VOYWAR 1993: Alternative Voyage Orders and Frustration

A recently published London Maritime Arbitrators Association (LMAA) award, London arbitration 8/26, has provided some useful guidance on the interpretation of VOYWAR 1993, in particular the nomination of an alternative discharge port and frustration. Whilst this decision arose out of the Russia/Ukraine conflict, it will be relevant for vessels which are trading in or near the Persian Gulf and other areas which are, or may become, high risk. 

The decision deals with various issues between the parties. This article discusses the obligation to nominate an alternative safe port under VOYWAR 1993, damages for detention and frustration. 

Background

Against the backdrop of the ongoing Russia / Ukraine conflict, the Vessel was chartered to carry a cargo of ammonium nitrate from an Azov Sea port to a Black Sea port, requiring transiting the Kerch Strait (“the Strait”) which the Russian Federal Security Service (“FSB”) had, at the material time, strengthened powers to restrict or prohibit movement through.  

Loading was completed on 9 January 2023. Upon the Vessel reaching the north entrance to the Strait on 15 January 2023, the FSB refused the Vessel's passage on account of its cargo being a fertiliser potentially usable in explosives – this position was made clear in official letters from the FSB on 20 January 2023. 

Subsequently:

• On 7 February 2023, Owners informed Charterers that “it is war/war like zone, the owners hereby notify the chrs to act under governing cp/law and to revert their solution w/in 48 running hours latest”
• On 15 February 2023, Owners informed Charterers that they would have to discharge the cargo at the loadport and sought Charterers’ confirmation.
• On 28 February 2023, Charterers nominated four possible alternative discharge ports – these were rejected by Owners who insisted that Charterers should nominate one alternative port. 
• On 13 March 2023, an official letter, published by the Russian Ministry of Transport, confirmed that vessels loaded with certain cargoes, including ammonium nitrate, would not be allowed to pass the Strait.
• On 15 March 2023, Charterers ordered the Vessel to return to the loadport for discharge.
• Discharge took place between 23 and 27 March 2023.

The charterparty

The charterparty incorporated, at Clause 17, the wording of the BIMCO Standard War Risks Clause for Voyage Chartering 1993 (“VOYWAR 1993”), which provides that:

“The Owners shall not be required…to proceed or continue on any voyage, or on any part thereof, or to proceed through any canal or waterway, or to proceed to or remain at any port or place whatsoever, where it appears…at any stage of the voyage thereafter before the discharge of the cargo is completed, that, in the reasonable judgement of the Master and/or the Owners, the Vessel, her cargo (or any part thereof), crew or other persons on board the Vessel (or any one or more of them) may be, or are likely to be, exposed to War Risks. If it should so appear, the Owners may by notice request the Charterers to nominate a safe port for the discharge of the cargo or any part thereof, and if within 48 hours of the receipt of such notice, the Charterers shall not have nominated such a port, the Owners may discharge the cargo at any safe port of their choice (including the port of loading) in complete fulfilment of the Contract of Carriage…”

The claim

Owners claimed damages for detention between the period 15 January 2023 and 24 March 2023 at the charterparty demurrage rate, together with associated expenses, on the basis that Charterers, in breach of the charterparty, had: (1) loaded a legally dangerous cargo (in that it was the cause of the FSB preventing the Vessel’s passage through the Strait); (2) nominated an unsafe port; (3) failed to prepare relevant documentation confirming the cargo’s intended use for the FSB; and (4) failed to promptly nominate an alternative discharge port when requested.

In relation to the nomination of an alternative port, Owners argued that Charterers were in beach  of their obligations under clause 17 on the basis that they failed: (i) to nominate an alternative safe port within 48 hours of being requested to do so; or (ii) order the Vessel to another safe port when it was or should have been obvious that it would not be able to pass. It was Owners’ case that this date was 20 January 2023. 

Charterers denied any breaches of the charterparty and argued that the charterparty had been frustrated from 20 January 2023 by the unforeseeable and unavoidable arbitrary decision of the FSB to prohibit the Vessel from passing through the Strait with this particular cargo onboard. 

The Tribunal’s decision

1. Failure to promptly nominate an alternative port

   The Tribunal held that Charterers were in breach of the war risks clause of the charterparty by their failure to give effective nomination of an alternative safe port until 15 March 2023. Charterers were under an implied obligation to cooperate to ensure prompt discharge at an appropriate place – this extended to giving prompt instructions, including the nomination of an alternative safe port

   The Tribunal awarded Owners damages for detention at the charterparty demurrage rate between 15 February 2023 (when Owners requested new orders) and 15 March 2023 (when Charterers gave new orders). However, as the charterparty demurrage rate was found to appropriately reflect the parties’ agreement as to Owners’ recoverable losses for the Vessel having to wait, the Tribunal held that Owners were not entitled to any additional damages claimed for operational expenses.

2. Frustration

   The Tribunal held that the charterparty was not frustrated. While the Tribunal agreed with Charterers that performance of the contractual voyage was no longer possible, the war risks clause expressly provided for the consequences of the exact situation where war risks prevented performance of the voyage. It was not therefore open to Charterers to assert frustration just because the risk allocation, as provided for in the war risks clause, was unfavourable. 

   The Tribunal further commented that, even if its decision on frustration was wrong (i.e. the charterparty had been frustrated), Owners would still have been entitled to remuneration for the period of the Vessel’s unjustified detention as a matter of quantum meruit, the measures of damages of which would be the agreed demurrage rate in any event. 

Comment

When considering invoking a war risk clause, in order to preserve any claim for detention, owners must ensure that they are entitled to request an alternative port be nominated by charterers and that any request is made in accordance with the contractual framework. Each decision will turn on both the precise factual circumstances and the wording of the war risk clause, and a different tribunal may well come to a different decision to the one in London Arbitration 8/26, particularly given that owners had a contractual remedy to themselves nominate an alternative safe port.

From a practical perspective: (i) charterers should be mindful that, following nomination of an alternative port (either by charterers or by owners as permitted by the charterparty), a valid NOR tendered at the alternative port should, subject to the specific terms of a charter, start laytime counting; and (ii) owners should bear in mind that, when discharging at an alternative port (under VOYWAR 1993 or any other relevant clause), delivery should only be made against the original bill(s) of lading to protect owners against any potential mis delivery claims. 

Where a war risks clause applies to the situation, even where the delays are significant or the voyage is impossible, this decision confirms that frustration arguments will be difficult. 

With the Russian special military operation in Ukraine in its fourth year, and tensions in the Persian Gulf continuing, war risks clauses are being tested more frequently than before, and further decisions may be likely. 

Given the complexities that these situations necessarily entail, Members should speak to their usual contacts at the Club for assistance.