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Gard News 199, August/October 2010

The London Commercial Court has recently ruled that a vessel chartered on NYPE terms remained on hire whilst under the control of pirates.

In an important decision1 on an appeal to an arbitration award, the London Commercial Court has ruled that a vessel chartered on the NYPE 46 form which was seized by pirates remained on hire while it was detained. 

The charterparty
The charterparty off-hire clause (clause 15) provided:
"That in the event of the loss of time from default and/or deficiency of men including strike of Officers and/or crew or deficiency of or stores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, dry-docking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost..."

The words "default and/or" and "including strike of Officers and/or crew or deficiency of" were amendments to the standard wording.

In addition, the rider included the following additional clause:
"Clause 40 - Seizure/Arrest/Requisition/
Should the vessel be seized, arrested, requisitioned or detained during the currency of this Charter Party by any authority or at the suit of any person having or purporting to have a claim against or any interest in the Vessel, the Charterers' liability to pay hire shall cease immediately from the time of her seizure, arrest, requisition or detention and all times so lost shall be treated as off-hire until the time of her release..."

The charterparty also included a put-back clause and the CONWARTIME 2004 clause.

The facts
Whilst on charter, on 22nd February 2009 the vessel was seized by Somali pirates in the Gulf of Aden and detained until 25th April 2009. The vessel reached an equidistant position with the location at which it was seized on 2nd May 2009.  

The arguments
It was common ground that the charterers were required to pay hire for the use of the ship unless they could bring themselves within the ambit of the off-hire exceptions.

The shipowners argued that the vessel remained on hire during the period of detention because seizure by pirates did not fall within the scope of the off-hire clause.

Charterers argued that the vessel was off-hire because: detention by pirates amounts to "detention by average accidents to ship or cargo"; the phrase "default and or deficiency of men" encompasses errors, alternatively negligent errors, by the master and crew (maintaining that the crew had been negligent in failing to prevent the pirates from seizing the vessel); seizure by pirates falls within the clause 15 provision "any other cause preventing the full working of the vessel".

The decision
All of charterers' arguments were rejected by the judge, who held that capture of the vessel by pirates could not properly be described as an "accident" within the scope of clause 15. He also held that damage to the ship is an essential ingredient of an "average accident ... to ship". In addition, the expression "default of men" does not encompass inadvertent or negligent errors by the crew and its meaning is restricted to a wrongful refusal by the crew to perform their duties. A failure or inability of the officers and crew to perform their duties in circumstances where they were under duress by the pirates falls outside the scope of the sweep-up provision "any other cause preventing the full working of the vessel".

The judge also noted that the charterparty included a clause dealing specifically with the risk of seizure, which did not extend to cover seizure by pirates.

According to the judge, seizure by pirates is a "classic example" of a totally extraneous cause that falls outside the scope of the off-hire clause. The charterers' appeal against the arbitration award was dismissed. 

At the time of writing it is not known whether charterers will seek permission to appeal to the Court of Appeal.

We thank Ince & Co. for the above information.

1COSCO Bulk Carrier Co., Ltd v. Team-Up Owning Co. Ltd, The SALDANHA [2010] EWHC 1340 (Comm).