Brexit. Nine days to go. PM seeks short extension.

The Prime Minister has just written to the EU requesting an extension to article 50 up to 30 June. A common refrain among EU Members has been that for an extension to be granted there needs to be a plan. As Michel Barnier stated yesterday any extension must be “linked to something new, a new political event, a new political process”. It is by no means certain that the extension requested will be granted by leaders of all 27 Member States. It is possible that an extension may be granted subject to conditions, such as UK participation in the elections for MEPs on 23 May. The possibility of a no-deal exit on 29 March remains.

 

The European Commission has taken the following position on the request for an extension beyond 23 May, according to this report from Reuters a few hours ago.

The European commission opposes extending British membership of the European Union to June 30, as British prime minister Theresa May proposed on Wednesday, according to an EU document seen by Reuters.

In a note on the Brexit process reviewed by the commission at its weekly meeting on Wednesday, officials wrote that leaders meeting May at a summit on Thursday faced a “binary” choice of a short delay of  Brexit from 29 March to before 23 May or a long delay to at least the end of this year, with Britain obliged to hold an election on 23 May for European parliament lawmakers.

“Any extension offered to the United Kingdom should either last until 23 May 2019 or should be significantly longer and require European elections,” the document said. “This is the only way of protecting the functioning of the EU institutions and their ability to take decisions.”

EU states which were due to receive additional legislative seats after Brexit would need to know by mid- to late-April if they would be denied those seats because Britain was staying.

The note also said that in any extended membership, Britain should, “in a spirit of loyal cooperation”, commit to “constructive abstention” on key issues, such as the EU’s long-term budget and filling top EU posts after the May election.

 

So, that looks like a ‘no’.

No deduction from hire clause in time charter means what it says.

In London Arbitration 7/19 the tribunal decided that a clause in a time charter stating ‘Charterers have no right to make any deduction from hire payments… Chrts do not have the right to deduct from hire payment any amounts on alleged under performance, except undisputed off hire” precluded charterers from making deductions from hire by way of equitable set off. The tribunal referred to the unreported decision in Marubeni v Sea Containers Ltd 17 May 1995, in which Waller J said:

“First, in the same way as the words ‘deduction or withholding’ are not terms of art which will always include‘set-off’, they are equally not terms of art which limit their meaning to only covering taxes, levies or duties. Second, the fact that clear words are necessary does not mean that the word ‘set-off’ must be used. The words can be clear from their context. Third, what is said in one contract between other parties in one context, cannot really assist in the construction of another contract between different parties in a quite different context.”

Charterers could not deduct their off hire claims either as these were not undisputed. The charterers had argued that they had not made deductions from hire,but that hire was simply suspended, but that was a distinction without a difference.

Less than two weeks to go until the UK exits the EU – or not?

 

After last week’s votes in the Commons on Thursday, the Prime Minister will put her withdrawal deal to the Commons for a third time on Tuesday. If it is passed she will ask the Council of Ministers of the EU for an extension until 30 June. If it is rejected she will ask for a longer extension and the UK will participate in the election of MEPs on 23 May.

Any extension requires unanimous agreement from all 27 Member States. There is a possibility that this may not be obtained in which case 29 March remains ‘exit day’ – or does it? Watch this space for ferocious times in Parliament in the final week before ‘exit day’ for a motion calling on the government to revoke the article 50 notice – and then to give the EU a further article 50 notice? Interesting discussion of the legalities of this can be found at http://goodlegaladvice.co.uk/?p=12486

After Speaker Bercow’s decision this afternoon not to allow the government to bring back its defeated motion of last week for a second time, we may soon be hearing about the ‘p’ word – prorogue.

