWN WEEK OVER WEEK
COALspot.com: API 8 CFR South China Coal swap for Q3’ 2015 delivery rose US$ 0.30 (0.58%) per MT month over month.
A commodity swap is a ...
Monday, 22 June 15
FOB NEWCASTLE COAL SWAP: UP WEEK OVER WEEK AND MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery up $ 0.54 per MT (1.19%) month over month to US$ 45.87 per mt. The swap was ...
Sunday, 21 June 15
SPOT RATE AVERAGES FOR FREIGHT FROM INDONESIA TO INDIA REMAIN STRONG THIS WEEK
COALspot.com: The freight market was quite firm this week compared to last week. The BDI was up 21% week on week and closed at 779 points. The cape ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
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- Siam City Cement - Thailand
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- Kohat Cement Company Ltd. - Pakistan
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
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- Baramulti Group, Indonesia
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- Sojitz Corporation - Japan
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- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- Romanian Commodities Exchange
- The University of Queensland
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
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- Interocean Group of Companies - India
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- Alfred C Toepfer International GmbH - Germany
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sarangani Energy Corporation, Philippines
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- New Zealand Coal & Carbon
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- Orica Australia Pty. Ltd.
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- Ministry of Transport, Egypt
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- Metalloyd Limited - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- PetroVietnam Power Coal Import and Supply Company
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- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- London Commodity Brokers - England
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
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- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
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- LBH Netherlands Bv - Netherlands
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- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- PowerSource Philippines DevCo
- Rio Tinto Coal - Australia
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- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
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- Maheswari Brothers Coal Limited - India
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Indika Energy - Indonesia
- Cement Manufacturers Association - India
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Bukit Baiduri Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Madhucon Powers Ltd - India
- Australian Coal Association
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- Mjunction Services Limited - India
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
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- White Energy Company Limited
- Gujarat Sidhee Cement - India
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Intertek Mineral Services - Indonesia
- Petron Corporation, Philippines
- Indonesian Coal Mining Association
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Posco Energy - South Korea
- Energy Link Ltd, New Zealand
- Kumho Petrochemical, South Korea
- Medco Energi Mining Internasional
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
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- Gujarat Electricity Regulatory Commission - India
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- The Treasury - Australian Government
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- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
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