The enquiries we have received relating to the impact of the conflict in the Persian Gulf have concerned several common issues in the context of charterparties and the carriage of goods by sea. This note briefly outlines some of those issues. These comments reflect Australian law and are of course only general in nature. Each case will turn on the specific contractual terms and surrounding circumstances.
Current situation
Earlier in the conflict, the IRGC announced that the Strait of Hormuz was closed and, referring to vessels attempting to transit the strait, threatened to ‘set those ships ablaze’. It subsequently announced that the strait was open to all vessels except the US, Israel and their allies.
As of 17 March, the UKMTO reported receiving notifications of 20 incidents affecting vessels in and around the Persian Gulf, the Strait of Hormuz and the Gulf of Oman. These include 15 confirmed attacks on ships.
Its advice remains for vessels to ‘transit with caution’. The IMO Secretary-General released a statement similarly urging the industry to ‘exercise maximum caution’ and to ‘rely only on verified, authoritative sources when making navigational decisions.’
The International Chamber of Shipping points out that attacks on ships have resulted in deaths and injuries to seafarers, and that there remain about 20,000 seafarers trapped in affected areas.
At the time of writing, there have been reports of a de facto safe corridor through the Strait that is being administered by the IRGC for ships not associated with the US or Israel. Whether this in fact reasonably assures the safety of such vessels would remain to be seen.
Master’s responsibility
The Master generally has ultimate responsibility to make decisions that are necessary to preserve the safety of life at sea and the environment.
How this responsibility is to be properly discharged, and the consequences thereof, are governed by the terms of the relevant contract.
Off-hire
Questions may arise about whether charterers would be entitled to withhold hire for periods during which the vessel is unable to perform the contractual service because, for eg, it is unable to safely enter the Strait of Hormuz to access ports in the Persian Gulf.
Off-hire clauses are typically directed at the physical condition of the vessel, crew or cargo (for eg, cl 15 of the NYPE 46 form). On their original terms, and unless the vessel has suffered damage, they are not likely to be engaged in the current circumstances.
There may, however, be room for argument about whether the catch-all ‘any other cause’ in provisions like cl 15 of the NYPE 46 form is wide enough to encompass a situation where threats to the vessel’s safety prevent it from performing the service required of it. There may also be argument about whether the insertion of the qualifier ‘whatsoever’ in the off-hire clause would enlarge the list of off-hire events to extraneous matters like the effective closure of the Strait of Hormuz, or the risk of attack while at ports in the Persian Gulf or Gulf of Oman.
Whatever the case, it is prudent to keep in mind the exhortation in The Berge Sund [1993] 2 Ll Rep 453 at 459 that: ‘The only general rule that can be laid down is that one must consider the wording of the off-hire clause in every case’.
Deviation
Issues may arise as to the scope of the owners’ ability to deviate from the contractual passage.
Aside from war risk clauses (which are dealt with below), owners may have a contractual liberty to deviate from the contractual route in specific circumstances. This is typically the usual or customary route, or otherwise the route necessitated by the obligation to proceed with due despatch.
Deviation clauses establish the boundaries within which the owner may justifiably depart from the contractual route without liability. For example, cl 22 of the GENCON voyage charterparty permits the vessel to deviate for ‘any other purpose reasonably necessary for the safe continuation of the voyage’. If the Hague/Visby Rules are incorporated into the charterparty or otherwise apply to the contract of carriage, Art IV r 4 provides that deviation to save life or property at sea or any reasonable deviation does not amount to a breach by the carrier.
Unjustified or unreasonable deviation can have serious consequences for owners, including the loss of the protection of the exclusions of and limits on liability in the Hague/Visby Rules, and in turn potentially affect their insurance cover.
Assessing whether a deviation to, for eg, avoid transiting through the Strait of Hormuz is contractually justified or reasonable will be heavily fact-dependent. Certainly, on one view, leaving aside whether the strait is (or can be) legally closed, the ongoing exchange of attacks and escalating threats to shipping, would justify deviation on account of significant risk to the safety of the crew, vessel and cargo.
