Corporate due diligence legislation in the EU. Goodbye ‘should’, hello ‘must’?

Earlier this year, the final report of a study, prepared for the European Commission by a research group led by the British Institute of International and Comparative Law earlier this evaluated four regulatory options available at the EU level in terms of human rights due diligence:

option 1: no change;

option 2: new voluntary guidelines;

option 3: new reporting requirements; or

option 4: the introduction of mandatory due diligence requirements.

Option 4 was the preferred option and the study concluded that that any new law ought to be cross-sectoral and applicable to all businesses, regardless of their size. This now seems to be the view of the European Commissioner for Justice, Didier Reynders, who on 29 April 2020 announced that the EU plans to develop a legislative proposal by 2021 requiring businesses to carry out due diligence in relation to the potential human rights and environmental impacts of their operations and supply chains. The draft law is likely to be cross-sectoral and to provide for sanctions in the event of non-compliance.

It remains to be seen whether the UK intends to enact any similar legislation.

 

Corporate human rights due diligence and direct liability. Switzerland gets serious.

 

In Switzerland a public initiative supported by at least 100,000 signatories can become the topic of a nationwide referendum.  Such an initiative in 2016 obtained the requisite number of signatures and put forward a wide ranging proposal which would:

require companies headquartered or registered in Switzerland to respect human rights and international environmental standards in their operations abroad, and to ensure that companies under their control respect these standards as well. makes it mandatory to conduct human rights and environmental due diligence;

introduce direct liability of companies for violations of human rights and environmental standards by companies under their control; and

reverse the burden of proof in part, requiring the company to establish that it took the requisite care to prevent such violations, or that the damage would have occurred even if the requisite care had been taken.

Under Swiss law, a counter-proposal may be provided by Parliament which if accepted by the organisers of the proposal obviates the need for a referendum. Early this month Parliament came up with a watered down version of the proposal without the provision for liability of parent companies under Swiss law for actions of their controlled companies abroad.

The organisers of the referendum proposal have rejected this. It therefore seems that the referendum will go ahead later this year along with the Parliamentary counter-proposal.

 

What a (public) nuisance. Two climate change suits in California to stay in the state courts.

 

This blog recently discussed climate change tort suits in the US. https://iistl.blog/2020/04/15/climate-change-and-tort-the-jurisdictional-battlefield-in-the-us/  The battleground has been keeping the suits in the US state courts and stopping their removal to the federal courts. The reason goes back to two previous decisions: 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 26 May 2020 the Ninth Circuit gave two favourable decisions to the municipalities claiming damages for what they estimate they will have to spend to mitigate the effects of climate change in future years. First they reversed the earlier decision in the claim brought by the City of Oakland against BP and other energy majors that the case should be removed to the federal courts. The Ninth Circuit held that the cities’ state-law claim for public nuisance did not arise under federal law and the cities’ nuisance claim did not raise “a substantial federal question.”  The Ninth Circuit rejected the companies’ argument that the Clean Air Act completely preempted the cities’ public nuisance claim and held that  the cities had not waived their arguments in favour of remand by amending their complaint to add a federal common law claim; the cities’ reservation of rights was sufficient. The case will now return to the district court to determine whether there was an alternative basis for federal jurisdiction, of the sort claimed, and rejected, in the San Mateo case.

Secondly, in the case brought by the County of San Mateo against Chevron Corp and other energy majors, the decision at first instance that the claim should not be removed from the state courts has been upheld. The Ninth Circuit held that its jurisdiction to review was limited to whether the cases were properly removed under the federal-officer removal statute and then that the companies had not proved that federal-officer removal could be invoked. under its existing precedent, it had jurisdiction to review the issue of federal-officer removal but not the portions of the remand order that considered seven other bases for removal. Conducting a de novo review of the issue of subject matter jurisdiction under the federal-officer removal statute, the Ninth Circuit found that the energy companies had not proven by a preponderance of the evidence that they were “acting under” a federal officer in any of the three agreements with the government on which the companies relied for federal-officer removal jurisdiction.

 

Who are the parties to the contract to the contract contained in or evidenced by the bill of lading?

 

This question has usually focussed on identifying the carrier, but what about the other party to the contract? Surely that’s the named shipper in the bill? Not so fast. In a recent s.67 Appeal from an arbitration award HH Judge Pelling QC in MVV Environment Devonport Ltd v NTO Shipping Gmbh & Co. KG [2020] EWHC 1371 (Comm) has held that one needs to broaden the enquiry from the bill itself to identify the contracting parties.

