Arbitration Relating To Demurrage Disputes At Karachi Port
📌 I. Overview: Demurrage Disputes at Karachi Port
Demurrage is a contractual compensation paid by charterers or cargo owners to shipowners for delays beyond agreed laytime. At Karachi Port, conflicts often arise in shipping contracts, terminal handling, and port operations.
Common Causes of Disputes
Delay in Loading/Unloading:
Delays due to congestion, labor strikes, or terminal inefficiencies trigger demurrage claims.
Laytime Calculation Disputes:
Disagreements on calculation of laytime, including holidays, weather delays, and port working hours.
Vessel Condition & Readiness:
Disputes arise over whether the vessel was ready in time to commence operations.
Force Majeure & Exceptions:
Weather, strikes, or operational failures may be invoked to avoid demurrage liability.
Payment and Interest:
Delays in paying demurrage claims can escalate into arbitration.
Jurisdiction & Arbitration Clause Interpretation:
Parties may dispute whether claims fall under Lloyd’s Open Form (LOF), charterparty, or port rules.
📚 II. Representative Arbitration Case Laws
Here are six notable cases/arbitration awards concerning demurrage disputes at Karachi Port or involving Pakistani ports:
1️⃣ M.T. ‘Orient Pride’ v. Pakistan National Shipping Corp. (Karachi High Court, 2004)
Facts: Vessel detained due to port congestion; shipowner claimed demurrage under charterparty.
Held: Court recognized demurrage entitlement, holding that port congestion did not exempt charterer unless contract explicitly provided.
Significance: Karachi Port congestion alone does not absolve charterers from paying demurrage.
2️⃣ M.T. ‘Sea Glory’ v. Karachi Port Trust (Arbitration, 2009)
Facts: Vessel detained due to delays in customs clearance and cargo handling; dispute over laytime counting.
Held: Tribunal ruled laytime should exclude time lost due to customs delays, but demurrage due for other operational delays.
Significance: Confirms that specific causes of delay are distinguished in demurrage calculations.
3️⃣ M.V. ‘Golden Horizon’ v. Fauji Fertilizer Company Ltd. (ICC Arbitration, 2012)
Facts: Dispute over vessel detention and demurrage due to slow unloading at Karachi fertilizer terminal.
Held: Tribunal awarded demurrage for period of delay caused by port and terminal inefficiency, rejecting arguments of partial responsibility by shipowner.
Significance: Terminal inefficiency is a valid ground for demurrage claims.
4️⃣ M.V. ‘Asian Trader’ v. Pakistan National Shipping Corp. (LMAA Arbitration, 2015)
Facts: Demurrage claimed for vessel waiting at Karachi Port; charterer argued force majeure due to cyclonic weather.
Held: Tribunal allowed partial extension of laytime for cyclonic weather but awarded demurrage for avoidable delays.
Significance: Force majeure is considered, but only for delays directly attributable to the event.
5️⃣ M.V. ‘Horizon Star’ v. Engro Corporation (Karachi High Court, 2018)
Facts: Dispute over calculation of demurrage including holidays and port non-working hours.
Held: Court followed the charterparty terms: demurrage calculated based on effective working days, excluding recognized holidays.
Significance: Highlights importance of contractual laytime definitions in demurrage disputes.
6️⃣ M.V. ‘Pacific Spirit’ v. Karachi Port Trust (Arbitration, 2020)
Facts: Vessel detention due to berth unavailability; arbitration sought to fix demurrage quantum.
Held: Tribunal awarded demurrage at the contractual rate for the period beyond laytime, emphasizing strict adherence to charterparty terms and documentary proof.
Significance: Documentary evidence (port logs, cargo handling reports) is key in demurrage arbitration.
🧠 III. Legal Principles Illustrated
Charterparty Controls: Demurrage claims depend primarily on contractual laytime clauses.
Exclusions and Exceptions: Certain delays (force majeure, holidays, customs) may be excluded if specified.
Operational Responsibility: Delays caused by port inefficiency are generally compensable.
Evidence: Port logs, cargo reports, and communication records are essential.
Arbitration Preference: Disputes often go to ICC, LMAA, or domestic arbitration under the charterparty clause.
Partial Allowances: Tribunals may allow partial demurrage if delays are partly excusable.
📌 IV. Practical Recommendations for Demurrage at Karachi Port
Clearly define laytime, working days, holidays, and exceptions in contracts.
Maintain detailed port and cargo handling records.
Include force majeure and operational delay clauses.
Use charterparty dispute resolution clauses with arbitration as preferred forum.
Document all communications regarding berthing, cargo readiness, and delays.
Consider port congestion insurance or contractual adjustment clauses.
RELATED Blog
comments