Certificate in Maritime

CE
ERTIF
FICAT
TE IN MAR
RITIME DIS
SPUT
TES
& ARB
BITRA
ATION
MODULE
E1
Tyypes of Marine
e Dispu
utes, Claims a nd
Ap
ion
pproach
hes to Resolut
R
A
AUTHOR
R
Constantina Sa
ampani PhD, LLM,
L
LL
LB
Lega
al Cons
sultant and Ind
depend
dent Tra
ainer
Welcome to the free tria

al of Module 1 of
o Certificate in
n Maritime Disputes & Arbitra
ation
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Lloyd'sanddtheLloyd'scresttaretheregistere
edtrademarksofftheSocietyincorrporatedbytheLloyd'sAct1871bbythenameofLlloyd's
CONTENTS
Page No.
1.
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.1
Wet Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.
COLLISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2
The Collision Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3
Breach of the Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4
Who Is Liable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5
Vicarious Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6
Standard of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.7
Duty to Assist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.9
Practical Aspects of Dealing with a Collision Incident . . . . . . . . . . . . . . . . . 21
2.10
Collision Litigation in the Admiralty Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.
GENERAL AVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2
Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3
Who Has the Authority to Order a General Average Act? . . . . . . . . . . . . . . 25
3.4
Requirements to Be Entitled to Contribution in General Average . . . . . . . . 25
3.5
What Constitutes Sacrifice? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6
What May Be Included in the Expenditure? . . . . . . . . . . . . . . . . . . . . . . . . 27
3.7
The Adjustment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.8
The General Average Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.
SALVAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Certificate in Maritime Disputes & Arbitration 2013 / 2014 (FLP2323)
1-1
Contents
Module 1
4.2
The Concept of Salvage Under Maritime Law . . . . . . . . . . . . . . . . . . . . . . . 31
4.3
Legal Framework of Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4
The Salvage Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.4.1
Application of the 1989 Convention . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.5
Salvage under Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.6
The Essential Elements of Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.7
Duties of the Salvor and the Salvee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8
Who Is Entitled to Claim? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.9
Calculation of the Salvage Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.10
Special Compensation p&i Club Clause (scopic) . . . . . . . . . . . . . . . . . . . . . 42
5.
MARINE POLLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.1
The 1992 Civil Liability Convention and 1992 Fund Convention . . . . . . . . . 48

5.1.1
Types of Vessel Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1.2
Who Is Liable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.3
When Liability Arises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.4
Exclusion of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.5
Time Bars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.1.6
Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.1.7
When the Shipowner Loses the Right to Limit Liability?. . . . . . . . . . 52
5.1.8
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.1.9
The Role of the 1992 IOPC Fund Convention . . . . . . . . . . . . . . . . . 52
5.1.10 Time Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

5.1.11 Jurisdiction for Actions under the IOPC Fund Convention . . . . . . . . 53
5.2
1-2
The HNS Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

5.2.1
Scope of the Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2.2
Ships Subject to the 1996 HNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2.3
Damages Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2.4
Who Is Liable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.2.5
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.2.6
Time Bars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.2.7
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Module 1
Contents
5.2.8
The 1996 HNS Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.2.9
Time Bars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.2.10 Jurisdictional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

5.2.11 The 2010 Protocol to the HNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.3
The International Convention for the Prevention of Pollution from Ships . . . 57
5.4
The International Convention on Civil Liability for

Bunker Oil Pollution Damage 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.5
5.4.1
Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.4.2
Ships Subject to 2001 BOPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.4.3
Liability and Who Is Liable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.4.4
Time Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.4.5
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Dry Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.5.1
The Contract of Affreightment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.5.2
Cargoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.5.3
Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.5.4
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.5.5
Contracts of Affreightment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.
BILL OF LADING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.1
Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.2
Legal Framework Relating to Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . 65
6.3
Functions of the Bill of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.4
Types of Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

6.4.1
Liner Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.4.2
Straight Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.4.3
Bearer Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.4.4
Order Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.4.5
Shipped and Received Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.4.6
Switch Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.4.7
Charterparty Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.4.8
Through Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1-3
Contents
Module 1
6.4.9
Clean and Claused Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.4.10 Freight Forwarders Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

6.4.11 Multimodal Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.5
Electronic Bills of Lading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.6
Other Documents of Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.7
Cargo Claims and Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.
CHARTERPARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2
Types of Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.1
Voyage Charterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.2
Time Charterparty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.2.3
Demise Charterparty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.3
Shipbrokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.4
Implied Obligations in a Charterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.5
Obligations of the Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.6
Obligations of the Charterer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

7.6.1
Not to Ship Dangerous Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.7
Common Law Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.8
Legal Highlights on Voyage Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . 95

7.8.1
Obligation to Provide Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.9
Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.10
Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.11
Types of Freight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.11.1 Freight Payable in Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.11.2 Lump Sum Freight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
7.11.3 Pro Rata Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
7.11.4 Back Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.11.5 Dead Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.11.6 Ad Valorem Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.12
1-4
Payment of Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Module 1
Contents
7.12.1 Charterparty Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

7.12.2 Bill of Lading Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.12.3 Party to Whom Freight Is Due. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.12.4 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.12.5 Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.13
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.14
Laytime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.14.1 The Arrived Ship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.14.2 Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
7.14.3 Notice of Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
7.15
Demurrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.16
Despatch Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
7.17
Legal Highlights on Time Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . 108
7.18
Hire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
7.19
Withdrawal for Non-payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
7.20
Off Hire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
7.21
Deductions from Hire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
7.22
Period of Hire and Legitimacy of Last Voyage . . . . . . . . . . . . . . . . . . . . . . 111
8.
CARRIAGE OF PASSENGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.2
The Athens Convention on the Carriage of Passengers and Their Luggage by

Sea, 1974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.2.1
Time Bars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
8.3
The 2002 Protocol to the Athens Convention . . . . . . . . . . . . . . . . . . . . . . . 115
9.
BUNKER DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
9.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
9.2
Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
9.3
Parties to a Bunker Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
9.4
The Contract of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
1-5
Contents
Module 1
9.5
Pre-delivery Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
9.6
Procedures during Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
9.7
Post-delivery Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9.8
Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9.9
Time Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9.10
Voyage Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
9.11
A Few Key Notes on Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
9.12
Samples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
9.13
Notes of Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
9.14
Collection of Evidence in Case of Occurrence

before Analysis Results Are Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
10.
SHIPBUILDING CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
10.1
Nature of Shipbuilding Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
10.2
Pre-contract Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.3
Formation of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.4
Types of Contractual Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
10.5
The Express Terms of a Shipbuilding Contract. . . . . . . . . . . . . . . . . . . . . . 132

10.5.1 Pre-delivery Inspection (Trials) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
10.5.2 Delivery of the Good . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
10.5.3 Warranties under the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
10.6
The Implied Terms under the Sale of Goods Act 1979. . . . . . . . . . . . . . . . 135
10.7
Main Obligations and Rights of the Parties

under a Shipbuilding Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
10.8
More Specific Issues of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

10.8.1 Increase in Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
10.8.2 Responsibility of the Seller and Buyer for Defects . . . . . . . . . . . . . 136
11.
SHIP REPAIR CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
11.1
Possible Sources of Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
11.2
How to Avoid A Contract Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
1-6
Module 1
Contents
12.
HULL DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
12.1
Particular Average: The Cost of Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
13.
MASTER AND CREW EMPLOYMENT TRAINING SAFETY . . . . . . . . . 147
14.
LITIGATION VERSUS ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

BIBLIOGRAPHY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
LIST OF APPENDIX SOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Copyright IIR Limited 2013. All rights reserved.

These materials are protected by international copyright laws. This manual is only for the use of course participants
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1-7
1.
INTRODUCTION
1-001
This course aims to introduce you to and familiarise you with a variety of wet
and dry shipping matters from which maritime disputes may arise and also with
different avenues of dispute resolution: litigation, arbitration and mediation.
1-002
The material was written with readers from different backgrounds in mind and
therefore I assume no previous legal knowledge.
1-003
The first module is substantially more extensive than it was probably expected
because it covers a wide range of sources of maritime disputes. Our purpose for
this was to offer a better and enriched understanding of the complicated and
technical nature of the law in these areas. The material is presented in a
simplified and comprehensive way so that the readers will easily grasp the
subject matters yet sufficiently discussed. The main focus is on international and
English legislation but a taste is also given from other jurisdictions. We welcome
of course the candidates contributions in respect of the laws and practice of
their countries on our interactive forum.
1-004
A variety of methods has been used to facilitate the learning process as the main
approach is a hands-on, practical one. Thus, in addition to the theoretical analysis
of the subjects we also include relevant cases. You will find statutory materials,
standard form contracts, and forms used in negotiations in the appendices.
Coursework exercises are designed to aid the understanding and learning of the
subject.
1-005
An inspirational feature of this course is that it touches upon shipping and

commercial matters and methods of effective dispute resolution which have longstanding historical roots and practices but they also have a proven dynamic nature
through the perpetual efforts of the international community to respond to the new
needs arising from incidents and today's globalised approach.
1-8
Module 1
Introduction
LEARNING OUTCOMES
After successfully completing this module you will:
Have been introduced to the principal concepts of wet and dry

shipping disputes
Identify the key issues, liabilities and legal consequences arising

from a breach of contract or statutory responsibilities
Recognise the purpose and function of the standard contract forms

and effective contract negotiations and drafting in avoiding maritime
disputes
Understand the basis of international legislation in its role to

prevent or resolve issues arising from accidents and other maritime
disputes
1.1
WET SHIPPING
1-006
This part of the material deals with the safety regulations in navigation and the
liabilities and claims arising from the breach of collision regulations from the
vessels operation, salvage, general average and marine pollution which are
usually called wet topics in contrast with dry shipping which mainly refers to
cargo and charterparty claims.
1-9
2.
COLLISIONS
2.1
INTRODUCTION
1-007
In the course of business practice it is unavoidable that incidents due to

negligence of employees or officers may occur which will raise criminal and civil
liabilities for the owners, managers, officers and the crew.
1-008
Criminal liability. Failure to comply with the Collision Regulations regardless of

whether the breach resulted in a collision or not has been made a criminal
offence under the Merchant Shipping Acts. Section 85 of the MSA 1995 provides
that the Secretary of State has power to make regulations relating to health and
safety on ships a contravention of which is an offence punishable on summary
conviction by a fine or on indictment by imprisonment for a term not exceeding
two years and a fine.
1-009
The provisions of the Criminal Damage Act (CDA) 1971 contain provisions for
the intentional or reckless damage to property of another and for endangering
or threatening the life of another without lawful excuse.
1-010
Where a collision between ships or between a ship and a fixed or floating object
is caused deliberately or recklessly, the provisions for the offence of the wilful
damage of property will apply.
1-011
The general principles of criminal law apply in cases of loss of life caused by
criminal gross negligence.
(Modern Maritime Law and Risk Management. Second edition, by Aleka
Mandaraka-Sheppard, Informa, London, 2009, pp. 549-560)
1-012
Civil liability. Collisions between ships lead to claims and frequently to litigation.
The facts, i.e. how exactly an incident occurred, are the principal concern of
lawyers and expert witnesses as the principles of law will apply to these facts.
Liability in every collision case arises from the tort of negligence from the person
who caused the damage. In English law negligence arises if three elements are
established: (a) duty of care owed by the defendant to the claimant, (b) breach
of that duty, and (c) damage resulting from the breach of that duty. The claimant
bears the burden of proof.
1-013
The choice of jurisdiction is a significant issue when a collision case ends in

litigation. In most of the cases either the parties agree the jurisdiction or,
frequently, the insurers of the ships involved, since the financial consequences
of a collision are to a large extent covered by them.
1-014
In this chapter we will discuss the Collision Regulations, legal issues such as
liability and damages and the main stages involved in arranging the procedure
in the aftermath of a collision.
(Maritime Law, Second edition, Edited by Professor Yvonne Baatz, Sweet and
Maxwell, 2011, pp. 242-243)
1-10
Module 1
Collisions
2.2
THE COLLISION REGULATIONS
1-015
Attempts have been made historically to draft uniform rules applicable to vessel
collisions which have resulted in international conventions. The need for uniform
rules is greater when collisions occur on the high seas between vessels under
different flags. A brief account of the main international and domestic legislation
is given below:
Convention on the International Regulations for Preventing Collisions at

Sea 1972 (as amended).
1-016
The practice and custom of seamen is the origin of the regulations which aim to
prevent collisions at sea. Collision actions in England are heard in the Admiralty
Court which is part of the Queens Bench Division of the High Court of Justice.
1-017
The need to introduce rules to prevent collisions emerged from the introduction
of fast steamships in the 19th century. A landmark development was made in
1840 as the London Trinity House set out regulations which had advisory nature
but did not have statutory effect. In 1846 Parliament enforced the Steam
Navigation Act 1846 with the purpose of giving statutory force to the obligations
provided in the regulations and imposed penalties upon masters of ships for
disobedience. Since then the regulations have been amended and updated
many times.
1-018
Nowadays the International Maritime Organisation co-ordinates, makes

recommendations and revises the Collision Regulations. The present Regulations
are the International Regulations for Preventing Collisions at Sea (COLREGS)
1972 which were produced under the auspices of the International Maritime
Organisation (IMO) and revised the previous 1960 Collision Regulations. Britain
incorporated the Collision Regulations 1972 in 1977 Collision Regulations and
Distress Signals Order 1977 (SI 982) which were amended by Resolution
A464(xi) of the IMO. The scope within which the 1972 Regulations had the force
of law was in all British ships on the high seas and all waters connected
therewith navigable by seagoing vessels and in foreign ships entering the UK
territorial waters. The Regulations were amended in 1983, 1989 and 1991. The
Merchant Shipping (Distress Signals and Prevention of Collisions) Regulations
1983 (SI 708) revoked the 1977 Order in order to comply with the amendments
of the 1972 Regulations. The 1983 Regulations were amended in 1989 and
1991 which were then repealed by the UK Merchant Shipping (Distress Signals
and Prevention of Collisions) Regulations 1996 (SI 1996 No. 75). In accordance
with the Convention further amendments were made in November 2003. They
are subject to the MSA 1995 as according to section 85 the Secretary of State
may make such provision as he considers appropriate. Departure from strict
compliance with the Regulations is permissible when in certain circumstances
this is necessary in order to avoid immediate danger.
1-019
The Collision Regulations include provisions for the care, skill, responsibility,
good seamanship and navigation. They consist of 38 Rules and are divided in
five parts (A to E). Part A (Rules 13) is general; Part B provides Steering and
Sailing Rules; Part C deals with lights and shapes; Part D provides the details
for sound and light signals; and Part E allows exemption for certain older vessels
regarding lights. There are also four Annexes containing provisions for the
1-11
Collisions
Module 1
positioning and technical details as to how lights and shapes should be displayed;
the obligation of use of additional signals by fishing vessels fishing in close
proximity; technical details of sound signal appliances; distress signals and the
use of flags. The 1972 Regulations also introduced (in rule 10) the concept of
Traffic Separation Schemes in congested waters.
1-020
The International Regulations for Preventing Collisions at Sea (COLREGS)

1972, as amended, have international application. Local rules relating to
harbours, rivers, inland waters of the states may vary them but, as it is stated in
reg. 1(b), ...such special rules shall conform as closely as possible to these
rules. The rules are a code of good practice and not a code of law. They
therefore provide that all dangers and special circumstances should be
considered even if this results in departure from strict compliance to the rules in
order to avoid immediate danger.
International Convention for the Unification of Certain Rules of Law with

respect to Collision Between Vessels 1910 (The 1910 Collision Convention).
1-021
This Convention was incorporated into English law by the Maritime Conventions
Act 1911 and introduced in England the principle of liability in proportion to
blame, and therefore the concept of contributory negligence. The owner of a ship
involved in a collision is liable to make payment for the damage suffered as a
result of the collision in proportion to his ships fault. There is no definition of the
fault in the Convention but it is internationally recognised by the courts that this
effectively means a breach of the principles set out in the International
Regulations for Preventing Collisions at Sea.
1-022
Another two important legal principles were established by this Convention.

Firstly, that where two or more ships involved in collision are in fault, liability for
death and personal injury shall be joint and several, subject to a right of recourse
between the ships themselves and, secondly, that the time bar for commencing
legal proceedings in connection with a collision shall be two years (Article 7
incorporated into English law by MSA 1995 section 190)
1-12
International Convention on Certain Rules Concerning Civil Jurisdiction in

Matters of Collision 1952 (entered into force in 1955).
International Convention for the Unification of Certain Rules Relating to Penal

Jurisdiction in Matters of Collision or other Incidents of Navigation 1952.
Draft Rules for the Assessment of Damages in Maritime Collisions 1988,

known as the Lisbon Rules.
Modern Maritime Law and Risk Management. Second edition, by Aleka

Mandaraka-Sheppard, Informa, London, 2009, pp. 533-534
Chorley and Giles Shipping law, Eighth edition, by N JJ Gaskell-C

Debattista and RJSwatton, Pitman Publishing, London, 1995, pp.369-373
Maritime Law, Second edition, Edited by Professor Yvonne Baatz, Sweet

and Maxwell, 2011, pp. 247-248
ICS Institute of Chartered Shipbrokers 2011/12 Centenary Edition,

Shipping Law, Whitherby Shipping Business, pp. 49-58
Module 1
Collisions
2.3
BREACH OF THE REGULATIONS
1-023
As aforementioned, breach of the Regulations results in a criminal offence and

also a civil case for damage.
1-024
Which ships are subject to the Collision Regulations?
1-025
The Collision Regulations (COLREGS) apply to:
Sea-going vessels: the Convention specifically refers to collisions between

sea-going vessels or between sea-going vessels and vessels of inland
navigation (Article 1). So, we must understand that collisions between
vessels of inland navigation or with maritime objects such as off-shore
platforms, buoys, docks, etc. are not subject to this convention.
All British ships wherever they may be and to all foreign ships within UK
waters. Her Majestys ships are exempt from the provisions of the MSA
1995 and therefore to the Collision Regulations being subject to it (section
308(1)). However, the Royal Navy obeys to Collision Regulations as it is
provided by the Queens Regulations, which are broadly the same as the
COLREGS.
Non-naval Government ships are not subject to the Regulations. Section

308 of the MSA 1995, however, provides that for such ships and any ships
held for the benefit of the Crown, may be registered by Order in Council as
British ships, so that the Act will apply. Therefore, since the Collision
Regulations are subject to it they will also apply, with exceptions and
amendments, under the provisions of the Order in Council.
Section 309 extends the application of such Order in Council to ships in

the service of the government by a demise charter to the Crown. Although
no orders have yet been made under these provisions it is considered
good seamanship that such ships, although they are not obliged by statute
to comply with the Regulations, will conform to them.

Mandaraka-Sheppard, Informa, London, 2009, p. 535-536
2.4
WHO IS LIABLE?
1-026
The owner, master and any other party responsible for the conduct of the vessel
is each guilty for an offence where the Regulations are breached.
1-027
Strict compliance is required. The prosecution does not need to prove the
intention of the defendant to break the Regulations. It suffices to be proved that
he intended the conduct which resulted to the breach. In Taylor v O Keefe (The
Nordic Clansman ), during the navigation of the vessel Nordic Clansman
through the Strait of Hormuz, the master of the ship ordered to pass through the
Strait. This was in breach of the Collision Regulations but the master considered
that the order was lawful. The master was charged with the offence of
infringement of the Collision Regulations on the basis that his conduct amounted
to wilful fault as he was aware of his acts, had the intention for them and he
1-13
Collisions
Module 1
was not acting lawfully. The defendant claimed that in order1 for the terms wilful
fault to apply the court would also have to establish he was aware and
appreciated that his act was wrong which could not be established since the
defendant believed that his actions were lawful. The court discussed the scope
of the mens rea of the offence in connection with the wilful fault and held that
the master was criminally liable on the basis of the principle ignoratia juris non
excusat (ignorance of law is not an excuse).
1-028
A defence for the persons charged is to prove that they took all reasonable steps
to avoid committing the offence.
1-029
Masters may be criminally responsible even if they misinterpret the Rules

although the Rules allows deliberate infringement. Infringements are recorded
on tape in the Dover Strait where coastguards keep a radar watch on vessels
and incidents can be replayed.
Chorley and Giles Shipping law, Eighth edition, by N JJ Gaskell-C Debattista
and RJSwatton, Pitman Publishing, London, 1995, pp.373-374.
Duygu Damar, International Max Planck Research School for Maritime Affairs at
the University of Hamburg. Wilful Misconduct in International Transport Law,
Springer Heidelberg Dordrecht, 2011, London-New York, p.29.
2.5
VICARIOUS LIABILITY
1-030
Collisions, in most of the cases, are the result of negligence of the crew.
1-031
The shipowner is not only liable for his own negligence but he is also
vicariously liable for the crews defaults as they are his servants (i.e.
employees) unless their conduct is outside the remit of their employment. This
liability is called vicarious as it results from the character of the employer and it
emerges from the contract of employment between the wrongdoer and the
shipowner.
1-032
The crew is also personally liable. In Adler v Dickinson,2 a passenger on a

steamship was injured when she fell from its gangplank. Her fall was due to the
careless handling of the plank by two sailors. Her contract included an exemption
clause against personal injury arising from or occasioned by the negligence of
the companys servants. The claimant did not sue the company on the basis of
the contract but the servants in tort. Her claim was successful and the master
was held to be not vicariously liable for the fault of the crew members but
personally liable as he failed to supervise the berthing.
1-033
Where the wrongdoer is not a member of the crew, it is of pivotal importance

to establish whether he/she was acting as a servant or agent of the
shipowner or as an independent contractor (e.g. salvors). In the latter case,
the shipowner is liable only if it can be proved that he did not show reasonable care
in his choice of the contractor. In Mersey Docks and Harbour Board Ltd v Coggins
[1984] 1 Lloyds Rep. 31 at 3132, QBD.
[1955] 1 QB 158.
1-14
Module 1
Collisions
& Griffiths (Liverpool) Ltd and MacFarlane,3 Coggins and Griffiths (a stevedoring
company) hired a crane and a driver for loading work from the appellant. The driver
handled the crane negligently and injured Mr McFarlane (a worker on the dock).
The appellant had the right to control the drivers handling of the crane which was
held to make the driver an employee (servant) of the Board and therefore made
the appellant vicariously liable for the negligence of the driver.
1-034
Pilots are professionals and act as independent contractors although the

port authorities license them. The mere licensing does not make the port
authority liable (section 22(8) of the Pilot Act 1987) but a port authority may be
liable, for instance, for not providing sufficient and experienced pilots. Section 16
of the Pilotage Act 1987 provides that the shipowner is vicariously liable for
negligent acts or omissions of compulsory pilots. The pilot (compulsory or
voluntary), while on board a ship, is considered to be the employee of the
shipowner. The shipowner may claim against a negligent compulsory pilot. The
liability of the port authorities and the pilots are limited to 1,000 (section 22 of
the PA 1987) plus the earnings of the pilot for the assignment.
1-035
Salvors are independent contractors and have full control of navigation for
the vessel to be salved. Salvors are therefore exposed to liability for breach of
duty of care to the salved property and third parties.
1-036
Tugs and tows. The vessel under tow will always be vicariously liable for
the loss or damage caused by the tug. The maxim tug is servant of the tow
was applied in The Niobe David M'Cowan v Baine and Johnston (The Niobe)4
where the underwriters had insured the ship Niobe by a policy of marine
insurance from the Clyde (in tow) to Cardiff and/or Penarth while there and from
there to Singapore and for 30 days after arrival whilst in port. The agreement
contained a clause that if the ship hereby insured shall come into collision with
any other ship or vessel and the insured shall in consequence thereof become
liable to pay, and shall pay, to the persons interested in such other ship or vessel,
any sum or sums of money, to pay the assured a certain proportion of the sum
paid.
1-037
During the time the Niobe was towed to Cardiff her tug collided with and sank
another vessel, whose owners claimed damages from the Niobe and the tug.
The owners of the Niobe took action against one of the underwriters in order to
pay his proportion. According to the sum paid by them for the collision the
underwriter pleaded that he had no liability under the policy from damage arising
from collision with the Niobe. The court in this case had to decide on whether
the collision with the tug was a collision with the ship (Niobe), the vessel under
tow within the provisions of the policy. It was held that the collision of the tug with
the damaged vessel must be considered as the collision of the ship (Niobe) with
another vessel and therefore the underwriters were liable.
1-038
The application of this rule, however, should be tested according to the extent to
which the tow controls the actions of the tug and the resulting liability. In The
[1946] 2 All ER 345.
[1891] AC 401.
1-15
Collisions
Module 1
Devonshire5 a dumb barge sank because of a collision between its tug with the
Devonshire. The tug was partly to blame for the collision but the tow was wholly
innocent. As the tug had sole control of the navigation the owners of the dumb
barge were successful in obtaining full recovery from the Devonshire despite the
fault of the tug.
1-039
Port authorities. A port authority is under a statutory and common law duty of
care to provide navigational safety. It may therefore be liable to ships using its
facilities if it is careless and breaches this duty.
1-040
Shipbuilders and ship-repairers. Where a collision or death or personal injury

occurs due to a defective building or repairs to a ship the shipbuilders or shiprepairers will be liable for negligence under common law and statute (section 2
of the Consumer Protection Act 1987). The shipowner, demise charterer or
manager of the ship which caused collision damage to a third party due to
defective building or repairs will have to produce evidence that (a) he had
appointed competent repairers with due care, (b) he had paid due attention to
any signs of malfunctioning, and (c) that reasonable care and skill could not
have detected the defect. The employer, shipowner, or demise charterer will be
liable to their own employees who may be injured on board the ship due to
defective building and equipment (section 1 of the Employers Liability (Defective
Equipment) Act 1969). In practice the insurance policy will indemnify the assured
for liability incurred by the collision to third parties.
Shipping law. Fifth edition, by Simon Baughen, Routledge. Taylor & Francis
Group, London and New York, 2012, pp.262-263.
Hong Kong Contracts by Carole Chui and Derek Roebuck, Hong Kong University
Press, Hong Kong, 1997, p.130.
Mandaraka-Sheppard, Informa, 2009, London, pp. 559-569
2.6
STANDARD OF CARE
1-041
The conduct of those navigating a ship involved in a collision will be judged in

the court by the standards of prudent seamanship. The court will decide upon
the facts presented and the assessment will be based on compliance with the
standards of the Collision Regulations. The role of the witnesses and the experts
is therefore very significant. The first instance judge will rarely be challenged
unless a pivotal fact of the incident is deemed to have been misinterpreted or
the appellate court considers that certain reasons presented as to why a vessel
is to blame are not valid.
1-042
The Collision Regulations and the unwritten rules of good seamanship apply to
the extent that they are included in the provisions of the law of the particular
state. For instance, in The Esso Brussels SS CV Sea Witch v SS Esso Brussels
(Belgium),6 a ship which was in Belgian waters did not use sound attention
[1912] AC 634.
[1973] 2 Lloyds Rep. 73.
1-16
Module 1
Collisions
signals when the collision occurred. It was held that although this is provided by
the Collision Regulations the ship was not at fault since the local port regulations
prohibited the use of such signals.
1-043
Colliding shipowners have to prove that the other was in breach of its duty of
care.
1-044
A shipowner whose crew failed to meet the standards of prudent seamanship

may use the defence that their conduct was due to the agony of the moment.
In the Bywell Castle7 in a collision with The Princess Alice which resulted in a
great loss of life the view of the Court of Appeal was that the Princess Alice was
to blame for not complying with the regulations of the Thames Conservancy
Board which provided that: If two vessels under steam are meeting end on, or
nearly end on, so as to involve a risk of collision, the helm of both shall be put
to port, so that each may pass on the port side of the other. The Court of Appeal
held that the Princess Alice was at fault and although the last minute manoeuvre
of the master of the Bywell Castle who turned into her instead of turning away
from her was wrong, it was not the cause of the accident. The reason for this as
stated by Brett LJ was that: ...when one ship, by her wrongful act, suddenly puts
another ship into a position of difficulty of this kind, we cannot expect the same
amount of skill as we should under the circumstances.
1-045
This favourable consideration of the seamanship, however, does not apply when
he has the choice of alternatives any of which would avoid the collision and yet
he chooses to do one thing which is almost certain to cause it and does
contribute to it.
Shipping Law. Fifth edition, by Simon Baughen, Routledge. Taylor and Francis
Group, London, 2012, pp. 266-267.
The Story of the Paddle Steamer, by Bernard Dumpleton, Venton, Eastebourne,
2002, p. 64.
Marsden on Collisions at Sea, by Simon Gault, Steven J. Hazelwood, M.
Tettenborn, Sweet and Maxwell, London, 2003, p. 72.
2.7
DUTY TO ASSIST
1-046
Masters and persons in charge of vessels are under a statutory duty to assist
other ships and any person in danger at sea. Annex IV of the Collision
Regulations 1972 provide for the use of one or more of the distress signals in
order to show the need for immediate assistance. The master alone has the
authority to order a distress signal if he is satisfied that his vessel is in serious
danger or that another ship is in this position and unable to send the signal.
1-047
Once the master receives a signal of distress he must proceed with all speed to
assist the persons in danger unless this is unreasonable or he is released from
the obligation because other ships have responded to the demand or he was
informed that the need for assistance ceased.
[1879] 4 PD 219.
1-17
Collisions
1-048
Module 1
Following a collision ships must exchange their names, the names of their home
ports, the ports from which they are proceeding and for which they are bound.
They are also under the duty to stand by and assist each other, provided that
they do not unreasonably set themselves in danger. The duty to offer assistance
is an absolute one.
Chorley and Giles Shipping law, Eighth edition, by N JJ Gaskell-C Debattista
and RJSwatton, Pitman Publishing, London, 1995, pp.374-376
2.8
DAMAGES
1-049
The aim of damages in tort is to put the injured party back into the position as if
the tort had not occurred (restitutio in integrum).
1-050
As the very word implies a collision occurs when there is a physical contact between
the vessels (not necessarily between their hulls but also contact with an anchor
chain, or with a fishing net) (direct collision). The contact may take place between
vessel bodies, equipment on board the vessels or cargo carried by the vessels. It is
of no importance if the vessels are underway or one of them is moored.
1-051
The provisions of The Collision Convention 1910, Article 13 expand the scope of
application of the rules on collisions to cases when a vessel by its manoeuvres
or in similar ways causes damage to another vessel or to persons or goods on
board although no collision takes place between the vessels (indirect collision).
An example of an indirect collision is when a vessel breaches navigation rules
and proceeds with excessive speed and as a result to this it causes her to sink.8
1-052
A vessel may also cause damage by its negligence, given the damage is not too
remote, to another vessel without actual contact. The basis of the claim is that
the negligence of the defendant ship caused damage to the claimant. In an
English case (The Carnival),9 in unusual circumstances a vessel was considered
to have caused damage to another vessel by its negligence without actual
contact. The vessel Danilovgrad was alongside the Setramar berth, north of the
port of Ravenna, in the process of becoming securely moored when another
vessel the Carnival proceeded along the canal assisted by two tugs. The
headway of the Carnival as it was passing the Danilovgrad caused movement in
the water which resulted in the latter coming into contact with the edge of the
quay. The vessels shell plating was pierced by the end plate as it pressed
against a fender and water flowed into the hold damaging the vessels cargo. The
owners of the Danilovgrad claimed damages from the owners of the Carnival on
the basis of negligent navigation which caused damage. The Court of Appeal
held that the Carnival was indeed negligent in navigation as it passed Danilovgrad
(a) before it was securely moored and (b) all the lines were out and made fast.
The defendant argued that there was remoteness between damage and its
negligence but the court rejected it.
1-053
If the court has found negligence of the crew of a colliding vessel it will consider
the following factors in the assessment of blame:
The Royal Eagle (1950) 84 LlL Rep. 543.
The Carnival [1994] 2 Lloyds Rep. 14, CA.
1-18
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Collisions
(a)
It must be proved that negligence caused or at least contributed to the

collision (causative potency). Any non-causative negligence will not be
taken into consideration in the assessment of the division of blame and will
be left out of the reckoning of the Court.10
(b)
Even if the claimant proves that the negligence of the defendant caused
the collision (causation in fact) and that the negligence was the cause or
one of the causes of the damage (causation in law), the claimant must also
prove that the damage suffered is not too remote (The Wagon Mound
(No. 1): Overseas Tankship UK Ltd v Morts Dock and Engineering Co.
Ltd),11 i.e. that the damage in the ordinary course of things would flow
from his wrongful act, the consequences were direct and not remote and
that the defendant could reasonably have foreseen the kind of damage
suffered by the claimant.
The claimant does not have the duty to mitigate his loss but he is under
the obligation to take reasonable steps to minimise the damage suffered
by the defendants breach. Foreseeability is not an issue for consideration
in mitigation for damages as it was held in the Humber Oil Terminal Trustee
Ltd v Owners of the Ship Sivand (The Sivand).12
(c)
In the assessment of blame the court will also take into account the
defence of the agony of the moment. If a wrongdoing ship causes another
ship to make a manoeuvre urgently in order to avoid collision its actions
will be treated more favourably (see above under heading 2.6 Standard of
Care and The Englantine, Credo and Inez13).
Maritime Law, Sixth edition, by Christopher Hill, LLP, London-Hong Kong, 2003, p. 284.
Maritime Collision under UAE Maritime Law. A Comparative Study, by Abdula
Hassan Mohamed, Issue No. 37-January 2009, pp. 94-95, available on http://
sljournal.uaeu.ac.ae
1-054
Recovery of loss is possible only in connection with physical damage and its
consequent financial loss. The assessment of damages for physical and
consequential loss will depend on whether or not the collision rendered the
claimants ship a total loss. If the ship was a total loss then damages will be
awarded on the basis of the value of the ship on the date the collision occurred
rather than the end of the planned journey. If the ship can be repaired, damages
will be principally calculated according to the costs of repairs. Any benefit that
the claimant may have from the repairs, such as an increase of the vessels
value from the use of new materials or repairs which would have been necessary
to be carried out anyway in order to enable the ship to pass her Classification
Society survey may not be for the credit of the defendant (see The Gazelle,14
The Bermina15 respectively).
10
Owners of the Global Mariner v Owners of the Atlantic Crusader [2005] 1 Lloyds Rep. 699.
11
[1961] AC 388.
12
[1998] 2 Lloyds Rep. 97, CA.
13
[1990] 2 Lloyds Rep. 390.
14
[1844] 2 W Rob 279.
15
(1886) 12 PD 36.
1-19
Collisions
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1-055
Regardless of whether the ship was a total loss or not an additional sum is
awarded as compensation to the claimant for loss of freight or profits at the end
of the voyages as fixed by the vessels charterers deducted by contingencies
and wear and tear. Even if the claimant is not trading the vessel he will still be
entitled to the award of compensation for its loss of use. There is a convention
in the Admiralty Court that a shipowner is entitled to claim 1% on its claim in a
collision action for interruption of his trading without the need to prove this. This
convention is not available to cargo owners in a collision action (The Kumanova
(Owners) v Owners of The Massira16). Loss of or damage to cargo will also be
taken into consideration for the determination of compensation.
1-056
Shipowners are also liable for damages caused by their ships to harbours, docks
and piers owned by public authorities (section 74 of the Harbour Docks and
Piers Clauses Act 1847) for the costs of their reinstatement and repair but not
for consequential loss which may be recovered under negligence.
1-057
Section 190 of the Merchant Shipping Act 1995 provides a two-year bar on
collision actions.
1-058
Division of loss. Regarding the division of loss section 187 of the Merchant
Shipping Act 1995 which repealed and replaced section 1 of the Maritime
Conventions Act 1911 provides:
1. Where, by the fault of two or more ships, damage or loss is caused to
one or more of those ships, to their cargoes or freight, or to any property
on board, the liability to make good the damage or loss shall be in proportion
to the degree in which each ship was in fault.
2. If, in any such case, having regard to all the circumstances, it is not
possible to establish different degrees of fault, the liability shall be
apportioned equally.
3. This section applies to persons other than the owners of a ship who are
responsible for the fault of the ships, as well as the owners of a ship and
where, by virtue of any charter or demise, or for any other reason, the
owners are not responsible for the navigation and management of the ship,
this section applies to the charterers or other persons for the time being so
responsible instead of the owners.
4. Nothing in this section shall operate so as to render any ship liable for
any loss or damage to which the fault of the ship has not contributed.
1-059
Currency in which damages are awarded. Judges and arbitrators are rather
liberal in their choice of currency in which they award damages. Damages are
awarded either in sterling or in the currency in which the innocent party directly
suffered the loss or, the currency of the country where the claimant actually felt
the loss and which is probably a home based currency.
Shipping Law. Fifth edition, by Simon Baughen, Routledge. Taylor & Francis
Group, London and New York, 2012, pp. 269,271
16
[1998] 2 Lloyds Rep. 301, QB.
1-20
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Collisions
1-060
Both to blame collision clause. Until 1975 blame in collision litigation in the USA
was either 100% on either of the two colliding vessels, or divided equally. In 1975
the US Supreme Court adopted the proportional fault principle in the Reliable
Transfer17 decision. The US Law has always considered cargo innocent, and
therefore entitled to recover 100% of its claim from the non-carrying vessel if the
latter is to blame and the owners of that vessel are entitled to claim contribution
from the other.
1-061
The entitlement for such an action, however, exonerates the carrying vessel from
the consequences of negligent navigation which is contained in the provisions of
the US COGSA and the Hague and Hague-Visby Rules. Thus the shipowners
have protected themselves by including into their contracts of carriage with the
shipper/cargo owner a both to blame collision clause which was drafted to
entitle them to seek back from the shipper/cargo owner the 50% contribution which
they may be under the obligation to pay to the non-carrying vessel in a collision.
1-062
Such a clause is found in many charterparties, e.g. GENCON 1994 clause 11;
ASBATANKVOY clause 20 (b)(iv). Institute Cargo Clauses clause 3 (A, B and C)
covers cargo interests for this liability).
2.9
PRACTICAL ASPECTS OF DEALING WITH A COLLISION INCIDENT
1-063
In a collision incident hull underwriters and cargo insurers have interest as

damage insurers whereas hull underwriters and P&I Clubs as liability insurers.
Third parties who had property in the vicinity may also suffer damages, general
average may be declared and a salvage operation may be called in.
1-064
More specifically the insurance interests concerned in collision litigation are:

(a)
Hull underwriters in relation to: the insured ships proportion of salvage

and general average, voyage and port expenses payable to port where the
repairs are undertaken, repairs to damage suffered by insured ship, threefourths of third party liability for damage to the other colliding ship and
cargo (Running Down Clause (RDC)).
(b)
P&I Club for: death and/or personal injury claims, pollution, liability to
cargo on entered vessel, one-fourth of the RDC if not covered by the hull
underwriter, other risks.
(c)
Defence (FD&D) Club for: proportion of legal fees for uninsured items of
claim and to claim for recovery of owners loss of earning.
(d)
Shipowner for: loss of earnings from detention due to repairs for collision
damage.
1-065
The lawyer must keep all these interests advised on the development of the case
and seek for their approval for every significant step taken.
1-066
Arrangements for the surveys, the security for payment of damages, the
collection of relevant documents and the witness statements play a major role in
the aftermath of a collision and the lawyer will frequently coordinate them.
17
421 US 397 (1975).
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Collisions
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1-067
Surveys. Refer to the damage suffered by the client ship as a result of the
collision, damage suffered by the opponents ship as a result of the collision
(without prejudice to liability), speed and angle of blow, in relation to the damage
to both ships.
1-068
Security. The P&I Club of the ship concerned usually issues a letter of guarantee
confirming payment of damages due, payable at the conclusion of the litigation.
The form of such a guarantee is negotiable, but in English practice the City of
London Admiralty Solicitors Group has published terms on standard forms for all
collision security.
1-069
Investigation of a collision. It is imperative that the facts of a collision at sea are

established with reasonable certainty and as quickly as possible. The role of the
lawyer conducting the investigation is to collate the ships documents including
log books, charts and any automatic data logging devices installed on the ship,
interview the officers and crew members on watch on the bridge and in the
engine room, and any other member of the crew who saw anything relevant, and
prepare a written statement of each witnesss evidence. These statements are,
according to the English Civil Procedure Rules, privileged (i.e. they cannot be
forcibly disclosed to the other parties to the litigation without the agreement of
the party on whose behalf they were made). In practice, however, most of these
statements are disclosed in English collision proceedings and treated as
evidence of the facts presented, unless the witness is called to give oral
evidence. The purpose of this practice is to save time and costs.
1-070
Independent evidence. This evidence is of considerable value in a collision case,

but not always easy to obtain. The Speed and Angle of Blow Survey Report is in
a sense independent since it is based on the crumbled metal of both ships, but
it is also an expression of professional opinion because it is drafted by an
experienced engineer surveyor. A videotape recording of the radar showing
movements of the ships concerned made by an official body such as Dover
Coastguard or other Vessel Traffic Surveillance (VTS) service (to be found in
major ports such as London, Southampton) also has a substantial evidential
value. The lawyer should act quickly to ensure that the recordings are preserved.
Most such bodies maintain a neutral attitude and make the information and
tapes available to the enquiries of all parties involved.
1-071
Independent evidence may be obtained from the officer on watch on another

ship in the vicinity of the collision, who may have observed the movements of
the two ships on radar. Although it is difficult to discover the existence of such
evidence an efficient practitioner should spend time and money to make
enquiries, since the value of such independent evidence is very significant.
1-072
Jurisdiction is usually established by agreement, but in the absence of such

agreement the parties may manoeuvre in order to establish a jurisdiction
which favours their case. This will be based on the appraisal of a range of
factors such as:
1-22
Whether the ship for whom the lawyer is acting is likely to be the recovering
or the paying party in the litigation. If the lawyer represents the recovering
party, then he/she should aim for the jurisdiction which offers a fair and
objective judgment issued as quickly as possible and which will be
Module 1
Collisions
enforceable without undue procedural delays. In the latter case he/she

should attempt to achieve a jurisdiction where the principles of Limitation
of Liability will be applied.
The probable division of blame between the two ships and the likely
amount of the damages ultimately recoverable. An informed estimate will
not be possible in the immediate aftermath of the collision, and therefore
the practitioner should conduct continuous reappraisal from further
information coming from surveyors, shipowners and other parties involved
in the litigation.
The availability of witnesses, particularly pilots if they were on the bridge

of one or both ships, or other sources of important evidence.
1-073
The Collision (Civil Jurisdiction) Convention 1952 contains a number of provisions

for the establishment of jurisdiction in collision cases, but since these are subject
to contrary agreement of the parties, this convention is rarely applied in cases.
1-074
In most cases an agreement is concluded. A typical form of such an agreement

is Form ASG2 to be found at http://www.admiraltysolicitorsgroup.com.
2.10
COLLISION LITIGATION IN THE ADMIRALTY COURT
1-075
In England collision cases are heard by the Admiralty Court, which is part of the
Queens Bench Division of the High Court of Justice. The applicable rules
regarding procedural matters are provided in Pt 61 of the Civil Procedure Rules
(CPR) and in the Admiralty Practice Direction.
1-076
The document known as the Collision Statement of Case, formerly Preliminary

Act, plays a significant role as it contains a series of questions in connection
with the circumstances of the collision. Each party is required to complete and
file it at the court without knowing the answers of their opponents. The answers
submitted are considered to be admissions of fact by the party filing it, and that
party may not proceed with a case inconsistently with their Collision Statement
of Case without the leave (permission) of the judge.
1-077
The Elder Brethren of Trinity House, who are retired ships masters, sit with the
Admiralty Judge as Nautical Assessors and advise him on matters of ship
handling and seamanship. The parties therefore do not normally undertake to
call expert evidence on these aspects.
1-078
The usual practice in collision cases in England is that the liability (the division
of blame) for the collision is decided separately from the quantum of damages.
The sums recoverable are usually negotiated and settled directly between the
solicitors for the parties but if they fail to agree, the disputed issue(s) will be
submitted to and decided by the Admiralty Registrar (para. 13 of the Admiralty
Practice Direction).
Maritime Law, Second edition, Edited by Yvonne Baatz, Sweet & Maxwell, 2011,
pp. 242-250
1-23
3.
GENERAL AVERAGE
3.1
INTRODUCTION
1-079
General average is an ancient form of distributing the risk of sea transport.

