Delay as a result of strikes and congestion can be costly. Therefore, an important question is who bears the risk of such delay? This was considered by the Commercial Court in the recent decision of Carboex SA v Louis Dreyfus Commodities Suisse SA [2011] EWHC 1165. In particular, the Court considered whether the strike clause in a berth charterparty applied in the case of delay to vessels caused by congestion (i) waiting to berth as a consequence of a strike that had ended and (ii) that had arrived after the strike had ended.
Facts
In 2008 owners, Louis Dreyfus, chartered four vessels, the “Co-op Phoenix”, the “Alpha Glory” the “C Young” and the “Royal Breeze”, to charterers Carboex, each under a contract of affreightment (“COA”) on an amended version of the Amwelsh voyage charterparty. The vessels were chartered for the carriage of coal from Indonesia to Puerto de Ferrol in Spain to be discharged at the terminal of Endesa SA. When the vessels reached Spain, there was congestion at Endesa’s terminal due to a nationwide Spanish haulage strike over fuel prices. The strike had, in fact, ended before each of the vessels berthed and did not cause any disruption in the actual discharge process. However all of the vessels were delayed getting into berth.
Which clauses in the charter applied?
The question then arose: who bears the risk for the resulting delay? The clauses germane to this question were clauses 9 (a standard printed clause commonly called the “strike exceptions” clause) and 40 (a bespoke typed amendment agreed by the parties):
“9. …In Case of strikes, lockouts, civil commotions or any other causes included but not limited to breakdown of shore equipment or accidents beyond the control of the Charterers consignee which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.”
“40. At port of discharge…If the berth is not available when vessel tenders Notice of Readiness, but provided vessel/Owners not at fault in relation thereto, then laytime shall commence twelve (12) hours after first permissible tide, Notice of Readiness received and accepted, whether in berth or not, whether in free pratique or not, whether in customs clearance or not, unless no customs clearance or free pratique due to vessel’s fault, unless sooner commenced in which case only time actually used to count..”
How should the clauses to be construed?
The dispute was referred to arbitration. Charterers contended that the discharge of the four vessels was delayed by reason of the strike and that this period was excluded from the computation of laytime by virtue of clause 9 and, particularly, the last sentence thereof, the effect of this being that owners bore the risk of delay caused by congestion in the port.
Owners contended that the combined effect of clauses 9 and 40, which contained a WIBON (“whether in berth or not”) provision, was that charterers took the risk of delay caused by congestion at the port, so that it was only delay suffered once the vessel had berthed by reason of a strike then in progress that was excluded by clause 9. Since the strike was over when each of the vessels eventually berthed, no period stood to be deducted from the laytime and demurrage calculated accordingly was due.
The Arbitral Tribunal determined that clause 9 of the COA applied neither (i) in the case of a vessel which is delayed by the after effects of a strike which has ended, nor (ii) in the case of a vessel which has arrived after the strike has ended.
Charterers appealed to the Commercial Court contending that the arbitrators had erred in law.
At the hearing of the appeal, owners formulated a further preliminary question namely: Does the strike exception in Clause 9 apply to a vessel which is unable to berth due to berth congestion caused by strike?
Owners submitted that the effect of the WIBON provision in clause 40 was that, prima facie, the risk of delay due to congestion at the discharge port was on charterers. They contended that clause 9 was too narrow to pass the congestion risk to owners and relied on the fact that clause 40 was a bespoke clause. They asserted that Clause 9 did not, as an ordinary matter of construction, prevent the running of laydays where the vessel was unable to berth due to congestion caused by a strike.
Charterers contended that the relevant authorities did not suggest that the WIBON provision had any effect on the construction of an exceptions clause and that clause 9 was a self-standing provision. Thus, the WIBON provision had no bearing on the construction of an exceptions clause in the nature of the Amwelsh clause 9. The delay in discharging each of the vessels was caused by the strike, regardless of the fact that the vessel was delayed by the after-effects of the strike and regardless of whether she arrived during or after the strike.
Discussion of the relevant authorities
There was an extensive discussion by the Court of the case law pertaining to the issue in dispute.
