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Newsletter 17
SEA VENTURE
Residential Training Course for Members
Oil Major Approvals
“Free In Stowed” – Free of Risk?
Beware Demurrage Time Bars and Documentation
Arrest, Dangerous Cargo and Delays – Who Pays?
What is Force Majeure?
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2011 Renewal
The Club concluded a successful renewal. Due to thestrong financial position, the Board set a zerostandard increase. Given the difficulties in the freightmarkets this was a very welcome relief to our hard-pressed Members. Naturally, adjustments to ratingsfor individual Members were made depending onrecord. In the event, taking into account change ofterms, there was an overall reduction in premium forowned P&I business of 0.69%. Premium overall hasincreased due to new business.
At the renewal just excess of 3 million tons of new businessjoined the Club with approximately 600,000 tons deciding not to renew.Unfortunately, in addition the Club was not able to offer renewal terms toIranian owned business due to political issues and international sanctions.This was a sadness to all concerned, the Members involved werelongstanding, excellent Members and the Club fervently hopes that one day itwill be possible to renew ties with the Iranian shipping community. Therewere notable new entries from Hong Kong, India, Italy, South Korea, Taiwanand the United States. We hope the new Members will be happy with thelevel of service they receive from the Club and that we will enjoy a long andmutually beneficial relationship.
The world is experiencing a period of great uncertainty; added to the upheavalin the financial markets and the disjuncts in supply and demand within theshipping markets we now have the dramatic political events in the MiddleEast. Against this challenging background it is the aim of the Club to provideits Members with P&I insurance based on a strong resilient financial positionand excellent levels of service.
We wish all of our Members a successful and prosperous 2011.
Gary Rynsard
16 March 2011
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CONTENTS4 Delay – Who is Responsible?
4 New Legislation for Cruise Ships Visiting U.S. Ports
5 Residential Training Course for Members
5 Recent Developments in Shore Excursion Liability
6 “Free In Stowed” – Free of Risk?
6 Court of Appeal warns against Hasty Acceptance ofRepudiatory Conduct
7 Oil Major Approvals
7 Voyage Data Recorders (VDR) – “CSI on the High Seas”
8 Beware Demurrage Time Bars and Documentation
8 Part 36 – What is the Effect of a Counter- Offer?
9 Hazardous Conditions – Obligation to Notify Coast Guard
11 Wind and Wave Action Not Inherent Vice
11 Sanctions
12 When No Means No – Arbitrator’s Jurisdiction
13 Tendering NOR before Free Pratique Granted – Part 2,including Demurrage Time Bars
13 Arrest, Dangerous Cargo and Delays – Who Pays?
14 Clarity of Drafting
14 Sale Contract v Charterparty Readiness
15 What is Force Majeure?
16 Loss Prevention Publications
16 Incoterms 2010 – What Has Changed?
18 Without Prejudice – Admissibility of Exchanges as an Aid toInterpretation
18 Anti-Suit Injunctions
19 Anti-Technicality Clauses and Withdrawal – Exercise of GreatCaution Revisited
19 Port State Control – Top Ten Findings
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EDITORIAL TEAM
Naomi CohenMalcolm ShelmerdinePaul BrewerPaul Amos
Sea Venture is available in electronic format. If youwould like to receive additional copies of this issue orfuture issues in electronic format only please send yourname and email address to [email protected] and suggestions for future topics should alsobe sent to this address.
CONTACT
For further information, please contact:
Steamship Insurance Management Services LimitedAquatical House39 Bell LaneLondon E1 7LUTelephone: +44 (0)20 7247 5490 and +44 (0)20 7895 8490
Website: www.simsl.com
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by Gary Rynsard
Cover photographs:
“Ocean Titan”: Western Towboat Company
“Marina”: Oceania Cruises
INTRODUCTION
As ever, the editors are grateful to all who have contributed to this issue of Sea Venture.In particular, it is pleasing to note a number of new in-house contributors.
The dedicated Sea Venture page on the Club website, where this and earlier issues withlinks to articles can be found, is at: www.simsl.com//SeaVenture.html
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Recent Developments inShore Excursion LiabilityThe Cruise Vessel Security and
Safety Act of 2010 was passedby the United States Congressand came in to force on 27July 2010.
This Act was canvassed by Senator JohnKerry together with the InternationalCruise Victims Association, an associationfor victims of crime on board cruise shipsand their families. The intention of the Actis to increase security, law enforcementand accountability on cruise ships ininternational waters on certain voyages. Inessence it can be viewed as a way in whichto ensure victims have access to trained
first responders and a confidentialmeans of communication with lawenforcement as well as legal and victim advocacy professionals. The Act applies to all cruise ships that carry 250 passengers or more, hasovernight passenger/crewaccommodations and embarks ordisembarks in the United States.
■ The provisions considered to have the greatest impact on cruise ships, theirimplementation dates and the likelyeffect of the Act on the cruising industryas a whole are considered in an article by([email protected]) on theSteamship Mutual website at:www.simsl.com/CVSSA0111.htm
New Legislation forCruise Ships Visiting U.S. Ports
The industry has seen this type of claim for many years.However, as a relatively recent development a growingnumber of claimants are attempting to attribute liabilityto the cruise line on the basis of negligent hiring andretention of a shoreside tour operator.
The exact duty of a cruise line when it hires and retainstour operators to provide shore excursions for passengershas not yet been expressly defined. There are nostatutes or regulations that discuss what is required ofthe cruise line when selecting a tour operator althoughcommon law provides some guidance on the matter.
