Ship Discharging Responsibility
Laytime will run from the moment the ship arrives at the port of discharge and is ready to unload. The respective obligations of shipowner and charterer are similar to those at the port of loading except for the fact that the operation is conducted in reverse.
Discharge is a joint operation, the shipowner being responsible for moving the cargo from the hold to the ship’s side and the consignee for taking it from alongside. Where lighters are required for receiving the cargo alongside, the cost will normally fall on the charterer.
This division of responsibility may of course be modified by the custom of the port or by express provision in the charter-party. Therefore, it may be agreed that the shipowner will be responsible for the cost of discharging, in which case he will have to bear such incidental expenses as the cost of any necessary re-bagging of the cargo.
Alternatively, the charter may provide that discharge is to be free of expense to ship (FIOST Free In Out Stowed Trimmed), with the result that the charterer will be liable for stevedoring costs. The discharging operation must be completed within the specified lay days, otherwise the charterer will incur the same liability for demurrage or damages for detention as if a similar delay had occurred during the loading operation.
Who is Responsible for Ship Discharging?
Responsibility for ship discharging can vary depending on the Charter Party, but here are the main parties generally involved:
- Ship’s Master/Captain: The ship’s master has the overall responsibility for the safe operation of the ship, which includes overseeing the discharging of cargo. They ensure that the discharge plan is followed and that safety measures are in place to prevent any mishaps.
- Chief Officer/First Mate: The Chief Officer is often directly responsible for planning and overseeing cargo operations, including discharging. They ensure the operations comply with the ship’s stability and strength requirements, as well as all relevant regulations.
- Cargo Officer: Depending on the ship’s crew structure, there may be one or more officers specifically tasked with managing cargo operations. They would work under the Chief Officer’s direction and help in implementing the discharge plan.
- Ship’s Crew: The rest of the ship’s crew, including able seamen and deckhands, play a role in the physical work of discharging cargo under the supervision of their officers.
- Stevedores: These are shore-based workers who physically handle cargo, either loading it onto or discharging it from the ship. They’re typically employed by a stevedoring company that contracts with the ship’s owner or operator, or with the port.
- Port Authority: The port authority often plays a regulatory role, ensuring that discharging operations follow local rules and regulations for safety and environmental protection.
- Ship Owner/Operator: The ship’s owner or operating company bears overall responsibility for the ship’s operations, including discharging. They’re responsible for hiring competent crew and ensuring they’re trained in proper procedures.
It’s important to note that while these parties have specific responsibilities, they must all cooperate and communicate effectively to ensure that ship discharging operations are carried out safely and efficiently.
Ship Discharging, Delivering and Responsibility
The ruling in The Sea Master (2020) case gives rise to an intriguing inquiry regarding the contractual responsibility for the discharge and receipt of cargo, as well as the liability for any delays resulting from a failure to fulfill such obligations. William Stansfield provides further elucidation.
In June 2016, the MV SEA MASTER was chartered by the Owners to the voyage charterers, according to the Norgrain ’89 form (“the Charterparty”). Pursuant to the Charterparty, the ship was loaded with corn and various soya cargoes from different Argentine ports, with the intention of discharging them in Morocco.
The ship embarked on its journey to Morocco, and in August 2016, the corn cargo and a portion of the soya cargoes were successfully unloaded.
The remaining cargo was ultimately discharged at Tripoli, Lebanon, in February 2017. The reasons behind this particular course of action remain undisclosed in this judgment. The court simply states: “the arrangements that made this possible were complicated and took a substantial period to finalize.” Nevertheless, it is worth noting that a previous jurisdictional challenge involving the same parties and ship was reported in (2018) EWHC 1902 (Comm). In that case, it was clarified that the voyage charterer also acted as the FOB purchaser of the cargo and chartered the ship to transport the goods. However, due to a subsequent loss of the on-sale, they found a new buyer at a different port of discharge.
Claims raised by the Shipowners
The Owners lodged claims for demurrage or damages resulting from the detention. Typically, such claims would have been directed at the voyage charterer in accordance with the Charterparty. Unfortunately for the Owners, the voyage charterer had already become insolvent, rendering any pursuit of a claim against them impractical.
