TALK TO THE CYPRUS ICS

Chris Hilton and Jessica Pollock, Eversheds LLP14 May 2008

LEGAL DEVELOPMENTS

The ARCHIMIDIS Court of Appeal decision

The law on named ports before the Archimidis

• Absent an express warranty of safety in the charterparty, no implied warranty as to the safety of the port

• Why? - HOUSTON CITY [1954] 2 Lloyd’s Rep 148 (Dixon C.J)– If charterer names the port, shipowner takes

responsibility of ascertaining safety– If shipowner is not happy, he does not enter charter– But if shipowner enters charter, risk of unsafety of

named port is his

• No cases dealing with a provision where the port is named but described as “one safe port Rotterdam”

The Facts

• ARCHIMIDIS chartered on an amended ASBATANKVOY form for a number of consecutive voyages

• 8 Voyages performed carrying gasoil Ventspils to Amsterdam

• On voyage 6, vessel arrived Ventspils and there was a draft restriction in place

• Charterers had available to load 90,000 MT of cargo, but the vessel could only load 67,058 MT and still safely sail because of the draft restriction

Material charterparty term

“4 Cargo:Minimum 90,000 metric tonnes always consistent with 45 feet fresh basis arrival Northwest Europe. No deadfreight to be for Charterer’s account provided minimum quantity supplied …

Load one safe port Ventspils. Discharge 1/2 safe ports United Kingdom Continent Bordeaux/Hamburg range.”

Issues for the Arbitration Tribunal

• Whether the owners were entitled to deadfreight in respect of the difference between the minimum contractual quantity and the quantity of cargo loaded

• Whether there was a safe port warranty in the charterparty

• (Third issue: applicable Worldscale rates)

Decision of the Tribunal/Courts

• Tribunal– Deadfreight: For owners– Safe port warranty: For owners

• High Court– Deadfreight: For charterers– Safe port warranty: For owners

• Court of Appeal– Deadfreight: For owners– Safe port warranty: For owners

The Court of Appeal decision

• Deadfreight decision – why?– No tender of the contractual minimum cargo

by charterers – in fact charterers only tendered 67,058 MT, because that is what they brought forward to load (regardless of what quantity they had available ashore)

– Charterers could have tendered full contractual performance either by topping off by STS or by waiting until the channel had been dredged and loading a full cargo at the berth

• Safe port warranty decision – why?– There was no dispute that the disport description “1/2

safe ports…” imported a warranty of safety and the loadport provision “one safe port” should be read as having the same meaning

– The word “safe” must have some meaning in the provision “one safe port”

– The safe port warranty was not part of the printed ASBATANKVOY form, but was specifically agreed between the parties

– The leading textbooks advocate this construction and the case law either supports this finding or at least does not contradict such a finding

And now ….?

• Deadfreight point – interesting, but confined to its facts

• Certainty in the law on safe port warranties? (Findings in owners’ favour by the Tribunal, the High Court and the Court of Appeal)

• … for now at least!

DOCUMENTARY DEVELOPMENTS

NEWBUILDCON

Newbuildcon

• Biggest BIMCO enterprise in recent years• 24 working days• Widely skilled committee• But no yard representatives on the Committee

• Innovative• Electronic• Draft guarantees in place• Explanatory notes available in Mandarin

• Considerable interest• Seminars in Hong Kong, Singapore, London and

Hamburg so far• BIMCO very enthusiastic• Completes the cycle of their cradle to grave

contracts

• Brief:– Box layout– Balanced– Clear– Logical– Succinct– Standard Wordings– General Purpose

• Competitors– SAJ– AWES– Norwegian– Marad– Plus lots of one-off variations

• Logical – follows pattern of shipbuilding• Preamble• Definitions• The Vessel• Financial• Production• Delivery• Legal• Sundry• Annexes

WHY USE IT?

Key points1. Boxes – menu2. Logical layout – cross referred3. Modern provisions – Green Passport4. Flexible – provision for additional requirements

5. Dispute resolution• Expert• Mediation

6. Guarantees (Instalment, Performance, Refund, Delivery Defects)– Wording provided– Integrated into contract– Especially RG/Termination

Stocznia Gdynia v Gearbulk

• Polish yard case on repudiation• Caution required• Risk for buyer• Law being clarified

Issues

Three Issues:1. Complete Code?2. Restrict scope of damages?(dependant on terms of contract)

3. Election – either cancel or repudiate

Complete Code/ Restrict Damages?

• Depends on wording of Contract• This one:

“The Purchaser shall not be entitled to claim any other compensation and the Seller shall not be liable for any other compensation for damages sustained by reason of events set out in this Article and/or direct consequences of such events other than liquidated damages specified in this Article.”

Complete Code

• Held NOT to be sufficient to exclude• Therefore Buyer retained right to claim:

– for repudiatory breach– Common Law damages

Issue 3

• Buyer cancelled • Got instalments back under RG• Then claimed CL damages• Held NO

– Elected to go one route– Could not have cake and eat it too

Complete Code

Newbuildcon covers Issues 1 and 2

Clause 37(e)

“… In the event, however, that a Party fails to perform the Contract, or unequivocally indicates its intention not to perform it, in a way which thereby permits the other Party to treat the Contract as at an end other than under the terms of the Contract, any such claim that the other Party may have shall not be limited or excluded by the terms of this Contract”.

• BUT does this cover third issue?• Does Buyer cancel & claim under RG?• Or claim damages for repudiatory breach?• May depend on terms of RG• Does it cover damages?

• One for the lawyers.• All subject to appeal to CA.

DOCUMENTARY DEVELOPMENTS

SHIPMAN

Shipman 2009

• Shipman• Committee set up in 2007• Balanced – Owners, Managers and Club• Chairman

Principle - minimal changes(BIMCO’s most successful document)

ButThinking is developing– updateAim to produce as suite of agreements

• Shipman• Crewman A – Cost plus fee• Crewman B – Lump sum

• Developed sequentially• Not identical terms• Inconsistencies

• Make consistent• Current thinking

– Shipman Technical Management Agt– Subject to consultation

• Going to Documentary Committee• Consultation• Fine tuning• Then:

Crewman A and B

• Forecast for 2009

ANY QUESTIONS?

© EVERSHEDS LLP 2008. Eversheds LLP is a limited liability partnership.