Polaris Shipping Co. Ltd v Sinoriches Enterprises Co. Ltd (The Ocean Virgo) [27.11.15]

High Court rules that an arbitrator erred in finding that an admissible period of good weather must be 24 hours from noon to noon and restricting the breach to one leg of the voyage, rather than applying it to the whole period of the charterparty.

Background

This was an appeal from a London arbitration award in relation to a claim for breach of a performance warranty. The vessel was warranted to perform in:

“good weather/smooth sea, up to max BF SC 4/Douglas sea state 3, no adverse currents, no negative influence of swell”.

The dispute did not arise out of an interpretation of the “good weather” criteria, as the parties were in agreement on the parameters of Beaufort scale force 4 and Douglas sea state 3, but rather the period of good weather sufficient to assess performance.

The arbitrator held that for a period to be considered as ‘good weather’ it must be a 24 hour period from noon to noon.

He then went on to consider the periods during which the charterers’ weather routing company had determined that there had been underperformance. Whilst during the second leg of the ballast voyage and the laden leg there had been periods of good weather, the arbitrator determined that these were too small a sample to establish a breach. While this was not the case for the first ballast leg, two out of the four periods were excluded on the grounds that they were less than 24 hours. On this basis, and given that the two other periods did not satisfy the ‘good weather’ criteria, the arbitrator concluded that there were no ‘admissible’ good weather days.

Consequently, the arbitrator found in the owners’ favour. The charterers appealed.

Decision

Mr Justice Teare allowed the charterers’ appeal and held that the case should be remitted to the arbitrator.

He noted that the charterparty merely referred to “good weather”. There were no words which justified construing good weather as meaning “good weather days of 24 hours from noon to noon”. In this respect, the arbitrator had made an error of law.

The arbitrator had also held that performance during the first ballast leg was restricted to only that period, not applied to the whole period of the charterparty. Teare J held that this was an error of law, as it did not give effect to The Didymi [1987] and The Gas Enterprise [1993], which are the seminal cases on performance analysis.

Comment

This is a welcome decision that provides clarification on a point of law that is regularly contested in speed and consumption disputes.

The authors of this article have been involved recently in arbitrations dealing with the point raised in Polaris. Owners argue that anything less than 24 hours of uninterrupted ‘good weather’ is insufficient to accurately assess a vessel’s true performance capability. Charterers, predictably, take the opposite view. Charterers produce reports from weather routing companies indicating that continuous periods of 12 hours are sufficient to assess performance. Owners produce reports requiring uninterrupted periods of 24 hours.

This decision clarifies this point, preventing the usual ‘battle of the performance reports’, and is one which arbitrators are now bound to follow. In the absence of a reference to “good weather days” in a charterparty, any periods of good weather can be taken into account. The only caveat is that an arbitrator or tribunal has a discretionary power with respect to the evidence.

In practical terms, this means that a party that has a performance warranty in its charterparty which only refers to “good weather” must make an assessment as to whether:

  • The ‘good weather’ periods are sufficiently long to make a proper assessment of a vessel’s true performance capabilities. In our view, 12 consecutive hours would be the minimum.
  • There is a sufficient sample of such periods, which is an evidential issue.

This judgment also reinforces that, if a breach in good weather is established, the performance in those conditions is applied to the whole of the charterparty period (as decided in The Didymi and The Gas Enterprise), not just one leg of a voyage under that charterparty.