Consequently, claims and counterclaims were initiated in London arbitration by the Owners, the receivers of the cargo, and the bank that provided financing under the Bill of Lading. The tribunal, as a preliminary matter, determined that neither the financing bank nor the cargo receivers were liable for demurrage under the Bill of Lading. The Owners chose not to appeal this decision. Therefore, the Owners were left with the option to pursue an alternative claim for damages due to the detention against the bank/cargo receiver under the Bill of Lading.
In order to assert such a claim, the burden rests on the Owners to establish that the bank/cargo receiver breached a term of the Bill of Lading and that such breach resulted in the loss of time.
In the arbitration, the tribunal was tasked with considering, as a preliminary matter, whether the Bill of Lading encompassed an implicit provision to:
Facilitate the unloading and delivery of the cargo within a reasonable timeframe (“the First Implicit Provision”); and/or
Unload the cargo within a reasonable timeframe (“the Second Implicit Provision”).
The tribunal, in its preliminary decision, concluded that neither provision should be inferred into the Bill of Lading. It was upon this preliminary issue that the Owners appealed to the court on a point of law.
The provisions of the Charterparty
All parties unanimously agreed that the terms of the Charterparty were incorporated into the Bill of Lading. The Charterparty, drafted in accordance with the Norgrain ’89 format, included the following pertinent clauses:
“10(a) Loading and unloading expenses
The cargo shall be unloaded without any cost to the ship…
11 Stevedores at Loading and Unloading Ports
Charterers/Receivers shall appoint and bear the expenses of stevedores at the unloading port(s).”
The Owners’ appeal against the tribunal’s decision on the preliminary issues proved unsuccessful. To comprehend the reasons for this outcome, it is more logical to examine the two proposed implicit provisions in reverse order.
The Second Implied Provision
The court determined that a provision mandating the charterers to “unload the cargo within a reasonable timeframe” could not be implicitly inferred into the Charterparty. This conclusion stemmed from the fact that, under the Norgrain ’89 charterparty format, the contractual responsibility for unloading the cargo lies with the Owner.
According to English common law, absent a contrary contractual provision, it is the Owner’s duty to unload the cargo—this principle was established in the ruling of The Jordan II, where it was similarly held that explicit language is necessary for a court or tribunal to conclude that the general rule has been displaced by mutual agreement.
The court observed that clause 10 of the Charterparty is unequivocal. The cargo is to be unloaded at no expense to the ship. Consequently, it is the Charterer who bears the costs of the unloading operation, and clause 11 mandates the charterers to appoint and compensate the stevedores at the unloading port. However, these two clauses do not shift the responsibility for unloading from the Owners to the Charterers. As the court eloquently stated:
“In my judgment, the Owner is mistaken in asserting that the Defendants were obligated to unload the Vessel. Their obligation was to provide payment solely for the operation and, in connection with this obligation, to bear the expenses by appointing stevedores to execute the operation on behalf of the Owner.”
The First Implied Provision
With regard to the alternative implied provision stating that the recipients would “Undertake all requisite measures to facilitate the unloading and delivery of the cargo within a reasonable timeframe,” it is essential to differentiate between “discharge” and “delivery.” Discharge pertains to the unloading of the cargo from the ship, while delivery involves the transfer of possession from the carrier to the recipient subsequent to discharge.
Concerning the existence of an implied provision obligating the recipient to undertake all necessary measures for the discharge of the cargo, the court deemed this proposed term an endeavor to circumvent the aforementioned challenge posed by the Secondary Inferred Provision, which established discharge as the exclusive responsibility of the Owner. Consequently, the court rejected this proposition.
Furthermore, in relation to the presence of an implied provision obligating the recipient to undertake all necessary steps for the delivery of the cargo, the court also deemed it unnecessary for various reasons, including the following:
- The recipients were already under an explicit duty to appoint and remunerate stevedores and potentially held a separate implied duty to provide a berth (although the court did not render a decision on the existence of a separate implied duty to provide a berth).
