William R. Bennett, III and Holli B. Packer ●
Since late 2023, the Yemen-based, Iran-backed Houthi rebel group has attacked dozens of commercial ships in the Red Sea, with no signs of slowing down. The unrest in the region threatens to impact supply chains and increase consumer prices. As activities in the Red Sea develop, appropriate precautions should be made to anticipate the instability in the region.
Ship Owner and Charterparty Considerations
Charterparty issues can arise for both Owners and Charterers. Resolution of such issues can be avoided by a careful inspection of charterparty terms. Questions as to whether Owners can refuse Charterers’ instructions to transit the Red Sea and whether Charterers can place the vessel off-hire or claim damages if Owners deviate the vessel via alternative routes requires individual analysis.
Since standard clauses are often amended, it is impossible to provide a “one-size-fits- all” answer to the main issues that arise from charterparties requiring transit through the Red Sea. Clearly, the specific wording of any force majeure clause will have a significant impact on the analysis in any given case. Generally, however, the test for determining whether Owners should or can refuse to proceed, is based on whether an area is dangerous. Owners must provide evidence that an area may be dangerous, or can become dangerous to the vessel, cargo, or crew. Owners, in order to establish that a decision has been made in the “reasonable judgment” of the Master or Owner, must carry out individual and contemporaneous risk assessments ahead of making a decision to invoke charterparty provisions, refuse to follow Charterers’ orders, cancel a charter, or deviate. Every charterparty must also be assessed for Charterers’ and Owners’ rights and responsibilities when “war risks” occur. As potential disputes arise, an assessment of outcome should also consider vessel ownership, trading patterns, security risks at the relevant time, and commercial considerations.
Continue reading “Red Sea Readiness: Navigating Risk Mitigation Measures for Safe Passage”