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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, 04 June 15
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The government’s program to develop 35,000 megawatt (MW) power plants will increase domestic coal consumption, which currently stands at arou ...
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- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
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- The State Trading Corporation of India Ltd
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- TNB Fuel Sdn Bhd - Malaysia
- Rashtriya Ispat Nigam Limited - India
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- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
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- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
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- Chamber of Mines of South Africa
- Power Finance Corporation Ltd., India
- LBH Netherlands Bv - Netherlands
- IHS Mccloskey Coal Group - USA
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- Bhatia International Limited - India
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- GAC Shipping (India) Pvt Ltd
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- Commonwealth Bank - Australia
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- Posco Energy - South Korea
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- Mintek Dendrill Indonesia
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Electricity Generating Authority of Thailand
- The University of Queensland
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
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- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Minerals Council of Australia
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Ministry of Mines - Canada
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
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- PetroVietnam Power Coal Import and Supply Company
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- PTC India Limited - India
- PowerSource Philippines DevCo
- PNOC Exploration Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- Australian Coal Association
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- Formosa Plastics Group - Taiwan
- Eastern Coal Council - USA
- AsiaOL BioFuels Corp., Philippines
- Latin American Coal - Colombia
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mjunction Services Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
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- Ministry of Finance - Indonesia
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- Maheswari Brothers Coal Limited - India
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- Central Java Power - Indonesia
- GMR Energy Limited - India
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- ASAPP Information Group - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Central Electricity Authority - India
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- Tata Chemicals Ltd - India
- Sinarmas Energy and Mining - Indonesia
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- Star Paper Mills Limited - India
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
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- White Energy Company Limited
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- Planning Commission, India
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- Binh Thuan Hamico - Vietnam
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
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- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Metalloyd Limited - United Kingdom
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- Bukit Makmur.PT - Indonesia
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- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
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- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- SMG Consultants - Indonesia
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
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- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- India Bulls Power Limited - India
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