sea venture issue 9 - steamship€¦ · this training programme, available in dvd and workbook...
TRANSCRIPT
Sea Venture newsletter Issue 9
Introduction ..........................................3
France - Owners’ Duty of Care to Cargo ......................................4
Naming of Ports and Safe Port Warranty- Recent Decisions ................................4
“Sea News” Wins APEX Award ............5
Economic Tort - Division Restored ........6
Loss Prevention Publications..................7
Italy - Delivery of Cargo WithoutProduction of a Straight Bills of Lading 7
Due Diligence - Obligation to Maintain. ........................8
Theft, Undeclared High Value Goods and CMR ........................8
LNG Seminar - Tehran ..........................9
Flat Racks on Deck - Deviation and Club Cover ....................9
Damages Following Late Redelivery -The “Achilleas” Affirmed....................10
Crane Breakdowns - “Net Loss of Time”or “Period”? ......................................10
Redelivery Notices - Good Faith and Reasonableness............................11
Deadfreight - a Surprise for Owners..........................................11
Germany - Detention of Cargo for Trade Mark Violation ....................12
Misdelivery and Conversion -Assessment of Damages ....................13
Delayed Issue of Bill of Lading -
For Whose Account? ..........................13
U.S. - Medical Malpractice Law ..........14
Australia - New Maritime
Crew Visa ..........................................14
Hong Kong - Conflicting
Decisions Resolved and More..............15
Dependency and Loss of Society
in the Fifth Circuit ..............................16
Port Waste Reception Facilities -
European Commission
Takes Action........................................16
SCOPIC ..............................................17
Bunker Wars - The Burden
of Proof Strikes Back! ........................18
Dispute Resolution Clauses in
Shipbuilding Contracts........................19
Jones Act - FELA Causation Standard 20
UCP 600 a Step Forward ....................21
Incorporation of Arbitration
Clauses by General Words ................22
Intermediate Hold Cleaning -
Owners’ Duty......................................22
Steamship Mutual Website ................23
Contents
2
Editorial TeamSue WatkinsMalcolm ShelmerdineNaomi Cohen
Sea Venture is available in electronic format. If you wouldlike to receive additional copies of this issue or futureissues in electronic format only please send your name andemail address to [email protected].
Feedback and suggestions for future topics should also besent to this address.
The high level of claims encountered by all of the Clubs inthe International Group in the 2006 year has been widelyreported and discussed. While the average value of claimsin the attritional layer has been increasing as aconsequence of inflationary pressures, it was thefrequency of high level claims in 2006 that was most eyecatching. In such an environment, and with thecontinuing growth of shipping activity, the importance ofloss prevention cannot be overstated.
Steamship Mutual has always attached great importanceto loss prevention. In 1992 the Ship Safety Trust wasestablished by the Managers to promote safety at sea andto develop high quality loss prevention and trainingmaterials. Over the last fifteen years a comprehensiveselection of onboard training programmes has beenproduced in association with Videotel MarineInternational. Further details of the Club’s loss preventionwork can be found on the Steamship Mutual website
but this issue of Sea Venture focuses on a number ofrecent and forthcoming Club initiatives. These range fromaward winning magazine format DVDs for the educationalbenefit of seafarers, incorporating case studies of eventswith the potential to give rise to serious claims, to trainingprogrammes and loss prevention posters.
In addition, in this issue there are contributions fromsolicitors in England, and lawyers in Italy, Germany, France,Hong Kong and the United States covering a wide varietyof interesting recent court and arbitration decisions.
The topic that is on the minds of most owners and,perhaps even more so, charterers, is the question of thecorrect measure of damages for breach of charter when avessel is redelivered late. The appeal from the English HighCourt decision in the “Achilleas” was heard in late May.Readers will recall that the vessel was redelivered 9 dayslate with the consequence that owners were forced toagree a reduced hire rate for the vessel’s follow on fixturewhich resulted in a loss of profit on the fixture of US$1.36million. The High Court upheld the majority arbitratorsdecision that owners were entitled to recover their loss onthis basis as opposed to the more conventional loss of useapproach. The significance for charterers was a liability indamages of over US $150,000 for each of the 9 days thevessel was redelivered late in comparison to damages ofUS$158,301 for the overrun period under the loss of useapproach. On 6th September the Court Of Appealdismissed the charterers’ appeal. The decision, andwhether as some commentators have suggested the casewill be of limited application, is covered at page 10 of thisissue of Sea Venture.
Malcolm Shelmerdine
17th September 2007.
Introduction
“Steamship Mutual
has always attached
great importance to
loss prevention... Over
the last fifteen years a
comprehensive selection
of onboard training
programmes has been
produced in association
with Videotel Marine
International”
Sea Venture newsletter Issue 9 3
www.simsl.com/loss-prevention-and-safety-training.html
Sea Venture newsletter Issue 9
The High Court has recently considered inquick succession two cases relating to theimpact of an express safe port warrantywhere the port is named in thecharterparty. By warranting the safety of anamed port had the parties agreed theport was safe or had charterers warrantedit was safe for the vessel? Surprisingly,there had been no previous direct authorityon this point.
The position, following these two cases, isthat where a charterparty includes anamed port and a safe port warranty, therisk of safety falls on the charterers.
The position is not finally settled as one ofthe two cases is the subject of an appeal.However, these decisions do highlight thenecessity for careful consideration ofcharterparty terms dealing with portdescriptions and safe port warranties; ifowners want charterers to bear the burdenof safety of the port, they should say soexplicitly to avoid subsequent disputes.
The cases are considered in detail in anarticle by Jessica Pollock of Eversheds onthe Steamship Mutual website at:
Naming of Ports and Safe Port Warranty - Recent Decisions
4
On the 27th July, 2007, the ChambreArbitrate Maritime de Paris issued anaward in favour of a vessel owner anddenied a cargo claim pursued on thebasis of an alleged breach of a duty ofcare owed by owners. The case raised anumber of novel issues.
