Case Law: London Arbitration 32/22

Charterparty - Deductions from hire – Speed and consumption – Meaning of ’good weather and smooth sea’ – Methodology – Evidence of weather – Effect of favourable currents – Whether weather routing company’s report final

Owners claimed for unlawful deductions from hire by charterers in relation to alleged breach of the charterparty speed and performance warranty. The dispute was referred to arbitration under the LMAA Small Claims Procedure.

The relevant charterparty clauses are as follows:

Recap:

“… – SPD/CONS: AVERAGE UNDER GOOD WEATHER AND SMOOTH SEA CONDITIONS ABT 15 KN B / ABT 14 KN L ON ABT 33 MTS IFO 380 CST PLUS ABT 0.15 MT LSMGO …

– AN UNDERPERFORMANCE CLAIM CAN ONLY BE SUBMITTED IN RESPECT OF DAYS ON WHICH THE VESSEL ENCOUNTERED WIND UPTO BEAUFORT 4 AND/OR DOUGLAS SEA STATE 3 (WITH MAX COMBINED SIGNIFICANT WAVE HEIGHT 1.25M) WITH NO ADVERSE CURRENT OR SWELL. SPEED IS NOT TO BE DEBITED DUE TO FAVOURABLE CURRENTS.

– ALT SPEED/CONS: ABT 13 KN B / 12 KN L ON ABT 23 MTS IFO 380 CST PLUS ABT 0.15 MT LSMGO O/WISE AS ABV…”

Rider Clauses:

“Clause 46. Speed and Consumption

Speed/consumption average under good weather and smooth sea conditions ABT 15 KN B/ABT 14 KN L ON ABT 33 MTS IFO 380 CST PLUS ABT 0.15 MT LSMGO … Any performance disputes to be decided as final by the weather routing organisation as selected by Charterers (usually Weather Routing Company) but always in accordance with Charter Party and Owners to be given copies Weather Routing Company reports …

Clause 89. Weather Routing

Charterers’ option to appoint [WRC]/other ocean routes. Being independent routing company to advise the master during the voyage specified by the charterers. The master is to comply with the reporting procedure of this weather service except for reasons of safety, in which case this is to be clearly and promptly communicated both to charterers and the WRC.

… Owners warrant that at the date of delivery, the Vessel shall be of the description set out in the main terms recap and c/p. Owners and charterers agree that evidence of the weather, sea state and other factors affecting the vessel’s performance shall be taken from both the Vessel’s log book and final report of an independent weather routing service. An underperformance claim can only be submitted in respect of good weather days on which the vessel encountered wind up to Beaufort 4 and/or Douglas Sea state 3 (with max combined significant wave height 1.25 mtrs) with no adverse current or swell. Speed is not to be debited due to favourable currents. In the event of a dispute over the vessel’s performance in this c/p and unless a commercial solution is found, the matter shall be referred to London arbitration small claims procedure to apply.”

As with all speed and performance disputes, the starting point for the assessment of a vessel’s performance will be the weather and sea conditions that the parties have agreed via the charterparty clauses and warranties will be acceptable for measuring the performance (‘benchmarking conditions’). If the parties agree to the involvement of a weather routing company ('WRC'), then the interrelationship between the agreed weather conditions, vessel performance warranties and WRC clauses needs to be assessed.

After performing that exercise, the tribunal found in favour of the owners and considered the following:

1. The parties had clearly agreed that ‘no adverse current or swell’ were benchmarking conditions and therefore any periods in which adverse current or adverse swell was encountered would be excluded for performance assessment purposes.
    
2. Pursuant to clause 89, evidence of the weather, sea state and other factors affecting the vessel’s performance was to be taken from both the vessel’s logbook and the final report of the weather routing service. A comparison of the logbook and the WRC entries was performed. While logbook entries were based on subjective assessments of the crew, ‘which were at best crude estimates’ of sea conditions, the tribunal also found that this did not mean the evidence could be ignored. Further, the tribunal found that while the WRC report was based on reliable data, it was not in compliance with the agreed benchmarking conditions, for example, in making no reference to swell. Accordingly, the WRC report was noncontractual and hence could not form the basis of charterers’ underperformance claim against the owners.
    
3. The charterers had the burden of proving owners’ breach of the speed and performance warranty. However, they failed to discharge their burden and prove that the vessel was in breach.

Comment

This award is a reminder of the significance of the proper application of the agreed contractual provisions in any weather routing company report prepared for performance dispute. It is essential for the parties, and WRCs, to pay attention to the wording of the applicable clauses as this can be decisive to the outcome; not only does the data have to be reliable (as in this case), it has to be used in accordance with the contractual terms.

Link to i-law can be found here

Category: Caselaw