LOI and delivery to agent of nominated receiver. The Songa Winds.


In The Songa Winds [2018] EWHC 397 (Comm) the court considered the enforceability of a letter of indemnity for delivery of cargo without production of a bill of lading. Songa had time chartered their vessel to Navig8 who had concluded a voyage charter with Glencore carrying crude sunflower oil from the Ukraine to New Mangalore and Kakinada. Delivery was made without production of bills of lading in return for indemnities on back to back terms from Glencore to Navig8 and from Navig8 to Songa. The indemnities were on the terms of the International Group’s Letter of Indemnity for delivery of cargo without production of a bill of lading which provides

“we, [insert name of party requesting delivery], hereby request you to deliver the said cargo to “X [name of the specific party] or to such party as you believe to be or to represent X or to be acting on behalf of X” at [insert place where delivery is to be made] without production of the original bill of lading.”

Both indemnities stipulated delivery to Aavanti, who had purchased the cargo from Glencore. Delivery, however, was made to Ruchi, who were Aavanti’s sub-purchaser. A claim was made against Songa by SocGen, who had financed Aavanti’s purchase and claimed to be the lawful holder of the bills of lading.

Andrew Baker J found that Ruchi had been acting as Aavanti’s agent and gave summary final judgment that the two LOIs had been triggered. Although Ruchi had not paid Aavanti, the evidence showed that it was acting as its agent at the two discharge ports. There was a standing practice, between Aavanti and Ruchi, for delivery to be made to Ruchi of cargo quantities sold to it by Aavanti without production of bills of lading. Aavanti had issued LOIs to Glencore requesting it to procure delivery to Ruchi although it had not been paid and without reference to whether it was going to be paid before delivery. Aavanti had no representative office or other presence in India and no right to import cargo into India and had not appointed anyone to receiver the cargo on its behalf at the two Indian ports. Ruchi had its own dedicated tanks at both ports and the overwhelming likelihood was that the cargo was discharged into those tanks.

“Everywhere you go, you can be sure with Shell.” No arguable duty of care in respect of Nigerian oil pollution leaks.


The issue of a parent company’s potential direct liability in tort in respect of acts of one of its subsidiary companies has recently come before the Court of Appeal in Okpabi v Royal Dutch Shell and Shell Petroleum Development Company of Nigeria Ltd , [2018] EWCA Civ 191. The Nigerian claimants suffered from harm from pollution arising from oil leaks from Nigerian land pipelines due to the illegal process of “bunkering” by which oil is stolen by tapping into the pipelines.

The claimants wanted to sue  Shell’s Nigerian subsidiary SPDC, who operated the pipelines, in the English courts rather than in Nigeria. To this end they sued the English holding company, Royal Dutch Shell (‘RDS’), in the English courts. RDS would now serve as an ‘anchor defendant’ and the claimants obtained leave to serve SPDC out of the jurisdiction under para 3.1 of Practice Direction 6B, on the ground that there was between the claimant and RDS a real issue which it was reasonable for the court to try and the claimant wished to serve SPDC as a necessary or proper party to that claim.

RDS applied under CPR Part 11(1) for orders declaring that the court had no jurisdiction to try the claims against it, or should not exercise such jurisdiction as it had. At first instance Fraser J found that there was no arguable duty of care owed by the parent company Royal Dutch Shell Plc to those affected by the operations of its subsidiary in Nigeria.( [2017] EWHC 89 (TCC), noted in this blog on 2 February 2017. The governing law would be that of Nigeria, but the issue was decided under English law, because the legal experts for the parties were agreed that the law of Nigeria would follow, or at least include as an essential component, the law of England in this respect.

The Court of Appeal has now upheld the decision by a 2-1 majority, Sales LJ dissenting. The Court of Appeal applied the three stage Caparo Industries v Dickman test for assessing novel duties of care[1990] 2 AC 605 (HL) which set out three requirements, all of which had to be satisfied. (1) Was it foreseeable that if the defendant failed to take reasonable care, the plaintiff would be injured by the acts or omissions of the defendant (the foreseeability factor)? (2) Was there a relationship between the plaintiff the defendant characterized by the law as one of “proximity” or of being “neighbours” one to another (the proximity factor)? (3) as a matter of legal policy it would be fair and just to impose a duty of care on the defendant (the policy factor)? The duty of care argued for by the claimants foundered on the proximity requirement.

