Time Charters. Off-hire. Seizure & Capture Last updated 28-Dec-2016

Loss of time due to the arrest or detention by authority of a time chartered vessel is a long-standing problem, aggravated by the difficulty in obtaining compensation for an arrest or detention which proves to be unjustified or is made in support of a claim which fails.
NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20, per Lord Sumption, at para 12.

Act or omission or default of the Charterers or their agents.

In The Global Santosh time charter between the owners NYK Bulkship and the charterers Cargill for one time charter trip was made on amended NYPE form with 3 independent off-hire clauses, one printed - cl. 15 and two typed - cl. 48 and cl. 49. Clause 49 was an additional off-hire clause designed to deal with such off-hire events as capture, seizure or arrest, inter alia it said:

Should the vessel be captured or seizured or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.

Eventually vessel was sub and sub-sub-chartered to the seller of the cargo of cement, to be delivered from Sweden to the buyer in Port Harcourt in Nigeria. On arrival to Port Harcourt and tendering valid NOR, vessel suffered substantial delays which in part was attributed to the breakdown of the buyer’s off-loader. Such long delay brought about considerable demurrage liability on the part of the buyer, which prompted the seller to arrest the cargo and the vessel as a security for its demurrage claim.

Vessel was arrested for almost one month and was subsequently released and discharged her cargo. Relying on cl.49, the charterers withheld hire for the period of arrest but recommenced the payment of hire when discharge began. The owners opposed this action contending that arrest was occasioned by "personal act or omission or default of the Charterers or their agents."

The tribunal held that the proviso on which the owners rely did not apply and, accordingly, that the vessel was off-hire during the period when she was under arrest. The High Court allowed the owners’ appeal. Field J indicated that the buyer’s failure to discharge the cargo within the laydays allowed by its contract of sale with the seller and its failure to pay the resultant demurrage arising under that contract, were omissions in the course of their performance of the discharging operation because the time charterers were "… responsible for the fulfilment of the charter." He said at para 23:

[I]t was Cargill after all who set in train the process of delegation and gave delegating parties a free hand to agree terms with delegates.

The learned judge remitted the award to the arbitrators to determine whether the failure to pay demurrage could be regarded as the cause of the arrest and the resultant delay.

The Court of Appeal upheld decision of Field J. Lord Justice Gross at para 41 stated:

41. … There can be no doubt in the present case that the acts, omissions or defaults in question, culminating in the detention or arrest of the vessel (whatever the ultimate conclusion on causation), involved Cargill's delegates and fell on its side of the line. NYK was not, in any sense, involved in the apparent dispute between [the seller] and [the buyer] as to the delay in unloading the vessel. While it is correct to say that Cargill was under no obligation to discharge the vessel in any given time, the dispute in question arose out of its trading arrangements concerning the vessel.

42. … The general scheme of cl. 49 provides for the vessel to be off-hire in the case of detention or arrest; that general scheme would cover matters either on NYK's side of the line or the acts or omissions (etc.) of third parties, unconnected to either NYK or Cargill – for example, governmental authorities. Here, however, the dispute between [the seller] and [the buyer] fell – and fell clearly - on Cargill’s side of the line, with the result that hire continued to run over the relevant period (always of course subject to questions of causation). On the approach to which I am attracted, the acts or omissions of both [the seller] and [the buyer] lead to this result. While the starting point must be the construction of the clause in question, rather than any generalised assumption, the outcome is unsurprising and gives effect to the familiar division between owners' and charterers' spheres of responsibility.

In the Supreme Court, the majority (Lord Sumption with whom Lord Neuberger, Lord Mance and Lord Toulson agreed; Lord Clarke dissenting) allowing charterers’ appeal held, that for the head time charterers to be responsible for something that sub-charterers or seller and/or buyer, acting under independent sale contract between themselves, might do which results in the detention of the ship, there must be some nexus between the occasion for the arrest and the function which the seller or the buyer are performing as "agent" of the charterers. Lord Sumption formulated this priniple at para 31:

The only sense in which the arrest of the Global Santosh can be said to have been occasioned by Cargill’s trading arrangements concerning the vessel, is that by sub-chartering her to [sub-charterers] made it possible for [the seller (sub-sub-charterers)] and [the buyer] to become involved further down the chain. That in turn provided the occasion for their dispute to lead to the arrest and detention of the vessel. What this amounts to is that anything that the sub-charterers or receivers may choose to do which results in the arrest of the vessel, becomes the responsibility of the time charterer if the occasion for doing it would not have arisen but for their having come in at the tail end of a chain of contracts which the time charterer initiated. Such a test is impossible to justify, since it depends simply upon the status of the sub-charterer or receiver, and would not necessarily require any nexus between the acts leading to the arrest and the performance of functions under the time charter.


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