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Thursday, January 14, 2010

Another legal question

Anyone care to have a go at an answer! Would like the benefit of hearing Gary's always wise perspective...


good aft VS! thanks yr reply reg period of brokerage payment. Have however next question, born from alive practise.. Vessel performed bulk grain shipment from black sea to ec india(kolkata). upon fixture has been agreed(and stipulated in CP in written) that chtr's broker will collect his brokerage from ows. when vsl sailed, broker faced his invoice to ows. during passage, chtrs changed dport from kolkata to chittagong and agreed with ows(against addtl amount) to change dport..transit time was arnd 25-27 days, and broker few times approached ows to remit his comm, but ows replied tht they will pay afer ''shipment will be completed''. disch took longer time than was agreed as per CP, and vsl fallen into demurrage(arnd usd 60,000), which is still under dispute/discussion.Already 5 month gone after fixture and 2 months gone after completion of discharging. When broker approached ows again(after completion of disch, with no shortage), ows advised tht they will not pay brokerage again, whilst ''all financial outstanding debts will be settled, including demurrage". Question: are they right to avoid brokerage payment in this case?? Why broker should be ''hostage'' in this situation??

January 13, 2010 6:57 AM



  1. First of all a Chrtrs broker having to collect brkge fm an Owner spells trouble so that should be avoided next time around. Usually Owns broker collects and Chrtrs broker deducts.

    Back to the issue. It is important to note that brkge is due on the freight, the addtnl freight for a new disport and also on any demurrage (under the presumption that brkge is due on F/D/D which most Charter forms provide for)

    Irrespective of the laytime dispute, brkge has been earned on the freight(s) and the broker has full legal rights to recover same fm Owners without delay. If and when the laytime dispute may be resolved and a final demurrage amount agreed, then addtnl brkge may be also due sometime down the road.

    Now with regards to collecting abve brkge, should the broker be a member of BIMCO then he could certainly get persuasive help there. If not then a small market wire may do the job or a rather unpleasant msge to Owners CEO to point out the unlikely chances of the said broker proposing any fresh biz to Owners in light of their conduct. Failing which a legal threat seems the last resort.

    Hope to hve helped.

  2. I'll Add to Gary's excellent reply. (btw if Gary is the Gary that I think Gary is then we should all be very happy he giving us the benefit of his knowledge!)

    The bottom line is this. Owners cannot legally hold the broker to ransom in a situation like the one you have described. REALITY - they do in many cases. Why?

    1. Because they feel they can get away with it.
    2. they have a real issue with the way that you have brokered the contract (they need to tell you that)
    3. they are trying to control cashflows.

    As Gary stated - you need to put pressure on them. Send them a strongly worded legal message and if you have to, you should seek formal legal advice.

    Depending on the case, ships can be arrested for unpaid brokerage!

    There are literally hundreds of millions of dollars of unpaid commissions out there. As a broker you must 'manage' these cashflows as you manage other parts of your business.

    Another lesson here. Successful brokers try and build a power base. The more powerful you are in terms of market influence, the less likely you are to be take advantage of. As I stated in an earlier post, because I have exclusive charterers, shipowners treat me (the broker) like a valued client and hence would not dare to avoid paying commissions.

    The other point is that if you do not trust a particular shipowner, you should try and get your commissions deducted by the charterers.

    Please keep us updated!