General average and cargo interests.

 

In Offshore Marine Services Alliance Pty Ltd v Leighton Contractors Pty Ltd and Another [2017] FCA 333 the Federal Court of Australia was called on to  decide whether parties interested in the cargo, other than the cargo owners at the date of the GA incident, were liable to contribute in general average. A tug and barge carrying construction materials grounded on its voyage from Henderson to Barrow Island and the disponent owner of the barge and tug incurred expenses and costs in securing the common safety of the barge and the cargo, including costs of some Aus $4m associated with stabilising the damaged hull of the barge, re-floating it and towing it back to Henderson with the cargo intact and undamaged.

The disponent owners claimed GA contributions from Leighton and Thiess who had supplied the cargo pursuant to contracts with Chevron. At the time of the incident ownership in the cargo had passed to Chevron, but the disponent owners claimed that Leighton and Thiess had a relevant interest in the goods because under their contracts they remained “on risk” in respect of the goods, and/or were “responsible for the care, custody, control, safekeeping and preservation of” the goods prior to their acceptance by Chevron.

McKerracher J held that a liability to contribute in GA attached only to the owner of the cargo that benefitted from the general average act, or someone contractually liable to contribute would be liable to contribute.

Charterers’orders under voyage charters.

 

London Arbitration 18/17 involved two claims by owners arising out of charterers’ orders, first to suspend loading after the vessel berthed and second to wait outside the discharge port while charterers deliberated on whether to discharge at an alternative port.

The first order was contractual as charterers had the liberty to use the laydays as they chose and there was no scope for owners recovering the extra port expenses incurred during the suspension of loading. Under a voyage charter there was no indemnity for owners for expenses incurred in following charterers’ orders.

The second order was non-contractual as under the terms of the charterparty the vessel was to sail directly to the discharge port where she could tender NOR and laytime could commence. Charterers’ orders prevented the vessel from proceeding to such a position and damages were payable to owners for the entire period of delay to the vessel in reaching the position where the vessel could tender an NOR. Owners were entitled to damages, rather than demurrage, together with the costs of bunkers consumed.

Recast European Insolvency Regulation kicks in next Monday.

Regulation (EU) 2015/848 of the European Parliament and of the Council of
20 May 2015 on insolvency proceedings (recast) [2015] OJ L141/19 entered into force on 26 June 2015,  and will apply to insolvency proceedings from 26 June
2017.

The main changes from the European Insolvency Regulation (Regulation (EC)
No 1346/2000) are as follows:
– Codification of how the centre of main interests (the “COMI”) is determined. There
will be a rebuttable presumption that the COMI is at the registered office, but this will not apply if there has been a move of the registered office during the three months prior to the opening of proceedings.
– Coverage of hybrid and pre-insolvency proceedings. UK schemes of arrangement are
excluded from the Regulation.
– A framework for group insolvency proceedings, where two or more companies in a
group of companies are insolvent, will be introduced.
– Secondary proceedings are no longer limited to liquidation proceedings where a
company has an establishment. “Establishment” is now defined as “any place of operations where the debtor carries out a non-transitory economic activity with human means and assets”. The relevant time for assessing an establishment will be either the time of the opening of the secondary proceedings or, alternatively, the three month period prior to that. The insolvency practitioner in the main proceedings may now provide undertake to treat local creditors as they would be treated under secondary proceedings.
– New linked registers of insolvency proceedings will be established in each member state by 26 June 2018, to be linked via a central European e-justice portal by 26 June 2019.

Admiralty jurisdiction over torts in the UK’s EEZ.

 

Virgin Media Ltd v Joseph Whelan T/A M and J Fish [2017] EWHC 1380 Admlty is an interesting decision on whether the Admiralty Court has jurisdiction in personam over a tort claim arising in the exclusive economic zone of the United Kingdom.  The claimant alleged that its fibre optic telecommunications cable, which ran across the Irish Sea between Dublin and Lytham St Annes, was damaged by a trawler at a location within the exclusive economic zone of the UK, but outside its territorial waters. The issue before the Admiralty Court was whether the courts of England and Wales had jurisdiction under the 2012 Recast Judgments Regulation. Under art.4 of the Regulation the defendant should be sued in the place of its domicile, the Republic of Ireland, subject to any of the additional grounds of jurisdiction provided for in the Regulation. Here the relevant one was contained in art 7(2) which provides that “A person domiciled in a Member State may be sued in another Member State in matters relating to tort, delict or quasi-delict in the courts for the place where the harmful event occurred or may occur”.

