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Monday, 29 February 16
LOSS OF EARNINGS IN THE WAKE OF A COLLISION - GARD
 KNOWLEDGE TO ELEVATE
A shipowner’s loss of earnings can form a significant part of a collision claim. Awareness of the ways of calculating loss of earnings claims can be useful in both presenting and challenging this type of claim. This Gard Insight looks at some general principles and methods applied by the courts.
A recent Gard example
A product tanker was hit by a bulker while at berth. Although the extent of the physical repairs – and therefore the repair costs – were relatively limited, the damaged tanks required stainless steel plates which had to be specially ordered. Long lead times led to a significant loss of earnings. As owners were able to document this loss with care and precision, leaving little room for doubt, the case against the owners of the bulker was settled quickly and amicably.
Basic principles
A claimant not only has the burden of proving that it has lost earnings as a result of the collision but also that it has suffered an actual loss. The fact that a ship has been unable to trade due to repairs being carried out is generally not enough, though it raises an obvious presumption that the shipowner has indeed suffered some sort of loss.
In the majority of jurisdictions, the principle of restitutio in integrum governs the measure of damages. This means that a shipowner who suffers a loss of earnings due to the negligence of another party will be put back into the position it would have been but for the negligence. Therefore, the shipowner must prove what the ship would have earned had the collision not occurred. This means that if the repairs are performed during a pre-arranged dry-docking period for example – there will be no loss.
The methods used to prove the loss depend on the facts of each case and one approach is not necessarily better than another. The optimal way is largely dependent on the trade patterns of the ship at the relevant time.
Ships on time charter
If a ship is damaged in a collision it will usually go off-hire until it has been repaired and able to function again under the terms of the charterparty. The shipowner can rely on specific off-hire statements and invoices from charterers. The loss will consist of:
- a fixed amount per day for the total time the ship is off-hire
- the bunkers consumed during the off-hire period, and
- any additional charges the time charterer may have incurred.
If the time charter has been justifiably cancelled as a result of the unavailability of the ship, the loss of earnings from that point onwards will be the difference between what the ship would have earned under the cancelled charter and what was actually earned during the same period.
Ships trading on the spot market
For a ship trading on the spot market, the approach is more flexible to calculate its loss of earnings. The starting point will be the total number of days the ship is unable to trade due to repairs, including removal time to the shipyard. However, losses may extend beyond the actual repair period, especially when the market has fallen in the meantime. If a shipowner can prove that it lost an actual fixture on the spot market due to a collision and necessary repairs, the potential net income from that fixture will be compared with the ship’s actual net income until the date the lost fixture would have ended. This is known in some jurisdictions as the time equalisation method, most recently approved in the English case of THE ASTIPALAIA [2014] EWHC 120.
For situations where a ship trading on the spot market is not fixed for her next voyage, the way to calculate the loss will depend on whether the ship was operating in an established or specialist trade.
For established trades such as the VLCC trade, fixture data is readily available throughout the year. It is a relatively simple exercise for a broker to work out what a VLCC would have earned at the relevant World Scale rates for a given period. Provided the ship would have obtained employment with a reasonable degree of certainty, the estimated charter earnings will be compared with the ship’s actual earnings for the period using the time equalisation method.
For specialised trades and trading patterns with little continuity, market data will be less readily available and reliable, so the loss of earnings calculation in each case will be more fact specific. In these cases, the best approach may be to present the average time charter equivalent earnings of the ship for a limited period around the time of collision, e.g. the casualty voyage and the voyages preceding and following the casualty. For some trades, it may be relevant to present income statements for even longer periods, however, the more remote the evidence, the more difficult it will be to prove that the figures are a true representation of the loss.
In the Norwegian collision case of Rana Frakt v ROBAS (LG-2013-173128) one party based its loss of earnings on two annual audited income statements, however the Court of Appeal made a discretionary reduction of about 33 per cent due to the lack of evidence relating to tangible fixtures the ship would have been engaged in during the period of repairs. That said, the mere fact that the loss of earnings cannot be quantified exactly will not be fatal to a claim.
