11/11 When can owners reject charterers' orders?
Marine and international trade briefing note
In what circumstances are the owners of a vessel entitled to reject charterers' orders because they believe that the vessel may be subject to the threat of piracy? In the case of Pacific Basin v Bulkhandling Handymax, 8 November 2011, Mr Justice Teare considered this question in the context of a charterparty which incorporated the CONWARTIME 1993 war risks clauses. (His decision is also applicable to a number of other war risk clauses.) It is the first case in which this contract wording has been considered.
In summary, the effect of the judgment is that if owners wish to reject charterers' orders because of piracy risks in reliance on CONWARTIME 1993 (or similar provisions), they must comply with the following requirements:
- Owners must judge that there is a real likelihood, in the sense of a real danger, that the vessel, cargo, crew or other persons on board will be exposed to acts of piracy;
- Owners must judge that there is a real likelihood, in the sense of a real danger, that the acts of piracy will be dangerous to the vessel, cargo, crew or other persons on board. The test of dangerousness is likely to be satisfied if the threatened harm is of a serious or important type.
- The owners' judgments must be made in good faith, and must be objectively reasonable. In order to ensure that the judgments are objectively reasonable, owners should make all necessary enquiries.