MARINE DISPUTE RESOLUTION
Introduction
The Marubeni Group
Marubeni International Petroleum (S) Pte Ltd
Purpose of my paper – not a legal discourse but a
practical approach and factors and considerations
for a successful legal action
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MARINE DISPUTE RESOLUTION
• A typical transaction
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London/Belize buyer
Japanese seller
FOB Korea Contract written out of Belize
Shipped from Taiwan
Vessel chartered by seller from charterer taking from head charterer
Vessel owner based in Malta
End receiver in Korea
Payment vide LC from Korean bank
Delivery basis Marine LOI
Negotiation for LC basis Banking LOI
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Similar case :
http://www.onlinedmc.co.uk/projector_sa_v__marubeni.htm
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MARINE DISPUTE RESOLUTION
Owner
Discharge w/o B/L
Marine LOI
End User
LC w/o
Banking
Head Charterer
LOI Provision
Marine LOI
Bank
Charterer
Open Credit
Marine LOI
TTR 30 DBL
Seller
FOB Taiwan
Loadport : Taiwan
(Japanese)
Disport : Korea
Gave B/L
Payment due 180
days DBL
Buyer
(London/Belize)
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MARINE DISPUTE RESOLUTION
Interested Parties in a typical transaction
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2.
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6.
7.
Vessel Owner
Charterer
Seller / Shipper
Buyer / Receiver
Bank
BL Holders
Insurers
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MARINE DISPUTE RESOLUTION
Applicable laws
Carriage of Goods by Sea Act incorporating Hague-Visby Rules
Sales of Goods Act
Law of Contracts
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MARINE DISPUTE RESOLUTION
Crude oil prices : 1947-2009
Source : http://www.wtrg.com/prices.htm
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Weekly bunker prices
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MARINE DISPUTE RESOLUTION
Bunker prices
1980s & 1990s = less than USD150/mt
2000 – 2005 = less than USD200/mt
2006 – 2009 = from USD300/mt up to USD750mt down to USD200/mt
and now at USD450/mt
Incentive to claim
0.5% loss – 280,000mt HSFO@USD150 = USD210,000
0.5% loss – 280,000mt@USD450 = USD630,000
Incentive to get out of contracts
280,000mt HSFO@USD150 = USD42M
280,000mt @USD450 = USD126M
Movement of USD10 for 280,000mt = USD2.8M
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MARINE DISPUTE RESOLUTION
Implication of price movements
Bunker prices
July 2008 : USD715 / mt
Aug 2008 : USD661 / mt
Sept 2008 : USD581 / mt
Oct 2008 : USD391 / mt
Nov 2008 : USD232/ mt
Dec 2008 : USD220 / mt
Oct 2009 : USD414 /mt
(-USD54) : Loss - USD15M
(-USD80) : Loss -USD22.4M
(-USD190) : Loss – USD53.2M
(-USD129) : Loss – USD44.5M
(-USD12) : Loss – USD3.36M
Gain or loss??
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MARINE DISPUTE RESOLUTION
Common disputes in Oil & Gas Industry
1. Contamination
2. Theft / Shortage
3. Off specification
4. Marine LOI
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MARINE DISPUTE RESOLUTION
Classification of the disputes
a.
Operational issues
1. Contamination
2. Theft / Shortage
3. Off specification
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b. Documentation issues
i.
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Marine Letter of Indemnity
Nature and usage in the oil industry
Stand of P&I Clubs
Legal position
ii.
