Introduction
On 28 February 2026, Iran’s Revolutionary Guard said that “no ship is allowed to pass the Strait of Hormuz”.[1]
At least three ships were attacked near the Strait of Hormuz during the weekend of 28 February 2026 - 1 March 2026.[2]
As of today, 2 March 2026, there are 700 tankers clustered on both sides of the Strait, with only three allowed to pass on 1 March 2026.[3]
Most of the tankers transiting the Strait are VLCCs, whose hire and demurrage rates currently exceed US$100,000 per day. That is potentially US$70 million of demurrage / detention / hire incurred everyday by reason of the Strait being blocked. Who will ultimately be responsible for these delays? This article examines potential arguments and likely allocation of liability between shipowners and charterers on the basis of the Asbatankvoy standard form charter party. It draws conclusions from a recent London arbitration where very similar issues arose by reason of another important shipping route being blocked by government authorities in the context of another major conflict.
Relevant Asbatankvoy provisions
Clause 1 of the Asbatankvoy form provides that the vessel shall proceed to Loading Ports named by the charterers “or so near thereto as she may safely get (always afloat)”.
Clause 8 of the Asbatankvoy form provides:
DEMURRAGE. Charterer shall pay demurrage per running hour and pro rate for a part thereof at the rate specified in Part I for all time that loading and discharging and used laytime as elsewhere herein provided exceeds the allowed laytime elsewhere herein specified. If, however, demurrage shall be incurred at ports of loading and/or discharge by reason of fire, explosion, storm or by a strike, lockout, stoppage or restraint of labour or by breakdown of machinery or equipment in or about the plant of the Charterer, supplier, shipper or consignee of the cargo, the rate of demurrage shall be reduced one-half of the amount stated in Part I per running hour or pro rata for part of an hour for demurrage so incurred. The Charterer shall not be liable for any demurrage for delay caused by strike, lockout, stoppage or restraint of labour for Master, officers and crew of the Vessel or tugboat or pilots.
Clause 19 of the Asbatankvoy form provides:
…neither the Vessel nor Master or Owner, nor the Charterer, shall, unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performing hereunder, arising or resulting from: - Act of God; act of war; perils of the seas; act of public enemies, pirates or assailing thieves; arrest or restraint of princes, rulers or people; or seizure under local legal process provided bond is promptly furnished to release the Vessel or cargo; strike or lockout or stoppage or restraint of labour from whatever cause, either partial or general; or riot or civil commotion.
Clause 20(vi) of the Asbatankvoy form provides:
WAR RISKS
(a) If any port of loading or of discharge named in this Charter Party or to which the Vessel may properly be ordered pursuant to the terms of the Bills of Lading be blockaded, or (b) If owing to any war, hostilities, warlike operations, civil war, civil commotions, revolutions or the operation of international law (a) entry to any such port of loading or of discharge or the loading or discharge of cargo at any such port be considered by the Master or Owners in his or their discretion dangerous or prohibited or (b) it be considered by the Master or Owners in his or their discretion dangerous or impossible for the Vessel to reach any such port of loading or discharge—the Charterers shall have the right to order the cargo or such part of it as may be affected to be loaded or discharged at any other safe port of loading or of discharge within the range of loading or discharging ports respectively established under the provisions of the Charter Party (provided such other port is not blockaded or that entry thereto or loading or discharge of cargo thereat is not in the Master’s or Owner’s discretion dangerous or prohibited).
If in respect of a port of discharge no orders be received from the Charterers within 48 hours after they or their agents have received from the Owners a request for the nomination of a substitute port, the Owners shall then be at liberty to discharge the cargo at any safe port which they or the Master may in their or his discretion decide on (whether within the range of discharging ports established under the provisions of the Charter Party or not) and such discharge shall be deemed to be due fulfillment of the contract or contracts of affreightment so far as cargo discharged is concerned. In the event of the cargo being loaded or discharged at any such other port within the respective range of loading or discharging ports established under the provisions of the Charter Party, the Charter Party shall be read in respect of freight and all other conditions whatsoever as if the voyage performed were that originally designated. In the event, however, that the Vessel discharges the cargo at a port outside the range of discharging ports established under the provisions of the Charter Party, freight shall be paid as for the voyage originally designated and all extra expenses involved in reaching the actual port of discharge and/or discharging the cargo thereat shall be paid by the Charterers or Cargo Owners. In the latter event the Owners shall have a lien on the cargo for all such extra expenses.
