London Arbitration 10/26

NYPE – TIME CHARTER – HIRE – UNDERPERFORMANCE – THE KOSTAS MELAS

This arbitration concerned a dispute under a time charter trip on an amended NYPE form for the carriage of logs. The owners sought a partial final award for unpaid hire of US$146,095, arguing that the charterers had wrongfully deducted hire in breach of clause 67 of the charterparty, which expressly stated: “No Hire deductions for alleged underperformance claims.”

The charterers admitted that the deductions related to the vessel’s alleged poor performance, including lost time of 77.36 hours and additional bunker consumption. However, they argued that the tribunal should consider the reasonableness and bona fides of their crossclaim, relying on The Kostas Melas.

The tribunal rejected the charterers’ argument. It held that an underperformance claim includes any allegation that a vessel failed to perform in accordance with the charterparty, whether relating to speed, fuel consumption or other operational deficiencies. Since the deductions were expressly made for alleged underperformance, they fell squarely within clause 67. The clause clearly prohibited deductions from hire on that basis, meaning the charterers had acted in breach of the charterparty.

Although the tribunal noted that the charterers’ substantive complaints—such as the vessel’s delivery condition, alleged over-reporting of weather, and possible hull fouling—might ultimately have merit, those issues had not yet been fully determined. They did not affect the owners’ immediate contractual entitlement to payment of hire. The tribunal also distinguished The Kostas Melas, observing that it involved no equivalent contractual prohibition on hire deductions and therefore had no application.

Accordingly, the tribunal awarded the owners US$146,095 together with interest at 5% per annum, compounded quarterly. The charterers were also ordered to pay the owners’ costs of the application, the costs of the award, and interest on those costs.