Claims against time charterers for damage to ship, caused by damage to cargo, not subject to limitation under 1976 LLMC.

In  July 2012 while under charter to MSC from the owner Conti, the MSC Flaminia suffered an explosion which killed five of her crew, and one crew member was never found.  Hundreds of containers were destroyed and extensive damage was caused to the ship. The explosion was caused by auto-polymerisation of the contents of one or more of three tank containers laden with 80% divinylbenzene (‘DVB’) which  had been shipped at New Orleans on 1 July 2012. In a series of arbitration awards MSC was held liable to Conti in respect of the casualty, and Conti was awarded damages of c.US$200 million on a quantification by the arbitrators of its recoverable losses.

In June 2020 MSC commenced an Admiralty limitation claim under the 1976 LLMC as amended by the 1996 Protocol which came before Andrew Baker J who gave judgment at the start of this month, MSC Mediterranean Shipping Company SA v Stolt Tank Containers BV & Ors [2022] EWHC 2746 (Admlty) (02 November 2022)

There were three defendants two Stolt companies (the first and second defendants, ‘Stolt’), Stolt having been the road carrier of the DVB tank containers to New Orleans, and vis-à-vis MSC the shippers of those containers onto MSC Flaminia, claimants other than Stolt in a claim brought by cargo claimants whose bill of lading claims against MSC were subject to English law and jurisdiction, and Conti, the shipowner.

Conti’s claims included ship repair costs, payments to public authorities in Belgium, France, the UK and Germany following the casualty and also the costs of and associated with removing the waste from the ship. Could MSC limit in respect of these claims? This involved a question of whether the effect of the phrase ‘consequential loss’ in Article 2(1)(a). Where losses caused by damage to the cargo were losses which Conti was required to incur in order to repair the ship, could Conti’s claims in respect of those losses be characterised as claims in respect of damage to the ship or consequential losses resulting from such damage and if so, did it follow that those claims could not be limited under Article 2(1)(a)?

Claims for consequential loss had been found to be limitable in The Aegean Sea  and The APK Sydney. Andrew Baker J, considered that the lost profits claims in The Aegean Sea, were claims for consequential loss resulting from the environmental damage, and the lost profits claims in The APL Sydney, had been claims for consequential loss resulting from the pipeline damage, where the relevant property damage occurred in direct connection with the operation of the ship in question, and was not damage to the ship herself. Those claims as made against the owner were limitable, and similarly the claim by the owner to pass those claims on to the charterer.

However that was not the case in the instant case, which involved claims in respect of damage to the ship which were not limitable, as held by the Court of Appeal in The CMA Djakarta , approved obiter by the Supreme Court in The Ocean Victory. The fact that it could be said, in point of fact, that all the damage to the ship can be traced back, by a chain of causation, to loss of or damage to the DVB that exploded, did not mean that a claim by Conti for compensation for damage to the ship was a claim in respect of loss of or damage to the DVB (or consequential loss resulting therefrom). The causal connection on the facts did not turn a claim for damaging the ship into a cargo claim. Conti’s claim against MSC, established in the arbitration, did not seek to enforce a right of redress in respect of loss of or damage to cargo, but rather a right of redress in respect of the risk of harm to the ship that had been posed by the cargo, and the damage the ship suffered when that risk eventuated

MSC also claimed that costs incurred by Conti related to the removal or destruction of cargo waste, burned or unburned were limitable under Article 2(1)(e), as claims “in respect of the removal, destruction or the rendering harmless of the cargo of the ship”. This claim was also found not to be limitable. The ordinary meaning of Article 2.1(d)/(e), is that tonnage limitation is to apply in respect of liabilities such as might be incurred by an owner for casualty intervention or aftermath liabilities of the kinds indicated, i.e. wreck removal (etc.) (Article 2.1(d)) and cargo removal, destruction or neutralisation (Article 2.1(e)). Conti’s claim for reimbursement of or damages in respect of the cost of cargo handling due to MSC’s breach in loading dangerous cargo was not a claim in respect of the removal, destruction or rendering harmless of cargo within Article 2.1(e). Nor could the claims be limitable to the extent that the relevant costs related to the removal or destruction of cargo waste, burned or unburned as they were to be characterised as claims in respect of damage to the ship or for consequential losses resulting from such damage.

