Benefits of updating war risks clauses in charterparty contracts


By Guillermo Zamora, Founder, Marlin Blue, IUMI Professional Partner
Although most of us dislike the introduction of new laws, guidance and compliance, they are often necessary and shipowners and insurers are not excluded. Given recent events in the Red Sea and the Middle East, new versions of some contract wordings are proving essential. This is particularly true for updates undertaken in 2013 to the War Risks Clause for Voyage Chartering VOYWAR 2013 and the War Risks Clause for Time Chartering CONWARTIME 2013. These changes will advantage shipowners and insurers and wording should be updated. The primary change lies in broadening the definition of War Risks for both VOYWAR and CONWARTIME. As stated by BIMCO, the test for determining whether to proceed is now based on whether an area is dangerous. In the 2004 edition, after the TRITON LARK case, the courts placed considerable emphasis on the meaning of “may be” and “are likely to be” for determining the existence of the risk of attack by pirates. It was the intention of the update to remove uncertainty and therefore better protect shipowners’ risks by enlarging the applicability of these Clauses.

Whether or not the risk existed at the time of entering into the contract is now irrelevant when these new clauses have been applied to the CONWARTIME wording. A further widening of the application is for the VOYWAR, where the updated wordings extend the application of these Clauses to a wider range of transport contracts. All these advantages for shipowners (and their insurers) is only offset by the increase in one day for the VOYWAR (14 to 15 days) for the obligation of payment from charterer to shipowner of additional premiums due to the charterer´s order to proceed to areas exposed to War Risks. Similar provision is made in CONWARTIME which, in general terms, does not prejudice shipowners’ rights. From a commercial standpoint, incorporating these changes into standard charterparty contracts for shipowners is a seamless process, and it is a commercially sound recommendation for insurers to suggest it to their shipowner clients. The potential drawbacks of not updating the wording cannot be overlooked. As such, clause H of VOYWARTIME 2013 explicitly places the burden of “all costs, risk and expenses for the alternative discharge shall be for the charterer´s account”. Failing to adopt the updated version may expose shipowners to an unfavourable outcome in legal proceedings using the “contra proferentem” rule and the lack of action by shipowners. Updating War Risk Clauses from the 2004 to the 2013 version in charterparty contracts is not only beneficial but essential.

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