The failure to pass on operational messages can have a wide variety of consequences for brokers and their principals. However, brokers can mitigate some of those consequences by proactive use of terms and conditions giving specific contact information for time sensitive information and requiring principals to confirm receipt of the same.
Fixtures are frequently negotiated via more than one method of communication. A typical fixture will result from a combination of emails and exchanges via electronic messenger systems. This creates difficulties if, in the event of a dispute, the broker has to ‘produce his files’. One thing is clear – the volume of messages has not got any smaller.
Issues of how to manage the flow of messages do not end when the fixture is concluded. A failure to spot and pass on a message can have severe financial consequences. Brokers receive a staggering number of messages every day. It is not surprising that sometimes messages do get missed. A failure to pass on a notice declaring an option to extend a period charter within time can be irrelevant if the owner is happy with the hire. But if the market has risen, the answer will be, “Sorry – not at the option rate”.
The charterer will demand that the broker makes up the difference between the option rate and the market. If the market has moved dramatically since the fixture was made, the sums involved will be correspondingly high.
In ITIC’s experience, the failure to pass on operational messages has had a wide variety of consequences. In one case a broker received instructions from the time charterer to notify the owner that the ship should change direction. This message was not passed on for two days, during which the ship had been steaming in the wrong direction. Another recent case involved the failure to pass on berthing instructions.
Although human error cannot be eliminated, the possibility of a claim can be reduced. One of the obvious problems is the volume of messages being received. A common solution is for brokers to specify an address to which operational messages have to be sent. This should lessen the chance of an important message being buried among the myriad market circulars and negotiation messages received during the average day. Some principals may not use the ops address and simply send messages to the email address or messenger service they have been using for negotiations. It is therefore important to use wording to support the broker’s position if such a message is missed.
Those brokers who use standard trading conditions (and ITIC strongly recommends brokers do so) can make appropriate provisions. ITIC’s terms and conditions for shipbrokers include the following provision:
“In relation to post-fixture services, if the broker has asked you to use specific email addresses for operational messages or claims then you will use those email addresses. In the event that you do not receive a prompt acknowledgement of receipt of time-sensitive messages or claims documentation from the broker, you undertake to contact the broker to confirm receipt. The broker will have no responsibility for a failure to action a message or claims documentation unless it is sent timely to the correct address and acknowledged by the broker.”
This places the obligation on the sender of time-sensitive messages to obtain an acknowledgment. When dealing with claims when the addressee of a message has denied receiving it, brokers are frequently criticised for not contacting the sender to obtain confirmation. To require principals to do the same when sending important messages to a broker is not unreasonable.
Funding and overcapacity are seen as key issues but the shipping sector also faces wider ranging challenges, such as the need for investment in the skills and size of its workforce to ensure that there are enough suitability qualified people to support the safe growth of the sector and the increasing environmental regulation of shipping which will continue to require new solutions and funding.
Although terms and conditions provide useful protection, ITIC recommends that the communication details and the consequences of not using them are spelt out at the bottom of recap messages. This has been widely used in the tanker trades. The most common claim against tanker brokers is demurrage claim documentation that has not been passed on by the broker in time. The broker may, unfortunately, only discover what has happened after a large demurrage claim has been time-barred under the charter party terms.
The clauses used at the end of recaps in tanker trades tend to deal with both operational messages and claims documentation. A typical example would read:
“Important: Operations. It is essential that all messages in respect of operations and claims be sent to the relevant email addresses stated above. Messages sent to any other email addresses within the company will not be considered as received. Please ensure that all important operational messages are followed up with a telephone call, especially after office hours.
“Important: Claims. When sending any claims or notifications of pending claims to this office, either by email (email@example.com) or post, kindly ensure that you have received positive written confirmation of receipt of the claim from us. If you do not receive such confirmation shortly after you have submitted the claim or notification to us, then it will be deemed that same has not been received. In this case, please call us immediately.“Please ensure that your operation and claims departments are informed of the above.”
The obvious question is, do such provisions work? ITIC’s experience is that such clauses do provide a high level of protection, and a number of claims have been prevented by their use.
Andrew Jamieson is ITIC’s claims director and has been with the club since its foundation in 1992. Previously he had been employed by one of ITIC’s predecessors, CISBACLUB, and as an in-house lawyer at a container leasing company.
Andrew is the author of ‘Shipbrokers and the Law’ LLP (1999), and provided a chapter on shipping contracts for ‘Privity of Contract’ edited by Robert Merkin LLP (2000). He has extensive experience of solving disputes worldwide by negotiation, litigation and mediation. He frequently gives lectures at events organised by industry bodies such as BIMCO, the Baltic Exchange, FONASBA, The Irish Maritime Law Society, The Institute of Chartered Shipbrokers and the London Shipping Law Centre.
He has lectured regularly on the legal position of shipbrokers for Lloyd’s Maritime Academy’s Annual Sale and Purchase of Second Hand Ships Seminar.