Tanker Laytime and Demurrage Curriculum

Transcription

1 Tanker Laytime and Demurrage Curriculum Learning objectives Time is money is a common statement for tanker owners and operators. This module focuses on voyage chartering of tankers and in particular with laytime and demurrage - matters that are closely connected with voyage charters. Solid understanding of the contractual foundation of tanker chartering and the knowledge of accurate calculation of laytime and demurrage will certainly help any business to avoid delays and maximise profit. Although laytime and demurrage can also be covered by legal textbook, it must be pointed out that laytime and demurrage can be very significant commercially and can be and are often affected by practical and operational considerations. Therefore, a pure legal discussion may not be sufficient to provide overall understanding of these important elements of operating and chartering tankers. This module first looks into tanker and tanker market which form the foundation of understanding contractual issues, it furthermore comments on the fundamental principles which underpin tanker laytime and demurrage as well as concepts that are unique to tanker voyage charters. By giving examples of what could go wrong with tanker chartering and how the Courts solved these problems, lessons can be learned and applied to prevent similar problems from happening. Module content This module will cover the following topics: 1. Tankers types, trades and markets, and terminologies This section discusses general practical and commercial matters and in particular those that impact significantly on chartering of tankers and on laytime and demurrage. These practical matters include first of all description of types of tankers and their purposes. Tankers that carry crude oil or petroleum products are initially dealt with and tankers that carry other bulk liquids such as vegetable oils, chemicals and liquefied gas are also explained. This section also introduces concepts that are unique to tanker voyage charters and freights such as Worldscale Hours Terms and Conditions. Tanker markets are also discussed in this section in order to apply commercial realities to tanker chartering and calculation of laytime and demurrage. Terminologies that are related to commercial and operational issues and are used in charter parties and Statements of Facts (SOFs) are also listed and explained. 2. Tanker voyage charter parties Shipowners receive payment for the service his ships provide. Time is important to a shipowner so when the shipowner calculates freight he takes into account the time the ship will be at the disposal of the charterer. This time is not only to carry the cargo but also time in a port during which cargo is loaded and discharged. Therefore, when a charterer enters into a contract he pays freight not only for carriage of the cargo but also for the time he uses the ship in a port for loading or discharging the cargo. If the agreed time for loading and discharging is exceeded, the charterer must compensate the shipowner with demurrage. If the charterer releases the ship to the BIMCO 1

2 shipowner earlier than agreed, then despatch applies although it is not usual to find a despatch clause in tanker voyage charter parties. This section looks generally at some voyage charter parties for tankers and in particular at clauses that deal with laytime and demurrage. This section also analyses certain clauses of TANKERVOY 87. It is difficult to carry out a comparison study of all clauses in tanker voyage charter parties but clauses from other charter parties are brought in at times for comments. A comparison of ASBATANKVOY and SHELLVOY 6 is also provided. 3. Laydays, cancelling clauses and commencement of laytime This section looks at legal issues relating to when laytime actually starts to count against a charterer. Laytime cannot start though unless certain conditions are met and these conditions will be discussed in this section. However, it may be that when the charterer enters into the contract with the owner, the charterer may not want the ship to arrive at the first loading place before a certain date. A charter party clause provides that laydays (or laytime) shall not commence before that date. Most voyage charter parties also give charterer the option to cancel the charter if the ship fails to present herself to commence the service by a certain date. This option is contained in cancelling clauses. Together, the two provisions are usually combined into a laydays-cancelling (laycan) option for the charterer and it is therefore a window of dates which will be discussed in this section. 4. Counting laytime and exceptions to laytime Laytime can be considered as a quantity of time that the charterer has paid for in the freight. Once it commences the time begins to run out, like sand in an hour-glass or a stopwatch counting backwards. The quantity of time continues to run out or be used unless some event occurs or situation develops that causes the reduction of time to stop for a short period. This section comments on what these events or situations are that can be considered as the exception to laytime counting. 5. Demurrage and damages for detention Tanker voyage charter parties contain clauses designed to benefit the charterer, e.g. he pays some fraction of the agreed rate of demurrage. A situation may develop after laytime has ended, for example after hoses have been disconnected. Because demurrage is closely connected with laytime but laytime has come to an end, it may be considered that demurrage is no longer the form of compensation for depriving the shipowner of time. If the form of compensation for the detention or delay is not expressly specified in the charter party, the shipowner may claim damages which are referred to as damages for detention. This section looks closely at demurrage and damages for detention. 6. Pumping, stripping, COW, IGS and cleaning clauses Most tanker voyage charter parties allow for a certain laytime for loading and discharging. However, it is common to find a pumping clause in the charter party that can affect the time taken to discharge the cargo. Many demurrage disputes for crude oil shipments involve disagreements over vessels' pumping performances. Arguments about crude oil washing, tank stripping, inadequate pumping logs, the absence of letters of protest and unreasonable deductions of all time in excess of 24 hours pumping are very familiar. BIMCO 2

