Charterers, tanker-owners and STS: FALKONERA revisited
The Owners also appealed on the ground that the judge had misconstrued the STS Lightering Clause by constraining Owners' freedom beyond the simple requirement that they should not behave unreasonably.The Court of Appeal agreed with the judge's findings, in particular holding that:• while there might be some force in the proposition that a VLCC-VLCC transfer was in a sense 'non-standard', it did not follow that the Owners had acted reasonably in withholding their approval of the VLCCs. Rather, it was necessary to consider what particular reasons, if any, there might be for Owners to withhold their approval;• the right to transfer was a right to transfer to any vessel, including a VLCC. The fact that the proposed transfer could be regarded as non-standard was not of itself a reasonable ground for refusal. If that were so, the Charterers' right to perform such an operation would be illusory. The Owners must be taken to have contractually accepted such risks as are inevitably attendant on any VLCC-VLCC transfer;• what Owners were required to approve was the vessel, and not the STS operation itself. However, Owners were not required to consider the nominated vessel's characteristics in a vacuum, but in the context of the operation contemplated;• the judge had been right to dismiss Owners' submission at first instance that the OCIMF Guide, in its then form, made no mention of VLCC-VLCC transfers, and that such operations were therefore not permitted by that publication. The Owners had (as the judge had found) "a settled policy or at the lowest had reached a clear position that they simply would not allow such a transfer," supporting the inference that Owners' refusal was based on their aversion to VLCC-VLCC transfers in principle rather than any particular characteristics of the transferee vessel;• the judge was also right to find that the Owners would not be justified in withholding approval of the vessels simply because there was uncertainty as to whether a suitable plan of operation could be devised, or indeed whether there was sufficient time in which to plan any STS operation. The required approval, as stated above, related to the vessel, and it was not the function of the STS Lightering Clause to allow Owners to vet the plans for the transfer operation before deciding whether to approve that vessel; and• the Owners' specific criticisms of the mooring plan did not make a withholding of approval reasonable. The judge had found that the proposed arrangement was safe in principle, and that the absence of head lines and stern lines was not something which gave any reason for concern. Further, Owners' concerns regarding the vertical aspect of the mooring lines were found to be without foundation.The appeal was therefore dismissed. The Owners have indicated that they will be applying to the Supreme Court for permission to appeal.CommentIt is worth noting that about a year after the first instance trial on 22 November 2013 a new edition of the OCIMF Guide was published containing a section dealing with ship to ship transfers involving vessels of a similar length. The Court of Appeal decided not to admit the new edition in evidence, but it was noted in a postscript to the judgment that the Court of Appeal regarded it as underscoring the judge's decision that the previous version upon which Owners had relied, did not intend to outlaw VLCC-VLCC transfer.The following comment from the Clyde & Co legal update of July 2013 following the first instance decision remains applicable following the Court of Appeal judgment:The Court construed Owners' reasonableness by reference to both the Charter terms and the specific facts of the case. Although each case will be fact-dependent, this decision provides useful guidance as to how the Court is likely to construe similar contentions made by owners in the future. For example, an argument that there is insufficient time to plan the STS transfer as a basis for refusal to permit a STS transfer is unlikely to succeed as this is a factor relevant to the operation itself rather than being relevant to Owners' right to approve the nominated vessel.Owners should be aware that if they do not act reasonably when considering charterers' requests to perform STS transfers, they risk finding themselves in breach of charter. This case will give comfort to Charterers that the industry practice of VLCC to VLCC STS transfers is not to be regarded as inherently suspect, but must be properly considered by Owners on a case by case basis. It also gives some guidance to owners about the basis upon which they can and cannot exercise their right to withhold approval. It may, therefore, have wider implications for other situations involving the requirement that owners act reasonably in relation to their right to withhold approval for operations that are apparently permitted (subject only to such approval) by the charterparty.
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