soundings Issue 4, October 2008 In this issue: Message from the Managers | RightShip Approval | ACHILLEAS Message from the Managers RightShip Approval Exploding The Managers have received a number of queries concerning containers, owners’ obligations in respect of the RightShip vetting dangerous scheme, a joint venture formed in 2001 between BHP Billiton, cargoes, and charterparty Rio Tinto and Cargill, which describes itself as “a boutique UKDC Seminar in Hamburg termination ship vetting specialist, promoting safety and efficiency in the were among global maritime industry.” some of the issues raised at an evening presentation in Hamburg earlier this month. Over 60 members of the German The English High Court has now it would proceed with the charter shipping industry heard representatives handed down a judgment on the without the RightShip clause. from the Managers explore the issues dispute as to whether an owner which can arise following a casualty, in was obliged to secure RightShip Four years into the charterparty the form of a dynamic role play scenario. approval throughout the course period, Glencore commenced The cast recounted the misfortunes which of a charterparty in the absence of arbitration proceedings against the befell the MV ATLANTIC after a container any express contractual obligation Member alleging that it had suffered of cigarette lighters exploded causing to do so. substantial damages as the ship was serious damage to the ship, lengthy repair not RightShip approved. Whilst delays and eventually the cancelling of a The charterparty was concluded Glencore acknowledged that there long term charter. The event culminated in a mock arbitration involving heated in November 2003, between the was no specific requirement in the argument between the parties’ lawyers, Association’s Member, the owner charter for the ship to be RightShip Andrew Wright of MFB and Julian Clark of the SILVER CONSTELLATION, approved, it argued that RightShip of Holman Fenwick Willan, and the cross and Glencore International A.G. approval is essential for the iron ore examination of an expert witness, John The charterparty did not contain any and coal trade, and without such Third of Brookes Bell Jarrett Kirman. Order was finally restored and the dispute express term regarding RightShip approval the ship’s trading would be resolved through LMAA arbitrator Michael approval. Moreover, during the fixture severely limited. It claimed that the Baker Harber. The evening concluded with negotiations, Glencore asked the Member was in breach of its a drinks reception, during which a lively Member to agree to a clause charterparty obligation that the ship debate over the outcome ensued. requiring RightShip approval to be be “in all respects eligible for trading”, maintained throughout the currency and that it should comply with “all UKDC of the charter. The Member refused, applicable laws and regulations” IS MANAGED BY THOMAS after which Glencore confirmed that for such trade. MILLER Continued overleaf soundings ACHILLEAS RightShip Approval Continued The arbitration tribunal agreed The House of Lords has recently handed down its decision with Glencore and found that the in the ACHILLEAS, which was commented upon in a previous Member was obliged to allow a edition of Soundings. RightShip inspection and to obtain and maintain RightShip approval. In summary, following the charterer’s What appears to have concerned the tender of a 10 day notice of redelivery, law lords was the idea that a rule of law The High Court has now the owner of the ACHILLEAS refixed which would allow an owner to claim for overturned the award in part. It the ship on a 6 month charter at a rate the loss of a subsequent fixture, would decided that in the absence of of $39,500 per day. However there was expose a charterer to unquantifiable specific wording, the charterparty a delay in the ship’s final voyage under and potentially large risks. Lord contained no obligation to obtain the existing charter, and as a result the Hoffman suggested that the price of and maintain RightShip approval, ship was redelivered late, and did not the contract was a relevant factor – and that obligations of eligibility meet the cancelling date under the next if a charterer was to take on such risk to trade relate to legally imposed charter. Following a substantial fall in he would expect some premium in requirements only, and not those the market in the interim, the owner exchange. The other law lords were of a private vetting scheme such as had to renegotiate its next charter at equally concerned that a charterer RightShip. However, the Court did a $8,000 per day reduction. could not be expected to know how uphold the tribunal’s finding that an owner would use the ship on a the Member was obliged to permit It was previously assumed that subsequent fixture. It was suggested a RightShip inspection, in order to following the charterer’s breach, the that the owner’s loss was not so much fulfil its obligation to follow the owner could only recover the difference a result of the charterer’s late redelivery “orders and directions of the between the charter rate and the market but because of the extremely volatile rate for the period of overrun – which market conditions at the time, and that charterer as regards employment” would result in a claim for $158,000. the charterer might have been liable of the ship under clause 8 of the However the arbitrators allowed the had the owner’s loss not been so large. NYPE form. owner a claim for loss of profit of $8,000 per day over the entire period The debate over the ruling will continue. This is not the end of the story, as of the next charter, on the basis that the Lord Hoffman’s speech gives some the judge granted permission to loss of a subsequent fixture was a “not support to the notion that claims for appeal to the Court of Appeal on unlikely” result of late redelivery. This the loss of a follow on fixture may not both issues. In the meantime, it decision was upheld by the High Court now succeed. However Lord Roger’s would seem that in the absence and by the Court of Appeal. opinion suggests that the result may of any express clause requiring have been different had the fall in the RightShip approval, an owner will The House of Lords has now market been less substantial. Whatever not be obliged to obtain it. overturned this ruling, and limited the the viewpoint, it seems unlikely that this However, an owner may be obliged owner’s claim to the period of overrun case is the last of its kind. to permit RightShip inspection if a only. However, the opinions of the five charterer requests it. Should that Law Lords, whilst reaching the same inspection not result in an approval, end result, were surprisingly different a charterer will have no grounds for in their reasoning. complaint, however all information on the RightShip database is The UK Defence Club Thomas Miller Defence Ltd, 90 Fenchurch Street, London, EC3M 4ST available to subscribers, and an tel: +44 207 283 4646 fax: +44 207 204 2131 adverse RightShip rating may affect email: email@example.com web: www.ukdefence.com the future trading of the ship.
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