The Court of Appeal recently considered the proper interpretation of Clause 29 of the BIMCO Barecon 2001 in the case Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC [2025] EWCA Civ 1227.
Wording of clauses 28 and 29
Clause 28 of the Barecon 2001 permits, inter alia, either owners or charterers to terminate the bareboat charter following an insolvency event.
Clause 29 sets out the position regarding the repossession of the vessel in such a situation:
“…the Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them without hindrance or interference by the Charterers, courts or local authorities. Pending physical repossession of the Vessel in accordance with Clause 29, the Charterer shall hold the vessel as gratuitous bailee only to the Owners. The Owners shall arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination of the Charter. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners’ representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the charterers’ Master, officers and crew shall be the sole responsibility of the Charterers”.
Brief procedural background
On 11 February 2013, a shipbuilder named Brodotrogir DOO (“BDOO”) agreed to charter the vessel (the “Vessel”) to Songa Shipping Pte Ltd. The charter was on an amended BIMCO Barecon 2001 form, and was subsequently novated to the owners (a special purpose vehicle in the same ownership as BDOO, “Owners”) and the charterers (another member of the Norwegian Songa Group, “Charterers”). On 16 October 2020, the Commercial Court in Split confirmed a Restructuring Plan and Pre-Bankruptcy Plan with respect to BDOO. Charterers subsequently terminated the charterparty pursuant to clause 28(d) and notified the Owners that the Vessel was ready for Owners to take repossession at Stockton, California, where the Vessel was situated, just having completed discharge. Owners refused to do so, instead insisting that the Vessel be sailed to Trogir, Croatia. Charterers eventually set sail for Trogir under protest, but whilst en route Charterers arrested the Vessel at Gibraltar, following which Owners repossessed the Vessel.
Charterers commenced LMAA arbitration against the Owners of the Vessel pursuant to the charterparty. In that arbitration, Charterers argued that Owners had breached clause 29 of the charterparty by failing to take possession of the Vessel at Stockton (where the Vessel was at the point of the purported clause 28 termination) and instead requiring that Charterers sail the vessel to Trogir.
The Tribunal concluded that the charterparty had been validly terminated pursuant to clause 28(d), meaning that the provisions of clause 29 applied regarding Owners’ repossession of the Vessel. The Tribunal interpreted Clause 29 as giving Owners the right to choose a place convenient to them to repossess the Vessel, subject to Owners’ nominated place for repossession not being an arbitrary or irrational choice, and held that clause 29 gave Owners the right to insist on repossessing the Vessel in Trogir.
Accordingly, the Tribunal awarded Charterers certain of their reasonable costs and expenses of caring for the Vessel as gratuitous bailee following the clause 28(d) termination. Owners, on the other hand, were awarded damages in respect of certain repairs to the Vessel, but their claim for lost hire failed in circumstances where the Tribunal found the charterparty had been terminated on 14 May 2021.
Charterers sought leave to appeal the award on the following question:
whether owners are required to repossess the vessel as soon as practicable where the vessel is upon termination; or
whether charterers are obliged to sail the vessel to any place nominated by owners which owners (in good faith) consider to be the place that would be the most convenient to themselves for repossessing the vessel.
Cockerill J granted leave to appeal to the High Court, and the appeal was heard on 29 November 2024 by HHJ Pelling KC (the “Judge”). The Judge did not agree with the Tribunal that clause 29 was unambiguous and held that it was necessary to pay attention to the commercial context. The Judge further considered that the phrase “convenient to them” should be construed narrowly, in order to apply fairly in circumstances where clause 28(d) applies regardless of whether owners or charterers are affected by an insolvency event.
The Judge therefore allowed the Charterers’ appeal and remitted the Partial Final Award to the Tribunal to reconsider its decision.
The Owners appealed to the Court of Appeal, arguing that the Judge’s interpretation of clause 29 was incorrect and thus that the Tribunal’s decision should be reinstated.
Court of Appeal’s judgment
Taken in isolation, the words at clause 29 may seem to suggest that owners are entitled to refuse to take repossession of a vessel even when it is already at a safe port, and instead to require that a vessel sails to its next port or other port convenient to owners (potentially some distance away from the vessel’s then current location) before repossession takes place.
The Court of Appeal disagreed, holding that the wording in clause 29 was not a “menu of options”. Instead, it is important to bear in mind the provisions of clause 28 which provides that termination is “with immediate effect by written notice”. Given that charterers’ obligations pursuant to the bareboat charter (including not only in respect of placing vessel insurances and hire payments, but also the obligation to indemnify owners in respect of any loss or damage to the vessel) come to an end immediately, owners should have the right to repossess the vessel at the port that the vessel is currently at or, if the vessel is at sea, at the next port. However, this is to be balanced with the fact that the charterer is required to hold the vessel as gratuitous bailee to the owners and this should be for as short a period of time as possible. Striking a balance between the two parties’ interests therefore requires owners to repossess the vessel as soon as reasonably practicable.
Consideration also needs to be given to the legal and commercial implications when construing the clause. It would make little to no sense for owners to be able to require charterers to sail the vessel from its current port to the next port prior to repossession in circumstances where owners may have limited knowledge or control of the vessel’s next port, and where in any event there is no ‘next port’ as the bareboat charter has been terminated.
The Court also stressed that it is important to read clause 29 as a whole. The third sentence of the clause requires owners to arrange for an authorised representative to board the vessel as soon as reasonably practicable following termination. Depending on how far the vessel is from its next port, this obligation may require the vessel to be diverted to another port convenient to the owners.
The wording “or at a port or place convenient to [owners]” is therefore not intended to give owners carte blanche to elect a port which they may prefer, but simply acts as a fallback if the current or next port is not convenient (e.g.: due to the port’s location or circumstances). This duty on charterers must be strictly confined to what is necessary, bearing in mind the termination of the charter and the gratuitous bailee obligations placed on charterers following termination and up to repossession.
To construe the clause otherwise could result in charterers being required to sail from a safe, accessible port to a distant port, potentially without any prospect of reimbursement for the costs of that voyage if the owners are in financial difficulty, which has precipitated a termination pursuant to clause 28(d).
Practical considerations
The Barecon 2001 is one of the most commonly used bareboat charter forms in the market and the wording for clauses 28 and 29 has been carried over to its successor, the Barecon 2017, which is gradually replacing the Barecon 2001. This guidance from the Court of Appeal is most welcome.
To the extent that owners wish to have the right to nominate a port at which to repossess the vessel, this case makes it clear that the standard Barecon 2001/ 2017 wording will need to be modified in order to provide expressly for such a right. If such wording is not included, then owners will need to be prepared to repossess the vessel at whichever port it may be upon a clause 28 termination taking place.
This case also clarifies that where there are contractual disputes (whether pursuant to a charterparty or any other contract), parties will need to consider carefully the wording of the contract as a whole when construing clauses and not to rely simply on specific words out of context.