Time Counting For Discharging Coal Cargoes By Geared Vessels At Indian Ports

When The Geared Vessels Should Be Considered Ready To Discharge?

One feature of the contracts for the procurement of coal by the Indian steel and energy companies on CFR terms basis is the buyers` requirement to nominate geared bulk carriers suitable for discharge of coal cargoes by grabs because the Indian ports do not have high-capacity cranes for the discharge of coal.
The question of geared vessels` readiness to discharge the coal cargoes was raised by Steel Authority of India Ltd. in two charter party disputes to avoid the payment of demurrage charge for the time lost by three geared vessels waiting for berth.
In 2014 Indian law case Steel Authority of India Ltd. v. Dampskibaselsbaket Norden A/S, Steel Authority of India Ltd. rejected two demurrage claims under a contract of affreightment for the carriage of cargoes of coking coal in bulk from Newport News to Indian ports Vishakhapatnam and Haldia.
The first cargo was shipped on board the vessel "Nord Fighter". The cargo quantity on board the vessel was 51,544.726 MT of which a quantity of 25,189 MT had to be discharged at Vishakhapatnam and the balance of 26,355.73 MT had to be discharged at Haldia.
When the vessel arrived at the port of Vishakhapatnam on 12th May 2008, the discharging berth was occupied. The Master tendered NOR at 09:45 hours on the same day from the waiting place.
The vessel berthed on 17th May 2008 at 17:00 hours and commenced discharging operations at 18:30 hours.
The vessel arrived with a non-functional crane (crane no.3) which was under repair and made available only on 20th May at 22:00 hours.
The vessel completed the discharging operations at Vishakhapatnam on 21 May at 03:45 hours and then sailed to Haldia to discharge the balance quantity of cargo.
The shipowner calculated the laytime on the basis of the NOR tendered on 12th May at 09:45 and claimed the payment of demurrage charge for the time spent by the vessel in excess of the laytime.
Steel Authority of India Ltd. rejected the demurrage claim on the grounds that it accepted the vessel`s NOR only from the time when all the four cranes along with the four grabs were made available in operational condition on 20th May.
The second cargo was shipped on board the vessel "Navios Kypros". The cargo quantity on board the vessel was 53,731.008 MT of which a quantity of 25,743 MT had to be discharged at Vishakhapatnam and the balance of 27,988.088 MT had to be discharged at Haldia.
The vessel arrived at Vishakhapatnam and tendered NOR at 14:00 hours on 28th July 2008. The vessel berthed on 31 July 2008 at 11:30 hours and commenced discharging at 15:30 hours. On 1 August 2008, the crane no.2 suffered a breakdown during discharging operations which could not be repaired during the time spent at Vishakhapatnam. The discharging operations at Vishakhapatnam were completed with the available cranes on 2 August 2008 at 21:30 hours.
Thereafter, the vessel sailed to the port of Haldia where it arrived and tendered NOR at 19:00 hours on 4 August 2008. The vessel berthed at 02:30 hours on 5 August 2008 and commenced discharging operations at 04:15 hours on the same day.
The non-functional crane was repaired and made functional only at 12:50 hours on 8 August 2008.
The discharging operations at Haldia were completed at 10:00 hours on 9 August 2008.
The shipowner calculated the laytime on the basis of the NOR tendered on the vessel`s arrival at Haldia on 4 August 2008 and claimed the payment of demurrage charge for the time spent by the vessel in excess of the laytime.
Steel Authority of India Ltd. rejected the claim on the grounds that it accepted the NOR tendered at Haldia only from the time when all the four cranes along with the four grabs were made available in operational condition, i.e. on 8 August 2008.
The dispute concerned the meaning of the following charter party clauses:

"35. Time counting provision:
At each discharging port, even if at second discharge port vessel arrives on demurrage, time to count 24 hours after Notice of Readiness is served on arrival of the vessel within port limits at each port of discharge and whether in berth or not and free pratique and ready in all respects to discharge the cargo. If turn time of 24 hours expires on Saturday afternoon, laytime will commence at 8.00 hours on first working day.

40. In the event of breakdown of gears/cranes and other equipment of the vessel by reason of disablement or insufficient power etc., the period of such insufficiency shall not count as laytime.

