Examining TCA Off-hire Clauses in the Shipping of LNG

I. Introduction

An off-hire clause is one of the clauses contained in a time charterparty agreement (TCA) in standard forms. The clause permits charterers to refrain from paying hire to shipowners. It is an exception to the general rule that charterers must pay hire to the owners of vessels. This happens when force majeure or unforeseen events that are contained in the off-hire clause occur, preventing the vessel from continuing the task needed by the charterers. For example, force majeure events, such as storms, wars, piracy, and outbreak of pandemic, and mechanical faults, exemplified by engine breakdown, prevent vessels from continuing its task. This culminates in a loss of time – an off-hire period – and the charterer may be exempt from paying hire during this period. Disputes arise when the wording of the off-hire clause is ambiguous, or the event is not expressly specified in the clause. Determining the duration of the off-hire period may also be an issue, and parties approach the court for the interpretation of off-hire clauses to distribute risk fairly between ship owners and charterers. This short article analyses case law, standard form agreements, and studies to examine the application of off-hire clauses in the shipping of liquefied natural gas (LNG) through these special vessels, to wit, LNG carriers (LNGCs) and floating, storage, and regasification units (FSRUs). The article examines the general principles of an off-hire clause and reviews the interpretation of off-hire clauses by courts. In conclusion, the article briefly addresses LNG projects in Nigeria that may lead to LNGC/FSRU TCAs off-hire disputes, highlighting steps drafters of off-hire clauses in TCASs should take to obviate the need to go to court for interpretation. Also, it mentions what needs to be done for Nigerian courts to adjudicate such disputes, if parties choose Nigeria as the destination for dispute resolution This is significant because Nigeria is a major player in the gas sector – the country has one of the biggest gas reserves in the world –and there are many completed and ongoing LNG projects in the Niger Delta region of the country that could lead to disputes.

II. General Principles of Off-hire Clauses

The first principle of the off-hire clause is that the off-hire event must prevent the full working of the vessel. Another principle of an off-hire clause is that the burden of proving that the event falls within the scope of the off-hire clause is on the charterers because an off-hire clause is an exception to the TCA general rule that charterers are liable to pay hire continuously. Hence, the court has held that ‘[i]t is settled law that prima facie hire is payable continuously and that it is for the charterers to bring themselves clearly within an off-hire clause if they contend that hire ceases.’ In the Royal Greek Government v Minister of Transport, the court stated that to benefit from off-hire clauses, the charterer ‘…must bring himself clearly within the exceptions.’ Consequently, the burden of proving that the event is within the exception contained in the off-hire clause is on the charterers, since where ‘there is a doubt as to what the words mean, …those words must be read in favour of the owners because the charterer is attempting to cut down the owners’ right to hire.’ Thus, to benefit from the off-hire clause, it is the responsibility of the charterer to show that the event leading to the delay  falls within the off-hire clause. Another important principle is that the off-hire event must be expressly contained in the off-hire clause. In the absence of that, the phrase “any other causes,” which is interpreted based on the ejusdem generis rule, or “every other causes whatsoever,” which has a broader interpretation, must be included in the clause. Further, there must be a loss of time. In The Saldanha case, the court stated that for extraneous events that lead to an impediment to the full working of the vessel to trigger the application of off-hire, the phrase “any other causes” must contain “whatsoever.”  

III. Interpretation of Off-hire Clauses

Unlike other types of vessels, technical and peculiar issues in the use of LNGCs/FSRUs, such as the breakdown or malfunctioning of the  boil-off gas facility, cargo-handling system, special safety system, send-out capability, and containment system, are grounds for the application of the off-hire clause. Generally, courts have applied off-hire clauses due to engine breakdown and mechanical malfunction. Nonetheless, the decision of the court in The H.R. Macmillan suggests that in a situation where a crane out of three cranes breaks down during loading, nevertheless, the remaining two cranes can do the job required in the same time frame, there would be no loss of time under the net loss of time off-hire clause. External factors that can lead to off-hire if they are expressly contained in the off-hire clauses include piracy, war, and pandemic. More importantly, the interpretation of piracy off-hire clauses most times cover war (warlike) risk clauses. This is because piracy attacks are regarded as warlike operations that prevent the full working of the vessel. However, unilateral withholding of hire due to piracy and delays as a result of rerouting to avoid war zones do not lead to off-hire. In all, aside from expressly providing off-hire events, such provision must be in simple language and the off-hire event must prevent the full working of the vessel before the court upholds the application of off-hire. 

