Arbitration agreements — for once, perhaps we should be the world’s policeman

Whatever the position as regards English jurisdiction clauses, we’ve known for nigh on a quarter-century that you can’t get an ASI in London to protect the agreed jurisdiction of a foreign court. In 1998 Airbus Industrie G.I.E. v Patel [1999] 1 A.C. 119, our judges firmly eschewed the idea that they should operate as a kind of Global Good Litigation Police, and said that that foreign fora wanting to guard their jurisdiction as a choice of place to litigate could be expected to do their own dirty work.

But what about arbitration? Does a similar rule apply to complaints that a defendant is blithely suing away in Ruritania under a contract containing on the face of it a clause calling for arbitration in Utopia? A decision a week ago from Sir Nigel Teare suggests a possible Yes.

In G v R [2023] EWHC 2365 (Comm) suit was brought in Russia on a performance bond governed by English law. The claimant pointed out that the bond provided for any disputes to be settled by ICC arbitration in Paris, and to make sure this happened sought an ASI from the High Court. Could it get it? The answer was a fairly resounding no. In fact the claimant fell at the first fence; having failed to show that the agreement to arbitrate, as against the main contract, was governed by English law, he failed to seise the court of the matter in the first place.

But apart from that, even if the contract to arbitrate had been governed by English law, the judge thought England was not shown to be the appropriate jurisdiction. The fact that England could grant ASI relief whereas the French court, as the court of the seat, could not, went for little: the parties having chosen a French seat, there was nothing wrong with saying that having made their bed they should lie in it, and thus be stuck with the limited remedies available in France. Nor was there much relevance in a (hypothetical) English governing law, even if that had been chosen, since there was unlikely to arise any serious issue of English law that it would be difficult for a foreign tribunal to determine.

We have, if we may say so with great respect, our doubts about this decision.

First, there is an argument that if parties choose to have an arbitration agreement governed by English law, that should incline a court in favour of doing their best to make available the remedies normally applying in English law for breach of it. If so it should actually be a strong pull in favour of the English courts being an appropriate venue. The parties in G v R, had they (as the claimant argued) chosen English law as the lex arbitri, would one suspects have been somewhat nonplussed at the information that the English courts were nevertheless closed to them as an inappropriate forum. To that extent, the differing view of the Court of Appeal on an interlocutory appeal in SQD v QYP, decided the day before G v R (and noted here), and also a similarly divergent view expressed in March this year by Calver J (noted here), seem to carry more conviction.

Secondly, unlike choice of court agreements, there is something approaching an agreed international regime in force for international arbitration agreements under the New York Convention, which very strongly favours giving the most robust protection possible to such agreements. (Indeed, it was the notoriously casual attitude of the Russian courts towards the New York Convention that spawned the satellite litigation in G v R in the first place.) There is something to be said for an “all hands to the pumps” approach here, with the English courts doing their best to uphold the New York system.

This issue is clearly heading fast towards the Court of Appeal, if not further. Meanwhile, what should practitioners do if they wish to feel secure in reserving their seat on the Eurostar for that ICC session in Paris? First, they must make clear, preferably expressly, that the lex arbitri is English – something doubly important, if the Law Commission’s recommendation is enacted that the presumptive lex arbitri should always be that of the seat, rather than that of the matrix contract.

They should also – as some already do — expressly confer at least non-exclusive jurisdiction on the English court in matters related to the arbitration agreement. Not only will this make service out easier: it will make it much harder for another party to deny that the English court is indeed the appropriate one to seek relief in. True, the parties cannot force the court by agreement to exercise its discretion in favour of the always-discretionary remedy of an injunction. But they can sure use tactful means to smooth its way to that destination.

FuelEU Maritime and Alternative Fuel Infrastructure Regulations now live.

Two pieces of EU Legislation on GHG reduction and shipping have just been finalised with publication in the Official Journal on 22 September 2023, to come into effect 20 days thereafter.

1. FuelEU Maritime.

REGULATION (EU) 2023/1805 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 September 2023 on the use of renewable and low-carbon fuels in maritime transport, and amending Directive 2009/16/EC

The Regulation applies from 1 January 2025, with the exception of Articles 8 and 9 (on the submission and modification of the ship’s monitoring plan) which shall apply from 31 August 2024.

2. AFIR

REGULATION (EU) 2023/1804 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 September 2023 on the deployment of alternative fuels infrastructure, and repealing Directive 2014/94/EU

The Regulation applies from 13 April 2024.