“Government interference” and laytime under the  1999 Sugar Charterparty

In Sucden Middle-East v Yagci Denizcilik Ve Ticaret Ltd Sirketi (The MV Muammer Yagci)[2018] EWHC 3873 (Comm) the Court heard an appeal from an arbitral decision  on the following point of law. “where a cargo is seized by the local customs authorities at the discharge port causing a delay to discharge, is the time so lost caused by ‘government interferences’ within the meaning of clause 28 of the Sugar Charter Party 1999 form?”. The case arose out of a substantial period of delay in the vessel’s discharge at Algiers due to the seizure of cargo by the authorities there following the identification of a discrepancy between the cargo and the relevant documents presented by the receivers. The cargo was eventually sold after a four and a half month delay in discharging the cargo.

Robin Knowles J found that delay fell within the laytime and demurrage exception in cl.28 of the Sugar Charterparty 1999 form as being caused by ‘government interferences’. The question put to the court was solely concerned with a seizure of cargo by local customs authorities at the discharge port. The ordinary meaning of the word “interference” was apt to include an intervention in this specific form, that is, by way of seizure. This action on the part of local customs authorities was, in this context, the action of government through its appropriate arm or agency. Seizure of cargo by the customs authorities was not a thing that could be treated as routine. The seizure caused the delay even if the submission of the false documents caused the seizure. The arbitrators had found that the key point would be that all the steps taken were in fact ordinary but that was incorrect. Seizure, of cargo, which is a significant exercise of executive power, cannot be regarded as “ordinary”.

 

The Hague Rules fire exception and barratry.

In Glencore Energy UK Ltd v Freeport Holdings Ltd, “The Lady M”,  [2019] EWCA Civ 388, the Court of Appeal has today upheld Popplewell J’s decision https://iistl.blog/2017/12/30/barratry-and-the-hague-visby-rules/   that article IV rule 2(b) of the Hague-Visby Rules is capable of exempting the carrier from liability to the cargo owner for damage caused by fire if that fire were caused deliberately or barratrously. Cargo owners argued that at common law a term which excluded liability for ‘fire’ would not have provided a defence if it were caused by the negligence or barratry of the crew; and consequently the exception in article IV.2(b) did not have the effect of excluding liability for fires which were caused either negligently or deliberately. The owners argued that the Judge’s interpretation of article IV.2(b) was correct. The words are clear and emphatic, and set out an exception for all loss or damage arising or resulting from fire, subject to the proviso: where the fire is caused with the actual fault or privity of the carrier. There is no proper basis for implying  a further proviso by adding the words ‘or the barratry of master or crew’, not least because ‘barratry’ is not a relevant concept in the Hague Rules.

The Court of Appeal agreed with owners’ contention. There was no sound policy reason for reading the word ‘fire’, both in isolation and in context, in a way that excludes fire where deliberately caused by the crew, from the carrier’s defence under Article IV.2(b). In cases of barratry the carrier’s agents are acting contrary to the carrier’s interests and in breach of the trust reposed in them. The construction of the fire exception was not affected by the Supreme Court’s decision in Volcafe in relation to the construction of the inherent vice exception. It was important not to lose sight of Lord Sumption’s observation that there is ‘no unifying legal principle’ behind the list of exceptions in article IV.2. The correct approach was to construe the exceptions in their own terms, while bearing in mind that they fall under a general heading and have to be construed as part of the overall scheme of obligations, liabilities and exceptions set out in articles III and IV. 66.    Lord Sumption’s observations that the carriers bore the legal burden of disproving negligence for the purposes of invoking an exception under article IV.2 did not address any argument in relation to article IV.2(b), and did not  assist on the assumed facts where there has been a deliberate act by a crew member to the prejudice of the carrier and without the carrier’s actual fault or privity.

None of the common law cases on construction of exceptions clauses assisted. There was no pre-Hague Rules judicial interpretation of ‘fire’ as a term which had a clearly assigned meaning that excluded fire caused by the crew, so that it must be presumed that it was used in article IV.2(b) in the same way. Nor did the travaux preparatoires to the Hague Rules support such a construction. Simon LJ was very doubtful as to whether the threshold for consideration of the travaux préparatoires came close to being met. This was not a provision in respect of which there were ‘truly feasible alternative interpretations’ of the words, nor was it one of those ‘rare’ cases where the travaux ‘clearly and indisputably’ pointed to a definite legal intention.

