No 10 | February 1999

Hull Eating Bugs
A leading scientific journal has warned of bacteria growing in bilge water that can eat through the steel hull of a ship in a matter of months. It appears that double hull oil tankers are particularly susceptible to this problem as some bacteria thrive in the warm conditions that may exist in the insulated space between the two hulls. However, all vessels are at risk as in
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Contents

Hull Eating Bugs Jordan: Customs Fines for Steel Cargoes Australia: Perils of the Sea Defence Philippines: Sugar Smuggling Algeria: New Maritime Code Brazil: Yellow Fever Hong Kong: Contacts Venezuela: River Navigation Permits England: Charterers’ Rights to Limit Under the Charterparty USA: Increased Criminal Charges for Individuals for Oil Spills

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general they are prevented from emptying their bilges within three miles of land as they contain oil and other pollutants and so crews tend to let bilge water accumulate thereby providing ideal conditions for ship-eating bacteria. Aerobic bacteria use up all the oxygen in the bilge water. This results in an ideal environment for anaerobic sulphate-reducing bacteria (SRBs) such as “desulfovibrio desulfuricans”. that attack metal. These bugs convert the sulphates in seawater into corrosive sulphides Left untreated the microbes form a sludge that can eat through 10 millimetres of steel plate in a year. Scientists Edward and Graham Hill of Echa Microbiology in Wales have now invented a simple test to detect and treat the sulphate reducing bacteria. A sample of bilge water is poured into a glass bottle containing a suitable medium for SRBs. Ferrous salts in the medium turn black overnight if there are large numbers of sulphide-producing SRBs in the sample. If found, the bugs could be killed with disinfectants such as bleach, but that means the water has to be detoxified afterwards. Instead, the Echa Microbiology team devised a way of knocking out the SRBs by

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Spain: Stowaways

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USA: Cargo Consignee Bound by Charterparty Arbitration Clause

Jordan Pandi Consultants Corporation. Our correspondents have therefore warned that all vessels calling at Aqaba Port should pay particular attention to the Customs Regulations so as to minimise the possibility of any claims which may arise. While crossing the Bass Strait the vessel encountered heavy weather and some of the containers were lost overboard. It has restated the approach adopted in Australian law that perils of the sea do not have to be unforeseeable or even unforeseen to constitute a defence under the Rules. the “Bunga Seroja” loaded ten containers in Sydney. Great China Metal Industries Co. less risk of environmental damage. Indeed. Australia: Perils of the Sea Defence Jordan: Customs Fines for Steel Cargoes We have recently been advised by our local correspondents in Jordan. This effectively unplugs the power source that drives the bacteria and they die off. made three important findings of fact. The judge at first instance. V. Our correspondents also By way of background. . having heard expert evidence. As this specifically targets the sulphate-reducing microbes there is In a recent case. If a cargo is discharged in loose condition. The consignees of the cargo in the containers brought a claim against the vessel’s owners in the Admiralty Division of the Supreme Court of New South Wales. The containers had all been shipper packed and were carried on a FCL basis and had been stowed within the container cells below deck. The carrier claimed that the weather conditions encountered by the vessel amounted to a “peril of the sea” entitling the carrier to a defence against the claim for cargo damage. The imposition of these fees has resulted in increased requests for security by the local Agents for any potential fees/fines they may face. Malaysian International Shipping Corp. The heavy weather encountered by the vessel was foreseeable in that the area is notorious for bad weather. the vessel had received forecasts of heavy weather while in Burnie. These were as follows:- reinforce the value of appointing a Surveyor to attend onloading and carry-out the required pre-loading steel survey. Although having a quick and effective method of treating these SRBs in bilges is important and the Echa Microbiology’s discovery will go some way to dealing with the problem the next step will be to find a way to stop aerobic bacteria colonising bilges in the first place. Bhd (the “Bunga Seroja”) the Australian High Court took the opportunity to consider in detail the perils of the sea defence in the Hague Rules. Ltd. The containers themselves had not shifted. Melbourne and Burnie. that there has been an escalation of customs fees and fines in respect of overlanding and shortlanding of steel cargoes. As a result of the seas and winds up to Force 10/11.2 interfering with their metabolism. there tends to be mixing between bars and various different sizes of steel which gives rise to overlanding/shortlanding claims. On discharge at Keelung the contents of four of the ten containers were found to be damaged. The treatment uses a chemical to block the flow of electrons in the anaerobic respiration of the SRBs. for carriage to Keelung. They further warned that all shipments of steel products should use steel strapping as they consider that this is the best method of securing such a cargo. the damage being caused when the steel coils had shifted within the containers during the heavy weather. the vessel also suffered minor structural damage.

