Covid lockdown and force majeure. Sale of vessel for demolition

The emergence of the COVID pandemic in March 2020 led to a great interest in commercial circles as to the effect on their contracts of force majeure clauses. One such case is NKD Maritime Ltd v Bart Maritime (No. 2) Inc [2022] EWHC 1615 (Comm) (24 June 2022) which involved the sale of a vessel for demolition on the beaches of India at the time the world was waking up to the pandemic.

On 5 March 2020 Bart Maritime concluded a MOA with NKD for the sale of a ship for scrapping in India with delivery to be at “outer anchorage Alang”. An initial payment of 30% of the purchase price was made and the vessel sailed to India but due to the risk of COVID the vessel was refused entry to the Gulf of Khambat Vessel Traffic Scheme (VTS) on 21 March 2020. Shortly afterwards India went into lockdown on 25 March 2020 which was extended on 14 April 2020 for a further 15 days. During this time the vessel was waiting some 100 nautical miles off Alang and on 14 April the buyers purported to cancel pursuant to cl.10 which gave either party the right to terminate the contract “should the Seller be unable to transfer title of the Vessel or should the Buyer be unable to accept transfer of the Vessel” due to (among other things) “restraint of governments, princes, rulers or people of any nation”. Owners claimed that this amounted to a repudiation and claimed retention of the initial payment as well as damages.

Three issues arose before Butcher J. First, did clause 10 operate so that transfer of title meant that there had to be a delivery of the vessel? Butcher J held that NKD were not entitled to cancel pursuant to cl.10 as, although delivery was affected by the COVID restrictions, these did not affect the ability of the seller to transfer title of the vessel. Transfer of title required payment of the price, delivery of the bill of sale and deletion from the relevant ship’s registry, and the COVID delays did not render Bart unable to transfer title. The MOA referred to both delivery and transfer of title, but they were not interchangeable terms and sometimes the terms appeared in the same clause meaning different things.

Second, if, contrary to the first finding cl.10 did require delivery as part of transfer of title, had there been a delivery as of 14 April? The vessel was not delivered at the delivery location as she had been told  not to enter the Vessel Traffic Scheme, and had anchored some 100 nautical miles off Alang.  However, there had been delivery pursuant to the substituted delivery provisions in cl.2 (a) of the MOA which provided

“[t]hat “if, on the Vessel’s arrival, the Delivery Location is inaccessible for any reason whatsoever … the Vessel shall be delivered and taken over by the Buyer as near thereto as she may safely get at a safe and accessible berth or at anchorage which shall be designated by the Buyer, always provided that such berth or anchorage shall be subject to the approval of the Seller which shall not be unreasonably withheld. If the Buyer fails to nominate such place within 24 (twenty four) hours of arrival, the place at which it is customary for vessel (sic) to wait shall constitute the Delivery Location”.

The delivery location was clearly inaccessible and the vessel had ‘arrived’ as it had got as near as possible to the delivery location. Although waiting outside the VTS was not a customary waiting place, for the purpose of the clause it was a suitable place to wait given the order of the port authority for the vessel not to enter the VTS.

Third, if cl.10 did require delivery as part of transfer of title, and there had been no delivery, could the buyer rely on cl.10? There was clearly a temporary restraint of government, but that was insufficient to show that Bart had been ‘unable’ to transfer title. ‘Inability’ to perform for the purposes of clause 10 by reason of a temporary restraint of governments depended on whether the probable period of that restraint was such as materially to undermine the commercial adventure. “Inability” was not to be judged simply by reference to whether there was inability to perform by the contractual cancellation date.

An analysis similar to that undertaken as regards frustration was required. Relevant factors were: the sale contract was for demolition of the ship, not for its trading; demolition would take a year from delivery; some delays were to be anticipated in demolition given that there were only two times in the month that the tides were such as to enable the vessel to be beached; delays were not anticipated beyond the expiry of the lockdown on 3 May and on 15 April revised guidance was issued by the Indian Home Secretary which permitted certain activities, including shipbreaking, to resume as of 20 April. The Court noted that had the buyers not purported to cancel it is likely that the vessel would have arrived at Alang outer anchorage on 1 May.

