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.

Insurance and P&I: life in Europe just got easier

Whatever you think of Brexit, there can be little doubt that English P&I Clubs have reaped a substantial dividend from it when it comes to jurisdiction. A discreet bottle or two will no doubt be cracked open as a result of Foxton J’s judgment today in QBE Europe SA v Generali España de Seguros y Reaseguros [2022] EWHC 2062 (Comm).

The facts will be entirely familiar to any P&I claims handler. The Angara, a small superyacht insured against P&I risks by QBE UK under a policy later transferred to QBE Europe, allegedly damaged an underwater cable linking Mallorca and Menorca to the tune of nearly $8 million. The cable owners’ underwriters Generali brought a subrogated claim in the Spanish courts against QBE, relying on a Spanish direct action statute (Arts. 465-467 of the 2014 Ley de Navegación Marítima). QBE pointed to a London arbitration clause requiring disputes between insurer and assured to be arbitrated in London, said that if Generali wanted to enforce the policy they had to take the rough with the smooth. This being a post-Brexit suit, they sought an ASI.

Generali resisted. They argued that they were enforcing a direct delictual liability under Spanish law, and that in any case since the arbitration clause merely referred to assured and insurer (and indeed the whole policy excluded any third party rights under the Third Parties (Rights against Insurers) Act 1999) they were unaffected by it.

Pre-Brexit, QBE’s position would have been fairly hopeless: intra-EU ASIs were banned, and furthermore the effect of Assens Havn (Judicial cooperation in civil matters) [2017] EUECJ C-368/16 (noted here in this blog) would have largely pre-empted the matter in the Spanish courts.

But in this, one of the first post-Brexit P&I cases to come to the English courts, QBE won hands down. Solid first instance authority had extended the rule in The Angelic Grace [1995] 1 Lloyd’s Rep 87 (i.e. that very good reasons had to be shown for not granting an ASI to halt foreign proceedings brought in blatant breach of contract) to cases where the person suing was enforcing transferred rights, as where a subrogated insurer sought to take advantage of contractual provisions between its insured and the defendant. That line of decisions applied here: and Foxton J duly followed it, confirmed it and lengthened it by one.

He then asked whether, properly characterised, Generali’s suit was a tort claim or in substance a claim to piggy-back on the policy QBE had issued. His Lordship had no doubt that it was the latter. True, the Spanish direct action provisions disapplied certain limitations in the policy, such as pay to be paid provisions and a number of defences based on misconduct by the assured; but the matter had to be viewed in the round, and overall the cause of action arising under the 2014 Spanish law, being based on the existence of a policy and limited to sums assured under it, was clearly contract-based. It remained to deal with Generali’s further point based on the limited wording of the arbitration clause. Here his Lordship accepted that parties could provide that an arbitration clause in a contract did not apply to those suing under some derivative title, but said that much more would be required to demonstrate such an intent: the mere fact of reference to the original parties to the contract was not nearly enough.

And that was it: having failed to show any substantial reason why the ASI should not go, Generali were ordered to discontinue the Spanish proceedings.

What messages can P&I clubs and other insurers taker away? Three are worth referring to. One is that the enforcement of jurisdiction and arbitration clauses in a European context is now fairly straightforward. Another refers to the specific case of Spain, which altered its direct action statute in 2014: the QBE case has confirmed that under the new dispensation, as much as under the old, an attempt to use direct action as a means of getting at insurers abroad will continue to be be regarded as essentially an attempt to enforce the insurance contract. And third, judges in the UK are unlikely to be very receptive to attempts by claimants desperate to litigate at home to give arbitration or jurisdiction clauses an unnaturally narrow meaning.

Life, in short, has got a good deal easier for P&I interests. Now, where’s that bottle of cava?

The Prestige case. Victory for Spain in the CJEU.

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

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

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

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

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

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

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

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

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

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

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

Collision litigation and the ASG forms: if you’re offered proper security, take it and don’t argue.

A nice little ship collision decision from the Court of Appeal this morning.

