Withdrawal in time charters and anti-technicality clauses


Published: 3 May 2004

Reviewing anti-technicality clauses in time charterparties and again the message is to check the clause before action is taken

In a rising market, Members who have fixed a vessel on long term time charter can have much to gain by withdrawing and re-letting at higher market rates. Correspondingly, charterers have much to lose. In practice, owners have to clear a series of obstacles in order to withdraw lawfully. An illegitimate withdrawal can be very costly and it is vital that owners seek advice at an early stage.

We have recently had a number of withdrawal cases which have required a close look at the anti-technicality clauses. These are clauses which place an obligation on owners to give charterers advance notice before they withdraw. Charterers are then entitled to a final chance to pay the outstanding hire. Some clauses are widely worded so that owners are obliged to give notice in all cases regardless of the reason for non-payment. Charterers sometimes assume that owners will always have to give them a notice prior to withdrawal. They assume they can safely withhold hire without the risk of termination unless and until owners give them notice. However this assumption can be dangerous.

Some anti-technicality clauses are quite narrow. Many refer only to "delay due to banking fault" or "due to delays in the banking system". There are many other reasons for non-payment, not least when charterers make a deduction by way of off-hire or a set-off in respect of a claim against owners. Charterers should be aware that these kind of deductions will not necessarily place an obligation on the owners to give notice of withdrawal under the anti-technicality clause. Charterers may have an unpleasant surprise if they expected a yellow card and instead get handed a red card.

If notice is required, the notice period is normally expressed in terms of working days or banking days. However, occasionally the word "days" is not qualified which can cause severe difficulties for charterers who find themselves facing a week-end or holiday period.

Again, the message is clear - check the clause before acting.