15 th Annual International Maritime Law Arbitration Moot

Transcription

1 15 th Annual International Maritime Law Arbitration Moot Hosted by the School of Law, University of Hong Kong Hong Kong MEMORANDUM On Behalf of : Against : Super Charters Inc. Reliable Tankers Inc. Reliable Holdings Inc. Team number 14

2 TABLE OF CONTENTS A. LIST OF ABBREVIATIONS iii B. LIST OF AUTHORITIES iii C. TABLE OF EXHIBITS vi D. SUMMERY OF THE FACTS 1 E. ARGUMENTS PRESENTED 5 1. JURISDICTION 5 2. APPLICABLE LAW 6 3. ALL TERMS AND CONDITIONS APPLY 6 4. THE CLAIMS ARE INADMISSABLE Nullity Impossibility to bring a counterclaim if claim should be rendered null 8 5. IF, WHICH IS DENIED, THE CLAIMS ARE ADMISSABLE, THESE ARE THE SUBSTANTIAL ISSUES 8 i

3 5.1 Payment of freight ETA Provision Condition of the contract If not a condition than an intermediate term which goes to the root of the contract Reasonable grounds Interpretation of cancelling clause set out in Standard terms of Owner Clause Distinction between ETA and lay/canceling date Reasonable dispatch Breach of Charter Party damages Damages due to increase in freight Damages due to payment of freight Damages due and payable to loadport terminal/sellers Damages due and payable to disport terminal/buyers Interest IF, WHICH IS DENIED, THE RESPONDENTS ARE LIABLE TO CLAIMANTS FOR PAYMENT OF FREIGHT AS FOR THE CLAIMS AGAINST RELIABLE HOLDINGS INC 22 ii

4 A. List of abbreviations ASBATANKVOY Tanker Voyage Charter Party by the Association of Ship Brokers & Agents (U.S.A.), Inc, Oct 1977 Charter Party Charter Party under ASBATANKVOY 77 as amended by Parties date 19 November 2010 Charterers Super Charters Inc. ETA Estimated time of arrival Laycan Laydays and cancelling date Owners Reliable Tankers Inc./Reliable Holdings Inc. Vessel Reliable Butterfly B. List of Authorities Ambietlos v. Grace Bros. & Co. [1922] 10 Lloyd s List L. Rep. 159, 161 (Eng. C.A.) Behn v. Burness [1863] 122 Eng. Rep. 281 (Ex. Ch.) Cheikh Boutros Selim El-Khoury v. Ceylon Shipping Lines (The Madeleine) [1967] 2 Lloyd s Rep. 244 (Q.B.) Christie & Vesey v. Helvetia [1960] 1 Lloyd s Rep. 547 Colonial Bank V. European Grain and Shipping Ltd., [1989] 1 Lloyd s Rep., at F.Supp. 1056, 1988 AMC 2570 (S.D.N.Y.1988) Dakin v. Oxley (1864) 15 C.B. (N.S.) 646, per Willes J. at The Elena D Amico, [1980] 1 Lloyd s Rep. 75 (Q.B., Com. Ct.) Evera S.A. Comercial v. N. Shipping Co., [1956] 2 Lloyd s Rep (Q.B.) iii

5 Evera S.A. Commercial v. N. Shipping Co., [1956] 2 Lloyd s Rep. 370 Geogas S.A. v. Trammo Gas Ltd. ( The Baleares) [1993] 1 Lloyds Rep. 215 Glaholm v. Hays (1841) 2 M.& G. 257 Hadley v. Baxendale, 156 Eng Rep. 145 (Ex. 1854) Hudson v. Hill [1874] 43 l. J. C.P. 273 Louis Dreyfus & Co. v. Lauro [1938] 60 Lloyd s List L. Rep Maredelato Cia Nav. S.A. v Bergbau Handel G.m.b.H. [1970] 2 Lloyd s Rep 47 (Eng. C.A.) 69 U.S. (2 Wall.) Maredelanto Compania Naviera S.A. v. Bergbau-Handel G.m.b.H. (The Mihalis Angelos) [1971] 1 Q.B. 208 Monroe Bros. v. Ryan [1935] 2 K.B. 28, 37-39; Evera S.A. Commercial v. N. Shipping Co., [1956] 2 Lloyd s Rep (Q.B.) Rawson v. Samuel, (1839) 1 Cr. & Ph. 161 R. Pagnan & Fratelli v. NG.J. Schouten NV [1973] 1 Lloyd s Rep. 358 Siemens AG/BKMI Industrieanlagen GmbH v. Dutco Construction Company, XVII YBCA 140 (1993) (Cour de Cassation, Paris) S. Sanday & Co. v. Keighley, Maxstel & Co., [1922] 10 Lloyd s List L. Rep (Eng C.A.) Sanday v. Keighley, Maxted & Co., [1922] 27 Com. Cas. 296 (C.A.) Sanday v. United States Shipping Bd. Emergency Fleet Corp., 1 F.2d 390, 391, 1924 AMC 989, (S.D.N.Y. 1924) The Hansa Nord [1975] 2 Lloyd s Rep. 445 Arbitral proceedings iv

