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: In the Matter of the Arbitration Between :
: ALLIED BULK NAVIGATION LTD. :
: Owner of the M/V SKYROS : FINAL AWARD
: :
: ---- and ---- : :
: :
: MMI INTERNATIONAL, INC., Charterer :
: Under a GENCON Charter party, dated June 7 1970. :
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Before: Jack Berg, Capt. E. Rigos and Donald Zubrod (Chair)
Peter Skoufalos, Esq. (Chalos & Brown) for MMI
International, Inc.
Eugene J. O'Connor, Esq. (Freehill, Hogan & Mahar) for
Allied Bulk Navigation Ltd.
INTRODUCTION
This arbitration is between ALLIED BULK NAVIGATION LTD., ( hereinafter
" ABN " or " Owner " ), as disponent owner of the bulk carrier M/V SKYROS, a
Maltese flag bulk vessel of 32,280 MT deadweight, and MMI INTERNATIONAL, INC.
( hereinafter " MMI " or " Charterer " ), as charterer under a GENCON form of
charter party, dated June 7, 1990.
The charter party described the cargo to be lifted as 25,000 long tons of
bulk steel scrap, 5% more or less in Owner's option, loading one safe berth
Tacoma, Washington for discharge at one safe berth, one safe port South Korea.
The vessel was ordered to discharge at Pusan.
THE PROCEEDING
The panel was first asked to address the threshold question of whether
the parties had entered into a fully effective and legally binding settlement
agreement capping the amount of damages which ABN would have to pay MMI for
the alleged cargo gear problem. On August 9, 1993, the panel majority,
Capt. Rigos dissenting, issued a Partial Final Award in favor of Charterer,
concluding there had been no legally binding settlement agreement. The panel
noted there were significant negotiations between the parties on this point
but that no agreement was ever concluded. See SMA 2998 (1993).
This Final Award will now address ABN's substantative defenses to the
claims and the proper measure of MMI's damages, if any. The schedule of
presentations called for ABN to submit its substantive defenses within 30
days of the Partial Final Award and for MMI to offer its rebuttal position
30 days thereafter. The submissions were made to the panel, as scheduled, the
last on September 30, 1993.
THE CLAIMS
MMI's claims for additional expenses attributable to the cargo gear
deficiency are as follows:
Cargo gear load test ---------- $ 2,165.00
Survey of gear --------------- 500.00
Stevedore standby cost --------- 27,600.00
Extra discharge costs ----------- 135,846.12
Despatch ------------- 13,750.00
------------
$179,861.12
MMI claims interest on the above, the cost of this arbitration and its
attorney's fees.
ABN contends it owes only $4,336.70.
ARGUMENT
ABN questions MMI's r ight under Clause 25 to order the vessel to
discharge at anchorage K-20 when the receiver's private berth, the Hanbo
Pier, was unavailable upon the vessel's arrival. Furthermore, ABN contends
the anchorage was unsafe for the SKYROS, therefore, the Master had every
right to refuse to proceed there for discharge.
MMI maintains Clause 38 permits it to lighter the vessel, with the
expense for its own account, and further argues there is no basis to construe
Clause 38 as one which limits lighterage to alongside a berth as opposed to
at an anchorage.
With respect to the gear capacity, ABN contends it previously conceded
the inadequacy of the cargo cranes solely for its threshold application to
the panel on the settlement agreement issue. ABN now contends the cargo gear
was in accordance with the requirements of Clause 29, and points to the
vessel having passed its quadrennial cargo gear survey just six months prior
to its arrival at Pusan. Furthermore,ABN argues that an independent surveyor
criticized the methodology Charterer's surveyor employed to test the gear
after the Pusan stevedores complained of insufficient lifting capacity.
MMI submits the evidence demonstrates the gear was incapable of complying
with the minimum eight metric ton weight requirement warranted in clause 29.
Furthermore, in no instance did Owner's surveyor ever attempt to lift that
weight.
MMI contends it suffered damages in the amount of $179,861.12, and that
the additional costs are the result of ABN's failure to comply with the
Clause 29 cargo gear warranty. MMI contends the above amount represents its
cost over and above what it would have incurred had it been able to discharge
the vessel as contemplated, utilizing ship's gear.
ABN contends MMI's alleged damages are vastly overstated and has submitted
its own detailed calculation of the financial consequences of the operation
had MMI correctly ordered the vessel to discharge at Pier 7 (Berth 73) rather
than improperly directing it to the X-20 anchorage. Assuming the ship's gear
could not be used, ABN maintains MMI would have incurred additional costs
using shore cranes, trucks, etc. but that the discharge at Pier 7 would have
completed much sooner. It is ABN's position that this procedure shortened the
discharge by about 23 days, thereby reducing ABN's sponsibility
significantly.
