Fondren v. Lagoven

Home ] Up ]

Fondren Corporation-Panama v. Lagoven, S.A. (the "Olympic Sponsor")

New York Society of Maritime Arbitrators: Agreed Arbitration Award: Richard H. Brown, Jack Berg and Louis P. Sheinbaum as arbitrators: November 2001

The owners of the m/t Olympic Sponsor claimed damages from Lagoven, the vessel’s charterers, for the cost of repairs and time lost resulting from the grounding of the ship outside the western limit of the exit channel from Lake Maracaibo in Venezuela. The shipowners alleged that the charter contained a safe port warranty and that the ship grounded by reason of insufficient depth of water in the channel. The shipowners argued that this was a breach of the safe port warranty. In the alternative, the shipowners alleged that charterers were at fault for instructing the ship to load to a 38 feet departure draft.

In a unanimous award, the tribunal found that there was no safe port warranty and that the cause of the grounding was navigational error on the part of the master and pilot. The tribunal further concluded that, under this charter, in order for the shipowners to recover from the charterers, the shipowners had the burden of showing that the grounding was caused by charterers’ neglect. They failed to do so.

DMC Category Rating: Confirmed

n n n

The Olympic Sponsor, a double-hulled tanker, built in 1994, of 96,547 metric tonnes summer deadweight capacity, was fixed to the Venezuelan charterers, Lagoven, to carry a part cargo from La Salina, in Venezuela, to Rotterdam. Lagoven are a corporate entity owned by the government of Venezuela, responsible for operating oil terminals and supplying crude oil and other petroleum products for export sales. La Salina is a major crude oil exporting port in Venezuela, situated on Lake Maracaibo, access to which is through two connected man-made channels. The ‘canal exterior’ extends into the Gulf of Venezuela and meets with the open sea. Responsibility for maintaining the condition of the channel rested with the Venezuelan Ministry of Transport and Communications, acting through the National Institute of Channels (‘INC’). Maximum permissible drafts in the channel were set by the Harbour Master of the port. There was no evidence that the Harbour Master was employed by, or under the control of, Lagoven or INC. At the time in question, the maximum fresh water sailing draft permitted in the channel was 38 feet at high tide.

The charterparty contained in Part I a typescript provision that the ship would load at ‘one or two safe ports Venezuela’. However, the printed clause 9 of Part II, provided that the charterers would not be deemed to warrant the safety of any port to which the vessel might be ordered, nor would they be responsible for any damage resulting from the condition of any such port ‘not caused by charterers’ fault or neglect, or which could have been avoided by the exercise of reasonable care on the part of the Master’. .

The Olympic Sponsor arrived at La Salina on March 8 1997. She loaded 72,000 tonnes of crude oil and sailed for the open sea on March 10, with a compulsory pilot on board. The ship encountered navigational difficulties between buoys 26 and 24 in the exit channel, making only three knots over the ground despite the engines working on full ahead manoeuvring speed. By the time the vessel reached buoy 22, she had lost steerageway and was set to the west side of the channel. She went aground shortly afterwards. The no.4 starboard double-bottom tank was holed but no pollution occurred. Sufficient cargo was then lightered to re-float the ship, which then re-loaded the cargo and continued her voyage to Rotterdam without incident. Repairs to the damaged hull were carried out in dry-dock at Dubai in April 1999. Subject to issues of liability, the amount of damages had been agreed between the parties. The day following the casualty to the Olympic Sponsor, the Harbour Master reduced the exit draft to 36 feet at high tide.

The Issues
The owners maintained that the reason for the grounding of the ship was the inadequate depth of water in the exit channel for the draft of the vessel. This rendered the port of La Salina unsafe and amounted to a breach of warranty by the charterers. The owners relied in this respect on the safe port stipulation in Part I of the charter, which they maintained overrode the exception in clause 9, since the charter expressly provided that in the event of a conflict between the provisions of Part I and Part II, the provisions of Part I would prevail. If this argument failed, the owners alleged that the charterers were nevertheless at fault for the grounding, since they either knew or should have known that the exit channel was unsafe for a ship such as the Olympic Sponsor, laden to a freshwater draft of 38 feet.

The charterers maintained that the cause of the grounding was not any inadequacy in the depth of water in the exit channel but rather errors in navigation on the part of the Master and pilot, by not properly taking into account the wind, sea, current and tidal conditions present at the time.

As regards the interpretation of the charterparty, charterers argued that there was no conflict between Parts I and II of the charter. Clause 9 in Part II simply set out the standard to determine whether liability attached to the charterers for any failure on their part to supply a safe port. The charterers further denied that they were in any way at fault in having the vessel sail from La Salina through the exit channel with a fresh water draft of 38 feet and maintained, in the wording of clause 9, that the grounding ‘could have been avoided by the exercise of reasonable care on the part of the Master’.

In an unanimous award, the arbitrators found, after a careful examination of the vessel’s course and speed in the exit channel, that the grounding was caused by errors in her navigation and not by any inadequacy in the depth of water in the channel. The course steered between beacon 33 and buoy 26 had taken her outside the channel after passing too close to the west side of the channel, causing her to lose speed as the hull came into contact with the sloping bank, and ultimately lose steerageway. The panel concluded that in going aground in the vicinity of buoy 22, the vessel had most likely proceeded through the trench or path in the bottom outside the channel, made by the "Nissos Amorgos", a ship that had grounded some ten days earlier, causing a major oil-spill.

Although the finding of negligent navigation made it, strictly speaking, unnecessary for the panel to address the remaining points, they adopted the charterers’ arguments on the issue of charterparty interpretation. They found no conflict between the safe port provisions in Part I and the provisions of clause 9 in Part II. The two provisions could be reasonably read together and therefore should be.

The panel did not find the charterers in any way at fault for allowing the vessel to sail with the permitted fresh water draft of 38 feet. Owners had failed to carry the burden of showing that the exercise of due care required the charterers to give instructions to load to a lesser draft.

Consequently, owners’ claims failed. They were also ordered to pay 75% of the charterers’ attorney’s fees and costs, together with interest, and a similar proportion of the arbitrators’ fees.

n n n


These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.