The claimants’ based their case on the duty of care owed by RDS to them on the fact that

“… [RDS] exerts significant control and oversights over [SPDC’s] compliance with its environmental and regulatory obligations and has assumed responsibility for ensuring observance of proper environmental standards by [SPDC] in Nigeria. [RDS] carefully monitors and directs the activities of [SPDC] and has the power and authority to intervene if [SPDC] fails to comply with the Shell Group’s global standards and/or Nigerian law.”

The claimants relied on five main factors to demonstrate RDS’s arguable control of SPDC’s operations: (1) the issue of mandatory policies, standards and manuals which applied to SPDC, (2) the imposition of mandatory design and engineering practices, (3) the imposition of a system of supervision and oversight of the implementation of RDS’s standards which bore directly on the pleaded allegations of negligence, (4) the imposition of financial control over SPDC in respect of spending which, again, directly relevant to the allegations of negligence and (5) a high level in the direction and oversight of SPDC’s operations.

Having reviewed the evidence submitted by the claimants Simon LJ concluded that none of the claimants’ five factors, either individually or cumulatively demonstrated a sufficient degree of control of SPDC’s operations in Nigeria by RDS to establish the necessary degree of proximity. There was no arguable case that RDS controlled SPDC’s operations, or that it had direct responsibility for practices or failures which were the subject of the claim. Simon LJ noted an important distinction between a parent company which controls, or shares control of, the material operations on the one hand, and a parent company which issues mandatory policies and standards which are intended to apply throughout a group of companies in order to ensure conformity with particular standards. “The issuing of mandatory policies plainly cannot mean that a parent has taken control of the operations of a subsidiary (and, necessarily, every subsidiary) such as to give rise to a duty of care in favour of any person or class of persons affected by the policies. [88]”.

A similar point was made by Sir Geoffrey Vos. The issue of mandatory policies, standards and manuals were of a highlevel nature and did not indicate control; control rested with SPDC which was responsible for its own operations.

“The promulgation of group standards and practices is not, in my view, enough to prove the “imposition” of mandatory design and engineering practices. There was no real evidence to show that these practices were imposed even if they were described as mandatory. There would have needed to be evidence that RDS took upon itself the enforcement of the standards, which it plainly did not. It expected SPDC to apply the standards it set. The same point applies to the suggested “imposition” of a system of supervision and oversight of the implementation of RDS’s standards which were said to bear directly on the pleaded allegations of negligence. RDS said that there should be a system of supervision and oversight, but left it to SPDC to operate that system. It did not have the wherewithal to do anything else.[205]”


Opkabi is one of three transnational tort claims involving attempts to sue a foreign subsidiary company using the English parent company as an ‘anchor’ defendant. In Lungowe v Vedanta and AAA v Unilever the court accepted that there was an arguable case that the anchor defendant owed a duty of care, although in AAA the claim foundered on the lack of foreseeability of the harm suffered by the claimants at the hands of third parties in the post-election violence in Kenya after the 2007 elections. An appeal is due to be heard later this year.

As a sidenote, in similar proceedings brought against SPDC in the Netherlands, using RDS as an ‘anchor defendant’, the Dutch Court of Appeal in December 2015 concluded that the claims against RDS were not bound to fail. They reasoned.

“Considering the foreseeable serious consequences of oil spills to the local environment from a potential spill source, it cannot be ruled out from the outset that the parent company may be expected in such a case to take an interest in preventing spills (or in other words, that there is a duty of care in accordance with the criteria set out in Caparo v Dickman [1990] UKHL 2, [1990] 1 All ER 56), the more so if it has made the prevention of environmental damage by the activities of group companies a spearhead and is, to a certain degree, actively involved in and managing the business operations of such companies, which is not to say that without this attention and involvement a violation of the duty of care is unthinkable and that culpable negligence with regard to the said interests can never result in liability.”


