Restraint of Princes – Did the London Arbitrators Get it Wrong?

December 28, 2010

I just read the recently published London Arbitration 20/10 with great interest.  It involves two demurrage issues which arose under a voyage charter fixed on an amended Asbatankvoy charter form for the carriage of fuel oil from Indonesia to Thailand.

The demurrage issue of particular interest to me pertains to a protracted interruption incurred during a ship-to-ship (STS) transfer operation at the load port.  The Vessel was arrested by the Navy for allegedly failing to have the required export permit and was only released 33 days later after the Charterer paid $600K cash. The tribunal found that the Charterer did in fact have the required permit and did not violate Indonesian law rendering this situation to be a case where two innocent parties suffered a loss (Owners were seeking $780K demurrage for this period).

Owner’s claim for demurrage was denied on the basis that this delay fell within the scope of “restraint of princes” as expressly excepted within Asbatankvoy, Part II, Clause 19, General Exceptions Clause.  However, the caveat in said clause stipulates that neither the Owner nor Charterer are responsible for various force majeure type exceptions “unless otherwise in this Charter expressly provided“.  This phrase has been held to mean that in matters involving laytime and demurrage, the exceptions to time counting must be found within the context of the clauses governing laytime and demurrage issues e.g. Clauses 5-9.  Furthermore, supporting the position that Clause 19 does not pertain to laytime and demurrage is evidenced by the fact that although it excuses delays due to strikes, Clause 8, Demurrage, provides for payment of demurrage at one-half the charter rate for loss of time caused by strikes of shoreside labor, with complete relief from demurrage attributable to strike of the officers or crew of the vessel or tugs.

In the English court ruling of Gem Shipping co. v. Babanaft (Lebanon) S.A.R.L. (The Fontevivo), [1975], the vessel departed the port after having discharged only part of the cargo owing to war risks.  She returned three days later and the issue at stake was whether the time when she was away from berth counted as laytime.  Justice Donaldson held that laytime was not interrupted and that Charterer was not excused from liability as there was no fault on the part of the shipowner.

In a N.Y. arbitration, SMA No. 3739 (Raphael),  the Vessel was delayed 11 days at port due to the Iraqi government halting oil exports during that period due to a pricing dispute with the United Nations “Oil-for-Food Program”.  The Charterer sought to be excused from demurrage on the basis that this delay fell within the scope of “restraint of princes” exception in Clause 19, General Exceptions Clause.  In ruling for the Owner, the Panel confirmed that the General Exceptions Clause does not apply to the running of laytime.

Based on the above, I wonder if the decision in London Arbitration 20/10 is correct?  Does anyone have any thoughts on this topic?