IV. Concluding Reflection on Nigeria

The concluding reflection on Nigeria is significant because of the country’s pivotal role in the oil and gas sector and global energy security. Hence, Nigeria has more than 209.26 trillion standard cubic feet (TSCF) and 102.59 TSCF of associated gas and 106.67 TSCF of non-associated gas, respectively, which makes the country a leading gas economy in Africa and a global oil and gas power house. To utilise its abundant natural gas, the Nigerian government introduced legislation, such as the Petroleum Industry Act (PIA), that provides measures to utilise and commercialise the resource and established institutions, exemplified by the Nigerian National Petroleum Company (NNPC) Ltd., to regulate and manage activities in the sector. Additionally, Nigeria has initiated policies, for example, the Nigerian Gas Master Plan (NGMP), to bolster gas utilisation and commercialisation in the country. Specifically, the Nigerian government introduced the “Decade of Gas Initiative” (DGI) in 2021 to transform Nigeria into a gas-powered economy and a regional leader in the sector that includes the expansion of natural gas production, consumption, and infrastructure development by 2030. In terms of gas exploration and exportation, Nigeria’s initial gas activities are linked to the creation of the Nigerian Liquefied Natural Gas (NLNG), which involves NNPC Ltd. (49 % stake) representing Nigeria, Shell (25.6 % stake), Total (15 % stake), and ENI (10.4 % stake). NLNG signed a letter of intent (LOI) for the engineering, procurement, and construction (EPC) with the SCD JV Consortium (Italian Saipem, Japanese Chiyoda, and South Korean Daewoo) to build the 7th train on 11 September 2019 in Abuja, Nigeria.

Most of the gas projects in Nigeria take place onshore, shallow waters, and deep-waters, and are collectively operated by multinational oil companies, such as Shell and TotalEnergies, state-owned entities, for example, NNPC Ltd., and domestic companies, exemplefied by Oando Plc and Seplat. It is observed that the commissioning of three heavy gas infrastructure projects – AHL Gas Processing Plant, the ANOH Gas Processing Plant, and the 23.3 kilometres ANOH to Obiafu-Obrikom-Oben (OB3) Gas Pipeline – executed by NNPC Ltd and its partners would lead to an increase in LNG exportation. According to a report, these projects will contribute to a 25 per cent increase in domestic gas supply for domestic consumption and gas-based industries. This implies that the remaining gas may be exported as LNG through LNGCs or FSRUs. Thus, there will be an increase in potential off-hire disputes, especially given that Nigerian waters are prone to piratical attacks. 

Thus, legal practitioners and drafters of commercial contracts in Nigeria should get acquainted with bespoke clauses for piracy, war, and infectious diseases, etc. Also, it is important to expressly provide for specific off-hire events, depending on the circumstances of the coastal state. For example, LNGC/FSRU TCAs in Nigeria must expressly provide for a piracy off-hire clause. More importantly, such an off-hire clause, whether it is a bespoke clause or not, must be in simple language. For the courts, it is important to train and retrain judges, especially Federal High Court judges, who have jurisdiction to adjudicate maritime disputes in Nigeria, so that they will understand the intricacies involved in commercial disputes, especially commercial activities in the energy sector, to be able to interpret off-hire clauses and fairly distribute risks between parties. If these measures are wholly implemented, the Nigerian maritime jurisprudence will not only be developed but also Nigeria will be the preferred forum for dispute resolution arising from commercial disputes, especially disputes involving the interpretation of LNGC/FSRU TCA off-hire clauses and the fair distribution of risk.  