■ In a collaborative article written for the SteamshipMutual website, Paul Brewer ([email protected])and Jerry D. Hamilton of Hamilton, Miller & BirthiselLLP discuss what guidance is available and the extentto which cruise lines are required to make enquiry andinvestigation of the tour operators they propose toretain. The article can be found at:www.simsl.com/ShoreExcursion0111.htm
When an accident takes place during a shoreside excursion aclaimant cruise passenger will often allege that the cruise lineis either vicariously liable for the acts of the shoreside touroperator or directly liable on general negligence principles.
by Paul Brewer
U.S.-by Aneeka Jayawardena
This summer the Managers will be conducting the Club’sinaugural residential training course for Members.
The course will run from 13th to 17th June2011 and will be based principally in theport of Southampton. An outline of thecourse programme can be found at:www.simsl.com/Loss-Prevention/MemberTrainingCourse2011.pdf
The aim of the course is to provide anopportunity for representatives of theClub’s Members who are involved with P&Iinsurance and risk management to spend
Residential Training Coursefor Members
time with the Managers’ LondonRepresentatives to explore P&I issues ingreater detail than is otherwise usuallypossible during the course of businessvisits. A morning will be spent using thebridge simulator at the Warsash MaritimeAcademy in order to undertake a collisionexercise that will be the subject of a laterworkshop. There will also be talks ontopical P&I issues by a number of guest
speakers. The social events that are plannedoutside the course hours will take advantageof the maritime heritage of the course venueand provide an opportunity for delegates toexperience the English countryside outsidethe constraints of London.
The maximum capacity of the course is 30delegates and it is possible that places willnot be available for all applicants. However, ifthe event is as successful as the Managersintend it to be, the course will become aregular event in the Club’s calendar for futureyears when further opportunities forparticipation will arise. Applications forparticipation should be submitted as directedin the brochure (see link in the openingparagraph of this article) and we lookforward to welcoming delegates in June.
Delegates will enjoy a private tour of HMS “Victory”
In a recent arbitration thetribunal was asked todetermine a dispute arisingfrom a period charter on anamended NYPE 1946 form.
The dispute related to responsibility fordelays following wet damage, caused bysea water ingress, to approximately 72 MTof grain cargo located in the areasimmediately below the hatch covers intwo of the vessel’s seven holds.
On arrival at the discharge port anchorage,the port authorities were alerted to thewetting of the cargo. Samples were takenfor analysis. Results indicated “fungalgrowth and foul odour” and although itappeared that inadequate sampling and/oranalysis of cargo had been carried out, allof the cargo on board was deemed not toconform to local standards. Customsauthorities denied permission for the vesselto commence discharging and refusedrequests for further sampling or analysis.
Attempts to negotiate with the customsauthorities were unsuccessful and,ultimately, an application was made to thelocal court in an attempt to compel the localauthorities to conduct further sampling andanalysis to show that the cargo waspredominantly sound and to securepermission for the cargo to be landed.
Delay – Who is Responsible?Charterers claimeddamages, including for hirethey had paid during theperiod of delay, or,alternatively, that they wereentitled to place the vesseloff-hire. The key questionsfor the tribunal were:
1. Had owners’ breachremained an effective cause of thecharterers’ loss due to the delay? Or
2. Had the unreasonable actions by thecustoms/port authorities, in refusing topermit the cargo to be discharged,rendered insignificant the effect of thesea water ingress so that owners’ breachhad not been an effective cause ofcharterers’ loss?
■ In an article prepared for the SteamshipMutual website, Andrew Hawkins([email protected]) reports onthe arbitration and the tribunal’s findingsin further detail:www.simsl.com/DelayWetCargo0211.htm
by Andrew Hawkins
■ These decisions arenot inconsistent andillustrate that partiesremain free toallocate responsibilitycontractually as well asthe risk of cargo handlingoperations. How the two decisions aredistinguished, and how bothresponsibility and risk of loadingoperations can be transferred isconsidered in an article by Mark Underhill([email protected]) on theSteamship Mutual website at:www.simsl.com/Achilles0211.htm
In accordance with Article IIIrule 2 of the Hague/Hague-Visby Rules an owner has theobligation to “properly andcarefully load, handle,stow… and discharge” thegoods carried.
As a matter of English law an owner may,nonetheless, limit the scope of thisobligation – see “The Jordan II” (featured inissue 1 of Sea Venture and on the websiteat: www.simsl.com/Jordan1204.asp) .
However, does the limitation of anobligation or responsibility for loadingor discharge operations carry with it acorresponding transfer of risk? This issuewas again considered in the Singaporecase of Subiaco Pte Ltd v Baker HughesSingapore Pte (the “Achilles”). The vessel inthis case was damaged while loading,allegedly at the hands of the stevedores. Asin the “Jordan II” the fixture was on “free instowed” terms and, therefore, the ownerclaimed the repair costs. Unlike the “JordanII”, while responsibility for loading had beentransferred to the shippers in the “Achilles”the risk of loading operations had not.
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However, two recent decisions of theCommercial Court have changed that.
The first followed an arbitration award inwhich the tribunal upheld charterers’termination of a time charter on theground that owners had failed to maintainoil major approvals.
The charter provided that: “... should [the]vessel be failed on three (3) consecutive oilmajor vetting reviews/inspections due toOwners’/vessel’s reason, the Charterer’s (sic)shall have the option to the put the vesselimmediately off-hire until the vessel nextpasses a vetting inspection ... and shall havethe option to cancel the charter ... A vettingreview/inspection is defined as a nomination
by the Charterer’s (sic) to an oil major andthe oil major reviewing the vessel by eithera physical inspection or latest SIREinspection report...”.
Three questions were considered:
1. What was the definition of an “oil major”?
2. Did the clause allow owners to initiate thevetting process?
3. The significance of SIRE reports.
Having done so, the court duly confirmed thetermination as lawful.
