The Legal Effect of “Subject-to” in Charterparty Contracts

When negotiating charterparties, it is very common to make such negotiations “subject to” a variety of conditions. Justice Foxton in Nautica Marine Ltd v. Trafigura Trading (The Leonidas) [2020] EWHC 1986 (Comm) offered a valuable guidance on the legal effect of such clauses in charterparty contracts.

In the case, the owners entered into negotiations between 8-13 January 2016 to conclude a voyage charterparty for their crude carrier, the Leonidas, with Trafigura. These negotiations were initially subject to “Charterers’ Stem/Suppliers’/Receivers’/Management Approval” latest 17.00 Houston time, Tuesday 12 January, 2016. The loading ports were to include Aruba and St. Eustasius (collectively referred to as Statia). The intended loading terminal rejected the Leonidas on the basis that the vessel was too large to load at that particular berth (the vessel could have been able to load from the Statia SBM- another nearby terminal not chosen by the charterers).

The owners brought an action against Trafigura arguing that this was a performance condition, meaning that it is a condition which does not prevent a binding contract coming into existence, but if not satisfied the contract would cease to be binding. Building up on that, the owners argued that it was an implied term of the charterparty that Trafigura would take reasonable steps to satisfy the suppliers’ approval subject. It was maintained that Trafigura took no such steps to obtain that approval, or alternatively, that Trafigura bearing the burden of proof, would have to show that the suppliers’ approval would not have been obtained even if reasonable steps had been taken.

Foxton, J, held that the “Suppliers’ Approval Subject” was a pre-condition to a contract (condition precedent to contract) and, therefore, Trafigura was not required to take steps to obtain its suppliers’ approval. A few factors led him to conclude in this manner:

  • a “subject” is more likely to be a pre-condition than a performance condition where the subject involves the exercise of a personal or commercial judgment of one of the potential parties to a contract. Here, it was a commercial choice for Trafigura to determine who the relevant supplier would be and which terminals and berths/tanks within terminals, cargo would be loaded from;
  • the particular negotiating language of the parties referring to agreements as “on subjects” and “lifting” subjects, point towards a subject in the chartering context being more likely to be a pre-condition because it connotes that the subject is resolved by one or both parties removing it, rather than the subject being resolved automatically on the occurrence of an external event; and       
  • based on previous authority, the “Stem Subject” and “Management Approval Subject” were both pre-conditions; where “subjects” appear as a compendious phrase, it is more likely that they are all intended to have the same effect.

Obiter dictum, Foxton, J, considered how damages were to be assessed if the clause had been a performance condition. He held that because the alleged lost benefit (loss of profit under a concluded charterparty) was dependent on the decision of a third party (supplier) to approve the vessel, damages in that case had to be assessed on a “loss of chance” basis (Wellesley Partners v. Withers [2015] EWCA 1146)

Two points emerge from the judgment that have implications for the market. First, the judgment strongly indicates that a “subject to” clause in a charterparty will normally be construed as a condition precedent to a contract given that such clauses often involve the exercise of a personal or commercial judgment of one of the parties to the contract. Obviously, it is still possible that a “subject to” clause could be treated as a performance clause if it depends on the approval or performance of those other than the parties to the contract; e.g. “subject to the approval of the Ministry”. In that case, the question may arise whether or not one of the parties to the contract must act reasonably or in good faith in taking steps to ensure that the condition is lifted (See, The John S Darbyshire [1977] 2 Lloyd’s Rep 457). Second, there was a disagreement in the case as to whether the suppliers referred to in the subject were only terminals from which cargo was intended to be loaded or included the charterers’ contractual suppliers. Foxton, J was adamant that the phrase encompassed all those approvals which the charterer commercially wished to obtain on the supply side. This sounds sensible but naturally makes such conditions more challenging from the shipowners’ perspective.          

One breach, two losses. Does demurrage cover both?

Andrew Baker J today has said that it does not. In K Line PTE Ltd v Priminds Shipping (HK) Co, Ltd [2020] EWHC 2373 (Comm) the vessel was kept at the anchorage for some 31 days due to port congestion and lack of storage space ashore for the cargo. In consequence when the cargo of soyabeans was discharged it exhibited substantial mould and caking. This led to a cargo claim against owners who then settled and sought to recover from voyage charterers by way of damages for breach of their obligation to discharge within the laydays.