General average means general loss in contrast with the particular loss of the
marine insurance. Rule A of the York-Antwerp Rules 1994 defines the general
average act as follows: There is a general average act when, and only when,
any extraordinary sacrifice or expenditure is intentionally and reasonably made
or incurred for the common safety for the purpose of preserving from peril the
property involved in a common maritime adventure.
1-080
The Marine Insurance Act 1906 of the UK defines general average act in
almost identical terms in section 66(2). The same applies to Canadas Marine
Insurance Act, SC 1993, c. 22, section 65(2) and in the Quebec Civil Code 1994,
Article 2599.
1-081
General average is therefore an equitable sharing, between a shipowner and

cargo interests, of losses and expenses which occurred during a voyage. The
roots of this concept lie in the perception that a voyage is a common adventure
between the vessel owner and the cargo owners. Being an equitable doctrine,
the core principle of the law of general average is that some parties to the
joint adventure should not benefit from the misfortune of other parties. If, for
instance, a vessel confronts a storm and the master decides that some cargo
must be jettisoned to lighten the vessel in order to give her a better chance
to avoid sinking resulting to the vessel and remaining cargo surviving the
storm, the consequence would be that the latter will benefit at the expense of
the sacrificed cargo. Other examples of situations where general average may
be encountered are: when a vessel is aground in a position of peril and
damages her hull or machinery in order to refloat; expenses incurred for
salvage; and port charges including detention of the vessel when the vessel
enters a port of refuge for the common safety. Under the rules of general
average the loss suffered by the owners of the sacrificed cargo must be
shared rateably to all the parties of the marine adventure, i.e. shipowner and
all owners of cargo. In a general average claim there is no need to prove
liability in tort or contract.
1-082
The five components of a general average loss are: (a) an extraordinary sacrifice
or expenditure, (b) which is intentionally, and (c) reasonably made, (d) against a
peril, (e) in order to benefit the common venture.
3.2
HISTORICAL BACKGROUND
1-083
The origins of general average is considered to be in the Rhodian law of

approximately 800 BC which provided that if a ship was in danger and cargo was
jettisoned with the purpose of saving the ship, then the latter and the remaining
cargo were under an obligation to make a contribution to the owner of the lost
1-24
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General Average
cargo.18 The only existing record of the Rhodian law can be found in Roman law
and it has then been repeated and expanded in all the subsequent sea codes
until the present day. In England the first decision which made reference to
general average was in 179919 and in America in 1798.20
1-084
Since then, as commerce evolved and the claims became increasingly

demanding, the Glasgow Resolutions of 1860, the York-Antwerp Rules of 1864
and the York-Antwerp Rules of 1877 were adopted in response to the need for
a uniform method of calculating the contribution of the parties. The York-Antwerp
Rules (codified rules on general average) were amended periodically. The most
recent version is the York-Antwerp Rules 2004 although they are very rarely
incorporated into contracts. The 1994 version remains popular.
1-085
The York-Antwerp Rules are not subject to national legislation or international

conventions but they are included, and therefore imposed, by special clauses in
standard form contracts.21
3.3
WHO HAS THE AUTHORITY TO ORDER A GENERAL AVERAGE ACT?
1-086
Traditionally the general average act was usually ordered by the master or other
crew member in authority over the vessel. In the UK, however, the general
average act may be ordered by a person outside the common adventure (for
instance, a local port authority) if this is imperative for the common safety.22 In
the US, only the shipowner, master or a person acting under his authority could
order a general average act but at present third parties are also entitled to order
it provided that their orders are endorsed by the master (Ralli v Troop23 and
The Beatrice24 respectively). The York-Antwerp Rules do not restrict the authority
to give orders for a general average act to the master.
3.4
REQUIREMENTS TO BE ENTITLED TO CONTRIBUTION IN GENERAL

AVERAGE
1-087
For a claimant (ship or cargo) to be entitled to obtain contribution from the

other parties to the common venture (cargo or ship) it does not suffice to show
sacrifice or expenditure or that the reasonable and voluntary act benefited
successfully the common venture before the common danger. It is also required
that the carrier must not have been at fault in law. At common law a carrier is
not entitled to claim contribution in general average from cargo, if the danger
which demanded the extraordinary sacrifice or expenditure results from his
actionable fault or negligence in law or that of his employees.25
18
C. Abbott (Lord Tenterden), A Treatise of the Law Relative to Merchant Ships and Seamen, (1st edition, London, 1802), p. 273.
19
The Copenhagen [1799] 1 C. Rob. 289 at 293294.
20
Campbell v The Alknomac, 4 Fed. Cas. 1155 at 1156 (No. 2, 350) (DSC 1798).
21
Goulandris Brothers Ltd. v Goldman & Sons Ltd. [1957] 2 Lloyds Rep. 207 at 213214.
22
Papayianni v Grampian SS Co. [1896] 1 Com Cas 448.
23
157 US 386 at 419 (1895).
24
[1924] AMC 914 at 914 (SDNY 1924).
25
Strang, Steel & Co. v A. Scott & Co. (1889) 14 App. Cas. 601 at 608, PC. See also Goulandris Brothers Ltd v B.
Goldman & Sons Ltd [1958] 1 QB 74 at 104.
1-25
General Average
Module 1
1-088
When the carriers fault is actionable (i.e. if the carrier has failed to exercise due
diligence to ensure that the ship is seaworthy before or at the beginning of the
voyage, where the Hague and Hague-Visby Rules apply, and this actionable
fault caused the loss or damage) he is not entitled to contribution in general
average from cargo.26 If the carriers fault is not actionable under the Hague or
Hague-Visby Rules he may claim contribution in general average from cargo.
This is the law in the UK.
1-089
A causal connection also between the loss and the general average act must be
proved in order to raise a claim (Rule C of the York-Antwerp Rules 1994 and
2004).
1-090
Under American law, however, in the past a carrier did not have a right to a
general average contribution where the peril necessitating the sacrifice or
extraordinary expenditure resulted from his fault. Nowadays, this can be modified
by an agreement between the cargo and the cargo interest. The majority of
current the bills of lading and other contracts of carriage contain a clause the
Jason or New Jason clause under which even when the peril was caused
by the fault of the carrier he is absolved from liability by law or contract and
maintains the right to a general average contribution.27
1-091
A party seeking to raise a claim of general average has also to satisfy the
following factors:
The danger must be common, real and not merely apprehended by the
master of the ship.28
The sacrifice or expenditure was real, voluntary and intentional for the
purpose of avoiding the peril.29
The sacrifice or expenditure must be necessary. This is to be determined

by the master of the ship.30
The attempt to save the imperilled property was successful. If the entire
venture is lost, there is no entitlement for a general average
contribution.31
3.5
WHAT CONSTITUTES SACRIFICE?
1-092
A claim for general average contribution may include sacrifices of cargo, ship
and tackle or freight.
1-093
Cargo. Jettison is the most common example of general average. The cargo
jettisoned must have been stowed in a proper place. If, for instance, the goods
26
The Lendoudis Evangelos [2001] 2 Lloyds Rep. 304 at 306.
27
Royal Ins. Co. of Am. v Cineraria Shipping Co., 894 F. Supp. 1557 (MD Fla. 1995).
28
Nesbitt v Lushington [1792] 4 TR 783.
29
Robinson v Price [1987] 2 QBD 91 at 285.
30
Papayianni & Jeronica v Grampian Steamship Co. Ltd [1896] 1 Com Cas 448.
31
Pirie Co. v Middle Dock Co. (1881) 44 LT 426.
1-26
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General Average
have been stowed on deck without the shippers consent and they are jettisoned
the shipowner is in breach of his contract to carry safely and is therefore
liable.
1-094
Ship and/or tackle. Sacrifice of ships machinery or tackle necessary for the
safety of the whole adventure may raise a claim for general average contribution.
The shipowner must undertake all ordinary losses sustained by the ship.
However, if the ships tackle is lost because it was used outside the usual
purposes to secure her safety it will then be the subject of a general average
contribution. If the ship is in danger of sinking and the master deliberately runs
her ashore to save the cargo and the ship, the loss of or damage to the ship may
be considered as a general average sacrifice.
1-095
Freight. Sacrifice of freight by the shipowner by an act whereby the cargo is

preserved gives rise to a general average contribution against the cargo.32
However, if freight is payable in advance the entitlement to a claim for a general
average contribution cannot be raised as freight does not depend on the safe
arrival of the goods.
3.6
WHAT MAY BE INCLUDED IN THE EXPENDITURE?
1-096
32
Extraordinary expenditure made voluntarily to avoid common danger or

extraordinary loss of time and labour voluntarily accepted may give rise to
a general average contribution.
Payments for salvage may or may not be general average expenditure.

Expenditure on saving both ship and cargo is treated as a general average
expense. However, if the cargo has been discharged safely and further
operations have taken place in order to float the ship and tow her into
repairs, the shipowner will have to undertake these further expenses.
If, in the occurrence of a peril, it has become unsafe for ship and cargo to
continue the voyage, the deviation to a port of refuge is a general average
act. If, however, the deviation was deemed necessary due to the
unseaworthiness of the ship, general average contributions for the
expenses may not be recovered.
Where, however, the ship is placed into a port of refuge to repair damage
caused by a general average sacrifice, the cost of repairing the ship
together with incidental expenses (e.g. warehousing, reloading of cargo if
it had to be unloaded to complete the repairs, pilotage) may be included in
the general average.
The shipowner or master is entitled to retain the cargo where a general average
loss has occurred on a voyage until he is paid or the amount due on it for general
average is tendered to him. Where cargo has been sacrificed the shipowner is
also under the obligation to take all reasonable precautions to protect the interest
of persons entitled to a general average contribution either by obtaining deposits
in cash or suitable bonds and guarantees.
Pirie Co. v Middle Dock Co. (1881) 44 LT 426.
1-27
General Average
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1-097
The shipowner, cargo owner and a consignee of cargo are liable for general
average contribution.
1-098
Where cargo has been sacrificed, the shipowner must obtain security from other
cargo before delivering it. Such security normally takes the form of a general
average bond (often a Lloyds Average Bond) or an undertaking from a cargo
underwriter.33
3.7
THE ADJUSTMENT PROCESS
1-099
The procedure for adjusting general average is provided in a contract which

frequently contains a clause incorporating the York-Antwerp Rules. The process
of adjusting a general average sacrifice or expenditure commences with the
declaration of general average usually made by the shipowner or through his
underwriters. General average claimants shall give notice of the loss or expense
in respect of which they claim contribution in writing to a general average
adjuster (a marine claims specialist) within 12 months from the date the common
maritime adventure was terminated (Rule E of the York-Antwerp Rules 1994 and
2004). In the case of failing such notification a general adjuster may estimate the
allowance or the contributory value based on the information given to him. The
same applies even if no evidence has been provided to him in support of the
claim or no particulars are given in connection with the contributory interest
within 12 months of a request for this material (Rule E of the York-Antwerp Rules
1994 and 2004). A general average adjuster is, therefore, responsible to make
a very complex decision on the expenses to be acceptable under a general
average and the amount payable by each party and prepare a general average
statement.
1-100
The contract of carriage usually provides that the York-Antwerp Rules apply
unless the parties choose otherwise. Rule G of the York-Antwerp Rules 1994
and 2004 provide how the general average is adjusted. In the absence of any
clause in the contract of carriage the general average is adjusted at the place
where the voyage terminates according to the local applicable laws.
1-101
The value of sacrificed property and the respective contributory values of the ship
and saved cargo are calculated as at the date of discharge at the port of
destination or as at the date on which the voyage was interrupted and is governed
by the law of the place of delivery (York-Antwerp Rule G).34 The same rule applies
to expenditure.35 If after the shipowner has incurred general average expenditure
at a port of refuge both ship and cargo are lost while completing the voyage the
shipowner loses its entitlement to claim from the owners of the cargo.
3.8
THE GENERAL AVERAGE STATEMENT
1-102
As aforementioned the actual adjustment and the general average statement is

prepared by an average adjuster. The general average is apportioned by
33
Castle Insurance Co. v Hong Kong Islands Shipping Co. [1984] AC 226 at 234.
34
Hill v Wilson [1879] 4 CPD 329.
35
Chellew v Royal Commission on the Sugar Supply [1921] 2 KB 627 at 634 and 639.
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multiplying the value of each contributory interest by a fraction, composed of the

value of all the general average expenditure, divided by the sum of the
contributory values. These calculations can be extremely complicated which
may result to the whole process to taking years to be completed and the general
average statement to be issued.36
1-103
The issuance of a general average statement is without any legal effect and
therefore in the absence of the agreement of the parties it is the court decision
or an arbitral award which will quantify the contributions.37
General Average Now and in the Future, by Professor William Tetley, Q.C.,
pp.3-30, available on <http://www.mcgill.ca/files/maritimelaw/general average.
pdf>.
Admiralty and Maritime Law by Robert Force, Federal Judicial Center, 2004, pp.
195-198.
Institute of Chartered Shipbrokers, Shipping Law, 2011/2012 Centenary Edition,
Witherby Shipping Business, pp. 83-85
36
See Pacific Employers Ins. Co. v M/V Capt. W.D. Cargill, 751 F. 2d 801 where the general average statement was
issued six years after the casualty occurred.
37
The Jute Express [1991] 2 Lloyds Rep. 55 at 6162.
1-29
4.
SALVAGE
4.1
INTRODUCTION
1-104
Salvage is a concept unique to maritime law. Under English law, if a person

voluntarily saves the property of another on land, he/she is not entitled to a
reward for his/her efforts. Where the same service, however, is performed at sea,
the person saving the property, the salvor, has an entitlement to a reward, not
exceeding the value of the property saved. The reasoning behind the different
approach lies in the public policy to provide financial encouragement to vessels
to assist other vessels in distress.
1-105
The law of maritime salvage is an ancient and important part of the wider law
governing marine perils and safety at sea. The modern international law which
primarily governs salvage is the International Convention on Salvage 1989
(hereafter the Salvage Convention 1989 or the Convention).
1-106
The law of salvage applies where the following component elements are in place:
(i) in maritime circumstances, (ii) there is a recognised subject of salvage, (iii)
which is in danger, and (iv) a person falling within the classification of salvors
(traditionally called a volunteer) (v) is successful or substantially contributes to
success in preserving the subject from danger. In the time of sails, salvage was
conducted without the conclusion of a contractual relationship between the parties.
With the evolution of swift means of communication and the increased use of
steam and, more recently, motor driven vessels salvage services are governed
more frequently, in part at least, by an agreement or contract. In either case, both
the provider and the recipient of salvage services have reciprocal duties.
1-107
When salvage services end, the salved value of the preserved property can be
calculated. The calculations include the upper limit of the salvors reward and the
most fundamental of all the relevant factors which must be considered is its
assessment, if not already the subject of a binding agreement. The award to the
salvor includes a reasonable remuneration for his efforts, reimbursement for his
loss or expenditure, plus an additional element of reward to reflect the judicially
promoted public policy of encouraging individuals to salve property imperilled at
sea. All recognised beneficiaries of salvage services are under the obligation to
make a contribution to the Crown and the immunity of foreign sovereign states.
The reward is apportioned amongst the various salvors who have participated in
the successful salvage.
1-108
Salvors remedies for enforcing their claim include a maritime lien in support of
a right to proceed in rem or in personam. Salvage claims fall within the jurisdiction
of the Admiralty Court, although in the last century salvage claims were
increasingly dealt with not judicially but by arbitration rather than judicially.
British Shipping Law, Kennedy & Rose. Law of Salvage, by Francis D. Rose,
Sweet and Maxwell Thomson Reuters, 7th edn, 2010 pp.1-7.
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4.2
THE CONCEPT OF SALVAGE UNDER MARITIME LAW
1-109
Brice defines salvage as a right in law, which arises under English law when a
person, acting as a volunteer (i.e. without a pre-existing contractual relationship
or a legal duty so to act) preserves or substantially contributes to preserving any
vessel, cargo, freight or other recognised subject of salvage from danger at sea.
This is known as the civil salvage as opposed to military, which is the rescuing
of property from the enemy at war times for which a reward is attributed by the
Court of Admiralty sitting as a Prize Court.
1-110
The right of an award rather than remuneration arises from the fact that salvage
is a combination of a private right and public policy. It has a dual purpose, to
compensate the salvor for the benefit he has offered to the salved property and
to provide an incentive to seafarers to take risks for the purpose of assisting
others in danger.38 The parties involved may enter an agreement for the
rendering of salvage services but the right to be rewarded for salvage at sea
under common law is based both on equitable principles and public policy and
is not contractual in origin.39 The law seeks to secure fairness for both the
owners of property and the salvor. Each interest that has received a benefit from
the salvage services must contribute.
1-111
Thus, the foundation of salvage is necessity, when the subject of salvage has
been in danger at sea and services are offered, even without request, and the
circumstances are such that a prudent owner would have accepted them.
Mandaraka-Sheppard, Informa, London, 2009, pp.634-635
Brice, G., Maritime Law of Salvage, 4th edn., 2003, Sweet and Maxwell
4.3
LEGAL FRAMEWORK OF SALVAGE
1-112
The merit of rewarding maritime salvors had always been recognised as selfevident.
1-113
The history of salvage law has its origins in the early civilisations. Phoenicia,
Carthage and Athens all had a strong maritime and commercial presence but
none of them set the foundations for an authoritative maritime law. It was in
Rhodes, the cradle of nautical jurisprudence, where the first maritime code was
formulated. The Romans who conquered Rhodes preserved these laws. Emperor
Augustus sanctioned the use of Rhodian laws in maritime cases in Rome. The
contribution of the Romans was that they added the notion of rewarding a
volunteer who saved or improved the property of another even without the
knowledge or consent of the owner. Many European countries maintained this
concept in their marine law under the title Rhodian Code. Anglo-American
jurisprudence adopted this concept from the Romans and provided that the
volunteer salvor should be rewarded for his efforts on the basis of the
38
The Industry [1835] 3 Hagg 203.
39
The Five Steel Barges (1890) 15 PD 142 at 145.
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circumstances and in proportion to the dangers involved.40 The law of salvage

originated to preserve property and promote commerce. In the Seven Coal
Barges,41 it is stated that: ...the very object of the law of salvage is to promote
commerce and trade and the general interests of the country, by preventing the
destruction of property.... These goals remain the most prevailing ones.
Admiralty and Maritime Law. Practitioners Edition, Vol. 1, by Robert Force, A.N.
Yiannopoulos, Martin Davies, 2007, Beard Books, Washington, p. 466
1-114
Lord Stowell, the Admiralty Judge who established the foundations of English
Admiralty law, has said:
It is what the law calls jus liquidissimum, the clearest general right that they
who have saved lives and property at sea should be rewarded for such
statutory exertions.
Sweet and Maxwell Thomson Reuters, 7th edn, 2010.
1-115
The current legal framework of salvage was first established by the decisions of
the Admiralty Court in the 18th and 19th centuries. Its fundamental principles
were established in the early 19th century as a result of the need which emerged
from varying and unsettled cases to administer justice and proceed on equitable
doctrines of fairness. These principles were continually refined by judges of the
Admiralty Court but it was only in 1910 when they were unified in the provisions
of the first international salvage convention.
1-116
A salvage reward would originally become payable when maritime property was
saved from a peril by a volunteer, i.e. a person who could not claim salvage on
the basis of a pre-existing relationship with the relevant property. The reward
could not exceed the salved value of the property because otherwise its owner
would not have a benefit from the efforts of the salvor. Salvage at the time of
those decisions was, therefore, still to a large extent a purely voluntary service,
often non-contractual, offered by ordinary ships which were incidentally passing
the distressed ship. By the end of the 19th century a professional salvage
industry had developed and, nowadays, almost all salvage work is performed by
professional salvors. The zenith of salvors was in the 1970s. The improvements
in the safety of vessels in the last decades, have led to a declining demand for
their services, and this has resulted in the current controversies in the law.
Shipping law. Fifth edition, by Simon Baughen, Routledge. Taylor and Francis
Group, London & New York, 2012, pp.274-275
4.4
THE SALVAGE CONVENTIONS
1-117
The International Maritime Organisation (IMO) attempted for the first time to
unify the principles on the law of salvage with the Brussels Convention 1910.
This Convention was enacted only partly into English law by the Maritime
40
The Calypso (1828) 166 ER 221.
41
21 F. Cas. 1096 at 1097 (CCD Ind. (1870)) (No. 12, 677).
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Conventions Act (MCA) 1911. The Convention was amended by the Brussels
Convention on Salvage of Aircraft 1938 in order to extend the law of salvage to
salvage by or to seaborne aircraft.
1-118
The provisions of the 1910 Convention, however, proved to be inadequate to

cover the needs of problems caused by big disasters which resulted in damage
to the marine environment. It was considered, therefore, that salvors should be
encouraged with an incentive to prevent or minimise such losses. The first
initiative to this purpose was an inclusion in the LOF 1980 of an enhanced
award, when the salvor, in addition to saving property, also prevented pollution
from oil tankers, and of a safety net in the form of compensation for the salvors
expenditure when he failed to earn an award because the tanker sunk (i.e.
property was not salved), but he prevented pollution to the coastline. Therefore,
the general principle of no cure, no pay was deviated from but it provided an
incentive to salvors to undertake salvage services involving oil tankers. The
enhanced award was connected to the property salvage (payable by the
underwriters of the ship and cargo) but the safety net became known as the
liability salvage (payable by the Protection and Indemnity (P&I) insurers of the
shipowners).
1-119
The Brussels Convention for the Unification of Certain Rules of Law Relating to
Assistance and Salvage at Sea 1910 was replaced by the 1989 Salvage
Convention (referred to as the Convention).
1-120
The 1989 Convention was enforced internationally on 14 July 1996 although its
application may vary from state to state due to the power given to the Contracting
States to make reservations in relation to specific provisions of the Convention.
In the UK the Convention was enacted it into English law by the Merchant
Shipping (Salvage and Pollution) Act (MS(SP)A) 1994 which came into force in
the UK on 1 January 1995. The 1994 Act was repealed and the provisions of the
Convention have been included in Schedule 11 to the MSA 1995.
1-121
The substantive changes to salvage law provided in the Convention were first
incorporated in the LOF 1990. Before the Convention gave these changes the
force of law as incorporated in the LOF 1990 they only had a contractual
effect. The provisions of the Convention have the force of law since 1 January
1995 as they were enacted into English law by statute whether or not the parties
enter into a contract, unless the parties to the LOF choose to contract out of
some provisions of the Convention. The new Convention modified the concepts
of enhanced award and safety net, contained in the 1980 LOF and the new
provisions were incorporated into LOF 1990. The enhanced award is
considered when the arbitrators assess the award under Article 13(1)(b), and
the safety net is known as the special compensation provision under Article
14(1) and (2). They apply to environmental damage from oil pollution, to
substantial physical damage to human health, or to marine life, or resources in
coastal or inland waters or the nearby areas affected by the pollution,
contamination, fire, explosion or similar major incidents (Article 1(d)). The
special compensation of Article 14(1) is based on the salvors expenses (as
they are provided in Article 14(3)) and it is available if the salvor has failed to
earn the award under Article 13, which should be at least equivalent to such
special compensation. The shortfall between an award and the expensesbased special compensation is payable by the shipowners. Their liability
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insurers, the P&I Clubs, are made directly responsible for any salvage award
involving environmental considerations. The special compensation includes a
maximum of 30% of the salvors expenses. The tribunal, however, may consider
it fair and just to further increase it up to a total of 100% of the salvors
expenses.
1-122
Article 14(4) provides that special compensation shall be paid only if and to the
extent that such compensation is greater than any reward recoverable by the
salvor under Article 13. The award of Article 13 must be assessed separately
from the special compensation of Article 14. Therefore, after the tribunal has
assessed the sums under Articles 13 and 14 separately it must then consider if
the sum awarded under Article 13 exceeds that under Article 14 in which case
the latter must be disregarded.
Thus if:
Salvage award under Article 13 is US $600,000
Salvage expenses under Article 14(3) is US $500,000
only the salvage award is payable apportioned pro rata between ship, cargo and
freight.
When the Article 14 sums exceed the award of Article 13 the difference is
payable by the shipowner (Article 14(4)).
Salvage award under Article 13 US $600,000
Salvors expenses under Article 14(3) US $500,000
30% under Article 14(2) US $150,000
Total payable under Article 14 US $650,000
Balance payable by shipowner US $50,000
1-123
42
These provisions were considered by the first arbitrator, the Appeal Arbitrator,
the Court of Appeal and finally by the House of Lords in The Nagasaki Spirit 42
In this case on the night of 19 September 1992, the 100,000-ton crude oil carrier
Nagasaki Spirit collided with the 27,000-ton container ship Ocean Blessing at
the northern entrance of Malacca Strait. As a result of the collision approximately
12,000 tonnes of crude oil were spilled into the sea and a massive fire started.
Two members of the crew of the Nagasaki Spirit survived the fire and all
members of crew of the Ocean Blessing lost their lives. The salvor agreed to
salve the Nagasaki Spirit and her cargo and also the Ocean Blessing in terms
of LOF 1990. Salvage tugs eventually extinguished the fire. There was concern
Semco Salvage and Marine Pty. Ltd v Lancer Navigation (The Nagasaki Spirit ) [1997] 1 Lloyds Rep. 323.
1-34
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that the Nagasaki Spirit might cause further pollution by spilling the rest of her
cargo and the Malaysian police ordered the salvors to tow the vessel away from
the Malaysian coast. The vessel was anchored off Belawan in Indonesia and
following a permission granted by the Indonesian government a ship-to-ship
transfer of her cargo was carried out. The Nagasaki Spirit was then redelivered
to her owners in Singapore. The contractors claim against the owners for
salvage remuneration (based on LOF 1990 and the 1989 Convention) was
initially referred to arbitration and then appealed to the Court of Appeal and
finally to the House of Lords.
1-124
The first arbitrator was primarily concerned with the traditional salvage reward
of Article 13 and also applied the formula for enhancement of the expenses of
Article 14.2, which exceeded the salvage award of Article 13 and the special
compensation caused a dispute. The Appeal Arbitrator disagreed with the
decision of the first arbitrator on the basis that the traditional salvage award of
Article 13 was too low and he increased it. In regards to special compensation
he held that:
the ability in certain cases to obtain an award of special compensation is
an additional incentive, but it is a fall-back or safety net. It is only awarded
when it is greater than any award recoverable for salvage. It follows that in
any case where the services are substantial the salvage award ought to be
more, and where possible significantly more, than what would be awarded
by way of special compensation, unless the amount which can be awarded
for salvage is constrained by the value of the salved fund.
1-125
He adjusted the award by calculating the amount in terms of Article 14, not
exceeding the award in terms of Article 13 and no special compensation was
awarded. The salvor appealed and the appeal was dismissed by the Court of
Appeal as it agreed with the Arbitrators arguments to which the salvor appealed
to the House of Lords.
1-126
The House of Lords decided that:

A fair rate for equipment and personnel actually and reasonably used in the
salvage operation in Article 14.3 means a fair rate of expenditure and did not
include any element of profit. This was clear from the context and in particular
from the references to expenses in Article 14.2 and the definition of salvors
expenses in Article 14.3; the computation prescribed by Article 14.3 required
the fair rate to be added to the out of pocket expenses, as clear an instance
as one could find of a quantification which contained no element of profit. The
ascertainment of the fair rate had necessarily to be performed with a fairly
broad brush. Article 14.3 is not concerned with the remuneration, but with a
more restricted basis of recovery. In the context of Article 14, the word rate
simply denoted an account attributable to the equipment and personnel
used. Resort to the travaux preparatoires was not strictly justified, as the
meaning of Article 13 was clear enough. The analysis of the travaux, however,
reinforced the view formed of the words in Article 14, read in their context.
1-127
The International Convention on Oil Pollution, Preparedness, Response and

Co-operation 1990 (OPPRC Convention) was also concluded at conference in
London in November 1990. The OPPRC Convention is in force internationally
1-35
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and it contains provisions on salvage policy, contingency plans and reporting of

casualties. Harbour authorities and ships are required to have oil pollution
emergency plans. It also provides for oil pollution reporting procedures, including
national contingency plans and promotes international cooperation on receiving
information about oil pollution incidents.
4.4.1
Application of the 1989 Convention
1-128
The Convention shall apply:
1-129
By virtue of Article 2, whenever judicial or arbitral proceedings in connection

to matters provided in the Convention commence in a state party.
By virtue of Article 6(1), to any salvage operations unless otherwise

expressly or impliedly agreed by contract. Therefore, it is at the discretion
of the parties to contract out of the Act or parts of it by including a term in
their contract.
The Convention shall not apply:
Subject to Article 5 to warships or other non-commercial state-owned

vessels unless a state party decides the opposite for warships
(Article 4).
To salvage operations controlled by public authorities (Article 5). The

salvors carrying out such salvage operations are entitled to the rights and
remedies provided in the Convention but whether the rights and remedies
of the Convention are available to a public authority being under the duty
to perform salvage operations shall be determined by the state where such
authority is situated.

4.5
SALVAGE UNDER CONTRACT
1-130
In old times, salvage used to be rendered by persons or ships using personal

skill and efforts endangering their lives in order to undertake to rescue property
from danger without a specific contract. The salvor could withdraw at any time
and yet be entitled to claim a reward if his services had contributed to the
successful saving of the ship. Before 1875, professional salvage contractors did
not exist and there were no express contracts.
1-131
By the last part of the 19th century salvage was rendered under agreements on
a no cure, no pay basis, which developed into a particular form of contract
Lloyds Open Form (LOF). From the second half of the 20th century, most
salvage services, with the exception of standing by a vessel in distress, are
performed by professional salvors under a salvage agreement (LOF). Under
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LOF, the salvage contractor is under the continuing obligation to bring the ship
to a safe port, to use his best endeavours to salve her and to provide the
equipment and labour reasonably suitable for the circumstances. Professional
salvors maintain tugs and equipment, waiting for an opportunity to assist and
earn salvage reward.
1-132
Contracts are usually entered into under LOF (1980, 1990, 1995, 2000 and now
the 2011 LOF which, as the previous one, incorporates Lloyds Standard Salvage
and Arbitration Clauses (LSSA clauses) which contain provisions of an
administrative or procedural nature). The salvors receive no salvage award
where property is not salved under these contracts (no cure, no pay). The
concept of special compensation to recover expenses for efforts made to prevent
or minimise damage to the environment, whether or not property is saved, has
developed in recent years. This was the main reason for the new International
Salvage Convention 1989.
1-133
The contract has been judicially categorised as one for work and labour that is
only subject to the principles of salvage law to the extent that these have been
expressly or impliedly incorporated into it. Nonetheless, the contract incorporates
many of the salient features of the general law of salvage in particular the
principle of no cure, no pay although there are important differences. One
important feature of the contract is that the quantum of any award is left open
to be determined subsequently in London before Lloyds arbitrators, applying
English law. Another crucial feature is that, under LOF, salvage is admitted,
thereby obviating the need for the salvor to show that the vessel was in danger
at the time that the agreement was made.
4.6
THE ESSENTIAL ELEMENTS OF SALVAGE
1-134
The essential ingredients of a valid salvage service are:
43
The service must be given to a legally recognised subject of salvage

i.e. vessels, their apparel, cargo, merchandise, bunkers, wreck, freight. Not
every property in tidal waters is maritime property. Therefore buoys or
other like structures are not included but only vessels used in navigation
(even unregistered vessels such as barges and rafts). Where the property
salved belongs to the Crown, section 230 of the Merchant Shipping Act
1995 provides that the salvor may claim a salvage reward as against a
private person. The saving of human lives does not justify a claim for
salvage unless it is somehow connected with the salvage of maritime
property.43
The Renpor (1883) 8 PD 115 at 117.
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The service must be voluntary. The person who rendered assistance

may lose his entitlement to salvage if he did not act as a volunteer, i.e.
he was under the duty towards the owners of the salved property before
the danger commenced. The performance of salvage services, however,
under a contract of salvage (LOF) does not deprive the salvor from his
status as a volunteer as at the conclusion of the contract he is not under
the duty to assist the ship in distress.
The subject of the salvage must be in danger (real or reasonably

apprehended). There may be risk for physical danger or of financial
consequences and the salvor must prove that any prudent seamanship
in charge of the venture would have accepted the salvors
assistance.44
The service must be successful. Success need not, however, be total

but it must confer benefit. In The Rene [1995] a vessel answered a call for
assistance but her efforts produced no success and indeed worsened the
situation since the two ships collided through the fault of the salving vessel.
This in itself caused the salvors claim to fail, but had that fault not occurred
the court admitted that the owners of the salving ship would have been
entitled to an award.
1-135
As for the geographical limits of salvage the 1989 Salvage Convention provides
that salvage may include assistance in navigable waters or in any other waters
whatsoever.
4.7
DUTIES OF THE SALVOR AND THE SALVEE
1-136
Article 8(1) and (2) of the 1989 Salvage Convention following the principles set
out by The Tojo Maru 45 provides the duties of the salvor and the salvee towards
each other. The Convention does not provide sanctions for the breach of these
duties but the intention is implied by the actual provision of duties. The legal
consequence for breach of these duties would be a claim in damages on a
contractual or tortuous basis. The duties are as follows:
Duties of the salvor
To conduct the salvage operations with due care.
To seek assistance from other salvors if this is deemed necessary in the

circumstances.
To perform his duties with due care to the environment.
To accept the intervention of other salvors if this requested by the owner

or the master of the vessel in distress provided that his award will not be
prejudiced if the request was unreasonably made.
44
The Charlotte [1848] 3 Rob 68. See also The Tramp [2007] EWHC 310.
45
[1973] AC 242.
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Duties of the salvee
To cooperate fully with the salvor during the salvage operations.
To exercise due care to the environment throughout the salvage operations.
To accept redelivery when the vessel or property has been brought to a

safe place when this has been reasonably requested by the salvor.
1-137
Article 18 of the 1989 Salvage Convention also provides that salvorial misconduct
may lead to the reduction or loss of entitlement of the salvor to a salvage award
or to special compensation and Article 14(5) refers to the possibility of the salvor
being deprived from part or the whole of special compensation due if being
negligent he failed to prevent or minimise damage to the environment.
4.8
WHO IS ENTITLED TO CLAIM?
1-138
All those who in any way contribute to the success of salvage operations are
entitled to claim and participate in the salvage award. This is in accordance with
the context of public policy which encourages the provision of salvage
services.
1-139
A salvage claim may be raised by an owner of the vessel rendering assistance,

the crew of the salving vessel, by any other person who renders assistance or
who allows their property to be used for rendering assistance. In certain
circumstances owners of cargo carried on board the vessel may perform
services which entitle them to claim salvage reward.46 Where more than one
salvor has participated in the operation of salvage services a single award will
be made and it will be apportioned between them with a further apportionment
being made between the owners and crew of each vessel.
1-140
Previously, the claimant should be within the traditional classification of qualified

salvors but, in fact, it was never and it is not true that a salvage award should be
made to salvors who come within a certain classification. The classification is
only an indication of the nature of services claimants provided.
1-141
A salvage reward is also not necessarily subject to the claimant being a

volunteer. The opposite may be true: i.e. the salvors status is not a precondition
of an award but a matter which in certain circumstances may deprive him of the
whole or part of a reward to which he is otherwise entitled.
1-142
A claimants interest in the salved property does not per se disentitle him from
claiming salvage. It is true that, for instance, misconduct may reduce or eliminate
a salvage award.
Sweet and Maxwell Thomson Reuters, 7th edn, 2010.
46
The Sava Star [1995] 2 Lloyds Rep. 134.
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4.9
CALCULATION OF THE SALVAGE AWARD
1-143
Salvage services end when the maritime property concerned has reached a
place of safety. Salvage is awarded because maritime property has been salved.
The value of the property salved constitutes the fund out of which the salvage
award is payable. The award can never exceed the value of the property salved.
A prerequisite for the assessment of the award is to fix the value of the salved
property when it arrived at the place of safety after the successful completion of
the salvage operations. This puts the so-called cap on the total amount of any
award and also determines the contributions to any award of the different owners
of the salved maritime property. Each interest contributes pro rata according to
the salved value of its property.47 The various degrees of risk or difficulty
regarding the salved property will not be considered, unless they can justify the
making of a separate award for each item salved.
1-144
For instance, if the salved value of the ship is US $1.5 million and that of the
cargo is US $3 million, the total award cannot exceed US $4.5 million. Ship
contributes by one third and cargo by two thirds. Therefore, if the overall award
is US $600,000, the ships contribution would be US $200,000 and the cargo US
$400,000. In case lives are salved and hence the award is enhanced, the
amount of the enhancement will be apportioned pro rata between the owners of
the maritime property salved. Each owner of maritime property is liable only for
his share of salvage award. The salved property must be valued at the time and
place at which the salvage services terminate. The salvors bear the burden of
proof for its value.
1-145
Any reductions in the value of the property after the salvage services are
terminated due to subsequent events, such as damages in the market value of
cargo, will be disregarded.48
1-146
More specifically the calculations will be based on the:
1-147
Ships value. The ships value is usually assessed at her value in sound condition
minus the costs to place her in this condition. Alternatively, the ships value may
be assessed according to her scrap value if this results in a higher valuation.
1-148
Repair costs are easily proved, but there are various approaches in regards to
the assessment of the vessels sound value such as: (a) to assess the ships
value on the open market; (b) in the absence of a sale of the salved vessel,
evidence of sales of similar ships sold at the same time when the salvage
services terminated; and (c) the ships existing charter commitments to be taken
into account when they raise the value of the ship.
1-149
The following items are deductible from the ships value: survey costs, the cost
of delivery to either the port of repair or to the scrapyard, the costs of discharging
cargo if this undertaking falls on the shipowners, the costs of repairs of any
damage to the ship (if either caused during or prior to the casualty), port charges,
pilotage, towage, additional insurance premiums and running expenses during
any repair period.
47
The M Vatan [1990] 1 Lloyds Rep. 336.
48
The Josefina Thorden [1945] 1 All ER 344.
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1-150
Cargos value. There are two ways of valuing cargo: either according to the value
of sales of similar goods at the port of destination or their price at the port of
shipment. If the latter method is followed, a sum for freight and insurance must
be added to the fob price, and a profit margin, say 10%, to the cif price. Freight
is not deductible from the salved value of cargo.49 Where the cargo is brought to
a port of refuge and then carried on to the port of destination in another vessel,
the value of cargo is assessed as at the port of refuge.
1-151
Freight value. Freight is frequently referred to as a separate head of salvage but

in practice any freight that is payable by reason of the salvage operations will
form part of the salved value of the ship. Freight due on delivery at the contractual
destination will be preserved for the shipowner if the salvage services end at that
place. The outstanding freight will be calculated in addition to the ships salved
value at that place. Pre-paid freight is at the risk of cargo interests. Pre-paid
freight will not be considered in the assessment of the salved value of cargo, but
it will appear in the cif value of the cargo at the port of refuge.
1-152
If the services end before the contractually agreed port of discharge, the
shipowners are entitled to full freight in case the cargo owner prevented them
from carrying the cargo to its destination.
1-153
Fixing the award. After the claimants have ascertained the salved values the
court or arbitrators assess the award to be made to the salvor. Normally the
award does not exceed 50% of the total salved value although this is not always
the case.50
1-154
Regarding salvors, the following factors will be taken into consideration: the
degree of danger to life in rendering the services; the classification, their skill
and conduct; the degree of danger to the salvors property; the length of time
involved in the service and the nature of work done; responsibilities undertaken
in the service; and loss and expenditure incurred in the service. Professional
salvors are treated with more generosity.
1-155
Serious misconduct by salvors may result in a reduction or a forfeiture of any

award regardless of whether the services were successful wholly or in part.51
The burden of proof for misconduct lies on the owners of the respective maritime
property and the standard of proof is such as leaves no reasonable doubt.52
1-156
Similar principles in the assessment of the award are applied by Article 13 of the
1989 Salvage Convention.
1-157
Apportioning the award between salvors. Where more than one salvor is
involved in salvage services, the share of each one of them is determined on
the basis of the same principle applied to the assessment of the whole award.
Where the salvors have rendered separate services at different times, the first
salvors are treated more favourably. However, if the second salvors contribution
49
The Charlotte Wyllie [1846] 2 W Rob 495 at 497.
50
The Lyrma (No. 2) [1978] 2 Lloyds Rep. 30.
51
The Magdalen (1861) 5 LT 807.
52
The Atlas [1862] Lush 518 at 529.
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to the preservation of the ship or cargo was more substantial they will receive
a larger share of the award.53 If the second salvors willingly replaced the
services of the first salvors, they will be entitled to a reward only if they can
prove that there was no reasonable probability that the first salvors could save
the vessel on their own.
1-158
Any award to the owners of a salving vessel will also be apportioned between
the owners and the crew. The crew usually receives a quarter-share out of which
the master will normally receive one-third and the remainder will be shared
amongst the crew in accordance with their rates of pay. According to the
provisions of Article 15(2) of the 1989 Salvage Convention such apportionment
is to be determined by the law of the flag of the salving vessel.
1-159
The time bar for commencing claims in connection to salvage is two years
(section 8 of the Maritime Conventions Act 1911) unless certain circumstances
provided in the Act allow the extension of these time limits.
4.10
SPECIAL COMPENSATION P&I CLUB CLAUSE (SCOPIC)
1-160
SCOPIC was introduced on 1 August 1999. The intention was to be used in

conjunction with Lloyds Open Form of Salvage Agreement (no cure, no pay)
LOF 1995. The 1989 Salvage Convention (Article 14) provided that salvors
(Contractors) could receive Special Compensation (which included their
expenses and a fair rate for tugs and equipment used in salvage operations) in
the event that under certain circumstances the salved fund was insufficient to
allow them to recover adequate remuneration as provided in Article 13 of the
Salvage Convention 1989.
1-161
The SCOPIC clause endorsed this notion and introduced a tariff to calculate the
Contractors Special Compensation in addition to an uplift fixed at 25%. The
traditional awards of Article 13 will be discounted by 25% of the amount which
exceeds the SCOPIC remuneration. Clause 2 of SCOPIC, however, provides
that it is at the contractors discretion to invoke the SCOPIC clause at any time
regardless of the circumstances and of whether or not there is a threat of
damage to the environment. A salvor is likely to opt for SCOPIC if he estimates
that he will receive a higher reward than under Article 13. Should the salvors
notify the owner in writing of their intentions to invoke SCOPIC, then under
clause 3 the owner shall provide the contractor within two working days
(excluding Saturdays and Sundays and holidays usually observed at Lloyds)
security in the form of a bank guarantee or P&I Club letter in the amount of $3
million, inclusive of interest and costs. Special Casualty Representatives (SCR)
and representatives for hull and cargo were introduced. Marine property
underwriters access to information about the services was also improved.
SCOPIC was welcomed by the maritime community but through its use a
number of matters were identified which needed clarification and a number of
gaps in the wording which needed to be filled in, particularly in Appendix A (Tariff
53
The American Farmer (1947) 80 Ll L Rep. 672.
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Rates). The SCOPIC drafting sub-committee produced an amended version of

