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.

Tuesday, 21 June 2016

What could Brexit mean for the shipping industry?

June 21, 2016.
Following the victory of the Conservative Party in last May’s general election, British Prime Minister David Cameron promised a referendum on the UK’s membership of the EU by the end of 2017. After negotiations between the UK and the other 27 EU Member States, a package of measures and reforms were recently agreed, and the Prime Minister has announced that a Referendum on EU membership will take place on Thursday, 23 June 2016.

One issue that has already provoked much public debate between those supporting and opposing a British exit (“Brexit”) is whether the package of measures and reforms negotiated by Mr Cameron is legally binding: that is a political hot topic and one on which we do not intend to comment, but we at Ince & Co have been thinking about how Brexit might affect our own clients’ businesses from a practical point of view. 

The EU is made up of 28 Member States and some of the world’s largest container and passenger ports are situated in its territory including Rotterdam, Hamburg, Antwerp, and Piraeus. Four of the world’s five largest shipping companies are based in the EU. According to a recent Parliamentary Briefing, the EU is the UK’s largest trading partner, accounting for around 45% of exports, and 53% of imports, of goods and services. Over three million jobs in the UK are linked, directly or indirectly, to exports to the EU. European Union law, in the form of Treaties, Regulations and Directives, affects a wide number of commercial issues including trade, environmental regulation, international trade sanctions, competition law, employment, tax, immigration and infrastructure projects.

If the electorate votes for Brexit, the UK will be the first Member State to do so since the creation of the first European “Community” in 1952, marking a new chapter in the European experiment, and sending the UK into uncharted waters. Commentators provide varying assessments of the likelihood of Brexit but it cannot be denied that it is a possibility that must be taken seriously, and now is the time for businesses to start thinking about how it might impact on them. As the debate develops and we get a better idea of the shape of any post-Brexit UK, it will be easier to assess its likely impact: the discussion below is therefore necessarily tentative but is intended to be helpful to contingency planning.

What might change?

UK laws of particular importance to the shipping industry that would be affected by Brexit:

  >  Directly: where EU Institutions create laws that are automatically incorporated into UK national law, such as Regulations, or where EU Treaties are transposed into UK law by the UK’s Parliament enacting implementing laws;

  >  Indirectly: where the EU Institutions issue Directives setting an objective aimed at creating harmonised EU-wide rules but leaving it to Member States to adopt national laws to achieve the objectives set by the Directives; and

  >  EU Decisions and the rulings and opinions of the EU Courts.

Laws of particular importance to the shipping industry are likely to those regarding trade, insurance, environmental regulation, international sanctions, contract terms, competition law, employment, dispute resolution and trade treaties with non-EU states.  We discuss some of these below.

Competition Law: EU competition law applies to agreements and market conduct that affect trade between Member States, and the EU Commission has primary jurisdiction to enforce EU competition law, including granting clearance to mergers and investigating cartel activity. Where the effects of an agreement or market conduct are confined to a single Member State, national laws apply. Brexit would likely lead to a separate competition regime applying to the UK and to competition enforcement in the remaining 27 Member States, leading to the need for dual clearances in the case of mergers and exposure to regulatory investigation under two parallel, but distinct, regimes. Brexit would likely mean that compliance with both UK and EU competition rules would become more complex and burdensome.

Contract Terms: Many shipping contract (for example voyage and time charters) provide for trading to certain countries or geographical regions. Should Brexit occur, there may be uncertainty as to whether a contract signed pre-Brexit (which contains such a clause) which refers to the EU will continue to include the UK.  If existing contracts are drafted in a way that presumes the existence of an EU containing the UK, or makes a reference to the EU without specifically defining what that is, such contracts may give rise to disputes as to the meaning or ambit of the contract. If Brexit occurs, care will need to be taken in the event that an existing contract is renewed, as the court would likely apply the definition of EU as at the time the (renewed) contract is entered into, which might be different from the original or intended definition.  The impact of Brexit on any related contracts will need to be assessed, including those intended to be on 'back to back' terms, in which relevant clauses may not be similarly defined.

Dispute Resolution: The rules by which the UK courts determine jurisdiction over, and the law applicable to, the majority of disputes arising between parties within the EU (both for contractual and tortious claims) are currently determined by EU Regulations. In addition, parallel proceedings in the courts of more than one EU member state are prohibited where those proceedings involve the same or related issues, meaning that a defendant is protected from being sued in relation to the same dispute in two separate EU jurisdictions. Parties also benefit from the ease with which judgments may be enforced across EU borders.  Should the UK withdraw from the EU, its courts may no longer be bound by the EU Regulations that achieve this. In the event of Brexit, it is not known whether the UK will continue to apply similar rules on applicable law and  jurisdiction as the current EU rules, or whether a system similar to that adopted in relation to disputes arising with companies in states outside the EU will apply. Either way, until clarified, Brexit would leave companies unable to calculate with any degree of certainty their exposure to different legal systems should a dispute arise. An exclusive law and jurisdiction clause in all contracts therefore remains of fundamental importance.

Employment: A significant amount of UK employment law is based on EU rules, for example the Working Time Directive and the Agency Workers Directive. In the event of Brexit, it would be open to the UK to redraft any aspect of its employment law. The UK would have to negotiate appropriate arrangements in relation to residence and employment of UK nationals working in the EU and EU nationals working in the UK. Given the significant number of international employees engaged by the shipping community, both onshore and offshore, the potential changes to UK employment law may therefore have a significant impact. For maritime operators with European operations both in the UK and in the rest of the EU, unless the UK chooses to continue to apply pre-Brexit EU employment law without modification, which appears unlikely, two separate (and not necessarily complementary) employment regimes may apply to their workforce.