The second concerned a claim for damagesby charterers following owners’ allegedbreach of the oil major approvals warranty
In the age of sail, the master was seen asthe agent of the owner and had authorityto act on his behalf and make businessdecisions in far flung ports of call.Technological advances have changedthe concept of the master from theautonomous agent of the owner once thevessel breaks ground, to something moreakin to a seagoing manager charged withthe stewardship of a very expensivebusiness unit. With satellitecommunications, e-mail, sat-phonecommunications and shipboardteleconferencing owners and operators canmonitor day-to-day shipboard operationslike never before. Similarly, all of theseactivities can be digitally recorded.
Technology is changing the face ofmaritime law; as ships become equippedwith more information gathering devices,the role of the ship's lawyer must also
adapt to these new evidentiary problems –he must understand the kind of evidencebeing captured and how it may be used.With regard to litigation of collisionmatters, for example, unless the VDR’sdata can be challenged as unreliable, theinformation it contains will obviate theneed for many of the traditionalmachinations employed in litigating suchclaims. This should result in a savings oflegal fees and expenses, and fosterprompter resolution of such claims.
■ James T. Brown and Paxton N. Crew ofLegge, Farrow, Kimmitt, McGrath & BrownL.L.P. Houston have prepared a paper whichdiscusses the implications of VDR for thoseinvolved in litigating maritime casualties incivil, administrative and potentially criminalproceedings. The paper can be found onthe Steamship Mutual website at:www.simsl.com/VDRPaper0111.htm
There is surprisingly little authority on the application andinterpretation of oil major approvals clauses in charterparties.
The English Court ofAppeal has givenguidance on the testfor repudiatory breach.
Although the case concerned contracts forthe sale of property it has relevance torepudiation in the context of commercialcontracts at large; it is likely to make anyparty wishing to terminate a contractbased on repudiatory breach by theircounter party think twice before doing so.
The buyer of the properties in questionfailed to complete the purchases on the dateagreed under the contracts. The seller serveda notice through their solicitors making timeof the essence. When the buyer had still notcompleted upon the expiry of the time setout in the seller’s notice, the seller acceptedthe buyer’s conduct as repudiatory and putthem on notice of a claim for damages. Thebuyer in turn alleged that the notice fromthe seller terminating the contracts was initself a repudiation.
The Court ofAppeal decisionemphasises theneed for cautionbefore concluding
that a counterparty’s behaviour is, in fact, repudiatory;had the buyer, through its conduct, clearlyindicated an intention to abandon andaltogether refuse to perform the contracts?If not, then that conduct cannot beaccepted as being repudiatory.
■ In an article written for the SteamshipMutual website Sacha Patel([email protected]) discusses thereasons why the Court of Appeal preferredthe seller’s evidence and the implications ofthe judgment for parties to commercialcontracts:www.simsl.com/Eminence0211.htm
(Similar issues in the context of a contractof affreighment were considered in issue16 of Sea Venture – Termination ofConsecutive Voyage Charter – Measureof Damage – which reported on the“Kildare”, also on the Club website at:www.simsl.com/Zodiac0810.html
by Sacha PatelThe relationship betweena vessel owner and themaster of an ocean goingship has created many ofthe nuances unique tomaritime law.
Voyage Data Recorders (VDR)– “CSI on the High Seas”
Court of Appeal warns againstHasty Acceptance of Repudiatory Conduct
by Mark Underhill
“Free In Stowed”
– Free of Risk?
clause in the charter. The clause provided:
“Owner warrants that the vessel is approvedby the following companies and will remainso throughout the duration of thecharterparty: Tbook vessel approved byBP/Exxon/Lukoil/Statoil/MOH”
The Court held that the clause requiredowners to keep the approvals in placethroughout the charter, so that at any time,the vessel must not be in a state which, tothe knowledge of owners, would remove thecomfort of the warranted approvals. Therewould be a breach of warranty if some eventoccurred which, if known to the approving oilcompany, would cause it to withdraw orcancel their approval.
Both decisions are discussed in more detail bySian Morris ([email protected]) in anarticle on the Steamship Mutual website at:www.simsl.com/OilMajorAppro0311.htm
Oil Major Approvals
Pursuant to a charterpartybased on BPVOY 4, the vesselwas chartered for a voyagefrom Freeport to Singapore.
The vessel arrived at Freeport and tenderednotice of readiness on 6 February 2008,berthed on 7 February and commencedloading. She left the berth on 11 Februarywhile waiting the arrival of a further parcelof cargo, re-berthed on 17 February and oncompleting loading sailed for Singapore todischarge.
Owners issued a “Supplementary Invoice”for time and bunkers at Freeport for thesecond berthing along with a “DemurrageInvoice.” This latter invoice was agreed andpaid by charterers on 9 June. When owners
pursued the unpaid “SupplementaryInvoice” charterers said that this shouldhave been part of the demurrage claimwhich had already been settled.Owners then sought to redefine the“Supplementary Invoice” as a claim fordemurrage, but the 90 day time-bar periodfor demurrage claims in the charterpartyhad expired. Owners sought summaryjudgment on their demurrage claim.
■ The Commercial Court found forcharterers and held that the later claimfor demurrage was time-barred under the charterparty. The decision is discussedin more detail by Anna Yudaeva([email protected]) in an articleon the Steamship Mutual website at:www.simsl.com/Abqaiq0211.htm
The purpose is to put legitimate pressure onthe other side to accept a proposal to settle,with potential costs consequences for non-acceptance. A Part 36 offer can be made byeither party to the dispute. It is therefore animportant tactical tool.
However, it is essential to understand howPart 36 offers work; when and on whatterms such offers should be made andwhat sum is appropriate. By way ofexample, and much to the surprise of theclaimants in two recent non-shipping casesdecided by the English Court of Appeal, aPart 36 offer is capable of being accepted if
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Beware Demurrage Time Barsand Documentation
Part 36– What is the Effect of a Counter- Offer?
by Faye Dohertynot withdrawn, is not superseded by a newPart 36 offer(s) unless the earlier offer(s)have, on their terms, lapsed or beenwithdrawn and will remain capable ofbeing accepted even if the other party tothe dispute has subsequently made acounter-offer. This is, of course, contrary tothe position at common law where acounter-offer constitutes a rejection of anearlier offer.