A Plymouth firm, MVV, converted waste into energy and sent its waste product to a waste management company Rock Solid BV who in turn sent it to their  recycling plant in the Netherlands. The waste became RS’s property from the moment it was loaded onto their vehicles at MVV’s plant. On 33 occasions bills of lading were issued which mistakenly named MVV as the shipper. SS had drawn up a draft bill of lading for the first shipment of waste that named the claimant as shipper on the basis that the claimant was identified as “exporter-notifier” in the notification document required to be produced in order to comply with European legislation concerning the cross-frontier movement of waste, which was in fact erroneous given the terms of its contract with MVV. That draft then formed the template for the bills of lading for the following shipments.  The first draft bill was sent in draft by SS to RS for approval and that RS approved its terms, wrongly in the light of the terms of its contract with MVV.  Copies of the bills were sent to MVV who raised no protest.

And then an explosion occurred on board the vessel carrying the waste to the Netherlands as a result of which her Chief Engineer was injured and in consequence the carrier suffered losses of €676,561.46, €45,000 and US$840. The carrier sought to recover these losses from the MVV as shipper named in the bill of lading and commenced arbitration. MVV challenged the tribunal’s jurisdiction but the tribunal concluded that it had jurisdiction.

HH Judge Pelling QC referred to observations of Hobhouse LJ in Cho Yang Shipping Company Limited v. Coral (UK) Limited [1997] 2 Lloyds Rep 641 at 643: “ … the shipper may be shipping as the agent of the consignee in which case the contract will be with the consignee …” and a little later on the same page, in English law “… the bill of lading is not the contract between the original parties but is simply evidence of it … (I)ndeed, … it may in the hands of a person already in contractual relations with the carrier (e.g. a charterer) be no more than a receipt.”. It was clear that MVV had not directly contracted with the carrier. The carrier’s contractual counterparty was whoever was represented by its agent, SS, which had entered the contract as agent.  SS was neither expressly or implied authorised by or had ostensible authority from MVV to enter a contract of carriage on its behalf. The same was true as regards Rock Solid BV. No authority could be spelled out of MVV’s silence as regards the preceding 33 bills naming it as shipper and it had no duty to speak.

 

In London Arbitration 3/20 the Tribunal considered the effect of the time bar provision in cl.6 of the Inter-Club NYPE Agreement 2011 (the ICA) .

“(6) Recovery under this Agreement by an Owner or charterer shall be deemed to be waived and absolutely barred unless written notification of the Cargo Claim has been given to the other party to the charterparty within 24 months of the date of delivery of the cargo or the dates the cargo should have been delivered, save that, where the Hamburg Rules or any national legislation giving effect thereto are compulsorily applicable by operation of law to the contract of carriage or to that part of the transit that comprised carriage on the chartered vessel, the period shall be 36 months. Such notification shall if possible include details of the contract of carriage, the nature of the claim and the amount claimed.”

The vessel was time-chartered on the NYPE form. Clause 27 of the charter expressly incorporated the ICA and contained a Clause Paramount. Under a booking note on the charterer’s house form dated 19 December 2014 between the charterer as carrier and G as merchant, the charterer contracted to carry a cargo of engine equipment (the Cargo) from a United States port to a North African port. During the voyage the vessel’s crew accidentally pumped water into No 2 cargo hold.  G gave notice to the charterer of its intention to pursue a cargo claim against it as contractual carrier, although no claim had yet been formally presented. By various emails, information was passed by G to the charterer and by the charterer to the owners, and extensions of time were given by the charterer to G, and by the owners and their P&I Club to the charterer.

The issue before the Tribunal was whether, following the expiry of 24 months from the date of delivery of the cargo, the charterer was now precluded by the time bar provision in clause (6) of the ICA from bringing any claim against the owners in respect of G’s intended cargo claim.

The Tribunal found that the “notification” did not have to refer to the ICA, either expressly or impliedly. Clause (6) required simply “written notification of the Cargo Claim” to be given to the other party. It was not in itself the claim for recovery under the ICA but was a notice required if a claim over was later to be made, which could only happen when the cause of action accrued, which necessitated the proper settlement or compromise and payment of the third-party claim under the terms of clause (4)(c).

To be an effective “notification”, the written notice did not have to comply with the requirements of the second sentence, namely to include details of the contract of carriage, the nature of the claim and the amount claimed, so far as it was possible to do so. The intention of the draftsman was to distinguish between the absence of a written notification which would bar the recovery claim and the absence of details to be included within it, if possible, which would not have that effect. The words “if possible” suggested that the provision of details was not essential to the giving of notification. The breach of such an obligation would give rise to a right to damages if any loss could be established, which appeared unlikely in most situations.

In consequence, as the tribunal had found that a notification was valid, even if details which could have been provided were not provided, and the recourse claim which the charterer wished to pursue was not deemed waived or barred.

