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., (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.

International insolvency outside the EU: contract under English law and we’ll see you right.

Before the twenty-first century there was a clear and undoubted rule in international insolvency known as the Gibbs rule (Antony Gibbs & Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399). Whatever recognition or other co-operation we might be prepared to grant foreign insolvency proceedings, if an obligation was governed by English law and otherwise valid, its validity could not be affected by any act of foreign courts or authorities proceeding under their own insolvency law.

There is no doubt that this is no longer the case for EU insolvencies: the EU Insolvency Regulations of 2000 and more recently 2015 have clearly put paid to any such exceptionalism. But what of non-EU insolvencies? Since 2006 there has been some question whether the simple Gibbs rule might have been affected by the UNCITRAL-based CBIR (Cross-Border Insolvency Rules), which now give the English courts considerable scope to replicate in England the effects of a foreign insolvency proceeding in a debtor’s own COMI (centre of main interests, essentially where its business was run from). Progressive and academic opinion (the latter as usual generally aping the former) consistently suggested that the answer ought to be Yes, on the basis that modified universalism in insolvency needed to become more global and less narrowly jurisdictional.

Today, however, Hildyard J, in a careful judgment in Bakhshiyeva v Sberbank of Russia & Ors [2018] EWHC 59 (Ch), a case on the dry subject of paper issued by a Baku bank, gave the answer No. The bank, OJSC, with connections to the Azeri state, was highly insolvent. It went into Chapter 11-style reconstruction in Azerbaijan, successfully applying to have the proceeding recognised in the UK under the CBIR. A vote of an overwhelming number of creditors, valid under Azeri law, agreed a complex debt-for-government-bonds-and-new-lower-debt arrangement under which OJSC would then continue trading. Two financial institutions, one English (Templeton) and one Russian (Sberbank), holding English-law-governed debt issued by OJSC, held out. They took no part in the vote, though as a matter of Azeri law they were bound by it.

The question was, could the English court prevent these two minority creditors bloody-mindedly enforcing their rights in full against the bank once the moratorium created by the Azeri proceedings was over? As stated above, the answer was No. Whatever one might think of the Gibbs rule, it was too solidly anchored to have been removed by the side-wind of the CBIR. Nor should it be bypassed by, for example, admitting that the debt still existed but then reducing it to something like the grin on the Cheshire cat by preventing its enforcement against the assets of the debtor.

There is much to be said for Hildyard J’s solution, both on grounds of legal certainty and also because Parliament has occasionally stepped in in other areas, but not this one, to prevent abuse of international creditors’ rights (notably, in enforcing statutory debt relief for poor countries against vulture funds and the like).

It may, moreover, be important not only for bondholders — who will obviously be opening discreet magnums of champagne this evening — but for other creditors, including maritime ones. Charter claimants and bunker suppliers whose rights are governed by English law will now, it seems, be able to watch smugly from the sidelines while shipping companies go into reconstruction, waiting for the proceedings to end before pouncing, catlike, on the very same companies, seizing their London accounts and arresting their vessels for the full amount of their claim as soon as they venture far from home. Commerce red in tooth and claw, you might say: but then that’s how it’s always been in shipping.


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.

Mandatory CO2 monitoring and reporting in the EU for big ships starts now.


On 1 January 2018 ships over 5000 grt, subject to a few exceptions, became subject to the monitoring and reporting obligations imposed by EU Regulation on monitoring, reporting and verification of carbon dioxide emissions from maritime transport (Regulation (EU) No. 757/2015 as amended) (the MRV Regulation).

The MRV Regulation requires reporting of three items: actual cargo carried onboard; fuel consumed and; CO2 emitted. These obligations apply to all relevant ships, irrespective of their flag, which make voyages that start or finish in an EU Member State port, which, for the purposes of this Regulation includes Iceland and Norway. The obligations include emissions arising from ships at berth or moving within a port. The obligations are imposed on “companies” meaning “a shipowner or any other organisation or person, such as the manager or the bareboat charterer, which has assumed responsibility for the operation of the ship from the shipowner”.

From 2019, by 30 April of each year, companies will have to submit to the Commission and to the authorities of the flag States concerned, an emissions report concerning the CO2 emissions and other relevant information for the entire reporting period for each ship under their responsibility, which has been verified as satisfactory by an independent verifier.

From 2019 by 30 June of the year following the end of a reporting period, ships arriving at, within or departing from a port under the jurisdiction of a Member State, and which have carried out voyages during that reporting period, will have to carry on board a valid document of compliance.

The UK will enforce these obligations through the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) and the Port State Control (Amendment) Regulations 2017 which entered into force on 1 October 2017. The Regulations impose criminal sanctions on companies which fail to comply with their obligations under the MRV Regulation. The Merchant Shipping (Port State Control Regulations) 2011 has been amended to make it a requirement for an inspection carried out on or after 30 June 2019 to check that the ship is carrying a document of compliance.

The IMO’s MRV scheme comes into effect on 1 January 2019.