The Admiralty Registrar held that the Admiralty Court had no greater rights over a collision with a fixed structure than it would in respect of any collision between ships which would be none unless the action is brought in rem or falls within one of the exceptions in s.22 of the Senior Courts Act 1981. Any extension of jurisdiction would have to be established by reference to an international convention or treaty. The relevant treaty would be the UN Convention on the Law of the Sea (UNCLOS).

Article 60(2) of UNCLOS provides that the coastal state has exclusive jurisdiction over artificial islands, installations and structures within its EEZ, and this formed the basis for Burton J’s decision in Conocophillips (UK) Ltd v Partnereederei MS Jork [2010] EWHC 1214 (Comm) that the Commercial Court had jurisdiction over a negligence claim against a shipowner in connection with a collision between a vessel and an unmanned oil platform 40 miles off the coast of Norfolk. Where there is a collision between a vessel and a platform which is an effective prolongation of the territory of the United Kingdom, the Court would have jurisdiction. The concept of ‘place’ in the predecessor provision to art 7(2) in the 2001 Judgments Regulation was limited to matters addressed in UNCLOS art. 60.

In contrast, art.58(1) provided that all States, and not just the Coastal State had the freedom to lay submarine cables and pipelines within their EEZ, but did not provide for the coastal state to have jurisdiction. Article 56 of UNCLOS gives an English court jurisdiction over matters with respect to fishing, but did not provide that the coastal state may assume jurisdiction with regard to civil disputes arising out of fishing. Accordingly, the Admiralty Court was not a court for the place where the harmful event occurred under art 7(2) and the Court declared it had no jurisdiction over the claim. The appropriate jurisdiction was in the Courts of the Republic of Ireland under art. 4 of the Recast Regulation.

Escalating demurrage under ‘stop and wait’ clause.

In Gard Shipping AS v Clearlake Shipping Pte Ltd [2017] EWHC 1091 (Comm) Sir Jeremy Cooke considered the effect of a ‘stop and wait’ clause which gave charterers a liberty, at any stage of the voyage, of instructing the vessel to stop and wait for orders. For the first three days time would count as used laytime or time on demurrage, if vessel was on demurrage, and all bunkers consumed were to be for charterers account. After five days “waiting for orders/disch instructions at sea vessel to be considered as being used for storage” and escalating rates of demurrage applied. The Vessel tendered NOR at the discharge port of Rotterdam at 2250 on 26 January 2016 but charterers did not give any discharge instructions until the afternoon of 31 March 2016.

Owners claimed demurrage at the escalating rate pursuant to the ‘stop and wait’ clause on the grounds that the vessel had been used for storage for this time. The charterers argued that the waiting time at Rotterdam of 64.7083 days fell under the laytime and demurrage regime in the charter. The owners’ claim failed. The clause only operated in the event of an instruction to the vessel “to stop and wait for orders” and did not cover a passive failure to give orders. The charter provided different regimes covering payments in the form of demurrage and/or payment for bunkers used, each with their own trigger. The trigger for entry into the ordinary loadport/disport regime was the service of the NOR, in this case, at the disport and this was wholly distinct from the orders to which the ‘wait and stop’ clause referred.

The court also rejected owners’ argument that there should be an implied term that the vessel was to be considered as being used for floating storage if stopped for more than five days over the course of the voyage, whether before or after reaching the disport or giving NOR. It was not necessary to imply the term into the contract and the implication of the term was inconsistent with the charter as properly construed.

Delivery obligations under bills of lading and electronic release systems.

