What are they?

Attacks with drones and missiles on vessels which are taking the Red Sea route. The Red Sea route is one of the main routes which connects Asia, the Middle east and Europe. It is also the shortest route. These attacks began shortly after the Hamas’ attack on Israel, in October 2023 Houthi militants are said to be targeting any ship operated by Western shipping lines. Attacks have been carried out against major shipping lines and military vessels which are not directly linked to the conflict. 

Temporary solution

As a result of the above, most shipping lines (“Carriers”) are now taking the alternative route via The Cape of Good Hope. This route adds on 3500 nautical miles to the journey extending the average shipping time by around 10 days in comparison to sailing through the Red Sea and Suez Canal.

Considerations for Freight Forwarders & Carriers

1. Due diligence – factors to consider, i.e., your customer, the carrier, the cargo, and the routes

• Geographical location of consignees:
• Will these shipments typically be shipped via the Red Sea?
• Voyage Route:
• Does the Freight Forwarder know prior to booking a carriage whether the intended route will be via The Cape of Good Hope rather than the Red Sea?
• Type of Shipment:
• Is the cargo shipped in containers, as bulk , or is it project cargo.? This will be relevant in respect of the type of bill of lading the carrier issues.
• Type of Cargo:
• Time sensitive shipments. (e.g. fruit, temperature sensitive) or not? In case of deviation via the Cape, is your customer’s cargo likely to suffer a loss due to delay?
• Domicile of Carrier:
• This will help determine if the shipping line is at risk of being attacked. However, whilst the attacks were said to have targeted ships linked to Israel, recent attacks have targeted Western operators with no obvious link to the conflict. It can therefore be assumed that any such ship traveling through the Red Sea route is at risk.
• Contractual terms of the Carrier:
• Is the freight forwarder’s contract with the carrier on standard liner (B/L) terms, or has a charterparty been concluded? It is likely that either the Hague or Hague-Visby Rules are incorporated into both above

   2. What are the freight forwarders potential liabilities for delay, loss or damage of cargo?

The freight forwarder’s contractual liability depends on the terms incorporated into the contract with their customer. It is also important that Members contract on back-to-back terms with their sub-contractor to benefit from the same rights and defences as the performing carrier.

Hague/Hague-Visby Rules

If the freight forwarder/NVOCC has issued a House Bill of Lading and has contracted back-to-back, they will be able to rely on the defences available to the Carrier. A freight forwarder/NVOCC should endeavour to contract with the Carrier on the same terms as those that apply between themselves and their customer to ensure “back-to-back” liability.

Article 4, rule 4 of the Hague/Hague-Visby Rules allows the carrier to make a deviation from the agreed route to save life or property at sea or any reasonable deviation. The Red Sea situation may be deemed a “reasonable” deviation, therefore, the Carrier may be able to relieve himself from liability to loss or damage resulting therefrom. 

Case Law to consider

Where a charterparty is involved, whether there is a valid deviation defence is dependent on whether the Owner has incorporated the Hague/Hague Visby rules into the charterparty or not. If not, the right to deviate should be expressed in the charterparty, otherwise it may only be implied where deviation is necessary to avoid danger. Stag Line Ltd v Foscolo, Mango & Company Ltd

It is important to note that according to the recent case of The Polar [2024],where the underlying contract of carriage contained an agreement to proceed via the Red Sea, the shipowner is not permitted to simply deviate and proceed around the Cape of Good Hope in order to avoid war risks unless there has been a material change in circumstances after the contract was signed.

British Freight Forwarders Associations Standard Trading Conditions (“BIFA”)

Where a House Bill of Lading has not been issued by a freight forwarder, but the freight forwarder is trading under BIFA terms, which under clauses 5 & 6 permit to sub-contract, the freight forwarder may rely on the following clause 25 which states:

Except under special arrangements previously made in writing by an officer of the Company so authorised, the Company accepts no responsibility with regard to any failure to adhere to agreed departure or arrival dates of Goods.’

The position then is that no liability is accepted for delay in the agreed departure / arrival date of the cargo. Therefore, freight forwarders may have a defence to any liabilities which result as a delay arising from Red Sea attacks.

Clause 26(c) excludes claims arising from delay and deviation, however caused, while clause 24 also relieves the Member of liability for loss or damage which it is unable to avoid and prevent by the exercise of due diligence.

Force majeure clause, frustration and applicability. Can the contract be terminated?

Since the beginning of these attacks, Carriers have been seeking to rely on force majeure clauses and/or on the doctrine of frustration.

Force majeure - A force majeure clause incorporated into a contract typically excuses one or both parties from performance of the contract in some way following the occurrence of certain stipulated events provided for in the clause. Its underlying principle is that on the occurrence of the stipulated events, which are outside a party's control, that party is excused from, or entitled to suspend performance of all or part of its obligations.

The doctrine of frustration – In the absence of an express force majeure clause which covers the relevant event under which a Carrier wishes to terminate the carriage, the doctrine of frustration may apply. Frustration can apply where a serious event occurs after the formation of a contract which is both unexpected and beyond the control of the parties, which renders it physically or commercially impossible to fulfil the contract, or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of entry into the contract. The act of deviating around the Cape of Good Hope in itself is not seen as an event so burdensome that it would frustrate the contract, it needs to be evidenced that the voyage has been substantially affected.

Finally, it goes without saying that if prior to concluding a contract of carriage it is known that a ship will go via The Cape of Good Hope, then it will not be deemed a deviation and 2.a – c above will not apply.

Conclusion

• Deviations and the resulting liabilities are a complex issue which needs to be considered on a case by case basis as per contract.
• Freight forwarders seeking to rely on a force majeure clause, frustration or BIFA terms seek legal advice. 

Back to back contracting with the Carrier is recommended.