What’s coming in 2023?

Nearly two weeks into the New Year and the IISTL’s version of ‘Old Moore’s Almanack’ looks ahead to what 2023 is going to have in store us.

Brexit. EU Retained EU Law (Revocation and Reform) Bill will kick in at end of the year. It will be a major surprise if the two Conflicts Regulations, Rome I and Rome 2 aren’t retained, but not the Port Services Regulation.

Ebury Partners Belgium SA/NV v Technical Touch BV, Jan Berthels [2022] EWHC 2927 (Comm) is another recent decision in which an ASI has been granted to restrain proceedings in an EU Member State (Belgium) in respect of a contract subject to English jurisdiction.

Electronic bills of lading. Electronic Trade Documents Bill. Likely to become law in 2023 and to come into effect two months after getting Royal Assent. The Law Commission will publish a consultation paper “Digital assets: which law, which court?” dealing with conflicts of law issues in the second half of 2023.

Autonomous vessels. The Department for Transport consultation on MASS and possible amendments to the Merchant Shipping Act 1995 closed in November 2021. Maybe some results in 2023?

Supreme Court cases

Okpabi v Royal Dutch Shell. The case may well go to trial in 2023, although in May 2022 the High Court EWHC 989 (TCC), held it was premature to grant a  Group Litigation Order and directed that each individual claimant should specify additional details to formulate a proper cause of action for the defendants to respond to.

In similar proceedings in the Netherlands in which the Court of Appeal in the Hague gave judgment in January 2021 relating to multiple oil pipeline leaks in the Niger Delta, it was announced just before Christmas 2022 that Shell will pay 15 million euros ($15.9 million) to the affected communities in Nigeria in full and final settlement on a basis of no admission of liability.

The Eternal Bliss appeal to the Supreme Court is likely to be heard in 2023, with possibility of judgment given in 2023.

But there must be a question mark over London Steam-ship Owners’ Mutual Insurance Association Ltd (Respondent) v Kingdom of Spain (Appellant), Case ID: Case ID 2022/0062 where it is stated “This appeal has been adjourned by request of the parties.”

Climate Change

IMO  Two measures aimed at reducing shipping’s contribution to GHG emissions,   EEXI and Cii, both came into force as from 1 January 2023 and will be in the forefront of the minds of those negotiating new time charters.

EU. Shipping is likely to come into the ETS system with the amendments to the 2003 ETS Directive with phasing in from 1 January 2024. Here and here.

BIMCO has produced time charter clauses to deal with all three of these measures.

Ewan McGaughey et al v. Universities Superannuation Scheme Limited is a case involving whether the investments in fossil fuels by a large pension fund in the UK breach the directors’ fiduciary duties and duties towards contributors of the pension fund. On 24 May 2022, the High Court refused permission to bring a derivative action against USSL, but the Court of Appeal gave permission to appeal in October 2022, so a hearing in 2023 is “on the cards”.

European Union

On 15 July 2022, the EU Taxonomy Complementary Climate Delegated Act covering certain nuclear and gas activities came into force on 4 August 2022 and has applied from 1 January 2023. A legal challenge against the Commission before the CJEU by various NGOs and two member states, Austria and/or Luxembourg has been threatened in connection for the inclusion of nuclear energy and natural gas in the Delegated Act. Climate mitigation and adaptation criteria for maritime shipping, were included in the EU Taxonomy Climate Delegated Act adopted in April 2021.

Previous requests from other NGOs asking the Commission to carry out an internal review of the inclusion of certain forestry and bioenergy activities in the EU green taxonomy had already been rejected by the Commission in 2022.

The Corporate sustainability reporting directive came into effect on 16 Dec, 2022

For EU companies already required to prepare a non-financial information statement, the CSRD is effective for periods commencing on or after 1 January 2024. Large UK and other non-EU companies listed on an EU regulated market (i.e. those meeting two of the three following criteria: more than €20 million total assets, more than €40 million net turnover and more than 250 employees) will be subject to the CSRD requirements for periods commencing on or after 1 January 2025. 

UK and other non-EU companies that are not listed in the EU but which have substantial activity in the EU will be subject to the CSRD for periods commencing on or after 1 January 2028.

Finally, a very happy 2023 to all our readers.

Shipping and the EU Emissions Trading Scheme. It’s going to cost you from 2024 onwards.

