First published on 19 October 2023
Last reviewed on 14 March 2024
The world’s focus is rightly on the plight of those affected by the recent events in the Middle East, and the impact on shipping and trade will at most be a subsidiary consideration in the face of a worsening humanitarian crisis. However, as the conflict escalates after the end of the most recent ceasefire, this will no doubt continue to be a priority for owners and charterers, who will have safety considerations – for the crew, ship and cargo - and be concerned about rights and obligations under the contractual arrangements they have for their ship and cargo where they are involved in voyages to, from or through the region.
In each case the position will very much depend on which port is involved, because some in the region have been largely unaffected, and the situation varies widely even for those ports within Israel, where it is understood that ports toward the north of the country have in many ways been operating as normal.
Whichever port is involved, the assessment is likely to require urgent consideration of complex legal issues, and with that in mind operators may find it helpful to refer to the following guidance, which is intended as a brief, high level checklist of enquiries that might be made wherever the voyage includes a call at a port in Israel or surrounding countries in the region, in particular Egypt, Lebanon and Jordan (Aqaba).
More recently attention has shifted to activity in the Red Sea, with attacks on merchant vessels by Yemen’s Houthi rebels. In many ways this has presented a more apparent threat to ships in the area and has had a more dramatic effect as far as the economics of transiting the Suez Canal are concerned. The final section of these FAQs considers some of the legal implications of this.
Regular updates on the status of ports and shipping in the region are available on the Club’s website, at https://www.steamshipmutual.com/israel-hamas-war-impact-shipping and these may provide some helpful guidance. However, as always the outcome will of course depend on the contractual terms involved and specific advice should be taken whenever faced with any of these issues. In this respect, Members should contact their normal Club contacts at the Club for further guidance.
Can orders to call at ports in the region be refused?
There are two main grounds upon which it may be possible to lawfully refuse an order, which are where the intended port is unsafe or where it is likely that war risks will be encountered.
Does the contract contain a safe port warranty?
In the description of the ports that the vessel will call at, wording such as “safe port” or “1SP” or “charterers warrant the safety of the port” will be taken as a warranty by charterers that the port is safe at the time of nominating that port. Breach of the warranty, by ordering the vessel to a port that is not safe, can lead to a damages claim where loss or damage is suffered as a result.
Where there is no express safe port warranty this may be implied, although this is unlikely to be the case in a voyage charter where the ports are identified in advance, since owners can then (in theory) make their own decision about whether the port is safe. This is in contrast to the position under a time charter for worldwide trading where the ports are not defined.
Are ports in Israel safe?
A port will not be safe unless a vessel can reach, use and leave it without being exposed to a danger that cannot be avoided by good seamanship. This requires an enquiry into the conditions at the port and the systems put in place to keep ships safe. 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, although they may then be under an obligation to give alternative orders that are safe.
Our correspondents have been providing regular updates on the status of ports in the region, which can be found on the Club’s website at www.steamshipmutual.com/israel-hamas-war-impact-shipping.
Are other ports in the region safe?
The Club’s correspondents have reported that ports in neighbouring countries in the region, Egypt, Lebanon, and Jordan have been operating more or less as normal, and there has been nothing to indicate that this is likely to change. Unless the conflict escalates it is unlikely that the legal position in relation to the safety of those ports has changed.
What if the vessel is ordered to a port that is not safe?
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.
If owners decide to call at the ordered port, owners will not necessarily be prevented from claiming for losses suffered if the vessel is damaged as a result.
Does the contract contain a war risks clause?
Charterparties often contain clauses setting out rights and obligations where the vessel is subject to war risks which will be defined and usually include situations of war, acts of war, hostilities, acts of piracy, violence, terrorism, blockades and seizure or detention.
As to what constitutes a war see section (1) of www.steamshipmutual.com/ukraine-russia-conflict-impact-shipping.
The most common war risks clauses in voyage and time charters provide that the question of whether the vessel will be exposed to war risks will be for the judgment of the Master or Owners. This judgment must be exercised reasonably based on evidence that there is a real risk that the vessel is likely to be exposed to war risks.
