Petroleo Brasileiro S.A. v Kriti Akti Shipping Co. S.A.

In a time charter, an express period stated as “more or less in charterers’ option” forms part of the period during which the charterer may use the vessel as of right. Where off-hire time may be used to extend the charter, that extension period and the option period are cumulative unless the charter provides otherwise.

The phrase “at the expiry of the period of this charter” ordinarily refers to the final terminal date, namely the expiry of all applicable contractual periods. An earlier authority concerning the interaction of two separate charter periods does not establish a universal meaning for “charter period”; the words take their meaning from their contractual context.

The parties entered into an 11-month time charter, with 15 days more or less in the charterers’ option. A typed clause also permitted off-hire time to be used as an extension of the charter period. Near the end of the charter, the charterers ordered a further voyage. The owners refused to perform it unless additional hire was paid and retook the vessel.

In arbitration, the tribunal held that off-hire time could extend the charter but that the 15-day option period could not be added to the extended period, considering itself bound by Gulf Shipping Lines Ltd v Compania Naviera Alanje S.A. (The ‘Aspa Maria’) [1976] 2 Lloyd’s Rep. 643. Both parties appealed on questions of law. The central issue was the meaning of “the period of this charter” in clause 18.

1. The charterers’ appeal was allowed and the owners’ appeal was dismissed. The tribunal had been wrong to treat The ‘Aspa Maria’ [1976] 2 Lloyd’s Rep. 643 as binding authority requiring rejection of the charterers’ construction.

2. Clause 50 entitled the charterers, if they wished, to add periods of off-hire to the charter period. Its purpose was to restore practical service lost during off-hire. The “charter period” in clause 50 referred to the period prescribed by clause 3.

3. The expression “at the expiry of the period of this charter” in clause 18 naturally referred to the point at which the charter finally expired. It therefore took effect only after the basic period, any clause 50 extension period and the 15-day option period had all expired.

4. The authorities on legitimate last voyages supported that construction. In The ‘Dione’ [1975] 1 Lloyd’s Rep. 115, the option period was treated as part of the charter period for deciding whether last-voyage orders were legitimate. The ‘Peonia’ [1991] 1 Lloyd’s Rep. 100 confirmed that an expressly defined period, including an agreed tolerance, was the final terminal date by which redelivery had to occur. The same approach appeared in The ‘World Symphony’ and ‘World Renown’ [1991] 2 Lloyd’s Rep. 251.

5. The ‘Aspa Maria’ was concerned with whether a second contractual period was added to six months or to six months plus the agreed tolerance. It did not establish that an option period was excluded from the charter period for every contractual purpose. “Charter period” was not a term of art and its meaning depended on context.

• High Court (Commercial Court): appeals on questions of law arising from the arbitration were heard by Mr Justice Moore-Bick. The charterers’ appeal was allowed and the owners’ appeal dismissed.