As regards Conti’s costs cost incurred in disposing of the firefighting water these were not limitable under Article 2.1(f) as the claim was not distinct from the non-limitable category of claims in respect of the loss of or damage to the ship.

Effectively, all Conti’s claims related to damage to the ship and the fact that had occurred due to the damage to the cargo in the explosion did not mean that the claim was one relating to damage to cargo. All the claims were claims for damage to the ship and were not subject to limitation.

We shall ‘overcome’ – through offering non contractual performance.

MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) raised 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, which has now come before the Court of Appeal [2022] EWCA Civ 1406.

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”. Charterers offered to make the payment in euros and to bear the cost of converting those euros into dollars which the tribunal described as a “completely realistic alternative” to the payment obligation in the COA, which was to pay in US dollars.

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 matter went to arbitration and the Tribunal in its award held that Mur could not rely on the force majeure clause because the offer of payment in euros meant that the ‘event or state of affairs’ could have been ‘overcome by reasonable endeavours from the Party affected’. The Tribunal found that RTI was therefore entitled to damages for MUR’s refusal to nominate vessels to load the relevant cargoes.

On an appeal under s69 of the Arbitration Act 1996 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. He held that the contract required payment in US dollars and that “a party is not required, by the exercise of reasonable endeavours, to accept non-contractual performance in order to circumvent the effect of a force majeure or similar clause”, referencing the decision in Bulman v Fenwick & Co [1894] 1 QB 179. The case involved a voyage charter where the charterer could discharge the cargo of coal at one of certain named places on the Thames. The charterer nominated the Regents Canal which subsequently became subject to a strike. The charterer resisted a demurrage claim on the grounds of a strike exception. Owners claimed charterers should have ordered discharge at one of the other possible places on the Thames. It was held that the charterer was entitled to send the vessel to the Regent’s Canal, with no limitation express or implied on its choice of discharge place and that the delay fell within the strike exception clause.

The Court of Appeal has now, in a majority decision [2022] EWCA Civ 1406, reversed the decision at first instance. The Court of Appeal focussed on the word ‘overcome’ in cl 36.3.(d). Males LJ, giving the principal judgment of the majority, held that the real question was whether acceptance of RTI’s proposal to pay freight in euros and to bear the cost of converting those euros into dollars would overcome the state of affairs caused by the imposition of sanctions on Rusal. Could that state of affairs only be overcome if RTI found a way to make timely payments of freight in US dollars, in strict accordance with the terms of the contract? The answer was ‘no’.

Clause 36 should be applied in a common sense way which achieves the purpose underlying the parties’ obligations –that MUR should receive the right quantity of US dollars in its bank account at the right time. RTI were able and willing to pay in euros and to bear any additional costs or exchange rate losses in converting the euros to US dollars. Accepting their proposal would have achieved precisely the same result as performance of the contractual obligation to pay in US dollars. The word “overcome” did not necessarily mean that the contract must be performed in strict accordance with its terms, given that the arbitrators’ conclusion in their award that the force majeure could have been “overcome by reasonable endeavours from the Party affected” was a finding of fact, or at any rate of mixed fact and law, with which the court should not interfere. The cases of Bulman v Fenwick and the Vancouver Strikes case referred to by Jacobs J were not relevant as neither case involved a force majeure provision such as cl.36 (d).

Arnold LJ dissenting found that if the parties to the contract of affreightment intended clause 36.3(d) to extend to a requirement to accept non-contractual performance, clear express words were required and there were none. He gave the example of a contract of carriage requiring discharge at port A which was strike bound. Clause 36 would not require acceptance of an offer by the other party to divert to port B which would involve no detriment to the party invoking the clause because the goods were required at a place equidistant to the two ports. The party invoking the clause is entitled to insist on contractual performance by the other.

