Climate change reduction and the IMO. What to expect from this week’s MEPC meeting.

Crucial measures to further reduce greenhouse gas (GHG) emissions from ships will be discussed by IMO’s Marine Environment Protection Committee (MEPC) met between 16-20 November to discuss measures to reduce further greenhouse gas emissions from shipping.

The IMO’s website notes that the MEPC is expected to adopt amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) to significantly strengthen the “phase 3” requirements of the Energy Efficiency Design Index (EEDI) – meaning that new ships built from 2022 will have to be significantly more energy-efficient. Those amendments were approved at the previous session of the Committee (MEPC 74) in May 2019. 

The MEPC will also discuss two further energy efficiency requirements comprising draft amendments which were agreed by IMO’s Intersessional Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 7) in October, and would also apply to existing ships:

  • a new Energy Efficiency Existing Ship Index (EEXI) for all ships;
  • an annual operational carbon intensity indicator (CII) and its rating, which would apply to ships of 5,000 gross tonnage and above.

If approved at this session of the Committee, they could then be put forward for adoption at the subsequent MEPC 76 session, to be held in June 2021. Under MARPOL, amendments can enter into force after a minimum 16 months following adoption.

EU Parliament suggests civil liability regulation for artificial intelligence. Possible collisions ahead with IMO civil liability collisions?

On 22 October the European Parliament sent a draft regulation to the Commission for a new strict liability regime for operators of AI systems. Its salient features are.

Scope

Art 2

This Regulation applies on the territory of the Union where a physical or virtual activity, device or process driven by an AI-system has caused harm or damage to the life, health, physical integrity of a natural person, to the property of a natural or legal person or has caused significant immaterial harm resulting in a verifiable economic loss.

Definitions

Art 3

(c)  ‘high risk’ means a significant potential in an autonomously operating AI-system to cause harm or damage to one or more persons in a manner that is random and goes beyond what can reasonably be expected; the significance of the potential depends on the interplay between the severity of possible harm or damage, the degree of autonomy of decision-making, the likelihood that the risk materializes and the manner and the context in which the AI-system is being used;

(d)  ‘operator’ means both the frontend and the backend operator as long as the latter’s liability is not already covered by Directive 85/374/EEC;

(e)  ‘frontend operator’ means any natural or legal person who exercises a degree of control over a risk connected with the operation and functioning of the AI-system and benefits from its operation;

(f)  ‘backend operator’ means any natural or legal person who, on a continuous basis, defines the features of the technology and provides data and an essential backend support service and therefore also exercises a degree of control over the risk connected with the operation and functioning of the AI-system;

(g)  ‘control’ means any action of an operator that influences the operation of an AI-system and thus the extent to which the operator exposes third parties to the potential risks associated with the operation and functioning of the AI-system; such actions can impact the operation at any stage by determining the input, output or results, or can change specific functions or processes within the AI-system; the degree to which those aspects of the operation of the AI-system are determined by the action depends on the level of influence the operator has over the risk connected with the operation and functioning of the AI-system;

(h)  ‘affected person’ means any person who suffers harm or damage caused by a physical or virtual activity, device or process driven by an AI-system, and who is not its operator;

(i)  ‘harm or damage’ means an adverse impact affecting the life, health, physical integrity of a natural person, the property of a natural or legal person or causing significant immaterial harm that results in a verifiable economic loss;

(j)  ‘producer’ means the producer as defined in Article 3 of Directive 85/374/EEC. (the Product Liability Directive)

Strict liability for high-risk AI-systems

Article 4

1.  The operator of a high-risk AI-system shall be strictly liable for any harm or damage that was caused by a physical or virtual activity, device or process driven by that AI-system.

2.  All high-risk AI-systems and all critical sectors where they are used shall be listed in the Annex to this Regulation…

3.  Operators of high-risk AI-systems shall not be able to exonerate themselves from liability by arguing that they acted with due diligence or that the harm or damage was caused by an autonomous activity, device or process driven by their AI-system. Operators shall not be held liable if the harm or damage was caused by force majeure.

