Can a shipowner currently refuse his charterer’s orders to travel via the Gulf of Aden because of the risk of pirate attack? Alternatively, can he avoid this route on his own initiative? This is a constantly evolving issue as it is very fact dependent. We set out below the issues for consideration. However, the recent capture by pirates of the Sirius Star means that by the time of publication, things may have moved on. The principles set out herein remain the same.
1. The transit route via the Suez Canal and the Gulf of Aden is one of the world’s principal waterways. There are in excess of 20,000 transits each year.
2. As is well known, the Somali coast and Gulf of Aden have been plagued by pirates for some years. The Joint War Committee (made up of underwriting representatives from both the Lloyd’s and IUA company markets) estimates that there are currently 5 major pirate groups operating in Somalia – Gulf of Aden Update, JW 2008/001 dd 27th August 2008. As has been widely reported, there has been a recent spike in piracy attacks and, in particular, vessel seizures and crew kidnappings. Between January – August this year, some 17 vessels were seized. More have been attacked. The current figure is over thirty.
3. Grey Page has calculated that since July, 1 out of every 330 ships transiting the Gulf of Aden has been hijacked – Lloyd’s List 29th September 2008 p. 4. Both Somalia and the Gulf of Aden have been designated by the Joint War Committee as Additional Premium Areas.
4. On 30th September, BIMCO, ICS/ISF, INTERCARGO, INTERTANKO and the ITF issued a joint statement calling on national governments to do more to combat the pirates. This included the following passage:
“There should be no doubt that the situation is now so serious that major shipping companies, who are currently negotiating with charterers to avoid transiting the Gulf of Aden and the Red Sea/Suez Canal altogether, will decide to redirect their ships via the Cape of Good Hope.”
5. This article examines whether shipowners can:
(a) safely refuse orders to transit via the Gulf of Aden; or
(b) deviate via the Cape of Good Hope on their own initiative; and/or
(c) bring a claim against their charterers in the event of losses suffered as a result of pirate action in the Gulf.
6. We have also tried to identify the factors owners ought to take into account when assessing the risks posed by a voyage via Suez and/or through the Gulf of Aden. In doing so, we will examine two commonly used “War Risks” clauses: clause 35 of Shelltime 4; and the Conwartime clause.
Shell time 4
7. War Risks are dealt with in clause 35 of Shelltime 4:
(a) They are defined as “any blockade, war, hostilities, warlike operation, civil war, civil commotions or revolutions” (sub-clause 35 (a)).
(b) The Master or owners have the right to refuse to go to any “place of peril” when, in their reasonable opinion, it is dangerous for the vessel to “reach, or enter or to load or discharge cargo” at such a place because of the existence of War Risks as defined in sub-clause 35 (a). Conwartime 1993 / 2004
8. Most dry-cargo fixtures now incorporate Conwartime 1993/2004. Conwartime contains two pertinent features:
(a) First, the term “War Risks” is defined in sub-clause (1) (b) of Conwartime 1993 and sub-clause (1) (a) (ii) of Conwartime 2004 as including“acts of piracy, acts of terrorists, acts of hostility … by any person, body, terrorist or political group” which “in the reasonable judgment of the Master and/or the owners, may be dangerous or are likely to become dangerous to the Vessel, her cargo, crew or other persons on board the vessel”.
(b) Secondly, sub-clause 2 of Conwartime 1993 and sub-clause 1(b) of Conwartime 2004 provide that the vessel “shall not be ordered to or required to continue to or through, any ... place, area or zone (whether of land or sea) or any waterway or canal, where it appears that the vessel, her cargo, crew or other persons on board the vessel, in the reasonable judgment of the Master and/or the owners may be, or are likely to be, exposed to War Risks.”
Can owners refuse, or elect not to, transit the Gulf of Aden?
9. At the heart of the question is the conflict between:
(a) An owner’s obligation to both (1) his charterers and (2) the bill of lading holders to prosecute voyages with “due” or even “utmost” despatch (by the usual and most direct route); and
(b) An owner’s right to refuse to enter, or avoid, areas where there is a genuine and real risk of attack.
Not an “unsafe port” question
10. As a starting point, the express safe port provisions in any charter are unlikely to provide an answer. While under Shelltime 4 this is only an undertaking to exercise due diligence in any event, the maximum scope of any warranty is that the approaches to a port will be safe. Realistically, an international transit route such as the Gulf of Aden cannot be characterised as an “approach” to any port, save, perhaps, to those situated in littoral states. Where a vessel is fixed for worldwide trading, a charterer does not guarantee the safety of any ocean route or sea passage the vessel may have to take.
Clause 35 of Shelltime 4 does not respond to piracy risks
11. It is often a surprise to owners who fix on the unamended Shelltime 4 form to find that clause 35 does not respond to piracy risks.