The cargo claimants alleged shortagesand damage to cargo discharged atMatadi. Security was provided to releasethe vessel from arrest on behalf of theowner, but the bills of lading had beenissued by charterers who were thecontractual carriers.
After initially commencing arbitrationagainst the owner for claims under the
bills of lading the claimantsacknowledged their mistake andchanged the basis of their claim againstthe owners to a tortious claim alleging abreach of owners obligations under thecharterparty.
In an article on the Steamship Mutualwebsite at:
Henri de Richemont of Richemont Nicolas& Associés, Paris, discusses the award.
France - Owners’ Duty of Care to Cargo
www.simsl.com/FrenchTort0807.html
www.simsl.com/NamedSafePort0807.html
Sea Venture newsletter Issue 9 5
Volume 1 of Sea News has received anAward for Excellence in the APEX 2007Competition. The APEX awards recogniseachievement in graphic design, editorialcontent and overall communicationsexcellence.
In the 19th annual competition Sea Newswon an award in the Education &Training, Electronic & Video Publicationscategory against strong competition.Further details can be found on the ApexAwards website at:
Sea News has been designed to keepseafarers informed on matters of topicalinterest and to examine case studies ofevents giving rise to liability, loss ordamage. It is produced by the Managersin association with Videotel MarineInternational, with the support of theShip Safety Trust. As publicised in Clubcircular B.460, volumes 1 and 2 of SeaNews are now available and can beobtained through Videotel (detailsbelow). Members are entitled to specialconcessionary rates.
Volume 1 features:
• the ILO Maritime Labour Convention• a casualty involving a pilot and poor
bridge teamwork• the benefits of computer based
training and• the problems which can arise with
the use of target tracking devices
Volume 2 focuses on environmentalissues including:
• the effects of climate change on maritime operations
• the work of IMO on environmental matters
• MARPOL violations involving Oily Water Separatorsand also
• Seafarer safety within the dock area
For further details about pricing and howto place orders contact:
Videotel Marine International84 Newman StreetLondon W1P 3LDTel: +44 207 299 1800Tel: +44 207 299 1818Email: [email protected]: www.videotel.com
“Sea News” Wins APEX Award
www.apexawards.com/A2007_Win.List.pdf
Sea Venture newsletter IIssssuuee 99
Economic Tort - Division Restored
66
OBG Ltd and others v Allan and others;Douglas and another v Hello! Ltd andothers; Mainstream Properties Ltd v Youngand others [2007] UKHL 21
On 2 May 2007, the House of Lordsrestored the division between the economictorts of “inducing breach of contract” and“causing economic loss by unlawfulmeans”, each now to be treated asindependent, with its own conditions forliability. This (restored) division hasimplications for the shipping industry andindeed many of the cases considered wereshipping cases (including, for example,Stocznia Gdanska S.A. v Latvian ShippingCo. [2002] 2 Lloyd’s Rep 436 whichconcerned a claim advanced by shipbuildersthat the buyers’ parent company hadinduced the buyers to breach theircontracts with those shipbuilders).
Liability for “inducing breach of contract”was established in Lumley v Gye (1853) 2 E& B 216, on the basis that a person whoprocured another to commit a wrongincurred liability as an accessory on thebasis of “accessory liability”; The personprocuring the breach of contract was heldliable as accessory to the liability of thecontracting party. Liability depended uponthe contracting party having committed anactionable wrong.
The tort of “causing economic loss byunlawful means”, however, has a differenthistory and involves no accessory, butrather “primary liability”. The defendant’sliability is primary; for intentionally causingthe claimant(s) economic loss by unlawfullyinterfering with the liberty of others.
The “unified theory” was adopted by theCourt of Appeal in D.C. Thomson & Co.Ltd. v Deakin [1952] Ch 646 by treatingprocuring breach of contract (the oldLumley v Gye tort) as one species of a moregeneral tort of actionable interference withcontractual rights.
In Lord Hoffmann’s May 2007 opinion, itwas time for the unnatural union between“the Lumley v Gye tort” and the “tort ofcausing loss by unlawful means” to bedissolved. They should be restored to theindependence which they enjoyed at thetime of the House of Lord’s majoritydecision in Allen v Flood [1898] AC 1.
The tort of “inducing breach of contract” isbased on intention. To be liable, thedefendant must know that he/it is inducinga breach of contract. Intention extends torecklessness but not to negligence (evengross). But if the breach is neither an end initself nor a means to an end, but merely aforeseeable consequence, it will not bedeemed to have been intended.
With regard to “causing economic loss byunlawful means”, acts against a third partycount as “unlawful means” only if they areactionable by that third party. This principleis, however, qualified if the only reason thatthe act is not actionable is that the thirdparty has suffered no loss. In such a case,the “unlawful means” requirement issatisfied despite the absence of any loss.
Rupert Talbot-Garman of Reed SmithRichards Butler discusses the case in anarticle written for the Steamship Mutualwebsite at:
Gregory Mitchell QC, of 3 VerulamBuildings, was Counsel in the case of OBGv Allan & Ors [2007] UKHL 21 and wrotean article on the case which was publishedon 29 June 2007 in the New Law Journal,on which this article is largely based.
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Engine Room Waste Management
This training programme, available in DVD and workbookformat, or as a Computer Based Training Course, hasbeen designed to assist Members with MARPOLcompliance against a background of growing concern forthe marine environment. The programme covers:
• Oily Water and Separators
• The Oil Record Book
• Sludge and the Incinerator
• Sewage and Waste Water Management
Produced in association with Videotel MarineInternational and with the support of the Ship SafetyTrust, the programme can be obtained from Videotel(see page 5 for details). Concessionary rates areavailable for Members.
Guide for correct entries in the Oil Record Book
Following the success of the first edition of thisIntertanko publication in 2004, the Guide has beenupdated. In June 2007 Members received acomplimentary copy of the revised publication withClub circular B.457.
With increasingly rigorous Port State Control review ofoil and oily water management, and rising penaltiesfor irregularities, ensuring that the proper proceduresare not only followed but correctly recorded hasbecome more important than ever.
