Disruption of Laytime
Once laytime has commenced, then the cargo handling operations can continue until completion. There are instances however, in which laytime may be interrupted, and these may be provided for in the charterparty. For example, a possible event that may occur and may interrupt laytime is the breakdown of cargo handling equipment.
If the ship is using its own gear for cargo operations and it Breaks Down, then laytime does not count during the period of breakdown. If shore-based equipment is used, then the charter party may specify that time lost because of equipment breakdown that was beyond the Charterer’s control will not count as laytime. Other events that are provided for in charterparties include:
1- Weekends and Holidays:
If the contract specifies a clause such as SHEX (Sundays and holidays excluded from the calculation of laytime) then laytime is interrupted during the period. If cargo work is performed during the excepted period, laytime will not normally count, unless the contract allows it to-it might say, “time not to count during weekends, unless used,” or SHEXUU (Sundays and holidays excepted unless used). Alternatively it may state that Sundays and holidays do not count even if used (SHEXEIU), or that Sundays and holidays are included in the calculation of laytime (SHINC). Because Sunday is a Christian holiday, in Islamic countries it is substituted by Friday and in Israel by Saturday
2- Adverse Weather:
Laytime will not count when cargo operations are disrupted by bad weather, which usually includes swelling of the sea and large waves. For this reason, clauses in the charter party indicate that laytime will count during “weather working days” or “days weather permitting.” Periods that are interrupt- ed due to weather are deducted from the calculation of laytime. Time lost when a ship is waiting to berth during bad weather that would have resulted in the interruption of cargo operations even if the ship was already berthed does not count.
3- Shifting Between Berths:
If a ship is waiting at anchorage and then sails into port, the time spent in shifting from anchorage to berth will not count as laytime. However, if the ship must shift from one berth to another in order to continue loading/ discharging operations, the shifting time involved will normally count as laytime. If shifting is not requested by the charterers but becomes necessary by order of the harbormaster or other port authority, then it counts as laytime. If the charter party nominates more than one port or multiple berths where the ship will proceed for cargo operations, then time lost will not count as laytime and the costs are borne by the owners.
There is nearly always a clause in a contract to the effect that delays due to shore strikes are not to count as laytime. However, such delays may count if the charterer agrees and pays half demurrage for time lost due to the strike and the consequent delay exceeding laytime.
The safe berthing/shifting clause of ASBATANKVOY illustrates the above items:
The ship shall load and discharge at any safe place or wharf, or alongside ships or lighters reachable on her arrival, which shall be designated and procured by the Charterer, provided the Ship can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer.
The Charterer shall have the right of shifting the Ship at ports of loading and/or discharge from one safe berth to another on payment of all towage and pilotage shifting to next berth, charges for running lines on arrival at and leaving that berth, additional agency charges and expense, customs overtime and fees, and any other extra port charges or port expenses incurred by reason of using more than one berth. Time consumed on account of shifting shall not count as used laytime.
What is Disruption of Laytime?
Disruption of laytime in the context of ship chartering refers to any interruption or suspension of the period allocated for loading or unloading cargo, known as laytime. Laytime is a critical concept in maritime transport, as it directly impacts the cost and efficiency of cargo operations. Several factors can disrupt laytime:
- Weather Conditions: Bad weather, such as storms or excessive winds, can halt loading or unloading operations. This is often referred to as “weather working days” in charter party agreements, where laytime does not count during periods of bad weather.
- Mechanical Breakdowns: Equipment failures either on the ship or at the port (like cranes or conveyor belts) can disrupt operations, leading to a suspension of laytime. The responsibility for such delays often depends on the terms of the charter party.
- Labor Strikes or Work Stoppages: Disruptions caused by labor disputes, strikes, or work stoppages at the port can halt cargo operations, impacting laytime.
- Port Congestion: If a ship is unable to berth upon arrival due to port congestion, this may affect the commencement of laytime, depending on the terms of the charter party (e.g., whether laytime starts upon arrival or berthing).
- Documentation and Customs Delays: Delays in processing necessary documentation or customs clearance can disrupt cargo operations. The responsibility for such delays typically depends on which party is responsible for handling documentation.
- Force Majeure: Unforeseeable circumstances, such as natural disasters or political unrest, can disrupt operations. Force majeure clauses in charter parties typically exempt parties from liability for delays arising from such events.
- Ship’s Readiness: If the ship is not ready to load or discharge cargo as per the charter party’s terms, this can disrupt laytime. For instance, if the holds are not clean, this can delay the start of laytime.
