BARECON redelivery – where do I go?

Bareboat charterparties are often used for the long-term chartering of support vessels, construction assets, and specialist tonnage. The case of the SONGA PRIDE recently highlighted the importance of clear and practical contract drafting to manage operational, legal, and financial risks in vessel redelivery and repossession scenarios.

BACKGROUND

Following an insolvency event in October 2020 which entitled Charterers to terminate, in May 2021, Charterers terminated a BIMCO Barecon 2001 charterparty while the Vessel was docked at Stockton, California.

Owners requested Charterers to redeliver the Vessel to Croatia (almost two months’ sailing from California). Charterers objected and moved the Vessel to Mexico in order to mitigate losses.

In August 2021, Charterers eventually set sail to Croatia under duress from Owners. Charterers claimed for their costs while the Vessel was berthed in Mexico for roughly three months (it being found separately that Charterers were otherwise entitled to their reasonable costs for redelivering the Vessel to Croatia in their capacity as gratuitous bailees).

ISSUES

This case involved a dispute in relation to the true construction of clause 29 of the BIMCO Barecon 2001 standard form (which is now clause 32 of the 2017 version of the same form) which states that “…Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them…” (our emphasis).

Owners argued (upheld by the Tribunal at first instance) they were entitled to order Charterers to redeliver the Vessel anywhere that was most convenient for them. They also argued that the separate obligation in the same clause to “…arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination of the Charter…” only arose after the Vessel was actually redelivered to the port which was convenient to them.

The English High Court and Court of Appeal disagreed. Repossession in a port convenient to Owners is a fall-back provision. If a charterparty is terminated in port, that is where the vessel should be repossessed. If it is terminated mid-voyage, the vessel will be repossessed at the next port of call. Repossession in a port convenient to Owners is only an option if those other ports are practically impossible locations for Owners to effect repossession. In the end, clause 29 does not present Owners with a “menu of options” for repossession.

The Court also confirmed that repossession by Owners – which is effected simply by putting a representative on board – has to be done “as soon as reasonably practicable”.

Conclusion

This decision clarifies a clause which until now had not received any judicial treatment. The place of termination could not have been more inconvenient to bareboat Owners (who were not accustomed to crewing and operating ships).

Owners may consider amending this clause to specify where exactly the vessel should be redelivered in the event of Charterers terminating. Charterers, meanwhile, will want to preserve the liberty to terminate (if that right arises) whenever and wherever, or at least within a range of locations.

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