Piracy Update: Conwartime, Piracy, And Owners' Obligations Revisited

A recent decision of the Commercial Court in London (handed down on 8 November 2011) has clarified the limits of a shipowner's obligation under the Conwartime 1993 clauses to obey his charterer's orders to navigate waters rendered parlous because of the threat of piracy. Although the reasoning of Teare J in The Triton Lark1 differs from the analysis we have previously adopted, ultimately both constructions arrive at the same practical result.

Conwartime

The Conwartime 1993 clauses have been incorporated in the majority of time charters concluded in recent times. By the terms of Clause 1, "War Risks" are defined to include "acts of piracy ... which, in the reasonable judgement of the Master and/or the Owners, may be dangerous or are likely to be or to become dangerous to the Vessel, her cargo, crew or other persons on board the Vessel".

Clause 2 provides inter alia as follows:

"The Vessel, unless the written consent of the Owners be first obtained, shall not be ordered to or required to continue to or through, any ... area or zone ... where it appears that the Vessel ... in the reasonable judgement of the Master and/or the Owners, may be, or are likely to be, exposed to War Risks." As we have previously advised, this clause is somewhat inelegantly drafted. In particular, it is not clear whether the phrase "may be, or are likely to be" is to be read conjunctively or disjunctively. In other words, there is ambiguity over whether it is necessary that, in the reasonable judgement of Owners, they may be and are likely to be exposed to War Risks, or whether it is sufficient that Owners reasonably consider that they may be or are likely to be exposed to such risks. This is despite the fact that the punctuation in the relevant phrase suggests otherwise.

The disjunctive analysis

Previously, we had advised clients that it was necessary that Owners reasonably consider that they may be or that they are likely to be exposed to War Risks (including piracy). This construction is supported by the syntax of the clause, and also by the clear intuition that the terms "may" and "likely" convey different meanings.

On this construction, it is plain that the requirement that Owners "may" be exposed to piracy was the operative condition, in that all events that are likely may occur, but not all events that may occur are likely. It was thus critical to determine the meaning of "may be". This phrase, we considered, would (i) exclude risks that are contingent and very...