Uncertainty Around BIMCO’s Non-Payment of Hire Clause

The vessel was time-chartered on an NYPE form containing the BIMCO Non-Payment of Hire Clause. Hire was payable 15 days in advance, every 15 days.

On one of the payment dates, Charterers withheld disputed hire. For two subsequent payments, Charterers paid the full amount of ongoing hire, but continued to withhold the arrears from the prior underpayment. Eventually, Owners served an anti-tech notice demanding payment of the now-some-months-old arrears, purportedly in line with the BIMCO Non-Payment of Hire Clause.

Following Charterers’ failure to comply, Owners withdrew the Vessel.

In arbitration, it was held that Owners were not entitled to withdraw. The BIMCO clause was not engaged. There was a difference between the right to claim repayment of a contractual debt and the right to withdraw on the basis of the BIMCO clause. The latter involves a tight timetable, and strict compliance to the clause (as is commensurate with the ‘nuclear’ effect of withdrawal’). Owners had lost the opportunity to do the latter.

Withdrawal is a nuclear option – and there are always complexities. Parties need to act promptly, and need to be sure of their legal position when doing so.