Edlow International v. BBC Chartering

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Edlow International Company v. BBC Chartering & Logistics GmbH & Co. KG.
United States of America: Arbitration Award: Society of Maritime Arbitrators of New York: David Martowski, as Sole Arbitrator: 6 January 2004

Nemirow Hu & Shea, for the claimant shipper, Edlow
Galloway Johnson Tompkins Burr & Smith, for the respondent carrier

In this case, the shipper claimed the return of additional lumpsum freight which it had paid under protest. The carrier had claimed the additional freight on the grounds that the cargo of Uranium Hexaflouride in cylinders had been misdescribed in the Booking Note. The arbitrator held that the description of the cylinders conformed to international standards and did not amount to a misdescription, nor had it been causative of the carrier’s inability to carry additional part cargo. The arbitrator was influenced by the fact that the carrier had held itself out as experienced in such shipments. Even had there been a misdescription, the "double freight" clause in the Bill of Lading would not have applied in this case, as the misdescription would not have been deliberate. The arbitrator allowed, however, the carrier’s claim for detention for the time spent at the discharge port removing the fittings and lashing materials provided by the shipper to secure the cargo

DMC Category Rating: Confirmed

Edlow International is a Washington, DC-based company specialising in the international management and transport of nuclear materials. In November 2002, Edlow entered into a BIMCO Liner Booking Note with BBC, as carrier, for the carriage of 60 x 48Y cylinders of Uranium Hexaflouride, from Montreal to Sete in Southern France on a BBC operated ship. The Booking Note described the cylinders as 122cm in diameter and provided for them to be carried on a Free In/Lashed/Secured/Dunnaged – Liner Out Hook basis. The freight was agreed at US$125,000 lumpsum. The Booking Note gave BBC the option to load other cargo, provided same "will in no way harm, disturb, complicate safe stowage or in any other way whatsoever be able to create problems to Merchants or their cargo." It also allowed for Edlow to weld four D-rings per cylinder onto the vessel’s tanktop and/or tween deck, and provided damages for detention of US$4,000 per day or pro rata. In negotiating the Booking Note, BBC represented that it had previously carried cargo of this type.

In February 2003, the Canadian Department of Transport ("Transport Canada") instructed Edlow that the cylinders should be secured to padeyes, with lashings set on at least a 45 degree angle, with sufficient space between cylinders to allow access, so that lashings could be re-tightened during the voyage.

On 20 March 2003, BBC nominated BBC Scotland as the performing ship, estimating that she would arrive at Montreal in early April. Shortly after the nomination, Transport Canada advised both parties that calculations showed that the safe weight per square meter would be exceeded if the cargo were loaded in the tweendeck as BBC had planned. As a result, the nuclear cargo could be loaded only in the lower hold and, in consequence, BBC could not carry other cargo in that space. BBC therefore demanded that Edlow pay a revised freight of US$235,000 based on its using the "full ship." On April 4, the cargo was duly loaded and stowed on the vessel’s tanktops, in accordance with Transport Canada’s requirements and a bill of lading, marked "Freight payable as per Booking Note" was issued on April 8. Clause 11(e) of the bill of lading gave the carrier the right to claim double the amount of freight in case the "contents, weights, measurements or value of the goods" had been misdeclared.

On April 15, Edlow paid the US$125,000 lumpsum freight. The following day, BBC demanded immediate payment of the additional freight and threatened, if payment were not made, to instruct the vessel not to enter the discharge port. Negotiations followed and, on17 April, Edlow paid an additional US$75,000 in freight "under protest". On April 20, the vessel arrived at Sete and discharge of the cargo was completed on 23 April.