3 Clauses also exist in tanker voyage charter parties concerning provision and use of Crude Oil Washing (COW) and an Inert Gas System (IGS). Obviously these methods of tanker operations must be used by competent personnel with equipment in good working order. When these two elements are missing, there may be delays and charterers may bring claims. Laytime and demurrage may also be in issue. Claim for damage to the cargo caused by overheating could also occur. These issues are discussed in this section with reference to recent cases. 7. Time bars and demurrage documents Tanker voyage charter parties often contain clauses which qualify an owner s right to claim demurrage. Not only must owners present their claims within a specified time period, but they must also do so with specified supporting documents. The same is true of any other party seeking an indemnity in respect of the shipowner s claim for demurrage. For example, in a contract of sale there may be one or more clause that permits the seller to claim demurrage subject to conditions of time bars and provision of specified documents. Usually both time bars and specified documents are connected in claims that are dealt with by arbitral tribunals and in Courts. In this Section we consider both issues together and outline how arbitrators and Judges have recently dealt with the relevant matters. 8. Dispute resolution Tanker voyage charter parties are the documents that contain the terms of the contract between the shipowner and the charterer. It is not uncommon for contracts to be performed (or not performed) in such a way as to cause a dispute between these two parties. The charter parties often contain clauses which specify how the disputes should be resolved (choice of method: litigation, arbitration or mediation), where they should be resolved (choice of exclusive jurisdiction) and what law should apply (choice of law). Arbitration and mediation offer advantages that litigation can rarely provide. In many cases an arbitrator or mediator is so expert in the field of the dispute that the entire proceeding can be conducted without lawyers who can obviously lead to speed and economy. This section comments on the advantage and disadvantages of various dispute resolutions. Module trainer Marcus is a partner in the Shipping Group, Reed Smith LLP. He is an experienced litigator, capable of handling both dryshipping, offshore and admiralty matters and also has extensive experience in non-contentious matters. Marcus heads the firm s LNG shipping practice and has been engaged as legal advisor to SIGTTO for many years. Before qualifying as a solicitor, Marcus served in the Merchant Navy for eleven years on a wide variety of vessel types, including gas carriers, breakbulk, reefer and container ships, as well as specialist mooring handlers. A qualified master mariner, he is also the only partner to have held command of a merchant ship. In addition, Marcus is a Younger Brother of the Corporation of Trinity House and a member of Lloyd s Register s Classification Committee. Training language English BIMCO 3

4 Training plan Learning outline Activity Week 1 Week 2 Complete section 1 Complete section 2 Complete section 3 Complete section 4 Complete section 5 Week 3 Attend webinar 1 Week 4 Week 5 Prepare case study 1 group answers* Complete section 6 Complete section 7 Complete section 8 Complete section 9 Complete section 10 Week 6 Attend webinar 2 Week 7 Week 8 Week 9 Week 10 Post Module Prepare case study 2 group answers* Complete section 11 Complete section 12 Complete section 13 Prepare case study 3 group answers* Attend webinar 3 Module revision Exam (3 hours) Exam results issued Complete course evaluation Certificate issued *Case Study answer are due three business days before the related webinar. Module prerequisites Students should have already obtained basic knowledge of the maritime sector through their educational background and/or daily work, which includes employment by owners, charterers, brokers, law firms, insurance companies, maritime authorities and classification societies etc. Otherwise, basic knowledge of shipping can be obtained by joining the Introduction to Shipping module. Training methods The module is internet based with four key elements: digital book (module learning material), case studies, webinars and resources section. Case studies This module has three case studies that the tutor discusses with participants during the webinars. Prior to the webinar participants work in groups, using a blog, wiki, correspondence, etc, to answers for each case study and are to be submitted to three days before the webinar. BIMCO 4

5 Exam The exam is a written open book, which means you are allowed to consult your notes, books, the Internet, etc. However, the answers are to be your own words and no direct copying of others work. The exam usually consists of scenario-based or discussion-based, or essay-style questions. Your answers need to demonstrate that you have understood the logic and concepts behind a certain issue. Pass grade is 50 or above. Recommended reading Laytime and Demurrage, by John Schofield, 7 th edition (London: Informa Law, 2015). Carriage of Goods by Sea by John F. Wilson, 7 th edition (London: Longman, 2010). Check Before Fixing!, by BIMCO (Copenhagen: BIMCO Informatique A/S, 2009). Commencement of Laytime, by Donald Davies (London: Informa, 2014). Laytime Calculating, by William V Packard (London: Fairplay, 1997). Maritime Law, by Christopher Hill, 6 th edition (London: Informa Law, 2004). Payne and Ivamy's carriage of goods by sea, E R Hardy Ivamy; William Payne 13 th edition (London: Butterworth Heinemann, 1989). Scrutton on Charterparties and Bills of Lading by Thomas Edward Scrutton, 21 st edition (London: Sweet & Maxwell, 2008). Shipbroking and Chartering Practice, by Lars Gorton, Patrick Hilenius and Rolf Ihre, Arne Sandevarn (London: Informa Law, 2009). Shipping Law, by Simon Baughen, 5 th edition (Oxon: Routledge, 2012). Summerskill on Laytime, by Simon Baughen, 5 th edition (Hebden Bridge: Sweet & Maxwell, 2013). The Safe Port, by William Astle (London: Fairplay, 1987). Voyage Charters, by Julian Cooke, Tim Young, Michael Ashcroft, Andrew Taylor, John Kimball, David Martowski, LeRoy Lambert and Michael Sturley, 4 th edition (London, Informa Law 2007). INTERTANKO publications related to operational, commercial and charterparty issues. BIMCO Website BIMCO Bulletins Lloyd s Maritime and Commercial Law Quarterly BIMCO 5