The claimants’ solicitors in Opkabi, Leigh Day, have indicated their intention to apply for leave to appeal to the Supreme Court.



Hague rules. No limitation for bulk cargo.


On Wednesday in The Aqasia [2018] EWCA Civ 276 the Court of Appeal upheld the decision of Sir Jeremy Cooke [2016] EWHC 2514 (Comm) that “unit” in Article IV rule 5 of the Hague Rules means a physical item of cargo and not a unit of measurement. The case involved a cargo claim against owners under a voyage charter for the carriage of bulk fishoil, which provided that “The Owners in all matters arising under this Contract shall also be entitled to the like privileges and rights and immunities as are contained in Sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and in Article IV of the Schedule thereto …”


Flaux LJ reasoned that the word “package” clearly referred to a physical item and the use of the words “package” and “unit” together and in the same context pointed strongly to both words being concerned with physical items rather than units of measurement. “Unit” refers to a physical item which is not a “package”, because, for example, it is incapable of being packaged or is not in fact packaged. This was the construction accepted by courts in other common law jurisdictions and favoured by the majority of academic commentators and textbooks.


It was also clearly confirmed by the travaux préparatoires for the Hague Rules. There was no suggestion in the travaux préparatoires that “unit” had been introduced to cater for bulk cargoes.  Any limitation by reference to weight or volume was abandoned by the end of the session on 31 August 1921, as was any limitation by reference to a multiplier of freight by the end of the session on 1 September 1921. The word “unit” had been introduced to cater for items of cargo which are carried without packaging, such as cars or boilers.


Accordingly, there is no limitation available under the Hague Rules in respect of loss or damage to bulk or liquid cargo. The Court of Appeal also rejected owners’ argument that the words of Article IV were written into the charterparty so that every provision in the Article must be given meaning and effect in the context of the carriage of the bulk cargo contemplated by the charterparty. On the correct construction of the charterparty, owners were entitled to rely upon no more than what Article IV provides.


Is  a ‘Waiting for orders’ claim a demurrage claim?



The answer to this question matters because of the documents required under a time bar clause for “demurrage claims”.

In The Ocean Neptune [2018] EWHC 163 (Comm) the vessel was chartered for a voyage from Taiwan to three Australian discharge ports on ExxonMobil VOY2005 form, and the Lukoil International Trading and Supply Company Exxonvoy 2005 clauses dated 30.05.2006 (“the LITASCO Clauses”). Clause 2 of the Litasco clauses provided a requirement for demurrage claims to be provided with supporting documentation within 90 days of completion of final discharge, with a similar provision for other claims but with a time limit of 120 days. In addition cl. 2(b) specified the types of documentation that had to be required for a demurrage claim.  Clause 4 of the Litasco clauses was a ‘waiting for orders’ clause which provided “If charterers require vessel to interrupt her voyage awaiting at anchorage further orders, such delay to be for charterers’ account and shall count as laytime or demurrage, if vessel on demurrage. Drifting clause shall apply if the ship drifts.”

At Gladstone, the first discharge port, the vessel berthed but then shifted back to the anchorage, remaining there for more than a month until charterers ordered the vessel to sail to Botany Bay.  The reason for the delay at Gladstone was that the receivers, Caltex, refused to take delivery of the cargo on the grounds that it was alleged to be contaminated/off specification. Owners initially presented this delay claim as a demurrage claim, but then reformulated it as a claim under cl. 4. The Tribunal held the Owners’ demurrage claims were barred because they failed to include a statement of facts for the loading port and the discharging ports, countersigned by the terminal, or if it was impossible to obtain such a countersignature, a letter of protest from the Master, as required by cl. 2(b). However, the Tribunal found that cl.2(b) did not apply to the claim for delay under cl.4. Charterers appealed against the finding.