Insurance: Any insurer in the EU is automatically entitled to write insurance business in other member states. This means that, for example, German insurers can write business in the UK, and London underwriters can write shipping risk in Germany (and indeed all other EU states). This is known as “passporting” and the idea is that the insurer’s “home” regulator regulates that insurer’s activities, removing the need for the insurer to be regulated in each Member State. Brexit would undermine this and, unless alternative measures were introduced, may restrict the ability of insurers (and those buying insurance) to shop around and get the best price and terms for their business.

Sanctions: As a member of the EU, Britain is party to, and therefore must comply with, the sanctions regime imposed by the EU. Those sanctions are currently against states such as Russia, North Korea, Belarus, Syria, and Yemen. The situation regarding Iran is currently, as widely reported, in a state of change. It remains to be seen whether, were Brexit to occur, the UK would implement mirror legislation, or even harsher or less strict sanctions. Regardless of whether it were to impose any replacement sanctions regime, the UK would not be ‘sanctions-free’, as it would still be a party to, and therefore have to comply with, the sanctions imposed by the United Nations against several regimes.

Trade: Under EU law, trade within the Union is liberalised as between Member States, allowing goods and services to be traded within the EU without internal customs barriers or tariffs. In addition, EU citizens can move freely, establish themselves commercially or as residents and can trade without restrictions (except for certain professional qualification rules). EU membership therefore gives UK businesses access to the EU “Single Market”. As to external trade with non-EU countries, the EU benefits from a wide range of bilateral and multilateral trade treaties, allowing preferential access to EU goods and services in these countries, as well as reducing or eliminating customs or tariffs. 

Should the UK cease to be an EU Member State, UK businesses would no longer benefit from EU internal trade access without a bilateral agreement between the UK and the EU. Although it is possible to be a member of the European Economic Area (EEA) as an associate state of the EU, it is not clear whether the UK would seek to do this or seek to enter into an entirely new free trade or association agreement with the EU. Operating within the EU market may become increasingly complex and consequently potentially more expensive for UK operators, as might operating in the UK market for EU operators. Those operating in the UK and also in the rest of the EU would face the burden of having to comply with both EU and UK laws on trade, rather than complying with the current harmonised EU system.

UK businesses would also not be able to benefit from the network of EU bilateral and multilateral external trade agreements with other countries, as the UK would have to negotiate its own individual trade agreements with those countries. The UK would continue to benefit from World Trade Organisation agreements, but these would not cover the detailed preferential bilateral arrangements that exist in current EU agreements with other countries. Exporting UK goods and services would become a more complex process than at present and, during the UK’s negotiations for its own individual trade treaties as a non-EU state, there would likely be uncertainty, which could be for a lengthy period.

What you should be doing and how we can help

If the UK votes to leave the EU, it will not happen overnight; under the existing Treaties, a two year exit process is envisaged. But now is the time for those who will vote in the June referendum to think about how their vote might impact on their industry and for all who may be affected by Brexit, wherever they may be, to start thinking about, and planning for, its possible implications. 

Souce: http://www.incelaw.com
            http://www.aljazeera.com

Monday, 20 June 2016

MPA release guidance of SOLAS regulation VI/2 on verified gross mass of containers

June 20, 2016. 

On 27 May 2016, the MPA issued Shipping Circular No.12 of 2016 concerning the implementation of SOLAS Regulation VI/2 on Verified Gross Mass of Containers (“VGM”) which will come into operation on 1 July 2016. Circular No.12 of 2016 is limited to export containers and does not apply to containers that are transhipped in Singapore.

One of the key amendments relates to the requirement of the gross mass of the container to be verified by the shipper prior to loading on a ship. In Singapore, the verification of the gross mass of a packed container shall be obtained by either of the following two methods.

Method 1:  Weighing the packed container using a weighing instrument that has been verified by an Authorised Verifier designated by SPRING Singapore under the Singapore Weights and Measures program; or

Method 2:   Weighing the individual packages and cargo items, including the mass of pallets, dunnage and other weighing instruments that have been verified by an Authorised Verifier designated by SPRING Singapore under the Singapore Weights and Measures program, and adding the sum to the ‘tare’ mass (i.e. unladen weight) of the container.

The shipper must maintain records of the weighing process to ensure that the process used to derive the VGM is traceable. Such records should trail the process and document details of the equipment used to demonstrate compliance with either Method 1 or 2.

Unlike in other jurisdictions, the MPA does not require the shipper to be registered as a shipper or be pre-approved for the use of either method. Further, the MPA does not require the shipper to be accredited to show compliance with the prescribed weighing methods. The shipper must, however, exercise due diligence when obtaining VGMs of packed containers and must ensure compliance with one of the two methods.

All containers arriving at terminals in Singapore for export are weighed using the weighbridges located at the terminal gates. The obtained weights may be utilized for the purposes of counter checking the declared VGMs. Although SOLAS regulation VI/2 does not provide for any margin of error in the VGM, the MPA, taking on board the industry’s recommendations, will at present, allow a margin of error of +/- 5% of the declared VGM. In the event that the declared VGM is outside of this margin, it will be turned away and will not be loaded on  a vessel. Terminal operators will also inform MPA in the event of serious breaches of a shipper’s obligation to provide an accurate VGM. 

The MPA will adopt a practical and pragmatic approach when verifying compliance with the new regulations for a period of three months after 1 July 2016, however, the stakeholders are still required to comply with the new requirements starting from 1 July 2016, in other words, if no VGM is provided the container will not be loaded onto a vessel.

The Singapore MPA’s website now includes a helpful “Q&A” Section providing answers to some frequently asked questions. Queries relating to the implementation of the new regulations should be directed to Mr Calvin Lee (Tel: +65 63756269 Email: calvin_lee@mpa.gov.sg) for shipping matters or Ms Zhou Peijun (Tel: +65 63252451 Email: zhou_peijun@mpa.gov.sg) on local export related matters.

With the implementation date just a few weeks away, we strongly advise all stakeholders to familiarise themselves with both the SOLAS Regulation itself as well as the relevant procedures required by MPA.

