The legal case between Hapag Lloyd and two Greek shipping companies, Skyros Maritime Corp and Agios Minas Shipping, is set to end up at the UK Supreme Court. The dispute began in 2021 due to Hapag Lloyd’s late return of two boxships, the Skyros and the Agios Minas, chartered on 20th February 2017 and 23rd March 2020 respectively. The Skyros was returned two days later than agreed and the Agios Minas seven.
At the heart of the dispute, however, is not the delay itself but the compensation that the two companies have demanded from the Hamburg shipping company for the late delivery.
First of all, it should be noted that when the ships were returned, freight rates had risen well above the rates agreed in the charter agreement. However, Hapag Lloyd continued to pay the agreed charter rates even during the delay period, without considering the fact that market dynamics had changed. Both shipping companies, which, in the meantime, had already agreed to sell the chartered vessels to third parties, had in turn requested substantial damages, to cover the difference between the contractual rates and market rates.
It was this that sparked the dispute. Based on an arbitration clause requiring the parties to resolve disputes through arbitration, the parties agreed to refer the matter to the London Maritime Arbitrators Association in order to break the deadlock.
In a nutshell, Hapag Lloyd argued that A) the request for substantial damages was contrary to the fundamental principle of compensation, according to which compensation must reflect the effective loss incurred by the injured party; B) the sale of the vessels by Skyros Maritime Corp and Agios Minas Shipping was a crucial factor in assessing the matter, since the charterers had already undertaken not to charter the vessels again in order to sell them, thereby depriving themselves of the possibility of earning extra charter profits due to the delay.
Skyros Maritime Corp and Agios Minas Shipping, on the other hand, had asserted that A) the use of the vessel beyond the agreed term constituted an extra-contractual service, to be paid at market price, and B) that the contract for the sale of the ships entered into with a third party (MOA) was a private matter (res inter alios acta), which the arbitrator should not have taken into account for the purposes of assessing the case.
The arbitrator ruled in favour of the two shipping companies, forcing the German carrier to turn to the Court of Appeal. However, the Court of Appeal upheld the arbitration decision, agreeing that Hapag Lloyd should continue to pay the market value for the time it had unjustly retained the vessels.
This led to Hapag Lloyd filing an appeal with the UK Supreme Court, which was deemed the competent court for the dispute because the ships had been chartered under the NYPE (New York Produce Exchange) form, which usually includes clauses delegating the resolution of disputes to the English courts.
The supreme court will have to determine whether the case represents a legal issue of sufficient public interest to justify the admissibility of the appeal. If the case is accepted, the actual hearing will likely take place between late 2026 and early 2027.
If the Supreme Court upholds the Court of Appeal’s decision, a favourable precedent will be set for all charterers: the market value will become a sort of minimum penalty for those who return the vessel late, regardless of the actual damage incurred as a result of the delay in returning the chartered ship.
Translation by Giles Foster
