DOES THE GENERAL STRIKE CLAUSE NEED REDRAFTING?

It’s not often that the interpretation of a voyage charter party “general strike clause” is raised before arbitrators. This might suggest that strikes seldom affect maritime transportation contracts or that strike clauses in charters are self-explanatory. The recent split decision in New York maritime arbitration of the M/V Silver Glory (SMA 2909) indicates that the above assumptions are not necessarily true.

Under maritime law, the charterer, without the benefit of a specific exception clause in the charter, assumes the risk of strike delays in cargo transportation contracts. This assumption is based upon the premise that the charterer chooses the ship’s itinerary and is in the best position to know labor conditions in selected load and discharge ports. There is also a presumption that the charterer will have its cargo ready to load at the appropriate time. How the charterer conveys the cargo to the dock is usually of no concern to the shipowner.

If a strike prevents the charterer from loading the amount of cargo agreed upon, it will pay the shipowner a “deadfreight” penalty for the cargo shortfall. However, the charterer may avoid the penalty by utilizing a general strike clause in the charter agreement. The clause also may perit the charterer to reroute the vessel to a strike-free port, sit out the strike by paying demurrage or cancel the charter. The general strike clause also may protect the shipowner from liability if the vessel’s crew were to strike.

The M/V Silver Glory arbitration involved the interpretation of a general strike clause in a Gencon charter party. The clause, insofar as relevant, reads as follows:
“Neither charterers nor owners shall be responsible for the consequence of any strikes . . . preventing or delaying the fulfillment of any obligation under this contract.”

A deadfreight dispute arose when, due to a shortage of steel coils, the charterer did not load a full cargo. The shortage was caused by a railroad strike at the supplier’s steel mill some 54 miles from the port.

The vessel owner argued that the strike clause is intended to excuse performance only when the strike directly and proximately prevents a charterer from actually loading cargo. The charterer asserted that the strike at its sole supplier’s premises directly prevented it from loading, and the clause excused it from paying deadfreight.

Two of the three arbitrators concluded that the board strike clause clearly stated that both parties were not responsible for the consequences of any strikes. The words “any strikes” must be construed to cover work stoppages outside the port. The panel majority found the strike was the direct cause of the charter’s inability to furnish the full cargo. The owner’s deadfreight claim was denied.

The dissenting arbitrator was of the opinion that a narrower interpretation of the strike clause was necessary to conform to the parameters of directness and proximity, and the charterer’s absolute duty to have the cargo ready for loading. To find otherwise would open a Pandora’s box of endless possibilities for charterers and owners to invoke strike defenses regardless of the strike’s remoteness.

The M/V Silver Glory arbitration presents an interesting issue for drafters of future strike clauses. Should geographic limits be applied to these claims? In its reply brief, the shipowner raised an interesting hypothetical: Would the Gencon strike clause free a charterer of its obligation to load a ship in New York because a rail strike in Chicago affected a cargo supplier’s ability to transport the designated cargo to New York, when no other source of cargo or means of transportation were available?


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