Whilst the IMO are urging enforcement authorities to take a “practical and pragmatic” approach to the new Regulation in its early months, it would be unwise to take too much comfort from this proclamation. The law reports are littered with judgments where adherence to the law is preferred by judges to commercial pragmatism. Compliance, as opposed to complacency will better serve business in the long run.

Source: http://www.incelaw.com

Saturday, 12 March 2016

Paramount clauses – what does “the Hague Rules as enacted in the country of shipment” mean and why does it matter?

March 12, 2016.

Yemgas FZCO & others v. Superior Pescadores S.A. (Superior Pescadores) [2016] EWCA Civ 101

The Court of Appeal has recently held that the expression in a clause paramount, “the Hague Rules as enacted in the country of shipment”, means the Hague-Visby Rules. This overturned the decision at first instance and, more importantly, the first instance decision and the obiter comments of the Court of Appeal in a 2001 case, the Happy Ranger.   

The background facts

The underlying dispute related to a shipment of LNG machinery and equipment from Belgium to Yemen in January 2008. Six bills of lading were issued and each contained a clause paramount which provided that “the Hague Rules … as enacted in the country of shipment shall apply to this contract.” Importantly, and contrary to many other forms of clause paramount, this clause did not make any reference to the Hague-Visby Rules (“HVR”). The governing law was that of the carrier’s principal place of business.

The cargo suffered damage during the voyage, resulting in a loss of US$3.6 million. The Owners’ P & I Club issued a letter of undertaking and agreed that English law would apply. The fact that a bill of lading is governed by English law does not mean that the HVR apply automatically but, as the shipment was from Belgium, and Belgium (like the UK) is a contracting state, the HVR did apply with force of law. 

Although the HVR applied with force of law, the cargo interests argued that contractually the Hague Rules and, more particularly, the Hague Rules package limit of £100 applied. This, they argued, allowed them to use the Hague Rules limit where this was higher than the HVR limit, on the basis that nothing in the HVR prevents the carrier from agreeing a higher limit. 

The Owners objected to this approach. They admitted liability to pay the amount of the HVR package limit, equivalent to just over US$400,000, but rejected the balance of the claim which was for another US$200,000.

The Court of Appeal decision

The Court of Appeal reached the same decision as the Commercial Court, but by a different route. It held that the wording of the paramount clause in this case contractually incorporated the HVR, not the Hague Rules. The Court’s thinking involved, in part, a meticulous consideration of what exactly the HVR are and how they came into being. Those dealing regularly with cargo claims may find it interesting to note that, according to Lord Justice Tomlinson, “Strictly speaking there are no such Rules”. As the Hague Rules, as amended by the HVR, had never in fact been promulgated as a single autonomous instrument, the phrase “the Hague Rules as enacted in the country of shipment” could mean the HVR.

Lord Justice Longmore felt unconstrained by precedent on this point and, at the start of his judgment, he posed the question, “Can it really be the case that a Paramount Clause in a contract made over 30 years later [i.e. from 1977 – when the Hague-Visby Rules came into force] in 2008 is still to be taken as incorporating the 1924 rather than the 1968 Rules?” 

In the light of the above, the Court of Appeal did not strictly need to decide whether the clause paramount amounted to an agreement allowing the parties to fix a higher limitation figure than that provided for by the HVR. However, doubt was cast on the idea, not least because when the bills of lading were issued, it was by no means obvious that the parties would agree, four years later, that English law would apply.

It was also not necessary to express a view as to the date for converting the gold value under the Hague Rules. However, the Court of Appeal indicated it would agree with the Commercial Court that this should be the date of delivery of the goods (or when they should have been delivered) rather than the date of judgment.

Comment

Package limitation can be very important in cargo claims, so often it is crucial to know at the outset of a cargo claim whether the Hague Rules or HVR apply. There are also other potentially important differences between the Rules, such as in relation to the time limit for passing on claims.

The undersigned’s view is that, in shipping, the Hague Rules and HVR are seen as related and yet very much separate regimes. When ship-owners and cargo interests use the phrase “Hague Rules”, they normally mean what they say and the fact that the Hague Rules are approaching their centenary is irrelevant. If the parties wanted to say the HVR, they would and often do use that expression. This line of argument was, however, dismissed by the Court of Appeal.

How important this decision is in practice will depend on the particular wording of the specific clause paramount. Contrary to what was said in both the judgments, the wording in the bill of lading was in fact very different to that found in the Congen bills (1978, 1994, 2007 and 2016). Where a clause paramount, as in the Congen bill, refers to the “Hague Rules as enacted” and also the HVR, it appears that the Hague Rules will still mean the Hague Rules, and not the HVR.  

Source: http://www.incelaw.com

Tuesday, 23 February 2016

Unanimous judgment of the Supreme Court gives a warning message to employers and their insurers

February 23, 2016. 

Facts

The pursuer, Tracey Kennedy was employed as a home carer by the defender, Cordia (Services) LLP which is wholly owned by Glasgow City Council and provides home care services on its behalf.  On the evening of 18 December 2010 she visited a homebound sick person with a colleague.  There had been a large snowfall that evening, and severe wintry conditions involving snow and ice lying underfoot had lasted a number of weeks.  They went by car and having parked it proceeded on foot down a public footpath.  Ms Kennedy lost her footing, fell and was injured.  She alleged:

There was no risk assessment to cover ice and snow;

There was no provision of personal protective equipment;

She had no guidance from her employer as to what was suitable workwear;

She was given no anti-slip attachments for her footwear which, if provided, she would have worn; and

Her training was inadequate.

The crucial issue was:

Had her employers failed in their common law duty to take reasonable care to provide the right equipment to her and failed in their statutory duties under the Management of Health and Safety at Work Regulations 1999 (“the Management Regulations”) and the Personal Protective Equipment Regulations 1992 (“the PPE Regulations”)?