4.  The frontend operator of a high-risk AI-system shall ensure that operations of that AI-system are covered by liability insurance that is adequate in relation to the amounts and extent of compensation provided for in Articles 5 and 6 of this Regulation. The backend operator shall ensure that its services are covered by business liability or product liability insurance that is adequate in relation to the amounts and extent of compensation provided for in Article 5 and 6 of this Regulation. If compulsory insurance regimes of the frontend or backend operator already in force pursuant to other Union or national law or existing voluntary corporate insurance funds are considered to cover the operation of the AI-system or the provided service, the obligation to take out insurance for the AI-system or the provided service pursuant to this Regulation shall be deemed fulfilled, as long as the relevant existing compulsory insurance or the voluntary corporate insurance funds cover the amounts and the extent of compensation provided for in Articles 5 and 6 of this Regulation.

5.  This Regulation shall prevail over national liability regimes in the event of conflicting strict liability classification of AI-systems.

Amount of compensation

Article 5

1.   An operator of a high-risk AI-system that has been held liable for harm or damage under this Regulation shall compensate:

(a)  up to a maximum amount of EUR two million in the event of the death of, or in the event of harm caused to the health or physical integrity of, an affected person, resulting from an operation of a high-risk AI-system;

(b)  up to a maximum amount of EUR one million in the event of significant immaterial harm that results in a verifiable economic loss or of damage caused to property, including when several items of property of an affected person were damaged as a result of a single operation of a single high-risk AI-system; where the affected person also holds a contractual liability claim against the operator, no compensation shall be paid under this Regulation, if the total amount of the damage to property or the significant immaterial harm is of a value that falls below [EUR 500](9).

Limitation period

Article 7

1.  Civil liability claims, brought in accordance with Article 4(1), concerning harm to life, health or physical integrity, shall be subject to a special limitation period of 30 years from the date on which the harm occurred.

2.  Civil liability claims, brought in accordance with Article 4(1), concerning damage to property or significant immaterial harm that results in a verifiable economic loss shall be subject to special limitation period of:

(a)  10 years from the date when the property damage occurred or the verifiable economic loss resulting from the significant immaterial harm, respectively, occurred, or

(b)  30 years from the date on which the operation of the high-risk AI-system that subsequently caused the property damage or the immaterial harm took place.

Of the periods referred to in the first subparagraph, the period that ends first shall be applicable.

Fault-based liability for other AI-systems

Article 8

1.  The operator of an AI-system that does not constitute a high-risk AI-system as laid down in Articles 3(c) and 4(2) and, as a result is not listed in the Annex to this Regulation, shall be subject to fault-based liability for any harm or damage that was caused by a physical or virtual activity, device or process driven by the AI-system.

2.  The operator shall not be liable if he or she can prove that the harm or damage was caused without his or her fault, relying on either of the following grounds:

(a)  the AI-system was activated without his or her knowledge while all reasonable and necessary measures to avoid such activation outside of the operator’s control were taken, or

(b)  due diligence was observed by performing all the following actions: selecting a suitable AI-system for the right task and skills, putting the AI-system duly into operation, monitoring the activities and maintaining the operational reliability by regularly installing all available updates.

The operator shall not be able to escape liability by arguing that the harm or damage was caused by an autonomous activity, device or process driven by his or her AI-system. The operator shall not be liable if the harm or damage was caused by force majeure.

3.  Where the harm or damage was caused by a third party that interfered with the AI-system by modifying its functioning or its effects, the operator shall nonetheless be liable for the payment of compensation if such third party is untraceable or impecunious.

4.  At the request of the operator or the affected person, the producer of an AI-system shall have the duty of cooperating with, and providing information to, them to the extent warranted by the significance of the claim, in order to allow for the identification of the liabilities.

National provisions on compensation and limitation period

Article 9

Civil liability claims brought in accordance with Article 8(1) shall be subject, in relation to limitation periods as well as the amounts and the extent of compensation, to the laws of the Member State in which the harm or damage occurred.

 There are also provisions regarding contributory negligence, Article 10, joint and several liability, Article 11, recourse for compensation, Article 12.