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Banking Letter of Indemnity
Nature and usage in finance
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MARINE DISPUTE RESOLUTION
Marine Letter of Indemnity
STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING
CARGO WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING
To : SHIPOWNER LTD
The Owners of the MT SHIP_
Dear Sirs
Ship: MT SHIP
Voyage: LOAD – MAILIAO, TAIWAN
DISCHARGE - CHEVRON PENJURU TERMINAL, SINGAPORE
Cargo: FUELOIL 380CST
Bill of lading:DATE : 1 OCT 2009
PLACE ISSUED: MAILIAO, TAIWAN
SHIPPER : TAIWAN OIL CORPORATION LIMITED
CONSIGNEE : TO THE ORDER OF RECEIVER INTERNATIONAL PTE LTD
DESTINATION : SINGAPORE
CARGO : FUELOIL 380CST
QUANTITY : 31,193.241 mts <B/L NO: FUELSHIP/123455 >
The above cargo was shipped on the above vessel by TAIWAN OIL CORPORATION LIMITED,
TAIWAN and consigned to TO THE ORDER OF RECEIVER PTE LTD for delivery at the port of
SINGAPORE but the bill of lading has not arrived and we, BUYER INTERNATIONAL PTE
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LTD, hereby request you to order the vessel to proceed to and deliver the said cargo to
RECEIVER PTE LTD without production of the original bill of lading.
MARINE DISPUTE RESOLUTION
Marine Letter of Indemnity
In consideration of your complying with our above request, we hereby agree as follows:
To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or
expense of whatsoever nature which you may sustain by reason of delivering the cargo in accordance with our
request.
In the event of any proceedings being commenced against you or any of your servants or agents in connection with the
delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.
If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or
associated ownership, management or control, should be arrested or detained or should the arrest or detention
thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of
a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other
security as may be required to prevent such arrest or detention or to secure the release of such ship or property or
to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by
such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or
detention or threatened arrest or detention or such interference may be justified.
If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility, or another ship,
lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the
party to whom we have requested you to make such delivery.
As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to
you, or otherwise to cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall
cease.
The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon
your proceeding first against any person, whether or not such person is party to or liable under this indemnity.
This indemnity shall be governed by and construed in accordance with English law and each and every person liable
under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.
Yours faithfully,
SO AND SO
MANAGING DIRECTOR
For and behalf of
BUYER INTERNATIONAL PTE LTD
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MARINE DISPUTE RESOLUTION
Banking Letter of Indemnity
LETTER OF INDEMNITY (LOI)
DATE :
FROM :
TO :
WE REFER TO A CARGO OF .....(QUANTITY) OF.......(COMMODITY) SHIPPED
ON BOARD THE TANKER .......AT THE PORT OF.......PURSUANT TO BILLS OF LADING DATED
…………….
ALTHOUGH WE HAVE SOLD AND TRANSFERRED TITLE TO SAID CARGO TO YOU, WE
HAVE BEEN UNABLE TO PROVIDE YOU WITH THE ORIGINAL BILLS OF LADING DATED
…………… COVERING THE SAID SALE.
IN CONSIDERATION OF YOUR PAYING THE FULL PURCHASE PRICE OF U.S.
DOLLARS............., WE HEREBY EXPRESSLY WARRANT THAT WE HAVE
MARKETABLE TITLE, FREE AND CLEAR OF ANY LIEN OR ENCUMBRANCE TO SUCH
MATERIAL, AND THAT WE HAVE FULL RIGHT AND AUTHORITY TO TRANSFER SUCH
TITLE AND EFFECT DELIVERY OF SUCH MATERIAL TO YOU.
WE FURTHER AGREE TO MAKE ALL REASONABLE EFFORTS TO OBTAIN AND
SURRENDER TO YOU AS SOON AS POSSIBLE THE ORIGINAL BILLS OF LADING DATED
……………, AND TO
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MARINE DISPUTE RESOLUTION
Banking Letter of Indemnity
PROTECT, INDEMNIFY AND SAVE YOU HARMLESS FROM AND AGAINST ANY AND ALL
DAMAGES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEY FEES) WHICH
YOU MAY SUFFER BY REASON OF THE ORIGINAL BILLS OF LADING DATED ……………
REMAINING OUTSTANDING, OR BREACH OF THE WARRANTIES GIVEN ABOVE,
INCLUDING BUT NOT LIMITED TO, ANY CLAIMS AND DEMANDS WHICH MAY BE MADE BY
A HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING, OR BY ANY OTHER
THIRD PARTY CLAIMING AN INTEREST IN OR LIEN ON THE CARGO OR PROCEEDS
THEREOF. OUR OBLIGATION TO INDEMNIFY YOU IS, OF COURSE, SUBJECT TO THE
CONDITION THAT YOU SHALL GIVE US PROMPT NOTICE OF THE ASSERTION OF ANY
CLAIM(S) AND FULL OPPORTUNITY TO CONDUCT THE DEFENSE THEREOF AND THAT
YOU SHALL NOT SETTLE ANY SUCH CLAIM(S) WITHOUT OUR APPROVAL.