What’s your contract? What’s your package limitation?

Poralu Marine Australia Pty Ltd v MV Dijksgracht – [2023] FCAFC 147 is a recent decision  from the Federal Court of Australia on identifying what constitutes the contract of carriage of goods by sea, and what terms are applicable to that contract. It will not necessarily be the transport document that is issued on loading, in this case a sea waybill. The cargo of 23 pontoons and 11 pallets was carried from Ireland to Australia and it was alleged that three pontoons were discharged damaged having been loaded in sound condition. Poralu commenced two actions for damages arising from the alleged damage to three of the pontoons, both in bailment and the tort of negligence. The first action was in rem against the vessel and its owner, said to be Dijksgracht CV (DCV), a Netherlands company. The second was an action in personam against Spliethoff Transport (ST) as carrier and Rederij Dijksgracht (RD), said to be the shipowner.

There were various contenders for the contract of carriage by sea; the second recap email; the booking note; the sea waybill. At first instance, [2022] FCA 1038, Stewart J found that the contract was concluded in the booking note which applied the law of the Netherlands and stated specifically that liability was limited to £100 lawful money of the UK per package or unit. The Hague-Visby Rules did not apply to the contract of carriage and accordingly the package limitation was the very low figure of £100 in sterling. By virtue of the Himalaya clause in the bill of lading the shipowner was able to rely on the limitation figure in the contract of carriage.

On appeal the Federal Court of Australia has upheld the decision that the shipowner could rely on the Himalaya clause in the standard form of bill of lading which formed part of the contract of carriage. However, it overruled the decision as to what constituted the contract of carriage and what was the applicable limitation of liability thereunder.

The Federal Court found that the contract of carriage was contained in the second recap email, which preceded the booking note.  This specified English law and was subject to the terms of the contemplated bill of lading which contained clause 3(a) a clause paramount which reads:

“1    Except in case of US Trade, the Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels, 25th August 1924, as enacted in the country of shipment, shall apply to this Bill of Lading.

2    If no such enactment is in force in the country of shipment, the articles I-VIII inclusive of the said Convention shall apply.

3    In trades where the International Brussels Convention 1924 as amended by the Protocols signed at Brussels on 23 February 1968 and 21 December 1979 (the Hague-Visby Rules) apply compulsorily, the provisions of the Hague-Visby Rules shall be considered incorporated in this Bill of Lading.

….

5    If the Hague Rules are applicable otherwise than by national law, in determining the liability of the Carrier, the liability shall in no event exceed £100 (GBP) sterling lawful money of the United Kingdom per package or unit.”

 The fact that the contract contemplated the issue of a bill of lading, even though a sea waybill was eventually issued, was enough potentially to engage the Hague-Visby Rules, as held by the English Court of Appeal in The Maersk Tangier [2018] EWCA Civ 778. As for the sea waybill, that was a mere receipt.  

The contract did not fall under Article 10(a) as Ireland, where the goods were loaded, was not a Contracting State, but did fall under Article 10(c) by virtue of paragraph 1 of the clause paramount in the contemplated bill of lading. Ireland had enacted the Hague-Visby Rules domestically and therefore, in line with the decision of the English Court of Appeal in The Superior Pescadores [2016] EWCA Civ 101, involving a similarly worded clause paramount, the reference to “the Hague Rules…as enacted in the country of shipment” referred to the “Hague-Visby Rules as amended by the 1979 Protocol”.  As a result, those Rules applied to the contract of carriage so that the relevant package limitation would be calculated in accordance with the operation of the SDR Protocol unless, at the trial, Art 4(5)(e) was found to apply (namely, because the damage to the pontoons resulted from an act or omission of the carrier done with intent to cause damage or recklessly and with knowledge that damage would probably result).

Delay due to COVID 19 tests on crew and off-hire.

London Arbitration 13/23 involved an off-hire claim was made by time charterers in respect of a period of delay in transiting the Panama Canal due to the vessel’s quarantine pending the results of PCR tests on the crew. Shortly before the vessel’s arrival at the Panama Canal the Master fell ill on May 24 2021 and the vessel deviated to the nearest port in Puerto Rico to land the master ashore. The next day the master died with the vessel then having an eta at Cristobal for transiting the canal on the morning of 28 May. A test was taken on the deceased master which came back negative and the crew took PCR tests but not until these came back negative was the vessel allowed to come out of quarantine, and the vessel ultimately started its transit of the Panama Canal at 16.47 on 31 May 2021.

