Friday, May 13, 2016

Case of Oil Tanker Which Grounded in US Waters Settled by Arbitration

Multi-Million Dollar Agreement Between Vessel Owner and Customer
Shipping News Feature
US – The legal dispute which followed the grounding of the oil tanker Stena Primorsk in the Hudson River estuary some 10 miles south of Albany, New York in December 2012, was settled this week with the owners of the vessel, Concordia Maritime, agreeing to pay $9.25 million to the unnamed counterparty. The ship was managed by Scottish headquartered Northern Marine group, a wholly owned subsidiary of Stena AB Gothenburg and, unusually, this is not a tale of pollution from the stranded Stena P-MAX tanker but one which actually comes across as a triumph of modern ship design.

The Stena Primorsk is constructed with a double hull, in a class which has been described as ‘arguably the safest product tanker ever’, and the six square foot hole torn into her outer skin when she grounded did not lead to a drop of oil polluting the waters she sailed in. She was navigating the river with a trained pilot on board when she suffered some sort of steering gear failure leading to her running aground.

The ship was en route from Albany with 40,000 tonnes of Bakken light, low sulphur crude oil, less than two thirds of her potential capacity, with her cargo bound for the Irving Oil Corp’s refinery in New Brunswick, Canada for processing and following the incident she was subsequently towed back to Albany where she was offloaded. The incident led however to her not continuing with her charter and the vessel was withdrawn from a contract to see her transit the same route every 8 days.

In July 2013 Concordia received an initial claim for $21 million from its customer, a claim which was then adjusted upward to $23 million with a request that the matter be settled by arbitration in the United States in accordance with the terms of their agreement. In connection with the arbitration proceedings, Concordia Maritime then asserted counterclaims in the amount of $6 million.

A discovery phase followed during which both parties standpoints and demands were examined carefully, and which was completed in the third quarter of 2015. After further discussions, the parties have now entered into a settlement agreement according to which Concordia Maritime will pay $9.25 million to the counterparty immediately and will constitute a final settlement between the parties with respect to the dispute. This outcome is doubtless a relief to both as the case was predicted to stretch well into 2017 should arbitration have failed and subsequent legal costs would of course continue to spiral upward.