Previous decisions

Hearing at first instance

Lord McEwan found the defender liable under both sets of regulations and also liable at common law. He focused the blame on the failure to provide safe footwear in the face of an obvious and continuing risk. The case was appealed to the Inner House.

On appeal to the Inner House

The appeal court in allowing the appeal made a number of crucial observations:

It criticised the reliance on the evidence from a health and safety expert, relied on by the pursuer.  The court made the point that health and safety was not a recognised body of science and the witness’s frequent expressions of opinion did not constitute expert evidence. The report was held to be inadmissible.

The Management Regulations did not impose a duty to take precautions and when interpreting the PPE Regulations a distinction fell to be made between work-related risks and other risks to which a worker might be exposed.  The risk in this case was not materially different to that to which any member of the public was exposed.  The regulations therefore did not impose on the employer a duty to provide the pursuer with PPE aimed at reducing the risk of her slipping on snow and ice. 

This decision was a welcome relief to employers and their insurers. It seemed that common sense had prevailed, emphasising there must surely be limits to the responsibilities of employers, especially when the activities they are engaged in are those which we also encounter in our normal day to day lives and are clearly capable of making a reasoned assessment for our safety.  

Supreme Court judgment

The Supreme Court unanimously allowed Ms Kennedy’s appeal. Lord Reed and Lord Hodge (with whom Lady Hale, Lord Wilson and Lord Toulson agreed) gave the judgment of the court.

Reasoning:

Reliance on the health and safety expert’s evidence was allowed and credence given to his evidence base on his experience and qualifications in health and safety.  While not able to comment on areas of law, his evidence on factual matters was useful and considered relevant.

The Management Regulations require a suitable risk assessment to be done, and the PPE Regulations require suitable protective equipment to be provided to employees who may be exposed to a risk to their health or safety while at work. Both duties were held to have been breached by the employers.

Emphasis was placed on the employer's knowledge of the risk.   They had years of experience showing them that home carers suffer such slipping accidents each year.

The fact that anti-slip attachments were available for footwear which would have been suitable to reduce the risk of home carers slipping and falling on ice was important in highlighting the employer's lack of guidance.

At common law the court was not of the view that the appellant was like an ordinary member of the public out walking in extreme weather.  The difference highlighted was her contractual obligation to go out and perform her duties even if the weather or road/pavement conditions were hazardous.  This risk to her was held to be sufficient that her employers should have conducted a proper risk assessment, especially given the history of accidents which the employers were aware of. 

Comment

Two main issues arise from the judgment which are worthy of comment:

First, what would have been the position had the accident occurred after the introduction of section 69 of the Enterprise and Regulatory Reform Act 2013 (ERRA) on 1 October 2013? And;

Secondly, what are the wider implications and effects of this decision across the personal injury spectrum?

ERRA

With reference to ERRA, if the accident had occurred in today’s climate the pursuer would not have been able to rely on the breach of the regulations as establishing separate causes of action. We knew though already that pursuers and claimants would seek to use the wording of the regulations as evidence of good practice when it came to considering whether there was liability on the part of the employer at common law. 

The Supreme Court’s judgment confirms the likelihood of this approach being followed, and indeed may take the position somewhat further. It seems that the Supreme Court’s position can be summarised by this passage in the judgment where the court stated at paragraph 64 that:

The expansion of the statutory duties imposed on employers in the field of health and safety has given rise to a body of knowledge and experience in this field, which … creates the context in which the court has to assess an employer’s performance of its common law duty of care.

It is likely to be argued by pursuers and claimants that the requirements of the regulations will still form the basis of what the court believes an employer must do to protect his employees at common law.  It would seem to be the court’s intention to emphasise that the common law now has to be viewed as having in some way absorbed the duties of the regulations.  These common law duties include the requirement to carry out a risk assessment (paragraph 110), to seek out knowledge of risks which are not obvious (paragraph 111), and to inquire into possible means of reducing risk (paragraph 112). 

Parliament’s best intentions, that the effects of the ERRA would be to reform health and safety law may, at least in part, have potentially been thwarted by this decision.

However, the point remains that the higher the duty imposed by the regulations, the less likely it is that that duty will be absorbed into the common law. The point is a key one when considering strict liability duties which would otherwise have applied under regulations.

Further, employers are still protected from liability where with reasonable diligence and inquiry the risk was still unforeseeable.

Wider implications

The wider implications of this decision for insurers should not be underestimated.  Slipping cases are notoriously very difficult for employers’ liability insurers.  This decision may expose a variety of employers across local authorities, health organisations and charities to a barrage of claims where their employees are required to walk outdoors, over uneven ground, in conditions of snow and ice. 

Finally, we need to consider whether the admissibility of evidence from a health and safety expert in this case should be seen as encouraging more widespread use of this type of expert. The Supreme Court accepted that this particular expert armed with results of his research could assist the court based on specialised knowledge and experience.

It does not necessarily follow that the bar for the involvement of experts has been lowered more generally. The Supreme Court noted that many judges would be able to decide this type of issue themselves without expert input. And the jurisdiction in which the case is progressing may also be relevant: the close control over the use of experts under the Civil Procedure Rules in England and Wales may well be a key factor.

Source: http://insurance.dwf.law

Sunday, 21 February 2016

Ship Captain Pleads Guilty to Felony Obstruction Related to Pollution from Tanker Ship

February 21, 2016.

A Filipino citizen and the captain of the tanker ship, T/V Green Sky, pleaded guilty today to one felony count in federal court in Charleston, South Carolina, for obstructing a U.S. Coast Guard investigation into pollution crimes aboard the vessel.
Genaro Anciano, 52, who was the highest ranking officer aboard the ship, pleaded guilty to one count of Obstruction of an Agency Proceeding.  The charge stems from a Coast Guard investigation in late August 2015 into the bypass of pollution prevention equipment, including the use of a “magic device,” on the Green Sky.  In court papers, the defendant stated that members of the ship’s engine room, including a senior officer, admitted to illegally discharging overboard.  These admissions occurred prior to the August 2015 Coast Guard inspection at the Port of North Charleston.  During the investigation, Anciano made several false and misleading statements to the Coast Guard to cover up the illegal conduct.
The T/V Green Sky is a 30,263 gross ton, ocean-going vessel that operates as a petroleum and chemical tanker.  The vessel is approximately 600 feet in length and is registered in Liberia.  The vessel is owned by an entity incorporated in the Marshall Islands.  Over the course of several days, the normal operation of the Green Sky generates thousands of gallons of bilge wastes that are contaminated with petroleum products and oil residues.  These bilge wastes must be removed for the vessel to operate safely.

