Pacific Basin IHX Ltd v Bulkhandling Handymax AS

Under clause (2) of CONWARTIME 1993, a vessel is “exposed to War Risks” where there is a real likelihood that it will be exposed to the relevant peril in the sense that the place will be dangerous because of it. Dangerousness is fact-sensitive. It depends on both the likelihood of the peril occurring and the gravity of the consequences for the vessel, cargo and crew. The assessment is for the contractual decision-maker, informed by the evidence. A court should not refuse remission of an arbitral award merely because a simple statistic appears to make one outcome likely. Unless the outcome is shown to be inevitable, the arbitrators should reconsider the issue as the fact-finding tribunal.

The court had previously given judgment in the dispute and indicated that the arbitral award should be remitted. The parties returned for clarification of the meaning of “exposed to War Risks” in clause (2) of CONWARTIME 1993 and for further submissions on the appropriate order.

The dispute concerned whether the Gulf of Aden was dangerous to the vessel Triton Lark because of piracy, and whether the evidence made remission futile. The central issues were the proper construction of “exposed to War Risks”, the assessment of dangerousness, and whether the arbitrators should determine those questions on the evidence.

1. The award was remitted to the arbitrators. The question was whether, in the reasonable judgment of Bulkhandling, there was a real likelihood that the vessel would be exposed to acts of piracy in the Gulf of Aden. In shorthand, the issue was whether the Gulf of Aden would be dangerous to Triton Lark on account of piracy.

2. Clause (2) of CONWARTIME 1993 must be read as a whole. Its reference to a place which becomes “dangerous” shows that “exposed to War Risks” refers to a situation which is dangerous. The relevant question is whether there is a real likelihood that the vessel will be exposed to piracy in the sense that the place will be dangerous because of piracy.

3. Dangerousness depends on the facts. It requires consideration of both the degree of likelihood that piracy will occur and the gravity of the consequences for the vessel, cargo and crew. The arbitrators, as the fact-finding tribunal, had to assess those matters on the evidence before them.

4. The argument that remission would be futile because the recorded hijacking risk was approximately one in 300 was rejected. A bare possibility is not a real likelihood, but the court did not know how the statistic had been assessed or how the experts related it to this case. The outcome was therefore not inevitable. Further guidance would risk trespassing on the arbitrators’ fact-finding responsibility.

The judgment followed an earlier judgment in the same dispute, [2011] EWHC 2862 (Comm), in which the court indicated that the arbitral award might be remitted. After further submissions, the award was remitted for reconsideration by the arbitrators.