UK: Construing The Strike Exception In An AmWelsh Charterparty (Update)

Last Updated: 14 August 2012
Article by Jamila Khan and Ruth Monahan

Carboex SA v. Louis Dreyfus Commodities Suisse SA [2012] EWCA Civ 838

The Court of Appeal in this case has decided an appeal in relation to an important question in the context of voyage charterparties, namely whether a strike exception to the running of laytime applies to stop laytime running (i) where the vessel is delayed by the after-effects of a strike which has ended; (ii) where the vessel has arrived after the strike has ended and (iii) where the vessel is delayed in berthing due to congestion that has arisen as a result of the strike.

The Commercial Court decision, which was appealed to the Court of Appeal, was reported in the Ince July 2011 Shipping E-Brief.

The background facts

Four vessels were chartered by the defendant owners to the claimant charterers under a Contract of Affreightment dated 6 March 2008 ("the COA") for the carriage of coal from Indonesia to Puerto de Ferrol in Spain. The COA was on an amended version of the AmWelsh voyage charterparty form and was a berth, as distinct from a port, charter. The relevant clauses of the COA were clauses 9 and 40.

Clause 9 provided for the rate of discharge of cargo and for payment of demurrage. The last sentence of the clause read:

"in Case of strikes, lockouts, civil commotions ... 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."

Clause 40 stated:

"At port of discharge...If the berth is not available when vessel tenders Notice of Readiness, but provided vessel/Owners not at fault in relation thereto, then laytime shall commence twelve (12) hours after first permissible tide, Notice of Readiness received and accepted, whether in berth or not, whether in free pratique or not, whether in customs clearance or not, unless no customs clearance or no free pratique due to vessel's fault, unless sooner commenced in which case only time actually used to count..."

When the vessels reached Puerto de Ferrol in Spain, there was congestion at the port due to a nationwide Spanish haulage strike and the vessels were delayed getting into berth.

The charterers contended that the discharge of the four vessels was delayed by reason of the strike and that these periods were excluded from computation of laytime by virtue of clause 9. The owners contended that the combined effect of clauses 9 and 40 was that the charterers took the risk of delay caused by congestion at the port, so that it was only delay suffered once the vessel had berthed by reason of a strike in progress that was excluded by clause 9. Since the strike was over when each of the vessels eventually berthed, they argued that time was to count in full, and that the demurrage as calculated was due.

The claim for demurrage was referred to arbitration. Two preliminary issues were decided by the tribunal. First, whether clause 9 of the COA applied in the case of a vessel which was delayed by the after-effects of a strike which had ended; and, secondly, whether clause 9 of the COA applied in the case of a vessel which had arrived after the strike had ended. The tribunal answered both questions in the negative. They found that clause 9 was ambiguous and was to be construed contra proferentem, applying Central Argentine Rly Ltd v. Marwood [1915] AC 981. The charterers appealed under s 69 of the Arbitration Act 1996 (appeal on point of law).

On appeal to the Commercial Court, the newly formulated question before the court was whether the strike exception in clause 9 applied to a vessel which was unable to berth due to berth congestion caused by a strike. The owners' argument was that the effect of the "whether in berth or not" provision in clause 40 meant that the risk of delay due to congestion at the discharge port was to be borne by the charterers. The charterers argued that the existence of the "whether in berth or not" provision could have no effect on altering the construction of the demurrage exceptions clause in order to shift liability to the charterers. The court found for the charterers and held that the tribunal's award should be set aside. The owners appealed.

The Court of Appeal's decision

The owners submitted that the charter was worded as a berth charter, which meant that, as a starting point, the owners took the risk of congestion preventing the vessel from reaching the berth. The inclusion, however, of the "whether in berth or not" provision at clause 40, means that the notice of readiness can be given from the usual waiting place, whether in berth or not, and that even if a berth is not then available, laytime proceeds to commence anyway as stipulated. The owners argued that the effect of this is that the risk of congestion at the port of discharge was transferred to the charterers, despite the wording of clause 9. In addition, the owners submitted that the wording of clause 9 was such that the phrase "the discharging" had to be given a narrow meaning, as in Central Argentine Rly Ltd v Marwood [1915] AC 981. Finally, the owners argued that clause 9 should only operate during the continuation of the strike and should not extend to delay caused by congestion which was itself a consequence of the strike.

The charterers, on the other hand, accepted that, by agreeing that the vessel could give notice of readiness "whether in berth or not", the parties had consciously transferred the general risk of congestion at the discharging port from the owners to the charterers. However, the charterers submitted that it remained open to them to make exceptions to that general position by excluding certain periods of time from the running of laytime. Insofar as they had done so, they had transferred the risk back to the owners.

The Court of Appeal found for the charterers and dismissed the appeal. The Court of Appeal started by considering the significance to be attached to the expression "whether in berth or not" and the extent to which it affected the construction of clause 9. The appeal judges stated that it is equally true to say firstly, that the purpose of including those words in a berth charter is to transfer the general risk of congestion from the owners to the charterers and secondly, that the words operated in order to start the laytime clock running. However, the establishment of that general regime, by using the words "whether in berth or not" did not preclude the parties from transferring the risk of delay due to specific causes back to the owners, if they so agreed.

In the Court of Appeal's view, clause 9 was intended to transfer the risk of some delays caused by strikes from the charterers back to the owners, and there was nothing in the language of clause 9 that indicated an intention to restrict its operation solely to the period during which the vessel was alongside the quay.

The Court of Appeal also did not accept the owners' alternative argument, that clause 9 should not apply to the delay caused by congestion, which was in turn caused by the strike. The natural meaning of the language of clause 9 showed that it was concerned only with the consequences of the excepted causes and not their duration.

The court also recognised, however, that the matter was not free from authority. In Central Argentine Rly Ltd v. Marwood [1915] AC 981, the House of Lords had considered the effect of a substantively identical provision to clause 9. The case was authority for two related propositions: (i) that "such time" in clause 9 meant time lost to the vessel in completing discharging by reason of one of the excepted causes; and (ii) that, in order to obtain the protection of clause 9, the charterers had to establish that the event on which they relied fell within the clause and was the effective cause of delay to the vessel. Marwood was not, however, authority for the proposition that clause 9 protected the charterers only once the vessel had reached her discharge berth. That narrow construction had not been submitted in argument and it would be surprising if the House of Lords had intended to decide such an important question without inviting argument and without making it clear in their speeches that they intended to do so. Accordingly, Marwood did not prevent the Court of Appeal in this instance from giving clause 9 the meaning which it, in their view, naturally bore.

Comment

The Court of Appeal upheld the previous decision of the Commercial Court, which had set aside the tribunal's award. The approach to the construction of clause 9, as with any contractual clause, depended upon the exact wording used. It is open to parties to transfer the risk of delay on a vessel's arrival at a load or discharge port due to specific causes from the charterers back to the owners. If the parties wish to restrict the operation of that allocation of risk solely to specific periods, such as when the vessel is alongside the quay, or to the duration of specific causes (and not the knock-on effect of those specific causes), specific and clear wording must be used.

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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