Charterers advanced their claim by reference to four clauses, and all were unsuccessful.

1.  cl.15. That in the event of the loss of time from deficiency and/or default and/or strike of crew and/or of men … or by any other cause preventing the full working of vessel, the payment of hire shall cease for the time thereby lost …”

Although in The Apollo [1978] 1 Lloyd’s Rep 200 a delay in berthing awaiting free pratique caused by previous illnesses on board was found to be an off-hire event, the off-hire clause there had included the term “any other cause whatsoever” and it was on the basis of that wording that the charterers had been found able to place the vessel off hire. Here, there was no cause within the terms of clause 15.

2. cl. 38. Certificates/Vaccinations

Owners are obliged to deliver and maintain throughout the currency of this Charter Party the vessel, her crew and anything pertaining hereto supplied with up to date and complete certificates (including Oil Pollution Certificates), approvals, equipment and fittings enabling the vessel and her crew to trade within the trading limits … Officers and crew to comply with vaccination and sanitary regulations in all ports of call and corresponding certificates to be available on board, enabling the vessel to obtain radio free pratique.

If requested, Owners to provide Charterers with copies of any certificates/approvals.

Any time lost and all proven and directly related expenses resulting from Owners’ non-compliance with the above to be for Owners’ account and may be deducted from hire.”

This clause was concerned with the kind of certificates, approvals and vaccinations that the owners would be able to procure, arrange or ensure had been obtained in advance to be maintained on board for the purposes of the service, rather than the more transitory PCR tests in issue, the need for which only arose as a result of the master’s unexpected death during the course of the voyage and which were necessarily only valid for a limited period of time.

PCR tests obtained before the vessel set out on the voyage would have been of no assistance by the time the vessel reached Panama as the requirement of the Panamanian authorities was for tests to be undertaken on arrival. The vessel complied with the authorities’ requirements in producing the negative PCR test results for the crew and there was no question of any non-compliance by the owners under the clause.

3. cl.55. Off Hire

“… in the event of loss of time … caused by sickness of or accident to the crew … or capture/seizure or threatened detention by any authority/legal process … the hire shall be suspended from the time of inefficiency until the vessel is again efficient in the same and equidistant position in Charterers’ option and voyage resumed therefrom. All extra expenses incurred including bunkers consumed during a period of suspended hire shall be for Owners account …”

The requirement for the crew to provide satisfactory PCR test results did not amount to a detention or threatened detention of the vessel.” Detention”  involved something more than mere delay and required some element of restriction and restraint that was clearly not present here.

4. cl.58. Panama/Suez Canal

“Owners warrant that the vessel is fitted for the transit of the Suez and Panama Canal in loaded and/or ballast condition and complies with all and any regulations of the relevant canal authority and shall not be subject to any conditions of transit not customarily required by the relevant canal authority whether pursuant to their regulations or otherwise.

Should the vessel not comply with all warranties contained in this clause and/or any regulations or conditions of transit laid down by the relevant authority, Charterers may suspend hire for all time lost and Owners to pay all expenses arising as a consequence of Owners’ failure to comply with the warranty.”

The Tribunal held that the clause was clearly concerned with the fittings of the vessel and its suitability for transit of both the Panama and Suez Canals. It did not contain a provision and code dealing with the (ultimately unjustified) concerns about Covid-19 that arose following the death of the master.

Accordingly the vessel had not gone off-hire.

Between discharge and delivery. What is the sea carrier’s responsibility?

What are the responsibilities of an ocean carrier in respect of damage to cargo that is sustained after discharge and before delivery? That was the question at issue in JB Cocoa SDN BHD & Ors v Maersk Line AS (The Maersk Chennai).  [2023] EWHC 2203 (Comm) (05 September 2023).  The vessel carried cocoa beans in containers from Lagos to Tanjung Pelepas, Malaysia. Discharge was on 1 October 2017 but the cargo was not collected until about 28 November 2017 when it was found to be suffering from condensation and mould damage which had occurred during the period between discharge and delivery. JB Cocoa, and their insurers, claimed both as lawful holder and indorsee of the bill of lading, which incorporated the Hague Rules, and also in negligence, in an attempt to claim free of the contractual provisions of the bill of lading.

