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 Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

Great Lakes Inks M.E., N.C. Coastal Protection Project Deals

Great Lakes Announces $55 Million in Subcontract Work in the Middle East and Award of $38 Million for a Domestic Coastal Protection Project Great Lakes Dredge

Olympic Subsea Vessel Bags Contract

Olympic Shipping has secured a contract for Olympic Delta, an inspection, maintenance and repair (IMR) vessel, with an international client  to work on a renewable energy project.

Asia Tankers-VLCCs Rates Ease as Tanker Jams Fade

Port congestion eases at Basra and Chinese ports; tanker demand set to expand on lower oil prices. Freight rates for very large crude carriers (VLCCs), hurt by slower-than-usual release of cargo,

Legal

Blacklisted Tanker Returns to Libya's Zawiya Port

A tanker that Libya's rival eastern government had been using to try to export oil in defiance of the Western-backed administration in Tripoli returned to the country on Saturday,

Lerwick Harbor sees Seasonal Boost

The opening of the offshore season in northern waters has seen specialist oil industry vessels return to Lerwick Harbor during April to support subsea development projects.

Drug Interception at Red Hook Container Terminal

Approximately 121 pounds of heroin and eight pounds of cocaine were discovered in a shipping container of vegetables that was moving from Ecuador to Miami, Fla.

Tanker Trends

Lerwick Harbor sees Seasonal Boost

The opening of the offshore season in northern waters has seen specialist oil industry vessels return to Lerwick Harbor during April to support subsea development projects.

Floating Products Storage in Focus

For much of 2015, talk of floating storage was dominated by speculation that the contango in crude futures might support crude floating storage, says Gibson Tanker Report.

Russia Diesel Exports from Primorsk to Rise in May

Russia is set to export 1.256 million tonnes of ultra-low sulphur diesel from the Baltic Sea port of Primorsk in May, slightly up from 1.209 million tonnes in April, trading sources said on Friday.

P&I Clubs

Dangers Arising from Carriage of Indonesian Coal

The London P&I Club has issued a warning about continued problems associated with the carriage of Indonesian thermal or ‘steam’ coal, following a number of recent

North P&I Suggests Owners Join the CSO Alliance

North P&I Club has partnered with CSO Alliance, an online community of maritime company security officers (CSOs), to encourage its members to join and take part

 
 
Maritime Contracts Maritime Security Maritime Standards Naval Architecture Offshore Oil Pipelines Port Authority Ship Electronics Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | 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: 0.0893 sec (11 req/sec)