(c) The Vessel shall have liberty to comply with any directions or recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any otherwise whatsoever given by the government of the nations under whose flag the Vessel sails or any other government or local authority including any de facto government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or authority or by any committee or person having under the terms of the war risks insurance on the vessel the right to give any such directions or recommendations. If by reason of or in compliance with any such directions or recommendations, anything is done or is not done such shall not be deemed a deviation.
If by reason of or in compliance with any such direction or recommendation the Vessel does not proceed to the port or ports of discharge originally designated or to which she may have been ordered pursuant to the terms of the Bills of Lading, the Vessel may proceed to any safe port of discharge which the Master or Owners in his or their discretion may decide on and there discharge the cargo. Such discharge shall be deemed to be due fulfillment of the contract or contracts of affreightment and the Owners shall be entitled to freight as if discharge has been effected at the port or ports originally designated or to which the vessel may have been ordered pursuant to the terms of the Bills of Lading. All extra expenses involved in reaching and discharging the cargo at any such other port of discharge shall be paid by the Charterers and/or Cargo Owners and the Owners shall have a lien on the cargo for freight and all such expenses.
Summary of the Asbatankvoy provisions
In summary, under the Asbatankvoy form:
- Charterers’ liability for demurrage is not excluded even in the event of ports being blocked due to the war. Liability is reduced by 50% if loading or discharge is delayed by fires or explosions.
- If performance of the voyage is delayed by reason of war or restrains of princes, rulers or people, then the Charterers have no liability for the resulting delay.
- If a vessel is to sail through the Strait of Hormuz to reach its discharge or loading port, then the Charterers have the right to order the vessel to load or discharge in another safe port. If the Charterers make no orders for alternative discharge or loading, the Vessel may discharge in another safe port at the Master’s discretion, and this will be deemed due fulfilment of the charterparty by the Owners, with Charterers being liable for any extra costs of such alternative discharge.
Are delays in passage of the Strait treated as demurrage or detention?
A question that frequently arises in such scenarios is whether the delay should properly be characterised as detention or demurrage. That is a very important difference, since the Charterers’ liability for detention may be completely excluded as a result of the restraint of princes clause, while liability for demurrage may continue despite wars and blockage of maritime routes.
The main difference between demurrage and detention is that demurrage is in effect liquidated damages for exceeded laytime during loading or discharge. Cooke & Young, Voyage Charters provides in this regard: “If the vessel is detained in loading or discharging beyond the agreed laytime, the charterer is in breach of charter… The charterer’s liability may sound in damages at large or, where a demurrage rate is agreed, in demurrage, which is liquidated damages for that breach”.
There can be no demurrage before the vessel arrives at the loading or discharge port and is ready to load or discharge. Nor can there be demurrage after the vessel is completely loaded, discharged, and sailed out of the port.
Detention, on the other hand, refers to delays other than in the process of loading or discharging the vessel. Detention may be a breach of the charterparty for which the Charterers will be liable unless there is an exclusion clause. Charterparties generally do not provide for liquidated damages for detention, and the demurrage rate cannot automatically be used to quantify damages for detention.
Restraint of princes caselaw
It is quite clear that the Iranian Revolutionary Guard restraining passage of vessels through the Hormuz Strait would amount to restraint of princes, rules or people under the Asbatankvoy form.
Cooke & Young cite a London Arbitration 20/10 where detention of a vessel by the Indonesian Navy was ruled to amount to restraint of princes.
In the Lefthero (1992 WL 895056), a requirement by authorities to discharge in Bushire (a port in Iran) instead of the intended discharge in Bandar Khomeini (where the vessel was not allowed to proceed with the convoy) was ruled by the arbitrators to amount to restraint of princes.
In the London arbitration discussed below, it was accepted that the delay in passage of a Strait by a government security agency, who wanted to inspect the vessel on route, amounted to restraint of princes.
