E.G. Arghyrakis & Co  
 
  Commercial law firm  
     
       
 
 
Trade Winds   4th April 2003  
 
High stakes in charter dispute.

Tanker players are awaiting a UK High Court ruling, which could have big implications for charterers.

An impending decision by the High Court in London on a VLCC time-charter is likely to have wide implications for tanker chartering. Speed and consumption clauses in the widely used Shelltime 4 charter-party form are at the heart of the dispute.

Greek manager European Navigation, whose broker is Elka Shipping, has taken action against Korean shipowner Hanjin Shipping for deductions to hire on the 256,000-dwt Eleuthera (built 1984) towards the end of its charter period and after. Hanjin said the vessel failed to perform to the agreed speed and consumption.

Hanjin chartered the Eleuthera for three years from 1996 at around $24,000 to $25,800 per day. But during the final year and at the end of the period the Korean owner made deductions amounting to $1.1m from the hire payments. Hanjin paid around $430,000 of this amount at the end of the time charter in 1999, and last month paid a further $150,000, leaving around $440,000 outstanding on the hire.

Court costs for the case could rack up to around £200,000 ($313,000), with high contractual interest on top of this.

Justice Mark Havelock-Allan will rule on a number of issues in the case, including how a vessel's speed and consumption should be calculated. Assessing the figures on a voyage-by-voyage basis, as the charterer has done in this case, or on a year-by-year average basis, according to European Navigation's calculations, produces very different figures.

He will also rule on the most appropriate method of calculation for situations where more than one speed has been ordered by the charterer in the same year.

In addition the judge will decide on whether the sub-fixture details sent to the ship's master constitute orders to the charterer as to the ship's speed.

Experienced tanker brokers say the speed-and-consumption clause is one of the main points of negotiation between owners and charterers in time-charter parties like the widely used Shelltime 4.

In a time-charter contract, the charterer pays for the bunkers throughout the period, something that tends to concentrate their attention to a vessel's performance.

More Fisher Brown is acting for Hanjin and newly set-up maritime law practice EG Arghyrakis & Co is representing Elka.

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