- Shifting of Ship: If the ship needs to be shifted within the port (e.g., from one berth to another), this may interrupt the laytime clock, depending on the specifics of the charter party agreement.
- Notice of Readiness (NOR): Disputes or issues related to the Notice of Readiness can also disrupt laytime. NOR is a declaration by the ship’s master that the ship is ready to load or unload. If there are disagreements over the validity of NOR, this can affect when laytime starts.
- Specific Provisions in Charter Party: The charter party may include specific provisions or exceptions that define circumstances under which laytime can be interrupted or suspended.
Understanding and managing laytime is crucial for both shipowners and charterers, as it directly impacts the economics of a chartering contract. Charter parties often contain detailed provisions outlining how laytime is calculated and what constitutes legitimate disruptions, ensuring clarity and reducing the potential for disputes.
What is the difference between Interruptions and Exceptions to Laytime?
In the context of ship chartering, laytime refers to the agreed period during which the charterer can load and/or unload cargo without incurring additional charges. Understanding the difference between interruptions and exceptions to laytime is crucial, as they can significantly impact the calculation of laytime and any associated demurrage or despatch fees.
- Interruptions to Laytime:
- Definition: Interruptions are temporary halts in the laytime clock due to various reasons. During these interruptions, laytime stops counting but will resume once the cause of the interruption is resolved.
- Causes: Common causes of interruptions include bad weather (weather working days), mechanical breakdowns, or labor issues like strikes. The specifics depend on the charter party agreement.
- Impact: The effect of interruptions is to extend the laytime period. If the laytime expires and the ship is still being loaded or unloaded, demurrage charges may apply. However, the total laytime available is increased by the duration of the interruptions.
- Exceptions to Laytime:
- Definition: Exceptions are specific conditions or periods during which laytime does not count at all, as stipulated in the charter party agreement.
- Nature: These are pre-agreed circumstances under which laytime is not to run, regardless of whether cargo operations could actually take place. Unlike interruptions, once time is lost due to exceptions, it is not added back into the laytime calculation.
- Examples: Common exceptions include official holidays, certain types of bad weather (if defined as an exception in the charter party), and delays caused by the shipowner, such as arriving in a non-ready condition.
- Contractual Agreement:
- Both interruptions and exceptions to laytime are governed by the terms of the charter party agreement. The specific wording and clauses of the agreement will determine what constitutes an interruption or exception, and how each is to be treated in terms of laytime calculation.
- Demurrage and Despatch:
- Understanding interruptions and exceptions is crucial when calculating demurrage (charges incurred for exceeding the laytime) or despatch (a rebate for loading/unloading under the laytime).
- Interruptions may delay the onset of demurrage but extend the total laytime, while exceptions can reduce the effective laytime without any extension.
- Legal and Commercial Implications:
- Disputes often arise regarding what constitutes an interruption or exception, how they should be documented, and their impact on laytime calculations. Accurate record-keeping and clear contractual terms are essential to resolve such issues.
Interruptions to laytime are temporary pauses in the laytime count, after which laytime resumes, potentially extending the overall laytime period. Exceptions, on the other hand, are specific conditions under which laytime does not count at all, and the lost time is not recouped. Both concepts are crucial in the calculation of laytime and any associated charges in maritime shipping.
An Interruption to laytime occurs when a specific period is not counted as part of laytime due to it falling outside the laytime clause’s definition. An example of this is the “Weather Working Day” (WWD) laytime period.
On the other hand, an Exception to laytime refers to a period that falls within the laytime definition but is excluded by an exceptions clause. The main difference between the two is that with an exception to laytime, it is necessary to demonstrate a causal connection between what is excluded and the failure to work cargo. In contrast, with an interruption to laytime, it only needs to be shown that the excluded condition exists at the cargo working location.
- Ship X has a port charter with an interruption to laytime expressed in “Weather Working Days.” (WWD)
- Ship Y has a similar charter but with laytime expressed in working days and an additional clause that excludes time lost due to adverse weather.
If both ships are waiting at anchorage for a berth, in the case of Ship X, rainy periods on working days will be excluded from laytime. However, this exclusion does not apply to Ship Y because the rain did not cause a delay in cargo operations.
Interruptions to Laytime
There are various interruptions to laytime, with the most common ones being “Weather Working Days” and “Sunday and Holidays excepted.”
a. Weather Working Days: The interpretation of the term “weather” is determined as a matter of fact. What might be considered bad weather for one ship may not necessarily be the same for another ship, even if they are in the same port at the same time. For instance, a period of rain might hinder the discharge of a cargo of rice but not affect the discharge of a cargo of crude oil.
