On 7 October 2025, the Court of Appeal issued its decision on the Owners’ appeal regarding the interpretation of clause 29 in the BIMCO Barecon 2001 standard charter form (which remains in same form as clause 31 in the current BIMCO Barecon 2017 form).
The Charterers, succeeded in having the owners’ appeal dismissed, in a decision that gives guidance on vessel repossession duties of the owner following charterers’ early termination.
Background
The bareboat charter in question was entered into on 11 February 2013, using a modified BIMCO Barecon 2001 form (Charter). Brodotrogir DOO (BDOO), a Croatian shipbuilder, agreed to charter a tanker to Songa Shipping Pte Ltd for five years (with a plus or minus two months flexibility at the Charterers’ discretion).
Subsequently, the original parties novated the Charter to their affiliates, Kairos Shipping II LLC (as Owners, sharing same beneficial ownership with BDOO) and Songa Product and Chemical Tankers III AS (as Charterers). Delivery of the Vessel under the Charter took place on 23 December 2016.
Key Charter Provisions
Clause 28 allowed either party to terminate early under specified insolvency-related events, such as bankruptcy, liquidation, or a court order. The clause was tailored to include a right of the charterers to terminate the Charter in the event of insolvency-related events affecting the Owners’ guarantor (BDOO).
Following termination under Clause 28, the print form of BIMCO’s BARECON 2001 Clause 29 set out the process for Owners retaking possession:
- The Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them […].
- […] Pending physical repossession of the Vessel in accordance with Clause 29, the Charterers shall hold the vessel as gratuitous bailee only to the Owners[…].
- […]The Owners shall arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination of the Charter[…].
Termination and Dispute
After the Croatian Commercial Court confirmed a Pre-Bankruptcy Agreement for BDOO in October 2020, Charterers argued this constituted grounds for termination per the tailored clause 28(d). On 14 May 2021, after cargo was discharged in Stockton, California, the Charterers terminated the Charter and advised Owners that the Vessel was ready to be repossessed.
Owners, however, denied termination and demanded that the Vessel be delivered to Trogir in Croatia and declined to repossess in Stockton. After an impasse of approximately 3 months, and an intransigent stance by the Owners, the Charterers began sailing the Vessel to Trogir under protest.
Arbitration Proceedings
Charterers initiated arbitration on 13 January 2022, claiming damages exceeding USD 2 million, alleging breach of clause 29. Owners counterclaimed for lost hire and other costs. Although Owners at first contended Charterers couldn’t claim expenses post-termination, they later agreed that, if the termination was valid, Charterers could recover costs for sailing the vessel to Gibraltar as bailees. However, Owners argued that time and expenses incurred by the Charterers during the impasse with the Vessel at anchorage off the coast of Mexico were not recoverable due to Charterers’ alleged breach of clause 29.
The Tribunal found the Charter had been validly ended. Regarding repossession, the Tribunal reasoned that even if it seemed odd for Owners to pick the place of repossession when they might be insolvent, the clear contract wording (“at her current or next port of call, or at a port or place convenient to them”) meant that even if the Owners could have repossessed the Vessel in Stockton, Trogir was objectively convenient to the Owners, and Owners had the right to insist on Charterers’ delivery of the Vessel for Owners’ repossession there.
High Court Appeal
The Charterers appealed the Award, on the following question of law:
“What is the correct construction of Clause 29 in the Charter (as per the BIMCO Barecon 2001 standard form)? In particular, does it mean and have the effect that:
(A) The Owners are required to repossess the Vessel as soon as practicable basically where the Vessel is upon termination or where the Charterers position her as they wind down their use and possession of the Vessel and take reasonable steps to keep the Vessel safe pending repossession, provided that the Owners are entitled to have the Vessel made available at a port or place that is convenient for repossession in the (objective) sense that it allows an authorised representative and crew to be put on board in a usual way; or
(B) The Charterers are obliged to sail the Vessel to any place nominated by the Owners which the Owners (in good faith) consider to be the place that would be the most convenient to themselves for repossessing the Vessel?”
