J.M William Turner – The Shipwreck, 1805, London - Tate Britain

Shipwrecks and other disasters at sea were frequently painted during the Romance period.

Costa Concordia Salvage Operation

It is expected to be the biggest salvage operation ever attempted. As of September 2013 the salvage has cost over $800 million.

The Bulk Carrier Double Fortune

The Panama flagged bulk carrier Double Fortune was built in 2010. Gross tonnage and deadweight are 50617 t and 95790 t respectively.

Manoeuvring Container Operations

Containerisation and multimodal transport: the development of door-to-door transport.

Fire Onboard Vessel

Fire on board ship is one of the most dangerous risks for vessels and cargos. Electrical equipments, flammable liquid on board, engines and boilers often cause it.

Sunday, 29 March 2015

Insurance Act 2015

March 29, 2015.
On 12 February 2015 the UK Parliament passed the Insurance Act 2015 which will introduce the most significant changes to British commercial insurance law for at least 100 years and, in the view of some commentators, the most significant changes ever.

Timing

The Act received Royal Assent on 12 February 2015. It will become effective in August 2016. 
Some leading insurers, however, are already acting on the basis that the new laws are in force. Brokers will, no doubt, be encouraging many others to follow suit. 

Scope

The new laws will apply to all insurance other than consumer insurance; they are equally applicable to reinsurance. 

Essence of the changes

The key changes are summarised below. 

1.Placement – Duty to make a ‘fair presentation’


  • The insured must disclose all material circumstances about the risk or give the insurer sufficient information to put it on notice that it needs to make further enquires for the purposes of revealing all the material circumstances about the risk. This will put a greater emphasis on the insurer to ask questions about the risk and to make clear what information it requires. 
  • The insured is obliged to make disclosure in a manner which is reasonably clear and accessible to a prudent underwriter (no data dumping) and not to misrepresent material information.

2.Graduated remedies for breach


  • The single remedy of avoidance from inception for a breach by the insured of its duty to disclose the risk at placement is abolished.Instead there will be a new system of graduated remedies based on what the insurer would have done had a fair presentation been made including: avoidance if the underwriter would not have written the risk at all; different terms of the contract may be imposed (which may mean that some claims which have already been paid have to be revisited);any claims under the contract may be reduced by the same proportion as the actual premium charged bears to the premium that would have been charged; and if the breach of duty was deliberate or reckless the insurer may avoid the contract and keep the premium whatever it would have done in the event of a fair presentation.

3.Warranties and terms not relevant to the actual loss


  • A breach of an insurance warranty will no longer automatically discharge insurers from further liability under the contract. Instead, the contract will be suspended until the breach of warranty is remedied; Insurers will not be liable in respect of losses occurring or attributable to something happening during the period of breach.
  • Where a loss occurs when an insured is not in compliance with a term which ‘tends to reduce the risk’ of loss, the insurer will not be able to rely on that non-compliance to exclude, limit or discharge its liability if the insured can show that its non-compliance did not increase the risk of the loss which in fact occurred in the circumstances in which it did occur.

4.Remedies in the event of a fraudulent claim


  • The insurer will not be liable to pay any part of a fraudulent claim and may recover any money paid in respect of that claim prior to discovery of the fraud. 
  • The insurer may give the insured notice that the contract is terminated from the date of the fraud (regardless of when the fraud is discovered). The insurer can then keep the premium and has no liability for claims arising after the fraud.
  • In the event of a fraudulent claim by one beneficiary under a group scheme, cover for the innocent beneficiaries is not impacted.
Source: http://incelaw.com
             http://www.mcwaldenbailey.com

Wednesday, 25 March 2015

Direct rights of action – P&I Club succeeds in upholding anti-suit injunction

March 25, 2015.

Shipowners' Mutual Protection And Indemnity Association (Luxembourg) v. Containerships Denizcilik Nakliyat Ve Ticaret AS (Yusuf Cepnioglu) [2015] EWHC 258 (Comm) 

The English Court has upheld an anti-suit injunction preventing a party from pursuing direct rights of action against a P&I Club (“the Club”) in Turkey. The Court protected the Club’s contractual right to English arbitration in priority to a direct right conferred by Turkish law. 

This important decision brings the relationship between English and foreign courts into focus again, and raises questions regarding the effect of European regulations on English conflict of laws principles.


The background facts 

The Yusuf Cepnioglu went aground off Mykonos in March 2014. The vessel was a total loss, and cargo claims were intimated against both the Turkish Charterers (the “Charterers”) and the Turkish Owners (the “Owners”). 

The Charterers commenced arbitration in London against the Owners under the charterparty. The Charterers also commenced proceedings against the Club in Turkey and sought security for their claims. The Charterers relied on a Turkish statute which gave them a right to claim losses directly from the Owners’ P&I insurer, the Club.

The Club sought an order from the English Court continuing an existing anti-suit injunction that restrained the Charterers from continuing proceedings in Turkey against the Club. The Club argued that because the insurance contract between the Club and the Owners contained an English law and arbitration clause,  the Club was entitled to rely on its right to have any claims brought against it by arbitration in London. 

