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Monday, 29 February 16
LOSS OF EARNINGS IN THE WAKE OF A COLLISION - GARD
 KNOWLEDGE TO ELEVATE
A shipowner’s loss of earnings can form a significant part of a collision claim. Awareness of the ways of calculating loss of earnings claims can be useful in both presenting and challenging this type of claim. This Gard Insight looks at some general principles and methods applied by the courts.
A recent Gard example
A product tanker was hit by a bulker while at berth. Although the extent of the physical repairs – and therefore the repair costs – were relatively limited, the damaged tanks required stainless steel plates which had to be specially ordered. Long lead times led to a significant loss of earnings. As owners were able to document this loss with care and precision, leaving little room for doubt, the case against the owners of the bulker was settled quickly and amicably.
Basic principles
A claimant not only has the burden of proving that it has lost earnings as a result of the collision but also that it has suffered an actual loss. The fact that a ship has been unable to trade due to repairs being carried out is generally not enough, though it raises an obvious presumption that the shipowner has indeed suffered some sort of loss.
In the majority of jurisdictions, the principle of restitutio in integrum governs the measure of damages. This means that a shipowner who suffers a loss of earnings due to the negligence of another party will be put back into the position it would have been but for the negligence. Therefore, the shipowner must prove what the ship would have earned had the collision not occurred. This means that if the repairs are performed during a pre-arranged dry-docking period for example – there will be no loss.
The methods used to prove the loss depend on the facts of each case and one approach is not necessarily better than another. The optimal way is largely dependent on the trade patterns of the ship at the relevant time.
Ships on time charter
If a ship is damaged in a collision it will usually go off-hire until it has been repaired and able to function again under the terms of the charterparty. The shipowner can rely on specific off-hire statements and invoices from charterers. The loss will consist of:
- a fixed amount per day for the total time the ship is off-hire
- the bunkers consumed during the off-hire period, and
- any additional charges the time charterer may have incurred.
If the time charter has been justifiably cancelled as a result of the unavailability of the ship, the loss of earnings from that point onwards will be the difference between what the ship would have earned under the cancelled charter and what was actually earned during the same period.
Ships trading on the spot market
For a ship trading on the spot market, the approach is more flexible to calculate its loss of earnings. The starting point will be the total number of days the ship is unable to trade due to repairs, including removal time to the shipyard. However, losses may extend beyond the actual repair period, especially when the market has fallen in the meantime. If a shipowner can prove that it lost an actual fixture on the spot market due to a collision and necessary repairs, the potential net income from that fixture will be compared with the ship’s actual net income until the date the lost fixture would have ended. This is known in some jurisdictions as the time equalisation method, most recently approved in the English case of THE ASTIPALAIA [2014] EWHC 120.
For situations where a ship trading on the spot market is not fixed for her next voyage, the way to calculate the loss will depend on whether the ship was operating in an established or specialist trade.
For established trades such as the VLCC trade, fixture data is readily available throughout the year. It is a relatively simple exercise for a broker to work out what a VLCC would have earned at the relevant World Scale rates for a given period. Provided the ship would have obtained employment with a reasonable degree of certainty, the estimated charter earnings will be compared with the ship’s actual earnings for the period using the time equalisation method.
For specialised trades and trading patterns with little continuity, market data will be less readily available and reliable, so the loss of earnings calculation in each case will be more fact specific. In these cases, the best approach may be to present the average time charter equivalent earnings of the ship for a limited period around the time of collision, e.g. the casualty voyage and the voyages preceding and following the casualty. For some trades, it may be relevant to present income statements for even longer periods, however, the more remote the evidence, the more difficult it will be to prove that the figures are a true representation of the loss.
In the Norwegian collision case of Rana Frakt v ROBAS (LG-2013-173128) one party based its loss of earnings on two annual audited income statements, however the Court of Appeal made a discretionary reduction of about 33 per cent due to the lack of evidence relating to tangible fixtures the ship would have been engaged in during the period of repairs. That said, the mere fact that the loss of earnings cannot be quantified exactly will not be fatal to a claim.