 Dicta of Sargant LJ in Reidar v Arcos [1927] KB 352, not the easiest of cases from which to extract a ratio, suggested that demurrage was the sole remedy for breach of that obligation, but that the case before him involved a breach of a separate obligation, a proposition applied by Potter J in The Bonde [1991] 1 Lloyd’s Rep 136). By contrast, Webster J in The Altus [1985] 1 Lloyd’s Rep 423 held that demurrage only had the effect of providing liquidated damages for a specific type of loss, the economic loss suffered by owners in the charterers exceeding the laydays for which they had paid in the freight. It did not cover other types of loss flowing from this breach. This was the view of Bankes LJ in Reidar. The contentious point was whether Atkin LJ had been with Sargant LJ or with Bankes LJ.

The academic writings were divided: Carver on Charterparties , Voyage Charters, and Shipping Law for the view of Sargant LJ; Scrutton contra for that of Bankes LJ; Schofield undecided; and Summerskill nowhere to be seen. After a long discussion as to whether precedent required him to follow The Bonde – it did not – Andrew Baker J held that damages could be claimed for the cargo claim resulting from the delayed discharge, notwithstanding the demurrage provision. He added that had he come to a different conclusion, there would have been no scope for implying an indemnity -owners’ second string to their bow.

One suspects this will come as an unpleasant surprise to charterers, but perhaps the bigger surprise is what owners were doing settling a claim which under the Hague Rules they would have had a good chance of resisting under Art IV (2)(q)  which provides an exemption as follows: “Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.”  Deterioration of the cargo due to delay in discharge due to congestion would very likely constitute such a cause.

This looks like one for the Court of Appeal, and, maybe, the Supreme Court.

BIMCO COVID-19 Crew Change Clause – An Attempt to Facilitate Crew Changes

On 25 June, BIMCO announced the publication of their novel COVID-19 Crew Change Clause for Time Charter Parties. The clause provides shipowners with the right to deviate for crew changes ‘if COVID-19 related restrictions prevent crew changes from being conducted at the ports or places to which the vessel has been ordered or within the scheduled period of call’. Shipowners can exercise their right to deviate by giving charterers a written notice as soon as reasonably possible. The crew change costs will rest on shipowners, unless shipowners and charterers agree that the vessel will remain on hire during the deviation period, but at a reduced rate. In such case, the cost of bunkers consumed will be shared equally between shipowners and charterers.

With more than 200,000 seafarers currently working on board after the expiry of their contracts of employment, the COVID-19 Crew Change Clause at least ensures that shipowners can sail to those few ports were crew changes are possible, without facing the risk of breaching their contractual obligations under time charters. It should be noted, however, that this is not a panacea to the issue of crew changes. Recognising seafarers as ‘keyworkers’ and designating ports where crew changes can take place safely following the Protocols designed by the IMO (Circular Letter No 4204/Add 14 (5 May 2020) should remain a priority. 


In London Arbitration 3/20 the Tribunal considered the effect of the time bar provision in cl.6 of the Inter-Club NYPE Agreement 2011 (the ICA) .

“(6) Recovery under this Agreement by an Owner or charterer shall be deemed to be waived and absolutely barred unless written notification of the Cargo Claim has been given to the other party to the charterparty within 24 months of the date of delivery of the cargo or the dates the cargo should have been delivered, save that, where the Hamburg Rules or any national legislation giving effect thereto are compulsorily applicable by operation of law to the contract of carriage or to that part of the transit that comprised carriage on the chartered vessel, the period shall be 36 months. Such notification shall if possible include details of the contract of carriage, the nature of the claim and the amount claimed.”

The vessel was time-chartered on the NYPE form. Clause 27 of the charter expressly incorporated the ICA and contained a Clause Paramount. Under a booking note on the charterer’s house form dated 19 December 2014 between the charterer as carrier and G as merchant, the charterer contracted to carry a cargo of engine equipment (the Cargo) from a United States port to a North African port. During the voyage the vessel’s crew accidentally pumped water into No 2 cargo hold.  G gave notice to the charterer of its intention to pursue a cargo claim against it as contractual carrier, although no claim had yet been formally presented. By various emails, information was passed by G to the charterer and by the charterer to the owners, and extensions of time were given by the charterer to G, and by the owners and their P&I Club to the charterer.

The issue before the Tribunal was whether, following the expiry of 24 months from the date of delivery of the cargo, the charterer was now precluded by the time bar provision in clause (6) of the ICA from bringing any claim against the owners in respect of G’s intended cargo claim.