■ Faye Doherty discusses these issues andPart 36 offers generally in an article writtenfor the Steamship Mutual website at:www.simsl.com/Part360211.htm
by Anna Yudaeva
A Part 36 offer is made in accordance with Civil Procedure Rules(CPR) Part 36 to settle a claim or part of a claim or any issue thatarises in a claim.
Owners and operators of vessels thatoperate in US waters should ensure thatall of their crews and operations personnelare well aware of the requirement tonotify immediately the Coast Guard of anyhazardous conditions or casualties.
U.S. v Canal Barge Company involvedcriminal charges brought against theowners of a barge, its shoreside manager,and two employee tug boat captains forfailure to report immediately a hazardouscondition to the Coast Guard. Thehazardous condition in question was acrack in the vessel’s hull from which someof the cargo of benzene leaked. Thecaptain on duty reported the crack andleak to the shoreside manager andordered the crack patched with soap. Theshoreside manager suggested moresubstantial (but not permanent) patching
of the crack. Another captain working onthe tug became aware of the crack andthe repairs. No one reported the crack tothe Coast Guard until the patch failedwhile the barge was being handled byanother tug boat company four days later.
The Coast Guard brought three criminalcharges against the barge owner, theshoreside manager and both captains: 1) willful failure to report the hazardouscondition; 2) negligent failure to report thehazardous condition and; 3) conspiracy toviolate the reporting requirement regulation.
A case report with backgroundinformation on the relevant statutoryprovisions, based on a Maritime Alert byKeesal, Young & Logan, can be found onthe Steamship Mutual website at:www.simsl.com/USCGCanalBargeKYL0211.htm
In a recent decision the United States Court of Appeals for theSixth Circuit reinstated a jury verdict which found that a vesselcrew’s failure to report immediately a hazardous conditionaboard their vessel to the United States Coast Guard amountedto a knowing or willful criminal violation of the Ports andWaterways Safety Act.
Hazardous Conditions– Obligation to Notify Coast Guard
Image courtesy of United States Coast Guard Photography
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New Luxury Cruise Shipfor Oceania
Built2009-2010
Building YardFincantieri S.p.A., Sestri Ponente, Italy
Tonnage66,000 gross tons
Length785 feet
Width106 feet
Decks15
Draught24 feet
Cruising speed21 knots
In an appeal by insurers on the scope of theexclusion in a marine insurance policy forloss caused by inherent vice, the U.K.Supreme Court in Global Process Systems vSyarikat Takaful Malaysia Berhad held thateven though loss was very probable, and theweather in which the loss occurred waswithin the reasonable contemplation of theparties, that was insufficient to afford theinsurers an inherent vice defence. The Courtof Appeal decision was discussed in SeaVenture issue 15 (and on the website at:www.simsl.com/ViceandPeril0210.html).
The case concerned an oil rig which wasbeing transported on a barge with its legsjacked up from Galveston to Malaysia forconversion into a mobile oil productionunit. Around the Cape of Good Hopefatigue cracking caused by the repeatedbending of the legs due to the motion ofthe barge caused the legs to break and belost. The assured had obtained an all-risksinsurance incorporating the Institute CargoClause (A) which excluded “loss, damage orexpense caused by inherent vice or natureof the subject matter insured.” Theinsurers said that where the ordinaryincidents of the voyage acted merely as atrigger causing the loss, those incidentswere not a new intervening external causethat caused the loss but were events thatthe cargo had to be fit to encounter. Theassured in turn said that this imported arequirement of seaworthiness and thatinherent vice meant inherent i.e. the causeof loss had to come from within.
The effect of the Supreme Court’s ruling isthat the exclusion of loss caused byinherent vice is limited to circumstanceswhere loss is inevitable or is caused onlyby something internal to the cargoinsured; where the action of wind andwaves have played a part it will bevirtually impossible for insurers to rely oninherent vice as a defence. Accordingly,where loss by inherent vice is beingexcluded, insurers will nonetheless have
to assess the inherent condition of thegoods being insured and theirsusceptibility to loss or damage, even inconditions reasonably to be expected onthe voyage.
In an article written for the SteamshipMutual website Kamal Mukhi of HillDickinson reports on the Supreme Courtdecision:www.simsl.com/InherentVice0311.htm
The recent civil unrest in some parts ofNorth Africa and the Middle East has andwill, so long as there is uncertainty in theregion, have the potential to createdifficulties for owners and chartererstrading to those countries. The Club ishappy to advise and assist members inthese circumstances.
A related issue is sanctions, whether
Sanctions• Political Unrest in Libya and Sanctions
Measures: www.simsl.com/Circulars-Bermuda/B.547.pdf
• Restrictive Measures in Respect of CoteD'Ivoire: www.simsl.com/RA24EUCD252011_CoteDIvoire.pdf
• Sanctions - Impact on Chartered VesselEntries:www.simsl.com/RA25SanctionsCharteredVesselEntries.pdf
imposed by the US, UN, EU, or othernational or international authorities.
The Club’s website now has a dedicatedSanctions area: www.simsl.com/Sanctions.htm where members can accessimportant information relating to sanctions,including Club circulars, Risk Alerts, relevantarticles and links to the text of Governmentalregulations. Recent updates include:
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Wind and Wave ActionNot Inherent Vice
The cover of this issue of SeaVenture features the “Marina” -Oceania Cruises’ new flagship. Thevessel was christened on 5thFebruary 2011 in Miami and isfitted with state of the art lossprevention equipment to ensureher safe operation as is customaryin this part of the industry. OceaniaCruises, together with sistercompany Regent Seven Sea
Cruises, are entered withSteamship Mutual.
