A Practical Understanding of Commercial Risks in Laytime and Demurrage

In theory, the determination of laytime and demurrage, if incurred, is a straightforward process as all of the relevant terms and clauses are contained in the charter party. However, as anyone who has examined a charter party will be only too well aware the wording is often less than clear and consequently the meaning is obscure. In short, lack of clarity over what does and does not count as used laytime can lead to contentious issues between parties. One of two things then happens. Either, a claim is made which potentially can require substantial resources to pursue, both in terms of time and money. Alternatively, potential claims are left to accumulate, unattended and considerable sums of money go begging.

Through a series of presentations and workshops the objectives of this course are:

• To help understanding of the commercial risks associated with laytime and demurrage in shipping charter parties and oil sales/supply agreements and the problems of ensuring compatibility between the two contracts;
• To help minimise these commercial risks;
• To clarify some of the most important issues surrounding laytime and demurrage;
• To provide practical examples of where things can go wrong and how such events might be avoided;
• To help improve the efficiency and speed of claims handling to the benefit of the parties concerned.

The aim is to provide practical understanding and instruction in the complexities of laytime and demurrage and in so doing, de-mystify them. Emphasis is placed on how to avoid potential problems from the outset, how to limit risk and exposure and ultimately save money through the efficient handling of claims and avoidance of costly legal proceedings. The course highlights differences between major charter parties and the problems encountered between shipping and oil sales contracts.

This is offered as both a public course and in-house training programme. In-house programmes enable client companies, if they wish, to select actual examples from their own operations for use in case studies.

The course is presented in association with Richardson Lawrie Associates Ltd (RLA) - a maritime economics and business consulting firm with an extensive global practice in oil, gas and chemicals transportation. For many years, RLA has been presenting management training programmes and workshops in all aspects of oil, gas and chemicals transportation around the world.

There are no pre-requisites for this course, nor is any advanced preparation required.

This is a two day course.

What You Will Learn

• A clear understanding of all of the contractual terms and clauses relating to laytime and demurrage
• How the same issues may be handled differently between the main charter parties (for example, ASBATankvoy, Shellvoy, BPvoy)
• How to calculate used laytime and demurrage incurred
• Common problems and practical solutions
• Compatibility between tanker charter parties and oil sales/supply contracts
• Some key decisions from cases in maritime law

Delegates encouraged to attend include executives from oil, gas, chemicals and shipping companies handling demurrage claims, commercial operations people, traders, and charterers.

The Elements of a Voyage Charter Party, Choice of Law, Time Bars, Arbitration and Dispute Resolution

• Legal framework for charter parties, choice of law, arbitration and dispute resolution
• Owners' and charterers' obligations under different forms of charter
• The key clauses
• Time bars

Demurrage

• What is it, how is it incurred, who pays, how is it calculated?
• What does and does not count as used laytime
• Practical problems
• Documentation and dealing with potential discrepancies
• Additional clauses

Demurrage and Mock Arbitration

• Participants are given details of a spot fixture, a copy of the charter party and a statement of facts relating to the voyage performed. They are asked to calculate the amount of laytime used, the amount of demurrage due, if any, and then to argue their cases in a mock arbitration.

Load Port Laytime, Arrived Ship, Notice of Readiness

• Vessel arrives prior to commencement of laycan
• What defines an 'arrived ship'
• Tendering and acceptance of Notice of Readiness (NOR)
• 6 hours' notice period and the concept of ‘once on demurrage, always on demurrage'
• Commencement of inbound passage and shifting time
• When does laytime commence/cease?
• Detention
• Reachable on arrival

Case Studies on Maritime Law

• Delegates take part in a workshop studying actual cases relating to, for example - time bars, safe port, reachable on arrival – in which they are asked to express opinions on the outcomes.

Discharge Port Laytime, Pumping Warranties -When does laytime commence/cease?

• Pumping warranties and clauses
• Bad weather – the wording of clauses and differences between charter parties
• Ship to ship transfers and lighterage
• Crude oil washing
• Documenting claims

FOB and CIF Contracts, Trading, Laytime and Demurrage Terms from a Commercial Viewpoint

• Charterers' risks in FOB, C&F and CIF sales
• Compatibility between charter party terms and oil sales/supply contracts
• Some examples of what can go wrong
• Vessel substitution
• Pro-rating laytime used/allowed in parcel tanker operations involving cargoes carried on a single ship for a number of different charterers

Comparison of Laytime and Demurrage Terms under Different Charter Parties

• Laydays/cancelling
• Notice of readiness
• Loading cargo before laycan
• Reachable on arrival
• Time not to count as laytime
• Half demurrage provision
• Conclusion of laytime

Delegates undertake an exercise in which they are asked to compare the ways in which three different charter parties treat various events in a tanker’s voyage.