Over the last two years the proposed inclusion of shipping in the Emissions Trading Scheme has bounced around the organs of the EU in the trilogue procedure. The EU  Parliament’s initial proposal of 16 September 2020 was to amend  the MRV Regulation 2015/757 and to include ships of 5000 grt and over in the ETS for all voyages into and out of a port in the EU including from and to ports outside the EU, starting on 1 January 2022. The shipowner, demise charterer, and time charterer would all be responsible under the ETS for the costs of acquiring ETS allowances.

The Commission responded on 14 July 2021 https://iistl.blog/2021/07/14/bastille-day-eu-commissions-present-to-the-shipping-industry/with a proposal to amend the 2003/87/EC directive establishing the Emissions Trading Scheme (‘ETS Directive’) so as to include maritime transport within the ETS but with only 50%  cost for CO2 emissions on a voyage from or  port outside the EU to one in EU, and to a voyage from the EU to a port outside the EU. There would be a phase in period between 2023 and 2026 for surrender of allowances. Only the shipowner and demise charterer would be responsible for allowances.

The Parliament made various counter amendments in June 2022 as did the Council, noted in here  https://iistl.blog/2022/07/06/eu-inclusion-of-shipping-in-the-ets-latest-developments/.

On 18 December 2022, hopefully before the World Cup Final took place, the Parliament and Council made a provisional agreement as outlined in the press release quoted below. The text of the agreement has yet to be released but the press release quoted below indicates agreed amendments to the Commission’s proposed amending of the ETS Directive.

“EU ETS maritime

The Council and Parliament agreed to include maritime shipping emissions within the scope of the EU ETS. They agreed on a gradual introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026.

Most large vessels will be included in the scope of the EU ETS from the start. Big offshore vessels of 5000 gross tonnage and above will be included in the ‘MRV’ on the monitoring, reporting and verification of CO2 emissions from maritime transport regulation from 2025 and in the EU ETS from 2027. General cargo vessels and off-shore vessels between 400-5 000 gross tonnage will be included in the MRV regulation from 2025 and their inclusion in EU ETS will be reviewed in 2026.

In addition, the agreement takes into account geographical specificities and proposes transitional measures for small islands, ice class ships and journeys relating to outermost regions and public service obligations and strengthens measures to combat the risk of evasion in the maritime sector.

Certain member states with a relatively high number of shipping companies will in addition receive 3.5% of the ceiling of the auctioned allowances to be distributed among them.

The co-legislators agreed to include non-CO2 emissions (methane and N2O) in the MRV regulation from 2024 and in the EU ETS from 2026.”

www.consilium.europa.eu/en/press/press-releases/2022/12/18/fit-for-55-council-and-parliament-reach-provisional-deal-on-eu-emissions-trading-system-and-the-social-climate-fund/

It now looks clear that shipping is going to be brought into the EU’s ETS in just over a year’s time. This will entail added costs to voyages into and out of the EU which will fall on owners and bareboat charterers. It should be noted that, although the UK has established its own ETS, this does not currently include shipping.

An example of these coming ETS costs was given by Safety4Sea in late September 2022, https://safety4sea.com/prepare-for-higher-shipping-costs-but-the-eu-ets-should-be-a-manageable-change/, who posited the example of a voyage from Brazil to Rotterdam, using a carbon credit price of $85 per metric tonne of carbon emitted, a similar figure to the current price of $85.20 per m/t. The example has been updated in line with the recently agreed phase-in period.

The example takes a Capesize dry bulk voyage carrying iron ore from Ponta da Madeira in Brazil to Rotterdam (4,100 nm). Assuming a Capesize speed of 14 knots this would take around 12 days: at 62 tonnes per day this corresponds to 744 tonnes of fuel consumed, emitting 2,300 tonnes of CO2. As the voyage starts outside Europe, only half of the emissions qualify for allowances – 1,150 tonnes.

40% of this will need to be covered for 2024– 460 tonnes. Therefore, at a carbon  credit price on 13 December 2022 of just over EUR 85/mt of carbon emitted, the total cost for the carbon allowance would be EUR 39,100, plus a small addition for consumption in port. This compares with a fuel cost for the voyage of around EUR 520,000 (equivalent to 8%).

