Following a general explanation in LP 05/2022 on some legal issues for both parties of a carriage contract in the context of the Russia-Ukraine conflict, the Association has been approached for further consultation.

I. Background information

Up to the present moment, the Association has been informed:

On 15 February 2022, the JWC issued JWLA-028 to amend the Hull War, Piracy, Terrorism and Related Perils List Areas to include Ukrainian and Russian waters in the Black Sea and the Sea of Azov.

On 24 February 2022, Russia launched a military assault against Ukraine. The northwestern part of the Black Sea north of the 45-21 parallel and the Sea of Azov have been closed off to navigation. Operations at most Ukrainian ports were suspended.

On 7 March 2022, the JWC updated listed areas in JWLA-029 and included new clauses with the notice period amended from 7 days to 48 hours.

More information about the regional situation and attacks on commercial vessels are covered in LP 07&08/2022.

II. Calling at Russian ports in the Black Sea

The Association has recently seen a lot more Members asking for advice about calling at Russian ports in the war area, instead of about calling at Ukrainian ports, which are closed at the moment. In this regard, specific contractual circumstances need to be considered for different cases.

1. Whether such ports are expressly excluded in the trading limits clause – often not before the Russia-Ukraine conflict.
2. Whether the JWC listed areas are excluded from permitted trading areas – with charter terms such as “war zone declared from time to time by the Joint War Committee of London always to be excluded”, owners are seemingly entitled to refuse to proceed to these areas.
3. However, the above clauses need to be looked at on the contractual level. To be specific, owners are still required to follow charterer orders, even with trading limits clauses, if it is agreed elsewhere (such as in rider clauses) that the owner should proceed to nominated areas as long as the charterer pays the increase in War Risk premiums (“AP”). It is, therefore, not reasonable to jump to conclusions relying on a single clause without considering the whole contract.
4. Whether an express safe port clause is included – if ports and nearby anchorages are unsafe, owners would generally be entitled to refuse to proceed to such places. But the problem is, although these ports are established as JWC listed areas, it may not be easy to find factual evidence to prove that these areas have been, or are likely to be under attack (or the ship is likely to be exposed to physical danger), as the court concluded “it by no means follows that a port is unsafe because it is an area for which, because of the risk of war, an additional premium is required” (The “Concordia Fjord”). Also, the BIMCO War Risk clause can only be invoked if it’s firstly established that a war risk exists.

III. War risks clauses

Most time charterparties contain “War Cancellation” clauses, such as BIMCO War Cancellation Clause 2004 and the clause Outbreak of War of the Shelltime 4 form, and some also contain so-called “War Risks” clauses, such as BIMCO War Risks Clause for Time Chartering 2013 (CONWARTIME 2013) and War Risks Clause for Voyage Chartering 2013 (VOYWAR 2013).

For war cancellation clauses, mutual cancellation rights are entitled in the event of conflict between two or more named countries agreed by the parties (usually between the United States, the UK, France, Russia, China, or other countries that are likely to be involved in war). For some old form of contracts where the USSR is referred to, both parties should consider whether the clause has given them the option to cancel the charterparty in the event of outbreak of war between the former Soviet Union countries.

For war risks clauses, owners are entitled with some right if the risk and level of danger to the ship can be assessed, such as the right to terminate the charterparty under BIMCO VOYWAR 2013, provided the requirements are met. The clauses also provide that who should be responsible for the additional war risk premium. Charterers who wonder whether payment for the AP can relieve them from their safe port warranty may contact the Association for elaborate explanation.

IV. Frustration

Many may also consider whether charterparties are frustrated in scenarios of wars or conflicts.

1. Long-term time charters (serving 24 or 36 months globally) would be less likely to be frustrated, with a rather long period of duration left, as charterers can give alternative orders.
2. Voyage charters and time charter trips for Ukraine are likely to be frustrated, but it is necessary to consider whether not being able to call at Ukrainian ports is substantial enough to constitute frustration by delay.
3. In terms of charterparties for vessels trapped in Ukraine, consider also frustration by delay unless the contract couldn’t be performed had the vessel been hit and lost.

In addition, self-induced frustration where the behavior of any one party, for example the charterer is in breach of the safe port warranty, has brought about the circumstances should be considered.

On grounds of frustration, some seeks higher or lower rates while some may demand reimbursement for certain payments. We would recommend consulting lawyers with regard to the specific case.

V. Demurrage and sanction-related issues

Charterers are generally obliged to pay hire in the absence of a frustrating delay, a breach or an applicable clause. Both parties should be aware that the demurrage exceptions clauses under voyage charterparties may be triggered in the context of the current conflict.

Sanctions risk should also be taken into account by ships, owners and operators who plan to have the vessel calling at Russian ports (in and out of war areas). We do not intend to provide detailed information here but some general advice.

• It is recommended to carry out due diligence before reaching any commercial results as the sanction list is constantly expanding.
• Be aware of the sanction regulations’ potential impact on charterparty performance, such as delayed bank transactions, or measures taken by administrations on vessels that have previously called at Russian ports.
• Beware of the complexity of the current sanction regime and the rapid change it is subject to.
• Both parties are encouraged to address in the contract responsibilities for loss of time and expenses.

The article is intended for general guidance only and should not be relied upon as legal advice for any specific case. The Association will keep following the developments, and if any assistance is required on an individual matter, please contact Managers of the Association for more information.