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2nd Half 2014: Market Challenges, Predictions And Directions:
Common Areas of Dispute in the Palm Oil Trade
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Malaysia is a key player in the international palm oil trade. Malaysia is one of the largest palm oil exporters and the Malaysian palm oil industry accounts for 39% of the global palm oil production.
As with most commodities, palm oil is primarily carried by sea under a bill of lading and paid for by way of a letter of credit. The shipment/delivery of, and payment for, palm oil cargo are areas of risk where disputes commonly arise.
This paper will discuss issues relating to the release of cargo from the vessel without presentation of the corresponding bill of lading, the duty of a bank in examining the relevant documents presented to it under a letter of credit and cargo shortfall claims. The paper will also consider practical suggestions for minimising risk.
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I assume that in this case: a) payment was by way of LC; b) the BL was in the banking chain when retrieved by the Seller; and c) the Seller did not instruct the carrier to release the cargo or provide an LOI. If so, under Singapore and English law, the release of the cargo without the original BL is wrongful and the carrier would be liable to the Seller (as Shipper) for the loss suffered. Proving ownership of the cargo at the time of the breach is not necessary if the claim is made under the BL. It is only necessary if the claim is made in tort. The fact that the cargo is liquid is also not material because the BL will state the quantity of cargo and this will be the measure of the claim. If the contract of carriage is subject to Singapore/English law, the position would be the same for palm oil shipped from Indonesia. To the best of my knowledge, this is also the position under Malaysian law though I am not able to say so conclusively as I am not a Malaysian qualified lawyer. I am also not able to comment on the judgment without knowing the full facts or the basis of the judgment. However, as a general rule, there should be a right of appeal against the decision of the Court. As the Poram contract is made between the Buyer and Seller, it cannot bind the carrier. However, a solution may be to retain ownership of cargo until payment is received by way of an appropriate clause in the contract.
9 years ago
The purpose of arresting a ship is to obtain pre-judgment security for a claim. To arrest a ship, a claimant must first file an in-rem writ against the ship in Court and obtain a warrant of arrest. The service of the writ and warrant of arrest on the ship effects the arrest. To file an in-rem writ and obtain a warrant of arrest, the claimant must essentially satisfy the following requirements: a) The claim must arise in connection with a ship; b) The claim must be a maritime claim i.e. one that falls within the High Court (Admiralty Jurisdiction) Act; and c) The person liable for the claim must be the Owner of demise charterer of the ship both at the time the claim arose and the time of the arrest. Put simply, an arrest is available to a maritime claimant against the Owner or demise charterer of a ship. An example would be if cargo is damaged on-route due to the carrier’s fault. The shipper or consignee would have a maritime claim against the ship and the right to seek an arrest (subject to the fulfillment of other conditions). There are 3 main responses to an arrest: 1. Provide security for the claim. Once acceptable security is provided (cash, bank guarantee or P&I Club LOU), the arrest will lifted and the ship released. 2. Settle the claim. Upon payment, the arrest will lifted and the ship released. 3. Challenge the arrest e.g. on the basis that the claimant did not satisfy the legal requirements. However, unless security is provided, the ship will remain under arrest while the challenge is taking place.
9 years ago