Steamship Mutual follows anunderwriting strategy underpinnedby diversity of Membership and acommitment to all high qualityareas of the shipping industry. Thecruise sector represents one sucharea, many of whose best regardedcruise vessel operators aremembers of the Club.
S.72(1) Arbitration Act 1996 provides:
“A party alleged to be a party to arbitralproceedings but who takes no part in theproceedings may question:-
(a) Whether there is a valid arbitrationagreement, ....
By proceedings in the court ……”
Toepfer commenced arbitration inLondon for the alleged breach of acontract for the supply of milling wheat.Broda alleged there was no concludedcontract between them, that they werenot bound by the GAFTA arbitrationagreement in that contract andcommenced proceedings in Russia for adeclaration in that respect. Broda alsoasked the GAFTA tribunal not to acceptjurisdiction. The Russian court agreedwith Broda but the GAFTA tribunal,while aware of the Russian decision,concluded that there was a bindingcontract and that it had jurisdiction todecide the substantive dispute.Accordingly, the tribunal invited theparties to serve submissions which Broda
did while maintaining there was nobinding contract.
When the tribunal issued an award infavour of Toepfer, Broda applied to theEnglish High Court to challenge thejurisdiction of the tribunal to hear thedispute under s.72 Arbitration Act.
Broda’s argument was that a party that did not argue that the tribunal had nojurisdiction but who served submissions in respect of the dispute in that arbitrationdid not lose its rights subsequently tochallenge the tribunal’s jurisdiction (under s.72). However, the English HighCourt decided that the tribunal did have jurisdiction.
Broda appealed. In the Court of AppealLord Justice Stanley Burton said s.72 had“surprisingly…not been the subject ofprevious authority”.
■ The Court of Appeal’s decision isdiscussed in an article by Juan Zaplana([email protected]) on theSteamship Mutual website at:www.simsl.com/BrodaAgro0211.htm
The decision of the Court of Appeal in BrodaAgro Trade (Cyprus) Limited v Alfred C.Toepfer International Gmbh has againconfirmed that caution needs to be exercisedif a party decides to challenge the jurisdictionof arbitrators to determine a dispute.
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The case was decided in owners’ favourand concerned issues of demurragepayable under a Shellvoy 5 charter withShell’s additional clauses of February 1999(SAC). The Court of Appeal has nowoverturned that decision.
Additional clause 22 of SAC stated that ifowners failed to secure customs clearanceor free pratique within 6 hours of tenderingNotice of Readiness (“NOR”), the NOR
would not be valid; however, the originalNOR would still be valid if the authoritiesgranted free pratique only after the vesselhad berthed.
The Court of Appeal agreed with charterersthat NOR tendered could not be validwhere a vessel did not obtain free pratiqueuntil more than six hours later, and laytimedid not begin until the vessel berthed. TheCourt also had to consider whether owners
had compliedwith the Shellvoy5 standarddemurrage timebar clauserequiring thedemurrage claimto be fully andcorrectlydocumented andreceived within 90 days of discharge.
■ Caro Fraser ([email protected])considers both aspects of the Court ofAppeal decision in an article on theSteamship Mutual website at:www.simsl.com/Eagle0211.htm
by Caro Fraser
In issue 15 of Sea Venture thefirst instance judgment in AETInc Ltd v Arcadia Petroleum(the “Eagle Valencia”) wasdescribed as “an interestingexample of a court looking atthe charterparty in its entiretyin order to determine the trueintention of the parties, ratherthan adhering to a strictinterpretation of the wordingof a single clause”:www.simsl.com/Eagle0210.html
Tendering N OR before Free Pratique Granted– Part 2, in cluding Demurrage Time Bars
Consider a situation where theactions of a third party lead tosubstantial loss suffered bytwo innocent parties to avoyage charter. Where doesthat loss fall?
The vessel was voyage chartered, onamended Asbatankvoy terms, for thecarriage of a cargo of fuel oil from Indonesiato Thailand. Disputes arose following twoperiods of delay: the first being an “arbitrary
and erroneous” detention of the vessel bythe Indonesian Navy at the load port and thesecond (arguably a knock-on effect of thefirst) while waiting charterers’ orders afterthe vessel had sailed from the load port. Notsurprisingly, the delay at the load port had aneffect on the underlying cargo sale contract.
Owners claimed demurrage and/or damagesfor both periods of delay in arbitration; first,on the basis that charterers had loaded adangerous cargo and that caused thedetention of the vessel and second, forfollowing charterers’ orders and pursuant tothe express provisions of the charterparty.
Charterers deniedthat the cargo was dangerous and arguedthat, in any event, they were entitled to relyon the General Exception and ParamountClauses of the charter.
■ In an article written for the SteamshipMutual website Sarah [email protected] discusseswhether the losses flowing from the two separate periods of delay “lay where they fell” or were for owners’ orcharterers’ account, as well as the lessonsto be learnt:www.simsl.com/DangerousDelay0211.htm
by Sarah McGuire
Arrest, Dangerous Cargo and Delays
– Who Pays?
When No Means No– Arbitrator’s Jurisdiction
Juan Zaplana
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Whether they work and the extent towhich they apply is a question of drafting.The Supreme Court decision in FarstadSupply v Enviroco Ltd (the “Far Service”), onappeal from the Scottish courts, is ofparticular interest.
The vessel owners had claimed damagesfrom a tank cleaning company, Enviroco,contracted by their charterer. Enviroco
There is a general understandingthat by simply claiming anextraordinary event as forcemajeure a party is automaticallydischarged from any contractingduties. This assumption is oftenincorrect and thorough attentionmust be given before invokingforce majeure.