6 Andino Chem. Shipping Co. & Aectra Refin. & Mktg. ( The Espoir), SMA Award No (1985) (Berg, James & Gyory, Arbs.), 197 Cities Serv. Co & Handels-En Transp. Maatschappij Transol B.V., Slikkerveer (The Venus V), SMA Award No (1985) (Messrs. Berg, Palmer & Gyory, Arbs.) 257 Elmadonna, Inc. & Trifinery, Inc. (The Felicity L), SMA Award No (1995) (Berg, Cederholm &Schlosser, Arbs.) Phillips Petroleum Int l (UK) Ltd. of Del. & Sentry Refin. Inc. (The Aralda), SMA Award No (Berg, Palmer & Smith, Jr., Arbs.) SMA Award No (1983) (Berg, Palmer & Smith, Jr., Arbs, The Aralda, SMA Award No (1983) (Berg, Palmer & Smith, Jr., Arbs.) Other Authorities J. Bond Smith, Jr., Recent Developments in the Law of Damages for Breach of Charter, Journal of Maritime Law and Commerce, 13, 3, 314 (1982) J. Cooke et al., Voyage Charters 64, (1993) J. M. Textor, OilVoy Clauses Vessel late arrival at Load Port: Recovery of commercial damages, 27 Tul. Mar. L.J. 468, L. M. Andreu, A comparative analysis of Charter Party agreements Subject to respective American and British laws and decisions It s all in the details, Tul. Mar. LJ, 2001, 26, 294 P. Bush, Delay and Detention, 25 Tul. Mar. L.J., 445, R. E. Gaisford, Cancellation of Voyage Charterparties: A comparison of Chinese and English law, Journal of Maritime Law and Commerce, 27, (1996) T. Carbonneau, 22 Tul. Mar. L.j. 131, , 133 v

7 N. J. Healy Jr., Termination of Charter Parties, 49 Tul. L. Rev. 847, C. Table of Exhibits 1. from Ian to Chris and Edward dated 1 October 2011 [ p. 1 Moot Problem ] 2. from Chris to Edward dated 10 October 2011 [ p. 2 Moot Problem ] 3. Charter Party ( fixture recap on Subjects) standard ASBATANKVOY 77 dated 17 November [ p Moot Problem ] 4. Super Charter Company Single Voyage Charter Party Rider Clauses to be used in conjunction with ASBATANKVOY 77 [ p Moot Problem ] 5. Intertanko s Standard Tanker Chartering questionnaire 88 [ p Moot Problem ] 6. Standard Terms Reliable Tankers Inc. [ p. 44 Moot Problem ] 7. Standard Terms Super Charters Inc. [ p. 45 Moot Problem ] vi

8 8. from Chris to Edward dated 19 November 2011 [ p. 46 Moot Problem ] 9. Charter Party ( fixture recap on Subjects) standard ASBATANKVOY 77 dated 19 November [ p Moot Problem ] 10. Super Charter Company Single Voyage Charter Party Rider Clauses to be used in conjunction with ASBATANKVOY 77 [ p Moot Problem] 11. Intertanko s Standard Tanker Chartering questionnaire 88 [ p Moot Problem ] 12. Standard Terms Reliable Tankers Inc. [ p. 87 Moot Problem ] 13. Standard Terms Super Charters Inc. [ p. 88 Moot Problem ] 14. from Edward to Chris dated 19 November 2011 [ p. 89 Moot Problem ] 15. from Chris to Edward dated 22 November 2011 [ p. 92 Moot Problem ] 16. from Edward to Chris dated 23 November 2011 vii

9 [ p. 94 Moot Problem ] 17. from Edward to Chris dated 25 November 2011 [ p. 95 Moot Problem ] 18. from Chris to Edward dated 27 November 2011, notice of cancellation [ p. 96 Moot Problem ] 19. from Edward to Chris dated 28 November 2011, answer to notice [ p. 97 Moot Problem ] 20. from Edward to Chris dated 28 January 2012, appointment of Mr. Smith as arbitrator [ p. 101 Moot Problem ] 21. to Reliable Tankers Inc dated 12 February 2012, rejection of appointment made by Reliable Tankers [ p. 102 Moot Problem ] 22. to Reliable Holdings dated 12 February 2012, appointment of arbitrator by Super Charters Inc [ p. 103 Moot Problem] 23. to Super Charters by Reliable Holdings dated 24 February 2012 [ p. 104 Moot Problem ] viii