There are no carve-outs as regards existing civil liability conventions for maritime claims such as the CLC, Bunker Oil Pollution Convention, HNS Convention, which are strict liability based, and the 1910 Brussels Collision Convention which is fault liability based. This is in contrast to the exclusions contained in the 2004 Environmental Liability Directive whose territorial scope was widened with the 2013 Offshore Safety Directive. The current proposal applies to the “territory of the Union” which would encompass the territorial sea of Member States and, in the light of the ECJ’s decision in Commun v Mesquer, loss or damage manifesting on land from an oil spill in the exclusive economic zone of a Member State would come within the scope of the Regulation. As such, it has the capacity to conflict with existing strict liability conventions as enacted in national laws (see the priority of the regulation stipulated in art 4(5)) where autonomous vessels come into operation at MASS Levels 3 and 4, if these are regarded as ‘high risk’. If that were the case, collision liabilities involving such vessels would be dealt with by a strict liability regime, as opposed to the current fault based regime under the Brussels Collision Convention 1910.

Norway’s ‘Urgenda’ moment? Greenpeace Nordic Ass’n v. Ministry of Petroleum and Energy

Between 4-12 November 2020 the Norwegian Supreme Court heard an appeal from environmental groups seeking the invalidation of the granting of licenses in 2016 to conduct exploratory drilling in the South and South East Barents Sea, an area on the Norwegian continental shelf spanning about 77 acres where oil and gas fields have recently been built. Companies were awarded licenses in 2016 to conduct exploratory drilling in the South and South East Barents Sea, an area on the Norwegian continental shelf spanning about 77 acres where oil and gas fields have recently been built. Parliament approved opening the area for exploration three years earlier.

Their action is brought under the Norwegian Constitution’s environmental provisions, art. 112, which were passed in 2014. They argue that exploratory drilling licenses violate a constitutional right to a healthy environment. They claim the oil-exploration plans were not fully researched before being approved and also rely on a previously unknown expert report throwing doubt on the economic benefit of drilling in the Barents Sea, which was commissioned by the government in 2013 but not passed onto the Parliament before its vote approving exploration in the Barents Sea. The Norwegian government has said that it fulfilled its constitutional duty by compensating for negative effects on the environment in other areas.

The action has failed in the lower courts, although both recognised the right of citizens to bring actions under the environmental provisions of the Constitution, with the higher court accepting that the right involved the impact from climate emissions — including those from oil and gas exported abroad, which is the case for most of Norway’s production.

The Norwegian government intends to continue requesting exploration licences and in June 2020 announced licensing awards in predefined areas (APA) 2020 which comprises blocks in the North Sea, the Norwegian Sea, and the Barents Sea.

Baltimore Climate Change litigation in State Courts. Supreme Court to wade in.

A follow on from our blog of 15 April 2020 where we stated, as regards the climate change suits in Baltimore, and the Fourth Circuit Court of Appeal’s denial of the defendants’ application to remove it to the federal courts – where it would be dismissed due the decision of the Supreme Court in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011) (AEP),  and that of the Ninth Circuit in Native Village of Kivalina v. ExxonMobil Corp., 696 F.3d 849 (9th Cir. 2012), that such actions, at least when they relate to domestic GHG emissions caused by the defendant, are pre-empted by the Clean Air Act. .

On 31 March 2020 the Defendants submitted a petition for certiorari to the US Supreme Court. on the question whether 28 U.S.C. § 1447(d) permits a court of appeals to review any issue encompassed in a district court’s order remanding a removed case to state court where the removing defendant premised removal in part on the federal-officer removal statute, 28 U.S.C. § 1442, or the civil-rights removal statute, 28 U.S.C. § 1443.

