1 introduction the marubeni group marubeni international petroleum (s) pte ltd purpose of my paper...

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Introduction

The Marubeni Group

Marubeni International Petroleum (S) Pte Ltd

Purpose of my paper – not a legal discourse but a practical approach and factors and considerations for a successful legal action

MARINE DISPUTE RESOLUTION

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• A typical transaction

• London/Belize buyer• Japanese seller • FOB Korea Contract written out of Belize• Shipped from Taiwan• Vessel chartered by seller from charterer taking from head charterer • Vessel owner based in Malta• End receiver in Korea• Payment vide LC from Korean bank• Delivery basis Marine LOI • Negotiation for LC basis Banking LOI

• Similar case : http://www.onlinedmc.co.uk/projector_sa_v__marubeni.htm


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Head Charterer

(London/Belize)

BuyerFOB Taiwan

(Japanese)Loadport : Taiwan

Disport : Korea

Open Credit

TTR 30 DBL

Charterer

Owner

End User

Bank

Marine LOI

Marine LOI

Marine LOI

Discharge w/o B/L

LC w/o Banking

LOI Provision

Gave B/L

Payment due 180 days DBL

Seller

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Interested Parties in a typical transaction

1. Vessel Owner

2. Charterer

3. Seller / Shipper

4. Buyer / Receiver

5. Bank

6. BL Holders

7. Insurers


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Applicable laws

Carriage of Goods by Sea Act incorporating Hague-Visby Rules

Sales of Goods Act

Law of Contracts


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Crude oil prices : 1947-2009

Source : http://www.wtrg.com/prices.htm


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MARINE DISPUTE RESOLUTIONWeekly bunker prices

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Bunker prices

1980s & 1990s = less than USD150/mt2000 – 2005 = less than USD200/mt2006 – 2009 = from USD300/mt up to USD750mt down to USD200/mt

and now at USD450/mt

Incentive to claim0.5% loss – 280,000mt HSFO@USD150 = USD210,0000.5% loss – 280,000mt@USD450 = USD630,000

Incentive to get out of contracts

280,000mt HSFO@USD150 = USD42M280,000mt @USD450 = USD126MMovement of USD10 for 280,000mt = USD2.8M


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Implication of price movements

Bunker prices

July 2008 : USD715 / mt

Aug 2008 : USD661 / mt (-USD54) : Loss - USD15M

Sept 2008 : USD581 / mt (-USD80) : Loss -USD22.4M

Oct 2008 : USD391 / mt (-USD190) : Loss – USD53.2M

Nov 2008 : USD232/ mt (-USD129) : Loss – USD44.5M

Dec 2008 : USD220 / mt (-USD12) : Loss – USD3.36M

Oct 2009 : USD414 /mt Gain or loss??


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Common disputes in Oil & Gas Industry

1. Contamination

2. Theft / Shortage

3. Off specification

4. Marine LOI


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Classification of the disputes

a. Operational issues

1. Contamination

2. Theft / Shortage

3. Off specification


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b. Documentation issues

i. Marine Letter of Indemnity• Nature and usage in the oil industry• Stand of P&I Clubs• Legal position

ii. Banking Letter of Indemnity• Nature and usage in finance


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Marine Letter of Indemnity

STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING

To : SHIPOWNER LTD

The Owners of the MT SHIP_

Dear Sirs

Ship: MT SHIP Voyage: LOAD – MAILIAO, TAIWAN DISCHARGE - CHEVRON PENJURU TERMINAL, SINGAPORECargo: FUELOIL 380CST Bill of lading:- DATE : 1 OCT 2009

PLACE ISSUED: MAILIAO, TAIWANSHIPPER : TAIWAN OIL CORPORATION LIMITEDCONSIGNEE : TO THE ORDER OF RECEIVER INTERNATIONAL PTE LTDDESTINATION : SINGAPORECARGO : FUELOIL 380CSTQUANTITY : 31,193.241 mts <B/L NO: FUELSHIP/123455 >The above cargo was shipped on the above vessel by TAIWAN OIL CORPORATION LIMITED, TAIWAN

and consigned to TO THE ORDER OF RECEIVER PTE LTD for delivery at the port of SINGAPORE but the bill of lading has not arrived and we, BUYER INTERNATIONAL PTE LTD, hereby request you to order the vessel to proceed to and deliver the said cargo to RECEIVER PTE LTD without production of the original bill of lading.


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Marine Letter of IndemnityIn consideration of your complying with our above request, we hereby agree as follows:To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or

expense of whatsoever nature which you may sustain by reason of delivering the cargo in accordance with our request.

