Eitzen Bulk A/S v TTMI SARL. Judgment of Eder J. on the meaning clause 15 of the Shelltime 4 form.

When bunker prices tumble in a falling market, the time Charterer who charters on the terms of Shelltime 4 form’s clause 15, may feel financially incentivised to claim from the Owner on redelivery the costs which he (the Charterer) has paid to its subcharterer for the bunkers on redelivery under the subcharter; at least, that is, where the “same prices agreed both ends” in the subcharter, prove to be higher than what it actually cost to stem the bunkers on board the vessel on redelivery, from the bunker suppliers.

In this case, an arbitration tribunal had accepted Owners’ argument held that the obligation on the Owner in clause 15 to pay the Charterer “the price actually paid”, meant an obligation to pay the stemmed price, viz. the price actually paid to the bunker supplier(s) for putting the bunkers on board. The Court granted permission to appeal this award, on the ground that the Charterer could raise a substantial argument, and one of general public importance, that “the price actually paid” was to be understood as meaning the price actually paid by whichever party (Owner or Charterer) was claiming money under the clause, a construction which would have enabled the stemmed prices to be ignored, or trumped by the Charterer’s subcharter price which it had paid its subcharterer.

On the appeal, however, before Mr. Justice Eder, the arguments that “the price actually paid” must mean the stemmed prices, and in particular (1) the sheer unlikelihood of the owner being taken to have agreed to pay a price for bunkers on redelivery over which price he would have no control and which was not necessarily reflective of any relevant market price or of the actual costs paid to a bunker supplier, and (2) the fact that clause 15’s “first-in-first-out” requirement compelled the conclusion that “price actually paid” did indeed mean the stemmed prices, carried the day, and led the Court to uphold the award of the arbitrators.

The full judgment can be found here.