Nordisk Circular
March 2020

NOTE – Off-hire issues under various charterparties

The below comments examine whether a vessel may be off-hire if the vessel is delayed due to (i) free pratique not being granted, or (ii) quarantine in the subsequent port after having called an affected port.

The focus here is on existing contracts, rather than post-outbreak charterparties which will typically seek to regulate the issue.

We will address three time charterparties below:

Shelltime 4:
The general off-hire provision is found in clause 21. Hire shall be suspended if there is a loss of time “due to deficiency of personnel (…) or any other similar cause preventing the full working of the vessel”. As a starting point note the need for loss of time to have been caused by the off-hire event, absent which there can be no off-hire. Where delay is suffered by a concurrent cause there is typically no off-hire.

A further requirement is that the vessel is prevented from working. A ship is not prevented from working merely because she cannot perform the next operation that the charterers contemplate, or were expecting, her to undertake. The relevant question is whether she is prevented from carrying out the service immediately required by charterers. As held in one case: “The question is not what the charterers hoped or expected their orders would be, but what service they actually required.” As a consequence, it is necessary to assess precisely what order the charterers have given to the vessel. If the order is to go to port X and start loading, and the vessel is prevented from berthing due to inability to obtain free pratique or is restricted by a quarantine, it may well be considered to be prevented from working in the meaning of clause 21. Insofar as that order requires the vessel on arrival to comply with local regulations, but there is nothing physically wrong with the vessel or crew, the delay is merely incidental to carrying out the orders given such that charterers will struggle to place the vessel off-hire.  Similarly, if the order is to go to port X and wait for berth, owners may say that they are in compliance with this order, even when awaiting free pratique or a quarantine. This is also an example of there being no loss of time despite the possible existence of an off-hire event.

Deficiency of personnel is understood to mean numerical deficiency. If crew members fall ill and are unable to work, it may be argued that there is “deficiency of personnel”.  Assuming no crew member is ill and the crew is in adequate numbers, it will be virtually impossible for charterers to argue that there is deficiency of personnel. The clause, however, does expand the list of possible off-hire events, by adding “any other similar cause preventing the full working of the vessel”. Due to the use of “similar cause”, it is clear that the sweep-up alternative shall be read in light of the list of off-hire events in clause 21 (a). As a consequence, only events of a similar nature will be covered by the more general sweep-up language. When examining the preceding events, the view is that they refer to the efficiency and condition of the ship and her crew, which is quite different from waiting for free pratique and quarantine, which are both a result of the commercial trading of the vessel – provided that the delay in obtaining free pratique or quarantine is a direct result of the vessel’s previous port call(s) and not due to suspicion of, or actual illness of, the crew. Thus it will be fairly difficult for charterers to place the vessel off-hire pursuant to the general off-hire clause.

It is also worth noting that clause 21 (a) (iv) contains regulation of a related situation – namely delay due to quarantine as a result of the master or crew having had communication with an infected area without consent or instruction from charterers. In such event, the vessel will be off-hire for the time lost. This sub-clause supports the idea that time waiting for free pratique or in quarantine is on-hire (as per the above). Charterers bear the delay risk, including time waiting to berth, as well as waiting for free pratique or in quarantine. Only events where the delay in quarantine is caused by the master/crew’s action shifts the risk, which in turn arguably required the particular regulation in clause 21 (a) (iv). It is worth noting that in relation to crew change, clause 21 (a) (iv) may cause a problem for owners if the incoming crew is being quarantined upon arrival in the country where the crew change is to take place and the vessel as a consequence is delayed. There is a possibility that this situation will result in off-hire for the time lost as the incoming crew is unlikely to have had communication with the affected area as part of charterers’ instructions or with their consent.

Even if a vessel is off-hire for time waiting for free pratique or in quarantine, owners may have defences available. There is generally an implied indemnity available to owners for the consequences of following charterers’ orders, unless the relevant risk is one that the owner can be considered to have assumed.  An assumed risk is one that is generally known at the date of the charter. Thus even if it was known that the particular port was affected when the vessel was sent there, the consequence (problems with obtaining free pratique or quarantine) may be considered to be a direct result of charterers’ order to send the vessel to the port nevertheless, for which the Charterers will be responsible. If the vessel faces quarantine in the next port after calling the affected port, and the next port is the first port under a new charterparty, the argument may not be available if the virus was a known issue at the date of that charterparty. In the case of new fixtures where the vessel has been in an affected port/will go to an affected port before being delivered into a new charter, we strongly recommend insertion of wording regulating the possibility of delay and quarantine.

