What Are the Consequences of “End of Voyage Declarations” for cover under the clause M3 on War Risk and Strike Risk?
The recent escalation of conflict in the Middle East raises the question what consequences this may have for insurance cover under the model clause M3 on War Risk and Strike Risk 2021. This model clause, developed by the VNAB, is frequently used in marine cargo insurance to reinstate cover for war risk and strike risk, which risks are normally excluded. Where the M3 applies, war risk is in principle covered if it materializes during the insured voyage. For sea carriage, this cover attaches once the insured goods are on board the ocean-going vessel. As a general rule, war risk cover terminates once the goods have been unloaded from the ocean-going vessel at the final port or place of discharge. In any event, cover ends after the expiry of 15 days, counting from 24.00 hours local time on the day of arrival at the final port or place of discharge.
The question arises what the position is where the carrier terminates the voyage prematurely. This is particularly relevant in light of so called End of Voyage Declarations issued by shipping lines in response to the situation in the Middle East. By such declarations, carriers notify cargo interests that they have decided to discharge the goods at a safe port, for example:
“All shipments currently en route will be diverted to the next safe port of discharge. At that location, cargo will be discharged and placed at customers’ disposal for local delivery and recovery.”
What are the consequences of such declarations for cover under the M3? Does war risk cover only terminate after the goods have been unloaded from the vessel at the safe port, or can cover also end at an earlier stage? In our view, the latter is the case, primarily due to the broad definition of “arrival” of the vessel under the M3.
Article II B clause 2 of the M3 provides that, where the contract of carriage is terminated at a port or place other than the destination named therein, that other port or place is to be regarded as the final port or place of discharge. In that case, war risk cover will in any event terminate after the expiry of 15 days, counting from 24.00 hours local time on the day of arrival at that port or place.
Article II B clause 3 of the M3 further defines “arrival” of the vessel as the moment the ocean-going vessel is anchored, moored or otherwise secured at a berth and/or place within the territorial jurisdiction of the Port Authority. If such a berth and/or other place is not available, “arrival” is understood to mean the moment the vessel first anchors, moors or otherwise secures, either at or near the port or place where the goods are to be unloaded.
“Arrival” is therefore defined much more broadly than the actual berthing of the vessel at the quay of the final port or place of discharge. The consequence is that the aforementioned 15 day period may already commence at the moment the vessel drops anchor at or near the safe port designated by the carrier.
If the vessel is required to wait for more than 15 days before the goods can be unloaded — which, given current port congestion, is a realistic scenario — war risk cover may therefore terminate while the goods are still on board the vessel, i.e. before discharge has taken place. The question is whether all parties involved in the cargo, including cargo owners, insurers and brokers, are sufficiently aware of this potential consequence.
If you have any questions regarding cover under the clause M3 War Risk and Strike Risk, please contact Leendert van Hee or Robert de Haan.