The choice of forum was of far-reaching consequence for the Club. In an English arbitration, the Club would be entitled to rely on a “pay to be paid” clause in the Club cover as a complete defence to the Charterers’ direct claim; the liability in question had not yet been discharged by the insured, the Owners. However, if the Charterers were allowed to pursue the Turkish proceedings, it was “more likely than not” as a matter of Turkish law that the “pay to be paid” clause would not provide a defence to the Club to defeat the direct action claim by the Charterers. 

The Commercial Court decision

Characterisation of the direct right 
The Court had to decide whether, under English law, the right of direct action under Turkish law was properly characterised as a claim to enforce the contract between the Club and the Owners, or alternatively a claim to enforce an independent right of recovery against the Club.

The Court followed the approach and reasoning in the 2014 case, The London Steam Ship Owners Mutual Insurance Association v The Kingdom of Spain and another (Prestige No.2) and concluded that the right of direct action was a right to enforce the contract between the Club and the Owners, rather than an independent right of recovery. The Charterers’ direct right of action was inextricably linked to the underlying insurance contract between the Club and the Owners: the Club’s liability was dependent on the loss being an insured peril, and was also prescribed by the limits under that contract. 

It followed that since the Charterers were seeking to enforce a contractual right which was itself subject to a law and arbitration clause, the Charterers were required to respect the law and arbitration clause in the contract. If the Charterers decided to exercise their right of direct action, they were bound to refer the disputes to English law arbitration.

The anti-suit injunction
The Court then had to decide whether to uphold the Owners’ application to continue the anti-suit injunction. An injunction could only properly be granted if the proceedings in Turkey were deemed to be “vexatious and oppressive” from the Club’s perspective.

The Charterers argued that there was nothing “vexatious and oppressive” in simply proceeding in Turkey under a Turkish statute which gave them the right to do so. 

However, the Court held that allowing the Turkish proceedings would deprive the Club of its contractual right to have claims brought against it arbitrated in London. There was also a real risk that the Turkish proceedings would prevent the Club from being able to rely upon the “pay to be paid clause” in its contract with Owners. 
Both of those interferences with the Club's contractual rights meant that, from the Club's standpoint, the Turkish proceedings were in fact “vexatious and oppressive”. The Court accordingly concluded that the anti-suit injunction should be continued, preventing the Charterers from continuing the proceedings in Turkey.

Comment

The Court decided to give priority to the Club's contractual rights in precedence to the right of direct action conferred upon the Charterers by Turkish law. Turkish legislation was not recognised as capable of affecting the parties' rights and obligations under English law.

The decision is significant, at least when the relevant parallel proceedings are in non-EU jurisdictions. A similar decision so far as the grant of an anti-suit injunction is concerned would not have been possible had the relevant foreign law been that of another EU state. Following the decision of the ECJ in Allianz SpA v. West Tankers Inc (Front Comor), an English court would have been bound by rules of comity and unable to grant an anti-suit injunction. 

There is developing European jurisprudence in this area. The impact of the newly-recast Brussels regulations on the relationship between courts of different EU states, particularly in light of the Rome II Regulation regulating the applicable law governing direct rights of action against liability insurers, remains to be seen.

The Charterers have been given leave to appeal, and all eyes now turn to the Court of Appeal to provide further guidance on this issue.

Source: http://incelaw.com
             http://green.harvard.edu/

Friday, 20 March 2015

Court finds payment of charter hire is not a condition: Astra not followed

March 20, 2015.

Spar Shipping AS v. Grand China Logistics Holding (Group) Co. Ltd [2015] EWHC 718 (Comm) 

In a decision handed down on 18 March 2015, a Commercial Court judge has declined to follow Flaux J’s decision in The Astra and has concluded that payment of hire by the Charterers was not a condition of the charterparty. Mr Justice Popplewell reached his decision following a careful consideration of the authorities on this issue and, in particular, The Astra [2013] EWHC 865 (Comm). 

The Court also considered issues concerning repudiatory breach, the validity of the charterparty guarantees and assessment of damages for repudiatory breach of charter. These issues are not discussed in this alert, but a more detailed article on the judgment will appear in our Spring 2015 Shipping E-Brief.


Brief background facts

By three charters dated 5 March 2010 on amended NYPE 1993 forms, three supramax bulk carriers were let on long term time charter to Grand China Shipping (Hong Kong) Co Ltd. The charters provided for performance guarantees to be issued by the Defendant (“GCL”) which is the parent company of the Charterers. By April 2011, the Charterers had fallen behind with their hire payments under the charters and, in September 2011, the vessels were withdrawn from service and the charters were terminated. The Owners claimed under the guarantees in respect of the loss of the balance of the charters. 

The decision in The Astra 

Mr Justice Flaux reviewed in detail the various previous cases which, over the last 100 years or so, have touched upon the question of whether a failure to pay hire amounts to a breach of condition as opposed to a breach of an innominate term (a breach of an innominate contractual term only entitles an innocent party to terminate the contract where the breach is sufficiently serious, whereas a breach of condition entitles the innocent party to terminate a contract regardless of the severity of the breach). Having reviewed the authorities, Mr Justice Flaux reached the conclusion that payment of hire is a condition of the contract and therefore that the failure to pay a single hire payment entitled the Owners to withdraw the vessel and claim loss of profit for the remaining charter period. 

