Sovetskaya Street,63,Office 153-Post

10. 10 .2003

……………………………………………………………………………………………………………………

AND TO

…………………………………………………………….

344019, RUSSIA, ROSTOV-ON-DON

SOVETSKAYA STREET,63,OFFICE 153-POST

DEAR SIRS,

…………………………………………………………………………………………………………………………………………………C/P 25. 03 .02

PLEASE NOTE THAT I HAVE PUBLISHED MY AWARD IN THE ABOVE REFERENCE AND ENCLOSE ONE ORIGINAL FOR EACH OF YOU.

I WOULD LIKE TO THANK YOU FOR HAVING APPOINTED ME AS THE ARBITRATOR IN THIS MATTER.

……………………………………………………………………………………………………………………………………………………………………………………

YOURS FAITHFULLY,

IN ANARBITRATION IN ISTANBUL BETWEEN

……………………………………………………………………………

Shipowners and Claimants

AND

……………………………………..

Charterers and Respondents

ARBITRATION AWARD

The charferparty, the arbitration agreement and my appointment

1. I have been appointed sole arbitrator of certain disputes arising out of a charterparty dated 25 March 2002 (the Charterparty) and made between ……………………… and …………………………. of 1 Lambrousa Street, Nicosia, Cyprus as Owners (the Claimants) and …………………...... , Ajeltake Island, PO Box 1405, Majuro, Marshall Islands MN96960 as Charterers (the Respondents).

2. The Charterparty contained in Clause 34 provisions that any such disputes shall be referred to arbitration in Russia and should be subject to Russian law.

3. On 4 August 2003 I was invited to accept appointment as sole arbitrator by a letter from the Claimants' Istanbul agents on the terms set out in the Arbitration Agreement dated 27 May 2003 made between the Claimants and the Respondents. The Arbitration Agreement did not refer to the jurisdiction and law of the arbitration other than to mention that it was an amendment and replacement of the terms of Clause 34 of the Charterparty and that I was to arbitrate the matter in Istanbul in accordance with the detailed procedures set out in the Agreement.

4. Having considered the Arbitration Agreement and Clause 34 of the Charterparty I wrote to both parties' representatives by e-mail dated 13 August (my Acceptance E-mail) advising them that 1 would sign the Arbitration Agreement (which they had already signed) and thereby accept the appointment on the condition that it was agreed I should apply the principles of English law. I state here that I considered and do now consider that the reference to Russian jurisdiction and related procedures in Clause 34 of the Charterparty had been replaced by the provisions of the Arbitration Agreement for the arbitration to be conducted my me in Istanbul in accordance with the procedures set out in the Arbitration Agreement.

5. On 22 August 2003 the Respondents' representative copied to me an e-mail addressed to the Claimants' Istanbul agents agreeing that I arbitrate the disputes referred to in the Arbitration Agreement (the Disputes) "on the basis of the British Legislation or on the basis of international practice." (the Respondents' Acceptance E-mail).

6. On 2 September 2003 the Claimants' Istanbul agents sent me a fax, which among other things, said "we accept English law to be applied in your decision" (the Claimants' Acceptance Fax).

7. I thensigned my original version of the Arbitration Agreement.

8. Copies of the Arbitration Agreement, my Acceptance E-mail, the Respondents' Acceptance E-mail and the Claimants' Acceptance Fax shall be deemed to form part of this my Arbitration Award.

The Disputes and the arbitration submissions

9. The parties agreed between themselves to waive most of the procedures in the Arbitration Agreement and to summarise their Disputes in the form of three questions which they require me to determine in the form of answers which they can apply to the Disputes themselves.

10. The three questions were put to me as Appendix A of the Arbitration Agreement in the form of a letter from the Claimants' Istanbul agents to the Respondents' representative dated 23 April 2003, which letter the Respondents' representative countersigned. In addition to the three questions I was provided with a copy of the Charterparty, but nothing else. The parties are content that I answer the three questions with only this material in front of me.

11. Nevertheless, in my Acceptance E-mail I asked the parties to clarify certain aspects of the first and the third questions. They provided clarification of the first question in the Claimants' Acceptance Fax and of the third question in the Claimants' Istanbul agents' fax to me dated 22 September 2003 (which fax shall also be deemed to form part of this my Arbitration Award), both of which faxes were expressed to be copied to the Respondents' representative.

12.I consider that the parties intend that their submissions to me are complete in accordance with the meaning and spirit of the Arbitration Agreement as applied and waived by them and that I should proceed to determine the three questions in theform of a final arbitration award (my Award).

The formality of my Award

13. I ……………………………, a ship manager and charterer of ……………………………..

Etiler/Islanbul, Turkey, having conscientiously considered the written submissions of the parties and accepted the burden of determining the disputes put to me in those submissions in the form of giving written answers to the three questions set out below, hereby make and publish my Final Arbitration Award as follows. The place of this Arbitration is Istanbul and I have made and signed this Award in Istanbul.