War risk clauses
As indicated above, war risk clauses may also entitle owners to deviate from the contractual passage. Additionally, along with the safe port warranty, war risk clauses provide a basis on which owners may be entitled to refuse to load or discharge at the charterers’ nominated ports.
Time and voyage charters typically contain a war risk clause which re-adjusts the parties’ rights and obligations when, as a result of war or similar events, there is danger to the crew, vessel and cargo.
War risks, in the commonly used CONWARTIME and VOYWAR clauses, are defined to include ‘war’, ‘warlike operations’, ‘malicious damage’ and ‘blockades’, which current events are likely to comprise.
When properly engaged, the clauses provide a range of liberties to the owners to refuse to proceed to or continue through an affected port or area, and entitle owners to recover additional war risk premiums from charterers. The 2025 version of the clauses, which are thought to be more beneficial to charterers than the previous 2013 version, require the owners to demonstrate (if requested by charterers) that they used reasonable endeavours to obtain appropriate cover and terms, including premium. The CONWARTIME 2025 clause permits the owners to recover any high-risk bonus payments payable and paid to the crew for transiting through an affected area.
For voyage charters, the VOYWAR 2025 clause gives charterers 72 hours (instead of the previous 48 hours) to nominate alternative ports (within the contractual range) for loading or discharging if notice is given prior to loading; or otherwise to nominate an alternative discharge port if the danger is judged to have arisen after loading has commenced or while the vessel is on its laden voyage. If no suitable alternative ports are nominated, owners may terminate or discharge at a safe port and claim adjusted freight, in respect of which the owners’ lien on cargo is extended. There is potential for disputes relating to the discharge of cargo at alternative discharge ports, including in respect of loss of or damage to cargo.
Safe port warranty
Apart from as a result of the war risk clause, questions may arise about when owners may be entitled to refuse charterers’ instructions, particularly where such instructions may contradict a safe port warranty within the charterparty.
The terms of the charterparty may include an express or implied warranty by charterers that the ports they nominate are safe. In a voyage charter, where specific ports are named and there is no express safety warranty, it is unlikely that one would be implied. Should the warranty exist, and should the owners suffer loss or damage as a result of a breach by the charterers of the warranty, the owners would be entitled to damages.
It is important to pay careful attention to the terms of the contract to determine the true scope of the warranty. It is generally treated as an absolute obligation, but in some charterparties, that obligation may be qualified – for eg, cl 4(c) of the Shelltime 4 charter.
The safety of the port is to be assessed prospectively, at the time of its nomination. A port will not be safe unless, in the ordinary course, the vessel can reach, use and return from it without being exposed to danger that cannot be avoided by good navigation or seamanship. The port may be unsafe at the time of nomination, but must be safe when the vessel is due to arrive.
The test brings into consideration the safety of areas outside port limits, so if the vessel would be exposed to risk of attacks during passage through the only approach to a port in the Persian Gulf, then the port may be unsafe.
The safe port warranty assumes normality at the port at the time of the vessel’s arrival. Especially relevant to loss or damage occurring at the outset of the conflict, there may be an argument in favour of charterers that such loss or damage occurred as a result of an abnormal occurrence – for eg, the commencement of military strikes by the US and Israel, or the retaliatory strikes by Iran.
If a port becomes unsafe after it is nominated, then under a time charter the charterer would be obliged to nominate a different, safe, port. Under a voyage charter, the charterer may likely have no right or obligation to re-nominate. There may however be an express liberty for the owners to only go ‘so near thereto as [the vessel] may safely get and lie afloat’.
Implied indemnity
In a time charter, there may be an implied indemnity in the owners’ favour in relation to any loss or damage resulting from the owners’ compliance with the charterers’ orders.
The indemnity is more likely to arise if, at the time the charterparty was fixed, the risk of the occurrence (including the extent of such risk) which gave rise to the loss was not foreseeable. Ordinary navigational risks or risks associated with trade to a particular port or region would not readily fall within the scope of the indemnity.