FFO claims
Loss of earnings claims can arise in other contexts, e.g. where a ship damages a quay or shore based crane and renders part of a terminal unusable. The underlying assumptions and calculations involved can be complex and the appointment of a forensic accountant with knowledge of the local accountancy rules and tax law may very well be necessary in order to properly defend a shipowner’s position.
Checklist
Whether claiming or challenging loss of earnings claims, the following should be submitted:
Evidence of the total period claimed for, such as:
– Master’s statement of facts
– copies of the deck log
– the off-hire statements from charterers.
A summary of the daily net loss of earnings for the total period and the underlying documentation relied upon, such as:
– the charterparty and recap
– the off-hire invoice
– a statement from a broker of potential earnings or income statements where a time charter equivalent rate per day is arrived at.
Evidence of any mitigation, e.g. that the claimant:
– has chosen the quickest and most reasonable repair option, or
– has used other ships in its fleet to perform the contractual obligations of the damaged ship.
Evidence of the average utilisation of the ship. For ships actively trading only 80 per cent of the time, it is clearly unreasonable to claim a loss equating to 100 per cent utilisation during the period of repairs.
Final note
It is well worth spending time and effort in presenting loss of earnings claims in a clear and unambiguous manner, so that both parties understand the figures presented and the assumptions behind them. This can help achieve a quick settlement in a collision dispute.
Source: GARD
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Monday, 18 April 16
INDONESIAN 5000 GAR COAL INDEX DECLINE 1.43 PERCENT WEEK OVER WEEK - CS (I) COAL INDEX
COALspot.com: Average 5000 GAR coal index of Indonesian origin fell 1.43 percent week over week to averaging $38.65 per ton on this past Friday, ac ...
Monday, 18 April 16
SOUTH KOREA STATE-OWNED UTILITY KOMIPO INVITES COAL BIDS FOR BORYEONG POWER PLANT
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 70,000 Metric Tons of 4,600 kcal/kg NAR coal for ...
Monday, 18 April 16
SOUTH AFRICA RB1 COAL HAS LOST GROUND IN INDIA; RB2 MAY LOSE GRIP IF THE PRICE CROSSES US$ 50 A TON - TRADERS
COALspot.com: Indian coal consumers preferred to buy South Africa RB2 coal instead of RB1 coal recent months due to RB2's low CFR price level. ...
Monday, 18 April 16
CAPESIZE INDEX ROSE 44.66 PER CENT WEEK OVER WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities continued to rose this week.
The freight market was ...
Friday, 15 April 16
PANAMAX MARKET CONTINUES TO FIRM - FEARNLEYS
Cape
It has been a positive freight market for the past few weeks, however, this week the market is taking a small breather, says Fearnleys in it ...
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Showing 2471 to 2475 news of total 6871 |
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- Madhucon Powers Ltd - India
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- White Energy Company Limited
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Bukit Asam (Persero) Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Green Power PLC Corporation, Philippines
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Videocon Industries ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- London Commodity Brokers - England
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Posco Energy - South Korea
- IHS Mccloskey Coal Group - USA
- Commonwealth Bank - Australia
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Australian Commodity Traders Exchange
- Indo Tambangraya Megah - Indonesia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Romanian Commodities Exchange
- Planning Commission, India
- Trasteel International SA, Italy
- Xindia Steels Limited - India
- Makarim & Taira - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Malabar Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- Siam City Cement - Thailand
- Antam Resourcindo - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Parliament of New Zealand
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- McConnell Dowell - Australia
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Ministry of Finance - Indonesia
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Economic Council, Georgia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- MS Steel International - UAE
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- SMC Global Power, Philippines
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Africa Commodities Group - South Africa
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Mjunction Services Limited - India
- Aditya Birla Group - India
- Central Java Power - Indonesia
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- Chamber of Mines of South Africa
- Vedanta Resources Plc - India
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Therma Luzon, Inc, Philippines
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Borneo Indobara - Indonesia
- The University of Queensland
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