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1 LAYTIME AND DEMURRAGE RECENT CASES HOUSTON March 29, 2007 William J. Honan Holland & Knight LLP.

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Presentation on theme: "1 LAYTIME AND DEMURRAGE RECENT CASES HOUSTON March 29, 2007 William J. Honan Holland & Knight LLP."— Presentation transcript:

1 1 LAYTIME AND DEMURRAGE RECENT CASES HOUSTON March 29, 2007 William J. Honan Holland & Knight LLP

2 2 Clause 5, Part II, ASBATANKVOY 5.LAYDAYS. Laytime shall not commence before the date stipulated in Part I, except with Charterer's sanction...

3 3 Clause 6, Part II, ASBATANKVOY 6.NOTICE OF READINESS. Upon arrival at customary anchorage at each port of loading or discharge, the Master or his agent shall give the Charterer or his agent notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo, berth or no berth, and laytime, as hereinafter provided, shall commence upon the expiration of six (6) hours after receipt of such notice, or upon the vessel's arrival in berth... whichever first occurs. However, irrespective of whether the berth is reachable on arrival or not where delay is caused to Vessel getting into berth after giving notice of readiness for any reason over which Charterer has no control, such a delay shall not count as used laytime or demurrage. In any event, Charterer shall be entitled to six hours notice of readiness at loading and discharging ports, even if the vessel is on demurrage.

4 4 Issue No. 1 1.If a vessel arrives prior to commencement of the laydays and is ready to load, is the vessel under an obligation to give its notice of readiness?

5 5 Issue No. 2 2.If the vessel gives its notice of readiness prior to the commencement of laydays, does the six hour free period begin running upon the giving of the notice of readiness or at midnight of the first layday?

6 6 Issue No. 3 3.Does the giving of an early notice of readiness require the charterer to commence loading immediately (or at least 6 hours afterwards)?

7 7 Issue No. 4 4.If the charterer upon receipt of the early notice of readiness, orders the vessel to a berth, can the vessel refuse?

8 8 Issue No. 5 5.If the charterer orders the vessel to its berth upon receipt of the early notice of readiness and begins loading the vessel, all before the commencement of the laydays, does the time used prior to the first layday count as laytime?

9 9 Mr. Justice Langley’s Holding 1. "[Laytime] never started at all, with the consequence not only that the owners have earned no demurrage, but also that they are obliged to pay the charterers despatch money for the whole of the laytime." 2. Charterer’s awareness that discharge had commenced without protesting or reserving its rights was not itself a “sufficient happening” to cause laytime start.

10 10 Free Pratique: General Principles (assumes ASBATANKVOY form) 1.Free pratique, absent express language otherwise, is not a prerequisite for the tendering of a notice of readiness and 2.Free pratique is considered granted when it is not denied. 3.If the vessel is continually available to charterer, no laytime is excluded between the time a notice of readiness is given and the time that free pratique is granted.

11 11 Clause 6.3.3, BPVOY 4 Notwithstanding tender of a valid NOR by the vessel such NOR shall not be effective nor become effective, for the purposes of calculating laytime, or if the vessel is on demurrage, demurrage unless and until the following conditions have been met: 6.3.3 free pratique has been granted or is granted within six (6) hours of the master tendering NOR. If free pratique is not granted within six (6) hours of the master tendering NOR, through no fault of owners, agents or those on board the vessel, the master shall issue a protest in writing (NOP) to the port authority and the facility at the port (the terminal) failing which laytime or, if the vessel is on demurrage, demurrage shall only commence when free pratique has been granted...

12 12 Clause 7.3.2, BPVOY 4 7.3.2 Laytime, or if the vessel is on demurrage, demurrage shall commence, at each loading and each discharge port, upon the expiry of six (6) hours after a valid NOR has become effective as determined under cl. 6.3, berth or no berth, or when the vessel commences loading, or discharging, whichever first occurs.

13 13 “Agios Dimitrios”: Clauses 23(b) and 25 Clause 23(b) At loading port(s) when tendering notice of readiness, Vessel's cargo holds and hatch covers shall be clean, dry of loose rust and otherwise ready and suitable to receive the intended cargo. Clause 25 Crew and mechanical failure – time lost at loading and/discharging port(s) which can be reasonably attributed to crew and/or ship's mechanical failure, shall not be counted as laytime or time on demurrage.

