The past few years have borne witness to the extreme commercial stress which the fluctuating spot market places upon long term charter commitments. The continued depression of the market for current tonnage has presented oil tanker owners in particular with petitions from their charterers seeking either downward renegotiation of previously agreed higher rates or complete cancellation of long term commitments. Conversely, when the spot market hit its peak just prior to the OPEC (Organisation of Petroleum Exporting Countries) oil embargo in October, 1973, there were owners of tankers, bulk carriers, general cargo and other ships who sought upward renegotiation or withdrawal from long term charters entered earlier at lower rates.

In the latter situation, a delay in receiving a hire or freight payment may be asserted as grounds by the shipowner to cease performing the long term commitment and withdraw its vessel from time chartered service or terminate a multiple voyage contract. The various standard forms of time charter commonly in use contain express language respecting withdrawal in such circumstances; by contrast, the forms usually employed for multiple voyage charters were originally intended for single voyage arrangements and accordingly are silent respecting termination of a multiple voyage commitment. This article considers disputes resolved by New York arbitration interpreting the withdrawal language of one of the standard time charter forms, the New York Produce Exchange (NYPX).

Since charter-parties such as the NYPX typically contain broad arbitration clauses, a charterer may respond to an owner’s notice of withdrawal by demanding arbitration and requesting that hearings be held and an award rendered on an expedited basis in order to resolve the ship’s legal status with the minimum disruption to both parties’ commercial arrangements. Where the ship is at sea, for example, the parties may seek to resolve their dispute before she arrives at port and commences loading or completes discharging, as appropriate.

These commercial disputes usually raise one or more basic legal questions as follows: Did the charterer’s disputed payment constitute a breach of the charter contract? If so, was the owner’s purported withdrawal effective or did it waive the breach by, for example, permitting the charterer to cure the lateness? In any event, does the charterer’s breach by a late payment not subsequently waived justify the owner in exercising the drastic remedy of withdrawal ?

In the United States, the foregoing questions cannot be answered in the abstract independent of the specific factual circumstances of a particular case. General rules cannot be formulated because arbitration awards have no precedential value as a