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A victory for commercial common sense: Owners’ obligations on repossession of a vessel following an early termination of a bareboat charter

Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC (Songa Pride) [2025] EWCA Civ 1227

The Court of Appeal handed down their judgment on 7 October 2025, following Owners’ s.69 appeal of the interpretation of clause 29 of the BIMCO Barecon 2001 standard form.

Mills and Co acted for Charterers in the successful dismissal of the appeal, providing clarity on the repossession of a vessel following early termination.

BACKGROUND:

The parties entered into a bareboat charterparty dated 11 February 2013, on an amended BIMCO Barecon 2001 form. Brodotrogir DOO (BDOO), a Croatian shipbuilder, agreed to bareboat charter a tanker to Songa Shipping Pte Ltd for a period of five years (plus/minus two months at Charterers’ option).

The Charterparty was later novated by the original parties to Owners (“Kairos Shipping II LLC”, in the same beneficial ownership as BDOO) and Charterers (“Songa Product and Chemical Tankers III AS”). The Vessel was delivered to Charterers on 23 December 2016.

CHARTERPARTY

The relevant clause of the Charterparty (clause 28) provides for early termination. In particular, clause 28(d) states:

“Either party shall be entitled to terminate this Charter with immediate effect by written notice to the other party in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of the other party (otherwise than for the purpose of reconstruction or amalgamation) or if a receiver is appointed, or if it suspends payment, ceases to carry on business or makes any special arrangement or composition with its creditors. The Charterers shall have the same rights in case of a similar event in respect of the Guarantor.” 

In the event of termination, the Vessel was to be repossessed by Owners in accordance with clause 29:

“…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 without hindrance or interference by the Charterers, courts or local authorities. 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. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners’ representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the charterers’ Master, officers and crew shall be the sole responsibility of the Charterers.” (emphasis added)

On 16 October 2020, the Commercial Court in Croatia confirmed a Pre-Bankruptcy Agreement in relation to BDOO. Charterers asserted that this fell within the remit of clause 28(d), and accordingly Charterers were entitled to terminate the Charterparty. Charterers did so on 14 May 2021, shortly after completing discharging operations in Stockton, California. Charterers notified Owners that the Vessel was ready for repossession.

Owners insisted that the Vessel must be brought to Trogir and refused to repossess the Vessel at Stockton. Following a standoff between the parties, Charterers commenced the voyage to Trogir under protest.

ARBITRATION

Charterers commenced LMAA arbitration proceedings against Owners on 13 January 2022 claiming damages of USD2,190,277.81 for breach of clause 29. Charterers were represented by SVW alongside Simon Milnes KC of Twenty Essex.

Owners counterclaimed for the lost hire and unrelated repair costs. Initially, the Owners argued that the Charterers were not entitled to recover any post-termination expenses. However, during arbitration, they conceded that if termination under clause 28(d) was valid, the Charterers could recover costs incurred while sailing the Vessel to Gibraltar as gratuitous bailees. They maintained that the time lost and expenses from the Vessel’s period at anchorage in Mexico during the “standoff” were not recoverable, alleging those resulted from the Charterers’ breach of clause 29. The central issue in the appeal was whether the Charterers could recover those expenses.

The Arbitration Tribunal held that the Charterparty was validly terminated, and further held regarding the Vessel’s repossession:

129. Charterers argued with some force that it would be surprising if Owners were given the choice of the place of repossession in circumstances where a termination under clause 28 could arise because Owners were in breach or insolvent. However, arguments as to what is the (perceived) commercially reasonable result may not reflect the bargain that the parties actually agreed on (for better or worse),and will generally not prevail over the ordinary meaning of unambiguous wording. The parties had chosen a standard form wording under which one side’s convenience was expressly given priority in determining the place of repossession. The ordinary meaning of the Barecon 2001 wording is clear and effective to achieve the purpose of a safe, unhindered repossession as soon as reasonably practicable. Furthermore, Charterers’ construction gave rise to greater room for uncertainty and debate (as illustrated by this case).”