The first question

14. This was originally put to me as: "When does laytime begin if the vessel was placed for loading with delay from preliminary monthly schedule of placing; providingsome absent vessels are accepted for loading".

15. I sought clarification in my Acceptance E-mail of the words "providing some absent vessels are accepted for loading".

16. By the Claimants' Acceptance Fax I was told: "'absent' means a vessel which is not initially included in the shipping schedule but was in fact presented for loading."

17. Therefore in order to answer this question I now rewrite it in full as follows: "When does laytime begin if the vessel was placed for loading with delay from preliminarymonthly schedule of placing; providing some vessels, which were not initiallyincluded in that schedule are accepted for loading?"

18. Naturally, I am restricted in how I may answer this question by the fact that I must rely on the Charterparty before me and on how English law might interpret the terms of the Charterparty.

19. The Charterparty is in an amended 1994 GENCON box layout form and it appears to operate like a contract of affreightment (c.o.a.). I consider the voyages of vessels under the c.o.a. to be contracts of carriage in the same way that a single voyage charterparty under such a GENCON would operate (see The "Kriti Rex" [1996] 2 Lloyd's Rep. 171). There are various vessels and barges which come within the category of vessels chartered (Box 5); all the voyages by those units must be for the carriage of fodder and/or granular sulphur (Box 12) and between the load port of Astrakhan (Buzan) (Box 10) and the port or the roads of Kavkaz (Box 13); no laycan is specified for any vessel (see e.g. Box 21), but there is a shipping season (Box 9); instead the Respondents must call for vessels for one month forward by the latest on the 22nd day of the preceding month; the Claimants then have three days in which to confirm or amend the list of requested vessels and to submit the Claimants' schedule of placing the vessels for loading at ten day intervals(Clause 20).

20.The laytime provisions of Clause 22 contemplate the Claimants nominating two or more vessels to start loading on the same day, but in that event provide that laylime of the vessel taken first runs, and for the second vessel only starts when the first vessel completes (unless the Respondents' notice expressly requires both vessels to start on the same day).

21.In the context of the above Charterparty provisions I understand the first question to ask me to assume that the Claimants have sent the Respondents a list of vessels to be presented for 1oading in the next month and that the 1ist gives a date for presentation for loading against the name of each vessel and that those dates are no less than ten days apart from eachother.

22.I also assume that the number and capacity of vessels in the list matches the terms of the Charterparty and the Respondents' written request for carriage under Clause 22 subject to any amendment by the Claimants under Clause 22 prior to the Claimants' sending their list of vessels to be presented for loading.

23.I find on those facts that the Claimants have in effect written laydays into the Charterparty in that they cannot claim that laytime should run before the date of arrival in their list. They also cannot claim laytime to run when another of their vessels is already on the berth. This seems to me to be self evident from the wording of clause 22 and from the principle stated by …………………………………s [1992] 1 Lloyd's Rep. 229 at 234 in the slightly different but to my mind equally relevant context of the nomination of a ship: "Nomination of a vessel under such a contract is not mere naming of a vessel; it is rather the identification of the subject-matter of the contract, with the effect that the name of the vessel, once nominated, becomes written into the contract."

24.I now make the assumption that one or more of the vessels in the Claimants' list is delayed in arriving at Astrakhan.

25.I decide on the above facts that such a vessel cannot start the laytime in any event before the giving of a valid notice of readiness in accordance with Clause 23 of the Charterparty. Nor can it claim to commence laytime if another of the Claimants' vessels is already on the berth.

26.I further decide that, if when the vessel does give notice of readiness with delay from the promised date in the schedule of placing, and if the Respondents or their shippers during the period of delay put a third party's vessel into that berth to load, then laytime for the late vessel should not run against the Respondents until the berth is again free.

27. Even if I were wrong on this interpretation, so that technically laytime starts to run because the vessel is an arrived ship, then I consider that the Respondents are entitled to deduct damages for delay equivalent to the laytime which the Claimants seek, so that the final calculation will be the same, whichever method is adopted.

28.I further decide that as soon as the berth becomes free then the laytime will start to run, subject always to application of the notice of readiness and laytime provisions of the Charterparty in the usual way.

29. In considering the second part of the first question (beginning with the words providing), I assume that after the sending the schedule to the Respondents, at some later date the Claimants notify the Respondents of a proposed amendment to the list in the form of the substitution of a different vessel. Since the Claimants have already nominated the vessels to be used in their list they are bound by that nomination as a term of the Charterparty (see the legal authority paragraph 23 above). However it is a principle of English law that damages are not recoverable for loss which the injured party could have avoided with due diligence. This is often called the "duty to mitigate loss" . For example in The "Solholt" [1981] 1 Lloyd's Rep. 574, the buyers of a ship were entitled to cancel the contract for the

purchase of that ship because the sellers failed to deliver in time. The Court held that the buyers were entitled to damages representing the difference between the contract price and the higher market price at the last date the vessel should have been delivered. However, because the sellers would have delivered the vessel to the buyers at the contract price 1ess a ny claim for delayed delivery, the Court decided the buyers had failed to mitigate their loss by accepting delivery on those terms and were not entitled to recover the rise in the market price as damages.