Butcher J concluded that that NKD was not entitled to terminate the MOA on 14 April 2020, and in doing so it was in default under the MOA and had repudiated the contract. Bart was entitled to retain the initial payment and to claim further compensation to the extent to which the initial payment did not cover any losses which it had sustained as a result of NKD’s non-fulfilment of the contract.

The decision is particularly interesting as to the construction of force majeure clauses in regard to the effects of the pandemic on contractual performance, particularly as regards the analysis of whether these had caused an ‘inability’ to perform.

EU inclusion of shipping in the ETS. Latest developments.

Almost a year ago the EU Commission proposed inclusion of shipping in the Emissions Trading Scheme https://iistl.blog/2021/07/14/bastille-day-eu-commissions-present-to-the-shipping-industry/  with a proposed directive amending the 2003 ETS Directive. This was considerably less extensive that the proposed amendment to the 2015 MRV Regulation which is what the EU Parliament voted for in October 2020. The matter has recently come back to the European Parliament which voted on 22 June to make certain amendments to the EU Commission’s proposed directive amending the 2003 ETS Directive.

The Parliament’s proposed amendments would see coverage of 100% of emissions from intra-European routes as of 2024 and 50% of emissions from extra-European routes from and to the EU as of 2024 until the end of 2026. From 2027, emissions from all trips in and out of the EU should be covered 100% with possible derogations for non-EU countries where coverage could be reduced to 50% subject to certain conditions. 75% of the revenues generated from auctioning maritime allowances should be put into an Ocean Fund to support the transition to an energy-efficient and climate-resilient EU maritime sector. Instead of the phasing in of the surrender of allowances proposed by the Commission, the Parliament proposes that from 1 January 2024 and each year thereafter, shipping companies shall be liable to surrender allowances corresponding to one hundred percent (100 %) of verified emissions reported for each respective year.

Under the Commission’s proposal the person or organisation responsible for the compliance with the EU ETS should be the shipping company, defined as the shipowner or any other organisation or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner.

The Parliament has accepted this, but has proposed an amendment whereby, a binding clause should be included in contractual arrangements with the shipping company so that the entity that is ultimately responsible for the decisions affecting the greenhouse gas emissions of the ship is held accountable for covering the compliance costs paid by the shipping company under this Directive. That entity would normally be the entity that is responsible for the choice and purchase of the fuel used by the ship, or for the operation of the ship, as regards, for example, the choice of the cargo carried by, or the route and speed of, the ship – in other words, the time charterer.

Quite how this binding clause in time charters of vessels coming into and out of the EU would be monitored is another matter.

The Parliament also proposed the expansion of the MRV Regulation, Regulation (EU) 2015/757, beyond CO2 emissions, to encompass ‘greenhouse gas emissions’ meaning the release of CO2, Methane and Nitrous Oxides into the atmosphere. The scope of the MRV Regulation should also be amended to cover ships of 400 gross tonnage and above from 1 January 2024, but operators of such ships operators should only be required to report the information which is relevant for inclusion from 1 January 2027 of such ships within the scope of the EU ETS, in particular the type of fuel, its carbon factor and energy density.

The Parliament’s decision was shortly followed by the Council communication of 29 June 2022 stating:

“The Council agreed to include maritime shipping emissions within the scope of the EU ETS. The general approach accepts the Commission proposal on the gradual introduction of obligations for shipping companies to surrender allowances. As member states heavily dependent on maritime transport will naturally be the most affected, the Council agreed to redistribute 3,5% of the ceiling of the auctioned allowances to those member states. In addition, the general approach takes into account geographical specificities and proposes transitional measures for small islands, winter navigation and journeys relating to public service obligations, and strengthens measures to combat the risk of carbon leakage in the maritime sector.

The general approach includes non-CO2 emissions in the MRV regulation from 2024 and introduces a review clause for their subsequent inclusion in the EU ETS.”

Following the adoption of the Council’s position, negotiations between the Parliament and the Council will start shortly in view of finding an agreement on the final text. One way or another, the inclusion of shipping in the ETS is coming soon.

Breaking limitation under the CMR?