Barratry and the Hague-Visby Rules

Glencore Energy UK Ltd v Freeport Holdings Ltd [2017] EWHC 3348 (Comm) raised the question of  whether barratry affected owners’ entitlement to rely on two of the exceptions in art. IV (2) of the Hague-Visby Rules. A fire started inside the engine control room of the “Lady M” while the vessel was on a laden voyage from Russia to the USA.  The fire resulted in owners engaging salvors to tow the vessel to Las Palmas where owners declared general average. Cargo interests denied liability to contribute on the basis that there had been the fire had constituted a breach of the contract of carriage, which was subject to the Hague-Visby Rules. I

t was agreed that the fire was started deliberately by a member of the crew with the intent to cause damage and for the purposes of the preliminary issues the assumed facts were that:  the perpetrator was the Chief Engineer; he acted alone; at the time of starting the fire deliberately and with intent to cause damage he was: “a. under extreme emotional stress and/or anxiety due to the illness of his mother; b. alternatively, suffering from an unknown and undiagnosed personality disorder and/or mental illness;c. alternatively, neither a nor b above.”

Three preliminary issues came before Popplewell J.

(1)        Did the conduct of the chief engineer constitute barratry?

(2)        Is Article IV Rule 2(b) capable of exempting the Owners from liability if the fire was deliberately or barratrously caused?

(3)        Are the Owners exempt from liability under the “any other cause” exception in Article IV Rule 2(q)?


Popplewell J defined barratry as (i) a deliberate act or omission by the master, crew or other servant of the owners (ii) which is a wrongful act or omission (iii) to the prejudice of the interests of the owner of the ship or goods (whether or not such prejudice is intended) (iv) without the privity of the owner. A “wrongful act or omission” would be: one that is generally recognised as a crime, including the mental element necessary to make the conduct criminal; or (b) a serious breach of duty owed by the person in question to the shipowner, committed by him knowing it to be a breach of duty or reckless whether that be so. It would be necessary for the crew member to have had the necessary knowledge or intent that what he is doing is either a crime or a serious breach of duty owed towards his owners, or at least recklessness in that regard. On the assumed facts the chief engineer may or may not have constituted barratry, depending upon further facts as to his state of mind. However, the issue of barratry was not determinative of the second and third preliminary issues.

Popplewell J went on to find that the owners were able to rely on the fire exception in art. IV (2)(b) applied, whether or not the fire was caused by  barratry. However, they would not be able to rely on the “any other cause” exception in art. IV (2)(q) as the chief engineer was acting within the course of his employment on the agreed facts. His access to the control room arose directly from the field of activities entrusted to him by the owners and his setting fire to the control room, with intent to cause damage, was a misuse of his position in the field of activities for which he was employed.


Carry on suing in England – at least if you’re suing a non-European

In matters of tort foreign defendants domiciled in the EEA are reasonably well-protected from the exorbitant jurisdiction of the English courts. Both Brussels I Recast and Lugano II limit jurisdction to cases where where the act leading to liability, or the harm done by it, happened in England: furthermore, Euro-law makes it clear that the reference to harm here is fairly restrictive, referring only to direct harm and not to the financial effects of it, such as the straitening of an English widow’s circumstances following a wrongful death abroad.

By contrast, there is no such luck for defendants domiciled outside the EEA. For some time conflicts lawyers have remarked that English claimants, especially personal injury claimants, find it remarkably easy to establish jurisdiction against them. This is because CPR, PD6B 3.1(9), allows service out not only where damage results from an act “committed … within the jurisdiction” but also in all cases of damage “sustained …within the jurisdiction.”, and in a series of cases such as Booth v Phillips [2004] 1 WLR 3292 and Cooley v Ramsey [2008] ILPr 27 this has been held to cover almost any loss, even consequential, suffered in the jurisdiction. And in Four Seasons Holdings Inc v Brownlie [2017] UKSC 80 the Supreme Court by a majority (Lords Wilson and Clarke and Lady Hale vs Lords Sumption and Hughes) has now weakly upheld this distinction.

International law enthusiasts will know that this case arose out of a car accident in Egypt in which the late Prof Ian Brownlie was tragically killed and his widow was injured. The actual decision was in the event a foregone conclusion: by the time the case reached the Supreme Court it was clear that the defendants, the franchising company behind the Brownlies’ Egyptian tourist hotel which had organised the fatal car ride, had never contracted with the Brownlies and was not liable in tort for the acts of the hotel itself. Nevertheless, the majority in the Supreme Court, doubting the decision of the Court of Appeal on this point, made it clear that, while not finally deciding the issue, they were not prepared to condemn the older authorities. It seems likely that future cases will follow their lead.

One further point. Lord Sumption and Lady Hale made the point that the decision whether a contract was made in England, another of the “gateways” in non-EEA cases (see CPR, PD6B 3.1(6)), was in the light of cases like Entores v Miles Far East Corpn [1955] 2 QB 327, pretty arbitrary and could do with a look from the Rules Committee. They were right. Let’s hope something gets done.

“Act” does not import culpability under cl.8(d) of ICA 1996. The Yangtze Xing Hua  


The Court of Appeal in The Yangtze Xing Hua  [2017] EWCA Civ 2107 has upheld the decision of Teare J that “act” in the phrase “act or neglect” in cl. 8 (d) of the 1996 Inter-Club Agreement means any act, whether culpable or not. The charterers, who had not been paid for the cargo, had ordered the vessel to remain off the Iranian discharge port for four months, during which time the cargo overheated, leading to a claim being brought against the owners, which they settled. Owners were entitled to recover the full amount of the settlement from charterers under the proviso to cl. 8(d): “unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim.”

The Court of Appeal has confirmed that the natural meaning of the word “act” was something which is done and did not connote culpability. “Neglect” did connote culpability but in the context of the ICA, which contained various provisions which applied regardless of culpability, this did not colour the meaning of “act”. Under cl.8 the critical question was that of causation, whether the claim “in fact” arose out of the act, operation or state of affairs described.