MSC v Glencore International AG is a timely reminder of the fundamental obligation of the sea carrier to deliver only against production of an original bill of lading. Two out of a consignment of three containers were misappropriated at the discharge port, Antwerp. operated an electronic release system (“ERS”). Under this system carriers provided, against bills of lading, computer generated electronic numbers (“import pin codes”) which were given to the relevant receivers or their agents and the port terminal. This was instead of delivery orders or release notes which would be presented to the terminal to take possession of the goods. The holders of bills of lading had to present the pin codes to the terminal in order to take delivery of the goods. In practice the collecting driver would enter the pin codes manually in order to gain access to the terminal and enable him to collect the containers. The system was not mandatory and not all carriers using Antwerp adopted it. Glencore’s agents, Steinweg, had used the system without incident 69 times. However, on the 70th occasion, when Steinweg’s haulier went to collect the container, it found that two had already been collected. It was likely that someone had learnt of the codes and had used them to steal the containers.

The bill of lading provided “one original Bill of Lading, duly endorsed must be surrendered by the Merchant to the Carrier (together with outstanding freight) in exchange for the Goods or a Delivery Order”. Andrew Smith J found the sea carrier liable in bailment and breach of contract in respect of the misdelivery of the two containers, rejecting the argument that the bill of lading had been exchanged for a delivery order constituted by the electronic pin codes; [2015] EWHC 1989 (Comm). The bill of lading’s reference to a ‘Delivery Order’ must have been taken to refer to a ship’s delivery order, and here there was no document containing the necessary undertaking by the carrier to a person identified in it to deliver the goods to which it related to that person

The Court of Appeal has now upheld the decision at first instance, [2017] EWCA Civ 365. The sea carrier raised a new argument that delivery of the pin code amounted in law to delivery of the goods, with the carrier being obliged to deliver to the first person to enter the pin code into the machine. This was rejected as delivery meant actual delivery, not delivery as a means of access, and there was nothing to the contrary in the bill of lading. At best the code was some form of delivery order. The alternative delivery obligation in the bill of lading required a ship’s delivery order which would require an undertaking by MSC to deliver to Glencore or their agent. The Release Note contained no such undertaking and was simply an instruction to the terminal to deliver against the entry of pin codes which it provide to Steinweg. Glencore was not estopped from contending that delivery of the cargo upon presentation of a pin code was a breach of contract and/or duty on the part of MSC, on the basis of having given the appearance that it was content for the ERS to be used for the 69 previous shipments.

Sea Carriers using the ‘ers’ system should take note. You bear the risk of misdelivery due to hacking of pin codes.

 

Detention damages. At net or gross demurrage rate?

In London Arbitration 17/17 the tribunal had to decide on what compensation the owners were available in respect of detention at the discharge port. The vessel was chartered for a voyage from Rotterdam to 1-2 safe berths, Iskenderun.  NOR was tendered outside Iskenderun and was therefore invalid. The vessel was unable to enter the port because charterers, who were the owners of the cargo, had been unable to complete their on-sale of the cargo. Six weeks later the charterers ordered the vessel to proceed to another port in Turkey, Mersin.

 

Owners had agreed to the direction to discharge at Mersin and were entitled to compensation by way of detention from the time laytime would have commenced, had the Iskenderun NOR been valid,to completion of discharge at Mersin. The usual method of calculating damages for detention would be the applicable net demurrage rate plus the cost of bunkers for periods the vessel was underway. Here owners claimed only damages for detention, but at the gross demurrage rate.

 

The tribunal held charterers could offset their allowed laytime at the discharge port against their liability in detention once the vessel reached Mersin, even though Mersin was not a permitted discharge port under the charter. The owners were entitled to compensation for their actual loss and if that was based on the demurrage rate, it would be based on the net rate, after deduction of 4% brokers’ commission, and not the gross rate, as owners had claimed. This was so even though the charter did not provide for commission on detention claims.

Unsafe ports. The Ocean Victory in the Supreme Court.

