Strikes, Congestion and Delay - Recent Decisions

May 2015

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The Club is often asked to advise on which party to a charterparty should be expected to bear the cost of delays to a vessel arising from strikes or consequent port congestion. In most cases, this will depend on the exact wording of charterparty clauses. In Carboex S.A. v Louis Dreyfus Commodities Suisse S.A.1 the Court of Appeal held that the wording in the strike clause in that charterparty had the effect that Owners bore the delays caused by strikes at the discharge port, and the delays caused by port congestion even after the strike had finished.

Two recently reported London arbitration awards have considered the treatment of delays caused by strikes on two voyage charters. Although arbitration awards do not create binding precedents at English law, the awards might give indications of how the law might operate.

LONDON ARBITRATION 3/17

The vessel arrived at the discharge port and tendered notice of readiness on 14 January 2017. Due to congestion caused by a strike, the vessel did not berth until 31 January. Discharge took place from 31 January to 2 February.

The parties had agreed the following charterparty provisions:

“COP DISCHARGE AT…..
1 GSB2 ALWAYS AFLOAT ALWAYS ACCESSIBLE BENDS AT ALL PORTS
DEMURRAGE USD 3800 PR OR PR FREE DESPATCH BENDS. ONCE IN DEMMS IS ALLWAYS IN DEMM CLAUSE TO BE APPLICABLE TO THIS C/P”

Charterers argued that ‘COP’ (custom of the port) should cover the entire time at the discharge port starting from tender of the notice of readiness. Charterers also argued that the ‘COP’ provision was in effect an agreement that no demurrage would be payable at the discharge port.

Owners argued that they were entitled to either damages for detention or demurrage for the period between the vessel’s arrival, on 14 January, and her berthing, on 31 January, because Charterers were in breach of their obligation to provide a berth reachable on arrival. They accepted that the time actually spent discharging (just over two days and five hours) was within the allowable scope of ‘COP’ and they did not make any claim for that period.

The arbitration tribunal found in Owners’ favour.

They noted that in the charterparty a demurrage rate had been expressly agreed on a ‘both ends’ basis and so Charterers’ argument that there could be no demurrage at the discharge port failed. The tribunal held that the ‘COP’ provision applied to the time for cargo operations, only, and not to the period when the ship was delayed, waiting for a berth.

Owners’ argument that there was a breach of the ‘always accessible’ obligation succeeded. Charterers argued that ‘always accessible’ did not equate to ‘reachable on arrival’ but the tribunal disagreed: the words spoke for themselves. They required that when a vessel arrived there be a berth that the vessel could access without delay.

The tribunal awarded Owners damages for the time lost waiting for a berth, up to 31 January, and assessed at the demurrage rate.

LONDON ARBITRATION 9/17

In the other arbitration reported recently and concerning strike delays, a vessel was fixed on an amended Gencon 94 form to carry salt in bulk from Kandla to Chittagong. She arrived at the discharge port and commenced discharge on 18 April. Discharge was interrupted from 21 April until 27 April by a strike by lighter barge workers, and was finally completed on 27 May.

Owners commenced arbitration claiming demurrage from the expiry of laytime, 14 May, until the completion of discharge (but allowing for a period of bad weather during the strike).

Paragraph three of the Gencon strike clause holds that:

‘If there is a strike or lock-out affecting the discharge of the cargo on or after vessel’s arrival at or off port of discharge and same has not been settled within 48 hours, Receivers shall have the option of keeping vessel waiting until such strike or lock-out is at an end against paying half demurrage after expiration of the time provided for discharging, or of ordering the vessel to a safe port where she can safely discharge without risk of being detained by strike or lock-out. Such orders to be given 48 hours after Captain or Owners have given notice to Charterers of the strike or lock-out affecting the discharge….’

Owners did not give Charterers any formal notice of the strike, but the tribunal considered that it was clear that Receivers and Charterers were both fully aware of the existence of the strike, and that the lack of any formal notice from Owners did not preclude them from counting laytime in full and claiming (i) half-demurrage for the period of the strike, and (ii) thereafter at the full rate payable.

CONCLUSION

Strike clauses vary considerably in their form and effect, and the question of whether laytime counts during a delay caused by a strike can also turn on the wording of other clauses in the charterparty.

1Carboex S.A. v Louis Dreyfus Commodities Suisse S.A. [2012] EWCA Civ. 838 - see 'Berth Charter and Risk of Delay - Strikes, Congestion - Revisited'

2Good and Safe Berth

 

Article By Danielle Southey
Syndicate Associate
European Syndicate