House of Lords ruling

Charterers are not liable for a shipowner’s loss of profits on a subsequent fixture resulting from the late redelivery of the vessel under English law following a decision by the UK’s House of Lords last week.

The decision overturns rulings by lower courts and follows an appeal by charterers Transfield Shipping against a ruling that Mercator Shipping had been to entitled to recover from its loss of profit on a follow-on fixture.

Back in 2003, Transfield had chartered the dry bulk carrier Achilleas. Prior to the redelivery date, Mercator had arranged a follow-on charter at USD 39,500 a day, but market hire rates fell sharply and as the vessel was redelivered nine days’ late, the owners had been forced to renegotiate the follow-on charter at the lower rate of USD 31,500 a day. Mercator claimed USD 1.3m damages for the USD 8,000 a day loss of profit it had suffered over the duration of the follow-on charter, whilst Transfield claimed that it was only entitled to the difference between the market and charter rates of hire for the overrun period.

Summarising the effect of various authorities on the measure of damages, Lord Rodger noted: "In any event, amidst a cascade of different expressions, it is important not to lose sight of the basic point that, in the absence of special knowledge, a party entering into a contract can only be supposed to contemplate the losses which are likely to result from the breach in question - in other words, those losses which will generally happen in the ordinary course of things if the breach occurs. Those are the losses for which the party in breach is held responsible - the stated rationale being that, other losses not having been in contemplation, the parties had no opportunity to provide for them."

The world’s largest LNG vessel was named last week at Samsung Heavy Industry’s shipyard in South Korea. Classed by Maritime London member Lloyd’s Register and ordered by the Qatar Gas Transport Company (Nakilat), Mozah, the first “Q-Max”-sized vessel with a capacity for 266,000 cubic-metres of LNG, will carry almost 80 per cent more cargo than conventional ships.

These new models are expected to spearhead long haul gas shipping to the United States and Europe. The Q-Max, which is about the size of four football fields, can load only at Qatar's Ras Laffan port and dock at specially built import terminals, one of which is operated by the South Hook LNG Terminal Co. in the UK and is scheduled to open later this year.

In addition to the existing global fleet of 270 LNG tankers, there are orders for a further 118 new ships. 29 LNG tankers have been delivered this year. Qatar, which overtook Indonesia in 2006 to become the world's biggest LNG exporter, plans to expand capacity to 77 million metric tons by the end of the decade, accounting for a third of the world's supply in 2010.

“We are very proud to have been involved in the design and construction of these revolutionary new vessels, which are destined to make a cleaner form of energy available to more of the world’s consumers,” said David Moorhouse, chairman of the Lloyd’s Register Group at the naming ceremony.

“As the classification society of choice for nine of the first 10 Q-Max LNG vessels – including the very first -- this project further enhances Lloyd’s Register’s reputation as a technology leader in this important and growing sector.”

The Q-Max model features slow-speed diesel engines that are more fuel- and thermally efficient than steam turbines, resulting in about a 30% reduction in overall emissions. The Q-Max has a re-liquefaction plant that returns evaporating gas back to the storage tanks, maximizing the fuel cargo at the discharge port. Traditional tankers typically lose 0.15 percent of cargo a day during a voyage.

Andy Richardson, shipping project manager for Qatargas, said that improving the industry’s strong performance record for safety, quality, operability and maintainability was at the forefront of his team’s thinking throughout the conception, design and construction stages for these innovative vessels, and their smaller “Q-Flex” sister-ships, which were previously the world’s largest.

“The adoption of new technology after rigorous qualification processes allowed significant economies of scale to be achieved,” Mr Richardson said. “Redundant, highly efficient propulsion systems and onboard re-liquefaction have realised operational efficiencies and a reduction in emissions. We believe these changes will provide meaningful benefits to all within the customer supplier chain, forever changing the traditional paradigm of LNG transportation.”

