Carboex SA v Louis Dreyfus Commodities

DMC/SandT/12/26
England
Carboex SA v Louis Dreyfus Commodities Suisse SA
English Court of Appeal: Lord Neuberger MR, Moore-Bick and Toulson LJJ: [2012] EWCA Civ
838: 19 June 2011
Miss Siobn Healy Q.C. and Miss Jessica Sutherland, instructed by Reed Smith, for the
defendant/appellant Shipowners, Louis Dreyfus Commodities Suisse SA
Mr Charles Kimmins Q.C. and Mr Socrates Papadopoulos, instructed by Thomas Cooper, for the
claimant/respondent Charterers, Carboex SA
DEMURRAGE: CALCULATION OF LAYTIME: STRIKE EXCEPTION: STRIKE CAUSING
CONGESTION AT PORT AND CHARTERED VESSELS DELAYED FROM BERTHING AS A
RESULT: PERIOD OF DELAY TO BE DISCOUNTED FROM CALCULATION OF LAYTIME SO
LONG AS STRIKE WAS THE EFFECTIVE CAUSE OF DELAY
Summary
A clause in the Americanised Welsh Coal Charter form (1979 amendment) provided that ... [i]n case
of strikes, or any other causes included but not limited to breakdown of shore equipment or
accidents beyond the control of the Charterers which prevent or delay the discharging, such time is
not to count unless the vessel is already on demurrage. The English Court of Appeal affirmed the
decision of Field J and held that so long as the strike was the effective cause of the delay, the period
of delay in cargo operations directly caused by strike was to be discounted from the calculation of
laytime and further, the charterers were also protected from the effects of strikes which prevented or
delayed the vessel from entering berth in order to discharge.
This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong),
BCL(Oxon) and barrister-at-law in Hong Kong.
Background
In March 2008, Louis Dreyfus Commodities Suisse SA (the Shipowners) chartered four of its vessels
(the Vessels) to Carboex SA (the Charterers) for the carriage of coal from Indonesia to Ferrol,
Spain on the Americanised Welsh Coal Charter form (1979 amendment).
Clause 4 governed the laytime at the loading port and provided that:
Any time lost through riots, strikes, or any cause whatsoever beyond the control of the Charterer
affecting mining, transportation, delivery and/or loading of the coal, not to be computed as part of the
loading time (unless any cargo be actually loaded during such time).

Clause 9 provided that:

... In case of strikes, or any other causes included but not limited to breakdown of shore equipment
or accidents beyond the control of the Charterers which prevent or delay the discharging, such time is
not to count unless the vessel is already on demurrage.
Clause 40 provided that:
At port of discharge, time to commence twelve (12) hours after the vessels arrival at berth, vessel is
ready to unload and Notice of Readiness received and accepted, unless sooner commenced in which
case time actually used to count. If the berth is not available when vessel tenders Notice of
Readiness, but provided vessel/Owners not at fault in relation thereto, then laytime shall commence
twelve (12) hours after first permissible tide, Notice of Readiness received and accepted, whether in
berth or not
In June 2008, there was a nationwide haulage strike in Spain. Two of the chartered Vessels arrived at
Ferrol before strike at the port ended, and the two other Vessels arrived at Ferrol after strike had
ended. When each of the Vessels arrived at Ferrol and gave notice of readiness, there were vessels
ahead of it. As a result, there was delay in berthing and discharging the cargo.
The Charterers argued that as the delay was caused by the strike, it should not be excluded from the
calculation of laytime pursuant to Clause 9. The Shipowners argued the contrary.
The dispute was referred to arbitration. Upon the request of the parties, the arbitral tribunal was asked
to determine the following preliminary issues:
(i) Whether Clause 9 applied in the case of a vessel which was delayed by the after-effects of a strike
which had ended; and
(ii) Whether Clause 9 applied in the case of a vessel which had arrived after the strike had ended.
Question (i) was directed at the situation of the two Vessels which arrived before the end of the strike,
and Question (ii) the Vessels which arrived after the strike had ended.
In June 2010, the tribunal published a declaratory award in which they answered each of the
questions in the negative. Relying on the decision of the House of Lords in Central Argentine Railway
Ltd v Marwood [1915] AC 981 which dealt with a provision materially the same as Clause 9, the
tribunal held that Clause 9 did not apply to a vessel which was prevented from berthing because the
berths were occupied by other vessels, even where the reason for the congestion at the discharging
port was a strike.
The Charterers appealed against the decision of the tribunal. At the appeal before Field J, [insert
huyperlink] the parties invited the court to consider a third issue which it was said would decide the
issues of construction common to those raised by questions (i) and (ii) above, namely whether the
strike exception in Clause 9 applied to a vessel which was unable to berth due to berth congestion
caused by a strike.