But two years later, in 2026, the cost for the carbon allowance would rise to 100% almost EUR 100,000 – equivalent to 20% of the total fuel bill for the voyage

For voyage charters to and from the EU, these costs will likely be reflected in increased freight rates for voyages in and out and within the EU. For time charters, although charterers bear the cost of bunkering the vessel during the currency of the charter, that does not mean that owners will be able to recover the costs of ETS allowances from them. Assuming that the EU is a permitted trading area, there is no mechanism for owners under the standard form time charters by which to recover these additional costs. The express or implied indemnity will not work, as these costs will be regarded as the natural costs of trading, as was the case in The Dimitris L [2012] EWHC 2339; [2012] 2 Lloyd’s Rep. 354, where the time charterers’ orders to proceed to the United States did not entitle the owners to be indemnified against the cost of U.S. Gross Transportation Tax.

However, specific clauses may be developed to deal with the apportionment of ETS costs. One such clause was is BIMCO’s Emissions Trading Scheme Agreement for Time Charterparties released on 31 May 2022.

The clause, which is not limited to the EU ETS, provides a mechanism for making the time charterer responsible for providing and paying for emission allowances with both parties cooperating and exchanging data necessary to facilitate compliance with any applicable ETS scheme and to calculate the amount of allowances that need to be surrendered for the period of the charterparty.

While the vessel is off-hire the charterers have the right to offset any allowances due or to require owners to return a quantity of emission allowances equivalent to that for which the charterers would have been responsible for this period had the vessel been on hire.

If charterers fail to transfer any emission allowances in accordance with the provisions in the clause, owners may suspend performance of all or any of their obligations, on giving charterers five days notice, until the time owners receive the emissions allowances in full. During this period of suspension the vessel is to remain on hire and owners are to have no responsibility whatsoever for any consequences arising out of the valid exercise of this right. The right of suspension is without prejudice to any other rights or claims owners may have against charterers under the charterparty.

Unlike many BIMCO clauses, there is no provision for the incorporation into any bills of lading or waybills issued under the charter. This makes sense as ensuring the time charterers bear the financial consequences of acquiring ETS allowances required during the currency of the charter will not directly impact on third party holders of bills of transport documents. This may happen, though, with delay due to owners operating their rights to suspend services under the clause in which case owners would be able to pass on to charterers any resulting liabilities incurred to such third parties.

New guidelines for port State and flag State authorities on how to deal with seafarer abandonment cases

Earlier this month the ILO and IMO jointly adopted guidelines for port States and flag States on how to deal with seafarer abandonment cases. The new guidelines aim to facilitate the development and implementation of practical steps for port State and flag State authorities to expeditiously and effectively resolve abandonment cases where duty holders have failed to do so.

Under the MLC, 2006, the shipowner remains liable to cover the cost of repatriation, outstanding wages, and other entitlements due to the seafarers under their employment contracts and the MLC, 2006, as well as provision of essential needs.[1] The shipowner is also required to provide adequate financial security to ensure that seafarers are duly repatriated.[2] In cases where the shipowner fails to fulfil the relevant obligations, the flag State should arrange the repatriation of seafarers.[3] If the flag State fails to do so, the responsibility to repatriate the seafarers shall rest with the port State or the State of the nationality of the seafarers.[4]

The new guidelines do not purport to bring any changes to the principles just described. On the contrary, they seek to address the practical difficulties that arise in cases of abandonment of seafarers due to lack of effective coordination and communication between flag States, port States, States in which seafarers are nationals or residents, States in which recruitment and placement services operate, and other stakeholders. In this respect, they set out a series of steps to be taken by port State and flag State authorities to expeditiously and effectively resolve abandonment cases.

The new guidelines provide, inter alia, that the port State shall immediately report an abandonment case to ILO and notify the parties involved, including shipowners, flag States, and any relevant seafarers’ representatives. Upon receiving such notification, the flag State shall urge the shipowner or financial security provider to fulfil their responsibilities in accordance with the MLC, 2006, and, if the latter fail to undertake their responsibilities within the given deadline, the flag State shall take the lead and coordinate the process for the seafarers’ repatriation. Should both the shipowner and the flag State fail to comply with their obligations, the port State shall take the lead of the repatriation process.

Most importantly, the new guidelines prompt flag States and port States to establish a consultation mechanism dedicated to the resolution of seafarer abandonment cases, as well as a domestic Standard Operating Procedure (SOP) to explicitly define the liabilities and obligations of flag State and port State authorities, and the roles to be played by other relevant government agencies and non-government entities.

Almost a decade after the MLC, 2006, entered into force, resolving seafarer abandonment cases remains a complex and time-consuming task. This is true even in the most straightforward cases where adequate financial security is available. Lack of coordination and bad communication between shipowners, financial security providers, port States, flag States, and other interested parties means that seafarers and their families have to suffer the adverse consequences of abandonment for longer. The new guidelines take positive steps towards eliminating any resulting risks. However, their non-legally binding nature can hinder their practical significance if flag States and port States are not willing to take action.