10 D. Summary of the facts In the matter of an arbitration between : 1. Reliable Tankers Inc, Claimants, are the Owners of the vessel RELIABLE BUTTERFLY. 2.Super Charters Inc., Respondents, are the Charterers of the vessel RELIABLE BUTTERFLY. In the matter of an arbitration between : 3. Super Charters Inc., Claimants, are the Charterers of the vessel RELIABLE BUTTERFLY. 4.Reliable Holdings Inc., Respondents, are the new Owners of the vessel RELIABLE BUTTERFLY. For practical reasons and ease of reference, although technically Super Charters are required to Defense & Counterclaim Submissions (first reference) and Claim Submissions (second reference), they set out their position in these combined submissions which are to be construed as appropriate in each reference. The Charterers trust that this will not inconvenience Arbitrators. Therefore Super Charters will be referred to as Respondents and Reliable Tankers Inc. / Reliable Holdings Inc. as Claimants. 1

11 5. Negotiations between parties regarding a voyage charter of a VLCC started 10 th October. Aim was to load BLS HC at each of the 2 terminals Blueland going to Indigoland. 6. Charter party was made under ASBATANKVOY 77 amended with Super Charters Rider clauses and the standard terms of both parties which they agreed upon to be fully incorporated. 7. Charter party held an arbitration clause and stated that English law applied. 8. Parties agreed that the expected time of arrival (ETA) at the loading port of the RELIABLE BUTTERFLY would be 3 rd December with commencement of the approach voyage on 25 th November Demurrage from loading port would start by 8 th December, with a 30 day voyage time and a few days to discharge. All would be completed by 10 th January Both parties understood and acknowledged that schedule was tight and completion of the itinerary by 10 th January 2011 was of the utmost importance due to a planned refinery shutdown from 15 th January The RELIABLE BUTTERFLY started its voyage to Redland for bunkering after having discharged her last cargo in Orangeland on 16 th November

12 12. The deal between parties was confirmed after all subjects were lifted as per 1700 hrs London 19 th November After learning that the RELIABLE BUTTERFLY had been arrested by third party bunker suppliers at the bunker port, Respondents asked Claimants for further information regarding the whereabouts and status of the RELIABLE BUTTERFLY. 14. On 23 rd November 2011 Claimants answered Respondents that they ( Owners ) anticipated that the vessel would still make her Laycan. 15. On 25 th November 2011, the day on which the RELIABLE BUTTERFLY should have started her approach voyage, Claimants informed Respondents that despite their efforts they were not able to release the RELIABLE BUTTERFLY from arrest. Therefore she would not make her Laycan. 16. Claimants were not able to give a revised Laycan. 17. On the 27 th November 2011 Super Charters Inc. gave notice of cancellation. 18. Respondents treated the refusal to give a revised Laycan as providing a revised ETA and Laycan for undetermined dates. Respondents declined these revised ETA and Laycan. 3

13 19. In this notice of cancellation Respondents stated to reserve all of their rights in relation to the Charter party, including but not limited to the right to claim from any losses resulting from Claimant s breaches of the Charter party. 20. Owners confirmed that the Charter party was cancelled but rejected the suggestion to be in breach of the Charter and reminded Respondents of the cancellation provision incorporated in its standard terms which are to be seen as being integrally part of the Charter party, relieving Claimants of all liability. Furthermore, Owners held that freight remained outstanding and unaffected by the Charterers decision to cancel. 21. On 28 th January 2012, Owners started arbitration proceedings, as held in the arbitration clause incorporated in the Charter party, and appointed Mr. Smith as arbitrator. 22. On 12 th February 2012, Super Charters Inc. rejected the appointment made by the Owners stating that the appointment could not have been valid since Reliable Tankers had ceased to exist as an entity. Super Charterers Inc. appointed Mr. John as arbitrator. 21. Owners responded that for all purposes Reliable Holdings Inc. and Reliable Tankers were the same entity and therefore commencement of the proceedings was done in a valid way. 4

14 E. Arguments presented 1. Jurisdiction 1.1 The arbitral tribunal has jurisdiction 1. Both parties have explicitly agreed upon the competence of the arbitral tribunal in London if and when a dispute would arise. The ASBATANKVOY as amended by parties in Part 2 clause 24 incorporates an explicit Arbitration clause. Therefore any dispute arising under or in relation to or in connection with the Charter party or the interpretation thereof or arising in or out of or in connection with the performance of the Charter party shall be referred to arbitration in London in accordance with the 1996 Arbitration act. 1.2 Party autonomy as a key aspect for arbitration 2. Party autonomy as to arbitration clauses is a key feature 1 and is to be regarded as a general principle underlying the 1996 Arbitration Act. 3. Section 1(b) announces the principle of party autonomy and proved for a nearly unrestricted scope of application 2 stating that the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest. 1 Siemens AG/BKMI Industrieanlagen GmbH v. Dutco Construction Company, XVII YBCA 140 (1993) (Cour de Cassation, Paris) 2 Thomas Carbonneau, 22 Tul. Mar. L.j. 131, , 133 5