43. Charterers guarantee to discharge the cargo at the average rate of 10,000 metric tons Vizag/Paradip, 12,000 metric tons Haldia, basis 5 hatches (served by minimum 4 cranes all minimum 25 tons each with minimum 10 CBM grabs) and pro rata if less, per weather working day of 24 consecutive hours, Sundays and holidays included (SHINC) provision to be applicable after commencement of laytime.

44. Owners guarantee that vessel has minimum 4 number of cranes each of capacity minimum 25 tons and minimum 4 number of grabs each of minimum 10 cubic meters capacity with cycle time of 4 minutes and serving all hatches and accordingly the minimum capacity to discharge is 12,000 tons per day of 24 consecutive hours. Owners also guarantee that vessel has fully automatic grabs [...]
A joint survey shall be conducted in order to ascertain the particulars of cranes and grabs as above. In the case of any deficiency, the surveyors` report shall be binding on the Owners and Charterers and the rate of discharge shall be reduced proportionately ..."

The charterers contended that the vessel "Nord Fighter" had to be ready in all respects to discharge the cargo at the time of tendering the NOR at Vishakhapatnam, with all the discharging equipment ready. The subsequent repair of the non-functional crane did not validate the NOR tendered at anchorage.
Similarly, the vessel "Navios Kypros" had to be ready in all respects to discharge the cargo at the time of tendering the NOR at Haldia on 4 August 2008, with all the discharging equipment ready. The subsequent repair of the non-functional crane on 8 August did not validate the NOR tendered on 4 August.
The arbitral tribunal held that the words "ready in all respects to discharge the cargo" in Clause 35 of the contract of affreightment did not state that all the cranes should be available for discharge, nor did it state that the vessel should be ready to discharge the cargo at the discharge rate provided in the contract of affreightment. It was sufficient that the vessel to be capable of discharging the cargo.
Thus, even if the vessels "Nord Fighter" and "Navios Kypros" arrived with a non-functional crane, they were ready to discharge the cargoes on board, though not at the rate stipulated in the contract of affreightment.
Notwithstanding the breakdown of one crane, the whole cargo quantity could be discharged using the other functional cranes. The breakdown of one crane did not prevent the discharge of cargo, but merely reduced the rate of discharge.
If the charterers could commence and complete the discharge of cargo with the available cranes, "it would be absurd to say that the consequence of breakdown of a crane … is that laytime does not count at all after tender of NOR", when the only consequence of non-availability of crane is a proportional reduction in discharge rate during the period of breakdown.
As long as the vessel`s functional cranes can be used for discharging the cargo from all the holds, the time counts. During the crane breakdown period the time shall count on a pro rata basis in function of the number of cranes available for the discharge operations.
Only if the vessel arrives with all cranes defective, NOR is invalid, because in such case the vessel would be totally unable to discharge the cargo.

Commentary

There is a distinction between the clauses which require the vessel to be ready in all respects to commence discharging the cargo as per the discharge rate agreed in the charter party or CFR sale contract, with all generators, cranes and grabs in good working condition and the clauses which require the vessel to be ready in all respects to discharge the cargo.
The first type of clauses include the requirement that the vessel`s generators be able to provide continuous and sufficient electric power to the vessel`s cranes and the requirement that the vessel`s cranes be able to serve all cargo holds, work simultaneously and continuously with lifts of the minimum capacity stated in the contract (charter party or CFR sale contract). If after berthing, the surveyors discover a deficiency to the generators that will affect the continued normal discharge operations or to the cranes and/or grabs that will affect their discharging capacity, then the vessel will not be considered ready to discharge and the time lost until the remedy of deficiency will not count as laytime or time on demurrage. If nonetheless, the charterers or CFR buyers commence discharging the cargo with the available cranes and grabs, this shall be considered a waiver on the reliance on the condition of contract and the time shall count pro rata in function of the number of cranes available for the discharge of cargo.
In the second type of clauses, the geared vessel`s readiness to discharge does not necessarily mean that the vessel`s gears must be ready to discharge the cargo at the contractual rate or that all the vessel`s cranes and grabs must be available for commencing the discharging operations.
If the vessel`s discharging equipment is not fully functional but the vessel is ready to commence discharging operations from all the holds with the functional cranes and grabs, the vessel is still considered ready to discharge the cargo, even though not at the contractual rate.