SCOPIC (SCOPIC 2000) which came into effect on 1 September 2000 in order
to answer the above criticism which was later updated by SCOPIC 2007. The
current version of SCOPIC in force is SCOPIC 2011.
Institute of Chartered Shipbrokers, Shipping Law, 2011/2012 Centenary Edition,
Witherby Shipping Business, pp. 88-90
1-43
5.
MARINE POLLUTION
1-162
The ocean is a popular route for the transportation of goods as it is relatively

cheap, safe and quick. However, its state has, on several occasions, been
degraded by shipping activities and accidents. The freedom of the seas in the
past meant that environmental pollution was unregulated. The shipping industry
would prioritise business efficiency and financial success disregarding the
practice of ships to clean their tanks with water and discharge the mixture of oil
and water or even hazardous wastes at sea.
1-163
The issue of preventing pollution of the sea was first seriously discussed in 1954
at an international conference which adopted the International Convention for
the Prevention of Pollution of the Sea by Oil (OILPOL 1954) as an initial attempt
to prevent pollution of the sea from oil tankers. Although the OILPOL Convention
was ratified pollution control was still not of utmost urgency for the IMO.
1-164
It was the Torrey Canyon disaster in 1967 when a supertanker capable of

carrying 120,000 tons of crude oil ran aground on Polland Rock off the coast of
England at high speed which caused the biggest oil pollution incident ever
recorded up to that time. The incident demonstrated the need to increase the
measures imposed to prevent oil pollution from ships and also the inadequacies
of the then existing maritime law to address issues of liability and compensation
following accidents at sea. The Torrey Canyon set in motion the chain of events
which eventually led to the adoption of MARPOL and conventions providing for
liability and compensation.
1-165
In 1969 the OILPOL 1954 was amended and a new procedure was introduced
known as load on top which aimed to save oil and reduce pollution.
1-166
However, the rapid growth of the maritime transport of oil, the enormous size of
tankers, the increasing amount of chemicals transported at sea and an increasing
global concern for the environment, led many countries to believe that the
OILPOL 1954 Convention was no longer adequate, despite its amendments.
1-167
In 1969, the IMO Assembly decided to hold an international conference with the
purpose to adopt a new convention, which would incorporate the regulations
and amendments of the OILPOL 1954.
1-168
The conference was set for the autumn of 1973 but preparatory meetings
commenced in 1970. In the meantime, in 1971 IMO adopted further amendments
to OILPOL 1954, which limited the size of cargo tanks in all tankers ordered after
1972. The intention was that in case the vessel was damaged, a more limited
amount of oil would end up in the sea.
1-169
The 1973 conference which adopted the 1973 International Convention for the
Prevention of Pollution from Ships incorporated much of OILPOL 1954 and its
amendments into Annex I. The Convention, covered issues such as pollution by
oil, chemicals, harmful substances in packaged form, sewage and garbage and
it also expanded and improved the previous Convention by including provisions
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for continuous monitoring of oily water discharges and the requirement for
Governments to provide adequate port reception and treatment facilities at oil
terminals and ports. It also listed a number of Special Areas where more
stringent standards for discharge applied.
1-170
The Argo Merchant incident, however, in 1976 in US waters triggered the

demands for more stringent action in order to prevent accidental and operational
oil pollution. The Argo Merchant was a small tanker carrying 27,000 tons of oil
which ran aground off Massachusetts and caused massive public concern as its
oil slick threatened New England resorts and the Georges Bank fishing
ground.
1-171
In 1977 the US initiated a request to the IMO Council to consider further

regulations for tanker safety which led to the 1978 Conference on Tanker Safety
and Pollution Prevention. This conference adopted the 1978 protocol to the 1973
MARPOL Convention. The Protocol expanded the requirements for tankers to
reduce the likelihood of polluting the marine environment by, for instance,
requiring ballast tanks to be protectively located in areas of the ship where they
would minimise the possibility of oil outflow in case of a collision or grounding.
Additional measures provided in the International Convention for the Safety of
Life at Sea (SOLAS) 1974 were also incorporated in the 1978 Protocol. The
SOLAS Protocol included stricter requirements for surveys and certification and
avoidance aids to prevent collision.
1-172
Both the 1978 MARPOL and SOLAS Protocols raised substantially the
construction and equipment standards for tankers by imposing more stringent
regulations.
1-173
Despite the stricter regimes to avoid oil pollution a new incident occurred in 1978
with Amoco Cadiz which was en route from the Persian Gulf to Rotterdam, The
Netherlands, and contained 223,000 tons of light crude oil. Severe weather
resulted in the breakup of the ship before any oil could be pumped out of the
wreck polluting 130 beaches with its oil spill.
1-174
A sufficient number of states ratified MARPOL by October 1982, and the

MARPOL 1973/78 Convention entered into force on 2 October 1983. Since then
many amendments have been made.
1-175
In 1989, another tanker accident occurred. The Exxon Valdez, ran aground on a
reef off the Alaskan coast spilling about 11 million US gallons of crude oil in US
waters. As a result of this the US introduced the Oil Pollution Act 1990 (OPA 90)
which stipulates that all tankers entering US ports must have double hulls. At the
same time the US requested IMO to make double hulls a mandatory requirement
of MARPOL. The oil industry resisted double hulls being mandatory as they
would be burdened with the cost of retrofitting existing tankers.
1-176
The Marine Environment Protection Committee (MEPC) eventually agreed to make

mandatory double hulls or alternative designs provided that such methods ensure
the same level of protection against pollution in the event of a collision or stranding.
These design methods should also be approved by the MEPC. The 1992 double
hull amendments were adopted in 1992 and entered into force in 1993.
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In the same year (1993), however, the Braer, following an engine failure ran
aground in severe weather conditions on Garths Ness in Shetland. The ship
broke apart and a total of 84,700 tonnes of crude oil spilled into the sea. The
incident led to the Donaldson Inquiry for the prevention of pollution from
merchant shipping. A report was produced in response to the inquiry with the
title Safer Ships, Cleaner Seas.
(Mark Wallace [1995] Lloyds Maritime and Commercial Law Quarterly 404).
1-178
A few years following the above incident, early on the evening of 15 February
1996 the Sea Empress a single-hull oil tanker grounded off south west Wales
and spilled approximately 72,500 tonnes of crude oil into the sea. As a result of
this incident the Welsh Office set up The Sea Empress Environmental Committee
whose task was to evaluate the impact of the spill and deal with the post-spill
clean-up operations and who prepared a report in order to pressurise the
Government to make coastal councils legally responsible for clean-up
operations.
1-179
The sinking of the Erika, also off the coast of France, in 1999 caused the French
government and the Maltese maritime authority to carry out investigations which
were concluded that vessel age, corrosion, insufficient maintenance and
inadequate surveys resulted in the structural failure of the ship. In response to
the incident, a need for additional international measures in order to abolish
substandard vessels emerged.
1-180
At the same time IMO adopted a series of other measures:
In 2000, the limits of compensation paid to the victims of pollution by oil

from oil tankers were raised by 50% under the CLC Convention and the
IOPC Fund.
In the same year, IMOs Maritime Safety Committee (MSC) introduced

amendments for enhanced inspections during surveys of bulk carriers and
oil tankers.
IMO took action on several operational matters with the aim to enhance
safety and minimise the risk of oil pollution.
1-181
The Prestige incident, in November 2002, off the north west coast of Spain,
called for further amendments regarding single-hull tankers and the introduction
of measures for the application of the Condition Assessment Scheme (CAS) for
tankers. The EU was also determined to impose more stringent restrictions and
penalties on those who pollute the marine environment. http://www.imo.org/
OurWork/Environment/PollutionPrevention/OilPollution/Pages/Background.
aspx) 29/07/2012.
1-182
The aforementioned catastrophic incidents raised a number of complex legal

and technical issues. These include international liability for environmental
pollution and also liability and compensation for claims connected to death and
personal injury, loss of or damage to baggage of passengers carried by sea,
claims of compensation for wreck removal which are a hazard to safe navigation
and the environment of coastal states. These incidents also made it obvious that
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the legislation of individual states did not provide a sufficient basis to respond to
these international problems. Therefore the need for the development of an
international scheme based on convention law was appreciated and a separate
field of regulatory obligations coupled with penal and civil liability evolved.
1-183
The International Maritime Organisation (IMO) has adopted more than 25 major
conventions with the main strands of focus being maritime safety, pollution
prevention and liability and compensation. There is also an extensive range of
free-standing mandatory and non-mandatory codes. All these instruments have
drastically reduced vessel-sourced pollution and have proved the commitment of
the IMO and the shipping industry to the protection of the environment. EU being
the other main body providing legal instruments has adopted regional measures
in order to complement or enhance the international regulatory regime. Industry
has developed its own processes of self-regulation with the purpose of making
shipping safe and efficient. Achieving safety and pollution prevention depends on
a chain of collective responsibility that includes flag states, port states, shipowners,
ship operators, seafarers, classification societies, insurers and charterers.
Prevention of Environmental Pollution by Ships. Regulatory and Compensation
Regimes and Industry Standards
(available on: http://www.nee.gr/
downloads/93UGC%20pollution%20prevention%20brochure.pdf)
1-184
In the Appendices you will find a list of regulations but as it is impossible to get
into a detailed examination of this massive subject we will mainly discuss the
following international conventions, the provisions of which focus on liability and
compensation and ships standards in construction, operation and manning:
The 1969/1992 Civil Liability Convention (CLC).54
The 1971/1992 International Convention on the Establishment of an

International Fund for Oil Pollution Damage (the Fund Convention).55 The
1971 Fund Convention ceased to be in force in 2002 and at present only
the 1992 IOPC Fund is in force.
The 1996 International Convention on Liability and Compensation for

Damage in Connection with the Carriage of Hazardous and Noxious
Substances by Sea (HNS Convention).56
The International Convention for the Prevention of Pollution from Ships

1973 (MARPOL 1973 and its 1978 Protocol)57 and the International
Convention for the Safety of Life at Sea (SOLAS 1974 as amended).58
54
1969/1992 CLC: Adopted on 29 November 1969; entry into force on 19 June 1975; being replaced by 1992 Protocol:
Adopted on 27 November 1992; entry into force on 30 May 1996.
55
The Fund Convention: Adopted on 18 December 1971; entry into force on 16 October 1978; superseded by 1992
Protocol: Adopted on 27 November 1992; entry into force on 30 May 1996.
56
1996 HNS: has not yet entered into force due to an insufficient number of ratifications.
57
MARPOL 73/78: Adopted in 1973, 1978 Protocol, 1997 (Protocol-Annex VI); entry into force on 2 October 1983
(Annexes I & II).
58
SOLAS 1974 (as amended): Adopted on 1 November 1974; entry into force on 25 May 1980; Protocol of 1978; Series
of Amendments last one May 2011; entry into force on 1 January 2013.
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The 2001 Bunker Pollution Convention (BOPC)59 which covers pollution

damage from bunker oil from ships other than tankers and which came into
force in November 2008. The Convention was enacted in the UK through
The Merchant Shipping (Oil Pollution) (Bunkers Convention) Regulations
2006, SI 2006/1244.
5.1
THE 1992 CIVIL LIABILITY CONVENTION AND 1992 FUND CONVENTION
1-185
The 1992 CLC and the 1992 Fund Convention updated the 1969 CLC and 1971
Fund Conventions respectively. The two treaties are applicable to oil pollution
damage from spills of oil from tankers. The scope of their application covers
damage suffered in the territory, the territorial sea or the Exclusive Economic
Zone (EEZ) or equivalent sea area of a state party and also covers the costs of
preventive measures wherever taken.60
1-186
Civil liability for oil pollution is provided in many international conventions. There
are special provisions for tankers as they are under the risk of causing extensive
pollution damage. The shipowner is under the duty to provide compensation for
pollution damage from tankers up to a certain limit and a specially formed legal
entity called the International Oil Pollution Compensation Fund (IOPCF) funded
by money from oil importers can add to the above amount.
1-187
The CLC and Fund Convention apart from providing limitation of liability have
also introduced elements of innovative character such as:
1-188
Strict liability of the shipowner, i.e. liability which does not depend on fault.
The shipowners limit of liability relates to the tonnage of the ship and he
may only be exempted from liability in limited circumstances.
Channelling of liability. Claims can only be pursued against the shipowner

who is obliged to obtain insurance in order to cover such claims.
Compulsory insurance. The shipowner must have the financial resources

to pay compensation to potential victims at all times.
Insurance certificate. The shipowner is obliged to obtain an insurance

certificate confirming that financial security is in force according to the
provisions of the Convention. The certificate must always be on board the
ship and a copy deposited with the authorities of the ship registered.
Direct access. Claims for compensation may be brought directly against

the insurer without having to go through the proceedings of the first
instance against the shipowner.
The aim of the 1992 Fund Convention provisions was to pay compensation to
states and persons who suffered pollution damage and are unable to obtain it
from the shipowner whose ship caused the oil damage because he or his insurer
is financially not in the position to cover the claim fully or if the damage exceeds
59
2001 BOPC: Adopted on 23 March 2001; entry into force on 21 November 2008.
60
Art. II (b) CLC.
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the limit of the shipowners liability as it is provided in 1992 CLC or because the
shipowner is exempted from liability. It also provides compensation to marine
pollution victims higher than those available from the shipowner.
1-189
The 1992 IOPC Fund which is an intergovernmental organisation funded by the

contributions of those individuals who receive more than 150,000 tonnes of
crude oil and heavy fuel oil in a state party to the Convention administers the
compensation. The 1992 Fund Convention provides that the maximum amount
of compensation payable for a single incident is 203 million SDR. This amount
includes the sum paid by the shipowner or his insurer under the 1992 CLC. This
system saves from parties lengthy and costly litigation.
1-190
A new treaty, the 2003 Supplementary Fund Protocol, was enacted in order to
satisfy the concern of some states that the maximum sum available for
compensation under the 1992 Fund Convention may not suffice to cover the loss
or damage suffered in certain circumstances. The amount available under the
Supplementary Fund is 547 million SDR added to the 203 million SDR of the
1992 Fund Convention making the total available amount for each incident 750
million SDR. The latter amount is available to Members to the Supplementary
Fund. This treaty was enforced in 2005. Participation to it is optional and available
only to state parties to the 1992 Fund Convention.
Martinez Gutierrez N.A.(edt.), Serving the Rule of International Maritime. Essays
in Honour of Professor David Joseph Attard, 2010, Routledge. Taylor and Francis
Group, London and New York
1-191
The geographical limits for the application of the 1992 CLC and Fund Conventions
are set within the territory, including the territorial seas, of a contracting state61
where the oil pollution has been caused and also to damage caused within 200
miles from the coast. It also covers the costs of preventive measures wherever
taken. The important matter is not where the incident that caused the pollution
took place but where the pollution damage occurred. Compensation is available
to the victims who suffered damage as a result of the pollution.
5.1.1
Types of Vessel Covered
The 1992 CLC covers ships defined as any sea-going vessel and any
seaborne craft of any type whatsoever.62 Warships and other government
ships used for non-commercial activities are not included in the provisions
of the 1992 CLC.
Ships must be physically suitable to carry oil as cargo ...constructed or

adapted for the carriage of oil in bulk as cargo.
The size of the ship is not relevant but insurance is compulsory for vessels
larger than 2,000 tons.
61
However, there is no requirement that the damage should be only in one contracting state. See Landcatch Ltd v
International Oil Pollution Compensation Fund [1999] 2 Lloyds Rep. 316 at 328.
62
MSA 1995, s. 170 of English law.
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The spill or discharge must be from a vessel with a flag of a contracting

state or which uses the ports or offshore terminals (or territorial waters) of
a contracting state.
5.1.2
Who Is Liable?
1-192
The 1992 CLC provides that the owner of the ship which caused the pollution
damage bears strict liability, i.e. fault of the shipowner does not need to be
proved. However, the shipowner may still claim against the party who is
responsible for the pollution and also maintains the defence of contributory
negligence by a victim of the pollution damage. The owner is defined as the
registered owner and if there is no registration it is the person(s) owning the ship
(or even the company owner).
1-193
Ownership relates to the time the incident occurred. If the oil escaped from two
or more ships their owners are jointly and severally liable for all damage which
is not reasonably separable.
5.1.3
When Liability Arises
1-194
The strict liability arises under the 1992 CLC for pollution damage caused by oil
which escaped or was discharged from a ship following an incident. If more than
one incidents have occurred it is important to distinguish between them as the
limits of liability are applied per incident.
1-195
Incident is any occurrence or series of occurrences which have the same

source of origin and cause pollution damage. Occurrences which constitute a
serious threat to pollution damage are also included in the term incident and
for this reason preventive measures before a potential incident are covered by
the 1992 CLC.
1-196
Pollution damage is a loss or damage outside the ship carrying oil which was
caused by the escape or discharge of oil resulting in contamination. Costs of
preventive measures are also covered for preventing or minimising pollution
damage.
5.1.4
Exclusion of Liability
1-197
The owner may be excluded from his liability for pollution damage if he proves
that:
1-50
The damage was the result of war, hostilities, civil war, insurrection or a
natural phenomenon of an exceptional character caused wholly by a third
partys act or omission with the intention to cause damage. The shipowner
may be exempted under the condition that he is not negligent. For instance,
where the pollution damage has been caused by a collision between a
tanker and another ship and the other ship is liable for the collision the
shipowner of the tanker has the duty to compensate the victims under the
1992 CLC and then sue the owner of the other ship for recovery.
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The oil pollution damage was caused by the negligence or wrongful act of
the government or other authority such as lack of maintenance of lights or
other navigational aids.
Contributory negligence is a defence which reduces the liability of the

shipowner.
The insurer will not be liable if the shipowner is excluded from his liability.
He can also avoid liability if he can prove that the damage was caused by
the wilful misconduct of the shipowner.63
5.1.5
Time Bars
1-198
An action has to be brought within three years from the date the damage
occurred for the rights of compensation to be active under the Civil Liability
Conventions and by no means after six years from the date the incident which
caused the damage occurred. The purpose of the dual time bar is because the
pollution may arise not immediately after the incident but delayed.
1-199
Third-party claimants have the direct right of action against the insurer or another
person who has undertaken to provide financial security for the owners liability
for pollution damage under the 1992 CLC. In this way even if the shipowner is
not in the financial position to pay, recovery will still be available for the victims.
1-200
No claims for pollution damage can be brought against crew members and other
servants or agents of the shipowner, the pilot, the charterer, the manager or
operator of the ship, any person who performs salvage operations with the
consent of the owner or competent public authority and any person who performs
operations in order to prevent oil pollution damage. For any pollution damage
claim action can be brought only against the shipowner or the insurer under the
1992 CLC.
1-201
Persons who are not covered by the protection of the 1992 CLC as, for instance,
shipbuilders classification societies, can be sued directly and therefore they may
potentially be exposed to the risk of unlimited liability based on fault.
5.1.6
Limitation of Liability
1-202
The shipowner is strictly liable but at the same time protected under the limitation
of liability provided in 1992 CLC for circumstances and damages provided by the
1992 CLC.
1-203
The owners and their insurers covered by the Convention are entitled to limit
their liability for oil pollution damage.64 The insurer may always constitute a
limitation fund even in the instances where the owner may not limit his liability.
1-204
The insurer is entitled to the same defences as the shipowner and he may be
required to join the owner in the proceedings. The limits of liability depend on the
63
Art. III 3 and the MSA 1995 s. 165(2).
64
MSA 1995, s. 157(1).
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tonnage of the ship. Since the 1969 CLC the limits have been increased by the
1976 and 1992 CLC Protocol and the 2000 Amendment. In English law the limits
are provided in the MSA 1995 section 157 as updated by the Merchant Shipping
(Oil Pollution Compensation Limits) Order 2003 which gave effect to the 2000
Amendment agreed by the IMO.65
5.1.7
When the Shipowner Loses the Right to Limit Liability?
1-205
The owner may lose his right to limit liability under the 1992 CLC because of his
acts or omissions. Therefore, if the shipowner had the intention to cause damage
or he was reckless and had the knowledge that there was a risk that the damage
would occur as a result he does not preserve his right to limit liability. The
claimant has the burden of proof for the shipowners conduct. The United States
is not a signatory to the Conventions. Instead it has enacted the Oil Pollution Act
1990 (OPA 90) which contains similar provisions but under certain circumstances
it may provide higher penalties. Vessels which enter US waters must have a
Certificate of Financial Responsibility (COFR) issued by their insurers.
5.1.8
Jurisdiction
1-206
The coastal states which have suffered oil pollution either in their territorial
waters or in the Exclusive Economic Zones (EEZs) or where preventive
measures have taken place are competent jurisdictions for claims under the
1992 CLC. The owner may establish a limitation fund in any of the competent
jurisdictions under the 1992 CLC.
5.1.9
The Role of the 1992 IOPC Fund Convention
1-207
The 1971 and the 1992 IOPC Fund Conventions were enacted as a result of the
undertaking of the oil importers to contribute to the compensation of oil pollution
damage. An intergovernmental organisation, the IOPC Fund, was created in
order to manage and organise the contributions. The IOPC Fund contributes
under the following circumstances:
If the pollution damage exceeds the limited liability of the shipowner by the
1996 CLC.
If the shipowner is financially not in the position to provide compensation

or he is exempted (i.e. when the pollution damage has been caused by a
natural phenomenon of an exceptional character etc)66 or he cannot be
identified (provided that the claimant can prove that the damage was
caused by at least one ship).
If the shipowner has undertaken expenditure for preventive measures

under the 1992 CLC67 or clean-up claims by other parties. The IOPC will
65
IMO Legal Committee Resolution Leg. 1/82.
66
Art. III.2 1992 CLC.
67
Art. I.6 1992 CLC.
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cover the excess to the shipowners limit in the same way and to the same
proportion as other claims.68
The IOPC Fund does not compensate for damages caused by acts of war,
hostilities, civil war, etc.
5.1.10
Time Bar
1-208
Claims against the IOPC Fund may be brought before the court within three
years since the incident occurred. The claimant may avoid this time bar by
notifying the IOPC Fund so that the Fund may intervene in the legal proceedings.
If the claimant does not bring a lawsuit within six years from the date the incident
occurred the action is time barred.
1-209
In case the shipowner pays his proportion the IOPC Fund will cover the
outstanding amount or otherwise the IOPC Fund will pay the full amount of
compensation.
1-210
In English law the limits of liability for the IOPC Fund are provided in section 176
Pt I of Schedule 5 to the MSA 1995 as updated by the Merchant Shipping (Oil
Pollution Compensation Limits) Order 200369 as it gave effect to the 2000
Amendment agreed by the IMO.70
1-211
Oil importers with an annual import of 150,000 tonnes or more into a contracting
state contribute financially to the 1992 IOPC Fund.
5.1.11
Jurisdiction for Actions under the IOPC Fund Convention
1-212
The action must have started before a competent jurisdiction under the 1992
CLC and the same state must also be a party to the 1992 Fund Convention for
the same court to have jurisdiction against the 1992 IOPC Fund.
1-213
If an action has commenced in a competent jurisdiction under the 1992 CLC but
this is not party to the 1992 Fund Convention, the IOPC Fund may sue either at
its place of business or another competent jurisdiction which is party to the 1992
IOPC Fund Convention.
5.2
THE HNS CONVENTION
1-214
The 1996 International Convention on Liability and Compensation for Damage

in Connection with the Carriage of Hazardous and Noxious Substances by Sea
(HNS) is modelled on the 1992 CLC and the Fund Convention and was adopted
in 3 May 1996.71 The 1996 HNS establishes strict liability for the shipowner and
a two-tier system in compensation focusing on shipping and cargo interests and
the joint responsibility of the shipowner (first tier) and the traders (second tier).
The two tiers are contained in one treaty instead of two independent ones.
68
Art. V.8 1992 CLC.
69
SI 2003/2559.
70
IMO Leg. 2/82.
71
The HNS Convention had not entered into force by 2009 due to an insufficient number of ratifications.
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Binding the liability of the shipowner with that of the importer did not happen
without difficulties arising from the practical differences between the oil trade
and the trade in hazardous and noxious substances.
1-215
In the IOPC Fund the contributions of traders of fuel and crude oil globally reach
approximately 500 traders, whereas the 1996 HNS covers around 6,000 types
of cargo with almost 500,000 traders involved. Also not all HNS traders are
involved with equally unsafe cargoes and therefore issues had arisen regarding
fair calculation of contributions. The 2010 Protocol to the Convention has been
agreed.
5.2.1
Scope of the Application
1-216
The 1996 HNS covers hazardous and noxious substances carried as cargo and
in certain cases residuals from these cargoes. The substances covered by the
1996 HNS are derived from lists of various international codes drafted for the
maritime safety and prevention of pollution. Examples of these substances are
cargoes of oils, dangerous liquid substances, liquefied gases etc and residues
from these cargoes in bulk. It also covers the transport of packaged dangerous
hazardous and harmful cargoes (such as cyanides, pesticides etc) covered by
the International Maritime Dangerous Goods Code.72
5.2.2
Ships Subject to the 1996 HNS
1-217
A ship is defined as any seagoing vessel and seaborne craft, of any type
whatsoever.73 The hazardous and noxious substances should be carried as
cargo for the Convention to apply. War ships and state ships not used for
commercial purposes are excluded from the 1996 HNS. Small vessels less than
200 grt employed in the coastal trade of a contracting state or employed in trade
between neighbouring state(s) can be excluded from the application of the 1996
HNS if the contracting state(s) declare this and if the cargoes are packaged. In
the case of exclusion no compensation is payable by the 1996 HNS74 from the
shipowner or the HNS Fund. National laws and the global limitation regime will
apply if damages arise in such circumstances.
5.2.3
Damages Covered
1-218
The 1996 HNS covers damage by contamination caused by any of the hazardous
and noxious substances carried (same as damages covered by 1969/1992
CLC). More specifically it covers damage by contamination to: (a) property
outside the ship; (b) financial loss from damage to the environment; (c) reasonable
costs for reinstatement of the environment; (d) costs and damage from preventive
measures;75 (e) loss of life and personal injury on board and outside the ship
unless there is a contract of carriage of passengers; and (f) property damage
outside the ship. A substantial difference between the CLC Fund regime and the
HNS Convention is that the latter includes claims for loss of life and personal
72
Art. 1.5(a)(iv) 1996 HNS.
73
Art.1.1 1996 HNS.
74
Art. 5.5 and art. 5.6 1996 HNS.
75
Art. 1.6(c) and (d)) 1996 HNS.
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injury on board or outside the ship (which have priority over others) and damage
by fire and explosion (provided they are caused under the circumstances
provided by the HNS).
5.2.4
Who Is Liable?
1-219
The registered owner of the ship which carries the hazardous or noxious
substances which caused the damage is strictly liable for the damage under the
1996 HNS.76 For claims made under the 1996 HNS the damage must have been
caused in connection with the carriage77 of hazardous and noxious substances
by sea.
1-220
Carriage by Sea extends to the period which commences at the time the
hazardous and noxious cargo crosses the ships rail and ends at the discharge
of cargo from any part of the ships equipment. The 1996 HNS does not provide
for the period before loading or after the discharge of the hazardous and noxious
substances. Therefore, whether the 1996 HNS applies or not depends on the
time the damage occurred, i.e. before or after the cargo crossed the ships rail
or the ships loading line.
5.2.5
Liability
1-221
The registered shipowner and his insurer78 have strict liability (i.e. claimant does
not need to prove fault). The liability of the owner and its insurer is limited on the
basis of the tonnage of the ship. Small ships have higher limits per ton. When
more than one ships are involved the liability is joint and several unless the
damage is separable.79 The owner may not limit his liability if the claimant proves
that the damage resulted from the owners personal act or omission which was
committed with the intent to cause such damage, or recklessly and with
knowledge that such damage would probably result.80 In this case the insurer,
however, may always limit his liability. The owner may be excluded from liability
if the damage is caused by an act of war, hostilities, civil war, insurrection or a
natural phenomenon of exceptional, inevitable and irresistible nature.81
1-222
Insurance is compulsory for the owner and the 1996 HNS provides that a direct
action may be taken against the insurer. The insurer is entitled to limit his fund
of liability, use the same defences available to the owner under the 1996 HNS
and also exempt himself from liability if it is proved that the damage was caused
due to the owners wilful misconduct.82
76
Art. 7.1 1996 HNS.
77
Art.7.1 1996 HNS.
78
Art. 12.8 1996 HNS.
79
Art. 8.1 1996 HNS.
80
Art.9.2 1996 HNS.
81
Art. 7.2(a) 1996 HNS.
82
Art. 12.8 1996 HNS.
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5.2.6
Time Bars
1-223
Article 37.1 of the 1996 HNS provides a three-year time bar for claims against
the owner or the insurer. This time bar is extended by 10 years when the damage
is identified with delay or the identity of the owner is not revealed.
5.2.7
Jurisdiction
1-224
Where the damage covered by the 1996 HNS occurred within the territorial
waters or the EEZ or equivalent 200 miles zone in a contracting state(s) within
which territorial waters or the EEZ or equivalent 200 miles zone then the courts
of this state(s) have jurisdiction to hear the claims. The 1996 HNS also covers
damages in the High Seas and the EEZs of non-contracting states particularly
where there is loss of life inside and outside the ship and damages to property
outside the ship in which case competent courts are the courts of the state
where the ship is registered or where the owner has his habitual residence or
principal place of business provided that this state is a contracting state or the
state where the limitation fund is established.83
5.2.8
The 1996 HNS Fund
1-225
The 1996 HNS Convention provides for the establishment of the HNS Fund
which will provide compensation in the following cases:
1-226
where the damages exceed the owners limit of liability;
the owner and his insurer are financially not in the position to cover their
part of liability;
the owner is exempted from liability under the provisions of the 1996 HNS
(i.e. where damages are caused by war, hostilities, insurrections etc or
where the provisions of the 1996 HNS do not apply to the ships which
caused the damage).84
The claimant must prove that the damage was caused by one or more ships to
be entitled to payment from the HNS Fund. The claimant loses wholly or partially
his entitlement to the HNS Fund if the damage was caused by his negligence or
intentional act.85 The compensation provided by the HNS Fund is up to
250,000,000 SDRs86 and this sum includes any compensation paid by the
shipowner under the 1996 HNS. Any expenses and sacrifices made on the part
of the owner in order to minimise or to prevent environmental pollution during an
incident may be claimed against the HNS Fund.87 Personal injury claims have
priority and are paid up to two thirds of the total amount of the HNS Fund
83
Art. 38.2 1996 HNS.
84
Art. 14.3(a) 1996 HNS.
85
Art. 14.4 1996 HNS.
86
Art. 14.5. 1996 HNS.
87
Art. 14.2. 1996 HNS.
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(166.667 million SDR). All other personal, property and loss claims are paid
proportionately up to the limit of liability.
5.2.9
Time Bars
1-227
The time bar for claims against the HNS Fund is three years.88 The calculation
for the three-year period commences from the time at which the claimant knew
or ought to have known of the damage.89 The time bar can be avoided if either
a claim against the HNS Fund has been initiated or a notification has been
served to the HNS Fund of the commencement of proceedings against the
owner.90
1-228
The additional time bar of 10 years from the date the incident occurred (or in a
series of occurrences the date of the last occurrence) which applies to claims
against the owner and its insurer can also apply to claims against the HNS
Fund.
5.2.10
Jurisdictional Issues
1-229
Claims against the HNS Fund are permitted where a court of a contracting state
is a competent court to hear an action against the shipowner.91 There are no
actions and therefore no competent courts where the shipowner is exempted
from his liability or where the ship which caused the damage cannot be identified.
In this case the competent courts are identified as the courts which would have
jurisdiction to hear the case had the owner been liable.92
5.2.11
The 2010 Protocol to the HNS
1-230
The 2010 Protocol to the HNS was drafted with the aim to address practical
problems that had prevented many states from ratifying the original Convention
and it will enter into force 12 months after 12 states (including a minimum of four
with 2 million grt) have consented to be bound to it and also the IMO SecretaryGeneral has received information...that those persons in such States who would
be liable to contribute pursuant to article 18, paragraph 1(a) and(c) of the
Convention, as amended by the 2010 Protocol to the Convention ...have
received during the preceding calendar year a total quantity of at least 40 million
tonnes of cargo contributing to the general account.93
5.3
THE INTERNATIONAL CONVENTION FOR THE PREVENTION OF

POLLUTION FROM SHIPS 1973 (MARPOL 1973 AND ITS 1978
88
Art. 37.2. 1996 HNS.
89
Art. 37.2 1996 HNS.
90
Arts 37.2 and 39.7 1996 HNS.
91
Art. 39.1 HNS Fund.
92
Art. 39.1 & 39.2 1996 HNS.
93
Art. 21, 2010 Protocol to the HNS.
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PROTOCOL) AND THE INTERNATIONAL CONVENTION FOR THE

SAFETY OF LIFE AT SEA (SOLAS 1974 AS AMENDED)
1-231
Shipping which is safe for the environment requires measures for the prevention
of shipping incidents and pollution. This aim can be achieved by: (a) improving
the construction and maintenance of the ships so that when they perform the
carriage of pollutants they can be more resistant to dangers and human errors;
(b) improving the standards of training for crew members; (c) establishing safety
management systems for ships, ports and shipping companies to increase the
early awareness of risks and how to minimise them; (d) establishing liability
regimes for the compensation of pollution victims which will also encourage
shipowners, insurers and cargo owners to make the utmost efforts to avoid
pollution in order to avoid liability; and (e) imposing criminal liability and fines to
those who cause pollution incidents.
1-232
SOLAS is the International Convention which sets the standards for the ship
safety by providing measures for the construction, equipment and operation of
ships. Flag and port states are responsible for the implementation and
enforcement of these measures. The ISM Code (International Safety Management
Code) and the ISPS Code (International Ship and Port Facilities Security Code)
are included in SOLAS.
1-233
Contracting states have undertaken to impose criminal liability and disciplinary

procedures for the violations of the provisions of MARPOL and SOLAS.
1-234
The most important regulations which provide standards for the operation of
ships in order to prevent pollution are contained in the International Convention
for the Prevention of Pollution from Ships 1973 as modified by the Protocol 1978
(MARPOL 73/78) which entered into force on 2 October 1983 (with Annexes I
and II). MARPOL contains provisions in relation to the prevention of pollution by
hazardous and noxious substances in bulk, harmful substances in package,
sewage and garbage from ships and air pollution from ships. More specifically,
MARPOL introduced the requirement for Crude Oil Washing (COW) which is a
method of cleaning the tanks of crude oil by the use of high pressure jets. This
minimises the quantity of remaining oil on board after discharge and therefore
reduces the risk of pollution. Segregated Ballast Tanks (SBT) and COW must be
fitted in newly-built crude oil carriers over 20,000 DWT whereas SBT or COW is
required to be fitted in existing crude oil carriers of 40,000 DWT or over.
MARPOL 1973 also provides that new tankers of 80,000 DWT or over must have
SBTs so that when the master discharges cargo he can then take on seawater
to compensate for the weight of cargo discharged which would secure stability,
strength and manoeuvrability of the vessel and ballast water is not discharged
into the sea. Any vessel also of 400 GRT or more is required to fit an oil-fromwater separating equipment or filter system and any ship over 10,000 GRT must
be fitted with an oil discharge monitoring and control system.
1-235
The increase of incidents caused by tankers, however, prompted the stricter

regulations for inspection and certification of the 1978 Protocol. The latter also
introduced the requirement of new tankers with deadweight tonnage 20,000 or
more to be fitted with SBTs in a protected location so that they are insulated
from the effects of a possible collision or grounding. Tankers which operate
between specific ports within specific national limits and/or designated areas
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defined by the Convention may be exempted from the requirements for COW
SBTs or CBTs.
1-236
MARPOL also contains requirements for the governments of contracting states

that certain categories of ports should provide adequate reception facilities for
oily residues within 12 months from entry into force of the Convention.
1-237
Amendments of Regulation 13G of Annex I of MARPOL were introduced in 2001

and entered into force on 1 October 2002.
5.4
THE INTERNATIONAL CONVENTION ON CIVIL LIABILITY FOR BUNKER

OIL POLLUTION DAMAGE 2001
1-238
The CLC/IOPC Fund Conventions cover pollution damage caused by bunker oil
and cargo for tankers but there were no provisions for other ships until the entry
into force of the 2001 Bunker Convention which maintains the principles of strict
liability, the channelling of liability, compulsory insurance and limited liability in
the centre of its provisions. This Convention has only one tier of compensation
as it was decided by the negotiating states that the insurance could provide
adequate compensation for damage caused by bunker spills. This treaty was
adopted on 23 March 2001 and entered into force on 21 November 2008. From
the date of entry into force of this Convention ships registered in a state which
is not party to the Convention and have a gross tonnage greater than 1,000 are
under the obligation to carry on board a Bunkers Convention certificate when
they call at a port, or arrive or leave an offshore facility within the territorial
waters of a contracting state.
5.4.1
Scope of Application
1-239
The 2001 Bunkers Convention applies for any liability from incidents which either
cause pollution damage or constitute a grave and imminent threat to cause
pollution damage.94 Pollution damage is any loss or damage caused outside
the ship by spilled bunker oil and the costs of preventive measures and any
further damage caused by preventive measures. Unquantifiable claims for the
general damage to the environment are not included in the provisions of 2001
BOPC.
1-240
The 2001 BOPC does not cover death and personal injury claims.
5.4.2
Ships Subject to 2001 BOPC
1-241
The scope of the definitions in 2001 BOPC covers any seagoing vessel and
seaborne craft of any type whatsoever. Government vessels used for noncommercial purposes are not subject to the provisions of the 2001 BOPC unless
the contracting state provides otherwise.
94
Art. 1.8 2001 BOPC.
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5.4.3
Liability and Who Is Liable?
1-242
The liability provided for the registered owner is strict (i.e. no fault is required)
but the term registered owner is not exclusive to the shipowner; it also includes
other individuals such as the bareboat charterer, manager and operator of the
ship in connection with oil pollution damage from bunker oil since all of them are
involved in the operation of the ship. However, only the registered owner is
obliged to obtain and carry compulsory insurance.
1-243
The Convention applies to all ships but insurance is compulsory only for the
registered owner of ships larger than 1,000 gt. The limits of liability provided in
national laws for the shipowner correspond with the amount of insurance and in
the absence of such provisions the strict liability and compulsory insurance
would be unlimited.
1-244
The shipowner can avoid liability if he can prove that the damage was caused
by an act of God, an act of war, hostilities etc or he can avoid liability (wholly or
partially) if he can prove contributory negligence of the victim. In case only one
vessel is involved in the incident but more than one persons fall under the
definition of the shipowner then liability is joint and several. A claimant may raise
a claim against the shipowner or he can directly sue the insurer regardless of
whether the shipowner is solvent or not and has breached the insurance
contract. The insurer may limit his liability regardless of whether the shipowner
is entitled to do the same or not. The insurer is also entitled to the same defences
with the shipowner and avoid liability if the pollution damage was due to the wilful
misconduct of the shipowner.95
5.4.4
Time Bar
1-245
There is an absolute time bar of six years since the incident occurred and three
years from the time of the damage. The dual time bar is provided in order to
cover the possibility of oil pollution damage occurring later than the shipping
incident.
5.4.5
Jurisdiction
1-246
The jurisdictional zones of application of the treaty are the land, territorial sea or
the EEZs or an equivalent zone of a contracting state where the pollution
damage was caused and preventive measures were taken. The competent
courts can hear a claim against the shipowner, the insurer or the provider of
security.96
5.5
DRY SHIPPING
1-247
This part of the module examines and analyses the background issues and
potential claims that may arise from them in relation to the carriage of goods by
sea.
95
Art. 7.10 2001 BOPC.
96
Art. 9 2001 BOPC.
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5.5.1
The Contract of Affreightment
1-248
The main areas of focus will be on the parties involved, the cargo and the
specifications of the vessel. The various types of contracts of affreightment in a
sea carriage will also be discussed. Therefore, the main questions of our focus
are:
1-249
The parties involved in a carriage transaction.
Kinds of cargoes shipped in a sea carriage.
Types of vessels.
Relevant factors in deciding the appropriate type of contract.
The Review of Maritime Transport (UNCTAD, 2011) indicates that more than
80% of goods sold in international trade are carried by sea and that the
development of international seaborne trade has dramatically increased over the
last few decades (see table below).
Year
Oil
Main bulks97
Other dry cargo
Total
1970
1980
1990
2000
2006
2007
2008
2009
2010
1442
1871
1755
2163
2698
2747
2742
2642
2752
448
796
968
1288
1836
1957
2059
2094
2333
676
1037
1285
2533
3166
3330
3428
3122
3323
2566
3704
4008
5984
7700
8034
8229
7858
8408
Development of International Seaborne Trade,

Selected Years & Millions of Tons Loaded97
Source: http://unctad.org/en/docs/rmt2011_en.pdf (United Nations Conference

on Trade and Development UNCTAD. Review of Maritime Transport 2011).
1-250
Maritime transport is especially used when the buyer and the seller are located
in different countries despite the existence of other forms of transport such as
rail, road and air.
5.5.2
Cargoes
1-251
A wide variety of cargoes is shipped globally every day. These cargoes include
raw materials and manufactured cargoes. The quantity and the nature of cargo
97
Iron, ore, grain, coal, bauxite/alumina, phosphate.
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play a decisive role in the appropriate type of contract the parties will choose.
For a large quantity of bulk cargo the shipper may choose to charter the entire
vessel, whereas for smaller quantities of cargoes he/she may choose to use
liner trades which run on a fixed schedule.
1-252
Dry cargoes are divided into two main categories: (a) major dry bulks (e.g. ore,
coal, grain, bauxite/alumina and phosphate rock); and (b) minor bulk (e.g.
manufacturers, agribulks, metals and minerals).
1-253
Within these main categories, however, there is a wide variation of characteristics

in goods. For this reason cargoes such as grain may be sensitive to contamination,
coal may be susceptible to inherent vice and therefore may need to be stored in
cooler temperatures, the quality of certain agricultural products such as potatoes
may deteriorate in damp conditions. Goods may also be classified as dangerous
and consequently require special handling when loading or unloading.
1-254
Liquid bulk cargo, for instance oil, requires special equipment to be transferred
onto the tankers for transport and also at discharge to a refinery for processing.
1-255
In terms of quantity certain cargoes will occupy the entire cargo space of the
ship whereas other cargoes are shipped in separate packages (e.g. pallets,
drums) with dunnage being used to secure them safely in the holds, or containers
are used to transport separate items in order to protect the goods and speed up
the process of loading and unloading goods.
5.5.3
Vessels
1-256
There are several types of vessels used in international trade. The choice of the
appropriate kind of vessel to be employed depends on the type and amount of
cargo. The most frequently used are the container ships which carry most of the
worlds manufactured goods and products and operate through scheduled liner
services. Bulk carriers are also used in the shipping industry mainly to transport
raw materials such as iron ore and coal or tankers for the transportation of crude
oil, chemicals and petroleum products. Other types of liner vessels can include
Pure Car and Truck Carriers and Pure Car Carriers.
5.5.4
Parties
1-257
Many parties may be involved in the international transport of goods by sea, some
of them play a primary role while others are ancillary in the process of carriage. The
seller and the buyer in the sale contract are the key parties in the carriage of goods
and the rights and responsibilities of each party depend on the applicable law or
set of rules to the contract and the terms of their agreement. For instance, under a
CIF contract the seller undertakes the responsibility to arrange the transport of
goods and the insurance. Frequently the seller and the buyer are located in different
countries and for this reason they may employ agents or brokers to act on their
behalf. Another key party to the contract of carriage is the carrier. The carrier will
make the initial contract of carriage with the shipper. The carrier may be someone
employed in the liner trade or may be a charterer. On board the vessel the members
of crew are responsible to undertake the voyage with the master being the most
important member as he issues commands to the other members and signs bills
of lading which indicate acceptance of the goods on board the vessel.
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1-258
The consignee is named in the bill of lading and is the person to whom the
goods should be delivered at the port of discharge. Stevedores are employed to
load and unload the goods and are usually treated as independent contractors
and not as servants of the shipowner. It is also of interest to examine the rights
and responsibilities of the shipper, carrier and consignee.
1-259
In a nutshell the parties to a contract of carriage are as follows:

Shipper: the person who undertakes to ship the goods. The term consignor
may also appear in the place of shipper on a bill of lading.
Carrier: the person who undertakes the carriage of goods.
The legal carrier: concludes a contract with the shipper to transport the
goods from port A (port of shipment) to port B (port of destination).
The actual carrier: is in actual possession of the goods and performs the
actual carriage.
The person of the legal carrier may differ from the actual carrier and therefore
there may be no contract between the shipper and the actual carrier since the
former may have contracted with the legal carrier. In a dispute one must
commence by identifying with which carrier the shipper has concluded the
contract in order to raise the claim against the right person.
Consignee: the person to whom goods are to be delivered. His name appears
in the relevant space on a bill of lading.
Endorsee: the person to whom the bill of lading has been endorsed or
transferred by the consignee or a previous endorsee. With the endorsement of
the bill of lading to him all rights from the contract of carriage are transferred to
him but only the clauses included in the bill of lading. Any clauses contained in
the bill of lading which contradict those of the contract of carriage will not be
binding for the endorsee acting in good faith.
Freight forwarder: the person who undertakes to make arrangements for the
carriage of goods acting either as a principal or an agent depending on which
his legal position changes.
5.5.5
Contracts of Affreightment
1-260
There are two main contracts of affreightment (contracts of carriage by sea):

charterparties and bills of lading. Shippers depending on the quantity of cargo
may choose to charter the entire vessel or for individual packages of cargo they
may choose to load them in a ships hold or on deck and use liner services which
operate between major ports on a fixed schedule or tramp vessels which sail
from port to port in search of cargo and carry them under bills of lading.
1-261
The shipper will charter either the entire or part of the ship which is used to carry
the goods. The shipper will therefore enter into a charterparty, i.e. a contract for
the hire of the vessel. There are three main types of charterparties: voyage
charterparties, time charterparties and demise (or bareboat) charterparties. A
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voyage charter is concluded for a single voyage or a series of voyages. The

charterer is obliged to provide the cargo, to pay freight (remuneration to be paid
to the shipowner) and also to pay for any laytime or demurrage subject to how
risk is allocated between the shipper and the charterer. A time charterer is
concluded when the vessel is used for a specified time period. The charterer is
obliged to pay a hire cost and the shipowner is responsible for the operation of
the ship and the employment of the crew. The charterer will issue the bills of
lading. In the demise or bareboat charterparty, the possession, full control of the
vessel together with the legal and financial responsibility for it is shifted from the
shipowner to the charterer.
1-262
Charterparties are not subject to any statutory regime unless the parties choose
to incorporate it into the charterparty, as for instance Hague-Visby Rules.
1-263
The bill of lading serves three main functions: it is a receipt for the goods, evidence
of the contract of carriage and a negotiable document of title. The bill of lading is
normally issued after the contract of carriage is has been concluded and it is on its
way to performance. A draft bill of lading which the shipper sends to the carrier is
an offer but the contract of carriage is concluded when the carrier accepts the offer
upon receipt of goods for carriage by the shipper.98 Therefore, a special term of the
contract of carriage agreed between the parties orally may prevail over a written
clause in the bill of lading. This is illustrated in The Ardennes.99 In this case the
shipper of mandarin oranges in Spain agreed orally with a carrier for the goods to
be shipped directly to England with delivery date before 1 December 1947, when
the import duty on these goods was to be raised. The bill of lading contained a
clause providing that the carrier was given liberty to choose any route and to carry
the goods directly or indirectly to the port of destination. The vessel proceeded first
to Antwerp and then to London and arrived after the agreed date of delivery. The
seller produced evidence before the court of the terms of the contract agreed
before the bill of lading was issued. It was an express term in the contract of
carriage that the carrier would not rely on the aforementioned liberty and that the
oral warranty prevailed over the terms contained in the bill of lading as the contract
was concluded before the bill of lading was issued. The court awarded the consignor
damages. In the United Kingdom the Carriage of Goods by Sea Act 1971 (COGSA
1971) includes provisions for the bill of lading and it imposes a limitation of liability
under the Hague-Visby Rules on bills of lading issued in the United Kingdom. The
Carriage of Goods by Sea Act 1992 (COGSA 1992) provides that the lawful holder
of the bill of lading and other sea carriage documents has rights to sue.
1-264
The above will be analysed in more detail in the following chapters.