In the event of any proceedings being commenced against you or any of your servants or agents in connection with the delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility, or another ship, lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the party to whom we have requested you to make such delivery.

As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise to cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

Yours faithfully, SO AND SO MANAGING DIRECTOR For and behalf of BUYER INTERNATIONAL PTE LTD


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Banking Letter of Indemnity

LETTER OF INDEMNITY (LOI)

DATE :

FROM :

TO :

WE REFER TO A CARGO OF .....(QUANTITY) OF.......(COMMODITY) SHIPPED

ON BOARD THE TANKER .......AT THE PORT OF.......PURSUANT TO BILLS OF LADING DATED …………….

ALTHOUGH WE HAVE SOLD AND TRANSFERRED TITLE TO SAID CARGO TO YOU, WE

HAVE BEEN UNABLE TO PROVIDE YOU WITH THE ORIGINAL BILLS OF LADING DATED …………… COVERING THE SAID SALE.

IN CONSIDERATION OF YOUR PAYING THE FULL PURCHASE PRICE OF U.S.

DOLLARS............., WE HEREBY EXPRESSLY WARRANT THAT WE HAVE

MARKETABLE TITLE, FREE AND CLEAR OF ANY LIEN OR ENCUMBRANCE TO SUCH

MATERIAL, AND THAT WE HAVE FULL RIGHT AND AUTHORITY TO TRANSFER SUCH

TITLE AND EFFECT DELIVERY OF SUCH MATERIAL TO YOU.

WE FURTHER AGREE TO MAKE ALL REASONABLE EFFORTS TO OBTAIN AND

SURRENDER TO YOU AS SOON AS POSSIBLE THE ORIGINAL BILLS OF LADING DATED ……………, AND TO


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Banking Letter of Indemnity

PROTECT, INDEMNIFY AND SAVE YOU HARMLESS FROM AND AGAINST ANY AND ALL DAMAGES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEY FEES) WHICH YOU MAY SUFFER BY REASON OF THE ORIGINAL BILLS OF LADING DATED …………… REMAINING OUTSTANDING, OR BREACH OF THE WARRANTIES GIVEN ABOVE, INCLUDING BUT NOT LIMITED TO, ANY CLAIMS AND DEMANDS WHICH MAY BE MADE BY A HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING, OR BY ANY OTHER THIRD PARTY CLAIMING AN INTEREST IN OR LIEN ON THE CARGO OR PROCEEDS THEREOF. OUR OBLIGATION TO INDEMNIFY YOU IS, OF COURSE, SUBJECT TO THE CONDITION THAT YOU SHALL GIVE US PROMPT NOTICE OF THE ASSERTION OF ANY CLAIM(S) AND FULL OPPORTUNITY TO CONDUCT THE DEFENSE THEREOF AND THAT YOU SHALL NOT SETTLE ANY SUCH CLAIM(S) WITHOUT OUR APPROVAL.

THIS LETTER OF INDEMNITY GOVERNED BY THE LAWS OF SINGAPORE. ANY DISPUTE ARISING SHALL BE REFERRED TO AND FINALLY RESOLVED BY ARBITRATION IN SINGAPORE IN ACCORDANCE WITH THE ARBITRATION RULES OF THE SINGAPORE INTERNATIONAL ARBITRATION CENTRE (SIAC RULES) FOR THE TIME BEING IN FORCE WHICH RULES ARE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS CLAUSE.

THIS LETTER OF INDEMNITY SHALL EXPIRE AND BECOME NULL AND VOID UPON OUR TENDERING THE ORIGINAL BILLS OF LADING DATED ……………, TO YOU.

DATE .............. AUTHORIZED SIGNATURE ............ COMPANY NAME ...........


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The situation when the dispute arises :

- Documents are not complete or not clear

- There would have been voluminous amount of correspondences such that it takes a long time to figure out what went wrong

- There may have been some attempts to cover up mistakes before it got too big / out of control

- Parties may have tried to negotiate but failed

- Mitigation of loss and other commercial considerations versus strict legal position and subrogation of rights to insurers.

- Are you the rightful holder of the BL? Has the cargo been sold while afloat?

- If contemplating an action under tort, claimant must the owner at the time of the loss or damage arising. This will require analysis of the contract, the passing of title and evidence of payment.


