Better watch your ‘back-to-back’

Understanding Back-to-Back Charterparties: Key Risks and Considerations for Members

In today's complex chartering landscape, it is common for vessels to be fixed under a chain of charterparties, often with a head owner, a charterer in the middle, and a sub-charterer. These arrangements are frequently described as “back-to-back”, implying that the terms across the contracts align seamlessly.

But in practice, "back-to-back" is often more assumption than reality. 

This article explores what “back-to-back” really means in practice, highlights common gaps, and offers guidance on how Members can protect their position.

What is a Back-to-Back Charterparty?

A back-to-back charterparty typically refers to a situation where a party (usually an intermediate charterer) enters into two contracts: one as charterer (under the head charter) and one as owner (under the sub-charter), with the intention that the terms and obligations mirror each other. This structure aims to pass liabilities and obligations seamlessly down the chain. 

However, unless terms are carefully aligned, even minor inconsistencies can cause serious gaps in protection, turning the middle party into an unintended buffer between conflicting obligations.

For the purposes of this article, the term back-to-back refers primarily to scenarios where both the head and sub-charters are time charterparties. While a voyage charterparty may include clauses that reflect provisions in a time charterparty up the chain, it cannot, by its nature, be truly back-to-back. Under a voyage charter, the owner bears the voyage risks and earns freight for carrying a specific cargo, while under a time charter, the charterer controls the vessel’s employment and bears operational costs and delays. Therefore, while a voyage charter may be drafted on similar terms with a time charter, it cannot be made fully back-to-back because the allocation of risk, responsibility, and cost differs between the two forms. Nevertheless, references to voyage charterparties are included below where relevant, in order to illustrate the risks Members may face when they are in the middle of a contractual chain.

Key Risks and Mismatched Clauses

1. Port/Berth Safety Warranties

   Safe port/berth warranties are typically found in time charterparties but may be differently worded (such as one requiring due diligence vs one imposing strict liability) or may be absent. If a head charterparty includes a warranty and the sub-charterparty does not, the charterer in the middle may be left liable for unsafe port claims with no contractual recourse. 

   In addition, where there is no express term as to safety it seems that the court may take different approaches in implying a term as to safety depending on the specific circumstances. 

   In the context of a voyage sub-charterparty for example, where the voyage is between specifically identified ports and no express safe port warranty is included, it is unlikely that such warranty making the charterers responsible for the safety of the port is implied. Because the owner will have been given the opportunity to consider the safety of the stipulated ports. Similarly, where a voyage charterparty identifies, a number of possible loading or discharging ports from which the charterer i can nominate the operative port, a safe port/berth warranty will not automatically be implied in the absence of an express undertaking. Any such implied warranty can arise only if it is consistent with the proper construction of the charterparty as a whole. 

   By contrast, under a time charter, the charterer has control over the vessel’s employment and chooses where the vessel goes. To give business efficacy to the charterparty, the court may in certain circumstances imply a term as to safety. 

   It follows that, while Courts may imply safe port warranties depending on the contract, relying on judicial interpretation instead of clear, express terms increases both litigation risk and uncertainty.

2. Bunker Specifications and Quality

   Bunker-related disputes can escalate quickly. To mitigate risk, bunker specification clauses (e.g. ISO 8217 compliance, sulphur content under MARPOL Annex VI and suitability for the vessel's machinery) must be aligned across all charterparties. 

   Where responsibility for bunkers and dispute resolution procedures differ, intermediate charterers may be left exposed without clear pathways to recover losses.
    

3. Stevedore Damage and Third-Party Injury

   In many standard time charter forms (such as the NYPE form), the charterer assumes responsibility for cargo handling operations, including loading, stowing, securing, and discharging,typically “at their risk and expense”. This means that any damage to cargo caused by stevedores, or personal injury to stevedores and longshore workers, may fall squarely on the charterer’s shoulders.

   In a back-to-back charterparty chain, it is essential that these responsibilities and any associated indemnities or insurance requirements are mirrored in the sub-charterparty. If the sub-charter omits these provisions, or allocates responsibility differently, the intermediate charterer may find themselves liable under the head charter without any contractual recourse downstream.

   Such gaps can result in significant exposure, particularly in jurisdictions where third-party injury claims attract high damages or strict liability regimes.

   Ensuring consistent and well-drafted clauses across the charterparty chain, including express provisions on stevedore responsibility, damage reporting, and conduct, is key to protecting Members from disproportionate liability.

