Osmium Shipping Corp v Cargill International SA

In construing an off-hire clause, the court must begin with the ordinary and natural meaning of the words used, considered in the context of the clause and the charterparty as a whole. The clause must be analysed according to its grammar, syntax, punctuation and structure. A provision dealing with war risks, piracy, performance and breach does not ordinarily alter a separate off-hire provision unless it clearly does so. Where “capture/seizure” forms a separate head of off-hire and “detention or threatened detention by any authority” is separately qualified, the qualification does not extend to capture or seizure. “Seizure” is wide enough to include forcible possession by pirates.

The claimant shipowner appealed under the Arbitration Act framework from an arbitration award dated 27 July 2011. The tribunal had decided a preliminary issue on agreed facts arising from the hijacking of the vessel Captain Stefanos by Somali pirates while carrying coal from South Africa to Italy.

The charterparty contained an amended NYPE form, including clause 56, which suspended hire for loss of time caused by specified events, including “capture/seizure” and “detention or threatened detention by any authority”. It also incorporated the Conwartime 2004 clause concerning war risks, including piracy. The central issue was whether the vessel was off-hire during the period of hijacking.

1. Appeal dismissed. The charterers discharged the burden of bringing the case within the off-hire exception. The vessel was off-hire during the hijacking period, subject to the operation of clause 56.
2. Hire is ordinarily payable continuously, and the charterers must establish that an agreed exception applies. Any uncertainty in an exception is resolved in favour of the owners. Construction remains a unitary exercise, requiring the words used to be read in the context of the relevant clause, the charterparty as a whole and the commercial circumstances.
3. Clause 56 contained distinct heads of off-hire. Its structure, the repeated use of “or”, the oblique stroke linking “capture/seizure”, and the punctuation separated “capture/seizure” from “detention or threatened detention by any authority”. The words “by any authority” therefore qualified only detention and threatened detention.
4. “Seizure” was a wide expression covering forcible possession. Its linkage with “capture” did not narrow its meaning. The term was apt to include hijacking by pirates. The use of different wording or punctuation in other charterparties did not assist the owners.
5. The Conwartime clause dealt with performance, liberties, additional costs and breach. It was not an off-hire clause and did not state that hire would continue during a seizure. Treating compliance with orders as fulfilment of the charter did not establish that the charterers had received the service required for hire purposes. The clause therefore did not negate or derogate from clause 56.
6. The arbitrators’ construction was correct. The appeal was dismissed with costs, subject to any submissions on unusual costs issues.

The claimant appealed from an arbitration award dated 27 July 2011, which had determined the preliminary off-hire issue in favour of the charterers. The High Court (Commercial Court) dismissed the appeal with costs.