Regarding weather days, the Statement of Fact (SOF) usually records the prevailing weather conditions in the port and is typically prepared by the agent, often counter-signed by the master. While the SOF serves as persuasive evidence, it is not legally binding. Parties involved can challenge the information in the SOF by providing alternative evidence, such as data from a local weather station. If ship owners have any concerns about the agent’s objectivity in preparing the SOF, it is advisable to appoint a protective agent to ensure the accuracy of the information.
b. Sundays and Holidays excepted: While interpreting “Sunday” presents no significant challenges, defining what constitutes a “holiday” can sometimes be more complex. Whether a day qualifies as a holiday or not is determined by examining regulations, customary practices, and local traditions. Local authorities may declare a day as a holiday, and this declaration may apply to the port and its immediate vicinity, irrespective of whether actual work is performed on that day.
Exceptions to Laytime
Do General Exception Clauses apply to Laytime and Demurrage?
The application of general exception clauses to laytime and demurrage is generally not assumed unless explicitly stated. These clauses typically need specific language to extend their coverage to laytime and demurrage.
For example, in Part II of the Asbatankvoy charterparty, clause 19 contains general wording, but the charter also includes its own set of more narrowly defined exceptions for laytime and demurrage provisions. In such cases, the specific exceptions for laytime and demurrage would take precedence over the general clause.
However, it is possible to argue that a general exception clause could be considered an exception to laytime and demurrage if it explicitly references delays in loading or discharging and there is no separate set of exceptions specified for laytime and demurrage in the charter. In essence, the specific language and intent of the charter would determine whether a general exception clause applies to laytime and demurrage or not.
Fault of the Shipowner
1- What period of time can charterer claim for?
Laytime and demurrage will not be counted when the delay is attributed to the shipowner’s fault. However, it’s essential that the delay and its cause occur simultaneously, and this provision does not cover consequential delays. Time will only be suspended when charterers have been prevented from using the ship when they intended to use it. For instance, if time is lost because a berth is unavailable due to a previous fault of the owner, charterers won’t be able to stop laytime or demurrage for the waiting time.
Nevertheless, charterers may still have a claim for damages related to a breach of a separate obligation outlined in the charter.
2- What does “fault” mean?
To interrupt the running of laydays, it’s not enough for the shipowner to merely prevent continuous loading or discharging of the ship. Several conditions must be met:
- There must be a breach of obligation on the part of the shipowner.
- The delay must result from a duty for which the shipowner is directly responsible under the charter or one for which they have delegated their responsibilities.
- The shipowner’s fault must be the sole or the primary cause of the delay.
- The delay must be within the owner’s control, and they must not voluntarily take actions to prevent the ship from being continuously available for cargo operations.
In addition, laytime or time on demurrage will not run if shipowners voluntarily prevent their ship from being continuously available for cargo operations, regardless of whether such operations were planned by the charterers.
Here are some examples to illustrate these principles:
- If the shipowner is responsible for the stevedores under the charter, any time lost due to stevedore negligence will be attributed to the owner. However, if the delay is caused by factors beyond the owner’s control, such as a stevedore’s strike, the owner will not be held responsible for the delay.
- If de-ballasting or ballasting operations delay cargo operations and these operations were not necessary but carried out for the shipowner’s convenience, the lost time will be considered the owner’s fault and will not be counted.
- If a ship runs aground due to the crew’s negligence, laytime will be suspended. Conversely, if the grounding was not a result of crew negligence, the time will count.
- Time lost due to the non-production of a bill of lading at the discharge port will not count, unless the charter obligates the owners to accept a Letter of Indemnity (LOI).
3- Can the fault of the Shipowner be excluded?
Excluding the fault of the shipowner requires clear and specific language in the contractual clause. Clauses that incorporate the U.S. Carriage of Goods by Sea Act (USCOGSA) or general exception clauses that state the Shipowner is not liable for delays caused by acts or neglects of the Master and other servants in the navigation or management of the ship may not be adequate to exclude the shipowner’s fault. To effectively exclude the shipowner’s fault, the clause should explicitly and unambiguously state the conditions and circumstances under which the shipowner is absolved of responsibility for delays.
Strikes, Congestion and Delays – Whose Risk?
The allocation of risk for strikes, congestion, and delays in shipping contracts depends on the specific terms and clauses outlined in the contract between the parties involved, typically the shipowner or charterer and the cargo owner. These risks can be complex, and the responsibility for them can vary depending on the type of contract and the negotiations between the parties. Here are some common scenarios:
- Laytime and Demurrage Clauses: In many shipping contracts, laytime and demurrage clauses specify the responsibilities and liabilities related to delays. Laytime is the time allowed for loading and unloading cargo, and demurrage is the fee payable if these time limits are exceeded. These clauses may include exceptions or exclusions related to strikes, congestion, and other delays. The allocation of risk depends on how these clauses are structured.