Judge Pelling found that the Tribunal had glossed over important commercial realities. He determined that clauses 28 and 29 together were meant as a balanced, self-contained early-termination framework. If Owners’ strict reading applied, Charterers could be forced to bear significant expense delivering to remote locations, especially unjust when Owners were insolvent or in breach.
Further, the Judge disagreed with the Tribunal that the wording requiring Owners to place a representative on board as soon as reasonably practicable did not impose a corresponding obligation to do exactly that. If Owners could demand repossession at any place whatsoever, this would ignore their obligation to place a representative as soon as practicable.
Judge Pelling allowed the Charterers’ appeal and remitted the Partial Final Award to the Tribunal accordingly.
Court of Appeal
Owners then appealed, arguing that
- The Judge had manufactured ambiguity to favour Charterers.
- Most defaults leading to early termination will be those of the Charterers, in particular, in failing to pay hire or in failing to maintain or repair
- In those circumstances clause 29 should be approached on the basis that it will mainly be applicable where the Charterers are in breach of the Charterparty, and will primarily be designed with the interests of the Owners in mind
- The Tribunal was right to find that the Owners were entitled to repossess the Vessel at Trogir, a place that was objectively convenient to them for the purpose of taking possession as soon as reasonably practicable, taking into account the insolvency process in which BDOO was engaged and that the Vessel could be cared for in BDOO’s shipyard without the need to engage a crew overseas through a ship management company
The Court of Appeal disagreed, finding:
- Clause 29 is not drafted, as it easily could have been, so as to give the Owners the express right to nominate a location for taking repossession, imposing a clear obligation on the Charterers to sail the Vessel there on termination.
- The phrase “her current or next port” is not part of a menu of options for the Owners from which to choose a location for repossession, but reflects the fact that the Vessel may be in port at the time of termination (her current port) or may be at sea (heading for her next port). It would be a nonsense to suggest that, if the Vessel is already in port at the time of termination, the phrase entitles the Owners to require the Charterers to set sail to her next scheduled port.
- The right to possess at the Vessel’s current port will sensibly coincide with the obligation to repossess as soon as reasonably practicable.
- The additional words “or at a port or place convenient to them” have a clear purpose and meaning as a fall-back in the event that “her current or next port” is not convenient for taking possession, as the Owners are obliged to do, as soon as reasonably practicable.
- Clause 29 imposes no express obligation on the Charterers to sail the Vessel to another port and the implication of any such duty must be strictly confined to what is necessary given the termination of their broad contractual obligations as Charterers and the replacement of them with the role of gratuitous bailee.
The Court upheld Judge Pelling’s view: unless it’s impossible or impractical, Owners must repossess the ship at its present port when the Charter is terminated.
Thus, the Owners’ appeal was dismissed.
Conclusion
Notably, the Court of Appeal decision, in upholding Judge Pelling’s view, restores commercial common sense in the interpretation of the repossession clause of the BARECON form, preventing Owners from obliging Charterers to deliver vessels to far-off ports at charterers’ own expense after validly terminating a charter, especially in cases involving Owner insolvency. Both the High Court and the Court of Appeal endorsed this commonsense resolution. It can also be noted that financial leases would rarely find any lesson learned from this, given that leases rarely afford any termination rights on the lessees.
And it should also be noted that it is even more rare to come across a similar situation where an owner who is faced with a terminating charterer seeks not to take possession of (and protect) its asset, at the earliest opportunity. In the words of Lord Justice Phillips: “ it is a legal and commercial imperative that the Owners, whose Vessel is no longer on hire and is without the benefit of the Charterers’ obligations to operate, maintain, insure and indemnify, should have the right to repossess it at the first opportunity, namely, at its current port (or its next port of call, if at sea) and that the Charterers should have a minimum obligation to care for the Vessel as gratuitous bailee in the interim. The quid pro quo for that obligation of the Charterers must be that the Owners should repossess the Vessel as soon as reasonably practicable so as to relieve them of that unremunerated burden.”
Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC (Songa Pride) [2025] EWCA Civ 1227