The Law of Carriage of Goods by Sea, by Lachmi Singh, Bloomsbury
Professionals, 2011, pp. 3-10
Schmitthoffs Export Trade: The Law and Practice of International Trade. Eleventh
Edition, by Carole Murray, David Holloway and Daren Timson-Hunt, Sweet and
Maxwell, London, 2009, pp. 282-352
98
Burke Motors Ltd v Mersey Docks and Harbour Co. [1986] 1 Lloyds Rep. 155.
99
[1951] 1 KB. 55.
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6.
BILL OF LADING
1-265
The bill of lading (B/L) is defined as the document under which cargo is carried
on board vessels and which is issued by or on behalf of the shipowner as a
receipt of goods signed by the master or another duly authorised person and
constitutes a document of title of the goods specified therein.
6.1
HISTORICAL BACKGROUND
1-266
The original concept of the bill of lading may be alleged to have its roots in the
13th century or even earlier. At that time the sole function of the bill of lading
would have been as a receipt for the goods shipped, perhaps as an entry in the
ship clerks register book, and as the owner of the goods would frequently be
physically present during the sea voyage no written document would be issued.
As the time passed by, with the evolution of the shipping industry, where different
types of cargo were on board the vessel, each of which may be bought or sold
before their arrival, the presence of the cargo owner during the voyage was no
longer practically possible. As a result of this the role of the bill of lading
expanded from being a document of acknowledging receipt of goods to
incorporating the terms of the contract of carriage. By the 18th century in order
to satisfy the needs of the trader who wished to sell the goods before their arrival
at the port of destination, the bill of lading also acquired the status of a document
of title. In Mason v Lickbarrow100 the transferable quality of the bill of lading was
recognised by Lord Lickbarrow:
A bill of lading is the written evidence of a contract of the carriage and
delivery of goods sent by sea for a certain freight. The contract in legal
language is a contract of bailment...The general property remains with the
shipper of the goods until he has disposed of it by some act sufficient in law
to transfer property. The endorsement of the bill of lading is simply a
direction of the delivery of the goods. When this endorsement is in blank,
the holder of the bill of lading may receive the goods, and his receipt will
discharge the ship-master; but the holder of the bill, if it came into his hands
casually, without any just title, can acquire no property in the goods.
Professionals, 2011, p. 249
6.2
LEGAL FRAMEWORK RELATING TO BILLS OF LADING
1-267
The clauses contained in a duly issued bill of lading represent in law the terms
of the agreement between the shipper and the carrier. The position of the
shipper, however, is very limited in the negotiation of these terms as they are
fixed in advance. For this reason the shipper is protected legislatively from the
possible abuse of the greater bargaining power of the other contracting party by
100
[1794] 1 H B1 359.
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the provisions of the Carriage of Goods by Sea Act 1971 which implements the
Hague-Visby Rules and was put into force on 23 June 1977.
1-268
The previous legislative regime was the Carriage of Goods by Sea Act 1924
which implemented the Hague Rules which were revised by the Brussels
Protocol of 1968 and formed the Hague-Visby Rules. The Hague-Visby Rules
were in turn substantially revised by the United Nations Convention on the
Carriage of Goods by Sea 1978 which accepted the Hamburg Rules. The
Hamburg Rules came into force on 1 November 1992 after being ratified by 20
states.
1-269
The Hamburg Rules have not been ratified by the United Kingdom at present.
The Hague-Visby Rules are law in the United Kingdom. A number of states,
amongst which is the United States of America, still adhere the Hague Rules.
Therefore, the original Hague Rules may still apply in proceedings before
arbitrators or in the courts in the United Kingdom when, for instance, a dispute
arises from a bill of lading which relates to a shipment from a non-contracting
state under the Hague-Visby Rules but which still adheres to the Hague Rules.
The original unity of international regulations relating to bills of lading is lost until
all sea-going states adopt again uniform rules.
1-270
The Carriage of Goods by Sea Act and the Hague-Visby Rules provide for the
carriers duty and liability in respect of goods shipped from a port in a contracting
state, or where the bill is issued in a contracting state, but only under the
condition that the goods are contained in an issued bill of lading or similar
document of title. The Rules, however, may also apply in other shipping
documents but only if they are expressly incorporated. They do not apply to
charterparties. The provisions also include exceptions and limits to the carriers
liability and the time limit within which the cargo-owner must make a claim for
loss or damage to the goods.
Schmitthoffs Export Trade: The Law and Practice of International Trade. Eleventh
edition, by Carole Murray, David Holloway and Daren Timson-Hunt, Sweet and
Contracting out: Singh L., The Law of Carriage of Goods by Sea, 2011,
Bloomsbury Professionals, p. 23
1-271
101
1-66
Contracting out. The carrier is allowed under Article V of the Hague-Visby Rules
to surrender any of his rights or immunities or to increase his obligations under
the condition that this is included in the bill of lading. The carrier may not improve
his position under the Hague-Visby Rules by including a clause which limits his
responsibilities. Such a clause would be null and void under Article III, rule 8
unless the contents of the clause fall within the provisions of Article VII. A
common source of dispute is when the carrier seeks to limit the value of his
liability under the Rules.101
The Rosa S [1989] QB 419.
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6.3
FUNCTIONS OF THE BILL OF LADING
1-272
The B/L has three main functions:
It is evidence of the contract of carriage.
It serves as a receipt for the goods shipped.
It is a negotiable document of title (i.e. property in the goods may be

transferred to the lawful holder of the B/L) and upon which payment is
made.
More analytically:
1-273
Bill of lading as contract of carriage. The reverse side of the bill of lading contains
terms of the contract but the bill of lading is not the contract of carriage
itself; it is evidence of the contract of carriage. A bill of lading, however, is
evidence of the contract of carriage only if the holder of the bill is the shipper as
he has agreed to the terms of carriage before the issuance of the bill of lading.
Any written terms contained on the issued B/L which are not in compliance with
the oral agreement between the shipper and the carrier may be presented by the
shipper as evidence of such oral agreement in the event of a dispute.102 If the
bill of lading is endorsed to a third party (i.e. the consignee or endorsee) in the
hands of the third party the bill of lading is treated as the contract of carriage.
This means that any oral or written agreement between the shipper and the
carrier not contained on the B/L will not bind the third party on the grounds of
lack of notice.103
1-274
Bill of lading as a receipt of goods. Originally the B/L functioned as a receipt for
the shipped goods. Nowadays the bill of lading in the hands of the shipper is a
receipt for: (a) the quantity, (b) the condition, and (c) the leading marks for the
goods received. The evidentiary weight of representations in relation to quantity,
condition of goods and leading marks depends on whether the B/L is in the
hands of the shipper or the endorsee and also whether it falls within the
provisions of the Carriage of Goods by Sea Act 1971 or outside it.
1-275
Article III(3) of the Carriage of Goods by Sea Act 1971 (and Article III rule 3 and
rule 4 of the Hague-Visby Rules) provides that the carrier is under the obligation
on demand of the shipper to issue a B/L which contains information such as the
quantity or weight of the goods, number of packages or pieces, their apparent
order and condition and also leading marks (i.e. marks on the packaging for the
identification of the goods). These statements in the B/L are prima facie evidence
of the receipt of the goods by the carrier. The carrier may prove the contrary. It
is, however, conclusive evidence once the B/L is transferred to a third party who
acts in good faith in which case the carrier may not prove the contrary.104 This
change in the evidentiary weight aims to protect the transferee who buys goods
relying on the statements contained in the bill of lading.
102
Ardennes v Owners of the Ardennes (The Ardennes) [1951] 1 KB 55.
103
Leduc v Ward (1888) 20 QBD 475.
104
Agrosin Pte Ltd v Highway Shipping Co Ltd (The Mata K) [1998] 2 Lloyds Rep. 614.
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1-276
At common law, statements in the bill of lading specifying quantity of goods are
regarded as prima facie evidence of the quantity of the goods shipped. Once the
bill of lading is signed the carrier has the burden of proving that the specified
cargo has not been shipped. The carrier could avoid liability, even towards a
transferee of the B/L who acts in good faith, if he could prove that the goods
were not shipped. In Grant v Norway,105 the master of the ship signed a bill of
lading that the goods (12 bales of silk) had been shipped although the cargo had
not, in fact, been loaded. The court held that the endorsee had no remedy since
the carrier had proved that the cargo had not been loaded on the grounds that
the master had no authority to sign bills of lading for goods which had not been
loaded on board the vessel. This decision undermined the role of the bill of
lading in international commerce since the consignee or endorsee would
normally rely on the information contained on the B/L. The Carriage of Goods by
Sea Act 1992 which replaced the Bills of Lading Act 1855 provides in section 4
that when the B/L contains statements that the goods have been shipped on
board a vessel or have been received for shipment on board the vessel and has
been signed by the master of the ship or another person duly authorised by the
carrier to sign bills of lading will, in the hands of the lawful holder of the B/L, be
regarded as conclusive evidence against the carrier confirming shipment of the
goods or receipt of the goods for shipment. With section 4 of the Act the Grant
v Norway doctrine applies now to straight bills of lading or waybills unless
otherwise agreed by the parties. If the carrier endorses the bill of lading with
statements such as weight and quantity unknown together with the gross
weight entered by the shippers, under the provisions of section 4 of the 1992 Act
the weight entered is not considered a representation that the quantity was
shipped.
1-277
In the hands of the shipper, statements in relation to the condition of the goods
shipped are regarded as prima facie evidence, but once the bill is in the hands
of a transferee who acts in good faith for value, the statements become
conclusive evidence (this is also provided in the Hague-Visby Rules Article III,
rule 4, if they are incorporated). In Compania Naviera Vascongada v Churchill,106
the master issued a bill of lading which contained the statement that the goods
were shipped in apparent good order and condition No reference was made to
the fact that the cargo (timber) was stained by petroleum while awaiting
shipment. The carriers were stopped from denying the inaccuracy of their
statement in the bill of lading against the transferee. This estoppel, however,
may be effective only if the defects of goods were apparent to the carrier with a
reasonable inspection. In Silver v Ocean Steamship Co.107 a cargo of Chinese
eggs was not properly packed with cloth or another form of packing protecting
them. The bill of lading did not contain any reservation in regards to defective
packaging. On arrival it was found that the goods were damaged and the tins
had pinhole perforations. The carrier was estopped from denying liability for not
making a statement on the bill of lading for the insufficient packaging of the
goods but could not be estopped for not stating the pinhole perforations since
they would not have been apparent on a reasonable inspection. Therefore, the
standard of care required by a carrier is one of reasonable diligence. The carrier
105
(1851) 10 CB 665.
106
[1906] 1 KB 237.
107
[1930] 1 KB 416.
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may also make reservations on the bill of lading such as condition unknown but
such statements are interpreted narrowly by the courts since such statements
could be made only after a reasonable inspection of the cargo has been made
by him.
1-278
Where the carrier records leading marks on the bill of lading which relate either
to the identification or to the quality of the goods he will not be stopped at
common law from denying that the goods were shipped under the marks as
described in the bill unless the marks are material to the identification or
description of the goods where the prima facie evidence rule applies. In Parsons
v New Zealand Shipping Co,108 frozen lambs were shipped under a bill of lading
which stated that 608 carcasses had been shipped with the mark 622X. On
arrival the endorsees found that 101 out of the 608 carcasses were bearing the
mark 522X instead of 622X and refused to accept delivery of the carcasses with
the different mark. The court was to decide whether the marks were material to
the identification and nature of the goods or whether their purpose was to trace
them easily. It was held that in the circumstances the marks were not material to
the identity of the goods and the carrier was not stopped from denying that all
the carcasses shipped bore the mark 622X.
1-279
Bill of lading as a negotiable document of title. Possession of the bill of lading is

considered to be constructive possession of the goods until goods are physically
delivered. Transfer of the bill of lading from the seller to the buyer amounts to a
delivery of the goods to the buyer and the buyer upon their arrival can demand
delivery of the goods. Since possession of the bill of lading is considered as
possession of goods the buyer may sell the goods to a third party while they are
in transit by endorsing the bill of lading and delivering it to the third party. In this
case, the third party may demand delivery of the goods upon arrival since he is
the lawful holder of the bill of lading.
1-280
Not all types of bills of lading, however, are negotiable. Certain bills are nonnegotiable. The term negotiable used in connection with a bill of lading means
transferable.109 Recent cases refer to the bill of lading as being a negotiable
instrument.110 Bills of lading may be made out to bearer, to a particular
person or his order. In the first case they are transferred by delivery whereas
in the latter they are transferred by endorsement and delivery of the bill. The
bill of lading is negotiable only if it is made negotiable. With the transfer of the
bill of lading the parties pass the rights in goods which they wish to pass.
Therefore, by making the bill of lading negotiable the cargo is made
negotiable. If the bill of lading is non-negotiable the carrier must provide
delivery only to the consignee named in the document whereas if the bill of
lading is negotiable the person with ownership of the bill of lading has the right
of ownership of the goods. A shipper who wishes to obtain a negotiable bill of
lading completes the left-hand corner box of the bill of lading, where the
wording is Consignee (if Order state Notify Party) with the words order and
adds as notify party the name of the consignee. If the shipper intends to
obtain a non-negotiable bill of lading he does not insert the word order in this
108
[1901] 1 QB 548.
109
Kum v Wah Tat Bank Ltd [1971] 1 Lloyds Rep. 439 at 446.
110
OK Petroleum AB v Vitol Energy SA [1995] 2 Lloyds Rep. 160 at 163.
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box but he inserts the name of the consignee in the following box. In the latter
case the shipper can transfer title in the goods to the consignee by delivering
to him the bill of lading but the consignee cannot transfer title to a third party
by transfer of the bill of lading. The House of Lords in The Rafaela S111
confirmed that a non-negotiable bill of lading in the hands of the named
consignee, and not the endorsee, operates as a document of title and therefore
entitles the named party to take delivery of the goods upon production of the
bill. Negotiable bills are used more extensively in the trade of grain or oil where
the bills of lading connected to the goods in transit are bought and sold in
string contracts.
International Trade Law. Fourth edition, by Indira Carr, Routledge-Cavendish.
Taylor & Francis Group, London and New York, 2010, pp. 174-182
Schmitthoff Export Trade: The Law and Practice of International Trade. Eleventh
6.4
TYPES OF BILLS OF LADING
1-281
There are various types of bills of lading. The following list is indicative and not
exhaustive.
6.4.1
Liner Bills
1-282
A liner bill of lading is issued by a particular shipping line which offers a regular,
scheduled service between specified loading and discharge ports. The shipper
advertises their route, usually as a list of named ports. The shipper, if the goods
are destined for one of the advertised ports, books a space on the liner.
1-283
There are many standard form liner bills amongst which the Conlinebill 2000,
approved by BIMCO, is frequently used for the transport of general cargo from
port to port. The front page of the document contains the name of the shipper,
the name of the consignee (if known), the identification of the vessel and the
particulars of the cargo as declared by the shipper. The back page of the
document contains 18 clauses. If the contract of carriage is subject to the US
Carriage of Goods by Sea Act an additional clause may be included.
6.4.2
Straight Bills
1-284
A straight bill of lading may not be transferred either by delivery or by its

endorsement to another party. It usually bears the mark non negotiable or non
111
1-70
[2005] 1 Lloyds Rep. 347.
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transferable. Another way to recognise a straight bill is to make it out to a named

consignee without including the words to bearer, to order or to assigns.
Straight bills of lading are used where it is known that the consignee will not sell
the cargo on, or whether the parties have a long-standing relationship. One view
is that a straight bill of lading is not transferrable as it is not a document of title
but in The Rafaela S a straight bill of lading was held to be a document of title.
6.4.3
Bearer Bills
1-285
A bearer bill does not name the person to whom or to whose order the goods
are to be delivered. The goods are therefore deliverable to the bearer, i.e. the
person who is in possession of the bill. The Carriage of Goods by Sea Act 1992
provides that the bearer of the bill is the person who is entitled to delivery.
6.4.4
Order Bills
1-286
Under an order bill delivery of goods is made to the order of the person named
in the bill. There are two kinds of order bills: in the first, goods are delivered to a
named consignee or to his order or assigns (or a similar term used to indicate
transferability). In the second goods are deliverable to order or assigns (or a
similar term used to indicate transferability) without naming a consignee. The
first kind of order bill is made to the order of the consignee as on the face of the
bill it is the consignee who has the entitlement to order the goods to be delivered
to another person (if he does not intend to take delivery of the goods himself).
In the second kind no person is on the face of the bill entitled to give an order
as above; the shipper only is entitled to order the carrier as to the person to
whom or to whose order the goods are deliverable. The bills are therefore made
to the shippers order.
1-287
The order is given by transferring the bill to the person to whom, or to whose
order, the goods are to be delivered. This process may be repeated by a
succession of transferees until the bill is accomplished by due delivery of the
goods. Where a transfer is made after such delivery the transferee does not
acquire any right against the carrier to delivery of the goods, but under certain
circumstances it may give the transferee contractual rights against the carrier,
e.g. he may claim damage suffered by the goods due to the carriers breach of
the contract of carriage (Carriage of Goods by Sea Act 1992, section 2(1)).
6.4.5
Shipped and Received Bills
1-288
A shipped bill states that goods have been shipped, i.e. loaded on board the
carrying ship. It will also frequently state the date of shipment. Even if the space
regarding the quantity of the goods was originally left blank and later it was
accurately inserted by the shipper it may still be treated as a valid document. A
bill of lading which contains a false statement in regards to the date of the
shipment is defective and the buyer can reject it but it is not utterly null merely
on the basis of the falsity.
1-289
A received bill of lading may refer to different kinds of documents. It may refer
to a document which states that the carrier has received the goods specified in
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it for shipment on a named ship or that the carrier has received them and intends
to ship them on that ship. Another kind of received bill is one which states that
the carrier has received the goods but either on a named ship or on another,
unspecified, vessel. A third kind of document is one which indicates that not the
carrier but another person (e.g. a warehouseman) is in the possession of the
goods and that they are held by that person at the disposal of the carrier or his
agent, and that they are intended to be shipped on a named ship. Since this
document is not a receipt of the goods by the carrier it is ambiguous whether it
can be treated as a received bill of lading and if it can it will therefore be subject
to the provisions of the Carriage of Goods by Sea Act 1992 so far as they relate
to bills of lading. It is the courts usually which decide the meaning of the phrase
received for shipment. Prima facie these words would not cover a document
which indicates that the carrier issuing the document intended to ship them but
without also indicating that the carrier has received them.
1-290
The 1992 Act provides that a received bill of lading can be used: (a) to transfer
contractual rights to the lawful holder; (b) to impose contractual liabilities to a
transferee of it; and (c) to give rise to conclusive evidence in favour of the lawful
holder of the bill that he has received the goods for shipment.
1-291
A received bill is not as satisfactory as a document as a shipped bill is for the

transferee of a bill of lading (usually the buyer of the goods covered by it). It does
not constitute evidence of the actual shipment and it may fail to give him the
continuous documentary cover to which he is entitled under a CIF contract. He
may also not be aware of the date of actual shipment. It is under question
whether a received bill is a document of title in the common law sense.
1-292
If after an issuance of a received bill, the goods are shipped and this is noted
by, or on behalf of the carrier, on the bill, it then becomes a shipped bill with
effect from the date of the shipment specified in the notation.112
British Shipping Laws, Carver on Bills of Lading, London, Sweet and Maxwell
2001, pp.1-7, Authors: Sir Guenter Treitel and F.M.B. Reynolds
6.4.6
Switch Bills
1-293
The carrier may issue switch bills of lading in exchange for the original set
altering certain details. The purpose of this may be, for instance, to conceal the
origin of the goods or the identity of the original supplier. In The Almak113 switch
bills were issued to change the date of shipment which was connected to the
price of the goods. Even in the cases where switch bills are issued with legitimate
purposes it is a practice fraught with danger....114
Schmitthoff Export Trade: The Law and Practice of International Trade. Eleventh
Maxwell, London, 2009, p. 315
112
Carriage of Goods by Sea Act 1971, Sched., Art III, r.7/ Westpack Banking Corp. v South Carolina National Bank
[1986] 1 Lloyds Rep. 311; the position is the same at common law.
113
[1985] 1 Lloyds Rep. 557.
114
The Atlas [1996] 1 Lloyds Rep. 642 at 645.
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6.4.7
Charterparty Bills
1-294
A charterparty bill of lading incorporates and is subject to the terms contained

in a charterparty. Under a charterparty bill the charterer is the shipper of the
goods and the terms of the contract of carriage are contained in the charterparty
and not in the bill of lading. The terms on the back page of charterparty bills of
lading are usually less detailed than, for instance, in liner bills of lading. Once
the bill is issued to a third party, this bill will be regarded to incorporate the terms
of the contract of carriage. The bills also contain an incorporation clause, such
as clause 1 in Congenbill, in virtue of which all the rights and liabilities are
transferred over to the bill of lading.
6.4.8
Through Bills of Lading
1-295
Through bill of lading is a term used to describe a document which contains a

contract for the carriage of goods from one place to another in separate stages,
of which at least one stage is a conventional sea transit. The sea transit may
itself also be performed into separate stages by different shipowners in a
process of transhipment. The sea transit is frequently combined with a stage of
transit by some other means of transportation, e.g. by road, rail or air, in which
case the through bill of lading is known as a combined transport bill of
lading.
6.4.9
Clean and Claused Bills
1-296
A clean bill of lading is issued when the goods are in an apparent good order
and condition or it is claused when the goods contain defects.
6.4.10
Freight Forwarders Bill
1-297
A freight forwarder is usually an agent to the shipper and he cares for the cargo
to be exported. The freight forwarder issues a document similar to a delivery
order to the shipper.
1-298
Where the freight forwarder, however, acts as a principal and not as an agent he
issues a bill of lading which might be a fully transferrable bill of lading and not
merely a cargo delivery order. For the court to decide whether the freight
forwarder acted as a principal, factors such as whether he performed the tasks
of arranging collection and transport of the goods or his remuneration will be
taken into consideration.
1-299
In Sonicare International Ltd v East Anglia Freight Terminal Ltd,115 the bill of
lading contained clauses such as: the Freight Forwarder (a) undertakes to
perform and/or his own name to procure the performance of the entire transport...
(b) assumes liability as set out in these Conditions and For the purposes and
subject to the provisions of this Bill of Lading.... These clauses indicated that the
freight forwarder had undertaken entire responsibility for the carriage and he
115
[1997] 2 Lloyds Rep. 48.
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also had the freedom to sub-contract in his own name. He was therefore
considered to be acting as a principal and not as an agent.
6.4.11
Multimodal Bills of Lading
1-300
The term multimodal bills of lading is used interchangeably with the term
combined transport bills of lading. It describes the process of goods being
shipped with the use of more than one means of transport, one of which may
include a sea leg, before they reach their destination. Legal issues may arise in
relation to multimodal bills of lading regarding which rules should apply if the
goods are lost or damaged. One approach is that a uniform system of liability
should apply from the stage of the dispatch of goods until their arrival or
alternatively, a network system may be used to identify at which stage of
transport the loss or damage occurred. The latter option may not be practically
convenient to use as it is not easy in all cases to identify at what stage the loss
or damage occurred. Each mode of transport is governed by its own convention
which provides different liabilities and a different system to accommodate
them.
6.5
ELECTRONIC BILLS OF LADING
1-301
The evolution of the electronic means of communication has now spread in the
shipping industry in the transmission of various types of information including bill
of lading data. The question is now whether these facilities can be used as
electronic alternatives to the traditional paper documents. For this aim to be
materialised it must involve and be accepted by a wide range of interests
including shippers, carriers, consignees, banks, underwriters and P&I Clubs.
Certain groups are more conservative in their approach to innovation and the
interests of others conflict. The hesitation of the market in the use of an electronic
bill of lading is mainly owed to the wide belief that an electronic bill of lading may
fulfil the function of the receipt and evidence of the terms of the contract of
carriage but it will be difficult to act as a document of title. The proposed
Rotterdam Rules seek to establish equivalence between electronic and paper
bills of lading subject to the express or implied consent of the carrier and shipper
involved (Rotterdam Rules, Article 8). The Carriage of Goods by Sea Act 1992
in section 1(5) gives the Secretary of State the power to make provisions for the
application of the Act to cases where telecommunication systems or information
technology is used in connection with (a) the issue of the document provided in
the Act, (b) the endorsement, delivery or transfer of this document, and (c) any
act related to this document.
1-302
There are three main types of electronic documentation currently in use which
will be briefly mentioned below.
1-303
The Atlantic Container Line datafreight system. The first attempt into the
electronic field was the Atlantic Container Line datafreight system which was
tried on an experimental basis in Sweden. This system is designed to make full
use of the possibilities of electronic data processing accommodating also the
need for the traditional documentation.
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1-304
Seadocs scheme. In the mid-1980s the International Association of Independent

Tanker Owners (INTERTANKO) in affiliation with Chase Manhattan Bank
attempted to introduce an electronic system known as SEADOCS but the
system did not progress as the participants were worried about how secure the
confidentiality of information was.
1-305
Electronic Data Interchange (EDI). Another effort made was the electronic data
exchange systems. The main advantage of this system lies in the ease and
speed with which electronic documents can be exchanged. In order for this
system to be commercially effective it must enable goods to be sold in transit as
it would happen with a negotiable bill of lading. The electronic bill of lading
should therefore contain some form of signature, equivalent to a hand-written
signature, for authentication purposes, and for the security interests it must
replicate the quality of a paper document. The first requirement is satisfied by
the introduction of an electronic signature and in order to fulfil the security
requirement various forms of encryption are employed.
The EDI Rules are:
UNCITRAL Model Law on Legal Aspects of Electronic Data Interchange

and Related Means of Communication 1995. Its aim was to create uniform
legislation and practice in the use of computerised systems in international
trade.
CMI Rules. The CMI Rules proposed that the carrier (in the place of the
bank) is responsible to effect the transfer of the bill of lading. In order for the
CMI Rules for Electronic Bills of Lading to apply they need to be incorporated
into the contract.
Bolero. The most recent experiment in the use of electronic bills of lading
is Bolero. Doubt existed as to whether such an electronic document would
fall within the legal definition of a bill of lading provided in the relevant
maritime legislation and conventions. A contractual solution was proposed
to this potential obstacle by requiring all users of Bolero to subscribe to a
rule book and become parties to a multilateral contract designed to
replicate contractually the functions of the paper document. This rule
book could incorporate the Hague-Visby Rules or any other relevant
maritime convention. The second potential issue could be that in the
absence of a legislative framework or a mercantile custom an electronic
bill of lading would not attract the element of negotiability. The proposition
in order to circumvent this problem was that the endorsement of the
electronic bill of lading would be notified to Bolero and while the contract
between the shipper and the carrier would be extinguished a new contract
between the carrier and a named consignee on identical terms would
replace it. In this way the endorsee will obtain control of the goods and title
to sue the carrier. All endorsements or other transactions relating to the
electronic document are communicated through Bolero and directly
between the parties themselves so that security and integrity of the
transaction is preserved. Facilities for paper documentation are also
available if the lawful holder wishes to endorse the electronic bill to an
endorsee who is not a member of the Bolero club. Bolero has many
advantages in terms of speed, simplicity of procedure replication of the
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traditional functions of the bill of lading but unless a sufficient proportion of

the market signs up, frequent refuge will be sought in the use of paper
documentation.
Carriage of Goods by Sea. Seventh edition, by John F. Wilson, Pearson, LondonNew York, 2010, pp. 165-171
6.6
OTHER DOCUMENTS OF CARRIAGE
1-306
Two other significant documents of carriage which are sometimes encountered

in the place of or in conjunction with the bill of lading are the sea waybills (or
waybills) and ships delivery orders.
1-307
Sea waybills. Sea waybills have been described as the modern contract of
carriage of goods by sea.116 In the Singapore High Court case of Voss Peer v
APL Co Pte Ltd,117 subsequently affirmed by the Singapore Court of Appeal,118
Judith Prakash J provided a summary of the essential features of the sea
waybill:
A sea waybill is the maritime version of a document which has long been
in use in the context of land and air carriage. It operates as a receipt for
goods received for shipment and evidences the contract of carriage. One
significant difference between it and a bill of lading is that it is never ever a
negotiable instrument and is therefore usually used on short sea routes and
where neither the shipper nor the cargo receiver needs to pledge shipping
documents in order to raise finance. It is not issued in sets and the receiver
is able to take delivery of the goods merely by establishing his identity. The
original sea waybill need not be produced. Further, since it is not a bill of
lading the Hague and the Hague-Visby Rules do not apply to it.
1-308
The sea waybills may be used:

(a)
where the importer and exporter of goods have a long-standing commercial

relationship and therefore the exporter sends the goods to the importer in
trust that the latter will pay on receipt of his account or the importer may
pay in advance entrusting the exporter that he will send the goods;
(b)
in multinational groups of companies where the national subsidiary of a

multinational company in one country sends goods to a subsidiary based
in another country and payment is made in-house; and
(c)
where it is the custom of the trade for sea waybills to be issued subject to
an actual agreement between the shipper and the carrier.
They are attractive especially for short-sea voyages where the goods may reach
the receiver before the bill of lading could.
116
William Tetley (1983) 14 JMLC 465.
117
[2002] SGHC 81.
118
[2002] 2 Lloyds Rep. 707.
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1-309
The sea waybill is a receipt for the goods shipped, it evidences the contract of
carriage between the shipper and the carrier but it is not a document of title at
common law. The significant difference between a sea waybill and a straight bill
of lading is that the latter is a document of title in the hands of the named
consignee. A straight bill of lading contains the standard terms of the carrier on
the reverse side of the document but a sea waybill is blank and also straight bills
of lading may be issued in sets of three whereas the sea waybills may not (The
Rafaela S).119
1-310
One of the main difficulties with sea waybills was the ambiguity as to whether
the consignee has the right to sue on the basis of the contract of carriage. The
Carriage of Goods by Sea Act 1992 (section 1(3)) provides that a sea waybill is
not a bill of lading but:
(a)
is such a receipt for goods as contains or evidences a contract for the

carriage of goods by sea;
(b)
identifies the person to whom delivery of the goods is to be made by the

carrier in accordance with that contract.
1-311
The Law Commission confirmed the advantage of including sea waybills as

...such liability is clearly preferable to the potentially greater and more
indeterminate liability in tort.120
1-312
Section 2(1)(b) of the Act also provides that all rights of suit under the contract
of carriage... are transferred and vested to the sea waybill holder ...as if he had
been a party to that contract. Furthermore, under section 5(3) of the Act even
the person who is not originally named as the consignee but subsequently
becomes that person, is entitled to sue.
1-313
The Comit Maritime International (CMI) produced the CMI Uniform Rules for
Sea Waybills which are not mandatory but will apply if they are incorporated into
the contract of carriage.
1-314
Ships delivery orders. Ships delivery orders are, at common law, documents
issued either by the carrier of the seller, followed by an attornment by the carrier,
under which the carrier undertakes to deliver the goods to a person identified in
the document and to which the document relates to.
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Such documents are used in shipments of bulk cargoes by sea where the seller
of a bulk cargo may wish to sell parts of the cargo to different buyers while the
goods are at sea and there is only a single bill of lading covering the whole
consignment. It is not possible for the seller to give a single bill of lading to each
of the buyers and for this reason he may stipulate the right to tender a ships
delivery order for each one of the small parcels. The Law Commission referred
to the ships delivery order as follows:
A ships delivery order is really designed to act like a mini bill of lading, the
main difference being that a ships delivery order is issued after shipment
119
[2005] 1 Lloyds Rep. 347.
120
Rights of Suit in Respect of Carriage of Goods by Sea, Law Com No 196 (Scot Law Com No 130).
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and is usually issued in respect of a smaller cargo...the use of ships

delivery orders commended as the only legitimate way of splitting a bulk
cargo, on the ground that bills of lading have to be issued on shipment or,
if later, without undue delay and within the ordinary course of business.
Thus, a ships delivery order may look like a bill of lading and would be one
but for the fact that it was not issued on shipment.121
1-316
A ships deliver order is not a negotiable document of title at common law.
1-317
The Law Commission also recommended for ships delivery orders to be

included in the reforms as the opposite would weaken the position of the buyer
of part of a bulk cargo.122 As a result the Carriage of Goods by Sea Act 1992
provides their definition in section 1(4) as an undertaking which:
1-318
(a)
is given under or for the purposes of a contract for the carriage by sea of
the goods to which the document relates, or of the goods which include
those goods; and
(b)
is an undertaking by the carrier to a person identified in the document to

deliver the goods to which the document relates to that person.
The person identified in the ships delivery order as the party entitled to delivery
has the contractual right to take delivery of the goods by the carrier subject to
proving his identity for claiming delivery. Section 2(1)(c) of the Act, provides that
the person who is entitled to the delivery of goods to which a ships delivery
order relates has all rights of suit under the contract of carriage.
Carriage of Goods by Sea. Second edition, by Stephen Girvin, Oxford University
Press, 2011, Oxford, pp. 55-61
6.7
CARGO CLAIMS AND BILLS OF LADING
1-319
At this point a few notes will be made on cargo claims. As this is a rather complex
and extensive subject a brief account on general terms will be given. Cargo
claims are brought by cargo interests against carriers when the cargo in which
they have an interest is not delivered or is delivered short or damaged. The
cargo interests may be the shipper or the receiver of the goods (or intended
receiver if goods have not been delivered) or the charterers or sub-charterers of
the vessel on which cargo was shipped. Banks, cargo insurance and P&I Clubs
may also lurk behind these interests. The claim may be brought on the terms of
a bill of lading or a charterparty. The contract of carriage will usually contain
provisions on the choice of law in case a dispute arises.
1-320
An adviser working on a cargo claim needs to answer certain crucial questions

at the beginning of his work. These are:
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Does the claimant have the right to sue? The claimant needs to establish his
legitimacy to sue the carrier, i.e. that he has the title to sue. This title may be
121
122
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based on the contract of carriage (either made or acquired by the claimant) or

in tort (conversion or negligence). If the carrier fails to deliver the goods to which
the claimant has proved rights the carrier is liable to the claimant in conversion
and if the carrier delivers the goods short or damaged then the carrier is liable
in negligence. Moreover, if the carrier was in physical possession of the goods
and was the cargo interests bailee he is liable in bailment. Even if liability is
based on tort or bailment it is still subject to the rules of causation, remoteness,
and time limitations applicable by law but also the terms which the parties have
agreed to incorporate in their contract. There are two instances where there is
no dispute as to the claimants title to sue:
1-322
(a)
where the cargo claimant is a charterer or a sub-charterer of a chartered

ship. The claimant has the title to sue the party from whom it has chartered
the ship, i.e. the shipowner or another charterer under a charterparty
concluded between the claimant and the respondent carrier;
(b)
where the bill of lading issued by the carrier is transferred by the shipper
to the receiver and the claim is brought by the shipper who has concluded
the contract of carriage.
Under English law the Carriage of Goods by Sea Act 1992 section 2 provides
that the cargo interests which has the right to sue the carrier are:
(a)
the lawful holder of a transferrable bill of lading;
(b)
parties named as consignees on seaway bills and straight bills; and
(c)
parties to whom the carrier has undertaken to deliver the goods under a
ships delivery order.
If a document is not included in the above categories then it needs to be

examined whether there is another basis for the title to sue under the common
law.
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123
Establishing the identity of the carrier? The identity of the carrier is easy to be
established when the claimants claim is based on a contract as the defendant
will be the claimants contractual counterparty. Sometimes, however, it is difficult
to identify who the contractual counterparty is given that in the way ships are
used there may be many layers of charters and sub-charters of the ship. Another
issue is the way bills of lading are signed and by whom. Making the wrong
assumption as to the identity of the carrier results in unnecessary costs and also
runs the risk of allowing a time bar to lapse against the proper defendant. Where
the claimant in a cargo claim is a charterer, then its carrier is the party who
chartered him the ship. Where the claimant is not a charterer, then the identity
of its carrier will appear on the logo heading of the bill of lading covering the
goods and the signature at the foot of the bill of lading. In The Starsin123 the
House of Lords held that the signature on the bill of lading prevailed as evidence
for the identity of the carrier to an express identity of the carrier clause
contained on the reverse of the bill of lading. If the actual carrier is different to
the legal carrier and there is no privity of contract between the shipper and the
Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] 1 Lloyds Rep. 571.
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actual carrier the claimant may sue him if he can establish tort committed by the
actual carrier or that he is in breach of his duties as a bailee.
1-324
Do the Hague-Visby Rules apply? It is important to establish whether or not the