Simon LJ added: “To adopt Lord Steyn’s analogy, Glencore’s argument not only failed to hit the bullseye, it should not have been aimed at the target.”

 

Going through the motions. What’s on the menu tonight in the Commons.

 

  1. The government motion.

“That this House declines to approve leaving the European Union without a Withdrawal Agreement and a Framework for the Future Relationship on 29 March 2019; and notes that leaving without a deal remains the default in UK and EU law unless this House and the EU ratify an agreement.”

  1. The amendment to the government motion from Jack Dromey and Dame Caroline Spelman which states “this House rejects the United Kingdom leaving the European Union without a Withdrawal Agreement and a Framework for the Future Relationship”.
  2. The ‘Malthouse Compromise’ which sets out the process for a “managed no-deal”. It requests:
  • The government publish tariff schedules
  • An extension of leaving to 22 May 2019
  • ‘Mutual standstill agreements’ between the UK and EU until the end of 2021, including payments to the EU
  • A unilateral guarantee of citizens’ rights

The third and fourth parts of the process look like the withdrawal agreement transition period but lasting another year and with no backstop at the end. Unlikely to be accepted by the EU.

 

The Brexit votes. One down two to go.

 

After the defeat of the Prime Minister’s revised withdrawal deal last night, Parliament today votes on whether to accept a no-deal exit from the EU on 29 March, and, if not, it will proceed to a third vote tomorrow on whether to ask the EU for an extension to the article 50 notice. Today’s vote is a free vote for MPs of the Conservative and Unionist Party and it is likely that the House will vote not to exit on 29 March without a deal.

The crunch comes with the third vote. An extension has to be asked for otherwise whatever Parliament decides we are out of the EU at 11 pm on 29 March. An extension for how long? Will the EU Member States grant such an extension, something that requires unanimity among the 27? Mr Juncker has indicated that a short extension might be possible, up to extension the elections for Members of the European Parliament, which run between 23 and 26 May – it is almost inconceivable that the UK could participate in these. It is possible that the extension could be granted up to 30 June the day before the new Parliament sits. There have been other indications that an extension will only be granted if the UK can explain what the purpose of the extension sought would be.

It should also be noted that, as held by the ECJ in Case C-621/18 Wightman and Others v Secretary of State for Exiting the European Union, the UK would still remain free unilaterally to withdraw its notice under article 50 “as long as the two-year period from the date of the notification of the intention to withdraw from the EU, and any possible extension, has not expired.”

If a short extension is granted, the UK would have to amend the EU Withdrawal Act 2018 accordingly. Furthermore, it is likely that the EU Member States would feel unable to grant a further extension as EU Member States are required to participate in the elections to the European Parliament. If the UK were to remain in the EU beyond 1 July, it would be required to hold the elections to the European Parliament but that would raise problems with the number of MEPs. Under Plan A, the current elections allocate seats to countries on the assumption that the UK will not be a Member State at the date of the elections. There is a Plan B to allow for elections on the basis of the 2014-19 allocation in the event that the UK is still a Member State at that date. If Plan B comes into effect, 73 UK MEPs have to be elected, and 73 MEPs in other Member States elected under Plan A have to pack their backs and go home.

Whatever the results of the votes today and tomorrow, the prospect of a no-deal exit from the EU remains, whether on 29 March, 24 May or 1 July.

Brexit and the return of Solomon Binding? The new UK-EU agreements on the Northern Ireland ‘backstop’.