The loss or damage must be directly caused by compliance with the charterers’ orders – lawful or not. However, if at the time of the charterers’ orders, the loss or damage was not a foreseeable consequence of complying with the order, then it would be difficult to establish liability in the charterers.
Force majeure
Force majeure clauses may be relevant particularly in voyage charters or contracts of affreightment. Like English law, Australian law does not recognize a standalone principle of force majeure. It is a purely contractual mechanism for relieving a party from its obligations when contractual performance is impeded due to an identified supervening event. These often include war or war-like operations and hostilities.
The precise extent of the parties’ rights and obligations is defined by the terms of the force majeure clause. Such clauses are construed by reference to their words and, and a party relying on the clause will need to strictly meet its requirements.
Often the force majeure mechanism is only engaged if the party claiming force majeure makes ‘reasonable endeavours’ or similar to avoid the adverse consequences of the specified event. In such a case, unless the terms state otherwise, that party need not accept an offer of non-contractual performance from the other party.
Frustration
Frustration is a principle by which the contract comes to end by operation of law. It occurs where a party can prove that an unforeseen situation has arisen, without the fault of the parties, that is radically or fundamentally different from that contemplated by the contract on its proper construction.
At common law, impossibility alone may not lead to frustration, and generally, increased inconvenience, expense or loss will not be sufficient to frustrate a contract. The doctrine does not ordinarily operate where the relevant event and its consequences are covered by a force majeure clause.
Where the contract is frustrated, it comes to an end, and the parties’ resulting losses typically lie where they fall. There may be limited grounds for restitutionary relief, or alternatively, recovery of money paid or payment for part performance pursuant to legislation in States like New South Wales, South Australia and Victoria – eg, Frustrated Contracts Act 1978 (NSW), which does not apply to voyage charters nor contracts of carriage.
Whether or not the contract is frustrated will depend on the specific facts of the case, including the type of contract and the scope of the parties’ obligations, the nature of the cargo being or to be carried, the stage of performance, the type and location of the vessel etc.
Carrier’s liability for delay
Technically, the Australian amendments to the Hague/Visby Rules apply by force of Australian law to outbound carriage of goods. In more limited circumstances, they may also apply (rarely, if ever) to the inbound carriage of goods.
Unlike the original Hague/Visby Rules, the Australian amended Rules make the carrier liable for delay, save for when it is ‘excusable’ and where the carrier ‘took all measures that were reasonably required to avoid the delay and its consequences.’ Among the reasons that delay may be excusable are that the delay was caused by circumstances beyond the carrier’s reasonable control, and where the delay was the result of saving human life, or where it was reasonably necessary for the safety of the ship and cargo.
Potential disputes may revolve around the carrier’s liability for delay and whether it took all measures that were reasonably required to avoid the delay and its consequences. Where there may be a force majeure or similar clause in or incorporated into a contract of carriage, there may be particular complexity around its interaction with the anti-repugnancy provision in Art III r 8 of the Hague/Visby Rules.
Other observations
As would be apparent from the above outline, many of the issues intersect each other and may have overlapping operation. They may give rise to questions about the obligation to issue and sign bills of lading for cargo at an at-risk port, or to amend the discharge port or consignee in the relevant contract of carriage. Particular care will need to be taken where such amendments are made, including where switch bills are being contemplated. Appropriate advice should be obtained about the operation of P&I cover in such circumstances and the necessity or utility of letters of indemnity as security.
Comment
The situation remains very fluid and the multitude of challenges that owners, charterers, seafarers and insurers are likely to continue to unfold, even after hostilities cease – whenever that may be.
We echo the comments of the International Chamber of Shipping in its statement of 18 March 2026: ‘The safety of seafarers, the integrity of essential global supply chains, and the stability of international commerce depend on immediate action to bring these hostilities to an end.’
For more information, please contact the author:
Ashwin Nair
+61 411 786 671
ashwin.nair@nairlegal.com