Conwartime 2004 clause – owners entitled to object to discharge port in vicinity of dangerous waters (Gulf of Aden) agreed to by them.
The Facts
The four parties were the owners, charterers, sub-charterers and sub-sub-charterers of the vessel. All three charters were on NYPE 93 form.
The last charter, agreed by the parties to be representative of the others, was for 11 – 13 months trading via safe ports from delivery at Hakodate dock, Japan. Instructions were given for the vessel to load cement clinker at Hoping, Taiwan for discharge in Mombasa, Kenya.
Owners refused the instruction relying on the provisions of the Conwartime 2004 clause, the operative part of which read as follows:
“(b) The Vessel, unless the written Consent of the Owners be first obtained, shall not be ordered to or required to continue to or through, any port, 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. Should the Vessel be within any such place as aforesaid, which only becomes dangerous, or is likely to be or become dangerous, after her entry into it, she shall be at liberty to leave it.”
Trading limits and exclusions were set out as follows:
“Vessel always to trade within IWL … excluding:
Abkhazia, Angola, Cambodia, C.I.S. Far Eastern ports, Eritrea, Ethiopia, Georgia but the port of Poti is allowed, Great Lakes, Haiti, Lebanon, but Iraq will be allowed as soon as situation normalizes, Israel, Liberia, North Korea, Serbia, Somalia, Syria is allowed provided vessel is not flying Liberian flag, Yemen, Zaire, places subject to U.N. sanctions, areas prohibited by vessel’s war risks underwriters due to war-like activities, and places which may be excluded by the authority of the vessel’s flag. Passing Gulf of Aden always allowed with H&M insurance authorization.
Cuba is included in the trading of the vessel but to be redelivered to the Owners free of any U.S.A. ban.
No direct trade between People’s Republic of China and Taiwan.”
To mitigate their damages, charterers hired a substitute vessel.
Charterers based their claim on the argument that by agreeing to the exclusions as set out above, owners impliedly agreed to go to Mombasa.
Findings
A panel of arbitrators (Messrs Siberry QC, Martin-Clark and Sheppard) was requested to decide whether the Conwatime 4 clause justified the owners’ refusal on the assumption that there had been no material increase of the risk involved in proceeding to Mombasa between entering the charter and giving instruction.
For the purposes of argument, it was assumed that the facts justified owners’ refusal.
The majority of the panel (Siberry QC and Martin-Clark) held that owners were justified in their refusal also by the provisions of the charter construed as a whole.
On an appeal pursuant to section 69 of the Arbitration Act, Teare J upheld the award.
The principle set out in the Product Star No.2 that where owners have accepted a particular risk, they were not free to refuse to take that risk in the absence of significant escalation, was accepted.
In short, the conclusion of the majority, endorsed by the Court, was that Mombasa was not excluded by the charter. That it was near the Gulf of Aden did not give rise to the inference that owners accepted the risk of trading to it.
Commentary
The Court took into account the possible reasons for owners agreeing to the Gulf of Aden i.e. the presence of naval escorts and a convoy system. These facts were irrelevant. What mattered was the fact of owners’ consent.
For the rest of the reasoning the court appears to be unassailable. Particularly, because the route from Taiwan to Mombasa does not pass through the Gulf of Aden.
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