THERE are multiple legal hurdles to clear before owners can refuse orders to make Middle East calls on account of the Gaza conflict, industry lawyers have warned.

While most charterparties contain provisions allowing diversion in case of war, it remains unclear whether the requisite threshold has been reached in Egypt, Jordan, Lebanon or Israel itself.

With around 20 attacks on vessels in the Red Sea since the outbreak of fighting in Gaza last October, the case for rerouting now seems increasingly strong, although the legal thresholds are again hard to define.

Variables include which ports are involved, with some in the region largely unaffected, and some northern Israeli ports still working normally.

Owen Fry, a syndicate associate at Steamship Mutual, said that while the P&I club was busy with Red Sea-related legal defence work, none of the consequences of the hostilities had yet constituted a liability. However, a bunker spill as a result of a missile strike is certainly possible.

“There are concerns about potential liability for unlawful deviation if shipowners do decide to use a different route and that takes them longer and somehow affects the cargo.

“The question has been considered at the International Group. While each case is a matter for each club alone, the clubs have agreed a reasonably flexible approach to cover when considering if a member’s decision to sail via the Cape of Good Hope is or is not a deviation.

“We would also be thinking about liability under charterers’ cover if the vessel is damaged.”

Fry has set out some of the legal considerations for shipping arising from the Israel/Hamas war on Steamship’s website.

Refusing an order 

He points out that there are two main grounds upon which it may be possible lawfully to refuse an order.

These are situations in which the intended port is unsafe or where it is likely that war risks will be encountered.

Charterparties usually contain a safe port warranty, which is taken as a warranty by charterers that the port is safe at the time of nomination. Breach of the warranty, by ordering the vessel to a port that is not safe, can lead to damages claims where loss or damage ensues.

Even if there is no express safe port warranty, one may still be implied, although this is unlikely to be the case in a voyage charter where the ports are identified in advance. This contrasts with the position under a time charter for worldwide trading, where the ports are not defined.

Orders to call at a port that is unsafe are unlawful, and owners are entitled to reject them and request that charterers give alternative orders to a safe port.

A port will not be deemed safe unless a vessel can reach, use and leave it without being exposed to a danger that cannot be avoided by good seamanship. An abnormal occurrence would not usually make a port unsafe.

Charterers’ duty arises at the time of giving the order, so that when the order is given, if the port is safe or expected to be safe upon arrival, charterers will not be in breach if it later becomes unsafe. However, they may then be under an obligation to give alternative orders.

Charterparties often contain clauses setting out rights and obligations where the vessel is subject to defined war risks, which usually include situations of war, acts of war, hostilities, acts of piracy, violence, terrorism, blockades and seizure or detention.

The most common war risk clauses in voyage and time charters provide that the question of whether the vessel will be exposed to war risks will be for the judgement of the master or owner. This judgement must be exercised reasonably and based on evidence.

When proceeding to an area subject to war risks, an extra premium for war risk insurance cover may be needed. The cost of this is often allocated to charterers.

Many charterparties contain a force majeure provision setting out when a party might be excused from contractual obligations for events that hinder or delay performance on grounds of events beyond the control of either party. The Israel/Gaza war likely meets that criterion.

However, English law does not recognise a concept of force majeure, so whether this is applicable will depend on the terms of the contract.

Fact specific

Contracts can also be deemed frustrated where performance of obligations becomes impossible, although the yardsticks invoked are necessarily fact specific, and Israeli ports are unlikely to meet the relevant requirements right now.

Under a time charter, the risk of delay is generally on the charterer, unless the delay is caused by owners or there is a clause providing for particular circumstances in which the vessel is off-hire.

The standard off-hire clauses in common forms such as NYPE and Shelltime charterparties do not cover a situation in which the vessel is delayed due to armed conflict, but bespoke clauses might say that the vessel is off-hire in these circumstances.

Where a vessel is damaged due to danger that cannot be avoided, in principle owners would be entitled to look to recover the losses from charterers for breach of the safe port warranty.

Where cargo is damaged or delivery is delayed as a result of the conflict, it is likely that the carrier under the contract of carriage will be entitled to rely on an exception under the Hague/Hague-Visby Rules, most relevantly the exceptions for acts of war (Article 4(2)(e)), riots  and civil commotions (4(2)(k)) or for any other cause without fault or privity of the carrier (4(2)(q)).

After the recent spate of Houthi attacks on merchant vessels, carriers might come to the view that Red Sea transits present an unacceptable risk of harm to the vessel, crew or cargo.

There is little clear guidance in the cases on what amounts to an unlawful deviation in these circumstances, and again, the terms of the contract will need to be considered.

Masters are required to take into account the nature and extent of the hostilities and make a judgement as to whether there is a real risk of harm to the vessel, crew or cargo.

Where such a judgement is reached on reasonable grounds, it is unlikely that choosing a longer route would then amount to a deviation for the purposes of the contract of carriage, although each case would have to be considered individually.

Jeb Clulow, a transport partner at law firm Reed Smith, also highlighted the implications of the Red Sea situation for world trade.

Keep calm and carry on

While some shipowners are avoiding the Suez Canal and rerouting via the Cape of Good Hope, others have adopted a “keep calm and carry on” approach and continue to transit the Red Sea.

The London marine insurance market has widened the area in the Red Sea judged to be high risk, which therefore attracts extra premiums.

“The timing of these security issues compounds difficulties for operators, coinciding with disruptions in transits via the other great canal, the Panama Canal,” he said.

“In this case, a severe drought has reduced the Panama Canal’s capacity. In both cases, many operators are taking the longer and more expensive route.

“The situation remains dynamic, prompting the United States to assemble a task force dedicated to preserving security along this crucial trading route. The outcome of these efforts may materially affect the situation,” Clulow added.