Yemen – When A Port Is Facing Assault

Introduction

Early Wednesday, June 13, 2018, a coalition led by Saudi Arabia and the United Arab Emirates invaded a major Yemeni port at Al Hudaydah.  Of course, the main concern is with the local people of Yemen and their well-being.   This development also seems likely to incapacitate the port for a period of time, which will have a major impact on international shipping and trading in these parts.  In this short article, we look at whether this may give rise to a force majeure situation under typical charter party clauses.  Of course, each force majeure clause will need to be assessed for its particular wording, as will the situation for its precise circumstances. Thus, this article is intended as general commentary only.

Mutual exceptions

Certain events are beyond the control of the parties. This may inhibit the parties from fulfilling their duties and obligations under a charter party. To avoid breach of contract, parties often agree upon ‘mutual exceptions’ in their commercial contracts, meaning that in the event of defined unforeseen events, either party may rely on a force majeure defense, typically on notice.  See US case: Clyde Commercial S.S. Co. v. West India S.S. Co. 169 F. 275, 277 (2d Cir. 1909); and English case: Embiricos v Sydney Reid & Co., [1914] 3 K.B. 45, 46 (1914).

A common iteration of an exceptions clause may be found in the NYPE 2015. Clause 21 outlines: “[t]he act of God, enemies, fire, restraint of princes, rulers and people, and all dangers and accidents of the seas, rivers, machinery, boilers and navigation, and errors of navigation […]” as excepted. In general, showing that war-like circumstances fall under a mutual exception usually means considering several factors, including the unpredictability and externality of the events, the burden on the party claiming the exception, and the interests of the other party. This is a highly fact-sensitive undertaking. It is advisable to monitor the situation as to involved risks, the scope of the impact on the charter party and to consider notice provisions contained within the relevant clause.

Other relevant issues

Regarding the situation in the Yemen, war risk clauses are equally important. In the NYPE 2015, the BIMCO CONWARTIME 2013 War Risk Clause lays out the obligations of the parties. The clause absolves the shipowner from the obligation to proceed to a dangerous area or port on behalf of the charterer “[…] where it appears that the Vessel, cargo, crew or other persons on board the Vessel, in the reasonable judgement of the Master and/or the Owners, may be exposed to War Risks […].” In case the vessel proceeds, the charterer is generally liable for any additional insurance premium.

Additionally, a charterer is often obliged to nominate a safe port / safe berth under charter parties. With the situation in Yemen evolving, the safety of the Port of Al Hudaydah may be in question, depending on further development and close analysis of the state of the port, and possibly for an extended period of time if there is extensive damage or obstructions in the port. Most importantly, this condition might outlast activity that triggers a war risks clause or a mutual exception.

Conclusion

The developments in the Yemen today illustrate that charterers and owners alike must be aware of current political and geo-political developments to navigate the seas safely and in accordance with their contractual obligations. Amongst other considerations, Masters and Company Safety Officers should be alert to threat matrices and best management practices, and legal teams ought to consider the potential triggering of applicable charter party clauses.

If you would like to discuss anything arising from this commentary please contact Jonas Patzwall at jonas.patzwall@floydzad.com; Ed Floyd at ed.floyd@floydzad.com and +1 (917) 999 6914; or Luke Zadkovich at luke.zadkovich@floydzad.com and +1 (917) 868 1245 / +44 (20) 8068 6844.

Subscribe for our updates

If you need guidance on any legal or commercial issues, then please contact us.