First, on title to sue , JB Cocoa and their subrogated insurers had title to sue as the lawful holder of the bill of lading under COGSA 1992, but JB Cocoa were not the owner of the goods at the relevant time and could not sue in negligence. Even if they had been able to sue in negligence the claim would fail on the basic principle that there is in general no liability in negligence for omissions and no positive duty to intervene to prevent loss. The claimants did not allege that the defendant did anything to damage the cocoa beans but failed to deliver the cocoa beans in good condition because it left them in their containers and failed to take steps to prevent their deterioration in the containers. The answer to this would be to rely on voluntary assumption of risk in respect of more onerous responsibilities which was not pleaded and could not plausibly have been alleged on any basis other than a bailment subject to the terms of the bill of lading.

On the substantive claim, HH Judge Keyser KC started by reiterating the Court of Appeal’s statements in The Giant Ace [2023] EWCA Civ 569,that the Hague, and Hague-Visby Rules, only operated up to the point of discharge, although the time bar in art III (6) applied to misdelivery claims where delivery had been made after discharge. The carrier’s obligations in respect of the period between discharge and delivery were to be determined by the terms of the bill of lading.

The relevant terms of the bill were contained in clauses 5 and 22.

“5. Carrier’s Responsibility: Ocean Transport

5.1 Where the Carriage is Ocean Transport, the Carrier undertakes to perform and/or in his own name to procure performance of the Carriage from the Port of Loading to the Port of Discharge. The liability of the Carrier for loss of or damage to the Goods occurring between the time of acceptance by the Carrier of custody of the Goods at the Port of Loading and the time of the Carrier tendering the Goods for delivery at the Port of Discharge shall be determined in accordance with Articles 1-8 of the Hague Rules save as is otherwise provided in these Terms and Conditions. These articles of the Hague Rules shall apply as a matter of contract.

5.2 The Carrier shall have no liability whatsoever for any loss or damage to the Goods, howsoever caused, if such loss or damage arises before acceptance by the Carrier of custody of the Goods or after the Carrier tendering the cargo for delivery. Notwithstanding the above, to the extent any applicable compulsory law provides to the contrary, the Carrier shall have the benefit of every right, defence, limitation and liberty in the Hague Rules as applied by clause 5.1 during such additional compulsory period of responsibility, notwithstanding that the loss or damage did not occur at sea.”

“22. Notification, Discharge and Delivery

22.1 Any mention in this bill of lading of parties to be notified of the arrival of the Goods is solely for information of the Carrier. Failure to give such notification shall not involve the Carrier in any liability nor relieve the Merchant of any obligations hereunder.”

HH Judge Keyser KC held that

“The first sentence of clause 5.1, taken together with the definition of “Carriage” in clause 1 but otherwise by itself, would suggest that the carrier is responsible for all handling of the goods and other services provided in respect of the goods at the port of discharge, even if the handling or other services came after discharge. However, the second sentence of clause 5.1 has the effect that the carrier’s liability for loss of or damage to the goods between two points in time—acceptance of custody at the port of loading, and tender for delivery at the port of discharge—shall be determined in accordance with Articles I to VIII of the Hague Rules. The Hague Rules do not regulate the liability of the carrier in respect of any period before loading or after discharge from the vessel; the references in Article II to “custody” and “care” relate to the period prior to discharge: [96]”

Turning to cl.5(2) the first sentence meant that the carrier is liable for loss and damage only within the limits of the Hague Rules, that is, from loading to discharge. Prior to and after those points in time, the goods are at the risk of the shipper or the consignee as the case may be. However, if the temporal delimitation of the carrier’s liability is ineffective in law, the defences, limitations etc. under the Hague Rules will apply to this additional period of liability as they apply to the period governed by the Rules themselves.

HH Judge Keyser KC then rejected the argument that the failure to give notification of arrival under cl. 22(1) amounted to a failure to tender the goods for delivery and rendered the carrier subject to an ongoing obligation to take reasonable care of the goods. The carrier was not obliged to serve an arrival notice at all and therefore such a notice was not an integral part of delivery or of tender of delivery.

If the carrier had remained responsible, HH Judge Keyser KC would have held it liable for the damage to the cocoa beans on the grounds that it failed to take reasonable care of them by opening the container doors to provide ventilation. However, as the carrier was not responsible for the goods after discharge it was under no duty to open the container doors.

So, for owners of containerised goods damaged between discharge and delivery, look closely at the terms of your bill of lading. Terms and conditions apply.

