Sandro Vuylsteke, Claims Executive in Syndicate 1, Skuld Copenhagen reviews the latest developments regarding domestic consumption and suggests how to deal with this aspect when new C/Ps are entered into

The notion of Domestic Consumption, which is dealt with in Clause 20 of the NYPE 1946 form, was the object of some controversy for a number of years, until finally the Court of Appeal’s Judgement in the "SOUNION" [1987] 1 Lloyd’s Rep. 230 provided clear guidance on the issue, stating that even though electrical power was consumed for "crew domestic purposes", this was produced by burning fuel and therefore, an allowance was to be made in accordance with the provision in Clause 20.

As a consequence of this Judgement, it has been the association’s recommendation that either an agreement is made between Owners and Charterers at the time of the fixture, as to the exact level and costs of the domestic consumption or alternatively, that Clause 20 is to be altered in such a way that all fuel consumed, except time where the vessel was off-hire, is for Charterers’ account.

Recently, the Association has handled a matter, where the Charterers originally made a deduction for Domestic Consumption on their final hire statement in the amount of app. USD 25,000.

In this case, Clause 2 of the C/P was altered to read: "That the Charterers shall provide and pay for all the fuel, …" with deletion of the words "except as otherwise agreed".

The matter could not be resolved amicably and was therefore subject to arbitration under the LMAA Small Claims Procedure.

During the course of the arbitration, the argument raised by the Association was that since the words "as otherwise agreed" had been deleted from Clause 2, there was no reference to clause 20 regarding domestic fuel consumption and therefore, members (owners) should not compensate charterers in this respect.

This was to a large extent based on the fact that Sir John Donaldson M.R. (as he then was) in the "SOUNION" Judgement specifically stated that the words "otherwise agreed" in Clause 2, made reference to clause 20.

The arbitrator found in favour of members based on the argumentation provided above.

Nonetheless, it is still recommendable that the issue concerning Domestic Consumption is dealt with as outlined in paragraph 2 above, in order to avoid lengthy disputes on the subject.