Case study: recent Asbatankvoy arbitration in London concerning another Strait and similar events
In a recent London arbitration, a situation similar to the current Hormuz Strait crisis arose in relation to the blockage of another Strait. The facts were as follows:
- Vessel A was chartered on the basis of the Asbatankvoy form to ship a chemical cargo from country B to country C.
- The voyage required passage of a Strait. Due to war / hostilities surrounding the Strait, the government of country B introduced a system of checks, which meant that each vessel passing the Strait was delayed for 2-3 months.
- Part I of the Asbatankvoy form was amended to provide as follows (amended to mention the Strait of Hormuz for confidentiality reasons):
HORMUZ STRAIT CLAUSE: 48 HRS IN/OUT FREE TIME FOR HORMUZ FOR OWNERS ACCOUNT – CONOCO WEATHER CLAUSE APPLICABLE AT HORMUZ STRAIT IN-OUT PASSAGES AND DURING THE WAITING TIME. AFTER 48 HRS WAITING TO BE FOR CHRTS ACCOUNT.
CONOCO WEATHER CLAUSE: Delays in berthing for loading or discharging and any delays after berthing which are due to weather conditions shall count as one half laytime, or if on demurrage at half the demurrage rate.
The vessel loaded the cargo in country B, sailed out of the port and was delayed by 3 months while waiting in line to pass the Strait. The government authorities of country B did not allow the vessel to pass the Strait otherwise. The Charterers made an open offer to discharge the cargo prior to passing the Strait in another port, so as to mitigate the loss. The Owners rejected this offer.
The Owners claimed demurrage (albeit later having re-characterised their claim as one for detention). The Charterers opposed the claim, arguing that the case fell squarely within the “restraint of princes” clause in the Asbatankvoy form, which was never specifically excluded in Part I. A former London Commercial Court judge and shipping specialist was appointed as the sole arbitrator.
The sole arbitrator interpreted the Hormuz Strait clause as an express exclusion to the restraint of princes clause for the following reasons:
- Since the vessel finished loading operations and sailed out of the port prior to its detention in the Strait, the relevant period could only be characterised as detention, and could not be characterised as demurrage. The Owners’ claim for demurrage accordingly failed.
- The reference to the Conoco weather clause meant that delays caused by weather would be charged at one-half demurrage rate. It followed that delays due to other causes were to be charged at the full demurrage rate. Effectively, the parties have agreed, by including the Conoco weather clause into the Hormuz Strait clause, that detention at the Hormuz Strait not caused by weather would be charged at the demurrage rate, and that the Charterers would be responsible for such detention.
- This meant that there was an agreement on how delays in the Strait would be dealt with, and accordingly, the restraint of princes clause did not apply, because it was “otherwise in this Charter expressly provided”. When reaching this conclusion, the sole arbitrator analysed some relevant caselaw on contract interpretation and reconciling clauses which might appear inconsistent. This summary may be useful when interpreting other similar clauses and is reproduced here, with relevant amendments to preserve confidentiality.
The principles applicable to determining whether one clause is inconsistent with another are well settled and have recently been reviewed by the Court of Appeal in Septo Trading v Tintrade Limited [2021] EWCA Civ 718.
In Septo Males LJ referred to the leading case of Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565. In Pagnan there was a special condition and a general condition and a clause dealing with the possibility of an inconsistency between those two clauses which provided that the special condition would prevail in the event of inconsistency.
In Pagnan Bingham LJ described the approach to be taken in the following terms:
"It would in my judgment be quite wrong to approach this question of construction with any predisposition to find inconsistency between the special condition and clause 19 [i.e. the prohibition clause]. They are all part of the same contract, and the parties expressly chose to make their contract subject to the terms of GAFTA Form 119. … On the other hand it is wrong to approach the contract on the assumption that there is no inconsistency. By including the inconsistency clause, the parties have acknowledged that there may be. One should, therefore, approach the documents in a cool and objective spirit to see whether there is inconsistency or not... It is a commonplace of documentary construction that an apparently wide and absolute provision is subject to limitation, modification or qualification by other provisions. That does not make the later provisions inconsistent or repugnant."