Last month the United States Supreme Court stated that it will review the Fourth Circuit Court of Appeals’ ruling. This is on the procedural ground as to what can be reviewed by a federal appellate court. Three circuit courts – including the Fourth Circuit, which ruled on Baltimore’s case – have ruled that federal officer jurisdiction is the only issue that they can review when considering the companies’ appeal of a lower court’s remand order. The seventh circuit has taken the view that that the federal officer removal statute authorizes appellate review of the entire remand order. In the Baltimore case the District Court rejected a total of eight grounds for removal but the Fourth Circuit concluded its appellate jurisdiction was limited to determining whether the companies properly removed the case under the federal-officer removal statute.

 The oil major defendants are banking on the hope that the more grounds for removal that the Court of Appeal must consider, the more chance of a successful remand to the federal courts where the pesky case will meet its demise.

We shall see.

Farm-Out Agreements and JOAs: a Joined-Up Approach to Construction

OVERVIEW

Apache North Sea Ltd v Euroil Exploration Ltd [2020] EWCA Civ 1397

In what circumstances will one contract be construed by reference to another? In the energy sector, the issue will often be an important one, given the prevalence of suites of contracts dealing with different aspects or layers of involvement or activity. The general rule is that “A document executed contemporaneously with, or shortly after, the primary document to be construed may be relied upon as an aid to construction, if it forms part of the same transaction as the primary document”: see Lewison, Interpretation of Contracts, 6th Edn, section 3.03. But this relates to different contracts which are “in truth one transaction” or “as it is called in modern jargon, a ‘composite transaction’” (Lewison). But what if the transactions are different ones, involving the same but also additional parties, but are related transactions?

Apache v Euroil: Summary and Take-Away Points

The Court of Appeal’s decision in Apache North Sea Ltd v Euroil Exploration Ltd [2020] EWCA Civ 1397 addressed this question in the context of a Farm-Out Agreement (the FOA) between Apache as and Euroil for the sale and purchase of minority interests in respect of a UK Continental Shelf production licence relating to the Val d’Isere block and for Apache’s participation in the associated Val d’Isere Joint Operating Agreement (the JOA) as Operator.

The Court of Appeal (as the Commercial Court before it) held that, on the terms of the specific contracts in issue, it was wrong in principle to treat the FOA and the JOA “as entirely separate contracts with Apache wearing different hats in each” and that would “not reflect the true nature of the parties’ dealings at the time” [39]. The contracts were to be construed together, and “in their proper context as a cohesive whole” [42]. 

While the Court stressed that it was dealing with the contracts before it and emphasised that it was not setting a “general precedent” for all FOAs and JOAs [70], the decision is significant in demonstrating a realistic approach to construing contracts which are meant to work together. As the Court stated, “Farm-out agreements do not typically exist in a vacuum. Where there is more than one owner, the parties will regulate their relationship in relation to that asset under a joint operating agreement. Farm-out agreements need to take account of and interact appropriately with those joint operating agreements to avoid inconsistencies and minimise the prospect of dispute.” [2]

The arguments in Apache v Euroil in the Court of Appeal

The issue arose out of the incurring of drilling costs by Apache in relation to an exploration “Earn-In Well”, using a drilling rig on a long-term lease. The rate for the drilling rig as incurred by Apache was one which was significantly above market rates at the time of drilling. 

Apache sought payment of the drilling costs in full from Euroil in full under the FOA. In the very detailed terms of the FOA drafted, as was common ground and as the Court accepted, by “sophisticated parties represented by experienced lawyers” provision was made for the “Val d’Isere Earn-In Costs” which Euroil agreed to bear: “twenty six point twenty five percent (26.25%) of the total costs (other than the Back Costs) in relation to the Val D’Isere Earn-In Well, whensoever incurred, and in respect of all works undertaken pursuant to the Well Programme in connection with the Val D’Isere Earn-In Well”. 

Euroil contended that the recovery was necessarily capped at market rates and relied upon the combination of the payment provisions in the FOA (requiring it to pay all Earn-In Costs “upon receipt of an invoice from [Apache] … in accordance with the relevant JOA within the applicable time periods as set out in the relevant JOA”), read together with provisions in the JOA to which both Apache (as Operator) and Euroil (and another) were parties. Euroil relied upon the usual ‘no gain no loss to the Operator” provision in the JOA and the detailed accounting procedure in the JOA which was used to be used for billing under the FOA, which had no billing procedure of its own. As part of that billing procedure, the cost of equipment leased by the Operator “not exceed rates currently prevailing for like…equipment”.