The appellants had argued that the more stringent US and Canadian position should be adopted. for example. These findings of fact were challenged on appeal to the New South Wales Court of Appeal but unanimously upheld. which in turn has encouraged smuggling operations. This has resulted in the authorities seizing a vessel and its cargo where even the slightest error appears in the documents. However. Del Rosario & Del Rosario. In the event the vessel is seized. It is therefore imperative to comply with the taken . A belated compliance or amendment which would normally be permitted for an non-controversial cargo. it would be inconsistent with the history of the development of the Rules to hold the carrier liable in such circumstances where proper stowage and cargo handling arrangements had been undertaken. However. have warned that there has been a significant increase in the amount of sugar being smuggled into the Philippines. Under US law. the Australian High Court rejected a reading of “perils of sea” whereby that expression was confined to matters that were wholly unforeseen or unpredicted. b) The carrier had discharged its obligations under Article III Rule 2 of the Rules and there had been no breach of its obligation to carry and care for the cargo. Philippine authorities have become increasingly vigilant in attempting to stop these smuggling operations. they took the view that their interpretation reflected the history of the Rules and their international origins more accurately. Of course. the perils of the sea defence restricted the carrier’s reliance on that defence by reference to the foreseeability of those perils. Del Rosario therefore advise that when sugar is carried to the Philippines shipowners should take particular care to ensure that all documentation is in order. the carrier would not be entitled to rely on the “peril of the sea” (or on any other defence in Article IV. Rule 2) to escape liability. The High Court took the opportunity in this case to consider in detail the perils of the sea defence in the Hague Rules. In the event a seaworthy ship suffered cargo damage when heavy weather had been forecast. If negligence was established. when such weather conditions are foreseeable and foreseen consideration must be given to the steps then taken by the carrier to determine whether or not. which must be correctly completed and in order at the time the vessel leaves the loadport. Philippines: Sugar Smuggling Our correspondent lawyers. they were upheld on further appeal to the High Court of Australia. will not automatically ensure the release of the vessel when sugar is carried. A shortage of sugar as a result of the poor harvest resulting from the El Nino phenomenon has meant an increase in the price of this commodity. The High Court took the view that “perils of the sea” could be foreseeable or indeed foreseen. The judges held that to accept this position would be to transform the obligation to use “due diligence” To summarise. that all measures are requirements. the judges noted that their viewpoint was divergent from the more stringent American and Canadian authorities.3 a) The vessel was fit in all respects for the voyage when leaving Sydney and Burnie. to make the vessel seaworthy into an absolute obligation of seaworthiness that the Owners of general ships formerly had. the carrier had discharged its obligations under Article III Rule 2 or whether the damage to the cargo could be attributed to any other negligence or default on the part of the carrier. and was indeed “the better construction of the Rules as a whole”. Specific attention should be given to the accuracy of the cargo manifest and to the bills of lading. Del Rosario warn that the seizure process is long and tedious. and c) There had been no negligence by the carrier. Thereafter. Master of crew in the management of the vessel. All vessels must be prepared to submit a complete set of documents to the Customs boarding officer on arrival at a Philippine port.