Loss Prevention Posters
In addition the Club will also be distributing within thenext few weeks the first of a series of loss preventionposters for use onboard entered vessels. These willaddress safe working practices with a view tominimising the risk of unnecessary claims for personalinjury, and also ship husbandy issues that, if neglected,have the potential to give rise to P&I claims.
LossPreventionPublications
Sea Venture newsletter Issue 9 7
www.simsl.com/ItalyDelivStraight0807.html
The principle under Italian law is that if the bill oflading is specifically endorsed non-negotiable, thecarrier must deliver the cargo evidenced by that bill oflading only to the consignee named in the bill oflading and can do so without production of that bill oflading. In these circumstances the bill of lading is not adocument of title but serves as a record of the receiptof the cargo and evidence of the agreement to carryand deliver the cargo to a specific destination andconsignee in return for payment of freight. Therationale for this principle, which is different to thatunder Hong Kong and English law (see page 15 of this issue) is discussed in an article written for theSteamship Mutual website by Aldo Mordiglia of StudioLegale Mordiglia, Genoa:
Italy -Delivery ofCargo WithoutProduction ofa Straight Billof Lading
During the period of a long term timecharter which party bears the risk of achange in international regulations whichhave the effect of restricting the cargoesthat the vessel can carry?
This was the issue at the heart of adispute, decided by the English High Courtin early August 2007, that arose as aconsequence of the MARPOL regulationsconcerning the carriage of fuel oil indouble hulled vessels that came into effectin April 2005 and, more particularly, theexemption for vessels with “double-sidesnot used for the carriage of oil andextending to the entire cargo tank length.”
If the vessel did not fall within theexemption were the owners under anobligation to exercise due diligence to
maintain or restore the vessel to thoseconditions? The charterparty requiredowners to deliver a vessel “in every way fitto carry crude and/or dirty petroleumproducts” and to be “tight, staunch,strong, in good order and condition, andin every way fit for the service...”
Sian Morris ([email protected])discusses the issues raised in this case inan article on the Steamship Mutualwebsite at:
Due Diligence - Obligation to Maintain
Sea Venture newsletter Issue 98
www.simsl.com/Datec0807.html
In the case of Datec Electronic HoldingsLimited & another v United Parcels ServiceLimited the House of Lords rejected UPS’sappeal against a Court of Appeal decisionholding them liable for the full value ofgoods lost from their custody. The casearose from the loss in transit of high valuegoods that were being carried by UPSfrom the UK to Germany by air and thento the Netherlands by road.
The main question before the Court waswhether the Convention on the Contractfor the International Carriage of Goods byRoad (“CMR”) would apply to goods thatdid not conform to the carriageagreement by virtue of being above thestandard US$50,000 limit which UPSwould ordinarily agree to carry. UPS hadsought to argue that, due to this non-
conformity, the consignments were eithernot “goods” or, alternatively, that therewas no contract of carriage.
In this case, described as “unusuallydifficult” for its subject matter, the Houseof Lords held that the CMR regime didapply despite the cargo’s value not havingbeen properly declared. This resulted inthe carrier being unwittingly liable to thefull extent of the value.
This case is discussed by Jeff Cox([email protected]) in an article whichcan be found on the Steamship Mutualwebsite at:
Theft, Undeclared High Value Goods and CMR
www.simsl.com/GoldenFleece0807.html
Sea Venture newsletter Issue 9 9
Steamship Mutual hosted a very successful LNG Seminarin Tehran in May, together with shipbrokers BarryRogliano Salles (“BRS”).
The seminar was inaugurated by Mr Souri, theChairman of the National Iranian Tanker Company anda Director of the Club, who presented a paper on theLNG industry and the position of Iran.
In addition to papers on the LNG market, andTechnological Developments in Ship Design from BRS,Steamship Mutual presented papers on P&I Issuesaffecting LNG operators and the management of riskunder LNG contracts. For further details contact RajeevPhilip ([email protected]) or Shahab Mokhtari([email protected]).
LNG Seminar- Tehran
As a basic principle, without clear words to the contrary,a bill of lading implies below deck carriage. In an age ofcontainerisation and advanced ship design, however, it isnot too controversial to suggest that it has become acustom of the trade to carry standard enclosedcontainers on the deck of a vessel fitted for the carriageof containers on deck, provided that there is no specialrequirement or instruction that would make deckcarriage inappropriate. This is more so if there is anappropriate liberty clause in the bill of lading allowingthe carrier the freedom to stow containers on deckwithout notice to the shipper.
Such customary acceptance of carriage on deck,however, is not likely to extend to all forms of containers.A prime example is the flat rack container which offersless protection to cargo than a closed container. Stowingsuch containers on deck may not be ‘customary’ and inmany jurisdictions it may also be doubtful that even aclearly worded liberty clause purporting to allow carriageof such containers on deck will protect the carrier.
When dealing with flat racks it is the Club’srecommendation that bills of lading should always beendorsed on their face to reflect carriage on deckregardless of whether or not there is a clear libertyclause purporting to allow stowage on deck. Withoutsuch specific clausing, carriage of flats racks on deckmay constitute a deviation under the contract of carriageand may result in the loss of Hague/Hague-Visby Rulesdefences and package limitation, with potentialprejudice to Club cover.
This issue is discussed in more detail by Louise Ashdown([email protected]) in an article on theSteamship Mutual website at:
Flat Racks onDeck -Deviation andClub Cover
www.simsl.com/RacksOnDeck0807.html
Sea Venture newsletter Issue 910
A London arbitration tribunal has recentlydelivered an award which highlights thedifferences between net loss of time andperiod off-hire clauses.
Where a net loss of time approach isadopted, charterers may deduct from hireonly if, following the occurrence of thequalifying off-hire event, the charterer hasactually suffered a loss of time. A periodoff-hire clause provides that the charterercan treat the whole of the period duringwhich the qualifying event is in existence asoff-hire irrespective of whether a loss oftime has actually been suffered. Thefinancial consequences for owners andcharterers can make the difference betweena successful and unsuccessful charter.