15 1.3 Agreements to be in writing 4. Section 5 (1) holds that (1) the provisions only apply where the arbitration agreement is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing. For as the clause is explicitly construed within the Charter party, this requirement can be deemed fulfilled. 2. Applicable law 2.1 English Law applies 5. A valid incorporation by explicit reference to English law is made by both parties. The ASBATANKVOY form as amended by Parties in Part 2 clause 24 states an explicit application of English law. On the same grounds as regarding the arbitration clause, English law applies. 3. All terms and conditions apply 3.1 Both parties special terms are incorporated and have full application. 6. Due to the absence of any particular legislation dealing with charter parties with any specificity, general contract law applies. Principles such as freedom of contract govern the entirety of the parties negotiations and further professional dealings. Therefore parties are free to allocate risks contractually. 3 3 Lourdes M. Andreu, A comparative analysis of Charter Party agreements Subject to respective American and British laws and decisions It s all in the details, Tul. Mar. LJ, 2001, 26, 294 6

16 7. Both parties agreed explicitly that special terms are fully incorporated as per attached. 4 Therefore both standard terms of Reliable Tankers Inc. and the standard terms of business of Super Charters fully apply THE CLAIMS ARE INADMISSABLE 4.1 Nullity 8. Claimants did not exist at the time arbitration was purported to commence. A contractual time bar in Clause 4 of Super Charters standard terms precludes the possibility to commence arbitral proceedings later than 20 days after discharge would have been completed. 6 Referring to the party autonomy and freedom of contract as explained above and the explicit agreement of both parties to incorporate parties standard terms, Claimants were necessitated to commence proceedings 20 days after discharge would have been completed. This would have been 20 days after 10 th January Reliable Tankers Inc. did no longer exist as an entity at the time the arbitration was purported to be commenced. Therefore commencement and appointment of Mr. Smith as an arbitrator on 28 th January must be considered invalid. 10. Consequently, as is stated in Clause 4 of Super Charters standard terms of business, all (counter)claims of Claimants are to be deemed invalid. 4 see exhibit 9 5 see exhibits 12 and 13 6 Clause 4 holds All claims against Super Charters must be notified to Super Charters within 10 days of discharge/re-delivery and/or when discharge/re-delivery would have taken place if for whatever reason it did not (as appropriate) and any suit or proceedings must be commenced within a further 10 days thereafter. 7 see exhibit 14 7

17 11. As such, Claimants do not have any right of suit against Respondents, therefore we ask the arbitral tribunal to declare claims null. 4.2 Impossibility to bring a counterclaim if claims should be rendered null 12. On the same grounds as the nullity, namely the valid incorporation of Clause 4 of Super Charters standard terms into the Charter Party, which holds that all claims against Super Charters must be notified 20 days after discharge, Reliable Holdings Inc cannot bring in a counterclaim. For valid commencement of arbitral proceedings was only made until 12 th February by Super Charters Inc. 5. IF, WHICH IS DENIED, THE CLAIMS ARE ADMISSIBLE, THESE ARE THE SUBSTANTIAL ISSUES 5.1 Payment of freight 13. Freight is the remuneration payable to the shipowner for the carriage of cargo. As was stated by Willes J. as follows: according to the law of England, as a rule, freight is earned by the carriage and arrival of the goods ready to be delivered to the merchant, though they may be in a damaged stated when they arrive. If the shipowner fails to carry the goods for the merchant to the destined port, the freight is not earned As the facts underlying this arbitral procedure clearly show, Owners failed to perform the contract voyage and as a consequence Charterers should not be held to pay any freight for a contract not-performed. 8 Dakin v. Oxley (1864) 15 C.B. (N.S.) 646, per Willes J. at (omissions added) 8

18 15. Furthermore, the owner s failure to procure the vessel s release must be seen as a repudiation of the charter. Consequently, even if arbitrators award Owners freight, Charterers are entitled to equitable set-off. As Lord Brandon of Oakbrook stated in The Dominique 9 although a claim in respect of a non-repudiatory breach of a voyage charterparty cannot operate as a defence by way of equitable set-off to a claim for freight, a claim in respect of a repudiation of such contract, accepted as such, is capable of doing so. 16. Similar sounds can be heard in cases in United States courts. In Drew Ameroid International v. M/V Green Star 10 Haight, J. stated as follows: where a shipowner is burdened by indebtedness to third parties that its vessels are subject to arrest at any time and in any port, the shipowner cannot receive or retain freight, even under an earned freight clause in the charter party or bill of lading, when an arrest occurs and prevents commencement or completion of the voyage and delivery of the cargo for whose transportation the freight is payable The repudiatory breach of a voyage charter-party must be seen as to satisfy the test for a defense by way of equitable set-off laid down in Rawson v. Samuel 12 of giving rise to an equity sufficient to impeach the legal title to a claim for advance freight. 5.2 ETA provision Condition of the contract 9 Colonial Bank V. European Grain and Shipping Ltd., [1989] 1 Lloyd s Rep., at F.Supp. 1056, 1988 AMC 2570 (S.D.N.Y.1988) 11 Id. At Rawson v. Samuel, (1839) 1 Cr. & Ph