provided that the chase commenced in Algerian waters.000. Article 175 states that pilots must now provide the master with a mooring plan. They have been raised from a maximum level of 4. The delivery is the juridical instrument under which the to sea carrier the undertakes deliver abandoned. 3.” This leaves it open to the carrier to . identification of the vessel itself (Article 508) and ballasting operations (Article 949). Similarly.000 up to DA5. no security provided and in the event the debt is not satisfied within 20 days of obtaining a summons to pay. the changes relating to the carriage of cargo brought about by Article 739 are probably the most significant for those trading to Algeria. The main changes that will immediately impact on our members trading to Algeria may be summarized as follows:1. Prior to the introduction of this article the vessel simply remained under detention for an indefinite period until such times as the authorities became concerned that the vessel would sink inside the port. they receive a bank guarantee prior to releasing the vessel. This provision previously allowed a ship to be detained by the “Maritime Authority” for up to three days on the request of a creditor. and our correspondents. the introduction of the New Maritime Code has also meant an increase in pollution fines. BEMI are concerned that cargo interests may systematically apply for the arrest warrant several days before the completion of discharge and request an inflated amount of security regardless of whether they are able to demonstrate their potential losses at that stage. Article 160 allows an arresting creditor to apply for the sale of a vessel where it has been However. Omar Khelifa. The death penalty has been introduced under Article 500 for any master found deliberately material. All members who trade to Algeria should instruct their masters to request such a plan from the pilot. tougher penalties have been imposed with regard to wreck removal (Article 489). Article 739 states: “the sea carriage contract starts as from the time the goods are picked up on board by the sea carrier and ends with their delivery to the consignee or its legal representative. identification of dangerous goods (Article 496). While the repeal of this article should mean that a vessel cannot be detained for a cargo shortage or damage claim it is anticipated that cargo interests will attempt to work round this by obtaining a formal arrest through the Courts. The amendment allows the sea carrier to define “cargo delivery” in the bill of lading. DA500. Article 159 gives the Coast Guard the authority to pursue a ship attempting to escape while under arrest beyond the territorial waters.000 (ie approximately USD8500 to USD85000) under Article 216. BEMI also advise that cargo interests may now be more willing to accept a Club letter of undertaking as an interim measure while a bank guarantee is being put in place. breach of the collision regulations and navigation rules (Article 493). However. To date cargo interests have refused to accept a Club letter and have insisted that In addition. Article 89 has been repealed. report that the Algerian National Assembly has recently approved a new Maritime Code. BEMI. dumping radioactive goods to the consignee or to his legal representative who acknowledges his acceptance unless otherwise stated in the bill of lading. 2.4 Algeria: New Maritime Code Our Algerian P&I lawyer. which can be amended if required.

Agent or Master must file a request with the particular Venezuelan Consul at least 72 hours in advance of the vessel entering the specific Venezuelan river. The certificate is required by many countries for entry of travellers coming from or through the yellow fever zones of Africa and South America. Alternatively. On arrival at the Venezuelan Port the Master must present the permit to the local Harbour Master. type of cargo. The Owners. The new fines imposed by the Ministry of Health in Brazil are in the region of US$340 for a first offence for each crew member coming from a noninfected port. Should the vessel be coming from or have passed through an infected area. Second or subsequent infringements of the regulations results in a penalty of US$510 per crew member.550 per crew member. Hong Kong: Contacts In addition to crew members the fines also apply to passengers on cruise ships. then the fines are increased to US$1. To obtain this permit the Owner. Once vaccinated a certificate of vaccination is issued.5 amend the bill of lading terms to define “delivery”. Omar Khelifa suggests that the bill of lading incorporate a clause stating that the carrier’s liability ends when the goods are delivered to the stevedores. consignee and the ports of loading and discharging. It We have been advised that there have been an increasing number of cases of vessels dragging anchor and making contact with other vessels in Hong Kong Harbour. This should ensure that the vessel is no longer responsible for stevedoring damage occurring during discharging operations. Possession of a valid Yellow Fever Certificate (as detailed by the World Health Organisation) is required for entry to any port in Brazil. The Consul must issue the permit within 15 days following the request.700 with a second infringement amounting to US$2. Brazil: Yellow Fever Our correspondents in Brazil. must be emphasised that crew and passengers in transit are subject to this legislation and not just those joining vessels or disembarking. anchorages are causing particular concern. Three designated Our Venezuelan correspondents have advised that the Ministry of Foreign Relations and the Ministry of Transport and Communication of Venezuela have issued a joint resolution requiring foreign flag vessels entering Venezuelan rivers with cargoes or passengers to register in a special registry and obtain a special river navigation permit. Pandibra McLintock. Immunisation from yellow fever is obtained by a single injection which provides protection from the disease for ten years. Our correspondents recommend that all members who trade to Algeria instruct their agents at the load port and their masters to insert the following definition into the bills of lading:“Delivery of goods is achieved when cargo is unlashed at discharge port”. Venezuela: River Navigation Permits . These fines are minimums and their application is at the discretion of the port health facility in question. amount of freight. They are subject to strong currents influenced by tidal streams and so all Members trading to this area are urged to keep a proper bridge watch and generally take extra care when using these anchorages. operator or master must provide the Consul with information in relation to the vessel. The permit is valid for 15 days. Should Members require any further information they should contact the Club. have advised us that a new scale of fines are being imposed where vessels’ crew do not conform with the Yellow Fever Certificate guidelines.