Hague-Visby Rules apply as the one-year time bar for bringing a claim and the
cap on recoverable damages which favour the carrier will apply under the Rules
while the bar on bill of lading clauses which seek to exclude or limit the carriers
liability (Article III rule 8) are important to cargo interests. These Rules were
incorporated into the UK by the Carriage of Goods by Sea Act 1971. An express
choice of law determines the law applicable to a contractual dispute and
therefore one might make the assumption that since most bills of lading contain
choice of law clauses the Hague-Visby Rules would apply only where the
parties had expressly incorporated them or, failing that, where the contract of
carriage had a close connection with the UK, a Hague-Visby state. The English
position in respect to the applicable law to cargo claims has been that instead
of finding first which national law applies and then which part of law applies to
the dispute the courts will use the 1971 Act to decide whether the English
regime on carriage matters applies to the cargo claim. For the 1971 Act to apply
and therefore the Hague-Visby Rules to apply, a bill of lading must be issued in
a Hague-Visby Rules contracting state, or the carriage must commence from
such a state, or the terms of the bill of lading incorporate the legislation of the
state which gives effect to the Rules, or the bill of lading contains an express
term by which the Rules are incorporated through a so-called clause
paramount.
1-325
In the rest of this discussion the application of Hague-Visby Rules will be

assumed.
1-326
How can the claimants loss be proved? Whether the claimant is the shipper or
the buyer of the goods he needs to prove his loss. Thus, it is the claimants
responsibility to establish that the carrier has failed to deliver what the carrier
claims to have shipped. This involves a comparison between the goods as they
were shipped and the goods as they were discharged.
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The cargo interest must preserve the evidence. Article III rule 6 of the HagueVisby Rules provides that notice of loss or damage must, if joint inspection did
not take place when the cargo interest receive the goods, be given in writing to
the carrier at the port of discharge before or when the cargo interest takes
custody of the goods or, where the loss or damage is not apparent, the notice
should be given within three days. In the cargo interest fails to give the expected
notice, which would offer a snapshot of damaged goods on discharge, the
carrier is prima facie assumed to have delivered the cargo according to the
description in the bill of lading. This assumption would not necessarily lead to
the failure of the cargo claim, but it would place the claimant into the position of
having to prove one of two negatives, i.e. either that the goods were not
delivered in the condition or quantity described in the bill of lading or that the
goods were not damaged ashore after discharge. The Article III rule 6 notice,
the receivers discharge snapshot, is of considerable evidential importance in
supporting a cargo claim.
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The description of the quantity of goods and the leading marks originate with
the shipper but once the bill of lading is issued and signed by the carrier the
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latter states that the goods identified by the indicated loading marks have been
loaded in the quantity and apparent condition as stated in the bill of lading. This
statement raises a prima facie presumption against the carrier that the goods
were loaded as stated, a presumption which the carrier can, if the shipper
raises a cargo claim, rebut by producing evidence which contradicts the
statements on the bill of lading as to loading marks, quantity and apparent
condition.
1-329
Article III rule 4 of the Hague-Visby Rules bars proof contradicting the statements
as to the quantity, apparent condition and leading marks contained in the bill of
lading when the bill has been transferred to a third party acting in good faith, e.g.
the buyer of the goods, and this makes the bill of lading conclusive evidence in
respect to the statements it contains about the goods. The result is that the buyer
can show that the goods were discharged in a smaller quantity or in a worse
apparent condition than what is stated in the bill of lading to have been shipped
and in this way he will have proved its loss and have a successful cargo claim.
Since, however, some of the information to which the carrier is bound leading
marks and quantity originates with the shipper the Rules provide that the
carrier may have an indemnity against the shipper for loss, damages and
expenses resulting from any inaccuracies contained in any such particulars
(Article III, rule 5).
1-330
How can the carriers breach be proved? The claimant, in order to succeed,
needs to prove that his loss directly resulted from a breach by the carrier of any
of his sources of obligation, i.e. contract, tort or bailment. The cargo claimant
needs to prove that its loss was caused by the carriers breach of a particular
contract. It therefore becomes crucial for the claimant to identify the contract
upon which the claim is brought. There are four possible sources to identify the
claimants contract of carriage:
1-331
(a)
the contract of carriage itself on which the claim is based;
(b)
the bill of lading;
(c)
a charterparty (but as a contract of carriage it does not provide a snapshot

of the goods on shipment and it cannot be passed to a string of buyers,
transferring rights of suit as it goes as is the case with the bill of lading);
and
(d)
a bill of lading incorporating charterparty terms.
Where a claim is brought on the basis of the terms of a contract of carriage

contained in or evidenced by a bill of lading which incorporates the Hague-Visby
Rules the claimant needs to establish facts which prove that the carrier is in
breach of his obligations to exercise due diligence before and at the beginning
of the voyage to provide a seaworthy ship, properly equipped and manned and
fit to receive the cargo, as provided in Article III rule 1, and to properly load,
handle, stow, carry, keep, care for and discharge the goods carried subject to
the provisions of Article IV while he is in custody of the goods, as provided in
Article III rule 2.
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The carrier will argue that he is excluded from liability by proving the relevant
facts (as provided in Article IV rule 2) or that the claim is time barred. If neither
of those escape routes are available the carrier could attempt to limit its liability
with the so-called package and unit limitation imposed by the Rules but the
claimant may try to deprive the carrier through one of two means, i.e. by proving
deviation or that the damage was caused intentionally by the carrier.
Baatz Y. (ed.), Maritime Law. Second edition, Debattista C., Cargo Claims and
Bills of Lading, 2011, Sweet and Maxwell, London, pp. 193-230
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7.
CHARTERPARTIES
7.1
INTRODUCTION
1-333
In this chapter we will discuss the definition and anatomy of charterparties, their
types and matters related to them. Charterparties are contracts between the
shipowner and the charterer for the use of the whole or part of the vessel
(depending on the amount of cargo to be transported) whereas the bill of lading
is evidence of the contract (or if it is endorsed to a third party the B/L is the
contract) for the carriage of goods. Charterparties differ from bills of lading in two
respects: (a) they are not subject to the provisions of the Hague and HagueVisby Rules unless the parties choose to incorporate them into the charterparty;
(b) they are not subject to the statutory assignment of the Carriage of Goods by
Sea Act (COGSA) 1992. There are many types of charterparties but the main
ones are:
The voyage charterparty.
The time charterparty.
The demise or bareboat charterparty.
1-334
Main information contained in a Time Charterparty: (a) Place and date, (b)
Parties, (c) Vessels name and Particulars, (d) Period of hire, (e) Cargo details,
(f) Cargo exclusions and Trading limits, (g) Ports of delivery and Re-delivery, (h)
Cancelling dates, (i) Hire (rate, time, place, currency), (j) Right to withdraw, (k)
Off-hire clauses, (l) Liability clauses (exceptions, general average, employment
and agency), and (m) Governing law and Arbitration.
1-335
Main information contained in Voyage Charterparties: (a) Place and date, (b)
Parties, (c) Vessels name and Particulars, (d) Expected readiness, (e) Cargo
details, (f) Ports of loading and discharging (or range), (g) Laytime and Cancelling
clauses, (h) Freight (rate, time, place currency), (i) Demurrage and Despatch
money, (j) Liability clauses (exceptions, general average, bills of lading), and (k)
Governing law and Arbitration.
1-336
The seller is responsible to make arrangements for the transport of cargo from
his country to the buyers when the contract of sale is under cost, insurance,
freight (CIF) terms. In a free on board (FOB) contract, the buyer may arrange
transport, unless otherwise agreed between the parties, e.g. he may ask the
seller to arrange transport on his behalf.
1-337
Where the amount of cargo suffices to fill a vessels full cargo-carrying capacity
the usual practice is to charter a ship. In this type of arrangement, the shipowner
agrees to make the ship available to the charterer either for (a) a specified
voyage(s), e.g. from Liverpool to Singapore, or (b) a specified period of time, e.g.
from 1 January 2010 to 1 January 2011. Apart from these two classifications of
charterparties, however, in practice there is a number of variations, e.g. trip
charter, consecutive voyage charter and long term freighting contracts. In a trip
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charter, the contract is for a voyage on time charter terms and it therefore
provides a minimum/maximum period for the voyage. In a trip charter the
charterer pays hire, not freight. In a consecutive voyage charter, the subjectmatter of the contract is for a number of consecutive voyages within an agreed
period. In a long-term freighting contract, the agreement is to carry quantities of
cargo on particular routes over an agreed period of time and the shipowner
chooses the ships.
1-338
In most jurisdictions, including England, it is not required that the charterparty is

in a written form although the usual practice is for it to be in writing. Charterparties
have been standardised since the late 19th and early 20th century by
organisations such as the Baltic and International Maritime Council (BIMCO),
the Association of Shipbrokers and Agents (ASBA) and the Chamber of Shipping.
In addition to the standard form charterparties there is a large number of private
charterparties (in-house charterparties). Large charterers such as major oil
companies have their own forms of charterparties (e.g. Shells Shellvoy, British
Petroleums Beepeevoy) and they only use their own standard form. A number
of standard charter forms are available for use with all cargoes and some for
special cargoes such as grain. The parties may vary both standard forms and
private charterparties clauses or supplement them by additional clauses
(so-called rider-clauses), should they wish to, since some of the standard
charterparties drafted in the early part of the 20th century do not reflect the
current trade practice. For terms contained in the charterparty, provided it is
governed by English law, the rules of interpretation of contract terms and general
principles of English contract law apply. However, English common law implies
certain obligations on the part of the shipowner and the charterer.
1-339
The most common charterparty standard forms are: (a) for voyage charters, the
GENCON 1994 form for general cargo and the ASBATANKVOY, SHELLVOY,
Exxonvoy or Beepeevoy for oil; (b) for time charters, the New York Produce
Exchange (NYPE) 1946 or 1993, BALTIME, ASBATIME, Shelltime (3 or 4 form);
and (c) for bareboat charters, BARECON is the most commonly used.
Taylor and Francis Group, London and New York, 2010, pp.160-172
7.2
TYPES OF CHARTERPARTIES
1-340
We will now examine the definitions and main characteristics of the three (main)
types of charterparties:
7.2.1
Voyage Charterparty
1-341
Under a voyage charterparty, the charterer hires the vessel for one or more
specified voyages. The shipowner is in control of the vessel and provides its
equipment and manning. The shipowner employs the master and crew and he
is responsible for their wages. The shipowner in a voyage charterparty undertakes
the transportation of goods to the port(s) specified in the charterparty and he
also insures the ship. He will be paid freight which includes costs (fuel, crew,
his profit). An agreed time, laytime, will be provided for the loading and
discharging of cargo but if the operations exceed the permitted laytime, the
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shipowner will be compensated by demurrage at the rate agreed in the

charterparty. The charterer undertakes to provide the specified cargo and pay
for the services either as a lump sum for the voyage, or proportion to the amount
and type of cargo carried. Voyage charterers may seek to extend the obligations
provided in the charterparty to the bill of lading holder. In this case a clause is
inserted which provides that the issue of bills of lading incorporates the terms of
the charter. This type of B/L (subject to COGSA 1992 effecting the statutory
assignment) creates a contractual link between the shipowner and the bill of
lading holder on the terms of the charterparty and this is incorporated into the
bill of lading. The charterparty may also contain a provision the so-called
cesser clause by virtue of which any obligations are removed from the
charterer once the cargo has been loaded.
1-342
Two remedies are usually available for the shipowner in voyage charterparties
for non-payment of freight or demurrage. These are: (a) the lien on cargo (i.e.
a right to detain the cargo pending payment) and (b) the lien on subfreights (i.e. a
right to hold subfreights due to the charterer by its subcharterers).
1-343
A number of standard forms are in use:

(a)
As aforementioned the most well known standard form for use with general
cargo is GENCON charterparty 1994, approved by BIMCO to which
parties frequently insert additional clauses. The 1994 version has
introduced new clauses to the 1922 and 1976 versions, such as clause 19
on law and arbitration, has modified other clauses, e.g. clause 8 (lien) and
clause 10 (bills of lading).
Other standard forms for use with specific cargo are:

(b)
NORGRAIN 89 (North American grain charterparty issued by the

Association of Shipbrokers and Agents (USA) Inc) for the carriage of
grain;
(c)
OREVOY (issued by the Baltic and International Maritime Council) for the
carriage of ore; and
(d)
FERTICON (Chamber of Shipping fertilisers) for the carriage of fertilisers.
Group, London & New York, 2012, p.184
7.2.2
Time Charterparty
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Under a time charterparty, the charterer hires the vessel for a defined period of
time, for instance 12 months. The shipowner maintains control of the ship and
the employees on board the ship. He is paid a hire which is calculated on a
daily basis and is usually payable in advance.124 Hire runs from the commencement
of the charter when the vessel is delivered and ceases with its termination
when she is redelivered according to the provisions of the charter as to the
124
The Baltime form provides a period of 30 days whereas the NYPE 93 form provides a period of 15 days.
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place and time this should take place. In a time charterparty there is no
equivalent to laytime and demurrage and delay is treated in a different way. The
running of the charter may be interrupted by the operation of an off-hire clause,
which provides for a temporary cessation of hire caused by any of the specified
causes.
1-345
In a time charter, the charterer is responsible for the number of voyages it

undertakes and the destination of the voyages. The shipowner in a time
charterparty does not undertake to transport the goods to a specified port(s) as
in a voyage charterparty but he insures the ship. As for the fuel consumed during
the charter period the charterers will take over and pay for the vessels bunkers
on delivery and the shipowners will pay on redelivery. The charterers will also be
paying for bunkers between delivery and redelivery.
1-346
Any slow steaming on the voyages performed will have a greater effect on a
time charterparty as this will restrict the total number of voyages that it will be
able to perform within the period provided in the charterparty. To reduce the
effects of such a possible problem, most time charters contain an express
clause, for instance, clause 8 of the NYPE form, under which the shipowner is
obliged to prosecute voyages with the utmost dispatch. The charterparty will
also normally contain a warranty as to the speed at which the vessel will be
able to proceed and a warranty by the shipowner as to the fuel consumption
of the vessel.
1-347
The contractual transfer of liability of voyage charters with charterparty bills of

lading and cesser clauses is not usually provided with time charters. Bills of
lading are issued but they do not incorporate terms of the charterparty. Such
bills are frequently marked as freight prepaid which prevents the shipowner
from being able to exercise a lien on cargo. The cargo will not usually be owned
by the time charterers. The lien on subfreight is likely to be more useful. Time
charters usually provide another remedy to voyage charters the right of
withdrawal. This is an option to terminate the charter if hire is not paid at the
agreed time in full. Different rules on frustration apply to voyage or time charters.
The Law Reform (Frustrated Contracts) Act 1943 does not apply to voyage
charters but it applies to time charters.
1-348
There are also a number of standard time charter forms as for instance the
BALTIME (Baltic and International Maritime Council uniform time charter) and
the NYPE (New York Produce Exchange time charter). Due to the nature of time
charterparties, their terms are mostly related to employment of vessel, speed
and maintenance of vessel, hire period, return of vessel, payment of hire.
7.2.3
Demise Charterparty
1-349
The demise charterparty is also known as a bareboat party. In this type of

charterparty, for the duration of the charter the shipowner passes possession
and control of ship to the charterer and he is no longer responsible for equipping
the ship or employing the crew or insuring the vessel as in a voyage or time
charterparty. A demise charterparty is a time charterparty usually for a long term
such as ten years. They are used for a small number of charters.
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Group, London & New York, 2012, p.184-185
7.3
SHIPBROKERS
1-350
The owner and the charterer may each instruct a chartering shipbroker who will
be abreast with the current chartering market. Shipbrokers have their own
specialisation in different types of ships such as oil tankers or general cargo
ships. Part of the role of the broker is to advise its principal how to tailor the
terms of the charterparty standard form according to the individual
transaction.
1-351
When the charterparty is concluded its terms are recorded in a fixture recap, i.e.
an e-mail or other written form recording the terms of the charterparty. A
charterparty is then drafted and signed by both parties.
1-352
The legal position of the shipbroker with the relevant obligations will depend on
whether the broker has contracted as agent for its principal or as a principal.125
Therefore it is important that this is clearly established.
1-353
The broker is paid commission and the charterparty will contains provisions in
regards to who will pay what amount of commission to which broker.126 The
broker is not a party to the charterparty contract.
Maritime Law. Second edition, by Yvonne Baatz (ed.), Yvonne Baatz
Charterparties, Sweet and Maxwell, London, 2011, pp. 128-131
7.4
IMPLIED OBLIGATIONS IN A CHARTERPARTY
1-354
The majority of standard form charterparties, both voyage and time, contain
express terms imposing obligations on the shipowner and charterer. In the
absence of such terms these obligations will be implied by common law. The
Rules applicable to the charterparty should also be considered in regards to
these obligations. The shipowner is therefore obliged to:
1-355
(a)
provide (or to exercise due diligence to provide) a seaworthy ship;
(b)
perform his contractual obligations with due dispatch;
(c)
carry the cargo to the agreed destination without deviation from the
contractually agreed voyage;
(d)
use due care and skill in navigating the vessel and carrying the goods.
The charterers duties are to:

(a)
nominate a safe port;
125
Polish Steamship C. v A.J. Williams (Overseas Sales) Ltd (The Suwalki) [1989] 1 Lloyds Rep. 511.
126
Cl. 24 of the Baltime form; NYPE 1946 cls 27 and 28 and NYPE 1993 cls 43 and 44.
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(b)
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not to ship dangerous goods without disclosure.
The above obligations of the shipowner are also implied in a bill of lading
governed by common law and for this reason the discussion which follows also
applies to bills of lading. Breach of these obligations will constitute the basis of
a dispute.
Taylor and Francis Group, London and New York, 2010, pp.164
7.5
OBLIGATIONS OF THE SHIPOWNER
1-357
Seaworthiness. The meaning of seaworthiness is a two fold one. It embraces

both the physical state of the ship and its fitness for receiving the agreed
cargo that is, cargoworthiness.127
1-358
The shipowner is under the absolute obligation that the ship will be fit for the
purpose intended. He cannot avoid liability by proving that he had taken all
precautions to make the ship seaworthy. Therefore, the ship must be:
(a)
fit in design, hull and machinery;
(b)
properly equipped to encounter the ordinary perils of the sea likely to

appear in the particular route at that time of the year;128
(c)
sufficiently manned with competent and trained crew for the agreed
voyage. In the Star Sea129 the vessel was held to be unseaworthy as the
master, despite being qualified and very experienced, was not trained to
use the fire-fighting equipment on the ship. When fire broke out he was not
aware that he should use the carbon dioxide fighting system quickly
enough and when he gave instructions for its deployment, he did not order
that all the CO2 to be used to flood the hold on fire, as he should have
done, which resulted in the fire not being extinguished and the ship
became a constructive total loss. The court held that the master was
incompetent and therefore the ship was unseaworthy. The ship must also
(d) take a safe supply of bunkers (i.e. fuel) for the agreed voyage.130
The vessel must be seaworthy at the time of sailing.131 The majority of modern
standard form charterparties contain express provisions in regards to
seaworthiness, although the actual word seaworthiness may not be
mentioned.132
1-359
The ship must also be cargoworthy, i.e. fit to carry the particular cargo safely. The
ship must be fit to encounter the ordinary perils of the sea for the contractual
127
Rathbone v Maclver [1903] 2 KB 378.
128
Stanton v Richardson [1874] LR 7 CP 421.
129
Manifest Shipping Co. Ltd v Uni-Polaris Insurance Co. Ltd (The Star Sea) [1995] 1 Lloyds Rep. 651.
130
Fiumana Societa di Navigazione v Bunge [1930] 2 KB 47.
131
Stanton v Richardson [1874] 9 CP 390.
132
Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.
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voyage at the agreed time and not for any other one. The undertaking of
cargoworthiness of the vessel was held in McFadden v Blue Star Line133 that it
must be fulfilled at the time of loading. However, in Elder, Dempster v Pater
Zachonis134 Lord Viscount suggested that seaworthiness for cargo extends to
fitness for the cargo not only at the time of loading but also at the time of
sailing.
1-360
Under NYPE 1946 the ship must be fit at the time of delivery but in practice a
description of the ship (i.e. ships class, her capacity, and her speed and
consumption) is included in the preamble of the charterparty at the time this is
concluded. Further details may also be given in additional typed clauses. The
same standard form clause135 provides for the continuing obligation of the
shipowner to maintain the ship and a clause paramount which incorporates US
COGSA.136 If the Hague or Hague-Visby Rules are incorporated into a
charterparty the absolute obligation of seaworthiness is reduced to the obligation
to exercise due diligence. It is ambiguous, however, when the obligation to
exercise due diligence under the Hague or Hague-Visby Rules commences
under a time charter. The more appropriate approach is probably that it applies
at the beginning of each voyage under the charterparty. The continuing obligation
to maintain the ship supports this view and although it may appear to be an
absolute obligation, when read together with the Rules, it becomes a duty to
exercise due diligence. Therefore certain modern standard form charterparties
provide in express terms that the owner shall exercise due diligence to maintain
the ship throughout the charter service.137
1-361
The burden of proof for establishing unseaworthiness is on the claimant who

must also show that the ship was unseaworthy before and at the beginning of
the voyage and that it was the unseaworthiness which caused the damage or
loss.138
1-362
It does not suffice for the owner to allege that he exercised due diligence in
selecting and delegating work to reputable ship repairers or surveyors. The
owner is also under the obligation to establish that those ship repairers or
surveyors themselves exercised due diligence.139
1-363
The shipowner may, however, rely on the exception of liability provided in Article
IV rule 2(a) of the Hague and Hague-Visby Rules for act neglect or default of
the master, mariner, pilot or the servants of the owner in the navigation or the
management of the vessel. In The Satya Kailash (Seven Seas Transportation
Ltd v Pacifico Union Marina Corporation140) the owner of the Satya Kailash
133
[1905] 1 KB 697.
134
[1924] AC 522.
135
See also NYPE 1993 cl. 6.
136
Cl. 24; see also NYPE 1993 cl. 31.
137
Shelltime 4 cl. 3 and also Golden Fleece Maritime Inc. v ST Shipping and Transport Inc (The Ellie and the Frixos)
[2007] EWHC 1890 (Comm).
138
International Packers v Ocean Steamship [1955] 2 Lloyds Rep. 218.
139
Eridania S.p.A. v Rudolf A. Oetker (The Fjord Wind) [2000] 2 Lloyds Rep. 191.
140
Seven Seas Transportation Ltd v Pacifico Union Marina Corporation (The Satya Kailash and Oceanic Amity) [1984] 1
Lloyds Rep. 588.
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chartered the Oceanic Amity to lighten the Satya Kailash. During the operation
of lightening damage was caused to the Satya Kailash due to the negligent
navigation of the master of the Oceanic Amity. The Court of Appeal held that the
owner of the Oceanic Amity could rely on the above mentioned exception of
negligent navigation.
1-364
The obligation of providing a seaworthy ship is an innominate term of the

contract. If the court considers that the breach went to the root of the contract
and therefore made its performance impossible the injured party can repudiate
the contract and claim damages. If the breach did not frustrate the commercial
purpose of the contract, the remedy available will be damages.
1-365
The shipowner has the liberty to contract out of the implied obligation of
seaworthiness but the provision has to be express, clear and unambiguous.
1-366
The time bar within which claims must be raised under a charterparty is six
years from the time the breach of contract occurred unless the parties have
expressly agreed a shorter time limit.141 However, where the Hague or HagueVisby Rules are incorporated into the charterparty the time bar is one year
(Article III rule 6) and under the Hamburg Rules it is two years (Article 20). Many
charterparties contain clauses for arbitration in which case the arbitration must
be commenced within the provided time limit. There must also be a real
connection between the loss or damage claimed and the goods being carried,
and not just a remote link.142
1-367
Due dispatch. This is a term implied into every voyage charterparty that the
shipowner must proceed with due dispatch (i.e. the vessel must proceed on the
voyage, load and discharge at the agreed time) not only under the contract itself,
but also on the approach voyage (i.e. the voyage from the place at which the
vessel is situated when the charter is signed to the loading port/place of delivery
specified in the charter).143 The same term is also implied into time charters in
regard to the approach voyage to the place of delivery.144
1-368
This term is an innominate term the breach of which will only justify the charterer
in terminating the contract if the consequences are sufficiently serious to
frustrate the commercial purposes of the contract.145
141
Babanaft International Co. SA v Avant Petroleum Inc. (The Oltenia) [1982] 2 Lloyds Rep. 99, CA.
142
Goulandris Brothers Ltd v B. Goldman and Sons Ltd [1957] 2 Lloyds Rep. 207.
143
Freeman v Taylor (1831) 8 Bing 124.
144
The Democritos [1976] 2 Lloyds Rep. 149, CA.
145
Universal Cargo Carriers Corn v Citati [1957] 2 QB 491.
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1-369
Statements as to vessels position and expected readiness. The implied

obligation to proceed with reasonable dispatch will frequently be linked with
terms in the charter which give the charterer a more concrete idea regarding the
likely time for performance to commence. Examples of such statements are: (a)
vessel now in the port of Liverpool; (b) vessel now sailed or about to sail from
a pitch pine port to Brussels; (c) vessel expected ready to load on 1 September.
These statements are considered conditions the breach of which will entitle the
charterer to terminate the contract and also seek for damages. The shipowner
will be in breach if the statement is untrue or if he had no reasonable grounds
to believe the statement in regards to the readiness of the vessel at the date of
the charter. If the charterer is aware that the statement is untrue and yet
proceeds with the charter, his right to repudiate is waived but not his right to
damages.
1-370
The cancellation clause. The majority of charters contain a cancellation clause.

Under this clause the charterer has the option to cancel if the vessel has not
arrived, ready to load, at the load port by a certain date. The importance of this
facility for the charterer is that it enables it to recharter if delays under the original
charter put it at risk of being in breach of its obligations under its contract of sale
regarding the time within which the cargo is to be loaded. The terms of the option
determine whether it will be exercised and not whether the shipowner has been
in breach. Cancellation will result in the discharge of the contract for both parties,
but it does not necessarily mean that the charterer can also sue the shipowner
for breach of contract. In The Democritos,146 the Court of Appeal held that the
shipowner would be liable in damages only if its failure to proceed with
reasonable dispatch led to its failure to meet the cancelling date. The contract
remains alive until the option is exercised.
Shipping Law. Fifth Edition, by Simon Baughen, 2012, Routledge. Taylor and
Francis Group, London & New York, pp. 203-204
1-371
Deviation. A charterparty may contain provisions for a particular route to be

followed or in a time charterparty the time charterer may give clear and express
instructions in regards to the route.147 The shipowner must follow the contractually
agreed route unless an exception is provided. In the absence of a contractually
agreed route the direct geographical route would be presumed, unless the
owner can prove that he followed the customary route.148
1-372
Many charterparties contain an express term which provides the liberty to

deviate (e.g. GENCON 1994 clause 3). This clause would be construed
restrictively against the owner.149 In the case where the charterparty incorporates
the Hague or Hague-Visby Rules, Article IV rule 4 of both sets of Rules provides
that the carrier is not liable for any loss or damage resulting from deviation for
saving or attempting to save life or property or any reasonable deviation.150 The
Rules do not allow the owner to contract out of the minimum obligations provided
146
[1976] 2 Lloyds Rep. 149.
147
Whistler International v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 Lloyds Rep. 147.
148
Reardon Smith Line v Black Sea and Baltic General Insurance [1939] AC 562.
149
Glyn v Margetson [1893] AC 351.
150
Stag Line v Foscolo, Mango & Co. [1932] AC 328.
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by the Rules.151 In the absence of an express liberty clause and when the Rules
do not apply to the charterparty, the owner can rely on the justifications for
deviation at common law which are narrower than those provided in the Rules
and cover deviation to save human life or to communicate with a ship in distress
where life is endangered or lost. Circumstances such as saving property, or
avoiding danger to the ship or her cargo, even if this was due to the vessel being
unseaworthy when she went to sea or where deviation is necessary due to the
fault of the charterer is not covered.
1-373
Unjustified deviation is a fundamental breach of contract and the charterer is

entitled to terminate or affirm the contract.152
7.6
OBLIGATIONS OF THE CHARTERER
1-374
Nomination of a safe port. A charterparty, either time or voyage, will usually

contain a provision that the ship may only be ordered to safe ports or places.153
In certain charterparties, the charterers obligation is of due diligence to ensure
that the ship is only employed between and at safe places.154 In the absence of
such a relevant express term this is an implied obligation.
1-375
The definition of the safe port was provided in Leeds Shipping v Societe
Francaise Bunge (The Eastern City)155 as follows:
...a port will not be safe unless, in the relevant period of time, the particular
ship can reach it, use it and return from it without, in the absence of some
abnormal occurrence, being exposed to danger which cannot be avoided
by good navigation and seamanship. (at p. 131)
1-376
The safety of a port is also decided in relation to factors such as the vessels
manoeuvrability and availability of weather reports. Metereological events which
cannot be avoided through good navigation, unpredicted weather and lack of
weather reports may render a port unsafe.156 The mere existence of hazards at
a port does not make that port unsafe if they can be avoided with good navigation
and seamanship, a coupled with safe system in the port to warn of hazards and
how to avoid them. Thus even if a port is prone to bad weather and it is necessary
for the ship to leave the port during such weather it will still be considered safe
151
The Hague and Hague-Visby Rules Art. III r.8.
152
Hain Steamship Company Ltd v Tate and Lyle Ltd [1936] 2 All ER 597.
153
NYPE 1946 cl. 6; NYPE 1993 cl. 5; GENCON 1994 cl. 1, Asbatankvoy cl. 1 and 9.
154
Shelltime 3 cl. 3 and Shelltime 4 cl. 4.
155
[1958] 2 Lloyds Rep. 127.
156
Independent Petroleum Group v Seacarriers (The Count) [2006] EWHC 3173.
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if there is an adequate system for forecasting bad weather, sufficient tugs and
pilots and adequate sea room to manoeuvre.
1-377
Disturbances of a political nature such as an outbreak of hostilities so that the

ship is trapped at her discharge port may also render a port unsafe.157
1-378
Temporary obstacles will not render a port unsafe and the master will be
expected to wait for a reasonable time until it is removed. Only where the delay
is of such an extent as to frustrate the contract will there be a breach of the safe
port obligation. In Grace v General Steam Navigation Co Ltd (The Sussex
Oak),158 it was held that an icebound port did not render the port unsafe unless
the length of period it was icebound would frustrate the object of the
charterparty.
1-379
The shipowner is not under an undertaking to nominate a safe port. The master
may refuse to enter the port nominated if he thinks it is dangerous to enter it
without this benefiting the shipowner. It is questionable whether the charterer in
the absence of an express term in the voyage charter is allowed to nominate
another port. The GENCON 1994 charterparty, in clause 1, provides that the
vessel is to proceed to the discharging port(s)...or so near as she may safely get
and lie always afloat.
1-380
When a time charterer gives voyage instructions its obligation is to nominate a

port which is safe at the time the ship arrives, uses it and leaves. The crucial
time for the port to be safe is not the time when the order is given, but the time
the ship arrives, as for instance, when the ice at the time of arrival at the port
has melted. The charterer, however, is not under the duty to guarantee the
safety of the port when abnormal and unexpected events take place. The
charterer was not found liable in The Evia (No.2)159 when the ship was trapped
in the Shatt al Arab waterway because of the outbreak of war between Iran and
Iraq. The House of Lords held that if the port which was initially safe subsequently
became unsafe, the charterer has the secondary obligation to order the ship to
a new safe port but where the ship is already at the port and it is not possible
to leave no such secondary obligation may arise, as in the case of The Evia
(No.2). The House of Lords left open the question as to whether the secondary
obligation is applicable to a voyage charterer. This is because in a voyage
charterparty the parties have expressly agreed in advance the contractual
ports and therefore the ship is to proceed to a named port or ports.
1-381
When a charterer gives voyage instructions under a time charterparty to proceed

to an unsafe port the owner may reject the order as invalid and request valid
voyage instructions. If the charterer is in a repudiatory breach of charterparty the
owner may be entitled to terminate the charterparty. The owner may refuse to
enter the port even if initially he is not aware that the port is unsafe but it
subsequently becomes clear that this is the position.
157
Kodros Shipping Corp. v Empresa Cubana de Fletes (The Evia (No.2) [1982] 2 Lloyds Rep. 307.
158
[1950] 2 KB 383.
159
Kodros Shipping Corp. v Empresa Cubana de Fletes (The Evia (No.2) [1982] 2 Lloyds Rep. 307.
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1-382
Where, however, the owner is aware that the port is unsafe but accepts the order
to proceed there, he may not later alter his decision and he may still be entitled
to damages for breach of contract.160
1-383
When the charterer has breached his obligation to nominate a safe port it will be
liable in damages including the physical damage to the ship and additional costs
incurred at the port. Where the consequences is delay the time charterer will be
liable for payment of time charter hire and other expenses incurred (e.g.
additional insurance premiums while the delay continued) whereas a voyage
charterer will be liable for damages for detention.
Taylor and Francis Group, London and New York, 2010, pp.217
7.6.1
Not to Ship Dangerous Goods
1-384
The obligation on the part of the charterer not to ship dangerous goods without
disclosure is also implied by common law. The obligation of notification is
waived when the carrier or a member of the crew was aware or ought to have
been reasonably aware of the dangerous nature of cargo.161 The interpretation
of the concept of dangerous goods is rather wide as it does not only include
substances such as radioactive materials, explosives, petroleum but also cargo
which is safe but under certain circumstances may create a hazardous
situation.162 Goods are deemed to be dangerous not only where they endanger
the ship or cargo but also when the ship is detained. The Athanasia Comninos163
case supports the strict liability of this common law obligation. The shipowner
bears the burnden of proof regarding lack of notification for the dangerous
nature of the cargo.
7.7
COMMON LAW IMMUNITIES
1-385
Common law implies immunities for the shipowner when he is not liable for loss
or damage to cargo that is caused by:
an act of God;
an act of the Queens enemies;
inherent vice.

Taylor and Francis Group, London and New York, 2010, p. 217-218
160
Motor Oil Hellas Refineries SA v Shipping Corp. of India (The Kanchenjunga) [1990] 1 Lloyds Rep. 391.
161
Brass v Maitland (1856) 26 LJ QB 49.
162
Ministry of Transport v Lamport and Holt [1952] 2 Lloyds Rep. 371.
163
[1990] 1 Lloyds Rep. 277.
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7.8
LEGAL HIGHLIGHTS ON VOYAGE CHARTERPARTIES
7.8.1
Obligation to Provide Cargo
1-386
The voyage charterer is under the obligation to provide cargo for loading on
board the vessel. As freight is calculated in connection with the amount of cargo
the shipowner is entitled to treat any failure to provide cargo on the part of the
charterer as breach of contract. A failure, however, by the charterer to provide
cargo will not give the right to the shipowner to withdraw the vessel. The latter
must wait for any allotted laytime to expire. Even when the laytime expires the
shipowner can still not withdraw the vessel until it becomes evident that the
charterer will not provide cargo or the extent of the delay is such as to frustrate
the contract.164
1-387
If the charterer expressly refuses to provide cargo or load it onboard the vessel
the shipowner may treat this as an anticipatory breach but he will be under a
duty to make any reasonable effort to mitigate his loss. The charterer is under
the obligation to provide cargo for the entire vessel if he contracts to provide a
full and complete cargo. It is also common practice that a charterer will specify
a range of cargoes to be loaded on board the vessel on arrival in which case he
will be bound to provide cargo from the range specified and if he fails to do so
this will constitute a breach of contract for which the shipowner could repudiate.
If, however, the shipowner accepts a different cargo from that specified his right
to repudiate because of the charterers breach will be waived.165
Professional, 2011, London, pp. 83-87
7.9
FREIGHT
1-388
One of the shippers main obligations under the contract of carriage is the
obligation to pay freight.
1-389
Definition. Freight is the remuneration payable to the carrier for the transportation
of goods from the port of shipment to the port of destination. Freight is provided
in voyage charterparties and bill of lading contracts of affreightment.
1-390
The American common law definition is as follows: Freight, when not used in a
sense to imply the burden or loading of the ship, or the cargo which she has on
board, is the hire agreed between the [cargo] owner and the master for the
carriage of goods from one port or place to another.166
1-391
At common law the carrier undertakes to carry the cargo at the agreed port of
destination and be ready to deliver it there, unless otherwise agreed, in
merchantable condition in order to be entitled to freight. If he fails to deliver the
cargo or the goods are lost or damaged for any reason no freight is payable and
if he delivers part of the cargo loaded freight is payable only in proportion to the
164
Universal Cargo Carriers v Citati [1975] 2 Lloyds Rep. 191.
165
Steven v Bromley [1919] 2 KB 722.
166
Brittan v Barnaby, 16 US (21 How.) 527.
1-95
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part delivered. In the case of Dakin v Oxley,167 the charterer refused to pay
freight as he alleged that the cargo of coal which was shipped from Newport to
Nassau was so damaged on arrival that its value was lower than the freight. The
court held that freight should be paid to the carrier if the contract was substantially
performed.
1-392
Payment of freight and delivery of the goods are concurrent conditions subject
to the contrary agreement of the parties. Freight, unless the charter stipulates
otherwise, is earned and paid upon delivery of the cargo at the place agreed
upon to the person entitled to the cargo. In instalment contracts freight is payable
for each instalment delivered and it may not be reserved until the performance
of contract is completed. The carrier is not entitled to claim freight if he is unable
to deliver the goods to the agreed port of destination, even if this is due to
circumstances beyond his control (including exceptions such as inherent vice).
1-393
The carrier may, however, claim freight if the cargo owner prevented him from
delivering the goods to the port of discharge by his own act or omission.168
7.10
CALCULATION
1-394
We will now discuss how freight is calculated, the person liable to pay it, the time
when it is payable and types of freight (i.e. how freight is agreed to be paid),
which are all sources of a possible freight-related dispute if not clearly agreed or
if not fulfilled in accordance with the agreement.
1-395
The voyage charterparty or bill of lading contract of affreightment will normally

contain express terms as to the calculation of freight. In the absence of such a
term reference will be made to the custom of the trade or port. The amount of
payable freight is usually calculated in accordance with the quantity of cargo.
The measurement of the quantity of cargo may be weight, number of packages
or cubic measurement. Where weight or volume of cargo is used as measurement
it is essential that the contract provides specifically when the quantity was
assessed, i.e. either at the port of loading or port of discharge. The GENCON
form (clause 4) allows the parties to choose whether freight is payable on the
intaken or delivered quantity. The reason for the existence of this term is
because intaken and delivered quantities may differ as certain cargoes may
by their nature lose or gain weight or volume, as a result of variations in moisture
or temperature, or other causes. For instance, liquid cargoes such as oil may
evaporate during the voyage and it is therefore advisable that the freight clause
takes into consideration this factor and stipulates the time at which the cargo
should be measured for the calculation of freight.
1-396
The entire or part of the cargo loaded may be lost or destroyed during the
voyage, as for instance, it may be washed overboard, or be stolen or seized, in
which case the parties may wish to include a provision on whether freight is
payable on such cargo. It is open to the parties to agree the stipulations regarding
the above matters but certain charters provide that, for the purpose of calculating
167
(1864) 15 CBNS 646.
168
Cargo ex Galam [1863] 167 ER 327.
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freight, the goods shall be measured on shipment but freight shall not be payable
if the goods are lost during the voyage.169
1-397
It is therefore clear that, unless the contrary is agreed, freight is not payable on
goods which are lost during the voyage and not delivered but the common law
rule is unclear in relation to goods in which the weight or volume changes during
the voyage. In Dakin v Oxley170 Willes J. commented that freight was payable on
the intaken measure because that is what the contract refers to. This view,
however, has not met universal acceptance.
1-398
By stipulating these terms clearly the parties reduce uncertainty and hence the
possibility of disputes and costs.
1-399
When the charterparty, or the bill of lading, does not provide that the bill of lading
shall be conclusive evidence of the quantity shipped it is open to either party to
prove that the quantity stated in the bill of lading is incorrect.171 The bill of lading
is considered prima facie evidence of the description of the shipped goods both
in common law and under Article III rule 4 of the Hague-Visby Rules, where they
apply. If, however, it is stipulated by the parties that the bill of lading shall be
conclusive evidence of the quantity of the goods shipped (as well as weight or
measure) then the bill of lading will be treated as conclusive evidence of these
matters.172
1-400
As aforementioned, freight is calculated in relation to the weight or volume of the

goods or number of units shipped. In certain trades the calculation of freight is
made customarily in reference to published scales such as Worldscale
(Worldwide Tanker Nominal Freight Scale) or Intascale (International Tanker
Nominal Scale).
7.11
TYPES OF FREIGHT
1-401
There are various types of freight used in the liner and tramp cargo trades.
These are as follows:
7.11.1
Freight Payable in Advance
1-402
The parties may include in a contract of affreightment an express provision that

a part or the whole of the freight is payable in advance. This is common in liner
cargo trades. At common law freight is payable upon delivery of the goods and
therefore if the parties wish to agree payment prior to delivery they would have
to word this explicitly in their contract. The relevant clause is specific, for instance,
on loading, on signing of bill of lading or on sailing of vessel. Once such a
clause is included in the contract it is irrevocable by the charterer even in the
case the contract is frustrated due to the loss of the ship or the cargo or by the
impossibility to perform the voyage, which is usually supported by an express
169
Spaight v Farnworth (1880) QBD 115.
170
(1864) 15 CB (NS) 646.
171
McClean v Fleming [1871] LR 2 Sc. & Div. 128.
172
Mediterranean & New York SS Co. v Mackay [1903] 1 KB 297.
1-97
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term providing that freight is non-refundable even if ship and/or cargo lost or not
lost. This was affirmed by the House of Lords in the case of Allison v Bristol
Marine Insurance.173 If, however, the cargo is lost or the contract is frustrated
before the time stipulated for payment the obligation to pay freight is
discharged.174
1-403
Other jurisdictions, either civil or common law (for instance, US and European
countries) adopt a rule that if the cargo does not arrive at the port of discharge,
advance freight is refundable.
7.11.2
Lump Sum Freight
1-404
Certain charterparties provide that freight shall be an overall fixed sum instead
of being payable at an agreed rate calculated according to the quantity of goods
shipped or delivered. This sum is known as lump freight or lumpsum freight
and it has been described as not being properly called freight but more properly
a sum in the nature of a rent to be paid for the use and hire of the vessel on the
agreed voyage(s).175 In the Thomas v Harrowing SS. Co.,176 however, it was
held that the core of the contract remains the carriage of goods rather than
making the vessel available. This form of freight is usually selected when the
precise quantity of cargo is unknown to the charterer or when it is difficult or
impractical to measure the quantity of goods loaded on board. It is common that
lump sum freight is payable when the goods are safely delivered at the port of
discharge but the contract of affreightment may also provide that all or part of
the sum is payable in advance. Even if part of the cargo has not been delivered
the entire lump sum freight is payable on right and true delivery.177
7.11.3
Pro Rata Freight
1-405
Pro rata freight usually arises where the goods have been transported for part
of the agreed voyage but have not reached the port of destination. This may
happen due to a strike or lockout at the port of discharge, making delivery
impossible. The cargo owner may agree to take delivery at a different place. In
this case, freight is usually calculated on a pro rata basis for the completed part
of the voyage.
1-406
In the absence of such an express term the shipowner must show that if these
circumstances had not arisen he would have been willing to make delivery. If the
cargo owner is forced to take delivery at a place different to the one contractually
agreed the obligation to pay pro rata freight will not apply. The acceptance of the
goods at a different port has to be voluntary to justify a pro rata claim.178
173
[1876] 1 App Cas 209, HL.
174
Roelandts v Harrison (1854) 156 ER 189.
175
The Merchant Shipping Co. v Armitage [1873] LR 9 QB 107.
176
[1915] AC 58.
177
Williams & Co. v Canton Insurance Office Ltd [1901] AC 462.
178
Metcalfe v Britannia Ironworks Co. [1877] 2 QB 423 at 427.
1-98
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Charterparties
7.11.4
Back Freight
1-407
Back freight refers to the case where the goods are delivered to the port of
discharge, but due to an outbreak of war, strikes or the cargo owners refusal to
take delivery, the goods are refused. In these circumstances the master is forced
to take action on behalf of the cargo owner and warehouse the goods or ship
them on to another port. Following this the master can recover these expenses
in back freight (i.e. freight payable for the return of the goods).179
7.11.5
Dead Freight
1-408
When the charterer fails to provide a full cargo he is under the obligation to pay
dead freight to the carrier, i.e. to pay for the shortfall in shipment. This is usually
calculated as the freight payable deducted by the charges levied for loading and
unloading. The shipowner should try to mitigate his losses by, for instance,
finding another cargo to fill the space. As it was held in the Wallems Rederij A/S
v WH Muller & Co. Batavia (The Storkviken)180 the shipowner could not recover
damages for the charterers failure to ship the full cargo as he could have
avoided the loss by making reasonable efforts to take other cargo in the
remaining available space.
7.11.6
Ad Valorem Freight
1-409
The ad valorem freight is freight rate assessed as a percentage of the value of

the cargo shipped.
7.12
PAYMENT OF FREIGHT
1-410
As there are many parties involved in the contract of carriage whether a voyage
charterparty or a bill of lading it is therefore important to discuss the rules for the
payment of freight.
7.12.1
Charterparty Freight
1-411
In a voyage charterparty it is the charterers obligation to pay the freight and he

will be ultimately responsible for it even if he has sub-chartered the ship or
issued bills of lading to third parties. Even if the shipowner delivers the goods to
the lawful holder of the bill of lading he maintains his right to claim freight from
the charterer. The charterer will attempt to insert a cesser clause in the
charterparty whereby he will relinquish himself from being liable for freight once
the goods have been loaded. The shipowner on the other hand will try to ensure
freight is paid by the consignee of the goods by retaining a lien on cargo for
freight due. In Cho Yang Shipping Co. Ltd v Coral (UK) Ltd181 the named shipper
was held not liable for the bill of lading freight as he had contracted with a third
179
Cargo Ex Argos (1873) 5 PC 134.
180
[1927] 2 KB 99.
181
[1997] 2 Lloyds Rep. 641, CA.
1-99
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party for the transportation of goods, acting as a principal, and he was not
contractually bound with the carrier who issued the bill of lading.
7.12.2
Bill of Lading Freight
1-412
Where the contract of carriage is a bill of lading, the shipper is responsible to

pay the freight, unless the contrary has been expressly agreed. Once the bill
of lading is consigned or endorsed to a third party, the provisions of the
Carriage of Goods by Sea Act 1992 apply regarding the shippers liability for
freight.
1-413
Under section 3(3) of COGSA 1992, the shipper remains liable for payment of
freight even when he has transferred the bill of lading as he is the original party
to the contract. However, if the consignee or endorsee seeks to enforce the
contract either by taking or demanding delivery from the carrier by raising a
claim under the contract of carriage or taken or demanded delivery of the goods
before he acquired the right of suit he will become liable under section 3(1) of
COGSA 1992.
7.12.3
Party to Whom Freight Is Due
1-414
The party responsible for paying freight is usually the charterer in the case of a
voyage charterparty or the shipper in a bill of lading contract of carriage and is
usually payable to the shipowner. This is, however, subject to the provision of
express clauses in the contract or by transferring the bill of lading to another
party.
7.12.4
Place of Payment
1-415
The Gencon form allows the parties to insert in Box 14 the bank account into
which freight is to be paid. In the absence of these details the freight must be
paid to the owner or his authorised agent. The loading broker or, in accordance
with custom, the master, will be the authorised agent responsible for the
collection of freight.
7.12.5
Time of Payment
1-416
The charterparty usually provides the time freight is payable but earlier payment
is permissible and may discharge the person liable under the charterparty to pay
freight unless there are special terms that an earlier payment would be treated
only as an advance.
Voyage Charters. Third edition, by Julian Cooke, Timothy Young, Andrew Taylor,
John D. Kimball, David Martowski, LeRoy Lambert, 2007, Informa, London, pp.
282-316
The Law of Carriage of Goods by Sea, by Lachmi Singh, 2011, Bloomsbury
Professional, pp. 149-170
1-100
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7.13
DEDUCTIONS
1-417
In English law if the goods delivered are found damaged or there is a shortfall in
quantity full freight is still due to the carrier. This rule may be bent by including a
term in the contract of affreightment that deductions are permissible when goods
are lost or found damaged.182 The rule on deductions from freight is different to
the deductions from hire in a time charterparty183 where it was held that there
was an equitable right of set-off against hire payments although there was no
express term for a set-off in the charter. This equitable right was available to the
charterer if he could quantify his loss by reasonable assessment made in good
faith and then deduct the sum so quantified.
1-418
No deduction from freight may be made in case