Apache responded that:

i.    the FOA and the JOA were entirely different contracts with different mechanisms and purposes and separate parties;
ii.    The FOA was a bilateral sale contract with a price agreed which the purchaser is liable to pay. The JOA on the other hand was a multilateral joint venture contract with a joint venturers’ account. 
iii.    Apache wore different hats at different times, depending on which contract is being considered.
iv.    To hold otherwise, would be impermissibly to incorporate a joint venture accounting convention in a multilateral joint operating agreement into a bilateral farm-out sale and purchase agreement so as to reduce the price there agreed;
v.    That would be “a significant development for the oil and gas industry, given that joint operating agreements are attached routinely to farm-out agreements by way of appendix”. 

The decision in the Court of Appeal

The Court of Appeal rejected Apache’s arguments and held that the recovery of the drilling costs was capped at market rates given the provisions of the JOA. This was essentially for three reasons identified in the judgment of Carr L.J.

First, the artificiality of trying to construe the FOA as if it stood alone and without reference to the JOA. As the Court stated, this was “an ex post facto theoretical argument that does not reflect the true nature of the parties’ dealings at the time” [39] in circumstances where, by the time that the FOA was executed, the terms of the JOA, including the Accounting Procedure, had been negotiated and by the terms of the FOA they were to be deemed to be in full force and effect before and after completion of the FOA. The two contracts were “part of a package” and fell to be read together. As the Court said at the outset, FOAs do not exist in a vacuum and necessarily need to take account of and interact appropriately with those joint operating agreements to avoid inconsistencies and minimise the prospect of dispute.

Secondly, and building on that, not only was the JOA part of the “Agreement” which made up the FOA (because the JOA was attached by way of schedule to the FOA), but the FOA also contained what the Court described as a “plethora of references throughout the FOA to compliance with the provisions of the JOA” which showed that they were intended to interact with each other. 

Thirdly, the argument that the FOA was an entirely separate and self-contained agreement could not sit with the parties’ express agreement for issuing AFEs, invoicing and payment under the FOA “in accordance with the relevant JOA”. The critical factor was that all billing under the FOA was to be done using the JOA accounting procedure and therefore invoicing Euroil for the Earn-In costs was subject, without qualification, to the JOA accounting procedure and the principles set out in it, in particular the ‘fair and equitable’ principle, reflected in market rates, and the ‘no gain no loss’ principle. 

Discussion

In one sense, it is difficult to see how the Court could have reached any other conclusion given the express inter-linking of the JOA into the FOA and the use of the JOA provisions for the accounting procedure. Looking at the language of the FOA in isolation, the Court found that Apache’s argument had at least an “initial attraction”. But the decisive factor was the fact that the proper construction of Euroil’s payment obligation fell to be determined on the basis of the text of both the FOA and the JOA, and sense made of each taken together. 

The realistic approach of construing multiple contracts used in the energy sector is a continuing one. There are different routes by which the approach can be deployed, for example by treating the other contract or contracts as part of the factual matrix in which the subject contract was made and against which it must be construed, even if not part of the same transaction and even if not directly inter-related (as they were in Apache v Euroil). 

The earlier decision of Teesside Gas Transportation v Cats North Sea Ltd [2020] EWCA Civ 503 illustrates this in perhaps an extreme form. In that case, the terms of a cost sharing formula in a Capacity Reservation and Transportation Agreement dated 1990 and relevant to the usage of the pipeline were construed in the light of the concepts found in the later Transportation & Processing Agreements with third party shippers (“TPAs”) were concluded by the CATS Parties and with which it was to be assumed the CRTA was to work in the future. A “separate contracts” / “subsequent contract” argument was rejected by the Court on the basis that “the concepts used in those later contracts (such as “Daily Reserved Capacity Rate”) were within the contemplation of the parties in 1990 even if the names given to them and the detailed terms of the TPAs were not” (per Males LJ at [84]).

