Off-hire Clauses- Normally Construed Narrowly Unless the Wording Is Expansive!

Disputes concerning ‘off-hire’ clauses often require various legal construction techniques to be employed and can be rather challenging for the courts/arbitrators. However, the arbitrator managed to resolve the dispute under the relevant off-hire clause in London Arbitration 25/19 with not much difficulty.

The chartered vessel arrived at a port on the US West Coast on 23 October to discharge a cargo of steel products. The vessel’s cranes were inspected on behalf of the charterers’ stevedors by or on behalf of the International Longshore and Warehouse Union (ILWU) and the vessel failed that inspection. The owners maintained that the cranes were in good working order as they complied with all statutory and Class requirements and they had been inspected and used for loading and discharging in the US three months earlier. They also put forward a recent report from the crane manufacturers. The relevant off-hire clause in the charter party was worded in the following manner:

‘The Vessel will comply with any and all safety regulations and/or requirements applicable during the currency of this Charter Party, including those in effect of any port of loading and/or discharge. If the Vessel does not comply with said safety regulations or requirements, the Vessel will be off-hire until the Vessel is compliant with the said safety regulations or requirements… ‘

The charterers’ argument was that the vessel was off hire from the time when she failed the inspection to the time when she passed (i.e. after the cranes were repaired) and discharging started. The arbitrator found that the vessel’s failing the inspection amounted to breach of the Pacific Coast Marine Safety Code. This Code governed safe working practices and conditions for the whole of the US West Coast when ILWU labour was employed. The arbitrator found that the Code was at the very least a ‘safety requirement’ and quite possibly, for practical purposes also a ‘safety regulation’. The views of crane manufacturers, Class and engineering company were treated as irrelevant as they only reflected the earlier experience of the ship.

Given that the off-hire clause made explicit reference to ‘safety requirements’ as well as ‘safety regulations’, the outcome does not come as a surprise. Had it made reference only to ‘safety regulations’, a closer legal scrutiny of the nature and status of the Pacific Coast Marine Safety Code would have been necessary. The fact that the arbitrator refers to the Code as a ‘safety regulation for practical purposes’ indicates that from a technical perspective it might not qualify as a safety regulation! The message to charterers is very clear. Off-hire clauses are often construed in a narrow fashion so to be able to bring themselves under the off-hire clause they need to ensure that the wording used is expansive! Charterers in this case were glad that the wording in the off-hire clause was very broad i.e. made explicit reference to ‘safety requirements’. Few doubts can be raised for a finding that a Code that provides safe working practices and conditions in a port for stevedors, who are members of a trade union, is a ‘safety requirement’ for that port.                    

Published by

Professor Barış Soyer

Professor Soyer was appointed a lecturer at the School of Law, Swansea University in 2001 and was promoted to readership in 2006 and professorship in 2009. He was appointed Director of the Institute of Shipping and Trade Law at the School of Law, Swansea in October 2010. He was previously a lecturer at the University of Exeter. His postgraduate education was in the University of Southampton from where he obtained his Ph.D degree in 2000. Whilst at Southampton he was also a part-time lecturer and tutor. His principal research interest is in the field of insurance, particularly marine insurance, but his interests extend broadly throughout maritime law and contract law. He is the author of Warranties in Marine Insurance published by Cavendish Publishing (2001), and an impressive list of articles published in elite Journals such as Lloyd’s Maritime and Commercial Law Quarterly, Berkley Journal of International Law, Journal of Contract Law and Journal of Business Law. His first book was the joint winner of the Cavendish Book Prize 2001 and was awarded the British Insurance Law Association Charitable Trust Book Prize in 2002, for the best contribution to insurance literature. A new edition of this book was published in 2006. In 2008, he edited a collection of essays published by Informa evaluating the Law Commissions' Reform Proposals in Insurance Law: Reforming Commercial and Marine Insurance Law. This book has been cited on numerous occasions in the Consultation Reports published by English and Scottish Law Commissions and also by the Irish Law Reform Commission and has been instrumental in shaping the nature of law reform. In recent years, he edited several books in partnership with Professor Tettenborn: Pollution at Sea: Law and Liability, published by Informa in 2012; Carriage of Goods by Sea, Land and Air, published by Informa in 2013 and Offshore Contracts and Liabilities, published by Informa Law from Routledge in 2014. His most recent monograph, Marine Insurance Fraud, was published in 2014 by Informa Law from Routledge. His teaching experience extends to the under- and postgraduate levels, including postgraduate teaching of Carriage of Goods by Sea, Transnational Commercial Law, Marine Insurance, Admiralty Law and Oil and Gas Law. He is one of the editors of the Journal of International Maritime Law and is also on the editorial board of Shipping and Trade Law and Baltic Maritime Law Quarterly. He currently teaches Admiralty Law, Oil and Gas Law and Marine Insurance on the LLM programme and also is the Head of the Department of Postgraduate Legal Studies at Swansea.

Leave a Reply