Shippers advised to read the fine print THE SA shipping industry’s economy is under pressure from the on-going Israel-Lebanon war, according to Shepstone & Wylie’s Anisa Govender. “The protracted fighting in the Middle East threatens the shipping economy and should raise concerns about contracts among ship owners, charterers and shippers operating in the area,” she said in a report on the economic backlash on international commerce, specifically shipping. “Apart from the huge increase in fuel prices, ship-owners, charterers, traders, consignees and insurers will no doubt be rifling through contracts and insurance policies to determine what effect the hostilities will have on war risk and ‘force majeure’ clauses in their contracts.” The bulk of international shipping contracts exclude loss, damage or expenses caused by war or civil strife, she added, but could be covered under a separate clause. “When hostilities are threatened or ongoing,” Govender said, “the insurance company may impose an additional premium to maintain the cover. She also told FTW that she believed the insurance companies would declare that ships may not call on Lebanon and Israel without paying the additional premium. “This places the onus on shipping lines and owners to disclose information regarding a vessel’s intended voyage into a war zone.” Govender advised ship owners and charterers to ensure that any risk clause within their contracts contained certain basic elements – including a method that identifies when the war risk clause comes into effect; a provision that allowed the owner or captain to refuse venturing into dangerous ports; details on who incurred the additional costs associated with war risk activities; cancellation rights; details on dealing with the cargo in the case of war, and particulars on dealing with terrorism. There are several situations in which contracts between ship owners and charter companies could be cancelled in the event of war - and Govender suggested that both parties should examine their contracts to establish whether the current conflict was applicable. But, she stressed, it’s a case of “shippers beware”. “Most war risk clauses allow the vessel to discharge cargo at the first safe port or to deviate from the intended voyage at the shipper’s or merchant’s risk and cost,” Govender added.