FFO claims
Loss of earnings claims can arise in other contexts, e.g. where a ship damages a quay or shore based crane and renders part of a terminal unusable. The underlying assumptions and calculations involved can be complex and the appointment of a forensic accountant with knowledge of the local accountancy rules and tax law may very well be necessary in order to properly defend a shipowner’s position.
Checklist
Whether claiming or challenging loss of earnings claims, the following should be submitted:
Evidence of the total period claimed for, such as:
– Master’s statement of facts
– copies of the deck log
– the off-hire statements from charterers.
A summary of the daily net loss of earnings for the total period and the underlying documentation relied upon, such as:
– the charterparty and recap
– the off-hire invoice
– a statement from a broker of potential earnings or income statements where a time charter equivalent rate per day is arrived at.
Evidence of any mitigation, e.g. that the claimant:
– has chosen the quickest and most reasonable repair option, or
– has used other ships in its fleet to perform the contractual obligations of the damaged ship.
Evidence of the average utilisation of the ship. For ships actively trading only 80 per cent of the time, it is clearly unreasonable to claim a loss equating to 100 per cent utilisation during the period of repairs.
Final note
It is well worth spending time and effort in presenting loss of earnings claims in a clear and unambiguous manner, so that both parties understand the figures presented and the assumptions behind them. This can help achieve a quick settlement in a collision dispute.
Source: GARD
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Monday, 18 April 16
INDONESIAN 5000 GAR COAL INDEX DECLINE 1.43 PERCENT WEEK OVER WEEK - CS (I) COAL INDEX
COALspot.com: Average 5000 GAR coal index of Indonesian origin fell 1.43 percent week over week to averaging $38.65 per ton on this past Friday, ac ...
Monday, 18 April 16
SOUTH KOREA STATE-OWNED UTILITY KOMIPO INVITES COAL BIDS FOR BORYEONG POWER PLANT
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 70,000 Metric Tons of 4,600 kcal/kg NAR coal for ...
Monday, 18 April 16
SOUTH AFRICA RB1 COAL HAS LOST GROUND IN INDIA; RB2 MAY LOSE GRIP IF THE PRICE CROSSES US$ 50 A TON - TRADERS
COALspot.com: Indian coal consumers preferred to buy South Africa RB2 coal instead of RB1 coal recent months due to RB2's low CFR price level. ...
Monday, 18 April 16
CAPESIZE INDEX ROSE 44.66 PER CENT WEEK OVER WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities continued to rose this week.
The freight market was ...
Friday, 15 April 16
PANAMAX MARKET CONTINUES TO FIRM - FEARNLEYS
Cape
It has been a positive freight market for the past few weeks, however, this week the market is taking a small breather, says Fearnleys in it ...
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- Trasteel International SA, Italy
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- Planning Commission, India
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Borneo Indobara - Indonesia
- Aboitiz Power Corporation - Philippines
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- Electricity Authority, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Minerals Council of Australia
- Sinarmas Energy and Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Petron Corporation, Philippines
- Port Waratah Coal Services - Australia
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- Bhatia International Limited - India
- Interocean Group of Companies - India
- Alfred C Toepfer International GmbH - Germany
- Power Finance Corporation Ltd., India
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Attock Cement Pakistan Limited
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Malabar Cements Ltd - India
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Siam City Cement PLC, Thailand
- Chamber of Mines of South Africa
- Holcim Trading Pte Ltd - Singapore
- Tata Chemicals Ltd - India
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- The State Trading Corporation of India Ltd
- Ministry of Mines - Canada
- Chettinad Cement Corporation Ltd - India
- Riau Bara Harum - Indonesia
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- International Coal Ventures Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Carbofer General Trading SA - India
- CNBM International Corporation - China
- Toyota Tsusho Corporation, Japan
- Sojitz Corporation - Japan
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- Central Java Power - Indonesia
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- Manunggal Multi Energi - Indonesia
- Therma Luzon, Inc, Philippines
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Central Electricity Authority - India
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- Metalloyd Limited - United Kingdom
- GVK Power & Infra Limited - India
- The University of Queensland
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Straits Asia Resources Limited - Singapore
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
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