[1] MLC, 2006, Regulation 2.5.

[2] ibid.

[3] MLC, 2006, Standard A 2.5.

[4] ibid.

Seafarers’ Wages Bill: Are Good Intentions Enough?

In March 2022 P&O Ferries made 786 seafarers redundant, without prior notice or consultation. The company also announced its decision to move to a new crewing model using agency workers who would be paid less than the NMW. In doing so, P&O Ferries openly took advantage of gaps in national and international legislation governing seafarers’ wages.

In the UK, for example, the NMW, which was first introduced by the NMW Act 1998, applies to anyone employed to work on board a ship registered in the UK, unless the employment is wholly outside the UK, or the person is not ordinarily resident in the UK.[1] The right to be paid the NMW also applies to all individuals working in the territorial waters of the UK or in the UK sector of the continental shelf, provided they were not employed in connection with a ship which is exercising the right of innocent passage or the right of transit passage, as defined by the United Nations Convention on the Law of the Sea (UNCLOS), or a ship which is engaged in dredging or fishing.[2]

What this effectively means is that seafarers working on board vessels serving domestic UK routes have a right to be paid the NMW, regardless of the flag of their vessel and even if they are not ordinarily resident in the UK. However, the NMW still does not apply to seafarers working on board ships serving international routes unless their ship is flagged in the UK, and they are ordinarily resident in the UK.

At an international level, on the other hand, the Maritime Labour Convention, 2006, although it includes a series of provisions regarding the seafarers’ right to be paid for their services,[3] it does not make any binding provisions regarding the right to be paid minimum wages. In fact, the MLC is limited to set guidance as to the procedures for determining minimum wages for seafarers and the minimum monthly basic rate of pay for able seafarers working on ships operating worldwide.[4]

In response to the P&O Ferries redundancies, the UK government announced, amongst other things, its intention to change the law so that seafarers working on ships that regularly use UK ports are paid at least equivalent to the UK NMW. Following a consultation from 10 May to 7 June 2022,[5] the UK government introduced the Seafarers’ Wages Bill to the House of Lords on 6 July 2022. The Bill, which had its first reading in the House of Commons on 8 November 2022, aims to ensure that seafarers with close ties to the UK are paid at least an equivalent to the UK NMW while they are in UK waters, and contains 15 provisions.

Cl. 1 to 2 set out the scope of application. Cl. 3 to 6 establish the obligation of ship operators to make NMW equivalence declarations to harbour authorities. Cl. 7 to 9 set out the powers of harbour authorities to impose surcharges and access restrictions where ship operators have not provided a valid NMW equivalence declaration. Cl. 10 sets out the power of the Secretary of State to institute proceedings relating to offences under this Bill. Cl. 11 to 12 deal with the powers of the Secretary of State to issue guidance, directions, and regulations. Cl. 13 and 14 define terms used in the Bill, including the terms harbour and harbour authorities. Cl. 15 deals with the extent and the commencement of the provisions of the Bill.

In essence, if the Bill passes it will create a system by virtue of which harbour authorities will have the power to request ship operators, the vessels of whom use their harbours at least 120 times a year, to provide a declaration that their seafarers are paid at a rate at least equivalent to the NMW for their work in the UK or its territorial waters if they do not already qualify for the NMW.[6] In addition, harbour authorities will be able to impose a surcharge on ship operators who fail to provide a valid NMW equivalence declaration.[7] The amount of the surcharge is to be determined by a tariff of surcharges specified by harbour authorities in accordance with regulations issued by the Secretary of State.[8] A surcharge paid by ship operators may be retained and used by harbour authorities for the purposes of any of their functions or for the creation of shore-based welfare facilities for seafarers.[9] Finally, subject to very few exceptions, harbour authorities will be entitled to refuse access to their harbours if ship operators fail to pay the surcharge.[10]

Apart from the powers vested on harbour authorities, the Bill will also create a dedicated enforcement system, allowing the Maritime and Coastguard Agency to play a role in checking the validity of NMW equivalence declarations.[11] The inspectors will have powers to board a ship in a harbour in the UK or to enter any premises for the purposes of determining whether ship operators comply with any NMW equivalence declarations, or of verifying information provided to ensure compliance with these declarations.[12]