- The demurrage regime outlined in the Charterparty typically compensates the Owners for any delays encountered in the recipient’s acceptance of the cargo. However, in this particular case, such compensation proved minimally beneficial to the Owners. The court observed that the Owners assumed the risk of the Charterers’ insolvency, and it was not the court’s responsibility to revise a contract to favor one party by considering an event occurring subsequent to the contract’s formation.
- The recipient already bears the duty to accept delivery of their cargo. In the event of the recipient’s failure to do so, English law grants the Owner a remedy in the form of permitting them to unload and warehouse the cargo, while holding the cargo owner liable for the reasonable expenses incurred during this process.
The court’s decision concluded that neither of the proposed terms were to be inferred into the bill of lading, resulting in the failure of the owners’ appeal. This appeal pertained to a preliminary issues award, and it has been reported that the bank/cargo receivers are initiating their own counterclaims for mis-delivery, implying that the case will likely continue in arbitration for an extended period.
More generally, this case serves as a reminder of the fundamental principle in English law that the Shipowner bears responsibility for discharging cargo, and substantial wording is necessary to shift this obligation onto the Charterer. The explicit terms of the Norgrain ’89 charterparty form do not supersede this overarching presumption. Additionally, this case emphasizes that the implication of a term into a contract should not be undertaken lightly. The court, in this instance, adhered to the well-established body of case law, which states that a term will only be implied if it is indispensable for the functionality of the contract and does not contradict an express provision. Ultimately, this case underscores the potential complications that can arise in contracts for the maritime transportation of goods involving multiple parties and highlights the significance of considering the risk of insolvency affecting one of the involved parties.
FIOST in Ship Chartering
FIOST in the context of ship chartering stands for Free In and Out Stowed and Trimmed. This is a term used in charter-party agreements, where the shipowner and the charterer agree on certain terms and conditions for the use of the ship. Here’s what each part of FIOST means:
- Free In (FI): The cost of loading the goods onto the ship is borne by the charterer, not the ship owner.
- Out (O): The cost of discharging the goods from the ship is also borne by the charterer.
- Stowed (S): The cargo will be stowed, or properly arranged in the ship’s hold, at the charterer’s expense.
- Trimmed (T): The cargo will be leveled out, or trimmed, at the charterer’s expense.
When a charter-party agreement is FIOST, it means that all the costs and responsibilities associated with loading, stowing, and discharging the cargo are borne by the charterer, not the ship owner. This kind of arrangement can affect the overall cost of the charter, the time required to load and unload, and who is responsible if any damage occurs during these processes.
The FIOST clause in a charter party agreement is just one of many terms that can be negotiated between the charterer and the ship owner. It is essential for both parties to thoroughly understand these terms as they can have significant financial and operational implications.
For instance, with a FIOST agreement, the charterer has to coordinate and pay for all aspects of loading, stowing, and discharging the cargo. This means they need to ensure they have the necessary personnel and equipment in place at both the loading and discharging ports. They also need to factor these costs into their overall budget for the charter.
On the other hand, a FIOST agreement can provide the charterer with more control over the handling of the cargo. Since they are responsible for loading, stowing, and discharging the goods, they can ensure that these processes are carried out in a way that minimizes the risk of damage to the cargo.
For the ship owner, a FIOST agreement means they have fewer responsibilities and potential costs to worry about with regard to the handling of the cargo. However, it also means they have less control over these processes, which could be a concern if they have specific requirements or standards for how the cargo should be handled.
In summary, the FIOST clause, like many other terms in a charter party agreement, has its pros and cons. The suitability of such an agreement will depend on the specific circumstances and needs of both the charterer and the ship owner. It’s important for both parties to carefully consider these factors and seek legal advice if necessary when negotiating and agreeing to the terms of a charter.
Risk and Responsibility for Poor Loading and Discharging
A recent ruling has been issued by the UK High Court regarding a dispute between cargo stakeholders and the carrier concerning liability for cargo damage under a Synacomex 90 charter agreement.
MV “Sea Mirror” (referred to as “the Vessel”) transported 453,089 bags of rice from Karachi, Pakistan, to Abidjan, Ivory Coast, under two bills of lading.
The bills of lading incorporated the provisions of a booking note, which in turn included the terms of a voyage charter agreement based on the Synacomex 90 Form.
