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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, 08 February 16
DRY-BULK SHIPPING DIVING DEEP
COALspot.com: The freight markets continued to fall this past week.
The Baltic Dry Index (BDI) of dry-bulk shipping freights, a measure of glo ...
Monday, 08 February 16
DRY BULK: SHIPBROKER SEES BDI MARKET REACHING LOW POINT OF 236 POINTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The endless pit that is the dry bulk market over the past two months, has been the issue of debate among ship owners, shipbroker and analysts alike ...
Friday, 05 February 16
COAL INDIA EYES COAL MINES IN SOUTH AFRICA - PTI
“Coal India Ltd has plans of acquiring coal mines in South Africa,” an official said. It is looking at acquiring mines in partnership w ...
Friday, 05 February 16
U.S. WEEKLY COAL OUTPUT ROSE 4.2% TO 13.6 MMST
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.6 million shor ...
Thursday, 04 February 16
CAPESIZE: WEST AUSTRALIAN TO CHINA HAS BEEN CONCLUDED AT US$ 2.85 PMT AND THE C3 MARKET REMAINS INACTIVE - FEARNLEYS
Capesize
As everyone is getting ready for the Chinese new year, already depressed rates are under further pressure.
According to Fearnleys, ...
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- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
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- Electricity Generating Authority of Thailand
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- GVK Power & Infra Limited - India
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
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- Bhushan Steel Limited - India
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
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- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Xindia Steels Limited - India
- Aboitiz Power Corporation - Philippines
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Mercator Lines Limited - India
- IEA Clean Coal Centre - UK
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Orica Mining Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Vedanta Resources Plc - India
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Carbofer General Trading SA - India
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- Deloitte Consulting - India
- Electricity Authority, New Zealand
- Riau Bara Harum - Indonesia
- Australian Coal Association
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
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- Bharathi Cement Corporation - India
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- Maharashtra Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- Sree Jayajothi Cements Limited - India
- Meenaskhi Energy Private Limited - India
- London Commodity Brokers - England
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Gujarat Sidhee Cement - India
- Energy Link Ltd, New Zealand
- European Bulk Services B.V. - Netherlands
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Ind-Barath Power Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Lanco Infratech Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- New Zealand Coal & Carbon
- Kartika Selabumi Mining - Indonesia
- Uttam Galva Steels Limited - India
- Bulk Trading Sa - Switzerland
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- SMC Global Power, Philippines
- Samtan Co., Ltd - South Korea
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Energy Development Corp, Philippines
- Anglo American - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Kepco SPC Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Thai Mozambique Logistica
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
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