Decision of the Moscow Commercial Court of 10.09.2020, case № А40-10728/19-39-111

(Eco Shipping LLC v. Bedford Group SPb LLC)

Facts: Eco (charterer) entered into a voyage charter with Bedford Group (shipowner) on a modified GENCON 1994 form to transport cargo from Bronka to Dudinka. The laytime agreed in the charter did not include interruptions in the loading. The freight included the cost of the disbursement bills the shipowners owned to their port agent, but not demurrage.

At the same time, the shipowner, through his port agent, entered into a berthing agreement with the operator of port Bronka. Under its terms, the berthing fee was charged only for the time the vessel lay idle without cargo operations, or during the interruption of cargo operations after such operations began.

After loading began, it turned out that the charterers had not prepared the cargo documents and cargo itself for loading, which caused the shipowners was forced to pay the berthing fee to the port operator for 5 days the vessel lay idle. The shipowners then demanded that the charterers reimburse this fee. The charterers refused, arguing that were already paying demurrage to the shipowners, although earlier in an email they promised to compensate the berthing dues.

Moscow Commercial Court: the shipowners’ claim allowed. Payment of demurrage is provided for in the charter and does not cover the losses which the owners may incur in connection with the breaches by the charterers of separate obligations, e.g. those arising under Art. 135 MSC (detention of the vessel in excess of agreed time on demurrage) and Art. 141 MSC (delay in transfer of cargo documents to the carrier). According to the calculation of the demurrage rate and under Art. 132 MSC, the amount of demurrage is determined by the costs of maintaining the vessel and its crew and does not include unforeseen costs, e.g. for berthing dues. There was a causal link between the charterers’ delay in providing the cargo and documents and the payment of the berthing dues to the operator by the shipowners: if the vessel had stayed at the berth for all 5 days and cargo operations were carried out during this period, the port would have had no reason to charge these dues.

9th Court of Appeal: decision upheld.

Commercial Court for the Moscow Circuit: the decisions of the lower courts were reversed and remanded for reconsideration. The reversal was due to the insufficiency of evidence on certain points: the shipowners did not provide the original berthing agreement signed by the parties and proof of payment of the berthing dues, some documents related to the provision of services were not signed, and some materials were attached without Russian translations.

Moscow Commercial Court: the shipowners’ claim was allowed, the original decision of the first instance was reproduced almost without changes.

Comments: although the outcome of the case remained unchanged from its first round, the judgments are quite interesting from a comparative law perspective. When the parties to a voyage charter agree on the demurrage rate, what damages of the shipowners does demurrage cover? Only losses due to the owners’ inability to use the vessel (i.e. lost profits) or other losses (in this case, payment of berthing dues to the port operator)?

The Russian court decided that since by default, under Art. 132 MSC, the amount of demurrage is determined by the costs of maintaining the vessel and its crew, then demurrage covers only the inability of the owners to use the vessel during the period exceeding laytime. At the same time, if in addition to the delay in the loading itself, the charterers committed other breaches of their obligations under the charter (for example, they did not provide cargo documents in violation of Art. 141 MSC), then the owners’ losses from such other violations are not covered by demurrage and can be recovered from the charterers in full.

It is still an open question, however, whether demurrage covers additional losses of the owners caused solely by delays in loading / unloading - without additional and separate breaches by the charterers. For example, this may happen if, as a result of delay in unloading, the cargo deteriorates, and consignees sue the owners. Will the owners be able to recover the amounts paid to the consignees from the charterers in full, or are these losses already covered by demurrage? This is precisely the issue that was recently addressed in the English case K Line PTE Ltd v Priminds Shipping (HK) Co, Ltd (Rev 1) (The Eternal Bliss) [2020] EWHC 2373 (Comm). It is discussed in detail below. ■