12. First, the reference in clause 35 to excluded areas being places which the vessel can “reach or enter, or to load or discharge cargo” and the reference to the Master being allowed to refuse to sign bills of lading for voyages to such places, strongly suggests that the clause only covers dangerous ports as opposed to dangerous sea passages or routes between ports.
13. More fundamentally however, clause 35 refers to a very narrow range of War Risks. In particular, there is no express mention of “piracy”.
Definition of Piracy
14. For the purposes of English marine insurance law the following characteristics have to be present before an event can be classed as one of piracy:
(a) the event must take place at sea, but not necessarily in international waters,
(b) violence or the threat of violence must be present in the commission of the seizure as opposed to the escape of the assailants, and
(c) the objective must be that of personal gain, not the advancement of a particular cause (typically political).
15. The pirates’ motive is the key issue. While precise intelligence on why the recent surge of attacks has occurred is not available, the consensus view is that the primary goal of the pirates is to secure the payment of ransoms. The gangs concerned appear to be criminal enterprises, although linked in some cases to local warlords. There is no real indication that the attacks are being carried out for any larger political purpose.
16. As such, they are clearly not “blockades,” “war,” “civil war,” “civil commotions,” or “revolutions” within the scope of clause 35. Similarly, both “hostilities” and “warlike operations” have technical meanings in the War Risks context. “Hostilities” are acts or operations of war committed by a party to an existing conflict, “warlike operations” are similar actions taken by a belligerent, but before a formal state of war exists. All of the named events have this common denominator: they are acts carried out by groups with some sort of political or military agenda. Acts by organisations whose only goal is criminal, fall outside clause 35 of Shelltime 4.
Conwartime 1993 / 2004
17. Unlike clause 35 of Shelltime, Conwartime 1993 and 2004 clearly apply to the Gulf of Aden. Sub-clause 2 of Conwartime 1993 and subclause 1 (b) of Conwartime 2004 give the Master and/or owners the right to avoid “continuing to or through” any “area or zone (whether of land or sea), or any waterway” exposed to War Risks.
18. In order to invoke Conwartime in the Gulf of Aden, two requirements must be met:
19. First, and easiest, the incidents in the Gulf of Aden must fall within “War Risks”. These are defined in sub-clause (1)(b) of Conwartime 1993 and sub-clause 1 (a) (ii) of Conwartime 2004 as events which may, in the owners’ and/or Master’s reasonable judgement, pose a danger to the vessel (to distinguish them from actions which fall within the definition of War Risks but which pose no danger to shipping: for example riots against a local authority).
20. By any definition the attacks on and seizure of vessels passing through the Gulf of Aden must fall within “acts of piracy” or (if there is an Al-Qaeda link as some have speculated), “acts of terrorists” or, if linked to the wider civil war in Somalia, “acts of hostility”. The pirates must also be one or more of “…any person, body, terrorist or political group”. By their nature, an armed attack on, or seizure of, a ship is a “danger” to shipping.
21. The second criterion, set out in sub-clause 2 of Conwartime 1993 and sub-clause 1 (b) of Conwartime 2004, is that the Master and/or owners must form:
(a) a “reasonable judgement” that the vessel;
(b) “may be”; or
(c) “is likely to be”
exposed to War Risks, as defined.
22. Conwartime does not therefore give an owner an unfettered discretion to decide whether to proceed into the Gulf of Aden or not. The use of the word “reasonable” imports an objective standard. It is not enough that any judgment be honestly and genuinely held, if a reasonable and prudent Master or owner would not have reached the same conclusion.
23. However, using the reasonable Master or owner as a yardstick is not the same as taking a cross-section of the opinions of reasonable Masters or owners. The fact that some would consider the situation dangerous and others would not, does not mean that more cautious owners cannot take the benefit of the clause. If there was sufficient evidence available at the time the decision was taken, which would justify a conclusion by a notional reasonable Master that his vessel was genuinely exposed to significant risk, then his judgment will be held to have been reasonable – notwithstanding the fact that others might have had, and did have, a different view.
24. In practical terms, it will be very difficult to justify a deviation from the Gulf of Aden in circumstances where the overwhelming majority of vessels are still prepared to use the route, although now that Odfjell, Svitzer and an unnamed LPG operator have ordered their vessels to go round the Cape of Good Hope, this may be the beginning of new trading patterns.
25. Secondly, the judgment which the Master or owners must reach, is that there is “likely to be” or “may be” danger if the vessel proceeds. Under Conwartime 1993 or Conwartime 2004, the Master or owners need not prove that actual physical danger exists at the time the decision is made or that the danger is “imminent”. The test is merely one of probability. The question is, what degree of probability does the test require?
26. The sub-clause introduces two alternative “screens” through which owners and the Master will have to sift the available information. First, that danger is “likely”, secondly that it “may” occur. As to these:
(a) Both words are capable of various shades of meaning and it would be wrong to try to give them a spurious degree of precision. What can be said though is this:
(i) Giving the word “likely” its ordinary and natural meaning (as being synonymous with “probably,” or “with considerable certainty” or “without much doubt” ), it must connote more than a mere possibility. The risk must be more likely than not – i.e. there must be a greater than 50% chance of exposure to pirate attack.