Thomas J held that it had been the clear intention of the Contracting States that a Charterer should have the right to limit when he is facing claims of the type that might be brought against an Owner. The Charterers argued that it would be unfair for the Owners to be entitled to limit in respect of claims brought by the Charterers but not vice-versa. If so. The Charterers argued that the grounding was the result of the Master's negligence for which they could not be liable. It was common ground that if the consignee were liable he would not be entitled to limit. He felt that no such terms could be implied and accordingly found against the Owners. These claims totalled US$ 65 million and were put forward on the basis of a breach of the safe port warranty or an implied indemnity for complying with the Charterers' orders. He held that if there was to be a limit between Owners and Charterers in claims such as these this would have to be expressly agreed in the Charterparty. Under the Convention. The arbitrators referred a number of issues to the Commercial Court for a ruling since there had been no previous consideration of the question of a Charterer's right to limit vis-à-vis the Owners. In December 1992. Additionally they sought an indemnity for any liability they might face to Cristal and for their costs in all proceedings. The effect was to restrict Owners to claims that they could pursue under the Charterparty. through the Courts. the Owners' claims must fall outside of the scope of the Convention and not be subject to limitation by the Charterers. they would be entitled to limit their liability to Owners under the 1976 Limitation Convention.6 England: Charterers’ Rights to Limit under the Charterparty In the case of the “Aegean Sea” the English High Court had to decide whether Charterers were entitled to limit their liability to shipowners under the Limitation Convention 1976 for indemnity claims brought by Owners under the Charterparty. he needed to ascertain whether or not this term had an implied safe ports warranty and then if the Consignee had breached this warranty. Thomas J felt that it would be wrong for the Owners' claims to compete with other claims in such scenario. The Owners were claiming separately. they said that. It was not appropriate that this should apply to parties who were involved in the operation of the ship. This would limit their liability to US$ 12 million. her bunkers and freight. The Owners sought an indemnity for the pollution claims from their Voyage Charterers in London arbitration. under CLC. Members may now clauses being introduced into He considered the hypothetical situation where there had been a limitation fund set up. for pollution damage. expect to find such Such agreement would be subject to the normal rules of construction in Accordingly. Accordingly. and for the salvage award they had paid. Almost her entire cargo of 80. However. general contract law. The purpose of a fund was to ensure that third parties not involved in the operation of the ship were adequately secured. if they were liable. In the alternative. the vessel was entering the port of La Coruna when she grounded. charterparties specifically confirming that the charterers’ liability should not exceed the limits provided for in the 1976 Convention or similarly the limits under domestic legislation .000 tonnes of crude was lost and there were substantial claims. They also sought damages for the loss of the vessel. such fund once established would meet claims against both Owners and Charterers. The judge had to decide whether the fact that the bills of lading did not name a specific discharge port or incorporate the Charter meant that there was an implied In light of this case it would seem that there is nothing to prevent owners and charterers agreeing a limit of liability in their charterparty should they so wish. she quickly began to break up and thereafter exploded. Despite the best efforts of salvors and the Spanish authorities. against the consignee under the bill of lading. term giving the Shipper or Consignee the right to nominate the discharge port. it did not follow that when facing claims from the Owners a Charterer would have the right to limit.

