Author: Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

Demurrage is not just for ships – and cannot last for ever.

Demurrage is a provision for liquidated damages for breach of the charterer’s obligation to load or discharge the vessel within the agreed laytime. Demurrage provisions are also to be found in carriage contracts in respect of detention of containers supplied by the carrier. In MSC Mediterranean Shipping Company S.A. v. Cottonex Anstalt [2015] EWHC 283 (Comm), we have the first case considering container demurrage, which is of general interest in its treatment of the carrier’s right to keep a repudiated contract alive and continue claiming demurrage.

In the summer of 2011 the carrier made several contracts with the shipper to carry containers of raw cotton by sea from Middle East ports to Chittagong in Bangladesh. However, the goods were never collected and the containers still remain in a yard in the port at Chittagong and the customs authorities have at all material times refused to allow the containers to be released.

The carrier claimed demurrage from the shipper pursuant to cl.14.8 of the bill of lading which provided for a period of free time for the use of containers and providing that the responsibility of the “Merchant”, defined as including the shipper, was “to return to a place nominated by the Carrier the Container and other equipment before or at the end of the free time allowed at the Port of Discharge or the Place of Delivery”. Demurrage on a daily basis was to be payable by the Merchant thereafter in accordance with the carrier’s tariff. As at 1 January 2015 the total demurrage claimed, from the expiry of free time in 2011, exceeded US$1m.

Leggatt J held that the shipper was liable to pay demurrage under cl. 14 (8) and that there was no scope for reducing the amount payable for this breach on the grounds that the carrier had not taken reasonable steps to mitigate its loss. A liquidated damages clause made proof of the claimant’s actual loss unnecessary and irrelevant.

However, demurrage would not run forever. On 27 September 2011 the shipper had committed a repudiatory breach of the contracts of carriage by sending an email to the carrier in which it indicated that there was no realistic prospect of it being to arrange for any of the containers being collected. The question now arose as to whether the carrier should accept the repudiation and sue for damages or whether it could keep the contract alive.

Following a repudiation, the innocent contracting party may decide to keep the contract alive, unless it has no legitimate interest in doing so which will be the case when: (a) damages are an adequate remedy and; (b) maintaining the contract would be “wholly unreasonable”. Here, the carrier had no legitimate interest in maintaining the contract of carriage. It was restricted to a claim for damages, which would be subject to the mitigation principle. If the containers were in its possession it could mitigate by unpacking them. If, as was the case here, the containers were not in its possession, it could mitigate by buying replacements. Had cl. 14 (8) purported to give the carrier an unfettered right to ignore the shipper’s repudiation and carry on claiming demurrage indefinitely, the clause would have been treated as penal and would be unenforceable.

Temporal scope of Hague Rules

Volcafe v CSAV [2015] EWHC 516 (Comm); [2015] 1 Lloyd’s Rep 639.

Loading of a cargo of coffee inland by the carrier into its containers has been held to fall within the temporal scope of the Hague Rules. This may seem somewhat surprising in the light of Article 1 (e) of the Rules which provides: “(e) “Carriage of goods” covers the period from the time when the goods are loaded on to the time they are discharged from the ship.” However, David Donaldson QC in the London Mercantile Court has held that the initial loading into the carrier’s containers and the subsequent loading of the container onto the vessel were to be regarded as part of a single loading process. Even if this were not the case, the parties had exercised their freedom to agree what constituted loading under art 1. (e) which they had done by providing that the carrier would stuff the cargo into its own containers.

Simon Baughen

Free in/ Free out clauses and cargo claims

SDTM-CI v Continental Lines N.V. [2015] EWHC 1747 (Comm)

Cargo claims were brought against the shipowner under two bills of lading incorporating the terms of a charterparty which contained a clause providing “Cargo shall be loaded, spout trimmed and/or stowed at the expenses and risk of Shippers/Charterers … Cargo shall be discharged at the expenses and risk of Receivers/Charterers at the average rate of 1,500 metric tons per weather working day ……Stowage shall be under Master’s direction and responsibility…” Flaux J has held that the incorporated provision has the effect of transferring responsibility for loading and discharging away from the shipowner. To the extent that it was established that the cargo was damaged by bad loading and/or discharge, as opposed to bad stowage, the cargo interests could not recover such damages from the shipowner.

Simon Baughen