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.

Collateral lies: The lie is dishonest but the claim is not

The Supreme Court rules that a collateral lie embellishing a valid claim does not amount to a fraudulent claim.

Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others [2016] UKSC 45

Facts

The vessel DC Merwestone was incapacitated by an ingress of water which flooded the engine room. A claim was made in respect of damage to the engines under a policy of marine hull insurance in the sum of approximately €3.2 million.

The relevant individual employed by the vessel’s managers was frustrated by the delay in the insurers recognising the claim and making a payment on account. At a time when the cause of the flooding was unclear, the individual said that the bilge alarm had sounded but that the crew had been unable to investigate the leak because of rolling of the ship in heavy weather. The employee said that members of the crew had told him this when, in fact, it was merely his own theory.

The individual thought that, by making the statement, he could speed up payment of the claim when the insurers might otherwise focus on, for example, the potentially defective condition of the ship. In fact, the loss was covered by the policy and the issue of whether the bilge alarm had sounded was irrelevant.

You can read our full client alert here.

The importance of the arbitration notice: make sure it is sent to the right person

Sino Channel Asia Ltd v. Dana Shipping and Trading Pte Singapore and Another [2016] EWHC 1118 (Comm)

A recent English High Court decision serves as a reminder of the importance of taking great care in relation to service of notice to commence arbitration. The case concerned whether the notice was sent to the correct party.

The judge set aside a US$1.68 million arbitral award for being neither valid nor binding as the notice to commence arbitration was not correctly served.

  • A notice of arbitration must be served on the intended respondent as set out in the arbitration agreement.
  • It is insufficient to serve notice on the person/entity with whom you commercially communicated during the business if they are not a party to the contract.
  • An agent for commercial purposes is not necessarily an agent to accept service of the notice of arbitration.

Impact

It is common in commercial contracts to communicate with an agent, associated company or head office. If the contract ends up in dispute, a party should take care to ensure that the arbitration claim comes to the notice of the contract counterparty, rather than simply the ‘usual’ party communicating during the business relationship.

To view our client alert on this case please click here.

 

Definitely indefinite? Container Demurrage in the Court of Appeal

In the recent case of MSC Mediterranean Shipping Company S.A. v. Cottonex Anstalt [2016] EWCA Civ 789 the Court of Appeal ruled that the commercial purpose of the contract had been frustrated and that demurrage on detained containers which could not be redelivered to the carrier did not accrue indefinitely.

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