The Role Of the Broker In Vessel Chartering

Shipbrokers are specialists in  certain markets. When regard to vessel chartering,  the charterer and the ship owner are keen to know about the expertise and experience of the broker. In particular this would include their negotiation  skills and  knowledge of  their field. Generally, both sides will have brokers; which means the charterer will have a dedicated broker, and so does the owner. Negotiations on both sides will be conducted by these brokers. Each will work towards preserving the interests of their respective sides.

In most cases, negotiations are carried out by the principal (owner or charterer) and broker. Once  negotiations are completed,  agreement will be made by the broker who has the authority to sign. Sometimes, the broker will sign  “as agent only” (by not mentioning the party) and sometimes “as agent for X”. Some legal formalities can arise in the former case as it is not clear who has entered into the agreement. The owner of a business can choose to carry out the work by selecting an exclusive broker. They may also choose to work with many brokers.

A broker may not be able to execute all required tasks. Sometimes a broker will  work with another broker who has the required connections. A broker who brings together a broker of a fitting charterer (who is working in competitive chartering) and the confidential broker of an owner is called a competitive broker.

Cable brokers’ work is to list down the orders which are passed in and around the shipping centres and share them with the brokers who are part of other shipping centres.

All brokers work for ‘principals’ who are either charterers or owners. They work as a confidential broker of a principal . Working on such terms helps the broker to secure contracts .

The broker works for one of the parties in the charter negotiations. It is their duty to preserve the interests of the principal. This is done in a number of ways:

  • The broker should work within the boundaries of the authorities when it comes to negotiations. Sometimes the broker will be offered a wide area to work on. Even still, they need to make sure that he should not cross the set limits.
  • It is the role of the broker to keep the charterer and owner informed about market developments regarding shipment possibilities and cargo proposals. The broker should be able to manage the market with regard to given orders and positions.
  • The broker must be loyal to the principal and capable of skillfully tackling charter The broker must be fully transparent in dealing with the principal. They should not reveal the business secrets in a way that can benefit the other party taking part in the negotiations.
  • An ideal broker should not escalate any vessel proposals or advance shipments to the principal if they doubt the honesty of the counterparty or the strength of their business. The broker should also ensure that the orders are correct and completed. It is the duty of the broker to protect the reputation of the principal.
  • It is the duty of the broker to take an active part in negotiations. They should do this by offering recommendations and advice based on the proposals, offers and compromises.

Final thoughts

The role of broker in ship chartering is independent whether acting for the owner or charterer. They actively participate in negotiations and work towards getting beneficial offers for their principal. It is the broker who keeps the business floating in the shipping industry by efficiently chartering ships to move cargo.  

Hanery

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