Ships to sound their horns for key workers on 1 May 2020

Jointly the International Chamber of Shipping (ICS) and the International Transport Workers’ Federation (ITF) are calling on seafarers across the world to sound their ships’ horns when in port at midday local time on 1 May 2020.

1 May marks International Workers’ Day (or Labour Day), with about 66 countries around the world (and many more unofficially) celebrating the contribution made by workers.

During the current COVID-19 crisis, it is especially important to recognise the contributions made by all maritime workers, including seafarers but also other on-board and onshore personnel, who are ensuring that medical supplies, fuel and food continue to be transported safely across the world. At the moment, they are doing so while working under extreme conditions, such as being unable to go home for even longer periods of time than usual, due to travel restrictions and difficulties in changing crews on vessels. Continue Reading

Modern trends and challenges for supply chains: emerging technologies and environmental consciousness

Clients are always on the lookout for commercial advice that helps to manage modern trends and current challenges. In the transportation and logistics industry this includes the opportunities created by new technologies as well as the global demand for sustainability. In response, law firms need to reassess their offering and provide comprehensive assistance to clients along the supply chain.

Blockchain

New technologies have enabled businesses to integrate new processes across the supply chain. The goal, unsurprisingly, is to increase efficiency and unlock potential as processes become more advanced and customer demand more complex.

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Demurrage time bar: The importance of providing supporting documents in demurrage claims

Summary
Charterers successfully appealed an arbitration award under section 69 Arbitration Act 1996 on the basis that Owners did not submit all supporting documents for a demurrage claim within the 90-day time bar under the charterparty. Mr Justice Robin Knowles ruled that as the calculation of demurrage was pro-rated under the charterparty where another parcel was loaded/discharged at the same time and the bills of lading detailing the quantity of such parcel were available and referred to in the charterparty, they were part of all supporting documents to be presented by Owners with the demurrage claim, the failure of which led to the entire demurrage claim being time-barred. However, this case is to be viewed with caution by charterers seeking to rely on it as it expressly states that it was decided only on the basis of an interpretation of the particular clauses in this case, and without suggesting that there is a requirement to provide bills of lading where these are not available in a particular case.

Facts
Charterers appealed the arbitration award on the basis that Owners had not attached all of the necessary documents to their demurrage claim and because the 90-day period to submit those documents had elapsed, Owners’ demurrage claim had become time-barred. Under the charterparty both the calculation of laytime and demurrage was to be pro-rated where simultaneous loading or discharge of cargo from different charterers took place. Owners did not provide copies of the two bills of lading for the two parcels of cargo (Charterers’ cargo and a third party’s cargo). In regards to the statement of fact Owners submitted in support of their demurrage claim, the figure recorded did not accurately record the bill of lading quantities for the Charterers’ parcel. The statement of facts for the third party’s cargo stated that the bill of lading quantity was 6,014.906 MT. Continue Reading

Part 2 – Take care before crossing the Rubicon

In an alert last year, we looked at payment obligations under English law and how payment instruments commonly referred to as ‘guarantees’ may be misleading. This is despite their being crucial components to security in a commercial context.

The recent decision of the English Commercial court, Shanghai Shipyard Co Ltd. v. Reignwood International Investment (Group) Company [2020] EWHC 803 (Comm), is the latest example of the type of dispute that can arise when the terms of the guarantee are not clearly drafted.

Read the rest of the alert here.

Safe-berth clauses bind to a warranty of safety: The U.S. Supreme Court brings into agreement U.S. and English law

CITGO Asphalt Refining Co. et al. v. Frescati Shipping Co., Ltd. et al.

On March 30, 2020, the U.S. Supreme Court held that “the plain language of the parties’ safe-berth clause establishes a warranty of safety.”

The decision brings U.S. law into alignment with the long-standing position under English law, as established by Leeds Shipping Co. v. Societe Francaise Bunge SA (The Eastern City) [1958] 2 Lloyd’s Rep. 127. The Eastern City and subsequent case law has confirmed that unqualified safe-berth clauses represent a warranty of safety for charterers’ nominated loading and discharge ports.

Facts

In November 2004, the sub-chartered oil tanker M/T Athos I allided with an abandoned nine-ton ship anchor during a journey from Venezuela to New Jersey. The unchartered anchor, lying on the Delaware River’s bed just outside the CITGO berth at Paulsboro, New Jersey, punctured the tanker’s hull, causing 264,000 gallons of heavy crude oil to spill into the river. Following the Exxon-Valdez oil spill in 1989, which led to the passing of the Oil Pollution Act of 1990 (OPA), Frescati (as owner) was deemed responsible for the cleanup costs, regardless of fault.

Under OPA, Frescati was held to be the “responsible party regardless of fault” and was called to cover the spill’s cleanup costs. The Oil Spill Liability Trust Fund (Fund), operated by the U.S. federal government, then reimbursed Frescati for the cleanup costs, which exceeded the Act’s $48 million liability limit. Frescati, as the statutorily responsible party, and the United States (through the Fund) then pursued legal claims against the sub-charterers, CITGO Asphalt Refining Co. et al. (CARCO) in order to recover the clean-up expenses.