The owner of two extremely valuable cars, a Mercedes Benz CLK GTR 97 and a 1948 Talbot-Lago T26 GS Franay Cabriolet claimed damages from the carrier, CARS, after they were damaged while in its possession. The carrier CARS was engaged through Peter Auto, a French events management company, to transport the two cars from the premises of their owner, Mr Knapfield, in Beaconsfield to the Chantilly Arts & Elegance Richard Mille Concours d’Etat (“Chantilly”), north of Paris, and back again after the event. During the return journey both cars were damaged when the Talbot – which had been stowed forward of the CLK 97 –  slipped backwards into the CLK 97, due to the front wheel straps attached to the Talbot becoming free, as a result of inadequate securing of its front wheel straps.

The central issue in Knapfield v CARS Holdings Ltd Company (No. 05481676) & Ors [2022] EWHC 1437 (Comm) (13 June 2022). was whether the owner’s damages were limited by the Carriage of Goods by Road Act 1965 which incorporates the CMR Convention (“CMR”).  The Convention’s provisions have the force of law “so far as they relate to the rights and liabilities of persons concerned in the carriage of goods by road under a contract to which the Convention applies” (s1) and a person concerned in the carriage of goods by road includes a consignee (s14(2)(b)). Under CMR the carrier’s liability would be limited to SDR 23,490.60, about $20,000, considerably lower than the diminution in value claimed by the owner of the two cars.

The CMR applied because there was a contract for the carriage of goods for the vehicles by road in the Transporter for reward, and because CARS took over the vehicles in France for carriage to the United Kingdom. The owner of the cars was not a party to that contract, but CMR applied because he was the consignee.  The failure of CARS to issue a consignment note did not affect the applicability of CMR due to article 4 which provides “The contract of carriage shall be confirmed by the making out of a consignment note. The absence, irregularity or loss of the consignment note shall not affect the existence or the validity of the contract of carriage which shall remain subject to the provisions of this Convention.” There was nothing in CMR which expressly placed the burden of issuing the consignment note on the carrier so that a claim for breach of contract could be made against the carrier for failure so to do.

The owner’s case was that the liability of CARS was not limited by CMR, due to three exceptions, all of which were rejected by Charles Hollander QC, acting as a Deputy Judge of the High Court:

a. Where the sender declares in the consignment note a value for the goods (Article 24 CMR).

The owner was not a party to the contract of carriage and was not the sender, who was the party that needed to make such declaration. Any discussion between the owner and the sender about the value of the vehicles, which was disputed, was oral and was not declared in the consignment note, as there was no consignment note. Any declaration of value needed to have been made with the agreement of CARS as the carrier and be evidenced in writing. There was no such agreement here.

b. Where the sender fixes the amount of a special interest in delivery in the consignment note (Article 26 CMR).

This argument failed for the same reasons as the Article 24 argument, with the additional reason being that “special interest” must provide for loss or damage which is not provided for in Articles 23, 24 and 25, such as consequential loss.

c. Where the damage was caused by the wilful misconduct of the carrier or its servants or agents (Article 29 CMR).

To establish wilful misconduct on the part of the carrier or its servants and agents, the Claimant needed to prove that:

a. There must have been misconduct.

b. The carrier, employee or agent either (a) must have committed the misconduct deliberately knowing that the conduct was wrongful, regardless of the consequences, or (b) must have committed the misconduct deliberately with reckless indifference as to whether what he or she was doing was right or wrong, where such misconduct was unreasonable in all the circumstances.

c. There must have been an increased real and substantial risk of damage to the goods resulting from such misconduct and the carrier, employee or agent must have been aware of that additional risk.

