A recent decision of the English High Court1 has clarified the meaning of "charterers" and confirmed that in respect of the Supreme Court Act 1981 Section (21)(4)2 the term "charterer of the ship" includes a slot charterer. The main consequence of this is that vessels owned by all charterers, including slot charterers, are liable to be arrested in respect of claims arising out of the chartering agreement.
The proceedings arose out of an agreement in 1993 for Polish Ocean Lines (POL) to slot charter space from vessel operator MSC Mediterranean Shipping Company (MSC) on a variety of different vessels. After a period of time POL found themselves in arrears with MSC owing them freight in the region of USD 1.5 million. In 1998 agreements were entered into with a view to reducing the outstanding arrears.
POL lapsed further into arrears and as a result MSC issued a writ in rem and arrested the M/V TYCHY, owned by POL, at an English port.
The main questions to be determined by the court were, firstly, was POL, as slot charterer, a charterer within Section 21 (4) of the Supreme Court Act 1981? If so, secondly, was the claim sufficiently connected with a particular ship or ships so as to come within Section 20 (2)(h) and Section 21 (4)(a) of the Supreme Court Act 1981?3
The court held that if the term "charterer" included the time charterer it must also include a voyage charterer and that this in turn then included a voyage charterer of part of a ship. Therefore, in their view, there was no distinction between a slot charterer and a voyage charterer of part of a ship - they were both charterers of space in a ship. Therefore a slot charterer was a "charterer" within Section 21.
Next, was the claim sufficiently connected with a ship? Section 20(2)(h)4 makes it clear that the claim must arise out of an agreement and the agreement must relate to the carriage of goods in or to the use or hire of a ship. POL argued that the claims arose out of the agreements which had been negotiated between POL and MSC for the restructuring of the debt. They, therefore, lacked the necessary direct connection with any particular ship. The court rejected this argument. It held the claims arose out of agreements related to the carriage of goods in a number of different ships and that MSC's underlying claim related to the actual carriage and specific cargo in specific ships. The various agreements between MSC and POL did not alter the nature of the claims, which were claims for freight.
Members should therefore be aware that under English law in the event claims arise out of slot charter arrangements then vessels owned by those slot charterers have now become legitimate targets for an arrest.
1 MSC Mediterranean Shipping Company (MSC) v. The Polish Ocean Lines (POL) - The TYCHY (1999)2 Lloyd's Rep. 11 (CA).
2 The relevant parts of Section (21) read: "Mode of exercise of Admiralty jurisdiction 21. (1) Subject to section 22, an action in personam may be brought in the High Court in all cases within the Admiralty jurisdiction of that court. (
) (4) In the case of any such claim as is mentioned in section (20)(2)(e) to (r), where - (a) the claim arises in connection with a ship; and (b) the person who would be liable on the claim in an action in personam ("the relevant person") was, when the cause of the action arose, the owner or charterer of, or in possession or in control of, the ship, an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against (i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise; or (ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it."
3 For the text of Section 21(4)(a) see footnote 2. The relevant parts of Section 20 read: "Admiralty jurisdiction of High Court 20. (1) The Admiralty jurisdiction of the High Court shall be as follows, that is to say - (a) jurisdiction to hear and determine any of the questions and claims mentioned in subsection (2); (
) (2) The questions and claims referred to in subsection (1)(a) are - (
) (h) any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship."
4 For the text of Section 20(2)(h) see footnote 3.