DMC Category Rating: Confirmed
Case Note contributed by Patrick V Martin, counsel to the Society of Maritime Arbitrators
Disputes arose and the parties, after protracted legal proceedings, agreed to submit them to a sole arbitrator in New York.
Charterer asserted a claim for US$471,435.81, primarily for blending stock to required to reduce the S&W content to acceptable limits and related tankage costs. Owner’s counter-claimed asserted a claim for demurrage totaling US$1,117,842.90, primarily for demurrage including the 18 days at anchorage.
The Owner contended that the load port analysis of the cargo used by the Charterer was at least suspect, if not erroneous., and that the small amount of fresh water which could have entered the cargo through the leaking heating from the coils was inconsequential and therefore could not and did not cause the considerable increase in S&W content found at New York.
The first issue was whether the load port analysis used by Charterer as the basis for its claim fairly represented the condition of the cargo upon loading.
The cargo was loaded from a massive open pit identified as open pit 801. Just before the M/T "Eos", another vessel loaded a fuel oil cargo from pit 801, which cargo had a S&W of 1.4%. The certificate of analysis prepared for the "Eos" was done by the supplier’s laboratory and not by an independent inspection company. The Owner had no involvement with the sampling or analysis of the cargo from pit 801. Further if, as Charterer contended, the sole cause of the increase in water content from 0.7% to 1.8% was due to the leaky coils then there would have been a commensurate increase in the volume of the liquid in the ship’s tanks. There was an increase of about 1,704 bbls, based on the difference between ship’s ullages at load and discharge ports. However, to support an increase in the volume based on a difference of 1.1%, there would have had to be a volumetric increase of about 6,050 bbls. There was no evidence to support this position.
While the load port certificates may be prima facie evidence of the cargo quality as between buyer and seller of the product (and indeed areis often "final and binding"), the quality certificate does not have the same import as between a charterer and an owner.
The arbitrator then considered the Owner’s demurrage and expenses claim of US$1,117,842.90, of which US $324,438.88 was for loading and discharging operations and US$822,066.65 was for time spent at the anchorage. The arbitrator had no difficulty awarding the former.
With respect to the latter, the Charterer argued that the high water content caused by the leaky coils made it impossible to discharge the cargo promptly. The arbitrator found that this position was not sustained by the evidence. The terminal would have taken the cargo in at any time and ultimately did so. Instead, the arbitrator found that the time spent at the anchorage had less to do with the cargo’s S& W content than Charterer’s decision to use the ship as floating storage. Further, the real reason the vessel was ordered to the anchorage was that the Charterer did not have tankage available and used the vessel for storage in a rapidly rising market from which it "profited enormously". The full amount of the Owner’s claim was awarded.
Lastly, each side claimed legal expenses in excess of US$600,000. With very little discussion, the arbitrator awarded the Owner, as the prevailing party, US$550,000 as being reasonable in the circumstances.
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