Suppose you’re a collision defendant, and the claimant has nabbed one of your other ships in port elsewhere. You want your vessel back and agree collision jurisdiction in England under ASG1 and ASG2. Relying on ASG2 (“Each party will provide security in respect of the other’s claim in a form reasonably satisfactory to the other”), you put up reasonable security from your P&I Club. Straightforward? Er … not quite. The other guy sucks on his teeth, says that even if your security is reasonable he doesn’t like it, and on second thoughts he prefers to say “thanks but no thanks” and hold on to your ship instead. You’d be miffed, wouldn’t you?

That was essentially what happened in M/V Pacific Pearl Co Ltd v Osios David Shipping Inc [2022] EWCA Civ 798. After the ASG1 / ASG2 agreement had been signed, collision defendants Pacific Pearl put up security to obtain the release of another vessel of their then languishing under arrest in South Africa. But to their dismay, collision claimants Osios David refused it on the (now admittedly bad) ground that it contained a sanctions clause. Put to sizeable expense as a result of their declining to lift the arrest, Pacific Pearl sued them for damages for breach of contract.

Sir Nigel Teare, having held the security good, slightly surprised the profession by going on to decide that even if it was it made no difference. The ASG2 obliged both sides to offer reasonable security, but said nothing about any obligation on either side to accept it; from which it followed that Osios David had been entirely within its rights to say it preferred to maintain the arrest after all. He therefore dismissed the action: see M/V Pacific Pearl Co. Ltd v Osios David Shipping Inc. [2021] EWHC 2808 (Comm).

This decision has now been reversed by the Court of Appeal, which read the ASG2 undertaking as requiring reasonable security to be both provided and, once tendered, taken up. This was, said Males LJ, implicit in the nature of the ASG1/ASG2 procedure. In place of a collision being litigated potentially worldwide, with arrest being threatened almost anywhere and the rights and wrongs of such arrests being thrashed out wherever they happened to take place, the whole matter should be dealt with by sober argument in London. In short, the whole object of the ASG2 undertaking attached to ASG1 was that such proceedings should, if at all possible, replace arrest rather than leaving it up o a claimant’s discretion.

Alternatively, he would also have been prepared to read the ASG2 undertaking to offer security as comporting, even if it did not say so explicitly, an implied obligation in the offeree to accept it. It did not matter which line one took: in either case, Osios David was in breach of contract and thus liable in damages.

This blog is loath ever to disagree with Sir Nigel Teare. But in this instance, it is our view that the Court of Appeal must be right. This both for the reasons given by Males LJ, and also because, in an era where it is almost invariably envisaged that insurers – whether P&I or H&M or both – will argue the toss over collisions and pick up the eventual tab, arrest should be seen very much as a last resort. Ships are better employed sailing the seven seas earning freight than being used as pawns in expensive transnational litigation; in so far as this decision will in future make this more likely to happen, we welcome it.

Financial Security in Cases of Abandonment: A Four-Month Limit for Unpaid Seafarers’ Wages?

Introduction

The International Labour Conference (ILC) at its 103rd session approved the first group of amendments to the Maritime Labour Convention (MLC), 2006. The amendments were agreed by the Special Tripartite Committee at its first meeting at the International Labour Organisation (ILO) in Geneva in April 2014 and entered into force in January 2017. The amendments concerned Regulations 2.5 and 4.2 which deal with the right to repatriation and the shipowners’ liability for sickness, injury or death of seafarers occurring in connection with their employment. In brief, the amendments inter alia set out requirements for shipowners to provide financial security to provide support for abandoned seafarers and to assure compensation in the event of death or long-term disability of seafarers due to occupational injury, illness or hazard. While an exhaustive overview of such amendments is beyond the scope of this blogpost, this blogpost aims to shed light into the operation of Standard A 2.5.2. of the MLC, 2006, as amended, paragraph 9 of which stipulates that the coverage provided by the financial security system when seafarers are abandoned by shipowners shall be limited to four months outstanding wages and four months of outstanding entitlements.