Force majeure may be defined asa civil law concept designed toexcuse one or all parties fromliabilities and or obligationsunder a certain contract. Forexample, an occurrence ofextraordinary events, specifiedevents or events beyond theparties’ control.
Under a civil law system, forcemajeure operates as a matter of
law. The definition and application are foreseenin statutes and the concept is implied into anycivil law contract. Contracting parties mayexercise their rights of freedom of contract toexpand the definition and widen its application.It is important, therefore, always to refer to therelevant contract before making generalassumptions.
As a matter of English law force majeure is ageneric term that has no specific legal meaning;for it to have any effect the parties to a contractneed to define those events which they agreewould constitute force majeure. In the absenceof a force majeure clause, parties will need torely on other remedies, such as frustration.
■ In an article written for the Steamship Mutualwebsite Flavio Damaceno([email protected]) discusses theconcept and application of force majeure from acivil law system point of view and also makesreference to the approach of English law. Thearticle can be found at:www.simsl.com/ForceMajeure0211.html
On 13 October 2010, the Court ofAppeal delivered its judgment inSoufflet Negoce SA v Bunge SA.
The buyers had purchased 15,000 mt ofbarley FOB Nikotera. The “Lady Hind”arrived at the load port and was presented“in readiness to load” within the agreeddelivery dates but the sellers alleged thatthe vessels holds were unclean and refusedto load. As such they refused to accept thatthe requirement of readiness had beensatisfied. The buyers claimed damages forthe sellers’ failure to load the cargo.
The issue between the parties was whetherthe “readiness to load“ requirement of thesale contract was equivalent or amountedto the same thing as a Notice of Readiness(“NOR”) served under a charterparty. If so,the buyers’ obligation under the salecontract was more than simply to present avessel for loading within the sale contractdelivery period.
by Rebecca Chetwood
■ The decision is a useful opportunity torevisit the requirements for service of avalid NOR under a charterparty. Thesecriteria, as well as the reasons why thecourt decided in favour of the buyers in this
argued that if they were liable to ownersthe charterers were liable to contributepursuant to section 3(2) Law Reform(Miscellaneous Provisions) (Scotland) Act1940. The Act allows a party that has beenfound liable to pay out damages to recovera contribution from another party who “ifsued, might also have been held liable” tothe vessel owner.
That, though, wouldhave been to ignorethe indemnity andexemption clause of thecharter that provided:
“Owners shall defend,indemnify and holdharmless the Charterer,…from and against any and all claims,demands, liabilities, proceedings...resulting from loss or damage in relation tothe vessel... irrespective of the clause of theloss or damage, including where such lossor damage is caused by, or contributed to,by the negligence of Charterers...”
■ The intention of this and similar clausesis risk allocation between contractingparties. In this case the clause worked.The decision and the reason why chartererswere protected are explained by DeanForrest ([email protected]) in anarticle on the Steamship Mutual website at:www.simsl.com/FarService0211.htm
case, are discussed by Rebecca Chetwood([email protected]) in an articleon the Steamship Mutual website at:www.simsl.com/LadyHind0211.htm
Exclusion and indemnity as well as “knock for knock” provisionsare commonly found in offshore contracts (as discussed in issue15 of Sea Venture and on the website at: www.simsl.com/GrandIsle0210.html).
by Dean Forrest
Sale Contract v Charterparty Readiness
What isForce Majeure?
Clarity of Drafting
by Flavio Damaceno
The eighth edition of the Incoterms came intoforce on 1 January 2011. The InternationalChamber of Commerce periodically reviews theseterms to ensure that they are kept up to datewith changes in international trade practice.
In view of the continuing high level of threatand the apparent need to raise awareness ofthe benefits of compliance with BMP3, theManagers believe that there is considerableloss prevention benefit to be derived fromproducing a DVD on this topic andproduction work on this project has recentlycommenced. The production will be fundedby the Ship Safety Trust and, as with previousDVDs will be produced by CallistoProductions and presented by EdwardStourton. As with A Team Effort theproduction will be in DVD ROM format toenable reference materials to beincorporated. Whilst the primary focus of theDVD will be Somali piracy, it will also addressthe more widespread risk of attacks andincidents of armed robbery on ships thatcontinues to exist in other parts of the world.
BMP3 is available to view and download viathe Club website at: www.simsl.com/IndustryPiracyBMP0610.htm
Risk AlertsThe first Risk Alert was published in July2009. Since then a further twenty threealerts have been issued covering a widevariety of loss prevention subjects as shownby those published since the last issue ofSea Venture:
■ Restrictive Measures in Respect ofCote D’Ivoire
■ Carriage of Direct Reduced Iron – DRI
■ Iran, Sanctions and the Provision of Security
■ Evidence Collection from VDRs
■ Dangerous Spaces
Piracy DVDThe threat to commercial shipping posed bythe activities of Somali pirates shows littlesign of being eliminated. As weatherconditions moderated off Somalia and in theIndian Ocean at the end of September 2010,there was as expected a resurgence in pirateactivity. Since then, attacks and hijackingshave occurred with great frequency over avery considerable sea area and, as at the endof January 2011, Somali pirates were holding33 vessels with 758 crew hostages.
Notwithstanding the attention that thissubject has received over the last two years,it is also a matter of concern that therecontinue to be reports that significantnumbers of vessels operating in the affectedwaters are not complying with the BestManagement Practice Guidelines to DeterPiracy (BMP3), and particularly failing toregister passage plans with MSCHOA and toreport to UKMTO.
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Loss Prevention Publications
Although there has been no radical departurefrom Incoterms 2000, the changes seek toaccommodate the growing complexities intrade practice over the last decade.
Incoterms 2010 adopts a more simplifiedformat and now contains more detailedguidance notes for each rule. It is hopedthat this will reduce misunderstandingswhen considering the use of the mostappropriate contractual terms ininternational commercial transactions.The new terms have been changed so asto encourage the use of Incoterms globally;in particular, in the United States, byimproving compatibility with the UniformCommercial Code, as well as in the EU, bytaking into consideration the existence ofEU custom-free zones.