This trend could cause companies to alter the way they carry out their internal investigations and indeed affect the willingness of employees to come forward with what could transpire to be vital information. advise that since then the focus of environmental criminal investigations has shifted. Where companies elect to permit the governmental agency to take over such an investigation this could mean those employees who have acted in good faith are left defenceless. Where an employee or officer of a company is involved in wrongdoing the company may choose to disclose the violations. whether environmental or not. As a result of turning such information over to the government companies are unlikely to obtain the co-operation of their employees in future investigations or audits. Venable Baetjer Howard & Civiletti therefore raise the question whether this trend by the EPA and DOP is good public policy. Spain: Stowaways . Venable Baetjer Howard & Civiletti. Club letters of undertaking are not accepted and delays can therefore occur whilst bank guarantees or bonds are lodged. face the prospect that their work during the internal investigation once made available to the government could assist and lead to further prosecutions. Such “co-operation” could entail turning over all documentation/information a company has gathered during its internal investigation. A further difficulty arises where prosecutors take the view that companies are violating their “co-operation” However. This shift in focus by the government has meant that companies. requirement where they have even the most limited form of joint defence agreement with their employees. The Environmental Protection Agency and the Department of Justice have stated that the aggressive prosecution of individuals is the only way to convince the regulated community that environmental criminal penalties are not merely a cost of doing business. without some form of joint defence agreement it is difficult to see how a company will be able to gather the information There has recently been a large increase in the number of stowaways attempting to enter Spain. General guidance is contained in the Association’s Loss Prevention Bulletins Nos 1/1992 and 1/1995. However. Spanish harbour masters have the authority to demand security following an infringement of the Spanish Immigration legislation and various members have faced significant security demands. The Authorities have responded by greatly increasing the level of fines imposed on vessels arriving at Spanish ports with stowaways on board. However. often in containers or trailers. it is not always easy to determine whether individuals have knowingly violated environmental laws or regulations without a thorough internal investigation first. which could include privileged information. whilst still having the need to conduct an internal investigation for the purpose of self-policing. with charges against individuals now making up nearly 75% of all environmental criminal enforcement actions. fully co-operate with the government in its investigation into the violation and punish the individuals concerned.7 USA: Increased Criminal Charges for Individuals for Oil Spills Upto 1990 about 80% of all environmental criminal charges were brought against companies as opposed to individuals. Members with vessels destined for Spanish ports are urged to take all possible steps to avoid allowing stowaways on board. Where prosecutors have executed plea bargains these tend to be conditional on “full co-operation” of the company in the government’s investigation of their employees. Washington lawyers. needed to realistically determine the scope of potential wrongdoing and intelligently assess its resulting liability while legitimately protecting employees’ rights.

the Court took the view that as the bill of lading was in standard form and as arbitration clauses were standard in the industry. all terms and conditions of which are incorporated in this Bill of Lading. the bill of lading governing the carriage of the cargo incorporated the charterparty and its arbitration clause with the following language: “Freight payable as per Charterparty dated 21 October 1994. Bland. who was also the consignee of steel coils shipped from Bulgaria to New Orleans and from New Orleans to Indiana. Hence the proceedings in the US were stayed in favour of London arbitration.” To summarize. have advised us of a decision of the US Fifth Circuit whereby the arbitration clause contained in a charterparty was held to be incorporated into the terms of the Bill of Lading. brought a claim for rust damage to the cargo. The Court rejected the plaintiff’s argument that it was not bound by the charterparty clauses because it did not have notice of these clauses. the plaintiff should have known of the existence of such a clause. Furthermore. The Court further found that the relevant language in the charterparty referring to London arbitration was broad enough to apply to all claims involving third parties and was not limited to disputes between Owner and Charterer. The West of England Ship Owners Insurance Services Limited Tower Bridge Court 224-226 Tower Bridge Road London SE1 2UP T +44 (0) 171 716 6000 F +44 (0) 171 716 6100 Contact Editor on fax number: F +44 (0) 171 716 6111 . The plaintiff. Although the plaintiff was the consignee and so not a party to the charterparty. The defendant filed a motion to stay the action as the charterparty for the voyage in question contained a mandatory arbitration clause providing for arbitration in London. The Court held that the language in the bill of lading was sufficiently precise to incorporate the arbitration clause. Mouledoux.8 USA: Cargo Consignee Bound By Charterparty Arbitration Clause New Orleans lawyers. Legrand & Brackett. The claim against the shipowner was under the Carriage of Goods by Sea Act based upon the terms of the bill of lading. this case reflects the increased willingness of US courts to enforce arbitration clauses whenever possible.

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