Shipping Update: Piracy Off-hire or not?

In Cosco Bulk Carrier Co. Ltd. V Team-Up Owning Co. Ltd. (The "Saldanha") [2010] EWHC 1340, the High Court has ruled on whether detention by pirates entitled charterers to put the vessel off-hire.

The Facts

The bulk carrier "Saldanha" was time chartered on the NYPE form with additional clauses for a charter period of 47 to 50 months at US$52,500 per day. She was delivered into the charter in July 2008.

On 22 February 2009 the vessel was seized by Somali pirates in the Gulf of Aden whilst on a voyage carrying coal from Indonesia to Slovenia. Having been forced to sail to the waters off the Somali town of Eyl, the vessel was detained until 25 April when she was released by the pirates. She reached a position equivalent to the location on which she was seized on 2 May.

The charterers refused to pay hire for the period between 22 February and 2 May. Owners claimed for hire plus the cost of bunkers, additional war risk premium and crew war risk bonuses.

The Issues

Although various preliminary issues were considered at arbitration, the appeal to the High Court focused on clause 15 of the NYPE charterparty which provided as follows:

"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... 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...."

(Emphasis added)

At arbitration it had been held that the "full working" of the vessel had been prevented by the actions of the pirates and this finding was uncontested on appeal. However, the tribunal had also gone on to find that charterers had failed to establish that the full working of the vessel had been prevented by any of the three causes in Clause 15 (indicated in bold above) namely:

Detention by average accidents to ship or cargo; Default and/or deficiency of men; Any other cause. Charterers appealed to the High Court on these three issues.

High Court

Mr Justice Gross first considered the relevant basic principles, which were not in dispute: the starting point under a time charterparty is that hire is payable continuously unless charterers can bring themselves within one of the exceptions, the onus being on charterers to do so. Any doubt as to the meaning of...