Golden President Shipping Corporation v Bocimar NV

A profit-sharing clause must be construed according to its wording and the charter party as a whole. Where a clause provides that optional years are to be considered for profit-sharing purposes on their own, those years remain subject to profit sharing but are excluded from the netting-off mechanism applicable to the basic charter period. Commercial considerations may support, but cannot replace, the contractual language. Unless the charter provides otherwise, its terms apply to additional periods created by contractual options.

The Owners appealed under section 69 of the Arbitration Act 1996 against an arbitration award concerning the construction of clause 98 of a long-term time charterparty. The charter provided for a five-year basic period, options for sixth and seventh years, and a further final-period option. Clause 98 contained a 50/50 profit-sharing arrangement, with profits and losses netted over the basic five-year period. The arbitrators held that profit sharing did not apply to the optional years. The central issue was whether clause 98(6), providing that optional years were to be considered for profit-sharing purposes on their own, excluded those years from profit sharing or merely from the five-year netting process.

1. Appeal allowed in substance. The arbitrators had failed to give effect to the clear meaning of clause 98(6). The clause was construed by reference to its language and the charterparty as a whole.
2. Paragraphs 1 to 5 of clause 98 established the profit-sharing obligation and the netting-off mechanism for the basic five-year charter period. They required profits and losses over that period to be assessed on a cumulative basis, subject to interim advances and claw-back provisions.
3. Clause 98(6) did not exclude optional years from profit sharing. Its natural meaning was that an optional year, if declared, was to be considered for profit-sharing purposes separately from the five-year netting-off process. The words “on their own” required each optional year to be assessed individually.
4. Paragraph 7, which illustrated the netting-off calculation over five years, did not alter that conclusion. The absence of an example for optional years was immaterial because those years stood outside the cumulative five-year calculation.
5. The other contractual options supported the same construction. In the ordinary case, the charterparty’s terms applied to additional periods created by an option unless the charterparty provided otherwise. Profit sharing therefore applied to the sixth and seventh years and to the final two-month period, but without netting those periods against profits or losses from the basic five-year period.
6. The award was varied. The Owners were held entitled to $14,679,557.84, together with interest and the costs of the appeal. Any remaining balance was left for the arbitrators to determine.

The judgment concerned an appeal under section 69 of the Arbitration Act 1996 against an arbitration award dated 13 August 2007. The High Court varied the award and determined the principal sum payable, leaving any remaining balance and ancillary matters to the arbitrators or the court as appropriate.