Risk of Charter Disputes Rises as Strait of Hormuz Disruption Drags on
Maritime attorney Christopher Nolan was interviewed for a TradeWinds article describing how the closure of the Strait of Hormuz as a result of ongoing conflict in the Middle East increases the risk for contractual disputes and how parties should approach resolution. With some ships trapped in the Middle East Gulf and others unable to enter, the bottleneck is disrupting supply chains and causing headaches for shipping companies and oil and gas organizations. Maritime professionals warned that although shipowners and charterers are largely remaining patient now, the chance for disputes will only rise as time passes. Mr. Nolan told TradeWinds that some clients have asked whether the blockade qualifies as force majeure, frustration or commercial impracticability, all of which allow parties to modify or exit contracts because of unforeseen circumstances preventing their execution. He also cautioned businesses to think twice before filing claims or seeking emergency relief through litigation or arbitration; given the unpredictable nature of the situation, judges will likely feel hesitant to issue definitive rulings clearly favoring one side over the other. Instead, Mr. Nolan advocated for a pragmatic strategy focused on the terms of the contract and collaboration between each stakeholder.
"For a company weighing its options, the first order of business is a recognition that both parties are in this position together, and how they can address the balance of risks based on what is currently in their agreements," he said.
The article additionally cited a Holland & Knight alert Mr. Nolan co-authored with fellow Maritime attorney Robert Denig on the U.S. Supreme Court's 2020 decision in Citgo Asphalt Refining Co. v. Frescati Shipping Co., Ltd., which arose after the Athos I tanker struck a submerged anchor in the Delawar River, causing an oil spill. In their opinion, the justices provided a roadmap for interpreting safe berth and safe port clauses in cargo contracts and charter agreements.
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