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”

By Ron Clark and Alex Brandt on 6 April 2017 Posted in Admiralty, Crew Fatigue

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

By Nicholas Rock and Thor Maalouf on 23 March 2017 Posted in Environmental Issues

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

Piracy – additional premium and crew costs

By Sally-Ann Underhill on 20 March 2017 Posted in Arbitration, BIMCO, Piracy

In London Arbitration 11/17 it was held in respect of a charter on an amended NYPE 93 form, incorporating the BIMCO Piracy clause and the Conwartime clause, that:

A claim for reimbursement of additional premium (AP) for transiting the Gulf of Aden and a call to Yemen was not analogous to a claim for hire but gave rise to a claim in debt. In this case there was no express or implied right to equitable set off of the debt and so the AP was payable by Charterers to Owners (such sums being payable within 15 days of receipt of the Owners’ supported invoices or on redelivery under the Conwartime and BIMCO Piracy clauses). Charterers could then counterclaim in respect of any alleged breach of charter.
The charter required the Owners to employ crew on terms that were acceptable to the ITF, and under the terms of the crew contracts the Owners could not insist on the crew remaining on board if the vessel proceeded to Yemen. The facts meant that there was no culpable delay on the part of Owners in changing the crew. Charterers were therefore responsible for the expense of the crew change and the crew bonus, the latter remaining payable notwithstanding the crew change.

The decision clarifies the nature of such claims and illustrates the strength of Owners’ position under the standard clauses.

New LMAA Terms coming into effect 1 May 2017

By Sally-Ann Underhill and Daniel Barber on 27 February 2017 Posted in LMAA

The LMAA has published new Terms and Procedures which will apply to arbitration proceedings commenced on or after 1 May 2017.

Key differences between the LMAA 2017 terms and the previous (2012) version are:

Within Port Limits

By Sally-Ann Underhill and Daniel Barber on 9 February 2017 Posted in Case Law

NAVALMAR UK LTD V KALE MADEN HAMMADDELER SANAYI VE TICART AS [2017] EWHC 116 (COMM) – The MV “ARUNDEL CASTLE”

In this case the Commercial Court considered the meaning of “within port limits” in the context of a charterparty on an amended Gencon 94 form which provided that:

“[Notice of readiness] to be tendered at both ends even by cable/telex/telefax on vessels arrival at load/disch ports within port limits. The [notice of readiness] not to be tendered before commencement of laydays.”

The underlying decision

In the arbitration which was subject to appeal, the arbitrators had held that as the Vessel had tendered NOR outside the port limits as identified on an Admiralty chart of the port, the NOR was invalid.

The arguments

Owners argued that any area within which vessels are customarily asked to wait by the port authorities and over which the port authorities exercise authority or control over the movement of shipping is within port limits. Alternatively, Owners argued that any place where vessels load or discharge cargo, including places outside the legal, administrative or fiscal area where vessels are “ordered to wait for their turn no matter the distance from that area”, is within port limits.

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

By Andrew Tetley and Aurelie Lopez on 13 January 2017 Posted in Arbitration, Case Law

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

By Nicholas Rock, Sally-Ann Underhill and Adam Hedley on 21 December 2016 Posted in Environmental Issues

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

By Marcus Dodds on 16 December 2016 Posted in Case Law, Inter-Club Agreement

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.

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

By Marcus Dodds on 14 November 2016 Posted in Case Law

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”.