With a conflict as widely reported as this one it is likely that if a real risk of exposure to war risks does arise, such evidence will be readily available, but enquiries with local agents, correspondents and other representatives in the region would also be recommended to support any argument that all the risks have been considered and a reasonable judgment has been made.
Does calling at Israel or other ports in the region expose the vessel to war risks?
This will depend on the specific provisions of the war risks clause and the situation on the ground, and any judgement will need to be subject to regular review as circumstances change. At the beginning of the conflict when there were frequent rocket attacks on Ashdod and Ashkelon and recommendations to divert to other ports in Israel, it may have been that that war risks clauses were engaged, subject to the judgement of the Master / owners. To the extent that rocket attacks have decreased or become more predictable that may no longer be the case, although that is always subject to change as the frequency and severity of attacks is of course unpredictable.
For ports in the north of Israel and others in the Mediterranean that have been operating normally, it is less likely that war risks would be relevant.
What happens if charterers order the vessel to an area that is subject to war risks?
The relevant clause will set out what options are available to an owner where the vessel is ordered to a region that exposes the vessel to war risks. This generally includes a right to refuse the order and request alternative orders.
When proceeding to an area that is subject to war risks, additional premium for war risk insurance cover may be needed. The cost of this is often allocated to charterers.
Can a charterparty requiring a call at ports in the region be cancelled or terminated?
Can the charterparty be cancelled if the vessel is delayed?
Where the vessel is delayed en-route to a port in the region it is possible that any laycan providing for arrival or delivery of the vessel by a certain date will not be met. This is a right for charterers to exercise, but it can only be done once the deadline has passed, not before, even if it is inevitable that the vessel will be late.
In the meantime owners owe a duty to proceed to the load port or place of delivery reasonably quickly, so cannot slow the vessel deliberately in the hope that charterers cancel when the laycan is missed.
Is there a clause allowing termination where war has broken out?
The charterparty may contain a specific clause dealing with the outbreak of war e.g. allowing either party to terminate wherever there is an outbreak of war between major international powers which this would not be (as yet), although some clauses might permit termination for more localised conflicts such as this.
If there is an option to terminate for this reason then it ought to be exercised reasonably quickly once it is clear that a situation of war exists, with nothing being done in the meantime to indicate that a party intends to continue with the contract. On that basis, since the fighting in Israel and Gaza has been continuing for some time now, there is a good chance that any right to terminate for this reason will have been lost if not already exercised.
Is there an applicable force majeure clause?
English law does not recognise a freestanding concept of force majeure, so whether this is applicable will depend on the terms of the contract. Many charterparties contain a force majeure provision setting out when a party might be excused from their contractual obligations for events which hinder or delay performance, such as war, strikes, riots etc. There is often a requirement that the event be outside the control of either party, which is unlikely to cause any difficulty here.
What if it becomes impossible to call at the intended port?
Even where there is no specific clause covering this situation, a contract might come to an end where performance of obligations becomes impossible. In general terms this would mean a state of affairs that renders performance radically different to that anticipated under the contract. Whether this is the case will be a highly fact specific issue and it is not possible to say without considering all of the circumstances whether the current conflict would result in a charterparty being frustrated.
Whilst not all ports in Israel have been affected to the same extent, it appears that most have been operating effectively with minimal impact on capacity, although in many cases under emergency regulations and stricter security measures, suggesting that calls at those ports are still possible, even if there may be safe port considerations (see above). Where it is possible to call at the contractual port, albeit more difficult, it is unlikely that frustration would be relevant but again this will turn on the terms of the contract involved and the current situation on the ground.
What happens if the vessel is affected by the conflict when calling at ports in the region?
Who is responsible for delay?
Under a time charter the risk of delay is generally on the charterer, unless the delay is caused by owners or (as is normal) there is a clause in the charter providing for particular circumstances in which the vessel is off-hire. The standard form off-hire clauses in common forms such as NYPE and Shelltime charterparties would not cover the situation where the vessel is delayed due to armed conflict, but bespoke clauses might say that the vessel is off-hire in these circumstances.
For voyage charters the position is similar where time has started to count at the load or discharge port. Time would in most cases continue to count unless there is a specific clause providing otherwise. Delays during the voyage however would usually be at owners’ risk so if, for example, the vessel is subject to blockade upon approach to a discharge port in Israel the vessel would not be on laytime / demurrage.
