Piracy, off hire clauses and principles of construction (again): The “ELENI P”

Back in 2010 the ship was under time charter when, having sailed through the Gulf of Aden into the Arabian Sea, it was captured by pirates.  Months and $4.5 million in accrued hire later it was released.

The case revolves around two clauses in the time charterparty.  Did either serve to place the ship off-hire?  The first, as written, reads:

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…..”

On the face of it, the ship was captured, and actual time was lost.  At commercial arbitration that was the approach of the majority of the tribunal and they held that the vessel was off-hire.  Owners appealed to the Commercial Court, arguing that “captured” did not refer to a free standing event.  It was governed by the later words “…by any authority or any legal process.”

Mr Justice Popplewell disagreed with that and found in favour of charterers.  He was able to point to a First World War case, some judicial comment from Cooke J in another case, and a warning in a Panama Maritime Authority bulletin about what they might do to ships trading to North Korea in support of that conclusion.  In fairness though, this was only to support his meticulous syntactical approach to the construction of the clause which left him in no doubt as to his conclusions.

One of several points the judge made was that unless one treats the words “…by any authority or any legal process” as applying to all the events listed in the clause, then they would be superfluous in that an “…arrest...” would not occur other than by these two methods.  In his view:

Whilst the presumption against superfluity is not always of significant weight in charterparties, in this instance it would involve surprisingly inept drafting if it had been added immediately after the word arrested to provide a meaningless qualification to it.”

This could be seen more clearly in the context of the word “detained”.  If that was not qualified by the requirement for a legal detention it could be said that it would include all sorts of events, including for instance detention at berth through weather, port conditions or congestion.

It might be said this case provides a good example of how precise English law rules relating to the interpretation of contract terms can be on the one hand and how commercially orientated they can be on the other.  

Having found in favour of owners under that provision, the judge considered the other provision, which, again as written, read:

“…Charterers are allowed to transit Gulf of Aden any time … In case vessel should be threatened/kidnapped by reason of piracy, payment of hire shall be suspended…”

Owners argued that this clause put the vessel off-hire only if the vessel was kidnapped within the geographical confines of the Gulf of Aden (whatever they may be).  The charterers’ argument was that the clause should be understood to include “...the immediate consequence of the Vessel being required to transit the Gulf of Aden…”. Popplewell J found in charterers’ favour on this point - the ship was off-hire.  In doing so, the major reasoning was that the clause’s “principal and critical purpose in a term time charter of this nature is to enable the Charterers to trade the Vessel through the Suez Canal.” In doing so, the ship would emerge from what were the undefined geographical limitations of the Gulf of Aden into an area where it was well known that there were piracy risks.  The structure of the clause overall was that charterers would pay certain additional costs of that (extra war risk insurance, crew war bonuses and the usual additional items).  Owners, however, accepted the risk of the ship going off-hire if it was detained by pirates.  There was no strict geographical limit on that, the question to be considered was whether the piracy was an immediate consequence of trading in that area. 

It might be said this case provides a good example of how precise English law rules relating to the interpretation of contract terms can be on the one hand and how commercially orientated they can be on the other.

Whilst the presumption against superfluity is not always of significant weight in charterparties, in this instance it would involve surprisingly inept drafting if it had been added immediately after the word arrested to provide a meaningless qualification to it.

Mr Justice Popplewell

Eleni Shipping Ltd v Transgrain Shipping BV (The “ELENI P”) [2019] EWHC 910 (Comm)

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