In (2007) 719 LMLN 4 a dispute arose asto how off-hire should be calculatedfollowing a crane breakdown. As well asthe net loss of time provision at clause 15of the standard NYPE form, the chartercontained two additional clauses whichwere open to conflicting interpretation.The tribunal ultimately held in favour ofthe charterers, resulting in owners havingto bear responsibility for loss of timewhere the extent of time actually lost tothe charterer was open to doubt.
A full report on this case by Sacha Patel([email protected]) can be foundon the Steamship Mutual website at:
The Court of Appeal, with Lord Justice Rixgiving the only judgment, has recentlydismissed an appeal from the wellpublicised and widely discussed judgmentof Christopher Clarke J in TransfieldShipping Inc v. Mercator Shipping Inc.
www.simsl.com/LateRedelivery0107.asp
In doing so Rix LJ confirmed that followinglate redelivery it was possible for an Ownerto claim not only the difference betweenthe market rate and the contractual hirerate for the period of the overrun, but alsolost earnings under subsequent fixtureslost, or in this case varied.
A number of commentators on the HighCourt decision have argued that it wouldbe of limited application, requiring the
coincidence of particular facts. However,through a detailed review of the relevantauthorities and consequent fleshing out ofprinciples, Rix LJ arguably crystallised thefindings at First Instance into a clearer setof general principles which will be relevantnot only to the majority of disputesinvolving late redelivery in a falling market,but also potentially to any number ofcases involving lost profits.
A full discussion by Rajeev Philip([email protected]) of the Courtof Appeal judgment and its implicationscan be found on the Steamship Mutualwebsite at:
www.simsl.com/AchilleasAppeal0907.html
Crane Breakdowns - “Net Loss of Time” or “Period”?
www.simsl.com/TimeLoss0807.html
Damages Following Late Redelivery -The “Achilleas” Affirmed
Deadfreight -a Surprise forOwners
Sea Venture newsletter Issue 9 11
In AIC LTD v Marine Pilot Ltd (2007) The CommercialCourt allowed an appeal from the Charterers of the“Archimidis” following the decision against them by apanel of arbitrators. The appeal, addressed two points:
1. A question on which there was no previous caselaw in relation to the safety of the load port, whichis discussed at page 4 of this edition of SeaVenture, and
2. Whether the charterers were liable to paydeadfreight to owners in circumstances where afull cargo had been tendered by charterers butcould not be loaded for reasons of safety at thenominated loadport.
This latter question and decision on appeal is discussed in an article by Sarah McGuire([email protected]) on the SteamshipMutual website at:
Briefly the facts of the case were that the master hadserved a notice of readiness stating that he did notexpect safely to be able to load a full cargo becausesilting of the dredged channel had led to draughtrestrictions. In the event the vessel loaded slightlymore than the NOR figure but not the full cargotendered by the charterers. The arbitral tribunaldecided owners were entitled to deadfreightnotwithstanding the tender when the parties were allaware that it was not possible at that time for thevessel to load a full cargo.
Surprisingly Gloster J disagreed.
www.simsl.com/MarinePilot0807.html
www.simsl.com/RedelNotice0807.html
RedeliveryNotices - Good Faith andReasonableness
The issue of redelivery notices under time charters hasrecently been considered by two London arbitrationpanels.
In one (2007 713 LMLN (London Arbitration: 3/07) thevessel was redelivered late and the Tribunal took the viewthat because of the importance to owners in fixing futureemployment for the vessel the charterers should makeappropriate enquiries to ensure the redelivery noticesserved were as accurate as possible. That is charterersobligation was not limited to an estimate in good faith.
In the other (2007 715 LMLN (London Arbitration: 5/07)the vessel was redelivered early but the Tribunal’s viewwas that because there is always uncertainly in relationsto vessel operations “margins” were built into charterperiods and redelivery notices were given onapproximate and expected terms.
These contrasting decisions are discussed by Sian Morris([email protected]) in an article on the SteamshipMutual website at:
The detention of containerised goods bythe German Custom Authorities as ameans to counter trade mark violationshas been on the increase for a number ofyears. The parties involved are thevendor and purchaser of the goods, thecompanies involved in their transport aswell as the trade mark proprietor, whoseeks the destruction of the goods.
Most cases concern the import and exportof goods. As to goods in transit theEuropean Court of Justice ruled in 2006that the trade mark proprietor canprohibit the transit of protected goodsthrough a Member State only if the goodsare put on the market in that state.
The German Customs Authorities follow ECRegulation 1383/03, which overlaysnational law. Generally, an application mustbe made to the courts for the detention ofgoods and a number of well knowncompanies have lodged precautionaryapplications. Under certain circumstances,Customs can also act upon suspicion.
If an application to detain goods isgranted the Customs Authorities suspendthe surrender of goods or retain the
goods. The decision is communicated tothe proprietor of the trade mark, whomust react within ten working days.
According to EC Regulation 1383/03 thesimplified procedure for the destructionof goods can only be pursued with theconsent of the possessor or owner of thegoods. Otherwise, civil court proceedingsaimed at the order of an interlocutoryinjunction have to be initiated which willdecide either the destruction or therelease of the goods.
The trade mark proprietor bears the costsof the proceedings. Carriers and freightforwarders can only be liable, if theycaused the trade mark violation but whatthis means, as well as the potentialexposure and practical solutions for thecarrier that has issued the relevant bill oflading are discussed in detail in an articleon the Steamship Mutual website byPandi Services J&K Brons and Dr.Schackow & Partner Rechtsanwälte onthe Steamship Mutual website at:
Sea Venture newsletter Issue 912
www.simsl.com/GermanyTMViolation0807.html
Germany - Detention of Cargo forTrade Mark Violation
Sea Venture newsletter Issue 9 13
At the end of July 2007 the Court of Appeal handeddown judgment in Mediterranean Shipping CompanySA v Trafigura Beheer BV “MSC Amsterdam”, a claimby cargo owners involving fraud, misdelivery andassessment of the resultant losses.
