Even though the international maritime organization Bimco has developed a set of standard slow steaming clauses throughout 2011 and 2012, created to prevent legal disputes between the owner and charterer of a ship, there are still a possibility of problems, especially in relation to time charter parties, in which the shipowner puts his ship at the shippers disposal for a longer period of time.
"With a time charter party the parties have usually agreed on the speeds at which the ship will be sailing. That's an obvious parameter in relation to chartering a ship, to know how fast it can sail. If the shipowners then order the ship to sail at a slower speed than agreed upon, that could result in a breach of contract. Bimco's slow steaming clauses will regulate this to some degree, but the clauses are not a "card blanche" for slow sailing, and in the case of a time charter party it will typically only be the charterer, not the shipowner, who can give the order to sail at slow speed. This because the charterer is the one responsible for the bunker expenses, which often constitute the incentive to sail at slow speed," says Mette Rosholm, senior attorney at Gorrissen Federspiel, to ShippingWatch.
A ruling in the British maritime and commercial court has granted Clipper Bulk the right to deduct the time lost due to slow steaming in relation to a ship chartered from the shipping company and shipowner Bulk Ship Union SA. The case has made precedent and can be used in the container industry, says several British shipping attorneys.
It is a basic commitment in standard charter parties that a ship must always take the term "utmost despatch" into account, which, under Danish maritime law translates into "due speed."
"Under Danish maritime law, a dispute in relation to slow steaming can just as well arise for the charterer as it can for a shipping company. A cargo owner, the commercial interest, who for instance needs to move a container from A to B, can make a deal with a shipping company or a shipper, and in that case the shipping company or the shipper is bound by law to deliver the goods at due speed. And at that point this law is not something one can agree to disregard," says Mette Rosholm:
"The basic question is whether slow steaming constitutes due speed. The parties can, to the best of their ability, try to make agreements that take into account the potential problems that can arise, there is a certain freedom for agreements in chartering, but the limitations could become apparent in relation to the commercial interest, as the commitment to sailing at due speed is not something that can be avoided through agreement. So it depends on the Danish courts' interpretation of the corresponding term in the Danish maritime law, whether slow steaming constitutes due speed."
Important British practice
Mette Rosholm believes that the British ruling could be an important element in relation to interpretating Danish law. In shipping, British practices often have a contagious effect on Danish practices:
"That's why we're also following the British court rulings with great interest, and the Clipper case, about Pearl C, is certainly interesting," says Mette Rosholm, who believes that there is a variety of possible disputes in relation to slow steaming:
"Bimco's slow steaming clauses can, to a certain degree, solve the problem between shipowners and charteres, but not necessarily in relation to the commercial interest."
In a legal memo from 2012 about slow steaming and the Clipper case concerning the ship Pearl C, the two shipping attorneys Neil Henderson and Tom Burdas, of the company Campbell Johnston Clark LLP, stress that the Bimco clauses only give the shipowner the right to order slow steaming, but the memo proposes that it would be wise for shipowners to use the clauses, which are based on input from international shipping.
In the case about Clipper Bulk, which chartered the ship Pearl C back in 2006 for a period of 9-12 months, for various journeys, Clipper chose at one point to withhold part of its lease, referring to the ship's "underperformance," claiming that the ship was unable to deliver the cargo at due speed, and that the charterer of the ship was thus able to deduct the time lost due to the ship's slow steaming.
The owner of the ship, Bulk Ship Union, had ordered the ship's captain to sail at less than 13 knots, which was listed as part of the agreement. A local court ruled that the owner had breached the contract, a ruling that was sustained by the British maritime and commercial court.