Issues

Let’s take a hypothetical case of seafarers being abandoned for 10 months. Seafarers contact the P&I Club for assistance, providing all the necessary documentation to substantiate their claim. The P&I Club’s claims handlers acknowledge receipt of the claim, check the validity of the financial security system, and investigate whether the shipowners have in fact failed to pay wages to seafarers. If the P&I is satisfied that the financial security system is valid and that the seafarers’ wages are outstanding, the P&I Club will pay four months of outstanding wages and take immediate action to repatriate the affected seafarers. Now, assuming that all the outstanding wages are of the same rate, no further questions arise. But what if the outstanding wages are not all of the same rate? If, for example, after the first four months, there has been a pay rise under the seafarers’ employment agreement.

In such cases, a further question can potentially arise as to how the limit of four months outstanding wages will be calculated. Should it be calculated based on the first four outstanding wages? Or is there a right to pick and choose which of such outstanding wages to form the basis for the calculation of such limit? If the latter is true, seafarers will be keen on calculating such limit based on the higher rate of such outstanding wages. On the other hand, the P&I Club will attempt to calculate such limit based on the lower rate of such outstanding wages. In the next section, this blogpost will explain what the relevant provisions of the MLC, 2006, as amended, provide.

The law

The relevant provision is Standard A 2.5.2 of the MLC, 2006, as amended. Paragraph 9 of this Standard states that:

‘Having regard to Regulations 2.2 and 2.5, assistance provided by the financial security system shall be sufficient to cover the following: (a) outstanding wages and other entitlements due from the shipowner to the seafarer under their employment agreement, the relevant collective bargaining agreement or the national law of the flag State, limited to four months of any such outstanding wages and four months of any such outstanding entitlements; […].’

If one looks at the wording of this provision, it can easily be ascertained that the actual text of the Convention does not give an answer to this question. Certainly, the use of the words ‘limited to four months of any such outstanding wages and four months of any such outstanding entitlements’ gives ample of space for arguments suggesting that the four months limit can be calculated by reference to any such outstanding wages, and not necessarily the first four outstanding wages.

However, it is not clear whether the specific wording was used with such flexibility in mind. The draft text of the amendments of Standard A 2.5.2. of the MLC, 2006, was based on the principles agreed at the Ninth Session (2-6 May 2009) of the Joint IMO/ILO Working Group on Liability and Compensation regarding Claims for Death, Personal Injury and Abandonment of Seafarers. During the negotiations, it was considered whether links should be drawn between paragraphs 2 and 9 of this Standard. Although this discussion took place in respect of the duration of the limitation period (it may be worth noting here that, initially, a limit of three months wages was suggested), it can still be instructive. In this respect, it was explained that the purpose of paragraph 2 is to identify when abandonment takes place, whereas paragraph 9 defines the scope of financial security to be provided in case of abandonment. Thus, it was concluded, it is necessary to allow for a time lapse between the recognition of the abandonment situation and the limitation of financial security.

Against this backdrop, it can be argued that the purpose of the said limit is to ensure that seafarers’ wages are fully paid up for the first four months since their abandonment. Bearing in mind that it is the seafarers who have to initiate the process with the P&I Clubs, it may also be worth noting here that such interpretation can assist with avoiding cases, although rare, where seafarers intentionally allow wages to continue to accrue.

Conclusion

In practice, it is highly unlikely that seafarers are owed only four months’ wages when they are abandoned by their shipowners. Thus, the possibility of different rates for wages or other entitlements cannot be precluded. Given the uncertainty of the wording of Standard A 2.5.2. paragraph 9 (a) of the MLC, 2006, amended, any conflicting arguments can easily be avoided if the purpose of this provision is clarified in future amendments.

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

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

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

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

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

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

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

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

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

UK bans Russian ships from entry to UK ports

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

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

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

(c)a ship registered in Russia,

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

(e)a specified ship.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Athens Convention- Elaboration on key terms “defect in ship” and “fault”

Warner v. Scapa Flow Charters (No 2) [2021] CSOH 92

The pursuer was the widow of Mr Warner who tragically died in a technical exploratory diving trip on a wreck off Cape Wrath on 14 August 2012. The defenders facilitated the trip and skippered the boat (MV Jean Elaine). While walking in his cumbersome gear, including diving fins, preparing for a dive, Mr Warner fell off the deck of the vessel. This fall caused him, unknowingly, to suffer internal injuries. Stating that he was fit, he started his dive but during the dive he got into difficulties and made a rapid surface ascent due to the pain of his internal injuries. By the time he surfaced, his breathing apparatus was no longer in situ and he drowned.       