Briefly, the cargo owners sued the ship owners forconversion and breach of contract in relation to acargo of copper stowed in 18 containers and shippedfrom Durban to Shanghai. Fraudsters, said to beemployees of the owners’ agents in Durban, arrangedfor a false bill of lading, against which owners gave adelivery order. With this, they paid customs duty andVAT but were prevented from taking delivery only bythe fact that the genuine bill of lading holder arrived aday later and the owners managed to prevent deliveryto the fraudsters.
Proceedings in the Chinese courts have kept matterstied up since and the cargo remains uncollected withno prospect of the rightful owners obtaining delivery.Those owners then claimed against the vessel ownerin the English courts. The dispute raised a number ofinteresting issues including which rules govern thecontract of carriage, whether those rules apply to theperiod after discharge of the cargo from the vessel,which monetary limitation the vessel owner can invokeand whether cargo owners can recover hedging losses.
The decision is discussed in detail by Sian Morris([email protected]) in an article written for theSteamship Mutual website at:
As a matter of English law, once loading of cargo hasbeen completed both the owner and charterer are underan obligation to ensure that the vessel can be promptlydespatched upon her voyage and, for the sake ofcommercial efficacy, both parties will be allowed areasonable time to complete those formalities.
In a recent case referred to arbitration in London, thetribunal was asked to consider which party wasresponsible for delays that ensued after cargo had beenloaded in India for carriage to Vietnam as a result of (i)time spent resolving a dispute as to the description of thecondition of the cargo to be inserted into the bills oflading, (ii) time during which owners consideredcharterers’ request for the issuance of ante-dated bills oflading and (iii) delay releasing “freight prepaid” bills oflading pending receipt of freight into owners’ account.
The charterers were held responsible for the delays arisingas a result of all three causes. A detailed article by SachaPatel ([email protected]) on the decision can befound on the Steamship Mutual website at:
MisdeliveryandConversion - Assessment ofDamages
Delayed Issueof Bill ofLading - For WhoseAccount?
www.simsl.com/Amsterdam0807.html
www.simsl.com/BillDelay0807.html
The vast majority of modern day cruiseliners carry a doctor or other medical staffonboard. Ordinarily such physicians areindependently contracted and recentlitigation in the 11th Circuit has focused onwhether the ship owner should be heldvicariously liable for the doctor’s negligence.
For years the leading case in this arena hasbeen Barbetta v Bermuda Star 848 F.2d1364 1998 which held that the ship’sphysician was an independent medicalexaminer engaged on the basis of theirprofessional qualifications, with passengersbeing free to contract with them formedical services they may require.Barbetta, and many cases since, have heldthat a ship owner cannot be held to bevicariously liable for the negligence of ashipboard doctor given the ship ownerdoes not possess the expertise required tosupervise physicians who are carriedonboard as a convenience to thepassengers.
However, the 3rd District Court of Appeal(“3rd DCA”) in the case of Carlisle vCarnival Cruise Lines set a new precedentwhen ruling that a ship’s doctor is, inessence, held out as an agent of thecruise line and, consequently, any
negligence on the part of that doctor canbe imputed to the ship owner.
Carnival appealed this decision to theFlorida Supreme Court which, in Februaryof this year, overruled the 3rd DCA. Whilstthe Court found merit in the plaintiff’sargument because this was a maritimecase the Court had to adhere to thefederal principles of harmony anduniformity when applying federal maritimelaw. When the case was decided by the3rd DCA, with one case only to thecontrary, the federal maritime law was thata ship owner is not vicariously liable for thenegligence of the shipboard physician.
With that in mind it was held that the shipowner was not vicariously liable under theprinciple of respondeat superior for themedical negligence of the shipboardphysician. This is a success for the cruiseindustry. However, it should be noted thatthe plaintiff has now requested anaudience with the US Supreme Court.Further updates on this case will beprovided in future editions of Sea Venture.
Article by Paul Brewer([email protected])
Sea Venture newsletter Issue 914
With effect from 1 July 2007 foreigncrew on commercial vessels calling atAustralian ports will need a MaritimeCrew visa (MCV). The new visarequirements replace the Special Purposevisa (SPV) system although transitionalprovisions will apply until 31 December2007 to ensure that any foreign crewwho arrive in Australia without a MCVmay still be eligible for the SPV.
The visa:
• is free of charge
• is valid for 3 years
• allows multiple entries to Australia
• must be applied for and granted prior to arrival
Applications can be made via the internet,or by mail/courier to the Brisbaine GlobalProcessing Centre. For internetapplications go to:
Owners and agents can apply for visas onbehalf of crew. Owners must ensure thateach crew member onboard vessels callingat Australian ports has a MCV. The newrequirements become mandatory witheffect from 1 January 2008 whentransitional provisions will no longer apply.Crew without the appropriate visa may bedetained and owners fined.
Further information is available at:
Australia - New Maritime Crew Visa
www.immi.gov.au/skilled/air-sea/mcv/index.htm
www.immi.gov.au/sea/mcv/index.htm
U.S. - Medical Malpractice Law
Sea Venture newsletter Issue 9 15
In issue 7 of Sea Venture and associated website articlethe conflicting decisions handed down by the HongKong courts in relation to delivery of cargo understraight bills of lading were discussed:
The appeal in Carewins Development (China) Ltd vBright Fortune Shipping Ltd was handed down by theHong Kong Court of Appeal on 13 July 2007. TheCourt of Appeal overruled Stone J’s first instancedecision on the issue of exclusion clauses and theapplicability of the Hague-Visby Rules to the facts of thecase, but upheld the decision on the question ofdelivery without production of a straight bill of lading.
