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"A recent Singapore arbitration examines the consequences of an owner's inability to position a vessel for a charterparty within the agreed laycan."
A recent Singapore arbitration examines the consequences of an owner’s inability to position a vessel for a charterparty within the agreed laycan. In doing so, the tribunal provides useful guidance on anticipatory repudiatory breach, the allocation of risk where a vessel is engaged on prior employment and the continuing application of the Monroe obligation.
The Laycan Dispute
The vessel had been fixed under a voyage charterparty with a laycan of 1 to 10 July. During performance of a preceding fixture, the owners sought amendments to the laycan as the vessel’s itinerary became increasingly uncertain. The charterers rejected those proposals and repeatedly insisted that the original laycan remained binding.
Matters came to a head on 28 June, when the owners informed the charterers that the vessel could not arrive within the agreed laycan and sought either cancellation of the charterparty or an extension of the laycan. The charterers proposed another laycan in August, which the owners rejected. The owners then reiterated that they could not guarantee the vessel’s arrival within the contractual window.
On 2 July, before the cancelling date had passed, the charterers asserted that the owners had committed an anticipatory repudiatory breach, accepted that breach and terminated the charterparty.
Did the owners commit an anticipatory repudiatory breach?
The central issue considered by the tribunal was whether the owners’ communications amounted to an anticipatory repudiatory breach, entitling the charterers to terminate before expiry of the laycan.
The tribunal noted that the test for anticipatory repudiatory breach is objective: the question is whether a reasonable person would conclude that the party in default no longer intends to be bound by the contract. A repudiatory breach may also arise where a party intends to perform the contract, but only in a manner that is substantially inconsistent with its contractual obligations.
Applying those principles, the tribunal distinguished between the owners’ communications on 9 June and 28 June. It found that the earlier suggestion to cancel the shipment or amend the laycan was not sufficiently clear or unequivocal to amount to a renunciation of the charterparty. In any event, the charterers had affirmed the charterparty by insisting that the original laycan remain in place.
The position changed on 28 June, when the owners made clear that the vessel could not arrive within the agreed laycan and could not guarantee timely performance. The tribunal held that these statements amounted to an anticipatory repudiatory breach. Although the owners maintained that the vessel would arrive eventually, the tribunal considered that a party may still repudiate a contract where it intends to perform only in a manner that is fundamentally inconsistent with its contractual obligations. In this case, the owners were effectively stating that they could perform only outside the agreed laycan.
The charterers were therefore entitled to terminate the charterparty on 2 July, without waiting for the expiry of the laycan.
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"A notable aspect of the award was the tribunal's treatment of the owners' argument that the vessel's inability to meet the laycan resulted from delays and developments under a preceding fixture."
Who bears the risk of delays under an intervening fixture?
A notable aspect of the award was the tribunal’s treatment of the owners’ argument that the vessel’s inability to meet the laycan resulted from delays and developments under a preceding fixture. The tribunal accepted that owners are free to employ their vessels on other voyages but emphasised that the commercial consequences of those decisions remain the owners’ responsibility.
In reaching that conclusion, the tribunal relied on CSSA Chartering and Shipping Services SA v Mitsui OSK Lines Ltd (The Pacific Voyager) [2019] 1 Lloyd’s Rep 370, Monroe Brothers Ltd v Ryan [1935] 51 Ll L Rep 179 and Louis Dreyfus v Lauro [1938] 60 Ll L Rep 94. Those cases establish that, while owners are free to take advantage of additional employment opportunities, they do so at the risk of being unable to perform a later fixture. If delays, congestion or other operational issues under the earlier voyage prevent the vessel from meeting its obligations under the subsequent charterparty, that risk generally falls on the owners, not the subsequent charterer.
From a commercial perspective, the decision underscores the importance of voyage planning and scheduling. Owners cannot assume that difficulties encountered under an earlier fixture will excuse non-compliance with a later laycan. Where a vessel’s trading commitments leave little margin for delay, the risk of missing the subsequent fixture remains firmly with the owners.
The Monroe obligation
Although it was unnecessary to do so given its findings on repudiatory breach, the tribunal also considered the charterers’ alternative claim based on breach of the implied Monroe obligation.
The Monroe obligation requires a vessel to commence its approach voyage in sufficient time to arrive at the load port as contractually contemplated. The obligation derives from Monroe Brothers Ltd v Ryan [1935] 51 Ll L Rep 179 and has been revisited in recent years in CSSA Chartering and Shipping Services SA v Mitsui OSK Lines Ltd (The Pacific Voyager) [2019] 1 Lloyd’s Rep 370.
The owners argued that the obligation only arises where there is both (i) an obligation to proceed with convenient speed or utmost despatch; and (ii) a specified ETA or expected readiness date. The tribunal rejected that submission.
Relying on observations made in The Pacific Voyager at first instance, it held that the absence of an express ETA does not prevent the Monroe obligation from arising. Where no ETA is provided, the laycan itself reflects the parties’ expectations as to when the vessel will arrive at the load port and can therefore perform the same function as an ETA for the purposes of the Monroe obligation.
The tribunal therefore found that the owners had breached the implied obligation by failing to arrange the vessel’s schedule in a manner that would enable it to commence the approach voyage in sufficient time to arrive within the contractual laycan.
The Advance Deposit
The owners also sought to argue that the charterers had themselves committed a repudiatory breach by failing to pay an advance deposit required under the charterparty.
The tribunal rejected that argument. While it accepted that the deposit clause was a contractual term and that the charterers had failed to pay the deposit when due, it held that the provision was not a condition precedent to the validity of the charterparty or to the parties’ obligations under it.
Accordingly, the failure to pay the deposit did not justify the owners’ position or deprive the charterers of their right to terminate for the owners’ repudiatory breach.
"The tribunal's decision reinforces the long-established principle that delays under a prior fixture will not ordinarily excuse an owner's failure to meet a later laycan."
Conclusion
Viewed more broadly, the award is a reminder of three important principles.
- First, owners who commit a vessel to earlier employment before a subsequent fixture do so at their own risk. The tribunal’s decision reinforces the long-established principle that delays under a prior fixture will not ordinarily excuse an owner’s failure to meet a later laycan.
- Secondly, a charterer may not need to wait until the cancelling date has passed before taking action. Where owners make clear that the vessel will be unable to perform in accordance with the agreed laycan, that may amount to an anticipatory repudiatory breach, entitling the charterer to terminate immediately.
- Finally, the tribunal’s discussion of the Monroe obligation confirms the continuing willingness of tribunals applying English law to look to the laycan itself as the relevant benchmark where no ETA or expected readiness date has been provided. For owners, this serves as a reminder that obligations relating to a vessel’s approach voyage and scheduling may arise long before the vessel begins the contractual voyage itself.
The relevant decision, Singapore Arbitration 2/26, is not publicly available but can be found in the Lloyd’s Maritime Law Newsletter.
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