Professional Documents
Culture Documents
Offshore Contracts and Liabilities Offshore Oil and Gas Installations Security
Barış Soyer and Andrew Tettenborn An International Perspective
Mikhail Kashubsky
International Maritime Conventions
Volume Two International Trade and Carriage of Goods
Navigation, Securities, Limitation of Liability Edited by Barış Soyer and Andrew Tettenborn
and Jurisdiction
Francesco Berlingieri Maritime Law and Practice in China
Liang Zhao and Lianjun Li
International Maritime Conventions
Volume Three Maritime Law
Protection of the Marine Environment Fourth Edition
Francesco Berlingieri Edited by Yvonne Baatz
The Modern Law of Marine Insurance The Law of Yachts and Yachting
Volume 4 Second Edition
Edited by D. Rhidian Thomas Edited by Filippo Lorenzon and Richard Coles
EDITED BY
B A R I Ş S OY E R
and
ANDRE W T E T T EN B O R N
First published 2019
by Informa Law from Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Informa Law from Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2019 selection and editorial matter, Bariş Soyer and Andrew Tettenborn; individual chapters, the
contributors
The right of Bariş Soyer and Andrew Tettenborn to be identified as the authors of the editorial material,
and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78
of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by
any electronic, mechanical, or other means, now known or hereafter invented, including photocopying
and recording, or in any information storage or retrieval system, without permission in writing from the
publishers.
Whilst every effort has been made to ensure that the information contained in this book is correct,
neither the author nor Informa Law can accept any responsibility for any errors or omissions or for any
consequences arising therefrom.
Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used
only for identification and explanation without intent to infringe.
Preface xiii
Table of Cases xv
Table of Statutes and Statutory Instruments xxv
Authors’ biographies xxxi
v
contents
CHAPTER 2 INTERNATIONAL AND NATIONAL OIL POLLUTION
REGIMES: THEIR COEXISTENCE IN CONTINENTAL
EUROPE AFTER THE ERIKA AND PRESTIGE
INCIDENTS 30
Professor Dr Olivier Cachard
2.1 Introduction 30
2.2 The applicability of the Convention on Civil Liability 33
2.2.1 The logical inclusion of pure ecological loss within the scope
of the CLC 34
2.2.2 The undue exclusion of the captain’s recklessness outside
of the scope of the CLC 35
2.3 The application of the Convention on Civil Liability 36
2.3.1 The hierarchy of the methods of interpretation 36
2.3.2 The legitimate inclusion of classification societies amongst
the beneficiaries of the channelling of Art.III.4(b) 37
2.4 Conclusion 38
vi
contents
CHAPTER 5 SMART CONTAINERS: THE SMARTER, THE MORE
SCOPE FOR LIABILITY? 72
Dr Frank Stevens
5.1 Introduction 72
5.2 How ‘smart’ is smart? 74
5.3 Carrier liabilities 74
5.3.1 Data-only containers 74
5.3.2 Remotely-controlled containers 78
5.3.3 Common issues 79
5.4 Shipper liabilities 80
5.4.1 Data-only containers 80
5.4.2 Remotely-controlled containers 81
5.4.3 Common issues 82
5.5 Conclusion 83
vii
contents
CHAPTER 8 CYBER RISK, LIABILITIES AND INSURANCE
IN THE MARINE SECTOR 103
Simon Cooper
8.1 Introduction 103
8.2 The nature of the cyber risk faced by the shipping industry 103
8.3 The means of attack 106
8.4 The source of the risk 107
8.5 Industry and regulatory response 108
8.5.1 IMO Guideline and the ISM Code 108
8.5.2 UK Code of Practice 109
8.5.3 Consequences of failing to implement adequate cyber safety
system110
8.5.4 National standards 111
8.5.5 GDPR 111
8.5.6 NIS 112
8.6 Insurance implications 113
8.6.1 Underwriting 113
8.6.2 Coverage 114
8.7 Conclusion 117
viii
contents
CHAPTER 11 THE LAW OF WRECKS AND BELGIAN
LIMITATION 156
Professor Marc A. Huybrechts
11.1 Introduction 156
11.2 The facts of the case 158
11.2.1 The causes of the collision 158
11.2.2 The Pilotage Service in Flanders, compulsory pilotage
and the immunity of the Flemish Pilotage Service 159
11.2.3 Collisions in Belgian territorial waters: inapplicability
of the Nairobi Convention on wreck removal 159
11.2.4 The first procedural steps: guarantees requested, and a
limitation fund constituted by the Flinterstar 160
11.2.5 Abandonment not accepted 162
11.2.6 Removal of bunker oil 162
11.2.7 Urgent procedural measures imposed by the President
of the Commercial Court in Bruges on 8 December 2015 162
11.2.8 Appeal to the Court of Appeal in Ghent/arguments submitted
by the appellants to the Court of Appeal and additional
demands by the government 162
11.2.9 The decision by the Court of Appeal of Ghent of 22 February
2016163
11.2.10 Grounds of appeal to the Court of Cassation 164
11.2.11 Submission by the Procureur du roi to the Court of Cassation 165
11.2.12 Redress of the anomaly 166
11.3 Conclusions 167
ix
contents
13.2 History 190
13.3 Three issues 191
13.3.1 The security function of an arrest 192
13.3.2 The geographical reach of an arrest order 195
13.3.3 The effect of international insolvency law on arrest 197
13.4 The future 200
x
contents
APPENDICES
1 International Convention on Civil Liability for Oil Pollution Damage,
1992241
2 International Convention on the Establishment of an International
Fund for Compensation for Oil Pollution Damage, 1992 253
3 The Nairobi International Convention on the Removal of Wrecks, 2007 273
4 Athens Convention Relating to the Carriage of Passengers and
Their Luggage by Sea, 2002 (consolidated text) 287
5 Convention on limitation of Liability for Maritime Claims, 1976 305
6 International Convention Relating to the Arrest of Sea-Going Ships,
1952315
7 International Convention on Arrest of Ships, 1999 321
Index 329
xi
P RE FAC E
The contributions to this book first saw the light of day as papers delivered at the
Thirteenth International Colloquium organised by Swansea Law School’s Institute of
International Shipping and Trade Law (IISTL) in September 2017.
The title of the Colloquium, which as usual combined delegates from academia,
legal practice and the judiciary, was ‘Maritime Liabilities in a Regional and Global
Context: The EU and Beyond’. Within this wide topic the organisers gave priority to
a number of salient features of serious contemporary importance, such as pollution
liabilities, wreck removal, limitation of liability, passenger carriage and insurers’ direct
liability. The analysis included, as it should, a number of comparative insights into
EU law and the national laws of several European states. In addition the Colloquium
also provided an opportunity to evaluate certain important procedural matters, such
as ship arrest, insolvency, applicable law and jurisdiction. The prospect of BREXIT
made much of this discussion particularly topical. The contributors were, as is the
practice with these Colloquiums, given additional time to develop their papers in the
light of comments made by delegates, and also advice from the editors of this work.
The final product we are happy to present to our readers as a book attempting to
offer insights on emerging issues and unresolved questions about all types of maritime
liabilities of contemporary importance. It is divided into two parts. Part I offers a
detailed and critical analysis of issues of contemporary importance concerning mari-
time liabilities. Part II discusses contemporary issues concerning the enforcement of
maritime liabilities.
The alert reader will quickly notice two things. First, maritime liabilities take enor-
mously varied forms. Secondly, and perhaps more depressingly for a truly transnational
business, achieving international harmonisation through international conventions is
rapidly becoming a utopian impossibility, owing to the continuous development of
national and regional law constantly undermining the spirit and letter of the interna-
tional rules. Increasingly, regional uniformity is the best we can hope for.
We are enormously grateful to many for making possible the Colloquium and the
book that grew from it. The research assistants at the IISTL, Ceren Cerit and Stella
Kounakou, were indispensable in providing the essential unsung back-up without
which these international events just cannot happen. Our publishers, Informa Law,
again provided us with their unstinting support as they had with the previous events.
We would particularly like to take the opportunity to thank their two contacts, Amy
Jones and Caroline Church, for their multifarious assistance during the production of
this book. Without them our life would have been impossible.
xiii
preface
The law in this area is fast developing. As servants of the maritime law and commu-
nity, we sincerely hope that the book will contribute to the learning and understanding
of maritime law.
Professors B. Soyer and A. Tettenborn
Swansea, April 2018
xiv
TAB L E OF CA SES
United Kingdom
Addison v Denholm [1997] ICR 770�������������������������������������������������������������������������������������123
Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2
Lloyd’s Rep 39������������������������������������������������������������������������������������������������������� 144, 145
Aga, The [1968] 1 Lloyd’s Rep 431����������������������������������������������������������������������������������������173
Akehurst v Thomson Holidays Ltd & Britannia Airways, Cardiff County Court,
6 May 2003, unreported�������������������������������������������������������������������������������������������� 66–67
Aline Tramp SA v Jordan International Insurance Co [2016] EWHC 1317 (Comm);
[2017] 1 Lloyd’s Rep 467������������������������������������������������������������������������������������������������173
Almatrans SA v The Steamship Mutual Underwriting Association (Bermuda) Limited
[2006] EWHC 2223 (Comm); [2007] 1 Lloyd’s Rep 104 �������������������������������������������������173
Alsey Steam Fishing Co Ltd v Hillman (The Kirknes) [1956] 2 Lloyd’s Rep 651�������������������141
Angel Bell, The [1981] 1 QB 65���������������������������������������������������������������������������������������������190
Annie Hay, The [1968] P 341�������������������������������������������������������������������������������������������������154
Argonaftis, The [1989] 2 Lloyd’s Rep 487������������������������������������������������������������������������������� 42
Aries Tanker Corp. v Total Transport Ltd (The Aries) [1977] 1 Lloyd’s Rep 334�������������������� 69
Aro Co Ltd, Re [1980] Ch 196 ����������������������������������������������������������������������������������������������193
Aspen Underwriting Ltd v Kairos Shipping Ltd [2017] EWHC 1904 (Comm); [2017]
Lloyd’s Rep IR 635 ����������������������������������������������������������������������������������������������� 172, 184
Atlantic Computer Systems Ltd, Re [1992] Ch 505; [1992] 1 All ER 476���������������������� 193, 233
Atlantic Computer Systems plc, Re [1990] BCC 859 ������������������������������������������������������������199
Attorney General v PYA Quarries Ltd [1957] 2 QB 169��������������������������������������������������� 50–51
BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd [2017] EWHC 2082
(TCC); [2018] 1 WLR 1165������������������������������������������������������������������������������������������� 178
Bahamas Oil Refining Co International Ltd v Owners of the Cape Bari Tankschiffahrts
DMBH & Co KG (Bahamas) (The Cape Bari) [2016] UKPC 20; [2016] 2
Lloyd’s Rep 469����������������������������������������������������������������������������������������������138, 139–140
Baker v Adam (1910) 15 Com Cas 227����������������������������������������������������������������������������������174
Bank of New South Wales v South British Insurance Co Ltd (1920) 4 Ll L Rep 266������������174
Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good
Luck) [1992] 1 AC 233���������������������������������������������������������������������������������������������������173
Bank of Tokyo-Mitsubishi UFJ Ltd v The M/V Sanko Mineral [2014] EWHC 3927
(Admlty); [2014] 2 CLC 908; [2015] 2 All ER (Comm) 979��������������������������������������������198
Barbados Trust Co Ltd v Bank of Zambia [2007] EWCA Civ 148; [2007] 1
Lloyd’s Rep 495 ������������������������������������������������������������������������������������������������������������174
Bexhill UK Ltd v Razzaq [2012] EWCA Civ 1376����������������������������������������������������������������175
Bowbelle, The [1990] 1 Lloyd’s Rep 532 ��������������������������������������������������������������������������������138
Boys v Chaplin [1971] AC 356�����������������������������������������������������������������������������������������������217
xv
table of cases
Bradley v Eagle Star [1989] 1 Lloyd’s Rep 465�����������������������������������������������������������������������177
Burton v Islington HA [1993] QB 204������������������������������������������������������������������������������������ 59
Caledonia North Sea Ltd v British Telecommunications plc [2002] UKHL 4; [2002] 1
Lloyd’s Rep 553�������������������������������������������������������������������������������������������������������������185
Caltex Singapore Pte Ltd v BP Shipping Ltd [1996] 1 Lloyd’s Rep 286���������������������������������218
Canmer International Inc v UK Mutual Steamship Assurance Association (Bermuda)
Ltd [2005] EWHC 1694 (Comm); [2005] 2 Lloyd’s Rep 479�������������������������������������������173
Caparo Industries plc v Dickman [1990] AC 465������������������������������������������������������������������100
Cape Bari, The [2016] UKPC 20; [2016] 2 Lloyd’s Rep 469������������������������������������������� 141, 142
Cape Distribution Ltd v Cape Intermediate Holdings plc [2016] EWHC 1119 (QB); [2016]
Lloyd’s Rep IR 499��������������������������������������������������������������������������������������������������������171
Cape Distribution Ltd v Cape Intermediate Holdings plc (No. 2) [2016] EWHC 1786
(QB); [2017] Lloyd’s Rep IR 1����������������������������������������������������������������������������������������184
Cattle v Stockton Waterworks (1874-75) L.R. 10 Q.B. 453; [1874–80] All ER Rep 220���������� 49
Centre Reinsurance International Co v Curzon Insurance Ltd [2004] EWHC 200 (Ch);
[2004] 2 All ER (Comm) 28�������������������������������������������������������������������������������������������177
Centre Reinsurance International Co v Freakley [2005] EWCA Civ 115; [2005]
Lloyd’s Rep IR 303��������������������������������������������������������������������������������������������������������177
Clark v Newsam (1847) 1 Ex. 131������������������������������������������������������������������������������������������ 47
Clark (Inspector of Taxes) v Perks [2001] EWCA Civ 1228; [2001] 2 Lloyd’s Rep 431�� 125–126
Clarke v Earl of Dunraven (The Satanita) [1897] AC 59�������������������������������������������������������140
CMA CGM SA v Classica Shipping Co Ltd (The CMA Djakarta) [2004] EWCA Civ 114;
[2004] 1 Lloyd’s Rep 460�������������������������������������������������������������������������������� 143, 144, 145
Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995]
1 WLR 1140������������������������������������������������������������������������������������������������������������������175
Colour Quest Ltd & others v Total Downstream UK plc & others [2009] EWHC 540 (Comm);
[2009] 2 Lloyd’s Rep 1[2009] All ER (D) 311 (Mar)���������������������������������������������������49, 50
Corinthian Glory, The [1977] 2 Lloyd’s Rep 280�������������������������������������������������������������������173
Cosco Bulk Carrier Co Ltd v Armada Shipping SA [2011] EWHC 216 (Ch); [2011] 2
All ER (Comm) 481������������������������������������������������������������������������������ 193, 199, 233, 235
Cosmotrade SA v Kairos Shipping Ltd (The Atlantik Confidence) [2013] EWHC 1904
(Comm); [2013] 2 Lloyd’s Rep 535���������������������������������������������������������������������������������134
Cosmotrade SA v Kairos Shipping Ltd (The Atlantik Confidence) [2014] EWCA
Civ 217; [2014] 1 Lloyd’s Rep 586�������������������������������������������������������������������������� 134–135
Cox v Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437������������������������������������������177
Cox v Deeny [1996] LRLR 288�������������������������������������������������������������������������������������������� 177
Cultural Foundation v Beazley Furlonge Ltd [2018] EWHC 1083 (Comm)��������������������������169
Curtis v Wild [1991] 4 All ER 172������������������������������������������������������������������������������������������ 61
CVG Siderurgicia del Orinoco SA v London Mutual Steamship Owners’ Mutual Insurance
Association Ltd (The Vainqueur José) [1979] 1 Lloyd’s Rep 557���������������������������� 177, 179
David Meek Access Ltd, Re [1993] BCC. 175������������������������������������������������������������������������199
Derby v Weldon (No 3) [1990] Ch. 65�����������������������������������������������������������������������������������195
Digital Satellite Warranty Cover Ltd, Re [2013] UKSC 7; [2013] 1 WLR 605�����������������������179
Disperser, The (1920) 3 Ll. L Rep 145��������������������������������������������������������������������������� 147–150
Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009]
EWHC 716 (Comm); [2009] 2 Lloyd’s Rep 123������������������������������������������������������ 171, 173
Donoghue v Stevenson [1932] AC 562����������������������������������������������������������������������������������� 47
E v M [2013] EWHC 895 (Comm)����������������������������������������������������������������������������������������195
Effort Shipping Co Ltd v Linden Management SA (The Giannis NK) [1998] 1
Lloyd’s Rep 337�������������������������������������������������������������������������������������������������������������143
xvi
table of cases