Incoterms 2010– What Has Changed?
The most obvious change is the abolitionof the four terms DAF, DES, DEQ andDDU. These have been replaced with twonew terms: DAP (delivered at place) andDAT (delivered at terminal). There arenow 11 rather than 13 terms to choosefrom, with each term being categorisedas either suitable for sea and inlandwaterway transport, or suitable for anymode of transport.
It is expected that changes in phraseologywill allow flexibility for furtherdevelopments in trade, customary practicesand the use of e-communication.
It must be remembered that these termsare not mandatory; if parties wish toinclude the latest version into their
All Risk Alerts can be found on theSteamship Mutual website and areavailable to view and download at:www.simsl.com/RiskAlert.htm
ICC Publication “Incoterms® 2010”. Copyright © 2010 International Chamber of Commerce.
standardised salecontracts theywill need to doso expressly.
■ The abovementionedchanges, as wellas further changeswhich take intoaccount growingconcerns aboutsecurity, the common practice of stringsales, insurance issues and double chargingat terminals, are discussed in more detailin an article by Claire Blackmore([email protected]) on theSteamship Mutual website at:www.simsl.com/Incoterms2010.htm
by Claire Blackmore
Taipei Seminar During a recent trip to Taiwan,staff from Steamship Mutual’sLondon and Hong Kongoffices visited Members andBrokers in Taipei.
As well as the opportunity to discuss claimshandling and underwriting topics, seminarswere given by Paul Amos and Connie Leeon a variety of subjects including shortageand contamination claims, speed andconsumption claims, as well as lossprevention initiatives.
Seoul Reception The Managers held areception in Seoul duringNovember and were pleasedto welcome 140 guestsfrom the Korean market.In the presentation given the Club’sprogress over the year was highlightedand the Members were thanked for theirloyal support of the Club.
Korea represents a significant part of theClub’s Asian portfolio and the Managersare proud of the close association thatexists between the Club and the leadingKorean ship owners.
Mr C.K. Ong, President of U-Ming Marine Transport Corporation (head of table, left),welcomes the Steamship Mutual team and U-Ming delegates.
Steamship Visits to Taipai and Seoul
Left to right: Y.K. Lee (Korea UniversalMarine), Jonathan Andrews, J.S. Kim andB.S. Kim (Mutual Marine).
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The High Court had held that evidence ofwithout prejudice exchanges is admissiblenot only to actually identify the terms of asettlement reached but also to explain themeaning of those terms. The Court ofAppeal disagreed. The dissenting judge, LordJustice Ward, however was driven to say:
“Why on earth can you not usenegotiations to establish the truth of whatthe concluded contract means? Not to doso would strike my mother as barmy.”
The Supreme Court took a similar view andoverturned the Court of Appeal decision,with Lord Phillips saying:
“When construing a contract between twoparties, evidence of facts within theircommon knowledge is admissible wherethose facts have a bearing on the meaningthat should be given to the words of thecontract. This is so even where theknowledge of those facts is conveyed byone party to the other in the course ofwithout prejudice negotiations.”
■ Both decisions are discussed in moredetail by Sian Morris ([email protected])in an article on the Steamship Mutualwebsite at:www.simsl.com/Oceanbulk0211.htm
by Sian Morris
The Commercial Court decision in Oceanbulk Shipping & TradingSA v TMT Asia Limited was discussed in issue 15 of Sea Ventureand on the Club website at: www.simsl.com/Oceanbulk0210.html.Since then the case has been heard on appeal before both theCourt of Appeal and the Supreme Court.
Without Prejudice– Admissibility of Exchanges as an Aid to Interpretation
Anti-Suit InjunctionsFollowing the High Court decision inAngara Maritime v Oceanconnect, in whichowners successfully evidenced that theyhad purchased the vessel’s bunkers fromtheir charterer in good faith and withoutnotice of the bunker suppliers’ rights (seeissue 16 of Sea Venture and website articleat: www.simsl.com/Angara0910.html)the bunker suppliers, Oceanconnect,appealed an earlier order of the High Courtgranting an anti-suit injunction in relationto proceedings they had started inLouisiana.
by Nooshin Moafi
Oceanconnect had arrested the vessel inLouisiana in an attempt to establishjurisdiction for their claim whereas ownershad sought and obtained a declaration ofnon-liability from the English High Courtpursuant to the jurisdiction provisions of anescrow agreement entered into subsequentto an earlier arrest.
■ In an article prepared for the SteamshipMutual website Nooshin Moafi([email protected]) discusses theprinciples governing the grant of anti-suitinjunctions and the reasons for the Courtof Appeal decision to set aside, which is atfirst blush at odds with the earlier HighCourt declaration of non-liability:www.simsl.com/antisuit0211.htm
The 2010 edition of the report - Port StateControl: The Top Ten PSC findings (or howto avoid detention) - is based on datacollected in 2008/9. The report shows thatthe top ten deficiency findings in detentionreports for this period were:
1. Charts and nautical publications
2. Engines, generators, auxiliaries
3. Cleanliness of engine room
4. Oily water separator
5. Oil Record Book
6. Magnetic compass
7. Emergency fire pump arrangements
8. Fire dampers
9. Fire doors
10. Lifeboats
Deficiencies found on detained ships bycategory were:
• Load lines (6.0%)
• MARPOL Annex I (7.4%)
• Stability, structure and electricalequipment (8.8%)
• Life saving appliances (11.5%)
• Safety of navigation (13.6%)
• Fire safety measures (16.3%)
• Propulsion and auxiliary machinery(17.4%)
• Others (18.9%)
■ Further details are given in the reportwhich, with GL’s permission, is available toview on the Steamship Mutual website at:www.simsl.com/GLPSCTop10Findings0211.htm
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Port State Control – Top Ten FindingsEvery few years Germanischer Lloyd collate and review data fromport state control inspections and prepare a report of thefindings.
charterer’s service. The anti-technicalityclause was effective if the failure to payhire was a consequence of “… an error oromission of Charterer’s employees, bankersor agents or otherwise for any reasonwhere there is absence of intention to failto make payment as set out,...”.
