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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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Friday, 29 May 15
SOUTH KOREAN STATE-OWNED UTILITY KOREA MIDLAND POWER INVITES BIDS FOR 780K MT OF COAL FOR H2' 15
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 780K Metric Tons (MT) of HCV and LCV ...
Thursday, 28 May 15
TIMEBAR FOR DEMURRAGE CLAIMS - SKULD
KNOWLEDGE TO ELEVATE
English law has traditionally had a strict approach to contractually agreed time bars between commercial parties as well ...
Wednesday, 27 May 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
Earlier in the year I looked at how the market was reacting to the prolonged fall of the price of oil. Back then it was still unclear if the fallin ...
Tuesday, 26 May 15
HOW HAS THE DROP IN OIL PRICES AFFECTED OTHER COMMODITIES? - CLYDE & CO
KNOWLEDGE TO ELEVATE
The effects of the dramatic drop in the price of both Ice March Brent, the international oil marker, and its US counterpa ...
Tuesday, 26 May 15
MINING ASSOCIATION PERHAPI PUSHES FOR 35,000 MEGAWATT ELECTRICITY PROGRAM - JG
The Indonesian Mining Professionals Association, or Perhapi, has announced its support for a 35,000-megawatt national electricity program, saying i ...
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- Bangladesh Power Developement Board
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- New Zealand Coal & Carbon
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
- Port Waratah Coal Services - Australia
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Aboitiz Power Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- Price Waterhouse Coopers - Russia
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- GMR Energy Limited - India
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Meralco Power Generation, Philippines
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- Semirara Mining Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indian Oil Corporation Limited
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- CNBM International Corporation - China
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Vizag Seaport Private Limited - India
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Xindia Steels Limited - India
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Bhoruka Overseas - Indonesia
- Gujarat Sidhee Cement - India
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- Central Java Power - Indonesia
- Kideco Jaya Agung - Indonesia
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- Sojitz Corporation - Japan
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Authority, New Zealand
- Indonesian Coal Mining Association
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Meenaskhi Energy Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
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