 

 

Those of us of a certain age will remember the ‘solemn and binding’ undertaking given by TUC leaders to Harold Wilson following the rejection of his proposals for industrial relations reform in 1969. This swiftly turned into the fictitious comic character, ‘Solomon Binding’? Is Solomon’s hand hovering over the three documents that emerged after the Prime Minister’s  meeting in Strasbourg last night and which will be put before the House of Commons tonight.

First there is the INSTRUMENT RELATING TO THE AGREEMENT ON THE WITHDRAWAL OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FROM THE EUROPEAN UNION AND THE EUROPEAN ATOMIC ENERGY COMMUNITY 

The agreement refers to arbitration under the mechanisms already established in the Protocol in the event that a party acts with the objective of applying the Protocol indefinitely and that a ruling by the panel would be binding on both parties. It does not alter the text of the withdrawal agreement. There is no time limit on the backstop. There is no procedure for either the UK or the EU to terminate the backstop unilaterally.

The key parts of the agreement as regards the backstop are set out below.

 

  1. A subsequent agreement replacing the customs and regulatory alignment in goods elements of the Protocol could stand alone or form part of a wider agreement or agreements on the future relationship, depending on the progress of the wider negotiations. Alternative arrangements, which supersede the Protocol in whole or in part, in accordance with Article 2 of the Protocol, are not required to replicate its provisions in any respect, provided that the underlying objectives continue to be met. In the event that the agreement needs to stand alone due to delays in progress on the wider negotiations, the parties will aim at establishing this agreement very rapidly after the end of the transition period in full respect of the parties’ respective legal orders.
  2. The Union and the United Kingdom agree that once negotiations on alternative arrangements have been completed to the satisfaction of both parties, the outcome will be transposed into a subsequent agreement. The subsequent agreement transposing the alternative arrangements will be applied as soon as possible after its signature, if necessary and appropriate by means of provisional application, in line with the applicable legal frameworks and existing practice.
Compliance and unilateral suspension
  1. The Union and the United Kingdom agree that it would be inconsistent with their obligations under Article 5 of the Withdrawal Agreement and Article 2(1) of the Protocol for either party to act with the objective of applying the Protocol indefinitely. Should the Union or the United Kingdom consider the other party was acting in this way after the Protocol became applicable, it could make use of the dispute settlement mechanism enshrined in Articles 167 to 181 of the Withdrawal Agreement.
  2. If a dispute arises in relation to Article 5 of the Withdrawal Agreement and Article 2(1) of the Protocol, the Union and the United Kingdom will immediately enter into consultations in the Joint Committee. They will endeavour to resolve the dispute in a timely manner, with the aim of reaching a mutually agreed solution. With a view to facilitating such a solution, each party will provide a written reasoned justification of its respective position and will respond in writing to the other.
  3. Under the dispute settlement mechanism, a ruling by the arbitration panel that a party acts with the objective of applying the Protocol indefinitely would be binding on the Union and the United Kingdom. Persistent failure by a party to comply with a ruling, and thus persistent failure by that party to return to compliance with its obligations under the Withdrawal Agreement, may result in temporary remedies. Ultimately, the aggrieved party would have the right to enact a unilateral, proportionate suspension of its obligations under the Withdrawal Agreement (other than Part Two), including the Protocol. Such a suspension may remain in place unless and until the offending party has taken the necessary measures to comply with the ruling of the arbitration panel.

 

Second, there is joint statement supplementing the Political Declaration setting out the framework for the future relationship between the EU and the UK 

The meat of the statement is in paragraph six which sets out

 

