Application of the crossing rules when in proximity to a narrow channel or fairway, and the “Alexandra 1”

In March this year the Admiralty Court in London handed down its judgment in respect of a collision between “Alexandra 1” (“A1”) and “Ever Smart” (“ES”) (see: Nautical Challenge Ltd v Evergreen Marine (UK) Ltd [2017] EWHC 453 (Admlty)). This blog takes a look at the judgment, which serves to clarify the positon on the obligations on vessels arising under certain rules provided in the International Regulations for Preventing Collisions at Sea, 1972 (the ‘Collision Regulations’). Continue Reading

The “New Flamenco”

The Supreme Court has today handed down Judgment allowing Owners’ appeal in the “New Flamenco” (see our previous blog of 2 March 2016 and our Client Alerts of 25 February 2016 and 8 November 2016).

For those of you who are not familiar with the case, Charterers were in repudiatory breach of the Charterparty, which Owners accepted as terminating the Charterparty, and the vessel was redelivered in October 2007. At that time the Owners sold her for USD 23,765,000, whereas if the vessel had been redelivered at the end of the Charterparty term, in 2009, her sale value would have been only USD 7,000,000.  The question was whether that benefit, i.e. the increase in sale price in 2007 over and above that which could have been obtained in 2009, should be set-off against Owners’ claim for damages calculated by reference to the net loss of profits which they alleged they would have earned during the additional two year Charterparty period.  If the increase in sale value were allowed to be set-off, this would have caused Owners to have no recovery from Charterers.

We are preparing a Client Alert which will set out the background to the Supreme Court’s decision, but for now we can say that it held that:

  1. On the facts of this case the value of the vessel was irrelevant because the Owners’ interest in the capital value of the vessel had nothing to do with the interest injured by the Charterers’ repudiatory breach of the Charterparty.
  2. The essential question in such cases is whether there is a sufficiently close link between the benefit and the loss caused by the wrongdoer. The benefit to be brought into account must have been caused either by the breach of Charterparty or by a successful act of mitigation.
  3. Notably in this case the benefit was not caused by Charterers’ repudiatory breach but by Owners’ commercial decision to sell the vessel.
  4. Given the relevant measure of damages, the pertinent mitigation would be the acquisition of an income stream alternative to the income stream under the original Charterparty.
  5. It was therefore held that the Judge was correct to hold that the Arbitrator erred in principle and that the answer to the question put to the High Court, namely “When assessing shipowners’ damages for loss of profits on earnings of hire under a time charterparty which has been repudiated by the charterers and the repudiation accepted by the owners as terminating the contract, are the charterers entitled to have taken into account as diminishing the loss of earnings/hire sustained by the owner as a result of the accepted repudiation “a benefit” said to consist of avoidance of a drop in the capital value of the vessel because the vessel has been sold shortly after acceptance of the repudiation whereas, if the vessel had been retained until after performance of the charterparty, it would have had a lower capital value by reason of decline in the capital value of the vessel through market decline and ship sale values in that period?” is “no”.

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Qatar – Sanctions and Restrictions: Key Developments

Readers may be aware that a number of countries, including Saudi Arabia, Egypt and Bahrain, have recently severed diplomatic and economic ties with Qatar. For further information on the restrictions in play and how they might impact your business, please refer to the Reed Smith Client Alert, which can be found here.

Saudi Arabia has now, via Kuwait which is acting as a mediator, presented a list of requirements, with which Qatar must comply, in order for the sanctions in place to be lifted. These include calling on Qatar to bring its economic and political involvement with Iran in line with US and international sanctions, and the closure of Al-Jazeera.  It is understood that if the requirements are not complied with within 10 days the offer will cease to be valid. It is not yet clear whether, and if so how, Qatar may respond to this most recent development.

 

Sanctions and Restrictions in Qatar

Earlier this month several countries, including Saudi Arabia, the United Arab Emirates, Egypt and Bahrain, severed diplomatic and economic relations with Qatar. This is an important issue for the shipping industry to monitor. In our recent client alert we explained the position to date and looked at what shipping companies trading Qatar need to consider to limit and manage any potential impact on their business.

You can read the alert here

 

Cyber issues in shipping

We have had reports of an email scam being circulated amongst owners and charterers and, in particular, being sent to ships. These emails are being sent by scammers posing as law firms in order to distribute malware, including the latest ransom-ware.

QUOTE

Dear Sir,

We have been appointed to proceed with legal steps in arresting your vessel due to your inability to clear your long overdue payment with our client. Our client claims that several reminder has been sent to you on this subject matter without getting any response from you.

Find attached lawsuit filed by our client including Court and lawyer cost. Kindly review and revert with your comment. Meanwhile, vessel will be arrested by the court till further notice.

