United Kingdom High Court: In a US$29 million LNG charterparty dispute concerning the proper interpretation of a “JKM-TTF Spread” pricing clause, Waksman, J., held that the contractual expression “JKM-TTF Spread” required TTF to be deducted from JKM in accordance with the calculation methodology set out in the charterparty and did not permit negative values to be converted into positive ones. The Court further held that the mechanism was intended to reflect the LNG arbitrage opportunity arising where JKM exceeded TTF and was not designed to operate as a “two-way” pricing formula whenever the differential moved in either direction. Thus, finding no basis for the owner’s alternative claims for rectification based on common or unilateral mistake, the Court dismissed claims exceeding US$29 million for alleged underpayment of hire.
Background
Briety Shipping Inc., owner of the LNG carrier TENERGY, entered into a five-year charterparty with Trafigura Maritime Logistics Pte Ltd. in July 2020. The parties agreed that the hire rate would be determined by reference to the spread between the Japan-Korea Marker (JKM) and Title Transfer Facility (TTF) LNG price indices, subject to a contractual floor of US$50,000 per day and a ceiling of US$145,000 per day.
The dispute arose after market conditions changed dramatically in 2022 and 2023, resulting in TTF remaining above JKM for extended periods. Briety contended that the charterparty required the “spread” between the two indices to be calculated as an absolute difference, irrespective of which index was higher, and claimed that Trafigura had consequently underpaid hire by more than US$29 million. Trafigura disputed that interpretation, maintaining that Clause 10 required a straightforward JKM-minus-TTF calculation and did not permit negative values to increase hire.
Aggrieved by the alleged underpayment, Briety brought proceedings seeking recovery of the claimed shortfall and declaratory relief. It alternatively sought rectification of the charterparty for common or unilateral mistake, both of which were opposed by Trafigura.
Analysis, Law, and Decision
1. Interpretation of Clause 10 and the “JKM-TTF Spread”
The Court held that Clause 10 favoured Trafigura’s interpretation. The contractual formula expressly required TTF to be deducted from JKM, meaning that where TTF exceeded JKM, the calculation would produce a negative figure. The Court found no textual basis for converting that negative result into an absolute value before calculating the monthly average.
The Court rejected Briety’s argument that the word “spread” necessarily referred to an absolute difference and stated that the term had to be interpreted in the context of the contractual calculation mechanism agreed by the parties.
2. Clause 10 Was Intended to Reflect the Traditional LNG Arbitrage
Examining the factual matrix and negotiations between the parties, the Court found that Clause 10 was designed around the LNG industry phenomenon commonly known as “the Arb”, namely the situation where JKM exceeded TTF sufficiently to encourage cargoes to move from Europe to Asia. The evidence showed that the parties viewed the JKM-TTF differential as a proxy for that arbitrage opportunity and its impact on freight rates.
Therefore, the Court rejected Briety’s contention that the clause was intended to operate equally when TTF exceeded JKM. It found no evidence that a “reverse arbitrage” was recognised in the LNG market at the time of contracting or that reasonable parties would have understood the pricing formula to work on a “two-way” basis. The Court also preferred Trafigura’s expert evidence and rejected Briety’s theory that higher TTF prices created “reallocation pressure” leading to increased freight rates.
3. Unforeseen Market Changes Could Not Alter the Meaning of the Contract
The Court acknowledged that the prolonged period during which TTF exceeded JKM following Russia’s invasion of Ukraine had not been anticipated when the charterparty was concluded. However, it held that subsequent changes in market conditions could not justify giving Clause 10 a meaning that its language and commercial context did not support. The contract already catered for situations where TTF exceeded JKM and in such circumstances, the hire simply remained at the contractual floor rate.
4. Rectification Claims Rejected
The Court rejected Briety’s alternative claims for rectification based on common mistake and unilateral mistake. It held that the Heads of Agreement was not a binding contract and did not support Briety’s alleged “two-way” pricing mechanism. The Court further found no convincing evidence of a common intention that Clause 10 should operate on an absolute-value basis, nor any evidence that Trafigura knew of, or took advantage of, any alleged mistake on Briety’s part.
Decision
The Court held that Clause 10 triggers increased hire only when JKM exceeds TTF by the contractual threshold and does not operate where TTF exceeds JKM. Accordingly, Briety’s claims for unpaid hire, declaratory relief and rectification were dismissed.
[Briety Shipping Inc. v. Trafigura Maritime Logistics Pte Ltd, [2026] EWHC 1714 (Comm), decided on 10-7-2026]
Advocates who appeared in this case:
For the Claimant: David Lewis KC and Michal Hain, instructed by Clyde & Co LLP.
For the Defendant: Michael Ashcroft KC and Daniel Bovensiepen, instructed by Schjødt LLP.