6 Fifth, given the Union’s and the United Kingdom’s firm commitment to work at speed on a subsequent agreement that establishes by December 31st, 2020 alternative arrangements such that the backstop solution in the Protocol on Ireland/Northern Ireland will not need to be applied, a specific negotiating track will be established at the outset and as part of the negotiations to lead the analysis and development of these alternative arrangements. This dedicated track will consider the use of all existing and emerging facilitative arrangements and technologies, with a view to assessing their potential to replace, in whole or in part, the backstop solution in the Protocol on Ireland/Northern Ireland.
That assessment will include an evaluation of their practicability and deliverability in the unique circumstances of Northern Ireland. By virtue of being embedded in the overall negotiation structure, the negotiating track on alternative arrangements will be able to take account of progress made in the wider negotiations on the future relationship, in particular on goods regulations and customs.
In addition, and in support of their work on alternative arrangements, both the Union and the United Kingdom will consult with private sector experts, businesses, trade unions, the institutions established under the Good Friday or Belfast Agreement, and appropriate involvement of parliaments. In the first instance, the progress concerning alternative arrangements will be assessed at the first high level conference envisaged by the Political Declaration. To ensure that the negotiations are concluded in good time, further progress will be reviewed at each subsequent high level conference.

Thirdly, there is the UK’s unilateral declaration concerning the Northern Ireland Protocol. The third paragraph deals with a situation where there is a breach by the EU of the parties’ obligation under Article 5 of the withdrawal agreement which states “The Union and the United Kingdom shall, in full mutual respect and good faith, assist each other in carrying out tasks which flow from this Agreement”.

 

“The United Kingdom wishes to record its understanding of the effect of this provision if, contrary to the intentions of the parties, it is not possible for them to conclude an agreement which supersedes the Protocol in whole or in part due to a breach of Article 5 of the Withdrawal Agreement by the Union. The United Kingdom would not consider its application to be temporary in these circumstances, as in its view the Protocol would then constitute a permanent relationship between the Union and the United Kingdom. Article 1(4) makes clear this is not the Parties’ intention. If under these circumstances it proves not to be possible to negotiate a subsequent agreement as envisaged in Article 2 of the Protocol, the United Kingdom records its understanding that nothing in the Withdrawal Agreement would prevent it from instigating measures that could ultimately lead to disapplication of obligations under the Protocol, in accordance with Part Six, Title III of the Withdrawal Agreement or Article 20 of the Protocol, and under the proviso that the UK will uphold its obligations under the 1998 Agreement in all its dimensions and under all circumstances and to avoid a hard border on the island of Ireland.”

 

The Attorney General is expected to produce his advice to the House of Commons on the legal effect of these three documents later this morning in advance of the vote scheduled for later today.

 

 

Actionable fault and general average. Due diligence and unseaworthiness.

Actionable fault and general average. Due diligence and unseaworthiness.

 

In The CMA CGM Libra  [2019] EWHC 481 (Admlty), a container vessel grounded on leaving Xiamen on a shoal in an area in which there is a risk of uncharted shoals. Salvors refloated the vessel which then proceeded on her voyage. The shipowners funded the salvage and declared general average. 8% of cargo interests refused to pay their share on the grounds of actionable fault on the part of the shipowners. The vessel’s primary means of navigation was intended to be paper charts published by the United Kingdom Hydrographic Office (UKHO). Before leaving Xiamen the Second Officer prepared a passage plan which the Master approved. The plan was inadequate in that it did not refer to the existence of a crucial Preliminary Notice to Mariners (NM6274/P10) that had been issued by the UKHO approximately 5 months before the grounding, alerting mariners to the presence of numerous depths less than charted in the approaches to Xiamen and confirming that the charted depths within the dredged channel were sufficient for the vessel. Nor did the passage plan refer to any “no-go areas” which had not been marked or identified on the chart. At trial the Master confirmed that had the chart been marked up with the appropriate “no-go areas” he would not have attempted to execute the manoeuvre that ultimately led to the stranding of the vessel.

Teare J considered the burden of proof. The Supreme Court’s decision in Volcafe related to the burden of proof in relation to Article III.2 of the Hague Rules and did not deal with the burden of proof for Article III.1. There had been actionable fault through a breach of Article III.1 of the Hague Rules Article IV r.1 provides that where loss or damage results from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier. Thus it deals with the burden of proof for the purposes of Article III r.1. It is implicit in Article IV r.1 that the burden of proving causative unseaworthiness must lie upon the cargo owner for the article assumes that such unseaworthiness has been established.