The Computation Of Time Spent By The Geared Vessel Waiting For Berth

In case of the first type of vessel readiness clauses, the vessel`s failure to provide the discharging equipment at the required capacity after berthing will entitle the cargo receivers to claim the deduction of time lost subsequent to berthing until the vessel is in fact ready to commence discharging the cargo with all cranes and grabs in good working condition. But the time lost by the vessel at anchorage counts in full, because the Master and crew cannot arrange the discharging equipment, including fitting the grabs into cranes, before berthing.
In 2012 Indian law case Great Eastern Shipping Company v. Steel Authority of India Ltd. the vessel "Jag Rishi" had to wait for berth from the time of arrival in port on 5th February 2008 until 12th February 2008. After berthing, two grabs needed repairs. One grab was fixed after 45 minutes, but the second grab was ready after 11 hours and 45 minutes.
The shipowner calculated the laytime on the basis of NOR tendered on 5th February and claimed the payment of demurage charge for the time spent by the vessel in excess of laytime.
The voyage charterer rejected the demurrage claim. The charterer contended that since the full discharging equipment was not available for use at the time of berthing on 12th February, it means that the vessel was not ready in all respects to discharge the cargo at the time of tendering the NOR on 5th February 2008 and therefore, the laytime commenced only from the time when all the four gears were fully operational, i.e. at 14:30 hours on 12th February.
The High Court of New Delhi held that:

"Merely because some of the equipments were non-functional at the commencement of discharge did not necessarily mean that they were non-functional even at the time the NOR was served. […]
In a port charter when such NOR is issued it is normally some days before the actual berthing. If some of the equipments were temporarily non-functional at the commencement of discharge, it did not mean they were in that position even when the NOR was issued. […] It was not possible to anticipate [at the time of tendering NOR] any partial failure of the cranes and grabs [after berthing]."

The degree of readiness of geared vessels at the time of arrival in port would depend on that of charterers or consignees to do their part of the work.
Quoting a paragraph from "Scrutton on Charterparties" 17th Edition, the High Court of New Delhi held that:
 
"the ship need not be absolutely ready by having all her gear fixed up for the work at a time when the charterers or consignees are not in a position to do any of their part of the work, so long as the ship can be absolutely ready as soon as they are."

In case of the second type of vessel readiness clauses, the vessel`s failure to provide the full discharging equipment at the required capacity after berthing will entitle the receivers to claim the deduction of time on a pro rata basis in function of the ratio between the cranes/grabs in breakdown and the total number of cranes/grabs. But the receivers are entitled to claim the pro rata deduction not only from the time lost after berthing but also for the time lost waiting for berth.
In 2014 case Steel Authority of India Ltd. v. Dampskibaselsbaket Norden A/S, the High Court of New Delhi held that in a port charter party the time lost by the vessel waiting for berth will count in the same way as the time spent by the vessel at berth. The excepted periods, which are not to be counted if the vessel would be at berth, would also not count if the vessel would be waiting for berth.
Since the vessel in that case arrived at the port of discharge with only three functional cranes instead of four, the charterer was entitled to a pro rata deduction from the time spent by the vessel waiting for berth. Had the vessel not been prevented from reaching the designated berth due to congestion in port, the vessel would have been at berth in which case only 75% of the laytime would have counted on the basis of the three functional cranes. Therefore, for the time lost by the vessel waiting for berth, the charterer should have been entitled to a similar reduction on account of breakdown of one crane, as if the vessel were in berth.
The Court based its decision on the House of Lords decision in Aldebaran Compania Maritima S.A. Panama v. Aussenhandel AG Zurich (The "Darrah")¹.
In that case the House of Lords held that in the computation of the time spent by the vessel waiting for berth, the vessel must be treated as if she had been at berth and all such periods that would be excepted from the computation of laytime if the vessel had actually been at berth were to be excluded in the computation of the time spent by the vessel waiting for berth. The shipowner should not gain a greater advantage from his ship being kept waiting for berth than it would get from the ship being kept at berth.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Coal Trade Review Edition No. 3.

Endnotes:

1. [1976] 3 Lloyd`s Rep. 320