With respect to the latter issue, Hong Kong law is nowmore or less settled; even if a straight bill of lading doesnot expressly provide for presentation before delivery ofcargo, a carrier who delivers cargo other than againstproduction of the relevant bill of lading runs the risk ofa claim for misdelivery brought by the party inpossession of the bill of lading and to whom deliveryshould have been made. This marks a developmentbeyond English law, albeit that in the “Rafaela S” LordBingham said obiter “... But like Lord Justice Rix I would,if it were necessary to do so, hold that production ofthe bill of lading is a necessary pre condition ofrequiring delivery even where there is no expressprovision to that effect”.
A report on the “Rafaela S” can be found at:
The Court of Appeal’s decision is also of interest inrelation to bill of lading exclusion clauses and theapplicability of the Hague-Visby Rules. These issues arediscussed in detail in an article by Sam Tsui of Tsui & Co,Solicitors, Hong Kong, on the Steamship Mutual website at:
Hong Kong -ConflictingDecisionsResolved and More
www.simsl.com/BrightFortune0107.asp
www.simsl.com/Articles/RafaelaS0405.asp
www.simsl.com/BrightFortuneAppeal0807.html
Sea Venture newsletter Issue 916
Generally speaking, United States’ courtshave held that loss of society is notrecoverable in maritime wrongful deathactions. Despite this general trend, therecurrently remains one area of UnitedStates maritime law where loss of societydamages can still be awarded: death of alongshore or harbour worker in stateterritorial waters. It has long beenunclear, however, whether financialdependency is required to claim thosedamages. The Fifth Circuit has nowremoved any remaining uncertainty that
dependency is required (at least in thestates comprising the Fifth Circuit) intheir recent decision In re Am. RiverTransp. Co. v U.S. Maritime Servs., Inc.
The decision is discussed in an article byDavid Walker and Rachel A. de Cordovaof Royston Rayzor Vickery & Williams LLP,Houston. The article can be found on theSteamship Mutual website at:
Dependency and Loss of Society in the Fifth Circuit
www.simsl.com/ReAm0807.html
In a press release dated 27 June 2007 theEuropean Commission announced itsdecision to act against Germany, Spainand Estonia for failure to respect EUlegislation on better availability and useof port reception facilities for ship-generated waste and cargo residues.Action will be taken through theEuropean Court of Justice.
Directive 2000/59/EC, adopted in 2000,aims to reduce discharges of ship-generated waste and cargo residues intothe sea from ships using ports in theCommunity; it provides for betteravailability and use of the facilitiesdesigned to receive and treat such wasteand residues, thereby enhancing theprotection of the maritime environment.
Member States should have establishedwaste reception and handling plans forall their ports by 27 December 2002.
The Commission’s action was promptedby insufficient implementation of theobligation to develop, approve andimplement waste reception and handlingplans relating to all national ports,
including fishing ports and marinas. Theseplans are essential in ensuring that portreception facilities meet the needs of theships normally using the ports. They arealso important for ensuring respect ofother key principles of the Directive, inparticular that fair, transparent and non-discriminatory fees are applied.
For further information on Directive 2000/59/EC see the Official Journal entry at:
The UK "Port Waste Reception FacilitiesRegulations 2003" is an example of howthe Directive has been implemented by amember state. These can be found on theUK Maritime and Coastguard Agencywebsite at:
Article by Naomi Cohen([email protected])
Port Waste Reception Facilities -European Commission Takes Action
http://europa.eu.int/eur-lex/pri/en/oj/dat/2000/l_332/l_33220001228en00810089.pdf
http://www.mcga.gov.uk/c4mca/mcga-3-mgn_253-port_waste_reception_facilities.pdf
Sea Venture newsletter Issue 9 17
SCOPIC - the Special Compensation P&I clause wasintroduced in August 1999 to provide an alternative toArticle 14 of LOF in order to allow a simplified methodfor dealing with special compensation under salvagecontracts.
The clause provides that the SCR committee(comprising 3 representatives from ship owners,salvors, property insurers and the P&I Clubs) shouldreview the SCOPIC rates for personnel and equipmenton an annual basis.
In order to ensure that salvors undertake salvage work,and thereby protect the environment, in cases where thechances of saving property are doubtful, it has alwaysbeen the intention that SCOPIC rates be generous andencouraging and, in that sense, “profitable”.
As reported in Sea Venture issue 5, reviews in previousyears had resulted in a 10% increase in personnelrates with effect from 1 January 2006 and amoratorium on SCOPIC rate increases for tugs andportable salvage equipment until September 2006 toallow time for a review as to the actual daily cost ofthis equipment.
Whilst it was not possible to obtain any meaningfulinformation as to tug rates, information was providedregarding portable salvage equipment whichsuggested that an increase in rates was appropriateand that the current market rates for tugs was far inexcess of current SCOPIC rates.
Accordingly, following prolonged discussions betweenall relevant sectors of the industry, it was agreed thatSCOPIC rates for tugs be increased by 25%, SCOPICrates for portable equipment be increased by 15%,and SCOPIC rates for personnel be increased by afurther 5%. These new rates apply to LOFAgreements entered into after 1 July 2007 and arefixed until at least 31 December 2010.
In addition, it was agreed that Article 18 of the 1989Salvage Convention - which enables claims to bemade against the salvor in the event of his negligenceduring a salvage operation - would be incorporatedinto the SCOPIC Clause.
Finally, it was agreed in the recent discussions that theparties to the SCOPIC Clause will work to introduce amutually acceptable review procedure in good time forthe next review, so as to hopefully avoid the problemswhich delayed the current review.
Article by Colin Williams ([email protected])
SCOPIC
Bunker quality disputes have traditionallyfocused on whether or not the bunkerssupplied to a vessel accorded with thecharterparty specification. Claimants insuch a dispute, normally the owner ordisponent owner, would have the dualburden of showing not only that therespondent suppliers of the bunkers hadsupplied bunkers outside of thecontractual specification, but also, andoften a more difficult burden to overcome,that the specific quality of the bunkerssupplied rendering them off specificationactually "caused" the damage complainedof to the vessel's main engine.
