Ukraine Crisis

A number of disputes may potentially arise under charter parties and contracts of carriage. These may include, for instance, disputes related to safety of ports, sanctions regime, deviation, detention, demurrage, off-hire disputes, force majeure events, frustration, cancellation of contracts and others.

We will briefly mention some general positions that would normally apply under standard contractual arrangements. Please keep in mind that each case may be different and you are encouraged to contact us further when in doubt.

1.        Unsafe ports or berths

Various charter parties contain a warranty of safety of the port or berth by the charterer. It follows that charterers are obliged to nominate a safe port or safe berth and if in breach of this obligation, they will be liable for the damage caused. What constitutes a safe port is described in The Eastern City (*):
"… a port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship…"

The safety of a port is very fact-specific and as the facts are changing rapidly, it is recommended that the situation is closely monitored.

(*)[1958] 2 Lloyd's Rep. 127

2.        Deviation

Whether shipowners are allowed to deviate will depend on the terms of the charter party. Standard charter parties usually provide the vessel with the liberty to deviate for the purpose of saving life and/or property. Furthermore, acting in accordance with a war risk clause may not be deemed a deviation but considered as due fulfilment of the contract. Some war risk clauses are more restrictive than others when it comes to exercising the rights allowed under the clause to refuse following the voyage orders or to deviate.

War clauses in charter parties may also entitle parties to cancel the contract if certain conditions are met. However, the terms of the war risk clause should not be interpreted in isolation as any such decision may have an impact on the contract of carriage and may attract liability for the carrier.

3.        Force Majeure and Frustration

Parties may look into their force majeure clause to see if the circumstances they are facing could qualify as a force majeure event. It should be reminded that the concept of force majeure does not exist in and of itself under each national law. This means that there must be an explicit force majeure clause in the contract if a party wants to invoke force majeure in order to suspend performance or terminate the contract. A party who seeks to rely on a force majeure clause will usually bear the burden of showing that: it could not perform its obligations under the contract due to the relevant force majeure event; the inability to perform was beyond the party’s control; there were no reasonable steps the party could have taken to avoid the event or the consequences. This is a high standard of proof, and it is usually not that easy to successfully rely on a force majeure clause. Just because a contract has become more expensive to perform would not necessarily constitute force majeure.

Furthermore, parties may look at the doctrine of frustration. "Frustration" occurs where there is an unforeseen event which makes the contract either impossible to perform, or the performance is radically different to what has been envisaged in the contract, provided there is no fault of either party. In general, frustration is very difficult to argue and establish, and it will require very serious and significant events to be triggered. Mere hardship, inconvenience or material loss will not frustrate a contract. Nor will mere delay in obtaining the cargo from the intended source. If frustration is successfully invoked, the contract will come to an end.

4.        Impact on Insurance Policies 

In general some insurance companies, who have a lead or follow participation, tend to give a 7 days’ notice of cancellation under the marine policies in accordance with the provisions of the contract in respect of War, Strikes, Riots and Civil Commotion risks. After the expiry of the above notice of cancellation period, coverage will be reinstated automatically, subject to the following:

• War, Strikes, Riots and Civil Commotions Risks within Ukraine and/or Russia within 200 km of the land border with Ukraine are excluded.
• Transit to or from Ukrainian and Russian waters within the Black Sea and the Sea of Azov subject to prior agreement by insurers and additional rate and conditions to be agreed.

The territorial scope has thus concretely been redefined according to the cancellation/approval notification. 

This note has been updated until March 5, 2022  but is subject to change. This information is meant for guidance only and is not a detailed analysis. Please note that no warranties are made regarding the thoroughness or accuracy of the information contained in this note. Nothing in this note should be interpreted as  providing definitive guidance on any question relating to policy interpretation, underwriting practice, or any other issues in insurance coverage. Mawyc Insurance cannot be held responsible for any mistakes.