Issues arose concerning claims for moisture damage, torn bags, and short delivery during the voyage. The focal point of contention between the parties revolved around whether the carrier bore responsibility for cargo loss and damage resulting from insufficient or improper loading, stowage, and/or discharge.
In the absence of an explicit provision within the charter agreement, the carrier assumes responsibility for loading, stowage, and discharge. However, the responsibility for these tasks can be transferred through the use of unambiguous language.
Clause 5 of the standard Synacomex 90 Form stipulates that “Cargo shall be loaded, trimmed, and/or stowed at the expenses and risk of Shippers/Charterers… Cargo shall be discharged at the expense and risk of Receivers/Charterer… Stowage shall be under Master’s direction and responsibility.”
The carrier acknowledged that the reference to stowage falling under the Master’s responsibility implied its liability for any damages resulting from improper stowage. The pivotal question was whether the phrase “at the expense and risk of” transferred the responsibility for cargo loss or damage occurring during loading and discharge from the carrier to the charterers or cargo stakeholders.
The claimants argued that the term “risk” in Clause 5 referred to the fortuitous risk of loss or, alternatively, that the phrase “at the expense and risk of” pertained to the allocation of the risk of delay in cargo operations. If the claimants’ interpretation was accepted, any loss or damage occurring during loading, discharge, and stowage would still be the carrier’s responsibility.
The Court’s Verdict
The court ruled that the phrase “at the expense and risk of” was sufficiently clear to transfer the responsibility for loading and discharge to the charterers and cargo stakeholders.
Justice Flaux concluded that, in this context, “risk” should be understood as synonymous with “responsibility.” While stowage remained the carrier’s responsibility, loading and discharge fell under the purview of the charterers and cargo stakeholders. Consequently, in cases where damage or loss of the rice bags resulted from poor loading and/or discharge (as opposed to improper stowage), the cargo stakeholders assumed responsibility and could not seek compensation from the carrier for such damage or loss.
This ruling holds significant importance for cargo claims in regions where stevedoring practices are questionable. Furthermore, it clarifies the allocation of risk and responsibility outlined in Clause 5 of the Synacomex 90 Form, providing insights into the criteria for defining “clear words” when transferring responsibility.
Ships Responsibility of Bulk Cargo Loading and Discharging
Once the cargo loading plan has been agreed upon, it is essential for the captain and the representative from the terminal to verify the approach to cargo operations, ensuring that excessive stresses on the hull, tank top, and related structures are avoided. Additionally, information exchange should take place to prevent any potential harm to the ship caused by cargo handling equipment.
Particular attention should be given by the terminal representative to notify the captain when dealing with heavy cargo or when individual grab loads are substantial. Such situations may result in high, localized impact loads on the ship’s structure until the tank top is fully covered by cargo, especially if high free-fall drops are permitted. Given that these impacts have the potential to cause structural damage, great care must be taken at the outset of the loading process in each cargo hold.
Special precautions must be exercised when dealing with heavy cargoes like iron ore, scrap iron, lead, and other concentrates. On bulk carriers with uniform hold lengths, it may be prudent to utilize alternate hold loading or block hold loading techniques to accommodate high-density cargoes. However, these loading arrangements can induce high shear forces at the ends of the holds, necessitating additional reinforcement of the side shell in the vicinity of the bulkheads.
To optimize loading conditions, it is advisable to maintain the loader chute, spout, or grab as close to the tank top as possible. Commence loading at a slow rate until a layer of cargo sufficiently covers the loading area of the tank top. As the cargo accumulates in this area, it will gradually roll down the pile and distribute itself evenly across the remaining portion of the tank top, minimizing any substantial impact.
Continuous monitoring of the cargo handling operation and effective communication between the terminal and the ship are of utmost importance, especially during the final trimming phase of the ship.
Communication can be upheld through any of the following means:
a) Direct verbal contact between the designated ship’s officer and the terminal representative.
b) Portable radio communication between the designated officer, terminal representative, and/or loader operator.
c) Telephone and/or conveniently accessible Talk-Back speakers on the loader structure, allowing the surveyor, designated ship’s officer, or terminal representative to converse directly with the loader operator during trimming operations.
