Time Charterparty
Oil Major’s Approval
Major’s approval - is a matter of status rather than condition
First time the effect of the owners’ failure to obtain in due time an oil major approval came in sight in The Seaflower [2001] 1 Lloyd’s Rep 341 case. Although the main difficulty met in this case was the clause drafted with insufficient consideration given to the precise meaning and effect of the terms, this decision attracted general attention to the importance of oil majors’ approval rather than to the importance of careful drafting.
First of all, majors’ approvals or rather their absence negatively affect tradability of the vessel, i.e. vessels which do not have an approval simply cannot carry products of that oil major.
Secondly, an approval is a matter of status, as Rix LJ stated at para 64:
An oil company’s approval may reflect the vessel’s condition, but it is a matter of status rather than condition. Similarly, a vessel’s class is a matter of status – although that status may be affected in many different ways: at one extreme a vessel may be completely out of class, which is a most serious matter, because such a vessel cannot trade, but at another extreme there may be only a recommendation or even a mere notation of class that something relatively minor be attended to within a certain date. In the case of an oil majors’ approval, however, the vessel either has it or it does not. In that respect it is like a term as to the vessel’s class at the time of contract: if the vessel is out of class, the condition as to her class is broken.
The Seaflower decision is, however, of limited application nowadays, since in the aftermath of The Erika incident all oil majors has changed its the vetting practice and clauses similar to one examined in The Seaflower case are no longer in use. As some industry experts feared The Erika judgment brought an ambivalent result. Although it led oil companies to strengthen safety standards of sea transportation of crude oil and petroleum products in order to improve the prevention of maritime accidents, but it also prompted oil majors to review their monitoring systems to remove from it any basis for liability under existing legislation.
No oil majors are using nowadays the term ‘acceptable’ or approved, as a vessel is always screened prior to use, instead, at the end of screening process, major may only respond that ‘no further information required at this time,’ which usually can be considered as the completion of a vetting procedure. Dilution of liability, which might arise as a result of major’s vetting, led to situation when no reasons commonly given by a major neither in case when vessel has finally been employed nor when she was rejected.
In a recent case of Dolphin Tanker Srl v Westport Petroleum Inc (The Savina Caylyn) [2010] EWHC 2617 (Comm) the High Court considered the owners’ appeal in respect of questions of law concerned to proper construction of cl.50 of amended Shelltime4 form, which arose out of an arbitration award made by a sole arbitrator. Continue…
Leave your questions and comments here
Although author encourages visitors to leave their comments using this form, but should you be unable or unwilling to use it for any reason you can mail to info@lawandsea.net to contact with him.