Brokerage (or Commission). It is customary to express the remuneration for the broker’s time and efforts in negotiating and arranging the contract as a certain percentage of the money earned by the shipowner. (In marine insurance, the broker is generally paid a commission by the underwriter although the assured is the broker’s client and the services are for the client.) In shipbroking, the term “brokerage” is generally preferable instead of “commission” because the latter term is usually related to the charterer’s reward as “address commission”.
Charterparties contain a clause specifying the brokerage percentage payable. Examples are:
GENCON voyage charterparty:
“14. Brokerage A brokerage commission at the rate stated in Box 20 on the freight earned is due to the party mentioned in Box 20.
In case of non-execution at least 1/3 of the brokerage on the estimated amount of freight and deadfreight to be paid by Owners to Brokers as indemnity for the tatter’s expenses and work. In case of more voyages the amount of indemnity to be mutually agreed.”
MULTIFORM voyage charterparty:
“32. A brokerage of …… % to …………………..
on gross freight, deadfreight and demurrage is payable by Owners at the time of receiving freight, respectively demurrage, vessel lost or not lost.”
NYPE (1946 version) time charterparty:
“27. A commission of 2 1/2 per cent is payable by the Vessel and Owners to . . . on hire earned and paid under this Charter, and also upon continuation or extension of this Charter.”
BALTIME (1939) time charterparty:
“25. Owners to pay a commission of . . . to . . . on any hire paid under the Charter, but in no case less than is necessary to cover the actual expenses of the Brokers and a reasonable fee for their work. If the full hire is not paid owing to breach of Charter by either of the parties the party liable therefore to indemnify the Brokers against their loss of commission. Should the parties agree to cancel the Charter, the Owners to indemnify the Brokers against any loss of commission but in such case the commission not to exceed the brokerage on one year’s hire.”
In some charterparties a “rider clause” may state that brokerage is “…due on shipment of the cargo”. In this case, the brokerage will be calculated on the basis of the bill of lading weight and the rate of freight, deadfreight, demurrage, etc., in the charterparty. In such case, the freight, if received by shipowners on the basis of delivered weight or bill of lading weight, less a certain deduction in lieu of weighing (in the case of coal charterparties) is not taken into consideration. If the charterparty does not provide for brokerage being “due on shipment of the cargo”, the brokerage is calculated on the amount of freight and other money actually received by the shipowner.
In the bulk trades brokerage for each broker is approximately 1.25 per cent of the gross hire or freight.
If an order is quoted in the market with a statement “5 per cent commission past us”, this implies that the percentage of brokerage being quoted does not include the brokers quoting the order. They are stating the commission for any “Intermediary brokers” or other brokers in the same transaction. The quoting brokers will be entitled to normal commission on the transaction.