The Ocean Victory involved a Capesize vessel which became a constructive total loss at the discharge port of Kashima. The quay at Kashima was vulnerable to long waves which can result in a vessel being required to leave the port. The only route in and out of Kashima is by a narrow channel, the Kashima Fairway, which is vulnerable to northerly gales. There was no meteorological reason why these two events should occur at the same time, but on this occasion the two events did coincide when the vessel had to leave port due to long waves, and subsequently became a constructive total loss. The vessel was demise chartered on Barecon 89 form and sub-time chartered. Both charters contained a safe port warranty.  One of the vessel’s hull insurers took assignments of the owners’ and demise charterer’s rights and claimed for breach of the safe port warranty.

The Supreme Court which gave judgment yesterday, [2017] UKSC 35,  held that there had been no breach of the safe port undertaking.  The test for breach of the safe port undertaking was whether the damage sustained by the vessel had been caused by an “abnormal occurrence”, and the date for judging the breach of the safe port warranty was the date of nomination of the port. The Supreme Court unanimously upheld the decision of the Court of Appeal. The combination of long waves and the exceptional nature of the storm at Kashima constituted an abnormal occurrence. Accordingly, there had been no breach of the safe port warranty under the demise charter and the sub-time charter.

The Supreme Court also dealt with two further questions that would have arisen if there had been a breach of the safe port undertaking under the two charters.  The first was whether the provisions for joint insurance in clause 12 of the Barecon 89 form precluded rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterer for breach of an express safe port undertaking. The majority view was that clause 12 did preclude such a claim and provided a comprehensive scheme for an insurance funded result in the event of loss of the vessel by marine risks. This scheme was not altered by the safe port undertaking.  The second was whether liability under the two charters could be limited under art. 2(1)(a) of the LLMC 1976. The Supreme Court unanimously agreed with the Court of Appeal in The CMA Djakarta [2004] 1 Lloyd’s Rep 460 that Article 2(1)(a) of the 1976 LLMC  which allows owners or charterers to limit liability for loss or damage to property “occurring on board the ship” or “in direct connexion with the operation of the ship” did not include loss or damage to the ship itself.

A matter of construction. Conflicting arbitration and jurisdiction clauses in time charter.

 

In London Arbitration 12/17 the tribunal considered a conflict as to law and jurisdiction arose under two clauses in a time charter. Clause 31, headed ‘Law and Arbitration’ provided for mediation and, if the dispute could not be resolved within sixty days, by reference to a single arbitrator, with arbitration to be “[h]eld at London, UK and…conducted in accordance with relevant acts and rules there under excluding any laws, opinions, or regulations that would require application of the laws of any other jurisdiction.” The parties appointed their own arbitrators and a third was appointed by the President of the London Maritime Arbitrators Association (LMAA). Charterers then raised the point that the contract was not subject to arbitration but rather to Egyptian law and jurisdiction pursuant to cl. 21, headed, APPLICABLE LAW, which provided: “This Contract and the relationship of the parties hereunder shall be governed by and interpreted in accordance with the laws of Egypt and parties hereby agree to submit to the jurisdiction of the Egyptian Courts in Cairo.”

The tribunal had to decide, under its general power to make a finding on its own jurisdiction, which clause, as a matter of construction  more closely expressed the intentions of the parties. The tribunal found in favour of cl.31 which appeared under the more all-embracing heading: “Law and Arbitration”, whereas Clause 21 appeared under the heading “Applicable Law”, no reference being made in the heading to jurisdiction. Further the reference in clause 31 to   attempts at settlement as a prelude to arbitration did not sit with an intention for the Egyptian courts to have jurisdiction.

Undeclared deck cargo and carrier’s right to limit Hague-Visby Rules? Canadian court says ‘yes’.

In De Wolf Maritime Safety BV v Traffic-Tech International Inc (‘The Cap Jackson’) 2017 FC 23, the Federal Court in Canada has held that (1) undeclared on-deck carriage did not prevent the application of the Hague-Visby Rules to the bill of lading and (2) that the carrier was entitled to rely on the limitation provisions in art. IV(5) of the Hague-Visby Rules. The decision on both points is in accordance with English law on the Hague-Visby Rules and deck cargo.