Evelpidis Era, The [1981] 1 Lloyd’s Rep 54���������������������������������������������������������������������������174
Evje, The [1973] 1 Lloyd’s Rep 509����������������������������������������������������������������������������������������173
Falstria, The [1988] 1 Lloyd’s Rep 495�����������������������������������������������������������������������������������218
Farrell v Federated Employers’ Assurance Association [1970] 1 WLR 1400��������������������������177
Feest v South West Strategic Health Authority [2015] EWCA (Civ) 708; [2016]
QB 503���������������������������������������������������������������������������������������������������������������� 61, 68, 69
Fibria Celulose SA v Pan Ocean Co Ltd [2014] EWHC 2124 (Ch); [2014] Bus
LR1041���������������������������������������������������������������������������������������������������������������� 198, 199
Firma C-Trade SA v Newcastle Protection and Indemnity Association [1991] 2
AC 1���������������������������������������������������������������������������������������������������������������������� 176, 177
Flightline Ltd v Edwards [2003] EWCA Civ 63; [2003] 1 WLR 1200������������������������������������190
Frasca-Judd v Golovina [2016] EWHC 497 (QB); [2016] Lloyd’s Rep IR 447�����������������������171
Gard Marine & Energy Ltd v China National Chartering Co Ltd (The Ocean Victory)
[2015] EWCA Civ 16; [2015] Lloyd’s Rep IR 295; [2017] UKSC 35; [2017]
Lloyd’s Rep IR 291��������������������������������������������������������������������������������� 143, 144, 145, 171
Gas Float Whitton, The (No. 2) [1897] AC 337������������������������������������������������������������� 122, 125
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd (1974) AC 689�����������������141
Good Herald, The [1987] 1 Lloyd’s Rep 236��������������������������������������������������������������������������173
Good Luck, The [1988] 1 Lloyd’s Rep 514; [1990] 1 QB 818 �������������������������������������������������174
Graham Joint Stock Shipping Co Ltd v Merchants’ Marine Insurance Co Ltd (1922) 13
Ll L Rep 509; [1924] AC 294������������������������������������������������������������������������������������������174
Greene Wood McLean LLP v Templeton Insurance Ltd [2009] EWCA Civ 65; [2009]
Lloyd’s Rep IR 505; [2010] EWHC 2679 (Comm); [2011] Lloyd’s Rep IR 557���������������185
Grosvenor Hotel Co v Hamilton [1894] 2 QB 836������������������������������������������������������������������ 50
Halcyon Isle, The [1981] AC 221�������������������������������������������������������������������������������������������197
Hamble Fisheries Ltd v L Gardner & Sons Ltd (The Rebecca Elaine) [1999] 2
Lloyd’s Rep I ����������������������������������������������������������������������������������������������������������������� 48
Harding v Wealands [2006] UKHL 32; [2007] 2 AC 1 (HL). ������������������������������������������������218
Hari Bhum, The (No 1) [2004] EWCA Civ 1598; [2005] 1 Lloyd’s Rep. 67; [2005] 1
All ER (Comm) 715������������������������������������������������������������������������������������������������������182
Hayn Roman & Co v Culliford (1879) 4 CPD 182����������������������������������������������������������������124
Howard v Furness-Houlder Argentine Lines, Ltd [1936] 2 All ER 781���������������������������������� 49
Hunt v London Borough of Hackney [2002] EWHC 195 (Admin); [2003] QB 151 ��������������� 64
Hunter v Canary Wharf [1997] AC 655��������������������������������������������������������������������������������� 50
International Energy Group Ltd v Zurich Insurance plc UK Branch [2015] UKSC 33;
[2016] AC 509����������������������������������������������������������������������������������������������������������������184
Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association
(Bermuda) Ltd [2010] EWHC 2661 (Comm); [2011] 1 Lloyd’s Rep 195�������������������������180
ISS Machinery Services Ltd v Aeolian Shipping SA [2001] EWCA Civ 1162; [2001] 2
Lloyd’s Rep 641�������������������������������������������������������������������������������������������������������������173
JP Klausen & Co A/S, Kitzinger & Co (GMBH & Co KG) v Mediterranean Shipping Co
SA [2013] EWHC 3254 (Comm)�������������������������������������������������������������������������������� 74–75
Juntha Rajprueck, The [2003] EWCA Civ 378; [2003] 2 Lloyd’s Rep 107������������������������������173
Kairos Shipping Ltd v Enka & Co LLC (The Atlantik Confidence) [2014] EWCA Civ 217;
[2014] 1 WLR 3883 �������������������������������������������������������������������������������������������������������173
Kairos Shipping Ltd v Enka & Co LLC (The Atlantik Confidence) [2016] EWHC 2412
(Admlty); [2016] 2 Lloyd’s Rep 525��������������������������������������������������������������������������������138
Kapetan Markos NL, The (No. 2) [1987] 2 Lloyd’s Rep 321�������������������������������������������������173
Keyu v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69;
[2016] AC 1355������������������������������������������������������������������������������������������������������������� 209
xvii
table of cases
Kommunar, The (No.3) [1997] 1 Lloyd’s Rep 22���������������������������������������������������������� 192, 193
Lady Gwendolen, The [1965] P 294 ��������������������������������������������������������������������������������������154
Laurie v Douglas (1846) 15 M & W 746�������������������������������������������������������������������������������124
Lawrence v NCL (Bahamas) Ltd (The Norwegian Jade) [2017] EWCA Civ 2222; [2018] 1
Lloyd’s Rep 607�������������������������������������������������������������������������������������������������������������� 62
Lee v Airtours Holidays Ltd. & Another [2004] 1 Lloyd’s Rep 683������������������ 62, 63–64, 65, 67
Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] AC 785��������������� 48
Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705��������������������������������154
Lensen Shipping Ltd v Anglo-Soviet Shipping Ltd (1935) 52 Ll L Rep 141 ������������������������143
Lister v Stubbs (1890) 45 Ch.D. 1.����������������������������������������������������������������������������������������190
Litsion Pride, The [1985] 1 Lloyd’s Rep 437��������������������������������������������������������������������������174
London Steam Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain
(The Prestige) (No 2)) [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep 33�����������179, 180, 182
Mac, The (1882) 7 PD 38������������������������������������������������������������������������������������������������������122
Maher v Groupama Grand Est [2009] EWCA Civ 1191; [2010] Lloyd’s Rep IR 543�������������183
Mareva Compañía Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep 509��190
Margolle & another v Delta Maritime Co Ltd & others (The Saint Jacques II) [2002]
EWHC 2452 (Admlty); [2003] 1 Lloyd’s Rep 203 ����������������������������������������������������������138
Mark Rowlands Ltd v Berni Inns Ltd [1986] 1 QB 211 ��������������������������������������������������������171
Markel International Co Ltd v Craft (The Norseman) [2006] EWHC 3150 (Comm);
[2007] Lloyd’s Rep IR 403����������������������������������������������������������������������������������������������182
McEwan v Bingham (t/a Studland Watersports) [2000] CLY 2001 (Hove County Court)������ 61
Medical Defence Union Ltd v Department of Trade [1980] Ch 82����������������������������������������179
Merchants’ Marine Insurance Co Ltd v North of England Protection & Indemnity
Association (1926) 26 Ll L Rep 201����������������������������������������������������������������� 52, 124, 125
Metall Market OOO v Vitorio Shipping Co Ltd [2013] EWCA Civ 650; [2013] 2
Lloyd’s Rep 541�������������������������������������������������������������������������������������������������������������173
Metvale Ltd v Monsanto International Sarl & others (The MSC Napoli) [2008]
EWHC 3002 (Admlty); [2009] 1 Lloyd’s Rep 246��������������������������������������������������� 144, 145
Michael v Musgrave (The Sea Eagle) [2011] EWHC 1428 (Admlty); [2012] 2
Lloyd’s Rep 37���������������������������������������������������������������������������������������������������������������� 61
Miraflores, The (Owners) v Abadesa, The (Owners) (No.2) [1968] 1 Lloyd’s Rep 493�����������133
Mitchell and Others v Milford Haven Port Authority [2003] EWHC 1246 (Admlty)������������� 50
Monica S, The [1968] P 741������������������������������������������������������������������������������������������� 193, 197
Mutualidad Compañía de Seguros y Reaseguros SA v Keefe [2015] EWCA Civ 598; [2016]
Lloyd’s Rep IR 94����������������������������������������������������������������������������������������������������������183
National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582�������������������� 169, 171
New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1
WLR 1237���������������������������������������������������������������������������������������������������������������������176
Norfolk v My Travel Group plc [2004] 1 Lloyd’s Rep 106�������������������������������������������������62, 67
Norman v Binnington (1890) 25 QBD 475����������������������������������������������������������������������������124
Oakwell, The [1999] 1 Lloyd’s Rep 249����������������������������������������������������������������������������������173
O’Kane v Jones [2003] EWHC 2158 (Comm); [2004] 1 Lloyd’s Rep 389������������������������ 169, 185
Oriental Baltic, The [2011] SGHC 75; [2011] 1 SLR 487�������������������������������������������������������193
OT Computers Ltd (In Administration), Re [2004] EWCA Civ 653������������������������������ 176, 177
Pacific, The (1864) Br & Lush 243����������������������������������������������������������������������������������������197
Pan Oceanic Maritime Inc, Re [2010] EWHC 1734 (Comm)�������������������������������������������������199
Peel Port Shareholder Finance Co Ltd v Dornoch Ltd [2017] EWHC 876 (TCC); [2017]
Lloyd’s Rep IR 374��������������������������������������������������������������������������������������������������������178
Petrofina (UK) Ltd v Magnaload Ltd [1983] 2 Lloyd’s Rep 91����������������������������������������������169
xviii
table of cases
Photo Production Ltd. v Securicor Transport Ltd [1980] AC 827������������������������������������������ 98
Pioneer Concrete (UK) Ltd v National Employers’ Mutual General Insurance Ltd
[1985] 2 All ER 395��������������������������������������������������������������������������������������������������������177
Polpen Shipping Co Ltd v Commercial Union Assurance Co Ltd (1942) 74
Ll L Rep 157������������������������������������������������������������������������������������������������������������������125
Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363����������������������������177
Prestige, The (No 2) [2015] 2 Lloyd’s Rep 33�������������������������������������������������������������������������182
Puerto Acevedo, The [1978] 1 Lloyd’s Rep 38�����������������������������������������������������������������������173
Quirkco Investments Ltd v Aspray Transport Ltd [2011] EWHC 3060 (Ch); [2013] 1
Lloyd’s Rep IR 55����������������������������������������������������������������������������������������������������������171
R. v Goodwin [2005] EWCA (Crim) 3184; [2006] 1 Lloyd’s Rep 432 61, 123, 125
Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] EWCA Civ 68;
[2001] QB 825�������������������������������������������������������������������������������������������������������� 174, 175
Rainham Chemical Works Ltd (in liquidation) v Belvedere Fish Guano Co Ltd [1921] 2
AC 465��������������������������������������������������������������������������������������������������������������������������� 49
Rathbone Brothers plc v Novae Corporate Underwriting [2013] EWHC 3457 (Comm);
[2014] Lloyd’s Rep IR 203; [2014] EWCA Civ 1464; [2015] Lloyd’s Rep IR 95������� 171, 185
Redman v Zurich Insurance plc [2017] EWHC 1919 (QB); [2018] 1 WLR 280����������������������178
Rena K, The [1979] QB 377������������������������������������������������������������������������������������������ 195, 196
RHM Bakeries (Scotland) Ltd v Strathclyde RC 1985 SC (HL) 17���������������������������������������� 49
Rio Assu, The [1999] 1 Lloyd’s Rep 201 �������������������������������������������������������������������������������173
River Rima, The [1988] 1 W.L.R. 758; [1988] 2 Lloyd’s Rep 193 �������������������������������������������191
Roberts v Gill [2010] UKSC 22; [2011] 1 AC 240������������������������������������������������������������������175
Royal Bank of Scotland plc v FAL Oil Co Ltd [2012] EWHC 3628 (Comm); [2013] 1
Lloyd’s Rep 327�������������������������������������������������������������������������������������������������������������195
Royle Ltd v Services Maritimes du Treport [1914] 1 KB 541�������������������������������������������������141
Rylands v Fletcher (1866) LR 1 Ex 265; affirmed (1868) LR 3 HL 330����������������������������� 48–50
Safadi v Western Assurance Co (1933) 46 Ll L Rep 140��������������������������������������������������������174
Saint Jacques II, The [2002] EWHC 2452 (Admlty); [2003] 1 Lloyd’s Rep 203�������������� 138, 151
Salt Union Ltd. v Wood [1893] 1 QB 370������������������������������������������������������������������������������� 62
Samsun Logix Corp v DEF [2009] EWHC 576 (Ch); [2009] BPIR 1502�������������������������������199
Schiffahrtsgesellschaft Detlev Von Appen GmbH v Wiener Allianz Versicherungs
AG (The Jay Bola) [1997] 2 Lloyd’s Rep 279���������������������������������������������������175–176, 182
Schiffahrtsgesellschaft MS Merkur Sky mbH & Co KG v MS Leerort Nth Schiffahrts
GmbH & Co KG (The Leerort) [2001] EWCA Civ 1055; [2001] 2 Lloyd’s Rep 291��������138
Sea Voyager Maritime Inc v Bielecki [1999] Lloyd’s Rep IR 356�������������������������������������������177
Seismic Shipping Inc v Total E&P UK Plc (The Western Regent) [2005] EWCA
Civ 985; [2005] 2 Lloyd’s Rep 359����������������������������������������������������������������������������������136
Sidhu v British Airways Plc [1997] AC 430; [1997] 2 WLR 26 (HL)���������������������������� 60, 65, 66
Silia, The [1981] 2 Lloyd’s Rep 534����������������������������������������������������������������������������������������121
Span Terza, The [1982] 1 Lloyd’s Rep 225�����������������������������������������������������������������������������146
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] Q.B. 27; [1972] 3
All ER 557���������������������������������������������������������������������������������������������������������������������� 48
St Helens Smelting Co v Tipping (1865) 11 HLC 642������������������������������������������������������������ 50
State of the Netherlands v Youell [1997] 2 Lloyd’s Rep 440���������������������������������������������������169
Steedman v Schofield [1992] 2 Lloyd’s Rep 163��������������������������������������������������������61, 123, 124
Stocznia Gdynia SA v Searbulk Holdings Ltd [2009] EWCA Civ 75; [2009] 1
Lloyd’s Rep 461�������������������������������������������������������������������������������������������������������������141
Stott v Thomas Cook Operators Ltd [2014] UKSC 15; [2014] AC 1347�����������������61, 65–66, 67
Stovin v Wise [1996] AC 923�������������������������������������������������������������������������������������������������� 86
xix
table of cases
Surf City, The [1995] 2 Lloyd’s Rep 242��������������������������������������������������������������������������������174
Swan, Hunter & Wigham Richardson Ltd v The Benwood (1923) 14 Ll L Rep 484��������������� 52
Syska v Vivendi Universal SA [2008] EWHC 2155 (Comm); [2009] 1 Lloyd’s Rep 59�����������227
Syska v Vivendi Universal SA [2009] EWCA Civ. 677; [2009] 2 All E.R. (Comm) 891;
[2009] 2 All E.R. (Comm) 891�������������������������������������������������������������������������������������� 227
Talbot Underwriting Ltd v Nausch Hogan & Murray [2005] EWHC 2359 (Comm);
[2006] 2 Lloyd’s Rep 195; affd [2006] EWCA Civ 889; [2006] 2 Lloyd’s Rep 195�������������169
Tarbuck v Avon Insurance plc [2002] QB 571; [2001] 2 All ER 503; [2002] Lloyd’s Rep
IR 393������������������������������������������������������������������������������������������������������������������� 169, 176
Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd [2011] EWCA Civ 1570;
[2012] Lloyd’s Rep IR 315; [2013] UKSC 57; [2014] Lloyd’s Rep IR 56��������������������������177
Tempus Shipping Co Ltd v Louis Dreyfus & Co [1931] AC 726�������������������������������������������141
Thompson v Hopper (1858) EB & E 1047����������������������������������������������������������������������������153
Three Rivers District Council v Bank of England [1996] QB 292�����������������������������������������175
Thwaites v Aviva Assurances SA [2010] Lloyd’s Rep IR 667�������������������������������������������������183
Tojo Maru, The [1972] AC 242���������������������������������������������������������������������������������������������156
Transco v Stockport Metropolitan Borough Council [2003] UKHL 61; [2004] 2 AC 1���������� 49
Trinder v Thames and Mersey Ins. Co [1898] 2 QB 114��������������������������������������������������������153
Tychy, The [1999] 2 Lloyd’s Rep 11������������������������������������������������������������������������������� 144, 146
Varna, The [1993] 2 Lloyd’s Rep 253�������������������������������������������������������������������������������������193
Viscous Global Investment Ltd v Palladium Navigation Corporation [2104] EWHC 2654
(Comm); [2014] 2 Lloyd’s Rep 600���������������������������������������������������������������������������������173
Von Rocks, The [1998] IR 41; [1998] 2 Lloyd’s Rep 198���������������������������������������������������������122
Wadi Sudr, The [2009] EWCA Civ 1397; [2010] 1 Lloyd’s Rep 193����������������������������������������206