19 18. The date of arrival is of great economic importance to the charterer, and should therefore be regarded as being of the essence. Provisions stating a precise date of sailing to the loading port, are generally being held to be conditions A condition of the contract is a promise or undertaking by one party which is fundamentally to the contract, with the result that any breach of it will entitle the innocent party to terminate (or rescind) the contract, even if the breach is minor in degree or in effect The ASBATANKVOY 1977 part 1 15 as amended states clearly that ETA at loadport will be 3 december Moreover both parties explicitly agreed that the vessel (RELIABLE BUTTERFLY) needed to sail by 25 th November if she wanted to make the Laycan. Failing to do so could have disastrous effects In the Mihalis Angelos 17, the Court of Appeal held that the provision was a condition and that the charterers were therefore entitled to rescind even though the cancelling date had not arrived. The Court of appeal stated that charterers were entitled, on 17 July, to rescind a charter containing an expected ready to load provision of about 1 July even though the contractual cancellation date under the charter was 20 th July because the Owners had no reasonable expectation that the vessel would reach her nominated load port by that date In Glaholm v. Hays (1841) 2 M.& G. 257, the words held to sail from England on or before before the 15 th March next were held to be a condition.; Robert E. Gaisford, Cancellation of Voyage Charterparties: A comparison of Chinese and English law, Journal of Maritime Law and Commerce, 27, (1996) 14 Julian Cooke et al., Voyage Charters 25, (1993) 15 see exhibit 9 16 see exhibits 15 and Maredelato Cia Nav. S.A. v Bergbau Handel G.m.b.H. [1971] 1 Q.B Maredelato Cia Nav. S.A. v Bergbau Handel G.m.b.H. [1970] 2 Lloyd s Rep 47 (Eng. C.A.) 10

20 22. Review and comparison of both American and English authorities confirm the above. In Lowber v. Bangs 19, the Court stated with support of English authority 20 that: Upon reason, principle, and authority, we are of the opinion that the stipulation before us is a condition precedent, and not a mere representation, nor an independent covenant, and that it goes to the entire root of the contract, breach of which entitled Lowber to terminate the charter. 23. Facts and provisions indicate very clearly that the Owners were aware and properly informed of the necessity of starting the approach voyage to the loading port by 25 th November and agreed to do so. I refer hereby to mailing on the 22 nd and 23 rd November As we both know, if she does not sail by 25 th November, she will not make the Laycan. 25. In response Reliable Tankers Inc. stated : I agree that she needs to sail by 25 th November if she is to make her Laycan If not a condition than an intermediate term which goes to the root of the contract 26. Even if considered as an intermediate term, the right to terminate depends upon the nature and effect of the breach, and must be so serious it goes to the root of the contract 22. When the delay was of sufficient length to frustrate the commercial purpose of the voyage 23, the charterers were entitled to terminate the charter U.S. (2 Wall.) citing Behn v. Burness [1863] 122 Eng. Rep. 281 (Ex. Ch.) 21 see exhibits 15 and The Hansa Nord [1975] 2 Lloyd s Rep Nicholas J. Healy Jr., Termination of Charter Parties, 49 Tul. L. Rev. 847, Evera S.A. Comercial v. N. Shipping Co., [1956] 2 Lloyd s Rep (Q.B.) 11

21 27. As to the fundamental nature of the ETA provision, negotiations between parties and construction of the contract clearly show the utmost importance of the provision. 28. I refer to the contact between Owner and charterer made on the 19 th November explicitly stating that the schedule is tight and that she (RELIABLE BUTTERFLY) needs to be clear before the planned refinery shutdown As the facts make clear, one cannot but admit that the ETA provision and the thereby implied obligation to proceed to the loading port go undeniable to the root of the contract. As a consequence any delay frustrates any commercial purpose of the voyage. 5.3 Reasonable grounds 30. A Failure to provide an expected date based upon reasonable grounds entitles Charterer to cancel the charter and to claim damages When an express obligation as to the date of arrival is given, it is an implied term that the vessel shall embark on her approach voyage at a time which is reasonable that she can arrive at the loading port on the estimated time of arrival. This is based upon the leading authorities set out in Louis Dreyfus & Co. v. Lauro [1938] 60 Ll. L. Rep. 94 and Evera S.A. Commercial v. North Shipping [1956] 2 Lloyd s Rep see exhibits 8 and S. Sanday & Co. v. Keighley, Maxstel & Co., [1922] 10 Lloyd s List L. Rep (Eng C.A.); Philip Bush, Delay and Detention, 25 Tul. Mar. L.J., 445, see also Geogas S.A. v. Trammo Gas Ltd. ( The Baleares) [1993] 1 Lloyds Rep

