Parties Should Proceed Warily Over War Clauses

Recent tensions in the Caucasus have dominated shipping

headlines. With Georgia and Russia both bordering the busy waters

of the Black Sea and a significant amount of international trade in

this area, there is apprehension over physical safety and the

potential effect of any trouble on contractual relations.

The naval presence of both Russian and US forces in the ports of

Poti and Batumi has reinforced that trepidation in various sectors

of the market.

Cargo interests, owners and charterers are considering the

damage that hostilities may inflict on their immediate and future

obligations. Oil exports have already been affected (Georgia war

hits Azeri oil exports, Lloyds List, August 12), leading maritime

unions to request, albeit unsuccessfully, that the Black Sea ports

and coastal waters be declared an "area of warlike

operations" (Georgia war area plea rejected, Lloyd's List,

August 15).

But despite the references to war in the media, do the

hostilities legally constitute war? To what extent can the

operation of get-out/cancellation provisions in various shipping

contracts be triggered?

Perhaps surprisingly, the law in this area is limited.

In Kawasaki KKK v Bantham Steamship ([1938] 61 Ll.L.Rep. 131),

the Court of Appeal held that the term war is to be interpreted in

accordance with the manner in which the term "would be

construed commercially".

Charterers alleged that the owners' cancellation of a

charterparty in 1937 on the grounds of war involving Japan was

wrong. Agreed facts included: 50,000 soldiers in the Shanghai area,

supported by the Japanese fleet and airforce, engaged in battle

with Chinese forces of more than 1.5m, on a front stretching 30

miles.

In North China, three Japanese armies numbering more than

100,000 fully- equipped men, advanced against a Chinese force

numbering 300,000. More than 50 battles were fought between August

and September 1937, and from August 25 onwards, the Japanese

maintained a naval blockade stretching over 1,000 miles of Chinese

coastline, and also occupied certain islands.

However, no declaration of war was made and diplomatic relations

were not broken off.

In evidence that was presented to the court, the British

government was not prepared to say whether, in its view, a state of

war existed.

A two-man tribunal was unable to agree whether the situation

constituted a war and it was left to the umpire to decide that war

had broken out.

The matter went to the Court of Appeal which upheld the

decisions...