‘Shipper’ proves it was not the shipper and avoids claim for cargo explosion: MVV Environment Devonport Ltd v. NTO Shipping GmbH & Co. KG MS Nortrader [2020] EWHC 1371 (Comm), “MV NORTRADER”

Summary

The claimant was named as shipper on a bill of lading for a consignment of cargo on the MV Nortrader, despite not being a party to the contract of carriage. The defendant, the owner of the vessel, suffered losses after a cargo explosion occurred on board the vessel shortly after the cargo had been loaded. The defendant commenced arbitration and brought a claim for damages against the claimant, as the named shipper. Although a London tribunal found it had jurisdiction to hear the dispute, the claimant was successful in its application to the High Court under section 67 of the Arbitration Act 1996 to set aside the award on the basis it was not the shipper and therefore was not a party to an arbitration agreement with the defendant.

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The term “mandatory provision of law” in an English law loan agreement found to cover U.S. secondary sanctions

The English Court of Appeal handed down judgment in the case of Lamesa Investments Limited v. Cynergy Bank Limited [2020] EWCA Civ 821 on 30 June 2020.

The Court of Appeal upheld the High Court’s decision that U.S. sanctions targeting Lamesa Investments Limited’s (LIL) ultimate owner justified Cynergy Bank Limited’s (CBL) withholding of interest payments on a £30 million loan from LIL.

While this case was decided in the context of a loan agreement, the case is of interest to anyone drafting or interpreting a provision of an agreement that grants a party rights if another party is affected by some form of illegality, including illegality clauses and sanctions clauses. In particular, it illustrates the court’s approach to interpreting such clauses in the context of U.S. secondary sanctions: measures which do not directly prohibit certain conduct by non-U.S. persons but which allow U.S. authorities to take severe action against such persons if they engage in that conduct. It is therefore of relevance to the shipping industry.

You can read the full client alert here.

Remote surveys – the future?

In these unprecedented times of global shutdown, the shipping industry has been forced to move rapidly into the digital age. Vessels still require their statutory surveys and the clock does not stop just because the surveyors are unable to fly out to a vessel. This has forced flag states and Recognised Organisations (ROs) to develop their own procedures for remote surveys/inspections.

Remote surveys/inspections were already in use before COVID-19 – Lloyd’s Register performed one in five of its surveys without attending the ship – but their use has increased considerably. In March 2020 the number of complex remote surveys performed by Lloyd’s Register increased by 25 per cent. As resources continue to remain limited, remote surveys/inspections will be an increasingly utilised tool from the suite of options available to flag states and ROs. Continue Reading

CARB continues to advance its regulation of air emissions for shipping industry

The California Air Resources Board (CARB) will conduct a public Board hearing later this month as it continues its efforts to expand the state’s existing Ocean-Going Vessels At-Berth Regulation to further reduce air emissions from ships docked in California. As earlier reported, CARB recently released further modifications to the at-berth rulemaking documents (15-day change). Due to these proposed changes, regulated parties remain concerned about significant increased costs related to supporting infrastructure and capital improvements – and some predict that not extending the compliance date to allow for economic recovery from the COVID-19 pandemic will make compliance more costly, or even “infeasible.”

You can read the full blog here.

COVID-19 and the impact on shipping– what have we learnt from Asia

Today’s global economy is facing unprecedented challenges and many firms are in the business of survival as a consequence of the Covid-19 outbreak. While some Asian countries are starting to show signs of emerging from lockdown, it is nonetheless a grim and trite recital to acknowledge that many Asian countries were heavily affected in the early stages of the global crisis. According to official figures, China’s GDP recorded an unprecedented 6.8 percent year-on-year decline in the first quarter of 2020. Being at the geographic forefront of the current crisis, our Asian offices have been both advising and counseling numerous clients with their commercial matters and arrangements that have faced interference as a result of the Covid-19 outbreak.

We would like to share our experience of handling Covid-19 in Asia, and lessons learned. Continue Reading

Singapore’s accession to the International Salvage Convention

Singapore’s accession to the International Salvage Convention is an important step, which will align the city state with other prominent maritime jurisdictions such as the United Kingdom, the United States, Australia, and China.

When the Salvage Convention becomes part of Singapore law under amendments to be made to the Singapore Merchant Shipping Act (1), it will enshrine into Singapore law a salvor’s right to recover expenses they have incurred in their attempts to prevent or minimize environmental damage, even if they are unable to salve the vessel or where the value remaining in the salved fund is insufficient.  This type of recovery is referred to as “special compensation,” which is available under article 14 of the Salvage Convention and protects salvors against the traditional consequences of “No Cure, No Pay,” which depended entirely on the successful salvage of the maritime property.  Article 14 is intended to incentivize salvors to invest and maintain the assets, in terms of salvage craft, equipment, and personnel, that are necessary to render prompt assistance to vessels in difficulty.  This is vitally important, and mitigates against the risk of geographical regions having insufficient response capacity.  Such a scenario could have a profoundly detrimental effect on local marine ecologies, particularly in the event of an oil spill.  At a time when the number of professional salvors is declining, providing an assurance to salvors that they will not be left out of pocket is increasingly important.

