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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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Wednesday, 17 February 16
THE OWNERS FACING HISTORICAL LOW DRY BULK RATES; COAL IMPORTS TO CHINA IS STILL POINTING TO A STRONG TREND OF DECLINING CONSUMPTION
The sharp fall in dry bulk rates that has been taking place since the end of last year and has left owners facing historical low rates for a substa ...
Monday, 15 February 16
CALL THE DOCTOR! SHIPPING'S MEDICAL DRAMA UNFOLDS......- CLARKSONS
The recycling market has started 2016 with a bang, with a huge volume of tonnage heading to demolition facilities. Many of the key shipping markets ...
Monday, 15 February 16
CS 42 COAL INDEX ROSE 0.07% WEEK OVER WEEK
COALspot.com: Average 5000 GAR coal index of Indonesian origin decline 0.15 percent week over week to averaging $38.96 per ton on this past Friday, ...
Monday, 15 February 16
BALTIC INDEX MARGINALLY ROSE BY A POINT D-D; CAPESIZE INDEX DOWN 13 POINTS W-W; PANAMAX INDEX UP 29 POINTS W-W
COALspot.com: The freight markets continued to fall this past week.
The BDI, The Baltic Dry Index (BDI) of dry-bulk shipping freights, a measu ...
Friday, 12 February 16
DRY BULK MARKET'S FORTUNES STILL TIED WITH CHINA'S ECONOMY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The inevitable slowdown of the Chinese economy was expected to hurt dry bulk shipping, but few expected the blow to be this hard, especially given ...
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Showing 2561 to 2565 news of total 6871 |
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- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- Borneo Indobara - Indonesia
- Planning Commission, India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Ind-Barath Power Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Xindia Steels Limited - India
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- White Energy Company Limited
- Energy Development Corp, Philippines
- GVK Power & Infra Limited - India
- ASAPP Information Group - India
- Krishnapatnam Port Company Ltd. - India
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Georgia Ports Authority, United States
- Baramulti Group, Indonesia
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- Independent Power Producers Association of India
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- Indian Oil Corporation Limited
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Energy Link Ltd, New Zealand
- SMG Consultants - Indonesia
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Bharathi Cement Corporation - India
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Indian Energy Exchange, India
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- ICICI Bank Limited - India
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- Mercator Lines Limited - India
- Eastern Energy - Thailand
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- McConnell Dowell - Australia
- VISA Power Limited - India
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
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