‘The legal nature of the storage expenses and price differentials in the Contract(s), and of the indemnity provided for in Article XII of the General Conditions of Contracts 13 and 7, i.e. whether they are considered “penalty" or otherwise and the conditions for claiming same.

In interpreting the Contracts' provisions relating to storage charges and price differentials, the Defendant contends that such provisions are but a kind of penalty, the indemnity resulting from which may not be due unless the Defendant has behaved fraudulently or in gross error, which it has not … The Claimant denies that but, nonetheless, it refers to [the applicable law] which provides that the parties may fix in advance the amount of indemnity either in the contract or in a subsequent agreement ... As will be seen below, [the aforementioned provision of the applicable law] relates to a conventional indemnity, which is also well known as a penalty clause in the concept of [the applicable law].

However, it is clear that the storage charges and price differentials as provided for in the Contracts are damages, the amount of which is based on the parties' prior agreement. In other words, the parties have determined in advance the amount of damages in respect of the storage charges and the basis of calculating such amount insofar as the price differentials is [sic] concerned. In both cases, the Defendant is liable for payment of such damages to the Claimant in the amount as provided for in the contract if the Defendant's vessel does not reach the terminal within the range agreed upon between the parties.

In the opinion of the Tribunal, a contractual provision of such type is a conventional indemnity subject to [the relevant provisions of the applicable law]. Under [such] law, damages resulting from penalty clauses become due, as a general rule, upon the violation of the Contract as provided for in the clause itself, without the need for the creditor (the Claimant) to prove the damage sustained by it as a result of the violation. However, this general rule is subject to certain exceptions, restrictions or requirements:

1. [The applicable law] provides, inter alia, that damages under a conventional indemnity:

a) shall not become due if a debtor (the Defendant) proves that a creditor (the Claimant) has not suffered any loss;

b) may be reduced by a judge if a debtor proves that such damages are exaggerated to a great extent or that the original obligation has been performed partially.

In fact, the Defendant did not prove either of these two situations, nor is there any evidence in the file from which the Tribunal could infer the same. The situation of partial performance, in particular, does not apply in the circumstances. To understand this, the Tribunal would like to stress that the Defendant's obligation subject to the conventional indemnity is the sending of a vessel or, more accurately, that the vessel nominated by it should arrive within a period of time, and not the vessel's loading which is another obligation imposed upon either of the contracting parties or even upon both. Therefore, either the whole vessel arrives within exactly the period agreed upon or not. Definitely, there is no room to argue about partial arrival in these circumstances.

Also, the Defendant's allegation that the Claimant must prove that it has suffered a loss in respect of which it is entitled to be indemnified … is legally baseless. This is due to the fact that, while the general rule in [the applicable law] is that the burden is rested on the Claimant when asking for damages, the burden is rested on the Defendant in case of conventional indemnity to prove either of the two events provided for [by the applicable law]. In other words, damages in the event of a conventional indemnity are presumed as provided for in such clause unless the debtor (the Defendant) proves otherwise ... Similarly, the Defendant's defence that a conventional indemnity does not apply as long as it has not behaved fraudulently or in gross error has no room in [the applicable law]. As a matter of fact, this applies to the reverse situation, i.e. where the Claimant, as a creditor, alleges that the loss occurred to it because of the Defendant's breach is much more than that provided for under the conventional indemnity. In such a case, the Claimant may not apply to the court (or the Tribunal) for increasing the damages unless it proves that the Defendant acted fraudulently or in gross error ...

2. The conventional indemnity does not apply if it is proved that late performance was due to a force majeure event ...

Relying on [the relevant provision of the applicable law] and on the Contract(s) as well, the Defendant has raised the defence of force majeure to excuse the late arrival of the vessels [1] and [4]. In the Defendant's opinion, engine trouble had occurred to the vessel [1], the result of which was, at the end, its replacement with [vessel 2]. As to [vessel 4], it suffered an unforeseen berthing delay … Each of these two situations constituted a force majeure event excusing the late arrival of the vessels ...

This allegation by the Defendant is not accepted by the Tribunal for at least one reason. According to the [applicable law relating to shipping], the maritime risks are limited to collision, assistance and average … Therefore, neither engine trouble nor unforeseen berthing delays at a third country's port may constitute a maritime risk. This is so even assuming that the Defendant proved these events pursuant to [the applicable law] which, as a matter of fact, is not the case.

