• Carboex S.A. v Louis Dreyfus Commodities Suisse S.A. [2012] EWCA Civ 838
  • July 19, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Introduction
    This briefing considers the recent Court of Appeal decision in Carboex S.A. v Louis Dreyfus Commodities Suisse S.A. in which the Court was asked to consider the meaning and effect of laytime provisions in a contract of affreightment made on the American Welsh Coal Charter form (1979 amendment) as amended following delay to vessels arriving in Spain both during and after a nationwide haulage strike. In finding for Charterers the Court held that in each case the effective cause of any delay was a question of fact, but that on the natural meaning of the charterparty wording, the delay to the vessels was capable of being brought within the scope of the clauses if the strike was the effective cause of the delay.

    The contract of affreightment

    In March 2008 the claimant Owners, Louis Dreyfus Commodities Suisse S.A. entered into a contract of affreightment with the respondent Charterers, Carboex S.A. for the carriage of ten cargoes of coal from Indonesia to Ferrol, Spain. The contract was made on the American Welsh Coal Charter form (1979 amendment), as amended. For the purposes of the issues before the Court, only three clauses were relevant.  

    Clause 4, which concerned laytime at the loading port, stated:

    Any time lost through riots, strikes, lockouts, or any dispute between masters and men, occasioning a stoppage of pitmen, trimmers or other hands connected with the working or delivery of the coal for which the vessel is stemmed, or by reason of accidents to mines or machinery, obstructions, embargo or delay on the rail way or in the dock; or by reason of fire, floods, frosts, fogs, storms 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, which concerned laytime at the discharging port, stated:

    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. (the words in bold were inserted in type into the printed form)

    Additional clause 40, which concerned the commencing of laytime at the discharge port, stated:

    At port of discharge, time to commence twelve (12) hours after the vessel’s 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, whether in free pratique or not, whether in customs clearance or not, unless no customs clearance or no free pratique due to vessel’s fault, unless sooner commenced in which case only time actually used to count. Notices to be tendered in writing Telex, Cable, Fax or Radio form from usual waiting place, any time day or night Sundays and Holidays included excepting Superholidays as below. ....

    The strike
    In June 2008 there was a nationwide haulage strike in Spain, during which time no coal was removed from the terminal. Following the nationwide strike, there was a further unofficial stoppage by lorry drivers. For the purposes of the issues between the parties it was assumed that the port congestion was due to the haulage strike, and that the later unofficial stoppage resulted in an interruption to discharge operations. In these circumstances, Charterers claimed that under clause 9 the time lost by each of the vessels did not count against laytime. Owners disagreed and asserted that on the true construction of clause 9, read with the balance of the charter and in particular clauses 4 and 40, the words “the discharging” referred to the working of the cargo and that time ceased to count only if the vessel was in berth and was ready to discharge cargo or had begun cargo handling operations.

    On submission of the dispute to arbitration two questions were put to the arbitrators:

    • Whether clause 9 of the COA applies in the case of a vessel which is delayed by the after-effects of a strike which has ended?
    • Whether clause 9 of the COA applies in the case of a vessel which has arrived after the strike has ended?

    The arbitrators answered each question in the negative. On appeal the High Court considered a further question:

    • Does the strike exception in clause 9 apply to a vessel which is unable to berth due to berth congestion caused by a strike?

    In reversing the decision of the arbitrators, the High Court held that all three questions should be answered in the affirmative. On further appeal, the Court of Appeal was asked to reconsider all three questions.

    Before the Court of Appeal Owners submitted that the charter form itself was a berth charter. However, this had been amended by clause 40 which expressly provided that notice of readiness might be given from the usual waiting place, whether in berth or not, and that if a berth was not then available laytime was to commence 12 hours after first permissible tide. As such, Owners position was that the risk of congestion at the discharge port had been transferred to Charterers.

    Charterers accepted the position that as the vessel could give notice of readiness “whether in berth or not”, the parties had transferred the general risk of congestion at the discharge port from Owners to Charterers. Charterers however argued that it was open to them to make exceptions to the general position by excluding certain periods of time from the running of laytime. The giving of notice of readiness before a vessel reaches a berth, it was submitted, says nothing about what periods, if any, can be excluded from laytime. On Charterers’ submission the natural meaning of clause 9 was to exclude the time by which the discharging operation, viewed as a whole, had been delayed by the strike.