The Commercial Court decision

Mr Justice Popplewell also reached his conclusion following a detailed analysis of the authorities and, in particular, following a careful analysis of the principles set out in The Astra. Popplewell J considered and dismissed each of the reasons given by Flaux J in The Astra for finding that payment of hire was a condition of the contract. In summary:

1. Popplewell J disagreed with Flaux J that the right to terminate under the withdrawal clause for any failure to make punctual payment meant that any non-payment was sufficiently serious to justify termination and therefore that a failure to pay hire promptly was intended to be a condition. The withdrawal clause in this case provided only for a liberty to withdraw the vessel from service, in other words it did no more than give the Owners an option to cancel. Without express wording to that effect, the withdrawal clause did not make payment of hire a condition.

2. If there were no withdrawal clause in the charters and so no express right to terminate, payment of hire would not be treated as a condition of the charter. It could not have been intended that any breach of the hire payment obligation, no matter how serious or trivial, would have the same consequences and allow the Owners to terminate a long-term charter even for a trivial breach.

3. In commercial contracts, the time for payment is not generally “of the essence” i.e. a condition, unless the contract expressly says so. In a time charter context, there is no good reason to treat the payment of hire as a condition (unless the charter says so expressly) because an owner may exercise his contractual right to terminate the charter and put an end to future performance (and the future expense of operating the vessel for the benefit of the charterer). In Popplewell J’s view, once an owner no longer has to provide a charterer with the services of the master and crew, then his interest in the prompt and punctual payment of hire disappears.

4. The need for commercial certainty did not mean that payment of charter hire should be treated as a condition. Commercial certainty can be achieved by the withdrawal clause which offers an option to cancel, without conferring on owners an unmerited right to damages (such as is conferred by a right to repudiate a contract for breach of a condition). The desirability of commercial certainty must be counterbalanced with the need not to impose liability for a trivial breach in undeserving cases.

Having gone through his careful and lengthy analysis, Popplewell J found himself unable to follow the decision of Flaux J in The Astra and concluded that payment of hire by the Charterers under the three charters was not a condition. 

Comment

It may come as little surprise that the decision in The Astra has not been followed and should not be treated as settling the law as to whether a payment of hire under a charterparty is a condition, any breach of which would justify a claim for repudiatory breach. Whether there is an appeal on this issue remains to be seen. However, for now, at least, this decision is likely to go some way to restoring the previously accepted view that the obligation to pay hire under a time charter as it falls due is not a condition such that, if an owner wants to recover its future losses following a termination, it must seek to bring the charter to an end for repudiatory breach of contract and, in doing so, demonstrate that charterers’ defaults are sufficiently serious as to deprive the owners of substantially the whole benefit of the charter. 

Source: http://incelaw.com

Demurrage time bar: crucial to comply with documentary requirements

March 20, 2015.

Kassiopi Maritime Co v. Fal Shipping Co Ltd (M/T Adventure) [2015] EWHC 318 (Comm)

In this case, the vessel Owners failed to provide the Charterers with all documents in support of their demurrage claim within the 90-day time period provided under the charterparty. Their claim was dismissed and they were time-barred from recovering demurrage from the Charterers.


The background facts

The vessel was chartered under a voyage charterparty on an amended BPVoy4 form dated 15 June 2011. The Owners brought a substantial claim for demurrage as a result of delays at the load port of Sitra, Bahrain, and the discharge port, Port Sudan. A formal demurrage claim was submitted to the Charterers by email on 5 August 2011. The email attached a number of documents. 

The Charterers disputed that demurrage was due to the Owners on the basis that the demurrage claim had not attached all of the necessary documents and that, because the 90-day period provided under the charterparty within which to submit those documents (and the claim) had elapsed, the Owners’ demurrage claim had become time-barred.

The charterparty provisions

The charterparty contained the following provisions:

19.7No claim by Owners in respect of additional time used in the cargo operations carried out under this Clause 19 shall be considered by Charterers unless it is accompanied by the following supporting documentation:
………….

19.7.3 copies of all other documentation maintained by those on board the Vessel or by the Terminal in connection with the cargo operations.
….

20.1Charterers shall be discharged and released from all liability in respect of any claim for demurrage, deviation or detention which Owners may have under this Charter unless a claim in writing has been presented to Charterers, together with all supporting documentation substantiating each and every constituent part of the claim, within ninety (90) days of the completion of discharge of the cargo carried hereunder.

The arbitration award

The Tribunal ruled that the Owners’ claim was time-barred. The Owners had failed to provide the Charterers with the documents required under clauses 19.7.3 and 20.1. 

In particular, the Tribunal ruled that the port log, time sheets and a manuscript note from the Master showing that he had received free pratique by VHF at Port Sudan should have been provided, being documents that would have been kept on board (per clause 19.7.3). The Tribunal also ruled that the Owners should have disclosed upfront all the documents they would be required to disclose in an arbitration in support of their demurrage claim.

