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Saturday, January 20, 2018

SHELLTIME 4 – CLAUSE 34 – WARNING - RECOVERY OF ADDITIONAL WAR RISKS PREMIUMS

We continue to scrutinise war risk clauses and to draw to members' attention particular provisions that may rive rise to additional liability or expense. The provisions in Shelltime 4 dealing with war risks are comprehensive and do give protection to owners, however the present situation does require careful note being taken of clause 34 regarding additional war risk expenses, the clause reads:

"If the vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war, charterers shall reimburse owners for any additional insurance premia, crew bonuses and other expenses which are reasonably incurred by owners as a consequence of such orders, provided that charterers are given notice of such expenses as soon as practicable and in any event before such expenses are incurred, and provided further that owners obtain from their insurers  a waiver of any subrogated rights against charterers in respect of any claims by owners under their war risk insurance arising out of compliance with such orders."

It will be seen that owners' right to claim reimbursement of additional war risk premiums and crew bonuses is conditional upon owners:

a)     giving notice to charterers of such expenses as soon as practicable and in any event before such expenses are incurred; and 

b)     obtaining from their war risk insurers a waiver of subrogated rights in respect of claims by owners under their war risk insurance.

In the current insurance climate owners may well find it difficult to comply with the second of these two conditions as underwriters may well not be disposed to give up such rights. Furthermore, it is conceivable that it may be a condition of cover that the underwriters do have such rights subrogated to them. Accordingly, owners ability to recover these additional expenses from charterers may well be prejudiced. Furthermore, owners right to refuse charterers' orders under clause 35 is limited to situations where in owners' reasonable opinion it is dangerous or impossible to reach the place the vessel has been ordered to go. At present owners would not be justified in refusing charterers orders. Owners could not maintain an argument that unless additional premiums and other expenses were paid they would refuse to follow charterers' orders. The current situation perhaps justifies a spirit of cooperation between owners and charterers and a recognition of the practical difficulties in complying fully with the conditions laid down in clause 34.

Contact: John Fawcett-Ellis