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.

Commercial firms possibly to breathe easier — courtesy of the ECJ

A City firm advises a commercial client from elsewhere in the EU on a big deal. Months or years later the client alleges the advice was bad and that it has suffered loss. If it comes to a claim in tort, can the firm insist on being sued in London, or must it (and its PI insurers) gear up to fight the proceedings in Tallinn, Trieste, or wherever the client is located? This depends on what is now Art.7(2) of Brussels I Recast, allowing suit in tort “in the courts for the place where the harmful event occurred or may occur”, and whether an Italian or Estonian trader is deemed to suffer loss in Italy or Estonia because — well — it is based there.

The ECJ today, sensibly, said No: see Universal Music International Holding (Judgment) [2016] EUECJ C-12/15. So a multinational that got its fingers burnt in a Czech acquisition couldn’t sue in Holland merely because its profits there were diminished. As we said, a matter for relief in EC3 and EC4.

AMT

Nice try — but an LOU means what it says.

In 2013 there was an incident in Padang, Indonesia involving a medium-sized chemical tanker, the FSL New York. Owners and charterers brought arbitration proceedings against each other: against mutual threats of ship arrests, LOUs were issued each way. That issued on behalf of the charterer was produced by the Norwegian Hull P&I Club, was explicitly limited to a maximum of $3.5 million, but contained the enigmatic boilerplate phrase “It is agreed that both Charterers and Owners shall have liberty to apply if and to the extent the Security Sum is reasonably deemed to be excessive or insufficient to adequately secure Owners’ reasonable Claims.”

Matters were indeed more complicated than they first seemed, and it was at least arguably clear that the security was not reasonably sufficient. Owners, instead of taking the normal course of applying to the court against the charterers for permission to arrest other vessels with a view to increasing their security, latched on to the “liberty to apply” wording and applied directly against the P&I Club for an order increasing its potential liability under its existing LOU. The Club understandably objected. Its liability was, it observed, stated to be capped at $3.5 million all in, and it would be curious if the “liberty to apply” provision nullified that cap by giving the court a roving commission directly to increase its liability to an indefinite extent above that figure.

Blair J, rightly in this blog’s view, decided for the Club on the basis of its arguments. He also suggested, with a good deal of common sense, that the prohibition elsewhere in the LOU on further arrests should be read subject to a proviso that it should not apply where the owners applied to the court as against the charterers with a view to obtaining further security.

One can almost hear the concerted sigh of relief from the P&I world.

See FSL-9 PTE Ltd (t/a Nordic Tankers) v Norwegian Hull Club [2016] EWHC 1091 (Comm). available on BAILII.

Third party claims against insurers

The venerable Third Parties (Rights against Insurers) Act 1930 was meant to be suppressed no less than six years ago and supplanted  by its namesake, the Third Parties (Rights against Insurers) Act 2010. Unfortunately, owing to a drafting glitch connected with insolvency law, the 2010 Act could not be brought into force; and so we still have the 1930 Act. But not for much longer. The glitch has now been cured by amendments brought in under the 2015 Insurance Act, and the shiny new 2010 Act comes into force on 1 August this year. A few changes (apart from length: the old Act made do with 5 sections, whereas the new model has 21 and 4 schedules, but that’s life). One is the obviation of the need to raise long-defunct companies from the dead, so as to be able technically to sue the corporate zombie and get judgment against it, so as to be able then to say that it could sue the insurer. Another is the abolition of “pay-to-be-paid”, except in the case of non-personal-injury marine insurance claims; yet another, the curtailment of the right of the insurer to rely on lack of notification by its own insured, provided such notification is given by the claimant.

The new Act makes it clear that it applies to insurance and not to reinsurance.

Details in brief from Clyde & Co’s ever-useful updating service.

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.

 

Dilatory English underwriters must watch out from next year

One of the most appalling rules of English insurance law finally bites the dust next year. The Enterprise Act 2016 received the Royal Assent earlier this month. From 4 May next year it inserts a new section (s.13A) in the Insurance Act 2015 finally allowing damages for late payment of insurance claims.

Quick overview: see our friends at Clyde & Co.

Detailed coverage: see The Insurance Act 2015: A New Regime for Commercial and Marine Insurance Law (ed M.Clarke & B.Soyer), ISBN: 9781138683303, Chapter 6 (by an author of this blog). Available from all good bookshops from August.

Fraud and continuing contracts

Imagine I contract to buy goods or assets of a given description or quality from you over a period of time; you start by performing properly, but later knowingly submit non-compliant stuff. Are you guilty of fraud?

In an interesting decision which could have relevance over here in trade and factoring, a US court of appeals has said no. The case, actually about bad loans, is US ex rel O’Donnell v Countrywide, CA2, 23 May 2016. Judgment here; comment here.

Loading illegal cargo by ‘Stealth’. Charterer’s libaility for the wrongs of sub-charterers.