Clause (6) of the ICA operated in an entirely different way from a conventional time bar for a cargo claim. The period allowed for notification ran from the date of delivery and not from the date when the cause of action accrued which, in the case of an indemnity might not be for a number of years, as and when the liability to cargo interests crystallised. To stop time running, the prospective claimant did not have to commence proceedings but merely to give notification of the claim under clause (6), with the six-year time bar operating from the date of accrual of the cause of action.

 

Hello operator? Limitation of liability and operator of dumb barge.

 

Splitt Chartering APS & Ors v Saga Shipholding Norway AS & Ors [2020] EWHC 1294 (Admlty) (22 May 2020)   involves a limitation action in connection with an underwater cable carrying electricity from France to England which was allegedly damaged by the anchor of the dumb barge STEMA BARGE II. The cable owners, RTE, accepted that the registered owner and a charterer Stema Shipping A/S could limit, but did not accept that the third party it had in its sights, Stema Shipping (UK) limited, a company said to be the operator of STEMA BARGE II whilst it was at anchor off Dover, was entitled to limit liability under the Limitation Convention 1976.

A shipment of rock armour, to be used for repairing the storm damage to the Dover to Folkestone railway line in December 2015, was transported from a quarry in Norway on the barge STEMA BARGE II. The barge arrived off Dover under towage on 7 November 2016, was anchored and then the tug departed. Storm force winds of up to force 9 from Storm Angus were forecast and it was decided to let STEMA BARGE II ride out the storm. STEMA BARGE II began to drag her anchor and at 0634 on 20 November 2016 an undersea cable (cable 12) supplying electricity from France to England registered a tripping.

Stema UK had placed a barge master, Mr. Zeebroek, and crewmember, Mr. Hayman, on board STEMA BARGE II, under a superintendent ashore, Mr. Upcraft. Could Stema UK limit as an operator of the vessel? RTE argued that the operator of a vessel is the person or entity which has “direct responsibility for the management and control of the ship” as regards “the commercial, technical and crewing operations of the ship.” – and that person was Stema A/S, not Stema UK.

Teare J considered that Stema UK were not “the manager of the ship” which would be the person entrusted by the owner with sufficient of the tasks involved in ensuring that a vessel is safely operated, properly manned, properly maintained and profitably employed to justify describing that person as the manager of the ship. A person who is entrusted with one limited task of management may be described as assisting in the management of the ship, rather than as being the manager of the ship.

However, it could qualify as the “operator” of the ship. For the purposes of article 1(2) of the 1976 Limitation Convention, “the operator of a ship” was not intended to cover those on board the vessel physically operating the vessel’s machinery, but imported a notion of management and control over the operation of the ship. Those who cause an unmanned ship to be physically operated have some management and control over the ship and could be said to be its operator, if with the owner’s permission they send their employees on board the ship with instructions to operate the ship’s machinery in the ordinary course of the ship’s business.

The use of the definite article “the” and the singular form of “operator” did not mean that there could be only one “operator”. The definite article was also used in relation to owner and charterer; yet there could be more than one owner, because there can be co-owners, and there could be more than one charterer, because there could be a time charterer and a voyage charterer.

From the barge’s arrival off Dover on 7 November 2016 to the date of the damage to the cable on 20 November 2016, Stema UK had a real involvement with STEMA BARGE II. Not only did its employees anchor her but they prepared the barge for lying safely at anchor. During the discharge operations they operated the barge’s machinery so as to ensure that she was safely ballasted. No personnel of Stema A/S were on board; only personnel of Stema UK (though not permanently because there was no accommodation on board the barge).

Even if Stema UK, as receiver/buyer of the cargo were obliged on the facts of this case to anchor and secure STEMA BARGE II that conduct still amounted to the operation of Stema Barge II. They provided a service of operating STEMA BARGE II in circumstances where there was no-one else to operate her.  The role of Stema UK was limited both in time and in the scope of its activities, but then the scope of the activities required to operate a dumb barge are necessarily limited.

Accordingly, the nature of Stema UK’s operation of STEMA BARGE II off Dover was such as to make it appropriate to describe Stema UK as the operator of the barge off Dover.

Spain says ‘manana’ to time limits for the duration of its lockdown

 

On the 14th March 2020, the Spanish legislature published Royal Decree 463/2020 declaring a state of alarm throughout Spain as a result of the COVID-19 pandemic. One of the exceptional measures under the Fourth Additional Provision was the suspension of the time periods for the application of the statute of limitations and expiration of actions and rights.