The decision is very much tied to the wording of the particular force majeure clause in question and to the fact that the offer to pay the dollar equivalent in euros would have involved no detriment to owners. In the absence of such a clause a party would still be entitled to insist on contractual performance, as in Bulman v Fenwick.

Running of laytime. Charterers’ order owners not to permit cargo sampling or to berth/discharge.

London Arbitration 31/22 is another reminder that once laytime starts it runs continuously unless interrupted by a laytime exception or a laytime definition or through delay due to the fault of the ship owner.

The vessel was chartered on an amended Gencon 94 form to carry wheat from Russia to Turkey. On Friday 17 September the vessel tendered NOR and was ordered by the harbour master to remain at anchor pending authorisation being given for cargo samples to be taken and analysed. The charterers’ agent then told owners’ operations manager not to send cargo documents to the discharge port agents and not to allow sampling, berthing and discharging as the receiver had not yet paid for the cargo. Eventually charterers permitted sampling and discharge on 29 September and discharge completed on 2 October.

As well as the laytime provisions, under which time would have started to run on 20 September, the voyage charter in question had two separate provisions dealing with time lost, and the question was which applied in the circumstances attending the vessel’s delay at the discharge port.

These two provisions were:



The owners claimed damages for detention at the demurrage rate under Provision 2 for the period from tender of NOR on 17 September until 29 September when the charterers authorised the taking of samples. The tribunal held that this claim must fail because the time lost waiting for cargo sampling clearly fell under the express terms of Provision 1.  The arbitrator found that time lost on arrival was due to the failure by the charterers to authorise/arrange for cargo samples to be taken, a problem that was caused by lack of payment for the cargo which fell within Provision 1. Provisions 1 and 2 appeared consecutively in the fixture recap and the parties could not have intended there to be any overlap between them, and time lost for reasons covered in Provision 1 could not come within the time lost in Provision 2.

Had the arbitrator found that Provision 2 applied, he would have been inclined to accept charterers’ argument that laytime would have started on 29 September and demurrage would have been unlikely to have accrued. Therefore, the arbitrator might have accepted that, given the evidence of lower demurrage rates in similar charters, damages for detention up to 29 September would have been assessed at a rate lower than the charter demurrage rate.

The owners also presented two alternative laytime statements and the arbitrator held that their second was correct. Under this laytime began at 08.00 on Monday 20 September and the vessel went on demurrage from 13.30 on 23 September until discharging was completed at 17.00 on Saturday 2 October.

The charterers argued that “cargo analyses and laboratory testing” did not include “cargo sampling” but the arbitrator considered that the wording in Provision 1 covered any delay in the import formalities after arrival at the discharge port, including the charterers authorising the taking of samples, analysis, communication of the results and allocation of a berth.

The arbitrator also rejected charterers’ claims that time did not count during ‘port congestion’ nor for ‘weather interruption’, alternatively was suspended by duty pilot due to bad weather. Time lost on arrival was due to the failure by the charterers to authorise/arrange for cargo samples to be taken, a problem that was caused by lack of payment for the cargo which came within Provision 1 and the charterers were wrong to argue that congestion was a circumstance obstructing the sampling/berthing/discharging, which was beyond their control. Once a valid NOR was tendered and took effect, laytime ran continuously against the laytime allowed. Congestion was therefore a charterers’ risk.

Brexit the endgame. Part 2. EU retained law in the maritime sphere.

Further items of maritime EU law that amount to retained law which were implemented through a statutory instrument pursuant to the powers given to the Secretary of State under s2(2) of the European Communities Act 1972.