22 32. Where the expected date is based upon reasonable grounds, an inability to commence the approach voyage in a timely manner entitles Charterer to cancel and to make claim for losses sustained as a consequence of breach A panel of arbitrators in Phillips Petroleum Int l (UK) Ltd. of Del. & Sentry Ref., Inc ( The Aralda) 29 ruled that the Owner would be excused for failure to meet that date only where the Owner can establish certain criteria, adopted from Evera S.A. Commercial v. North Shipping Co. 30 These criteria are : 1) When given, the expected date was honestly made on reasonable grounds, 2) The vessel sets out [ for the load port] in good time so that under normal circumstances she will arrive at the port of loading at or about the day which she has given as being the one when she expected to be ready to load, and 3) She proceeds direct to the load port without deviation for Owners own purposes. 34. The ETA clause as constructed in the standard terms of the Owner states the Owner has to advise and inform parties if ETA changes by more than 6 hours, save during last 24 hrs before arrival when to advise immediately if ETA changes by 3 hrs or more A similar provision can be found in the standard terms of business from charterers which holds that the Owner needs to give notice to charterers every 5 days and then 96, 72, 48, 24 and 12 hours before arrival Louis Dreyfus & Co. v. Lauro [1938] 60 Lloyd s List L. Rep ; Monroe Bros. v. Ryan [1935] 2 K.B. 28, 37-39; Evera S.A. Commercial v. N. Shipping Co., [1956] 2 Lloyd s Rep (Q.B.) 29 SMA Award No (1983) (Berg, Palmer & Smith, Jr., Arbs, Evera S.A. Commercial v. N. Shipping Co., [1956] 2 Lloyd s Rep see exhibit 12 13

23 36. When establishing proof of fault by the Owner, charterer has to demonstrate that the Owner failed in the charter-party to give an honest estimated time of arrival (ETA) based on reasonable grounds When deciding whether the Owner s expectation was based upon reasonable grounds one must not only consider the information which was in fact known to the Owner but also any facts which he ought to have known or as to which he is put on enquiry Owners did not make any notice that the RELIABLE BUTTERFLY had been averted. Charterers had to find this out by back channels. The Owners even refused to give a revised ETA at load port nor inform Charterers of the situation at hand even though the facts of the situation made painfully clear that the RELIABLE BUTTERFLY wouldn t be able to arrive at the load port at the date expected. 39. Therefore, the expected date given cannot be seen made based on reasonable grounds and consequently the vessel (RELIABLE BUTTERFLY) did not set out in good time so that under normal circumstances she would have arrived at the port of loading at the time needed and negotiated. 40. Owners did not fulfill the criteria set out in Evera for which as a result Charterers are entitled to cancel the charter and claim damages. 5.4 Interpretation of cancelling clause set out in Standard terms of owner Clause Distinction between ETA and lay/canceling date 32 see exhibit Sanday v. Keighley, Maxted & Co., [1922] 27 Com. Cas. 296 (C.A.) 34 R. Pagnan & Fratelli v. NG.J. Schouten NV [1973] 1 Lloyd s Rep

24 41. The primary object of the approach voyage is to meet the expected date. The presence of a canceling clause does in no means alter this. Missing the expected date can cause substantial damage to the charterer due to loss on the price it must pay to thirdparty suppliers for goods 35 and/or losses on the ensuing delayed delivery of raw materials to receivers Distinction has to be made between the vessel expected time of arrival and the Laycan dates. The canceling clause grants the Charterer an option to cancel if the vessel arrives at the load port after the fixed date. 37 Charterer may not only cancel, but may also make claim in damages for breach of such separately stated obligations There is no right to anticipatory cancellation. No right to cancel accrues before the cancellation date under the cancellation clause unless and until the date specified in that clause has reached This does not mean that a charterer may, for commercial practicability, make the necessary arrangements they wish in anticipation of exercising their option under the clause when the cancelling date arrives In Geogas S.A. v. Trammo Gas Ltd. 41 the court stated in discussing the all convenient dispatch obligation contained in ASBA form Part I, clause 1: It seems clear that this form was designed primarily to deal with the simple case where the fixture is made shortly before the voyage under the charter-party is due to 35 Arbitration in The Aralda, SMA Award No (1983) (Berg, Palmer & Smith, Jr., Arbs.) 36 Arbitration in Elmadonna, Inc. & Trifinery, Inc. (The Felicity L), SMA Award No (1995) (Berg, Cederholm &Schlosser, Arbs.) 37 Ambietlos v. Grace Bros. & Co. [1922] 10 Lloyd s List L. Rep. 159, 161 (Eng. C.A.) 38 Sanday v. United States Shipping Bd. Emergency Fleet Corp., 1 F.2d 390, 391, 1924 AMC 989, (S.D.N.Y. 1924) 39 Cheikh Boutros Selim El-Khoury v. Ceylon Shipping Lines (The Madeleine) [1967] 2 Lloyd s Rep. 244 (Q.B.) 40 Maredelanto Compania Naviera S.A. v. Bergbau-Handel G.m.b.H. (The Mihalis Angelos) [1971] 1 Q.B Geogas S.A. v. Trammo Gas Ltd. ( The Baleares) [1993] 1 Lloyds Rep