- Force Majeure Clauses: Some contracts may include force majeure clauses that address unexpected events or circumstances beyond the control of the parties, such as strikes, labor disputes, or acts of nature. When such events are explicitly mentioned in a force majeure clause, they may relieve one or both parties from their contractual obligations during the event’s duration.
- Charter Party Terms: In charter party agreements, the terms negotiated between the shipowner and charterer can specify how risks related to strikes and delays are allocated. These terms can vary widely and may place responsibility on one party or the other, or they may be shared to some extent.
- Customary Practices: In some cases, industry customs and practices may play a role in determining risk allocation. For example, if it is customary in a particular trade route or region for shipowners to bear the risk of certain delays, it may become part of the standard contractual understanding.
- Negotiations: Ultimately, the allocation of risk depends on the negotiations between the parties involved. They may agree to specific terms that allocate responsibility for strikes, congestion, or delays in a way that suits their commercial interests and bargaining positions.
It’s important for parties entering into shipping contracts to carefully review and understand the terms and clauses in the contract, as well as any applicable laws and regulations. Legal counsel with expertise in maritime law can also provide guidance on interpreting and negotiating contractual terms related to risk allocation for strikes, congestion, and delays.
Who assumes the risk of Strikes, Congestion and Delays?
The issue of delay resulting from strikes and congestion can have significant financial implications. Therefore, an important question arises: who assumes the risk of such delays? This matter was recently addressed by the Commercial Court in the case of Carboex SA v Louis Dreyfus Commodities Suisse SA  EWHC 1165. The Court specifically examined whether the strike clause in a berth charterparty applied to delays of ships due to congestion, both when waiting to berth after a strike had ended and when ships arrived after the strike had concluded.
Here are the key details of the case:
Background: In 2008, the owners, Louis Dreyfus, chartered four ships, namely the “Co-op Phoenix,” the “Alpha Glory,” the “C Young,” and the “Royal Breeze,” to the charterers Carboex, each under a contract of affreightment (“COA”) based on an amended version of the Amwelsh voyage charterparty. These ships were chartered for transporting coal from Indonesia to Puerto de Ferrol in Spain, where the cargo would be discharged at the Endesa SA terminal. Upon reaching Spain, congestion occurred at Endesa’s terminal due to a nationwide Spanish haulage strike over fuel prices. Importantly, the strike had concluded before each ship berthed, and it did not disrupt the actual discharge process. Nonetheless, all the ships experienced delays in berthing.
Which Clauses Applied: The primary question that arose was who should bear the risk of the resulting delay? The relevant clauses in this context were clauses 9 (a standard printed clause often referred to as the “strike exceptions” clause) and 40 (a bespoke typed amendment agreed upon by the parties):
- “9. …In Case of strikes, lockouts, civil commotions, or any other causes included but not limited to the 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 ship is already on demurrage.”
- “40. At port of discharge…If the berth is not available when the ship tenders Notice of Readiness, but provided ship/Owners not at fault in relation thereto, then laytime shall commence twelve (12) hours after the 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 ship’s fault, unless sooner commenced, in which case only time actually used to count.”
How to Construe the Clauses: The dispute was submitted to arbitration, where the charterers argued that the discharge of the four ships had been delayed due to the strike, and this period should be excluded from laytime calculation under clause 9, especially the last sentence of that clause. Essentially, they contended that owners should bear the risk of delay caused by port congestion.
Owners, on the other hand, maintained that when combining clauses 9 and 40, which included a “whether in berth or not” (WIBON) provision, charterers assumed the risk of port congestion delay. They argued that clause 9, by itself, was too narrow to transfer the congestion risk to owners. Owners emphasized that clause 40 was a bespoke clause. According to them, clause 9, as a matter of ordinary interpretation, did not prevent the running of laydays when a ship could not berth due to congestion caused by a strike.
Discussion of Relevant Case Law: The Commercial Court extensively reviewed the relevant case law pertaining to this matter. Owners’ argument was based on the notion that the WIBON provision in clause 40 shifted the risk of congestion delay to charterers. Charterers countered this by referring to three cases, Leonis Steamship Co v Rank (No.2)  Com. Cas. 295 (CA), London and Northern Steamship Co Ltd v Central Argentine Railway Ltd  108 LT 527, and Reardon Smith Line Ltd v East Asiatic Co (1938) 62 Ll. L. Rep. 23, which they believed contradicted owners’ position.
