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CLIENT ALERT: EXPERIENCED ARBITRATORS REBUKE “TROUBLING” GOTCHA TACTICS UNDER ONEROUS DEMURRAGE DOCUMENTATION AND TIME LIMIT CLAUSES

August 16, 2018

A Panel of experienced arbitrators sitting in NY and applying SMA Rules this week issued a unanimous Partial Final Award which rebukes a charterer’s attempt to enforce onerous “gotcha” time bar and document requirements contained in confusing demurrage claims clauses in a series of chemical tanker voyage charters. The Panel (David Martowski, Richard Ziccardi and A.J. Siciliano as chairman) ruled that while contractual time bar provisions, particularly involving demurrage, have become commonplace, they are subject to strict scrutiny and will not be enforced where found to be ambiguous or confusing as to what is specifically required to formalize a claim within the set time limit. The Panel further took issue with evidence (which it described as “troubling”) that “Charterer” failed to object and remained largely unresponsive to Owner’s claim supports until after the short time limits had expired or the eve thereof, holding:

“Rather than allow those submissions to languish, we find that Charterer was required to explain its objections and/or accurately identify the documentary deficiencies far sooner that it did. Not to have done so until after or on the eve of a claim becoming time-barred smacks of bad faith and constituted a breach of the implied covenant of good faith and fair dealing [charterer] owed Owner.”

The Award gives significant guidance to owners and charterers as to their dealings with respect to recovery or denial of demurrage in the current sea of restrictive time limit and onerous demurrage supports clauses in general. In denying the Charterer’s application for dismissal, the Panel awarded Owner $114,800 in costs and fees of defense. A copy of the Award will be published in the SMA Awards service, and can be viewed HERE. Owner was represented by FHM’s Don Murnane, Manny Molina and Jan Gisholt.