The Tribunal found that the “notification” did not have to refer to the ICA, either expressly or impliedly. Clause (6) required simply “written notification of the Cargo Claim” to be given to the other party. It was not in itself the claim for recovery under the ICA but was a notice required if a claim over was later to be made, which could only happen when the cause of action accrued, which necessitated the proper settlement or compromise and payment of the third-party claim under the terms of clause (4)(c).

To be an effective “notification”, the written notice did not have to comply with the requirements of the second sentence, namely to include details of the contract of carriage, the nature of the claim and the amount claimed, so far as it was possible to do so. The intention of the draftsman was to distinguish between the absence of a written notification which would bar the recovery claim and the absence of details to be included within it, if possible, which would not have that effect. The words “if possible” suggested that the provision of details was not essential to the giving of notification. The breach of such an obligation would give rise to a right to damages if any loss could be established, which appeared unlikely in most situations.

In consequence, as the tribunal had found that a notification was valid, even if details which could have been provided were not provided, and the recourse claim which the charterer wished to pursue was not deemed waived or barred.

Clause (6) of the ICA operated in an entirely different way from a conventional time bar for a cargo claim. The period allowed for notification ran from the date of delivery and not from the date when the cause of action accrued which, in the case of an indemnity might not be for a number of years, as and when the liability to cargo interests crystallised. To stop time running, the prospective claimant did not have to commence proceedings but merely to give notification of the claim under clause (6), with the six-year time bar operating from the date of accrual of the cause of action.


Commencement of Laytime- Covid 19 and “Free Practique” Rears Its Face Again

“Free pratique” is essentially the licence given to a vessel by authorities to enter a port on the assurance that she is free from contagious diseases. In normal times, obtaining this certificate is regarded as a mere formality and this led some judges to comment in some cases, like Longmore, LJ did in The Eagle Valencia [2010] EWCA 713, that lack of this certificate will not prevent a valid notice of readiness (NOR) essential for the commencement of laytime. However, it should not be disregarded that the decision in this case was the result of judicial construction of various contradictory terms incorporated into the relevant charterparty. So, it will be ambitious to suggest that this case establishes a principle to the effect that obtaining free pratique is not essential for a vessel to be ready in legal sense!

In fact, the “free pratique” forms an important part of the ship’s papers and has the potential to cause problems for owners in today’s climate especially if the charterparty in question does not expressly state otherwise. It has been doubted in a number of old authorities (e.g. The Delian Spirit [1971] Lloyd’s Rep 64) whether incorporation of a “WIFPON” clause (Whether in free pratique or not) removes the need for obtaining a “free patique” certificate so a vessel which is physically ready becomes an “arrived ship” in legal sense of the word. To say that WIFPON clause does not have this effect clearly contradicts plain meaning of such a clause. And, it is hoped that this point receives some judicial attention soon.

aerial photo of cargo ships on pier
Photo by Tom Fisk on

However, in the absence of a specialized clauses (e.g.  BIMCO’s Infectious or Contagious Diseases Clause for Voyage Charterparties) and in  today’s world hit by the Covid-19 pandemic, it is very likely that not being able to obtain free pratique will have grave consequences for the owners and time lost in a loading or discharging port as a result will be on their account. Reports are suggesting that in many ports around the world, vessels are asked to remain in quarantine for 14 days before authorities grant the free pratique certificate. For example, recently Argentinian Ministry of Transport and the Ministry of Health have instructed the maritime authorities in the country to compel specific vessels- under certain circumstances- to remain in quarantine for 14 days.

When entering into charterparties, shipowners need to be aware of the so-called “new normal” and it is advisable to insist on incorporating specialized clauses to deal with such problems.  BIMCO’s Infectious or Contagious Diseases Clause, mentioned above, or INTERKANKO’s Covid-19 Clause, (discussed in an earlier blog) offers protection to owners as under such clauses any time lost in a port of loading or discharge due to reasons associated with Covid-19 pandemic will count as laytime  (or demurrage).