Author: Kalu K. Anele, PhD

Notes

1. Standard form agreements depend on the cargo and vessel. For LNG, see ShellLNGTime 1, 2005; BIMCO’s
   LNGVOY 2016; and NYPE Form 2015.
2. COSCO Bulk Carrier Co Ltd v Team-up Owning Co Ltd (‘The Saldanha’) [2010] EWHC 1340.
3. See the Fastfreight Pte Ltd v Bulk Trident Shipping Ltd ( (The ‘Anna Dorothea’) [2023] EWHC 105 (Comm).
4. Mareva Navigation Co. Ltd. V Canaria Armadora S.A. (The Mareva AS) (1977) 1 Lloyd’s Rep. 368.
5. (The Ilissos) (1948) 82 Lloyd’s Rep 199.
6. Ibid.
7. See Minerva Navigation Inc. v Oceana Shipping AG (The Athena) [2013] EWCA Civ 1723.
8. See the case of Court Line v Dant & Russel In. (1939) 364 LI.L Rep 212.
9. Andre & Cie S.A. v Orient Shipping (Rotterdam) B.V. (The Laconian Confidence) [1997] 1 Lloyd’s Rep. 139
10. See the Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 82 L1.L. Rep 196.
11. Compare and contrast the period of loss of time, see the case of Hogart v Miller (The Westfalia) [1891] A.C. 48 (H.L.), and the net loss of time, see the case of The Pythia [1982] 2 Lloyd’s Rep 160.
12. Supra note 2.
13. Sidermars S.p.A v Apollo Corporation (The Apollo) [1978] 1 Lloyd’s Rep 200.
14. Hyundai Merchant Marine Co Ltd v Furness Withy (Australia) Pty Ltd [2006] 2 Lloyd’s Rep 175.
15. Canadian Pacific (Bermuda) Ltd v Canadian Transport Co. Ltd (The “H.R. Macmillan) [1974] 1 Lloyd’s Rep. 311 (per Lord Denning MR at p. 314).
16. See The Saldanha, supra note 2; Osmium Shipping Corporation v Cargill International SA (The Captain Stefanos) [2012] EWHC 571.
17. See The Anna Dorothea’, supra note 3.
18. See the case of Bunge S.A. v Pan Ocean Co Ltd [2025] EWHC 168 (Comm).
19. See The Anna Dorothea’, supra note 3; The Saldanha, supra note 2; The Captain Stefanos, supra note 16.
20. See The Anna Dorothea’ ibid.
21. See The Captain Stefanos, supra note 16.
22. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), 2024 Annual Report (Abuja: NUPRC,
    2024) 4 <https://www.nuprc.gov.ng/wp-content/uploads/2025/04/UPDATED-NUPRC-2024-ANNUAL-REPORT-1.pdf>accessed 22 November 2025.
23. See the Petroleum Industry Act, Federal Republic of Nigeria Official Gazzette, No. 142 Vol. 108, 2021.
24. Ibid, S. 53.
25. See NNPC Limited Gas master Plan 2026
    <https://cms1977.nnpcgroup.com/uploads/NNPC_GMP_2026_Report_Final_For_Upload_51bfeafda6.pdf>
    accessed 2 February 2026; Nigerian Gas Master Plan 1st Edition, September 2013 <https://aldg.org.ng/wp-content/uploads/2021/05/NIGERIA-GAS-MASTER-PLAN.pdf> accessed 2 February 2026.
26. Loubna Eddallal, ‘Nigeria: Africa’s Gas Powerhouse in the Making’ Policy Brief, Policy Center for the New
    South, PB-32/25, May 2025, 5.
27. ‘The NLNG Train 7 Project’ <https://a.storyblok.com/f/302089/x/2c1b2c3c74/the-nlng-train-7-project.pdf>
    accessed 22 November 2025.
28. Eddallal, supra note 26.
29. Ibid.
30. Ibid.
31. Ibid.
32. See Kalu Kingsley Anele ‘Theoretical Analysis of the Linkages Between the IOCs’ Oil Exploration Activities and Piracy in Nigeria’ (2023) 36 Security Journal 732–759. https://doi.org/10.1057/s41284-022-00361-1; Kalu Kingsley Anele ‘Comparative Analysis of the Impact of Piracy on International Trade in Korea, Indonesia and Nigeria’
    (2023) 31(1) Asia Pacific Law Review 12–32. https://doi.org/10.1080/10192557.2022.2117476; Kalu Kingsley Anele ‘Analysis of the Enforcement of the Suppression of Piracy and Other Maritime Offences Act in Nigeria: Matters Arising’ (2023) 34 Criminal Law Forum 375–419. https://doi.org/10.1007/s10609-023-09462-y.
33. See BIMCO Piracy Clause for Time Charter Parties &lt;https://www.bimco.org/contractual-affairs/bimco-
    clauses/current-clauses/piracy_clause_for_time_charter_parties/&gt; accessed 2 February 2026.
34. See BIMCO War Risks Clause for Time Chartering 2013 (CONWARTIME 2013)
    <https://www.bimco.org/contractual-affairs/bimco-clauses/earlier-clauses-
    list/war_risks_clause_for_time_charters_2013/> accessed 2 February 2026.
35. See BIMCO Infectious or Contagious Disease Clause for Voyage and Time Charter Parties
    <https://www.ukdefence.com/fileadmin/uploads/uk-defence/Documents/Coronavirus/BIMCO_Infectious_or_Contagious_Diseases_Clauses.pdf> accessed 2 February 2026.
36. See The Anna Dorothea’, supra note 3.
37. Ibid.
38. See the Constitution of the Federal Republic of Nigeria, S. 251 (1)(g).