Nickel ore and related off-hire claims - protecting owners position


Published: 8 May 2012

The club was recently representing owners in an arbitration relating to an alleged off-hire in connection with a cargo of Nickel ore being loaded in Indonesia.  The matter concerned off-hire during loading, and was decided by a sole arbitrator as per agreement between the parties involved.

The vessel was chartered on a standard NYPE-46 form and set out that cargo should be loaded in strict compliance with the IMSBC code. This is already mandatory under the SOLAS convention as per 1 January 2011.

In the rider clauses it was stipulated that;

  • Loading was to be carried out in strict conformity with the IMSBC code and the Nickel ore Transportable Moisture Limit (TML), Flow Moisture Point (FMP) and Moisture Content (MC) was to be provided to the Master as soon as possible and in any event before loading.
  • Certificates for these limits should be issued not more than 3 days before loading. These should be issued by an internationally recognised testing authority.
  • The Master was entitled to do a can test and if the test failed, he had the right to reject the cargo. He also had the option to have the cargo tested with the help of a P&I surveyor.  Any delays would be at charterers’ risk.

The charterers claimed that the vessel was off-hire during some periods of time at the load port and deducted from hire accordingly. Owners objected that the Master was entitled to test, reject and wait for the cargo to dry out as per his own discretion in accordance with what was stipulated in the rider clauses.

The tribunal agreed that Nickel ore was generally accepted as a “Group A” cargo as per the IMSBC code and therefore subject to requirements that the shipper is obligated to provide specific information regarding the cargo before loading.

Charterers claim that the requirement of certificates issued by internationally recognised testing authorities was an unclear term, and should be void or if not it should be construed in charterers favour since owners had not properly defined it. They considered the certificates issued by a local laboratory to be sufficient. This was rejected by the tribunal who considered “internationally recognised” to be far beyond this.  There were no further comments as to this being an unclear term.

An internationally recognised testing authority was involved at a later stage, whose test results showed significantly different results than that of the local laboratory. Nevertheless the certificates issued by them were, due to circumstances during loading, not deemed to comply with the IMSBC code.

The owners relied on well established case law including;

The Doric Pride [2006] 2 Lloyd’s Rep. 175 at page 179, “under a time charter the risk of delay is fundamentally on a time charterer, who remains liable to pay hire in all circumstances unless the charterer can bring himself within the plain words of an off-hire provision”

The Hill Harmony [2001]1 Lloyd’s Rep.147, “The master remains responsible for the safety of the vessel, her crew and cargo. If an order is given compliance with which exposes the vessel to a risk which the owners have not agreed to bear, the master is entitled to refuse to obey it: indeed, as the safe port cases show, in extreme cases the master is under an obligation not to obey the order”

Time Charters, 6th Edition, at paragraph 19.2 (citing The Houda [1994] 2 Lloyd’s Rep. 541 with approval), it is stated that “[a]lthough the master is obliged to employ his ship in accordance with the orders of the charterers, he is not always obliged to obey their orders immediately. The circumstances in which an order is received, or the nature of it, may make it unreasonable for the master to comply without further consideration or enquiry. The right of the owners or the master to delay for a reasonable time before complying with an order is not confined to specific categories of cases and the question to be determined in each case is how a person of reasonable prudence would have acted in the circumstances.”                                                           

In this case the tribunal concluded that the charterers did neither comply with the strict requirements in the rider clauses nor the IMSBC code. They did not succeed in neither lifting the burden of proof to place themselves within an off-hire provision, nor show a breach of the C/P by owners and thus the owners claim succeeded.

The conclusion can be drawn that a London tribunal will be reluctant to deem precautions taken by a Master in order to secure the safety of the vessel as unreasonable or redundant. Especially in places of the world where reliable certificates can be hard to get, and where heavy pressure may be put on the Master to accept a questionable cargo, it is important to establish that the loading of cargo is at the Masters’ discretion. If there is reason to doubt the condition of the cargo, or the test results provided, the Master will be allowed to take the appropriate steps to assure that the cargo loaded is as per IMSBC code.

In this case, the C/P ensured this right with a clear clause on what certificates are to be accepted as well as leaving further testing up to Masters’ discretion.  Leaving it up to Masters’ discretion with any time lost for the account of charterer/shipper will let the Master focus solely on what is safe. To require internationally recognised testing authorities (rather than accept “local laboratories” – or leave the testing facility entirely open) to be involved may also ensure that remote or corrupt areas where fraudulent certificates are a well-known problem will become less problematic and the pressure put on the Master will be manageable by third party involvement and protection given by the C/P.  

The way forward must be that it is better to err on the side of caution, with the prevailing interest to transport this cargo in a safe manner.

A web circular has been issued by the Club discussing precautions to be taken when loading nickel ore in Indonesia or the Philippines.