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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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Thursday, 28 January 16
RICHARDS BAY COAL SWAPS FOR Q1,Q2 AND Q3 DELIVERIES FIRM THIS PAST WEEK
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap rose month over month and week over week.
The Q1’ 2016 FOB Richards Bay Coa ...
Wednesday, 27 January 16
API 5 FOB NEWCASTLE COAL SWAPS CLOSE MIXED
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $1.17 per ton (3.13%) this past week compared to the sam ...
Wednesday, 27 January 16
CHINA'S STALLING ECONOMY HAS HAD A GREAT EFFECT ON VARIOUS COMMODITIES; DECREASED DEMAND DRIVING COMMODITY PRICES LOWER AND LOWER - LINOS ALEXANDROS KOGEVINAS
Having gone through the first few weeks of 2016, it’s starting to look like another challenging year is ahead of us. Hopes for a recovery in ...
Wednesday, 27 January 16
WORLD HARD COAL PRODUCTION AND CONSUMPTION DECLINE IN 2015 FOR THE FIRST TIME IN OVER A DECADE - VDKI
COALspot.com: Seaborne hard coal trade and the changes in this area were decisively affected by China and India - VDKi.
China bears the g ...
Tuesday, 26 January 16
Q3'16 CFR SOUTH CHINA COAL SWAP DROPPED BELOW $41 A TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.82 (1.94%) per ton month over month.
A commodity swap is ...
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Showing 2586 to 2590 news of total 6871 |
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- PTC India Limited - India
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Power Finance Corporation Ltd., India
- Vijayanagar Sugar Pvt Ltd - India
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- San Jose City I Power Corp, Philippines
- Price Waterhouse Coopers - Russia
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Vizag Seaport Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Metalloyd Limited - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Borneo Indobara - Indonesia
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Semirara Mining and Power Corporation, Philippines
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Eastern Coal Council - USA
- Eastern Energy - Thailand
- Renaissance Capital - South Africa
- VISA Power Limited - India
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- Trasteel International SA, Italy
- Thiess Contractors Indonesia
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Therma Luzon, Inc, Philippines
- Central Java Power - Indonesia
- Australian Coal Association
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- Ministry of Finance - Indonesia
- Videocon Industries ltd - India
- Standard Chartered Bank - UAE
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Malabar Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
- Planning Commission, India
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Petrochimia International Co. Ltd.- Taiwan
- Kartika Selabumi Mining - Indonesia
- Agrawal Coal Company - India
- Electricity Authority, New Zealand
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Miang Besar Coal Terminal - Indonesia
- Sical Logistics Limited - India
- Grasim Industreis Ltd - India
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- The State Trading Corporation of India Ltd
- Manunggal Multi Energi - Indonesia
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Singapore Mercantile Exchange
- Edison Trading Spa - Italy
- Romanian Commodities Exchange
- Barasentosa Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Economic Council, Georgia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- Minerals Council of Australia
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
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