The Commercial Court decision

The Owners’ appeal was dismissed by the Commercial Court. The Judge was slightly more sympathetic to the Owners than the Tribunal had been. He agreed, however, with the Tribunal that the claim was time barred.  

In particular:

1.The Judge disagreed with the Tribunal that the Owners had to disclose upfront all documents that they would be required to disclose in an arbitration or court case. This would impose a far-reaching and potentially unworkable obligation on the Owners. It would require them to undertake a detailed search for documents, in the context of disclosure, which was beyond what was being contemplated by the clause. The scope of disclosable documentation in arbitration or court proceedings is determined by the parties’ pleadings that identify the issues in dispute. Undertaking that type of disclosure before a claim had been formulated and formally commenced would be a heavy burden to impose upon the Owners. 

2.Clause 19.7.3 of the charterparty was limited to contemporaneous records kept by the vessel in connection with cargo operations. In this context, the Judge agreed with the Owners’ submission: the documentation contemplated under the clause involved regularly updated documents, as compared to “one-off” documentation that comes into being solely for the purpose of a demurrage claim, such as a statement of facts. However, the type of documents that had to be submitted at the time of submitting the demurrage claim to the Charterers was a question for the Tribunal.

3.Under clause 20.1, the Owners were to provide “all supporting documentation”, not merely “supporting” or “essential” documentation. What was required was documents which substantiated each and every part of the claim and which provided Charterers with the material required to satisfy themselves that the claim was well-founded. Accordingly, the port logs and timesheets were required to be presented to the Charterers. The email with the Master’s manuscript note regarding the time when free pratique had been granted at Port Sudan was probably a supporting document too, because this information was important to the commencement and proper calculation of the laytime and there was no record of it in the other documentation provided by the Owners. The Owners’ failure to provide these documents to the Charterers within the 90-day time period provided under clause 20.1 meant that the Owners’ demurrage claim was time-barred.

Comment

This case reminds us again of the importance of understanding and fully complying with charterparty terms when presenting a demurrage claim to charterers – or any claim subject to time limits or explicit requirements regarding what needs to be produced and when. The effect of non-compliance may be fatal to owners - who may find themselves unable to recover substantial amounts to which, in all other respects, they have a straightforward entitlement. 

Source: http://incelaw.com

Tuesday, 17 March 2015

BUNKER DISPUTES

March 17, 2015. 
Bunker and bunkering related disputes are a repeat problem for owners and charterers. Members are advised to ensure that this very critical part of a ship's operation is subject to carefuly risk management, both at the contracting and at the operational stages.

Bunker disputes

The Association has over the years dealt with many disputes relating to bunkers and bunkering and typically these fall in to three broad categories:


a. disputes over quantity supplied

b. quality and contamination issues

c. payment and credit problems

Often this meant having to investigate the issues "post event" and deal with the facts and evidence such as they were. It also meant having to work with contract terms, such as they may have been agreed.

Even with the recent significant, and for the time being sustained, drop in oil / fuel prices, these matters need to continue to be a priority for owners and operators as sums involved are still substantial, the damage caused by bad bunkers to a main engine can be severe, and the risk of legal action by unpaid suppliers is very real.

This is an area where all the efforts made towards prevention can have a direct and positive effect, but where a less than diligent approach less ample scope for disputes, extra costs and ultimately significant losses.

In the bulletin from "The Bunker Detectives" AVA/2015/0020, an overview is provided as to what steps can be taken to prevent losses or, at least, deal with situations effectively should a problem arise.

Risk management

  • Commercial

Members will be very familiar with the structure of the bunkering business as well the typical contract terms found in supply contracts. That means it is not unusual for the performing physical supply vessel, as well as the physical supply, to involve different parties to the one which contractually agreed to perform the supply. Furthermore there may be multiple parties involved including intermediaries like bunker brokers. The still relatively recent issues arising out of the bankruptcy of OW Bunker A/S (as well as some affiliated companies) highlighted the potentially complex transactional arrangements that may be involved in the supply of fuel.

Furthermore, it is often the case that the terms of the supply contract can be very tight, with short time limits for notifying claims (sometimes as short as seven days), restrictions on the evidence that can be used to pursue the claim as well as limits on the amount of damages that may be recoverable (often limited to the value of the supply). Whether or not it is possible to negotiate better terms from the vessel's point of view depends a lot on the parties respective bargaining position and industry practice.

The terms which members will have more control over are the charterparty terms, and it is here where the parties need to decide on the allocation of risk as to the supply of bunkers, amount and specifications, who will arrange and pay for it, will surveys be done, who will pay for those, what evidence can be used for dispute resolution, etc.. Careful thought should be given to the applicable charter clauses based on past experience.

The "counterparty" risk factor, which could mean a direct charterparty risk or indeed a risk of the supply chain, is one that can be managed in part by way of careful consideration of whom to do business with, and while shipping continues to be in a challenging period of time this issue is one that should always be in mind prior to concluding any contract.

