Charterparty War Risk Clauses Face Real-World Test as Iran-Israel Tensions Escalate: Gard

Charter deal signed before the June 13 Iran-Israel escalation may offer shipowners a firmer legal footing to reject transits through Hormuz. File Image / Pixabay

The Strait of Hormuz, a critical chokepoint for global oil trade, has come under renewed scrutiny following the recent military escalation between Iran and Israel.

Insurance provider Gard says that with around 35% of the world's seaborne oil passing through the Strait, the conflict has introduced serious legal and operational risks for vessels navigating the region.

While the Strait remains open, there are fears that Iran may attempt a potential blockade or closure of the waterway if the situation deteriorates further. This could force shipowners to reassess their legal rights under charterparty terms, Gard said in an article posted on its website on Wednesday.

Under widely used BIMCO CONWARTIME and VOYWAR clauses, owners may refuse orders to proceed through areas where vessels, crew, or cargo are at risk from war-related dangers, including blockades or attacks

Gard says that the timing of the charterparty matters.

Charters agreed before the June 13 escalation may give owners stronger legal grounds to refuse transits than those signed after. If Iran's threats escalate further, such as a full blockade or attacks on commercial vessels, the clauses are more likely to apply.

"For instance, there is a reasonable argument that there has been a qualitative change in the nature of the risk of proceeding through the Strait after the recent outbreak of hostilities on 13 June, and therefore it is easier for owners to justify a refusal to proceed through the Strait under a charterparty formed before 13 June than one formed afterwards," Gard notes.

Safe port warranties and additional war risk premium clauses are also coming into focus, as owners consider exposure to threats including missile strikes, drone attacks or potential vessel confiscation.

Gard advises owners to document risk assessments thoroughly and seek legal guidance before refusing orders.Charterers, meanwhile, face growing pressure to adjust routing or offer alternative safe ports.