DISCUSSION AND DECISION
The issues which are before the panel in this second and final phase of
the arbitration are those raised by ABN in defense of MMI's claim. Stated
briefly, they are:
1. Was MMI permitted under the charter to order the
vessel to lighten at an anchorage;
2. Was the designated lightering anchorage a safe one;
3. Was the vessel's cargo gear capacity as warranted
in the charter party; and
4. Are MMI's damages overstated.
Clauses 25 and 38 are pertinent to the question of whether MMI had a
right to direct the vessel to the K-20 anchorage for partial discharge. ABN
relies mainly on the language of Clause 25, arguing that MMI is required to
discharge at a berth, and that an anchorage is not a berth within the meaning
of the Clause. Clause 25 states:
Vessel is to discharge at one (1) safe berth, one (1)
safe port South Korea. Discharging port to be declared
on vessel's arrival at the load port.
MMI contends it had the right to lighten the vessel at its expense and
that anchorage K-20 was a permissible location for the vessel to be lightened.
MMI relies mainly on Clause 38, which states:
Lighterage, if any, either end, to be for Charterer's
account.
While MMI no doubt preferred utilizing the receiver's Hanbo Pier for
discharge, it had the right to order discharge at any safe berth. MMI also
had the option of lighterage, if necessary, to enable the vessel to discharge
at the nominated berth. Lightening operations are generally expected to be
performed at safe anchorages and, in our unanimous view, they are permissible
unless the charter party expressly provides otherwise. It does not here.
We may quickly dispose of the question of whether the anchorage was safe.
The fact is that there is ample evidence of similar vessels being assigned to
the K-20 anchorage on a regular basis and there is nothing of substance to
suggest danger or unsafe conditions. The Master stated he considered the
anchorage was unsafe but there is nothing specifically advanced to support
his allegation. In fact, we believe his reluctance to lighten at the
anchorage had more to do with the vessel's cargo gear problem than the safety
of the anchorage itself. The panel unanimously agrees the nominated anchorage
was a safe one.
We may also rapidly dispose of the cargo gear issue because the evidence
on this point is overwhelming. MMI has submitted surveys of established and
experienced surveying firms attesting to the inadequacy of the cargo gear.
Clause 29 provides in part:
7 holds/hatches - 3 cranes of 8 tons serving hatches 2 through 7
2 derricks at 8 tons serving number 1 hatch (all "about")
ABN relies on statements contained in its surveyor's report criticizing
MMI's surveyor's technique, but the argument is unpersuasive. At no time did
ABN ever demonstrate the sufficiency of the cargo crane capacity by attempting
to lift the eight metric ton minimum capacity warranted in the charter party.
The panel unanimously concludes the cargo gear was not as warranted.
With respect to MMI's damages, the panel majority, Capt. Rigos dissenting,
concludes that MMI's damages, as presented, are supported by our findings of
fact and the documentation which MMI has introduced. Capt. Rigos' partial
dissenting opinion is attached as Appendix A.
ABN, in contesting MMI's damages, relies upon a theoretical calculation
which takes into account the additional expenses of discharging at Pier 7,
but which then credits back a saving of approximately 23 days at $5,500 per
day. The theory assumes MMI would have expended 44.14 days for the combined
discharge at K-20 anchorage and Hanbo Pier, a procedure which MMI states it
would have followed if the vessel's cranes were in accordance with the
warranted minimum lifting capacity. This is the exercise which appears in the
ABN's surveyor's report.
The panel majority has reviewed the underlying computations and concludes
we are simply unable to accept the assumptions on which they are based. They
are speculative at best. ABN's surveyor and an official of Owner's London
representative postulated the above theory in their reports but neither
appeared before the panel to testify and be cross examined on this point.
Owner's London representative was scheduled to appear on two separate
occasions but cancelled both. We, therefore, afford little weight to the
validity of the underlying premises and conclude ABN's theory of savings is
mere speculation.
The panel majority awards MMI the sum of $179,861.12, consisting of its
additional discharge expenses, despatch and other documented expenses. The
balance of freight, less the overage insurance premium, appear not to be in
dispute and this sum is credited to Owner. We further award interest on the
net sum, at 7% per annum, from January 30, 1991, until the date of this award.