Wagon Mound, The (No 2) [1967] 1 AC 617�������������������������������������������������������������������������� 48
Wallhead v Ruston and Hornsby (1973) 14 KIR 285������������������������������������������������������������� 48
Wells v Owners of Gas Float Whitton (No 2) [1897] AC 337 (HL)���������������������������������������� 52
William McIlroy (Swindon) Ltd v Quinn Insurance Ltd [2011] EWCA Civ 825; [2012] 1
All ER (Comm) 241������������������������������������������������������������������������������������������������������177
William Pickersgill & Sons Ltd v London & Provincial Marine & General Insurance
Co Ltd [1912] 3 KB 614�������������������������������������������������������������������������������������������������174
Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81�������������������������������������������������� 174, 175
Wilson v McIntosh [1894] AC 129����������������������������������������������������������������������������������������140
Wood v Waud (1849) 3 Ex 748����������������������������������������������������������������������������������������������� 50
Wright v Dunlop Rubber (1973) 13 KIR 255������������������������������������������������������������������������� 48
X-Fab Semiconductor Foundries AG v Plessey Semiconductors Ltd [2014] EWHC
3190 (QB)����������������������������������������������������������������������������������������������������������������������199
Youell v Kara Mara Shipping Co Ltd [2001] Lloyd’s Rep IR 553������������������������������������������182
Yusuf Cepnioglu, The [2016] EWCA Civ 386; [2016] 1 Lloyd’s Rep 641����������������������� 181–182
Zafiro, The [1960] P 1������������������������������������������������������������������������������������������������������������193
Australia
ASP Ship Management Pty Ltd v Administrative Appeals Tribunal [2006]
FCAFC 23��������������������������������������������������������������������������������������������������������������������146
Kim v SW Shipping Co Ltd [2016] FCA 428������������������������������������������������������������������������199
Kirmani v Captain Cook Cruises Pty Ltd (1985) 159 CLR 351�������������������������������������������� 62
Seafood Imports Pty Ltd v ANL Singapore Pte Ltd [2010] FCA 702������������������������������������ 75
Union S.S. Co. of New Zealand Ltd v Commonwealth (1925) 37 CLR 130��������������������������� 62
United Airlines v Sercel Australia Pty Ltd [2012] NSWCA 24������������������������������������������������ 69
X & Y v Pal (1991) 23 NSWLR 26.���������������������������������������������������������������������������������������� 59
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Yakushiji v Daiichi Chuo Kisen Kaisha [2015] FCA 1170; (2015) 333 ALR 513�������������������198
Yu v STX Pan Ocean Co Ltd [2013] FCA 680; (2013) 223 FCR 189�������������������������������������199
Belgium
Cour de cassation, 13 janvier 2017, c.16.0219.N–c.16.0220.n/l. (“Flinterstar”)������������� 158–167
Cour de cassation, 19 juin 2012, R.W. 2012–13, p. 1267��������������������������������������������������������� 77
Cour de cassation, 23 janvier 2014, AR C.12.0603. N, Arresten van Cassatie 2014, n° 61,
Procureur Général Leclercq (FXR Services v Gemeentelijk Autonoom Havenbedrijf
Antwerpen)����������������������������������������������������������������������������������������������������������� 163, 165
Cour d’appel Ghent, 22 février 2016 (“Flinterstar”)����������������������������������������������������� 163–164
Canada
Buhlman v Buckley (2011) 330 DLR (4th) 755.��������������������������������������������������������������������� 58
Connaught Laboratories Ltd v Air Canada (1978) 94 DLR (3d) 586.������������������������������������ 70
Peracomo Inc and others v Telus Communications Co and others (The Realice) [2014]
SCC 29; [2014] 2 Lloyd’s Rep 315�������������������������������������������������������������������137, 150–155
R (Canada) v St John Ship Building & Dry Dock Co (1981) 126 DLR (3d) 353�������������������122
European Union
Air Baltic Corp. AS v Lietuvos Respublikos Specialiuju TyrimuTarnyba, Case C-429/14
[2016] 3 CMLR 1; [2016] 1 Lloyd’s Rep 407�������������������������������������������������������������������� 60
Allianz SpA & Generali Assicurazioni Generali SpA v West Tankers Inc, Case C-185/07
[2009] ECR I-663�����������������������������������������������������������������������������������������������������������206
Assens Havn v Navigators Management (UK) Ltd, Case C-368/16 [2017] IL Pr 30������ 183–184
Commune de Mesquer v Total France SA & Total International Ltd, Case C-188/07
[2008] ECR I-4501; [2008] 3 CMLR 16����������������������������������������������������������������������34, 54
Deo Antoine Homawoo v GMF Assurances SA, Case C-412/10������������������������������������������218
FBTO Schadeverzekeringen NV v Odenbreit, Case C-463/06 [2007] ECR I-11321 [2008]
Lloyd’s Rep IR 354��������������������������������������������������������������������������������������������������������183
Interedil Srl v Fallimento Interedil Srl, Case C-396/09 [2011] ECR I-9915����������������������������200
Universal General Insurance Co v Groupe Josi Reinsurance Co SA, Case C-412/98 [2000]
ECR I-5925�������������������������������������������������������������������������������������������������������������������214
France
Cour de cassation Civ. 1ère, 5 février 1991, Bull. Civ. I, no 44�����������������������������������������������232
Cour de cassation Civ., 13 décembre 1994, 92-14307�������������������������������������������������������������194
Cour de cassation Crim., 23 novembre 2004, n° 04-84265������������������������������������������������������ 30
Cour de cassation Civ., 17 décembre 2008, n° 04-12315��������������������������������������������������������� 34
Cour de cassation Civ. 1ère 6 mai 2009, JCP G 2009, I, 2167 no 7, obs. J. Béguin�����������������232
Cour de cassation Crim., 25 septembre 2012, n° 10-82.938 (“Erika”)�������������� 18, 23, 31, 33, 37
Cour de cassation Civ. 1ère, 4 mars 2015, Bull. civ. I, No. 327������������������������������������������������ 70
Cour d’appel Aix-en-Provence, 29 juin.2001�������������������������������������������������������������������������200
Cour d’appel Aix-en-Provence, 24 mai 2002 (Grand Seaways Limited v Total Fina
Elf – “Renai I”, “Renai II”) 2002 DMF 772������������������������������������������������������������������194
Cour d’appel Aix-en-Provence, 29 juin 2011 (Puglia di Navigazione SpA v Cambiaso
& Risso Marine SpA), 2012 DMF 131��������������������������������������������������������������������������200
Cour d’appel Aix-en-Provence, 7 décembre 2012������������������������������������������������������������������200
Cour d’appel Aix-en-Provence, 28 novembre 2013, n° 13/02884, (SAS Magellan v SA
CMA CGM)������������������������������������������������������������������������������������������������������� 79–80, 82
Cour d’appel Bordeaux, 6 mars 2017, DMF, n° 792, 2016, p. 513, obs. Luc Grellet��������������� 30
xxi
table of cases
Cour d’appel Montpellier 1 décembre 2003 (“Sargasso”), 2004 DMF 435����������������������������194
Cour d’appel Paris (11ème ch. des appels correctionnels), 30 mars 2010, n° 08-02278
(“Erika”)������������������������������������������������������������������������������������������������������������� 32, 35, 37
Cour d’appel Paris, 7 avril 2011, Rev. arb. 2011, 747, note S.Bollé & B.Haftel�����������������������232
Cour d’appel Rennes, 25 septembre 2012, 2013 DMF 335����������������������������������������������������194
Cour d’appel Rouen 22 mai 2003 (“MV Skaufast”) 2003 DMF 737�������������������������������������194
Germany
AG Hamburg 03.03.2015, 67a IN 400/14, IPRax 2016, 72����������������������������������������������������195
LG Bremen, 14.08.2011, 2 T 435/11��������������������������������������������������������������������������������������195
Greece
Supreme Court (Areios Pagos) 23/2006 (The “Slops”) unreported���������������������������� 43, 45, 122
Supreme Court (Areios Pagos) 2234/2009, ChrID 2011, 121, EllDni 2010, 411��������������������234
High Court of Piraeus, 2716/1988�����������������������������������������������������������������������������������������195
Hong Kong
Eleni Maritime Ltd v Heing-A Shipping Co. Ltd and Others (The Eleni) [2017]
HKCFI 795; [2017] 2 Lloyd’s Rep 263������������������������������������������������������������������� 147–150
Ital
“Celia”, The, 2013 Dir. Mar. 690������������������������������������������������������������������������������������������200
Genoa, 21.5.2004 (European Stars), 2006 Dir. Mar. 537�������������������������������������������������������196
Genoa, 24.4.2004 (European Vision), 2006 Dir. Mar. 524�����������������������������������������������������196
La Spezia, 09.08.2013, 2013 Dir. Mar. 690����������������������������������������������������������������������������200
Netherlands
Court of The Hague, 8 May 2017, R.S.V. 2017, 163 (ECLI:NL:RBDHA:2017:5165).����������� 77
Raad van State, No 200105168/2, 19 June 2002 (“Sandrien”)������������������������������������������������� 92
Raad van State, No 200606331/1, 21 February 2007 (“Otapan”)������������������������������������������� 92
New Zealand
Kim v STX Pan Ocean Co Ltd [2014] NZHC 84���������������������������������������������������������� 198, 199
Norway
M/K HADSELØ v M/K POLLY (Rt-1957-624) (Supreme Court)���������������������������������������154
Spain
Tribunal Supremo, Sala de lo Penal, 14 de enero de 2016, n° 865/2015
(“Prestige”)�����������������������������������������������������������������������������������������������������18, 31, 32, 35
Switzerland
Bundesgericht 31 March 2009, 4A_428/2008, ASA Bulletin 1/2010.104��������������������������������228
United States
Atlas Shipping A/S, In Re, 404 B.R. 726 (2009)��������������������������������������������������������������������199
Bates Block v Compagnie Nationale Air France, 386 F.2d 323 (5th Cir 1967)������������������������ 59
Chubb Ins. Co. of Europe SA v Menlo Worldwide Forwarding Inc., 634 F.3d 1023
(9th Cir 2011)����������������������������������������������������������������������������������������������������������������� 69
Coryell v Phipps 317 US 406 (1943)��������������������������������������������������������������������������������������154
xxii
table of cases
Evridiki Navigation, Inc v Sanko SS Co, 880 F.Supp.2d 666 (2012)������������������������������ 198, 199
Hays & Co. v Merril Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1159 (3d Cir 1989)�������238
Jam. Shipping Co. v Orient Shipping Rotterdam, B.V. (In re Millenium Sea Carriers, Inc.,
Millenium II), 458 F. 3d 92 (2d Cir 2006); 2006 AMC 2376�������������������������������������������239
Lloyd’s :Leasing Ltd v Conoco, 868 F.2d 1447 (5th Cir 1989)������������������������������������������������ 47
Lozman v City of Riviera Beach, Florida, 133 S. Ct. 735 (2013) ���������������������������������� 120, 126
Northern Pipeline Construction Co. v Marathon Pipe Line Co, 458 US 50 (1982)���������������236
Pacor, Inc. v Higgins, In re, 743 F.2d 984, 994 (3rd Cir 1984)������������������������������������������������237
Reino de Espana v American Bureau of Shipping, 691 F.3d. 461 (2d Cir 2012)��������������������� 32
Reino de Espana v American Bureau of Shipping, 528 F.Supp.2d. 455 (S.D.N.Y 2008)��������� 32
Reino de Espana v American Bureau of Shipping, 729 F.Supp.2d. 635 (S.D.N.Y 2010)��������� 32
Shearson/American Express, Inc. v McMahon 482 US 220 (1987)����������������������������������������236
Société Nationale Algérienne v Distrigas, 80 B.R. 606 (D Mass 1987)����������������������������������236
Ultramares Corp v Touche 174 NE 441 (1932)���������������������������������������������������������������������� 48
United States v Hyundai Merchant Marine Co., 172 F.3d 1187 (9th Cir 1999)���������������������� 17
United States v Murphy Exploration & Prod. Co., 939 F. Supp. 489 (ED La 1996)��������������� 17
U.S. Lines, Inc. v Am. S.S. Owners Mut. Prot. & Ind. Ass’n (In re U.S. Lines, Inc.), 197 F.3d
631 (2d Cir 1999), 2000 AMC 784 ��������������������������������������������������������������������������������238
xxiii
TAB L E OF S TAT UTES A N D
STAT U T ORY I N STRU MEN TS
xxv
table of statutes and statutory instruments
s. 1���������������������������������������������������� 168 s. 11(1)���������������������������������������������� 218
s. 3���������������������������������������������������� 168 s. 11(2)���������������������������������������������� 217
s.17��������������������������������������������������� 180 s. 12(1)���������������������������������������������� 217
s. 20�������������������������������������������������� 180 s. 12(2)���������������������������������������������� 218
s. 39�������������������������������������������116, 180 s. 14(3)(a)������������������������������������������ 218
s. 39(5)���������������������������������������������� 116 s. 15A����������������������������������������������� 219
s. 40(2)���������������������������������������������� 116 s. 15B������������������������������������������������ 219
s. 41�������������������������������������������������� 180 Road Traffic Act 1988
s.43��������������������������������������������������� 180 ss. 151 and 152���������������������������������� 179
s. 48�������������������������������������������������� 180 Senior Courts Act 1981������������������������ 136
s. 50�������������������������������������������������� 175 s. 21(4)���������������������������������������������� 193
s. 55�������������������������������������������������� 153 s. 24(1)���������������������������������������������� 120
s. 55(2)(a)������������������������������������������ 153 s. 37(1)���������������������������������������������� 190
s. 63(1)���������������������������������������������� 162 Third Parties (Rights against Insurers)
s. 79�������������������������������������������������� 185 Act 2010���������������������177–8, 179, 180
s. 80�����������������������������������������������184–5 s. 1���������������������������������������������178, 179
Maritime Conventions Act 1911 s. 1(1)������������������������������������������������ 178
s. 8���������������������������������������������148, 149 s. 1(2) ����������������������������������������������� 178
Merchant Shipping Act 1894���������������� 140 s. 1(3)������������������������������������������������ 178
s. 502������������������������������������������������ 141 s. 11�������������������������������������������������� 178
Merchant Shipping Act 1995�����������67, 135 s. 2(11)���������������������������������������������� 178
s. 77���������������������������������������������������� 72 s. 2(2)������������������������������������������������ 178
s.100�������������������������������������������������� 84 s. 2(9)������������������������������������������������ 178
s. 153�������������������������������������������46, 180 s. 9(2)������������������������������������������������ 178
s. 153(7)�������������������������������������������� 180 s. 9(3)������������������������������������������������ 178
s. 153A�����������������������������������������46, 180 s. 9(4)������������������������������������������������ 178
s. 154�����������������������������������������������46–7 s. 9(5)�����������������������������������������178, 181
s. 154(1)���������������������������������������������� 47 s. 9(6)�����������������������������������������178, 181
s. 154(5)���������������������������������������������� 46 s. 14(1)���������������������������������������������� 178
s. 156(2)���������������������������������������������� 47 s. 20�������������������������������������������������� 178
s. 163������������������������������������������������ 179 Sch. 1������������������������������������������������ 178
s. 165������������������������������������������������ 179 Sch. 3������������������������������������������������ 178
s. 168�������������������������������������������������� 47 Transport Act 2000�������������������������������� 58
s. 182A���������������������������������������������� 180 s.95(5)������������������������������������������������� 59
s. 182B���������������������������������������������� 180 Wreck Removal Convention
s. 185�������������������������������������������47, 134 Act 2011��������������������������������������� 180
s. 185(1)�������������������������������������������� 134
s. 190��������������������������������������������� 148-9 Statutory Instruments
s. 190(5)�������������������������������������������� 149 Air Navigation Order 2005 (SI 1970/2005)
s. 255P���������������������������������������������� 180 Art. 155���������������������������������������������� 59
s. 313�������������������������������������������61, 120 Air Navigation Order 2009
s. 313(1)�������������������������������������������� 120 (SI 2009/3015)��������������������������������� 59
Sch. 5A��������������������������������������������� 180 Air Navigation Order 2016
Sch. 7���������������������������������������������47, 51 (SI 2016/765)����������������������������������� 59
Petroleum Act 1998 Civil Aviation (Access to Air Travel for
s.3(1)��������������������������������������������������� 49 Disabled Persons and Persons with
Private International Law (Miscellaneous Reduced Mobility) Regulations
Provisions) Act 1995��������������219, 220 (SI 2007/1895)��������������������������������� 65
Pt. III����������������������������������������217, 218 Civil Jurisdiction and Judgments Order
s. 10�������������������������������������������������� 217 2001 (SI 2001/3929)���������������������� 206
xxvi
table of statutes and statutory instruments
Civil Procedure Rules 1998 (SI 1998/3132) Reg. 15����������������������������������������������� 63
r. 25.1(f)�������������������������������������������� 190 Reg. 15(3)������������������������������������������� 64
