Logistics Middle East – August 2019

18 AUGUST 2019 | LOGISTICS MIDDLE EAST http://www.logisticsmiddleeast.com

As readers will be aware, the Strait of Hormuz

is the only sea passage to the important ports

in the Arabian Gulf. The attacks on tankers

transiting the Strait of Hormuz on 12 May and

13 June 2019 have had an immediate impact on

terms of insurance premiums for shipowners.

In this article, we consider the ramifications for the ship-

ping and logistics industry.

Insurance

Following the attacks, the Joint War Committee desig-

nated the Arabian Gulf and its adjacent waters as a high-risk

area. Shipowners whose vessels transit through this area

are required to pay additional premiums to maintain their

insurance cover.

Whether such additional insurance costs can be passed on

to charterers or cargo owners will generally depend on the

wording of the charterparty and bill of lading.

An example of a charterparty clause which may allow for

costs to be passed on to charterers is as follows:

“If the vessel is ordered to trade in areas where there is

war or threat of war, Charterers shall reimburse Owners for

any additional insurance premia, ...”

Normally under a bill of lading, a carrier would not be able to

pass to the cargo owners such additional insurance costs save

for the extreme circumstances discussed in the next section.

May the shipowner or carrier refuse to call at ports within

the Arabian Gulf?

The general position is that under a charterparty, the ship-

Strait of Hormuz:

the impact of vessel attacks on shipping and logistics

Got something to say?

If you have any industry

comments to make please

e-mail: [email protected]

COMMENT | JEB CLULOW

Jeb Clulow, partner, Reed

Smith, London looks at the

impact of the Iran tensions

on shipping in the region

As it currently stands,

it is probably unlikely

that shipowners/

carriers will have the

right to refuse to transit

the Strait of Hormuz.”

COMMENT

owner is required to follow

the charterers’ orders. Simi-

larly, under a bill of lading the

carrier is required to proceed

to the place of destination

listed in the bill of lading.

If the shipowner or carrier

failed to do so, then, absent a

specific clause allowing a de-

viation, it would be liable for

any damages, including the

costs of carriage of the cargo

to the agreed destination.

In the charter context a

common clause is the CON-

WARTIME or VOYWAR war

risks clause. These generally

provide that if the master of

the vessel has considered the

situation and concluded that

there is ‘likely to be’ or ‘may

be’ a danger if the vessel pro-

ceeds, then the shipowner

may be relieved of having to

enter within that high risk

area. The words “likely” and

“may” suggest different lev-

els of probability, with the

former connoting a greater

chance of exposure to danger

and the latter being further

down on the scale of probabil-

ity. In general, this wording

is permissive and gives the

Master some discretion.

A bill of lading for contain-

erised cargo will typically

have clauses permitting al-

ternative performance such

as transhipment, but these

will not relieve a carrier from

taking the cargo to the agreed

destination. A bill of lading

may have a war risks clause,

which might read as as fol-

lows: it should “appear” that

the vessel “would” be exposed

“to the risk of seizure, damage

or delay, in consequence of

About the author: For 20 years

Jeb has helped

clients with shipping,

logistics, sale of

goods, offshore and

construction issues. He has

extensive international arbitration

and court experience.

war or warlike operations”.

Such wording suggests that

more extreme circumstances

would be required for a car-

rier to bring himself within

the ambit of this clause.

In the present circumstanc-

es, where there have been only

two attacks causing damage

to tankers, it is unlikely that

they would justify a Master

refusing to proceed through

the Strait of Hormuz.

It is also worth mentioning

that on 11 July, it was report-

ed that three Iranian vessels

sought to interfere with a BP

tanker passing through the

Strait of Hormuz and were

warned off by a British naval

vessel. It is said that the Ira-

nian vessels complied with

the instructions of the British

naval vessel and the transit of

the BP tanker was not affected

with and no damage was done

to her. It is also reported that a

US led military coalition plans

to offer support to commer-

cial shipping transiting the

Strait of Hormuz.

Shipowners/carriers should

consider the continuing de-

velopments in the Arabian

Gulf but as it currently stands,

it is probably unlikely that

shipowners/carriers will have

the right to refuse to transit

the Strait of Hormuz.