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Case law: London Arbitration 20/21
News & Insights 20 December 2021
Charterparty – Charterers nominating discharge port but subsequently nominating different port – Whether subsequent nomination breach of charter – Vessel proceeding to subsequently nominated port – Whether owners entitled to...
Charterparty – Charterers nominating discharge port but subsequently nominating different port – Whether subsequent nomination breach of charter – Vessel proceeding to subsequently nominated port – Whether owners entitled to freight for carriage to originally nominated port
This dispute concerned a charterer’s attempt to change a nominated port of discharge. The charterparty stated ‘Disport 1/2 SBS each 1/2 SPS China’ […] ‘Declaration of sole/1st disport and cgo breakdown per port, to be done 10 days prior to vsl passing Singapore. Charterers agree to declare disch port ASAP once they know’ […] ‘Freight deemed earned on shipment discountless and non-returnable vessel and or cargo lost or not lost’.
On 6 June, the vessel finished loading cargo in Paranagua. Bills of lading were issued referring to the port of discharge as ‘China Port(s)’.
On 20 June, the cargo receivers nominated Zhoushan and Taixing as the Chinese discharge ports. On 3 July, the cargo receivers changed the first discharge port to Tianjin, which the charterers communicated to the owners. The owners informed the charterers that altering the discharge port to Tianjin meant they would suffer a loss of US$ 99,519.50 as opposed to US$ 2,796.59 if the vessel proceeded to Zhoushan and Taixing as planned. The matter was referred to arbitration.
Owners argued that charterers’ port nominations on 20 June had the effect to write these two ports into the charterparty as if they had been named at the time of contracting. Further, they said, based on The Jasmine B  1 Lloyd’s Rep 39, once written in the charterparty the charterers have no right to change the nominated port and therefore the subsequent nomination of Tianjin was a breach of the charterparty.
Charterers submitted that where the bills of lading referred to ‘China Port(s)’ it was reasonable and foreseeable to expect changes prior to a declaration of the final ports. Charterers also argued the requirement in the charterparty to declare the discharge port(s) before passing Singapore served the purpose to: (i) direct the vessel to such port(s); and (ii) avoid any deviation from the direct and shortest route to such port(s) after passing Singapore. The charterers further contended that the owners could not earn freight for a voyage that was not performed.
The tribunal agreed with the owners and held that the owners were entitled to the freight payable on the initial nomination of the two ports in China.
In particular, the tribunal held that:
- In accordance with The Jasmine B, the charterers initially made a valid nomination with the effect that the two ports were treated as if written into the charterparty from the outset.
- For the well-founded legal authority not to apply, the charterers had to distinguish the case by establishing either a special provision allowing them to change the nominated ports or some form of estoppel or waiver on owners’ side.
- The nomination provision was considered to be typical and there was nothing in it or in the charterparty that rendered it in any way ‘special’ and so as to confer any right on the charterers to change a valid nomination.
- There was no waiver or estoppel by the owners. The owners made it expressly clear during the exchanges that the charterers could not nominate a new port and that they would only proceed to Tianjin under protest while reserving all rights.
- Owners had a right to the (higher) freight paid based on the original two discharge ports. There was no unjust enrichment of the owners at charterers’ expense, and there was nothing in the charterparty to oblige owners to return the freight if charterers failed to perform their obligations. As per the terms of the charterparty freight was ‘deemed earned on shipment discountless and non-returnable vessel and or cargo lost or not lost’.
This arbitration decision is a useful reminder of the well-established legal authority of The Jasmine B regarding nomination of ports while it highlights once again the importance of the contractually agreed terms. For the parties to distinguish themselves from any of the legal authorities, they should do so with express and special terms.
- Link to i-law can be found here