Any necessity for cargo trimming should align with the procedures outlined in the IMO Code of Safe Practice for Solid Bulk Cargoes (BC Code).
Both the captain and the terminal representative must bear in mind the unloading of the cargo while loading the ship. Whenever possible, they should avoid trimming cargo onto beams or ledges that would pose challenges or hazards during removal.
To effectively monitor the progress of the cargo loading operation, readily accessible information regarding the total quantity loaded, as well as the quantities per pour, is essential for both the captain and the terminal representative.
Cargo Trimming Procedures:
a) Prior to the 90% survey, the loading belts should be run empty if any uncertainty exists regarding the remaining cargo quantity on them.
b) If applicable, scale weights should be cross-checked against the draught survey estimates of loaded cargo and remaining cargo, and allowances should be made to achieve balance.
c) The quantity of cargo intended for trimming into the fore and aft holds should be delivered precisely as required, ensuring that the ship attains the desired fore and aft draughts and trim. This guarantees a safe departure from the load port and a secure journey to the unloading port, maintaining the necessary under keel clearance.
Upon completion of loading, the captain and the terminal representative should mutually agree in writing that the ship has been loaded in accordance with the loading plan, including any approved variations. The ship’s agent should provide assistance in preparing the requisite documentation upon completion of loading.
Responsibilities of the ship during cargo operations:
The ship bears the responsibility of overseeing the loading of the cargo at all times. The utmost importance is placed on ensuring the safety of both the ship and its occupants. In order to achieve maximum efficiency, it is imperative to establish a commercial understanding and foster cooperation with the loading terminal when preparing for any cargo loading operation. The loading process must strictly adhere to the ship’s instructions, disregarding any directions provided by the terminal. Should any unresolved discrepancies arise concerning the safe loading or the ship’s safety post-loading, it is recommended to not only inform the owners’ agent or operating office but also engage in discussions with the port safety services or the coastguard.
Preventive Measures Against Shifting of Bulk Cargo
As a general practice, bulk cargoes with an angle of repose less than 35° ought to be leveled and distributed evenly within the cargo hold to avert any cargo shift. This becomes less of a concern in bulk carriers equipped with wing tanks designed to occupy the uppermost spaces within the hold.
Trimming cargoes also brings the benefit of reducing their surface area, thereby minimizing the risk of spontaneous combustion in cargoes such as concentrates.
In modern ports, flexible extending grain chutes capable of rotation are commonly employed, enabling access to all areas of a hold. During the final stages of loading, bulldozers may be employed to adjust and level the cargo. Typically, the shipper provides the angle of repose information before loading. In cases of uncertainty, detailed procedures for calculating the angle of repose can be found in the IMSBC code.
Definition of Angle of Repose
The angle of repose denotes the maximum slope angle assumed by non-cohesive granular material (i.e., material that flows freely). It is measured as the angle formed between a horizontal plane and the inclined slope of the material.
Responsibilities of the Deck Officer of the Watch/Cargo Officer
While on cargo watch duty, the cargo officer assumes the usual responsibilities expected of an officer of the watch (OOW). Additionally, the cargo officer should:
- Oversee the ballasting operations.
- Monitor the discharge process to ensure that neither the grabs nor the bulldozers cause any damage to the holds, tank tops, or frames. Any instances of rough or improper handling should be promptly reported to the terminal authority and halted.
- Exercise heightened vigilance when dealing with cargoes susceptible to water damage.
- Attend to the repair of damaged paint coatings on hopper sides and indents.
- Pay attention to tank top damage and indents.
- Ensure that double bottom or side tank access lids are not damaged when removed for tank inspection. These lids must be correctly reinstalled, and a competent individual should verify the condition of gaskets while ensuring that nuts are securely fastened and pressure-tested before loading the next cargo.
- Verify that hold ladders, platforms, and handrails are in a sturdy and secure condition.
- Conduct inspections of hold piping, air vent and water ballast sounding lines, as well as piping protection brackets.
