May 2, 2019

“The Eleni P” – Owners denied hire from hijacked vessel

The Commercial Court dismissed a shipowners' claim for hire exceeding USD 4.5 million in respect of a period of seven months during which their vessel "The ELENI P" was detained by Somali pirates in the Arabian Sea. In reaching its decision the Court applied fundamental principles of contractual construction in a time charter context. Clyde & Co acted for the successful charterers/defendants.

Background

Eleni Shipping Limited v Transgrain Shipping BV (“The ELENI P”) [2019] EWHC 910 (Comm) was an appeal from an arbitration award, pursuant to s.69 of the Arbitration Act 1996, over the correct construction of two additional typewritten clauses, Clauses 49 and 101, in a time charter on an amended NYPE 1946 form. The Tribunal had rejected the Owners' claim on the basis that hire was excluded by each of the two clauses.

Clause 49 

"Should the vessel be captures [sic] or seized 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 for the actual time lost […]".

Clause 101 

"Charterers are allowed to transit Gulf of Aden any time, all extra war risk premium and/or kidnap and ransom as quoted by the vessel’s Underwriters, if any, will be reimbursed by Charterers. […] In case vessel should be threatened/kidnapped by reason of piracy, payment of hire shall be suspended. It’s remain understood [sic] that during transit of Gulf of Aden the vessel will follow all procedures as required for such transit including but not limited the instructions as received by the patrolling squad in the area for safe participating to the convoy west or east bound".

In addressing the question, Popplewell J undertook a syntactical and contextual analysis, the latter relating to the parties' allocation of risk in the Charterparty as a whole, and concluded that Clause 49 only applied to capture carried out by an authority or legal process, and therefore not to capture by pirates. The appeal succeeded in respect of clause 49.

However, the Owners' appeal ultimately failed as the judge held that the payment of hire was nonetheless suspended over the relevant period by virtue of Clause 101.

Popplewell J agreed with the Tribunal's finding that Clause 101 applied to detention by pirates as an immediate consequence of transiting the Gulf of Aden rather than by reference to a particular geographical area, for three reasons:

First, the Tribunal found as a matter of fact that the expression "Gulf of Aden" was not capable of being given a geographical definition in this context – a finding that was not susceptible to challenge on an appeal under s.69.

Secondly, the principal purpose of Clause 101 was to enable the Charterers to trade the Vessel through the Suez Canal. The purpose of the third sentence was to allocate to the Owners the risk of delay from detention by pirates as a consequence of the first sentence, which permitted the Charterers to give instructions to the Owners for transit through the Gulf of Aden. Against the factual finding of the Tribunal, namely that in 2010 it was well known in the shipping community that transiting the Gulf of Aden exposed ships to the risk of piracy in the Arabian Sea generally and not only in a particular area, the natural construction of the allocation of risk was that the Vessel should be off hire if it was detained by reason of piracy as an immediate consequence of the transit.

Thirdly, the allocation of risk in the Charterparty provision relating to each of war risks, kidnap and ransom, and crew war bonus was not tied to a single and definable geographical area.

Comment

The decision highlights the willingness of the Commercial Court to review the decision of an experienced panel of shipping arbitrators by embarking on its own analysis of the correct construction of a charterparty and by examining the intended allocation of risk between the parties in the context of perils such as piracy. In addition, this case provides a prime illustration of the manner in which the Court will review the meaning and effect of contractual wording by undertaking a granular analysis of the semantics of the terms used.