Such misconduct was not made good by negligence or even gross negligence. The case of wilful misconduct was based on the combination of an unjustified failure by CARS’ driver, Mr Constantinou, to follow instructions given by the owner to him and the use of an unsafe method of securing the Vehicles in circumstances. Responsibility and expertise in carrying the Vehicles lay with CARS rather than the owner and whilst a failure to do what the owner had proposed or advised might be evidence of deliberate or reckless conduct, it would not be a breach of any obligation to fail to follow the owner’s instructions,

The cause of the damage was the failure of Mr Constantinou properly to secure the front over-the-wheel straps on the Talbot on the return journey, so that in the course of that journey they worked loose. Although that failure could readily be described as negligent, perhaps even grossly negligent, there was no reason to think it was reckless, still less deliberate. Although Mr Constantinou had failed to follow company policy to use chocks were possible, there was a legitimate explanation for this – he did not do so because the Transporter had forward wheel wells sunk into the deck, and the Talbot was driven into the wells, which had already acted as chocks. Significantly, that method for transportation was the same as been used for the carriage to Chantilly without incident, which went against any suggestion that the method of carriage was reckless.

The owner also claimed by way of damages for misrepresentation under s2(1) of the Misrepresentation Act 1967, and by way of an alleged contract with CARS  whereby it agreed to reimburse him for the damage which had occurred in full, that contract being separate to CMR. The Misrepresentation claim could not succeed as this claim could not succeed because the misrepresentation would have been made to someone who was neither a contracting party or their agent. The claim based on the reimbursement contract could not succeed as there was no consideration for CARS’ promise, and if there were to be an enforceable promise to surrender the right to rely on the statutory limit of liability under CMR, there would have to have been express reference to the right to limit. Without such a reference, the promise would not be clear and unequivocal, which is a requirement for a contractual surrender of such rights of limitation.

The Prestige case. Victory for Spain in the CJEU.

Back in March we noted the reference to the CJEU of three questions regarding the application of Article 34 in the London P&I Club’s appeal against the recognition of the Spanish judgment against it in The Prestige case. https://iistl.blog/2022/03/25/the-prestige-20-years-on-cjeu-reference-may-be-withdrawn-at-last-gasp/

The High Court stayed proceedings and referred three questions to the CJEU for a preliminary ruling:

1. Is a judgment granted pursuant to s.66 of the Arbitration Act 1996 capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3)?

2. Is a judgment falling outside the material scope of Regulation No 44/2001 by reason of the Article 1(2)(d) arbitration exception, capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3)?

3. If Article 34(3) does not apply, can Art 34(1) be relied on as a ground of refusing recognition and enforcement of a judgment of another Member State as being contrary to domestic public policy on the grounds that it would violate the principle of res judicata by reason of a prior domestic arbitration award or a prior judgment entered in the terms of the award granted by the court of the Member State in which recognition is sought?

The Court of Appeal set aside the Judge’s order referring the questions to the CJEU. However, only the referring judge has jurisdiction to withdraw the reference. The Court of Appeal referred to Butcher J, pursuant to CPR 52.20(2)(b), the question of whether, in the light its judgment, he should withdraw the reference he made to the CJEU on 21 December 2020.

  The reference was not withdrawn and on Monday the CJEU gave its decision on the three questions referred [2022] EUECJ C-700/20.

The answer to the first two questions is that Article 34(3) of Regulation No 44/2001 must be interpreted as meaning that a judgment entered by a court of a Member State in the terms of an arbitral award does not constitute a ‘judgment’, within the meaning of that provision, where a judicial decision resulting in an outcome equivalent to the outcome of that award could not have been adopted by a court of that Member State without infringing the provisions and the fundamental objectives of that regulation.

The infringement would be two fold. First, as regards the relative effect of an arbitration clause included in an insurance contract which does not extend to claims against a victim of insured damage who bring a direct action against the insurer, in tort, delict or quasi-delict, before the courts for the place where the harmful event occurred or before the courts for the place where the victim is domiciled (as per the CJEU judgment of 13 July 2017 in Assens Havn, C 368/16, EU:C:2017:546).

Second, as regards the rules on lis pendens in Article 27 which favour the court first seised where there are parallel proceedings between the same parties, and does not require effective participation in the proceedings in question. The proceedings in Spain and in England involved the same parties and the same cause of action, and the proceedings were already pending in Spain on 16 January 2012 when the arbitration proceedings were commenced. It is for the court seised with a view to entering a judgment in the terms of an arbitral award to verify that the provisions and fundamental objectives of Regulation No 44/2001 have been complied with, in order to prevent a circumvention of those provisions and objectives, such as a circumvention consisting in the completion of arbitration proceedings in disregard of both the relative effect of an arbitration clause included in an insurance contract and the rules on lis pendens laid down in Article 27 of that regulation. No such verification took place before either the High Court or the Court of Appeal and neither court made a reference to the CJEU for a preliminary ruling under Article 267 of the CJEU.

