HBC Hamburg Bulk Carriers GmbH & Co KG v Tangshan Haixing Shipping Co Ltd

A charterer’s agreement that a vessel may be taken out of the charterparty service for a third-party owner’s voyage creates a special arrangement outside the ordinary off-hire provisions, unless the parties clearly agree otherwise. The period during which hire is suspended under that arrangement does not count towards a contractual cancellation threshold for off-hire.

An off-hire clause concerned with prevention of the vessel’s full working requires prevention of the charterer’s use under the charterparty. Where the charterer has agreed that the vessel will be unavailable and pays no hire, the necessary element of involuntary prevention is absent. General wording that the charterparty’s terms remain unaffected does not clearly preserve a right to count the period towards cancellation.

The Charterers challenged an arbitrator’s award concerning their cancellation of a time charterparty for alleged off-hire exceeding 30 days. The vessel had been made available, with the consent of the Charterers and the disponent Owners, to Cosco for a short coal voyage before dry docking.

The arbitrator held that the arrangement took the vessel outside the charterparty and that the relevant period did not count as off-hire under clauses 15, 56 or 70. The Charterers applied under Arbitration Act 1996, sections 68 and 69, alleging serious irregularity and an error of law.

1. Applications dismissed. The arbitrator’s award was upheld. The arbitrator was not obviously wrong; he was, in the judge’s view, obviously right.
2. The agreement involving Cosco was a special contractual arrangement under which the vessel was taken outside the service contemplated by the charterparty. During Cosco’s coal voyage, no hire was payable by the Charterers to the Owners, but the period was not off-hire within clauses 15, 56 or 70. The charterparty was effectively suspended. There was no agreement that Cosco’s voyage would count towards the 30-day cancellation period.
3. The statement that all rights, obligations, terms and conditions of the charterparty remained unaffected did not preserve the Charterers’ asserted right. It lacked sufficient clarity, particularly when the parties’ arrangement had altered the contractual position. If the Charterers wished the Cosco period to count towards cancellation, they needed to say so expressly.
4. Clause 15 did not apply. Its purpose was to suspend hire where an event prevented the Charterers from making the full use of the vessel required by the charterparty, such as breakdown or arrest. A charterer who agrees that the vessel may be taken out of service is not involuntarily prevented from using it. The judge regarded the contrary contention as obviously wrong.
5. The arbitrator was entitled to leave issues concerning estoppel, waiver, clause 70 and implied terms unresolved because they became unnecessary once the Cosco arrangement was correctly analysed. No serious irregularity or appealable question of law was established under Arbitration Act 1996, sections 68 and 69.

• High Court (Commercial Court): The applications under sections 68 and 69 of the Arbitration Act 1996 were dismissed.
• Arbitration: Sir Christopher Staughton, sitting as sole arbitrator, issued a reasoned award on 17 August 2006. Tomlinson J directed that the section 69 application be dealt with at the oral hearing of the section 68 application.