However, a couple of points to bear in mind. An exception against “loss and damage” after discharge won’t protect the carrier against liability for misdelivery East West Corp. v. DKBS 1912 [2003] 1 Lloyd’s Rep 239. Second, where the ocean carrier supplies the container, the start of loading under the Hague Visby Rules can begin earlier than loading onto the vessel. In Volcafe it was the start of stuffing the container at an inland facility. Similarly, ‘discharge’ can be extended to the point of delivery. In Australia in Seafood Imports Pty Ltd v ANL Singapore Pte Ltd [2010] FCA 702 it was held that where a refrigerated container was supplied by the carrier, the duty under the Hague-Visby Rules to discharge the goods properly and carefully extended to ensuring that the refrigerated container in which they had been carried did not have a propensity to become stuck in defrost mode while at the port terminal and before the goods could reasonably be expected to be removed from the container.

EU top court: no avoiding the bar on intra-Europe ASIs by bringing a damages claim instead. But how far does it matter post-Brexit?

Don’t say it too loudly, especially when there’s a European listening, but yesterday’s CJEU decision in The Alexandros T (C-590/21) [2023] EUECJ C-590/21 might make some English lawyers a bit more relieved that Brexit happened. Put simply, the EU court has held that just as under EU law you can’t get an anti-suit injunction in an EU court preventing suit elsewhere in Europe, you equally can’t sue a litigant for damages for bringing suit there in breach of contract. But this will not affect any ost-2021 proceedings here.

The Alexandros T, a Capesize bulker of 172,000 dwt, will be familiar to most readers. She sank off South Africa in 2006, taking with her 26 crew and a large cargo of Brazilian iron ore destined for China. Her hull insurers were initially not entirely convinced about the resultant claim against them, but around Christmas 2007 paid a sum in settlement under an agreement governed by English law. That agreement provided for a release of the underwriters and everyone associated with them and contained a London jurisdiction clause in respect of any dispute.

Little did the underwriters know that this was not the end, but – this being well before Brexit – rather the beginning of a massive game of juridical Euro-ping-pong.

Four years after the settlement, Alexandros T’s owners Starlight brought proceedings in Greece against the underwriters and also Charles Taylor, a marine insurance consultancy that had acted for them. They claimed big money on the basis that the underwriters and others had indulged in skulduggery in defending the claim, and had acted tortiously in blackening Starlight’s name and causing it serious losses.

Unable to get an anti-suit injunction because of settled EU law based on the full faith and credit principle, the underwriters countered by suing Starlight in England for damages for breach of the settlement agreement (i.e. the costs of defending, and anything they were forced to pay under, the Greek suit). Starlight attempted to invoke the Greek proceedings to stop these latter proceedings in their tracks under the lis alibi pendens provisions of what was then Art.27 of Brussels I (now Art.29 of Brussels I Recast). However they failed, it being held by the Supreme Court that the claims were merely related and did not involve the same subject-matter, and that the new claims should be allowed to go forward. (See The Alexandros T [2013] UKSC 70; [2014] 1 Lloyd’s Rep. 223.) The underwriters duly proceeded, and Burton J’s judgment giving damages against Starlight was upheld by the Court of Appeal in July 2014 in Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG [2014] EWCA Civ 1010; [2014] 2 Lloyd’s Rep. 544.

Having got this judgment, the underwriters took the battle to the enemy and sought to have it recognised in Greece. The Piraeus Court of Appeal refused recognition, holding in 2019 that it would be manifestly contrary to public policy under Art.34 of Brussels I (Recast Art.45). The Areios Pagos, the Greek Supreme Court, sought the opinion of the CJEU.

Yesterday that court, in a short (by EU standards) judgment, went against the underwriters. It said, first, that a claim for damages for suing in another EU court, being dissuasive of the maintenance of EU proceedings and aimed at impeding them, was no more permissible under the Brussels I scheme than a claim for an anti-suit injunction (see [25]). It then went on to say that this factor provided ample justification for a court in the EU to say that to enforce or recognise a judgment arising out of such a claim was manifestly contrary to EU (and hence national) public policy. It therefore gave a green light to the Greek courts to refuse recognition of the 2014 judgment, something which will no doubt formally take place in the not too distant future.

Fairly predictable was the holding that claims for damages for suing in an EU court were prohibited by Brussels I, contrary to English decisions the other way – notably West Tankers Inc v Allianz SpA [2012] EWHC 854 (Comm); [2012] 2 Lloyd’s Rep. 103. A combination of post-Brexit Schadenfreude, the court’s highly sensitive political antennae, and its ingrained instinct for centralisation of power Brussels-ward whenever possible, saw to that. But in respect of post-Brexit proceedings it is not now very important: such actions for damages continue available in England whatever Brussels says, and the betting must now be that the UK will never again sign up to any jurisdictional framework in the Brussels-Lugano mould.