  • Operational

At this level, it is the ship's crew that is in the frontline of protecting against the possibility of a problem occurring. Well trained crew, being able to dedicate sufficient time to the task of bunkering, will be able to ensure that all possible checks are made and to verify - as far as that is possible - that the supply is according to pre-described terms.

In particular the crew can:

  1. duly pre-plan the bunkering operation and allocate sufficient personnel to monitor the same
  2. where possible, seek to isolate new bunkers in separate tanks and avoid mixing with existing bunkers on board
  3. undertake (whether with or without surveyor assistance) careful calculations to check the quantity supplied
  4. ensure accurate samples are taken at the vessel's manifold
  5. have those samples witnessed and appropriately sealed to preserve the evidential value
  6. check all documentation tendered and be alive to attempts to introduce contract terms or bind the vessel itself to the supply by way of clausing in the bunker delivery note (such should be resisted)
  7. keep a careful record of the whole operation, and where safe and permitted : keep a photographic record, too
  8. undertake follow up checks with the receiving tanks to see how much settling occurs post supply
  9. if the vessel has subscribed to a bunker testing programme, avoid (if possible) using the new bunkers until test results are available
  10. monitor engine performance post change over to the new supply

With such steps, as well as other measures, members can seek to manage the risks and mitigate against possibly negative consequences.

In any event, should members have a concern about a bunkering operation, they are encouraged to make soonest contact with the Association.

Source: http://www.skuld.com


CONTAINER DETENTION CHARGES

March 17, 2015.

The Chinese Supreme Court has considered the issue of responsibility for container detention charges, when the cargo is abandoned. Operators in the container sector with China trade will wish to take note of this legal development.

Container detention charges
Abandoned cargo and containers are a perennial issue for the box-ship trade. For some reason, typically economic, the designated receiver fails to pick up the box and it then becomes an issue, incurring continued charges for storage, charges for the use of the box, as well as liabilities for the contents and their possible disposal.

There are also other reasons for boxes being abandoned, and these can prove more problematic. It has been noted that at times containers are used for smuggling purposes or contain illegal waste products. When such containers are abandoned they are unlikely to contain anything that could be auctioned off for an off-set against the cost of storage and disposal, or indeed any fines that the authorities may impose.

Who then has to take the responsibility can become a complex matter, as there are multiple parties involved, including the shipper, the freight forwarders, local shipping agents, the vessel, her operators and possibly further NVOCC(s). The parties will be linked by contracts, including charters, but also bills of lading (and indeed possibly multiple sets of bills of lading, with differing terms).

Chinese legal development
In a recent decision before the Chinese Supreme Court, a matter was determined as to who would bear the risk and cost of container detention charges. The case involved a claim between a carrier and a consignor. A container had been abandoned and very substantial charges were incurred which could not be offset by the sale of the contents.

The course of this litigation included two appeals, culminating in a decision by the Supreme Court, which placed liability on to the consignor in circumstances where the consignee had refused to take delivery of the cargo, in part this was because the bill of lading (and the contract of carriage contained therein) had not been transferred to the consignee.

While this outcome depended on the facts, it is at least some comfort to carriers picking up cargo from China.

Further details can be found in the case note from Hai Tong & Partners, republished alongside this advisory with their kind permission.

Risk management
It will not be possible to predict if a particular box will fail to be taken by the receivers, and create this abandonment issue. It is, however, possible to take practical and contractual steps to manage the risks.

From a practical point of view, members will have likely experienced this situation before and it may be possible, over time to develop statistics that can guide as to what % of containers may end up being stored long term ashore, or even entirely abandoned. It is likely that any model for this issue will involve economic factors, seasonal factors, as well as the experience factor of specific ports and countries. Developing an understanding of the amount of boxes that may, statistically, be likely to become abandoned will help members budget for potential costs and put in place advance arrangements for dealing with such a situation.

That brings us to the legal consideration, and members will wish to ensure that any charter or bill of lading which they may be party to includes effective clauses that address the issue of who will bear the risk and liability of a box not being picked up in timely fashion, as well as provide for the right to lien, seize and ultimately auction of contents.

From an operational point of view, there has to be diligent follow up to ensure that boxes are not overlooked if they are not picked up, and it is noted early on that a box may become an issue. The earlier this is identified the better the following process can be managed, and cost consequences mitigated against.

Source: http://www.skuld.com

Monday, 16 March 2015

WRECK REMOVAL CONVENTION ENTERS INTO FORCE ON 14 APRIL 2015

March 16, 2015.
On 14 April 2014, Denmark became the 10th country to ratify the Nairobi International Convention on the Removal of Wrecks (the Nairobi Convention), which consequently will enter into force 12 months later, on 14 April 2015.

The ten states that so far have ratified the Convention are: Bulgaria, Denmark, Germany, India, Iran, Malaysia, Morocco, Nigeria, Palau and United Kingdom. The text of the Convention can be found here.

Articles in Gard News, issues 186 and 187, described the main features of the Convention and the possible implications for shipowners and their P&I clubs, who provide cover for owners’ wreck removal liabilities.