The answer to the third question is that Article 34(1) of Regulation No 44/2001 must be interpreted as meaning that, in the event that Article 34(3) of that regulation does not apply to a judgment entered in the terms of an arbitral award, the recognition or enforcement of a judgment from another Member State cannot be refused as being contrary to public policy on the ground that it would disregard the force of res judicata acquired by the judgment entered in the terms of an arbitral award.

Sanctions, force majeure. No obligation to accept payment in alternative currency.

MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) raises the question of whether the effect of financial sanctions obliges a contractual party to accept payment in a currency other than that specified in the contract. Mur Shipping BV (“the Owners” or “MUR”) concluded a Contract of Affreightment (“COA”) with RTI Ltd (“the Charterers” or “RTI”) in June 2016. Under the COA, the Charterers contracted to ship, and the Owners contracted to carry, approximately 280,000 metric tons per month of bauxite, in consignments of 30,000 – 40,000 metric tons, from Conakry in Guinea to Dneprobugsky in Ukraine. On 6 April 2018, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) applied sanctions (“the sanctions”) to RTI’s parent company, adding them to the Specially Designated Nationals and Blocked Persons List. This led to the Owners invoking a force majeure clause in the COA by sending a force majeure notice (“FM Notice”) on 10 April 2018 in which the Owners said that it would be a breach of sanctions for the Owners to continue with the performance of the COA and noted that the “sanctions will prevent dollar payments, which are required under the COA”.

The force majeure clause provided for the suspension of the obligation of each party to perform the Charter Party while such Force Majeure Event is in operation.  The clause provided that

“36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:

a) It is outside the immediate control of the Party giving the Force Majeure Notice;

b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;

c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;

d) It cannot be overcome by reasonable endeavors from the Party affected.”

The claim arose from the fact that RTI had chartered in 7 vessels when MUR, alleging force majeure, suspended performance of the COA in April 2018, and was based on the difference between the COA and chartered in rates for these 7 vessels.

The tribunal accepted that the effect of both “primary” and “secondary” sanctions was drastic. Thus, normal commercial counterparties would be frightened of trading with the party that has been sanctioned, bank finance was likely to be frozen, and underwriters would be reluctant to insure normal trading activities. The tribunal also held that sanctions had an impact on the ability of the Charterers to make US dollar payments to the Owners. The tribunal held that, but for one point, the Owners’ case on force majeure succeeded. The point on which it failed was that, applying the terms of the force majeure clause, it could have been “overcome by reasonable endeavours from the Party affected.” This was because the tribunal considered that the exercise of reasonable endeavours required the Owners to accept a proposal made by the Charterers to make payment in €. The tribunal described this as a “completely realistic alternative” to the payment obligation in the COA, which was to pay in US dollars.

Jacobs J held that the Tribunal had erred in their finding that “reasonable endeavours” required the Owners to accept the Charterers’ proposal to make payment in a non-contractual currency. A party does not have to perform the contract otherwise than in accordance with the contract in order to avoid a force majeure event. There was no reason to construe the force majeure clause as being concerned only with contractual obligations directly concerned with loading and discharging: the force majeure event may have an impact on other contractual obligations which then have the causative impact required by clause 36.3 (b). Jacobs J noted “Clause 36.3 (b) is an important part of the force majeure clause: it identifies the necessary consequence, as a matter of causation, of the “event or state of affairs” described in other parts of the clause. However, it is clear from clause 36.3 (c) that there may be a wide range of different matters which bring about the consequence that loading or discharge is delayed or prevented. Those matters include “restrictions on monetary transfers and exchanges”.

Interruption of laytime and demurrage due to owners refusing to berth.