4. Clause Paramount and Time Bars

   The Clause Paramount incorporates in a charterparty vital protections under the Hague or Hague-Visby Rules, including a one-year time bar for cargo claims. Its purpose is to ensure that the carrier’s rights, obligations, and liabilities for cargo loss or damage are governed by these mandatory rules, even if the voyage or contract would not otherwise fall under their scope. If it is included in one charterparty but omitted in another, time-bar conflicts can arise.

   For example, a sub-charterer could bring a claim outside the one-year period allowed under the head charter, making it unrecoverable for the intermediate party. 

   Other time bars may also differ. Some voyage charters may have 6- or 12-month time bars for cargo claims, while the Inter-Club Agreement (ICA) provides for 24-month notification time limit.

5. Inter-Club Agreement (ICA)

   The ICA is vital for apportioning cargo claims in time charters. However, clauses such as “claims to be settled as per ICA” may be too vague. It is critical that charterparties clearly and precisely incorporate the latest ICA version (now ICA 2025) and state that it takes precedence over conflicting provisions. (London IGPI Circular)

   Failure to do so can lead to disputes over liability apportionment and even the enforceability of the ICA itself.

   It is also worth noting that voyage charterparties typically do not include ICA provisions, meaning cargo claims in those cases may fall outside the ICA’s framework altogether. Members should be especially alert when a voyage charter follows a time charter with an ICA clause.

6. Governing Law and Jurisdiction Clauses

   Discrepancies in law and arbitration clauses can lead to procedural complications and costly parallel proceedings. For instance, an English-law LMAA Arbitration clause in the head charter and a U.S. law clause (potentially under COGSA) in the sub-charter could require separate legal actions in different jurisdictions.

   To avoid this, Members should ensure alignment of dispute resolution provisions across the charter chain, including clarity on arbitration forums, applicable law, number and qualifications of arbitrators, and time bars.

7. Hold Cleanliness, Speed & Performance, Force Majeure

   Operational clauses often vary in language, scope, and standards. Hold cleanliness requirements (e.g. grain vs. ‘hospital clean’ standard), speed and performance warranties, and force majeure definitions can create confusion and delay — especially when a vessel is immediately relet or there are intermediate voyages involved.

   Common issues include:

   • Delivery disputes due to inconsistent cleaning standards or inspection protocols.
   • Conflicting off-hire or laytime calculations.
   • Unclear demurrage entitlements.
8. Financial Exposure

   1. Costs Exposure in a charterparty chain 

      Costs awards in Charterparty chain arbitrations can leave the party in the middle in a particularly vulnerable position. Even when successful in one arbitration, a charterer in the middle may find itself unable to recover the costs it incurred and those awarded against it in the unsuccessful arbitration.

      Where faced with a claim, the charterer in the middle needs to consider its options carefully before commencing proceedings up or down the line. Full-scale sub-arbitrations are not always necessary and may, in fact, result in significant unrecoverable costs, even where the charterer bears no apparent fault.

      For further insight, see our article - Costs Recovery In Charterparty Chain Arbitrations: Costs Recovery In Charterparty Chain Arbitrations

   2. Financial Risk from Defaults

      In addition to procedural risks, the financial stability of parties in the charter chain should never be overlooked. A default by the head charterer, due to insolvency or breach, can lead to termination or suspension of the entire chain. 

      Intermediate charterers may still be bound to perform under one contract while being unable to do so under another. This can lead to serious financial consequences, including unpaid hire, damages claims for non-performance, or prolonged periods of idle time.
       

What Should Members Watch Out For?

• Understand the risks of acting as middle charterer: The intermediate position carries inherent risk unless carefully managed.
• Ensure symmetry: Key clauses should be mirrored across all charterparties in the chain, including liability, time bars, performance standards, and governing law.
• Avoid vague references: Terms such as “as per head charter” or “as per ICA” without the actual clause text or sufficiently worded explanations can lead to disputes over interpretation.
• Review sub-charter terms early: Do not assume brokers or counter-parties will align terms automatically.

Conclusion

Back-to-back charterparties offer commercial flexibility but require careful drafting and a clear understanding of liability flow. Members should not rely on assumptions or shorthand references but instead take proactive steps to ensure their contracts are aligned and enforceable.

For tailored guidance, Members are encouraged to contact their usual claims handler at the Club.