In a nutshell: Owners and charterers trading in the Strait should carefully consider the wording of their charterparty's war risk clauses and safe port warranties in this new era of geopolitics in the Middle East.

Iranian media reported on Sunday that its parliament had resolved to close the Strait. However, any such decision must ultimately come from the executive. An Iran-Israel ceasefire was announced on Monday morning, only to be apparently broken just two hours later. Hapag-Lloyd, CMA CGM, Maersk and others announced on Tuesday that their vessels are still navigating the Strait while they constantly monitor developments. Below, we consider the implications for charterparties in the current situation.

Charterparty War Risks Clauses

Most charterparties will include a war risks clause such as – for time charterparties – BIMCO's CONWARTIME or – for voyage charterparties – VOYWAR.

Both clause b) of CONWARTIME 2013 and clause 2. of VOYWAR 20213, for example, permit owners to either refuse to call or to leave any area where it appears "in the reasonable judgement of the Master and/or the Owners" that the Vessel, cargo, crew or other persons on board the Vessel "may be exposed to War Risks". Such war risks include an "act of war…hostilities…blockades" and other occurrences falling under a very broad definition. Owners may, on notice, request charterers to nominate a safe alternative port to discharge any cargo on board. Failing such nomination within 48 hours of the receipt of such notice and request, the owners may discharge the cargo at any safe port of their own choice at charterers' cost.

Such a refusal to follow charterer's orders must be made in good faith and there must be a "real likelihood" or a "serious possibility" of harm (The Triton Lark [2012] 1 Lloyd's Rep 151). The perceived danger cannot be general but must affect the owner's vessel, with the particular cargo on board at the time, with her current charterer, on the particular route, and at the specific time.

Even if a charterparty specifically allows for trading in the Strait of Hormuz, owners will still be able to refuse orders under the war risks exception if they can show that there has been a "qualitative change" in the risk since the date of the relevant charterparty (The Polar [2024] UKSC 2).

Many charterparties contain clauses making charterers' responsible for the payment of any additional premium should the vessel call any areas exposed to war risks, such as for example clause d) of the CONWARTIME 2013.

Charterparty Safe Ports Warranties

The war risks clause will run in parallel to any express or implied safe port warranties contained in the charter. This is a warranty by the charterer that the vessel will only be ordered to proceed to safe ports. A port is safe where "in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship" (The Eastern City [1958] 2 Lloyd's Rep.127). This concept of safety includes political risks such as those potentially encountered in the Strait of Hormuz.

A port has to be safe at the time the vessel is due to arrive, remain and leave. Where a time-chartered vessel is ordered to a port that subsequently becomes unsafe, charterers are under an obligation to revise their orders and order the vessel to a port that is safe. A breach of the safe port warranty by charterers will make them liable to owners for any loss and damage suffered as a result.

Like the war risks clause, a safe port warranty may also permit the owners to refuse charterers' orders to proceed to an unsafe port. If charterers persist, they may be in repudiatory breach of contract, giving owners the right to terminate the charterparty.

The question when a port is unsafe can be a difficult one to answer.

One-off or intermittent events will not usually render a port unsafe if such events are abnormal occurrences, out of the ordinary course and unexpected ("The Ocean Victory" [2017] UKSC 35).

In the "The Saga Cob" ([1992] 2LLR 545) hostilities in Eritrea 40 kilometres from the port with artillery attacks on the port itself every few weeks and one previous attack on a vessel in the vicinity were insufficient to render the port unsafe. The decision that the port was safe was heavily influenced by the presence of local naval escorts and convoys designed to protect vessels.

However, in the “Chemical Venture” [1993] 1 LLR 508 the port was considered unsafe. During the Iran/Iraq war of the 1980s, the "Chemical Venture" was struck by a missile fired by an Iranian jet while she was in a narrow channel near the Iranian coast en route to Mina Al Ahmadi in Kuwait. Three tankers had been attacked by Iranian jets in the same channel in the eleven days prior. A further eleven vessels were similarly attacked in the following five months. In the circumstances, the Court found that the attack was not an abnormal and unexpected event and that the port was unsafe.

Implications

Were Iran to introduce a blockade in the Strait of Hormuz, this would likely engage war risks clauses such as CONWARTIME and VOYWAR, both of which expressly include blockades in their definition of war risks. Similarly, Iranian missile attacks on vessels transiting the Strait would likely trigger these clauses. Other differently worded war risk clauses would need to be considered in the context of the charterparty as a whole.

As for a safe port warranty, given Iran's threats to blockade the Strait, owners might have an arguable case that a blockade is an expected occurrence at the time of writing, as are missile attacks on Israeli-linked vessels, such that a relevant port may be judged unsafe. A missile attack on a neutral vessel, on the other hand, would probably currently be deemed an abnormal occurrence. Political developments, especially as concerns maritime operations, will be crucial to determining the merits of any such arguments.

Should the Strait of Hormuz become unnavigable, the doctrine of frustration will become relevant. This relieves the parties from all future obligations where a change of circumstances has made the performance of contractual obligations “radically different” from that which was reasonably contemplated when the contract was executed. Similarly, a force majeure clause – depending on its wording – might foreseeably be triggered in case of a blockade.

If you need any help or advice on a particular charterparty or clause, or would like to discuss any aspect of this article in more detail, please contact Dr. Nina von Borries in our English disputes team.