Cross-Border Insolvency Regulations Third Parties (Rights against Insurers)
2006 (SI 2006/1030)���������������������� 222 Act Commencement Order 2016
Art. 17���������������������������������������������� 233 (SI 2016/560)��������������������������������� 178
Art. 20(2)�����������������������������������199, 233 Third Parties (Rights against
Art. 20(4)�����������������������������������233, 234 Insurers) Regulations 2016
Art. 20(6)������������������������������������������ 233 (SI 2016/570)��������������������������������� 178
Sch. 1������������������������������������� 198, 232–4 Transfer of Undertakings (Protection
Hovercraft (Civil Liability) Order 1986 of Employment) Regulations 1981
(SI 1305/1986) (SI 1981/1794)������������������������������� 179
Sch. 1�������������������������������������������������� 61
Hovercraft (Civil Liability) Other Jurisdictions
(Amendment) Order 1987
(SI 1835/1987)��������������������������������� 61 Australia
Sch. 6�������������������������������������������������� 58 Bankruptcy Act 1966 (Cth)������������������ 231
Law Applicable to Contractual Corporations Act 2001 (Cth)
Obligations (England and Wales Ch. 5������������������������������������������������� 231
and Northern Ireland) Regulations Cross-Border Insolvency Act 2008 (Cth)
2009 (SI 2009/3064)���������������������� 219 s.16(b)����������������������������������������������� 199
Law Applicable to Non-Contractual
Obligations (England and Wales and Bahamas
Northern Ireland) Regulations 2008 Merchant Shipping (Maritime
(SI 2008/2986)������������������������������� 218 Claims Limitation of Liability)
Law Applicable to Non-Contractual Act 1989��������������������������������������� 139
Obligations (Scotland) Regulations
2008 (SI 2008/404)������������������������ 218 Belgium
Merchant Shipping Act 1995 Amendment Code of Civil Procedure
Order 2016 (SI 2016/161)�������������� 133 Art. 584�������������������������������������161, 163
Merchant Shipping and Maritime Security Art. 1039��������������������������� 161, 163, 164
Act 1997 (Commencement No. 2) Commercial Code
Order 1997 (SI 2007/1539) Art. 61������������������������������������������������ 72
Art. 2������������������������������������������������ 180 Decree of 23 November 1987 on the safety
Merchant Shipping (Compulsory of vessels (Arrêté du 23 novembre
Insurance of Shipowners for 1987 relatif à la sécurité des navires)
Maritime Claims) Regulations Réglement général, Art.221-V/28
2012 (SI 2012/2267)�������������������47, 51 bis��������������������������������������������������� 72
Merchant Shipping (Oil Pollution) Decree Flemish Region 8 of 15 July
(Bunkers Convention) Regulations 2002���������������������������������������������� 159
2006 (SI 2006/1244)���������������������� 180 Statute on the Pilotage Service of 3
Package Travel and Linked Travel November 1967
Arrangements Regulations 2018 Art.3bis, §1��������������������������������������� 159
(SI 2018/634)����������������������������������� 65 Art.3bis, §1 n° 3�������������������������������� 159
Reg. 15(1)������������������������������������������� 67 Statute on Wrecks (Wrakkenwet) of 11
Reg. 15(8)������������������������������������������� 67 April 1989
Reg. 16(5)������������������������������������������� 64 Ch. V (Arts. 12 to 18)����������������������� 157
Reg. 16(10)����������������������������������������� 63 Art. 13������������������������������ 157, 158, 163,
Package Travel, Package Holidays and 164, 165, 166
Package Tours Regulations 1992 Art. 14������������������������������� 157, 163, 165
(SI 1992/3288)����������������������������65, 67
xxvii
table of statutes and statutory instruments
Art. 15, §2����������������������������������������� 157 Japan
Art. 18������������������������������ 157, 163, 164, Law on Recognition and Assistance
165, 166 in Foreign Insolvency Proceedings
Art. 18, §5����������������������������������������� 157 2001���������������������������������������������� 222
Canada Netherlands
Bankruptcy and Insolvency Act, RSC Commercial Code
1985, B-3 Art. 348���������������������������������������������� 72
s.271(3)��������������������������������������������� 199
Companies’ Creditors Arrangement Act, New Zealand
RSC 1985, C-36 Insolvency (Cross-border) Act 2006
s.49(3)����������������������������������������������� 199 Sch. I, Art.20(2)�������������������������������� 199
Marine Insurance Act 1993, RSC 1993,
C-22) Norway
s. 53(2)���������������������������������������������� 153 Insurance Contract Act 1989 No 69
Marine Liability Act 2001, SC 2001 c.6 Ch. 7��������������������������������������������������� 12
s.37(2)������������������������������������������������� 58 Petroleum Activities Act 1966
No 72����������������������������������� 12, 13, 21
France
Civil Code Poland
Arts. 1386-19 to 1386-25��������������������� 31 Bankruptcy and Reorganization Act
Code of Criminal Procedure Art. 142�������������������������������������������� 227
Art. 3�������������������������������������������������� 31
Commercial Code Singapore
Art. 622-21��������������������������������������� 194 Companies Amendment
Art. 632-1����������������������������������������� 194 Act 2017��������������������������������������� 222
Art. R5114-115��������������������������������� 193 High Court (Admiralty Jurisdiction)
Act (Ch. 123)�������������������������������� 189
Germany
Code of Civil Procedure (ZPO) South Africa
§ 930.1���������������������������������������������� 195 Admiralty Jurisdiction Regulation
§ 931.1���������������������������������������������� 195 Act 1983��������������������������������������� 189
Cross-Border Insolvency Act 2000������� 222
Greece
Bankruptcy Code Switzerland
Art. 53���������������������������������������������� 235 Federal Law on Private International
Civil Code Law of 18 December 1987
Art. 33���������������������������������������������� 234 (Loi fédérale sur le droit
Law 3858/2010, adopting the 1997 international privé)������������������������ 228
United Nations Commission
on International Trade Law Turkey
Model Law on Cross-Border Insurance Contract Law
Insolvency������������������������������������� 222 Pt. 2, Ch. 1(B)����������������������������������� 181
Art. 20(2)������������������������������������������ 234
United States
Hong Kong Bankruptcy Abuse Protection and
Merchant Shipping (Limitation of Consumer Protection Act 2005
Shipowners’ Liability) Ordinance, (11 USC Ch. 15)��������������������222, 235
Cap 434����������������������������������������� 149 §362������������������������������������������������� 237
xxviii
table of statutes and statutory instruments
Bankruptcy Amendments and Federal Nuclear Industries Indemnity Act
Judgeship Act 1984 (Pub. (42 USC Ch 23)������������������������������ 24
L. 98–353)������������������������������������� 236 Oil Pollution Act 1990 (33 USC
Bankruptcy Code (11 USC)����������236, 238 §2701 et seq)������������������������� 13–15, 41
Bankruptcy Reform Act 1978 (Pub. United States Code
L. 95–598, 92 Stat. 2549)��������������� 236 28 USC
Constitution 1783 §157�������������������������������������������237, 239
Art. III��������������������������������������������� 236 §1334������������������������������������������������ 237
Federal Arbitration Act 1925 (9 USC
Ch. 1)�������������������������������������������� 235
xxix
AU T H ORS ’ B I OGR A PH I ES
EDITORS
Professor Barış Soyer
Professor of Commercial and Maritime Law
Director of the Institute of International Shipping and Trade Law
Swansea University
Professor Soyer directs the Institute of International Shipping and Trade Law at
Swansea University, and is a member of the British Maritime Law Association
and British Insurance Law Association. He is the author of Warranties in Marine
Insurance (2001) (winner of the BILA Book Prize in 2002) and Marine Insurance
Fraud (2014) (winner of the same prize in 2015), and has written numerous articles
published in journals including the Cambridge Law Journal, Law Quarterly Review,
Lloyd’s Maritime & Commercial Law Quarterly, Edinburgh Law Review and Journal
of Business Law. He has also edited a large number of collections of essays on com-
mercial, maritime and insurance law. In addition, he sits on the Editorial Boards of
Shipping and Trade Law and the Journal of International Maritime Law. Professor
Soyer currently teaches Admiralty Law, Charterparties: Law and Practice and Marine
Insurance on the LLM Programme at Swansea.
Professor Tettenborn has been attached to the Institute of International Shipping and
Trade Law at Swansea Law School since 2010, teaching international trade, payments
and banking and Admiralty. He has also taught at the universities of Cambridge,
Exeter and Geneva and held visiting positions in Europe, Australia and the US.
Professor Tettenborn is general editor of Marsden’s Collisions at Sea, an editor of
Clerk & Lindsell on Torts and also of the leading student textbook on commercial law
(Clarke, Hooley, Munday, Sealy, Tettenborn & Turner’s Text, Cases and Materials),
He has authored numerous articles on commercial law and obligations and sits on the
Editorial Boards of Lloyd’s Maritime & Commercial Law Quarterly and the Journal of
International Maritime Law.
xxxi
authors’ biographies
CONTRIBUTORS
Professor Lia Athanassiou
Professor in Law
University of Athens, Greece
Professor Baughen joined Swansea in 2013 from Bristol Law School as Professor of
Shipping Law, having previously practised as a shipping lawyer in the London P&I
Club and later as a solicitor with Horrocks & Co. He is a leading expert on shipping
law; his book on the subject, simply called Shipping Law, has run to six editions and
is very well known to academics and students alike as by far the most approachable
work on the subject. In addition he now writes the very well-established practitioner’s
work Summerskill on Laytime, a new edition of which appeared in 2018. Apart from
shipping law, he is also interested in the regulation of multinational corporations in
the developing world, having authored International Trade and the Protection of the
Environment (2007) and Holding Corporations to Account: Closing the Governance
Gap (2015). The subjects he teaches include trust law, shipping law, carriage of goods,
charterparties and Admiralty law.
xxxii
authors’ biographies
a ppointments in Germany, the US and Japan. He has been invited to teach twice at the
Hague Academy of International Law, in 2009 and 2014. Apart from his academic life,
Professor Cachard is also an active arbitrator in commercial and Admiralty matters
under the ICC Rules and under those of the Chambre Arbitrale Maritime de Paris. He
is a member of the Board of the Association française de droit maritime and a member
of the Maritime Cluster of Luxembourg.
Professor Cachard’s research interests lie in shipping and transportation law, com-
mercial law and conflict of laws. His publications include Droit International Privé
(2015, now in its fourth edition) and Droit du Commerce International (second edition,
2011); and, in English, Luxembourg Maritime Code (2014) and numerous articles.
Andrew Chamberlain
Partner and Mariner
Holman Fenwick Willan LLP, London
Andrew Chamberlain is a former naval officer and specialises in ‘wet’ shipping cases,
including salvage (acting alike for salvors, owners and underwriters), collisions, fire
and explosion and wreck removal. His practice, which is very varied, also covers both
civil and criminal pollution liabilities and marine insurance coverage. He has served
at sea in the Royal Navy and also spent time in the Hong Kong Squadron. He left the
Navy in 1990 and joined Holman Fenwick Willan in 1994, having trained at Richards
Butler (now Reed Smith), being made partner in 2003. His cases in recent years have
included the affairs of the BP Thunderhorse (2005), the MSC Napoli (2007), the MSC
Chitra (2010), the Costa Concordia (2012), the Flash (2012), the Kulluk” (2012), the
Smart (2013), the Norman Atlantic (2014), the Maersk Seoul (2015), the Charlton and
the Burgos (2016). He also finds time to lecture regularly on salvage, wreck removal
and casualty response.
Andrew is consistently ranked in the top tier for Shipping in Chambers and Legal
500 and ‘what he doesn’t know about shipping isn’t worth knowing’ (Chambers UK
2017). Andrew is qualified in England and Wales.
Simon Cooper
Partner
Ince & Co LLP, London
Simon Cooper is a partner in the insurance and reinsurance group of Ince & Co LLP
having joined from another International law firm in 2011. He has more than 30 years’
experience of advising clients in the London and international insurance and reinsur-
ance markets and has extensive experience of all forms of dispute resolution both
in England and in a number of overseas jurisdictions. Many of these disputes have
involved multiple parties and complex issues of fact and law.
Simon’s practice focuses on commercial dispute resolution, insurance and reinsur-
ance, and he heads the cyber group at Ince in Europe. He is experienced in working
with lawyers in many jurisdictions and coordinating multi-jurisdictional projects
on clients’ behalf. In 2012 he was named winner of the UK Leading Insurance &
Reinsurance Lawyer of the Year by ACQ Magazine and the International Law Office
xxxiii
authors’ biographies
(ILO) Client Choice Award 2012 for Insurance/Reinsurance. He is a member of the
IUA Clauses Subcommittee and also edited the second edition of Reinsurance Practice
and the Law.
Måns Jacobsson
Former Director of the International Oil Pollution Compensation Funds, Sweden
From 1985 to 2006 Måns Jacobsson was Director and Chief Executive Officer of
the International Oil Pollution Compensation Funds (IOPC Funds). He studied law
xxxiv
authors’ biographies
at Lund University in Sweden graduating in 1964. He served as a judge at district
court and appellate court level in Sweden. He was legal advisor in the Department
for International Civil Law of the Swedish Ministry of Justice 1970–1981 and Head
of that Department 1982–1984. He has also held the post of President of Division of
the Stockholm Court of Appeal. Måns is a member of the Board of Governors of
the World Maritime University (WMU) in Malmö (Sweden). He is Visiting Professor
at WMU and at the Maritime Universities in Dalian and Shanghai and Honorary
Professor at the University of Nottingham. He is a member of the Institute of
International Shipping and Trade Law at the University of Swansea and Visiting
Fellow at the IMO International Maritime Law Institute (IMLI) in Malta. He is
also a corresponding member of the Argentine Academia Nacional de Derecho y
Ciencias Sociales and Academic Associate of Quadrant Chambers. He was a member
of the Executive Council of the Comité Maritime International (CMI) 2007–2014.
Måns has published three books and numerous articles in various fields of law,
such as maritime law, torts, patent law, nuclear law and treaty law. In 2007 the
University of Southampton conferred upon him the Degree of Doctor of Laws
honoris causa.
Henning Jessen is a fully qualified lawyer in his German home jurisdiction. He gradu-
ated from the University of Kiel in 2001 and he has also undertaken postgraduate
studies in Admiralty and Maritime Law at Tulane from 2003–2004.
Henning started his legal career as a WTO lawyer in 2006 in the German Ministry for
Economic Cooperation & Development. Since 2016, has been an Associate Professor
of Maritime Law & Policy at the World Maritime University (WMU) in Malmö. His
main teaching and research areas are the law of the sea, international economic law,
transport law and also comparative and EU law. In 2016 he co-edited EU Maritime
Transport Law to which he also contributed several chapters.
Dr Tabetha Kurtz-Shefford
Senior Lecturer in Law
Institute of International Shipping and Trade Law
Swansea University
xxxv
authors’ biographies
Associate Professor George Leloudas
Associate Professor in Law
Institute of International Shipping and Trade Law
Swansea University
xxxvi
authors’ biographies
Dr Frank Stevens
Assistant Professor in Law
Erasmus University, The Netherlands
Frank Stevens graduated from Louvain in 1991, later gaining an LLM in Admiralty
from Tulane in 1992, a Special Degree in Maritime Sciences from Antwerp in 1993
and a doctorate from Ghent in 2017. He joined the Antwerp Bar in 1993, and has
practised in the area of transport and maritime law since then, being associated with
Roosendaal Keyzer, one of the leading maritime law firms in Antwerp. Since 2016, he
has been an Assistant Professor at the Erasmus School of Law in Rotterdam.
Frank has written textbooks on carriage by sea and limitation of liability, and
regularly publishes and speaks on issues of transport and maritime law. He is the
Editor-in-Chief of the Tijdschrift voor Internationale Handel en Transport and sits on
the Board of Editors of two other legal journals.
Richard Williams retired from private practice in 2000 after 30 years as a partner
with Ince & Co, latterly also as chairman of the firm’s dry shipping business group.
Having grown up in South Wales, Professor Williams has been a Visiting Professor at
Swansea University since then and teaches charterparties and carriage by sea on the
LLM course. Throughout his career he has been involved not only in the litigation of
cases to the highest courts of appeal in the UK and abroad but also in the development
of policy and documentation within the industry both for clients and international
industry bodies. He has been consulted by United Nations agencies and other interna-
tional bodies such as BIMCO and the International Group of P&I Clubs in relation
to industry-wide issues and the drafting of standard documents and is currently a
member of the working group established by the UK Department for Transport to
consider the implications of the implementation of the Rotterdam Rules into the law
of the UK.
