Fifth Circuit Holds Time Charterer Is Not Liable For Allision With A Barge And Dock In Houston Ship Channel

• Published date: 26 September 2022
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Marine/ Shipping, Trials & Appeals & Compensation
• Law Firm: Lane Powell
• Author: Ms Katie Matison

In August, a panel of the Fifth Circuit Court of Appeals held that the time charterer of a bulk carrier, did not exercise operational control over the vessel to be deemed either a de facto vessel owner or bareboat charterer. Further, in Grand Famous Shipping Limited v. China Navigation Company PTE., Limited, — 45 F.4^th – (5^th Cir. 2022), 2022 WL 3351781, the Court held that the time charterer was not required to investigate either the vessel owner's finances or its safety management system before executing the time charter.

What Exactly is a Charter Party?

A charter party is a maritime contract for the lease or use of an owner's vessel. GRANT GILMORE & CHARLES L. BLACK, JR., The Law of Admiralty 193 (2d ed. 1975) defines a charter party as "arrangements and contractual engagements entered into when one person (the 'charterer') takes over the use of the whole of a ship belonging to another (the 'owner'). The three types of charter parties are (1) the voyage charter; (2) the demise or bareboat charter; and (3) the time charter. A time charter is a charter for a specific period of time. "The time charter is used where the charterer's affairs make it desirable for him to have tonnage under his control for a period of time, without undertaking the responsibilities of ship navigation and management of the long-term financial commitments of vessel ownership. Id. at 194.

China Navigation Time Chartered the M/V YOCHOW

In 2013, Grand Famous Shipping, Ltd. ("Grand Famous") , the owner of a bulk carrier,¹ executed a time charter party with China Navigation for the carriage of cargo for a specific period of time. The negotiations were conducted through a shipbroker. The time charter was a traditional time charter—and the Owner—Grand Famous—remained responsible for navigation of the vessel, the crew, and all operational aspects. Notably, Grand Famous was also responsible for the insurance of the vessel, paying all port expenses and compliance with the International Ship Management Code ("ISM Code"). The charter party allowed China Navigation to paint its colors on the vessel during the term of the charter party.

An Exhausted Helmsman Steered the M/V YOCHOW into a Moored Barge and Dock

On June 13, 2018, the M/V YOCHOW was sailing through the Houston Ship Channel. Although the captain directed the helmsman to steer hard right (starboard), the exhausted crewmember steered the vessel in the opposite direction. The M/V YOCHOW then allided with a moored barge, the OSG 243...