– The Merchant Shipping (Oil Pollution) (Bunkers Convention) Regulations 2006  SI 2006/ 1244 which implemented the Bunkers Convention

– the Merchant Shipping (Carriage of Passengers by Sea) Regulations 2012 which implemented the Protocol to the Athens Convention, pursuant to the powers given to the Secretary of State under s2(2) of the European Communities Act 1972, and also applied it to domestic voyages within the UK on board Class A ships on or after 30 December 2016 and Class B ships on or after 30 December 2018.  When the Protocol entered into force internationally on 23 April 2014, the UK ratified the Protocol by means of the Merchant Shipping (Convention relating to the Carriage of Passengers and their Luggage by Sea) (Amendment) (Order) 2014 no 361 in exercise of the powers conferred by sections 183(4) and (6) and 184(1) and (3) of the Merchant Shipping Act 1995, and therefore the Protocol itself will remain part of the law of the UK after Brexit. The provision relating to domestic voyages within the UK does, however, constitute retained EU law.

– The Environmental Damage (Prevention and Remediation) (England) Regulations 2015 SI 2015/810 (and equivalent Regulations in Northern Ireland, Scotland and Wales);

– The Merchant Shipping (Compulsory Insurance of Shipowners for Maritime Claims) Regulations 2012, SI 2012 No. 2267.

These will all be subject to the sunset provisions of the Retained EU Law (Revocation and Reform) Bill 2022 unless restated by regulation by a relevant national authority no later that 23 June 2026 (the tenth anniversary of the EU referendum).

All clear now? A unified interpretation on breaking limitation under LLMC 1976 and 1992 Protocol, and 1992 Protocol to CLC.

On 15 December 2021 the International Maritime Organization adopted two resolutions on the interpretation of Art 4 of LLMC 1976 and of the 1996 Protocol to LLMC 1976. The resolution is framed as a statement by the State Parties to the LLMC 1976. As such,  it would have binding effect as between the State Parties. Article 31(3) (a) of the 1969 Vienna Convention on the Law of Treaties provides: “There shall be taken into account, together with the context (a) any subsequent agreement between the parties regarding the interpretation of the treaty of the application.” Domestic courts must “take into account” the subsequent agreement when interpreting the treaty but are not required to so. The two resolutions, which are identical, state that the test for breaking limitation of liability under LLMC is to be interpreted as follows:

“(a) as virtually unbreakable in nature, i.e. breakable only in very limited circumstances and based on the principle of unbreakability;

(b) to mean a level of culpability analogous to wilful misconduct, namely:

(i) a level higher than the concept of gross negligence, since that concept was rejected by the 1976 International Conference on Limitation of Liability for Maritime Claims;

(ii) a level that would deprive the shipowner of the right to be indemnified under their marine insurance policy; and

(iii) a level that provides that the loss of entitlement to limit liability should begin where the level of culpability is such that insurability ends;

(c) that the term “recklessly” is to be accompanied by “knowledge” that such pollution damage, damage or loss would probably result, and that the two terms establish a level of culpability that must be met in their combined totality and should not be considered in isolation of each other; and

(d) that the conduct of parties other than the shipowner, for example the master, crew or servants of the shipowner, is irrelevant and should not be taken into account when seeking to establish whether the test has been met;”

The interpretation largely reflects the existing interpretation of Art 4 under UK law, but the linking of culpability in (b) to a level analogous to wilful misconduct and the loss of insurance cover under a marine insurance policy is a new factor in determining when the right to limit liability is to be lost. In Canada in Peracomo Inc. v. TELUS Communications Co., [2014 SCC 29, [2014] 1 S.C.R. 621, Wagner J dissenting in part.] the Supreme Court held that Art 4 imposes a higher standard of fault than does the insurance exclusion in s. 53(2) of the Marine Insurance Act1993, the provision  equivalent to s.55(2) (a) of the UK Marine Insurance Act 1906,and that the shipowner who had been guilty of wilful misconduct in cutting a submarine cable could limit their liability but the loss was excluded from coverage under their marine insurance policy.