Coda: “Precedence Clauses”: any use?

As so often, reliance was placed on a conflicts or inconsistencies precedence clause in the FOA (“If there is any conflict between the provisions [the FOA and the JOA], the provisions of this Agreement shall prevail”). Apache argued that this established that the FOA ‘trumped’ the JOA. Again, as equally so often, the Court emphasised that such clause was only of any utility in the case of true conflict, which would usually not arise once the terms had been construed together and for which, in Carr L.J’s words, it had to be shown that “one clause in one document emasculates another clause in another document”. [36]

Off-hire Clauses- Normally Construed Narrowly Unless the Wording Is Expansive!

Disputes concerning ‘off-hire’ clauses often require various legal construction techniques to be employed and can be rather challenging for the courts/arbitrators. However, the arbitrator managed to resolve the dispute under the relevant off-hire clause in London Arbitration 25/19 with not much difficulty.

The chartered vessel arrived at a port on the US West Coast on 23 October to discharge a cargo of steel products. The vessel’s cranes were inspected on behalf of the charterers’ stevedors by or on behalf of the International Longshore and Warehouse Union (ILWU) and the vessel failed that inspection. The owners maintained that the cranes were in good working order as they complied with all statutory and Class requirements and they had been inspected and used for loading and discharging in the US three months earlier. They also put forward a recent report from the crane manufacturers. The relevant off-hire clause in the charter party was worded in the following manner:

‘The Vessel will comply with any and all safety regulations and/or requirements applicable during the currency of this Charter Party, including those in effect of any port of loading and/or discharge. If the Vessel does not comply with said safety regulations or requirements, the Vessel will be off-hire until the Vessel is compliant with the said safety regulations or requirements… ‘

The charterers’ argument was that the vessel was off hire from the time when she failed the inspection to the time when she passed (i.e. after the cranes were repaired) and discharging started. The arbitrator found that the vessel’s failing the inspection amounted to breach of the Pacific Coast Marine Safety Code. This Code governed safe working practices and conditions for the whole of the US West Coast when ILWU labour was employed. The arbitrator found that the Code was at the very least a ‘safety requirement’ and quite possibly, for practical purposes also a ‘safety regulation’. The views of crane manufacturers, Class and engineering company were treated as irrelevant as they only reflected the earlier experience of the ship.

Given that the off-hire clause made explicit reference to ‘safety requirements’ as well as ‘safety regulations’, the outcome does not come as a surprise. Had it made reference only to ‘safety regulations’, a closer legal scrutiny of the nature and status of the Pacific Coast Marine Safety Code would have been necessary. The fact that the arbitrator refers to the Code as a ‘safety regulation for practical purposes’ indicates that from a technical perspective it might not qualify as a safety regulation! The message to charterers is very clear. Off-hire clauses are often construed in a narrow fashion so to be able to bring themselves under the off-hire clause they need to ensure that the wording used is expansive! Charterers in this case were glad that the wording in the off-hire clause was very broad i.e. made explicit reference to ‘safety requirements’. Few doubts can be raised for a finding that a Code that provides safe working practices and conditions in a port for stevedors, who are members of a trade union, is a ‘safety requirement’ for that port.                    

Mink to human spread of COVID 19. UK restrictions on travel from Denmark.

As from 0400 GMT on Sunday 8 November new rules begin in relation to travel from Denmark as a result of the release of “further information” from health officials in Denmark, where some 200 people have been found to have mink-related mutations of virus, most of them connected to farms in the North Jutland region. Any UK citizens who have travelled to Denmark must isolate for 14 days, along with their household.

Passenger planes and ships carrying freight from Denmark will also not be allowed to dock at English ports.

Cabin crew are also no longer exempt from the quarantine rules

The Department for Transport (DfT) has said that the rules will be reviewed after a week.

Hague Convention 2005. After the transition period.