Both the United States and Liberia are parties to the MARPOL treaty, which regulates the overboard discharge of bilge waste.  It was prohibited to discharge bilge wastes from the T/V Green Sky without first running that effluent through the ship’s oily water separator.  According to the MARPOL treaty, all overboard discharges from the vessel’s bilges had to be recorded in theT/V Green Sky’s oil record book.  A bypass of the oily water separator, which is not recorded in the oil record book, jeopardizes the accuracy and integrity of that document.  It is a separate federal crime for oceangoing vessels to enter a U.S. port with a false oil record nook. Anciano’s sentencing has not been scheduled.

The case was investigated by the U.S. Coast Guard Investigative Service with assistance from inspectors from Sector Charleston as well as Legal from U.S. Coast Guard in Miami.  The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division and Assistant U.S. Attorney Matt Austin of the U.S. Attorney’s Office for the District of South Carolina in Charleston.

Source: http://www.marineinsight.com

Testing Of New Panama Canal Locks Carried Out Successfully

February 21, 2016. 

The Panama Canal has announced that Grupo Unidos por el Canal (GUPC), the consortium responsible for the design and construction of the Third Set of Locks Project, has successfully completed testing of the reinforcements in sill of the CocolĂ­ locks.
GUPC technical personnel, the designers and Panama Canal Authority (ACP) specialists monitored the testing process which consisted of gradually raising the water behind the lock gate to the level in which the seepage was first detected in sill last August.
Later, the testing was inspected by a team of independent experts, professors and structural engineers from the Technological University of Panama (UTP), all of whom expressed satisfaction with the final results. Following the completion of this work, GUPC will proceed to test the electromechanical components necessary for the Expanded Canal to operate.

Less than four percent remains to complete the overall project which will be inaugurated later this year.

About the Panama Canal

The Panama Canal is run by an autonomous agency of the Government of Panama in charge of managing, operating and maintaining the Panama Canal. The operation of the Panama Canal Authority (ACP) is based on its organic law and the regulations approved by its Board of Directors.

Source: http://www.marineinsight.com

Wednesday, 17 February 2016

Insurer’s attempt to stand in the shoes of government contractor fails

February 17, 2016. 

The Tucker Act cannot be read to waive sovereign immunity for a general liability insurer that brings suit as an equitable subrogee of a prime contractor, a panel of the U.S. Court of Appeals for the Federal Circuit instructed. In so ruling, the panel affirmed the Federal Claims Court’s dismissal for lack of subject-matter jurisdiction an attempt by the commercial general liability insurer for the general contractor on a Post Office asbestos-removal project to recoup the amounts that the insurance company had paid to settle an underlying tort suit against its insured by a postal employee who alleged that he had contracted mesothelioma after having been exposed to asbestos during the project (Fidelity and Guaranty Underwriters Insurance Co. v. U.S., November 6, 2015, Schall, A.).

Background

The U.S. Postal Service contracted with a construction firm for the abatement of asbestos and for fireproofing at a municipality’s main post office building. As a general contractor, the firm subcontracted the asbestos-removal portion of the project to another company, which purchased commercial general liability insurance for the asbestos-removal work under the terms of the subcontract.

During the course of the work and after delays caused by the Postal Service, the asbestos-removal subcontractor attempted to renew its CGL policy but the insurance company refused the renewal. Because the cost of liability insurance had significantly increased during the interim, the general contractor sought additional compensation from the Postal Service to cover the increased cost of completing the project. Instead of providing additional monetary compensation, the Postal Service proposed that the project’s contract be amended to indemnify the general contractor for any liability incurred as a result of any asbestos-related injury. The general contractor accepted the proposal, and ultimately obtained its own liability insurance covering periods during which the project was being completed.

Several years later, a Postal Service employee sued both the general contractor and the subcontractor alleging that he had contracted mesothelioma as a result of the asbestos-removal work performed under the contract. The general contractor demanded that the Postal Service provide a defense and indemnification for the lawsuit pursuant to the amended contract. The Postal Service refused, after which the general contractor and its CGL insurer eventually reached a settlement with the aggrieved employee totaling over $1 million for the employee’s claims and just over $529,000 in legal expenses.

The insurer sought reimbursement of the amounts paid from the Postal Service, but a federal contracting officer denied the claim. The insurance company then filed suit against the government claiming jurisdiction under the Tucker Act and alleging breach of contract. The government filed a motion to dismiss, arguing that the general contractor’s insurer was not in privity with the United States because the insurer was not a party to a contract with the federal government. In addition, the insurance company failed to demonstrate that its suit fell within one of the several limited exceptions to the privity requirement, the trial court found, dismissing the action for lack of subject-matter jurisdiction. The insurer appealed the trial court’s decision.

Statutory language

The Tucker Act provides in relevant part that the Court of Federal Claims has jurisdiction to “render judgment upon any claim against the United States founded … upon any express or implied contract with the United States.”

The parties’ contentions. The insurance company argued on appeal that under the Tucker Act, sovereign immunity is waived as to any claim founded upon any contract with the United States and that, as such, the Court of Federal Claims had jurisdiction to hear the suit. Relevant case precedent established that the insurer should be considered an equitable subrogee of the general contractor for purposes of the court’s jurisdiction; therefore, the trial court erred in dismissing the insurer’s complaint.

