SHIPPING LAW, INTERNATIONAL TRADE DEMURRAGE & DETENTION CHARGES

Legal Updates from YHA Law Firm

SHIPPING LAW, INTERNATIONAL TRADE DEMURRAGE & DETENTION charges

Recently there is a dispute between shipping lines and shippers on landside charges imposed. Shippers (represented by MNSC and FMFF) claimed shipping lines to be “profiteering” from these charges. Two of these charges are demurrage and detention. What are demurrage and detention and whether they are charges valid under the shipping law in Malaysia?

What are demurrage and detention?

Most charterparties will provide agreed lay days for loading and discharging of cargo to be completed. Charterer is required to complete loading and discharge during this period. This period is known as “laytime” or “lay days“.

However, some charterparties will provide for “additional” period (on top of laytime) for charterers to complete loading and discharge on payment of a fixed daily amount. This is termed demurrage. For example, if the agreed laytime in a charterparty is fixed for “3 days after which demurrage at RM1,000.00 for an additional 3 days” and if loading is completed on the 5^th day, the liner is entitled to charge demurrage of RM2,000.00 (being an additional period of 2 days outside laytime to complete the loading operation).

By relying on the above example, what happened if loading cannot be completed on the 6^th days and was completed on the 10^th day. In this situation, the additional days outside the number of days fixed for demurrage is also known as “detention”. Liner is then entitled to be paid “detention charges” or “damages for detention“. On a side note, if demurrage is not provided in a charterparty, any additional days spent to complete loading and discharge will be treated as detention too.

Are demurrage and detention valid charges in Malaysia?

It must be remembered, demurrage and detention are purely creation of contract in English law. These are essentially “liquidated damages” in English law required to be paid in contract as a result of the charterer’s breach for its failure to load or discharge within laytime. In UK, liquidated damages are allowed to be claimed as long as they are not “extravagant and unconscionable” in which event it will be treated as a penalty.

However, unlike in the UK, there is no distinction between liquidated damages and penalties in Malaysia. Any sum named in a contract as the amount to be paid in case of breach it is to be treated as penalty. In another words, demurrage and detention (which is essentially a sum named in a contract) is treated as a penalty in Malaysia. It follows that liner is only allowed to recover “reasonable compensation” under Section 75 of the Contracts Act notwithstanding what is stipulated as demurrage and detention in the charterparty. Liner is required to prove actual damage suffered before they are entitled to claim demurrage and detention.

Hence, whenever there is a claim for demurrage and detention in Malaysia, Charterer should insist upon the liner to show actual losses. Ask the liner what are the actual losses liner would suffer as a result of delay. Charterer in Malaysia should recognise that there is a difference between shipping law in Malaysia and that of the shipping law in the UK insofar as demurrage and detention is concerned.

ADMIRALTY IN REM – WRONGFUL ARREST – POSSESORY RIGHT – ARREST GONE WRONG: WHEN A SHIP ARREST BACKFIRES WITH DAMAGES

In Eletson Holdings Inc & Ors v The Vessel “Paros” [2026] 8 MLJ 80, the High Court set aside an arrest after finding that the plaintiffs had no proprietary or possessory right to the vessel at the time of the writ, as the bareboat charter had already been terminated. The Court held that the claim was in substance a corporate control dispute dressed up as an admiralty action, and emphasised that such disputes do not fall within admiralty jurisdiction. Critically, the plaintiffs’ failure to disclose the termination of the charter when obtaining the arrest warrant amounted to a serious breach, leading the Court to find mala fides or gross negligence and order damages for wrongful arrest. The decision reinforces that ship arrest is a powerful remedy that must be exercised with full disclosure and a proper maritime foundation.

