Ship Withdrawal

Ship Withdrawal

If the Time Charterer defaults on the payment of hire, then the shipowner is entitled to withdraw the ship from the service of the charterer. This entitlement is provided for in the terms of all time charter parties that recognize the importance to the shipowner of the regular receipt of hire.

The right of withdrawal is strict-the shipowner may withdraw his ship immediately when the charterer defaults.

Anti-Technicality Clause

The inclusion of a so-called Anti-Technicality Clause provides a grace period to the charterer by requiring the shipowner to give notice to the charterer of the nonpayment of hire. The notice provides an allowance to the charterer of a period of time, such as three banking days, during which the charterer may make good his default and avoid withdrawal of the ship. Hence an Anti-Technicality Clause is in effect a notice of withdrawal.

For example, Clause 9(a) of Shelltime 4 reads: “In default of such proper and timely payment, Owners shall notify Charterers of such default and Charterers shall within seven days of receipt of such notice pay to Owners the amount due including interest, failing which Owners may withdraw the vessel from the service of Charterers ….”.


Shipowners Notice

The shipowner must give an ultimatum, making it clear that withdrawal will take place if payment is not made. In the case of The Afovos (1983): “Owners have instructed us that in case we do not receive the hire which is due today, to give charterers notice as per cl. 31.. .for withdrawal of the vessel from their service.”

A notice under an anti technicality clause cannot be given until after midnight on the day the payment falls due.


Temporarily Withdrawal of a Ship

A shipowner may not temporarily withdraw his ship for nonpayment of hire unless such a withdrawal is expressly allowed under the terms of the charter (The Mihalios Xilas, 1979). In The Pamela (1995), notice was sent by telex late on Friday night but was not effectively received until Monday morning. Hence, it was too late for the anti-technicality clause to take effect.

In The Western Triumph (2002), the shipowners gave notice of withdrawal by e-mail before hire became overdue. The e-mail was not received until after the hire was overdue. The arbitrators held that the notice was invalid because it was premature. The shipowners may lose their right to withdraw if they act in such a way as to communicate to charterers that the charter is to continue, such as accepting a late payment.


Withdrawal Clause

The acceptance of timely but under-paid hire does not amount to a waive of the right to withdraw. All tanker charters contain a Withdrawal Clause. This is an important protection for the shipowner, who can regain control of his or her ship if the hire money is not paid on time. Shelltime 4 allows a seven day grace period for the charterer to rectify, after which the owner may withdraw.

This right of withdrawal can present a tempting opportunity to an owner who has a vessel chartered at a low rate but wishes to take advantage of a higher market. The shipowner’s right to withdraw continues throughout the charter party and centers around the nonpayment of hire, late payment of hire, or part payment of hire.

However, it is only available if expressly reserved. There is no common law right to withdraw. The law regarding withdrawal was firmly established in The Laconia (1997). The right to withdrawal accrued immediately when the hire installment was late in being paid and it was noted that the default committed could not be erased or remedied by effecting a late payment, unless, of course, the owners agreed to accept a late payment.