In London Arbitration 12/22 a dispute arose as to demurrage due under a charter on an amended Gencon 94 form for a voyage carrying coal from Indonesia to China.  The owners refused to berth the vessel when ordered to do so by the charterers, because of the probability of a delay in commencing discharge because the storage yard to which the charterers intended to discharge the cargo was full. Charterers did not confirm they would reimburse the owners for berthing charges levied on the vessel during the period of non-discharge, and the vessel therefore remained at the anchorage until space became available.

The tribunal found that berthing charges levied on the vessel fell to the account of owners under 13(a) of the Gencon 94 form which provides “Taxes and Dues Clause (a) On Vessel – The Owners shall pay all dues, charges and taxes customarily levied on the Vessel, howsoever the amount thereof may be assessed.” The cost of using the berth was not part of the cost of cargo operations, which were for charterer’s account under cl.5.

The tribunal found that following The Stolt Spur [2002] 1 Lloyd’s Rep 786, any non-availability, whether it affected cargo operations or not, or even if none were planned, was sufficient to prevent laytime and or demurrage running. The owners were in breach of their obligation to have their vessel available, whether called upon to perform cargo operations or not, and this applied to a ship at anchorage, especially were a berth was free.

EU Port Services Regulation heading for the UK dustbin. Consultation process now running.

The Port Services Regulation 2017/352 Regulation (the PSR), includes provisions in the following areas: market access for port service providers; transfer of undertakings; financial transparency; charges; training and consultation; complaints and appeals.

The PSR has not been popular in the UK. In October 2017 the then shipping minister John Hayes told members of the UK Major Ports Group that the Regulation would be “consigned to the dustbin” in the UK due to Brexit”. But the Port Services Regulation was not immediately repealed. It was supplemented in domestic legislation by practical and procedural provisions in the Port Services Regulations 2019 (SI 2019/575) and in The Pilotage and Port Services (Amendment) (EU Exit) Regulations 2020 (SI 2020/671 which covers the situation as from 1.1.21.

The government’s view is that all the areas covered by the Ports Services Regulation are sufficiently covered in the UK by commercial practice within the framework of domestic law. The government intends to repeal the PSR as EU retained law, to revoke The Port Services Regulations 2019, and to amend the Pilotage and Port Services (Amendment) (EU Exit) Regulations 2020, by revoking those parts of the regulations that relate to the PSR and were made to ensure that the EU PSR remained operable after the UK’s withdrawal from the European Union.

 The government has now opened a consultation period from 22 March – 22 April 2022, https://www.gov.uk/government/consultations/repealing-the-eu-port-services-legislation/repealing-the-eu-port-services-legislation#:~:text=The%20government%20has%20signalled%20its,worked%20properly%20for%20the%20UK.

The Prestige, 20 years on. CJEU reference may be withdrawn at last gasp.

The London Steam-Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain M/T “PRESTIGE” (No. 5) [2022] EWCA Civ 238 (01 March 2022),  concerns a reference to the CJEU by Butcher J, arising out of the longstanding litigation between Spain and the owners’ P&I Club in connection with the Prestige oil spill in 2002. The Club had appealed against an order registering the judgment of the Spanish Supreme Court on 28 May 2019. The appeal was fixed for a two-week trial from 2 December 2020 to determine (i) as a matter of law, whether the judgment entered by Hamblen J constituted a judgment within the meaning of Article 34(3) and, if not, whether that judgment and the arbitration award (and the res judicata to which they give rise as a matter of English law) could be relied upon and (ii) as a matter of fact and law, whether the Spanish Proceedings had breached the human rights of the defendants, including the Club.

Spain made an application seeking the reference of six questions to the CJEU (later adding a seventh) and invited  Butcher J to determine that application at the hearing of the appeal in order to be in a position to lodge any request with the CJEU before “the Brexit cut off”  with the end of the Implementation Period on 31 December 2020. On 21 December 2020 Butcher J then referred three issues to the CJEU.

“(1) Given the nature of the issues which the national court is required to determine in deciding whether to enter judgment in the terms of an award under Section 66 of the Arbitration Act 1996, is a judgment granted pursuant to that provision capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3) of EC Regulation No 44/2001?