(a)
the goods are so damaged that they are deemed non-merchantable, i.e.
they no longer correspond to their commercial description; in the case of
Ansfar v Blundell 184 a cargo of dates was badly damaged after a collision
with another vessel and the vessel sank; after the vessel was raised the
dates were found unmerchantable since they were not appropriate for
human consumption but they were sold as they could be used for
distillation;
(b)
of unjustifiable deviation where any freight owed under the contract would
cease to be payable. However, in the Hain Steamship Co. v Tate & Lyle185
it was held that if the cargo is delivered at the port of destination the carrier
may be allowed to claim freight in a rate less than contractually agreed but
reasonable considering the circumstances.
7.14
LAYTIME
1-419
One of the most common sources of disputes which relates to the performance
of a voyage charterer is laytime and/or demurrage. Laytime is the period the
charterer uses for loading and discharging cargo which is free of any further
expense beyond the freight agreed for the transportation of goods. The
calculation of laytime is subject to the contractual agreement of the parties.
Certain periods are usually excepted by agreement from the calculation of
laytime as, for instance, Sunday and public holidays or periods of bad weather.
The time of its commencement is usually provided in the agreement and it
follows a reasonable interval from the tendering of the notice of readiness by the
master that the ship is ready to load or discharge.
1-420
If the terms of the charterparty provide that the load or unload will take place
within a fixed period of time (fixed laytime), that is an absolute and unconditional
engagement, for the non-performance of which he is answerable, whatever may
be the nature of the impediments which prevent him from performing it and
182
The Olympic Brilliance [1982] 2 Lloyds Rep. 206.
183
The Nafri [1978] 2 Lloyds Rep. 132.
184
[1896] 1 QB 123, CA.
185
(1936) 41 Com Cas 350 at 367369.
1-101
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which cause the ship to be detained in his service beyond the time stipulated.186
The advantage of a fixed laytime for the shipowner is that he knows in advance
the length of time his vessel will be engaged in loading and discharging.
1-421
If the parties to a contract of affreightment remain silent in their agreement in

regards to the length of time the vessel is allowed to load or discharge her cargo
or their agreement contains phrases such as with all dispatch according to the
custom of the port, then the reasonable necessary time will be allowed by
implication of law (customary laytime).187 The circumstances at the particular
port will be considered in order to determine the period of time allowed and
therefore the time may vary from ship to ship and from time to time. Thus, in
contrast with the fixed laytime the time allowed cannot be determined in advance
of loading or discharging.
1-422
Three conditions must be satisfied before the charterer may be required to

commence loading or discharging and therefore before laytime commences to
run. These are: (a) the vessel must have arrived at the destination provided in
the charterparty (it is therefore an arrived ship); (b) the vessel must be ready
and fit to receive or discharge the cargo; and (c) notice of readiness must have
been given to the charterer if this is provided in the charterparty. In the absence
of such an express term this requirement only applies at the first port of loading.
Upon fulfilment of these conditions the ship is deemed Arrived and subject to
any provisions of the charter in relation to the expiry of any period the laytime
starts to run. The interests of the shipowner is that the laytime clock starts ticking
as early as possible so that he will earn demurrage whereas the charterer will
seek to prolong the laytime to the maximum possible extent so that the ship does
not come on demurrage.
1-423
In The Johanna Oldendorff (EL) & Co. GmbH v Tradax Export SA (The Johanna
Oldendorff),188 Lord Diplock divided the adventure of a voyage charterer into
four stages:
(1) The loading voyage, viz. the voyage of the chartered vessel from
wherever she is at the date of the charterparty to the place specified in it
as the place of loading
(2) The loading operation, viz the delivery of the cargo to the vessel at the
place of loading and its stowage on board
(3) The carrying voyage, viz. the voyage of the vessel to the place specified
in the charterparty as the place of delivery
(4) The discharging operation, viz. the delivery of the cargo from the vessel
at the place specified in the charterparty as the place of discharge and its
receipt there by the charterer or other consignee.
1-424
More specifically:
186
Postlethwaite v Freedom (1880) 5 App Cas 599 at 608.
187
Postlethwaite v Freedom (1880) 5 App Cas 599 at 608.
188
[1972] 2 Lloyds Rep. 285 at 304.
1-102
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Charterparties
7.14.1
The Arrived Ship
1-425
Arrival of the ship at the specified destination is considered the point where
geographically and in time the voyage stages end and the loading/discharging
operation begin. Fixed laytime charters are divided into berth, dock and port
charters depending on where the voyage stages end. Sometimes instead of
naming a specific berth, dock or port a charter may provide that the vessel will
proceed to one or more berths, docks or ports within a specified geographical
area in which case the ship is deemed to have reached her specified destination
when she reaches the first berth, dock or named port named by the charterer
and the charter is a berth, dock or port charter.189
1-426
Berth charter. Arrival in berth is the natural completion of the voyage. The
Voylayrules 1993 define berth as:
BERTH shall mean the specific place within a port where the vessel is to
load or discharge. If the word berth is not used, but the specific place is (or
is to be) identified by its name, this definition shall still apply.
1-427
Individual berths usually have numbers and not names and the charterer is free
to nominate a berth or to inform the shipowner as to which berth he has been
given by the port authority. In berth charters the risk of delay before the berthing
of the ship lies on the shipowner. For this reason the owners may include a
WIBON clause (whether in berth or not).190 Under this provision the shipowner
may accelerate the commencement of laytime by giving NOR before berthing in
cases where the berth is congested at the time the ship arrives at the port.
1-428
Even if the ship is, for instance, about 17 miles away from her berth she is still
considered an arrived ship if she is at the usual waiting place191 and within the
limits of the port.
1-429
Dock charter. This is a hybrid between a berth and a port charter and like a port
charter it covers a geographical area. Dock systems may be either tidal or nontidal. They usually have a clearly defined entrance and therefore there is little
dispute as to the time a vessel arrives in dock, i.e. when she reaches her
specified destination.
1-430
Port charter. Under a port charter a vessel reaches its specified destination
when it arrives within the port and is in such a position as to be at the immediate
and effective disposition of the charterer.
1-431
The term port includes not only that part of the port where a ship can be
loaded when a berth is available192 but the whole area of the port in its
commercial sense, i.e. the port as it is perceived by shippers, charterers and
shipowners. This perception of the port may differ to the legal area of the port,
being the area within which the port authority exercises powers, regulates the
189
The Laura Prima [1980] 1 Lloyds Rep. 466.
190
Seacrystal Shipping Ltd v Bulk Transport Group Shipping Co. (The Kyzikos) [1989] 1 Lloyds Rep. 1.
191
The Johanna Oldendorff [1973] 2 Lloyds Rep. 285.
192
The Aello [1961] AC 135 now overruled.
1-103
Charterparties
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movements and conduct of ships.193 Once the ship proceeds to the berth
selected by the charterer, she becomes an arrived ship but not before. If she has
to wait for the berth to become vacant she becomes an arrived ship only if she
has come to rest within the port and is at the disposition of the charterer.194
Laytime and Demurrage. Fourth edition, by John Schofield, LLP, London Hong
Kong 2000, pp. 67-77
1-432
A ship chartered to load or unload at a named port or dock or berth, or so near

as she can safely get (the near clause), may have to wait for a reasonable time
as this is fixed by commercial considerations and the nature of the voyage, if
prevented on her arrival from reaching the place of loading or unloading, before
selecting an alternative place of loading or discharge, or wait until she can safely
get to the port or dock or berth named for loading or unloading.195
1-433
The interests of both parties will also be considered in determining what is

reasonable in commercial terms.196 For instance, in tidal rivers or harbours she
may have to wait until ordinary spring tides;197 in icebound rivers or seas until
the ice melts;198 or in case of delay by congestion in docks, a time reasonable
in its commercial sense. The obstacle preventing her from reaching the named
port, dock or berth need not necessarily be physical.199
7.14.2
Readiness
1-434
Accurate statements must be contained in the notice of readiness that the ship
is arrived and is actually ready when the notice is given. If the statements are
inaccurate the notice is null (Compania de Naviera Nedelka v Tradex International
(The Tres Flores)200) unless the charterer or his agents accept it or where there
is a waiver for the requirement for a notice or readiness.
1-435
If the shipowner is in doubt as to the validity of the notice of readiness he should

tender another notice of readiness when it is clear that the ship is arrived and
ready. The owner needs to protect himself from the possibility of a delay between
giving a valid notice of readiness and the commencement of cargo operations.
The ship must be actually ready when the notice of readiness is given, i.e. the
holds must be clean and she must be ready to receive the cargo, to have clear
customs and medical clearance. If an invalid notice of readiness is given lay time
may not commence even where the ship has started loading or unloading. If the
charterers, however, accept the notice and knowingly they start loading or
unloading without reservation or if they are not aware of it, the invalidity is
193
Oldendorff v Tradax Export [1974] AC 479 at 535, 552553, 559, 561.
194
Oldendorff v Tradax Export [1974] AC 479 at 390391,397, 407, 414415, 535, 552, 553, 561.
195
Dahl v Nalson [1881] 6 App. Cas. 38.
196
Athamas (Owners) v Dig Vijay Cement Co. [1962] 2 Lloyds Rep. 120.
197
Parker v Winlow (1875) 7 E & B 942.
198
Schilizzi v Dahl (1879) 12 Ch. 568.
199
Dahl v Nelson (1881) 6 App. Cas. 38.
200
[1973] 2 Lloyds Rep. 247.
1-104
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Charterparties
waived.201 A charter may also provide that laytime may commence after the
service of a notice, even if the ship was not actually ready, provided that the
notice was served in good faith.202
1-436
The charterparty may stipulate that laytime will count even if it is found that the
ship is not ready except the time making her ready, given that the notice was
given in good faith.203 This provision is included for the case where the shipowner
gives a notice of readiness without the ship being ready because the ship was
not inspected on arrival at the port of loading and is kept waiting for a berth. The
owner may be told that the vessel is not ready as soon as a berth is allocated
and the ship is inspected. No time will count until the ship is actually ready even
though it may not take long to make her ready.
1-437
A ship must be completely ready to load in all her holds so that the charterer can
have complete control of every portion of the ship available to load the cargo.204
A charter for the full reach and burden of the ship contains an undertaking for
her structural capacity at the date of the charter,205 and that all the space of the
vessel is proper to be filled with cargo.206 A ship may be ready to load so that
the cancelling clause does not operate even if she is not in full compliance with
some requirement necessary for the lay time to start counting. Therefore, if the
charterer or consignees are not ready to do their part of the work, the ship does
not need to be absolutely ready. Therefore, the ship must be absolutely ready
when the charterers or consignees are ready to perform their part in loading or
discharging.207 The ship may also obtain subsequently without delaying the
loading or discharge if this is a formality subject to the practice in the port and
the actual medical condition of the crew.208 Equally, the ship may be ready to
load and lay time may start even if she is not yet in full compliance with all the
local routine formalities.209 It suffices that the ship is ready in a businesslike and
mercantile sense.210
7.14.3
Notice of Readiness
1-438
The charterer may require notice that the ship has arrived so that he can
commence the loading operation promptly. The charterparty may stipulate that
the shipowner is under the obligation to give notice of the ships expected time
within a specified time, e.g. 72, 48, 24 hours notice so that the charterer can
make the necessary preparations for the cargo to be ready and a berth to be
available as soon as the ship arrives. Many standard form charterparties provide
201
Glencore v Flacker Shipping (The Happy Day) [2002] EWCA Civ. 1068.
202
United Nations Food and Agriculture Organisation World Food Programme v Caspian Navigation Inc. (The Jay
Ganesh) [1994] 2 Lloyds Rep. 358.
203
The Linardos [1994] 1 Lloyds Rep. 28.
204
Groves, Maclean & Co. v Volkart (1884) A & E 309.
205
Japy Freres v Sutherland (1921) 26 Com. Cas. 227.
206
Weir v Union S.S. Co. [1900] AC 525 at 532.
207
Antclizo Shipping Corp. v Food Corp of India (The Antclizo No. 2) [1992] 1 Lloyds Rep. 558 at p. 564.
208
AET v Arcadia (The Eagle Valencia) [2010] 2 Lloyds Rep. 257 at 259 [4].
209
The Aello [1961] A.C. 135.
210
Unifert International S.A.R.L. v Panous Shipping Co. Inc. (The Virginia M) [1989] 1 Lloyds Rep. 603.
1-105
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that the calculation of the laytime may not commence until after six hours of the
notice of readiness being tendered or received or until the ship has berthed
(whichever is the earliest).211
1-439
The charterparty usually provides that laytime may not commence before the
stipulated commencement date unless the charterer approves this. The
shipowner is obliged to proceed with all convenient despatch to the port of
loading even if it is clear that the vessel will not arrive until the cancellation date
with the result of it being cancelled. The charterer is not entitled to cancel before
the cancellation date even if it is clear that the ship will not arrive before the
cancellation date. Where the ship is late and the charterer does not cancel he
may have to pay for the time spent waiting for a berth.212
1-440
The charterparty stipulates the form in which the notice of readiness should be
given (i.e. by fax, in writing) or in the absence of provisions the notice may be
oral (Franco-British SS Co. v Watson & Youell 213) when (i.e. during working
hours excluding weekends or holidays) it must be given and to whom (i.e. the
charterers load agents, the loading terminal). If the notice of readiness is given
outside the stipulated hours it will not be null for as long as the notice was
truthful and the ship is ready but the time will commence counting when the
working hours at which the notice would have been validly given start without
further notice.214 If an owner gives notice of readiness prematurely, i.e. before
the first permissible layday then, contrary to the effects of a notice which is
invalid because the ship is not ready, or it is not an arrived ship, it takes effect at
the earliest layday.215
1-441
The shipowner is not obliged to give notice of readiness to unload to the

charterers, shippers or consignees under bills of lading unless the contract
provides otherwise or there is a relevant custom.216 If, however, the shipowner
by his wrongful act or omission has prevented the charterers or consignees to
learn, by exercising reasonable diligence, of the ships readiness to unload, they
will to that extent be discharged.217
Maritime Law. Second edition, by Yvonne Baatz (ed.), Sweet and Maxwell, 2011,
London, Yvonne Baatz Charterparties, pp.178-184
&
Scrutton on Charterparties and Bills of Lading. Twenty Second edition, by Sir
Bernard Eder, Howard Bennett, Steven Berry, David Foxton and Christopher F.
Smith, Sweet and Maxwell, 2011, London, pp. 146-301
211
See Asbatankvoy cl.5.
212
Triton Navigation Ltd v Vitol SA (The Nikmary) [2003] EWCA Civ. 1715.
213
Franco-British SS Co. v Watson & Youell (1921) 9 Ll LR 282 at 284.
214
Galaxy v Novorossisk (The Petr Schmidt) [1998] 2 Lloyds Rep. 1.
215
Tidebrook v Vitol SA (The Front Commander) [2006] 2 Lloyds Rep. 251.
216
Harman v Mant (1815) 4 Camp. 161.
217
Houlder v General Steam Navigation Co. (1862) 3 F & F 170.
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7.15
DEMURRAGE
1-442
Demurrage is the sum agreed in the charterparty to be paid for liquidated

damages if the laytime is exceeded. The Voylayrules 1993 define demurrage as:
DEMURRAGE shall mean an agreed amount payable to the Owner in
respect of delay to the vessel beyond the laytime for which the Owner is not
responsible. Demurrage shall not be subject to laytime exceptions.
1-443
Although strictly speaking demurrage is the money paid for the excess of laytime
it is frequently used to describe the period during which the agreed sum is
payable. The charterer is under an absolute and unconditional obligation to load
or discharge within the fixed period of time unless certain exceptions covered by
the charter, or loading or unloading being illegal by the law of the place where
it is conducted or occurred, is due to the fault of the shipowner or those for whom
he is responsible.
1-444
Demurrage commences when the allowed laytime has expired unless the parties
agree the payment of demurrage at an earlier stage.
1-445
A charter may provide for the length of duration for demurrage or more commonly
provide only for a demurrage rate and leave the period unspecified. In the latter
case demurrage will run until the contract becomes frustrated or repudiated with
any further delay thereafter giving rise to a claim for detention. In Dias Compania
Naviera SA v Louis Dreyfus Corporation218 Lord Diplock stated that:
But unless the delay in what is often, though incorrectly, called re-delivery
of the ship to the shipowner, is so prolonged as to amount to a frustration
of the adventure, the breach by the charterer sounds in damages only. The
charterer remains entitled to continue to complete the discharge of the
cargo, while remaining liable in damages for the loss sustained by the
shipowner during the period for which he is being wrongfully deprived of the
opportunity of making profitable use of his ship.
1-446
Provisions relating to the allowed amount of laytime are therefore warranties

rather than conditions and therefore a breach only results in damages unless the
delay is so substantial as to terminate the charter by frustration or repudiation of
the charter.
1-447
In regards to the rate and payment of demurrage Lord Diplock said in the same
case that:
It is almost invariable practice nowadays that for these damages to be fixed
by the charterparty at a liquidated sum per day and pro rata for part of a
day (demurrage) which accrues throughout the period of time for which the
breach continues.
1-448
Most charters provide for demurrage to be calculated on a daily basis but in

certain cases an hourly or other basis may be provided.219 Although the
218
[1978] 1 WLR 261 at 263.
219
Rayner v Rederiaktiebolaget Condor (1895) 1 CC 80.
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entitlement to demurrage is calculated on a day-to-day basis payment is usually

made on completion of the voyage.
1-449
The court may allow damages to be paid under certain circumstances in addition
to demurrage where the shipowner proves losses which exceed the sum payable
as demurrage. For instance, in the cases of Aktieselskabet Reidar v Arcos Ltd
and the Suisse Atlantique Societe d Armement Maritime SA v NV Rotterdamsche
Kolen Centrale (The General Guisan)220 the breach of the laytime provisions by
the charterer resulted in detention of the ship and a consequent loss of earning
to the shipowner. The court held that since the shipowner could prove a separate
breach of charter despite the fact it arose from the same circumstances he could
recover damages if he could show that the consequences were beyond the
detention of the vessel.
1-450
Where the parties have contractually agreed for liquidated damages for breach
this implies that it is not necessary for the claimant to prove an actual loss or to
attempt to mitigate his loss.221
1-451
Demurrage is not payable where it arises due to the fault of the shipowner or
those for whom he is responsible.
7.16
DESPATCH MONEY
1-452
The shipowner may include a clause in the charterparty that if the charterer
completes the loading and discharge in time shorter than that provided in the
contract then he may be entitled to despatch monies. This payment must be
based on the mutual agreement of the parties and may be advantageous for the
charterer as he has the incentive to receive payment and the shipowner may have
the vessel at his disposal at an earlier date. Despatch monies is calculated at half
the rate of demurrage and includes the period of time saved at the port.222
The Law of Carriage of Goods, by Lachmi Singh, Bloomsbury Professional,
2011, p. 108
7.17
LEGAL HIGHLIGHTS ON TIME CHARTERPARTIES
1-453
Under a time charterparty the owner remains in possession of the ship. The ship is
delivered to the time charterer and redelivered by it at the time provided by the
charter. The time charterer may give voyage instructions to the owner as to where
the ship will go and the cargoes that it will carry but always within the limits provided
in the contract. The time charterer pays hire (and not freight as in voyage
charterparties) for the entire time the vessel is at his disposal and for the bunkers.
7.18
HIRE
1-454
The time charterer is under an obligation to pay hire for every minute that the
ship is at his disposal from the time of delivery until redelivery. The hire is
220
(1926) 25 Ll L Rep. 513 and [1966] 1 Lloyds Rep 529, HL, respectively.
221
Clydebank Engineering & Shipbuilding Co. Ltd v Don Jose Ramos Yzquierdo y Castoneda [1905] AC 6 at 11.
222
The Themistocles (1949) 82 Ll LR 232.
1-108
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Charterparties
calculated at a daily rate and is paid in advance.223 It is crucial for the shipowner
to receive hire at the agreed amount and on time, the reason being that he is
responsible to pay the principal and any interest due for a possible loan to buy
the vessel, insurance premiums, P & I calls, maintenance and crew wages. The
owner is entitled by a standard form contract to withdraw the vessel and
terminate the charterparty if the charterer fails to pay hire. The charterer may be
protected against this right of the owner by inserting in the contract antitechnicality clauses, off-hire clauses and clauses for the limitation of the right of
the charterer to make deductions for hire. Payment of hire must be made in
cash by the due date. Cash includes interbank transfers with the right date and
banker drafts.224 If the due date is on a weekend or bank holiday the charterer
must ensure that hire is paid on the last working day before the due date.225
7.19
WITHDRAWAL FOR NON-PAYMENT
1-455
The owner has the right to withdraw the vessel under most standard form
contracts if the charterer does not pay hire on the due date or pays too little hire.
The consequence of this is that the charterparty is terminated and therefore the
parties are released from the future performance of their contractual obligations.
Late payment of hire does not deprive the owner from his right to withdraw but
it will have to return the hire to the charterer. The owner is not entitled to a
temporary withdrawal of the vessel unless otherwise provided in the contract.226
If payment of hire is not made and the ship is due to load cargo the shipowner
will not want loading to take place until hire is paid, for once the cargo is loaded
he loses his entitlement to damages if he withdraws and discharges the cargo
again.227 If a bill of lading has been issued the owner is obligated to transport
the cargo to the port of destination regardless of whether the charterer has
made payment of hire or not. Therefore, the owner must withdraw or perform.
Modern standard form charterparties may include a clause which provides that
the owner can withhold the performance while awaiting payment of hire.228 The
owner must exercise his right to withdraw promptly or otherwise it is waived.
1-456
The owner may wish to exercise his right to withdraw if the market is rising
substantially and therefore it will serve his interests to go out in the market and
conclude a new charter at a much higher rate of hire. On the other hand, if the
market is falling, the charterer is creditworthy, the cargo has been loaded, (see
ENE 1 Kos Limited v Petroleo Brasileiro SA (The Kos) [2010] EWCA Civ 772)
and he has undertaken obligations to third parties under a bill of lading (see
Vantage Navigation Corp. v Suhail and Saud Bahvan Building Materials (The
Alev) [1989] 1 Lloyds Rep. 138) he may not wish to exercise his right to
withdraw.
1-457
The right of the owner to withdraw may prove to be a draconian remedy against
the charterer under certain circumstances. For instance, the charterer may fail
223
NYPE 1946 cls 4 and 5 and Baltime 1939 cl.6.
224
The Chikuma [1981] 1 Lloyds Rep. 371.
225
The Lakonia [1977] 1 Lloyds Rep. 315.
226
The Mihalios Xilas [1978] 2 Lloyds Rep. 186 and London Arbitration 10/97 LMLN 460.
227
ENE 1 Kos Limited v Petroleo Brasileiro SA (The Kos) [2010] EWCA Civ 772.
228
Lines 153158 NYPE 1993 cl.11.
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Charterparties
Module 1
to pay hire not due to his own fault but due to an error of the bank in transferring
the hire. In order for the charterer to be protected it is not unusual to include in
the charterparty an anti-technicality clause. Under this clause the owner is
obliged to notify the charterer when the default has occurred so that the charterer
can rectify the error. The charterer may make payment of the hire at any time
during the whole day of the due date unless otherwise provided in the
charterparty and therefore the owner may only give the anti-technicality notice
the following day. Even if the owner gives notice after banking hours on the due
date the notice will not be valid and if he withdraws the vessel he will be in a
repudiatory breach of the contract.229 The anti-technicality notice must be in the
form of a clear and unambiguous ultimatum.
7.20
OFF HIRE
1-458
Standard form contracts contain a clause under which hire will cease to be
payable if certain events occur which prevent the full performance of the ship
(e.g. breakdown of the engines, the ship running aground, an accident which
causes damage etc) either for the time lost230 or during the period that the event
continues.231 The causes may be specifically listed in the contract or the word
whatsoever may be added after the words any other cause in which case
there is no limit of causes although these must prevent the full performance of
the vessel. Tailor-made off-hire clauses may be contained in the charterparty. If
the full performance of the ship is not possible due to the fault of the shipowner
then the charterer may terminate the charterparty or claim damages in addition
to or in substitution for the vessel being off hire. In the case where the off-hire
event was caused by a breach of the charterparty by the charterer the owner will
be entitled to recover damages for the off hire including any off hire.
1-459
The charterer is under the obligation to make payment of hire continuously

unless he can prove that the wording of the clause in the charterparty included
the event which occurred. Once the ship returns to full working order it is no
longer considered off hire even if time is lost thereafter.232
1-460
The charterparty may include a clause where the ship has to deviate and be off
hire until she is again in an efficient state to complete her service and in a
position not less favourable to the charterer than the state at which the loss of
time commenced.233 The ship will come on hire again when she is at the
aforementioned state.
1-461
The charterparty may contain an express term that the charterer has the right
to add a period of off hire at the end of the charter period.234
229
The Afovos [1983] 1 Lloyds Rep. 335.
230
The Baltime form cl.11, NYPE 1946 cl. 15 and NYPE 1993 cl. 17. See also The Marika M [1981] 2 Lloyds Rep. 622.
231
Shelltime 4 form cl.21. See also The Bridgestone Maru No. 3 [1985] 2 Lloyds Rep. 62.
232
Vogemann v Zanzibar (1902) 7 Com. Cas. 254, CA.
233
Shelltime 4 cl. 21(c).
234
Hong Kong Fir and Petroleo Brasileiro S.A. v Kriti Akti Shipping Co. S.A. (The Kriti Akti) [2004] EWCA Civ 116.
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Charterparties
7.21
DEDUCTIONS FROM HIRE
1-462
The charterer may deduct claims from the hire instead of making full payment of
hire and then seek to recover its claims from the owner. These claims may
include fuel used while the ship is off hire, speed and performance from the hire,
the cost of bunkers on redelivery from the last hire payment, failure to load a full
cargo in breach of charterers instructions etc. He is entitled to do this where
there is an express term providing his right to do so or where there is an
equitable right of set off assessed reasonably and in good faith235 and is
important for his cashflow. It is not necessary that the owner agrees to the
amount.236 The charterer, however, may not make wrongful deductions as this
may entitle the owner to withdraw the vessel. In the absence of such a right the
charterer may pursue his claim against the owner and, if the latter does not pay,
the charterer may issue proceedings before the court or arbitration. The voyage
charterer does not have such right to deduct from freight.237
7.22
PERIOD OF HIRE AND LEGITIMACY OF LAST VOYAGE
1-463
It is crucial for both parties to a time charter to be aware of how long the
charterer is entitled to have the vessel at his disposal. The charterparty will
contain an express clause providing that the charterer will become liable for hire
at the earliest date and a cancellation clause which will give the right to the
charterer to cancel the charterparty if the ship is not delivered at the specified
date. The charterer must redeliver the ship within the period stipulated in the
contract failing of which will result in a breach of contract and make him liable
for damages. The parties may agree to allow a degree of flexibility in the length
of the charter period as factors such as the weather or a strike may disrupt the
initial plans. In the absence of such a clause the courts will imply a margin of
tolerance unless the charterparty provides an absolute obligation for redelivery
of the vessel at a specified date.238 The courts will not extend, however, the
margin expressly provided in the charterparty.239 In London Arbitration 12/02
LMLN 594 the charterparty in NYPE form provided a period between 1114
months. The ship was redelivered five days before the expiration of 11 months
and the arbitrators held that there was no implied margin to allow the charterer
to redeliver the vessel five days before the 11 months expired.
1-464
The parties may contain a provision that the period is without guarantee. In
Continental Pacific Shipping Ltd. v Demand Shipping Co. Ltd (The Lendoudis
Evangelos II)240 the time charterer provided duration about 70/80 days without
guarantee. The trip lasted over 103 days. The arbitrator held that although the
charterer had been negligent in the estimate of time, it was never alleged that
he did not have genuine belief in his estimate and for this reason he was not
found liable.
235
The Nafri [1978] QB 927.
236
The Nafri. SL Sethia Liners Ltd v Naviagro Maritime Corp. (The Kostas Melas) [1981] 1 Lloyds Rep. 18.
237
Aries v Total Transport [1977] 1 All ER 398.
238
Alma Shipping Corp. of Monrovia v Manotvani (The Dione) [1975] 1 Lloyds Rep. 115, CA.
239
Mareva Navigation Co. v Canaria Armadora SA (The Mareva AS) [1977] 1 Lloyds Rep. 368.
240
[1997] 1 Lloyds Rep. 404; London Arbitration 5/97 LMLN 458.
1-111
Charterparties
Module 1
1-465
The charterparty may contain an express term that the charterer can add any
periods of off hire to the period agreed in the charter.241
1-466
The charterer will want to keep the ship until the latest possible date (the final
terminal date) provided in the charterparty if the market is rising and if the
market has fallen he will wish to redeliver the ship as early as he is entitled by
the contract (the earliest terminal date) so that he can charter another vessel
for a lower rate.
1-467
The charterparty may stipulate an express obligation of the charterer to give

notice to the owner in good time as to when and where the vessel will be
redelivered so the latter will be able in the meantime to find employment for her
at the end of her current charterparty.
1-468
Early redelivery. If the ship is redelivered before the earliest date of expiration
the charterer will be in breach and liable for damages. The damages will be
calculated as the difference between the charterparty rate of hire and the market
rate of hire for the time between the date of the redelivery of the vessel and the
earliest date the charterer was entitled to redeliver it by the charterparty. If there
is no market the calculation of damages is based on the normal and direct loss
that the breached charterparty caused to the owners.242
1-469
Late redelivery. Where the charterer instructs the owner for the final voyage
which is reasonably expected to result in redelivery by the final date of termination
this is a legitimate final voyage order and the owner must comply with it. In The
Gregos243 the House of Lords held that the legitimacy of the order should be
considered not at the time the order is given but at the time of performance. In
case the charterer gives instructions and the voyage cannot be reasonably
expected to terminate by the final terminal date the owner is entitled to refuse
the instructions but not to terminate the charterparty. He must first ask for valid
voyage instructions. If the charterer fails again to give valid instructions the
owner will have the right to terminate or affirm the charterparty. In case, for
instance, there is cargo on board the owner may elect not to terminate the
charterparty as he will still be liable to deliver the cargo under the bill of lading
or in tort or in bailment.
1-470
Regardless of whether the order is legitimate or not if the owner performs it and
the ship is redelivered after the final terminal date the charterer will be in breach
of the charterparty even if the delay was not due to his fault and the owner will
be entitled to damages for the time between redelivery and the final terminal
date (the period of overlap) at the rate of the charter or the market depending
on which one is the higher.244 The owners are entitled to damages for late
delivery for the period between the last permissible date of redelivery and the
date of the actual redelivery.
241
Petroleo Brasileiro SA v Kriti Akti Shipping Co. SA (The Kriti Akti) [2004] EWCA Civ 116.
242
Zodiac Maritime Agencies Limited v Fortescue Metals Group Limited [2010] EWHC 903, Comm.
243
[1995] 1 Lloyds Rep. 1.
244
Hyundai Merchant Marine Co. Ltd v Gesuri Chartering Co. Ltd (The Peonia) [1991] 1 Lloyds Rep. 100.
1-112
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1-471
Charterparties
The parties may expressly agree that the charterer may complete any last
voyage even if it runs beyond the provided final terminal date without being liable
for damages and pay the hire only at the rate agreed in the charterparty until the
date of the actual redelivery unless the delay is due to the charterers breach of
a contractual term.245
Maritime Law. Second edition, by Yvonne Baatz (ed.), Sweet & Maxwell, London,
2011, pp. 160-175
245
Hyundai Merchant Marine Co. v Gesuri Chartering Co. (The Peonia) [1991] 1 Lloyds Rep. 100, CA.
1-113
8.
CARRIAGE OF PASSENGERS
8.1
INTRODUCTION
1-472
Claims arising from accidents to passengers on ships have attracted the

attention of maritime lawyers since the loss of the Titanic in 1912. There is a
distinction in the regulatory regimes between international and domestic carriage
of passengers. This chapter will focus on the carriage of passengers and their
luggage by sea between different states which has been regulated by the 1974
Athens Convention which entered into force in 1987.246 Attempts have been
made by governments to revise the outdated provisions of this Convention by
the Protocols of 1990 and 2002 but without substantial success. The United
Kingdom incorporated the 1974 Athens Convention into the Merchant Shipping
Act 1995247 and increased the limit of liability for the domestic carriage per
passenger to 300,000 SDRs. The European Union also introduced legislation to
make it compulsory for all member states to ratify the 2002 Athens Protocol until
the end of 2011.
8.2
THE ATHENS CONVENTION ON THE CARRIAGE OF PASSENGERS AND

THEIR LUGGAGE BY SEA, 1974
1-473
This Convention establishes a regime of liability for damage suffered in the

international carriage of passengers carried on a sea-going vessel and it applies
to the majority of ship owning nations. The 2002 Athens Protocol which is not yet
in force has attempted to revise out-of-date provisions of this Convention.
1-474
More specifically, Article 3 of the 1974 Athens Convention provides that the
carrier is liable for any damages caused by the death or injury of a passenger
due to negligence or fault of his servants or agents acting within the scope of
their employment. The claimant bears the burden of proof that the incident
causing the loss or damage occurred during the carriage.248
1-475
Article 1 provides that the period within which the Convention applies is when
the passenger and their luggage are on the ship and not when they are, for
instance, in a terminal ashore. It also applies to injuries suffered by marine
risks and not hotel risks such as cabins and food.
1-476
Article 7 provides that the carriers limit of liability is 46,666 SDRs per carriage249
unless he acted with intent to cause such damage or recklessly and with
knowledge that such damage would probably occur in which case he cannot
limit his liability.
246
Adopted on 13 December 1974; entry into force: 28 April 1987. The 2002 Protocol: Adopted on 1 November 2002;
entry into force: 12 months after being accepted by 10 states; not yet in force.
247
Sched. 6. The Carriage of Passengers and their Luggage by Sea (Domestic Carriage) Order 1987 (SI 1987/670) and
also SI 1998/2917.
248
Art. 3 para. 2 of the 1974 Athens Convention.
249
For SDRs per currency unit per five days, visit: http://www.imf.org/external /np/fin/rates/rms_five.cfm.
1-114
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Carriage of Passengers
8.2.1
Time Bars
1-477
A two-year time bar is provided for bringing a legal action unless an extension is
agreed in writing.250 Article 17 contains provisions in regards to jurisdiction but
Article 17(2) allows the parties to agree after the incident causing the damage
occurred to any jurisdiction or to arbitration.
8.3
THE 2002 PROTOCOL TO THE ATHENS CONVENTION
1-478
The revision of provisions in the 1974 Athens Convention was recognised by the
International Maritime Organisation (IMO) and the 2002 Protocol to the
Convention was adopted in a diplomatic Conference in 2002.
1-479
The 2002 Protocol to the Convention introduced the following amendments:
It is compulsory for passenger carriers to obtain and carry liability

insurance. A Certificate of Financial Responsibility is compulsory for each
passenger ship carrying more than 12 passengers.
The carrier is liable unless he proves that the incident was the result of an
act of war, hostilities, civil war, insurrection or a natural phenomenon of an
exceptional, inevitable and irresistible character, or was wholly caused by
an act or omission of a third party done with the intention to cause the
incident.
The passengers are entitled to pursue their claims by direct action against
the liability insurer.
Liability to passengers for death or injury by a shipping incident (as this is

defined in Article 3 paragraph 5) is strict (i.e. the claimant does not need
to prove negligence of the carrier or his servants) up to 250,000 SDRs with
the possibility of a further liability up to a maximum limit of 400,000 SDRs.
The claimant has the burden of proof.
The liability of the carrier for loss or for damage to cabin luggage is limited
to 2,250 SDRs, for baggage in hold 3,375 SDRs and for motor vehicles
12,700 SDRs.
The Protocol allows the States to opt-out of the imposed limits provided that
those limits are not lower than those imposed by the Protocol and the state
party which makes use of this option must inform the IMO Secretary-General
of the limit of liability adopted or of the fact that there is none.
1-480
The 2002 Protocol has not yet been ratified since, as it was stated by a leading
underwriter at the Diplomatic Conference in 2002, there is no insurance on the
market to meet the Protocols requirements.
1-481
In reality there are very few reported cases of death and injury claims brought
before the courts. This is because such claims are covered by the Carriers
Protection and Indemnity (P&I) insurance, and the general approach of the P&I
Clubs which insure virtually all the worlds fleet of passenger ships is to reach
amicable settlement of such claims out of court.
250
Art. 16 of the 1974 Athens Convention.
1-115
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1-482
The English courts have been rather frugal in their awards to death and injury
claimants especially comparing them to jurisdictions such as the United States.
1-483
For personal injury claims the principal heads in the English courts are:
1-484
Medical expenses.
Past, present and future pain and suffering.
Loss of amenity as well as past, present and future loss of earnings.
For death claims pursued by the personal representatives of the deceased the
heads are as follows:
Medical and funeral expenses.
Expenses in connection with coroners inquest and testamentary.
Pain and suffering of the deceased before death.
Damages to specified dependants provided in the Fatal Accidents Acts.
Claims by spouse, children or aged parents who the deceased was

supporting before his death. For the calculation of these claims the state
of health of the dependants will be taken into consideration and also the
duration of these payments if the deceased had survived.
1-485
As aforementioned the United States courts are far more generous in their
awards for death and personal injury claims and this means that the lawyers
acting for the relevant claimants will always seek to pursue their clients, claims
in the US given that there is a US element in the case to justify a US
jurisdiction.
1-486
The advantages offered by a US court for the claimant are briefly:
1-487
Higher levels of awards for damages.
Class actions.
No liability to undertake the defendants costs.
Thorough discovery procedures.
Lawyers may accept instructions on a fee charged for their services only if
the lawsuit is successful or favourably settled out of court (contingency
fee or conditional fee) which is now also available in the UK.
The possibility of issuing such proceedings for a maritime casualty in Europe

has led to a Mid-Atlantic Settlement at an amount considerably higher than
those awarded in the English courts.
Baatz Y. (edt), Maritime Law. Second edition, 2011, Sweet and Maxwell, London,
pp.231-239
http://www.imo.org/About/Conventions/ListofConventions/Pages/AthensConvention-relating-to-the-carriage-of-Passengers-and-their-Luggage-by-Sea(PAL).aspx
1-116
9.
BUNKER DISPUTES
9.1
INTRODUCTION
1-488
Marine fuel oil, widely referred to as bunker fuel or bunkers, is a source of

concern to shipowners and charterers as quantity and quality disputes of bunker
fuel have increased in the recent years. Engine damage which results in repair
costs, de-bunkering costs and loss of time as well as detention of ships and/or
fines from port states for non-compliance of fuels with the international and
regional regulations may be a few of the possible consequences. Disputes may
also arise between the shipowner and charterer in regards to the supply of
bunkers.
1-489
Bunker disputes may turn out to be complicated but in this chapter we will
discuss in a concise way procedures to be followed for the prevention of claims,
terms in a contract of sale and charterparty clauses which would require special
attention and key legal principles in connection with the supply of bunkers
should a claim arise.
9.2
COMPLIANCE
1-490
Shipowners and charterers must ensure that fuels comply with the provisions of
MARPOL Annex VI (these provisions refer to the prevention of air pollution from
ships and applies to ships of 400 GT and above), EU Sulphur Regulations and
regional regulations.
1-491
Port state control officers may board ships in port and require to check
documentation which proves the compliance of ships. This control may include
(a) bunker delivery receipts, (b) records of MARPOL samples, and (c) log books
showing the time that compliant fuels were used. It is also a common practice of
certain ports that officers require samples from ships bunker tanks and test
them for sulphur content and compliance. Ships may be detained and/or fined if
they are found non-compliant.
9.3
PARTIES TO A BUNKER DISPUTE
1-492
The shipowner. (a) He may be the buyer of the bunker fuel. (b) He is also under
the obligation (under a time and voyage charterparty) to ensure that the ships
staff has the knowledge, qualification and experience to handle bunker fuel
whether he buys the fuel or not.
1-493
The charterer. Where he is the buyer of bunker fuel he is contractually obliged

to supply fuel in accordance with the agreed specifications.
1-494
The bunker supplier. He is under the obligation to provide bunker fuel of quality
strictly complying with the specification agreed and not off spec bunkers.
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Bunker Disputes
Module 1
1-495
The ships crew. They are obliged to provide accurate information in regards to
bunkers, handle the fuel and maintain the engine during operating hours with
due care or otherwise they may be found negligent.
9.4
THE CONTRACT OF SALE
1-496
The shipowner or the time charterer may be the buyer of bunker fuel.
1-497
When purchasing bunkers it is important to ensure that the contract of sale

