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Shelltime 4 form – Clause 28 construed as an absolute warranty – Khorfakkan not an unsafe port by reason of failure of the justice system to prevent unjustified confiscation of the vessel by UAE executive

The Facts

The vessel was let on the Shelltime 4 form for an initial period of 3 months which was extended to almost 12 months.

The broker’s fixture message formed part of the contract and read:

“3 months’ time charter for trading always afloat within IWL via safe ports – anchorages – AG/ Gulf of Oman area Excl. Iran – Iraq with lawful cargoes of fuel oil – crude oil”.

Clause 28 provided:

“No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments”.

Clause 13(a) provided:

“The Master, (although appointed by owners) shall be under the orders and direction of charterers as regards employment of the vessel, agency and other arrangements, and shall sign bills of lading as charterers or their agents may direct…without prejudice to this charter… charterers hereby indemnify owners against all consequences or liabilities that may arise …from signing bills of lading in accordance with the directions of charterers or their agents, to the extent that the terms of such bills of lading failed to conform to the requirements of this charter, or …from the Master otherwise complying with charterers’ or the agents’ orders.”

Charterers used the vessel as a storage facility at anchor of Khorfakkan.

Almost a year into the charter the vessel and its cargo were detained by the UAE coast guard. The vessel and cargo were later confiscated by the UAE authorities and sold on public auction after being detained for about 15 months.

The UAE authorities alleged that the vessel had on board Iraqi oil in contravention of UN sanctions.

After almost a year in detention, charterers advised the owners that they contested liability for hire from the time of detention of the vessel.

After the initial detention of the vessel, the parties entered into two consecutive without prejudice agreements for payment of hire at a reduced rate.

In the meantime, charterers who denied having Iraqi oil on board, initiated legal proceedings to obtain the release of the vessel.

Charterers’ denial involved a complex factual inquiry into the sources of and the chemical composition of the oil on board.

During the course of legal proceedings both the charterers and the UAE authorities tampered with the evidence.

Owners claimed damages for detention and for the loss of the vessel.


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