The situation with Iran is obviously worrying. Yet further hostilities in a world that is already rife with them. One can only hope that they end as quickly as possible so that people can remain safe from harm.
In the meantime, while the situation persists, this presents problems to people in shipping.
Time charterparties (for bulk carriers and tankers) usually include BIMCO’s 2013 Conwartime clause and Piracy Clause addressing calls though areas subjected to actual/potential war, hostilities, or piracy, as well as safe port/place warranties. Voyage charterparties contain equivalent clauses
Conwartime’s sub-clause (a) defines its covered ‘War Risks’ as (i) “any actual, threatened or reported … hostilities; … warlike operations … acts of hostility or malicious damage; blockades (whether imposed against all vessels or imposed selectively against vessels of certain flags or ownership, or against certain cargoes or crews or otherwise howsoever), by any person, body, terrorist or political group” which (ii) “in the reasonable judgement of the Master and/or the Owners, may be dangerous or may become dangerous” to the vessel, cargo or crew.
Its sub-clause (b) then says that if in the master’s or owner’s ‘reasonable judgement’ the vessel, cargo or crew may be exposed to a War Risk at a port, place, area, zone, waterway, or canal then the vessel shall not be required to proceed/continue to or remain there.
The voyage charterparty equivalent requires the owner to send the voyage charterer a notice requiring alternative orders.
Applying this to the current situation with Iran and orders to enter/call at places in the Arabian Sea/Strait of Hormuz (or any other dangerous waters depending on how this unfolds):
1. Is it a ‘War Risk’ for the purposes of the BIMCO clause? Whilst any assessment is fact-specific, there seems a strong argument that it is.
2. Reasonable judgment of the master or owner. According to The Triton Lark 1 & 2 (in the context of the BIMCO piracy clause) this requires a judgment/assessment by the owner or master made in good faith (not for financial gain) that is also reasonable (by reference to the necessary enquiries a reasonable person would make).
3. That the vessel/cargo/crew may be exposed to a war risk. According to The Triton Lark, the words “may be dangerous or likely to be” refer to a ‘real likelihood’ of exposure to a War Risk (i.e. real danger) and include an event less than 50% likely to happen but require more than just a ‘bare possibility’. But not an analysis that is too complex for an owner or master to apply. The new Conwartime and Piracy Clause words “may be exposed” to War Risks and to the situation being ‘dangerous; to the vessel/cargr/crew make this clearer.
4. Did the danger exist at the charterparty date? Consistent with the decision in The Paiwan Wisdom the BIMCO notes accompanying the Conwartime and Piracy clauses seek to override the decision in The Product Star (No 2), requiring no increased risk since the charterparty date. But according to the recent Supreme Court decision in The Polar, where you have an agreement to go somewhere in the main terms recap, you must read the Conwartime/Piracy clause along with that such that an increased risk since the charterparty date may well be required after all.
And so:
1. One must first look at the main terms recap along with any war/piracy clause, to determine whether the risk has increased since the charterparty date.
2. In applying BIMCO’s war/piracy clauses, a commonsense, easy-to-apply application by the master or owner is required, not a complex statistical analysis.
3. An owner would be well-advised to document the following things: (i) what flag the ship flies/what country its ownership/management if affiliated with (for example a US/Israeli-flagged ship may be at particular risk of attack though the danger of damage to a ship seems to be a general one right now); (ii) the practical danger of being hit (bearing in mind the current reports on this); (iii) threats that the Strait of Hormuz is effectively closed to ships; (iv) what the master and/or crew think about the proposed call for that matter; (v) what up-to-date advice/reports/recommendations are being given by authorities, P&I Clubs and H&M insurers (numerous of these are being circulated); and (vi) what other ships/operators in the area are doing (though bearing in mind similar considerations with regards to those ships).
LCI Law regularly assist their clients with these sorts of queries, and are advising their clients on what to do in light of these hostilities.