25 commence. In such a case the obligation can be expressed as an obligation to start for the loading port in sufficient time to meet the date specified as the date of expected readiness to load. The exception clause will protect the Owners from delays due to circumstances beyond their control. 46. An expected ready date is a representation to be made and adhered to in good faith and for which the Owner has an independent obligation to set a practical and honestly represented ETA, and thereafter to use its best efforts to achieve the arrival in accordance with the representation, regardless of the Laycan dates Cancellation dates and expected time of arrival dates are not equivalent terms, although they relate to the same subject. If the vessel misses its lay/canceling dates the charter may cancel the charter. Neither good faith nor any other reason excuses the Owners failure to timely tender the ship. An expected ready date, however, is a representation to be made and adhered to in good faith and invites reliance The presence of a canceling clause should detract from Charter s right to cancel either for a misrepresented expected date, or for breach of the obligation to proceed in timely fashion to meet the expected date Where the charter-party makes express provision for the vessel to proceed to the loading port, the chartered service commences when, but only when, the vessel embarks on that approach In Arbitration between Andino Chem. Shipping Co. & Aectra Refin. & Mktg. ( The Espoir), SMA Award No (1985) (Berg, James & Gyory, Arbs.), 197 ; see also James M. Textor, OilVoy Clauses Vessel late arrival at Load Port: Recovery of commercial damages, 27 Tul. Mar. L.J. 475, Arbitration between Cities Serv. Co & Handels-En Transp. Maatschappij Transol B.V., Slikkerveer (The Venus V), SMA Award No (1985) (Messrs. Berg, Palmer & Gyory, Arbs.) Geogas S.A. v. Trammo Gas Ltd. ( The Baleares) [1993] 1 Lloyds Rep Julian Cooke et al., Voyage Charters 64, (1993) 16

26 50. The exception clauses in the charter will generally be construed as extending to events occurring on the approach voyage 46 but not to events occurring before the voyage has commenced Standard terms clause 2 of the Owners clearly is construed as a canceling clause and should therefore be interpreted as such. As is pointed out distinction must be made between canceling clauses and ETA provisions. Any terms regarding the canceling clause have no effect upon the obligation set out in the ETA clauses and the implied and absolute obligation for the owner to sail out to the loading port with reasonable dispatch. 52. Failure to do so will not exempt the Owners from any liability which is based on a provision regarding a similar but in no way an equivalent matter. 53. As to any exception clauses found in the ASBATANKVOY 77 as amended by parties and complemented by the parties standard terms, it must be pointed out with emphasis that the vessel did not begin its approach voyage for she was arrested in the bunkering port. 54. The assumption that the vessel was already on the approach voyage are contradictory to the facts and events underlying this arbitration. 55. Therefore no exceptions, relieving the Owners of their obligations and liability, will have effect. 5.5 Reasonable dispatch 46 Hudson v. Hill [1874] 43 l. J. C.P Christie & Vesey v. Helvetia [1960] 1 Lloyd s Rep

27 56. The term reasonable dispatch was regarded in by the court in North Anglia 48 as an absolute promise on the part of the ship Owner that the vessel will commence her approach voyage to the loading port at such a time as when, by proceeding with utmost dispatch, she should arrive at the load port by the expected date. To establish what is reasonable, one must look at the given ETA date as well as the expected readiness to load date. Therefore the question of fault does not arise and consequently it does not matter why the vessel is unable to start the approach. 57. No exceptions or eventualities will excuse late arrival at the load port, if the vessel failed to start in timely fashion As pointed out above, facts underlying this arbitration which led to the breach of contract by owners undoubtedly point out that the named vessel RELIABLE BUTTERFLY failed to start in a timely fashion, moreover she failed to start at all. 59. The Owner did not, as was obliged under their own standard terms, provide any notice regarding a possible delay or revision of the ETA. In failing to do so, the RELIABLE BUTTERFLY needed to start her approach voyage the 25 th November which she did not. Consequently, the Owners were in breach of contract. 5.6 Breach of charter party damages 60. The general rule applied to charter parties to establish the proper measure of damages is the difference between the market rate at the time of breach and the charter 48 Evera S.A. Commercial v. North Shipping [1956] 2 Lloyd s Rep see also Arbitration in Elmadonna, Inc. & Trifinery, Inc. (The Felicity L), SMA Award No (1995) (Berg, Cederholm &Schlosser, Arbs.) 18