Who is responsible if the vessel is damaged as a result of conflict?
This would depend on the cause of the damage and whether charterers have warranted the safety of the port (see above). Where the vessel is damaged due to danger that cannot be avoided (i.e.. the port is unsafe), in principle owners would be entitled to look to recover the losses from charterers for breach of the safe port warranty.
The warranty applies at the time of nomination of the port, so if the port is safe at the time that the vessel is ordered there but subsequently after arrival becomes unsafe e.g. due to escalation of the conflict, this would not usually amount to a breach of the safe port warranty. However, if the port becomes unsafe whilst the vessel is en-route, charterers would then be under an obligation to give alternative orders to a safe port. Where there are indications that shipping activity in Israeli ports has become more stable and predictable it would be less likely that the position would change significantly between giving the order and arrival. However, the situation remains uncertain and subject to change on a daily basis, so it is crucial for owners and charterers to keep this under review and be prepared to change plans at short notice.
Who is responsible for damage or delay to delivery of cargo?
The starting point will be to consider the contract of carriage. In most cases this will be subject to the Hague or Hague Visby Rules, and may also incorporate the terms of a charterparty giving the carrier the benefit of any war risks provisions set out therein. However, as far as transit through the Red Sea / Suez canal is concerned, recent Supreme Court authority confirms that the ability to rely on war risks clauses to avoid this area would be limited where the voyage is described as one that necessarily involves sailing via this route (see https://www.steamshipmutual.com/uk-supreme-court-guidance-application-war-risks-clauses).
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)).
Can the carrier deliver the cargo elsewhere?
The terms of the and who support their efforts against the Israeli forces in the Middle East contract of carriage may provide for a liberty to discharge at an alternative port or, where the contract incorporates a charterparty which includes a war risks clause, owners may make alternative arrangements for discharge in accordance with that clause.
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)).
Can the carrier proceed by a different route?
It is not just ports in Israel and the immediate surrounding area that may be affected by this conflict. Recent events have made clear that commercial vessels sailing even in international waters may come into contact with hostile actors connected to the fighting in Israel / Gaza.
Since the end of November 2023 there have been numerous attacks on merchant ships transiting the Red Sea, orchestrated by Houthi forces in Yemen who are reported to have connections to Hamas. The attacks include hi-jackings, suspicious approaches, drone and missile strikes and, at least in the beginning, it appeared that vessels with Israeli connections (ownership, management, scheduled calls at Israeli ports) were being targeted in particular. Later attacks on vessels with no apparent connection to Israel suggest that all ships are vulnerable, and with roughly half of the ships affected so far being container vessels, there are concerns that this type of ship is especially under threat in the region, on the understanding that attacks on container ships are more likely to impact Western consumers.
A response by a coalition of naval powers has led to military vessels being deployed in the area. A number of attacks have been prevented by shooting down drones and missiles and sinking small boats crewed by Houthi rebels and, more recently, US and UK forces have carried out strikes on Houthi facilities in Yemen. The deterrent effect of these operations remains to be seen, although attacks continue and the range of stated targets has been expanded to include ships connected with the US and UK, in retaliation for the air strikes, There are concerns that more forceful action by the US and its allies could result in a wider escalation of tensions in the region.
With the sad news of fatalities from missile strikes on a bulk ship and the stranding and subsequent sinking of another vessel based on what appears to be out of date from shipping databases, it is clear that the attacks are capable of causing significant harm, despite efforts by international forces to neutralise the threat.
Many shipping companies and operators have already responded by re-routing their vessels around the Cape of Good Hope to avoid the Suez Canal altogether, adding weeks and significant cost to voyages between Europe and the Far East.
In light of the continuing apparent danger to vessels – even those not owned, flagged, managed or chartered by Israeli interests – it is likely that many more carriers will face such decisions in the coming weeks, having to come to a view on whether proceeding via the Suez Canal presents an unacceptable risk of harm to the vessel, crew or cargo where it requires transiting the Red Sea, and whether the much longer and more expensive route should be taken.