This continues until 24 May unless the Spanish Parliament approves a further lockdown extension. At this date, the time limits will be revived for the equivalent time that was left to run prior to the 14th March. Where the time limit was due to expire after 24 May (or any later end to lockdownt) the majority view of legal experts is that it will be extended by the duration of the lockdown.

The Spanish Government is currently seeking to extend the lockdown for a further month.

 

 

No maritime lien against demise chartered vessel for claim for disbursements made to vessel on time charterer’s orders.

 

The Irish Court of Appeal has recently decided in The Almirante Storni [2020] IECA 58 that a claim against the demise charterer by a ship’s agent in respect of  disbursements made to the vessel on the orders of the time charterer does not constitute a “maritime claim” within the meaning of article 1 of the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships done at Brussels on 10 May 1952 (The Arrest Convention). Insofar as the claim involved “disbursements” they were not disbursements made by the master but by the ship’s agents.

Article 1(n) of the Arrest Convention did not entitle an agent to maintain a claim against the owner of the vessel for disbursements made by such agent “on behalf of a ship”, in the absence of any personal liability on the part of the owner. The argument that the time charterer ordered services from the plaintiff as agent of the owners was not tenable. There was no evidence of any actual or ostensible authority to support a finding of agency.

 

Brexit and civil jurisdiction. EU unlikely to consent to UK joining the 2007 Lugano Convention in time for the end of the implementation period.

 

Once the news was all “Brexit, Brexit, Brexit”. Halcyon days. Now it is nothing but the public health emergency. Except, there are still a few pieces of news about Brexit. One of which concerns the arrangements for civil jurisdiction and enforcement of judgments between the UK and the EU Member States after 1 January 2021.

Absent an agreement with the EU on jurisdiction, the UK will revert to its common law rules on jurisdiction on 1 January 2021. This assumes that the UK does not avail itself of the opportunity under the EU Withdrawal Agreement to seek an extension to the implementation period by the end of June, something Mr Johnson has repeatedly stated he will not do, and something which has been specifically ruled out in the statute implementing the Withdrawal Agreement. But there are two other civil jurisdiction regimes to which the UK can become a party, and that is certainly the government’s intention.

The first is the 2005 Hague Convention  on Choice of Court Agreements 2005 (Hague Convention), which came into force as between the Member States and Mexico on 1 October 2015 (for intra EU matters the Recast Regulation prevails).  The Convention deals with exclusive jurisdiction clauses in favour of a Contracting State and for recognising and enforcing judgments within Contracting States in respect of contracts with such clauses. The Convention does not apply to contracts for the carriage of goods ( bills of lading and voyage charters) or passengers, although it would apply to time charters and demise charters. The EU has exclusive competence over anything jurisdictional, and agreements with third party states must be made by the EU acting on behalf of the Member States – hence it was the EU that ratified the 2005 Hague Convention and not the Member States. The UK government previously submitted its accession to this back in December 2018, to come into effect on ‘exit day’, but this has, for the time being, been withdrawn. Doubtless it will re-accede in September to allow for the UK to join the Convention in its own right as of 1 January 2021.

The second is the 2007 Lugano Convention between the EU and three third states, Norway, Iceland and Switzerland. This is basically the original 2001 Brussels Regulation, an inferior regime to the 2012 Recast version, but better than nothing. On 8 April the UK applied to join the Lugano Convention. For this to happen the consent of all the existing contracting parties must be forthcoming. The three third states seem quite happy about this but what about the EU? The signs are that it is not going to consent to the UK’s application.

An article in today’s FT states “EU diplomats said the European Commission had advised the bloc’s member states earlier this month that a quick decision was “not in the EU’s interest”. The diplomats said the commission raised the issue during a meeting with EU member-state officials on April 17, saying that granting the request would be a boon for Britain’s legal sector. A commission official told the meeting there were other international rules that Britain could use as a fallback, and that current signatory countries were all part of the EU’s single market, the diplomats said. With the UK determined to leave the single market after the transition expires, the commission “will surely not make a positive recommendation,” said one national official who took part in the meeting.”

Fixture recap “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. Are Gencon 94 law and arbitration provisions brought into the charter?

 

In London Arbitration 2/20 a fixture recap set out detailed provisions and concluded “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. The charterers argued that the law and arbitration provisions in cl. 19(a) of Gencon 94 was not a “main term” agreed in the recap email and was not incorporated into the charter. The tribunal rejected this argument and held that the  concluding words of the recap meant that one should take a clean Gencon 94 form and write into it what “main terms” had been agreed. The parties  had agreed considerable details as set out in the recap email, and then incorporated the terms of the Gencon 94 charter, which were to be adjusted to reflect the detail agreed. The tribunal accordingly had jurisdiction