28 rate 50, and any other item of damage which is not too remote and which could not be avoided As to the remoteness of the charterer s damages, it is clear that these damages must me foreseeable within the Hadley doctrine Nevertheless, due to the nature of certain petroleum trades, in which the Owners are considered to be in close contact and with good knowledge of the charterer s business, the Owner s remoteness or unforeseeability defense will be more closely scrutinized Damages due to increase in freight 63. The increase in the amount of approximately US$ 824,000, holds the difference between the Charter freight and the amount payable under the replacement fixtures secured by the Charterers. 64. Due to failure to perform by VLCC RELIABLE BUTTERFLY and with no available replacement similar sized tonnage on dates, Charterers had to find 2 Suezmaxes (sisters STAR LIGHT and EVER LIGHT) and negotiate for the 2 to cover the now 2 separate voyages. 65. The total freight of these 2 separate voyages amounts in US$ 6, 018, 804. The difference with previous amount, being US$ 5, 195, 125, amounts to US$ 823, J. Bond Smith, Jr., Recent Developments in the Law of Damages for Breach of Charter, Journal of Maritime Law and Commerce, 13, 3, 314 (1982) 51 The Elena D Amico, [1980] 1 Lloyd s Rep. 75 (Q.B., Com. Ct.) 52 Hadley v. Baxendale, 156 Eng Rep. 145 (Ex. 1854) 53 Arbitration in Phillips Petroleum Int l (UK) Ltd. of Del. & Sentry Refin. Inc. (The Aralda), SMA Award No (Berg, Palmer & Smith, Jr., Arbs.) ; Arbitration in Elmadonna, Inc. & Trifinery, Inc. (The Felicity L), SMA Award No (1995) (Berg, Cederholm &Schlosser, Arbs.) 19

29 5.6.2 Damages due to payment of freight 66. If, which is denied, freight should be paid, Charterers claim the amount of such freight being US$ 4, 935, It is undeniable that Charterers suffer damages due to the Owners breach of contract. As mentioned above, damages must also be seen as any other damage which is neither too remote nor unforeseeable. 54 Payment of freight for a contract not being performed must be seen as such for it is foreseeable for both parties and directly linked to the contract. Furthermore, in casu payment of freight must be considered a total commercial loss, due to the impossibility, created by the breach of contract by the Owners, to embark on a financially rewarding enterprise by the Charterers, which evidently was the goal of the Charterer when entering the contract with the Owners. 67. Damages resulting from payment of freight must be regarded separately, but added up with the amount resulting from the increase in freight payable under an alternative contract Damages due and payable to loadport terminal/sellers 68. Due to delayed arrival Charterers experienced damage of the amount of US$ 100, 000, due to sums due and payable to the loadport terminal/sellers. These damages are to be regarded as being directly linked with the Charter party. 54 see also James M. Textor, OilVoy Clauses Vessel late arrival at Load Port: Recovery of commercial damages, 27 Tul. Mar. L.J. 468,

30 5.6.4 Damages due and payable to disport terminal/buyers 69. On the same grounds as in 5.4.4, Charterers suffered damages due to sums due and payable to the disport terminal/buyers for delayed arrival in the amount of US$ 300,000. These damages are to be regarded as being directly linked with the Charter party Interest 70. Pursuant to section 49 of the Arbitration act 1996, Charterers claim compound ( or alternative simple) interest on any sums found at such a rate and with such rests and for such a period as the Tribunal sees fit. 6.IF, WHICH IS DENIED, THE RESPONDENTS ARE LIABLE TO CLAIMANTS FOR PAYMENT OF FREIGHT For the above reasons Charterers counterclaim against Reliable Tankers Inc. (1) US$ 823, 679 (2) US$ 4, 935, (3) US$ 100, 000 (4) US$ 300, 000 Interest on a compound basis pursuant to s. 49 of the Arbitration Act

31 7.AS FOR THE CLAIMS AGAINST RELIABLE HOLDINGS INC. For the above reasons Charterers claim against Reliable Holdings Inc. (1) US$ 823, 679 (2) US$ 4, 935, (3) US$ 100, 000 (4) US$ 300, 000 Interest on a compound basis pursuant to s. 49 of the Arbitration Act