In Eleni Shipping Limited v Transgrain Shipping BV (“The ELENI P”)  EWHC 910 (Comm), Popplewell J held that Owners were not entitled to claim hire from Charterers in the sum of around US$4.5 million in respect of a period of seven months during which the Vessel was detained by Somali pirates in the Arabian Sea. In doing so, Popplewell J provided a concise and transparent example of the application of the fundamental principles of contractual construction in the context of time charter disputes – and showed a firm willingness to challenge the views of an experienced maritime tribunal.
Owners were represented by Robert Thomas QC, instructed by Evangelos Catsambas, Watson Farley & Williams and Charterers were represented by Thomas Macey-Dare QC, instructed by Eurof-Lloyd-Lewis and Emma Skakle, Clyde & Co LLP.
The Vessel, subject to a time charter on an amended NYPE 1946 form, was ordered to load a cargo of iron ore at a port in Ukraine for discharge at Xiamen in China. The Vessel was routed via the Suez Canal and the Gulf of Aden. She sailed through the Gulf of Aden without incident and into the Arabian Sea, but was there attacked and captured by pirates. She was only released by the pirates some seven months later.
Owners claimed hire in the sum of around US$ 4.5 million over the time during which the Vessel was captured and detained by pirates.
The Tribunal rejected Owners’ claim for hire in this period on the basis that it was excluded by each of two additional typewritten clauses in the Charterparty, clauses 49 and 101. Owners appealed in respect of the correct construction of each pursuant to s69 of the Arbitration Act 1996. The appeal succeeded in respect of clause 49, but Popplewell J held that the hire was nonetheless suspended over the relevant period by clause 101.
Clause 49 – Capture, Seizure and Arrest – 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 […]
Owners contended before Popplewell J that Clause 49 only applied when the Vessel was captured, seized, detained or arrested by any authority or any legal process – it therefore did not apply to capture by pirates. Charterers argued that only the word “arrested” was qualified by the phrase “by any authority or by any legal process” – the word “captured” was not so qualified, and as a matter of ordinary language, the Vessel had been captured.
Popplewell J rejected this argument, holding that Clause 49 only applied to capture where by an authority or legal process, and therefore not to capture by pirates. The phrase “any authority or any legal process” must apply to the whole preceding list of events - if it applied only to arrest it would be superfluous, and the drafting would be “surprisingly inept”. His Lordship also found that the contrary construction was inconsistent with the terms of Clause 15, which only put the Vessel off-hire for detention “by average accidents to ship or cargo” – on Charterers’ construction, Clause 49 would render any detention an off-hire event and “substantially cut across the careful allocation of risk in clause 15, without any apparent commercial rationale for doing so”.
Popplewell J therefore disagreed with the Tribunal’s assessment that “capture” is not something that an “authority” could be involved in and therefore should be read as a freestanding exclusion. In characteristically pithy terms, his Lordship explained “capture does not necessarily connote the use of force. Unoccupied land or undefended goods may be captured. My wife may capture my heart. I see no difficulty as a matter of the ordinary use of language in the concept of a governmental authority or ruler capturing a vessel.”
Clauses 101 – Piracy Clause – 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.
Owners argued that the latter cited sentence only put the Vessel off hire if threatened by piracy occurring during transit of the Gulf of Aden, a finite geographical area capable of definition. Charterers, by contrast, argued that it applied wherever the Vessel was threatened in the Gulf of Aden or as an immediate consequence of her transiting or being about to transit the Gulf.
The Tribunal had held that (a) there was no generally understood precise definition of the Gulf of Aden as a geographical area in the context of a time charter of this kind and (b) the parties knew that transiting the Gulf of Aden exposed the ships to the risk of piracy not only in any area that could be precisely defined as the Gulf, but also in the Arabian Sea, and that the risk of piracy was expanding.
Popplewell J noted the silence of the language of the clause on the question posed, but agreed with the Tribunal for three reasons. First, the Tribunal found as a matter of fact that the Gulf of Aden was not capable of being given a geographical definition in this context – such a finding itself not being susceptible to challenge.
Second, Clause 101 is concerned with voyages through the Gulf of Aden – its purpose is to oblige Owners to accept instructions to trade the Vessel through the Suez canal, in order to make the Vessel more attractive to Charterers, and allocate the risks thereof. The first sentence allocates the burden of an extra war risk premium – and the sentence concerning hire suspension is to allocate the risk of delay from detention as a consequence of the transit which the first sentence requires. It should therefore apply to the immediate consequences of the transit through the Gulf of Aden, and not just be referable to a specific geographic area.
Third, the war risk and kidnap ransom premium are not defined by reference to a single geographic area – and there is no basis for reading the provision on hire suspension differently.
At the core of his reasoning was the purpose of Clause 101 – to permit Charterers to engage in trade through the Gulf of Aden – and that the Clause was intended to allocate the risks associated with such trade, not solely within a specifically defined geographical area.
Consequently, despite a considerable victory in relation to Clause 49, Owners’ appeal ultimately failed. The judgment of Popplewell J nonetheless provides an excellent example of the willingness of the Commercial Court to engage with both the text of the Charterparty and the underlying allocation of risk arising out of voyages as perilous as those ordered by Charterers in this case.