Each case will of course depend on the circumstances at the time and the contractual framework of the voyage concerned, but the main questions are likely to be: (i) whether an owner can insist on a different route, and (ii) if doing so would amount to a deviation for the purposes of the contract of carriage. This latter question is likely to be of the utmost importance given that the consequences of an unlawful deviation can be severe, including increased liability under the contract of carriage and possible prejudice to P&I club cover.
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 carefully to check whether there are any particular terms dealing with this situation. Generally, however it is likely that similar considerations as apply to the question of war risks – see (1) above –would be relevant here, meaning that the Master would be required to take into account the nature and extent of the hostilities and make an objectively reasonable judgement as to whether there is a real risk of harm to the vessel, crew or cargo. This question has been considered before in similar circumstances in the context of attacks on shipping in the Strait of Hormuz (see, for example, https://www.steamshipmutual.com/publications/articles/transiting-strait-hormuz062019)
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. If so it is unlikely there will be implications for Club cover.
However, every case will be very fact specific, and detailed consideration of the contractual terms and surrounding circumstances would be needed on a case-by-case basis. It is therefore not possible to give a comprehensive checklist of factors that would support a case that the decision was reasonable, although operators may find the following considerations (amongst others) to be relevant in the decision-making process:
- Whether there is a clear Israeli, US or UK connection, with the vessel being flagged in or owned, managed, chartered, operated by interests from those countries; or even a more tangential connection based on publicly available resources which may be inaccurate or out of date;
- Whether an Israeli port call has been scheduled now or in the future, even if the information about the port call is incorrect;
- It is impossible to know what information sources the attackers are relying on and there have been no assurances that vessels with no Israeli, US or UK connections will not be targeted;
- More container ships have been attacked than any other type of vessel;
- Increased military presence in the region and international condemnation, although recent steps taken by the international coalition do not appear to have deterred the attacks, and may continue to have limited deterrent effect;
- The Lloyds Joint War Risk Committee has expanded the boundary of waters in the Red Sea considered to be high risk;
- Some of the biggest and most widely known ship owners and operators, including Maersk, Hapag-Lloyd, MSC, BP, have chosen to reroute around the Cape of Good Hope, or are considering doing so.
Is cover affected?
Members will be aware of our recent circulars L439 and L440 concerning Notice of Cancellation in respect of War Risks relating to vessels transiting the Red Sea applying to Charterers covers, and to certain fixed premium and ancillary covers which include war risks, and the availability of cover to reinstate that exclusion in respect Charterers cover.
For further information on this we recommend that members get in touch with their usual contacts at the Club. The relevant circulars can be found here:
https://www.steamshipmutual.com/sites/default/files/medialibrary/files/L.439.pdf
https://www.steamshipmutual.com/sites/default/files/medialibrary/files/L.440_0.pdf
Are there any particular considerations for charterers?
Many of the consequences of trading in this region will fall to vessel owners and their underwriters. However, for vessels under charter there may be further questions about whether loss or damage can be passed on to the charterers, either through direct claims from the owners or via subrogated claims by the vessel’s insurers.
Time charters
There may be potential exposure to claims by owners where charterers refuse to change orders to proceed through the high risk area following a request by owners in accordance with the terms of an appropriate war risks clause (such as Conwartime 2013). There is also possible liability for breach of a safe port warranty in circumstances discussed above, where trading at ports within the region. As always, the terms of the clauses and the factual background need to be considered carefully in every case as there are a number of factors which may restrict owners’ rights to rely on such a claim.
Voyage charters
Generally speaking voyage charterers would not be exposed to similar claims under a standard form voyage charter war risks clause such as Voywar 2013, but possible breach of a safe port warranty would remain a relevant consideration.
Other losses
In addition to possible claims for loss or damage to vessels, charterers may potentially be liable for other types of loss where the chartered vessel is involved in an incident in the high- risk area. It is not possible to provide an exhaustive list, but this could include claims by cargo interests for loss or damage to cargo or, in more extreme scenarios, liability for the costs of clean-up operations for pollution or a wreck removal.
First published on 19 October 2023
Last reviewed on 14 March 2024 and updated to refer to issues that might affect in particular charterers of vessels trading in the region.
We are grateful for the assistance of our correspondents in the region for providing reports on the status of ports and shipping in those countries.