The “Amstermolen”  2 Lloyd’s Rep 1, a case that Field J acknowledged was not brought to the attention of the Tribunal, played a significant role in the Court’s decision. In this case, the ship was chartered to load wheat in New Orleans but faced congestion at the port upon arrival. The charterparty incorporated the Centrocon Strike Clause (Amended), stating that in case of any delay due to a strike or obstructions beyond charterers’ control, no claim for damages or demurrage would be made. The Court of Appeal had to determine whether the delay in loading was caused by an obstruction as per the clause. The Court held that an obstruction included anything at the quay side preventing the ship from coming alongside to load. The WIBON provision only initiated laytime counting and did not change the interpretation of the exceptions clause.
Court’s Approach: In Carboex SA v Louis Dreyfus, Field J adopted a similar approach to that taken in The “Amstermolen.” He found that, based on their ordinary meaning, the words “In case of strikes…beyond the control of the Charterers which prevent or delay the discharging” in clause 9 covered delays in discharging due to the after-effects of a strike that had ended. He cited the Leonis case as an example of similar terms in a strike clause and how the Court of Appeal had held that the delay caused by the strike and its aftermath was covered by the strike exception. Field J also noted that the Court of Appeal in Reardon Smith reached a common-sense conclusion that the strike had been the cause of the delay.
The judge concluded that the arbitral tribunal had made a legal error in determining that charterers were not protected by clause 9.
Ultimately, the Court held that the strike exception in clause 9 was broad enough to encompass (i) delays in discharging due to the after-effects of a strike that had ended and (ii) delays in discharging caused by congestion due to a strike when the ship arrived after the strike had ended.
This decision provides clarity on the allocation of risk for delay resulting from strike-related congestion, which can be costly for the parties involved.
Exception to Laytime Case
The Court of Appeal has recently issued its verdict, rejecting the charterer’s appeal against a prior High Court ruling. The decision reinforces that the charterers were indeed liable for demurrage, as stipulated in the terms of a Sugar Charter Party 1999, for the delays following a fire incident at a sugar terminal in Brazil in 2010. The case is ED&F Man Sugar Ltd v Unicargo Transportgesellschaft GmbH  EWCA Civ 1449.
ED&F Man Sugar Ltd chartered the ship named the “Ladytramp” from its disponent owners under a modified Sugar Charter Party dated June 9, 2010, with the purpose of loading at “1-2 safe berth(s).” Initially, the plan was to load at the charterers’ usual terminal at Paranagua. However, on June 14, 2010, a week prior to the ship’s expected arrival at the loading port, a fire incident occurred, causing severe damage to the conveyor belt system that linked the terminal and warehouse.
Consequently, and due to the assessment by local experts that the terminal would remain non-operational for at least three months, charterers decided to direct the ship to load at an alternate terminal at Paranagua. The “Ladytramp” arrived off Paranagua on June 20, tendered notice of readiness at 23:30 hours the same day, eventually berthed on July 15, and finished loading, setting sail on July 20.
Owners claimed demurrage charges amounting to nearly $400,000 for the duration of waiting to load at Paranagua. Charterers disputed any responsibility for demurrage, arguing that the delay should not be considered as laytime because it resulted from a fire that had damaged the mechanical loading equipment.
Clause 28 of the Charter Party outlined the following exceptions to laytime:
“In the event that whilst at or off the loading place or discharging place the loading and/or discharging of the ship is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lockouts of men, accidents and/or breakdowns on railways, stoppages on railways and/or rivers and/or canals by ice or frost, mechanical breakdowns at mechanical loading plants, government interferences, ship being inoperative or rendered inoperative due to the terms and conditions of employment of the Officers and Crew, time so lost shall not count as laytime.”
The charter party mandated that disputes be resolved through arbitration in London. The tribunal’s decision was that clause 28 did not apply because, during the period when the original berth was unusable, they had the right to nominate any safe berth. Thus, they were only “prevented or delayed” from loading because it was unfeasible to do so at the intended berth. Additionally, even if charterers could have brought themselves under clause 28, exception clauses are interpreted strictly against the party proposing them. The clause did not specifically mention fire, and the conveyor belt system’s malfunction resulted from physical damage, not mechanical breakdown. Moreover, this case did not involve government interference.
Charterers appealed this decision but were unsuccessful in the English High Court. Nonetheless, the Court disagreed with the tribunal’s view that clause 28 did not apply, as there was no prerequisite to nominate a berth for the clause to take effect. Nevertheless, the appeal was dismissed since none of the exceptions listed in clause 28 were applicable.
