Philip Teoh summarized the issues of contracts, surveys and insurance in the shipping industry. Is it worth to stinge on legal advice or get caught up in an arrest of your vessel?
The shipping industry is huge. One part of the industry impacts and services another. I am a maritime lawyer and arbitrator and have been for the past three decades. As this is my inaugural column as a member of the Board of Industry Experts, Maritime Fairtrade, it might be opportune to summarize the issues I have advised some stakeholders of the industry.
Contracts are meant to be read. If you can enter into a contract, you can read the terms BEFORE you enter into the contract. Many contracts used in the industry have standard forms e.g., BIMCO Charters. There is no good argument when you are faced with a claim you raised that your counterparty never highlighted terms you deemed oppressive. Judges will not buy that excuse. Your appointed lawyer may be hamstrung. It does not mean that he cannot do anything but it does limit his options.
In many of these contracts, a clause can drastically shift the risk. Are you entering into a Port or Berth Charter? What may be called a Berth Charter may, with other clauses, be an effective Port Charter. If your chartered vessel arrives at a congested port that required three weeks to wait, you have to pay demurrage. Demurrage at a daily rate of US$5,000 is common. Larger vessels will have much higher rates.
Do you know what is the effect of a laycan clause? You offer a vessel which is not yours, and a chain of charters are involved. You are committed and your sub-chartered cannot arrive in time. What happens? You will be embroiled in a chain of arbitrations. Can you avoid this? Yes, if you plan properly and know well the parties you contract with.
Legal advice? You stinge on this and rely on advice from the internet. Good strategy? Stinge on US$5,000 for advice, then get caught up in an arrest of your vessel, then pay US$200,000 to resolve the dispute.