Whilst the first burden of proof was ofteneasy to establish through evermoresophisticated sample collection methods at the vessel manifold and samplingprocedures, the second burden of proofwould almost inevitably require extremelycomplicated expert evidence of both anengineering and chemical nature to provethat the specific off specification quality of the bunkers actually caused the specific damage to the engine and theconsequential losses that flowed there from.
With a less than perfectly maintained andregularly overhauled main engine andcomponent parts, and in the absence offaultless on board bunker managementprocedures, it was often easy for thecharterer, or the ultimate physical supplierof the bunkers, to raise alternativepossibilities as to the cause of the damage.For example, improperly maintainedpurifiers or improper bunker managementthrough co-mingling of bunkers or cylinderliners exceeding their life expectancy.
The burden of proof was a "burden" in avery real sense.
Recent bunker quality disputes have becomeever more complicated and the focus hasvery much been on the dual obligation of thebunker supplier not only to supply bunkersthat were on specification but also fit for thepurpose (and for the specific engine onboardthe vessel supplied) intended.
Arguably though, the "fitness for purposetest" represents a swing too far in theburden of proof in owners favour. Indeed,absent any other cause of an enginefailure if there was some “defect” withthe bunkers, and even though that“defect” did not necessarily render thebunkers off specification, for examplepoor ignition quality, it was open to aTribunal to decide on a balance ofprobabilities (i) that those bunkers wereunsuitable for use in that particular vessel’sengine, and (ii) the damage must havebeen caused by those bunkers. That isthere was a risk to charterers of a findingof liability when there was no actual proofthat a specific quality of the bunkers (be itignition quality or anything else) hadcaused the specific damage concerned.
As a consequence of the focus onignition quality and unfitness for purposeowners were able to attribute any and allengine damage to alleged poor quality ofbunkers, and because of the costs andrisk of defending a claim charterersand/or bunker suppliers were moreminded to settle rather than risk anadverse finding of fact by a tribunal,which was unappealable.
Subsequent to a recent arbitral decisionthe pendulum has swung back towardscharterers and the requirement that aclaimant discharge the burden of proofplaced upon it both as to breach of thespecification and/or the obligation tosupply bunkers fit for the purposeintended, and as to causation. Thecharterers defence in this dispute washandled by Mark O’Neil of Reed SmithRichards Butler who, in an article on theSteamship Mutual website
sets out the history and shifting balance ofthe burden of proof in bunker disputes.
Bunker Wars - The Burden of Proof Strikes Back!
www.simsl.com/Bunkers0807.html
Sea Venture newsletter Issue 918
The current high volume of activity in the shipbuildingmarket has drawn attention to the ways in whichdisputes under shipbuilding contracts can be resolvedin the most satisfactory manner. There is particularfocus upon disputes which arise during theconstruction phase, when there is often considerablepressure for a speedy resolution in order to keep to aminimum any delays in the construction and deliveryof the vessel. For those contracts governed by Englishlaw and jurisdiction there is a choice betweenreferring disputes to court or arbitration, and quiteoften arbitration is chosen as there is potential forgreater procedural flexibility. However, the standardarbitration provisions are often too slow for dealingwith disputes which arise during construction andwhich can have the effect of slowing and evenhalting construction until they are resolved.
One solution commonly employed is for “technicaldisputes” to be referred to a technical man.However, there are some potential pitfalls in adoptingthis approach, such as whether such a person (i) isqualified to decide associated legal issues and (ii) willnot, unless otherwise directed, be constrained by therules of natural justice so that he does not even haveto consider the arguments of the parties and candecide the dispute in whichever way he wishes.
One way of avoiding these difficulties is to include aprovision in the shipbuilding contract for a short formarbitration procedure which is designed to enable predelivery disputes to be resolved in the minimum time.
Some of the points to bear in mind when drafting ashort form arbitration provision are dealt with morefully in an article written by Peter Jago of MFBsolicitors for the Steamship Mutual website at:
DisputeResolutionClauses inShipbuildingContracts
www.simsl.com/ShipbuildDRC0807.html
Sea Venture newsletter Issue 9 19
Sea Venture newsletter Issue 9
In Norfolk Southern Railway Company vSorrell the Supreme Court was presentedwith the issue of whether the lowercourts in Missouri erred in determiningthat the causation standard for railroademployee contributory negligence underthe Federal Employers’ Liability Act (FELA)differs from the causation standard forrailroad employers’ negligence. Since theJones Act expressly incorporates byreference FELA’s liability standard, thiscase has a direct impact on US maritimepersonal injury claims.
Sorrell was injured while working forNorfolk Southern Railway (Norfolk). Hesought damages for neck and backinjuries under FELA. Both Sorrell and therailroad had been negligent in the incidentand Norfolk argued that under FELA the“causation standard” - the standard forattributing fault for an incident - was thesame for both the employee and therailroad. According to Norfolk, anydamages awarded to Sorrell for therailroad’s negligence had to be reduced bythe amount of damages that wasattributable to Sorrell’s own negligence.
At first instance the Court ruled that thecausation standards were different. It heldthat Norfolk was responsible for anynegligence that contributed to theaccident, but that Sorrell was onlyresponsible for negligence that directlycaused damage. Under this more lenientstandard for employee negligence, thetrial court awarded Sorrell US$1.5 million.
The Missouri Court of Appeals affirmedthe Court of first instance. The matterwas referred to the United States SupremeCourt via the Missouri Supreme Court onthe question whether the causationstandard for employee negligence underFELA (and thus the Jones Act) wasdifferent from the causation standard forrailroad (employer) negligence.
The Supreme Court decided that underFELA the standard of causation for thedefendant’s negligence must be the sameas the standard for a plaintiff’scontributory negligence. Unfortunately,the Court did not go so far as to decidewhat constitutes the causation standard.
Maritime defence practitioners in the USare of the view that the decision in Sorrellwill provide a platform to attempt toattack the current “feather-weight”causation standard that is applied in cases.The ultimate aim is for the railroad andmaritime industries to be on a level playingfield in which personal injury claims aredecided based on common law principlesof proximate causation rather than therelaxed causation standard which iscurrently applied. This judgement is a stepin the right direction for US ship ownerswho are regularly involved in US employeepersonal injury litigation.