Richard is the author of numerous papers and articles on shipping law, is co-author
of the textbook Limitation of Liability of Maritime Claims (4th edition 2005) and
author of the Gard Guidance to the Statutes and Rules (2008), the Gard Guidance on
Maritime Claims and Insurance (2013) and the Gard Guidance to the Rules (2015).
xxxvii
PART I
MARITIME LIABILITIES:
BOUNDARIES AND LIMITATION
OFFSHORE SECTOR LIABILITY CONVENTION MÅNS JACOBSSON
CHAPTER 1
1.1 Introduction
Issues relating to liability and compensation for pollution damage resulting from
various types of shipping incidents are governed by several global international con-
ventions adopted under the auspices of the International Maritime Organization
(IMO). The most important of these regimes is that relating to tanker oil spills. There
is, however, no international convention governing liability for pollution damage in the
offshore sector.1
In the aftermath of two recent incidents in the offshore sector, the Montara incident
in the Timor Sea off the coast of Western Australia in 2009 and the Deepwater Horizon
incident in the Gulf of Mexico in 2010, it has been proposed that an international
convention be developed that would govern liability and compensation for pollution
damage resulting from activities offshore.
The United Nations Convention on the Law of the Sea (UNCLOS) is of interest in
this context. Under UNCLOS, coastal States have sovereign rights in their respective
exclusive economic zone (EEZ) and on their respective continental shelf over activities
related to the exploration for and exploitation of natural resources over and above
the seabed and in the subsoil (art. 193). UNCLOS contains a number of provisions
imposing obligations on States to take measures to prevent, reduce and control pol-
lution of the marine environment (in particular art. 194 and arts. 207–212) and to
impose criminal sanctions on those who cause marine pollution (art. 230). There are
also provisions on State responsibility.
Issues relating to civil liability and compensation are, however, dealt with in
UNCLOS only in Article 235, which provides that States shall ensure that recourse is
available in accordance with their legal systems for prompt and adequate compensa-
tion or other relief in respect of damage caused by pollution of the marine environ-
ment by natural or legal persons within their jurisdiction. To this end, States shall
3
måns jacobsson
co-operate in the implementation of existing maritime law and the further develop-
ment of international law relating to responsibility and liability for the assessment of
and compensation for damage as well as development of criteria and procedures for
payment of adequate compensation, such as compulsory insurance or compensation
funds. UNCLOS does not contain any substantive provisions on liability and compen-
sation for marine pollution, but imposes, however, an obligation on States to develop
legislation in this regard, and this could be accomplished by international treaties.
With few exceptions, liability and compensation for pollution damage resulting
from offshore activities are governed by the applicable domestic law, and national
regimes vary greatly. Some States have very detailed legislation in this regard; others
have no legislation in this field and liability issues would have to be dealt with under
general legislation or jurisprudence on civil liability.
The liability and compensation issues in the offshore sector have however been
addressed on a regional basis, in particular within the European Union (EU). Of
interest in this regard are Directive 2004/35/EC on environmental liability, which deals
with liability for some types of pollution damage and applies to offshore operations
in EU Member States, and Directive 2013/30/EU on safety of offshore oil and gas
operations. As regards the North Sea area, there is a voluntary industry agreement,
the Offshore Pollution Liability Agreement 1974 (OPOL).
As will be set out below, the IMO (which would appear to be the most
appropriate body to address this issue) has decided not to embark on the elaboration
of a convention governing liability and compensation in the offshore sector. It is
unlikely, therefore, that any global treaty in this field will be developed in the foresee-
able future.
It might nevertheless be interesting to explore whether, in the event that the prepara-
tion of such a convention be contemplated at a later stage, the liability and compensa-
tion regime relating to tanker oil spills could serve as an inspiration for a convention
governing these issues for the offshore sector, hereinafter referred to as a prospective
offshore liability convention.2
The regime relating to tanker oil spills was created in the aftermath of the
Torrey Canyon oil spill which occurred in 1967 off the southwest coast of England.3
This regime consisted originally of the 1969 Civil Liability Convention (1969 CLC)4
and the 1971 Fund Convention.5 These Conventions were revised in 1992 by two
Protocols, and the revised Conventions are normally referred to as the 1992 Civil
Liability Convention (1992 CLC) and the 1992 Fund Convention. In 2003 a Protocol
(the Supplementary Fund Protocol) was adopted to the 1992 Fund Convention.6 The
2 For a discussion of the present legal situation and possible ways forward see the contribution of
B. Soyer, “Compensation for Pollution Damage Resulting from Exploration for and Exploitation of Seabed
Mineral Resources”, in B. Soyer and A. Tetterborn (eds), Pollution at Sea, Law and Liability (Informa Law,
2012), p. 59.
3 M. Jacobsson, “The Torrey Canyon Fifty Years on: The Legal Legacy” (2017), Journal of International
Maritime Law, p. 20.
4 International Convention on Civil Liability for Oil Pollution Damage, 1969.
5 International Convention on the Establishment of an International Fund for Compensation for Oil
Pollution Damage, 1971.
6 Protocol of 2003 to the International Convention on the Establishment of an International Fund for
Compensation for Oil Pollution Damage, 1992.
4
offshore sector liability convention
l iability and compensation system created by the 1992 CLC, the 1992 Fund Convention
and the 2003 Protocol is hereinafter referred to as the CLC/Fund regime.
This chapter will focus on the substantive provisions of the treaties forming the
CLC/Fund regime. It will not discuss the procedures that have been developed for
handling compensation claims under these treaties.7
For comparative purposes, a brief outline will be given of the relevant parts of
the above-mentioned EU Directives and the voluntary industry agreement OPOL,
as well as of the national legislation of Norway and the United States dealing with
these issues.8 On some points a comparison will be made with the solutions adopted
in the Conventions governing civil liability for damage in the field of nuclear energy
which have been developed under the auspices of the Organisation for Economic
Co-operation and Development (OECD) and the International Atomic Energy
Agency (IAEA).9
7 As regards these procedures see the contribution of M. Jacobsson, “The CLC/Fund Experience”, in
G. Handl and K. Svendsen (eds), Managing the Risk of Offshore Oil and Gas Accidents, The International
Legal Dimension (Edward Elgar Publishing, 2018).
8 A summary of the national legislation of a number of States can be found in a report by J. Rochette,
M. Wemaëre, L. Chabason, S. Callet, published by l’Institut du développement durable et des relations
internationales (IDDRI), entitled Seeing beyond the Horizon of Deepwater Oil and Gas: Strengthening the
International Regulation of Offshore Exploration and Exploitation, Studies No 01/14 (IDDRI, Paris).
9 This chapter does not discuss State liability for pollution under public international law; see
J. Crawford, Brownlie’s Principles of Public International Law, 8th ed, (OUP, 2012), Chapter 25; P. Sands and
J. Peel, Principles of International Environmental Law, 3rd ed (CUP, 2012), Chapter 17; see also International
Tribunal for the Law of the Sea, Case No 17, Advisory opinion (2011) re Responsibilities and Obligations of
States sponsoring persons and entities with respect to activities in the Area.
10 LEG97/14/1.
11 LEG97/15 paragraphs 14.10–14.12,
12 C 106/D paragraph 10(ii).
5
måns jacobsson
carried out on the continental shelf of States and are regulated by national law
and bilateral and regional agreements, making the need for a uniform global regime
questionable.
It has been suggested, however, that these arguments were not the real ones but a
subterfuge. The IMO’s mandate has over the years been expanded significantly when
there has been a political will to do so.13 The States that most strongly maintained that
the IMO was not the proper forum for the development of such a treaty were mainly
those with large or growing exploration and exploitation industries that did not want
such an international regime to be developed.14
After having further considered this issue, the Legal Committee decided in 2013
not to elaborate such a treaty regime but rather to develop guidance to assist States
interested in preparing bilateral or regional arrangements.15
In 2015 the Iberoamerican Institute of Maritime Law (IIDM) introduced a docu-
ment in the Legal Committee in which the Institute emphasized the need for a new
international convention to be drafted under IMO auspices to address this subject,
and the Committee was asked to reconsider the matter.16 After a brief reconsideration,
the Committee stated again that there was no compelling need for an international
convention in this field.17
At its April 2017 session, the Legal Committee took note of a document prepared
by the delegations of Indonesia and Denmark containing guidance to assist Member
States that wished to prepare bilateral or regional arrangements.18 The guidance docu-
ment did not include any substantive provisions on liability but rather contained a
list of issues that ought to be considered when such arrangements are developed. The
Committee encouraged Member States and observer delegations to take the guid-
ance into consideration when negotiating bilateral/regional arrangements or agree-
ments connected with transboundary pollution damage from offshore exploration and
exploitation activities.19
13 The IMO has dealt with offshore activities in the past; see for instance the 1990 International
Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), which inter alia deals with
incidents involving offshore oil rigs, the 2009 Code for the Construction and Equipment of Mobile Offshore
Drilling Units and the 1988 and 2005 Protocols for the Suppression of Unlawful Acts Against the Safety of
Fixed Platforms Located on the Continental Shelf.
14 R. Shaw, “Regulation of Offshore Activity – Pollution Liability and Other Aspects”, CMI Yearbook
2011–2012, p. 302, which also gives information on the work relating to Offshore Mobile Craft carried out
by the Comité Maritime International (CMI) 1977–1998; R. Balkin, “Is There a Place for the Regulation
of Offshore Oil Platforms within International Maritime Law; If Not, Then Where?”, CMI Yearbook 2014,
p. 179; J. M. Radovich and A. Brandani, “The Need for International Regulation of Offshore Liability
and Financial Security”, International Ocean Institute, Ocean Yearbook 31 (2017), p. 23; J. M. Radovich
and A. Bradani, “Protecting the Aquatic Environment: Are All Costs and Benefits Accounted for?”, 2013
Le Droit Maritime Français 839 and T. Kurtz-Shefford, “Liability for Offshore Facility Pollution Damage
After the Deepwater Horizon? What Happened to the Global Solution?” (2012), Journal of International
Maritime Law, p. 453.
15 LEG99/14 paragraphs 13.16 and13.17.
16 LEG102/11, published in CMI Yearbook 2015 New York I, p. 184.
17 LEG102/12 paragraph 11.8.
18 Guidance for bilateral/regional arrangements or agreements on liability and compensation issues
connected with transboundary oil pollution damage resulting from offshore exploration and exploitation
activities; LEG104/14/2.
19 LEG104/15 paragraph 14.7.
6
offshore sector liability convention
1.3 Main elements of the CLC/Fund regime
The CLC/Fund regime, which addresses liability and compensation for pollution
damage resulting from tanker oil spills, is a regime in three tiers.
The first tier of compensation is provided under the 1992 CLC and is paid by the
registered owner of the ship that causes the oil pollution or his liability insurer. The
shipowner has strict liability for pollution damage, and he is exempt from liability in
only a few particular cases. His liability is normally limited in amount. The limitation
amount under the Convention is for ships up to 5,000 units of gross tonnage 4,510,000
SDR (US$6.3 million), increasing on a linear scale up to 89,770,000 SDR (US$126
million) for ships of 140,000 units of gross tonnage or over.20
A shipowner is deprived of the right to limit his liability if it is proved that the pol-
lution damage resulted from the shipowner’s personal act or omission, committed with
the intent to cause such damage, or recklessly and with knowledge that such damage
would probably result.
The shipowner is obliged to maintain insurance to cover his liability under the 1992
CLC up to the limitation amount. The victims of pollution damage are entitled to
bring legal action directly against the insurer.
The 1992 Fund Convention, which is supplementary to the 1992 CLC, establishes a
system for compensating victims through an international fund when the compensa-
tion under the CLC is inadequate. The maximum amount of compensation payable
under the 1992 Fund Convention for a particular incident is 203 million SDR (US$285
million), including the amount actually paid under the 1992 CLC.
The 2003 Protocol to the 1992 Fund Convention (the Supplementary Fund
Protocol) adds a third layer of compensation for pollution damage in States parties
to the Protocol by the creation of a Supplementary Fund that provides additional
funds when the amount of compensation available under the 1992 Conventions is
inadequate to compensate all established claims in full. The total amount available for
compensation under the Protocol is 750 million SDR (US$1,055 million), including
the amount payable under the 1992 Conventions.
The limits laid down in the 1992 Conventions and the Supplementary Fund Protocol
can be increased by means of a special simplified procedure provided for in the respec-
tive treaties (“the tacit acceptance procedure”).21
The courts in the State or States parties where the pollution damage occurred or
measures to prevent or minimize such damage were taken have exclusive jurisdiction
over actions for compensation against the shipowner, his insurer and the respective
Fund.
The 1992 Fund is financed by contributions levied on any person who received in
the relevant calendar year more than 150,000 tonnes of crude oil and heavy fuel oil
20 The limitation amounts in the 1992 Conventions and the Supplementary Fund Protocol are expressed
in the Special Drawing Right (SDR) as defined by the International Monetary Fund. The figures given in
United States dollars in this chapter have been calculated using the rate of exchange applicable on 2 July
2018, i.e. 1 SDR = US$1.05716.
21 This procedure was used in 2001 to increase the amounts laid down in the 1992 Civil Liability and
Fund Conventions by 50.73 per cent with effect from 1 November 2003; IMO Legal Committee Resolutions
LEG.1(82) and LEG.2(82). The amounts set out in this chapter are the amounts as increased by these
Resolutions.
7
måns jacobsson
in ports or terminal installations in a State party to the 1992 Fund Convention after
carriage by sea. The contribution system for the Supplementary Fund differs from that
of the 1992 Fund in that, for the purpose of paying contributions, at least 1 million
tonnes of contributing oil will be deemed to have been received each year in each State
party to the Supplementary Fund Protocol.22
The 1992 Fund Convention and the Supplementary Fund Protocol each established
an intergovernmental organization to administer the compensation regime created by
the respective treaty, normally referred to as the 1992 Fund and the Supplementary
Fund (collectively referred to as the IOPC Funds). By becoming party to one of these
treaties a State becomes a member of the respective Fund.23 A State cannot become
Party to the Supplementary Fund Protocol without being Party to the 1992 Fund
Convention.
The supreme organ governing the 1992 Fund is an Assembly composed of repre-
sentatives of all Member States. The Assembly elects an Executive Committee com-
prising 15 Member States, the main function of which is to approve settlement of
compensation claims. The Supplementary Fund has a similar structure. The 1992
Fund and the Supplementary Fund have a joint Secretariat located in London. The
Secretariat is headed by a Director and has some 30 staff members.
Since their establishment, the 1992 Fund and its predecessor, the 1971 Fund, have
been involved in 150 incidents. Some of these incidents have given rise to thousands
of compensation claims.24 The total amount of compensation paid by these Funds is
£674 million (US$890 million). So far, the Supplementary Fund has not been involved
in any incidents.25
The 1992 Conventions have established a truly global regime. As at 1 July 2018
the 1992 CLC had been ratified by 137 States and the 1992 Fund Convention
by 115 States. Thirty-two States had become parties to the Supplementary Fund
Protocol.
It should be noted that the United States is not a party to any of these treaties.26
22 If the total quantity of contributing oil actually received in a State party to the Protocol is less than
1 million tonnes, the State will itself be liable to pay contributions for a quantity of contributing oil cor-
responding to the difference between 1 million tonnes and the aggregate quantity of actual receipts in that
State.
23 The 1971 Fund Convention also established an intergovernmental organization, the 1971 Fund,
which was dissolved with effect from 31 December 2014. Up to that date the expression “the IOPC Funds”
included the 1971 Fund.
24 For instance, the Erika incident (France, 1999) gave rise to some 8,000 compensation claims, the
Solar 1 incident (the Philippines, 2006) resulted in some 32,000 claims and the Hebei Spirit incident
(Republic of Korea, 2007) gave rise to some 128,000 claims.
25 For details of the CLC/Fund regime, reference is made to M. Jacobsson, “Liability and Compensation
for Ship-source Pollution”, The IMLI Manual on International Maritime Law, Volume III, Marine
Environmental Law and Maritime Security Law (OUP, 2016) p. 287; C. de la Rue and C. B. Anderson,
Shipping and the Environment, Law and Practice 2nd ed (Informa, 2009), pp. 81–175, 355–490.
26 As regards the reasons for the United States not having joined the CLC/Fund regime see
M. Jacobsson, note 3 supra, p. 25; M. Jacobsson, “The International Liability and Compensation Regime
for Oil Pollution from Ships – International Solutions for a Global Problem”, 32 Tulane Maritime Law
Journal 1 (2007).
8
offshore sector liability convention
1.4 Examples of existing liability regimes in the offshore sector
27 The relationship between the two Directives is very complex; see the 2013 Directive, Preamble para-
graphs 9, 11, 58 and 63. For an analysis of the 2013 Directive and the relationship between the 2013 and 2004
Directives see H. Jessen, “The EU’s Offshore Oil and Gas Directive (2013/30/EU) and Arctic Governance:
Does the Activity of Third Parties Have Any Regulatory Impact?”, OGEL Special issue “Emerging Issues in
Polar Energy Law and Governance” 2016.
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international treaties, including the 1992 CLC, which is in force for the EU Member
State concerned.
The scope of application of the 2004 Environmental Liability Directive was ini-
tially limited to the territorial sea, which would in fact exclude most offshore and gas
activities. The 2013 Directive (art. 38) extends the scope of the 2004 Directive to the
exclusive economic zone and continental shelf of EU Member States.