The Supreme Court’s decision

The U.S. Supreme Court in its decision concluded that CARCO had breached the contractual “safe-berth” clause in the charter, which was on an amended Asbatankvoy form and provided that “[t]he vessel shall load and discharge at any safe place or wharf,…which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer.”

CARCO had failed to select a “safe” (that is, free from harm or risk) berth for the vessel’s loading and discharging operations. Frescati was deemed to be an implied third-party beneficiary to the charter-party between CARCO and the operator, Star Tankers. The contractual obligation was held to amount to a warranty regarding the safety of the sub-charterers’ selected berth. The safe-berth clause therefore embodies a warranty of safety and not a mere duty of due diligence. Following the precepts of contract law, the warranty obligor is “strictly liable for a breach of contract, without regard to fault/diligence.” The unqualified language of the clause constituted an absolute contractual duty, while the lack of the express mentioning of the term “warranty” did not affect the fact that the contractual duty amounted to a warranty obligation.

The Court further directed that where a charter contains a clause expressly providing for liability for the designation of an unsafe berth, the charterer cannot rely upon (i) a general exclusion clause regarding the “perils of the sea” or (ii) oil-pollution insurance to cover the expenses since this covers risks that go beyond those resulting from the selection of an unsafe berth. The Court concluded that this decision provides “a legal backdrop against which future charter-parties will be negotiated.” Charterers may still, however, contract “around unqualified language that would otherwise establish a warranty of safety, by expressly limiting the extent of their obligations or liability.”

Shipping Update 2 – COVID-19: Emerging Themes

On 11 March 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. Two days later, the WHO stated that Europe showed more reported cases and deaths than the rest of the world combined, apart from China. Italy now has more reported deaths from COVID-19 than China and, as COVID-19 continues to spread, governments across the globe are implementing ever stricter measures in an attempt to contain or delay the spread of the disease. Those measures are causing significant disruption to seaborne trade.

Reed Smith is fielding a substantial number of enquiries relating to COVID-19. In this briefing, we set out some guidance on the most common issues we are seeing.

To read more please see our client alert here.

Passage Planning and Unseaworthiness – The Court of Appeal decision – CMA CGM LIBRA

The Court of Appeal upheld the decision of the Admiralty Judge in ‘The CMA CGM LIBRA’ in that a defective Passage Plan can render a vessel unseaworthy notwithstanding that the defect stemmed from navigational decisions. Any such error is attributable to the carrier or owner and constitutes a failure by the carrier or owner to exercise ‘due diligence’ before and at the commencement of the voyage to make the vessel seaworthy under the Hague/Hague-Visby Rules. This ruling represents a significant shift of the risk of loss caused by navigational mistakes away from cargo interests and onto owners’ mutuals.

Read the rest of the article here.

BIMCO releases fresh sanctions clauses for time and voyage charter parties – Managing sanctions risk in 2020

In response to the evolving challenges facing the shipping industry in 2019, BIMCO has released new standard sanctions clauses for time and voyage charter parties. The release attempts to respond, in particular, to the United States’ more aggressive sanctions regimes for Iran and Venezuela, which have strained the previous BIMCO language. BIMCO states that the updates are designed to address the high risk of violation, incidental to the “complex, imprecisely drafted, often changing” sanctions rules.

Read the rest of this article here.

Novel coronavirus and charterparty issues

On 30 January 2020, the World Health Organization declared the outbreak of the novel coronavirus (2019-nCoV) (the Virus) to be a Public Health Emergency of International Concern. It seems clear that the Virus is also having an impact on economic activities not only in China, but also in the 23[1] countries outside of China where it has been recorded at the time of writing.

The implications for shipowners and charterers could be substantial if there is no mechanism to deal with potential issues arising out of the spread of the Virus. Owners and charterers alike will need to consider, inter alia, whether a port will be deemed safe, validity of notices of readiness if tendered before free pratique is obtained, any implications of quarantine restrictions and delays, the effect of clauses such as force majeure or epidemics clauses and whether the doctrine of frustration could be invoked.

To read more about the ways in which charterparties are likely to be affected by the Virus’ impact on the economic activity, please see our client alert here.

If you have any questions, please contact one of the authors or your usual Reed Smith contact.

[1] World Health Organization – Novel Coronavirus (2019-nCoV) situation reports

The JCPOA: is it the end?

On 14 January 2020, the UK, France and Germany (the “E3”) triggered the dispute resolution mechanism under the JCPOA by referring assertions of Iranian non-compliance to the Joint Commission.

The triggering of the dispute resolution mechanism could (but not necessarily will) lead to the re-imposition of UN and EU sanctions on Iran, though the statement released by the E3 reiterates their “sincere hope of finding a way forward to resolve the impasse”.

To read more about the implications of the E3’s triggering of the dispute resolution mechanism, please see our client alert here.

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