MarIus

3.2.1 Identification of the precise issue in the Eternal Bliss

To narrow down the specific scope of the issue in the Eternal Bliss, it is useful to introduce four separate legal scenarios which may occur due to delays in cargo operations:

1. The first situation that may arise is that the charterer delays the vessel beyond laytime with the only consequence that the owner is prevented from using the vessel as an income-generating asset. In this case, the only ‘breach’ of contract committed is a breach of laytime and the only ‘loss’ incurred is the detention of the vessel. In this situation, it is intuitive that demurrage will liquidate that loss as the only remedy available to the owner. Since there are neither separate breached obligations nor additional losses, no issue of further damages emerges.

2. A second situation is that where the charterer commits

   1. a breach of the laytime provision and

   2. a breach of a second, separate contractual obligation. From these two separate breaches, different heads of losses arise. This would happen, for instance, when the charterer breaches laytime, causing a loss in terms of detention of the vessel, and in addition, breaches the obligation to load a full and complete cargo, causing additional losses in terms of deadfreight. In this situation, there are two breaches of contract and two separate losses. Damages above demurrage will then generally be recoverable subject to ordinary rules on damages.

3. A third situation arises where the charterer commits a breach of several obligations under the charterparty, but the only consequence of these multiple breaches is that the vessel is detained. Here, there are two or more separate breaches, but only one loss. Demurrage will thus limit damages recoverable in relation to that loss which is identified with the inability to use the vessel during the detention, regardless of how many obligations under the contract have been breached.

4. The fourth and most complex scenario arises where there is i) a single breach, i.e., of laytime and ii) several different heads of losses. For instance, this is the situation where the charterer breaches no other provision than laytime, but where the delay causes additional losses that represent a different category of loss from the loss of the profit-earning use of the ship.

It is the fourth scenario that materialised in the Eternal Bliss: In addition to depriving the owner of the use of the vessel as an income-generating asset, the breach of laytime led to the deterioration of the soybeans aboard the ship. The question then is: Will this second category of loss be recoverable in the absence of a breach of a separate obligation of the charterparty, or is demurrage an all-damages clause which represents the sole remedy of the owner in case of delay?

3.2.2 The starting point: the wording of the contract

The solution of a dispute on the meaning of demurrage would, as a first step, always start by examining the contractual clause the parties have agreed upon. In the Eternal Bliss, the demurrage clause read as follows:

“Demurrage at loading and/or discharging ports, if incurred, to be paid at the rate of declared by Owners upon vessel nomination but maximum USD 20,000 per day or pro rata/despatch half demurrage laytime saved at both ends per day or for part of a day and shall be paid by Charterers in respect of loading port(s) and by Charterers/Receivers in respect of discharging port(s). Despatch money to be paid by Owners at half the demurrage rate for all laytime saved at loading and/or discharging ports. Any time lost for which Charterers/Receivers are responsible, which is not excepted under this Charter Party, shall count as laytime, until same has been expired, thence time on demurrage”.(1)[2020] EWHC 2372 (Comm), para 13.

The clause, based on the Norgrain 1973 form, refers to the possibility to claim demurrage, if incurred, when laytime is exceeded and provides for the calculation of the same. Such wording does, however, not help in establishing which damages are ultimately covered by the clause itself. This point was emphasised in both the High Court and the Court of Appeal decisions in the Eternal Bliss.(2) See respectively, [2020] EWHC 2373 (Comm), para 28 and [2021] EWCA Civ 1712, para 18.

3.2.3 Interpretation in light of other sources

In the absence of a more articulate demurrage clause, help can be sought in previous English case law. An analysis of case law is of the essence when trying to bring clarity into the interpretation of demurrage clauses under English law.

However, when investigating how demurrage has been construed over case law in the last century, there is indeed the risk of losing sight of what demurrage represents in the understanding of the parties to the specific contract and in the shipping industry more generally.

This aspect cannot be overlooked. All the conclusions drawn by case law, and even the categorization of demurrage as ‘liquidated damages’, are of limited significance if they are not read in conjunction with the understanding of the concept as developed in the industry.

Therefore, together with case law, it will be submitted in section 3.4 below that it is vital to consider how demurrage is calculated and perceived by the actors of the shipping industry when seeking to delineate what losses it is intended to cover.