In their recent appeal to the Court of Appeal, charterers attempted to convince the Court that the delay in loading the ship at Paranagua was a result of a “mechanical breakdown” and therefore fell within the scope of clause 28. Charterers argued that it was sufficient to demonstrate that the loading machinery was incapable of performing its intended function to establish the occurrence of a “mechanical breakdown” at the loading facility, which would trigger the application of clause 28.
However, Tomlinson LJ disagreed with this argument, stating:
“The arbitrators’ finding is that there was complete destruction of the conveyor belt system, which on the approach of Robert Goff J, approved by the Court of Appeal, involves something more than a breakdown. However, in my view, by no stretch of the imagination can the arbitrators’ finding be regarded as one of mechanical breakdown. The arbitrators’ only finding is that the conveyor belt system was destroyed by fire. If that involves a breakdown, it is not without more a mechanical breakdown. As Eder J rightly observed, this clause is concerned with the nature of the breakdown. Mr. Young’s argument amounts to saying that if machinery does not work, there has been a mechanical breakdown. I do not agree. That is not so where the only finding is that the machinery has been destroyed by fire.”
This reference to the approach of Robert Goff J in a previous decision, “The Thanassis A,” pertained to a case where damage was caused to an oil pier at the loading port due to a collision with a tanker. Goff J’s statement emphasized that the term “mechanical damage” should not be broadly interpreted. It was held that the damage to the jetty did not constitute a breakdown of machinery or equipment. Complete destruction of part of a facility was considered something beyond a mere breakdown. Tomlinson LJ reiterated that machinery destroyed by fire and a “mechanical breakdown” should not be considered identical, stating that “complete destruction of part of a facility is not only something more than a breakdown, it is plainly something different in kind from a mechanical breakdown, although equally plainly a mechanical breakdown might lead to complete destruction of all or part of a mechanical loading plant, whether through fire or through some other mechanism.” Charterer’s argument that the cause of the lost time fell within clause 28 was consequently rejected, and they were held liable to pay demurrage for the time lost due to the loading delay at one terminal, which was ultimately linked to an incident at another terminal.
Under English law, if a party to a contract seeks to benefit from the terms of an exclusion, exception, or exemption clause in the contract, such as clause 28 in this case, they must clearly fall within its terms without the need for expanding its meaning or implying additional language. The “Ladytramp” case serves as a valuable reminder of this principle known as the contra proferentem rule.
Furthermore, the Court of Appeal’s decision in the “Ladytramp” raised an interesting side issue regarding the admissibility of new evidence. Charterers had another ship, the “Ziemia Zamojska,” under charter, which also experienced delays due to the same fire incident in Paranagua. The demurrage claim related to the delays of the “Ziemia Zamojska” was subject to a separate arbitration process. However, after the award and appeal of the “Ladytramp,” charterers’ legal team obtained evidence in Brazil suggesting that a mechanical breakdown may have triggered the fire incident. Charterers sought to argue that it was up to the “Ladytramp” tribunal to determine whether this new evidence could be admitted for consideration, potentially leading to further factual findings. The Court of Appeal disagreed with this proposition, deeming it highly inappropriate to remit the matter to the arbitrators. They emphasized that charterers could have obtained this evidence and presented it during the initial arbitration process had they considered it relevant.
In English law, an appeal from an arbitration decision is only possible under specific circumstances outlined in the Arbitration Act 1996. These circumstances include substantive jurisdiction (section 67), serious irregularity (section 68), and a point of law (section 69). The application for appeal in this case was made under section 69, which focuses on points of law. Charterers had previously argued that the cause of the fire was irrelevant in the arbitration proceedings.
When ports face strikes, industrial action, or other disruptions that render a terminal inoperable, the question arises: who is responsible for the associated costs?
Force Majeure and Frustration: Parties may seek to excuse their performance of a charter based on force majeure or Act of God provisions, depending on the terms outlined in the charterparty.
However, it’s important to note that force majeure isn’t an independent legal principle in English law. Courts expect commercial parties to understand that the future is uncertain, and agreements should account for such uncertainties. While many standard clauses consider “strikes” as force majeure events, it’s not universally defined, so parties must carefully evaluate whether the specific industrial action falls within the clause’s scope. If a force majeure event occurs and requires notice to counterparties, strict compliance with notice and documentation provisions is crucial.
Frustration of a contract occurs when unforeseeable circumstances make it impossible to perform the contract’s obligations or drastically change performance. Mere inconvenience, hardship, or financial loss typically doesn’t constitute frustration. Strikes, port closures, or disruptions usually won’t frustrate a time or voyage charterparty based on increased cost or delay alone.
