July 5, 2016

“WEHR TRAVE” - Be careful not to “trip”

The Commercial Court's recent decision in SBT Star Bulk & Tankers (Germany) GmbH & Co. KG v Cosmotrade SA (The "WEHR TRAVE") [2016] came as a warning to owners when entering into trip voyage charters. With the Court asserting that no single definition as to what constitutes a "trip" or "one trip" exists, the scope of any "trip time charter" will depend upon the particular terms agreed between the parties.

As the current case demonstrates, it is up to the parties to overcome the hurdles of the all-embracing trip time charter definition.

Facts

On 16 October 2013, the "WEHR TRAVE" (the Vessel) was chartered on an amended NYPE 1946 form with additional clauses, which, inter allia, provided:

"That the said Owners agree to let, and the said Charterers agree to hire the said vessel, from the time of delivery, for … one Time Charter trip via via (sic) good and safe ports and/or berths via East Mediterranean/Black Sea to Red Sea/Persian Gulf/India/Far East always via Gulf of Aden, with steels and/or other lawful/harmless general cargo, suitable for carriage in a cellular container vessel as described…"

The Vessel was delivered in the Black Sea where it loaded cargoes at three ports (Sevastopol/Avitla, Novorossiysk and Constantza/Agigea). It then proceeded on its route, discharging at one port in the Red Sea (Jeddah), one port in the Gulf of Oman (Sohar), and three ports in the Persian Gulf (Hamriyah, Jebel Ali and Dammam).

Before completing the discharge at Dammam, the charterers ordered the Vessel to load further cargo at Sohar (Oman) for discharge in India. This led to a dispute between owners and charterers as to whether charterers were contractually entitled to give the vessel the order to load at Sohar for discharge in India, under the charter, i.e. whether this was a legitimate or an illegitimate order.

The key issue

On a true construction of the charter, after the vessel had discharged the entirety of all previous loaded cargo, were the charterers under a "one time charter trip" entitled to order the empty vessel to another load port in order to perform a further trip/voyage, or only to order the vessel to proceed to the agreed charter redelivery place, having completed the agreed one time charter trip?

The judgment

The Court held that the charterers were entitled to order the vessel to perform the further trip/voyage. In delivering the judgement, the Hon Sir Bernard Eder confirmed that time charters can be divided into two main categories: term time charters (where the charter period is agreed in advance), and trip time charters (where the charter period is defined by a trip within a geographical range). As per Popplewell J in the "WISDOM C", "the defining characteristic of a time charter is that the vessel is under the directions and orders of the charterer as regards its employment. It is the charterer who determines what voyages the vessel is to undertake and what cargo it is to carry, within the geographical and other constraints contained in the particular charterparty clauses".

The Court emphasised that from the charterer's perspective, one of the advantages which a time charter (including a trip time charter) has over a voyage charter is that voyage orders under a time charter do not constitute an irrevocable election.

It further asserted that the concept of a "trip time charter" embraces (or at least may embrace) a number of possible permutations. For example, a "trip" may involve loading cargo at A and a single voyage to X to discharge the cargo there, or it may involve several loading and discharging operations at different ports along a route from A to Z, e.g. loading at A discharging at X, then loading at B discharging at Y, and then loading at C discharging at Z. There is no single definition as to what constitutes a "trip" or "one trip".

Comment

As the current case demonstrates, it is up to the parties to overcome the hurdles of the all-embracing trip time charter definition. Clear wording is essential. Before entering into an agreement, parties should carefully define and agree the geographical range and route of the "trip" to be followed, and use clear language to that effect.