In recent years, the increased complexity and cost of wreck removals has become a major concern for shipowners and operators, their insurers and their reinsurers. Much of this can be attributed to the widely publicised COSTA CONCORDIA grounding/wreck removal in January 2012, but this is not the only wreck removal case which has given rise to such concern. For several reasons, the COSTA CONCORDIA is an exceptional case. The more ’normal‘ wreck removal cases involve different types of cargo vessels (e.g. bulk carriers, container ships) and are more representative of the challenges which owners and insurers may expect to face.

So far, states have had their own legal framework in place for dealing with wreck removals within their territorial waters. This has led to a patchwork of different legislation, which in turn has created legal uncertainty and lack of transparency for all parties involved.

States have been, and still are, empowered to order the removal of wrecks from their Exclusive Economic Zone (EEZ) if this is supported by applicable public international law, i.e. the International Convention relating to Intervention on the High Seas in Cases of Oil Pollution Casualties 1969, as amended in 1973, or the Protocol relating to Intervention on the High Seas in Cases of pollution by Substances other than Oil (the Intervention Conventions). These conventions empower a coastal state to intervene on the high seas, i.e. outside its territorial waters, in order to prevent and mitigate threats of marine pollution that would affect the state concerned. However, depending on local legislation, many states have had limited rights to claim compensation for their costs related to the removal of wrecks within their EEZ.

The Convention, which was adopted in 2007, intends to provide a set of uniform international rules for the prompt and effective removal of wrecks located outside the territorial sea of the States party to the Convention. The application of the Convention can be extended to the territorial sea of a state. Of the ten states that have ratified the Convention so far, only three states: Bulgaria, Denmark and the United Kingdom, have extended the Convention to also apply to their territorial waters.

Most accidents resulting in shipwrecks occur in territorial waters, often due to groundings. The states which have ratified the Convention, but chosen not to apply it to their territorial waters, are prevented from obtaining the benefits of the Convention in the circumstances arguably most necessary and relevant. Examples of such benefits are compulsory insurance cover for shipowners and the right of direct action against the insurers. This also works against the idea of international uniformity of law which is a key ambition of international conventions.

The Convention also covers issues addressed in the Intervention Conventions, but it follows from Article 4 (1) that the rules of the Intervention Conventions shall prevail in such circumstances. Hence, situations may arise where the Intervention Conventions work in conjunction with the Nairobi Convention.

In conclusion, it is believed that the Nairobi Convention, which enters into force on 14 April 2015, will be a step in the right direction to achieve greater harmonisation of the laws on wreck removal internationally, as well as more legal certainty and transparency in this regard. Arguably this would have been even more effective had more of the states that have ratified or acceded to the Convention also extended its application to their territorial waters.

 Source: http://www.gard.no

Tuesday, 10 March 2015

Judgment call: ALEXANDROS T

March 10, 2015.

After much to-ing and fro-ing between the English High Court, a Greek court, the Court of Appeal in London and the Supreme Court, we now thankfully have some clarity around the issue of the finality of an English settlement agreement. In a landmark decision the Supreme Court has ruled that an English settlement agreement should bring a full stop to a dispute and should not be capable of being unravelled by a foreign court.

The facts of the story have been well publicised: after the sinking of the ALEXANDROS T, owners Starlight Shipping Company became embroiled in a bitter dispute with its insurer, launching a claim against them in the High Court in London in 2006. The case settled for 100% of the principal sum claimed. Subsequently Starlight issued a fresh claim against the insurers in Greece, sending a shock wave through the London insurance market, where their action was seen as potentially undermining the very concept of finality (key to legal and business certainty) in settlement agreements. Starlight was using arguments that evidence had been fabricated and witnesses bribed in the course of the English proceedings, to persuade the Greek court to review the circumstances of the case and effectively unpick the settlement agreement. In response, the insurers sought the assistance of the High Court in enforcing the settlement which was in turn resisted by Starlight who applied for these English proceedings to be stayed while the Greek proceedings were ongoing. So a classic turf war over the jurisdiction of the dispute. The High Court concurred with the insurers and stayed the Greek proceedings, but the to-ing and fro-ing continued with the Court of Appeal reversing this position. The insurers then took the matter to the Supreme Court, which issued its judgment late last year.

The sound of the insurance markets breathing a collective sigh of relief is audible. In its judgment the Supreme Court underlined that it was important not to prevent a final decision of the English court where this was the jurisdiction that governed the contract. “Once there is a final judgment of the English court, it will be recognisable in Greece, as elsewhere in the EU and will assist the Greek courts.” The Supreme Court determined that Article 27 of the EU Jurisdiction Regulation, which obliges any Court other than the first seised (in this case Greece) to order a stay, did not apply because the English and Greek proceedings did not involve the same “cause of action”. This is a highly technical argument, and possibly the result is counter-intuitive to what the man on the street would have thought, but this was an essential determination if there was to be a victory for common sense in this case. The outcome is that both proceedings can in theory continue, but the Greek action is now pointless as any recovery will be automatically indemnified in England.

