In London Arbitration 3/08 (2008) 734 LMLN 3 Charterers, in reliance on a cargo retention clause contained within a voyage charter, made a deduction from freight equivalent to the volume of liquid (pumpable) cargo which an independent surveyor determined remained on board after completion of discharge. Owners commenced arbitration proceedings asserting that Charterers were not entitled to make the deduction. The Tribunal held that since cargo retention clauses represent a departure from the well established rule of English law that freight is sacrosanct, Charterers were obliged to bring themselves squarely within the provisions of the wording of the clause. In these particular circumstances the Tribunal held that the surveyor’s report was inadequate to satisfy the requirements of the cargo retention clause, and as such, Charterers had not been entitled to make the deduction from freight.
The vessel was chartered on the Shellvoy 5 form to perform a voyage, with a cargo of Belayim blend crude oil, from
“Shell additional Clauses – February 1999
14. Cargo Retention Clause.
If on completion of discharge any liquid cargo reachable by vessels fixed pumps of a pumpable nature remains on board (the presence and quantity of such cargo having been established, …… by an independent surveyor, (appointed by Charterers and paid jointly by Owners and Charterers), Charterers shall have the right to deduct from freight an amount equal to the FOB loading port value of such cargo, cargo insurance plus freight thereon; provided, however, that any action or lack of action hereunder shall be without prejudice to any other rights or obligations of the Charterers, under this charter or otherwise……”
Following completion of loading, the Master signed a bill of lading for 556,594.20 barrels (bbls) of crude oil. Surveyors were subsequently appointed by Charterers, as independent surveyors to make a determination of fuel remaining on board (“ROB”) after discharge, as provided for by Clause 14, and Owners agreed with the appointment.
Shortly after discharge was completed in
The printed form of the Report also contained, near the foot, the words:
“LIQUID OIL or FREE FLOWING OIL is usually considered by the Industry as “Pumpable cargo”. NON LIQUID (Sediment/Sludge) are considered by the Industry as “Unpumpable cargo””.
Owners contended that the ROBs were solid, unpumpable and not reachable by the vessel’s fixed pump and, to the extent that there was any liquid cargo on board, it was trapped by solid ROB. The Charterers on the other hand contended that all of the requirements of Clause 14 had been met by the surveyor’s report, and as such, they were entitled to deduct the CIF value of the 3,503 bbls of liquid ROB.
The Tribunal held that provided an independent surveyor made a determination on completion of discharge that liquid cargo of a pumpable nature reachable by the vessel’s fixed pumps remained on board, then such a determination entitled Charterers, as per the terms of Clause 14, to deduct the CIF value of the liquid remains from freight. Charterers did not need to prove their entitlement to retain the amount deducted, by bringing a formal cargo claim. Instead the deduction from freight would be on a permanent basis as the independent surveyor’s determination was final in this respect. However, the Tribunal went on to make it clear that, because Clause 14 gave Charterers a right under the Charterparty which they would otherwise not have, it was incumbent upon Charterers to bring themselves squarely within the provisions of the wording of the clause, which had to be read strictly.
In this case the Tribunal held that no challenge could be made to the surveyor’s independence and it was not in doubt that the determinations made were on completion of discharge. However, while the surveyor distinguished between liquid and non liquid ROB and inserted terms such as “pumpable” and “unpumpable” into his report, the words at the foot of the printed form, and in particular the phrase “usually considered by the industry”, implied that the liquid cargo might not be pumpable. To satisfy the requirements of Clause 14, the surveyor had to say in an unqualified way that the liquid ROB cargo was pumpable and, for that reason, the Tribunal found the description in the report to be inadequate.
The other matter, on which the certificates were silent, was whether or not the liquid ROB cargo was reachable by the vessel’s fixed pumps. While it is known that oil tankers are generally designed to keep pumpable residues to a minimum level, the Tribunal held that such knowledge, which might imply that pumpable cargo was always reachable, was insufficient. Instead, to fulfil the requirements of Clause 14 the fact that the liquid ROB cargo was reachable by the vessel’s fixed pumps had to be certified.
In making this determination the Tribunal made clear that they were aware of the fact that surveyors generally were very reluctant to state a cargo was reachable by a vessel’s pumps. However, given that clauses such as Clause 14 had to be construed strictly against Charterers, and that it was for the Charterers to get themselves wholly within the provisions of such a clause, it was not appropriate to adopt an approach as to what surveyors said or wrote that was anything less than rigorous.
Accordingly, in this case the Tribunal held that, because the surveyor’s report did not certify in an unqualified way that the liquid cargo was pumpable and reachable by the vessel’s fixed pumps, Charterers had failed to bring themselves within the provisions of Clause 14 and, in this respect, Owners claim succeeded.
However, this was not the end of the matter as Charterers brought a counterclaim for damages, Clause 14 being without prejudice to any further right of Charterer’s to claim under the charter in respect of short delivery. In this respect the Tribunal held that the evidential burden was upon the Owners to demonstrate that the presence of such a significant quantity of ROB was not the fault of the vessel and, in this case, the Tribunal held that Owners had not discharged that burden. So far as quantities were concerned, however, the Charterers did not demonstrate to the Tribunal’s satisfaction that the Owners were responsible for any shortage in excess of the 3,503 bbls of liquid ROB certified by the surveyor. Charterers counterclaim therefore succeeded and Charterers were awarded damages to the exact same amount as was originally deducted from freight.
olivia.furmston@incelaw.com