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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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Tuesday, 05 January 16
4200 GAR COAL INDEX FALL TOWARD $27;SLIPPED 28.05% YEAR-TO-DATE
COALspot.com: Average 5000 GAR coal index has not moved in the past week, averaging $40.12 per ton on last Thursday, according to CS (i) Coal Index ...
Monday, 04 January 16
CFR SOUTH CHINA COAL SWAP REMAIN FLAT OVER CHRISTMAS & NEW YEAR HOLIDAYS
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.68 (1.64%) per ton month over month.
A commodity swap is ...
Friday, 01 January 16
FOB INDONESIA COAL SWAP FOR Q1'16 DELIVERY CLOSED AT $36.75 PER TON
COALspot.com: Indonesian coal swap delivery Q1 2016 declined month on month but flat week over week.
According to AsiaClear OTC coal swap' ...
Thursday, 31 December 15
COAL PRICES FELL ON WEAK DEMAND
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap decline month over month and slightly up week over week.
The Q1’ 2016 ...
Thursday, 31 December 15
2016 FOB NEWCASTLE COAL SWAP RALLY TO CLOSE AT $37.98/TON
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $1.48 per ton (4.05%) this past week compared to the sam ...
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- Semirara Mining Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Larsen & Toubro Limited - India
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Iligan Light & Power Inc, Philippines
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Georgia Ports Authority, United States
- Tamil Nadu electricity Board
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Ministry of Mines - Canada
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- The Treasury - Australian Government
- Maheswari Brothers Coal Limited - India
- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Petron Corporation, Philippines
- MS Steel International - UAE
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- The University of Queensland
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- CIMB Investment Bank - Malaysia
- Globalindo Alam Lestari - Indonesia
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Kartika Selabumi Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- GMR Energy Limited - India
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Indian Oil Corporation Limited
- White Energy Company Limited
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Neyveli Lignite Corporation Ltd, - India
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- Krishnapatnam Port Company Ltd. - India
- The State Trading Corporation of India Ltd
- OPG Power Generation Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Energy Link Ltd, New Zealand
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Borneo Indobara - Indonesia
- IHS Mccloskey Coal Group - USA
- Australian Coal Association
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Thiess Contractors Indonesia
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Siam City Cement PLC, Thailand
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Coal and Oil Company - UAE
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Bukit Makmur.PT - Indonesia
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