The government countered that the Court of Federal Claims correctly held that the insurance company did not meet the statutory requirements for being able to sue the United States in the insurer’s own name as an equitable subrogee of the general contractor. The insurer had no relationship at all with the Postal Service, and the insurer’s payment of settlement monies and legal fees satisfied only an obligation to its insured and not to the United States, the government contended, distinguishing the case on appeal from case precedent involving sureties.

Sovereign immunity waiver

The pivotal issue underpinning the jurisdictional question was whether the Tucker Act’s waiver of sovereign immunity extends to a general liability insurer seeking to sue as the equitable subrogee of a prime contractor. As a general rule, for purposes of Tucker Act jurisdiction, the government consents to be sued only by those with whom it has privity of contract. The common thread of the exceptions to the privity rule as a prerequisite to invoking jurisdiction under the Tucker Act is that the party standing outside of privity by contractual obligation must stand in the shoes of a party within privity.

In arguing that sovereign immunity was waived, the insurance company analogized a prior U.S. Supreme Court decision holding that the Federal Tort Claims Act (FTCA) authorizes insurers that pay the claims of those injured by the negligence of government employees to sue the United States as equitable subrogees to a prior decision by the U.S. Court of Appeals for the Federal Circuit that the language of both the FTCA and the Tucker Act contain an unequivocal expression waiving sovereign immunity as to claims and not to particular claimants.

Contrary to the insurer’s assertion that the prior case’s statement that sovereign immunity is waived “as to claims and not particular claimants” opened the door to claims from all equitable subrogees regardless of the status or nature of the claimant bringing the suit for breach of contract, the case did not stand for that broad proposition. Rather, the earlier decision’s statement simply reflected the fact that, in their respective waivers of sovereign immunity, both the FTCA and the Tucker Act speak in terms of claims against the United States. Thus, the earlier case simply reaffirmed the previously well-established principle that a surety can sue the United States and recover not only any retainage but also any amounts paid by the United States to the contractor after the surety had notified the government of default.

Nothing in the prior case undermined the well-settled principle that the exceptions to the general jurisdictional rule requiring privity of contract are based upon the party that is outside of privity by contractual obligation standing in the shoes of a party within privity. In the case at bar, by having settled the underlying tort claim of the allegedly injured Postal Service employee, if anything, the insurance company became the equitable subrogee of the general contractor solely with respect to that tort claim—the settlement of which the insured never would have had to pay if the insurer had not stepped in.

Therefore, the insurance company never became an equitable subrogee of the general contractor with respect to any of that firm’s contract claims against the Postal Service because the insurer never stepped into the firm’s shoes in the firm’s capacity as general contractor on the post office project. As the firm’s general liability insurer, the insurance company had no responsibility for contract performance and had no obligations owed to the government. Consequently, the insurer failed to establish jurisdiction under the Tucker Act. For those reasons, the statute could not be read as waiving sovereign immunity for a general liability insurer that brings suit as an equitable subrogee of a prime contractor. Accordingly, the trial court’s dismissal of the insurer’s complaint for lack of subject-matter jurisdiction was affirmed.

The case is No. 2015-5036

Source: http://abovethelaw.com

Make sure your commercial contracts cover all the issues

February 18, 2016.

Marks and Spencer plc (Appellant) v. BNP Paribas Securities Services Trust Company (Jersey) Limited and another (Respondents) [2015] UKSC 72

The UK Supreme Court has clarified the English law approach to implying terms into contracts, adopting a restrictive approach. Although not a case relating directly to the shipping industry, the decision has important implications for all commercial contracts.

The key point is to try and deal with all contingencies explicitly in the contract. Failing to do so may cost you money.

The law

In certain circumstances, the Court will imply terms into contracts that were not dealt with explicitly in the wording of the contracts. There are two types of implied term:

(i)  A term that is implied into a particular contract, in light of the express terms, commercial common sense, and the facts known to the parties at the time the contract was made; and

(ii)  Terms implied because the law effectively imposes certain terms into certain classes of relationship.

This case dealt with the first type of implied term. Traditionally, the Court has been reluctant to imply these kinds of terms into contracts, viewing this as an intrusion into the parties’ commercial autonomy. To be implied, a term had to:

(i)  Be reasonable and equitable;

(ii)  Be necessary to give business efficacy to the contract (i.e. without the implication of the term, the contract would lack practical or commercial coherence);

(iii)  Be so obvious that “it goes without saying”;

(iv)  Be capable of clear expression; and

(v)  Not contradict any express term of the contract.

This stringent test reflected the Court’s traditional reluctance to impose terms on parties that they had not explicitly agreed.

Recently, some observers have said English law had changed, and that the English courts were now more willing to look beyond the explicit terms of commercial contracts and imply terms more liberally. This case has re-affirmed the traditional view.

The background facts

The dispute arose out of the terms of a lease under which M&S leased premises from BNP. M&S were entitled to break the lease by giving six months’ notice before a specified date. The lease would then terminate on that date so long as all payments due had been paid. Rent was to be paid in quarterly instalments in advance.  

M&S exercised its right to terminate the lease on 24 January 2012. In accordance with its obligations, M&S paid a three-month instalment of rent before 25 December 2011 (which covered a period up to 24 March 2012). The lease then terminated on 24 January 2012. 

M&S asked to be refunded pro rata for the rent they had paid from 24 January 2012 to 24 March 2012. BNP refused.  

There was no provision in the lease that expressly obliged BNP to pay back these sums to M&S, who argued that such a term should be implied into the lease.

The Supreme Court decision

The Supreme Court refused to imply this term into the lease. Although it was clearly reasonable and equitable that M&S be refunded this money (as this sum represented a pure windfall for BNP), this was not sufficient to imply a term into the lease.  

This was a detailed commercial lease that had been entered into between two experienced parties. It had been negotiated and drafted by lawyers and dealt with a large number of contingencies.

