A new ruling finds that trip charters can offer unexpected flexibility for charterers
What does a time charterer who charters a vessel for a trip from A to B promise to do? Does he, for example, undertake to load cargo only at the specified load ports, for discharge at the specified disports? Or is the description of the “trip” effectively irrelevant, so that as long as the charterer redelivers within the contractual redelivery range, he can during the stated duration trade the vessel wherever he likes? This issue was fully explored in the judgment in the Wehr Trave.
The vessel was chartered on an NYPE form for one time charter trip “via East Mediterranean/Black Sea to Red Sea/Persian Gulf/India/Far East always via Gulf of Aden”. The charter duration was “minimum 40 days”. Redelivery was to be Colombo/Busan range, including China. On the day she was delivered, the charterer gave voyage instructions showing loading ports in the Black Sea and Turkey, a probable discharge port rotation of “Jeddah + Muscat + Hamriyah + Jebel Ali + Dammam”.
Having loaded her cargo, the Wehr Trave proceeded to discharge ports in the Red Sea, the Gulf of Oman, Sohar, and the Persian Gulf. The last of the cargo was discharged in Dammam, and during discharge, the charterer ordered the vessel to load further cargo at Sohar for discharge in India.
The owner refused. They stated that the order to sail to Sohar was illegitimate because the charterer was not entitled to load additional cargo once the initial cargo had been completely discharged. The charterer persisted with its orders, arguing that it was entitled to employ the vessel as it wished, provided it did not infringe any of the restrictions in the charter.
The vessel undertook the voyage and in due course an arbitration progressed. The charterer succeeded in the arbitration, the arbitrators finding that it was entitled to employ the vessel for the further voyage.
“In terms of restrictions, if a vessel is chartered under a time charter trip to a specific place, the charterer is entitled to send the ship only to places which are broadly speaking ‘on the way’.”
The owner appealed this decision to the High Court, deploying two main arguments. First, it argued that “one time charter trip” meant a voyage from one place, or range of places, to another, and that “one” such trip clearly meant a single voyage of this kind. The charterer therefore had the right to load in the “Eastern Mediterranean/ Black Sea” and to discharge at ports in the “Red Sea/Persian Gulf/India/Far East”. Therefore, the charterer was not entitled to load in the latter range, and hence not in Sohar.
Second, the owner argued that the “trip” defined the duration of the charter which came to an end with the conclusion of the cargo-carrying leg, and that the right to load cargo therefore came to an end with that trip. If not, then there was a risk that a one trip time-charter would become “open-ended”.
The court decided in favour of the charterers. It held that the trip conducted under a trip time charter could reflect a number of permutations, including loading at a single port and discharging at a single port, but also a series of loading and discharging operations at different ports along the contractual route.
It also found that as the charterer was only permitted to give orders that were lawful (i.e. within the trading limits and on the contractual route) the charter party would not be open-ended. It was, after all, open to the parties to agree the trading limits and contractual route.
While some have argued that the Court’s decision is controversial, it is in line with previous English cases (e.g. The Aragon). In terms of restrictions, if a vessel is chartered under a time charter trip to a specific place, the charterer is entitled to send the ship only to places which are broadly speaking “on the way”. However, the charterer otherwise has a great deal of freedom where he can order the vessel to go.
Boiled down to the essentials, it seems that as long as the charterer redelivers within the contractual range, and the route he has taken there from the place of delivery was substantially on the way to that destination, he will have complied with the terms of the charter.
Edward Waite is an associate at Holman Fenwick Willan. He can be contacted on +44 (0)20 7264 8266 or Edward.firstname.lastname@example.org.