Mrs Warner brought an action for damages on behalf of her son. The action was within the scope of the Athens Convention 1974 (by virtue of the Carriage of Passengers and their Luggage by Sea (Domestic Carriage) Order 1987). It was argued that:

  1. Mr Warner’s injury arose from or in connection with a “defect in ship”. This meant under Article 3(3) of the Athens Convention that the carrier’s fault could be presumed.
  2. Even if not, the carrier was at fault as it failed to make adequate risk assessment.

The Outer House of the Court of Session held that the injury was not connected with or arose from a “defect in ship”. There was no evidence that the configuration of the deck defective. Also, it was pointed out that there were handrails that could have been put to sensible use, but at the time of the incident Mr Warner was not using them. The Court, however, held that the carrier was at fault in that he failed to recognise that the system of dive preparation he had set up or allowed to develop permitted or even encouraged divers to walk on deck in fins, and that was an inherently risky activity to the extent that consideration should have been given to putting in place mechanisms apt to eliminate it or at least bring it under control. Given the known risk of falls while walking in fins, particularly given the equipment worn by technical divers, and the unavailability of swift medical assistance on board, there should have been put in place proper precautions to mitigate the risk. Such precautions would have eradicating or minimising the risk of falling and Mr Warner would not have fallen at all, or it he did, he would not have  sustained a serious injury as he in fact sustained, because the force of any fall would probably have been broken by him holding on to a handrail or being supported by the onboard deckhand.  Accordingly, the defenders were liable to make reparation to the pursuer in terms of Art 3(1) of the Athens Convention 1974.               

What do we learn from the case?

The Athens Convention 1974 does not provide a definition for the term “defect in ship”. This means that determining whether an injury has occasioned from a “defect in ship” needs to be addressed by the national court. It is hard to suggest that the court’s handling of the matter in the present case is not satisfactory. That said, it should be noted that 2002 version of the Athens Convention provides a more rounded definition for this term. There, a defect in the ship has been described as “any malfunction, failure or non-compliance with applicable safety regulations in respect of any part of the ship or its equipment when used for the escape, evacuation, embarkation and disembarkation of passengers, or when used for the propulsion, steering, safe navigation, mooring, anchoring, arriving at or leaving berth or anchorage, or damage control after flooding; or when used for the launching of life saving appliances” (Article 4 of the Athens Convention 2002). Given that the main finding of the Court here was that the carrier failed in their risk assessment and there was no evidence that the deck’s configuration was defective, it is unlikely that a different outcome would have been reached even if Athens Convention 2002 had applied in this case.       

It is also left to the national law to determine what amounts to “fault” for the purposes of Article 3 of the Athens Convention 1974. This enabled the Court to adopt a flexible approach in determining whether the carrier was at fault for failing to make appropriate assessment of the risk. The Court initially focussed on a statutory duty to carry out a risk assessment of those on board under Regulation 7 of the Merchant Shipping and Fishing Vessels (Health and Safety at Work) Regulations 1997 but then moved its focus to general duty to exercise reasonable care for the health and safety of others onboard and a positive obligation to assess risk. This approach is in line with the general principles of tort law and a similar approach has been employed by British courts in the context of deliberating what amounts to “fault” under the Athens Convention- see Janet Dawkins v. Carnival PlC (t/a) P & O Cruises [2011] EWCA Civ 1237.

One positive development coming out of the case, especially for small maritime operators and their insurers, is that the Court found that a risk assessment was carried out by the skipper here although it was not written down or recognised as such (and of course although it was not adequate). This indicates that risk assessments need not to be formal affairs and a dynamic risk assessment carried out by the skipper or operator might be deemed to be adequate in some instances.            

For a comprehensive analysis of these issues see:

Carriage of Passengers by Sea: A Critical Analysis of the International Regimeby B. Soyer and G. Leloudas published

[2018] Michigan State University International Law Review, Volume: 26, Issue: 3, Pages: 483 – 535

This article has been cited with approval by the District Court of Columbia in Erwin-Simpson v. Berhard (DC DC, 2019).