Time Charter Ship Employment and Routes

Clause 11 of the NYPE form provides: ‘That the charterers shall furnish the Captain from time to time with all requisite instructions and sailing directions, in writing, . . . ’

Clause 8 of the NYPE form provides: ‘That the Captain shall prosecute his voyages with the utmost despatch … .The Captain shall be under the orders and directions of the charterers as regards employment and agency;’

It has long been recognized that charterers’ right to give orders as to the vessel’s employment does not extend to navigational matters. By the same token the indemnity to which owners are entitled in respect of the consequences of complying with charterers’ orders does not apply to matters of navigation only. There is inevitably some tension at times between (i) the charterers’ orders to the Master to follow a certain route and (ii) the Master’s freedom to decide for himself concerning matters of navigation. The legal position has now been clarified by the House of Lords in the leading case of The HILL HARMONY [2001]. The HILL HARMONY, a bulk carrier, was chartered on a NYPE form incorporating the Hague-Visby Rules. In January and again in April 1994, the Master ignored orders from the charterers (based on the advice of a weather routing service) to use the Great Circle route for a voyage from Vancouver to Japan and sailed instead by the more southerly and longer rhumb line route, considerably extending the time taken for each voyage. The charterers deducted from hire in respect of the extra time used and bunkers consumed, claiming that the owners were in breach of Clause 8, in that (a) the Master had failed to prosecute the voyages with the utmost despatch and (b) had not obeyed their orders as regards employment. The Master had followed the more southerly route because in October 1993, under a previous charter, the ship had been damaged in heavy weather on the Great Circle route. However, there was evidence that many other ships had followed the Great Circle route in early 1994 without any particular difficulty and the majority arbitrators concluded that this Master had shown no good reason for not doing likewise owners appealed. The main issue before the Commercial Court and the Court of Appeal was whether there had been a breach of the Master’s obligations under Clause 8, namely, to follow charterers’ orders as regards ‘employment’. They held that there had been no such breach, as these routing orders related to navigation as opposed to employment and therefore fell outside the clause.

The House of Lords reversed their decisions and restored that of the majority arbitrators. They held that the northerly route was the shortest route; there was evidence that the northerly route was the usual route to follow as it had been used by more than 360 vessels over a three-month period; the arbitrators found that the Master did not have any rational justification for what he did; on the finding of the arbitrators the charterers were, by ordering the vessel to proceed by the shortest and most direct route, requiring nothing more than what was in any event the contractual obligation of the owners; and the order was an order as regards the employment of the vessel; the choice of ocean route was, in the absence of some overriding factor, a matter of employment of the vessel, her scheduling, and her trading so as to exploit her earning capacity. The breach of contract was the breach of both aspects of the owners’ obligations under Clause 8 – to prosecute the voyage with the utmost despatch and to comply with orders and directions of the charterers as regards the employment of the vessel. Owners could not use as a defence to these breaches Article IV, rule 2(a) of the Hague-Visby Rules, ‘act, neglect or default of the Master … in the navigation or management of the ship’. The Master had not erred in his navigation, but had simply chosen to disregard his two contractual obligations under Clause 8. The nature of charterers’ entitlement to decide which route or course the vessel shall take is helpfully set out by Lord Bingham in the above case: ‘The responsibility for making good, so far as practicable, whatever course is chosen of course remains with the Master and crew, as does that for navigating the vessel safely into and out of port, and responding to maritime problems encountered in the open sea. But subject to safety considerations and the specific terms of the charter, the charterers may not only order a vessel to sail from A to B but may also direct the route to be followed between the two.’ This case also identifies the essential difference between ‘employment’ and ‘navigation’. ‘Employment’ is concerned with the economic exploitation of the vessel, such as what cargoes to carry and ports to visit, whereas ‘navigation’ involves seamanship and the ‘specialized professional maritime expertise’ with which the vessel is operated.