As expected the UK government has made a fresh declaration agreeing to be bound by the Hague Convention on Choice of Law 2005 in its own right from the end of the transition period at 11pm, UK time, on 31 December  2020. It states “With the intention of ensuring continuity of application of the 2005 Hague Convention, the United Kingdom has submitted the Instrument of Accession in accordance with Article 27(4) of the 2005 Hague Convention. Whilst acknowledging that the Instrument of Accession takes effect at 00:00 CET on 1 January 2021, the United Kingdom considers that the 2005 Hague Convention entered into force for the United Kingdom on 1 October 2015 and that the United Kingdom is a Contracting State without interruption from that date.”

It has also made a reservation under art 21 of the Convention that it will not apply the Convention to insurance contracts except as stated below.

(a) where the contract is a reinsurance contract;

(b) where the choice of court agreement is entered into after the dispute has arisen;

(c) where, without prejudice to Article 1 (2) of the Convention, the choice of court agreement is concluded between a policyholder and an insurer, both of whom are, at the time of the conclusion of the contract of insurance, domiciled or habitually resident in the same Contracting State, and that agreement has the effect of conferring jurisdiction on the courts of that State, even if the harmful event were to occur abroad, provided that such an agreement is not contrary to the law of that State;

(d) where the choice of court agreement relates to a contract of insurance which covers one or more of the following risks considered to be large risks:

(i) any loss or damage arising from perils which relate to their use for commercial purposes, of, or to:

          (a) seagoing ships, installations situated offshore or on the high seas or river, canal and lake vessels;

          (b) aircraft;

          (c) railway rolling stock;

(ii) any loss of or damage to goods in transit or baggage other than passengers’ baggage, irrespective of the form of transport;

(iii) any liability, other than for bodily injury to passengers or loss of or damage to their baggage, arising out of the use or operation of:

         (a) ships, installations or vessels as referred to in point (i)(a);

         (b) aircraft, in so far as the law of the Contracting State in which such aircraft are registered does not prohibit choice of court agreements regarding the insurance of such risks;

         (c) railway rolling stock;

(iv) any liability, other than for bodily injury to passengers or loss of or damage to their baggage, for loss or damage caused by goods in transit or baggage as referred to in point (ii);

(v) any financial loss connected with the use or operation of ships, installations, vessels, aircraft or railway rolling stock as referred to in point (i), in particular loss of freight or charter-hire;

(vi) any risk or interest connected with any of the risks referred to in points (i) to (v);

(vii) any credit risk or suretyship risk where the policy holder is engaged professionally in an industrial or commercial activity or in one of the liberal professions and the risk relates to such activity;

(viii) any other risks where the policy holder carries on a business of a size which exceeds the limits of at least two of the following criteria:

          (a) a balance-sheet total of EUR 6,2 million;

          (b) a net turnover of EUR 12,8 million;

          (c) an average number of 250 employees during the financial year.

2. The United Kingdom of Great Britain and Northern Ireland declares that it may, at a later stage in the light of the experience acquired in the application of the Convention, reassess the need to maintain its declaration under Article 21 of the Convention.”

Times’ up. NBF gets s.12 extension.

The fate of Times’ anti-suit injunction against National Bank of Fujairah was reported in this blog on May 6 2020 –  they got their injunction on condition not to take any time bar point in any subsequent arbitration against them commenced by NBF.

Shortly afterwards, in National Bank of Fujairah v Times Trading Corp [2020] EWHC 1983 (Comm) Foxton J came part two of the saga. NBF had commenced arbitration against the registered owners, Rosalind, within the one year time limit under the Hague Rules, in respect of misdelivery. This expired on 20 June 2019. Shortly after receiving a copy of the bareboat charter, after months of asking, on 20 March NBF then made an application under s.12 of the Arbitration Act 1996, in respect of its claim against bareboat charterer, Times, on the assumption that the one year time bar applied to that claim.