Commentary so far on the long term impact of the ruling has focussed on the point that it increases certainty and confirms that English settlements cannot be unravelled easily by a foreign jurisdiction. But is the position really as well shored up as many commentators would have us think? Looking at the detail of the case it was actually a very close call. The critical question was whether the two arms of the dispute – ie a) upholding the settlement agreement in contract, and b) seeking tortious damages effectively on the basis that the action that led to the agreement was tainted by fraud – were completely separate causes of action, or whether they were actually part of the same one. The Supreme Court decided they were separate causes of action, which is the main reason it determined the case in the way that it did. But the facts would not have to be that different in another case for the court to come to a different conclusion, at which point we could well find ourselves in a similar position to where we were after the Court of Appeal’s decision in this case. For example, fraud could make the settlement voidable, or the jurisdiction in the settlement agreement might not be expressed as exclusive. Also, what gave this case extra dimension is the fact that damages for late payment by insurers are not available in England (unlike in Greece), whereas the Law Commission looks like it may change that. Further, not all settlement agreements will be subject to English law and jurisdiction: if they are subject to another law or jurisdiction, all the questions that were examined in the chain of proceedings we saw in the Starlight case might be viewed differently elsewhere, in any country in the EU.

Source: http://www.allaboutshipping.co.uk
             http://law.smu.edu.sg

Monday, 9 March 2015

Italian Shipping Firm Fined for Magic Pipe Case

March 9, 2015. 

Italian shipping firm Carbofin S.p.A. that owned and operated the M/T Marigola was sentenced to pay an overall criminal penalty of USD 2.75 million by a Florida District Court for knowingly falsifying the vessel’s oil record book in violation of the Act to Prevent Pollution from Ships (APPS).

Out of the USD 2.75 million fine, USD 600,000 will be paid to the National Marine Sanctuary Foundation for the benefit of Florida’s only national marine sanctuary: the Florida Keys National Marine Sanctuary.

As informed by the US Justice Department, the funds are to be used to support the protection and preservation of natural resources located in and adjacent to the sanctuary, including the cleanup and remediation of pollution in the sanctuary; restoration of injured resources, particularly coral reefs and seagrass beds and species dependent on those habitats.  The funds will also be channeled to support scientific research in, and public education about, the Florida Keys National Marine Sanctuary.

During 2013 and 2014, on numerous international voyages, senior members of the crew of the M/T Marigola directed the installation and use of a so-called “magic hose” to dispose of sludge, waste oil and oil-contaminated bilge water directly into the sea bypassing required pollution prevention equipment.

On April 16, 2014, the vessel called upon the Port of Tampa to load anhydrous ammonia.  Coast Guard inspectors boarded the vessel and were approached by two junior engineering crew members who showed the inspectors a video of the “magic pipe” hooked up between piping leading to the bilge tank and the vessel’s boiler blow down valve.

The boiler blow down valve is a discharge point for the boiler to release hot water and steam.  The inspectors had the valve removed and an oily black substance was discovered.  Oil samples taken from the “magic hose,” the bilge piping and the boiler blow down valve matched.

The Chief Engineer, Carmelo Giano, and the Second Engineer, Alessandro Messore, had previously pleaded guilty and were sentenced for their role in ordering the use of the “magic hose” to illegally discharge oily waste into the sea.

“We are extremely grateful to the U.S. Department of Justice in supporting the work of the National Marine Sanctuary Foundation on behalf of the nation’s marine sanctuaries, including here at the Florida Keys National Marine Sanctuary,” said President and CEO Jason Patlis of the National Marine Sanctuary Foundation.

During the course of the investigation, it was revealed that the oil record book for the M/T Marigola was falsified since at least June 16, 2013.  The investigation also revealed that illegal oily waste discharges had occurred from two other vessels owned and operated by Carbofin, the M/T’s Marola and Solaro.

On the M/T Marola, a “magic hose” was used between on or about December 2012 and April 2013 and on the M/T Solaro between on or about February to August 2013.

Source: http://worldmaritimenews.com

Wednesday, 4 March 2015

BIMCO Launches Green Guide

March 4, 2015.
The international shipping association BIMCO has launched a new, three-part guidance resource called Guide to Maritime Environmental & Efficiency Management, to support ship owners and operators in improving their environmental performance and the efficiency of their ships.

Developed in partnership with maritime efficiency specialists Fathom, and supported by ClassNK, the Guide provides a resource to facilitate compliance with environmental regulations and assist owners and operators in the development of an environmental and efficiency management system, allowing ship owners and operators to develop an all-encompassing environmental and efficiency management system.

BIMCO says that the need for this sort of independent, fit for purpose resource is greater than ever, given the complexity of the regulations governing the impact of shipping operations on the environment and the ever-present need to drive ship efficiency.

”The extensive review process means that this Guide has been written by the industry, for the industry – ultimately helping companies remain competitive in today’s complex regulatory landscape,” Catherine Austin, Executive Director at Fathom, said.

”This is the first publication to address the lack of a single resource covering both comprehensive information on environmental and efficiency management and to provide a framework for shipping companies to develop their own tailored system.”

 Source: http://worldmaritimenews.com

Monday, 2 March 2015

STEEL SHIPMENTS

March 2, 2015.
The transport of steel remain one of the cornerstones of global industry and shipping, but the risk of significant claims persists given the sensitive nature of the cargo and the ease with which it may sustain damage or suffer from other issues.