30.I decide that if the substitute vessel conforms with the description in Charterparty Box 5, the offer of the substitute is a reasonable attempt by the Claimants to mitigate any loss the Respondents might suffer from the delay of the vessel originally named in the list. The Respondents should therefore accept the substitute vessel or give up any claim for damages which they might have as a result of that vessel being delayed. They will still be able to reduce their liability for laytime if the substitute vessel arrives later than the date scheduled by the Claimants in their original list.

31. Therefore, taking into account the absence of a cancelling clause, the lack of mention of any notice from the Respondents to the Claimants making time of the essence and the duty to mitigate mentioned above, I decide that the fact that a vessel is not named in the original list is not in itself a good reason for the Respondents not to accept that vessel. I further consider that the Respondents can only reduce the laytime, which otherwise they must pay for a vessel, on the grounds that the vessel was late if they can show that either one of the Claimants' vessels is using the berth, or if the Respondents put a vessel into the berth on or after the time the vessel was late or advised that she would be late.

Answer to the first question

32. Therefore my answer to the first question is:

32.1 Laytime will begin no earlier than by the tender of a valid notice of readiness by the vessel in accordance with Clause 23 of the Charterparty.

32.2 Laytime will not begin while the Claimants have another vessel on the berth.

32.3 Laytime will not begin while the Respondents or their shippers have a third party's vessel on the berth which was placed there on are after the time when the Respondents or their shippers learned that the Claimants' vessel would be late.

32.4 The running of laytime will be subject to the express provisions of Clause 22.

32.5 The Respondents should mitigate any losses which might be caused by delay by accepting substitutions of vessels by the Claimants for ones in the schedule for placing vessels and the same principles as to when laytime commences apply to vessels so accepted.

The second question

33. This question asks me: "Is the Owner [the Claimants] obliged to give consideration to the laytime calculation carried out by the Charterers [the Respondents], providing it has been submitted on the termination of the period stated in the Contract [the Charterparty]. In what form and in what way should demurrage documents be furnished for consideration and when does the time of this consideration of the documents is supposed to begin.

34. In my experience, although I know of no legal decision on this point, the standard practice in the shipping business followed by shipbrokers and reflected in the BIMCO recommended forms, is for the owners to provide the charterers with copies of the notices of readiness issued by the master and the statements of facts signed on behalf of the ship and charterers for the respective ports as supports for the calculation m their timesheets. Additional supports are not considered necessary unless some special point arises or unless, of course, the Charterparty makes express provision for them. The charterers are then expected to respond within a reasonable period of time. In the event of any dispute having to be resolved in arbitration, London arbitrators applying English law will usually award owners interest on demurrage commencing 30 days after discharge provided the owners were timely in their submission of their documents.

35. In the Charterparty at Clause 25 there are some express previsions which I must consider, namely:

36. The fifth paragraph goes into considerable detail as to what must be provided in support, namely: "The verified certificate of hydro meteorological station and statement of sea vessel in the loading port denying the absence of bad weather time in the Owner's time sheet/statement is obligatory as supplement to the statement in the port of loading/discharging and stands in force if they are submitted within 7 calendar days after the Master/agent signs the timesheet and or the statement." My interpretation of this part of the paragraph is that the Claimants should follow the trade practice I described in my paragraph 34 above, i.e. submit the notices of readiness and the statements of facts for the load and discharge ports. If the Respondents wish to contest the statements of facts as to sea and weather conditions, they must obtain valid certification of such conditions from the appropriate weather stations and port authorities, otherwise they will not be able to disprove what is in the statement of facts. This is what I understand by the word "obligatory", i.e. the parties have agreed that the Respondents must do this to be able to rely on such arguments. Normally the definition by a third party (e.g. here a weather station, or a harbour master) could not bind an arbitrator (see Bennetts & Co. v Brown [1907] 1 K.B. 490, where the certificate as to what was a surf day issued by the port captain of Valparaiso was not admitted as conclusive evidence of how surf affected the discharge of the ship), but if the parties agree that a certificate of a third party will "stand in force", I consider that means they agree to be bound by the facts in such a document.

37. The Respondents are given a time limit of seven days from when the Master or the port agent signs the statement of facts. If they comply with this time limit then the paragraph says the certificates they provide will "stand in force". I read this as meaning that such certificates must be submitted (presumably to the Claimants or their agents, for which purpose I hold a fax would be sufficient) within the seven days to be fully effective appendices to the statements of facts.