includes the appropriate description of the fuel to be supplied. In order to avoid
a bunker quality dispute and an engine damage claim a shipowner must identify
the types of fuels which are appropriate for a particular ships plant. Therefore,
personnel in a shipowners office who have the responsibility to purchase fuel or
to insert relevant clauses in charterparties should cooperate closely with the
technical departments in order to ensure that they identify the appropriate shipspecific fuel oil specification. Reference to the International Standard ISO
8217:2010 (or latest version), identification of the required grade within this
standard, e.g. RME 180, RMG 180, RMG 380, and any special sulphur limits
should be made in the contract.
1-498
A shipowner or time charterer may enter into a contract directly with the bunker
supplier or bunker trader or via a bunker broker. A bunker broker is an agent to
the buyer of fuel oil and therefore the ship operator can have a claim against him
only if he exceeded his authority or failed to conduct his role with due care. The
bunker broker will not be liable to the purchaser if the supplier has breached the
contract unless he has induced the buyer to enter into the contract by making
representations which he was aware to be untrue at the time they were made.
1-499
The terms of the contract under English law are classified as follows:
1-500
1-501
1-118
(a)
Terms expressly agreed by the parties.
(b)
Terms incorporated into the contract (usually by the supplier).
(c)
Terms implied by law.
The bare bones of the contract expressly agreed between the parties will be
evidenced by the confirmation of stem by e-mail or fax and which contains:
Price.
Place and date of delivery.
Amount of fuel ordered.
Quality which refers to a standard specification.
Incorporation of standard terms and conditions.
The details of the agreement are provided by standard terms and conditions
which are commonly incorporated into the contract by the supplier and refer to
the contents of the confirmation of stem, previous dealings of the parties in
Module 1
Bunker Disputes
which terms and conditions were used consistently, and practice and custom of
the particular trade.
1-502
These terms and conditions will contain, amongst others, more detailed
provisions for:
Payment. Manner and timing by which payment has been agreed to be

made.
Evidence. Limits to evidence that may be admitted if a quality or quantity

dispute arises.
Manner in which samples are taken. Identification of parties that need to

be present when samples are taken, places from which samples are taken.
MARPOL 73/78 Annex VI contains provisions for the obligation of the ship
operator to retain samples for a period of no less than 12 months from the
time of delivery and also to observe certain procedures in regards to
taking samples in the manifold of the receiving vessel which should be
sealed and signed by the suppliers representative and the master or
officer responsible for the bunkering. In the absence of incorporation of
MARPOL requirements in the standard form of sale a conflict may arise
between the requirements of law and contractual terms.
Time bars. These are the time limits within which claims may be raised and
must be observed.
Lien clause. A clause which provides the right to withhold the property of
another until payment for the fuel price is made.
Retention of title clause. Provision of the terms and conditions which refers
to the point at which the parties have agreed that the title of ownership to
the fuel oil will pass from the supplier to the buyer.
1-503
The buyer should be well aware of the terms and conditions of the agreement
which is frequently drafted by the supplier and therefore tends to be in his favour
containing provisions with short time bars for the notification of claims, limited
liability clauses, reference to the validity of samples and procedures regarding
the handling of disputes on quality. The bunker purchaser should always request
to be provided with a copy of the agreement.
1-504
In the BIMCO Standard Bunker Contract an attempt has been made to create a
balance between protecting the interests of the buyer and the seller. Therefore,
it is provided that the sampling should take place in the presence of both parties
and at a mutually agreed point. The master may also make reservations
regarding quantity or quality on the bunker receipt or in a letter of protest. The
time limits for a notification of claim by the owner or the time charterer is 30 days
from the date of delivery.
1-505
The terms implied by law (where English law applies) are those: (a) in the
absence of which the contract cannot function effectively, (b) that incorporate the
provisions of the Sale of Goods Act 1979 (as amended) regarding the fuel to be
in accordance with the contractual description (section 13), to be of satisfactory
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Module 1
quality251 and to be reasonably fit for purpose.252 Where the bunker delivery
contract is governed by the laws of a different country it is likely that similar
provisions will apply.
1-506
The majority of charterparties and bunker supply contracts also provide that
English law is applicable and that English courts have jurisdiction. If there is no
provision for jurisdiction the latter will usually be determined in connection to the
residence of the physical supplier, or vessel operator, or the place where the
contract was concluded, or where the vessel was arrested, or where the vessel
was registered.
1-507
The following procedures are mostly of interest for the ships crew and the ship
operator. Any acts or omissions of the crew which may lead to or affect the
process of a dispute may be due to crew negligence (when a crew member has
fallen below the expected standard of care required by that particular crew
member) or crew incompetence (when the crew member does not have the
appropriate training and qualification for the position held).
1-508
As fuel oils are potentially hazardous it is of utmost importance for the crew to
handle them with care. The bunker supplier must supply the master or chief
engineer material safety data sheets (this is a legal requirement under the laws
of many countries). IMO has published guidance (IMO Resolution MSC. 150(77)
Recommendation for Material Safety Data Sheet for MARPOL Annex I Cargoes
and Marine Fuel Oils) in order to prevent bunker-related injuries to the crew.
9.5
PRE-DELIVERY PROCEDURES
1-509
The ships crew must be instructed to check the quality of the fuel to be supplied
against the bunker delivery receipt (or bunker delivery note) which must
accompany all fuel taken by a ship (clause 18 of MARPOL Annex VI). The
bunker delivery note must contain:
(a)
name and IMO number of receiving ship,
(b)
port,
(c)
date of commencement of delivery,
(d)
name, address and telephone number of the marine fuel supplier,
(e)
product name(s),
(f)
quantity in metric tonnes,
(g)
density at 15C (test method ISO 3,675 kg/m3),
(h)
declaration signed and certified by the fuel,
(i)
temperature of product delivered, and
(j)
sample seal numbers.
251
S. 14 (2A). See also Fal Bunkering Co. Limited v Gerrard Chartering A/S [1990] (unreported)).
252
S. 14(3). See also Manchester Liners Limited v Rea Limited [1912] AC 74.
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The chief engineer must check that the above information is in compliance with
his requirements and either he or the bunker barge master or master of the
receiving ship should sign it. It is stamped with the official stamp of the ship and/
or barge. The chief engineer should only sign any documentation stating for
volume at observed temperature only as he cannot be certain as to any weight
figures for the fuel loaded. The bunker delivery note should be retained onboard
for a period of at least three years after the fuel was delivered on board and be
kept in a place where it may be readily available for inspection at all reasonable
times. It must also be accompanied by a representative sample of fuel oil sealed
and signed by the supplier.
1-510
A common term of suppliers is that sampling will be conducted on the barge and
that in the case of dispute for claims on quality such samples will be used. It is
therefore important that all barges are fitted with drip sampling devices and also
that the ships crew verify that they are correctly installed and operate throughout
the entire delivery. If there are no drip sampling devices fitted in the barge and
samples are drawn from the barges tanks then the chief engineer must establish
that the fuel is supplied from the tanks that the samples are taken from. If the
samples do not satisfy the chief engineer he must issue a note of protest and
make an entry in his log book. Photographs of any irregularities are useful
evidence in case a dispute arises.
1-511
A competent member of crew should attend on the barge prior to and after the
delivery to measure and record the contents of all the barge tanks. It is important
to attend accurately these procedures in order to avoid possible disputes on the
quantity of fuel discharged from the barge. If the chief engineer has any concerns
in relation to the efficiency of the control of quantity methods he should issue a
letter of protest at the time and invite an independent surveyor to examine the
barge. The letter of protest must include the following information: (a) name of
receiving ship, (b) date and time bunker oil was loaded, (c) volume shortage and
percentage shortage in connection with the order, (d) type of bunker oil loaded,
(e) name of bunker supplier, (f) name of bunker barge or shore facility, and (g)
bunker receipt reference number. The master or chief engineer should sign the
letter of protest and direct it to the barge master or shore representative and also
send a copy to: (a) the shipowner or manager, (b) charterer (if time charter), (c)
bunker supplier, and (d) bunker broker. The letter of protest must also be signed
by the barge master or shore representative and be stamped with the official
stamps of the ship and barge official stamps. Time bars for any protest may be
as short as 24 hours and must be observed.
9.6
PROCEDURES DURING DELIVERY
1-512
Throughout the delivery the sampling on the barge and the ship should be
constantly monitored to ensure that the necessary adjustments of the drip
sampling are made, also frequent checks of the loading rate and receiving tank
contents in order to avoid spillage. The chief engineer should note any stops/
start and attend closely the fuel delivered in that period.
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9.7
POST-DELIVERY PROCEDURES
1-513
Barge tanks and ships tanks must be re-measured and the quantity discharged
by the barge and received by the ship calculated and recorded. The mt should
be recorded on the bunker receipt and this will be the information included in the
invoice. In case the chief engineer disagrees with this figure he should issue a
note of protest and make a record in the log book or the oil record book. The oil
record book should contain information in regards to all the contents of the ships
bunker tanks before and after the delivery.
1-514
One representative sample should be despatched to the testing company.
1-515
The supplier is under the obligation to supply the ship with a MARPOL sample
the seal number of which must be recorded on the bunker delivery receipt
together with the seal numbers of any other samples issued by the supplier.
Certain shipowners take their own MARPOL sample but the official one is the
one issued by the supplier. If the chief engineer is not satisfied with the manner
the Marpol sample was taken he should issue a note of protest.
1-516
All the samples and documentation from the bunkering operation should be
retained in a safe place on board as a port state control officer may request
them and they would be valuable evidence in case a dispute on quality
arises.
9.8
CHARTERPARTIES
1-517
In the majority of charterparties the charterer is responsible for the supply of

bunkers (see NYPE 1946 and 1993, Shelltime 4) and contain the provision that
the charterer shall provide and pay for all fuel.
9.9
TIME CHARTERPARTIES
1-518
Under a time charterparty the bunker delivery contract is concluded between

the bunker supplier and the time charterer. The shipowner is not a party to the
contract under English law and therefore he does not have any rights from it
and also the bunker supplier does not have any rights against the shipowner
unless otherwise agreed in the contract. The time charterer is not entitled to
bind the owner into the contract. In other jurisdictions, however, the supply of
marine oil may allow the supplier the entitlement of a lien against the ship. For
instance, in the USA, if the contract provides that the applicable law is US law
the supplier is entitled to enforce its claim for the agreed payment against the
ship. A shipowner may endorse the bunker delivery receipt with a prohibitionof-lien notice in order to protect his ship but the effect of such a notice is
ambiguous.
1-519
Ownership of the bunkers. The charterer is the owner of the bunkers upon
delivery of the ship and the ownership is transferred back to the owner upon
redelivery.
1-520
Quantity of bunkers. If the ship is delivered with less bunkers on board than the
minimum quantity agreed in the charterparty the charterer is not entitled to
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reject delivery subject to the bunkers are not making the ship unsafe for the
service agreed and that the bunkers sufficient for the ship to sail safely to the
next port. If the charterparty contains the word about for qualifying the quantity
of bunkers the owner is obliged to provide an honest estimate of it. The owner is
also obliged to provide the charterer with any information in connection with
previous and current consumption and any particular characteristics of the ship.
The charterer on the other hand is under the obligation not to order quantities
which are not required for the performance of the charter in order to make a
profit on bunker prices on redelivery.
1-521
In regards to bunker prices, if the charterparty contains no provision, market

prices will apply although certain charterparties forms either provide a specific
price or a mechanism for establishing the price.
1-522
The charterer has the right to select the port at which the ship is to receive the
bunkers but if he chooses an unsafe port he may be liable for the losses.
1-523
Quality of bunkers. The charterer is under an absolute obligation to provide

bunkers of reasonable quality and suitable for the ship. If the charterparty
contains provisions in regards to the type and grade of bunkers the charterer will
have to be in compliance with these requirements. For instance, clause 9(b) of
the NYPE 1943 form requires the charterer to supply bunkers of a quality
suitable for the ships engines and auxiliaries and conforming to agreed
specifications. If the charterer does not comply with the charterparty terms he
will be liable for any damage caused to the engine. The charterer is also under
the obligation to purchase marine fuel from a reputable supplier. The shipowner
must provide the charterer with a detailed specification of the grade of fuel that
is appropriate for the ships plant.
1-524
Fit for purpose. Under English law the bunkers must not only be in compliance
with the contractually agreed specifications they should also be fit for purpose
under the Sale of Goods Act 1979 as amended by the Sale and Supply of Goods
Act 1994. However, where the engine is unusual or has particular requirements
the charterer will only be liable if he had been advised as to the unusual
characteristics of the engine before the supply of bunkers.
1-525
Causation. In a bunker dispute, it must be proved that the damage caused was
due to the poor quality of bunkers and not an irrelevant cause. The owner bears
the burden of proof regarding the link between the bunker quality and the
damaged caused to the engine. If this is not established the owners claim will
fail.
1-526
Mitigation. The ships crew is under the duty to mitigate the loss even if the
bunkers do not comply with the agreed specifications. The owner will seek that
the charterer will undertake the de-bunkering process and costs unless the latter
denies liability in which case the owner should consider paying the costs and
then claim them from the charterer. The chain of causation is interrupted if the
crew although being aware that the bunkers are off specification continues to
burn them and this either causes or exacerbates the damage of the engine.
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9.10
VOYAGE CHARTERPARTIES
1-527
Under a voyage charterparty the owner is responsible for the provision of

bunkers and will therefore contract directly with the bunker supplier. There are
many forms of contracts but the common characteristic is that most of them have
terms and conditions very much in favour of the supplier.
1-528
Quantity. A typical bunker contract will provide that the figure provided by the
supplier is conclusive.
1-529
Quality. A suppliers conditions will attempt to exclude any implied terms or

warranties but under English law the Sale and Supply of Goods Act 1994 will
apply. Terms referring to samples should provide that the suppliers samples are
binding and conclusive.
1-530
The suppliers terms will also impose short time bars for notification of claims
and they will seek to limit their liability to the value of the bunkers and exclude
any consequential losses.
1-531
Whether the bunkers are ordered by the owner under a voyage charter or by the
time charterer the ship may be exposed to the danger of being arrested by the
bunker supplier if the bunkers have not been paid for. Bunker contracts will also
contain a lien clause or a Romalpa/retention of title clause.
1-532
In The Saetta253 the vessel was under a time charter on the Shelltime 4 form.
The charterparty contained the provision that the charterers were under the
obligation to provide and pay for all fuel and that the shipowners could terminate
the charter for non-payment of hire. The charterer ordered fuel oil but did not pay
for it. The bunker delivery contract contained a retention-of-title clause according
to which the ownership in the fuel would be the sole and absolute property of
the seller until the buyer had made full payment of the agreed price. As payment
was made, title of ownership of the fuel oil did not pass to the charterer. It was
held by the court that when a shipowner terminates a charterparty by exercising
its right to withdraw it does own the fuel oil on board the ship. If the shipowner
uses, or deals with the fuel oil on board the ship, it will be liable to account to the
charterer for the value of the fuel oil according to the price paid by the charterer
or (if it is different) the price charged by the nearest bunker facilities at the time
the charterparty was terminated. The shipowner may also be liable in tort for
dealing with the property of another in a way contrary to that partys ownership
of the property.
Member of North of England P&I Association. Loss Prevention Guides, Bunker
Claims Prevention. A Guide to Good Practice. Third edition, Richard Bracken,
Chris Fisher, Mike Salthouse & North of England P&I Association, 2011, edn.
North of England P&I Association Limited, pp. 1-98
1-533
In The Fesco Angara254 the owners, Angara, chartered the vessel to Britannia
on a 12-month time charter. The charterparty provided that the charterers on
253
Forsythe International (UK) Ltd v Silver Shipping Co. Ltd and Petrolglobe International Ltd (The Saetta) [1993] 2
Lloyds Rep. 268.
254
Angara Maritime Ltd v Oceanconnect UK Ltd and another [2010] EWHC 619, QB.
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Bunker Disputes
delivery and owners on redelivery would respectively pay for all bunkers
remaining on board.
1-534
Bunker suppliers, Oceanconnect, sold a certain quantity of bunkers to Britannia

and delivered them to the vessel. Britannia did not make payment of the bunkers.
The bunker supply contract contained a retention-of-title clause in favour of the
suppliers. As Britannia experienced financial problems it redelivered the vessel
before the completion of the agreed term to the owners under the charter. The
unpaid bunkers remained on the vessel and the owners consumed them in
various operations.
1-535
The suppliers claimed that since the owners had taken over the ownership of the
bunkers they should make payment for them. The owners brought an action for
declaration of non-liability against the bunker suppliers. The court held that on
the basis of section 25(1) of SOGA 1979 and The Saetta the owners had
purchased the bunkers from the charterers upon redelivery since they acted in
good faith and had no notice of any opposing right of the suppliers.
9.11
A FEW KEY NOTES ON EVIDENCE
1-536
The golden rule for the success of a quantity or quality claim is to preserve
evidence properly. The collection of evidence can be distinguished between
routine (i.e. collection of documents and notes which are related to every
bunkering operation) and non-routine (i.e. collection of evidence in relation to the
claim as to the quantity or quality of bunker fuel supplied). Good record keeping
is crucial. The ship should maintain: (a) detailed records, (b) log book entries,
and (c) samples. Early proper investigation and prompt appointment of the right
expert is also essential.
1-537
Typical documentation of a bunker dispute would include:

(a)
ships log books,
(b)
oil record books,
(c)
maintenance records,
(d)
pre-arrival checklist,
(e)
bunker start-up and completion time,
(f)
bunker tank contents records,
(g)
consumption records (which fuel was used when),
(h)
bunker receipts,
(i)
historic sample results,
(j)
photographs of damaged parts,
(k)
survey reports,
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(l)
class records,
(m)
statements of engineers,
(n)
invoices for spare parts, and
(o)
other costs, documents and correspondence.
9.12
SAMPLES
1-538
The focus of most bunker quality disputes are the samples taken during and
after delivery. The chief engineer must be present when the sampling container
is sealed. The latter must provide security from tampering and contamination
throughout the bunkering process. The seals of samples must be numbered and
the numbers must be recorded in the sample labels and bunker delivery note.
The accurate labelling and the ability to trace samples and analysis reports are
crucial for a successful claim. Each sample must bear a sample number and the
bottle label must include:
(a)
the name and IMO number of the ship,
(b)
the barge or installation name,
(c)
place or port of bunkering,
(d)
name of bunker supplier,
(e)
name of bunker carrier,
(f)
type of bunker fuel,
(g)
date and time delivery commenced/date of sample,
(h)
name and signature of suppliers representative,
(i)
name and signature of receivers representative,
(j)
sampling method,
(k)
location at which sample was drawn, and
(l)
seal number (and also cross-check with bunker delivery note).
The name of the person who is given custody of samples sent ashore for testing
should also be recorded and also how they are transported. Any sample labels
submitted before the completion of bunkering should not be signed by the chief
engineer and if the bunker supplier offers a sample which the ship has not
witnessed the chief engineer may sign the sample but state for Receipt only,
source unknown. An inaccurate sampling, labelling and recording allows the
possibility for an opponent to challenge the authenticity of the test results.
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http://www.bimco.org/en/Products/media/Products/Publications/Pamphlets/
Bunkering_Guide/Bunkering_Pamphlets.ashx
9.13
NOTES OF PROTEST
1-539
The barge master must issue a note of protest if he ascertains that there is
anything unsatisfactory in the delivery. The note of protest should contain: (a)
details of the problem, and (b) a copy which should be retained on board for
reference and submission to the bunker supplier.
9.14
COLLECTION OF EVIDENCE IN CASE OF OCCURRENCE BEFORE

ANALYSIS RESULTS ARE RECEIVED
1-540
If fuel needs to be used before the analysis results are received or if no analysis
has been conducted and in the meantime engine damage occurs it is important
to keep a detailed record of dates and times of occurrences, times when fuels
were first used, tanks used, when the problems first occurred. Damage
components should be retained on board and also any photos, videos of blocked
filters and separators, samples from fuel system at various locations.
1-541
The prevention of a bunker dispute by considering with care the terms and
conditions of the contract of sale, compliance with international and regional fuel
regulations and due care in conducting the procedures of bunkering will save the
parties costs and time but the quality of the evidence produced will be crucial for
a successful prosecution/defence of a claim.
UK Defence Club, Bunkers: a guide to quality and quantity claims, available on
http://www.ukpandi.com/fileadmin/uploads/uk_pi/Latest_Publications/UK_
Defence/UKDC_BunkerDisputes_web.pdf
Claims Prevention. A Guide to Good Practice. Third edition, Richard Bracken,
Chris Fisher, Mike Salthouse & North of England P&I Association, 2011, edn.
North of England P&I Association Limited, pp. 1-98
1-127
10.
SHIPBUILDING CONTRACTS
1-542
The lifeblood of commercial shipping is international trade but the object-symbol

of the maritime community is the ship.
1-543
Tens of thousands of ships are at present in service worldwide255 with the

shipbuilding market making a shift towards the east, particularly Japan, Korea
and China in recent years. The ban on single-hull tankers has contributed to a
boom in orders for building new double-hull tankers. The IMO has developed
shipbuilding standards called the goal based standards and cooperation
between shipowners, shipbuilders and classification societies through ICAS has
been established in order to ensure their mutual interest that ships are fit for
purpose by discussing shipbuilding standards, contractual relationships and
yard capacity.
1-544
A shipbuilding contract is different from purchasing an existing ship, since

workmanship and materials are involved and legal questions such as the
shipbuilders plans, copyright may arise. Shipbuilding contracts are complex and
it is common to be in standard form contracts led by the shipyards which are
used as templates and the parties, after their negotiations, amend them
according to their agreement. The standard form contract the parties will choose
depends on the geographical location of the yard, the habit of the owner and the
power of the relevant trade association. The most popular forms are: the
Shipbuilders Association of Japan Form (SAJ Form); the Association of
European Shipbuilders and Ship Repairers Form (AWES Form); the Norwegian
Standard Form of Shipbuilding Contract (Norwegian Form); the Baltic and
International Maritime Council (BIMCO) Standard Newbuilding Contract
(NEWBUILDCON), whose objective was to balance the interests and liabilities
of the parties; and the MARAD Form by the Maritime Administration of the
United States Department of Commerce, and many others. The language in
shipbuilding contracts is usually English and provide for English law and
jurisdiction. An accurately drafted contract which reflects the intention of the
parties would minimise the causes of disputes or would provide good evidence
if a case reaches litigation.
10.1
NATURE OF SHIPBUILDING CONTRACTS
1-545
Shipbuilding contracts involve both the construction and the sale of the ship and
therefore the question arising is whether the contract would be classified as a
building or as a sale of goods contract. The importance of an answer to this
question lies firstly on the application of the relevant rules. If the contract is one
of sale then the ordinary rules of the sale of goods apply but if it is a building
contract then the rules on construction and the supply of work and material will
be applicable.
255
Commission of the European Communities, Seventh Report from the Commission to the Council on the Situation in
World Shipbuilding, COM(2003)232 final.
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1-546
Shipbuilding Contracts
Traditionally English law has treated shipbuilding contracts as agreements to

sell256 future goods (i.e. goods to be manufactured by the seller after the
making of the contract of sale)257 by description. The final product, the ship, is
included in the definition of goods as it is provided in the Sale of Goods Act
1979 (as amended). In Lee v Griffin258 the court held that:
if the contract be such that, when carried out, it would result in the sale
of a chattel, the party cannot sue for work and labour; but if the result of the
contract is that the party has done work and labour which ends in nothing
that can become the subject of a sale, the party cannot sue for goods sold
and delivered.
1-547
In McDoughall v Aeromarine259 the same thread of thought was followed.

Diplock J. said:
it seems well settled by authority that, although a shipbuilding contract
is, in form, a contract for the construction of the vessel, it is in law a contract
for the sale of goods.
1-548
This interpretation has been doubted in the two House of Lords, decisions,
Hyundai Heavy Industries Co. Ltd v Papadopoulos260 and Stocznia Gdanska SA
v Latvian Shipping Co.261 In the first case the court held that there would be no
accrued rights of the parties if the contract was solely one of sale. The buyer had
not made payment of the second instalment and consequently the builder
exercised his contractual right to terminate it. Viscount Dilhorne said that:
in this case the contract was not just for the sale of goodsIt was a
contract to build, launch, equip and complete a vessel and to deliver and
sell her. The contract price included all costs and expenses for designing
and supplying all necessary drawings for the vessel It was a contract
which was not simply one of sale but which, so far as the construction of
the vessel was concerned, the contract resembled a building contract.
1-549
In the second case the court held that the shipbuilding contract in question was
one for the construction and sale of the hull.
1-550
The intention of the parties will always be considered by the courts but the more
modern general view regarding the nature of the shipbuilding contract is that it
is a hybrid contract of construction and sale of ship.
1-551
Different jurisdictions instead treat shipbuilding contracts as construction

contracts and for this reason the choice of the applicable law in the agreement
is of utmost importance.
256
Sale of Goods Act 1979 ss 2(5) and 5(3).
257
Sale of Goods Act 1979 s. 5(1).
258
(1861) B&S 272.
259
[1958] 2 Lloyds Rep. 345 at 355.
260
[1980] 2 Lloyds Rep. 1 at 5.
261
[1995] 2 Lloyds Rep. 592.
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1-552
Another reason that makes the response to the question on whether a

shipbuilding contract is one for sale of goods or a contract of construction crucial
is because this will determine the parties accrued rights. In other words in case
of a dispute this answer will determine the point at which the title of property
passes from the seller to the buyer. More specifically, the issues arising are: (a)
when does the title of property on the complete vessel pass? (b) does the buyer
have a property right to the constructed hull? (c) is the buyer entitled to property
on the material for which he has given his approval but had not yet been made
part of the hull? (d) what happens to the parties accrued rights in case the
contract is cancelled?
1-553
When the contract for the purchase of a ship is concluded no property exists and
none passes at that time since the purchaser buys future goods (i.e. goods not
yet in existence). Technically speaking where an order is given for a construction
of a vessel no sale is possible; the contract will always be an agreement to sell.
In general terms, the property in future goods, unless evidently otherwise
agreed, will pass to the purchaser under two conditions: (a) the goods comply
with the contractual description and they exist in such a state that the buyer is
contractually obliged to take delivery of them, and (b) the goods are
unconditionally appropriated to the contract by the consent of the parties.
Therefore, the passing of property on the vessel will not take place until the
completion of the vessel. The parties, however, may agree that the transfer will
occur in stages as building proceeds. Many shipbuilding disputes arise in
regards to these provisions.
1-554
The larger the vessel the higher are the costs involved and the longer time the
builder has to wait to be paid the agreed price. He will often be obliged to finance
the construction by relying not only on his own finances but also on the purchaser
or third parties such as banks which will require security for their advance. The
builder may require that the buyer arranges that third parties guarantee payment
of the agreed price. The purchaser should safeguard himself from the possibility
of the builder becoming insolvent especially if he has made advanced payments.
It is advisable that a term in the building agreement is included providing for the
passing of the property to the purchaser of portions of the ship as construction
proceeds according to the instalments he pays. In instalment sales the vendor
retains the title of property until payment of the last instalment whereas in our
present case the purchaser acquires portions of property with every instalment.
Registered mortgages may be effected when the ship is completed and
registered.
1-555
Turning to the question on whether the buyer obtains a property right to the
partly constructed hull, this has been discussed by the House of Lords in Seath
v Moore (1886).262 Although this court decision was made before the Sale of
Goods Act 1893 was enacted it was made clear that under English law the
intention of the parties in the construction of the contract determines when the
property passes to the buyer. The parties may include in their contractual
agreement a term which provides that property will pass at a certain stage of the
shipbuilding process and therefore a ship being under construction may pass
before completion.
262
(1886) 11 App Cas 350 at 370, HL.
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1-556
In connection with the question on whether the materials may pass to the buyer
before completion it has been considered by the courts that it is necessary to
use clear which state the stages and requirements of appropriation.263
1-557
The buyer will desire that as building proceeds the vessel will become his and
also that if the builder becomes insolvent the completion will take place in due
course. For this reason he should attempt to secure this by including a term in
the contract that the materials brought into the shipyard for the purpose of
constructing the ship shall become his property. In case the parties do not
express clearly their intention to that effect the decision of the court may decide
against the purchaser.264 Whatever is transferred to the buyer ceases to be
available to the builders general creditors.
1-558
Those who supply materials to shipbuilders may protect themselves against

defaults in payment by including in their contractual agreement with the builder
a retention-of-title clause. Section 19(1) of the Sale of Goods Act entitles the
seller to do this and the theory is that the seller retains ownership in the goods
until paid. However, where the shipbuilder incorporates those materials into the
ship the purchaser acting in good faith and without knowledge of the rights of
the original supplier may obtain a title of ownership to them.
10.2
PRE-CONTRACT STAGE
1-559
The stage prior to the conclusion of the contract is expensive and time consuming
for the parties. The buyer would normally choose a builder with whom he had
previous dealings and he would seek for expertise opinion in commercial,
technical and legal matters. The instruction of shipbrokers and naval architects
is crucial in obtaining information from different shipyards for prices, timing and
designs. The shipbuilder may have ready specifications to present (known as
Principal Particulars) or the buyer may submit his own specifications and
proposed contract terms (known as an invitation to tender) to various
shipbuilders in order to obtain competitive bids. Upon completion of these stages
the parties will execute a letter of intent which does not have a legally binding
effect unless it is proved that this was the intention of the parties.
10.3
FORMATION OF CONTRACT
1-560
Under English law the essential ingredients for the formation of a valid and binding
contract (including a shipbuilding contract) is the offer, acceptance, intention to
create a legal relationship and consideration (i.e. the exchange of something of
value between the parties in return for the other partys promise). The certainty of
terms which define clearly the obligations and rights of the parties is crucial and
matters of substance should not be left to be agreed at a later stage.265 Unless a
binding agreement has been concluded between the parties there is always the
risk that the owner may walk out of advanced negotiations due to an unexpected
263
Workman, Clarke & Co. Ltd v Lloyd Brazileno [1908] 1 KB 968.
264
See the decision of the House of Lords in Reid v Macbeth & Gray [1904] AC 223, HL, in which since the material had
not been affixed on the vessel at the time the builder became bankrupt it was not regarded as appropriated to the
contract.
265
Fast Ferries v Ferries Australia [2001] 1 Lloyds Rep. 622.
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fluctuation of the market with the result of time and money loss. It is advisable
therefore that both owners and yards sign a separate indemnity agreement in
order to protect themselves from the risk of withdrawal.266
10.4
TYPES OF CONTRACTUAL TERMS
1-561
A preliminary point of importance is to understand the classification of contractual

terms into conditions, warranties and intermediate or innominate terms as the
breach of each one of them results in different remedies. A breach of a condition
will entitle the injured party to terminate the contract whereas the breach of a
warranty will entitle the injured party to seek for damages. The effect of breach of
an intermediate or innominate term depends on whether the nature and
consequences of the breach go to the root of the contract (where the injured party
is entitled to treat himself as discharged) or not.267 Whether a term is a condition,
warranty or innominate term may depend on the exact wording of individual
clauses in the contract but also on the construction of the contract as a whole.
10.5
THE EXPRESS TERMS OF A SHIPBUILDING CONTRACT
1-562
The terms without the inclusion of which a shipbuilding contract may not be
complete are:
The main part of the contract
The ships description and dimensions with dead weight capacity (DWC).
During construction the ship is given a hull number which is not an
essential part of the description.
The specified class of the ship.
Amendments on the agreed description.
Speed and fuel consumption.
Price and method of payment.
Inspection of work in progress.
Nature and conditions of trials.
Time and place of delivery.
Transfer of title and risk with insurance arrangements.
Rectification of defects.
Specifications are contract documents which consist of written terms in regards

to how the ship will be constructed is also a significant part of the contract and
it contains the following provisions:
266
Radiant Shipping Co. Ltd v Sea Containers Ltd [1995] CLC 976.
267
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1961] 2 Lloyds Rep. 478, CA.
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A detailed description of the type of ship, her hull and equipment (it
includes the plans and drawings of the builder).
The materials to be used in agreement with the wishes of the buyer and
the agreed costs involved.
The manner of construction, configuration of engine and fittings, method

of welding, description of officers cabins etc.
Sea trials and the way they will be conducted.
The specification must meet the requirements of the regulations set by the
country of the ships intended registration, the international regulations of
safety (e.g. the International Convention for Safety of Life at Sea 1974) and
the regulations of the ships intended classification society.
1-563
The specifications are equally important with the main contract but in case of
conflict between the two the second part will prevail unless otherwise agreed by
the parties.
1-564
Special attention will now be given to three important features of the shipbuilding
contracts: (a) pre-delivery inspection (trials); (b) delivery of the good; and (c)
warranties under the contract.
10.5.1
Pre-delivery Inspection (Trials)
1-565
Under a shipbuilding contract the owner is usually entitled to have its

representative on board the ship during her sea trials (SAJ Article VI(1)) and to
accept or reject the newbuild on the basis of the outcome of the trial (SAJ Article
VI(4), and NEWBUILDCON Article 23). If the buyer decides to reject the ship,
Article VI(4) requires that he should give notice to that effect to the yard
specifying the reasons why the ship or her equipment is not in compliance with
her contractual description. If the buyer fails to do so, he will under the SAJ
form be deemed to have accepted the ship (SAJ Article VI(4)(a)).
1-566
The seller, however, will be under the obligation to deliver the newbuild ship in
compliance with the contractual description whether the buyer decides to accept
the ship or is deemed to have accepted her as complying with the contract
description.
10.5.2
Delivery of the Good
1-567
The seller is obliged to deliver the ship at the time and place agreed in the
contract, including any postponement or alteration allowed by the agreement
(SAJ Article VII). The timing of the delivery is particularly important to the buyer
so that he can fulfil its chartering commitment, settle the registration of the ship,
her insurance and all other financial and other arrangements related to the
launch of a new ship. Whether the time of delivery is of the essence of the
contract or not depends on the provisions of the delivery clause (SAJ Article
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III(1)(c)) and in the absence of a relevant term it appears that time will not be
treated as of the essence of the contract.268
1-568
The place of delivery should be in accordance with the stipulation of the contract.
This is usually the main yard or the last yard where the ship was constructed. In
the absence of the relevant term the delivery should take place at the sellers
place of business.269
10.5.3
Warranties under the Contract
1-569
In all contracts for the sale of goods there are express and implied warranties.
Express warranties are terms which state clearly what the warranty covers and
does not cover for the seller and buyer. An example of an express warranty is
contained in Article IX(1) of the SAJ which clearly covers: Any defects in the
VESSEL which are due to defective material and/or bad workmanship on the part
of the Builder [] discovered within [] twelve months after the date of delivery270
provided the buyer notifies the seller of the defect with the formal procedure as
provided in Article IX(2), failing which no warranty is due (SAJ Article XI(2)).
1-570
Express warranties may also contain exclusions (NEWBUILDCON Article 37)

and also SAJ Article IX(4)(b) where it is provided that: (b) The Builder shall not
be responsible for any defects in any part of the VESSEL which may be
subsequent to delivery of the VESSEL have been replaced or in any way
repaired by any other contractor, or any other defects which have been caused
or aggravated by omission or improper use and maintenance of the VESSEL on
the part of the BUYER, its servants or agents or by ordinary wear and tear or by
any other circumstances beyond the control of the BUILDER.
1-571
Therefore the builder is relieved from liabilities for defects in case of the buyers
contributory negligence. The issue is, however, how to establish whether the
original defect or the owners contribution is the dominant cause of the failure of
the vessel or her parts. In Ackerman v Protim271 where the ships failure was the
result of the contribution of the defective workmanship and a proven lack of
maintenance, the Court of Appeal held, applying the doctrine of contra
proferentem, that the initial breach of contract was less significant than the lack
of maintenance in causing the event. Builders can protect themselves from such
liability with a separate guarantee risk insurance policy.272
1-572
Warranties in shipbuilding contracts may be implied by the common law where

applicable in consideration of the surrounding circumstances. The degree of
ambiguity of certain implied warranties may raise issues especially when the
shipbuilding contract is concluded between the yard and suppliers and it is
subject to different laws and/or different jurisdictions. In order for such ambiguity
to be avoided, Article IX(4)(c) of SAJ excludes any other liability, guarantee,
268
Lindvig v Forth (1921) 7 Ll L Rep. 253 at 255.
269
Sale of Goods Act 1979 s.29(2)).
270
See also China Shipbuilding Corporation v Nippon Yusen Kabukishi Kaisha and Anr (The Setu Maru, The Saikyo and
The Suma) [2000] 1 Lloyds Rep. 367.
271
[1988] 2 EGLR 259.
272
Heesens Yacht Builders BV v Cox Syndicate Managements Ltd (The Red Sapphire) [2006] EWCA 384.
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warranty and/or condition imposed or implied by the law, customary, statutory or

otherwise (SAJ Article IX(4) (c)).
10.6
THE IMPLIED TERMS UNDER THE SALE OF GOODS ACT 1979
1-573
The courts may sometimes imply a term in the contract even if it was not
expressly contained in the agreement of the parties. Such terms would be:
Compliance with description (the law before January 1995).273 Section 13 of

the SOGA 1979 provides that in a contract for the sale of goods by description
the latter must be in compliance with the contractually agreed description. It
is therefore a term implied by statute that under a shipbuilding contract the
ship eventually delivered must comply with the agreed description or
otherwise the buyer is entitled to reject the ship for non-compliance.
Merchantable quality (the law until 3 January 1995). Section 14(2) of the
SOGA 1979 provides that the seller must supply goods of merchantable
quality unless the defects were specifically drawn to the attention of the
buyer.
Fitness for purpose. The goods (in a shipbuilding contract, the ship) must
be fit for the commercial purpose the buyer purchased them for. A slight
breach of this implied term, however, will not entitle the buyer to reject it by
virtue of the provisions of the new section 15A of the SOGA 1979.
10.7
MAIN OBLIGATIONS AND RIGHTS OF THE PARTIES UNDER A