Unlike the 1992 CLC, the 2004 Directive does not impose on operators any obliga-
tion to maintain insurance or financial security to cover their liability. However, the
2013 Directive (art. 4.1–4.3) obliges Member States to take due account of a licensee’s
financial capabilities, including any financial security, to cover liabilities potentially
deriving from the offshore operations in question. Member States are further required
(art. 4.3) to facilitate the deployment of sustainable financial instruments and other
arrangements to assist applicants for licenses in demonstrating their financial capacity.
Liability and insurance issues relating to offshore activities have also been c onsidered
within the EU since the adoption of the 2013 Directive.
In 2014 the European Commission released a report on Civil Liability, Financial
Security and Compensation Claims for Offshore Oil and Gas Activities in the European
Economic Area, prepared to assist the Commission in its study of the issues involved.28
The report concludes that in many EU Member States there is no existing liability
regime for third-party liability claims for traditional damage caused by pollution from
offshore activities, no regime in the vast majority of Member States for handling com-
pensation payments and no assurance in many Member States that operators would
have adequate financial assets to meet such claims. The report does not offer any solu-
tion to this unsatisfactory situation.
Also in 2014 the European Commission published a report prepared by Maastricht
University entitled Civil Liability and Financial Security for Offshore Oil and Gas
Activities. This report, which includes an overview of the relevant legislation in a
number of States, recommends that the EU should take the initiative in establishing
an international agreement dealing with the problems of oil spills from offshore activi-
ties. In the report it is recognized, however, that there is no real prospect of such an
agreement coming into existence in the near future, as there appears to be an absence
of the necessary political will.
Attention should also be drawn to a report published in 2014 by l’Institut du
développement durable et des relations internationales (IDDRI) in Paris entitled
Seeing beyond the Horizon of Deepwater Oil and Gas: Strengthening the International
Regulation of Offshore Exploration and Exploitation.29 This report contains a com-
prehensive review of existing international, multilateral and bilateral agreements on
the regulation of offshore activities. The report recommends the promotion of an
international convention regulating liability and compensation for pollution damage
resulting from offshore drilling activities.
As required under the 2013 Directive, in 2015 the Commission submitted a report
to the European Parliament and the Council on liability, compensation and financial
28 Bio by Deloitte, Final Report Prepared for European Commission – DG Energy. The Report covered,
in addition to the EU Member States, the EEA States Norway and Iceland.
29 J. Rochette, M. Wemaëre, L. Chabason, S. Callet, Studies No 01/14, note 8 supra.
10
offshore sector liability convention
security for offshore oil and gas operations. In the report it is stated that broaden-
30
ing the liability provisions through EU legislation does not appear appropriate at
this juncture. It is also suggested that the Commission could, by working together
with Member States, help achieve safeguards for claimants as regards the prompt
and adequate handling of claims. It is submitted that if new national laws would not
improve the availability of financial security instruments and put in place procedures
for ensuring prompt and adequate handling of compensation claims, the Commission
should reassess whether and what further EU action could achieve these objectives.
1.4.2 OPOL
An alternative way of dealing with liability issues in the offshore sector is the Offshore
Pollution Liability Agreement (OPOL), concluded in 1974 and amended from time
to time. OPOL is a voluntary agreement between companies that are operators of
offshore facilities used in connection with the exploration for or production of oil or
the exploration for or appraisal of gas.
Under the agreement the parties operating in that sector accept strict liability (with
very narrow exceptions closely corresponding to those in the 1992 CLC) for pollution
damage and costs of remedial measures, i.e. measures taken to prevent, mitigate or
eliminate pollution damage or to remove or neutralize the oil following an escape. The
maximum liability per incident is US$250 million, out of which US$125 million is to
cover pollution damage and US$125 million to cover remedial measures. However,
when all claims in one of these categories have been met, any surplus may be used to
meet unsatisfied claims in the other category.
OPOL applies to offshore facilities from which there may be a risk of escape or
discharge of oil causing pollution damage. These facilities are wells, drilling units,
platforms, offshore storage/loading systems and pipelines located to seaward of the
coastal low water line, including gas-wells being drilled, recompleted or worked upon.
It does not apply to abandoned facilities.
Initially OPOL applied only to operators of offshore facilities within the jurisdic-
tion of the United Kingdom, but it has over the years been extended to such facilities
within the jurisdictions of Denmark, the Federal Republic of Germany, France, the
Netherlands, Norway, the Republic of Ireland, the Isle of Man, the Faroe Islands and
Greenland, but excluding those facilities located in the Baltic and the Mediterranean
Seas.31 OPOL applies to any pollution incident occurring within the jurisdiction of
one of the above-mentioned States or territories. It will be possible, therefore, to claim
compensation under OPOL for pollution damage outside these jurisdictions, provided
the damage was caused by an offshore installation in one of these jurisdictions.
It should be noted that it is not possible for an operator to obtain a license from the
United Kingdom Government for operations in the offshore sector without being a
party to OPOL, and membership of OPOL is also compulsory for operations in the
offshore sectors of Greenland and the Faroe Islands.
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The parties to the agreement have to establish that they have the financial capacity
to meet their obligations under OPOL for an amount of no less than US$250 million
for any one incident and US$500 million in the annual aggregate. The financial stand-
ing can be established by producing evidence of insurance with the financial strength
required by the OPOL Rules or of a guarantee from a company with a credit rating
required by these Rules, or by producing evidence that the operator qualifies as a self-
insurer by meeting the financial strength required by these Rules.
The parties to OPOL jointly agree that, in event of default by one of the parties,
each of the other parties will contribute to meet the claims against the defaulter on
a pro rata basis, depending on the number of facilities operated as at the date of the
relevant incident.
There is some uncertainty as to the types of damage recoverable under OPOL. This
uncertainty relates in particular to pure economic loss, since OPOL only covers direct
loss or damage by contamination, and to damage to the environment as such.
Disputes under OPOL, which is governed by the laws of England, are to be resolved
exclusively by arbitration under the Rules of the International Chamber of Commerce,
and persons receiving compensation under OPOL are contractually bound not to
pursue further claims against the liable operator on the basis of national law. However,
persons not receiving compensation under OPOL are entitled to pursue legal actions
against the liable operator.32
1.4.3 Norway33
Under the Norwegian Petroleum Act,34 the licensee of an installation is strictly liable
without any limit for oil pollution from offshore activities. Licensees will have to
insure part of their liability. There are no provisions in the Act on direct action by the
claimants against the insurer, but in Norwegian insurance law there is a general rule
allowing for direct action.35 If oil escapes from a pipeline laid across a geographical
area covered by the exploitation license (a “block”), it is the licensee of the pipeline
and not the licensee of the block that is liable. There are channelling provisions, so that
most other persons involved are not exposed to liability.
Under the Norwegian Act the strict liability applies not only to drilling and pro-
duction units but also, for instance, to pipelines. Drilling vessels are included since
they are considered part of the installation, whereas stand-by vessels and supply
vessels are not.
32 For an analysis of OPOL see the contribution of S. Tromans, “Pollution from Offshore Rigs and
Installations”, in B. Soyer and A. Tetterborn (eds), Offshore Contracts and Liabilities (Informa Law, 2015),
p. 265; B. Soyer, “Compensation for Pollution Damage Resulting from Exploration for and Exploitation
of Seabed Mineral Resources”, note 2 supra, p. 59; T. Kurtz-Shefford, “Liability for Offshore Facility
Pollution Damage after the Deepwater Horizon? What Happened to the Global Solution?”, (2012) Journal
of International Maritime Law, p. 458.
33 The summary of the Norwegian legislation is based on E. Røsæg, “The Norwegian Perspective with
regard to Liability Regimes Concerning Oil Rigs and Installations”, published in B. Soyer and A. Tetterborn
(eds), Offshore Contracts and Liabilities, (Informa Law, 2015), p. 274.
34 Act 1966 No 72 relating to petroleum activities.
35 Insurance Contract Act 1989 No 69 Chapter 7.
12
offshore sector liability convention
If an inevitable event of nature, act of war, exercise of public authority or a similar
force majeure event has contributed to a considerable degree to the damage or its
extent under circumstances that are beyond the control of the liable party, the liability
may be reduced to the extent it is reasonable, with particular consideration to the
scope of the activity, the situation of the party that has sustained the damage and the
opportunity for taking out insurance on both sides.
The licensee may refer actions for compensation to the operator of the relevant
field. The licensee is only liable if the operator does not pay.
The licensees in the Norwegian sector are for practical purposes Norwegian com-
panies and their solvency is supposed to be evaluated when the license is granted. In
addition, insurance is required for an amount that is appropriate, considering the
exposure of each licensee. It is understood that a common level of insurance is about
US$250 million for each licensee, covering its pro rata share of the liability. Insurance
through captives is accepted.
The geographical scope of application of the Norwegian Act includes damage on
the Norwegian continental shelf as well as damage to Norwegian installations, ships
and catching equipment in areas adjacent to the Norwegian continental shelf.
The scope of the liability provisions in the Petroleum Act is determined, therefore,
by the place where the pollution damage occurred and not by the nationality of the
licensee. The Act will apply, therefore, also to pollution damage in the Norwegian
sector caused by an offshore operation in, for instance, the United Kingdom sector.
It appears that the Norwegian Act will not apply to damage caused outside the
Norwegian sector even if the offshore operations were carried out within that sector,
except as regards damage to Norwegian installations and ships and catching equip-
ment referred to above. However, the liability provisions in the Act apply to pollu-
tion damage caused in Denmark, Finland and Sweden by facilities used in petroleum
activities in the Norwegian sector, as established by the 1974 Nordic Convention on
Environmental Protection.
13
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of the United States, the adjoining shorelines or the exclusive economic zone. The
expression “responsible party” includes for a vessel the owner, operator or demise
charterer, for an offshore facility the lessee, owner and holder of operating rights for
the area where the facility is located and the designated operator or agent of the lessee
and for a pipeline the person owning or operating it.
A responsible party may be exempt from liability only if it establishes that the inci-
dent was caused solely by an act of God, an act of war or an act or omission of a third
party who is not in contractual relationship with the responsible party. These defences
may not be invoked if the responsible party fails to report the incident, co-operate and
assist with removal activities when requested by authorities or comply with an order
issued by authorities.
With some exceptions, OPA places limits on the strict liability. For instance, for
double hull oil tankers greater than 3,000 gross tons the limitation is the greater of
US$2,200 per gross ton or US$18,796,800. As regards offshore facilities there is no
limit for removal costs incurred by federal, state or local governments, whereas there is
a limit of US$133,650,000 for damages.
Furthermore, a responsible party may not avail itself of the OPA limits if the inci-
dent was proximately caused by the gross negligence, wilful misconduct or violation
of an applicable federal safety, construction or operating regulation by the responsible
party, its agent or employee, or a person acting pursuant to contractual relationship
with it. Simple negligence in violating an applicable federal regulation could, there-
fore, result in unlimited liability. Even if a responsible party is entitled to limit its
liability under OPA, it still has to pay all removal costs and damages, but it can claim
reimbursement from the Oil Spill Liability Trust Fund (OSLTF) – see below – for the
amount it has paid over its limit.
Each ship entering United States waters must have a Certificate of Financial
Responsibility (COFR) which certifies that the ship has insurance or other financial
guarantee (surety bond, guarantee, letter of credit or self-insurance) covering oil pol-
lution liabilities up to the applicable limitation amount. For offshore installations the
maximum amount of financial responsibility is US$150 million.
The recoverable damages under OPA fall into six categories: (a) natural resources,
(b) property, (c) subsistence use, (d) revenues, (e) profits and earning capacity and (f)
public services. Damages for loss of natural resources, revenues and public services are
recoverable by governmental bodies only.
State law may impose additional liability or requirements for the discharge of oil
within the State (i.e. there is no so-called state pre-emption). Many States have enacted
their own legislation.
In the Deepwater Horizon case the question arose whether responders could be liable
for damages caused by spill response efforts. The court held that responders carrying
out clean-up activities acting under the direction and control of the federal govern-
ment in the exercise of legitimate federal authority are entitled to derivative govern-
mental immunity against claims for damage as a result of the responders’ actions when
the government validly confers its authority on the private party and such authority
was not exceeded.
Courts have reached divergent decisions as to whether or not punitive damages are
available under OPA.
14
offshore sector liability convention
The OSLTF established under OPA is available to pay for removal costs and
damages. OSLTF is financed by a fee on parties receiving or using the oil, i.e. opera-
tors of refineries in the United States receiving crude oil, persons receiving imported
petroleum products for consumption, use or warehousing and persons using or
exporting domestic crude oil from the United States. Other sources of financing
are fines, penalties and recoveries of costs and damages from responsible persons or
guarantors.
OSLTF is available for the payment of inter alia removal costs incurred by public
authorities, other uncompensated removal costs consistent with the National
Contingency Plan and uncompensated damages. For any payments made by OSLTF,
it becomes subrogated to the rights of the claimants to seek recovery from the respon-
sible party.
OSLTF may pay up to US$1,000 million for any one oil pollution incident, includ-
ing up to US$500 million for natural resource claims in connection with any one
incident.
There have not been any major changes in OPA following the Deepwater Horizon
incident, with the exception of increased limits for offshore facilities.
15
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definition of “ship”. These lists, although not binding on national courts, would be
38
16
offshore sector liability convention
not lay down precise definitions since this has enabled the Funds, through their gov-
erning bodies being composed of representatives of the governments of the States
parties, to develop the regime in the light of experience.
The question will arise, however, whether a more detailed and precise definition of
“pollution damage” would be needed in a prospective offshore convention in order to
achieve a reasonable degree of uniformity of application, at least if there would be no
intergovernmental body that could consider issues of interpretation.
The definition of “pollution damage” in the 1992 Conventions covers damage to
property caused by contamination. Clean-up operations at sea or onshore have gener-
ally been considered as falling within the concept of preventive measures. A prospec-
tive offshore pollution liability regime should also apply to property damage and
reasonable preventive measures, including clean-up at sea or onshore, and further
damage caused by such measures.
It should be emphasized that the concept of preventive measures in the 1992
Conventions only comprises reasonable measures.42 The governing bodies of the IOPC
Funds have repeatedly stated that whether or not such measures are reasonable should
be determined on the basis of objective criteria in the light of the facts available at
the time of the decision to take the measures. The fact that a government or a public
authority has decided to take certain measures does not, in the view of these bodies, in
itself mean that the measures are reasonable for the purpose of compensation under
these Conventions.43
Should the costs of measures to prevent or minimize pollution damage be included
in the concept of pollution damage in a prospective off-shore convention, considera-
tion would have to be given to the criteria for admissibility of such measures.
Economic losses suffered by a person whose property has been contaminated by oil
(consequential economic loss) qualify in principle for compensation in most jurisdic-
tions. Such losses have always been considered in principle admissible for compensa-
tion under the 1992 Conventions. The application of a prospective offshore convention
to consequential economic loss should not be controversial.
A more contentious issue might be whether economic losses suffered by a person
whose property has not been contaminated (pure economic loss) should qualify for
compensation under a prospective offshore convention. In many States whose legal
systems are based on common law such losses are in principle not admissible. On the
other hand, most States whose legal systems are based on the European civil law tradi-
tion do not make any distinction for compensation purposes between consequential
economic loss and pure economic loss and apply the same criteria for admissibility for
both types of losses, e.g. the criterion of foreseeability and remoteness, or require that
there is direct link of causation between the damage and the defendant’s action, and
42 M. Jacobsson, “How Clean Is Clean? The Concept of ‘Reasonableness’ in the Response to Tanker Oil
Spills”, in Scritti in Onore di Francesco Berlingieri, special issue of Il Diritto Marittimo (2010 Vol I), p. 565.
43 In this regard there appears to be a difference between the international regime and the legislation in
the United States (OPA-90). A United States Court of Appeals held that OPA-90 did not restrict the United
States Coast Guard’s recovery to costs that were prudent, necessary or reasonable, provided the actions were
consistent with the National Contingency Plan and not arbitrary or capricious: United States v. Hyundai
Merchant Marine Co., 172 F.3d 1187, at 1191, 1199 (9th Cir. 1999); see also U.S. v. Murphy Exploration &
Prod. Co., 939 F. Supp. 489 (E.D.La 1996).
17
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that the damage must be certain and quantifiable in economic terms. Since the early
1980s the IOPC Funds have also considered claims for pure economic loss admissible
for compensation in principle, provided there is a sufficiently close link of causation
between the contamination and the loss.44
It is submitted that claims for pure economic loss should be admissible in principle
under an offshore convention, although as mentioned above such losses do not qualify
for compensation in a number of common law countries. It would probably be very
difficult from a political point of view to exclude from compensation under an offshore
convention fishermen and small businesses in the tourism industry having suffered
pure economic loss as a result of an offshore oil spill.
