Important Judgment on RightShip Approval

7 August 2008

The English High Court has recently clarified Owners obligations in respect of maintaining RightShip approval in dry-bulk shipping trades. The Court also set out Owners obligations with regard to permitting access to private vetting agency inspectors. 

The central issues in the dispute between Owners and Charterers were:

*     Whether the charterparty provisions calling for the vessel to be in possession of all documents required for trading obliged the Owners to secure RightShip approval

*     Whether Owners were obliged to permit a RightShip inspection arranged by Charterers pursuant to Clause 8 of the NYPE form

The Court found in favour of the Owners in the first issue. It held that, absent an express charterparty obligation to maintain RightShip approval, the standard clauses of the NYPE form charterparty did not impose a duty upon Owners to ensure that their vessels are RightShip approved.

However, the Court found in favour of the Charterers in the second issue. It held that Clause 8 of the NYPE form, which requires Owners to obey Charterers orders as to the vessels employment, does impose a duty upon Owners to co-operate with Charterers when they organised their own RightShip inspection and that refusal to co-operate put the Owners in breach of the charterparty.

Whilst both parties have been given leave to appeal, the law firm Reed Smith comment that the decision provides welcome clarification of Owners obligations with regard to both RightShip approval, and permitting access to inspectors in order that such approval may be obtained. In their view, the lesson for Charterers is that if they wish to employ a chartered ship between ports where RightShip approval is required by most shippers, then this needs to be an express term of the charterparty. And the lesson for Owners is that if they ignore a request by their Charterer to allow access to inspectors employed by a private vetting agency, then they do so at their peril. A copy of the Reed Smith client alert is attached and the full High Court Judgment can be viewed by clicking here.