That leaves the holding that judgments obtained here for damages are not portable to Europe by way of recognition. This raises two issues.

First, it will make the enforcement of judgments like that in The Alexandros T slightly harder – though perhaps this difficulty should not be exaggerated, since most of those involved in international trade will at some time want to deposit monies in London which can then be the subject of execution proceedings.

Secondly, there is a nice issue whether the EU position would survive a UK ratification of the 2019 Hague Judgments Convention, which by Art.7(1)(c) contains a similar public policy let-out. You might think it did: but matters aren’t as simple as that. Unlike Brussels I, the Hague Convention is not an EU instrument and it is therefore not automatically subject to overriding EU public policy considerations to the same extent. It is certainly possible that the EU would be in breach of Hague if the CJEU decided that judgments given in non-EU courts for damages for suing in EU courts were automatically excluded from its ambit as they are from Brussels I. We’ll just have to wait and see.

A DAY TO REMEMBER: THE 2019 HAGUE JUDGMENTS CONVENTION ENTERS INTO FORCE

At last, we no longer lack functional global rules for the recognition and enforcement of judgments. Only a couple of days ago, on 1 September 2023, the Hague Judgments Convention 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (HJC) entered into force. This is a momentous event for private international law and a real game-changer for international dispute resolution. With its entry into force, the HJC can now be utilised by commercial parties and contribute to a swift resolution of disputes by shortening expenses and timeframes for the recognition and enforcement of a foreign judgment in other jurisdictions. Having adopted the HJC, the Hague Conference achieved its target to guarantee the effectiveness of court judgments similar to arbitral awards as ensured by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

A year ago and almost around the same time we provided some comments on the provisions of the Convention determining the procedure for becoming effective (see here: Hague Judgments Convention to enter into force! – The Institute of International Shipping & Trade Law (IISTL) Blog). According to Articles 28 and 29 of the HJC, the Convention shall enter into force on the first day of the month following the expiration of the twelve months after the second State has deposited its instrument of ratification, acceptance, approval, or accession. On this occasion, the Convention was ratified by Ukraine and the EU on 29 August 2022, and now has a force of law for both. In addition, Uruguay ratified the treaty on 1 September, and it will come into force for the latter 12 months later.

The HJC provides recognition and enforcement of judgments given in cross-border civil and commercial cases, excluding the carriage of passengers and goods, transboundary marine pollution, marine pollution in areas beyond national jurisdiction, ship-source marine pollution, limitation of liability for maritime claims, and general average. That being said, the HJC is not an ideal framework and does not include every issue that might arise from civil and commercial cases. Yet, it complements the HCCCA not only by sharing the same objectives but also by covering judgments given by non-exclusively designated courts; therefore, it indeed serves party autonomy and ensures the effectiveness of an entire range of choice of court agreements.

The Convention further contributes to certainty and access to justice post-Brexit since it is the only international treaty providing rules for the recognition and enforcement of judgments in cross-border commercial disputes. However, the UK has not ratified the Convention yet and even if it does, the Convention will enter in and for the UK only twelve months after the date it deposits an instrument of ratification. Following the analysis, the Government will make its final decision on becoming a Contracting State to the HJC and on whether to make any reservations. If signed and ratified, the Convention would be implemented in domestic law under the terms of the Private International Law (Implementation of Agreements) Act 2020, subject to appropriate parliamentary scrutiny. Indeed, if ratified, the HJC will not only contribute to access to justice and effectiveness of judgments involving EU-related civil and commercial cases but also the UK’s global judicial cooperation with the other Hague Contracting States will be enhanced. For the previous post related to the UK’s plans to ratify the HJC see: The Ball is Rolling: The UK to ratify the Hague Judgments Convention? – The Institute of International Shipping & Trade Law (IISTL) Blog.

Yet, we must admit the HJC leaves significant matters unresolved. Besides excluding extremely important commercial matters from its application scope, the Convention does not contain any specific regulation of parallel proceedings, lis pendens, and related actions – the famous yet infamous Brussels terminology. In this regard, there is a hope that the Hague Conference will succeed in its Jurisdiction Project. Indeed, if the latter is achieved the three Conventions might well function together and provide safeguards for international commercial parties and global justice.

