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IN RE TRANS-ASIATIC OIL LTD.

July 31, 1985

In the Matter of the Arbitration Between TRANS-ASIATIC OIL LTD. S.A., As Disponent Owner of the M/V "Silver Lady," Respondent-Cross-Petitioner, against UCO MARINE INTERNATIONAL LTD. a/k/a LANDSEA CORP., As Charterer, Petitioner-Cross-Respondent


The opinion of the court was delivered by: LEISURE

MEMORANDUM & ORDER

LEISURE, District Judge:

UCO Marine International Ltd. ("UCO") has petitioned the Court to vacate, pursuant to 9 U.S.C. § 10, the Final Decision and Award by the Arbitrator dated January 15, 1985 ("Award") and direct that a rehearing be had before new arbitrators. Trans-Asiatic Oil Ltd. S.A. ("Trans-Asiatic") has cross-petitioned the Court for an order, pursuant to 9 U.S.C. § 9, confirming the Award and directing entry of final judgment in its favor upon the Award, denying UCO's counterclaim, awarding interest at a compounded rate from January 15, 1985, awarding interest on the judgment sum, awarding costs, legal fees and disbursement as stipulated in the parties' agreement and awarding punitive damages in the amount of $200,000 or sanctions against UCO and its counsel.

 UNDERLYING FACTS

 Briefly stated, the facts of the underlying dispute are as follows. UCO entered into a sales contract, dated May 27, 1980, with third-party, that provided the "delivered cargo to be heated to 145 degree F. minimum." The sales contract specified the pour point *fn1" was 115 degree maximum. These provisions of the sales contract were not made known to Trans-Asiatic. UCO thereupon attempted to charter a vessel to transport this cargo consisting of 44,000 long tons of crude and/or dirty petroleum products. A number of vessels, including the M/V Silver Lady, owned by Trans-Asiatic, however, were unwilling to agree to the 145 degree F. heating requirement.

 After UCO failed to find a ship capable of supplying the high heating requirement, UCO and Trans-Asiatic entered into an Asbatatank Charter Party form dated June 9, 1980 ("Charter Party") for the M/V Silver Lady to transport a load of high pour low sulphur No. 6 fuel oil from Salvador, Brazil to New York. The Charter Party states that "heat 135 degree F. to be maintained throughout voyage and discharge." the voyage orders stipulated that the "cargo is to be heated enroute and for arrival and discharge to a temperature of 135 degree F., basis a pour point on the cargo of 105 degree F." The voyage orders further stated that if the actual pour point exceeded 105 degree F. that the "Vessel do its utmost to hear the cargo enroute and for arrival and for discharge to a level of not less than 30 degree F. above the actual pour point on the cargo." In response to this suggested language Trans-Asiatic reminded UCO that the "Charter heating obligation was to a maximum of 135 degree F." Trans-Asiatic asked UCO to amend the voyage instructions to provide that "in no event is this request to be construed as a request to heat beyond a maximum of 135 degree F." UCO thereupon issued instructions that the ship should heat the cargo in the most economical manner for arrival temperature in New York and throughout discharge of 135 degree F.

 After loading the cargo, the vessel sailed for New York on June 24, 1980. The cargo was heated enroute. The major part of the cargo was drawn from three shore tanks, having temperatures ranging from 156 degree to 159 degree F. A fourth tank had a temperature of 148 degree f. Cargo temperatures were taken daily and logged, ranging from 135 degree F. to 154 F. in the ship's individual tanks. No difficulties in heating were reported.

 On arrival at the discharging berth in New York on July 6, 1980, pre-discharge temperatures and samples were taken. The temperatures ranged from a low of 134 degree F. to a high of 155 degree F., with an average of 143.9 degree F. Nevertheless difficulties were encountered in discharging the cargo with result that 3,915 barrels remained on board. Due to the large residue, the Silver Lady sailed for Virginia to have her tanks cleaned.

 Trans-Asiatic commenced arbitration to recover the costs of the cleaning operation which amounted to over $200,000. UCO counterclaimed for approximately $112,000, the value of the 3,915 barrels which were not delivered.

 The arbitration panel conducted seven hearings between December 17, 1982 and May 1, 1984. Seven witness testified and numerous exhibits were received into evidence. The Arbitrators denied UCO's claims for non-delivery of cargo and attorneys' fees and expenses. The panel awarded Trans-Asiatic a total of $371,502.67, representing excess demurrage incurred in connection with the discharge problems and cleaning, cleaning costs, additional bunkers, and interest from August 20, 1980 to January 15, 1985 at 14.195% on the sum of $228,512.21. The award also directed UCO to pay Trans-Asiatic $25,000 toward legal expenses, making for a grand total of $396,502.67. UCO was directed to pay to award within 30 days of January 15, failing which, interest would commence accruing on the principal sum of $228,512.21 at the rate of 10.5% until paid or reduced to judgment by a Court having jurisdiction. The Arbitration panel also allocated between the parties the costs of the arbitration. *fn2"

 THE PETITION TO VACATE

 UCO petitions the Court to vacate the award on the following grounds. First, UCO alleges the Arbitrators manifestly disregarded the law by improperly allocating the burdens of proof on UCO. Second, the Arbitrators allegedly disregarded and avoided consideration of determinative facts favorable to UCO's position for which there was no evidence. In other words, the Award does not meet the fundamental test of rationality. Finally, the Arbitrators acted ultra vires in awarding interest on the amount awarded to Trans-Asiatic since neither the contract between the parties nor the submission agreement provided for the award of interest.

 The Court's power to vacate an arbitration award is limited to the grounds set forth in 9 U.S.C. § 10. Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 LEd. 168 (1953). Arbitrators are not required to explain their conclusions in the awards they issue. Id. at 436, 74 S. Ct. 187; Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1214 (2d Cir. 1972). "When arbitrators explain their conclusions . . . in terms that offer even a barely colorable justification for the outcome reached, confirmation of the award cannot be prevented by litigants who merely argue . . . for a different result." Andros Compania Maritima v. Marc Rich & Co., A.G., 579 F.2d 691, 704 (2d Cir. 1978). It is not the function of the district court to review the record of the arbitration proceedings for errors of law or fact. Saxis S/S Co. v. Multifacs International Traders, Inc., 375 F.2d 577, 581-82 (2d Cir. 1967).

 UCO's first basis for challenging the award relies upon the rule under the United States Carriage of Goods by Sea Act, 46 U.S.C. § 1300 et seq. ("COGSA"), that once non-delivery of cargo is established "the burden of proof is on the carrier to establish that the [loss] was not due to its negligence, or that it was occasioned by one of the 'excepted causes' listed in § 1304(2)." Amerada Hess Corp., 558 F. Supp. at 1167; Demsey & Associates v. S.S. Sea Star, 461 F.2d 1009, 1015 (2d Cir. 1972). UCO alleges that although the Arbitrators were aware of this rule they deliberately refused to apply it. Such conduct, UCO claims, amounts to manifest disregard of the law of the part of the Arbitrators. "The 'manifest disregard' standard has been construed to require a showing that the arbitrator ...


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