- Assure the cleanliness and good working condition of bilge wells, including bilge covers, strum boxes, and bilge well valves, including non-return valves. Wet damage cargo claims are increasingly attributed to malfunctioning bilge systems. Non-return valves must undergo thorough checks to ensure their full operational capability. They should be incorporated into the planned maintenance system and formally examined every three to four months, subject to operational constraints. Bilge lines ought to be purged to verify the effectiveness of the valves.
- Verify the functionality of bilge high-level alarms.
- Verify the operational status of lights and light fittings. There have been instances, some involving high-value claims, where both the ship and the cargo faced jeopardy due to inadvertently leaving the hold lights on or having inadequate lighting wiring, resulting in fires within
Charterers’ Liability for Damage to Ships
Physical Damage to Ship or Ordinary Wear and Tear?
Most charterparties specify that if the charterer, due to breaching any of their obligations under the charter, returns the ship in a worse state than it was when initially delivered, excluding ordinary wear and tear, they will be held responsible for paying damages. Consequently, determining the extent of physical alteration that constitutes “ordinary wear and tear” versus “damage” for which the charterer is liable often becomes necessary. The specific trade in which the ship is chartered and the purpose of the charterparty are pertinent factors.
The guiding principle in this matter is that when the ship is involved in a trade with a high risk of physical harm to the ship, the scope for considering physical harm as ordinary wear and tear expands. In safer trades, the requirements concerning the physical condition of the ship at the time of redelivery are adjusted accordingly. Several circumstances can either increase or decrease the extent of ship usage permitted under the charter. Some of the most significant factors pertain to the cargo itself, such as the type of cargo carried, the loading and unloading methods employed, and the frequency of these operations. Statistics reveal that certain categories of cargo cause damage to the ship more frequently than others, and the reasons for this vary. The cargo itself may inflict physical harm to the coating in the cargo holds, or the ship’s winches or derricks may sustain damage during the loading or unloading process carried out by stevedores. In other cases, the nature of the cargo may lead to a higher degree of wear and tear without causing any actual physical damage. In some instances, although not always, it may be reasonable to assume that in trades where physical harm to the ship occurs relatively frequently, wear and tear of the ship is high.
Nonetheless, the charterparty as a whole must be taken into account. Therefore, in line with common practice, if the charterparty imposes on the shipowner the responsibility for maintaining the ship, the charterer will not be held liable for maintenance defects present at the time of redelivery.
Furthermore, it appears reasonable to conclude that the charterer assumes no liability regarding the ship’s condition unless such conditions result from their own negligence. For instance, clause 13, section 2 of the Baltime form stipulates that “the Charterers to be responsible for loss or damage to the ship (…) by improper or careless bunkering or loading, stowing or discharging of goods or any other improper or negligent act on their part or that of their servants.” However, if a charterparty contains both clause 13 and an “employment and indemnity” clause, negligence may not be necessary to hold the charterer accountable. An “employment and indemnity” clause, when added as a rider clause to the Baltime charter, grants the charterer the right to issue a broad range of instructions to the shipowner, while also providing the shipowner the right to be indemnified by the charterer for complying with such instructions. English law has frequently referred to the “employment and indemnity” clause in the context of bills of lading, as well as cases involving hull damage due to hazardous cargo.
The requirement for redelivery of the ship in the same good condition as when delivered encompasses not only the absence of physical damage but also stipulates that areas used by the charterers, such as cargo holds, should maintain the same level of cleanliness as they had at the start of the charter period. This criterion holds particular importance for certain ships, such as those involved in the oil and chemical trades, whereas other ships are less sensitive in this regard.
The responsibility of a Charterer for Damage to Ships
The determination of whether the shipowner or the charterer assumes the risk of ship damage relies upon the party or factor responsible for the harm, as well as the terms outlined in the governing charterparty. Presented below are a few illustrations.
Loading, stowage, and discharge of cargo Charterparty clauses commonly allocate the duty of loading, stowage, and/or discharge of cargo to the charterers, making them accountable for any ensuing loss or damage inflicted upon the ship.