MMI has argued right along that ABN's unreasonable position with respect
to the alleged settlement agreement and the substance of other MMI claims have
unnecessarily prolonged the proceeding and made it far more costly than it
should have been. MMI seeks an award of attorney's fees pursuant to Clause 47,
which expressly authorizes the arbitrators "to award and/or apportion legal
costs to the successful party" The panel majority concurs and awards MMI the
sum of $12,000 towards its attorney's fees.
RECONCILIATION
The following sums are awarded Charterer:
1. Additional expenses of discharge,
despatch 6t documented expenses ....... $179,861.12
2. Less balance of freight with
overage insurance credit ...............( 24,879.42)
3. Interest on net above at 7% p.a.
from Jan. 31, 1991 to award date ....... 32,248.75
4. Allowance of attorney's fees ............ 12,000.00
5. Credit for arbitrators' fees
paid on behalf of Owner .................. 7,840.00
-------------
Total due Charterer $207,070.45
In the event the above sum is not paid within thirty days of the date of
this award, interest at 6% p.a. shall resume on the principal sum of
$154,981.70 from the award date until it is paid or reduced to judgment,
whichever occurs first.
The panel's fee is contained in attached Appendix B, duly incorporated
herein, and payment is to be made pursuant to its terms. Liability for the
arbitrators' fees is a joint and several obligation.
The governing charter party specifies that the arbitrators' decision, or
that of any two of them, shall be final, and for the purpose of enforcing any
award, the agreement may be made a rule of the court.
-----------------------------
Jack Berg
----------------------------
Captain E.N. Rigos
(Dissenting in part)
----------------------------
Donald Zubrod,
Chairman
New York, New York
January.21, 1994
APPENDIX C
MV Skyros/MMI
CP 06/07/90
DISSENTING OPINION
OF
CAPT.E.N.RIGOS
Based on the evidence presented to the panel, and with all respect to the
opinion of the other members, I disagree with their conclusion. I am of the
pinion that there was a binding agreement between the two parties, ABN and
MMI, involved in the arbitration.
On August 20,1990 the Owners of the vessel, ABN, proposed without prejudice
the following:
1.- All cargo to be discharged at Berth 73 using shore
cranes ( and vessels's derricks if this required.)
2.- Owners to contribute with 50 percent but maximum
usd 30,000 towards any additional stevedoring/transportation
etc costs incurred over and above what the cost would be if
vessel discharged whole cargo at K-20 with her own gear and
the remaining portion to be met by charterers/receivers.
3.- Laytime from when berth 73 becomes available to count in
accordance with the provisions of the C/P.
4.- Time for the time between vessel's arrival at Pusan and
the time berth 73 becomes available to count in half for
laytime purposes.
5.- First of the two shiftings made so far to be for owner's
account. Shifting from waiting anchorage to berth 73 for owners'
account. Any other shiftings in accordance with C/P provisions.
6.- Any stevedore cancellation expenses incurred so far for
charterers/receivers' account.
The same day August 20, 1990 the charterers reverted as follows:
" .... However, in order to solve the present matter at Busan with a spirit
of goodwill and cooperation to minimize the possible damage to the concerned
parties, we have agree with owner's proposal without prejudice."
On August 24, 1990 the owners send a fax to Charterers advising them that
receivers claimed USD 162,476 as extra cost. In addition, and with the same
document, the owners requested charterers "... whether the agreement made with
Charterers is to be followed by Charterers or not."
Charterers reverted " ... Meantime, please refer to our previous fax of
August 20th, 1990 which will be followed by us."
On October 5, 1990 the Charterers of the vessel repudiated the agreement by
advising Owners as follows:
" We are regretfully forced to repudiate our agreement of August 20th, 1990
which was made on a "without prejudice" basis, because the total claim amount
we are facing now is much greater than it was originally represented by you."
Although charterers, with their letter dated October 5, 1990, repudiated the
agreement because it was made "without prejudice" and because the amount was
greater than it was originally represented, I have noticed that owners advised
charterers for the increased amount on August 24, 1990 and charterers accepted
same. Charterers were aware of the fact that the, amount of the claim was
$162,476.
With reference to "without prejudice" statement in their correspondence by
both parties, I am of the opinion that Charterers and Owners placed this term
in there communication in order to protect themselves in any unknown claim
over and above the amount of $162,476.
As a conclusion, I am of the view that there is a binding agreement and the
proposal of Owners dated August 20, 1990 was accepted by Charterers,
Therefore, this agreement is binding for both parties up to the amount of
$162,476.
New York, N.Y.
August 9 1993
Capt. E.N.Rigos
(Dissenting)
RETURN. to RIGOS home
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