As set out above, owners’ submission was that the effect of the WIBON provision within clause 40 was that the risk of delay due to congestion was transferred to charterers. Charterers argued that three cases were inconsistent with owners’ contentions based on the WIBON provision: Leonis Steamship Co v Rank (No.2) [1908] Com. Cas. 295 (CA), London and Northern Steamship Co Ltd v Central Argentine Railway Ltd [1913] 108 LT 527 and Reardon Smith Line Ltd v East Asiatic Co (1938) 62 Ll. L. Rep. 23
In the first case, Leonis the chartered vessel was delayed in loading cargo due to congestion in the loading port Bahia Blanca. This was caused partially by a strike by railway workers and there was an argument over whether the strike exceptions clause applied as the strike was over before the vessel reached Bahia Blanca. The Court of Appeal held the strike exception applied even though the strike was over before the vessel reached the port and started loading and thereby allowed the consequential delay as a result of the strike. Whilst this case related to a port rather than a berth charter, nevertheless, it is analogous as the risk of congestion was on the charterers (as is in a berth charter with a WIBON provision). In the second case, London and Northern Steamship, the Court held that charterers needed to show that the strike had a causative effect on their ability to discharge, namely that they had the protection of the strike clause to the extent that a strike delayed their work and no further. In the third case, Reardon Smith, the Court adopted the same approach as in Leonis, that is that the WIBON clause cannot have an effect on the construction of the strike exception clause. All that the WIBON clause does is indicate the time at which Notice of Readiness shall be given in order to fix when the laydays commence. It provides that notice may be given whether the ship is in berth or not and, therefore, the existence of the WIBON clause cannot enable the Court to put a different construction on the strike exceptions clause.
More significantly, there was also a discussion of The “Amstermolen” [1961] 2 Lloyd’s Rep 1, which Field J notes was unfortunately not brought to the attention of the Tribunal. In The “Amstermolen”, the vessel was chartered to sail to New Orleans to load a cargo of wheat but following her arrival at New Orleans she was unable to find a berth due to congestion at the port. The charterparty incorporated the Centrocon Strike Clause (Amended) which provided that in the case of any delay due to a strike or by reason of obstructions or stoppages beyond the control of the charterers, no claim for damages or demurrage shall be made by charterers, receivers or owners. The issue before the Court of Appeal was whether the delay in loading the vessel was caused by an obstruction within the meaning of the clause. The Court held that the word “obstructions” should be given the same meaning as in the case of Leonis, namely something at the quay side that prevented the vessel from coming alongside to load was an “obstruction” for the purposes of the exceptions clause. It was held that the effect of the WIBON provision was no more than to start the laytime clock ticking and that the exceptions clause was to be construed as a free-standing provision.
Even in a berth charter, the effect of the WIBON provision may be largely neutralised by a suitable exception clause such as the Centrocon strike clause. Thus, in The “Amstermolen” where the vessel in question was unable to berth because of congestion, the Court of Appeal held that although laytime ran by virtue of the phrase “whether in berth or not” nevertheless there was an obstruction within the meaning of the strike clause and time did not therefore count during the continuance of the obstruction.
Approach taken by the Court
In Carboex SA v Louis Dreyfus Field J elected to approach the question of the construction of the clause 9 in the manner adopted in The “Amstermolen”. In his judgment, on their ordinary meaning, the words “In case of strikes….beyond the control of the Charterers which prevent or delay the discharging” covered delay in discharging caused by congestion due to the after-effects of a strike which had ended. In this regard, he referred to the decision in the Leonis where the strike clause was in similar terms and the Court of Appeal held that the delay was covered by the strike exception clause. He also noted that a similar approach was adopted by the Court of Appeal in Reardon Smith where the chartered vessels arrived before the end of the strike and were delayed in loading by reason of congestion due to the strike. In that case the Court of Appeal had concluded that, as matter of common sense, the cause of the delay had been the strike.
The judge further noted that Scrutton J in London and Northern Steamship held that the Amwelsh strike clause excused delay caused by the after-effects of the strike and that Cooke on Voyage Charters commented that the approach normally adopted in interpreting the effect of strike exceptions is to hold that delay caused by congestion in the aftermath of a strike is excused.
The judge concluded that the arbitral tribunal had erred in law in deciding that charterers did not have the protection of clause 9.
The Court therefore held that the strike exception was wide enough to cover (i) delay in discharge due to the after-effects of a strike that had ended and (ii) delay in discharge caused by congestion due to a strike where the vessel had only arrived after the strike had ended.
Delay as a result of strike congestion can be costly to the parties involved and this decision has provided some welcome clarity on the question of who bears the risk of such delay.
The Court of Appeal decision in this case is discussed in "Berth Charter and Risk of Delay - Strikes, Congestion - Revisited".
Article by Jo Cullis