INTERTANKO Covid-19 Clause- Tailor Made Solution to the Pandemic in Voyage Charters

One of the main legal challenges emerging from the ongoing Covid-19 pandemic for shipowners in the context of voyage charterparties is whether a valid NOR can be tendered to enable the running of laytime clock before a “free pratique” certificate is obtained from authorities. Reports suggest that there are significant delays in some ports in obtaining this certificate. Some charterparties might include a “WIFPON” clause (Whether in free pratique or not) and some commentators believe that such a clause removes the need for obtaining a “free patique” certificate so a vessel which is physically ready becomes an “arrived ship” in legal sense of the word. However, as discussed by my colleague Professor Simon Baughen ( this position has been doubted in a number of authorities (e.g. The Delian Spirit [1971] Lloyd’s Rep 64) although such a finding seems to contradict plain meaning of a “WIFPON” clause.

The most recent clause released by INTERTANKO seems to offer a clarification and much needed certainty for shipowners. If incorporated into the contract, under Clause 2© of the INTERTANKO Covid-19 Clause for Voyage Charterparties, ship owners are able to serve a valid and effective NOR whether or not free pratique certificate has been granted, thereby passing the risk of any delay on to charterers who ordered the chartered vessel to that particular port.

It needs to be noted that the Clause deals with other issues that can arise in ports that are affected from the current situation. Clause 1 enables the shipowner to refuse an order to proceed to a port affected from the pandemic. An interesting point here is that the right to refuse to proceed is left to the reasonable judgment of the owners or master by taking into account whether there is a risk of exposure of the crew or other personnel on board to Codivid-19. From legal perspective, this subjective test means that owners and masters are likely to be given the benefit of any doubt as to the state and condition of the port in question if the matter becomes the subject of litigation at a later stage. Clause 2 is designed to protect the interest of the owners further. For example, by virtue of Clause 2(a) if the chartered vessel sails towards a Coronavirus-affected port, the master can request fresh orders should the level of risk become unacceptable prior to arrival at the load or discharge port. Similarly, Clause 2(b) provides that the chartered vessel may still depart and proceed to a safe waiting place if the risk escalates after the arrival of the chartered vessel at the port and even after the tendering of NOR. Clause 2(d) addresses the issues which arise due to the Coronavirus risk, e.g. quarantine and any delay thereby caused, and indicates that such expenses are passed to charterers.

In addition to risks associated in a port that has been directed by the charterer, the clause goes on to allocate the risk of losses that the vessel might suffer after the completion of the voyage (i.e. in the course of its future employment). Clause 3, therefore, provides:

“Should the Vessel be boycotted, refused admission to port, quarantined, or otherwise delayed in any manner whatsoever by reason of having proceeded to a Coronavirus Affected Area, for all time lost Owners to be compensated by Charterers at the demurrage rate and all direct losses, damages and/or expenses incurred by Owners shall be paid by Charterers. In the event that the Vessel is boycotted, refused admission, or otherwise delayed as stated above within 30 days after having completed discharge under this charterparty, then Charterers are to compensate Owners for all time lost as a result at the demurrage rate in addition to compensating Owners for all direct losses, damages, and or expenses which may arise as a result of the above.”


This is a very bold provision and it essentially offers a protection for owners for a period of 30 days after the completion of discharge under a previous fixture so that any delays or expense under a subsequent fixture will fall to the previous charterer.

Needless to say, the INTERTANKO Covid-19 Clause is rather owner friendly and is designed to apply to this particular pandemic unlike BIMCO Infectious or Contagious Disease Clause for Voyage Charter Parties 2015 which has a much wider application, i.e. the latter can apply in any instance when there is “a highly infectious or contagious disease that is seriously harmful to humans”. That said, the INTERTANKO Covid-19 Clause offers a tailor made solution to the legal and practical problems facing the sector at the moment and no doubt some owners might be able to slip it in their charter agreements!

The murky world of anti-suit injunctions — with a new twist

When it comes to remedies in international litigation, what matters in most cases is not whether the court can give them, but when it will. The point is nicely illustrated in a decision yesterday from Cockerill J about anti-suit injunctions (see Times Trading Corporation v National Bank of Fujairah [2020] EWHC 1078 (Comm)). Essentially the issue was this. A person who sues abroad in blatant breach of an arbitration or jurisdiction agreement will be enjoined almost as of course on the basis of The Angelic Grace [1995] 1 Lloyd’s Rep 87 and Donohue v Armco Inc [2002] 1 All ER 749. But what if this is not so (for instance, where the injunction defendant is an assignee, or where the existence of a direct contract between the two is controverted)? Jurisdiction is not in doubt: but does the ASI run almost as of course as before, or does the person seeking it have to jump the fairly high hurdle of showing oppression? Cockerill J plumped for the former solution.