Field J ([2011] EWHC 1165 (Comm), [2011] 2 All ER (Comm) 365) [[1]] held that, following Leonis
Steamship v Joseph Rank Ltd (No 2) (1908) 13 Com Cas 295, the ordinary meaning of Clause 9 was
that it covered not only delay in discharging caused by congestion due to a strike but also delay in
discharging caused by congestion due to the after-effects of a strike which had ended. This was so
whether the vessel arrived at the discharging port before or after the strike had ended. Statements by
various members of the House of Lords in the Marwood case were obiter and were not binding on the
Court. Field J thus allowed the appeal and set aside the award.
The Shipowners appealed against the judgment of Field J.
Judgment
The Court of Appeal dismissed the Shipowners appeal. The leading judgment was given by MooreBick LJ.
The Court first noted that, by agreeing that the Vessels could give notice of readiness whether in
berth or not under Clause 40, the parties had agreed that the laytime clock would start to run after
giving notice of readiness before the vessel reached the berth. This also had the effect of transferring
the general risk of congestion at the discharging port from the Shipowners to the Charterers.
However, it created no presumption that the parties did not intend to transfer the risk of delay from
specific causes back to the Shipowners. The Court rejected the Shipowners argument that Clause 9
was confined to protecting the Charterers against strikes which directly interfered with cargo handling
operations.
The language of Clause 9 showed that the parties also intended the Charterers to be protected from
the effects of strikes which prevented or delayed the vessel from entering berth in order to discharge.
There was nothing in Clause 9 which indicated an intention on the part of the parties to restrict its
operation to the period during which the Vessels were alongside the quay ready to work. The court in
Leonis Steamship Co Ltd v Joseph Rank Ltd (No 2) (1908) 13 Com Cas 295 adopted the same
approach to a differently worded strike clause. It held that although the vessel was delayed in loading
cargo due to congestion at the load port caused by a military revolt and a strike on the railways, this
period was discounted from laytime pursuant to the strike clause.
This conclusion was not affected by the apparent difference in wordings between Clause 4 and
Clause 9. Clause 4 only made clear that a wide variety of different events well beyond the confines of
the port may affect the Charterers ability to have the cargo ready for loading, and that express
provision was necessary in order for the Charterers to be protected from such events.
Moore-Bick LJ was further of the view that despite statements by Viscount Simon, Lord Parmoor and
Lord Wrenbury in Central Argentine Railway Ltd v Marwood [1915] AC 981 to the effect that the
clause did not extend to strikes which only prevented the chartered vessel from getting to a berth
because the strike prevented other vessels from getting out of the berth, they were only dicta and did
not assist the Shipowners here. The shipowners in the case of Marwood conceded that laytime did

not run during the period between the vessels arrival at berth and the partial resumption of work at
port. It would be surprising if the House had intended to rule to the contrary without hearing argument
in this respect. The case was only authority for the proposition that such time in Clause 9 meant time
lost to the vessel in completing discharging by reason of one of the excepted causes, and that the
excepted cause had to be the effective cause of delay to the vessel. Thus, when there was a partial
resumption of work during a strike, the equivalent number of days for which work was done should be
counted towards laytime.
Moore-Bick LJ was of the view that whether the strike was the effective cause of delay was a question
of fact (Reardon Smith Line Ltd v Ministry of Agriculture Fisheries and Food [1962] 1 QB 42). The
closer the vessel was to the head of the queue when the strike broke out, the easier it was likely to be
to establish the causal link. One could not exclude the possibility that causal link existed even for
vessels arriving after the strike had ended.
Thus, each of the preliminary questions would be answered, Yes, provided the strike is the effective
cause of the delay, and the appeal would be dismissed.

Carboex SA v Louis Dreyfus Commodities Suisse SA [2011]

EWHC 1165 (comm)

Reed Smith LLP

United Kingdom
August 8 2011

The Commercial Court has allowed a Charterer to rely on

an exclusion in a berth charter where the vessels
unloading was delayed by congestion after a strike.
The Appellant Charterers had entered into a berth charter with
the Respondent Owners on an amended AmWelsh voyage
charterparty form. The charterparty provided for the transport
of coal by four vessels from Indonesia to Spain.
Under clause 40 of the charterparty, time was to run from 12
hours after the vessels arrival at berth once notice of readiness
had been tendered. If a berth was not available at that time,
provided that this was not due to any fault on Charterers part,
laytime commenced 12 hours after the first permissible tide,
whether the vessel was in berth or not.
Clause 9 of the charterparty contained the following exceptions
clause:
In case of strikes, lockouts, civil commotions or any other
causes included but not limited to breakdown of shore
equipment or accidents beyond the control of the Charterers
consignee which prevent or delay the discharging, such time is
not to count unless the vessel is already on demurrage.
After the vessels arrived at the discharge port and tendered
notices of readiness, discharge was delayed by around two
weeks due to port congestion. This congestion was caused by a
nationwide Spanish haulage strike. The strike ended before

each of the vessels berthed, and did not cause any interruption
in the actual discharge process.
DEMURRAGE CLAIM
Owners commenced arbitration, claiming demurrage from
Charterers. They submitted that the effect of the whether in
berth or not provision in clause 40 was that Charterers bore
the risk of delay due to congestion. Charterers argued that this
provision had no effect on the construction of the exceptions in
clause 9. The tribunal found that Charterers could not rely on
the exception in clause 9, as the strike had ended by the time
the vessels berthed. Charterers appealed.
COURTS FINDINGS ON APPEAL
The Commercial Court allowed Charterers appeal. In doing so,
they found that the whether in berth or not provision did no
more than start the laytime clock ticking. The exceptions clause
was to be construed as a freestanding provision.
Further, the ordinary meaning of the words in clause 9 covered
delay in discharging caused by congestion due to the aftereffects of a strike that had ended. They also covered delay in
discharging caused by congestion due to a strike where the
vessel arrived after the strike had ended.
The Court therefore found that the tribunal had been wrong to
conclude that Charterers did not have the protection of the
exceptions in clause 9 of the charterparty.
COMMENT
In this case, the Court found that Charterers could use an
exceptions clause as a defence to a demurrage claim, even
though the relevant delays were not directly caused by one of
the exceptions listed. Rather, strikes caused the congestion
which was the immediate cause of the delay.
It is important to note that, in spite of this finding, the courts
will still interpret exceptions clauses strictly. It must be possible
to show a causal link between the exceptions listed in the
clause and the delay in question. This will depend very much on
the facts and circumstances of the case in question. As such,

advice should be taken before deciding whether or not a

particular set of circumstances falls within an exceptions
clause.
The Commercial Court granted leave to appeal in this case, so
these issues will be further considered by the Court of Appeal.