A Tale Of Dirty Deals, Demurrage And Discontent: Enforcement Of Arbitral Award Refused

In a recent decision, the Paris Court of Appeal refused to enforce an LMAA arbitral award on the basis that the underlying contract was affected by illegality on account of corruption.

Introduction

Pursuant to article V of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a national authority may refuse to enforce or recognise a foreign award on certain limited grounds, including where it would be contrary to the public policy of the country concerned.

On the question of public policy, the approach of the French civil courts is not to look to the domestic concept of public policy. Instead, the Paris Court of Appeal has developed the narrower concept of international public policy, enshrined in the French Code of Civil Procedure. This concept comprises a body of rules and values, the violation of which the French legal order will not accept, even where a matter is international in nature. For this reason, the French civil courts will refuse enforcement where there has been a failure to adhere to international public policy, although the courts usually place a high burden of proof on the contesting party, requiring it to demonstrate that any violation is flagrant, effective and concrete.

In the case in question, proof of the violation was straightforward. During the appeal proceedings, the competent French criminal court found that corrupt practices had occurred.

Read the full client alert on this case here.

Maritime greenhouse gas emissions – legal update

In our April update on this subject, we reported on the outcome of the sixty-ninth meeting of the Marine Environmental Protection Committee (MEPC) of the International Maritime Organization (IMO) (MEPC 69) and on what to expect from the next MEPC meeting (MEPC 70).

This update outlines the outcome of MEPC 70 (which took place on 24-28 October 2016), the global monitoring, reporting and verification (MRV) system to be introduced by the IMO across the shipping sector and next steps towards an international deal on maritime greenhouse gas (GHG) emissions.

For the full client alert please click here.

Culpability and Clause 8(d) of the Inter-Club Agreement – The Yangtze Xing Hua

TRANSGRAIN SHIPPING (SINGAPORE) PTE LTD v YANGTZE NAVIGATION (HONG KONG) CO LTD [2016] EWHC 3132

This was an appeal from an LMAA arbitration award, considering the true construction of clause 8(d) of the Inter-Club Agreement 1996 (“ICA”); specifically, whether the meaning of the term “act” in the phrase “act or neglect” should be restricted to a culpable act.

The dispute concerned a trip time charter where the charterers (also the shippers) had, for their own purposes, ordered the ship to wait off the discharge port for over four months before discharging the cargo. During this time part of the cargo was damaged due to overheating, which was found by the Tribunal to have been caused by a combination of the prolonged delay at the discharge port and the inherent nature of the cargo.

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Court determines the meaning of “in light ballast condition” (again)

REGULUS SHIP SERVICES PTE LTD v (1) LUNDIN SERVICES BV (2) IKDAM PRODUCTION SA [2016] EWHC 2674 (Comm)

In this case, the meaning of the term “in light ballast condition” came up for consideration by the Court for a second time.  The irony being that the earlier precedent derived from another dispute that the same claimant had brought before the Commercial Court a decade earlier.

This latest dispute concerned the relocation of an FPSO from the Mediterranean to Malaysia. The claimant was the owner of a 1980 built AHTS, engaged on TOWCON terms to tow the FPSO to her new field for a lump sum payment.  The respondents were the owner of the FPSO and its affiliate and disclosed agent.

The FPSO had started life in 1971 as an Aframax size tanker, before being adapted to serve as a shuttle tanker for North Sea production and then converted to an FPSO.

The conversion required, amongst the more obvious changes, the ‘chopping-off’ of most of her bulbous bow, so as not to interfere with the mooring pendant (and combined risers) that, when on station as an FPSO, were rigged from her bow. As a result of this modification, the remnant of her bulbous bow presented a blunt vertical face.

The claimant wanted the FPSO to be de-ballasted to reduce drag through the water and to achieve a significant stern trim in order to increase the directional stability of the tow. They had towed a similar FPSO and were confident that this was the optimum disposition.

However, the respondents considered that the FPSO would tow better with her blunted forward appendage submerged. They clearly also had in mind that this disposition might reduce the structural fatigue imparted upon (and thus prolong the life of) the already aged FPSO.