Article by Mike McAleer([email protected])
20
Jones Act - FELA Causation Standard
On 1 July the existing Uniform Customs Practice ofDocumentary Credits, or UCP 500, was replaced withthe new UCP 600. The new rules, adopted by theInternational Chamber of Commerce (ICC) on 25October 2006, are the result of more than three years’work and represent the first revision of the rulesgoverning documentary credits since 1993.
UCP is a universally recognised set of rules governingthe use of letters of credit in international trade andcommerce. The rules have, since inception in 1933,gained almost universal acceptance worldwide and arereportedly voluntarily written into virtually every letterof credit exchanged today. The purpose of the rules isto facilitate the flow of international trade.
The new rules are leaner than their predecessors, with39 as opposed to 49 articles. They seek to remove thescope for ambiguity and error in application byincorporating new definitions and interpretations.Many articles have been revised so that they areclearer and easier to read. Another central purpose ofthe revision is to reduce the frequency with which,under UCP 500, letter of credit documents wererejected on their first, and indeed subsequent,presentation. It has been estimated that under UCP500 up to 70% of documents failed on firstpresentation. In addition, transport articles have beenre-drafted in an attempt to remove confusion whenidentifying carriers and agents.
Whilst it is early days for UCP 600, it is hoped that thenew rules will further facilitate transactions bysimplifying procedures.
Sue Watkins ([email protected]) discusses thenew rules are in more detail in an article on theSteamship website at:
UCP 600 - a StepForward
Sea Venture newsletter Issue 9 21
www.simsl.com/UCP6000807.html
In Sea Trade Maritime Corporation vHellenic Mutual War Risks Association(Bermuda) Ltd the English High Court wasasked to decide whether the Association’sarbitration provisions were incorporated intotheir Member’s contract of insurance.
The vessel had been entered in the HellenicMutual War Risks Association but herowners had not given notice that the vesselwould be in an additional premium area.When at Trincomalee, Sri Lanka, the vesselwas damaged by an explosion said to havebeen caused by the Tamil Tigers. A claimwas presented on a discretionary basis andthe War Risks Association made adiscretionary payment.
Their Member brought proceedings inGreece and New York for the full amount oftheir loss.
The proceedings in New York were stayed infavour of London Arbitration. However, theMember argued before the Tribunal that thearbitration provisions of the Association’s
Rules were not incorporated into thecontract of insurance because they had notbeen specifically referred to in thecontractual documents and correspondencewhen the vessel had been entered and thatthey were unaware of the arbitrationprovision.
Therefore, the issue in dispute was whethergeneral words of incorporation, for example“Conditions as Rules” or “… in accordancewith the … Rules …” were sufficient toincorporate the arbitration provisions of theAssociation’s Rules into the contract ofinsurance, or whether more specific words, asare needed to incorporate the arbitrationprovisions of charterparties into bills of lading,were required.
Mahtab Khan ([email protected])discusses the decision in a SteamshipMutual website article at:
Incorporation of Arbitration Clauses by General Words
Sea Venture newsletter Issue 922
Ordinarily, charterparties such as the NYPEform are silent in relation to what duty theowners may have to ensure that thevessel’s holds are cleaned to a particularstandard for receiving the next cargo to beloaded at an intermediate stage of thecharter. Subject always to a properconstruction of any charterparty, the usualmaintenance warranty or warranty that thevessel is fitted for charterers’ cargo/tradeapply to hold cleanliness on delivery or atthe first load port and not to intermediatevoyages during the charter period. Indeed,in The Bunga Saga Lima (2005) thecharterers failed in their argument that thewarranty as to cleanliness should also be inplace for the subsequent voyages.
It is, however, entirely normal that ifrequired by charterers owners arecontractually obliged to provide“customary assistance” in cleaning holds in preparation for the vessel’s next cargo.What constitutes customary assistance?This question was the subject of a recentand successful arbitration involving aSteamship Mutual Member and isdiscussed in an article by Francis Vrettos([email protected]) on theSteamship Mutual website at:
Intermediate Hold Cleaning - Owners’ Duty
www.simsl.com/Katerina0807.html
www.simsl.com/Hellenic0807.html
Sea Venture newsletter Issue 9 23
Vessel Search Facility
As publicised in issue 7 of Sea Venture the new SteamshipMutual website went live in February 2007.
The vessel search facility is just one of several improvementsfeatured on the new site; searches can be made by vessel name or IMO number and results include details of the claims and underwriting contacts responsible for the vessel:
www.simsl.com/list-of-vessels.html
Also included in this area of the website is the InternationalGroup Policy as regards the confirmation of cover to thirdparties. This will be helpful to those Members andCorrespondents receiving inquiries as regards the scope ofcover for an entered vessel:
www.simsl.com/confirmation_of_entry.html
Website Articles
• Concentrated Inspection Campaign on ISM Compliance -September to November 2007
www.simsl.com/CIConISM0807.html
• North Sea SECA in Force
www.simsl.com/NSeaSECA0807.html
• Ukraine - Minimising Deballasting Fines
www.simsl.com/UkraineDeballast0707.html
• Ships to Carry Emergency Plans to Deal with HNS
www.simsl.com/OPRC_HNS_Protocol0607.html
• Reporting Casualties and Safeguarding the Interests Of Indian Seafarers Serving On Foreign Flag Ships - Latest Guidelines
www.simsl.com/IndiaGuidelines0607.html
• Drug Smuggling - Prevention Measures
www.simsl.com/DrugPrevention0507.html
SteamshipMutualWebsite
For further information please contact:
Steamship Insurance Management Services LimitedAquatical House,39 Bell Lane, London E1 7LU. Telephone: +44 (0)20 7247 5490 and +44 (0)20 7895 8490 Email: [email protected]
Website: www.simsl.com