As regards environmental damage, the 1992 CLC contains a proviso (art. I.6(a)) to
the effect that compensation for impairment of the environment other than loss of
profit from such impairment shall be limited to the costs of reasonable measures of
reinstatement undertaken or to be undertaken. This proviso was inserted by the 1992
Protocols amending the 1969 and 1971 Conventions to make it clear that damage to
the marine environment per se is not admissible for compensation under the 1992
Conventions, but only the economic consequences of such damage, for example losses
suffered by fishermen and businesses in the tourism industry resulting from damage to
the marine environment. The proviso excludes damage calculated on the basis of theo-
retical models or of a punitive character.45 In this regard there is a difference between
the international regime, on the one hand, and the United States legislation in OPA-90
and the EU regime on environmental liability, on the other.
The restrictive approach of the 1992 Conventions relating to environmental damage
has been criticized. It is in the end a political question as to whether under a prospective
offshore convention also claims for non-economic damage to the environment should
be admissible for compensation, for instance modelled on OPA-90. It is likely that in
the present environmentally minded world, there would be considerable support for
making damage to the environment per se compensable under such an offshore regime.
It should be noted, however, that if – as is normally the case – there is only a spe-
cific amount available for compensation (either because the operator liable is entitled
to limit his liability, or is financially unable to pay all established claims in full and
the insurance amount is insufficient to cover all such claims), admitting claims for
44 As regards the policy developed by the IOPC Funds relating to the admissibility of claims for
pure economic loss see M. Jacobsson, “Liability and Compensation for Ship-source Pollution”, note 25
supra, p. 296; C. de la Rue and C. B. Anderson, Shipping and the Environment, Law and Practice, note
25 supra, pp. 445–475. For a discussion of the admissibility of pure economic loss claims see also B. Soyer,
“Ship-sourced Oil Pollution and Pure Economic Loss”, (2009) 17 Torts Law Journal 17.
45 J. Nichols, “Admissibility of Claims: Development of the IOPC Funds’ Policy”, in The IOPC Funds’
25 Years of Compensating Victims of Oil Pollution Incidents (2003), p. 114; M. Jacobsson, “L’indemnisation
des dommages résultant des atteintes à l’environnement dans le cadre du régime international CLC/
FIPOL”, (2010) Le Droit Maritime Français 469; M. Jacobsson, “Liability and Compensation for Ship-
source Pollution”, note 25 supra, p. 298. As regards the legal development in France see M. Jacobsson, “The
French Court of Cassation and the Erika Case; Some Issues Relating to Civil Liability”, (2014) Journal of
International Maritime Law 24, and Code Civil arts. 1246–1252 (as amended in 2016). Reference should
also be made to the ruling by the Spanish Supreme Court of Cassation in the Prestige case referred to in
M. Jacobsson, “To What Extent Do International Treaties Result in the Uniformity of Maritime Law?”,
(2016) Journal of International Maritime Law, 105. See also Guidelines for presentation of claims for envi-
ronmental damage (2018 ed.), adopted by the Assemblies of the 1992 Fund and the Supplementary Fund.
18
offshore sector liability convention
on-economic damage (such as damage to the ecosystem) could result in other claim-
n
ants not getting full compensation.
In the CLC/Fund regime all claims are given equal treatment, i.e. no type of claim is
given preferential treatment in relation to any other type. In the context of a prospec-
tive offshore convention it might be appropriate to consider whether certain types of
claim should be given preferential treatment. This might be relevant in particular if
claims for non-economic damage to the environment were to qualify for compensa-
tion. Experience from discussions in the 1992 Fund of possible preferential treatment
of some types of claim has shown that States may, however, have different priorities in
this regard. Some States may consider that priority should be given to claims relating
to expenses for clean-up incurred by public authorities, whereas other States may wish
to give preferential treatment to claims for pollution damage suffered by individuals
and small businesses.
19
måns jacobsson
One possibility would be to make only one of these subjects, i.e. either the licensee
or the operator, liable under the offshore convention. Another option could be to make
both the licensee and the operator liable pursuant to the convention, in which case their
liability should probably be joint and several.
If a prospective convention were to impose liability on more than one person, con-
sideration would have to be given to the ultimate distribution of liability between these
persons. It might be difficult, however, to lay down rules in this regard in the conven-
tion. If this were the case, the distribution would have to be decided by the competent
court in accordance with applicable national law.47
47 The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Bunkers
Convention) provides for such a joint and several liability. The owner, including the registered owner,
bareboat charterer, manager and operator of the ship causing the pollution damage are jointly and severally
liable for the damage (art. 2.3). The Convention does not address the issue of how the liabilities should be
distributed between the liable parties.
20
offshore sector liability convention
Finally, the shipowner is exonerated under the 1992 CLC if the damage was wholly
caused by the negligence or other wrongful act of any government or other authority
responsible for the maintenance of navigational aids in the exercise of that func-
tion (art. III.2(c)). Although the wording of that provision may not be directly rel-
evant for most offshore activities, it cannot be ruled out that an offshore incident is
wholly caused by negligence of public authorities, and the question would be whether
the person liable under the convention should in such a case be exonerated from
liability.
It could, however, be argued that the party reaping the economic benefits of the off-
shore activities should be liable to pay compensation also in the cases corresponding
to those referred to in Article III.2(b) and III.2(c), rather than the third-party victims
being deprived of compensation.48
It should be noted that, except for the first ground of exoneration (that relating to
war and war-like situations), the 1992 Fund and the Supplementary Fund are not
exonerated in any of these cases (not even in case of natural disasters), although the
shipowner will be exempt from liability (art. 4.2(a)).49
The 1992 CLC also contains a provision on contributory negligence (art. III.3). If
the pollution damage resulted wholly or partly either from an act or omission done
with intent to cause damage by the person who suffered the damage or from the
negligence of that person, the shipowner may be exonerated wholly or partly from
his liability to that person. The 1992 Fund Convention contains a corresponding
provision, but the 1992 Fund may not invoke this defence with regard to preventive
measures (art. 4.3). It may be worth considering including in an offshore convention
a provision on the effects of contributory negligence by a person having suffered
pollution damage.
48 As mentioned above, under the Norwegian Petroleum Act the party liable (the licensee) is not exempt
from liability in these cases; the liability may be reduced to the extent it is reasonable, with particular
consideration to the scope of the activity, the situation of the party that has sustained the damage and the
opportunity for taking out insurance on both sides. See E. Røsæg, “The Norwegian Perspective with regard
to Liability Regimes Concerning Oil Rigs and Installations”, note 33 supra, p. 278.
49 Pursuant to the nuclear liability convention adopted under the auspices of the OECD, the 1960 Paris
Convention on third-party liability in the field of nuclear energy (as amended), the operator of the nuclear
installation has strict liability for nuclear damage. He is exonerated only if the damage was caused by an
armed conflict, hostilities, civil war or insurrection, and – unless the legislation of the State party where the
nuclear installation is located provides to the contrary – by a grave natural disaster of an exceptional charac-
ter This latter defence will no longer be permitted under the 2004 Protocol to the Paris Convention (not yet
in force). The 1963 Vienna Convention on Civil Liability for Nuclear Damage adopted under the auspices
of the IAEA, as revised by its 1997 Protocol (which is in force), is on this point identical with the 2004
version of the Paris Convention. As regards the international conventions in the nuclear field see P. Reyners,
“The International Nuclear Energy Law Framework: An Outlook”, German Yearbook of International Law
Vol. 56 (2013), p. 227.
21
måns jacobsson
The question is whether an offshore convention should also provide for limitation
of liability and, if so, how the limitation amount should be determined. The issue of
limitation of liability is fundamentally a political question. It could be argued that to
give the party liable the right of limitation is against the principle of “polluter pays”.
Some States provide in their national law for unlimited liability for offshore opera-
tions, e.g. Norway, and the liability under the EU Environmental Liability Directive is
also unlimited.
If an offshore convention were to provide for limitation of liability, the level of the
limitation amount would have to be determined. It could, for instance, be appropriate
to set different limitation amounts depending on the scale and type of the operations
and the magnitude of the damage which a major incident might cause.
In order to be entitled to limitation of liability the shipowner must, under the 1992
CLC, establish a limitation fund corresponding to the limitation amount by deposit-
ing that amount in court or producing a guarantee acceptable to the court (art. V.3).
Such a requirement is included in most maritime conventions providing for limitation
of liability. The assets of the limitation fund shall be distributed between the claimants
in proportion to the amounts of their established claims (art. V.4). It is possible that
such a procedure would not be suitable in the context of an offshore convention. It
is submitted, however, that some provisions would have to be included in such a con-
vention to ensure a fair and equitable distribution between claimants of the amount
available for compensation in cases where the aggregate of the established claims
exceeds that amount. This is especially important in respect of incidents giving rise to
pollution damage in more than one State party.
It is submitted that if a prospective convention were to provide for limitation of
liability, provisions should be included for a simplified procedure for updating the limi-
tation amount(s) in the light of experience, which could be modelled on the so-called
tacit acceptance procedure laid down in the 1992 CLC. Under that procedure, amend-
ments to limitation amounts may be decided by the IMO Legal Committee by a two-
thirds majority and such an amendment is deemed to have been accepted unless, within
a period of 18 months, at least one-quarter of the States parties communicate their
objections to the IMO. An amendment deemed to have been accepted enters into force
for all States parties 18 months after their acceptance (art. 15 of the Final Clauses).50
Consideration would also have to be given to the test to be applied for determin-
ing whether the party liable has lost the right to limitation. As mentioned above,
under the 1992 CLC the shipowner is deprived of the right to limitation if it is
proved that the pollution damage resulted from his personal act or omission, com-
mitted with the intent to cause such damage, or recklessly and with knowledge that
such damage would probably result (art. V.3). When this test was introduced in the
1992 CLC, following the solution adopted in the 1976 Convention on Limitation of
Liability for Maritime Claims, it was expected that the shipowner’s right to limita-
tion would be practically unbreakable.51 Experience has shown, however, that this
50 Also the 1992 Fund Convention and the Supplementary Fund Protocol provide for a tacit acceptance
procedure.
51 Under the 1969 CLC the shipowner loses the right to limitation if the incident was due to the fault
or privity of the shipowner himself.
22
offshore sector liability convention
may not necessarily be the case. This test has nevertheless been criticized as being too
strict.52
The question of limitation of liability is closely linked with the question of compul-
sory insurance that will be dealt with below.
52 Under the nuclear liability conventions referred to in note 49 supra in their most recent versions,
States have the option to impose unlimited liability on the operators of installations located in the respec-
tive States. If, however, the operator may limit his liability under national law, his right to limitation is
unbreakable.
53 The nuclear liability conventions referred to in note 49 supra provide for a channelling of liability to
the operator of the nuclear installation involved. Pursuant to these conventions no person other than the
operator of the nuclear installation may be held liable for nuclear damage, whether under the conventions
or otherwise. As a consequence, suppliers and manufacturers of equipment to a nuclear installation cannot
be held liable for such damage. The operator has a right of recourse only (a) against an individual who has
caused the damage intentionally, or (b) if so provided expressly by contract.
54 As regards the interpretation of the channelling provisions, see M. Jacobsson: “The French Court of
Cassation and the Erika Case”, note 45 supra, p. 21.
23
måns jacobsson
involved in the offshore activities would be financially covered by the licensee/operator
and his/their insurance or financial security.55
It should be mentioned that the provisions in the 1992 CLC are without prejudice
to the shipowner’s right of recourse against third parties (art. III.5). The shipowner
is entitled, therefore, to pursue claims for recovery of the amounts he has paid in
compensation against any person who has caused or contributed to the pollution,
including the persons covered by the channelling provisions, for instance salvors and
persons taking preventive measures. Such recourse action cannot be based on the 1992
CLC but will have to be brought under the applicable domestic law. It is suggested
that the inclusion of similar recourse provisions in a prospective offshore convention
should be considered, which would allow the party liable under the convention (e.g.
the licensee or the operator) to pursue recourse actions against other entities which
may have caused or contributed to the pollution damage.56
55 This is the approach in the United States in the field of nuclear law under the Price-Anderson Act
(Section 170 of the Atomic Energy Act); the Act channels the financial responsibility and insurance obliga-
tion for public liability claims to the nuclear plant operator.
56 Due to the complexity of offshore operations and the multiplicity of contractors and subcontractors,
the offshore industry has adopted various contractual solutions based on contractual pre-allocation of the
risks involved between the parties, including suitable insurance packages. The most familiar is the mutual
hold harmless indemnity regime, frequently referred to as the knock-for-knock regime, under which each
party to an offshore contract agrees to bear responsibility for, and indemnify the others, against injury and
loss to its own personnel, property and any other specified losses by a set of inter-dependent loss indemni-
ties. Such contracts preclude recourse actions in certain cases. See the contribution of S. Rainey, “The
Construction of Mutual Indemnities and Knock-for-knock Clauses”, in B. Soyer and A. Tettenborn (eds),
Offshore Contracts and Liabilities (Informa Law, 2015), Chapter 5; F. Lerede, “Knock-for-knock, the P&I
Insurance Perspective”, same publication Chapter 9.
57 As regards the insurer´s right to limitation see M. Jacobsson, “To What Extent Do International
Treaties Result in the Uniformity of Maritime Law?”, note 45 supra, p. 101.
24
offshore sector liability convention
Group of P&I Clubs is a group of 13 mutual insurers that collectively provide liability
insurance for approximately 90 per cent of the world’s ocean-going tonnage and for
some 95 per cent of the world’s ocean-going tanker tonnage. Except for small coastal
tankers it is rare that a tanker owner’s liability in not covered by a P&I Club.
Although under the 1992 CLC the shipowner is only obliged to maintain insur-
ance up to the limitation amount applicable to the ship in question, tanker owners
practically always take out insurance with their P&I Clubs for much higher amounts.
Through the International Group’s pooling arrangement and a system of reinsurance,
the Group Clubs offer cover for oil pollution up to US$1,000 million.
Vessels constructed or adapted for the purpose of carrying out drilling operations
in connection with oil or gas exploration or production of oil are excluded from
the International Group’s pooling arrangement, as are fixed platforms or fixed rigs.
Drilling or production operations in connection with oil or gas exploration or produc-
tion are also excluded.
As regards a prospective offshore convention, it should be obvious that the person(s)
liable should be obliged to maintain a liability insurance or provide a financial security
acceptable to the licensing State.
The structure of the insurance market in the offshore sector differs from that for
shipping industry. The main risks for third-party liability in the offshore sector are
placed in the energy insurance market, for instance with Lloyds Syndicates. Some 50
major oil companies worldwide are members of Oil Insurance Limited, which offers
a mutual solution to such risks. Another type of mutual cover is that under OPOL as
discussed above. Major oil companies often prefer to rely on self-insurance or use a
captive insurer.
If it were decided that the liability under a prospective offshore convention should
be unlimited, it would nevertheless be necessary to set a limit on the amount of the
insurance obligation, since it is highly unlikely that insurers would provide unlimited
cover.
As mentioned above, the 1992 CLC gives claimants the right of direct action against
the insurer which, in certain jurisdictions, is not possible under general insurance law.
It is submitted that consideration should be given to follow in a prospective offshore
convention the approach taken in the 1992 CLC in this regard.
58 With regard to the interpretation of these provisions see M. Jacobsson, “Liability and Compensation
for Ship-source Pollution”, note 25 supra, p. 318.
25
måns jacobsson
It should be mentioned that the time bar provisions in the 2010 Convention on
liability and compensation for damage in connection with the carriage of hazardous
and noxious substances by sea (HNS Convention) differ from those in the 1992 CLC.
Under the HNS Convention, legal action must be brought within three years from the
date when the person suffering the damage knew or ought reasonably to have known
of the damage and the identity of the shipowner, and in any event within ten years
from the date of the incident (art. 37).
26
offshore sector liability convention
Compensation Fund 1992 (1992 Fund) that pays compensation in the following cases
(art. 4.1):
i) no liability arises for the shipowner under the 1992 CLC; or
ii) the shipowner is financially incapable of meeting his obligations under the 1992
CLC in full and the insurance is insufficient to satisfy the compensation claims; or
iii) the damage exceeds the shipowner’s liability as limited under the 1992 CLC, pro-
vided that he is entitled to limitation of liability.
Under the 1992 Fund Convention, the 1992 Fund is financed by contributions from
those entities that receive crude and heavy fuel oil in States parties after sea transport.
In view of the risk of incidents in the offshore sector causing pollution damage
for extremely high amounts, it could be appropriate to consider whether it would
be possible to establish, within an offshore convention or in a separate additional
instrument, a second layer of compensation. This second layer could intervene when
the total amount of the established compensation claims exceeds the liability limit
laid down in the convention (if any), or exceeds the amount covered by insurance
or financial security, as well as in cases where in fact the liable party and the insurers
or providers of financial security are unable to fulfil their obligations. It could also
intervene when the person(s) liable may invoke any grounds of exoneration which
may be set out in the convention, for example because the pollution damage resulted
from a terrorist attack.
