MV 'ARCTIC' – Obligation To 'Keep Vessel In Class' Is An Innominate Term

Summary

The Court of Appeal's decision in Ark Shipping Co LLC v. Silverburn Shipping (IOM) Ltd, "ARCTIC" [2019] EWCA Civ 1161, provides a clear statement of the principles of construction, and how they are applied in ascertaining whether a term is a condition or an innominate term.

This decision provides guidance on the proper interpretation of parties' continuing obligations during the life of a bareboat charterparty in relation to matters such as classification status, and the consequences if a charterer fails to fulfil such obligations. It also demonstrates the Court's reluctance to classify contractual terms as conditions, where the risk of disproportionate consequences outweighs the advantages of commercial certainty.

While this case is particularly relevant to bareboat charterers, it is also anticipated to have implications for the interpretation of similar obligations in a time charter context.

Ark Shipping Company LLC v. Silverburn Shipping (IoM) Ltd [2019] EWCA Civ 1161

In a judgment of 10 July 2019, the Court of Appeal heard an appeal of a High Court decision dated 22 February 2019, where an appeal from an LMAA arbitration award was brought pursuant to s. 69 of the Arbitration Act 1996.

Facts

The claimant owners (Owners) let the vessel to the defendant charterers (Charterers) under a charterparty in an amended BARECON '89 form for a period of 15 years in October 2012. The facts, as summarised by the judge at first instance ,were: "She arrived at the Caspian port of Astrakhan for repairs and maintenance on 31 October 2017. Her class certificates expired on 6 November 2017, before she entered dry dock for repairs five years after her last special survey."

The Owners sought to terminate the charterparty on 7 December 2018 because the vessel's class had expired, and the Charterers were in breach of Clause 9A of the charterparty, which requires charterers to keep the vessel with unexpired classification certificates at all times. The Charterers resisted on the basis that the vessel had arrived in dry dock before the documents expired, and that she was not out of class; and also that the class requirement was a condition of the contract.

Charterparty

The charterparty was in an amended BARECON '89 form, an industry standard form.

The maintenance and operation clause in Clause 9A in Part II of the charterparty provided:

"The Vessel shall during the Charter period be in the full possession and at the absolute disposal for all purposes of...