Factual and Procedural Background
The court delivered a judgment on 8 November 2011 concerning a dispute arising under clause (2) of Conwartime 1993 related to the phrase "exposed to War Risks," which includes acts of piracy. The parties requested an opportunity to make further submissions regarding the appropriate order, leading to a further hearing on 13 January 2012. The court was asked to clarify the meaning of "exposed to War Risks" due to a newly identified dispute between the parties over its interpretation, which had not been apparent at the initial hearing.
Legal Issues Presented
- What is the correct interpretation of the phrase "exposed to War Risks," specifically in relation to acts of piracy as used in clause (2) of Conwartime 1993?
- Whether the phrase "exposed to War Risks" should be understood as exposure to actual peril or danger, or as exposure to the risk of such peril or danger.
- Whether the arbitral award should be remitted to the arbitrators for reconsideration in light of the clarified meaning of "exposed to War Risks" and the evidence presented.
Arguments of the Parties
Appellant's Arguments (Charterers)
- The phrase "exposed to acts of piracy" means being exposed to the peril or danger of piracy, requiring actual contact with pirates or acts having an actual effect on the vessel, such as an attack or a failed attempt.
- It would be impractical for a master or owner to assess whether there is a "real likelihood of a risk of acts of piracy," suggesting the focus should be on actual danger rather than abstract risk.
- Remission of the award would be futile because the risk of piracy (estimated at about 1 in 300) does not constitute a real likelihood of exposure to acts of piracy.
Appellee's Arguments (Owners)
- The phrase "exposed to acts of piracy" should be construed as being exposed to the risk of piracy rather than requiring actual contact or effect.
- It is reasonable for a master or owner to assess whether there is a real likelihood that the vessel will be exposed to a danger or risk of piracy.
- The arbitrators, as fact-finders, are best placed to assess the evidence regarding the likelihood and gravity of piracy risk and whether the Gulf of Aden was dangerous for the vessel.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| The Vakis T [2004] 2 Lloyd's Reports 465 |
Remission of awards is inappropriate where the outcome of remission is inevitable. |
The court considered this principle in determining whether remission would be futile given the statistical risk presented, ultimately deciding that remission was appropriate as the outcome was not inevitably certain. |
Court's Reasoning and Analysis
The court began by addressing the dispute over the meaning of the phrase "exposed to War Risks" in clause (2) of Conwartime 1993, which includes acts of piracy. Initially, the court had interpreted "exposed to acts of piracy" as meaning the vessel is subject to the risk or danger of piracy, relying on an OED definition of "expose" as "lay open to danger or subject to risk."
Upon further submissions, it became clear that the parties disagreed: the Charterers contended that exposure required actual contact or effect (e.g., an attack or pursuit), while the Owners argued that exposure meant the risk of such danger.
The court resolved this by interpreting the phrase in the context of the entire clause, noting that the clause itself uses the word "dangerous" to describe a place where the vessel may be exposed to War Risks. Accordingly, "exposed to War Risks" was construed as referring to a situation that is dangerous, involving a real likelihood of harm rather than mere possibility or abstract risk.
The court held that the test for whether a vessel is exposed to War Risks should consider both the degree of likelihood of peril (here, acts of piracy) and the severity of consequences if such peril occurs. This approach aligns with the practical need for a master or owner to make reasonable judgments to keep the vessel, cargo, and crew safe, consistent with BIMCO's guidance.
Regarding the request to remit the award, the court rejected the Charterers' argument that remission would be futile due to the statistical risk being low (1 in 300). The court emphasized the importance of the arbitrators' fact-finding role, noting that it lacked sufficient information about how the statistic was derived or applied and that the arbitrators should assess the evidence on likelihood and dangerousness.
Therefore, the court ordered the award to be remitted to the arbitrators to reconsider whether, in the reasonable judgment of the owners, there was a real likelihood that the vessel would be exposed to acts of piracy in the Gulf of Aden, i.e., whether the Gulf of Aden was dangerous for the vessel on account of piracy risk.
Holding and Implications
The court ordered the award to be remitted to the arbitrators for reconsideration in light of the clarified meaning of "exposed to War Risks" and the evidence presented by the parties.
This decision directly affects the parties by requiring further fact-finding and assessment by the arbitrators regarding the piracy risk and dangerousness of the Gulf of Aden. The court refrained from establishing new precedent beyond clarifying the interpretation of the contractual phrase and reaffirming the role of the arbitrators as fact-finders.