The lease was still workable without the implied term. As it was not necessary to imply the term, the Court refused to do so.

Comment

The term M&S wanted implied was reasonable and fair. Without the implied term, the Court accepted that the lease operated in a capricious way. Nonetheless, the Court refused to imply the term. An implied term must be necessary to give commercial or practical coherence to a contract. Reasonableness was not enough.

In terms of the shipping market, there are many terms that the Court implies into charterparties (e.g. the implied indemnity given by charterers to owners for following charterers’ orders). These implied terms will not be affected by this judgment. 

However, when negotiating rider clauses, it is imperative that you consider in detail at that stage what you are agreeing. Only that kind of review will allow you to assess adequately the risks of any deal (and then make the commercial decision as to whether you will accept these risks). In particular:

>  The courts have already determined the meaning of most of the older industry standard charterparty clauses. This gives a degree of certainty. If you are replacing these standard clauses with rider clauses, do the rider clauses have the same effect?

>  When negotiating additional rider clauses, do they cover everything? Think through all contingencies that could occur and try to deal with these explicitly. This is particularly important on longer term or higher value contracts where your potential liabilities will be greater.

>  Keep your contract terms under review – if a situation occurs that is not dealt with, can you insert a clause in your future contracts that deals with this issue?  

>  Try to use clear and unambiguous language when drafting.

>  Seek professional advice where necessary.  

Taking such precautionary steps at the contracting stage could save you a lot of money later. If you make a bad bargain, the Court will not correct your mistake, so get your contracts right!

Source: http://www.incelaw.com

Monday, 15 February 2016

Insurance Act 2015 – the key points

February 15, 2016. 

The Insurance Act 2015 (the Act) is the result of a detailed review of insurance contract law conducted by the Law Commissions of England and Wales and of Scotland. The review was prompted in part by a perception that, in some respects, the current law is outdated and unsuitable for the modern business environment. The Act seeks to address these concerns through a mixture of (i) radical amendment in areas where the existing law is no longer thought to achieve a fair balance between the interests of the insured and the insurer and (ii) the codification and clarification of existing law to reflect the development of the common law since the coming into force of the Marine Insurance Act 1906 (the leading statute relating to commercial insurance, which, despite its name, also applies to non-marine insurance and reinsurance).

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

The key features of the Act are summarised below.

Placement – duty to make a “fair presentation”

>  The insured must disclose all material circumstances about the risk or, failing that, it must give the insurer sufficient information to put it on notice that it needs to make further enquiries 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 (preventing so called ‘data dumping’) and not to misrepresent material information.

>  The insured will be taken to know what is known to its “senior management”, to those responsible for the insurance (including agents such as brokers) and what “should reasonably be revealed by a reasonable search” of information available to the insured both within its own organisation or held by “any other person”.

Graduated remedies for breach

>  The single remedy of avoidance from inception for a breach by the insured of its duty to make a fair presentation of the risk at placement is abolished. If the breach of duty was deliberate or reckless, the insurer may still avoid the contract and keep the premium whatever it would have done in the event of a fair presentation.

>  In the more likely event that the breach was innocent or negligent, however, there will be a new system of graduated remedies based on what the insurer would have done had a fair presentation been made. These include:
  •   avoidance if the underwriter would not have written the risk at all; or

  •  the imposition of different terms in the contract from inception if the evidence is that the underwriter would have imposed those terms in the event of a fair presentation (this may mean that some claims which have already been paid have to be revisited); and/or

  •  if the premium charged was lower than it would have been if a fair presentation had been made, 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.

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 of a particular kind, at a particular location or at a particular time, 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.  This provision will not apply, however, if the term in question is one which “defines the risk as a whole”.

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.

Contracting out

The Act allows the parties to contract out of any of the provisions relating to the duty to make a fair presentation, warranties and fraudulent claims (save for the provision relating to the abolition of so called ‘basis of the contract’ clauses). Contracting out will only be effective, however, if transparency requirements stipulated in the Act are observed. These requirements apply to any term which is more “disadvantageous” to the insured than the default position as per the Act.

Source: http://www.incelaw.com


Environmental Regulation Update

February 15, 2016. 

IMO’s Ballast Water Management Convention and China’s Emission Control Areas Programme – beginning January 2016.


IMO’s Ballast Water Management Convention 

In November 2015, at the IMO Biennial Assembly Meeting in London, Monaco, Indonesia, and Ghana became the most recent countries to ratify the IMO Ballast Water Management (BWM) Convention. This brings the number of IMO Members that have ratified the Convention to 47 – well in excess of the 30 states required for the implementation of the Convention.

The final remaining criterion is the ratification by states representing 35% of the world’s merchant shipping tonnage. Prior to the Biennial Assembly Meeting, the Convention had been ratified by 44 states representing approximately 32.9% of the world’s tonnage.

According to Lloyd’s List Intelligence, the combined fleets of Indonesia and Ghana represent approximately 1.46% of the global fleet in terms of gross tonnage. Argentina, the Philippines, Belgium, and Finland have all confirmed that they are in the process of ratifying the Convention. Should one of these countries with a larger proportion of the world’s gross tonnage on its register complete the ratification process, it would seem likely that the criteria for enforcement of the Convention will have been met, leading to the Convention coming into force 12 months thereafter.

As at January 2015, the IMO has confirmed that the Convention will not enter into force on 24 November 2016 (as had been anticipated by some), given that the required tonnage requirements have still not been met. Whilst, as mentioned above, some 47 states have ratified the Convention, it is likely that the required 0.4% tonnage will be achieved over the next three months and, as such, the Convention will not enter into force until 2017.  

China’s Emission Control Areas Programme – beginning January 2016

On 1 January 2016, China began a five-stage scheme introducing Emission Control Areas (ECAs) requiring ships to switch to low-sulphur fuel within coastal and inland waters near the Pearl River Delta (excluding Hong Kong and Macao), Yangtze River Delta, and Bohai Rim Area.

