Category: Sea Carriage

Pirates, ransom, and general average. There really is no alternative.

 

The Longchamp involved the allowance in General Average under Rule F of the York Antwerp Rules 1974 of expenses incurred by the shipowners while they were negotiating a ransom with Somali pirates over a period of some six weeks following the vessel’s seizure in the Gulf of Aden. Four items were claimed in respect of this period: crew wages, the high risk bonus due to the crew for being at sea in a high risk area, crew maintenance, bunkers consumed. Stephen Hofmeyr QC found that all items were allowable in general average. His finding has now been overruled by the Court of Appeal : [2016] EWCA Civ 708.

Rule F provides:

“Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.

The crux of the matter is whether these expenses were incurred “in place of another expense which would have been allowable as general average”. In this case, the shipowners claimed these expenses were incurred in place of an immediate payment of the demanded ransom at a higher figure than the ransom eventually negotiated. The Court of Appeal accepted cargo’s contention that in fact there was only one course open after the hijacking of the vessel (negotiation with the pirates to seek to achieve a release of the vessel and cargo) and the substituted expenses were incurred taking that course. There were only two available options to the owners once the vessel had been seized by pirates – abandon the vessel and cargo or engage with the pirates, negotiate and agree a ransom and pay it to effect release of ship, crew and cargo.  Rule F presupposes some real choice being made. Acceptance of the initial ransom demand is not a true alternative; nor is acceptance of any other ransom sum less than that initially demanded but greater than that eventually agreed.  Accordingly, the four expenses claimed by owners were not allowable in under Rule F.

The owners also claimed in respect of the costs of professional media response under Rule A in that they were incurred “for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure”.  At first instance, cargo interests argued that the costs must have been incurred for that sole purpose. The Judge rejected that argument and held that the costs were allowed.  On appeal they submitted that the costs must have been incurred for that predominant purpose. The Court of Appeal rejected this argument. It was enough that preserving the property from peril was an effective cause.

October diary –Piraeus Conference

On 13-15 October this year we have the Ninth International Conference on Maritime Law in Piraeus. An excellent cast of speakers will feature, headed by names such as Marc Huybrechts, Thomas Schoenbaum and Giorgio Berlingieri who need no introduction from anyone. There will also be the IISTL’s own Andrew Tettenborn and old IISTL friend Olivier Cachard from Nancy, together with many others from industry, academia and government. A number of other IISTL members will also be there. Programme here: bookings here.

Demurrage cannot last forever – but can go on for a bit longer.

 

MSC v Cottonex Anstalt was the case we reported last autumn about the containers of cotton that nobody came to collect from their discharge port in Bangladesh. Leggatt J held that the carrier was entitled to claim demurrage from the shipper under the bill of lading up to the point at which the contract came to an end due to its repudiation by the shipper. The Court of Appeal has upheld the first instance finding but has overturned the finding that the repudiation took place on 27 September 2011 when the shipper advised the carrier that it would not be able to collect the containers. At this time the delay was between two and a half to four months from discharge and the carrier argued that this was not a long enough period of delay to go to the root of the contract.

 

The Court of Appeal agreed ([2016] EWCA Civ 789). No reason had been given as to why the contract should be taken to have been repudiated on 27 September 2011. Instead, the Court of Appeal fixed on 2 February 2012 as the date of repudiation. That was when the carrier offered to sell the containers to the shipper in an attempt to break the impasse. That was the clearest indication that the commercial purpose of the adventure had by then become frustrated. The sale would have discharged the shipper’s obligation to redeliver the containers and with it the final obligations under the contracts of carriage which still remained to be performed. Accordingly, the shipper was liable for demurrage up to that date and for the value of the containers by way of damages.

 

A trap for the unwary. Service of proceedings in other Member States.

 

 

CPR 6.40(3) lists service in accordance with EU Regulation 1393/2007 (the “Service Regulation”) as one of several permissible methods of service of proceedings out of the jurisdiction. However, service under the Service Regulation is actually the only permissible method of service where proceedings are served on the territory of a Member State in respect of a civil or commercial matter (see C-325/11 Alder v Orlowska [24-25]).

 

In Asefa Yusuf v A.P. Moller [2016] EWHC 1437 (Admlty) cargo claimants’ English solicitor purported to serve proceedings on shipowners in Denmark in which the Service Regulation applies by virtue of a declaration made by Denmark ([2008] OJ L331/21).  However, art. 15 of the Service Regulation provides that service may be made “through the judicial officers, officials or other competent persons of the member state addressed, where such direct service is permitted under the law of that member state.” In the case of Denmark this meant service through a bailiff. Accordingly service was not within art.15 and Simon Bryan Q.C. , acting as a Deputy Judge of the English High Court, held that there could be no exercise of discretion under any English CPR Rule (such as CPR 6.15, 6.16 or 3.10). This could only be done if there was service within Article 15 with minor errors of procedure, but this was not the case here where service was effected through an English solicitor, rather than through a Danish bailiff.

 

Accordingly the High Court had no jurisdiction to try cargo’s claim against owners and the Admiralty Claim Form and service of the Admiralty Claim Form were set aside.

 

UK Referendum Result. Implications for shipping law?

As a result of the vote to leave the EU,  the UK will cease to be a member of the EU probably around November 2018 after the new prime minister has invoked article 50 and Parliament has repealed the European Communities Act 1972. How will this affect shipping law?