(ii) Clearly, worrying though the situation in the Gulf is, we are not there yet. Indeed, were the risks to reach this level, underwriters would be sure to declare it a prohibited area and the vessel could not be compelled to go there in any event.
(b) If the danger is not “likely” a refusal is still justified if a reasonable Master or owner would consider that it “may” be present. This second screen is further down on the scale of probability. In other contexts, the Courts have said that the phrase “may be”:
(i) excludes the contingent and very remote; and
(ii) cannot include the purely fanciful.
27. If shipowners wish to obtain further contractual protection, then, provided their charterers are prepared to accept such a clause at the time of fixing, an additional “Piracy Clause” could be added to supplement the rights conferred by Conwartime.
28. We have, for example, seen the following wording tucked away in proposed protective clauses in recent tanker charter negotiations:
If piracy activity or the threat thereof requires that owners deviate, slow steam and/or change port rotation in order to ensure the safety of the crew, vessel and/or cargoes, any additional costs for bunkers, heating, nitrogen, inhibitor, war risk premiums, insurance costs shall be paid by Charterers.
This clause takes effect irrespective of whether the area is classified as a “war risk zone” by insurers, hence it is within owners’ and/ or the Master’s sole discretion to impose the measures they deem necessary in order to ensure the safety and integrity of the crew, vessel and cargoes.”
29. The other drafting solution is to define “any additional war risks premium area” as an excluded area when fixing – provided, once again, that charterers can be persuaded to accept this.
30. Any decision taken by the Master or owners to avoid an area rendered dangerous by pirates must be an objectively reasonable one. That remains equally true under most War Risks clauses, even those which purport to confer a discretion on the Master and owners. Accordingly, below is a “checklist” of the facts which should be considered in the event owners find themselves confronted by this situation.
31. As a starting point, we would note that “danger” is a strong word. A mere vague apprehension would not qualify to activate any War Risks clause. So in between the very remote and merely fanciful on the one hand and a degree of likelihood less than 50% on the other, there is a wide margin within which owners and the Master have to exercise their judgment.
32. While it is impossible to produce a definitive list, in our view, shipowners should consider the following factors when assessing whether the risks of exposure to pirate attack in the Gulf of Aden have moved away from the “fanciful”, “contingent” or “very remote” and further towards “less than 50%”.
(a) While the Master or owners do not have to assess the risks with the precision of a political or military analyst, the statistical likelihood of attack should be considered. At present the risks of seizure are ? of 1%. While even in a worst case scenario, the number of vessels affected is likely to be a fraction of the total using the passage, any increase in the number of incidents is a relevant consideration.
(b) Information should be gathered from all publicly available sources, including:
(i) The websites of the International Maritime Bureau, the Piracy Reporting Centre and the Joint War Committee;
(ii) The shipping press;
(iii) Circulars and Alerts from Hull Underwriters and P&I Clubs; and
(iv) Flag State and other governmental warnings.
(c) In this regard, headlines do not tell the whole story. For example, the Joint War Committee reports that while more vessels have been hi-jacked, there have been fewer incidents of ships being fired upon – JW 2008/001 27th August 2008.
(d) Similarly, any increase in the additional premium charged by War Risk underwriters for transit through the Gulf of Aden would point to a general acceptance that there was an enhanced level of risk.
(e) Likewise, any restrictions imposed by flag states, or countries which are traditionally a source of crew, on their vessels or nationals being sent through the Gulf of Aden would support a claim that a refusal or deviation was reasonable.
(f) Also, inquiries should be made of other owners, or relevant Associations of owners (or indeed P&I Clubs) as to whether they consider the Gulf of Aden safe.
(g) Both the availability and effectiveness of efforts to combat the pirates should be taken into account.
(h) In this regard, on 22nd August, the US Naval Central Command established a Maritime Security Patrol Area (MSPA) in the Gulf of Aden.
(i) While this has yet to prove itself, owners will now have to differentiate between the risks inside the coalition-patrolled channel and elsewhere in the Gulf. At the time of writing, only one vessel had been seized inside the patrolled channel.
(j) On a related note, owners would also have to show that they had taken all necessary precautions to minimise the risks of attack. For example, charterers might well have cause for complaint if anti-boarding equipment has not been fitted.
(k) Lastly, before an owner takes any decision not to proceed, he should consult the Master. Failure to do so may lead to a finding that the rejection was a pretext.
33. Regardless of which way the decision goes, owners and the Master are allowed a reasonable time to consider and evaluate the risk. The obligation is not one of instant obedience to the charterers’ directions, but of reasonable conduct. Only unreasonable delay constitutes a refusal to obey an order. Owners and the Master have the right to perform the investigations listed above.