Cromwell J, at para 67, identified the distinction as follows

“While the threshold to break liability under the Convention requires intention or recklessness with knowledge that the loss will probably occur, wilful misconduct under the Marine Insurance Act does not require either intention to cause the loss or subjective knowledge that the loss will probably occur.  It requires, in the context of this case, simply misconduct with reckless indifference to the known risk despite a duty to know.”  

A third resolution adopted the same interpretation as regards Art 6 of the 1992 Protocol to the CLC.

Brexit, the endgame. The Retained EU Law (Revocation and Reform) Bill 2022.

On 22 Sept 2022 the UK Government introduced The Retained EU Law (Revocation and Reform) Bill 2022 which provides for two sunset dates for existing retained EU law. On 31st December 2023, all retained EU law will expire, unless otherwise preserved. Any retained EU law that remains in force after this date will be assimilated in the domestic statute book, by the removal of the special EU law features previously attached to it. The Bill provides a second sunset date by including an extension mechanism for delaying the expiry of specified pieces of retained EU law until 2026. The Bill will also reinstate domestic law as the highest form of law on the UK statute book. In case of conflict with retained EU law domestic law will prevail.

There is very little by way of retained EU law that is relevant to the maritime practitioner. The Brussels Regulation and Lugano Convention both ceased to have effect as at the end of the implementation period. The Port Services Regulation survived but is currently on death row and is the subject of a government consultation as to its repeal.

What does remain, however, are the two conflicts of law regulations, Rome I for contracts and Rome II for tort/delict, both now suitably domesticated as UK law, and also the Rome Convention 1980 which was brought into UK law by the Contracts Applicable Law Act 1990, now amended so that it will continue to apply to existing contracts entered into between 1 April 1991 (the date on which the Rome Convention came into force) and 16 December 2009 (after which Rome 1 replaced the Convention in the relevant EU Member States). 

It is likely that these three pieces of retained law will either be specifically retained, or their expiry delayed until the end of 2026, but who knows? Should they disappear into the sunset, conflicts of law will return to the common law rules for contracts made after the sunset date and the rules in Part III of the Private International Law (Miscellaneous Provisions) Act 1995 for torts committed after the sunset date.

Closing the gap.  Hague Rules time bars and misdelivery claims.

In The Alhani [2018] 2 Lloyd’s Rep 563 the Hague Rules one year time limit was held to apply to a misdelivery claim, where delivery was made on discharge within the ‘tackle to tackle period’. This left an open question as to whether the one year time limit would apply when delivery was made after discharge from the vessel. This question has now been answered by Sir William Blair (Sitting as a High Court Judge) in FIMBank PLC v KCH Shipping Co., Ltd [2022] EWHC 2400 (Comm). The case arose out of a misdelivery after discharge under a bill of lading on Congenbill form. The Tribunal, comprising three leading maritime arbitrators,  Julia Dias QC, Sir Bernard Eder and Timothy Young QC, found that: (i) the Hague-Visby Rules time bar can in principle apply to claims relating to misdelivery occurring after discharge; and (ii) Clause 2(c) of the Congenbill form did not disapply the Hague-Visby Rules time bar to the period after discharge. On a s.69 appeal, two questions were posed.

i) Whether Art.III, r.6 of the Hague-Visby Rules applies to claims for misdelivery of cargo after discharge (the “first question”);

ii) Whether clause 2(c) of the Congenbill form disapplies the Hague-Visby Rules to the period after discharge (the “second question”).

The clause reads. “The Carrier shall in no case be responsible for loss and damage to the cargo, howsoever arising prior to loading into and after discharge from the Vessel of [which must mean “or”] while the cargo is the charge of another Carrier, nor in respect of deck cargo or live animals.”

Sir William Blair upheld the finding of the tribunal, giving a positive answer to the first question, and a negative answer to the second.