(2)  Given that a judgment entered in the terms of an award, such as a judgment under Section 66 of the Arbitration Act 1996, is a judgment falling outside the material scope of Regulation No 44/2001 by reason of the Article 1(2)(d) arbitration exception, is such a judgment capable of constituting a relevant “judgment” of the Member State in which recognition is sought for the purposes of Article 34(3) of the Regulation?

(3)  On the hypothesis that Article 34(3) of Regulation No 44/2001 does not apply, if recognition and enforcement of a judgment of another Member State would be contrary to domestic public policy on the grounds that it would violate the principle of res judicata by reason of a prior domestic arbitration award or a prior judgment entered in the terms of the award granted by the court of the Member State in which recognition is sought, is it permissible to rely on 34(1) of Regulation No 44/2001 as a ground of refusing recognition or enforcement or do Articles 34(3) and (4) of the Regulation provide the exhaustive grounds by which res judicata and/or irreconcilability can prevent recognition and enforcement of a Regulation judgment?”

At the time of making the reference Butcher J had not decided the Club’s human rights argument. That was decided against the Club in May 2021, after the end of the Implementation Period, and could not be referred to the CJEU. The reference, C-700/20, was heard by the CJEU on 31 January 2022 and the opinion of the Advocate General is expected on 5 May 2022, with the judgment of the CJEU to be delivered at any time thereafter.

The Club appealed the decision of Butcher J, and on 1 March 2022 the Court of Appeal held that Butcher J did not have the authority to refer the questions to the CJEU. The necessity test mandated in Art 267 of 267 of the Treaty on the Functioning of the European Union would only be satisfied if the European law question is conclusive of the issue which the national court has to decide on a particular occasion in accordance with its national procedure. The judge’s discretion as to whether to make a reference only arises once the test of necessity has been satisfied.  That was not the case here as Butcher J had not decided the human rights policy issue raised by the Club. Unless and until that issue had been determined against the Club, the questions referred could not be said to be conclusive or even substantially determinative of the appeal. The questions could have been resolved entirely in Spain’s favour, yet the Club could have won on the human rights issue. Looking at previous CJEU authority in Cartesio Oktato es Szolgaltato bt (Case 210/06) [2009] Ch 354 it was clear that as a matter of national law a reference can be set aside on appeal.

The Court of Appeal allowed the appeal and set aside the Judge’s order referring the questions to the CJEU. However, only the referring judge has jurisdiction to withdraw the reference. The Court of Appeal referred to Butcher J, pursuant to CPR 52.20(2)(b), the question of whether, in the light its judgment, he should withdraw the reference he made to the CJEU on 21 December 2020. The Court of Appeal indicated that the hearing should take place as soon as possible, and in any event in time for any decision to withdraw the reference to be effective.

UK bans Russian ships from entry to UK ports

As part of the UK’s sanctions against Russia following its invasion of Ukraine, Regulations 57 a-i of The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022 (SI 2022/203) took effect on 1 March 2022. These ban the entry into UK ports of

(a)a ship owned, controlled, chartered or operated by a designated person,

(b)a ship owned, controlled, chartered or operated by persons connected with Russia,

(c)a ship registered in Russia,

(d)a ship flying the flag of Russia, or

(e)a specified ship.

A ship is ‘controlled’ by “a person who is able to take decisions about its operation, including (but not limited to) decisions about the route the ship may take and the appointment of master or crew.

The Secretary of State may direct the UK Ship Registrar to terminate the registration of such ships and to direct harbour authorities to detain Russian ships at ports or anchorages.

The Secretary of State may also specify a ship for the purposes of the entry prohibitions provided the Secretary of State—

(a) has reasonable grounds to suspect that the ship is, has been, or is likely to be, involved in a relevant activity, and

(b) considers that it is appropriate for that ship to be specified, having regard to the purposes stated in regulation 4.

A ship is “involved in a relevant activity” if the ship is used for any activity whose object or effect is to contravene or circumvent, or to enable or facilitate the contravention or circumvention of, any provision of these Regulations.

The prohibition on entry does not, as yet, apply to Russian cargo although there have been incidents where dockers in the UK have refused to unload such cargo.

Canada also closed its port to Russian ships on 1 March. The European Commission has also proposed banning Russian ships from docking at European ports but there is currently opposition to this.