Popplewell J allowed the appeal. The claim under clause 4 was a demurrage claim. Demurrage was defined by clause 13(d) of the ExxonMobil VOY2005 form which provided that demurrage was to be paid for all time by which the allowed laytime “is exceeded by time taken for loading and discharging and for all other Charterer’s purposes and which, under this Charter, counts as laytime or as time on demurrage.”  Clause 4 provided that the delay caused by waiting at anchorage shall “count as” used laytime or demurrage. Demurrage was not limited to a claim where charterers had exceeded the allowed laytime by the time taken for loading and discharging. The waiting time was, therefore, time taken for Charterers’ purposes which under the charter counted as laytime or demurrage.  This was to be contrasted with other clauses in the charter which provided merely that compensation for delay caused by breach would be at the demurrage rate.


And the levy was dry. OPA Trust Fund levy expires.



The US Oil Pollution Act of 1990 set up a trust fund to take care of expenses beyond the costs that might be covered by the responsible party spilling any oil. This was funded by the federal Oil Spill Liability Trust Fund levy of 9cts per barrel. The levy expired on 31 December 2017 and has not been renewed. There is currently about $5.7 billion in the fund.

Scope of OPA expanded. The US Foreign Spill Protection Act 2017.


On 12 December 2017 President Donald Trump signed into law the Foreign Spill Protection Act of 2017. This  amends the Oil Pollution Act of 1990 to make foreign facilities that are located offshore and outside the exclusive economic zone (EEZ) liable for removal costs and damages that result from oil spills that reach (or threaten to reach) U.S. navigable waters, adjoining shorelines, or the EEZ. Specifically, the following parties may be held liable: (1) the owners or operators of the foreign facilities, including facilities located in, on, or under any land within foreign countries; and (2) the holders of a right of use and easement granted under applicable foreign law for the area in which the facility is located. The Act extends to abandoned foreign facilities. The Act also expands the definition of  an “offshore facility” under the Clean Water Act so as to cover facilities seaward of the US EEZ. The expansion applies to the  subsections of s.311 of the Clean Water Act relating: to administrative and civil penalties for spills of oil and/or other hazardous substances; federal removal authority; civil enforcement ; the savings clause for existing state, local and federal law.

Maritime or non-maritime? The status of oilfield contracts in Louisiana



On 8 January 2018 the Fifth Circuit  en banc (In re Larry Doiron, Inc., http://caselaw.findlaw.com/us-5th-circuit/1885307.html (5th Cir. Jan. 8, 2018 No. 16-30217)) reworked the test for determining whether oilfield contracts are maritime or non-maritime in nature. Under maritime law knock for knock indemnity clauses in oil field service contracts are valid, but under anti-indemnity statutes in some states, such as Louisiana and Texas, they are invalid.


The case involved flowback operations performed in state waters on a fixed platform. The master service contract for the flowback work did not call for any vessel involvement. However, during the job the flowback contractor, STS, found a crane was needed to manipulate some of the flowback equipment. A tug and barge were needed to get the crane to the platform and the platform owner had to charter in vessels to allow the flowback contractor to do its work. required the platform owner (Apache) to subcontract with Larry Doiron Inc to charter in the necessary vessels to allow STS to do its work under the MSC.   During the ensuing operations, an STS technician was injured, and LDI sought indemnity from STS under the terms of the Apache-STS MSC (which provided for indemnity from STS to Apache and any of Apache’s subcontractors).


The Fifth Circuit set out a new two part test to determine whether or not the contract is maritime in nature. First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? Second, if the answer to the above question is “yes,” does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is maritime in nature.


Applying this new test to this case, the oral work order called for STS to perform downhole work on a gas well that had access only from a platform. After the STS crew began work down hole, the crew encountered an unexpected problem that required a vessel and a crane to lift equipment needed to resolve this problem. The use of the vessel to lift the equipment was an insubstantial part of the job and not work the parties expected to be performed. Therefore, the contract was non maritime and controlled by Louisiana law which barred the indemnity under Louisiana Oilfield Indemnity Act.

