RightShip Approval by kjv16627


Issue 4, October 2008

In this issue: Message from the Managers | RightShip Approval | ACHILLEAS

Message from
the Managers
                                             RightShip Approval
                                             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
                                             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”
BY THOMAS                                    after which Glencore confirmed that      for such trade.
MILLER                                                                                                           Continued overleaf

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: tmdefence@thomasmiller.com web: www.ukdefence.com                                      the future trading of the ship.

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