The Commercial Court has considered the true construction and implementation of the CONWARTIME 1993 clause in a time charter on the NYPE form (Pacific Basin IHX Limited v Bulkhandling Handymax AS  EWHC 2862 (Comm)).
The “TRITON LARK” was instructed to carry a cargo from Hamburg to China, via Suez and the Gulf of Aden. The Defendant Owners refused to proceed on that route due to the risk of pirate attack, and instead proceeded via the Cape of Good Hope. Extra costs were incurred as a result of this, which a Tribunal held should be borne by Charterers. Charterers appealed that decision.
The appeal centred on the construction of sub-clause (2) of CONWARTIME 1993, in particular as to:
(i) the meaning of the words “may be, or are likely to be, exposed to War Risks”;
(ii) whether on the facts Owners had made the reasonable judgment required by the clause; and
(iii) whether the clause gives Owners a discretion and if so whether they are obliged to make proper enquiries before exercising it.
Charterers’ appeal was allowed. Owners were required to show a “real likelihood”, based on evidence rather than speculation, that the vessel would be exposed to acts of piracy. A refusal of orders required Owners to make an objectively reasonable judgment as to whether such a real likelihood existed. In order to do this, all necessary enquiries must be made. If Owners make enquiries which they consider sufficient, but do not make all necessary enquiries, the judgment may still be objectively reasonable.
The judge recommended that the award be remitted to the Tribunal in order for it to reconsider whether, in Owners’ reasonable judgment, there was a “real likelihood” that the vessel would be exposed to acts of piracy.
A more detailed consideration of the case can be found in the Reed Smith Client Alert, sent out on 23 December 2011. The full facts of the case and the Court’s detailed findings are set out in the judgment text, available on Bailii.