Can carriers sue shippers for non-adherence to contracts?

A recent move by a liquidated shipping line on the trans-Pacific trade to sue what it claims as errant customers for the equivalent of almost R152-million for failing to meet minimum quantity commitments contributing to its collapse, could be the catalyst to get more realistic minimum quantity commitments in the contracts – and, as a consequence, better adherence to contractual agreements. But it is unlikely that a similar event is ever going to happen in SA. The Containership Company (TCC) is suing 83 shippers, claiming they broke contractual agreements to ship a certain amount of cargo. A standard clause in the carrier’s sea freight agreement states the compensation applicable for not complying with previously agreed volume commitments is US$250 per TEU. The press quoted Lars Jensen, CEO SeaIntel Maritime Analysis, who estimated that, theoretically, shippers in the transpacific trade could be liable for liquidated damages of up to almost R26.5 billion for breaking minimum quantity commitments. But, he added: “Realistically, such amounts are unlikely to be claimed by carriers.” FTW talked to Glen Delve, marketing director of MSC; Iain McIntosh, marketing manager of MOL; David Williams, MD of Maersk Line; and an unnamed executive of another Far East shipping line, about the matter. Would this ever happen in SA? FTW asked. The majority opinion was that the chances of this sort of court action in SA were slim. Contracts here are almost always person-to-person in the creation, and not the hardbitten contracts that are found on the trans-Pacific and trans- Atlantic routes – the world’s main trades. In addition, the numbers of TEUs in any contract in SA are comparatively small, compared to the multi-million boxes that are plied across the two oceans, mainly from the Far East and Europe to the US. “It’s not in our thinking in SA,” said Delve. “We don’t have the same regulations here as on the trans-Atlantic/ Pacific routes, where the agreements are very strictly adhered to. “Each line will have a contract with each of its major customers, but these are a line/customer relationship – not strict like those on the US trades.” Williams agreed. “All contracts to the US are governed by the Federal Maritime Commission (FMC). There are minimum quantity requirements and shippers can be sued if they fail to adhere to these. This is very rare on the SA trades.” SA contracts are between the line and shippers, and failure to meet promised quantities would be better settled on “a commercial basis”, rather than court action, he added. McIntosh followed a similar line of thinking, describing the strict agreements on the US trades as “boilerplate contracts” because of their toughness. He also highlighted the comparative numbers on the trans-Atlantic/Pacific trades and the SA market. McIntosh quoted the latest figures from London market analysts, Drewry, as an indication. “In 2010,” he told FTW, “the eastbound trade on the trans-Pacific route was 13.8-million TEUs, over 18% up on 2009. The forecast growth for 2011 is 8.86% to 15.03m. There were 63 strings looking for that business. “You can see that you’re talking big numbers here, and if somebody doesn’t supply 50% of their contracted commitment on that trade, it leaves a big, big hole.” The total trade on the Asia- SA trade, meantime, was 650 000 to 700 000 TEUs. “That,” McIntosh added, “puts it into perspective. So your exposure here is that much less.”