Is terrorism the new norm for shipping?

THE STORY

On the 13/06/2019, two oil tankers were victim to what has been described as “sabotage” attacks in the Gulf of Oman, leaving one ablaze and both adrift. Following, a similar incident involving four tankers, which took place one month ago, on the 12th of May, 2019.

Is terrorism the new norm for shipping?

THE STORY

On the 13/06/2019, two oil tankers were victim to what has been described as “sabotage” attacks in the Gulf of Oman, leaving one ablaze and both adrift. Following, a similar incident involving four tankers, which took place one month ago, on the 12th of May, 2019.

Japan’s trade ministry reported, that the two oil tankers carried “Japan-related” cargo. The timing of the attacks, was thus especially sensitive, occurring while discussions were being held between the Japanese prime minister and Iranian leadership in Tehran, in an effort to find a basis for negotiations between the US and Iran.

THE IMPACT

While the facts surrounding the incident might not be fully known at this stage, most likely the incidents would be classed as acts of terrorism.

If you believe that this issue only concerns tanker operators and charterer’s, think again!

A terrorist attack along one of the world’s busiest oil routes, affects not only nearby vessels but also port operations, charter party terms, spot fixtures, as well as other forms of shipping related contracts, including ship sale and purchase, contracts of affreightment and brokerage agreements. Furthermore, followed by the imposition of new sanctions by Trump against Iran, this should be noted as a red alert for the industry.

The impact of the attacks, as well as the new sanctions, invite serious risks. Advice should be sought before any calls to the area are undertaken, in order to understand the extent of exposure on your business, strengthen preventative measures, assess contractual rights and obligations and manage any resulting risks and reputational damage.

CONTRACTUAL RELATIONS

It is important to understand your contracts and have them re-assessed to reflect the new norm. With terrorism being excluded from standard P & I Cover and war risk underwriters charging additional premiums for calls to the Gulf of Oman area, BICMO strongly recommends the incorporation of the latest available edition of their Standard War Risk clauses, in charter parties. It is also important to widen sanction clauses, shifting from location specific to cover wider risk zones. With the US using sanctions as a political negotiation tool, contract clauses should ideally allow for the necessary flexibility required to adhere to unpredictability in this respect.

REPUTATIONAL RISK

Adjusting to this new norm, also includes protecting your company’s reputation. Media response strategies should be comprehensive and updated, becoming an inseparable part of the Emergency Response plan. While staff, must be trained to effectively deal with media pressure during such times, mitigating the company’s legal exposure.

BEING ON GUARD

When dealing with the protection of human element, the environment and business operations, industry stakeholders should be alarmed in light of terrorism becoming a recurring threat. Risk assessments should be conducted on ship security plans, communication strategies and contractual relations.

Through these challenging times, safeguarding your business requires extensive due diligence on cargo carried, political risk of chosen trade routes and of contractual commitments. Summarizing, to tackle the new norm, it is vital to make these processes your businesses’ new norm!

HOW CAN WE HELP ?

Michael Kyprianou & Co. LLC is equipped to become your expert advisor on re-assessment of your contracts, update of your communications and media policies and facilitate your business in minimizing and mitigating legal exposure and vulnerability.

For any further information please contact Gina Panayiotou, Global Head of Shipping & Energy by email at [email protected] or by phone at [+357] 25363685.