Handling of claims in the maritime industry.

“I shall look at you out of the corner of my eye, and you will say nothing. Words are the source of misunderstandings.” (Antoine de Saint-Exupéry, “The Little Prince”)

Not wanting to dwell on the simple or obvious, two parties concluding shipping related business will, we must assume, have a common understanding of what has been agreed at the time of finalizing negotiations.

Commonly, at least in my corner of the shipping industry, such negotiations are immediately followed by a recapitulation of what has been agreed, with an outline of the essentials (the “main terms”)  and traditionally comments on agreed changes to the more intricate details of the underlying charterparty (the “details”); all so that a new charterparty may be drafted.

Or: That’s how it used to be.

If you have ever listened to a shipbroker of old, you will undoubtedly also have heard stories about forms a mile long and endless nights spent typing up and filling in such forms. Presumably few will have mourned the passing of paper-based and printed charterparties, and most have embraced the digital versions available through various charterparty editors, or typed up be entrepreneurial brokers etc: Distribution is easy, insertions, amendments and deletions as agreed are a breeze (sort of, anyways).

And yet, more and more prevalent are “Fixture Notes” or simply printed recaps, with then just a signature and a stamp.

Admittedly charterparties widely use archaic and ackward terms, which most non-native English speakers would never come across, with sentences construed in ways that perhaps rightfully leaves you suspicious of one too many maritime solicitors having been allowed his or her fingerprint on the form.

And admittedly many charterparties, with additional (“Rider”) clauses easily can be 12-15 pages long, with the wording of such clauses often amended more or less skillfully to suit one party’s needs at the expense of the other party.

Add to this that charterparty editors are (relatively) costly to purchase and may additionally have charges per printed form, and you may full well appreciate the emergence of said Fixture Notes, printed recaps and their like.

Whether we agree with this practice or bemourn the potentially imminent demise of this-or-that charterparty is not really the issue; any agreement will have at least two parties to it, who in turn will also agree the form their agreement will take.

With the use of more and more ad hoc contract forms follows, however, also an intrinsic danger of actually differing in opinion on what an agreed terminology covers, irrespective that it may originate verbatim from a “recognized” charterparty form.

Such ad hoc form references to existing charterparty forms, regularly include also choice of law and jurisdiction, but will naturally be ambiguous and require considerable delving into case law and prior arbitration awards by solicitors.

The easy and perhaps less well thought through law, and moreover jurisdiction choice is English and London, which even with application of LMAA rules for most parties will be daunting, with the principal of “Ex Aequo et Bono” (where the dynamic interpretation and rulings are made on basis of agreed industry practice on a “fair and equitable” basis) clearly both more sensible and less controversial.

A recent sample was the use of a payment term worded as (in extract) “Full freight only in US dollars to be paid within 5 banking days after completion of loading…”, “Prepaid Bill of Lading to be released only after full freight has been confirmed by Carriers. Always BBB”.

Apart from an attempt at a payment terms panacea, in particular the “Always BBB” in this instance was interpreted differently by the two parties involved. The “conventional” use and application of the “Always Before Breaking Bulk” term has been to ensure that a short transit would not oblige carriers to discharge cargo before having received freight and thereby jeopardize carriers’ lien in cargo for the freight. As an extra assurance, the prepaid bill of lading should not, of course, be released before carriers have confirmed receipt of full freight, and as such serves as an additional surety on “cargo against documents”.

The booking in question was from South China to West Africa, so a transit significantly longer than 5 days and in carriers’ mind it was clear that terms agreed were that full freight was payable within 5 days.

Merchants’ opinion was, however that while 5 days payment terms had been agreed, it was in their option to alternatively defer payment, as long as it was made prior “breaking bulk”.

In the end, of course, carriers maintained their lien in the cargo, but were in a position where discharge into agents’ custody was not an option – they could discharge and deliver the cargo in the hope that freight would eventually be received, or discharge cargo at a different port altogether.

At the present moment the dispute is unresolved with a claim against merchants in excess of USD 50,000 for unpaid freight and detention. However, carriers are after months’ pursuing merchants for a settlement that there is next to no chance of being paid in full and even less that merchants will partake in arbitration proceedings let alone honor a ruling made in such proceedings.

In the case at hand it is pointless to argue whether the potential ambiguity in payment terms agreed were a contributing factor to the dispute and underlying misunderstandings. It is, however very clear that assessing and evaluating merchants’ legal understanding of terms agreed, carriers would have rated this at a “single star” in for instance a Maritime Trust Platform scheme.

Within the Maritime Trust Platform is also incorporated a simple dispute resolution forum, where the ensuing dispute and the parties to, in public but as anonymous entities (to reduce the risk of bias, geographically or with commercial undertones) can exchange views and moreover facts pertaining to the dispute at hand, and based on the “Ex Aequo et Bono” principal receive a majority-derived decision based on “common industry practice”.

Henrik Hansen / 28.11.2017