Substantively, not a great deal. English dry shipping is based on common law, and a few key statutes, such as COGSA 1992, and the implementation of international carriage conventions through domestic legislation – such as COGSA 1971 with the Hague-Visby Rules. Nothing European here, so no change.

With  wet shipping, the CLC and the Fund are part of our national law through domestic law implementing international conventions. Similarly,  the Wreck Removal Convention, the Salvage Convention, and the 1976 Limitation Convention. Again, nothing European here, so plus ca change.

However, procedurally,  we are very much affected by European legislation – and this is something we shall return to in a later post. As a starting point, bear in mind the two sources of EU legislation.

  • Directives which are implemented by and Act of Parliament. On our leaving the EU it will be up to Parliament to decide whether to repeal or amend the implementing legislation.
  • Directives which are implemented as statutory instruments pursuant to s.2 of the European Communities Act 1972. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep them we need to enact them as part of our domestic law.
  • Regulations which have direct effect. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep Regulations we need to enact them as part of our domestic law.

Know your defendant when commencing arbitration.

In London Arbitration 13/16, reported in LMLN, the claimants commenced arbitration against X and Y under a Conline booking form containing a London arbitration clause. The form evidenced a contract between X, as merchants, and the claimant. The claimants alleged that during the voyage an accident occurred due to alleged misdescription of the cargo by X and Y at the port of loading. A claim under the booking note could clearly be made against X, but what about Y? They were described in the booking note as the merchant’s representative at the loading port and were also named as the shipper in the bill of lading that was eventually issued. Y objected to the jurisdiction of the tribunal as they were not a party to the booking note, an objection  accepted by the tribunal who declared that it had no jurisdiction and ordered the claimants to bear Y’s costs and the costs of the award.  Claims against Y might exist in tort or under the bill of lading, but Y was not a party to the booking note. The position was not changed by the contemplation of the claimants and X that the booking note was an interim contract which would be superseded by the bill of lading.

Containers a-weigh! 14 days to go.

On 1 July 2016 new amendments to the Safety of Life at Sea (“SOLAS”) convention that will apply to international shipments come into effect. For all containers to which the IMO’s convention for safe containers apply there must be a verified gross mass (‘VGM’) prior to loading of a container. The party named as shipper on the ocean bill of lading must provide the maritime ocean carrier and the terminal operator with the verified gross mass of a packed container. Until this has been received, the carrier and the terminal operator cannot load a packed container aboard a ship until the verified gross mass for that container has been received. Ship stowage plans should use VGMs for all packed containers loaded on board. Weight verification is not required for an empty container, and there is no requirement that the shipper’s declaration be verified by the ocean carrier or the container terminal.

The shipper may weigh, or arranged for a third party to weigh, the entire packed container, alternatively the shipper, or a third party, may weigh all packages and cargo items individually, including pallets, dunnage and other packing and securing material, and add the resulting mass to the tare mass of the container. The shipper must clearly specify the “verified gross mass,” through the shipping instructions or by a separate communication, such as a declaration, including a weight certificate. In the UK the Competent Authority for implementing these requirements is the Maritime and Coastguard Agency.

OK, YAR? BIMCO gives thumbs up to York Antwerp Rules 2016.

BIMCO has decided that all new and revised BIMCO charter parties, bills of lading and waybills will refer to general average being adjusted in accordance with the YAR 2016 adopted by the CMI earlier this month. The main features of the new rules are as follows.

The new rules revert to certain key provisions of the 1994 rules, as regards:

– salvage (art VI),

– inclusion of wages and maintenance of the master, officers and crew during the period a vessel is in a port or place of refuge undergoing repairs recoverable in general average (rule XI).

– removal of the cap, introduced in the YAR 2004, on the cost of temporary repairs of accidental damage at a port of refuge (rule XIV)

The new rules retain the time bar introduced in rule XXIII of the YAR 2004 and the abolition of the 2 per cent commission on owners’ disbursements under YAR 2004. However, rule XXI now provides for interest on general average expenditure, sacrifices and allowances to be calculated at an annual rate of LIBOR plus 4 percentage points.

Rule XVII now permits adjusters to exclude low value cargoes from contribution to general average where the cost of inclusion would be likely to be disproportionate to its contribution.

 

Singapore Court orders sale of liened cargo

In Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311 the High Court of Singapore has ordered the sale of cargo subject to a lien exercised by the shipowner on behalf of the head charterer pursuant to a bill of lading incorporating the terms of the sub-charter, which was subject to Singapore arbitration and English law. The order was made pursuant to the powers of the court under s12 A (4) of the International Arbitration Act, which is in similar terms to s 44(3) of the English Arbitration Act 1996. Section 12 A (4) provides “If the case is one of urgency, the High Court or a Judge thereof may, on the application of a party or proposed party to the arbitral proceedings, make such orders under subsection (2) as the High Court or Judge thinks necessary for the purpose of preserving evidence or assets.” All parties were before the court and subject to its in personam jurisdiction.

The court held that an order for sale was “necessary” in order to preserve the “asset”, the disponent owner’s right to detain possession of the Cargo. The vessel was in international waters in the Bay of Bengal and the crew had been on board the vessel for almost four months, and some were falling ill. There was a lack of fresh food, water and medical supplies and overheating of the cargo of coal had been detected, with the risk of self-ignition should it continue to remain in the Vessel’s holds, a dire situation exacerbated by the monsoon season. The shipowners had been willing to exercise their lien under the bill of lading but the court noted that they would have been obliged to do so by reason of the employment clause in the time charter.