MT STENA PRIMORSK - CM P-Max III Ltd v Petroleos del Norte SA

Charterers Orders v Safety of the Vessel
Most disputes we deal with at Nordisk are resolved without the need for a formal ruling. Of those that do, the forum of choice for most is arbitration which by its very nature is private and confidential to the protagonists. It is rare to have a matter proceed to judgment in open court but, bucking the trend, the decision was handed down in the “Stena Primorsk” in late summer which allows us the chance to share issues and lessons publicly.

At first glance this was a straightforward claim for demurrage and in the scheme of things for not that much at USD 143,000 or so, but the issues were more interesting.

The Facts
The “Stena Primorsk” was chartered by members CNP-MAX III Ltd to Petrolios del Norte S.A. on an amended Shellvoy 6 form for the carriage of oil from Bilbao to a range of possible ports, but in the event to Paulsboro on the Delaware River in the USA. Laytime was agreed at 72 hours total and there was agreement between both owner and charterer that on leaving the load port Charterers had used 68 hours 53 mins of that laytime, leaving only 3 hours 6 mins in which to discharge before demurrage was inevitably going to be incurred. The events at Paulsboro were the cause of the dispute.

The Vessel arrived at Paulsboro on 29 March 2019 with a draft of 12.15 m. The confirmed depth at the designated berth selected by Charterers was 12.19 m plus an expected 1.6 m at high tide. The Owners’ under-keel clearance (UKC) policy was to have no less than 10% of the Vessel’s static draft. That required 1.215 m at Paulsboro. Thus, on berthing the Vessel needed a depth of at least 13.36 m on inward passage and at the berth to meet the UKC policy. The Vessel was likely to breach its UKC on the passage to berth as the tide would be less than full. The Master discussed this risk in conjunction with the Vessel’s technical managers, who granted a one-off waiver to proceed in on high water on the basis that the berth had assured the Master that the Vessel would start to discharge upon berthing at high tide and at a rate in excess of 15,000 barrels an hour. At that rate of discharge the Vessel, although initially breaching the UKC on the falling tide, was unlikely to ground.

The Vessel proceeded inwards and was all fast at 23:30 on 31 March. At this point the Terminal informed the Master that the discharge rate in excess of 15,000 barrels an hour would not be met. For the first 7-8 hours the receiving rate would be only 5,000 barrels an hour. The Master’s rapid calculation was that at this rate the Vessel’s UKC polity would rapidly be breached and citing safety decided at 23:48 hours that he should return to the anchorage where the Vessel proceeded on a falling tide.

The following day at around 11:00. the Terminal advised it could now accept cargo at the rate of initially 10,000 barrels per hour into two tanks for the first six hours and thereafter at approximately 15,000 to 20,000 barrels an hour. The next high tide was at 21:00. The Charterers ordered the Vessel to go in. The Master’s calculations in conjunction with the technical managers based on the available data of (i) the available water at high tide (ii) the Vessel’s draft and, assuming the promised discharging rate, (iii) the rate of decrease in Vessel’s draft (due to reducing cargo weight) and (iv) the depth loss as the tide ebbed, meant that the UKC policy was going to be breached.

The Owners refused to issue any further UKC waiver, and the Charterers then arranged lighters to remove cargo at the anchorage before the Vessel finally berthed at 23:54 on 4 April.

The Charterers’ case
The Charterers contended that laytime or time on demurrage should not run against them from

a)  23:48 on 31 March, when the Master decided to return to the anchorage until 23:34 on 4 April (save for the actual time spent discharging into lighters), alternatively

b)  from 21:00 on 1 April when they ordered the Vessel to return to the berth until 23:54 on 4 April, again less any discharge time into barges.

Charterers further counter claimed the costs of the lighter barges to the tune of USD 65,000 or so.

Disputes are almost always a mixture of contractual terms and the facts. The Charterers relied on the Owners’ obligation to “perform the service with dispatch” and “proceed as ordered to such berths as Charterers may specify” (Clause 3(ii)) and the exception to the running of laytime at clause 14 if time was lost “as a result for breach of Charterers’ orders by Owners”.

The Owners’ case
In turn, Owners pointed to Part I clause A III where the information in the Q88 (which contained the UKC policy) was warranted by them and that “this information is an integral part of the charterparty”. Further, by an amended clause 3(ii) whilst Owners were responsible for the consequences of a failure to obey Charterers’ orders, this was tempered with the proviso that such orders “are considered safe by the Master”.

The Judgment
Whilst there was much debate, there was significant agreement between the experts that on arrival at the berth for the first time the Master had little time to decide what to do and was lucky the pilot was still on board. Ultimately, the Judge considered that the rights of the Charterer to give orders and utilize the Vessel was not absolute but always tempered that whatever Charterers wanted to do, it was a question of safety and whether, in the light of the available knowledge, the Master acted reasonably.

This was a sensible cutting through some precise legal niceties, mindful of the grave consequences of a laden tanker grounding and the risk of pollution, particularly in the USA where the Oil Pollution Act hold owners strictly liable. Under the Shellvoy 6, like many Charterers’ forms, the charterer does not warrant the safety of the berth to which he may send the vessel.

The Judge agreed with Owners that the Q88 was part of the Contract and that, as Nordisk argued, was to be read as a limit on the Charterers’ rights to order the Vessel to berth where the safety policy would or might be breached.

The Judge was equally pragmatic in dismissing the Charterers’ objection to the running of any laytime at the discharge port on the basis that Owners failed to meet the requirement to obtain free pratique, unless this was not customarily issued prior to berthing, within six hours of tendering NOR. If that was breached, the NOR would not be valid.

Although there was no evidence of free pratique being granted, and indeed the Master protested that it was not, there was little evidence on whether it was customarily granted prior to berthing or not. The Judge approached this on the basis that he did not think the port authority would have allowed the Vessel to berth if free pratique was a prior requirement and indeed had acted as if it was granted. He ruled that effectively the port had a system of granting free pratique by default – i.e. you had it if you were called in, unless it was specifically refused.

On this basis, the Master’s actions leaving the berth on the first occasion and refusing to return until the UKC policy could always be met or substantiated, were not faulted. The lesson is that the Court will give the master and owners the benefit of the doubt if acting based on safety issues. With no breach by the Owners, both the demurrage claimed fell due and Charterers’ counterclaim for the lighterage fell away. Nordisk’s members were entirely successful.

For those interested in reading further, the case citation is CNP-MAX III Ltd v Petrolios del Norte S.A. (the “Stena Primorsk”) [2022] EWHC 2147 (Comm).