A payment dispute over Very Large Crude Carrier (VLCC) charter hire has escalated to formal arbitration in London, with Norwegian shipping company Hunter Group seeking to recover $28.2 million from an undisclosed counterparty. The action, initiated before the London Maritime Arbitrators Association (LMAA) under English law, aims to recover all outstanding charter hire plus interest and costs.
Arbitration Details
According to Hunter Group, the counterparty has failed to pay approximately $28.2 million plus interest under the relevant charterparties and related agreements. The Oslo-listed company stated: “The counterparty continues to dispute its contractual obligations and has failed to pay a total of approximately $28.21m plus interest.” Hunter Group said it considers the legal action necessary to protect its contractual rights and the interests of shareholders and other stakeholders. The identity of the charterer has not been disclosed, and the company said further updates will be provided as the arbitration process progresses.
Payment Dispute Timeline
The dispute first surfaced in April when Hunter Group disclosed that one of its long-term contractual counterparties had made a reduced payment for March charter hire. The company subsequently reported similar shortfalls relating to April and May payments. Despite repeated demands for payment, the charterer continued to challenge its contractual obligations, according to updates released in May and earlier this month. Hunter Group has consistently maintained that the charterer has no legal basis for reducing the payments and expressed confidence that its claims will succeed in full.
| Month | Payment Status |
|---|---|
| March | Reduced payment received |
| April | Shortfall reported |
| May | Shortfall reported |
Broader Implications for Tanker Shipping
While Hunter Group’s dispute involves a single charterer, the case highlights the risks that payment shortfalls pose to tanker operators. A VLCC can carry up to 2 million barrels of crude oil, and charter hire rates are a critical component of vessel profitability. If charterers fail to meet contractual obligations, operators may face cash flow constraints or be forced to relet vessels on the spot market, potentially impacting tanker rate benchmarks. For logistics managers and shippers relying on crude oil transportation, such disputes can create uncertainty in vessel availability and charter pricing. Hunter Group’s confidence in its legal position suggests the company expects a full recovery, but the prolonged nature of arbitration means counterparties should monitor developments closely.
Watch List
- Arbitration outcome: The LMAA process will determine whether Hunter Group recovers the full $28.2m. Any ruling could set a precedent for similar disputes.
- Charterer identity: Disclosure of the counterparty may influence other tanker operators’ credit assessments.
- Market reaction: If vessels are withdrawn from the spot market during the dispute, VLCC rates could see upward pressure.
- Further payment defaults: Continued shortfalls from other charterers could signal broader liquidity issues in the tanker sector.
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