Time Charter Owners’ Right Of Indemnity

The wide freedom given to charterers to choose how and where to employ the vessel gives rise at common law to a corresponding obligation to indemnify ship owners in respect of any liability or damage, which they incur as a direct consequence of the Master complying with charterers’ orders. Such a right of indemnity is implied as a matter of law into all time charters, other than certain charter forms, such as the Baltime or Shelltime, which already contain an express indemnity clause. The charter will in any event contain numerous express clauses, which prohibit certain cargoes, exclude certain geographical areas and prohibit the charterers from ordering the vessel to unsafe ports. However, as pointed out by Mr Justice Devlin (as he then was) in The ANN STATHATOS (1949) owners’ entitlement to a general indemnity gives valuable additional rights in situations where the express clauses excluding unsafe ports or prohibiting certain named cargoes may not apply: ‘…I see nothing incongruous in the idea that the (indemnity) clause was intended to have, as it were, a life of its own and to be more than a bin for odds and ends left over from other clauses. Dangerous cargoes, trades, ports and places can all be prohibited by express provision; but many cases may arise which are outside the rigid framework of a prohibition clause, but where an owner, if he were free to choose, might prefer not to go to a particular place …, not necessarily because he foresees any definite danger but because he feels it might lead to trouble. If he is to surrender his freedom of choice and put his Master under the orders of the charterer, there is nothing unreasonable in his stipulating for a complete indemnity in return.’ In that case the charter, which was on the Baltime form, contained an express indemnity clause. However, the indemnity otherwise implied at law is essentially no different.