DMC Rating Category: Confirmed

This case note has been contributed by Patrick V. Martin, a retired New York attorney and active arbitrator, who specializes in charterparty and commodity disputes

Background
The vessel was fixed on April 15, 2003, on a Gencon form, for a voyage from Providence, Rhode Island, to one safe port Korea. The cargo was scrap iron. Loading was performed without incident. At the discharge port – Pohang, cargo was "to be discharged at the rate of 3,000 metric tons per weather working day of 24 consecutive hours…" The dispute concerned the definition of "weather working days" at Pohang and whether the Owner was entitled to demurrage, claimed in the amount of some US$81,400.

The panel also had to consider the Owner’s application for pre-award security in the amount of US$125,000 from the Charterer, to cover the demurrage claim. In other words, rather than applying to the appropriate court for an order to seize the Charterer’s property, the Owner simply made an application to the panel.

Dealing with the latter issue first, the Owner argued that the Charterer was basically a start-up company without substantial assets and that without security there would be no money at the end of the day to pay the anticipated award.

The ruling on pre-award security
The panel agreed stated that they had authority to order the Charterer to post security. The sole question was whether they should exercise that power in the facts of this case. The majority decided they should not. They stated that there were no special circumstances that required this extraordinary relief. There was not sufficient evidence produced to persuade the panel  that there had been changes in the Charterer’s financial condition that would impair Owner’s ability to collect on the award. (There was a vigorous dissent from arbitrator Nichols.)

The Demurrage claim
The panel then turned to Owner’s claim for demurrage at Pohang. in the amount of $81,418.40. Charterer argued that there were adverse weather conditions which prevented the longshoremen from working because of safety concerns. The panel stated that the test was not only the prevailing weather itself, but whether the prevailing weather conditions would have had an adverse effect on the condition of the cargo being worked. "The weather working term has historically been applied for the protection of the commodity to avoid cargo damages" The burden is on the Charterer to satisfy this standard and it failed to do so. The panel found that the scrap had been loaded during rain periods and was stored outdoors in Pohang after discharge. Further, the Statement of Facts evidenced that discharging had itself continued during some periods of inclement weather. Obviously, rain and bad weather did not adversely affect the condition of the scrap cargo. The panel commented that certain cargoes, including scrap, are routinely worked during periods of bad weather.

Therefore, the Charterer failed in its burden of proof and the Owner was accordingly awarded the amount of the demurrage claim of US$81,418, interest of US$15,111, (based on an average of prime rates over the relevant period) and legal fees and costs of US$18,502. 

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