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Guidance on incorporation of standard form “law and arbitration” provisions in charterparties by way of email fixture recaps

In London Arbitration 2/20 the tribunal determined that it had jurisdiction under a standard “Gencon 94” form “law and arbitration” provision, which had been incorporated into the charterparty through the wording of the parties’ recap email.

Factual summary

The charter was evidenced by a fixture recap email. The email contained various detailed provisions relating to the description of the vessel, volume of cargo, laycan, loading and discharge ports, laytime, demurrage et al. The email’s final sentence read as follows: “owise as clean Gencon 94 cp incl cls paramount … to be amended / altered as per above main terms agreed.”

When a dispute subsequently arose, the owners appointed an arbitrator in accordance with the law and arbitration clause in the standard Gencon 94 form. The charterers disputed the arbitrator’s jurisdiction over the matter, arguing that the provision was not a “main term” agreed in the email and therefore did not apply.

Tribunal’s ruling

The tribunal clarified that the correct approach to the construction of the email’s wording was to take a clean copy of the Gencon 94 and to write into it the main terms agreed in the recap email. It found that it could not be suggested that, simply because the law and arbitration clause was not specifically referred to in the agreed main terms, it did not apply. The contract therefore included the standard form Gencon 94 law and arbitration clause.

Reference was made to the fact that the meaning of the phrase “main terms” is not established. Given that main terms can therefore be quite limited, or more extensive as in this case, the parties will be well advised to consider carefully the concluding wording used in their recap emails.

CARB continues to revise air emissions rules for the shipping industry, despite COVID-19 concerns

The California Air Resources Board (CARB) continues its efforts to expand the state’s existing Ocean-Going Vessels At-Berth Regulation to further reduce air emissions from ships docked in California. (See here for prior alert). CARB recently released draft modifications to the At-Berth Rulemaking Documents. The modifications would include:

  • Allowing use of an Innovative Concepts (IC) provision as a compliance option. The IC provision would enable regulated entities to use potentially lower-cost options to achieve earlier or equivalent (or greater) emissions reductions in port communities versus reducing emissions directly at berth. The IC provision would also provide a pathway for regulated vessel fleets to continue using fleet averaging methods to comply with the proposed regulation.
  • Expanding use of Vessel and Terminal Incident Events to new and expanding fleets to encourage new business at California ports.
  • Providing additional operational flexibility: by extending the time a vessel has to connect to shore power or another CARB-approved emissions control strategy (CAECS) from one hour to two hours; by extending the timeframe for reporting deadlines; and by expanding the remediation fund to ports and third-party CAECS operators.
  • Broadening the scope of the interim evaluation to include a review of public information provided to CARB, including terminal-specific engineering evaluations, logistical considerations, public engagement, and independent studies, to help inform the evaluation and implementation timeline.
  • Accelerating implementation dates for roll-on / roll-off and tanker vessels to achieve earlier public health benefits.

The resolution and all other regulatory documents for this rulemaking are available online here.

You can read the full article on our EHS blog here.

Preparing and attending a virtual arbitration hearing

The question of whether COVID-19 would forever change the world as we know it remains to be answered. For the time being, however, the pandemic has certainly changed the way we live and conduct business. In an effort to adjust to the current requirements of strict social distancing, we have had to be creative and use technology to our advantage. For instance, in order to sustain the administration of justice, we have had to allow virtual hearings to become the new norm.

In April 2020, Richard Gunn (partner), Elli Aidini (associate) and Katherine Varney (trainee) were involved in a three-day virtual arbitration hearing via Zoom. The experience was unique for all. Although initially there were concerns about the confidentiality of the process and the ability of the parties to overcome technical difficulties, the hearing was concluded successfully. In this article, we will attempt to share our experience of a virtual hearing and recommendations for conducting such hearings in the future. Continue Reading

Shipper’s presentation of bill of lading for signature is merely an invitation to master to make his own assessment of cargo’s apparent condition on loading: Priminds Shipping (HK) Co Ltd v Noble Chartering Inc, Tai Prize [2020] EWHC 127 (Comm)

On appeal by the charterer, the High Court overturned the award of a London tribunal ordering the charterer to indemnify the disponent owner for the payment it had made to the owner of the vessel in settlement of the latter’s claim for a 50% contribution to the sum paid to cargo receivers for damage to cargo. The cargo had been loaded heat damaged and the shippers’ statement on the bill of lading (as agents for the charterer) that the cargo was “clean on board” and “in apparent good order and condition” did not constitute a warranty in respect of the condition of the cargo nor did it preclude the master from taking reasonable steps to verify the condition of the cargo.

Background

Noble Chartering Inc (“Noble”), disponent owner of the MV Tai Prize (the “Vessel”) voyage chartered the Vessel to Priminds Shipping (HK) Co Ltd (“Priminds”) for the carriage of a cargo of heavy grains, soya and sorghum in bulk from Brazil to China (the “Charterparty”).

The bill of lading issued by the shipowner, drafted by the shippers and offered for signature by or on behalf of the Master of the Vessel (the “Bill of Lading”), described the cargo as being “…Clean on Board…” and “SHIPPED…in apparent good order and condition…”. It also incorporated the Hague Rules. Agents on behalf of the Master issued the Bill of Lading without any reservations.

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