The Tribunal further held that the phrase “at her current or next port of call, or at a port or place convenient to them” should not be read together:

“The parties had agreed that Owners had a right to repossess the Vessel at her next port of call and this could entail a trans-ocean voyage. A convenient place similarly did not have to be close. The obligation to repossess as soon as reasonably practicable was not to be read as requiring repossession at a close place (or a place as close as reasonably practicable).”

Although the Tribunal found that Owners could have repossessed the Vessel in Stockton, the Tribunal held that Trogir was objectively convenient to them, and Owners had the right to insist upon repossession there.

HIGH COURT APPEAL 

Charterers sought to appeal the Award on the following question of law:

• “What is the correct construction of Clause 29 in the Charter (which is 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?”

Mills and Co and Simon Milnes KC were instructed for the High Court appeal. Leave to appeal to the High Court was granted, and following the hearing on 29 November 2024, Judge Pelling delivered his reserved judgment. The Judge disagreed with the Tribunal that the wording of clause 29 was unambiguous and held it was necessary to pay particular attention to the commercial context.

The Judge directed that clauses 28 and 29 should be read together as a self-contained code for early termination. If Owners’ construction was correct, then Charterers would have to deliver the Vessel anywhere as required at considerable cost, even when repossession is following termination following Owners’ insolvency. Charterers would then be at considerable risk of not recovering these costs.

The Judge further 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 repossess as soon as practicable. If Owners could direct repossession at any place at all, this would ignore their obligation to place a representative as soon as practicable.

The Judge allowed Charterers’ appeal and remitted the Partial Final Award to the Tribunal to reconsider the decision

COURT OF APPEAL

Owners appealed on the basis that the Judge’s interpretation of clause 29 was wrong, and the original Tribunal decision should be reinstated.

According to Owners:

• the clause should not have been construed on the facts of the present case, but as it is a standard provision in a widely used form, instead should be construed in a manner that was universally applicable.
• Owners asserted that the Judge “sought to create” ambiguity in the language when there was none, simply because the circumstances would have been unfair to Charterers.
• As most defaults leading to early termination will be due to Charterers, clause 29 is primarily designed with Owners’ interests in mind and should be construed as such. This supposedly was supported by BIMCO’s Explanatory Notes for Barecon 2001, which states that the purpose of the clause was to strengthen owners’ position

Court of Appeal’s Judgment:

• The Court of Appeal rightly held that the provisions of clause 29 must be considered in the context of the legal and commercial nature of a bareboat charter.
• Although on delivery, Charterers have more obligations under the charter, this does not mean that the clause must be read in a manner favourable to Owners. The clause identifies bases for termination due to default of both parties, and the suggestion that there is a bias within the clause is misconceived.
• The Judges held that the clause does not grant Owners an unrestricted right to choose any repossession location convenient to them; there would need to be an express obligation on Charterers for such a broad obligation which was not present in the clause.

The Court of Appeal dismissed Owners’ appeal, agreeing that clause 29 does not grant Owners an unrestricted right to choose any repossession location and must be read fairly, requiring repossession at the vessel’s current port unless impracticable, aligning with the High Court’s reasoning.

They concluded in agreement with Judge Pelling that if the Vessel is currently at port when the Charterparty is terminated, then Owners must repossess at that port unless it is impracticable or impossible to do so.

Accordingly, the appeal was dismissed, “largely for the reasons given” by Judge Pelling.

SUMMARY:

This decision helps clarify shipowners’ rights under clause 28-29 of the BARECON 2001 form:

“Owners cannot arbitrarily choose any repossession location after early termination which suits them; the vessel must be repossessed at the current port as soon as reasonably practicable, unless it is impossible or impracticable to do so.”

The decision also represents a victory for commercial common sense – the notion that an insolvent Owner could order a Charterer who had validly terminated a Barecon charter to sail a vessel halfway around the world at its own cost, with almost no prospect of recovering those costs was plainly contrary to commercial common sense. Thankfully, the High Court and the Court of Appeal agreed.

Charterers were represented by Amy Nicolaou and Tom Whitworth

The full judgment can be read here: Songa Product and Chemical Tankers III AS -v- Kairos Shipping II LLC (Songa Pride) [2025] EWCA Civ 1227