So far, the Bill has been received with scepticism. The UK Chamber of Shipping, for example, commented that the Bill could potentially undermine existing international agreements.[13] Similarly, the British Ports Association raised concerns about the compatibility of the Bill with international treaties, as well as the suitability of ports to regulate the wages of port-users.[14] Nautilus, on the other hand, pointed out that the Bill could potentially lead to ship operators ‘port hopping’ to avoid having to pay seafarers the equivalent of the NMW.[15]

Despite its good intentions, the potential impact of the Bill on underpaid seafarers working on board ships serving international routes could be minimal. First, as it was commented by Nautilus, the requirement that a ship must enter a harbour at least 120 occasions in the year for the NMW equivalence declaration to apply means that unscrupulous ship operators can easily bypass regulation by shifting their services between different ports. As the Bill appears, this is an unavoidable risk. It is the author’s view that this risk could only be avoided by a more centralised regulatory approach which would not depend entirely on casting powers on individual harbour authorities. Secondly, the fact that ship operators who fail to provide a valid NMW equivalence declaration will still be able to use a harbour if they pay a surcharge undermines the whole purpose of the Bill. This is because ship operators with significant financial means will be able to buy themselves out of regulation. After all, this is exactly what P&O Ferries did when they dismissed 786 seafarers without prior notice or consultation. Finally, adding yet another issue on the agenda of port inspectors without conducting structural changes on the way port inspections are carried out can only be of minimal practical significance when it comes to the protection of the seafarers’ employment rights.


[1] NMW Act 1998, s 40.

[2] NMW (Offshore Employment) (Amendment) Order 2020, s 2.

[3] MLC, Regulation 2.2. See also MLC, Standard A2.2.

[4] MLC, Guidelines B2.2.3 and B2.2.4.

[5] Department for Transport, Consultation outcome: Conditions for harbour access and seafarers’ pay-rates: scope and compliance, 10 May 2022 < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1088162/seafarers-wages-consultation-gov-response.pdf> accessed 7 December 2022.

[6] Bill 184 2022-23, cl 3.

[7] Bill 184 2022-23, cl 7.

[8] ibid.

[9] ibid.

[10] Bill 184 2022-23, cl 9.

[11] Bill 184 2022-23, cl 6.

[12] ibid.

[13] UK Chamber of Shipping, ‘Seafarers’ Wages Bill’ (6 July 2022) <https://ukchamberofshipping.com/latest/seafarers-wages-bill-/> accessed 7 December 2022.

[14] British Ports Association, ‘ BPA Reacts to New Harbours (Seafarers’ Remuneration) Bill’ (10 May 2022) <https://www.britishports.org.uk/bpa-reacts-to-new-harbours-seafarers-remuneration-bill/> accessed 7 December 2022.

[15] Nautilus, ‘First reading of Seafarers’ Wages Bill’ (7 September 2022) < https://www.nautilusint.org/en/news-insight/news/first-reading-of-seafarers-wages-bill/> accessed 7 December 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The ILO adopts a Resolution on Financial Security in cases of the Abandonment of Seafarers 

In one of our previous posts ( https://iistl.blog/2022/04/13/financial-security-in-cases-of-abandonment-a-four-month-limit-for-unpaid-seafarers-wages%ef%bf%bc/ ), we considered some of the issues that emerge from the operation of Standard A2.5.2 of the Maritime Labour Convention (MLC), 2006, as amended, on financial security in cases of the abandonment of seafarers. In particular, we looked at paragraph 9 of this Standard which requires that the coverage provided by the financial security system when seafarers are abandoned by shipowners shall be limited to four months of any such outstanding wages and four months of any such outstanding entitlements. In this regard, we highlighted, inter alia, the inadequacy of the fourth month limit to accommodate the needs of seafarers when a case of abandonment is not resolved in time.  

Only a few months ago, during the second part of the fourth meeting of the Special Tripartite Committee, the possibility of extending the minimum coverage afforded by the current financial security system from four months to eight months was considered following a proposal from the seafarers’ group of representatives. While the proposal was not supported by the representatives of the shipowners’ group and the representatives of the Governments’ group, mainly because of the risks faced by the insurers, a joint resolution was adopted. The latter called for the establishment of a working group under the auspice of the Special Tripartite Committee to discuss the financial security system required under Standard A2.5.2 of the MLC, 2006, as amended, with a view to making recommendations on potential improvements that would make the system more effective and sustainable, as well as ensure a greater degree of protection and assistance for abandoned seafarers.  

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?