This short note deals with some of the key issues that may affect the obligations and rights of charterers and owners resulting from Russia being added to the JWC Listed Areas, with a focus on BIMCO clauses.
In all circumstances, parties should carefully review their contractual terms for current and future fixtures and, if in any doubt, seek legal advice before acting.
- Russia added to the JWC Listed Areas – contractual implications
It is very important to check that your charter parties contain a War Risk clause. Take a close look at what your War Risks clause says to understand how the responsibilities and costs are allocated and what you may or may not be entitled to do.
BIMCO recommends using the latest editions of its War Risks clauses – CONWARTIME 2013 for time charters and VOYWAR 2013 for voyage charters. The clauses contain a very broad definition of “War Risks” that include warlike operations and hostilities that do not require a declaration of war by states. The clauses also apply to War Risks that may pre-date the charter party, which means that an escalation of risk is not required to invoke the clause. Please be aware that older versions of the clause allocate the costs in different ways.
We also recommend using the BIMCO War Cancellation Clause 2004 which provides mutual cancellation rights in the event of conflict between two or more named countries individually agreed by the parties.
1. Can owners refuse to call at Russian ports?
2. Who pays the increase in War Risk premiums under a voyage charter and time charter party?
3. Can owners ask for alternative orders?
4. Can owners cancel a voyage because of a significant increase in War Risk premiums?
Under the BIMCO VOYWAR or CONWAR Clauses 2013 or 2004 the charterers will bear the additional costs which means that the issue of issue of cancellation for economic reasons does not arise. This is however different under the 1993 versions of the clauses where the owners are exposed to the additional premium – but a significant increase in costs rendering the performance of a contract unprofitable does not ordinarily give owners the right to terminate the charter party. The fact that performing a contract more onerous or expensive is not sufficient to bring about a frustration of the contract. The performance of a contract must be unjust to frustrate a contract.
General things to keep in mind:
1. Incorporate the BIMCO CONWARTIME 2013 to be able to reject voyage orders or, in case of a voyage charter, to terminate the charter party in accordance with VOYWAR 2013.
2. Keep up to date with the latest information and developments: consult BIMCO´s website to obtain guidance and information on the current situations and measures to be taken.
3. Use back-to-back clauses up and down the chain of charter parties to ensure that the rights and obligations are aligned.
4. For new voyage fixtures: address the increase in insurance premium.
5. If the BIMCO war risks clauses are used for contracts of affreightments: check that any reference if the War Risks Clause to “contract” or “charter party” is changed to “voyage” to avoid any termination of the contract when only one voyage is affected.