14 14 “Nikmary” Facts Summary  The vessel arrived at the port of Sikka to load a cargo of gasoil on December 2 and proceeded immediately to its berth.  The vessel's tanks were inspected on December 3rd by an independent surveyor appointed by the charterer and were rejected.  The supplier, Reliance Petroleum Limited, was prepared to supply the cargo on December 3rd.  The vessel's crew cleaned the holds and, on December 5, the two surveyors, one appointed by the owner and the other appointed by the charterer passed the holds and the vessel gave its valid NOR to the receiver.  No cargo was forthcoming and, on December 9, Reliance notified the charterer that due to its other commitments, both domestically and to other vessels, the “Nikmary” would not be loaded until the end of the month.  Loading in fact did not commence until January 3.

15 15 “Nikmary” Clause 30(c)(v) Owner shall indemnify Charter for all direct and/or indirect costs and consequences as a result of the Vessel not being clean to the satisfaction of jointly appointed inspector and... all time until connection of hoses, after the Vessel has been passed as clean to the satisfaction of jointly appointed inspector shall not count as laytime or, if on demurrage, as time on demurrage.

16 16 Charterer’s Duty to Provide Cargo  A voyage charterer owes an absolute and non-delegable duty to provide cargo for loading and  charter exceptions will normally be read as protecting a charterer only in respect of its duty to load, and not as covering its duty to provide a cargo.

17 17 “Cape Equinox”: Clause 9 9.The cargo to be discharged by the consignee at port of discharge free of expense and risk to the vessel. If longer detained, consignee to pay vessel demurrage at the rate of $10,500 U.S. Currency per day.... In case of strikes, lockouts, civil commotions, or other causes or accidents beyond the control of the consignee which prevent or delay the discharging, such time is not count....

18 18 Clause 20.1, BPVOY 4 20.1 Charterers shall be discharged and released from all liability in respect of any claim for demurrage, deviation or detention which owners may have under this charter unless a claim in writing has been presented to charterers, together with all supporting documentation substantiating each and every constituent part o the claim within ninety (90) days of the completion of discharge of the car go carried hereunder.

19 19 Clause 20.2, BPVOY 4 20.2 Any other claim against charterers for any and all other amounts which are alleged to be for charterers' account under this charter shall be extinguished, and charterers shall be discharged from all liability whatsoever in respect thereof, unless such claim is presented to charterers, together with full supporting documentation substantiating each and every constituent part of the claim, within one hundred and eight (180) days of the completion of discharge of the cargo carried hereunder.

20 20 “Bow Cedar” Facts Summary  On August 27, 2002 at 0130 the vessel tendered its NOR.  On September 2, while the vessel waited at the load port, the charterer notified the owner that its attempts to find a cargo had failed and it was cancelling the charter.  On September 3, the owner accepted the charterer's repudiation and, on September 5, the owner chartered the vessel to a third party in mitigation.  On July 15, 2003 (i.e., over 180 days thereafter), the owner's Club presented owner's claim amounting to $547,468 to charterer.

21 21 “Bow Cedar” Judge’s Holding 1.The time periods of 90 and 180 days run from the completion of discharge. With no discharge completion date, the 90 and 180 periods have no date from which to run. The Court was unwilling to imply language such as "from the completion of discharge or when the completion of discharge should have occurred.“ 2.A claim for wrongful repudiation is not a claim "for charterer's account under this charter." The Court pointed to a number of provisions in the charter that called for charterer to pay for certain services or time periods. There as no similar provision for wrongful repudiation of the charter. The Court stated that time bar clauses, as they prevent the recovery of monies otherwise rightfully due, should be construed strictly against the parties which seek to invoke them.

22 22 Time Bar General Principles 1.Contractual time bars are enforced. 2. Contractual time bars are construed strictly against the drafter. 3.Contractual time bars are enforced even if there is no dispute concerning the claim in question. 4.Arbitrators require strict compliance to satisfy contractual time bars. Substantial compliance probably is insufficient.

23 23 Time Bar Practice Tips 1.If the Owner: a)seek to eliminate altogether b)make the clauses mutually applicable c)provide as long a period as possible d)provide training to the persons handling claims 2.If the Charterer: a)include all claims not just demurrage and detention b)draft the clause so as to avoid obvious loopholes

24 24 LAYTIME AND DEMURRAGE RECENT CASES HOUSTON March 29, 2007 William J. Honan Holland & Knight LLP

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