On the question of the applicability of the timebar to claims for misdelivery of cargo after discharge, he found the tribunal had correctly decided that on its true construction Art.III, r.6 of the Hague-Visby Rules, which includes the time bar but is concerned with delivery in a broader context, applies to claims for misdelivery of cargo after discharge.  This conclusion avoids the necessity for fine distinctions as to the point at which discharge ends. It is also consistent with the authoritative statement of the objective of the article by Bingham LJ in The Captain Gregos ([1990] 1 Lloyd’s Rep. 310 at p.315 (col 2)) that it is, “like any time bar, intended to achieve finality and, in this case, enable the ship owner to clear his books”. In addition there no consensus to be shown among the courts of other jurisdictions, nor in the commentary.

Additionally, the application of the time limit to a misdelivery after discharge could be supported by the implication of a term as argued by Carver on Bills of Lading, Sir Guenter Treitel and Professor Francis Reynolds, 4th ed (2017) at [9-130] which states that the Rules may appear on their face to cease operation on discharge, but that consignees will normally collect them after some period of storage. The carriage contract arguably continues, and that under English law the carrier still holds the goods under the contract of carriage and under the Rules, unless it alters its responsibility for this stage by a term in the contract of carriage.

On the second question, the effect of cl.2(c) of the CONGENBILL, Sir William Blair upheld the tribunal’s conclusion that the clause did not disapply the Hague-Visby Rules to the period after discharge. The clause made no reference to any Hague-Visby Rules period. By contrast, the clause in The MSC Amsterdam [2007] EWCA Civ 794, [2007] 2 Lloyd’s Rep 622 was materially different in that its reference to loss “after the end of the Hague Rules period” showed that there was to be a period when the Hague Rules did not apply but would be be a time when the Owners may still have the obligations of a bailee in respect of the goods, and can agree that the terms of that bailment are not to be those of the Hague Rules.

Wireless transmission of NOR by email a valid tender under cl.6 Asbatankvoy.

In London Arbitration 30/22, the vessel was chartered on amended Asbatankvoy in which Clause 6 of the charterparty provides that the master was to give NOR “by letter, telegraph, wireless or telephone”. The master tendered NOR by email. Charterers argued that the tender was bad, relying on The Port Russel [2013] 2 Lloyd’s Rep 57 where an email tender was held to be not permitted under a charter on BPVOY3 which provided for NOR  to be given by “by letter, facsimile transmission, telegram, telex, radio or telephone”. Unlike cl.6 of Asbatankvoy the clause did not refer to tender by ‘wireless’. The tribunal accepted owners’ arguments that the reference to tender by “wireless” covered the email which was transmitted wirelessly using the vessel’s communication safety system. Owners also produced evidence, from Wikipedia, that email was around in the 1960s and early 1970s and so was in existence in 1977 the year of the Asbatankvoy form.

Excluded wreck removal claims under art 2(d) LLMC in Hong Kong. No limitation of liability through the back door.

In Perusahaan Perseroan (Persero) PT Pertamina v Trevaskis Ltd (The Star Centurion and The Antea) – [2022] HKCA 1089 a collision occurred between the “Antea” and the “Star Centurion”, a vessel at anchor in Indonesian waters. The Star Centurion sank and the authorities issued a wreck removal order. The claimant, the owner of the “Antea”, established a limitation fund in Hong Kong and paid HK$175,062,000 into court. The wreck removal claims were HK$139 million and growing.

The claimant issued a summons seeking a declaration that that part of the defendant’s claim for damages, in respect of the raising, removal, destruction or the rendering harmless of the  “Star Centurion” was subject to limitation under article 2 of the 1976 Convention and under the limitation fund constituted by the claimant. Article 2 (d) of LLMC specifically covers wreck removal claims but Article 18(1) allows a contracting party to disapply it through a reservation. The UK has made such a reservation, and so has Hong Kong.

