BP EXPLORATION OPERATING CO LTD V DOLPHIN DRILLING LTD (THE "BYFORD DOLPHIN")

[2009] EWHC 3119 (Comm), Queen's Bench Division, Commercial Court, Mr Justice David Steel, 3 December 2009

Charterparty (time) - Construction of terms of a drilling rig charter - Termination - Charterer entitled to terminate "to suit its convenience" irrespective of the timing of the commencement date - LOGIC General Conditions of Contract for Drilling Rigs (Edition 1, December 1997), Section II 22(1)

In this dispute, BP, the claimant oil exploration company, sought a declaration that it was entitled to terminate a contract relating to the semi-submersible drilling rig Byford Dolphin, owned and operated by the defendant. The contract contained a termination clause with the subclause (a) to "suit [BP]'s convenience". Section II 22(1) was entitled "termination" and one of the subclauses was "(a) to suit the convenience of [BP]". The following subclauses referred to force majeure and to insolvency events, respectively. BP argued that subclause (a) entitled it to terminate at any time. Dolphin contended that BP's contractual entitlement to terminate the agreement "to suit its convenience" only began after the prescribed commencement date for drilling work under the terms of the agreement and that BP's argument led to a commercially absurd and irrational outcome. David Steel J held that BP was entitled to terminate irrespective of the timing of the commencement date. The language of the provision was derived word for word from standard industry terms. Representatives from all quarters of the industry were on the drafting and review committee. They had been in use in the oil and gas industry for 12 years. This greatly undermined Dolphin's suggestion that an open ended liberty to terminate at the convenience of the charterer both before and after the commencement of the drilling operations made no commercial sense. Subclause (a) was introduced by the same language as the other subclauses and must be interpreted in the same way; yet on Dolphin's interpretation, only that sub-clause would apply only after the commencement date and all the others also before. The results of BP's interpretation were highly unattractive to Dolphin but it was not made out that the consequences were commercially absurd.