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Collation of evidence

i. Chronology of events.

ii. Preservation of rights

iii. Importance of Contemporaneous documents

iv. Notification of Insurance

v. Documentary evidence

- Certificate of Insurance

- Original Invoice

- Bills of Lading

vi. Loading documents

vii. Surveyors’ documents

viii. Matrix of events

ix. Do NOT lie


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Additional Evidence

1. Surveyors

Expand their scope to include technical details surrounding the event

2. Experts

Check the vessel. If you are the charterer, you can request to go on board to do general inspection. Can find out a lot of damning observations


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Preliminary Issues in considering legal actions

a. Governing laws & Jurisdiction

b. Right to claim & the identity of the other party

c. Dispute resolution forum

d. Type of dispute resolution


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Important Legal actions to assist

1. Rule B

For a simple definition of what is Rule B, the write-up by Sheppard Mullin LLP which clearly states that it is to enable a party to obtain security for a maritime claim that has not yet been reduced to judgment or arbitral award. One of the key criteria is to prove maritime nature and in their newsletter, Clyde & Co has highlighted that it is not well defined yet and "may well depend on the opinion of the particular judge allocated to hear the Complaint". GARD has aptly portrayed the situation by saying that until the matter is resolved by the Second Circuit Court of Appeal, "B" is for bewilderment.


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Rule B – Cont’d

Rule B Attachments are popular because they are effective. In Winter Storm Shipping, Ltd. v. TPI, the Court of Appeals for the Second Circuit held a Rule B Attachment can intercept and attach an electronic funds transfer (EFT) in the hands of an intermediary bank, including the New York Clearing House banks in Manhattan that process virtually all transfers of U.S. currency (or USD transfers) made worldwide. Because shipping industry transactions are generally in U.S. currency and usually pass through one of the New York Clearing House banks, Rule B Attachment proceedings have become exceptionally popular in the Southern District of New York (which includes Manhattan) where they now comprise approximately 30% of all new cases filed.


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1. Mareva Injuction

Definition from Wikipedia -

The Mareva Injunction (variously known also as a freezing order, Mareva order or Mareva regime), in Commonwealth jurisdictions, is a court order which freezes assets so that a defendant to an action cannot dissipate their assets from beyond the jurisdiction of a court so as to frustrate a judgment. It is named for Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep 509, decided in 1975. It is widely recognised in other common law jurisdictions and such orders can be made to have world-wide effect. It is variously construed as part of a court's inherent jurisdiction to restrain breaches of its process.


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Mareva Injunction – Cont’d

Absolutely Important to remember :

a. Real risk of Dissipation of Assets

b. Indemnity of wrongful application

Procedure and Risk


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Sample OrderTHE ORDER An application was made today [date] by counsel for the plaintiff, [ ] to Justice [ ] by way

of ex-parte summons no. [ ] of [ ]. Justice [ ] heard the application and read the affidavit(s) of [name] filed on [date].

As a result of the application IT IS ORDERED by Justice [ ] that: Disposal of assets 1. (a) The defendant must not remove from Singapore in any way dispose of or deal with or diminish the value of any of his assets which are in Singapore whether in

his own name or not and whether solely or jointly owned up to the value [$ ].

(b) This prohibition includes the following assets, in particular: (i) the property known as [ ] or the net sale money after payment of any mortgages if it has

been sold;


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(ii) the property and assets of the defendant’s business known as [ ] (or carried on at [ ]) or the sale money if any of them have been sold; and

(iii) any money in the accounts numbered [ ] at [ ]. (c) If the total unencumbered value of the defendant’s assets in Singapore

exceeds [$ ], the defendant may remove any of those assets from Singapore or may dispose of or deal with them so long as the total unencumbered value of his assets still in Singapore remains not less than [$ ].

Disclosure of information 2. The defendant must inform the plaintiff in writing at once of all his assets

in Singapore whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets. The information must be confirmed in an affidavit which must be served on the plaintiff’s solicitors within [ ] days after this order has been served on the defendant.


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EXCEPTIONS TO THIS ORDER

3. This order does not prohibit the defendant from spending [$ ] a week towards his ordinary living expenses and also [$ ] a week [or a reasonable sum] on legal advice and representation. But before spending any money, the defendant must tell the plaintiff’s solicitors where the money is to come from.

4. This order does not prohibit the defendant from dealing with or disposing of any of his assets in the ordinary and proper course of business. The defendant shall account to the plaintiff [state interval] for the amount of money spent in this regard.

5. The defendant may agree with the plaintiff’s solicitors that the above spending limits should be increased or that this order should be varied in any other respect but any such agreement must be in writing.


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EFFECT OF THIS ORDER 6. A defendant who is an individual who is ordered not to do something must not do it

himself or in any other way. He must not do it through others acting on his behalf or on his instructions or with his encouragement.