As the FPSO would be manned during the tow, adjustments to her ballast could be made on passage. Therefore, in the end, the TOWCON charterparty was agreed and the convoy set-off with the drafts (forward and aft, and thus the trim) of the FPSO still under discussion.  The claimant apparently comforted by the warranty that the tow would be “in light ballast condition”.

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Sulphur emissions to be further capped by 2020

The International Maritime Organisation (IMO) has confirmed that new a global cap  on the sulphur content in shipping fuel will be introduced on 1 January 2020. Since 1 January 2012, the global limit has been 3.5% mass/mass (m/m) which will decrease to 0.5% m/m when the new cap takes effect. The cap will apply to all fuel used in main and auxiliary engines as well as boilers.

The shipping industry is the biggest emitter of sulphur oxides (SOx). The new cap is intended to reduce the harmful impact that shipping has on the environment and human health from emissions and is expected to reduce relevant emissions by around 85%. 

The implementation of the new cap is the result of the revised Annex VI of the International Convention for the Prevention of Pollution from ships (MARPOL) which was adopted in 2008. Annex VI envisages a progressive reduction in global emissions of SOx and nitrous oxides (NOx). MARPOL also introduced designated SOx Emission Control Areas (ECAS) such as the Baltic Sea and the North Sea areas. Since 1 January 2015, sulphur limit for fuel oil in the ECAS has been 0.10% m/m. The new global cap will not affect the emission cap already in place in ECAS.

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Watershed Ruling in U.S. Rejects OW Bunker’s Maritime Lien Claims

In a watershed decision concerning the scope of maritime liens under the U.S. Commercial Instruments and Maritime Lien Act (“CIMLA”), the District Court for the Southern District of New York recently held that OW Bunker entities did not have valid maritime liens for the supply of bunkers to vessels. In the first decision by a U.S. court to hold that the OW Bunker entities do not have maritime liens under U.S. law, the Court underscored that maritime liens are an extraordinary remedy for suppliers of necessaries to vessels and cannot be assumed to apply in all circumstances. This ruling, together with previous rulings by other courts holding physical suppliers did not have valid maritime liens, may leave no party with a valid maritime lien arising from the OW Bunker collapse and bankruptcies. Without a maritime lien, suppliers of necessaries to vessels do not have a right to arrest. See the full client alert here.

 

English Court confirms that package limitation under the Hague Rules excludes a bulk cargo

A recent decision provides authority for the broadly accepted understanding that a “unit”, for the purposes of limitation under Article IV Rule 5 of the Hague Rules, cannot apply to a bulk cargo – it can only mean a physical unit for shipment and not a unit of measurement or a customary freight unit (the unit of measurement used to calculate freight).

The cargo in question was 2,000 tonnes of fish oil, loaded into the ship’s tanks. The (disponent) owner contended that each tonne was a “unit” for these purposes and thus it had a right to limit its liability for damage to the cargo. The Commercial Court disagreed.

Had the Court found otherwise, presumably more bulk cargoes would be nominated by lesser units in future (e.g. kilogrammes).

This was one of those peculiarly academic arguments that amuse shipping lawyers, at least.

Although there was no Clause Paramount (or variant), the charterparty permitted the owner to rely upon the package or unit limitation in the same circumstances as it would have been entitled to do so, had the Hague Rules been incorporated in full. Therefore the decision has broad application. Albeit, not if the Hague-Visby Rules apply, as Rule 5(a) therein provides for an alternative weight-based limitation that is apt to include a bulk cargo, in any event.

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U.S. Authorities Roll Back the ‘180-Day Ban’ for Vessels Calling at Cuban Ports

Today the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS) further eased sanctions against Cuba with a host of new amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). Of special interest to the shipping industry is the issuance of a general licence that rolls back the so-called ‘180-day ban’- a prohibition on vessels calling at U.S. ports within the first 180 days after calling at a Cuban port.

Please see our full client alert here.

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