Limitation for charterers — the Court of Appeal makes life a little easier

The Limitation Convention 1976 isn’t the best drafted of maritime conventions, but the Court of Appeal this morning in The MSC Flaminia (No 2) [2023] EWCA Civ 1007 made a very good stab at cutting through the verbal undergrowth to reach a clear and sensible result.

The background first, for those who don’t know it. In 2012 the MSC Flaminia, a 86,000 dwt container vessel owned by Conti and time chartered to MSC, suffered a disastrous fire while en route from the US to Antwerp when certain containerised chemicals ignited. She received salvage services and was towed dead to Wilhelmshaven, where most of her cargo was discharged and where necessary decontaminated or destroyed. Dirty firefighting water was also offloaded and sent to Denmark to be cleaned up. Further cleanup operations took place in Romania and Denmark; the vessel was then repaired in Romania, and finally returned to service in mid-2014.

All this cost big money. Her owners Conti, having been unsuccessfully pursued by cargo interests in the US, claimed against the time-charterers to recover the expenses of these operations on the basis that they were responsible for the shipment of the dangerous chemicals involved. Arbitrators awarded some $200 million, whereupon MSC sought to limit, the relevant limitation figure being about 25 million SDRs.

Some of Conti’s claims were indubitably outside the 1976 regime limitation, notably the direct cost of repairs (clear since The CMA Djakarta [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep. 460). But this left the offloading and cleanup costs: were they limitable or not? The Convention was not clear on this. Article 1(2) extended the shipowner’s right to limit to a “charterer, manager and operator of a seagoing ship.” Article 2(1) allowed limitation for personal injury and cargo claims (Article 2(1)(a)), passenger and cargo delay claims (Article 2(1)(b)), tort claims by third parties (Article 2(1)(c)). It then, in its English incarnation, went on to cover “claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship” (Article 2(1)(e)) and “claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures” (Article 2(1)(f)). How these all fitted together, however, was not very clear.

The Admiralty judge, Andrew Baker J, denied limitation to MSC (see here, noted here in this blog). True, he said, there was no absolute bar on limitation in respect of claims arising between charterers and owners other than for damage to the vessel: indeed there could not be, since clearly owners had to be able to limit if they found themselves at the sharp end of cargo claims from charterers. But limitation was still impossible in this case because, even if dressed up as a series of claims for offloading cargo, rendering it harmless and the like under Article 2(1)(e), Conti’s claim was in substance a single one for damage to the vessel and its consequences, which was exactly what The CMA Djakarta said was entirely outside the limitation regime.

MSC, or rather its P&I Club, fared no better in the Court of Appeal. But here the reasons, given in a pellucid judgment by Males LJ, were slightly different. The rule he advanced about charterer-owner claims was simple and elegant, and sufficed to dismiss the appeal. Charterers were in a special position, different from that of owners. They could not limit at all, he said, in respect of claims by owners (or anyone else in the charmed circle of those entitled to limit under Article 1) for losses originally suffered by the latter. But by way of exception, charterers could limit in recourse claims from owners, who having paid claims to third parties where limitation did apply, then sought indemnity from them. Here, however, that was beside the point: since there was no element of recourse in the present proceedings, it followed that MSC had to pay in full.

This sufficed to wrap up the case. If one may say so, Males LJ’s solution seems instinctively right. Presumably, it is worth adding, it equally applies to claims not from owners but from other charterers: so if there is (say) a series of time charters and subcharters and a claim – dangerous cargo, stowage damage, or whatever – to be passed down the line, each charterer in turn would be able to limit. Presumably also Males LJ’s reasoning applies to operators of vessels who find themselves in the firing line after a casualty and wish in turn to invoke the power to limit under Article 1(2).

Males LJ also said something about MSC’s other grounds of appeal, though these strictly did not arise. In particular, Andrew Baker’s holding that the claim from Conti had to be looked at as a whole he found unimpressive. It is suggested he was right to do so: there seems no reason to demand that a large and possibly disparate claim be pigeonholed as a whole into some category or another rather than looked at seriatim as regards its parts.

It seems to follow that had it been not been found that all the expenses had been incurred as part of the operation of repairing the vessel, and that some had been genuine recourse claims arising from Conti’s potential liabilities to cargo, limitation would have been allowed.

All in all, however, this is a decision that will make the lives of lawyers and P&I executives seeking to settle claims, not to mention academics, a great deal easier. Just what we want: a bit of good news as we all return from our holidays for the new term.