The charterers had a very poor record ofpayment. On one occasion charterers paidhire after receiving an anti-technicalitynotice from owners. However, whencharterers failed to pay the 34th hireinstalment owners withdrew the vessel thenext day stating that charterers’ conductevidenced an intention no longer to bebound by the charter.
■ Were owners entitled to withdraw thevessel without first having served an anti-technicality notice? This question, as wellas the timing and form of anti-technicalitynotices, is discussed in an article byChristine Vella ([email protected])on the Steamship Mutual website at:www.simsl.com/QatarStar0211.htm
The risk to owners if they withdraw a vesselwrongfully can be substantial, while the risk ofwithdrawal to charterers is equally significant.It is for good reason that withdrawal clauseshave been referred to as forfeiture clauses, theeffect of which can be draconian.
The recent decision in the OwneastShipping Limited v Qatar Navigation QSC(the “Qatar Star”) has once again brought
these issues to the fore. The vessel hadbeen chartered on a standard NYPE for afour year period. Clause 5 dealt with thevessel’s withdrawal in the event of a failureto pay hire on time and, as is commonlythe case, the charter incorporated an anti-technicality clause requiring owners to givethree days’ notice to correct any failure topay hire before withdrawing the vessel from
by Christine Vella
Anti-Technicality Clauses and Withdrawal –Exercise of Great Caution Revisited
The importanceof adhering to contractualobligations is underlinedin the context of withdrawaland anti-technicality clauses.
In House TrainingA series of lectures for SIMSL staff has been co-ordinated with theInstitute of Chartered Shipbrokers. Lecture topics are: ThePractitioners in Shipping Business, The Geography of Trade andInternational Trade and Finance, International Terms of Sale andFinance in International Trade and Insurance. As part of the Club’scontinuing training programme, arrangements are being made withthe ICS for the course to run again in 2011.
Victory for “Youngsters”The most recent Steamship Trivia Night was a closely-foughtaffair with young upstarts from the aptly named team “WeThought It Was A Disco” emerging victorious from the basementof local establishment The Water Poet. What the team lacked inyears, they more than made up for in enthusiasm and obscuregeneral knowledge.The Greco-Scot duo Francis Vrettos and Dean Forrest proveda devastating partnership, with Jamie Taylor emerging as theteam’s secret weapon in the crucial opening round. RebeccaChetwood, Tim Guyer and Dougal Gordon all deserve anhonourable mention for their outstanding contribution to whatwas very much a Steamship Team Effort.
Aquatical House New Reception
Separate to the ICS course the Chartered Insurance Institute has nowaccredited two P&I modules developed by the International Group –The Marine Insurance Business and P & I Insurance: History, Operationand Practice – as part of a longer term plan for an InternationalGroup P&I qualification. The Club’s training programme also includestwice monthly in house seminars on a number of practical and legaldevelopments given by the Club’s staff and a number of the leadingLondon law firms – Reed Smith, Holman Fenwick & Willan, HillDickinson, MFB and Thomas Cooper – as well as other experts.
Left to right: Jamie Taylor, Francis Vrettos, Dean Forrest,Rebecca Chetwood, Tim Guyer and Dougal Gordon.
Left to right: Piers Barclay with receptionistsJanet Meldon-McSweeney and Rosemary Fowler.
SIMSL News
The refurbishment of the reception area of the Managers’London office was completed in mid-December. The stylish newlook has been well received by staff, Members and other visitorsand is one of the first commercial premises in the UK to use thelatest energy efficient lighting, heating and cooling systems. Therefurbishment project, under the careful supervision of BuildingAdministration Manager Piers Barclay, was completed inexcellent time despite the challenges of severe adverse weatherconditions that delayed the supply of a number of materials.
• Website News • Website News • Website News •
Piracy PageOne Earth Future (OEF) Foundation hasconducted a large-scale study to quantifythe cost of piracy as part of its OceansBeyond Piracy project. Based on itscalculations, maritime piracy is costing theinternational economy between $7 to$12 billion, per year. The OEF report, TheEconomic Cost of Maritime Piracy, detailsthe major calculations and conclusionsmade in the study. The report is availableto view, with kind permission of OEF,via the Steamship Mutual website at:www.simsl.com/EcCostPiracyOEFPaper0111.htm
Other recent additions to this page include:
■ ICC IMB Piracy Report 2010
■ U.S. Coast Guard Advisory on Piracy –Emerging Security Threats Against Vessels
CircularsMembers receive copies of Club circularsbut they are also available to view anddownload via the website at:www.simsl.com/Club-Circulars.htm
Recent circulars have covered thefollowing subjects:
■ Charterparty Clause – Financial Securityin Respect of Pollution
■ Regulations of The PRC on thePrevention and Control of MarinePollution from Ships
■ Venezuela – Illegal Narcoticsonboard Vessels
Subscribe to our RSS FeedThe Club website has an RSS feed whichkeeps subscribers up to date with details ofthe latest articles and news published onthe site. To add the feed to your internetbrowser go to the website homepage at:www.simsl.com and click on the “subscribeto updates” link (at the bottom left of thescreen). You will be offered severalmethods to subscribe. Follow theinstructions that best suit your needs.
If you would prefer to view the latestSteamship Mutual news with your emails,some email systems are designed to acceptRSS feeds. Instructions vary from system tobut this is usually a relatively straightforward process.
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