Teare J then found that cargo interests had established a breach of Article III.1 in that the absence of an adequate passage plan was a cause of the grounding.. The presence on board a vessel of the appropriate chart is an aspect of seaworthiness. Where the Admiralty gives notice of a correction to the appropriate chart a vessel will not be seaworthy unless the chart has been corrected. If the vessel’s navigating officer fails, before the commencement of the voyage, to correct the chart the vessel is thereby rendered unseaworthy. The production of a defective passage plan is not merely “an error of navigation” but involves a breach of carrier’s obligation that the vessel is seaworthy “before and at the beginning of the voyage.” If there is a causative breach of Article III r.1 the fact that a cause of the subsequent casualty is also negligent navigation will not protect the carrier from liability. Passage planning by the master before the beginning of the voyage is necessary for safe navigation.

The carrier’s duty under Article III r.1 was not discharged by putting in place proper systems and ensuring that the requisite materials were on board to ensure that the master and navigating officer were able to prepare an adequate passage plan before the beginning of the voyage. As set out in Scrutton on Charterparties and Bills of Lading 23rd.ed at paragraph 14-046:

“The due diligence required is due diligence in the work itself by the carrier and all persons, whether servants or agents or independent contractors whom he employs or engages in the task of making the ship seaworthy; the carrier does not therefore discharge the burden of proving that due diligence has been exercised by proof that he engaged competent experts to perform and supervise the ask of making the ship seaworthy. The statute imposes an inescapable personal obligation.”

Due diligence was not exercised because the Owners’ SMS contained appropriate guidance for passage planning and that the auditors of the vessel’s practices were competent. To comply with Article III r.1, which imposes a non-delegable duty on thecarrier, it is not enough that the owner has itself exercised due diligence to make the ship seaworthy. It must be shown that those servants or agents relied upon by the owner to make the ship seaworthy before and at the beginning of the voyage have exercised due diligence. Negligence by the master or chief engineer or other officer before the commencement of a voyage can amount to a failure by the carrier to make the vessel seaworthy.

 

Accordingly there had been actionable fault by the shipowners and cargo were not required to contribute to general average.

 

No absolute immunity for international organisations before US courts.

 

The International Finance Corporation (IFC) makes loans to private businesses to finance projects in developing countries. In 2008, it lent $450 million to finance a coal-fired power plant in India. Local residents complained of harm suffered as a result of pollution from the plant and sued the IFC before a federal court in Washington, D.C., where it is headquartered, claiming, inter alia, that the the IFC had violated provisions of the loan agreement that were included to protect the local community. The International Organizations Immunities Act 1945 gives international organizations “the same immunity from suit” as “as is enjoyed by foreign governments.”

At the time foreign governments enjoyed virtually absolute immunity and the IFC claimed immunity from suit. Since then s1605(2)(a) of the Foreign Sovereign Immunities Act 1976, s1605(2)(a) U.S.C., has lifted the immunity of foreign governments in respect of suits based on their commercial activities, but the Act made no reference to the immunity of international organisations. In Jam et al v International Finance Corporation 586 U.S _ (2019) the US Supreme Court held on 27 Feb, Justice Breyer dissenting, that the immunity of international organisations is co-equivalent with that of foreign governments and the IFC is not absolutely immune from suit. The case was remanded for further hearing consistent with this opinion.

However under s.1605(2)(a) there are three alternative conditions for the lifting of immunity: (i) the action arises out of commercial activity in the US, or (ii) the action arises out of an act in the US in connection with commercial activity elsewhere, or (iii) the action arises out of an act outside the US in connection with commercial activity elsewhere  and the act causes a direct effect in the US. In many cases against international organisations based in the US these criteria will not be satisfied and this may prove to be the case with the further hearings in the instant case.