Charter Party Dispute: Shipowner Acted Unreasonably

MaritimePropulsion.com
Monday, September 09, 2013

In a recent decision, the Commercial Court held that a shipowner's refusal to allow two VLCC's nominated by the charterers to carry out STS transfer operations was unreasonable. The decision was noted by Hattie Sumption, partner at Clyde & Co LLP as follows:

Facts

A vessel was chartered to carry crude from Yemen to the Far East. The charterer also nominated 2 VLCCs to act as storage and receive the cargo at the discharge port by way of STS transfer. The owner of the chartered vessel withheld its approval of the 2 VLCCs and the charterer therefore had to discharge the cargo into smaller vessels to shuttle the cargo into the VLCCs.

Charter Party Terms

The charter party provided that if the charterer required ship-to ship transfer operations, all vessels to be used would be 'subject to the prior approval of owners, which not to be unreasonably withheld...'. It further provided that 'Charterers shall have the option of transferring... cargo... to or from any vessel including, but not limited to, an ocean-going vessel... All transfers... shall be carried out in accordance with the recommendations set out in the latest edition of the 'ICS/OCIMF Ship to Ship Transfer Guide (Petroleum)'.

Judgment


The Court held that the shipowner unreasonably withheld its approval of the 2 nominated VLCCs. On a proper construction of the charter party terms, the shipowner's right of approval was limited to an approval of a nominated vessel by reference to its suitability to the proposed STS operation and did not extend to a right to approve the proposed STS operation itself. In this context, the phrase 'not to be unreasonably withheld' was found to mean that the shipowner which refused approval was not allowed to base its decision on something other than the specific facts of the matter in question. 


The shipowner in this case had a company policy of not allowing STS between VLCCs, as a result of a previous incident. This was not sufficient grounds for a reasonable shipowner to decline approval in the present case. There was nothing inherent in the characteristics of the 2 nominated VLCCs that made a veto of the STS transfers involving them reasonable. Although there was no section in the ICS/OCIMF guide specifically relating to STS between VLCCs, this did not mean that STS operations could not be conducted in accordance with it: with adequate planning and precautions, STS could have been performed in accordance with the guide and therefore in accordance with the charter party.

Comment

The Court examined both the terms of the charter party and the specific facts of the case. Although the facts will vary between each case, the judgment does provide guidance on how the Court is likely to construe similar contentions made by shipowners in future, for example facts relating to the specific operation itself will be deemed to be irrelevant. STS between VLCCs should not be regarded as inherently suspect but should be considered on a case-by-case basis.

Court of Appeal

The decision is being appealed, and a further update will follow after the outcome of the appeal hearing, which has been fixed for early 2014.

Source: UK P&I Club/Hattie Sumption, partner at Clyde & Co LLP
 

Maritime Reporter February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

More MERUS Rings for MS Rotterdam

Pronomar has installed two additional MERUS rings on board Holland America Line’s MS Rotterdam, this time in the wellness area for the steam generators.   The

Royal IHC Merges Four Units into IHC IQIP

Royal IHC (IHC) has integrated four of its business units – IHC Hydrohammer, IHC Handling Systems, IHC Sea Steel and IHC Fundex Equipment – into one new organization,

Statoil: Johan Castberg, Snorre 2040 Timelines Changed

The licensees in the Johan Castberg and Snorre 2040 licences have decided to spend more time on the projects. “Castberg and Snorre 2040 are two major and important projects in our portfolio,

Legal

Cruise Line Agrees to $500K Settlement for Disguising Sales Calls

Caribbean Cruise Line Inc. has agreed to a $7.73 million settlement after the Federal Trade Commission (FTC) and 10 state attorney generals sued the Fort Lauderdale-based

USCG Petty Officer Convicted, Sentenced

A Coast Guardsman was convicted and sentenced during a General Court-Martial in New Orleans, Thursday. Petty Officer 2nd Class Leonel Hinojosa, 32, was sentenced to reduction to E-1,

Hapag-Lloyd Warn About Verification by German Customs

Hapag-Lloyd has informed that for all import cargo to be discharged at the German ports of Hamburg and Bremerhaven the carrier is responsible to send a complete

Tanker Trends

Global LNG-Asia Prices Creep Higher on Japanese Demand

Asian spot liquefied natural gas prices edged higher as scattered demand from Japanese buyers and others helped stem the recent decline in prices, traders said on Friday.

First LNG-powered EcoLiner Launched

Europe’s greenest inland vessel debuts Damen group innovations   Damen Shipyards Group launched the first LNG-powered Damen EcoLiner inland shipping tanker

Stronger Panamaxes Boost Baltic Sea Freight Index

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, made minor gains on Thursday on higher rates for the panamax and smaller vessel segments.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Port Authority Salvage Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2161 sec (5 req/sec)