THIS LETTER OF INDEMNITY GOVERNED BY THE LAWS OF SINGAPORE. ANY DISPUTE
ARISING SHALL BE REFERRED TO AND FINALLY RESOLVED BY ARBITRATION IN
SINGAPORE IN ACCORDANCE WITH THE ARBITRATION RULES OF THE SINGAPORE
INTERNATIONAL ARBITRATION CENTRE (SIAC RULES) FOR THE TIME BEING IN FORCE
WHICH RULES ARE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS
CLAUSE.
THIS LETTER OF INDEMNITY SHALL EXPIRE AND BECOME NULL AND VOID UPON OUR
TENDERING THE ORIGINAL BILLS OF LADING DATED ……………, TO YOU.
DATE ..............
AUTHORIZED SIGNATURE ............
COMPANY NAME ...........
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MARINE DISPUTE RESOLUTION
The situation when the dispute arises :
- Documents are not complete or not clear
- There would have been voluminous amount of correspondences
such that it takes a long time to figure out what went wrong
- There may have been some attempts to cover up mistakes before it
got too big / out of control
- Parties may have tried to negotiate but failed
- Mitigation of loss and other commercial considerations versus strict
legal position and subrogation of rights to insurers.
- Are you the rightful holder of the BL? Has the cargo been sold while
afloat?
- If contemplating an action under tort, claimant must the owner at the
time of the loss or damage arising. This will require analysis of the
contract, the passing of title and evidence of payment.
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i.
ii.
iii.
iv.
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vi.
vii.
viii.
ix.
Collation of evidence
Chronology of events.
Preservation of rights
Importance of Contemporaneous documents
Notification of Insurance
Documentary evidence
- Certificate of Insurance
- Original Invoice
- Bills of Lading
Loading documents
Surveyors’ documents
Matrix of events
Do NOT lie
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MARINE DISPUTE RESOLUTION
Additional Evidence
1. Surveyors
Expand their scope to include technical details surrounding the event
2. Experts
Check the vessel. If you are the charterer, you can request to go on
board to do general inspection. Can find out a lot of damning
observations
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MARINE DISPUTE RESOLUTION
Preliminary Issues in considering legal actions
a.
Governing laws & Jurisdiction
b.
Right to claim & the identity of the other party
c.
Dispute resolution forum
d.
Type of dispute resolution
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
1. Rule B
For a simple definition of what is Rule B, the write-up by Sheppard
Mullin LLP which clearly states that it is to enable a party to obtain
security for a maritime claim that has not yet been reduced to
judgment or arbitral award. One of the key criteria is to prove
maritime nature and in their newsletter, Clyde & Co has highlighted
that it is not well defined yet and "may well depend on the opinion of
the particular judge allocated to hear the Complaint". GARD has
aptly portrayed the situation by saying that until the matter is
resolved by the Second Circuit Court of Appeal, "B" is for
bewilderment.
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
Rule B – Cont’d
Rule B Attachments are popular because they are effective. In Winter
Storm Shipping, Ltd. v. TPI, the Court of Appeals for the Second
Circuit held a Rule B Attachment can intercept and attach an
electronic funds transfer (EFT) in the hands of an intermediary bank,
including the New York Clearing House banks in Manhattan that
process virtually all transfers of U.S. currency (or USD transfers)
made worldwide. Because shipping industry transactions are
generally in U.S. currency and usually pass through one of the New
York Clearing House banks, Rule B Attachment proceedings have
become exceptionally popular in the Southern District of New York
(which includes Manhattan) where they now comprise approximately
30% of all new cases filed.