    In finding for Charterers, the Court stated that clause 9 was clearly intended to transfer the risk of some delay caused by strikes from Charterers to Owners and that the Court could not see anything in the language of the clause itself to indicate that its operation is restricted to time lost while the vessel is alongside the berth. Whilst the expression “the discharging” could be given a wide or narrow construction, the Court was of the view that it was naturally read as referring to the discharging operation as a whole. What clause 9 lacked, in the view of the Court, was any language which indicated an intention to restrict its operation to the period during which the vessel is alongside the quay ready to work.

    According to the Court, the question to be asked was whether the parties intended that Charterers should be protected from the effects of strikes that prevented or delayed the vessel entering berth in order to discharge or only from strikes that directly interfered with cargo handling operations. In this the Court took the view that the general language of clause 9 supported the former rather than the latter. It followed that had the parties intended to confine Charterers’ protection more narrowly, they should have used clearer language.

    The Court also took the view that the natural meaning of the language of clause 9 indicated that it is concerned only with the consequences of the excepted causes, not with their duration. In this the Court contrasted clause 9 with that of the Centrocon strike clause, which provides that “the time for loading or discharging, as the case may be, shall not count during the continuation of such causes”.

    The Court also noted that there was nothing in clause 9 to support the conclusion that its operation is limited to interruptions and delays occurring during the period of the excepted causes. When one of the excepted causes is “accidents beyond the control of Charterers”, it would be difficult to see how any other interpretation could have been intended.

    As regards clause 4, the Court was of the view that it reflected the fact that a wide variety of different events well beyond the confines of the port may affect Charterers’ ability to have cargo ready for loading and that if Charterers were desirous of being protected against them it would be necessary to make express provision for that.

    Whilst the Court was prepared to find in favour of Charterers on the above analysis, the Court accepted that the issue was not free from authority and in this the Court was referred to the matter of Central Argentine Railway v Marwood.1 In Marwood the House of Lords was asked to consider the effect of a clause in identical terms to clause 9. In reaching their decision, the House of Lords held that the words “such time” meant the time for which the discharging was actually prevented or delayed by the strike. In what is regarded as the leading passage in Marwood, Viscount Sumner stated:

    Be this as it may, I do not think the charterers can succeed. It is to be remembered that when notice of readiness has been given, the ship being then ready to unload, the shipowner's part is done and the risk of delay, including the risk of want of a berth, falls on the charterer, subject to his right to bring himself within the strike clause in question if he can. The words are express, “whether in berth or not.” I think the words “which prevents or delays the discharging” mean strikes which in themselves prevent or delay the discharging of the chartered ship herself, and do not extend to the case of strikes which only prevent the chartered ship from getting into a berth because they prevent some other ship from getting out of that berth.2

    Following a detailed analysis of the Marwood decision, together with a review of the authorities which have since considered Marwood, the Court was of the view that Marwood is authority for two related propositions:

    • the words “such time” in clause 9 means time lost to the vessel in completing discharging by reason of one of the excepted causes; and
    • that in order to obtain the protection of clause 9 the charterer must establish that the event on which he relies falls within the clause and was the effective cause of delay to the vessel.

    In this the Court held that clause excluded time actually lost to the vessel by reason of strikes, not merely time during which the vessel is prevented from entering berth by reason of strikes.

    In the light of the above, the Court held that the decision in Marwood did not prevent it from giving clause 9 the meaning which it naturally bears. It followed that if and to the extent that Charterers can establish that the strike at Ferrol was the effective cause of delay to the discharge of any of the vessels, the time lost as a result will not count against laytime.

    The issue of whether a strike is the effective cause of delay is a question of fact. In situations where a vessel is closer to the head of a queue when a strike occurs, the easier it is likely to be to establish the causal link. Similarly, it is not possible to exclude in principle the possibility that the necessary causal connection may be established, even in relation to vessels arriving after the strike has ended. Each case will turn on its own facts.

    On this basis the Court dismissed the appeal and the answer to each of the questions was therefore “Yes, provided the strike is the effective cause of the delay”.

    [1915] A.C. 981.
    [1915] A.C. 981, 989.

    As the Court noted, the cause of each delay will require a careful assessment of the factual matrix. If on investigation the facts support the conclusion that the proximate cause of the delay was strike action, it stands to reason that Charterers in a similar position are likely to be buoyed by the decision in Carboex v Louis Dreyfus Commodities. In the present climate of depressed freight rates, together with evidence of increasing union assertiveness across European countries, it is recommended that both Owners and Charterers be alert not only to the trigger for activation of laytime in their charterparties, but also the scope of any exclusionary provisions intended to minimise the risk of loss in the event of shore side strike action.