Berth Charter and Risk of Delay - Strikes, Congestion - Revisited

December 2012

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The issue of who bears the risks of delay as a result of strikes and congestion can be a costly one as between owners and charterers. This issue was recently revisited by the Court of Appeal in Carboex S.A v Louis Dreyfus Commodities Suisse S.A [2012] EWCA Civ 838.

Facts

Four vessels had been chartered on the Amwelsh voyage charterparty to carry coal from Indonesia to Puerto de Ferrol in Spain. But there was congestion at terminal at the discharge port as a consequence of a nationwide haulage strike over fuel prices during which no coal could be removed from the terminal. The strike had, in fact, ended before each of the vessels berthed and did not cause any disruption in the actual discharge process. However, as a result of the congestion caused by the strikes, all of the vessels were delayed getting into berth.

The charterers’ position, seeking to rely on the strike exceptions clause in the charterparty, was that the vessels were delayed by reason of the strike and that this period was excluded from laytime,.

In contrast, owners’ position was that it was only delays caused by strikes after the vessel had berthed that were excluded from laytime.

The dispute had been arbitrated in London and the tribunal decided in owners’ favour. The charterers successfully appealed that decision to the High Court. The High Court held that the strike clause in the charterparty was wide enough to cover (i) delay in discharge due to the after-effects of a strike that had ended and (ii) delays in discharge caused by congestion due to a strike where the vessel had only arrived after the strike had ended. The decision is discussed in more detail in "Strikes, Congestion and Delays - Whose Risk?"

Owners then appealed against the High Court’s decision.

Arguments advanced by owners to the Court of Appeal

The charter form contained a strike exceptions clause (clause 9) and a bespoke clause (clause 40) which were pertinent to the issues in dispute:

In Case of strikes, …….or any other causes  …… 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.”

and

At port of discharge….If the berth is not available when vessel tenders Notice of Readiness…then laytime shall commence twelve (12) hours after first permissible tide, ….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 the vessel’s fault, unless sooner commenced in which case only time actually used to count…”

Counsel for owners argued that the charter form was worded as a berth charter, thus placing on owners the risk of congestion preventing a vessel from reaching a berth and so becoming an arrived ship. However, Counsel argued that in the present case the parties had by clause 40 expressly provided that NOR might be given from the usual waiting place, whether in berth or not, and that if a berth was not then available laytime was to commence 12 hours after first permissible tide. The effect of these provisions, it was submitted, was to transfer to charterers the risk of congestion at the port of discharge.

As an alternative argument, Counsel for owners argued that clause 9, the strike exceptions clause, operated only during the continuation of the strike and did not extend to delay caused by congestion which was, itself, a consequence or after-effect of the strike.

The Court of Appeal’s Decision

The Court considered the significance to be attached to the expression “whether in berth or not”.  Whilst it is true to say that the purpose of including these words in a berth charter is to transfer the general risk of congestion from owners to charterers, it was noted that it is equally true to say that its function is to start the laytime clock running. The Court indicated that the establishment of a general regime of that kind does not give rise to a presumption that the parties did not intend to transfer the risk of delay from specific causes back to owners and, indeed, parties are free to allocate that risk under different circumstances. In the view of the Court, clause 40 did not point to a narrower construction of clause 9 than it would naturally bear.

The Court indicated that clause 9 was clearly intended to transfer the risk of some delay caused by strikes from charterers to owners, and there was nothing in the language of the clause itself to indicate that its operation was restricted to time lost while the vessel was alongside the berth. The general language of clause 9 suggested that the parties intended that charterers should be protected from the effects of strikes that prevented or delayed the vessel entering berth rather than only from strikes that directly interfered with cargo handling operations.  Had the parties intended to protect the charterers’ protection more narrowly, they should have used clearer language.

The Court also noted that the construction advanced by owners was capable of producing some surprising results. For example, if a vessel was prevented by a strike of pilots or tugs from getting into an available berth to begin discharging, the charterer would not be protected, whereas if she was already in berth but could not begin discharging because of a strike of crane drivers, she would be. The language of clause 9 did not, in the Court’s view, suggest that the parties intended that such different consequences should pertain depending on whether the vessel had or had not been able to enter berth.

The alternative argument adduced by owners was also rejected by the Court on the basis that the natural meaning of clause 9 showed that it was concerned only with the consequences of the excepted causes, not with their duration, and that there was nothing in the clause to support the conclusion that its operation was limited to interruptions and delays occurring during the period of the excepted causes. The Court indicated that its conclusion was borne out by the decision in London and Northern Steamship Co v Central Argentine Railway Ltd (1913) 108 L.T. 527.

The Court held that if the matter were free from legal authority clause 9 would operate to protect charterers in respect of any time lost to the vessel by reason both of the strike and of the unofficial stoppage. However, the Court had to consider Central Argentine Railway v Marwood [1915] A.C. 981, as in that case, the House of Lords considered the effect of a clause in identical terms to clause 9. In the Court’s view, Marwood was authority for two related propositions: (i) that “such time” in clause 9 means time lost to the vessel in completing discharging by reason of one of the excepted causes; and (ii) that in order to obtain the protection of clause 9 the charterer must establish that the event on which he relies falls within the clause and was the effective cause of delay to the vessel.  The Court did not think that Marwood was authority for the proposition that clause 9 protects the charterer only once the vessel has reached her discharge berth.

Whether the strike was the effective cause of the delay is a question of fact. The closer a vessel is to the head of the queue when a strike broke out, the easier it will be to establish the causal link, but it should be emphasised that, of course, each case will turn on its own facts.

For the above reasons, the Court dismissed owners’ appeal and held that the strike clause in a berth charterparty was wide enough to cover (i) delay in discharge due to the after effects of a strike that had ended and (ii) delays in discharge caused by congestion due to a strike where the vessel had only arrived after the strike had ended, with the proviso that the strike was the effective cause of the delay.

Article by Jo Cullis (jo.cullis@simsl.com)