According to English law, when unaltered, clause 8 of the NYPE 1946 form shifts the primary obligation of loading, stowing, and trimming the cargo from the owners to the charterers. However, it is frequently modified by incorporating the phrase “and responsibility.” In the 1980s, a series of cases determined that the addition of these words, prima facie, restores the liability for the loading, stowing, and trimming operation to the owners. Nonetheless, this transfer of liability can be overridden if it can be demonstrated that the charterers have intervened and, as a result, caused the relevant loss. For example, the interference of a port captain in the aforementioned operations. It is important to highlight that the inclusion of “and responsibility” not only transfers liability for loss concerning the cargo but also extends it to damage inflicted upon the ship itself, such as stevedore damage. Lastly, the inclusion of “and responsibility” also affects the distribution of liability for any cargo claim in accordance with the Inter-Club Agreement (if incorporated). Paragraph 1 (II)(c) of the Inter-Club Agreement defines the phrase “and responsibility” as a substantial amendment in relation to cargo claim liability.
The responsibility of a Charterer for Unsafe Ports and Unsafe Berths
On occasion, the failure to designate a secure port/berth can lead to perilous circumstances for the ship (and a broad range of other P&I-related liabilities). In cases where a charterparty stipulates that a ship must proceed to a secure port or berth designated by the charterer, the charterer warrants the safety of the nominated port or berth. It is possible for this warranty to be implied when the charter allows for the nomination of a port or berth but remains silent on its safety. The definitive criterion for safety is that a port cannot be considered safe unless, within the relevant timeframe, the specific ship can reach it, utilize it, and return from it without being exposed to avoidable danger, barring any extraordinary events, through skilled navigation and seamanship.5
If the charterers instruct the ship to proceed to a potentially unsafe port, they would be breaching the charter. A port may be considered unsafe due to various circumstances that compromise the physical safety of the ship. Examples of factors that render a port unsafe include insufficient weather forecasting systems, unavailability of competent pilots and tugboats, inadequate maneuvering space, and more. While the causes for an unsafe port usually revolve around its physical characteristics and susceptibility to climatic changes, it is firmly established that safety obligations also encompass political security.
If the master reasonably complies with the charterers’ instruction and the ship is lost or damaged as a consequence of the port’s unsafety, the owners are entitled to seek compensation. The ship may suffer physical damage through a variety of means, including incidents such as grounding and collisions, as well as harm caused by malfunctioning loading equipment at the berth.
The responsibility of a Charterer for Engine Malfunction or Partial Impairment Stemming from Substandard Bunker (Fuel)
In the context of a time charter, it is typically the charterer’s responsibility to supply and cover the cost of bunkers. The master, in turn, bears the duty of determining the adequate quantity of fuel to be taken on board the ship, ensuring it is sufficient to carry out the voyage as instructed by the charterer. With regard to fuel quality, standard time charter agreements usually incorporate provisions outlining technical specifications for the bunkers. Under English law, even in the absence of a bunker quality clause or fuel specification in the charterparty, the charterers may still be obligated to provide bunkers that are reasonably suitable for the ship’s engines. Moreover, if the parties have explicitly agreed upon specific fuel type or quality in the charter, the charterer becomes liable for any losses resulting from the use of fuel that fails to meet the specified criteria. However, although the shipowner may initially establish that the supplied fuel does not meet the agreed-upon standards, it is necessary for them to demonstrate a causal link between the defective fuel and the alleged damage in order to substantiate their claim. This task is not always straightforward, as the charterers often assert defenses, claiming that the engine malfunction was caused by the crew, a pre-existing condition of the engine itself, or other factors.
In a recent arbitration case conducted in the United States, the charterparty delineated the fuel that the charterer was obligated to provide as “IFO 1550 SECS and MDO”. The shipowner contended that the fuel furnished was substandard, inadequately blended, or contained an excessive amount of impurities. The panel of arbitrators concurred with the shipowner’s position, although they did not find the charterer to be legally responsible since the shipowner failed to establish that the fuel was the direct cause of the engine malfunction. To bear the burden of proof in such instances, shipowners often procure “drip samples” of the delivered bunkers, which can serve as compelling evidence against charterers in the event of a disagreement.
The repercussions stemming from the provision of faulty bunkers are frequently significant and encompass physical harm to the engines, diminished performance levels, and a loss of valuable time.
