Panama Canal cuts daily vessel transits to conserve water, reducing from 22 to 18 by February 1, 2024, amid record low rainfall.
Panama Canal Warns Of ‘Indefinite Delays
The Authority has advised that vessels without bookings may face “indefinite delays”.
The Authority recently amended its auction system by introducing a ‘fast pass’ system obtainable by vessels that have been waiting for at least 10 days, paying a one-off premium at special auctions and this relates to the last available transit slot per day. Slots have been reported as selling for 7-figure sums. In early November, it was reported that one operator paid almost USD 4 million for a slot for a neo-Panamax vessel and Panamax vessels are averaging USD 1 million to USD 1,5 million.
Charterers And Owners Navigate Complexities
Under a standard time charter, charterers would be obliged to pay for hire and bunkers during the waiting period or to pay for hire and bunkers for the lengthier voyage around South America to avoid delay. It would be up to the charterers to decide whether to bid at auction, but, if they did so, the cost would be for their account. Charterers may have to factor into their decision-making the potential for disputes about the legitimacy of their voyage orders when the charter is coming to an end.
Under a standard voyage charter or bill of lading, owners/despondent owners would not be entitled to recover additional freight, demurrage, or other payment for waiting time. It would be up to owners/deponent owners to decide whether to bid at auction, but if they did so, the cost would be for their account (unless charterers or cargo interests agree to bid at their own expense).
Navigating Legal Complexities
It is also arguable whether owners/disponent owners would be obliged to sail via the longer route or obliged to bid at auction, to avoid delay at the Panama Canal. This is likely to be fact- and contract-dependent. However, it is doubtful there would be an obligation on most owners/despondent owners to buy slots at auction (since logically, only a limited number of participants could be successful).
The problems in passing through the Panama Canal are unlikely to frustrate either a time or voyage charter or bill of lading under English law (see for example, The Eugenia [1964] 2 KB 226 in which it was held that the closure of the Suez Canal did not frustrate a time charter trip from Genoa to India), save that the position might be arguable if the cargo is perishable or the charter party requires the vessel to proceed through the Panama Canal.
To protect their position, owners/despondent owners or time charterers should pre-book if possible and/or attempt to negotiate special contractual provisions. In principle, it would be possible to agree on a clause apportioning or transferring the cost of delay (or additional transit fees); for example, time charterers could attempt to negotiate terms that the vessel would be off-hire (or that hire would be reduced) in the event of a delay. In a voyage charter context, owners/despondent owners could attempt to negotiate clauses that provide for voyage charterers to pay at the demurrage rate for waiting time (similar to the Turkish Straits clauses) or additional freight for the lengthier voyage (as per BIMCO’s Stoppage of Canals and Waterways Clause 1968).
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Source: SKULD