To over-simplify, a cargo of coal carried in the 57,000 dwt bulker Archangelos Gabriel was delivered without production of the bills of lading, which were held by NBF, a Fujairah bank financing the buyer. It was common ground that the bills incorporated a London arbitration clause. NBF, mindful that the twelve-month Hague-Visby time-bar expired in June 2019, intimated a claim to the vessel’s owners R in December 2018; they issued in rem proceedings in Singapore in January 2019 and served them ten months later. In addition they issued arbitration proceedings in London against R in June, just within the time-bar. Then came a bombshell: after some procedural skirmishing R alleged with considerable plausibility that the vessel had actually been bareboat chartered to T, with which it seemed to have fairly close relations, and that the relevant bills, issued on behalf of the master, were charterers’ bills and not theirs.

Caught on the hop, and with a claim against T now out of time, NBF made it clear that they would add T to the Singapore proceedings and attempt to add them as a respondent to the London arbitration. T, fairly confident that it could resist the latter attempt, sought an ASI to prevent continuation of the Singapore proceedings against it, relying on the arbitration clause.

Had it been admitted that T and NBF were both party to a contract containing the arbitration clause, the case would have been easy: but it was not. However incongruously given its claim against T in Singapore under the bill of lading, in London NBF put in issue the question whether T was party to that document at all. Was this a case where the ASI should normally run as of course? T said it was: NBF that it was not. Having discussed the authorities, Cockerill J fairly unhesitatingly supported T’s position. The claim for the ASI here was “quasi-contractual” in the same way as if the injunction defendant were an assignee of some sort seeking to enforce an obligation without respecting an arbitration clause in it (as in cases like The Yusuf Cepnioglu [2016] 1 Lloyd’s Rep 641); true that here the claim was that T rather than NBF was a technical third party, but that was irrelevant. And in all such cases, she said, the rule in The Angelic Grace [1995] 1 Lloyd’s Rep 87 applied. And rightly so in our view; what should matter in international litigation cases is a clear illegitimate attempt to make an end-run around a clear contractual arbitration or jurisdiction clause, not technical questions of rights to enforce, or duties to perform, a particular contractual obligation.

Not that this mattered in the event. Had push come to shove, her Ladyship would, in a no-nonsense way reminiscent of Bertie Wooster’s Aunt Agatha, have decided T was the carrier under the bill of lading and so applied The Angelic Grace anyway (see at [80]). But that is beside the point for our purposes.

We should add the final twist to the story. In the event T’s victory on this point was for another reason entirely Pyrrhic, the only gainers being the lawyers. NBF had acted fairly reasonably in proceeding against R, and T’s merits were not entirely sparkling. In the circumstances the judge, while clearly willing to injunct NBF, did so only on terms that T would not take any time-bar points in the London arbitration. Ironically these were exactly the terms on which NBF had offered to discontinue the Singapore proceedings in the first place. But at least we now know that their judgment was right; and in addition we have some very useful clarification on the subject of ASIs generally.

Security clauses in charters — by hook or by crook they will be enforced

Behind Teare J’s decision today in Trafigura Maritime Logistics PTE Ltd v Clearlake Shipping PTE Ltd (Rev 1) [2020] EWHC 995 (Comm) lies a fairly standard series of shipping lawyer’s nightmares.

Trafigura time-chartered the Miracle Hope, a big (320,000 dwt) VLCC, from Ocean Light. They voyage-chartered her to Clearlake and Clearlake sub-voyage-chartered to Petrobras, both charters being back-to-back under Shellvoy 6. Petrobras demanded that the cargo be delivered without production of the bill of lading; the demand was passed up the chain and the cargo (worth, before the recent oil debacle, something over $70 million) released.

Thereupon Natixis, a Dutch bank which had financed Petrobras’s buyers, emerged brandishing a bill of lading apparently issued by Ocean Light, demanded the value of the cargo, and arrested the ship in Singapore. Ocean Light immediately demanded an indemnity from Trafigura: Trafigura, relying on a duty in the charterer in such cases to “provide an LOI as per Owners’ P&I Club wording”, demanded an LOI from Clearlake and Clearlake did the same from Petrobras. Following clear practice (e.g. The Laemthong Glory [2004] EWHC 2738 (Comm); [2005] 1 Lloyd’s Rep. 632), Henshaw J granted mandatory orders down the line requiring the charterers to provide such bail or other security required to secure the release of the vessel.