Your urgent response will be appreciated.

THKS N B’RGDS

UNQUOTE

Continue Reading

India extends service tax on freight

Indian authorities have recently extended the service tax on ocean freight, payable under the Finance Act 1994 (“Service Tax”), to cargoes imported on a CIF basis. The amendments to the Act in this regard came into effect from 22 January 2017.

This Service Tax has been levied since June 2016 over freight on cargoes imported on an FOB basis, including where ships have been chartered by importers domiciled in India. But it was not applicable where transportation services were provided from a place outside India to a port in India by a foreign shipping line at the request of a foreign shipper. The amendments are intended to correct this anomaly. Continue Reading

Collecting your goods – Electronic Release System

The Court of Appeal handed down a judgment this week in MSC Mediterranean Shipping Company SA v Glencore International AG [2017] EWCA Civ 365 relating to a dispute arising out of the Electronic Release System (“ERS”) in operation at the port of Antwerp.

Continue Reading

The Supreme Court decision in the Ocean Victory

The Supreme Court decision in the Ocean Victory was handed down this morning.  We will prepare a detailed client alert on the implications of the decision, but for now can report that:

(1) Unsafe ports

The Supreme Court upheld the decision of the Court of Appeal that there was no breach of the safe port undertaking: it was held that it was wrong to extrapolate from the fact that there were two weather conditions which were characteristic of the port, namely swells from “long waves” and severe northerly gales, that the port was unsafe because they could occur together. The mere possibility of those two weather conditions coinciding ( when they had not done so in the previous 35 years, albeit there was no meteorological reason why they should not do so)  was not sufficiently regular or sufficiently foreseeable to amount to an attribute or feature of the port – it was unexpected.

The Supreme Court  confirmed that the question in such cases is whether the event (or in this case the combination of natural events) which led to the casualty was an abnormal and unexpected occurrence or not.  It held that “abnormal occurrence” has its ordinary meaning and is not a term of art: it just means something “out of the ordinary course and unexpected“, and that the Court of Appeal was entitled to reach the decision that it did, namely that the port was not unsafe.

(2) Clause 12 of Barecon 89 form

As to the question of whether, if there was a breach of the safe port undertaking, the provisions for joint insurance in clause 12 of the Barecon 89 Form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses by hull insurers against the demise charterer for breach of an express safe port undertaking, the Court was split.  By a 3:2 majority, it was held that in accordance with the general rule that an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co-insured against another, and notwithstanding an amendment to the Barecon Form in this case to refer to employment in lawful trades for the carriage of lawful merchandises “only between good and safe berths, ports or areas where the [vessel] can safely lie always afloat etc“., the critical question of whether the contractual scheme between the owners and the demise charterer precluded any claim by the former against the latter for the insured loss of the vessel, was a matter of construction.  It was held that the scheme in this contract was for there to be an insurance fund and that if demise charterers were in breach of the safe port clause they would be under no liability to the owners for the amount of the insured loss because they had made provision for looking to the insurance proceeds for compensation.  The commercial purpose of maintaining the joint insurance in such circumstances was said to be “not only to provide a fund to make good the loss but to avoid litigation between them, or the bringing of a subrogation claim in the name of one against the other“.

It is notable that the position in the case of an insolvent insurer, not being relevant in this case, was left open.

(3) Limitation

On the question of whether, assuming a breach of the safe port undertaking, the charterer is entitled to limit its liability for the insurer’s losses pursuant to section 185 and Schedule 7 Article 2(1) of the Merchant Shipping Act 1995, it was held that the CMA Djakarta [2004] 1 Lloyd’s Rep 460 was correctly decided: the ordinary meaning of Article 2(1)(a) does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated: the charterer is therefore not entitled to limit its liability in accordance with the limitation fund calculated by reference to the vessel.

 

Project MARTHA, crew fatigue and the implications for a vessel’s “seaworthiness”

In January of this year the findings of “Project MARTHA”, a three year study into the causes and effects of crew fatigue, were released – along with proposals as to how best to mitigate against the risks posed by crew fatigue. The study was conducted by a number of eminent academic institutions with extensive input from the shipping community.

The report serves as a timely reminder of the dangers associated with fatigue to those serving on board vessels, as well as those who own and operate them. Continue Reading

EU threatens to bring shipping within its emissions trading scheme unless the IMO sets a target for reduction of greenhouse gas emissions

Last week the top EU climate official, Jos Delbeke, issued a challenge to the International Maritime Organization (the IMO) to adopt an ambitious target for reduction of emissions as part of the IMO’s planned 2018 strategy on reduction of greenhouse gas emissions from ships. Continue Reading

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