Starting in 2016, 11 “Key Ports” in the identified ECAs have the option of requiring ships at berth to use fuel with less than 0.5% sulphur content. By 2017, this requirement will become mandatory, eventually expanding to non-Key Ports in the ECAs by 2018. The scheme aims to cover all ships (except for military vessels, sport ships and fishing boats) entering into the Chinese ECA waters from 2019 onwards.

Source:http://www.incelaw.com
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Is it OK to backdate shipbuilding contracts?

February 15, 2016.

Crescendo Maritime Co. and Alpha Bank A.E v Bank of Communications Company Limited and others; Alpha Bank A.E v. Bank of Communications Company Limited and Bank of Communications Company Limited Qingdao Branch [2015] EWHC 3364 (Comm)

At a time when a lot of shipyards are in financial difficulty, it is increasingly likely that buyers will be looking to bring shipbuilding contracts to an end and make claims under the refund guarantees. A recent decision indicates the importance of checking the terms of any security assignment of the contract to ensure the buyer’s claims are pursued in the right names. It also highlights the risks of backdating shipbuilding contracts. 

The background facts

A Chinese shipyard, Nantong Mingde Heavy Industry Stock Co. Ltd (“the Builder”), agreed to construct and sell a vessel to Crescendo Maritime Co. (“the Buyer”) pursuant to the terms of a shipbuilding contract. The Buyer obtained funding from Alpha Bank A.E (“the Lender”) and the Bank of Communications Company Limited Qingdao Branch (“the Bank”) provided refund guarantees to the Buyer as security for instalments paid under the shipbuilding contract. 

The construction was delayed and the Buyer claimed that it was entitled to cancel the shipbuilding contract and claim repayment of the instalments. Arbitration was commenced in London. The Builder disputed the Buyer’s right to cancel the shipbuilding contract and did not repay the instalments. The Builder also claimed that it was entitled to damages. 

The Buyer claimed under the refund guarantees, but these claims were declined by the Bank pending the outcome of the dispute between the Builder and the Buyer. Therefore, the Buyer commenced arbitration against the Bank. 

The Bank alleged, in the arbitration proceedings, that the shipbuilding contract had been fraudulently backdated; that it had been “cheated to agree to issue the refund guarantees”; and that the refund guarantees should be null and void and/or unenforceable.  The Bank also claimed that the Buyer had assigned its rights under the shipbuilding contract to the Lender and, as such, it was the Lender, not the Buyer, who was entitled to commence arbitration proceedings. The Lender was later joined to the arbitrations. 

Arbitration awards were issued in the favour of the Buyer and the Court dismissed the Bank’s challenge to the arbitration awards. 

Meanwhile, the Bank had commenced court proceedings in China. These concerned whether the backdating of the shipbuilding contract constituted fraud and so whether the refund guarantees had any binding force. The proceedings in China continued, despite the Bank having been ordered by the English Court, on an interim basis, not to pursue proceedings in China. 

The Commercial Court decision

In the two actions before the Court, the Buyer and the Lender sought to obtain anti-suit injunctions restraining the Chinese proceedings. Not surprisingly, the Court granted the anti-suit injunction sought by the Buyer. However, because the Lender was not a party to the arbitration agreement (under the shipbuilding contract), the Court was not persuaded that it was appropriate to grant the anti-suit injunction sought, restraining the Bank from pursuing the Chinese proceedings against the Lender.

Of more interest were the following two declarations that the Lender sought:

i)  A declaration that the Lender was not an assignee of the refund guarantees. Although the Court concluded that the Buyer probably had defaulted under the deed of assignment, the Lender did not give notice that it intended to enforce its rights under the deed of assignment. Until such notice had been given, the Buyer was entitled (in accordance with the terms of the deed of assignment) to exercise its rights as if the assignment had not been made.  

ii)  A declaration that the Lender had no liability to the Bank for fraud. It was common ground that the shipbuilding contract had been backdated to 2 December 2006, in order to circumvent the application of certain amendments to the SOLAS Convention regarding tank coatings (which applied to shipbuilding contracts signed after 8 December 2006). The true date of execution, as stated in the second addendum, was 15 August 2007. The Court concluded, on the factual evidence, that the Bank was aware that the shipbuilding contract had been backdated and, as such, there could not have been any concealment or non-disclosure of the date of the shipbuilding contract by the Lender; and without any intention to deceive, there could be no finding of fraud in either English or Chinese law. Accordingly, the Court granted the declaration.

Comment

In circumstances where a deed of assignment is not an absolute assignment, but rather an assignment by way of security under which the assignee must give notice to the assignor that it intends to enforce its right (following the occurrence of a default event) until such notice has been given, the assignor is entitled to enforce its rights as if the assignment had not been made. This is reassuring for buyers, but it highlights the importance of checking the exact nature and form of the assignment to ensure the claims under the contract and guarantee are being made by those who have title to sue.

The Court was not asked to consider the enforceability/illegality of the shipbuilding contract or the refund guarantees as a result of the shipbuilding contract being backdated. Because  the arbitrators had already found that the Bank was aware that the shipbuilding contract had been backdated, there was no concealment or non-disclosure of the true date and, as such, the Lender could not be said to have deceived the Bank issuing the refund guarantees.

However, if the Bank had not been aware of the backdating, the Buyers may well have been in some difficulty claiming the refund under the contract and refund guarantee. English law will regard as void and unenforceable a contract to commit a legal wrong or one that is contrary to morals or public policy. Backdated contracts are very often a feature of transactions structured to deceive and whether or not fraud is involved, backdating is likely to be offensive to English public policy. Deception under foreign law or international treaty obligations may also lead to a contract being unenforceable if it is subject to English law. 

There are therefore serious risks for the buyer in backdating shipbuilding contracts, and for anyone in backdating any contract. In shipbuilding transactions, the contract and the refund guarantee may be tainted and unenforceable.

Source: http://www.incelaw.com
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