Off-Hire: In cases of delays due to strikes or industrial action affecting shipments to or from ports, a key question is whether owners or charterers bear the responsibility for these delays. Time-charterers may argue that the ship should be considered “off-hire” when facing extended waiting times outside an affected port or when incurring additional time and fuel costs to reach an alternative. The specific off-hire clause in the charterparty must be carefully examined, but if it includes typical off-hire clauses like NYPE ’93 clause 17, charterers will likely struggle to claim the ship is off-hire. If charterers unlawfully refuse to pay hire, owners may consider terminating the charterparty, especially if rates have increased due to the disruption.
Unsafe Ports: Issues can arise regarding the safety of ports experiencing disruptions, whether these ports fall within the charterparty’s trading limits, and whether owners can deviate to an alternative port.
Legally, a port suffering disruption due to strikes is typically not considered unsafe if a ship can reach, use, and return from it without being exposed to extraordinary dangers. If a port is legally safe but experiences ongoing disruptions, owners may argue they’re not required to call there based on the charter’s trading limits. Parties should also consider whether the industrial action falls under exceptions like riot or insurrection, as named in the charterparty.
Deviation: Owners must carefully review the charterparty to determine if they have the right to deviate to an alternative port. If allowed, they must do so in good faith and not arbitrarily or unreasonably. It’s crucial to ensure the cargo can be safely discharged at the alternative port and delivered to the correct entity. If there’s no explicit right to deviate, owners may try to argue for a “reasonable deviation” under applicable rules like the Hague Rules. However, unlawful or charterparty-breaching deviation can have severe consequences, including contract termination and loss of insurance coverage. Parties should consult with their insurers and legal advisors before deviating.
When cargo is rerouted, carriers must decide whether they can pass additional charges, transshipment costs, and freight expenses onto their customers.
Voyage Charterparties: For voyage charterers, the main concerns are whether Notice of Readiness was properly tendered, whether laytime has begun, and if charterers can rely on any laytime interruptions or exceptions (otherwise, demurrage may apply). If the ship is already on demurrage, it becomes more challenging for charterers to avoid it, as exceptions to running time must be explicitly drafted.
Liner Operators: Liner operators running scheduled services face schedule disruptions due to port strikes, which can impact their rates and reliability. Parties must be aware of their rights and responsibilities under the charterparties and related contracts. Liner operators’ bills of lading often contain clauses allowing flexibility in routing, transshipment, and liability limitations.
Manufacturers: Modern manufacturing systems often rely on just-in-time logistics, making them vulnerable to port strikes that cause delays in parts delivery. Manufacturers, suppliers, and assemblers should carefully review their contracts to determine who bears the risk of shipment delays. They should also consider business interruption insurance and alternative supply routes.
Conclusion: Port disruption due to strikes or industrial action is a serious issue with potential cascading effects on ships and shipments. While most agreements have business interruption provisions, they are unlikely to frustrate the contract. Parties should continue to perform their contracts and address the associated costs through careful contract review and adherence to contractual provisions. Understanding these arrangements is crucial in determining who ultimately bears the financial burden.
What is Turn Time (TT) within Dry Cargo Charterparties?
“Turn Time” (TT) in dry cargo charterparties is a term that refers to the time allocated for a ship to complete a round trip, including loading, unloading, and the voyage itself. This concept is particularly relevant in time charterparties where the ship is hired for a specific period. Understanding Turn Time is crucial for both the shipowner and the charterer for planning and operational purposes. Here’s a breakdown of its components:
- Voyage Duration: This includes the time taken for the ship to travel from the loading port to the unloading port and back to the starting point or another destination as per the charterparty agreement.
- Loading and Unloading Time: Turn Time encompasses the time spent loading the cargo at the origin and unloading it at the destination. This period is critical as it directly impacts the efficiency and profitability of the voyage.
- Laytime Considerations: Within the Turn Time, laytime – the agreed period for loading and unloading the cargo without incurring additional charges – plays a crucial role. Exceeding the laytime can lead to demurrage charges, while finishing early can result in despatch payments.
- Operational Efficiency: Turn Time is a measure of operational efficiency. Shorter Turn Times mean that the ship can complete more voyages within a given period, potentially increasing earnings for the shipowner and reducing costs for the charterer.
- Planning and Scheduling: Accurate estimation of Turn Time is vital for both parties for effective planning and scheduling. It helps the charterer to plan their cargo operations and the shipowner to schedule subsequent charters.