Repudiation claims and voyage charter timebar clause


Demurrage time bar clauses are a commonplace in tanker charters. They require owners to submit their claim with supporting documentation within a specified period of time after completion of discharge, failing which the claim is extinguished. Some clauses extend this regime to all claims by owners against charterers. However, what happens to the time bar when the cargo is never discharged, because charterers have repudiated the charter and have never loaded a cargo? The Tribunal in London Arbitration 3/18 has found that the clause which discharged the charterer from all liability if appropriate documentation is not provided “within 90 days after completion of discharge at last discharging port” did not affect owners’ load port demurrage claim, nor their  cancellation claim. The clause could not operate effectively in circumstances where the contemplated voyage was not performed at all. If charterers had wanted the clause to operate in these circumstances, they needed to provide clearly for this eventuality, as is the case with the Hague/Hague-Visby Rules which discharge an owner from liability if suit was not brought within one year of the delivery of the goods or of the “date when they should have been delivered”. A similar finding was made by Nigel Teare QC, as he then was, in The Bow Cedar,[2005] 1 Lloyd’s Rep 275.

BARECON 2017 out now.


In December 2017 BIMCO published the new version of its bareboat charter form, BARECON. The main changes to its predecessor, BARECON 2001 are:


  • The shipowner now owes an absolute obligation to deliver the vessel in a seaworthy condition, as opposed to being obliged to exercise due diligence to make the vessel seaworthy on delivery. If the charterer has inspected the vessel before delivery, the owner must deliver the vessel to the charterer in the same condition, fair wear and tear excepted. (Cl 3(a)).


  • An option to extend the charter period at a pre-agreed rate is now included (cl.2).



  • Charterer and owner are given the right to place representatives on board before delivery and redelivery (cl.6) and have the option to arrange for an underwater inspection of hull, rudder and propeller in the condition survey on delivery and redelivery (cl.7).


  • Charterers remain liable for undertaking any structural changes mandated by compulsory legislation but two options are provided for allocating their costs. The default position is that all costs are for charterer’s account. The second option is to provide a pre-determined formula for the apportionment of the costs.(Cl 13(b).


  • The words ‘in respect of which time shall be of the essence’ have been removed from the provision relating to payment of hire and this now provides a prescribed grace period of three banking days (cl.15).



  • The insurance provisions in cl. 17 have been amended so as to take account of the decision in The Ocean Victory, so as to provide that payment of insurance to cover the owners loss does not prevent the owners or their insurers from claiming against the charterer, nor the owner or the charterer, or their insurers, from claiming against third parties. Cl.19(a) provides that the bareboat charterers are to become liable to damages if the vessel becomes a total loss. Clause 17 provides two for taking out insurance. First, charterers to insure for Hull and Machinery, war, and P&I risks. Second, owners to insure for Hull and Machinery and war risks, charterers to insure against P&I risks.


  • The charter now contains anti-corruption (cl.28) and sanctions clauses (cl.29) based on the existing BIMCO clauses, amended for a bareboat charter context.



  • The owner’s right to withdraw is now described as a right to terminate, and the war risk clause has been deleted from the termination provisions (cl.31).


  • The optional provisions in relation to newbuildings in Part III now include a right on the part of charterers to request a change order to the vessel’s specifications in accordance with the terms of the building contract, with charterers bearing any additional costs, and the termination provisions are amended so that the owner has the right to terminate the charter in the event it becomes entitled to cancel the building contract.



Demurrage claim against seller. Don’t blame your buyer if you don’t pay freight due under your charter.


London Arbitration 2/18 give us an interesting issue on causation arising out of two related contracts, a cfr sale contract, and the charterparty made by the seller. The cfr sale contract required buyers to pay charterparty freight to sellers as soon as possible after signing bills of lading; which they failed to do. The shipowners refused to release the ‘freight prepaid’ bill of lading until freight had been paid. The consequent delay resulted in the seller incurring a liability for demurrage at the discharge port under their charterparty. The tribunal held that the sellers were not entitled to an indemnity from the buyers in respect of their demurrage liability. Despite the provisions of the sale contract, the primary obligation to pay to the owners the charterparty freight remained with the sellers, as charterers of the vessel.  The sellers decided not to pay themselves the freight due to the owners and this broke any chain of causation there might have been between the buyers’ breach and the demurrage incurred by sellers under the charter. Alternatively, the sellers had failed to mitigate the damages to which the buyers’ breach exposed them and thereby incurred a liability for demurrage that could have been otherwise avoided.