UK: Voyage Charterparties: Court Of Appeal Clarifies Strike Exceptions To Laytime

Last Updated: 7 August 2012
Article by Elizabeth Turnbull and Leon Alexander

On 19 June, the Court of Appeal handed down judgment in the case of "Carboex v Louis Dreyfus Commodities Suisse" [2012]. The case considered whether the laytime exception in case of strikes contained in clause 9 of the AMWELSH form extended to delays caused by congestion following a strike.

The relevant clause stated "...in case of strikes, lockouts, civil commotions or any other cause ... beyond the control of the Charterers which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage".

The relevant charter was a berth charter, which meant that the vessel would not be an "arrived ship" until she arrived at the berth. This meant that a Notice of Readiness ("NOR") could not be tendered until the vessel berthed and laytime would not start to run.

However, one of the rider clauses, clause 40, stated that an NOR could be tendered whether the vessel was in berth or not ("WIBON") and laytime would commence 12 hours thereafter.

Carboex chartered four vessels to carry coal from Indonesia to Ferrol, Spain, as part of a 10-voyage contract of affreightment. Between 9 and 16 June 2008, there was a nationwide haulage strike in Spain, during which no coal was removed from the terminal. When the strike ended, there was a large amount of coal stockpiled at the terminal which took some time to clear.

Four of the Carboex vessels arrived at Ferrol and were affected by the strike. Two of the vessels arrived during the strike and were placed in the queues for the relevant berths, the third and fourth vessels arrived after the strike, where three vessels were ahead of them in the relevant queue.

Carboex alleged (and for present purposes it was assumed) that an unofficial stoppage by some lorry drivers took place between 23 and 24 June 2008. No discharging took place on either day, but some cargo was removed from the stock pile on 25 June.

For the purpose of the preliminary issues, it was assumed that the congestion at Ferrol was entirely due to the haulage strike and the interruption to discharging caused by the later unofficial stoppage.

The dispute had been referred to arbitration and the tribunal ruled in Owners' favour. Charterers successfully appealed and the award was set aside. The Owners then appealed to the Court of Appeal where, essentially, the question was: "does the strike exception in Clause 9 apply to a vessel which is unable to berth due to berth congestion caused by a strike?"

In this regard, Owners' argument was twofold: (1) that Clause 40 had the effect of transferring all the risk of congestion at the port onto Charterers and, therefore, that the exceptions to the running of laytime in Clause 9 should be narrowly construed to when the vessel was at berth; and (2) that Clause 9 operated only during the continuation of the strike and did not extend to delay caused by congestion which was in itself a consequence or after effect of the strike.

(1) Did the WIBON provision in clause 40 of this berth charter transfer all risk of delay onto Charterers up until the vessel berthed?

The Court of Appeal found in Charterers' favour. Moore- Bick LJ surmised:

"It is quite true to say that the purpose of including those words in a berth charter is to transfer the general risk of congestion from the Owner to the Charterer, but it is equally true to say that its function is to start the laytime clock running... the instance of the risk of congestion is essentially a matter to be determined by reference to the commercial considerations, including demurrage rates, and the parties are free to decide for themselves how to allocate that risk under different circumstances. In my view, Clause 40 does not point to a narrower construction of Clause 9 than it would naturally bear..."

The judge went on to find that there was nothing within Clause 9 to suggest that its application should be restricted to periods when the vessel was alongside, ready to work. If the parties had intended to confine the Charterers' protection more narrowly, they would have used clearer language.

(2) Did the strike exception cover congestion after the strike?

The Court of Appeal also considered that, on its natural meaning, the wording of Clause 9 covered the consequences of the strike and not just the duration, which is the position in some charters such as the Centrocon clause, where the relevant clause states that laytime does not count "during the continuation" of the strike.

However, the Court also considered the relevant authorities, as the arbitrators had relied upon Central Argentine Railway Ltd v Marwood [1915] as authority for the proposition that time spent waiting to berth was not covered by the exception. Marwood was a House of Lords decision involving an identical strike exception clause. In Marwood, demurrage was incurred due to a strike of engine drivers at the discharge port.

The vessel arrived during a strike which ended on 15 February 1912. The vessel berthed on 1 March, but between 27 January and 15 February 1912, some 6 and ¼ days' work was done. Owners had conceded the time between the vessel's arrival and 27 January did not count, but they argued that in respect of the period between 27 January and 15 February, 6 and ¼ days should count against laytime because, to that extent, discharging had not been prevented or delayed.

The House of Lords accepted the Owners' construction and held that they were entitled to count 6 and ¼ days against laytime. Their Lordships were of the view that the words "such time" meant the time for which the discharging was actually prevented or delayed by the strike, but some of the speeches seemed to go further and supported the Owners' argument that the exception only applied where the vessel was at berth.

The Court of Appeal disagreed with Owners' interpretation of Marwood and ruled that it was authority for two things:

  1. That "such time" meant time lost by reason of one of the excepted causes
  2. That the Charterer must prove that the excepted event was the "effective cause" of delay to the vessel

Accordingly, the Court of Appeal did not consider that Clause 9 only operated where the vessel was at berth or prevented from berthing, but held that it would also cover congestion preventing berthing.

However, the Charterer would need to establish that the congestion would not otherwise have been there. For example, if a vessel arrived at the disport and was sixth in the terminal queue before a strike started, then five vessels would have had to be loaded first, irrespective of the strike, and the only waiting time for Owners' account would be the time when those five vessels were prevented from discharging.

What are the practical implications of the Carboex v Louis Dreyfus Commodities Suisse decision?

The decision applies to 'net loss of time' laytime strike exception clauses like clause 9 of the AMWELSH form. It will not apply to "duration" laytime strike exception clauses such as CENTROCON or NORGRAIN clauses.

This means that delays during a strike are not analogous to the net loss of time position under NYPE clause 15 (where the vessel is only off-hire when she is not at the charterers' disposal) and, depending on the terms of the charter, owners may bear the risk of any delay that post-dates the excepted event.

This decision appears to strike a fair balance of the risk associated with delays caused by strikes at discharge ports and the allocation of such risk under voyage charters in general. However, some sympathy will be with owners in circumstances where they bear a significant amount of the exposure for time lost due to strikes which arises as a result of following charterers' orders.

Ultimately, it is a question of commercial negotiation and an owner who includes a provision allowing tendering of NOR WIBON, or even outside of port limits at a customary waiting place, may just as easily include a term that laytime will only be excepted for time lost in the duration of any strike.

Consequently, owners frequenting Spain or South American ports in particular may be well advised to consider closely the relationship between their commencement of laytime and laytime exception clauses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Elizabeth Turnbull
Leon Alexander
 
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