The Conwartime war risks clause permits the owners of a vessel to refuse to follow charterers’ orders in certain circumstances where the vessel could be deemed to be at risk. The operation of this clause in a piracy situation has been considered in a number of cases. In the recent case of The Paiwan Wisdom (Taokas Navigation SA v Solym Carriers Ltd [2012] EWHC 1888 (Comm)) the High Court considered whether there must be an increased risk of an attack by pirates before shipowners can rely on the clause in refusing to follow charterers’ orders.

The vessel was chartered on the NYPE 93 form for a period of 11-13 months. The charterparty incorporated the Conwartime 2004 clause and provided that the vessel would be employed in lawful trades between safe ports and safe places within IWL excluding (among other countries) Eritrea, Ethiopia and Somalia. The charterparty also provided that “passing Gulf of Aden always allowed with H&M insurance authorization”.

The charterers ordered the vessel to sail to Hoping, Taiwan to load a cargo for discharge in Mombasa, Kenya. The owners refused to perform those voyage instructions in reliance on the Conwartime 2004 clause, referring to recent developments in the Indian Ocean in respect of piracy and the risk of piracy becoming more severe and extending along the coast of East Africa. The charterers were therefore obliged to charter in substitute tonnage to perform the voyage at a significant cost.

The question which fell to be determined (firstly as a preliminary issue in arbitration proceedings and subsequently on appeal by the High Court), was whether, on the true construction of the charterparty, the owners could rely on the Conwartime 2004 clause to justify their refusal to proceed to Mombasa if there had been no material change in the risk of proceeding with that voyage between the date of the charterparty and the date of the relevant orders.

The arbitrators found that the owners were entitled to rely on the Conwartime 2004 clause, in the context of a factual background that (a) the owners did not know that voyages to Kenya were contemplated when they entered into the charterparty; (b) at that time the shipping community was aware of the risk of piracy in at least some parts of the Indian Ocean; and (c) the risks of passing through the Gulf of Aden had been reduced by the presence of naval forces and the use of convoys.

For the purposes of the appeal to the High Court it was also assumed that (a) the owners’ liberty to determine that there was a real likelihood that the vessel would be exposed to acts of piracy had been exercised in good faith; but (b) there had been no escalation in that risk between the date of the charterparty and the date of the relevant orders.

The charterers relied on the decision of the Court of Appeal in The Product Star (No. 2) [1993] 1 Lloyd’s Rep 397, which they said established the general principle that where the owners have, by the terms of the charterparty construed in its factual context, accepted a particular war risk involved in trading to a port or area, the liberty to refuse to trade to such a port or area is not available unless the owners can establish that there has been an increase, or escalation, in the relevant war risk since the date of the charter.

The charterers argued that it was clear from the agreed trading limits that the parties had considered the risk of piracy, in that trading to certain countries in East Africa (which did not include Kenya) was excluded and transits through the Gulf of Aden were permitted, and that the owners had therefore accepted the risk of piracy in proceeding to Kenya.

The High Court rejected the charterers’ argument concerning the effect of the charterparty in question and held that, as a matter of construction of that contract, there did not need to be an escalation in the relevant risk before the owners could rely on the Conwartime 2004 clause:

  1. Conwartime 2004 does not contain a requirement that the relevant war risk must have escalated since the due date of the charterparty
  1. The effect of the words “passing Gulf of Aden always allowed with H&M insurance authorization” was that owners would not be entitled to refuse to pass through the Gulf of Aden on account of there being a danger of an attack by pirates. (Although the judge did not expressly say so, it appears that the position would be different if the danger of passing through the Gulf had increased since the charterparty was entered into, as the parties were in agreement that this was the effect of The Product Star (No. 2).)
  1. The owners’ agreement to transit the Gulf of Aden was explained by the increased protection available for such transits and could not be construed as an agreement by them to accept the risks of proceeding to any port or place in East Africa other than those countries which had been expressly excluded.
  1. The Product Star (No. 2) could be distinguished, because in that case the relevant voyage and attendant risks had in fact been contemplated at the time the charterparty was concluded. In the present case the owners were not aware, when entering into the charterparty, that the vessel was likely to be employed on a voyage to Kenya. Accordingly, they had not accepted the risk of piracy in trading to Kenya.

Comment

This case highlights the importance of establishing whether or not, as matter of construction of a charterparty, owners have accepted the risk of going to a particular port or area.

If, as a matter of construction, owners have accepted the risk of piracy in trading to a particular area, then they will only be able to rely on Conwartime in rejecting charterers’ orders to go there if that risk has increased since the charterparty was entered into.

If, however, owners have not accepted the risk of piracy in trading to a particular area, then they will be able to rely on Conwartime in rejecting charterers’ orders to go there whether or not that risk has increased.

Owners can take comfort from the High Court’s rejection of the charterers’ argument that the agreement to transit the Gulf of Aden together with the exclusion of certain named east coast of Africa countries constituted a more general agreement to bear the risks of piracy in other countries on the east coast as part of the ordinary chartered service.

However, owners should be aware that their ability to rely on the war risks clause may be restricted if they knew, at the time the charterparty was concluded, that the charterers intended to use the vessel for particular trades. Particular care should be taken when drafting provisions relating to the payment of additional war risk premiums for particular areas, as such provisions might be taken to indicate that the owners have accepted the risk of their vessel trading in those areas.