Steel re-bar shipments from Turkey
Steel is a significant export from a number of Turkish ports, and steel re-bars are often consigned for shipment in areas such as the Marmara Sea, Izmir / Nemrut Bay and Iskenderun Bay.

This cargo is produced from steel pre-cursor material as well as steel scrap. Melted down and mixed with iron and manganese, these re-bars are often readied for shipment and stored without any protective cover or packaging.

While steel cargo claims have often involved coils, project cargoes and other more sensitive materials, the Association is aware of claims having arisen in connection with this cargo, too.

As is often the case, even though a pre-loading survey may note deficiencies in the cargo and have them noted on the mate's receipts, the demand for clean bills of lading is a typical feature of steel cargo trading. In part it is due to the arrangements for the letter of credit / other trade financing, as well as specifications that may exist in the underlying sale contracts (and to which members may not be a party or have sight of). Commercial pressure may then be applied to force the issuing of such documents. Often these issues are then resolved by way of a letter of indemnity arrangement, to which more below.

The basic P&I cover position is that bills of lading must accurately reflect the cargo laden on board, and should not be issued clean if on inspection or during loading there were visible defects or other issues that would call for the bills to be claused.

Particular issues for steel cargoes
Wet cargo - fresh water
Cargo may be wet when offered for loading. Such cargo should be considered rejected as it may deteriorate during shipment. Temperature fluctuations inside the cargo hold could also create further condensation that affected both the wet cargo and any other cargo shipped in a dry condition. Rust and corrosion may follow, which could be grounds for cargo to be rejected at discharge port, or at least generate cargo damage claims.

Wet cargo - sea water
Depending on local wind and wave conditions, there may also be airborne spray of sea water affecting the port and which could come in to contact with cargo being prepared for loading. It would be prudent to check with a silver nitrate test prior to loading whether any noted wet areas indicate the presence of salt water. This issue can affect older cargo stored for some time, as well as recently produced cargo just arriving at the port. In any event sea water presence on the cargo brings with it a significant chance of corrosion during the subsequent sea voyage.

Time of loading
It has been noted that sometimes it is the visually less attractive cargo which is arranged for shipment during night shifts, presumably to be less noticed by the vessel and any attending pre-loading surveyor. Hence extra vigilance at night time is advisable.

Duration of loading
If loading takes a significant amount of time, then humidity and moisture may accumulate in cargo holds. Where possible, depending on weather conditions and general safety, ventilation should be carried out for cargo already laden and in closed off holds.

Very new cargo
Sometimes cargo presented for loading may be so fresh as to still contain significant heat from the production process. If these are loaded immediately then this may exacerbate the condensation issue inside the hold during shipment. Such very fresh cargo should be allowed to cool sufficiently before loading.

Mill scale
This issue arises from the forming of a thin layer on the outer surface of the cargo during the production process. It may have a bright and light grey appearance.

During the handling of the cargo this so called mill scale may chip and brake off.

Underneath the cargo may have a darker and more matte look.

That may lead to a perception, especially at the discharge port, that there is a cargo quality or grade issue, which could mean rejection and / or claims.

Where this is noted on loading it should also be clearly remarked in the mate's receipts as well as bills of lading.

Cargo specification issues
The vessel is likely to be unaware of the specifications required for the cargo in the underlying sales contract. It has on occasion occurred that cargo was shipped that was later alleged to be not to specification, and that may include issues such as:

a. cargo size and dimensions
b. thickness of the steel, weight of the steel
c. other quality and grade issues

It is not possible for a vessel to assess these matters when the cargo is presented for loading, but it has happened before that in some jurisdictions vessels were held responsible for delivering cargo not to sale contract specifications. In such circumstance it is likely that well preserved evidence, appropriately claused bills of lading and clear rights of recourse in charterparties and other contracts will assist in dealing with such difficult cases.

Letters of Indemnity
It may be the case that either by way of ad hoc agreement, or by way of advance contractual arrangement, the parties agree to have clean bills of lading issued for commercial purposes. As it is well known that such arrangement can be prejudicial to P&I cover, it is typically part of such arrangements that while the mate's receipts are claused, the clean bills are issued against the promises contained in a so called "Letter of Indemnity" (LoIs).

These letters, however, come with a significant risk and health warning as follows:


  • not all LoIs are legally enforceable;
  • some LoI / clean bill arrangements could be considered a fraud under English law
  • the LoI does not replace prejudiced P&I cover
  • the issuer of the LoI is unlikely to have insurance backing for the promises given
  • absent a clear and counter-confirmed guarantee, the LoI will not bind third parties such as parent companies or banks
  • a LoI is therefore likely to be only as "good" in terms of financial and moral strength as the entity giving it
  • LoIs need to be carefully drafted and reviewed to ensure they assist in mitigating the risks as best as possible

Even members who are very experienced with this practice should take the time and care to not consider this as a "routine" exercise, but instead devote to it the commercial risk management attention and due diligence it deserves.

The consequences, when it all goes wrong, can be extreme including very high levels of financial losses with no chance of recourse.

Source:http://www.skuld.com