The responsibility of a Charterer for Hull Damage Resulting from Cargo
A charterer may also incur liability for harm caused by cargoes transported during the charter period. Depending on the nature of the incident and the various interests involved, claims for compensation may be pursued by the shipowner, other cargo owners, as well as third parties (e.g., in relation to oil spills).
There are numerous cargoes that, depending on their nature and other circumstances, may possess varying levels of “peril”. Certain goods, such as hazardous chemicals or corrosive substances, inherently pose risks, yet when packed and sealed in accordance with guidelines, they will present minimal hazards. On the other hand, there are categories of goods that cannot be classified as inherently possessing dangerous transport characteristics. However, within these two categories, there exist numerous types of goods that are not typically regarded as dangerous but can cause damage if mishandled.
For example, some coals, depending on their specific properties, may be more susceptible to heating or explosion compared to others. Sulphur cargoes can induce corrosion on the ship carrying them, although many such cargoes are transported without incident. The term “dangerous,” when applied to cargoes, lacks a precise legal definition within the context of contracts. The International Maritime Organization (IMO) has issued two codes, namely the International Maritime Dangerous Goods Code (IMDG) and the Code of Safe Practice for Solid Bulk Cargoes, which offer a classification of potentially hazardous substances. These codes are not obligatory and, as far as contractual responsibility is concerned, they will only apply if the contract terms stipulate adherence to their requirements. Nevertheless, they are frequently employed as evidence to determine whether goods should be deemed dangerous or if appropriate packaging and segregation standards have been adhered to.
Regardless of whether the shipper or charterer is aware of the hazardous nature of the goods being shipped, they generally have an absolute obligation to notify the carrier. The purpose of notifying the carrier about the dangerous characteristics of the cargo is to enable the carrier to take necessary precautions for its safe transportation or to decline carriage if not contractually obligated to transport it.
Under English law, there is usually an implied warranty that the charterer will not transport dangerous goods without informing the owner. However, this duty does not arise if the shipowner is already aware of such characteristics. Likewise, if both parties, in a contractual agreement, explicitly specify the shipment of a particular cargo while being fully aware of its characteristics and associated risks, the charterer will not be held liable for any damage or delay caused by that cargo. However, the situation may differ if the cargo possesses obscure and unique qualities that increase the danger beyond what a carrier of that type of cargo should reasonably anticipate and safeguard against.
Measure of Ship Damages
In cases where the charterers bear responsibility for the ship’s condition upon redelivery, the standard gauge of damages that the shipowner can seek is the consequential decrease in the ship’s value. Specifically, the claim will encompass the expenses incurred for repairs or, alternatively, the cost of acquiring replacement components. In accordance with established principles of damage calculation, any additional economic value attributed to these new replacement parts will generally be subtracted from the claim.
Moreover, the shipowner is entitled to compensation for the loss of earnings typically incurred due to the ship’s detainment for repairs. When not governed by the demurrage rate, the damages associated with the detention or delay of the ship, resulting from a breach by the charterer, are prima facie determined as the amount that the ship could have earned at prevailing market rates during the net period of detainment, after deducting any expenses saved through the detainment. In the absence of more compelling evidence, the demurrage rate may serve as an indication of the prevailing market rate.
The prevailing P&I coverage for charterers is a reflection of the undeniable reality that, on numerous occasions, charterers encounter similar perils to those faced by shipowners. However, it is widely acknowledged that charterers assume certain liabilities with greater frequency while being subjected to others less frequently. In each particular scenario, the risks necessitate a meticulous evaluation of contractual obligations and the applicability of legal frameworks. Comparable to shipowners, claims pertaining to cargo carry immense significance as a risk category. Nevertheless, the handling of P&I claims on a day-to-day basis reveals that charterers are susceptible to an array of risks encompassing liability towards entities involved in the operation of the ship (including shipowners, cargo owners, crew members, and stevedores), as well as various other third parties. Neglecting to designate a secure berth or port may engender a wide spectrum of P&I-related responsibilities, encompassing cargo damage or loss, ship damage or loss, personal injury and fatality, environmental contamination, wreckage clearance, and subsequent losses.