Lloyd’s Register is the world’s leading classification society for LNG vessels with 39% of the existing fleet under its class, a proportion that is destined to grow with the delivery of the new Q-Maxes in the next two years.

The North of England P&I club has warned its members to check their contractual position carefully before slowing down to save on fuel. According to Tony Baker, North of England’s head of loss prevention, “Mirroring similar actions in the air, road and rail transport industries to offset costs and reduce environmental impact, many ship operators are considering whether to adopt a ‘slow-steaming’ policy. However, before making the decision to slow steam, owners and charterers alike need to ensure their position is protected – both under the terms of the relevant charterparties and under the bills of lading.”

The club says chartered ships which slow down to save on ever-rising bunker costs risk being sued for breach of charterparty. Examples might include failing to ‘proceed with the utmost despatch’ under a New York Product Exchange (NYPE) 1946 time charterparty, and failing to ‘proceed with reasonable despatch’ under a voyage charterparty. Slowed ships may also be exposed to claims under the bills of lading for deviation by delay.

"Another possible risk might be indemnity claims under the charterparty for losses suffered under the bill of lading contract," says Baker. North of England has thus advised members via its loss-prevention newsletter Signals to check their contractual position carefully before ordering vessels to slow steam.

The club’s freight demurrage and defence department is providing members with advice on their potential exposure and, where appropriate, on amendments which can be made to governing contracts.

The Society of Marine Industries is holding a seminar (London, 30 July) looking at the financing of port infrastructure projects. The event will feature speakers from 3i plc, Babcock & Brown Infrastructure, European Investment Bank, Sumitomo Mitsui Banking Corporation, EBRD, Moody’s Investment Service and International Project Finance Association.

The speakers will address the current port finance market, infrastructure financing, Asia’s inexorable growth, European initiatives, the health of the ports/infrastructure sector and the work of the International Project Finance Association (IPFA).

For further details click here.

Against a background of turbulent investment markets, high claims and a weak dollar, Maritime London member London P&I Club, has reported its first net loss since 2003. The Club reported a post-tax loss of USD 30m.

The results were described as “disappointing” by the club’s manager A Bilbrough chief executive Paul Hinton and follow five consecutive years of either stable or improving financial performance.

According to the club, overall claims incurred in 2007/08 actually fell by approximately US$8.5m compared to the prior year. However, in contrast to the prior year’s 13% investment return, there was no positive contribution from investments net of investment expenses and taxation.

Gross claims paid in the year were in excess of $210M, while at the same time the Association recovered more than $114M from reinsurers which includes the group's International Pool.

RTI Ltd, a London-based specialist international casualty investigation company, is close to completing an agreement with a major ship registry to be responsible for investigating a significant proportion of casualties incurred by vessels under its flag. The company claims to be bringing a new dimension to establishing the precise cause of accidents and incidents through a team of highly-experienced investigators backed, if necessary, by forensic analysis.

Les Chapman, recently appointed chief operating officer of RTI Ltd. with responsibility for the overall direction and management of RTI’s European business, said: “At a time when the major maritime organisations have agreed that accidents should be investigated more thoroughly, we are establishing positive and encouraging links with flag states, shipowners, marine underwriters and P&I clubs, and maritime legal firms.”

The company has a team of some 40 consultants on call, led by Dr Phil Anderson, the special marine adviser to RTI and a master mariner who formerly headed the risk management and loss prevention department of the North of England P&I Club.

The 10th Cadwallader Memorial Lecture entitled: Lawmaking and implementation in international shipping: Which law do we obey? will be held on Wednesday 1 October 2008 at the IMO's Headquarters.

Organised by the London Shipping Law Centre, the event always stimulates high quality debate and discussion.

See www.london-shipping-law.com for full details.

Informa, the publisher of daily shipping newspaper Lloyd’s List has launched www.maritimeanswers.com. Designed as a dedicated search engine for the shipping industry, the free to use resource provides users with streamed results when searching for maritime related topics.