It is also worth noting that the exceptions clause, clause 27, expressly regulates liability for quarantine restrictions – neither party shall be “liable for any loss or damage or delay or failure in performance hereunder arising or resulting from (…) quarantine restrictions.”  This clause will be an available defence against a claim for damages for alleged breach of contract, but does not affect the off-hire.

BPTIME 3
In BPTIME 3 the general off-hire regulation is in clause 19. The wording of the clause is to a certain extent similar to Shelltime 4, but differs on a potentially important point. Even though the specified off-hire events are to a large extent the same as in Shelltime 4, the list of off-hire events in clause 19.1.4 contains general sweep-up language “any other cause preventing the full working of the Vessel”, while the corresponding clause in Shelltime 4 refers to “any other similar cause.” The question is whether the generality of the wording of BPTIME 3 clause 19.1.4 will make the clause more extensive than the corresponding wording in Shelltime 4. In legal theory and case law the phrase “any other cause” has been held to mean ‘any other cause of the same type as those previously mentioned’. This is an application of the ejusdem generis rule, a rule of construction to the effect that a sweep-up provision at the end of a list must be taken to refer to the same kind of things as those specifically mentioned. In The Laconian Confidence [1997] 1 Lloyd’s Rep. 139, Rix, J., said at page 150: “In my judgment it is well established that [the words ‘any other cause’], in the absence of ‘whatsoever’, should be construed either ejusdem generis or at any rate in some limited way reflecting the general context of the charter and clause.”

In order to apply the above rule, it is necessary to identify the common features of the named causes. This is not obvious. However, it seems that there is commonality relating to the condition of the ship or her crew. In The Laconian Confidence [1997] 1 Lloyd’s Rep. 139 said, at page 150, Rix, J., said: “A consideration of the named causes indicates that they all relate to the physical condition or efficiency of either vessel (including its crew) or, in one instance, cargo. There is, moreover, the general context, emphasized for instance by Mr Justice Kerr in The Mareva AS (at page 382) that it is for the owners to provide an efficient ship and crew.” The reference in clause 19.1.3 to clause 9.6.5 as a separate off-hire event may cause some problems in this matter, when assessing the meaning of clause 19.1.4. Clause 9.6.5 refers to an obligation for owners to have all documents required to trade within the trading limits. If the reason for the vessel being prevented from obtaining free pratique or held in quarantine is caused by failure to provide required documents, there is a possibility that clause 19.1.4 may be applicable, even if the documents needed do not fall within the scope of clause 9.6.5.

If the vessel despite the above is placed off-hire, the same defence as presented above for Shelltime 4 will be available to owners (implied indemnity for complying with charterers’ orders).

ExxonMobil Time 2012
Clause 11 regulates the charterers’ right to place the vessel off-hire. The list of off-hire events is relatively similar to what is found in Shelltime 4 and BPTime 3, but does not contain a sweep-up provision of the kind found in the other two charterparties. In addition, the issue of quarantine is expressly regulated in clause 11 (a) line 835, where it is stated that time spent in quarantine shall be for charterers’ account. As a consequence, the vessel will not go off-hire unless the quarantine is caused by the Master or crew having communications with the shore at an infected port subject to charterers having given the Master adequate written notice of the infection risk.

The clause does not regulate free pratique expressly. Clause 11 (a) (i) refers to “detention or other interference by authorities”, which charterers could potentially argue will cover the refusal to grant free pratique. However, when read in light of item (i) as a whole, it is unlikely that such an argument would succeed, both because the “other interference has to be read in light of the preceding events (capture, seizure and arrest)” and also because item (i) relates to the condition of the vessel as such, while items regarding the crew are regulated in item (ii).

It is worth noting that if any of the crew members fall ill due to the virus and this is what causes delay, the charterers may pursuant to clause 11 (a) (ii) place the vessel off-hire.

Written by Camilla Bråfelt.