Bingham LJ further said that:
"It is not enough if one term qualifies or modifies the effect of another; to be inconsistent a term must contradict another term or be in conflict with it, such that effect cannot fairly be given to both clauses."
In Septo Males LJ also referred to Alexander v West Bromwich Mortgage Co Ltd [2016] EWCA Civ 496 where inconsistency was found.
In Alexander Hamblen LJ said:
“In my judgment, inconsistency is not limited to such cases [clear and literal contradiction]. As Pagnan v Tradax makes clear, it extends to cases where clauses cannot 'fairly' or 'sensibly' be read together; not merely cases where they cannot literally be read together. One should approach that question having due regard to considerations of reasonableness and business common sense.”
In Septo Males LJ then summarised the correct approach in the following way:
“Thus there is a distinction between a printed term which qualifies or supplements a specially agreed term and one which transforms or negates it. In order to decide on which side of this line any particular term falls, the question is whether the two clauses can be read together fairly and sensibly so as to give effect to both. This question must be approached practically, having regard to business common sense, and is not a literal or mechanical exercise. It will be relevant to consider whether the printed term effectively deprives the special term of any effect (some of the cases describe this as the special term being "emasculated", but in my view it more helpful to say that it is deprived of effect). If so, the two clauses are likely to be inconsistent. It will also be relevant to consider whether the specially agreed term is part of the main purpose of the contract or, which is much the same thing, whether it forms a central feature of the contractual scheme. If so, a printed term which detracts from that scheme is likely to be inconsistent with it. Ultimately, the object is to ascertain the intention of the parties as it appears from the language in its commercial setting.”
I must be guided by those principles when considering whether the Hormuz Strait Clause is inconsistent with clause 19 of the Asbatankvoy form.
The agreed rate payable for detention was the liquidated demurrage rate, by reason of the parties’ having incorporated the Conoco weather clause into the Hormuz Strait clause. The duty to mitigate does not apply where a claim is made for liquidated damages: MSC Mediterranean Shipping v Cottonex Anstalt [2015] 1 LR 359 at paragraphs 69-78 per Leggatt J. and [2016] 2 LR 494 at paragraphs 48-50 per Moore-Bick LJ. Since here the claim was for a liquidated amount at the demurrage rate, the Owners had no duty to mitigate by discharging at an alternative port.
Conclusion
Delays in the passage of the Strait of Hormuz caused by the Iranian Revolutionary Guard are likely to lead to claims of detention by shipowners against charterers. Unless these delays occur at ports and during loading or discharge operations (which is unlikely), they are unlikely to be treated as demurrage by competent fora.
If the applicable charterparty is based on the Asbatankvoy form and nothing is said about the passage of the Strait of Hormuz in Part I of the charterparty (i.e. specifically agreed terms), then the charterers’ liability for such delays is likely to be excluded by the restraint of princes clause.
If Part I of the charterparty makes provision on how delays in the Strait of Hormuz are to be treated, whether or not the charterers are liable for the delay caused by the Iranian Revolutionary Guard will depend on whether that provision can be interpreted as specifically excluding the restraint of princes clause. This interpretation will depend on the factual background and what the parties will be deemed to have intended by the specific Part I provision in question. Where they may be inconsistency between the restraint of princes clause and the specific provision, the principles applied to resolve the inconsistency / reconcile the different provisions will be those set out in Septo Trading, Pagnan and Alexander.
If the parties have agreed on a liquidated damages rate for the delays in passing the Strait of Hormuz, the charterers will be liable to pay that rate and the owners have no duty to mitigate by reducing the time lost / discharging at an alternative port.
Shipowners are not obliged to sail to ports which they believe to be unsafe and are unlikely to be in breach of the charter if they refused to do so.
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[1] https://www.reuters.com/world/middle-east/irans-revolutionary-guards-tell-ships-passage-through-Strait-hormuz-not-allowed-2026-02-28/
[2] https://www.bbc.com/news/articles/c75evve6l63o
[3] https://www.aa.com.tr/en/economy/oil-flows-via-Strait-of-hormuz-plunge-86-as-over-700-tankers-queue/3846665
