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Thursday, October 18, 2018

DELAY IN PORT - IS DEMURRAGE THE ONLY REMEDY?

Demurrage is a form of liquidated (fixed) damages for delay and arises once the laytime provided in a charterparty has expired. The issue is, in what circumstances can owners claim additional compensation over and above the demurrage that has accrued?

In most cases demurrage is the only compensation available to owners. In exceptional circumstances where owners can show that: i) there is a separate breach of the charterparty by charterers in addition to their failure to carry out cargo operations within the agreed laytime; and ii) the owners’ loss forms a separate head of damages not covered by the demurrage, the owners can recover additional damages.

We have previously alerted members to the possibility that additional tug expenses may be incurred at the single buoy mooring (SBM) at Jose Ignacio, Uruguay, (see December 1998 issue of the Tanker Charterparty Circular). The issue of owners incurring additional expenses, which they sought to recover in addition to demurrage, arose when a vessel was ordered to load at the SBM at Jose Ignacio The vessel, which had been fixed on the Asbatankvoy form of charter, was delayed in mooring at the SBM initially due to it being occupied and subsequently due to bad weather. The Mooring Master at Jose Ignacio ordered a large tug, which was available to assist in mooring operations, to remain on standby rather than sending it back to Montevideo. Owners were charged for the 10 days that the tug was kept on standby. The additional cost of the tug to owners over and above what they would normally have incurred if there had be no delay was some USD 70,000.

Under clause 9 of Asbatankvoy charterers have an obligation to designate and procure a berth which is “reachable on…arrival”. It is arguable that this obligation is quite distinct from the provisions governing laytime. Charterers were in breach of this provision as upon arrival at the SBM it was occupied and subsequently bad weather precluded the vessel from mooring. Were the additional tug expenses “… not only different in character from loss of use but stem from breach of an additional and/or independent obligation” (“The Bonde”, [1991] 1 Lloyd’s Rep. 136)? Whilst it is clear that breach of the warranty contained in clause 9 is separate to a breach of the laytime provisions, the more difficult requirement to overcome is that the additional costs incurred by owners must be of a different character.

Demurrage compensates owners for the costs and expenses which are incurred due to the vessel being delayed following the expiry of the agreed laytime. Such expenses would include: bunkers, crew salaries, supplies and port charges. The standby tug expenses are arguably different in character. They were not a necessary expense associated with the running of the vessel during the period of delay. The tug was required only when the vessel had moored and was carrying out cargo operations. The expenses incurred are also no different in character from the expenses that would have been incurred had the tug made the return trip to Montevideo. These additional expenses flow naturally and directly from the failure of charterers to have a berth reachable on arrival, as opposed to the mere detention of the vessel at the port, and are recoverable from charterers.