SHIPBUILDING CONTRACT
1-574
The terms of the standard form contract mainly govern the relationship between
the buyer and the builder. The main obligations and entitlements of the seller
under the agreement are: (a) to build a ship, (b) made to specification, (c) to
perform trials, (d) to deliver it on time, and (e) for a fixed price.
1-575
The buyer on the other hand has agreed: (a) to pay the agreed price (usually by
instalments), (b) during the process of building, (c) with the full agreed price to
be paid upon satisfactory completion to specification, and (d) to accept delivery
of the ship at the agreed time.
10.8
MORE SPECIFIC ISSUES OF CONSIDERATION
10.8.1
Increase in Price
1-576
A price fluctuation in labour and materials or a currency instability may cause a

significant problem to shipbuilders as their costs may rise dramatically after a
fixed-price contract has been concluded. Shipbuilders may protect themselves
from such a risk by including a cost escalation clause where such extra costs
incurred by the builder may be passed on to the buyer. Such clauses are known
as contract price adjustment clauses or fluctuation clauses. In the absence of
the relevant clause the shipbuilder may have to undertake the extra costs
273
The Sale of Goods Act 1979 has been substantially amended by the Sale of Goods Act 1994 for contracts made on
or after 3 January 1995. The most notable substitution was made on the satisfactory condition for the previous implied
term of merchantability.
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himself. It is in the interests of the builder to require a clause as wide as possible

whereas the buyer must seek to restrict the width of such a clause with precise
wording providing for a cut-off point.
10.8.2
Responsibility of the Seller and Buyer for Defects
1-577
The shipbuilder is a person on whose skill or judgment the buyer relies and
therefore the builder is under the implied undertaking to provide a vessel fit for
the particular purpose.274 The Directive 85/374/EEC of 25 July 1985 on Defective
Products Liability as amended by Directive 1999/34/EC is relevant to shipbuilders
and the suppliers of materials if any defects in their products cause death or
personal injury. The defences allowed would be that the defect was due to the
compliance with mandatory regulations, or that the scientific and technical state
of the art would have made it impossible for the defect to be discovered; or that
a component was made in accordance to the design of the main producer. The
position might change if the shipowner has contributed to the design process,
e.g., where his own naval architect failed to detect a fault in the design or if his
own inspectors negligently delivered bad work.
Chorley and Giles Shipping Law. Eighth edition, by N.J.J. Gaskell, C. Debattista
and R.J. Swatton, Pitman Publishing, London, 1995, pp. 37-57
Maritime Law. Second edition, Yvonne Baatz (edt.), Filippo Lorenzon and Ainhoa
Velasco Shipbuilding, Sale, Finance and registration, Sweet and Maxwell,
London, 2011, pp. 69-77
Recommended bibliography in this area: Clarke, M., Shipbuilding Contracts, 2nd
edn, 1992 LLP, Curtis S., The Law of Shipbuilding Contracts, 3rd edn., 2002,
Informa Publishing, London, Hill C., Maritime Law, 6th edition (Informa
Publishing, London 2004, pp.75 and ff)
Chorley and Giles Shipping Law. Eighth edition, by N.J.J. Gaskell, C. Debattista
and R.J. Swatton, Pitman Publishing, London, 1995, pp. 37-57
Maritime Law. Second edition, Yvonne Baatz (edt.), Filippo Lorenzon and Ainhoa
Velasco Shipbuilding, Sale, Finance and registration, Sweet and Maxwell,
London, 2011, pp. 69-77
Recommended bibliography in this area: Clarke, M., Shipbuilding Contracts, 2nd
edn, 1992 LLP, Curtis S., The Law of Shipbuilding Contracts, 3rd edn., 2002,
Informa Publishing, London, Hill C., Maritime Law, 6th edition (Informa
Publishing, London 2004, pp.75 and ff)
274
SOGA 1979 s. 14(1).
1-136
11.
SHIP REPAIR CONTRACTS
1-578
Ships may seek shipyard services from a routine annual check-up to a major
conversion or renovation.The technologies of the vessel may require maintenance,
repair or reconfiguration. The contract and supporting documents, i.e.
specifications and plans are drafted and formatted according to the specific
tasks required. Standard form contracts (e.g. REPAIRCON, MINREPCON)
produce a basis for the parties agreement but there is room for amendments
and additions which reflect the result of negotiations between the parties.
Contract disputes, however, may potentially arise due to the different perspectives
between the owner and the shipyard. The shipowner will always seek to maximise
profitability by minimising the expenses and time spent and have the best
solution for its money whereas the shipyard will have an interest for the leastcost solution which satisfies the requirements of the contract, is fulfilled within
the project time schedule and survive the contract warranty period. A possible
dispute resolution process may cost far more than what the original issue was
worth. Therefore prevention by identifying and avoiding the sources of contract
disputes would be cost and time effective.
1-579
Many ship repair disputes emerge from the contract document package which
is usually prepared by the owner to describe the work he proposes to perform
upon the vessel and include a pro-forma contract, contract specifications,
contract drawings of new or modified systems and drawings of the as-built of
the vessel. The interested shipyards prepare their bid to perform the work based
on the information included in the package.
11.1
POSSIBLE SOURCES OF DISPUTE
1-580
Disputes may arise in connection with the contract documents for the following
main reasons:
(a)
Conflicting requirements in relation to a specific item of work. For instance,

a clause in the contract may provide that all material removed from the
vessel become the property of the contractor and may be disposed at his
expense. In the contract specifications of the same package it may be
provided that a new item is to be installed and the existing one is to be
saved for later re-use by the owner. Therefore, two different documents of
the same package may place ownership in both parties. A dispute may
arise in which the shipyard will claim that the bid price was based on the
anticipated profit of the scrap sale of the existing old item demanding that
the owner should make a reimbursement to the contractor for the loss of
this anticipated profit if he wishes to retain the old unit. Such a discrepancy
may arise when two different people, for instance the owners lawyer and
naval architect, have prepared two different documents of the package.
(b)
The contract documents do not describe accurately the full scope of work
expected by the owner in relation to a particular item.
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(c)
The contract documents do not describe accurately the level of quality

anticipated by the owner in relation to a particular item. For instance, the
contract specification may require the installation of positive means in
order to prevent moisture from entering electrical cable insulation. The
interpretation of the owner of positive means may be that the contractor
will install a heat-shrink tubing or boots around the termination fittings
whereas the contractor may interpret it as a need to place enough layers
of good electrical tape.
(d)
The contract specification describes the work that needs to be done on a

vessel system but the contract drawing does not illustrate it and therefore
the calculations of the shipyard may have been made without the contractor
having made an in-depth review of the contract specifications in order to
identify the conflict between the contract documents.
(e)
The contract documents do not reflect accurately the present condition of

the vessel and this description has been taken into consideration by the
ship repairer when he prepared the bid. For example, a contract
specification may require for a new 120-volt lighting circuit to be installed.
The as-built drawings show that a nearby existing 120-volt lighting
distribution panel contains two spare circuit breaker slots and any of the
two would be suitable to carry the required new circuit. The as-built
drawings did not include an update of modifications that have occurred in
the service life of the vessel and the contractor may discover that the
spare breaker slots have been utilised and he therefore needs to install
a new distribution system from the machinery room main switchboard.
1-581
Other sources of dispute may arise when the contract does not contain clauses
in regards to payment,275 procedures and costs if any change in the order of
work is needed. The increase in costs may result from a higher labour rate
compared with their contract price divided by estimated production hours,
increase of costs on all materials purchased or subcontract labour provided or
costs may increase as a result of delay and/or disruption. These unexpected
costs may be challenged or disputed by the owner.
1-582
A contractor may face liability if he cannot meet the contractually agreed delivery
date. The timely delivery of the project is the shipyards responsibility and also
the manner on how the project will be carried out. This danger may be removed
or minimised by providing a realistic and effective project scheduling. Scheduling
may perform two roles, to maximise the time control over the project and also to
be used as a project-history document in evidence explaining causes of delay,
what was done and when it was done.
1-583
A dispute may also arise in regards to a claim of damage caused to the vessel
while it was in the contractors custody. A contractor may discover that upon
redelivery of the vessel to the owner the electrical system does not function
although it was not disturbed during the project. In such a case the shipowner
will respond that the electric system will seek to support in perfect operation
275
See Roberts v Havelock (1832) 3 B & Ad 404 where a contractor agreed to repair a ship. The contract did not include
any provisions in regards to the time when payment was to be made. He decided not to continue with the work. The
court held that the contractor was not bound to complete the repairs before claiming some payment.
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before the project commenced and that the damage is caused by the performance
of the contract work.
11.2
HOW TO AVOID A CONTRACT DISPUTE
1-584
The contract is the core document of a ship repair project. It is therefore of

utmost importance to ensure that its language is precise and the parties involved
have full knowledge and understanding of the requirements provided in it before
the contract is signed.
1-585
The contractor may need to take into consideration the open and inspect items
contained in the contract the nature of which may make it impossible for him to
estimate precisely the full extent and cost of the work which will be required to
complete the item when the bid is prepared. It is therefore crucial for the parties
to agree the mechanism for pricing any additional work, estimating any additional
time for the completion of the work, the hourly labour rates for any change work,
and the increase in cost of materials. The possibility of any disruptions,
accelerations and delays should also be provided and clear cost data for the
extended use of the shipyards facilities should be included in the contract.
Contractual provisions should also include additional costs or schedule time
extensions due to a late delivery of owner-supplied equipment.
1-586
The entire contract document package should be thoroughly considered before

any bids are made especially since in case of a dispute the emphasis will be
given to documentation.
1-587
A survey immediately upon arrival of the vessel in the shipyard with the use of a
video camera, a walk-through of the vessel by the owners representative and
the shipyards project manager, the operation of any piece of the vessels
equipment to discover any inherent defects may prevent disputes in relation to
the condition and function of all parts and systems of the vessel before the
shipyard assumes its custody.
1-588
Effective record keeping of the daily observations as well as weekly activities

with regard to dates and times where specific activities are commenced or
completed or any problems which may develop and a weekly report prepared
after a meeting of the owners representative and the shipyard project manager
should be in writing and signed by both representatives. Judges and arbitrators
will consider any contemporaneous documentation as more credible than
documentation prepared later by experts and lawyers.
1-589
The prevention of any dispute or includes lower costs and less time spent than
a dispute resolution either through the avenue of arbitration or even more
litigation.
Avoiding Contract Disputes and Litigation: Lessons Learned from Ship Repair
Contracts, by Richard Dinapoli and Albert H. Bowers
available
on:
http://www.fishermaritime.com/publications/pdf/
avoidingcontractdisputes.pdf
1-139
12.
HULL DISPUTES
1-590
This chapter aims to explain in a concise way the types of marine hull insurance
claims which may arise under standard insurance conditions and the steps a
shipowner can take in response to the casualties from which these claims
arise.
1-591
The claims usually covered by standard hull and machinery policies are:
Actual total loss. This occurs when the vessel is actually destroyed or the owner
is irrecoverably deprived of her (Marine Insurance Act 1906, section 57).
Constructive total loss. This occurs when it is unlikely that the vessel will be
recovered or the recovery/repair cost exceeds her value when repaired (Marine
Insurance Act 1906, section 60). Where a vessel appears to the owners to be a
constructive total loss, under English law, if the owners wish to claim for this loss
they must give a notice of abandonment of the vessel to the insurers as soon as
reasonably possible after the casualty (Marine Insurance Act 1906, section 62).
Particular average damage to the vessel. This means a partial loss caused by a
peril insured against and it is not general average loss (Marine Insurance Act
1906, section 64). (For the perils covered see the Institute Time ClausesHulls
1.10.83, American Institute Hull Clauses2.6.77 and Institute Time Clauses
Hulls1.11.95). Shipowners may extend the coverage provided by these clauses
for an additional premium and add clauses as, for instance, the Institute
Additional Perils Clauses Hulls1.10.83.
1-592
The above clauses include cover for loss or damage caused by any accident and
under any circumstances. It suffices that the assured proves that the loss or
damage was caused by an accident during the currency of the insurance policy
provided that the accident was not the result of the want of due diligence by the
assured, owners or managers (see clause 62 of the Institute Time Clauses
Hulls1.10.83 and the Additional Perils Clauses 1.10.83) or, as the Institute
Time ClausesHulls1.11.95 added, superintendents or any other onshore
management.
1-593
Damages the owner is liable to pay to other vessels or their cargoes due to a
collision and legal costs incurred with their consent. Certain policies (e.g. the
American Institute Hull ClausesHulls2.6.77) contain provisions that such
damages will be paid in full whereas others (e.g. the Institute Time Clauses
Hulls1.10.83 and 1.11.95) that three quarters of these items will be paid.
1-594
Vessels proportion of general average or salvage. In a general average loss the

parties to the adventure (ship, cargo, freight at risk etc) each contribute to the
loss in proportion to their value when the adventure ends.
1-595
Suing and labouring charges. The assured is under the obligation to avert or
minimise the loss for which a claim would be payable under the insurance. The
costs for undertaking these steps are usually covered by the insurers but the
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Hull Disputes
assured may have to examine the excess liability policies for any amount which
may not be covered by his hull and machinery policies by reason of underinsurance.
1-596
Except from the claims aforementioned covered by a typical hull and machinery
policy there are also other risks which are not usually covered. Examples of
these are: the increased value, disbursements and excess liabilities (these
policies are designed to provide an additional coverage to the value insured in
the hull and machinery policy in the case of total loss), protection and indemnity
risks (e.g. for pollution, loss of life or injury, liabilities to harbour authorities,
medical expenses of crew, repatriation expenses), loss of hire (under these
policies the assured is indemnified for any loss of hire/profits if the vessel is not
in the position to trade due to the damages resulting from an insured peril; the
indemnity is calculated at a fixed daily rate subject to a deductible period which
is usually between 1014 days), loss of freight (same as for loss of hire applies
to loss of freight and the shipowner may use a set of clauses available for this
such as the Institute Time ClausesFreight1.10.83), war risks (these risks are
excluded from policies subject to standard clauses such as the Institute Time
ClausesHulls1.10.83 or 1.11.95 and also many P&I associations the
Institute War and Strikes Clauses1.10.83 and 1.11.95 are available for this
purpose and also P&I Clubs which specialise in this area of business).
1-597
As a general rule in case of a hull and machinery dispute the burden of proof
lies with the party which makes the claims or asserts to prove that his allegation
is correct. Once the assured has produced a prima facie case that the loss or
damage was caused by a peril included in the policy the burden of proof shifts
to the insurers to produce a counter argument that the loss or damage was not
caused by a peril insured against.
1-598
Most of the aforementioned claims arise from loss or damages caused by

accidents whereas general average losses are always the result of a voluntary
act. As general average has been discussed in a previous chapter we will now
examine practical aspects of particular average.
12.1
PARTICULAR AVERAGE: THE COST OF REPAIRS
1-599
The object of the marine hull insurance contract is to indemnify or reimburse

the assured for what he lost in connection with the insured subject-matter. In
English law section 1 of the Marine Insurance Act 1906 provides that:
A contract of marine insurance is a contract whereby the insurer undertakes
to indemnify the assured, in manner and to the extent thereby agreed, against
marine losses, that is to say, the losses incident to marine adventure.
1-600
In regards to the measure of indemnity in cases involving partial loss of ship

section 69 of the same Act provides that:
Where a ship is damaged, but is not totally lost, the measure of indemnity,
subject to any express provision in the policy, is as follows:
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(1) Where the ship has been repaired, the assured is entitled to the
reasonable cost of repairs, less the customary deductions, but not
exceeding the sum insured in respect of any one casualty
(2) Where the ship has been partially repaired, the assured is entitled to
the reasonable cost of such repairs, computed as above, and also to be
indemnified for the reasonable depreciation, if any, arising from the
unrepaired damage, provided that the aggregate amount shall not exceed
the cost of repairing the whole damage, computed as above
(3) Where the ship has not been repaired, and has not been sold in her
damaged state during the risk, the assured is entitled to be indemnified for the
reasonable deprecation arising from the unrepaired damage, but not exceeding
the reasonable cost of repairing such damage, computed as above.
1-601
It is therefore difficult to find the measure of indemnity in respect of the

reasonable cost of repairs as the definition of reasonable may vary from case
to case and time to time.
1-602
When quantifying a claim one should bear in mind that in a policy covering hull
and machinery the subject-matter insured is the ship as a physical entity and
therefore the measure of indemnity is confined to the reasonable costs of repairs
for the ship and it does not extend to other financial consequences of the
casualty. The reasonable costs of repairs may include: removal expenses,
drydocking, repair accounts, purchase of spare parts required for repairs, port
charges, bunkers, underwriters surveyors fee and expenditure etc.
1-603
We will now briefly look into the various aspects of assessing the reasonable
cost of repairs.
1-604
Drydock expenses. Drydock expenses are divided according to the provisions of

Rule of Practice D5 of the Association of Average Adjusters and the principles of
common law. The costs of docking and undocking in order to repair a damage of
the vessel together with the dock dues for the relevant period form a claim against
the insurers for payment in full. Any costs of repairs which are related to routine
drydocking or are immediately necessary for the seaworthiness of the vessel which
take place concurrently but are not related to the damage caused and dock dues
for the relevant period are halved. In all other cases the shipowner can carry out his
own repairs in drydock (even if the repairs are necessary to satisfy the classification
societys requirements) and the insurers will pay for the drydock expenses.
1-605
A division is made according to the following example:

Particular Average damage requiring eight days in drydock
Owners work requiring 2 days
Docking/undocking
Dock dues:
8 days@1,000
2 days@1,000
10 days
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P.A.
3,000
Owners
3,000
8,000
2,000
5,000
5,000
2,000
16,000
8,000
10,000
6,000
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1-606
Removal expenses. Removal expenses are calculated according to Rule of

Practice D1 of the Association of Average Adjusters. Where a vessel is removed
from one port to another because either repairs cannot be conducted in the first
port or they are economically not viable, the additional costs reasonably
occurring in moving the vessel to the port of repair are allowed as part of the
costs of repair. The costs of the return journey are also included. If a vessel loads
new cargo either at the port of repair or proceeds to another port to load, the
additional costs allowed will only cover the journey between the port where she
was removed from the port of repairs. The costs also include any necessary
temporary repairs, wages and provisions to the crew, pilotage, towage, port
charges, bunker and stores. The net amount earned for freight or hire on the
removal passage are deductible from the removal expenses.
1-607
In case a casualty occurs during the removal passage to the port of repairs and
these repairs are conducted in that port the removal expenses due to the
casualty will not be apportioned.
1-608
The treatment of the wages and maintenance of the crew depends on the provisions
of the policy. The Institute Time ClausesHulls1.10.83 for instance provide:
Wages and Maintenance
No claim shall be allowed, other than in general average, for wages and
maintenance of Master, Officers and Crew, or any member thereof, except
when incurred solely for the necessary removal of the Vessel from one port
to another for the repair of damage covered by the Underwriters, or for trial
trips for such repairs, and then only for such wages and maintenance as
are incurred whilst the Vessel is under way.
1-609
Similar provisions are contained in the Institute Time ClausesHulls1.11.95

and the American Institute Hull Clauses2.6.77.
1-610
If the insurers wish to exercise their right to decide the port where repairs will be
carried out they agree to respond to the actual additional expenses of the
voyage under clause 10 of the Institute Time ClausesHulls1.10.83 or clause
13 under the 1.11.95 Clauses.
1-611
Temporary repairs. Temporary repairs are not allowed in particular average

unless they have resulted in a saving to underwriters. Thus due to the temporary
repairs the assured may vary the permanent repairs until a routine drydocking
and repair period when drydock dues and other expenditure will be apportioned
between the insurers and the owners as opposed to being allowed in full when
incurred at a special repair period. The following example will elaborate this:
Cost of temporary repairs at Singapore, July 2010
Cost of permanent repairs at Singapore,
January 2011 during scheduled drydocking
Cost of drydock dues, etc (divided)
US$ 50,000
US$ 300,000
US$ 50,000
Cost of permanent repairs if effected at Singapore, July 2010

Cost of drydock dues, etc (in full)
350,000
US$400,000
US$250,000
100,000
US$350,000
1-143
Hull Disputes
Module 1
1-612
The cost of temporary repairs effected at Singapore in July 2010 (i.e. US$50,000)
would be allowed as particular average, because of the overall amount saved in
repair costs.
1-613
The effecting of temporary repairs may also result in a saving to underwriters

when they enable permanent repairs to be effected at a cheaper repair port.
1-614
The cost of temporary repairs may exceptionally be allowed without considering

saving in the cases of passenger liners running on an advertised route or cargo
vessels running on advertised sailing dates or where an unreasonable delay in
minor temporary repairs would make the vessel cease trading with the
consequence of substantial reduction on the vessels earnings.
1-615
Generator hire. The generator hire may be allowed as a reasonable cost for
repairs under the following circumstances:
(a)
To effect damage repairs by, for instance, providing power to tools or

lighting needed for repairs.
(b)
To remove the vessel to another port where repairs can be effected when
the port where the vessel is situated cannot effect damage repairs.
(c)
Where by hiring a generator savings in repair costs can be demonstrated.

For instance, a vessel is disabled because of a generators breakdown due
to an insured peril and she is at an expensive port. The costs may be lower
if a generator is hired and repairs are deferred until she arrives at a
cheaper port.
1-616
Claims for generator hire include: (a) installation and removal, (b) hire, and (c)
additional cost of operating the generator.
1-617
Excess cost of overtime. Generally the insurers cannot be made liable for the
excess cost of working overtime to conduct the repairs where such costs are
incurred for the owners convenience to enable the vessel to continue her trading
operations, unless some benefit accrues to the insurers. An example of such
benefits may be that the overtime work results in a saving in the total number of
days required on repairs and consequently in a saving of drydock dues,
superintendents fees and other expenses charged on a daily basis. For example:
Cost of repairs (standard time)
Excess cost of overtime
Drydock dues, superintendents fees,
other expenses charged on a daily basis
10 days@ US$ 3,000
US$ 150,000
10,000
30,000
US$ 185,000
1-618
Overtime work saves five days of repair at US$3,000 = US$15,000, in which

case excess cost of overtime will be allowed as the benefit for the insurers will
be US$5,000.
1-619
The general rule is exempted in liners and when overtime is unavoidable for
technical reasons in which case the excess cost of overtime is allowed as part
of the reasonable cost of repairs regardless of savings.
1-144
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Hull Disputes
1-620
Increased cost through deferment of repairs. The reasonable cost of repairs is

determined in accordance with effecting repairs at the first reasonable
opportunity. An owner may elect to defer repairs until a time convenient to him
as the vessel may have trading commitments although in the meantime repairs
could have been conducted and as a result during this time there has been an
increase in the cost of repairs due to inflation or otherwise, insurers are not liable
for an increase in the claim due to decisions made by the owner due to his
trading commitments.
1-621
Where deferment of repairs reduces or does not increase the cost of repairs the
full claim against the insurers will be allowed. In non-urgent cases the next
routine drydocking and repair period is considered as the first reasonable
opportunity to effect repairs.
1-622
Air freight. Nowadays air freight has become a recognised form of transportation
of spare parts required for repairs and a reasonable cost of repairs. These costs
are now allowed in full regardless of what the cost would be if these parts were
transported by sea. This, however, should also be examined in the light of
circumstances as, for instance, if a very heavy spare part for which repairs are
required in several months is transported by air to a specific port the costs of air
freight may not be included in the reasonable cost of repairs.
1-623
Improvements and modifications. If, during the damage repairs an owner decides
to conduct improvements with the purpose either to prevent a reoccurrence of
the damage or to improve the efficiency or earning capacity of the ship he must
bear the additional costs of this work. This general rule is bent in case a modern
replacement with improved features is inevitable because the original part is no
longer available. The new for old costs are not subject to deductions and the
assured may gain some advantage from the casualty with the replacement of a
used part with a new one.
1-624
Riding repair teams. Where owners select to send a travelling repair team
following a casualty to the vessel to conduct repairs on board whilst the vessel
continues to operate the claim on the policy will depend on whether this course
of action was adopted because (a) the nature of the damage was serious as to
require the immediate intervention of a repair team on board, or (b) the owner
wished to continue operating the vessel and therefore the priority was to avoid
suffering a delay for repairs in port.
1-625
In the first instance the costs of the repair team may be considered part of the
reasonable cost of repairs whereas in the second costs would be allowed to the
extent that the cost for the intervention by the riding repair team is compensated
by savings to insurers.
1-626
Unrepaired damage. Where the vessel has suffered damage due to a peril
insured against, but the damage is left unrepaired, the claim on the policy is
calculated on the basis of the lower of the two following amounts:
(a)
The estimated cost of repairs for the damage.
(b)
The reasonable depreciation resulting from the unrepaired damage.
1-145
Hull Disputes
1-627
Module 1
Clause 18.1 of the Institute Time ClausesHulls1.10.83 (The Institute Time

ClausesHulls1.11.95 and the American Institute Hull Clauses2.6.77 contain
similar provisions) provides that:
The measure of indemnity in respect of claims for unrepaired damage
shall be reasonable depreciation in the market value of the Vessel at the
time this insurance terminates arising from such unrepaired damage, but
not exceeding the reasonable cost of repairs.
1-628
The reasonable depreciation should be calculated at the time the insurance

terminates, i.e. either by expiry of time, sale of vessel or otherwise according to
the provisions of the above clause. This provision reflects the spirit of common
law and section 77(2) of the Marine Insurance Act 1906 which states that:
Where, under the same policy, a partial loss, which has not been repaired
or otherwise made good, is followed by a total loss, the assured can only in
respect of the total loss:
Provided that nothing in this section shall affect the liability of the insurer
under the suing and laboring clause.
1-629
In case the vessel becomes a total loss until the insurance terminates the
damage sustained on the earlier occasion of partial loss is deemed to be
overridden and merged into the subsequent total loss since the owner cannot
pursue a claim until the termination of the insurance. The underwriters are liable
in respect of unrepaired damage up to the insured value of the vessel at the time
the insurance terminated (International Hull Clauses 1.11.03 and Institute Time
ClausesHulls 1.11.95).
1-630
The insurance department will have to consider compliance with warranties,

maintenance of classification requirements, potential exposure to risk in order to
have the broad picture in mind when analysing the insurance requirements and
determining whether an early offer to settle may reduce the costs and maintain
a long-term relationship.
1-631
The maintenance of accurate information in regards to the claim is of utmost

importance. Information collection commences with log books, reports on particular
events or even the retention of damaged parts onboard the vessel for examination.
The liaison with superintendents is also very important in the assembly of documents
and information related to the cause of damage and subsequent costs. The
superintendents also code the repair invoices into categories and communicate with
the insurers surveyors in regards to agreeing the cause of damage and cost of
repair. The insurers surveyors are usually informed about the local repair practices
and prices and can assist the superintendent. The accounts department is an
important source of information especially in connection with disbursements outside
the scope of work of the superintendent. The operations department should keep
the insurance department updated for the movements of the vessel so that breaches
of warranty can be dealt with. The insurance and claims department of many
companies maintain a damage ledger in order to show costs occurred in connection
with a particular casualty, the anticipated recovery from insurance and/or third
parties and any possible shortfall that the company will have to bear.
Guide to Hull Claims,
guidetohullclaims.07.03.pdf
1-146
available
on:
http://www.rhlg.com/pdfs/
13.
MASTER AND CREW EMPLOYMENT

TRAINING SAFETY
1-632
The International Convention on Standards of Training, Certification and WatchKeeping (STCW 95) as amended by the STCW 2010 (the Manila Amendments)
aims to ensure that seafarers are trained and their certificates are issued
according to consistent standards worldwide. Before 1978 when the first STCW
Convention was drafted most of the recognised maritime administrations had
their own procedures to satisfy these requirements but since non-traditional flag
states emerged where such procedures were not in place the need arose for the
introduction by the IMO of the International Convention on Standards of Training,
Certification and Watch-Keeping (STCW) 1978, which came into force in 1984.
1-633
The original Convention was amended in 1995 as it became clear that further
strengthening of the provisions was necessary to meet the requirements of the
changing maritime world. Observation and analysis of the maritime accidents
led to the conclusion that human error was a significant factor in most of the
casualties and therefore awareness and training should be increased by
imposing more accurate and stringent regulations. The revised Convention was
published in 1995 (STCW 95) and came into force in February 2002.
1-634
The ISM Code and the STCW Convention relate to the human element and
complement each other. The ISM states: The company must ensure that each
ship is manned with qualified, certificated and medically fir seafarers in
accordance with national and international requirements.276 The STCW
Convention defines these international requirements and somehow amplifies
the ISM Code. Non-compliance with the requirements of the STCW Convention
amounts to breach of the ISM Code and if the failure is of serious nature it may
be construed as a major ISM non-conformity.
1-635
The STCW Convention is divided into two parts: one relevant to flag
administrations and the other to the shipping companies and operators. Directive
2008/106/EC277 requires for the EU member states that the minimum training
seafarers should have is in compliance with the requirements of the STCW
Convention.
1-636
Flag administrations. Flag administrations are responsible under the provisions

of the STCW 95 Convention to establish training centres, uniform standards of
training and competency and measures to ensure uniform worldwide
implementation.278 Flag states must provide the relevant legislation,
documentation procedures, compliance administration and record keeping. Flag
states may issue their own certificates of competency to seafarers of their own
276
ISM Code para. 6.2.
277
Directive 2008/106/EC of the European Parliament and of the Council of 19 November 2008 on the minimum level of
training seafarers, Art. 3.1.
278
STCW 95 Convention reg. I/6.
1-147
Master and Crew Employment Training Safety
Module 1
nationality or for foreign seafarers they may either issue their own certificates or
endorse certificates of other states.279
1-637
Countries who wished to be included in the White List280 as properly

implementing the provisions of the STCW 95 were required to have submitted
to the IMO all documentary evidence of compliance with the standards of the
Convention by August 1998.
1-638
Since 2002 when the Convention came into force, a quality standards system is
in place in order that the governments or non-governmental agencies can
demonstrate that training, assessments of competence, certification and
endorsement are conducted in compliance with these standards.281 Similar
requirements applies to states who do not issue certificates but endorse and
recognise the certificates issued by other states.282
1-639
Port state inspectors are authorised to verify the qualifications and competence
of seafarers especially if an accident occurs.283
1-640
Obligations of the shipowners.

(a)
Certification. The seafarers employed on board must have valid certificates

of competency for the position they hold.284 The same applies to ratings
when watch-keeping.285 Officers certificates must be revalidated every
five years.286 They must also go through medical examinations recognised
by the authority issuing the certificate every five years.287 Endorsement of
these certificates which certifies compliance with these standards is in
English.288 Employment of officers and ratings in certain types of ships
such as tankers would require special endorsements.289 The original
copies and not photocopies of the certificates must be available on board
for inspection and it must be ensured that they are valid.290
(b)
Seafarers on board must be able to communicate in a common language,

especially in the event of an emergency.291
(c)
All watchkeeping personnel must have the minimum of rest hours.292
279
STCW 95 reg.I/10.
280
An updated list can be found on http://www.imo.org.
281
STCW 95 Convention Ch.I reg.I/8.
282
283
284
STCW 95 Convention Ch.I reg.II/1; II/2; II/3.
285
STCW 95 Convention Ch.I reg.II/4.
286
287
288
289
STCW 95 Convention Ch.I reg.II/1; II/2; II/3.
290
STCW 95 Convention Ch.I reg.I/2; I/9.
291
292
STCW 95 Code Ch. VIII, reg.VIII/2.
1-148
Module 1
1-641
(d)
Personnel employed to conduct safety and pollution prevention duties

must receive training and be competent in personal survival techniques
such as fire prevention and fire-fighting, first aid, and emergency
procedures etc.293 Records of training certificates must be maintained.
(e)
The company must provide the master with written instructions in regards
to equipment and operating techniques for newly employed personnel294
and a member of crew must be appointed to deliver this information in the
language the new seafarers understand.295 A full record of this must be
maintained and be available.296
(f)
The shipowner or operator must keep records of the seafarers experience,

training received prior to and during employment, medical fitness and
competence.297 The records must be maintained and be ready for
inspection at all times (ISM Code and STCW Convention).
(g)
In the case the where shipowner delegates his above responsibilities to a

third party their contractual agreement must clearly provide who has
responsibility for compliance with the STCW Convention.298
Breach of SCTW Convention by the shipowner may be construed as a nonconformity with the ISM Code as a result of which the ship will be rendered
unseaworthy with all the relevant consequences in regards to cargo claims,
prejudice of insurance and limitation of liability.
Maritime Law. Second edition, by Yvonne Baatz (ed.), Fillipo Lorenzon Safety
and Compliance, 2011, Sweet and Maxwell, London, pp. 401-410
1-642
The STCW amendments of 2010 (the Manila Amendments) will start to apply
from 1 January 2012, when they enter into force, and between the present time
and January 2017 new requirements will be introduced by the maritime
administration according to a transitional timetable.
1-643
In a nutshell the key new training requirements are:

(a)
changes in the Competence Tables according to which the deck officers

must be competent in the use of ECDIS and engineer officers must be
able to handle pollution prevention equipment;
(b)
new requirements of competence related to leadership, teamwork and

managerial skills have been added for deck and engine officers. Seafarers
of even lower grades must receive assertiveness training for communication
of safety matters with senior officers, master and/or shore personnel;
293
STCW 95 Convention Ch.VI reg.VI/1.
294
STCW 95 Code Ch.I, s.A-I/1.
295
STCW 95 Code Ch.I, s.A-I/14.
296
297
298
1-149
Module 1
(c)
deck and engine rating trainees must be competent in the use of on board
training record books the completion of which will be supervised by the
responsible officers;
(d)
all grades of shipboard personnel will receive further training on security;
(e)
training and seafarers standards of competence in regards to basic safety

will be refreshed throughout their careers on-board and at shore-based
institutions;
(f)
new Competence Tables for training in oil, chemical and gas tanker
operations are contained in the STCW;
(g)
new seafarer grades and certification is introduced by the STCW 2010;
(h)
medical fitness standards and new requirements have been added for the
certification;
(i)
minimum amount of rest hours have been increased to 77 hours from the
previously 70 hours per seven-day period and a minimum of 10 hours rest
in a 24-hour period except in an emergency. Records must be maintained
for each individual seafarers rest hours which the seafarers will need to
sign periodically and which may inspected by port state control. The rest
hours now include masters.
1-644
Seafarers whose certificates were issued before 1 January 2012 will have to
meet the new requirements and the refresher training in for order their certificates
to be validated after 1 January 2017. From 1 January 2014 all seafarers must be
trained and certified in security matters in compliance with the 2010 provisions.
After 2017 all medical certificates must be issued in compliance with the 2010
standards but the administration may require this even before 2017.
1-645
On a second note the International Labour Organisation (ILO) has prepared and
drafted over a period of more than five years the Maritime Labour Convention
(MLC) 2006 which is not yet in force. The minimum ratification of 30 states which
together represent at least 33% of the worlds merchant shipping tonnage is
required before the convention can enter into force. The EU encourages its
member states to ratify the Convention and the 2009/13 European Directive
forces member states to adopt national legislation which reproduces the MLC
regardless of its ratification. The Directive enters into force on the date MLC
enters into force and national legislation should be enforced 12 months later.
ISF International Shipping Federation, Manila Amendments to the STCW
Convention. A Quick Guide to Seafarers, 2011 available on http://www.marisec.
org/quickguide/html/pdf
1-646
The structure of the Convention includes Articles, Regulations and the so-called
Code which mainly contain provisions on minimum requirements for seafarers
employed on board, employment conditions, accommodation, recreation,
catering, health protection, medical care and social security protection and
compliance and enforcement.
Maritime Law. Second edition, by Yvonne Baatz (ed.), Fillipo Lorenzon Safety
and Compliance, 2011, Sweet and Maxwell, London, pp. 401-410
1-150
14.
LITIGATION VERSUS ARBITRATION
1-647
It is unavoidable that in the course of shipping business many contractual or

non-contractual relationships will become a source of dispute. A case may
contain issues falling into different categories of a dispute, e.g. contract and/or
tort. It is therefore important before starting to work on a case to identify the
issues raised and then classify and analyse them in the context of the dispute
as a whole. The parties will ultimately need to decide on the avenue through
which they will resolve their dispute. One option is to issue proceedings before
the courts the mechanism provided by the state- to settle the issue or they
may seek to find a solution through arbitration or conciliation. The consideration
of the advantages and disadvantages of the different methods, the length and
quality of their business relationship, and the legal, economic and commercial
backgrounds of the parties will determine the method most suitable for their
dispute. Litigation operates on the basis of well-settled legal rules and
principles, procedural rules, and a wide range of precedents. At the same time
acrimony created during the course of litigation, the publicity of the procedure
and the lengthy and costly procedures may not be what is desired by the
parties when they intend to maintain a long-term commercial relationship and
resolve their dispute in a swifter and cost effective manner. In an international
commercial context, however, the uncertainties about the applicable procedural
rules and substantive laws of different states may make litigation a less
attractive option.
1-648
The aim to unify the law relating to international matters has been partially
achieved by the enforcement of international conventions drafted by international
organisations but the result is piecemeal since not all states have adopted the
international conventions or promote the use of standardised rules. Clauses
inserted in the contracts which provide for jurisdiction and choice of law may
protect the parties from nasty surprises but even such clauses are not always
effective in meeting the parties wishes as it is possible that the forum consider
that it is not the appropriate forum, or it may not apply the law chosen by the
parties on grounds of public policy.
1-649
In this climate of uncertainty, other forms of dispute resolution, such as

arbitration, which allows a greater degree of control to the parties and also the
application of law merchant (lex mercatoria) or equitable principles (ex aequo
et bono) for deciding the issue may be attractive. The decision has a more
pragmatic approach in this way and the privacy and confidentiality of the
procedure may offer protection of the business relationship between the
parties.
1-650
Since the Second World War, arbitration has proved a very popular method of
resolving disputes. It could be argued that arbitration is the first step towards
privatisation of justice as it is an alternative to resolution by national courts.
The parties have control over the appointment of arbitrators, the language of
the arbitration and the place of arbitration. Arbitration is the product of consent
between the parties as opposed to litigation. The parties may agree the
alternative dispute resolution either before or after the dispute arises. The
1-151
Litigation versus Arbitration
Module 1
circumstances of the case will therefore determine which method best serves
their needs.
1-651
The matters of litigation and alternative dispute resolution will be discussed

more analytically in the following modules.
Enforcement of Maritime Claims, Third edition, by D.C. Jackson, LLP
Professional Publishing, 2000, London-Hong Kong
Taylor and Francis Group, 2010, London and New York, p.515-516, 623
1-152
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Schofield J.: Laytime and Demurrage. (4th edn, LLP, London Hong Kong,
2000), pp. 6777, 317351.
Sir Eder B., Bennett H., Berry S., Foxton D. and Smith C.F.: Scrutton on
Charterparties and Bills of Lading (22nd edn, Sweet and Maxwell, London,
2011), pp. 146301.
Baatz Y. (ed.: Maritime Law (2nd edn, Sweet and Maxwell, London, 2011), pp.
231239.
http://www.imo.org/About/Conventions/ListofConventions/Pages/AthensConvention-relating-to-the-carriage-of-Passengers-and-their-Luggage-by-Sea(PAL).aspx.
Bunker Disputes
Bracken R., Fisher Ch., Salthouse M. and North of England P&I Association,
Claims Prevention. A Guide to Good Practice. (3rd edn, North of England P&I
1-155
Bibliography
Module 1
Association Limited, 2011), pp. 198. http://www.bimco.org/en/Products/media/

Products/Publications/Pamphlets/Bunkering_Guide/Bunkering_Pamphlets.ashx.
UK Defence Club, Bunkers: a guide to quality and quantity claims, available on
http://www.ukpandi.com/fileadmin/uploads/uk_pi/Latest_Publications/UK_
Defence/UKDC_BunkerDisputes_web.pdf.
Gaskell N.J.J., Debattista C. and Swatton R.J.: Chorley and Giles Shipping Law
(8th edn, 1995, Pitman Publishing, London, pp. 3757.
Lorenzon F. and Velasco A.: Shipbuilding, Sale, Finance and Registration, in
Baatz Yvonne (ed.): Maritime Law (2nd edn, Sweet and Maxwell, London, 2011),
pp. 6977.
Mandaraka-Sheppard A.: Modern Maritime Law and Risk Management. (2nd
edn, Informa, London, 2009), pp. 419465.
Recommended bibliography in this area: Clarke, M.: Shipbuilding Contract, (2nd
edn, LLP, 1992); Curtis S.: The Law of Shipbuilding Contracts, (3rd edn, Informa
Publishing, London, 2002); Hill C.: Maritime Law (6th edn,, Informa Publishing,
London, 2004).
Dinapoli R. and Bowers A.H.: Avoiding Contract Disputes and Litigation: Lessons
Learned from Ship Repair Contracts, available on: http://www.fishermaritime.
com/publications/pdf/avoidingcontractdisputes.pdf.
Hull Disputes
Guide to Hull Claims,
guidetohullclaims.07.03.pdf.
available
on:
http://www.rhlg.com/pdfs/
Master and CrewEmployment Training Safety

Lorenzon Fillipo: Safety and Compliance, in Baatz Y (ed.), Maritime Law (2nd
edn, Sweet and Maxwell, London, 2011), pp. 401410.
International Shipping Federation: Manila Amendments to the STCW
Convention. A Quick Guide to Seafarers, 2011 available on http://www.marisec.
org/quickguide/html/pdf.
Enforcement of Claims-Arbitration
Jackson D.C.: Enforcement of Maritime Claims (3rd edn, LLP Professional
Publishing, London Hong Kong, 2000).
Group, London and New York, 2010), pp. 515516, 623.
1-156
LIST OF APPENDIX SOURCES
1.
1974 International Convention for the Safety of Life at Sea; Source: http://
cil.nus.edu.sg/1974/1974-international-convention-for-the-safety-at-sea
2.
Sample copy NEWBUILDCON; Source: http://www.bimco.org
3.
Shiprepairs Standard Contract.REPAIRCON; Source:http://www.bimco.

org
4.
Standard Minor Repair Work Contract-MINREPCON; Source: http://www.

bimco.org
5.
SCOPIC 2007; Source: http://www.lloyds.com
6.
LOF2011; Source: http://www.lloyds.com
7.
Marine Pollution-List of Regulations; Source: http://www.nee.gr/

downloads/93UGS%20pollution%20prevention%20brochure.pdf
8.
MARPOL
9.
BIMCO Standard Bunker Contract; Source: http://www.bimco.org
10.
The 1992 Civil Liability Convention (CLC); Source: http://www.iopcfund.

org
11.
The 2001 Bunker Pollution Convention (BOPC); Source: http://www.

official-documents.gov.uk/document/cm66/6693/6693.pfd
12.
The 2010 Protocol to the HNS; Source: hhtp://www.hnsconvention.org/

Documents/2010%20%HNS%20Protocol.pdf
13.
Athens Convention Relating to the Carriage of Passengers and their

Luggage by Sea, 2002; Source: http://www.folk.uio.no/erikro/WWW/corrgr/
Consol.pdf
14.
Hague Rules; Source: hhtp://iew.unibe.ch/unibe/rechtswissenschaft/dwr/

iew/content/e3870/e3985/e6338/sea_1_HagueRules1924_ger.pdf
15.
Hague Visby Rules; Source: http://www.nvzb.de/html/2003/rules/1968%20

Hague-Visby%20Rules.pdf
16.
BIMCO UNIFORM Time-Charter (as revised 2001) BALTIME 1939;

Source: http://www.bimco.org
17.
Agency Code of Practice 2005; Source://www.lloyds.com
18.
ASG1-Collision undertaking; Source: http://www.admiraltysolicitorsgroup.

com/asg-documents.html
1-157
List of Appendix Sources
1-158
Module 1
19.
Salvage Guarantee Form ISU5 (SCOPIC Remuneration); Source: http://

www.marine-salvage.com/documents/418905_1.pdf
20.
BARGEHIRE 2008; Source: http://www.bimco.org
21.
CONGENBILL 2007; Source: http://www.bimco.org
22.
Dangerous Goods Container Trailer Packing Certificate; Source: http://

www.bimco.org
23.
Dangerous Goods Declaration; Source:http://www.bimco.org
24.
GENCON; Source:http://www.bimco.org
25.
NYPE 93; Source: http://www.bimco.org
26.
SCOPIC 2011; Source: http://www.lloyds.com
27.
BARECON 2001; Source: http://www.bimco.org
28.
SCOPIC 2011-Appendix A(SCOPIC); Source: http://www.lloyds.com
29.
SCOPIC 2011-AppendixB(SCOPIC); Source: http://www.lloyds.com
30.
SCOPIC Code of Practice ISU; Source: http://www.lloyds.com
31.
The 1989 Salvage Convention; Source: http://www.jus.uio.no/lm/imo.

salvage.convention.1989/portrait.pdf
32.
International Convention on Oil-Pollution Preparedness, Response &

Co-operation; Source: http://www.fco.gov.uk/resources/en/pdf/3706546/38
92733/4190568/5046946/24
33.
The Merchant Shipping (Salvage and Pollution) Act 1994; Source: http://
www.legislation.gov.uk/ukpga/1994/28/conventions/1995/21
34.
LOF 2000; Source: http://www.lloyds.com
35.
LOF 2011; Source: http://www.lloyds-agency.com
36.
International Convention on Salvage, 1989; Source: http://www.jus.uio.no/

lm/imo.salvage.convention.1989/portrait.pdf
37.
Lloyds Average Bond; Source: http://www.blueseasadjusters.com/docs/

Lloyds_average_bonds_ns.pdf
38.
Notes to ASG2; Source: http://www.admiraltysolicitorsgroup.com
39.
Colregs 1972 and the UK Merchant Shipping Regulations 1996; Source:

http://www.mcga.gov.uk
Module 1
List of Appendix Sources
40.
Convention on the International Regulations for Preventing Collisions at

Sea. Amendments 2003
41.
HNS Convention; Source: http://www.hnsconvention.org
42.
Report on Receipts of Contributing Cargo; Source: http://www.

hnsconvention.org
43.
The Lisbon Rules 1987; Source: http://comitemaritime.org
44.
York Antwerp Rules, 1994; http://www.jus.uio.no/lm/cmi.york.anwterp.

rules.1994/portrait.pdf
45.
York Antwerp Rules; Source: http://www.medav.co.uk/pdfiles/YAR2004.

pdf
46.

Matters of Collision 1952-Penal; Source: http://www.legislation.gov.hk/doc/
multi-909.pdf
47.

Matters of Collision; Source: http://www.ecolex.org
48.
Collision Statement of Case; Source: http://www.justice.gov.uk/courts/

procedure-rules/civil/forms
49.
CONLINEBILL 2000; Source: http://www.bimco.org
50.
Hamburg Rules; Source:http://www.uncitral.org/pdf/English/texts/transport/

hamburg/hamburg_rules_e.pdf
51.
SHELLTIME4; Source: http://shippingforum.files.wordpress.com/2012/08/

shelltime-4-asrevised-20031.pdf
52.
American Institute Hull Clauses; Source://www.aimu-org/aimuforms/7.pdf
53.
Institute Time Clauses-Hulls 1.11.95; Source: http://www.brokmar.com/

wp-content/uploads/timehull.pdf
54.
Institute War and Strike Clauses Hulls-Time 1.11.95; Source: http://www.

iuo.co.uk
55.
International Hull Clauses 2003
1-159
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The Collision Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Breach of the Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Practical Aspects of Dealing with a Collision Incident . . . . . . . . . . . . . . . . . 21

Collision Litigation in the Admiralty Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Who Has the Authority to Order a General Average Act? . . . . . . . . . . . . . . 25

Requirements to Be Entitled to Contribution in General Average . . . . . . . . 25

What Constitutes Sacrifice? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

What May Be Included in the Expenditure? . . . . . . . . . . . . . . . . . . . . . . . . 27

The Adjustment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

The General Average Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Certificate in Maritime Disputes & Arbitration 2013 / 2014 (FLP2323)

The Concept of Salvage Under Maritime Law . . . . . . . . . . . . . . . . . . . . . . . 31

Legal Framework of Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

The Salvage Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Application of the 1989 Convention . . . . . . . . . . . . . . . . . . . . . . . . . 36

Salvage under Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

The Essential Elements of Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Duties of the Salvor and the Salvee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Who Is Entitled to Claim? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Calculation of the Salvage Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Special Compensation p&i Club Clause (scopic) . . . . . . . . . . . . . . . . . . . . . 42

The 1992 Civil Liability Convention and 1992 Fund Convention . . . . . . . . . 48

Types of Vessel Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

When Liability Arises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

When the Shipowner Loses the Right to Limit Liability?. . . . . . . . . . 52

The Role of the 1992 IOPC Fund Convention . . . . . . . . . . . . . . . . . 52

5.1.10 Time Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

The HNS Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Scope of the Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Ships Subject to the 1996 HNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Certificate in Maritime Disputes & Arbitration 2013 / 2014 (FLP2323)

The 1996 HNS Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

5.2.10 Jurisdictional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

The International Convention for the Prevention of Pollution from Ships . . . 57

The International Convention on Civil Liability for

Ships Subject to 2001 BOPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Liability and Who Is Liable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

The Contract of Affreightment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Legal Framework Relating to Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . 65

Functions of the Bill of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Types of Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Shipped and Received Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Through Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Certificate in Maritime Disputes & Arbitration 2013 / 2014 (FLP2323)

Clean and Claused Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

6.4.10 Freight Forwarders Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Electronic Bills of Lading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Other Documents of Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Cargo Claims and Bills of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Implied Obligations in a Charterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Obligations of the Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Obligations of the Charterer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Not to Ship Dangerous Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Common Law Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Legal Highlights on Voyage Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . 95

Obligation to Provide Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Certificate in Maritime Disputes & Arbitration 2013 / 2014 (FLP2323)

7.12.1 Charterparty Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Despatch Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Legal Highlights on Time Charterparties . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Withdrawal for Non-payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Off Hire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110