7. A defendant which is a corporation and which is ordered not to do something must

not do it itself or by its directors, officers, employees or agents or in any other way. THIRD PARTIES Effect of this order 8. It is a contempt of Court for any person notified of this order knowingly to assist in

or permit a breach of the order. Any person doing so may be sent to prison or fined. Set-off by banks 9. This injunction does not prevent any bank from exercising any right of set-off it

may have in respect of any facility which it gave to the defendant before it was notified of the order.


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Withdrawals by the defendant 10. No bank need enquire as to the application or proposed application of any

money withdrawn by the defendant if the withdrawal appears to be permitted by this order.

[SERVICE OUT OF THE JURISDICTION AND SUBSTITUTED SERVICE 11. (a) The plaintiff may serve the writ of summons on the defendant at [ ]

by [mode of service]. (b) If the defendant wishes to defend the action he must enter an appearance within [ ] days

of being served with the writ of summons.] UNDERTAKINGS 12. The plaintiff gives to the Court the undertakings set out in Schedule 1 to this

order. DURATION OF THIS ORDER 13. This order will remain in force until the trial or further order.


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VARIATION OR DISCHARGE OF THIS ORDER

14.The defendant (or anyone notified of this order) may apply to the Court at any time to vary or discharge this order (or so much of it as affects that person), but anyone wishing to do so must inform the plaintiff’s solicitors.

NAME AND ADDRESS OF PLAINTIFF’S SOLICITORS

15.The plaintiff’s solicitors are:

[Name of lawyer(s) having conduct of action or charge of matter.]

[Name of law firm.]

[Address of law firm.]

Tel : [Telephone number.]


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SCHEDULE 1

Undertakings given to the Court by the plaintiff

1. If the Court later finds that this order has caused loss to the defendant, and decides that the defendant should be compensated for that loss, the plaintiff shall comply with any order the Court may make.

2. As soon as practicable the plaintiff shall [issue and] serve on the defendant [a] [the] writ of summons [in the form of the draft writ produced to the Court] [claiming appropriate relief] together with this order.

3. The plaintiff shall cause an affidavit to be sworn and filed [substantially in the terms of the draft affidavit produced to the Court] [confirming the substance of what was said to the Court by the plaintiff’s solicitors].


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4. As soon as practicable the plaintiff shall serve on the defendant a copy of the affidavits and exhibits containing the evidence relied on by the plaintiff.

5. Anyone notified of this order shall be given a copy of it by the plaintiff’s solicitors.

6. The plaintiff shall pay the reasonable costs of anyone other than the defendant which have been incurred as a result of this order including the costs of ascertaining whether that person holds any of the defendant’s assets and if the Court later finds that this order has caused such person loss, and decides that such person should be compensated for that loss, the plaintiff will comply with any order the Court may make.


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Anton Piller Order

An Anton Piller order is a court order that provides the right to search premises and seize evidence without prior warning. This prevents destruction of incriminating evidence, particularly in cases of alleged trademark, copyright or patent infringements. The order is named for the case of Anton Piller KG v Manufacturing Processes Limited [1976] Ch 55 [1] in 1976

Because such an order is essentially unfair to the accused party, Anton Piller orders are only issued exceptionally and according to the three-step test set out by Ormrod LJ in the Anton Piller case :


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Anton Pillar Order – Cont’d

a. There is an extremely strong prima facie case against the respondent,

b. The damage, potential or actual, must be very serious for the applicant, and

c. There must be clear evidence that the respondents have in their possession incriminating documents or things and that there is a real possibility that they may destroy such material before an inter partes application can be made.


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Arrest of Vessel

Section 3(1) of the High Court (Admiralty Jurisdiction) Act Cap 123.

Where the claim relates to the vessel ie, performance of the carriage or running of the vessel BUT not a contractual dispute with the charterer, eg off specifications.

Caution :

WRONGFUL ARREST


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VASALIY GOLOVNIN [2008] 4 SLR 994

Chelyabinsk carried rice from China to Lome. Banks were financiers and holders of 3 BLs.

Dispute arise and Chelyabinsk was arrested at Lome but arrest set aside.

One month later, sister ship came into Singapore and was arrested. Arrest set aside for non disclosure of material facts and DAMAGES granted by CA.


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Issues to be considered in a Settlement

• Negotiating parties - ego

• Style of negotiations

• Presence of lawyers

• Enforceability


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It can be a cruise……

THANK YOUXIE XIE

TERIMA KASIHNANDRI


1 introduction the marubeni group marubeni international petroleum (s) pte ltd purpose of my paper...

Documents

mt hsfo

usd715 mt

mt ship voyage

days dbl seller slide

usd391 mtusd190

usd220 mtusd12

usd232 mtusd129

usd581 mtusd80