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 August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

URAG Orders Two ASD Tugs from Damen

URAG, a German port and offshore towage provider based in Bremerhaven, has placed an order for two Damen ASD 2411 tugs. The contract was signed at the SMM exhibition in Hamburg.

iSURVEY Awarded Two-year Contract with Island Offshore

iSURVEY has been awarded a two-year contract with offshore vessel owner, Island Offshore Management, which will see iSURVEY AS provide positioning services to Island

Buckeye Pipeline Quietly Makes Key Acquisition

Houston-based logistic firm Buckeye Partners has spent more than $3.5 billion buying assets since 2010, transforming itself from a quiet regional pipeline utility into an emerging energy powerhouse.

Legal

Impact of Upcoming Regulations on Wreck Removal

The Nairobi International Convention on wreck removal was ratified by India recently and will be enforceable from April next year. This will place financial responsibility

Buckeye Pipeline Quietly Makes Key Acquisition

Houston-based logistic firm Buckeye Partners has spent more than $3.5 billion buying assets since 2010, transforming itself from a quiet regional pipeline utility into an emerging energy powerhouse.

Bangladeshi Albedo Survivors Helped by their Govt.

Yesterday, 16th September 2014, Chirag Bahri, MPHRP's Regional Director for South Asia, attended a ceremonial event organised by the Ministry of Shipping, Bangladesh

Tanker Trends

For Europe's LNG Ports, Russia Gas Fears and US Exporters Buoy Demand

Gas buyers nervous of Russia cutting supply are helping solve Europe's problem of too many underused liquefied natural gas (LNG) terminals, as they seek space at France's Dunkirk plant.

Buckeye Pipeline Quietly Makes Key Acquisition

Houston-based logistic firm Buckeye Partners has spent more than $3.5 billion buying assets since 2010, transforming itself from a quiet regional pipeline utility into an emerging energy powerhouse.

Scorpio Tankers Receive 7 More Newbuildings

Scorpio Tankers Inc. say it has recently taken delivery of seven newbuilding vessels as follows: STI Madison and STI Park, LR2 product tankers, were delivered

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Offshore Oil Pod Propulsion Ship Electronics Ship Repair Ship Simulators Sonar 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: 0.1520 sec (7 req/sec)