Unfortunately at this point problems arose. Clearlake and Petrobras negotiated with Natixis; the result was deadlock. Furthermore, owing to the worldwide contagion the Singapore courts could not break the deadlock for some weeks. And, of course, all the time the Miracle Hope was mewed up in Singapore: something which, with tanker hire rates now sky-high, would not do.

In other words, Henshaw J’s order was unworkable. As a result the matter came back to the Commercial Court. To order the provision of a guarantee satisfactory to Natixis would be unsatisfactory: furthermore, since the matter was likely eventually to reach the Singapore courts, it risked prejudging the issue in that forum.

The solution reached was workmanlike. The court had to do something. Security to obtain the release of a vessel could take the form of a payment into court; and, faute de mieux, Teare J ordered just that. Clearlake and Petrobras were ordered to arrange for payment into the Singapore court of $76 million within 8 days, no doubt with Petrobras bound to indemnify Clearlake, who in the circumstances were little more than piggy-in-the-middle. If this was necessary to secure the release of the vessel, this would be what was ordered.

And rightly so, in our view. As the title of this blogpost implies, an obligation to secure the release of a vessel has to be given effect. As with Coronavirus, so with the release of a ship: it is a case of doing all that it takes. Even if that takes a slightly unorthodox form.

Fixture recap “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. Are Gencon 94 law and arbitration provisions brought into the charter?


In London Arbitration 2/20 a fixture recap set out detailed provisions and concluded “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. The charterers argued that the law and arbitration provisions in cl. 19(a) of Gencon 94 was not a “main term” agreed in the recap email and was not incorporated into the charter. The tribunal rejected this argument and held that the  concluding words of the recap meant that one should take a clean Gencon 94 form and write into it what “main terms” had been agreed. The parties  had agreed considerable details as set out in the recap email, and then incorporated the terms of the Gencon 94 charter, which were to be adjusted to reflect the detail agreed. The tribunal accordingly had jurisdiction


US Supreme Court Rules- Warranty of Safety in Charterparties is an Absolute Obligation (Citgo Asphalt Refining Co v. Frescati Shipping Co Ltd)

The tanker, Athos I, was directed to a berth by her charterers at a terminal in Philadelphia in 2004. As the vessel was approaching the berth, she struck a submerged anchor. As a result, the vessel’s hull was damaged and some 263,000 gallons of crude oil spilled into the Delaware River. The cost of the clean-up operations was around US$180m.

The owners of the Athos I brought an action against the voyage charterer contenting that the charterer was in breach of its warranty to provide a safe port/safe berth for the ship to discharge the cargo and was therefore liable to reimburse the ship owner for the costs of the clean-up paid by them. The relevant provision in the charterparty provided:

‘…the vessel shall load and discharge at any safe place or wharf… which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer….’


The district court gave the judgment against the owners of the Athos I on the basis that the obligation of the charterer under the charterparty was to exercise due diligence in providing a safe berth/safe port and that was satisfied in the case. On appeal, the US Court of Appeals for the Third Circuit reversed the district court’s decision. In doing so, the Third Circuit aligned itself with the Second Circuit ignoring a case decided in 1990 by the Fifth Circuit (whereby it was held that a due diligence standard should be read into a charterer’s warranty of a safe berth/safe port).

The US Supreme Court (7-2) came to the conclusion that such a form clause commonly used in the industry must be construed as an express warranty of safety and imposes on the charterer an absolute duty to select and provide safe berth. The majority emphasized that the safe berth clause in the charterparty was clear and unambiguous.

The majority (an opinion delivered by Justice Sotomayor) rejected charterer’s that the safe berth clause imposes simply a duty to exercise due diligence. In their view, such a due diligence standard resonates more in tort, rather than contract. The parties could have adopted a due diligence standard explicitly in the safe berth clause, as they did elsewhere in the contract. The absence of similar language in the safe berth clause provides further evidence that the parties did not seek to imply such a limitation on the duty of the charterer.

The Supreme Court’s decision follows the traditional approach adopted by the English law with regard to warranty of safety of a port/berth (The Eastern City [1958] 2 Lloyd’s Rep 127) and will certainly be welcomed by the industry (i.e. shipowners) and, their hull underwriters who in most cases will end up pursuing charterers when a chartered vessel is damaged in a port/berth which turns out to be unsafe. It is worth to note that the judgment does not prevent this obligation from being watered down by a due diligence standard in a charterparty as long as clear and apposite wording is employed to this end.