Saturday, June 22, 2024

War risks additional premiums – whether as per London market

The vessel was chartered on an amended NYPE 1946 form for a trip to Hodeidah- an area exposed to war risks. A dispute arose concerning the amount of the extra war risk insurance premium payable by the charterers. Consequently, the parties referred the dispute to arbitration in London.

The owners presented the invoices from their London brokers that calculated the extra premium as 1.5% of the vessel’s value less a 35% discount. The owners said this amount was paid and did not exceed what Lloyd’s of London Underwriters quoted. In addition, the owners referred to another fixture with the charterers concerning another vessel for which the charterers had paid a similar amount. Thus, the owners said that the charterers knew the premiums to pay for this fixture.

The charterers’ case was that the calculation based on 1.5% of the vessel’s insured value was not representative of the vessel’s time in port and was excessive. The owners should have presented a quote (based on the wording “as quoted”) before entering this area, allowing the charterers to challenge the sum quoted by the owners’ insurers. The charterers denied any reliance on the other fixture caused a waiver or acceptance. Lastly, the charterers applied 0.5% less 35% discount and paid that sum to the owners. That was based on the charterer’s brokers’ enquiries for other Yemeni calls.


The owners have failed to submit documentation or quotations before entering the war zone. If the owners could not comply with the requirements of the clause because they could only offer the documents after the event, the relevant clause required necessary amendments. However, the owner’s failure to follow this process was not enough for the charterers to avoid payment of EWRI. But, importantly, the extra insurance payment should be a London Market rate or a rate not exceeding what was quoted by the London Market at the time. On the evidence, the rate obtained was at the high end of the range, but it fell within the charter party provisions. Therefore, the charterers had to pay the amount claimed by the owners.

Award accordingly.

For a similar issue, see London Arbitration 9/02.

Note: no other information can be provided for this award. The website removes the names of the parties involved in any award.

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