Little ado “ABT”

A recent award under the LMAA Fast and Low Cost Arbitration (FALCA) Rules, reported as London Arbitration 7/25 in the March edition of the LMLN newsletter, provides practical guidance on vessel performance disputes. 

The relevant performance warranty clause read:

"Speed & Consumption

Laden: Abt 13,0 knots on abt 23,5 mts VLSFO + abt 0,2 mts LSMGO

Ballast: Abt 13,0 knots on abt 21 mts VLSFO + abt 0,2 mts LSMGO

SPEED AND CONSUMPTION OF THE VESSEL (as above) IS IN GOOD WEATHER CONDITIONS (ABT TO MEAN +/- 5PCT) AND UPTO BEAUFORT FORCE 4 AND DOUGLAS SEASTATE 3 WITH NO ADVERSE CURRENT. CALCULATION OF VSL'S PERFORMANCE ON BALLAST/LADEN PASAGES HAS TO BE BASED UPON AN AVERAGE SPEED/CONSUMPTION DURING WEATHER DAYS UPTO BF 4 AND DSS 3 AND SWELL/WAVE HEIGHT OF NO MORE THAN 1,25 METERS. LADEN OR BALLAST SPEED/CONSUMTION WITH NO ADVERSE CURRENT FOR PERIOD OF WEATHER IN EXCESS OF THESE CONDITIONS TO BE EXCLUDED FROM CALCULATIONS. ...

ALL DETAILS ABOUT/IN GOOD FAITH AND WITHOUT GUARANTEE."

[Emphasis Added]

The charterers relied on a weather routing company (WRC) report to support the underperformance claim. However, the arbitrator, ruling in favour of owners, preferred the master’s firsthand reports over WRC data, ultimately finding that the vessel performed in line with warranted standards. There was no indication that the master’s reports had been falsified or that the WRC's records were inherently more reliable.
 

Key Observations
 

• Interestingly, although the term "abt,” was defined in the clause as "+/- 5 pct,” the arbitrator applied a fixed margin of 0.5 knots. While the numerical difference was small (0.65 versus 0.5 knots), this highlights a broader contractual principle:

When parties expressly define a term, should an arbitrator substitute an alternative standard?

Or

should an arbitrator should only give effect to the contract rather than modify its terms?

• Other interpretative points were more straightforward:
  • "Up to BF4" was held to mean "up to and including" Beaufort Force 4. An analogy with medication - where "up to six times a day" allows for taking the sixth dose - was used to illustrate this reasoning.
  • "No adverse current" permitted the exclusion of days with adverse currents but did not allow consideration of favourable currents—aligned with The Divinegate [2023] 1 Lloyd’s Rep 442.
     

Reflections 

Although the issues were resolved efficiently with consideration for commercial common sense, this case highlights how legal interpretation can sometimes subtly diverge from commercially negotiated terms. Where contractual language is clear and unambiguous, is  there justification for departing from it in favour of commercial common sense or surrounding circumstances?

Had the dispute been under the full LMAA Terms, an appeal on a point of law under Section 69 of the Arbitration Act 1996 may have been available. Under FALCA Rules, parties expressly waive the right to appeal to the courts. FALCA provides speed and simplicity, but parties opting for expedited arbitration should remain mindful of the potential trade-off.
 

Dealing with a dispute? 

Then speak to Shearwater Law today. Our team is able to assist with a variety of disputes including charterparties, shipping and commercial contracts, insurance coverage issues and more. 

Contact Shearwater Law now for an initial discussion

Authored by: 

Tristan Harwood: Barrister, Shearwater Law.
Rahul Miranda: Solicitor, Shearwater Law.