Shipbrokers’ Duties

Shipbrokers’ Duties

Shipbrokers are still wrongly considered by some principals as parasites. Shipbrokers form an essential part of negotiating and their skills are far more wide-ranging than simply having the right contacts.

The majority of shipbrokers should be neither abused nor ignored by the trading and legal professions; of course there are always some rotten apples to be avoided.

Conversely, many shipbrokers would be well advised to take a good look at their principals.

Shipbrokers are the Shipowners’ and Charterers’ link with the market, so it is up to the shipbroker to keep their principals, Shipowners and Charterers, informed about developments in the market, even though the principal may not be planning any market operations at the moment.

It is this information that makes it possible for both parties, Shipowners and Charterers, to plan ahead. To assist with this, most of the large shipbrokers maintain a computer database giving the current position and status of all ships in which they specialise.

The charterers are therefore able to check on the tonnage that is available before they enter the market. This helps them to ensure that they can get a good rate, since there may be several owners interested in their business.

It is the job of the Shipowners’ shipbroker to ensure that all charterers who may have a cargo from an area where his ship could load know the position and the details of his vessel. This entails contacting not only the charterer’s agents but the competitive shipbrokers as well.

The function of the Charterer’s shipbroker is to ensure that all possible owners are aware of his need for a ship in order to enable him to obtain the best possible rate.

Shipbrokers Duties towards their Principals

Shipbrokers must be aware of the necessary application of basic agency law. Shipbrokers must always work within their ‘warranty of authority’ as defined by their principal shipowner or charterer. Even if shipbrokers take on the mantle of an ‘agent of necessity’, they should always ensure that their principal ratifies their actions within time, otherwise the shipbrokers might find that they have become a principal, which will have several potentially devastating effects:

  1. Shipbrokers will almost certainly not be able to afford to become that principal by providing a vessel or a cargo
  2. Shipbrokers might be accused of misrepresentation
  3. Shipbrokers might not be able to defend their error
  4. Shipbrokers action might invite an expensive law suit
  5. the result of such action could ruin the shipbrokers financially
  6.  irrespective of any legal action, the shipbrokers’ reputation would probably never recover.

Shipbroker’s Role In Negotiating And Fixing Charterparties

Chartering forms the most important method of employing a ship and there is a world-wide network of shipbrokers involved in chartering ships.

Traditionally, these Shipbrokers may work as

  • Shipowners’ Shipbrokers
  • Charterers’ Shipbrokers
  • Competitive Shipbrokers

In London, this distinction is not so clear, as most charterers put their business out through several brokers, so a large charterer may employ a number of brokers.

Shipowners frequently have the brokering function in-house, hence the term House Broker.

Shipbrokers Ethics

The motto of both the Baltic Exchange and the Institute of Chartered Shipbrokers (ICS) is ‘Our Word Our Bond’, which embodies a very strong Code of Ethics. The need for a code of ethics comes from the fact that much of the business is based on word of mouth and is only followed up later by written confirmation.

The spoken word legally binds both principals, Shipowners and Charterers, to each other via the Shipbroker or Shipbrokers. This is a very powerful negotiating tool and is only useable by approximately 5,500 brokers world-wide, comprising 2,000 members of the Baltic Exchange and 3,500 Members and Fellow of the Institute of Chartered Shipbrokers (ICS).

The value of the Code of Ethics is that it makes it possible to transact business from a position of trust, without which it would be very difficult to fix ships. BIMCO (Baltic and International Maritime Council) also recommend to their members various principles of chartering.