In The CV Stealth [2016] EWHC 880 (Comm) time charterers sought permission to appeal against the award of an arbitrator who had found them liable to the shipowners in respect of the consequences of the vessel’s detention following an attempt by the sub charterer to load a cargo of oil from Venezuela without the necessary export permission. The finding was on the basis of an indemnity under cl. 13 of Shelltime 4 form, off hire under cl. 21, and for breach of cl.28 which provided …  No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments.” The appeal was on the basis that the arbitrator had committed an error of law in not construing cl.28 as having prospective effect at the time the relevant order was given by the charterer. Popplewell J found that the arbitrator had construed the clause prospectively and found that the risk of loading the unauthorised cargo had existed at the date the order was given. He also expressed the view that by analogy with the charterer’s obligation to nominate safe ports, if the risk arises whilst the vessel is en route, the owners would be entitled to refuse to continue to comply with the order, if they were aware of it. In the event of continued compliance, the charterers would be in breach of provided that the risk arose before it became impossible for the charterers to give fresh orders which could be complied with in time to avoid the risk.

Permission to appeal was refused because the statutory criterion in s. 69(3)(a) of the Arbitration Act 1996 was not fulfilled.

The case also raised a procedural issue as to the effect of cl. 41 of the charter which provided “The parties hereby agree that either party may –(a) appeal to the High Court on any question of law arising out of an award;”  The clause  was clearly drafted with the terms of section 69 of the 1996 Arbitration Act in mind. It scope was limited to a question of law whose determination by the Court may serve a useful purpose for the parties, on a question that will substantially affect the right of the parties.

 

The problem of foreign judicial determinations

A charterparty case today, Shagang Shipping Co Ltd v HNA Group Co Ltd [2016] EWHC 1103 (Comm) looked like a simple case of owners claiming charter hire and damages from time charterers (or rather their parent company guarantors). Unfortunately it turned into something like a nightmare for the owners’ lawyers.

The difficulty was that, while the figures were fairly straightforward, the charterers’ group (HNA) sought to escape scot-free by alleging that the charterers had only signed the charter because the owners had bribed one of the charterers’ employees to approve it. HNA was a leading and influential company in Hainan Province in China. It duly produced confessions of, and convictions in Hainan for, the relevant bribery by an officer of the owners and their own employee. Unfortunately there were distinct indications that these confessions had been obtained by some interesting police practices not unconnected with rubber truncheons, cigarette burns and  near-drowning, which were testified to in the case and which Knowles J specifically stated could not be ruled out. Happily Knowles J was able to rule against HNA  on the basis of external evidence that there had been no bribery.

A correct result, therefore. But the difficulties cases like this raise are of a high order. External evidence will not always be present; and where it is not the difficulties of obtaining evidence of malpractice of the kind alleged in Shagang are obvious. The only cure would seem to be a term in the relevant contract excluding a priori the use of at least some court decisions as evidence in subsequent proceedings arising out of a dispute. But that cure might well be worse than the disease.

OW Bunkers — common sense prevails, and a few answers given

The appeal in the OW Bunkers case, previously noted in this blog, was dismissed today by the UK Supreme Court. To recap (and simplify), what happened was that OW contracted to supply, and supplied, bunkers to a vessel in a Russian port. The bunkers were supplied on 60-day credit and reservation of title terms, and it was expected that by the time the 60 days were up they would have been consumed. OW had obtained the bunkers from Rosneft, again on reservation of title terms. OW then became insolvent. Rosneft argued that the shipowners owed them the value of the bunkers, since OW had never had any title to them and hance had had none to pass to the shipowners. At the same time OW, or rather its bank as assignee of its claims, sought payment under OW’s supply contract with the shipowners. The shipowners, wishing to guard against having to pay twice, said they didn’t have to pay OW because of s.12 of the Sale of Goods Act and also because, whatever the contract between them and OW said, s.49 of the same Act precluded a claim for the price of goods to which no property had passed except in the limited circumstances of s.49(2). Males J and the CA disagreed. The contract between OW and the owners was not, they said, a contract of sale, since the parties envisaged that no property in the fuel would ever pass (since it would have been consumed by the time the price became payable). Thus ss.12 and 49 did not apply.

The Supreme Court essentially agreed. The contract between OW and the owners was sui generis, a licence to use followed by an agreement to pass title to any bunkers left after 60 days. It followed that ss.12 and 49 were irrelevant. The only implied term related to title was a promise by OW that the shipowners would have a valid licence to burn the bunkers. But Lord Mance (who gave the only judgment) also went on to say that even if the contract had been for the sale of goods the result would have been the same because s.49 did not preclude agreements to make the price payable outside the circumstances it mentioned, as was the case here. The section was not, he said, a complete code: in so far as F G Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2014] 1 WLR 2365 said it was, it was wrong.

So the owners had to pay OW. What of Rosneft’s claim? Nothing definite was said of that, but reading between the lines the SC seems to indicate that it might well fail on the basis that by selling the bunkers to OW on the terms they did, Rosneft had acquiesced in their consumption.

Overall, this seems the sensible  result (though there is still something odd about the idea that sales for consumption morph into something else as soon as you introduce a reservation of title clause).

One further thought. One simple piece of legislation would have avoided all this, and also a great many other problems related to reservation of title. What about a provision that no reservation of title clause can be asserted against a third party obtaining, using or consuming goods in the ordinary course of business, whether or not the latter knows of the clause concerned? If we want to encourage the retention of English law as the system of choice for supply contracts of this sort, we need to keep ahead of the game. Does anyone in the Dept for Business, Innovation and Skills follow this blog, and if not might someone point it out to them?