Speed and consumption claims: what to look out for

Speed and consumption is always a “hot topic”, but unfortunately it is also one of the areas of law which bear a very large degree of uncertainty. Often, parties entering into a charterparty will fail to appreciate the significance of the definition of “good weather” that underlies the vessel’s performance warranty. Unfortunately, this may well come back to haunt them.

The Didymi ([1988] 2 Lloyd’s Rep.108) laid down the principle, that if there is a suspicion as to a vessel’s performance, one has to look at the vessel’s performance in good weather first. If the vessel does not perform in accordance with the warranted speed and consumption in good weather, then it is assumed that she also did not perform in bad weather and the lack of performance is then mathematically applied to the entire voyage.

There is no need for an entire “good weather day” in one continuous 24 hour period (The Ocean Virgo [2015]). However, it is likely stretches of less than 12 continuous hours would not be considered representative. In addition to having to show a period long enough to be representative, a tribunal will also require a claimant to show a proportion of good weather large enough to be representative of the whole voyage. Again, no hard and fast rule has been laid down on this point by the courts. What a sufficient sample will be will depend on the circumstances of the case.

Recent phenomena

There has been a trend recently where the definition of “good weather” in the charterparty is very restrictive, such as: “These figures are about and based on 7,60m draught, clean bottom, even keel, deep and current less waters, calm sea and max wind force Beaufort2/Douglas2 and maximum sea temperature 28/29 degrees Celsius”. Such a clause will clearly benefit owners. Charterers however ought to watch out for these. They will find it nearly impossible to bring a claim for underperformance, because there won’t be enough “good weather” to provide a “representative sample” which is needed to establish an underperformance (Polaris Shipping Co Ltd v Sinoriches Enterprises Co Ltd [2015]). How much good weather is needed to form a representative sample has not been defined by the courts.

There is no need for an entire “good weather day” in one continuous 24 hour period (The Ocean Virgo [2015]). However, it is likely stretches of less than 12 continuous hours would not be considered representative. In addition to having to show a period long enough to be representative, a tribunal will also require a claimant to show a proportion of good weather large enough to be representative of the whole voyage. Again, no hard and fast rule has been laid down on this point by the courts. What a sufficient sample will be will depend on the circumstances of the case.

Another recent trend has been to try to limit performance claims to good weather only. The courts have felt that such clauses were illogical and made no business sense (The Gas Enterprise [1993], London Arbitration 4/11). After all, if a vessel does badly in good weather she will obviously do badly in bad weather as well. Compensation for one but not the other seems illogical. However, if the clause is worded clearly enough, then it is possible that it will be upheld (The Gas Enterprise).

A further point that often causes problems is the qualification of speed and consumption warranties by the word “about”. There have been some moves by the courts to say that the definition of “about” depends on all the circumstances, such as the vessel’s configuration, size, draft and trim, but these attempt have been sporadic. “About” is virtually always interpreted to mean 5% for bunkers and 0.5 knots for speed (London Arbitration 20/07). Even more contentious however is the question whether one can include a double “about” i.e. “about x knots at about y consumption”. While this obviously provides the owner with a double benefit – a lesser speed already means less bunkers are burnt – this may be what the parties in fact intended to agree. Drawn by both arguments, the courts have not reached a consensus on this point yet (London Arbitration 12/85 and 2/87). If there is very clear wording that a double about was intended, it is not unlikely that the courts will hold the parties to that.

Conclusion

The most effective qualification owners can include in charterparties are the words “without guarantee”. It has been held that the effect of stating that the vessels’ performance data is provided “without guarantee”, is that the figures will no longer constitute a warranty. The charterer can no longer rely on them. The only legal requirement on owners is, that the figures given are given in good faith at the time the vessel is fixed (The Lipa [2001]). The belief does not even have to be reasonable (The Lendoudis Evangelos No.2 [1997]). In practice, it will be very difficult indeed to prove bad faith.

Given the common nature of speed and consumption claims, NYPE 2015 now includes a new clause 12 which provides for the parties to instruct an independent expert or alternative weather routing service for final determination of the issue, with the costs being shared between the parties. Needless to say, this clause could save parties a lot of time and money even compared to the frequently employed small claims clause.

Dr. Nina von Borries is assistant vice president at Skuld, a marine insurance provider. Contact her on +49 40 3099 8727 or by emailing [email protected].