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
1. Mareva Injuction
Definition from Wikipedia The Mareva Injunction (variously known also as a freezing order,
Mareva order or Mareva regime), in Commonwealth jurisdictions, is
a court order which freezes assets so that a defendant to an action
cannot dissipate their assets from beyond the jurisdiction of a court
so as to frustrate a judgment. It is named for Mareva Compania
Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep
509, decided in 1975. It is widely recognised in other common law
jurisdictions and such orders can be made to have world-wide effect.
It is variously construed as part of a court's inherent jurisdiction to
restrain breaches of its process.
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
Mareva Injunction – Cont’d
Absolutely Important to remember :
a. Real risk of Dissipation of Assets
b. Indemnity of wrongful application
Procedure and Risk
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MARINE DISPUTE RESOLUTION
Sample Order
THE ORDER
An application was made today [date] by counsel for the plaintiff, [ ] to Justice [ ] by
way of ex-parte summons no. [ ] of [ ]. Justice [ ] heard the application and read the
affidavit(s) of [name] filed on [date].
As a result of the application IT IS ORDERED by Justice [ ] that:
Disposal of assets
1. (a) The defendant must not remove from Singapore in any way dispose
of or deal with or diminish the value of any of his assets which are in Singapore
whether in his own name or not and whether solely or jointly owned up to the value
[$ ].
(b)
This prohibition includes the following assets, in particular:
(i) the property known as [ ] or the net sale money after payment of any mortgages if27
it
has been sold;
MARINE DISPUTE RESOLUTION
(ii)
the property and assets of the defendant’s business known as [ ] (or
carried on at [ ]) or the sale money if any of them have been sold; and
(iii)
any money in the accounts numbered [ ] at [ ].
(c) If the total unencumbered value of the defendant’s assets in Singapore
exceeds [$ ], the defendant may remove any of those assets from Singapore
or may dispose of or deal with them so long as the total unencumbered
value of his assets still in Singapore remains not less than [$ ].
Disclosure of information
2. The defendant must inform the plaintiff in writing at once of all his assets
in Singapore whether in his own name or not and whether solely or jointly
owned, giving the value, location and details of all such assets. The
information must be confirmed in an affidavit which must be served on the
plaintiff’s solicitors within [ ] days after this order has been served on the
defendant.
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EXCEPTIONS TO THIS ORDER
3. This order does not prohibit the defendant from spending [$ ] a week
towards his ordinary living expenses and also [$ ] a week [or a reasonable
sum] on legal advice and representation. But before spending any money,
the defendant must tell the plaintiff’s solicitors where the money is to come
from.
4. This order does not prohibit the defendant from dealing with or disposing
of any of his assets in the ordinary and proper course of business. The
defendant shall account to the plaintiff [state interval] for the amount of
money spent in this regard.
5. The defendant may agree with the plaintiff’s solicitors that the above
spending limits should be increased or that this order should be varied in
any other respect but any such agreement must be in writing.
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EFFECT OF THIS ORDER
6. A defendant who is an individual who is ordered not to do something must not do it
himself or in any other way. He must not do it through others acting on his behalf
or on his instructions or with his encouragement.
7. A defendant which is a corporation and which is ordered not to do something must
not do it itself or by its directors, officers, employees or agents or in any other way.
THIRD PARTIES
Effect of this order
8. It is a contempt of Court for any person notified of this order knowingly to assist in
or permit a breach of the order. Any person doing so may be sent to prison or fined.
Set-off by banks
9. This injunction does not prevent any bank from exercising any right of set-off it
may have in respect of any facility which it gave to the defendant before it was
notified of the order.
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Withdrawals by the defendant
10.
No bank need enquire as to the application or proposed application of any
money withdrawn by the defendant if the withdrawal appears to be permitted by
this order.
[SERVICE OUT OF THE JURISDICTION AND SUBSTITUTED SERVICE
11.
(a)
The plaintiff may serve the writ of summons on the defendant at [ ]
by [mode of service].
