Construction/interpretation – off-hire/cancellation clause – “oil major” defined
The vessel was let on a five year time charterparty in terms of an amended Shelltime form.
In dispute was the interpretation of the following clause:
“Should the vessel be failed on three (3) consecutive oil major vetting revues/inspections due to owners’/vessel’s reason, the charterers shall have the option to put the vessel immediately off-hire until the vessel passes a vetting/inspection..…and shall have the option to cancel the charter…..[A] vetting revue/inspection is defined as a nomination by the charterers to an oil major and the oil major reviewing the vessel by either a physical inspection or latest SIRE inspection report …”
The vessel was a newbuilding. In an earlier portion of the same clause, provision was made for initial “approvals” from a minimum number of 3 “major” oil companies who were named:
• BP, Shell, ExxonMobil, ChevTex and Totalfina Elf i.e. 5 companies.
About 18 months in to the charter, at the charterers’ instance, ChevTex vetted the vessel and rejected it. Shortly thereafter, the vessel undertook a SIRE (Ship Inspection Report) inspection carried out by BP at the owners’ request and passed.
The vessel suffered 3 further consecutive rejections in inspections at charterers’ instance by Total, ConocoPhillips and ChevTex.
Thereupon charterers gave owners notice of cancellation under clause 50.
The sole arbitrator, Lionel Percy QC, found in favour of charterers on three issues:
• He found that ConocoPhillips qualified as “oil major” for the purposes of clause 50 despite this company not having been included in the 5 companies referred to in the earlier part of the clause.
• He found that the inspection at the owners’ instance by ChevTex on did not qualify as a “vetting review/inspection” as defined because a requirement was that such vetting review/inspection be done at the instance of the charterers in terms of the plain language of the clause. The effect of this was that the inspection at the owners’ instance could not interrupt the series of consecutive inspections at the instance of the charterers. A decision on this point was sought by charterers, presumably, in case of an adverse finding on the 1st point.
• In each of the qualifying rejections, the relevant oil major had had regard to the latest SIRE inspection report as required by clause 50.
Owners appealed to the Commercial Court. It was common cause that the three issues referred to above were issues of law.
Simon J upheld the arbitrator’s decision on all three points.
The interpretation given to clause 50 is unremarkable as it follows the plain language of the clause.
The judgment contains references to case law on the procedural aspect of the documentation to be placed before the court on an appeal from an arbitration award. The owners sought, unsuccessfully, to introduce material other than the award and the contract itself which material can only be placed before the court on appeal in exceptional circumstances.
The judgement records expert evidence led on the nature of the SIRE system.
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