In the first period before 18 January 2019 Times, through their solicitors, Waterson Hicks (WH), communicated in a manner which implied, and contributed to the belief of R&T, acting for NBF, that WH acted for the carrier liable under the Bills of Lading, and for the entity to whom the claims were appropriately addressed. WH acted innocently but Times knew the true position. In the second period after 18 January 2019, the conduct of WH, and of Times, was open to more criticism. The objective effect of the communications of WH and Holman Fenwick and Willan, solicitors for charterers Trafigura who became responsible for handling NBF’s misdelivery claims on behalf of Rosalind and Times, conveyed an impression which did not accord with the facts as Times and the parties acting for them understood them.

The question before Foxton J was whether the effect of this conduct such as to render it unjust hold NBF to the strict terms of the time bar. As regards the first period, the impression given on Times’ behalf, in ignorance of the true position up to 18 January 2019 and with knowledge of it thereafter, was a significant factor in NBF missing the time bar, such that the requisite causative nexus is established which made it unjust to hold NBF to the strict terms of the time bar. The jurisdictional threshold under s.12(3)(b) – whether the respondent’s conduct makes it unjust not to extend time – was satisfied.

On the matter of discretion, it was right to say that there had been significant culpable delay by NBF in failing to seek s.12 relief before it did – delay measured in months rather than merely weeks or days. The delay was particularly difficult to justify from early November 2019, when NBF did not appear to have taken the possibility that Times might be the carrier seriously. However, this was not a case in which it could be said that Times itself played no part in NBF’s delay in the period after 18 July 2019 when Reed Smith sent its letter advising that Rosalind was not the carrier, and that it was Times. However, the continuing refusal to provide a copy of the demise charter could be regarded as a continuation of the approach which had been adopted by or on behalf of Times before 18 July 2019, and which made it unjust to enforce the strict time bar against NBF. Its clear contribution to NBF’s delay in seeking s.12 relief was seen in the fact that, once the Bareboat Charter was produced for the purposes of Times application for an anti-suit injunction, NBF prepared and issued its s.12 application within short order.

The fault of NBF was not a reason for denying its application for relief under s.12, and NBF got its extension.

His last bow. As Teare(s) go by.

On 5 October 2020, Sir Nigel Teare gave his last judgment in the Admiralty Court, in a three handed collision case involving a pile up of three laden bulk carrier vessels in the Suez Canal in 2018. The Panamax Alexander (PA) was the final vessel in an eight vessel southbound convoy that halted some two hours after the initial convoy vessel suffered an engine breakdown and blocked the canal. The other vessels had to take emergency anchoring and/or mooring action. The sixth and seventh vessels managed to do this. About fifteen minutes later PA collided with the first of these, the Sakizaya Kalan (SK) which led to PA and SK drifting downstream and colliding with the Osios David (OD), over an hour after the initial collision. For a few minutes all three vessels were locked together and a further two sets of collisions took place.

PA was held 100% to blame in failing to appreciate that there was a risk of collision and, not mooring earlier to avoid that risk of collision. These were causative breaches of Rules 5, 7 and 8 of the International Collision Regulations (Colregs).

Although OD was at fault in that she had failed to inform SK and PA behind of her intention to moor, that fault had no causative potency as the duty to inform was owed mainly to the vessel immediately behind, which had already stopped before the first collision. Were the subsequent collisions caused by the initial collision for which PA was wholly to blame? Teare J stated:

“That question of causation depends upon whether the effect of the first collision was continuing in such a way as not merely to provide the opportunity for the later collisions but as to constitute the cause of them. The courts have answered questions of this nature (which usually arise where there has been intervening negligence) by the use of metaphors. Was the hand of negligent navigator on board PA still heavy on SK and OD at the time of the later collisions? Were those on board SK and OD not free agents by reason of the hard necessities imposed on them by the first collision? Were those on board SK and OD still in the grip of the first collision? These metaphors and their source are described by Brandon J. in The Calliope at p.101. Such questions are to be approached in a broad common sense way; see p. 102.[298].”

Teare J concluded that the initial collision “not merely provided the opportunity for the later collisions but constituted the cause of” those subsequent collisions, even though they took place over an hour after that and recognized the difficulties faced by the master of SK and of OD on the horns of a dilemma created by the fault of PA. Accordingly, PA was found wholly responsible and liable for all the collisions.