14 July ,2026 No Comments

GUARANTEE – PERSONAL GUARANTEE ≠ PAY ON DEMAND: COURT DRAWS THE LINE BETWEEN SURETYSHIP AND DEMAND GUARANTEES

In CE Energy DMCC v Bashar [2026] Lloyds’s Rep 267, the Commercial Court clarified that not all guarantees labelled “on demand” will be treated as demand guarantees. On a proper construction, the court held that the personal guarantee in question was a contract of suretyship, requiring proof of the principal debtor’s liability rather than automatic payment upon demand. Crucially, the court found that the debtor’s “irrevocable” admissions of debt in a payment agreement created a binding contractual estoppel, which the guarantor could not challenge. The decision also confirms that, where payment is due on a “day certain”, a seller may still claim the price notwithstanding retention of title. The case underscores the importance of precise drafting and the risks of entering into settlement agreements that conclusively fix liability.

14 July ,2026 No Comments

MARITIME NEGLIGENCE – PLAINTIFF CLAIMED FOR DAMAGES CAUSED DURING ANCHOR DEPLOYMENT OPERATION – CALDERBANK OFFERS

In Tom Eastwind 365 Sdn Bhd v The Owners of the Vessel “Icon Sophia” [2025] 9 MLJ 397, the High Court held that the doctrine of res ipsa loquitur applied in a maritime collision during an anchor deployment operation, allowing an inference of negligence against the tug owner. The Court clarified that the doctrine is not defeated merely because the defendant adduces evidence explaining the accident – such evidence goes to rebutting the inference, not preventing it. While liability was established due to the tug master’s error of judgment in manoeuvring too close to a stationary barge, the plaintiff failed to properly prove its damages and was awarded only RM50,000. Notably, despite succeeding on liability, the plaintiff was ordered to pay costs after rejecting reasonable Calderbank offers, underscoring the risks of pursuing litigation without properly substantiated claims.

14 July ,2026 No Comments

JURISDICTION – BILLS OF LADING – BREACH OF HIMALAYA CLAUSE – BREACH OF EXCLUSIVE JURISDICTION CLAUSE – ONEROUS OR UNUSUAL TERMS

In Maersk Guinéa-Bissau SARL v Almar-Hum Bubacar Baldé SARL [2026] 1 Lloyd’s Rep 215, the English Commercial Court held that a shipper was liable for breach of an exclusive jurisdiction clause and a Himalaya clause after commencing proceedings in Guinea-Bissau instead of England. The Court confirmed that such clauses are standard and enforceable, and that commencing foreign proceedings in breach of them can give rise to a claim for damages. Notably, the Court also recognised that Himalaya clauses may be used offensively, allowing subcontractors to recover losses caused by wrongful litigation. The foreign judgment was not recognised due to lack of jurisdiction and denial of natural justice.

14 July ,2026 No Comments

DELIVERY WITHOUT PRESENTATION OF BILL OF LADING – LOI WON’T SAVE YOU: SHIPOWNER LIABLE FOR MISDELIVERY DESPITE INDEMNITY

In United Overseas Bank Ltd v The “Maersk Katalin” [2026] 1 Lloyd’s Rep 18, the Singapore High Court reaffirmed that delivery of cargo without presentation of original bills of lading remains a fundamental breach, even where carried out against letters of indemnity. The Court held that LOIs merely shift commercial risk but do not authorise misdelivery, and rejected arguments of consent, ratification and causation. Significantly, the Court emphasised that the burden lies on the carrier to prove that the loss would have occurred in any event – a burden not easily discharged. The decision underscores the continued strict liability regime in misdelivery cases, particularly where banks as bill holders are involved.

14 July ,2026 No Comments

CONTRACT LAW – ‘UK COURTS’ MEANS ENGLAND: COURT UPHOLDS JURISDICTION DESPITE VAGUE CLAUSE

In SMT Global Logistics Ltd v Georgian Airlines LLC [2025] Lloyd’s Rep. Plus 89, the Commercial Court held that a clause referring disputes to “the court in accordance with current legislation of the United Kingdom” was a valid jurisdiction clause in favour of the High Court of England and Wales. The Court also confirmed that the Montreal Convention does not apply to pure contractual claims for non-performance, such as repayment and loss of profits. Emphasising a broad and commercially sensible interpretation, the Court enforced the parties’ choice of forum and refused to stay proceedings, reaffirming that jurisdiction clauses will be upheld unless there are overwhelming reasons to depart.

14 July ,2026 No Comments