The Wall Street Journal has reported that an estimated 60,000 Russian and Ukrainian sailors are stuck at ports, with Russia providing over 10% of the global workforce for shipping.

Russia’s prime minister, Mikhail Mishustin, has said that nations that ban Russian ships from their ports could face retaliation.

Article 13.2 LLMC. Effect on LOU of owners establishing limitation fund in a different jurisdiction.

A maritime claim is brought before the courts of a state which applies the 1996 Protocol to the 1976 LLMC, and the owners P&I Club provides security based on the limits of the 1996 Protocol. However, the owners commence proceedings in another jurisdiction to limit by reference to the lower level in the 1976 LLMC which is in force in that jurisdiction? Do those proceedings affect the security provided by the Club? This was the issue which came before HH Judge Pelling QC in the High Court in Enemalta Plc v The Standard Club Asia Ltd [2021] EWHC 1215 (Comm)

The claim was for damage to an underwater connector cable, which caused a nationwide power failure in Malta. This was allegedly caused by a vessel, whose registered owners were a company domiciled in Singapore , and which was entered with the defendant P&I Club. The claim was brought in Malta which applies the 1996 Protocol and security was provided by owner’s P&I Club up to the limitation figure in the 1996 Protocol, and the LOU was subject to English law and exclusive jurisdiction of English High Court.

Owners then commenced proceedings in Singapore and sought to limit by reference to the lower level in the 1976 LLMC which applied in Singapore. Owners invited the Singapore court to order that on establishment of this fund any existing security given by or on behalf of owners should be released immediately. The claimants then requested the English High Court to make various declarations as to the validity of the LOU, irrespective of what the Singapore Court might decide. The defendant to these proceedings was the P&I Club and not the owner and the sole basis for the challenge to the High Court’s jurisdiction to make the requested declaration was that the Singapore Court had sole and exclusive jurisdiction to make an order art 13.2 of 1976 Convention.

Article 13.2 provides: “After a limitation fund has been constituted in accordance with Article 11, any ship or other property, belonging to a person on behalf of whom the fund has been constituted, which has been arrested or attached within the jurisdiction of a State Party for a claim which may be raised against the fund, or any security given, may be released by order of the Court or other competent authority of such State…”

HH Judge Pelling QC saw the instant case as the mirror image of the ICL Vikraman [2003] EWHC 2320 Comm, where an English domiciled Club provided a LOU, with a non- exclusive English jurisdiction agreement, to Cargo in Singapore to secure release of vessel arrested there. The UK was then party to 1976 LLMC, and Singapore not. Owners established their Fund in England and applied to the High Court to order the release of the  LOU under art 13.2 of LLMC. Colman J  held that although the owner was entitled to establish the limitation fund in England, the effect of Article 13.2 was that security located in Singapore did not fall within that article because Singapore was not a state party to the 1976 Convention and so that security would not be, or could not be, released

In the instant case, it was at least strongly arguable that an English court applying English law would conclude that the letter of undertaking should be treated as located in England. Therefore, the Singapore Court would have no jurisdiction to order its release, if that is what ultimately happened. The LOU would not be a security within the jurisdiction of a state party to the 1976 Convention. If the claimant succeeded in recovering a judgment in the Maltese proceedings for a sum in excess of the security that would be provided under the 1976 Convention in Singapore, the claimant would then seek to enforce its claim in England against the defendant under the letter of undertaking. By the terms of the LOU those proceedings would have to be brought in England and would be subject to English law. There was no principled reason why the court would not have jurisdiction to determine by declaration what would be the effect on the LOU of any order made by the Singapore Court under Article 13.2.

Although the Singapore Court had exclusive jurisdiction to make an order under Article 13.2 of the 1976 Convention, the present proceedings were concerned with the dispute between the claimant and the defendant as to the effect of any order made in the Singapore proceedings, commenced by or in the name of the vessel’s owner, on the liability of the defendant under its autonomous contract with the claimant. That was an issue that the parties had agreed should be determined exclusively by the English Court. Accordingly, HH Judge Pelling QC rejected the Club’s challenge to the jurisdiction of the High Court to hear the claim seeking declarations as to the continuing validity of the security provided under the LOU.