The contentions of the parties
Edlow thereafter instituted arbitration proceedings to recover the additional freight which it had paid under protest. BBC contested the claim, principally on the ground that Edlow had misdescribed the dimensions of the cargo. Whilst the diameter of the cylinders themselves was indeed 122cms, the addition of stiffening rings and lifting lugs increased the diameter overall to 150-160cms. As a result, Edlow’s cargo needed more space for stowage and lashing and prevented BBC from loading additional part cargoes permitted under the Booking Note. BBC maintained that Edlow had not objected to stowage plans that it had submitted in advance showing tween-deck stowage and BBC had booked part cargo accordingly. Edlow, as an expert in the international shipment of nuclear material, had a heightened duty of care, BBC alleged, in failing to inform BBC that its cargo would require the full use of the vessel. Its misdescription entitled BBC to take advantage of clause 11(e) but instead of demanding double freight of US$250,000 as it was entitled to do, BBC had agreed a compromise figure of US$75,000, which Edlow had agreed to pay. The fact that Edlow paid under protest did not change the voluntary nature of its payment.

BBC claimed in addition detention of some US$12,180 in respect of time spent at Sete after completion of discharge, in removing from the ship pad eyes and other lashing equipment amounting to over nearly 1,500 individual items.

Edlow, on the other hand, maintained that the description of the cargo in the Booking Note strictly conformed to international standards, reflected in regulations and drawings approved and published by the US Department of Transportation and the Canadian Nuclear Safety Commission. Both authorities described the cylinder diameter as 122cms and drawings clearly showed the stiffening rings and the lifting lugs. In negotiating the Booking Note, BBC represented that it had previously carried this cargo on numerous occasions. As carrier, BBC was responsible for the safe loading and stowage of the cargo and had failed to anticipate that the cylinders were too heavy for tweendeck stowage. As a result, BBC was bound by the terms of the Booking Note and the bill of lading, which clearly provided for a lumpsum freight of US$125,000 only. Clause 11(e) in the bill of lading was, Edlow maintained, a penalty clause and therefore unenforceable. It had paid the additional freight under duress, and under protest and on the understanding that its claim would be resolved by arbitration. It was therefore entitled to a refund of the additional US$75,000, together with attorney’s fees, costs and expenses.

The Award
The additional freight
The sole arbitrator held that Edlow had not misdescribed the cargo, noting that the model 48Y cylinder had been certified by US and Canadian authorities, as well as the International Atomic Energy Agency, as meeting regulatory requirements for the carriage of Uranium Hexaflouride. Both American and Canadian Packaging Design Certificates describe the cylinder’s dimensions as set out in the Booking Note. The relevant regulations are accompanied by detailed diagrams clearly showing the stiffening rings and the lifting lugs. The arbitrator attached particular importance to the representations made by BBC during the negotiations for the Booking Note, that it had previously transported cargo of this type. As a result, "BBC must be charged with knowledge of the cylinders’ dimensions and weights" – and with the safe working loads of the vessel’s tweendecks.

The arbitrator also agreed with Edlow that the argument over the cylinders’ diameter was, in fact, irrelevant, given the stowage requirements of Transport Canada that they be secured to pad eyes with lashings set at least at a 45 degree angle with sufficient space between the cylinders to allow access for tightening lashings as necessary during the voyage.

As for clause 11(e), the arbitrator noted that there was judicial authority which held that the clause was enforceable in the case of intentional misdescription of the cargo, which was clearly not the case here.

As for the payment "under protest", the arbitrator held that Edlow had acted reasonably in the circumstances and had sufficiently preserved its right to have the issue resolved in arbitration.

In the final analysis, Edlow did not misdescribe its cargo and BBC simply performed its obligations in accordance with the Booking Note. Accordingly, Edlow was entitled to a refund of the additional freight, together with an allowance towards attorneys’ fees and costs of US$6,000.

The claim for detention
The arbitrator interpreted the provision in the Booking Note for "Damage for Detention US$4,000 per day pro rata" as reflecting the parties’ intention that BBC would be compensated for delays after completion of discharge not otherwise contemplated by the terms of the Booking Note. Since the Booking Note permitted Edlow to weld 4 D-rings per cylinder onto the vessel’s tanktops, "it was Edlow’s attendant responsibility to remove the pad eyes and its lashing equipment on completion of discharge at Sete". According to the Statement of Facts, BBC performed this task and was entitled to compensation for the provable delays to the vessel arising from this work. The arbitrator calculated that a total of 28 hours and 50 minutes were effectively used for this task and accordingly awarded BBC detention of some US$4,800.

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