Fit for 55. Two more EU laws for shipping to think about.

Two more ‘Fit for 55’ measures that will affect maritime transport have now reached the legislative finishing line with approval by the Council on 25 July 2023. The new rules will be published in the Official Journal of the European Union and enter into force 20 days after publication.  

  1. FuelEU Maritime

FuelEU Maritime sets maximum limits on the yearly greenhouse gas intensity of the energy a ship uses, covering CO2, methane and nitrous oxide emissions over the full lifecycle of the fuels and applies to all commercial vessels of 5,000 gross tonnes with exemptions for naval vessels, fishing vessels, and ships using non-mechanical propulsion. It covers all energy used on board when the ship is at the port, all energy used on voyages between EU ports and 50% of the energy used on voyages departing from or arriving at an EU port. The reduction schedule from a 2020 baseline is -2 per cent from 2025; -6 per cent from 2030; -14.5 per cent from 2035; -31 per cent from 2040; -62 per cent from 2045; -80 per cent from 2050. Offsetting emissions credits are given to those ship owners who use renewable fuels of non-biological origin (RFNBO) from 2025 to 2034, and a 2 per cent renewable fuels usage target as of 2034 will be set if the Commission reports that in 2031 RFNBOs amount to less than 1 per cent in fuel mix. There are also similar provisions to those in the ETS regarding evasive container transhipments from ports less than 300 nautical miles from an EU port, with the Commission to provide the first list of such ports before 31 December 2025.

From January 2030, container ships and passenger ships at EU ports will also have to connect to the onshore power supply and use it for all energy needs while at berth at quayside in TEN-T core and comprehensive network ports or use alternative zero-emission technologies. From January 2035, this will apply to container ships and passenger ships at quayside in all EU ports where the quay is equipped. Whether this onshore power supply will be provided from green sources remains to be seen.

The responsibility for compliance lies with the “company”, defined in the same way as the ‘shipping company’ in the amend MRV Regulation and the amended ETS Directive. Shipping companies must submit to verifiers a standardised emissions monitoring plan for each of their vessels by 31 August 2024. Their records must contain the ‘well to wake’ emissions factors for each type of fuel used at berth and sea. At the end of April each year, shipping companies must submit their data, including that already reported for MRV regulation. There are harmonised penalties for non-compliance with the requirements on both the greenhouse gas intensity content and the connection to onshore electricity. The Regulation provides for a voluntary pooling mechanism under which ships will be allowed to pool their compliance balance with one or more other ships, thereby making it the overall pool that has to meet the greenhouse gas intensity limits on average.

FuelEU Maritime also recognises the polluter pays’ principle, providing in Article 23(8):
“The company shall remain responsible for the payment of the FuelEU penalties, without prejudice to the possibility for the company to conclude contractual agreements with the commercial operators of the ship that provide for the liability of the commercial operators to reimburse the company for the payment of the FuelEU penalties, when the responsibility for the purchase of the fuel or the operation of the ship is assumed by the commercial operator. For the purposes of this paragraph, operation of the ship shall mean determining the cargo carried, the route and the speed of the ship.”
There is a similar provision in Article 23(9) with regard to contracts with fuel suppliers. Unlike the costs of surrendered ETS allowances in the revised ETS Directive, there is no provision for any statutory right of pass-through from the company to the time charterer of penalties in Article 23(8) and (9).

  1. Regulation on the deployment of alternative fuels infrastructure (AFIR). This amends the Directive on the Deployment of Alternative Fuels Infrastructure 2014/94/EU (DAFI) to require Member States to take necessary measures to ensure that minimum shore-side electricity supply for seagoing container and passenger ships is provided in maritime ports by 1 January 2030. Additionally, Article 11 requires Member States to ensure that an ‘appropriate’ number of refuelling points for liquified methane ‘liquefied methane’ are put in place at TEN-T core maritime ports by 31 December 2024. On 19 October 2022, the Parliament proposed adding hydrogen and ammonia to the core network of refuelling points for LNG at maritime ports by 2025 but this does not appear in the final text of the Regulation. Instead Article 14 requires Member States to develop draft a national policy framework for developing alternative fuels for transport, containing various elements, in particular (k) “an overview of the state of play, perspectives and planned measures in respect of the deployment of alternative fuels infrastructure in maritime ports other than for liquefied methane and shore-side electricity supply for use by seagoing vessels, such as for hydrogen, ammonia, methanol and electricity.”