- Contractual Implications: In charterparty agreements, Turn Time may be used to set expectations and benchmarks. It can be a factor in negotiating charter rates and other terms.
- Impact on Charterparty Duration: For time charters, where a ship is chartered for a specific period, understanding and managing Turn Time is essential to maximize the utilization of the ship within the charter period.
- Flexibility and Contingencies: Effective management of Turn Time often requires flexibility and the ability to adapt to unforeseen circumstances, such as delays due to weather, port congestion, or mechanical issues.
Turn Time is a comprehensive measure of the time taken for a complete cycle of a dry cargo ship’s operations under a charterparty. It is an important factor in assessing the efficiency and economic viability of maritime cargo operations.
What are the conditions for Laytime?
The topic of Laytime Commencement is quite extensive. Therefore, this article aims to provide a concise overview of the key conditions typically required for laytime (or demurrage if applicable) to begin, along with references to significant supporting legal precedents that underpin these principles.
In most charterparty agreements, there are generally three conditions that must be met before laytime can commence:
- The ship must have arrived at the specified destination outlined in the charterparty.
- The ship must be fully prepared in all essential aspects and in suitable condition for cargo loading or unloading.
- If required, a valid Notice of Readiness (NOR) must be tendered, confirming the ship’s arrival and readiness.
Once these conditions are satisfied, the ship is considered an “arrived ship” for the purposes of the contractual laytime or demurrage provisions, and the countdown begins. Let’s explore each of these requirements further.
Arrival at Destination: For a ship to be considered as having arrived, it must reach the location within the port where NOR can be legally served, as specified in the charterparty. The agreed-upon destination may vary depending on whether the charterparty is a “berth charter” or a “port charter.”
- In a “Berth Charter,” the ship is not considered arrived until it reaches the designated loading or unloading berth within a named port. Until this point, the ship is still in the process of the voyage, and the charterer is not obliged to load or receive cargo. In such cases, the risk of congestion or berthing delays typically falls on the shipowner.
- In a “Port Charter,” the ship must reach the named port and either reach the intended berth or, if the berth is unavailable, a customary waiting area within the port where ships usually wait. In this position, the ship must be at the “immediate and effective disposition of the charterer.” While the charterer bears the cost of waiting for an available berth, the waiting place must generally be within the port limits. If the waiting place is outside the port limits, NOR cannot be validly tendered unless the charter expressly states otherwise.
WIBON/WIPON: Some charters include clauses like WIBON (“whether in berth or not”) and WIPON (“whether in port or not”), which modify the standard arrival requirements. WIBON allows NOR to be tendered before reaching the berth if congestion renders the berth unavailable, shifting the congestion risk to the charterer. WIPON applies when a ship has arrived but cannot wait within port limits due to congestion, allowing NOR to be tendered if the ship reaches the usual waiting area outside port limits.
Reachable on Arrival/Always Accessible: Many charters contain additional clauses allocating the risk of congestion or berthing delays to charterers. These may include a warranty that the ship will be able to proceed directly to the berth upon arrival, expressed as “reachable on arrival” or “always accessible.” The warranty “reachable on arrival” places the obligation on charterers to ensure that a loading or unloading berth is available without delay upon the ship’s arrival, regardless of the cause of unreachability.
Readiness of the Ship: The second requirement for laytime commencement is that the ship must be fully prepared in all aspects to load or unload cargo. This means the ship must be physically ready, with clean and dry holds and all necessary equipment (e.g., cranes, hatches, pumps) in working order. Additionally, all required documentation must be in order for immediate cargo operations.
Notice of Readiness (NOR): NOR serves as the trigger for laytime to start running. While the tendering of NOR might seem straightforward, disputes often arise, and there are several pitfalls to be aware of.
- Form: The charterparty usually specifies the means and method of NOR service. It’s essential to strictly adhere to these requirements. Deviating from the specified form or content can render the NOR invalid.
- Content: NOR must consist of statements of existing facts. If the NOR asserts that the ship has arrived and is materially ready but the ship is not, the notice will be invalid. Similarly, premature NOR tendering is also considered invalid and cannot be cured once the ship reaches the required condition.
- Waiver and Estoppel: In some cases, even if an NOR is invalid, charterers may be found to have accepted it based on legal doctrines of waiver and estoppel. This acceptance can trigger laytime commencement.
In conclusion, laytime commencement is a complex and legally intricate matter. Disputes on this topic are common, and the points discussed here provide only a concise summary of fundamental principles and case law. When addressing laytime commencement issues, a thorough review of the charter’s terms is crucial to ensure compliance and mitigate potential disputes.