In a later stage, the Defendant contends that both an engine defect in [vessel 1] and an unforeseen berthing delay in a third country's port constitute an unexpected event causing a difficulty in the Defendant's performance of its contractual obligation under [the applicable law] and the Defendant requests the Tribunal to apply [the relevant provision of the applicable law]. Before commenting on this request, it is important to mention that [the applicable law] provides that:

If general abnormal incidents which could not be foreseen occur and due to this the performance of a contractual obligation though not becoming impossible is rendered cumbersome to the debtor threatening him with a great loss, a court may, according to the circumstances and after balancing the interests of both parties, reduce the cumbersome obligation to the reasonable extent if so prescribed by equity and any agreement to a contrary effect shall be null.

In reality, none of the conditions required by this provision is met nor is it possible for the Defendant, accordingly, to prove any. Engine trouble in a specific vessel, for instance, is not general nor abnormal. Besides, it is extremely difficult to assume that it is unforeseen by the contracting parties or at least by the Defendant who is the concerned party in the circumstances. Also, it is not sufficient that the Defendant has sustained a loss or it lost profit as a result of a relevant event, but such loss must exceed what is normal in the circumstances [according to a precedent under the applicable law]. Anyway, the file of the case contains no evidence whatsoever proving the occurrence of a general and abnormal event and the effect thereof on the Defendant, as all required by [the applicable law].

Therefore, the Tribunal concludes that the Defendant's reliance on [the applicable law] has no legal ground and a plea to this effect should be rejected.

3. Also, a debtor is not bound to pay damages under a conventional indemnity unless a creditor notifies him to effect specific performance and the period of time provided for in the notice expires without performance ... This is why the Defendant contends that since it was not notified by the Claimant it would not be liable for damages by the conventional indemnity …

In the opinion of the Tribunal, this contention may not be accepted for the following reasons:

First: The rule of notification does not apply unless specific performance is still possible and also useful to the creditor. Otherwise, there is no need for the notification ... As mentioned above, the Defendant's obligation is the bringing of a vessel to the terminal within a certain period of time as specified by the parties. If such period passes, it is impossible to bring it back, which means also the impossibility of specific performance by the Defendant in these circumstances ... This would lead to saying that a notice or notification of performance is useless. If otherwise had to be presumed, no result would be reached and definitely this is not the law. Assuming, for instance, that the date range agreed upon was 1-3 October … within which a vessel should have arrived to the terminal. But time passed in vain. The notion of notification, if it had to be applied, would mean that a creditor should, on 6 October as an example, notify a debtor to bring the vessel to the terminal within the period of 1-3 October which had already passed or, else, the debtor would be liable for damages. Since this situation is absolutely impossible, the Tribunal is of the opinion that a notice (notification) does not apply to the case in the surrounding circumstances.

Second: The nature of the Contracts, upon careful review, would lead to the conclusion that time for performing each obligation by either party is of the very essence of the contract and may not, generally, be extended or derogated from without the parties' agreement. In such contracts, one can easily conclude that if a party fails to perform any of its obligations within the period designated for the same, the other party may exercise its rights ensuing therefrom immediately without the need for a notice of performance.

For example, Contract 13 provides for "cargoes of approximate quantity for each and distributed over (11) months". If time for a specific cargo passes without performance, then it is over for that cargo and the performance of the next cargo, in turn, comes into existence. Accordingly, there is no room to argue about specific performance of the former cargo as far as time is concerned and, based on that, the argument about a notice of specific performance becomes useless.

Another example may be given here. Article 13 of the General Conditions of Contracts 7 and 13 provide for demurrage to be paid, as a conventional indemnity, by the Claimant to the Defendant for each day or part of day in case the latter's tanker is delayed at the terminal without a justified cause. The amount of demurrage is based on the charterparty. The Defendant shall submit the invoice of demurrage claim to the Claimant within (30) days from B/L and the latter shall settle it within

(60) days of receiving it. Assuming that the Defendant's tanker was delayed at the terminal without a justified cause. In this example, it is not possible, in fact, to talk about preventing the Defendant from its right of claiming the demurrage on the ground that it has not sent a notice to the Claimant for specific performance.

From the foregoing discussion, the Tribunal concludes the following:

1. The Contracts' provisions for storage charges and price differentials are a kind of conventional indemnity under [the applicable law]. The result of which is that such a clause applies as it stands in the Contracts unless the Defendant proves that the Claimant suffers no loss, the damages are greatly exaggerated or that the original obligation has partially been performed. In fact, none of these events has been proved by the Defendant.

2. Neither an engine trouble nor the delay in berthing at [a port in another country] in respect of [vessel 1] and [vessel 4], respectively, may be considered a maritime risk under [the applicable law], even assuming that both were proved by the Defendant.

3. There is no need for the Claimant to send a notice of performance to the Defendant for claiming storage charges or price differentials, if any.’