The claimant argued that the wreck removal claims could be limited as they fell within art 2(1)(a) “claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom”; and also 2(1)(c) “claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;”

The Hong Kong Court of Appeal has recently upheld the first instance decision [2021] HKCFI 396 that the wreck removal claims were excluded from limitation by virtue of the reservation in respect of article 2(d). Claims under this head encompassed direct claims by statutory authorities, whether under statute or at common law, and private recourse claims by shipowners for consequential loss or damage to property or resulting from the infringement of rights. There could be no “partial reservation” under article 18(1) in excluding the application of article 2(1)(d) only as regards claims by waterway authorities and not to recourse claims by shipowners. Although wreck removal claims fell within articles 2(1)(a) and (c), general provisions should give way to the specific terms of article 2(1)(d) where the claim was for wreck removal costs.

The Hong Kong Court of Appeal in reaching this conclusion referred to majority obiter dicta of the Full Court of Queensland in The Tiruna and Pelorus [1987] 2 Lloyd’s Rep 666 and to the decision of the Supreme Court of the Netherland in  Shipping Co MS Amasus BV v ELG Haneil Trading GmbH. It is likely that a UK court would come to the same decision.

Liability of demise charterer for bunkers supplied to vessel on time charterer’s orders. Contracting in to US law on what constitutes a maritime lien.

In London Arbitration 28/22 a bunker supplier that had supplied bunkers on the order of the time charterers successfully obtained an award against the demise charterers, who later exercised their option to purchase the vessel. The bunker supplier’s invoice, dated 17 May 2021, was issued to “Master and/or Owners and/or Charters (sic) of [the Vessel] and/or [registered owners] and/or [time charterers]”.

The bunker supplier’s general terms and conditions (GTC) expansively identified the buyer under cl.2.1 as “ the contracting party/ies identified in the Nomination including but not limited to any agent, principal, associate, manager, partner, servant, parent, subsidiary, owner or shareholder thereof and any vessel as defined in clause and/or vessel owner and/or charterer and/or operator to which the Products have been delivered to and/or any other party benefiting from the consumption of the Products.” Cl.15 asserted that the seller had a lien against the vessel for sums due under the contract and also provided “It is expressly agreed between Seller and Buyer that the delivery of Marine Bunker/products creates a maritime lien in accordance with article 46 US Code § 31342 of the United States Federal Maritime Lien Act.” Cl 19 provided for English law but as regards what constituted a maritime lien the US federal Maritime Lien Act was to apply.

Arbitration was brought against the demise charterer and the time charterer. The arbitrator rejected an attempt part way through the reference to add the registered owner at the time of the sale. The only way to get at the registered owner would be by commencing second proceedings against them.

The arbitrator found that both the bareboat and time charterers came within the definition of Buyer in clause 2.1 of the GTC and that the time charterers had apparent and/or ostensible authority to bind the bareboat charterers to being liable under the GTC. Although the supply of bunkers would not create a lien under English law, it would do so under US law as a supply of ‘necessaries’. The lien could extend to bunkers supplied outside the United States if that was what the parties provided for in their contract of supply. The GTC allowed him to determine the existence of such maritime liens applying US maritime law. The maritime lien transferred to the bareboat charterers when they became the owners of the vessel upon its sale and delivery to them some months after the supply of the bunkers to the vessel. Although both the time charter and the bareboat charter contained ‘no-lien’ clauses, no notice of those clauses was given to the bunker supplier before issue of its confirmation letter.

The award may cause some alarm amongst owners and demise charterers as to their potential in personam and in rem liability in respect of unpaid bunkers ordered by time charterers. The award goes against The Yuta Bondarovskaya [1998] 2 Lloyd’s Rep 357 QB, where it was held that it was not arguable that the time charterer had any sort of authority from the owner, whether implied actual or ostensible, to make bunker contracts on its behalf. It also goes against The Halcyon Isle  [1981] AC 221 where the Privy Council found that maritime claims were classified as giving rise to maritime liens which were enforceable in actions in rem in English Courts where and only where the events on which the claim was founded would have given rise to a maritime lien in English law if those events had occurred within the territorial jurisdiction of the English Court. By contrast, under this award it is the terms of the bunker supply contract that determine what system of law, in this case US maritime law, is to apply as regards what claims constitute a maritime lien against the vessel.