THE overlapping conflicts rocking the Middle East have already generated human misery and destruction on the scale that all wars entail and unless some sort of settlement ensues soon, the damage to the world economy will ultimately prove severe.

So, the observation that the conflicts will also result in plenty of work for shipping lawyers and marine underwriters may strike some readers as an utterly parochial concern.

Yet for the readership of Lloyd’s List who earns its livelihood by working for shipowners or charterers, the insurers that provide their war risk policies, or for the law firms that settle the arguments between them, this could be among the most enduring consequences.

As Lloyd’s List reported in early July, the ongoing hostilities between the US and Iran has already led to billions of dollars’ worth of contract disputes.

Charterers and underwriters are contending that because a handful of vessels made Strait of Hormuz transits even when the missiles were flying, others could and should have delivered cargoes as agreed and should not qualify for insurance claims.

Hannah Chua, a partner in the Singapore office of Clyde & Co, told Lloyd’s List that the recent Houthi attacks on Saudi-linked vessels may see similar tensions.

The Yemeni Islamist faction attacked around 100 ships in the 2023 to 2025 period, causing most shipowners to avoid the Red Sea and the Suez Canal and reroute round the Cape of Good Hope instead.

That adds up to 14 days in transit time and vastly increases the outlays on seafarer salaries and bunkers. Charterers will inevitably be asking whether such detours are necessary.

Industry consensus suggests that common sense is prevailing. Even if lawyers acting for company A are writing strong letters to lawyers acting for company B, the parties involved are mostly coming to compromises.

But splitting the difference is not going to be possible in every case. Some of these disputes will end up in arbitration, and others will almost certainly reach the courts from 2027.

However nasty legal fights become, they are never as bad as two countries hurling costly ordnance at one another. That said, most shipowners and trading houses prefer to keep the workings of their businesses confidential. They should probably consider carefully whether or not this is the optimum way forward for them.

David Osler
Law and marine insurance editor, Lloyd’s List

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