(b) If the defendant wishes to defend the action he must enter an appearance within [ ]
days of being served with the writ of summons.]
UNDERTAKINGS
12.
The plaintiff gives to the Court the undertakings set out in Schedule 1 to this
order.
DURATION OF THIS ORDER
13.
This order will remain in force until the trial or further order.
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VARIATION OR DISCHARGE OF THIS ORDER
14.The defendant (or anyone notified of this order) may apply to the Court at
any time to vary or discharge this order (or so much of it as affects that
person), but anyone wishing to do so must inform the plaintiff’s solicitors.
NAME AND ADDRESS OF PLAINTIFF’S SOLICITORS
15.The plaintiff’s solicitors are:
[Name of lawyer(s) having conduct of action or charge of matter.]
[Name of law firm.]
[Address of law firm.]
Tel : [Telephone number.]
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SCHEDULE 1
Undertakings given to the Court by the plaintiff
1. If the Court later finds that this order has caused loss to the defendant, and
decides that the defendant should be compensated for that loss, the plaintiff
shall comply with any order the Court may make.
2. As soon as practicable the plaintiff shall [issue and] serve on the defendant
[a] [the] writ of summons [in the form of the draft writ produced to the
Court] [claiming appropriate relief] together with this order.
3. The plaintiff shall cause an affidavit to be sworn and filed [substantially in
the terms of the draft affidavit produced to the Court] [confirming the
substance of what was said to the Court by the plaintiff’s solicitors].
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MARINE DISPUTE RESOLUTION
4. As soon as practicable the plaintiff shall serve on the defendant a copy of
the affidavits and exhibits containing the evidence relied on by the plaintiff.
5. Anyone notified of this order shall be given a copy of it by the plaintiff’s
solicitors.
6. The plaintiff shall pay the reasonable costs of anyone other than the
defendant which have been incurred as a result of this order including the
costs of ascertaining whether that person holds any of the defendant’s
assets and if the Court later finds that this order has caused such person loss,
and decides that such person should be compensated for that loss, the
plaintiff will comply with any order the Court may make.
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
Anton Piller Order
An Anton Piller order is a court order that provides the right to search
premises and seize evidence without prior warning. This prevents
destruction of incriminating evidence, particularly in cases of alleged
trademark, copyright or patent infringements. The order is named for
the case of Anton Piller KG v Manufacturing Processes Limited
[1976] Ch 55 [1] in 1976
Because such an order is essentially unfair to the accused party, Anton
Piller orders are only issued exceptionally and according to the
three-step test set out by Ormrod LJ in the Anton Piller case :
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
Anton Pillar Order – Cont’d
a. There is an extremely strong prima facie case against the respondent,
b. The damage, potential or actual, must be very serious for the applicant, and
c. There must be clear evidence that the respondents have in their possession
incriminating documents or things and that there is a real possibility that
they may destroy such material before an inter partes application can be
made.
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MARINE DISPUTE RESOLUTION
Important Legal actions to assist
Arrest of Vessel
Section 3(1) of the High Court (Admiralty Jurisdiction) Act Cap 123.
Where the claim relates to the vessel ie, performance of the carriage or
running of the vessel BUT not a contractual dispute with the
charterer, eg off specifications.
Caution :
WRONGFUL ARREST
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Important Legal actions to assist
VASALIY GOLOVNIN [2008] 4 SLR 994
Chelyabinsk carried rice from China to Lome. Banks were financiers
and holders of 3 BLs.
Dispute arise and Chelyabinsk was arrested at Lome but arrest set
aside.
One month later, sister ship came into Singapore and was arrested.
Arrest set aside for non disclosure of material facts and DAMAGES
granted by CA.
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MARINE DISPUTE RESOLUTION
Issues to be considered in a Settlement
• Negotiating parties - ego
• Style of negotiations
• Presence of lawyers
• Enforceability
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MARINE DISPUTE RESOLUTION
It can be a cruise……
THANK YOU
XIE XIE
TERIMA KASIH
NANDRI
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