Safe port – port prospectively unsafe – charterers liable
The vessel, carrying bagged cement from Constanza on the NYPE Form was ordered to Basrah on the Shatt-al-Arab waterway on the eve of the outbreak of war between Iran and Iraq in September 1980 (orders in Evia 2 had been given in March 1980 on the same waterway).
The escalation of hostilities had been reported and outright war was reasonably expected at the time of the charterers’ orders.
The vessel was fired upon by Iranian forces and sustained minor damage. Commercial navigation in the waterway ceased because of heavy fighting.
A number of issues were referred to arbitration:
1. Whether the safe-port warranty had been breached;
2. Whether the restraint of princes exception operated;
3. Whether the employment and indemnity clause was operative; and
4. Whether the charterers were entitled to cancel in terms of clause 63 – a special clause in the contract dealing with detention as a result of government action.
On the main point, the safe-port warranty, the majority arbitrators, Clifford Clark and Donald Davies held that, although the port was prospectively unsafe at the time of the charterers’ orders, the detention of the vessel was due to abnormal circumstances (disruption of sea traffic) which excluded the operation of the warranty.
Mr John Selwyn dissented, observing that a disruption of commercial sea carriage was an ordinary consequence of war.
By unanimous decision, the arbitrators decided that neither the written restraint of princes exception nor the employment and indemnity clause were operative and that the charterers were not entitled to cancel in terms of clause 63. They held frustration of the contract to have occurred.
On appeal to the Commercial Court, Bingham J held that the conclusion to which the majority came on the safe-port provision was one which no tribunal could reach acting judicially and properly instructed according to the relevant law – the test for review.
The finding on the main point effectively disposed of the findings on the other three. In deciding whether to certify leave to appeal on the various points raised, Bingham J held that clause 63 defied any conventional approach to legal construction.
The Court of Appeal (Stephenson and Kerr LJJ) upheld the Commercial Court.
Bingham J accepted the argument by counsel, P Gross, that the charterer’s secondary obligation to cancel their orders if a port became unsafe made the concept of abnormal circumstances virtually redundant.
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