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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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Friday, 18 March 16
OUTLOOK ON GLOBAL SHIPPING SECTOR TURNS NEGATIVE AS SUPPLY-DEMAND GAP WIDENS AND EBITDA DECLINES - MOODY'S
Moody’s Investors Service (Moody’s) has changed its outlook on the global shipping sector to negative as it expects supply growth to ou ...
Friday, 18 March 16
DRY BULK MARKET HAS LITTLE TO LOOK FORWARD TO FROM CHINA AT THE MOMENT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market’s rebound is long overdue, but when it comes, it won’t be because of China’s strong demand for commodities, o ...
Friday, 18 March 16
COAL PRODUCTION IN THE UNITED STATES SLIGHTLY DECREASED THIS WEEK - EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 12.5 million shor ...
Thursday, 17 March 16
THE PANAMAX MARKET SEEMS TO BE A BIT TOPPISH THIS WEEK - FEARNLEYS
Cape
There are challenging days with rates or less unchanged from last week; West Australia to China still below US$ 3 pmt, and Tuarao to China i ...
Wednesday, 16 March 16
OIL SUPPLY OUTPACES DEMAND ON ANY GIVEN DAY, AND BILLIONS OF BARRELS OF OIL ARE BEING STORED RATHER THAN CONSUMED - CHRISTOPHER
Oil producers have turned to the concept of limiting their output to January levels as a certain form of action to boost prices that have fallen mo ...
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Showing 2516 to 2520 news of total 6871 |
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- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Makarim & Taira - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- MS Steel International - UAE
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- PTC India Limited - India
- The Treasury - Australian Government
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Global Business Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- India Bulls Power Limited - India
- Australian Coal Association
- Parliament of New Zealand
- Georgia Ports Authority, United States
- Asmin Koalindo Tuhup - Indonesia
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- TeaM Sual Corporation - Philippines
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Kaltim Prima Coal - Indonesia
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Attock Cement Pakistan Limited
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- SMG Consultants - Indonesia
- Indian Energy Exchange, India
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- Parry Sugars Refinery, India
- Mercator Lines Limited - India
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Thiess Contractors Indonesia
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- Krishnapatnam Port Company Ltd. - India
- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- The University of Queensland
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- GMR Energy Limited - India
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- Trasteel International SA, Italy
- Bhatia International Limited - India
- VISA Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
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