A major problem would most likely be to establish a workable system for the financ-
ing of such a second compensation layer in the offshore sector. One option, inspired
by the CLC/Fund regime, might be to levy the funds required from those, or from
certain categories of those, who carry out offshore activities in the States parties to the
prospective treaty. A fee could, for instance, be levied on oil rigs based on their respec-
tive volumes of production and on operators of pipelines on the quantities flowing
through them.59 It is recognized, however, that in view of the complex structure of the
offshore industry, it would probably be difficult to reach agreement on the construc-
tion of such a financing system.
Another possibility would be to establish a second layer of compensation funded
by the States parties.
A system of supplementary state compensation has existed since 1984 in the field
of nuclear law within the framework of two treaties adopted under the auspices of
the OECD, namely the 1960 Paris Convention on Third Party Liability in the Field
of Nuclear Energy and the 1963 Convention Supplementary to the Paris Convention.
The system comprises three layers. Under the 2004 Protocols to the Conventions (not
yet in force) the liability of the operator of a nuclear installation shall in principle be
no less than 700 million euros, which should be covered by insurance or other financial
security (first layer). Above that amount the Installation State will have to provide
public funds for compensation payments up to 1,200 million euros, i.e. an amount
of 500 million euros (second layer). Should the operator’s liability under the law of
the Installation State be higher than 700 million euros, the obligation of that State
59 As for the financing of the United States Oil Spill Liability Trust Fund (OSLTF) see section
1.4.4 above.
27
måns jacobsson
to make public funds available under the second layer is reduced correspondingly. If
required, the States parties will have to make available a further amount of 300 million
euros shared between them according to a set formula (third layer). Consequently, a
total amount of 1,500 million euros will be available to compensate victims. Public
funds shall be made available by the States parties under the third layer even if the
Installation State has imposed higher limitation than 700 million euros or unlimited
liability on the operator.60
A similar compensation system in two layers, where the second layer is financed
by funds provided by the States parties, has been created by the 1997 Convention on
Supplementary Compensation for Nuclear Damage adopted under the auspices of
the IAEA. The States parties shall ensure that at least 300 million SDR are available
under the first layer for installations in their respective State, but the Convention does
not determine how the States parties shall ensure the availability of that amount. The
second layer will consist of an international fund providing additional compensation
to be financed by contributions from the States parties according to a set formula.
Payments of contributions to the second layer will only be made when a major incident
so requires. The amount of the second layer is not fixed but depends on the capacity
of the nuclear installations in the States parties. It appears that at present the amount
available under the second layer would be fairly modest, i.e. some 110 million SDR.61
It appears very unlikely, however, that it would be possible to reach agreement for
the offshore sector between a sufficient number of States on a second compensation
layer financed by public funds provided by the States parties.
60 Under the versions of these Conventions in force, i.e. as amended by the 1982 Protocols thereto, these
amounts are significantly lower.
61 This Convention, which was developed following the Chernobyl incident in 1986 and is primarily
of interest for States not parties to the OECD treaties, entered into force in 2015. It has been ratified by
several important States, e.g. the United States, Japan, Canada and India. See B. McRae, “The Convention
on Supplementary Compensation for Nuclear Damage, Catalyst for a Global Nuclear Liability Regime”,
OECD Nuclear Law Bulletin No 79 (2007), p. 17.
28
offshore sector liability convention
of the IOPC Funds on the interpretation of various important provisions of the CLC
and the Fund Conventions and on the procedures for handling compensation claims.
It is important that a prospective offshore convention would be drafted in such
a way so as to facilitate uniform interpretation and application of the convention,
since an oil pollution incident in the offshore sector may affect more than one State.
Uniformity would be especially crucial if a second layer of compensation were to be
included, financed by contributions from legal entities in States parties or by public
funds provided by these States.
It is recognized that the offshore sector is very different from oil transport by tankers
and that the solutions in a prospective offshore liability convention would on a number
of points be different from those in the CLC/Fund regime. It appears that if in the
future a convention on liability for pollution damage arising from offshore activities
were to be elaborated, it would nevertheless be fruitful to explore the approach on
important liability issues in the CLC/Fund regime. It is suggested that the experience
gained from the operation of that regime might assist the drafters of an offshore con-
vention to find balanced and appropriate solutions to the issues involved. A study of
the CLC/Fund regime might also be useful in the context of searching for bilateral or
regional solutions to liability issues in the offshore sector.
It is, of course, for governments to decide whether a convention on offshore liability
should be adopted and, if so, on its content. Experience of the operation of the CLC/
Fund regime has demonstrated, however, the importance of the involvement of the
industries concerned for the efficient functioning of an international liability and com-
pensation system. The close co-operation between the IOPC Funds and the P&I Clubs
and the support of the shipping and oil industries have been crucial for the efficient
functioning of the CLC/Fund regime.
29
Professor Dr Olivier Cachard
CHAPTER 2
2.1 Introduction
The wrecking of the Erika on December 12, 1999 and the Prestige on November 13,
2002 generated unprecedented oil spills on the shores of France and Spain. These two
environmental disasters created strong emotions, not to mention resentment against
the ones that President Chirac depicted as “voyous des mers”1, i.e. unscrupulous ship-
owners operating substandard vessels. In the wake of these dramatic oil-spills, diverse
lawsuits were filed in France, Italy, Spain and the US, so as to recover consequential
damages, clean-up costs, compensation and reparation for damage to the natural
environment. These lawsuits, proceeding under the close scrutiny of public opinion,
involved expertise in both science and law. Several legal opinions were submitted to
courts. The crucial issue dealt with by most of these legal opinions and memos submit-
ted to state courts was about the relationship between international law and national
legislation on the matter.
The proper relationship between international conventions and national legisla-
tion was an issue both as regards questions of procedure, and also in connection
with the substantive law, as soon as claimants sought to establish liability in the
classification societies which had given a relevant vessel her class and the statutory
certificates on behalf of her flag state. On the grounds of procedure, the issue arose
when classification societies sought to raise a defence of state immunity. A land-
mark decision of the Cour de Cassation2 acknowledged that a classification society
could avail itself of the defence to the extent that it had delivered statutory cer-
tificates on behalf of the government of Malta. But a recent decision by the Cour
d’appel of Bordeaux3 refused the defence of immunity in so far as the classification
society had granted mere general classification rather than any statutory certification.
Nevertheless, even if the scope of immunities was defined by national legislation,
* Honorary Dean, Faculty of Law of Nancy, University of Lorraine; Avocat à la Cour d’appel –
Arbitrator ( CAMP).
1 A French phrase best translated as “sea-thugs”.
2 Cass. Crim., 23 novembre 2004, n° 04-84265.
3 Bordeaux, 6 mars 2017, DMF, n° 792, 2016, p. 513, obs. Luc Grellet criticizing the legal path
followed by the Court.
30
oil pollution regimes
reference was made to customary international law, to the 2004 Convention and to 4
the UNCLOS Convention.
But the question of the proper interaction between international law and national
legislation was even more a subject of debate in connection with the substantive issue
of civil liability. Was the CLC 1992 applicable to all parties and claims? To what extent
was it permissible for a court to apply national liability regimes?
At this stage, two things need to be made clear. First, at the time of the wreck of
the Erika, there were no specific provisions in French law dealing with the matter,
except the droit commun. It was several years before the French Civil Code was
supplemented by a special regime for making good pure ecological loss5. Secondly,
readers from a common law background should bear in mind the relation between
criminal proceedings and civil liability in civil law countries, especially France and
Spain. Although an injured party can claim compensation in a separate civil suit, he
may prefer to bring his claim before the criminal courts6, where he will have several
advantages: apart from the psychological satisfaction of participating in the criminal
proceedings as a partie civile, he will benefit from the investigatory facilities provided
for in criminal prosecutions. And if criminal liability is established, then the fault of
the offender is quasi-automatically established as far as compensation is concerned.
It is therefore no surprise that in transportation disasters, victims generally opt to
participate as parties civiles. This is what happened both in France with the Erika and
in Spain with the Prestige. However, the interactions between public prosecutions
and civil action have special features when the civil action is not governed by national
legislation but international conventions, for instance the CLC Convention and the
Fund Convention 1992. Consequences may be drawn from criminal proceedings, but
the international regime should not be distorted. Is such articulation possible without
distortions?
To address this theoretical question, we will refer to two decisions from, r espectively,
the French Cour de cassation7 on September 25, 2012 and the Spanish Tribunal
Supremo8 on January 14, 2016. As a result of the claimants in both cases exercising
their option to make a civil claim in the civil proceedings, the Criminal Chamber of
these two Supreme Courts gave the decision on liability. A brief summary follows.
As regards the Prestige, lawsuits took place both in the US and in Spain. The
Kingdom of Spain first brought a lawsuit against the Houston-based classification
society ABS in the federal district court for the Southern District of New York. The
4 That is, the UN Convention on State Immunity of December 2, 2004, ratified by France.
5 The Law n° 2016-1087 of August 9, 2016 introduced arts1386-19 to 1386-25 in the Civil Code.
Art.1386-19 provides: “Toute personne responsable d’un préjudice écologique est tenue de le réparer“ (“Anyone
responsible for ecological damage must make it good”). Art.1386-20 goes on to say: “Est réparable, dans
les conditions prévues au présent titre, le préjudice écologique consistant en une atteinte non négligeable aux
éléments ou aux fonctions des écosystèmes ou aux bénéfices collectifs tirés par l’homme de l’environnement”
(“Ecological damage is compensable under the conditions provided for in this Title if it amounts to a
non-neligible interference with elements or functions of ecosyestems, or with benefits drawn by mankind
from the environment”). Professor L. Neyret had already published a nomenclature of pure ecological loss.
L. Neyret et al., Nomenclature des préjudices environnementaux, LGDG, 2012, p. 456.
6 Under Art.3 of the Code of Criminal Procedure.
7 Cass. Crim., 25 septembre 2012, Navire Erika, n° 10-82.938.
8 Tribunal Supremo, Sala de lo Penal, 14 de enero de 2015, Buque Prestige, n° 865/2015.
31
professor dr olivier cachard
Kingdom alleged that the vessel being “in class” for its final voyage, the classification
society had owed a duty of care to the coastal States in the vicinity of which the vessel
was sailing. This probably was a bold claim, as the US case law is reluctant to accept
the existence of a duty of care owed by classification societies to third parties. The
action was dismissed at first instance, with an obiter dictum about the interpretation of
the CLC Convention9: although the US was not a contracting State, the judge found
that the ABS was one of the persons benefiting from the channelling of Art. III.4(b).
In later proceedings, the same court also found that the ABS had owed no duty of
care to the coastal States10. Finally, the Court of Appeals held that the claim had to be
dismissed for lack of convincing evidence of recklessness on the part of ABS11.
On a parallel track, criminal proceedings were brought in Spain against the master,
the shipowner being curiously omitted from local criminal proceedings. The Audiencia
Provincial of La Coruña delivered a first decision on November 13, 2013. The master
was not found guilty of the environmental crime he was accused of, but he was con-
victed of the offence of disobedience to the authorities as he had refused to accept a
tow when ordered. This first instance decision, however, made no mention of either
the CLC 1992 or the Fund Convention.
The decision of the Tribunal Supremo delivered three years later partly reversed this
determination, and also added other grounds of decision. Not only did it find that the
master had been guilty of environmental crime, but it also addressed the issues of his
civil liability and that of the vessel’s P&I Club. Furthermore, the Tribunal Supremo
also gave an obiter dictum on the liability of the shipowner, even though it was not
a party to the trial. On the substance, although the Tribunal Supremo recognised the
applicability of the CLC 1992, it nevertheless found that the master was fully liable
on the ground of the parallel operation of national law, as if there were a gap in the
liability scheme of the CLC Convention as regards the master’s responsibility. This
was a clear attempt to circumvent the application of the CLC.
Compared to this “quantic” thought-process, the French litigation about the Erika
almost looks simple. In France, the victims sued the shipowner, the time charterer, the
voyage charterer, the ship manager, the classification society and the voyage charterer’s
holding company Total. On March 30, 2010, the Cour d’appel of Paris confirmed the
first instance judgment12. As far as the classification society was concerned, it decided
that it could not avail itself of immunity on the basis of a tacit waiver, but surprisingly
concluded that it could not benefit from the channelling provision in Art.III.4(c) of
the CLC. As regards the owner of the cargo, which had chartered the vessel allegedly
without vetting it properly, the court decided that it could benefit from the channelling
system of the Convention in the absence of any recklessness. Concerning damages
liability, the court concluded that all claims fell within the scope of application of
the CLC Convention, including clean-up costs, consequential economic losses result-
ing from pollution, préjudice moral13 and even pure ecological losses. Therefore, the
9 Reino de Espana v. American Bureau of Shipping (S.D.N.Y 2008), 528 F.Supp.2d. 455, 458.
10 Reino de Espana v. American Bureau of Shipping (S.D.N.Y 2010), 729 F.Supp.2d. 635.
11 Reino de Espana v. American Bureau of Shipping (CA 2d Cir), 691 F.3d. 461.
12 Paris (11ème ch. des appels correctionnels), 30 mars 2010, navire Erika, n° 08-02278.
13 That is, non-pecuniary losses.
32
oil pollution regimes
national liability regime was inapplicable. The case was then submitted to the Cour
de cassation. This court, in its decision of September 25, 201214, followed a different
path of reasoning. It held that both the classification society and the Total companies
(in their different capacities) could, in principle, benefit from the channelling system
established by the CLC. However, it also found that both companies had acted with
recklessness, as a result of which they fell to be deprived of the benefits of both chan-
nelling and limitation. This aspect of the decision, which was not very much com-
mented on, is generally favourable to classification societies, since they know that they
are now considered by the French Supreme Court to be persons providing services to
the ship15.
Although the disputes decided by the Cour de cassation and the Tribunal Supremo
naturally raised substantial issues of maritime law and civil law, they first had to be
addressed in terms of international public law, taking into consideration the specific
methodology to be used for the interpretation and construction of treaties. Even if
there is no unified international court in charge of interpreting the CLC, national
interpreters should not lose sight of its nature and origin: it is an international conven-
tion aimed at establishing uniform law16. Once ratified and duly enacted in the form,
if any, required by the relevant national constitution, an international convention is
not at the same level as national legislation: account must be taken of the primacy of
international law. And it seems that the form of the constitutional system of the forum
makes no difference: be it constitutional monism as in France or a formal constitu-
tional dualism as in the UK, the forum state is equally bound by its ratification of an
international convention. Following this approach, we will study, first, the applicabil-
ity of the CLC, and, secondly, its application.
33
professor dr olivier cachard
2.2.1 The logical inclusion of pure ecological loss within the scope of the CLC
Art.II of the CLC Convention states:
This Convention shall apply exclusively …
(a) to pollution damage caused …
(b) to preventive measures, wherever taken to prevent or minimize such damage … .
The questions have been raised whether the EU “Polluter Pays” principle for waste
and pure ecological damages fall within this definition. In this connection, the ECJ has
decided in Commune de Mesquer v Total France SA (Case C-188/07)18 that “hydrocar-
bons accidentally spilled at sea following a shipwreck, mixed with water and sediment
and drifting along the coast of a Member State constitute waste within the meaning
of Directive 75/442”.19
The Court drew the following conclusion:
If it happens that the cost of disposing of the waste produced by an accidental spill-
age of hydrocarbons at sea is not borne by the International Oil Pollution Compensation
Fund, or cannot be borne because the ceiling for compensation for the accident has
been reached … such a national law will then, in order to ensure that Article 15 of that
directive is correctly transposed, have to make provision for that cost to be borne by the
producer of the product from which the waste thus spread came. In accordance with the
“polluter pays” principle, however, such a producer cannot be liable to bear that cost unless
he has contributed by this conduct to the risk that the pollution caused by the shipwreck
will occur20.
Although this decision is debatable in terms of international law21, the view has been
expressed that it did not contradict the CLC limitation of liability principle. This is
because the person who may be called to guarantee the cost of disposing of the waste is
defined not as a shipping operator but as the producer of the waste. The ECJ-inspired
“polluter pays” principle is therefore situated upstream of the scope of application of
the CLC and is unaffected by it. As a result, in a decision of December 17, 200822, the
French Cour de cassation reversed the decision of a Cour d’appel that had decided that
Total could not be liable as a previous holder of the spilt oil.
34
oil pollution regimes
Going one step further, some of the victims claimed that compensation for pure
ecological damages should be regarded as outside the scope of the CLC. They thus
submitted that full compensation could be claimed from the charterer under droit
commun. This submission, however, was regarded as going too far, as it was targeting
one of the maritime parties expressly within in the scope of the CLC. As the Cour
d’appel of Paris decided23, such a submission had to be rejected as clearly detrimental
to the effectiveness of the CLC.
23 Paris (11ème ch. des appels correctionnels), 30 mars 2010, navire Erika, n° 08-02278.
24 TS, Sentencia de 14 de enero 2016, Sexagésimo Tercero, p. 53.
25 “Nos encontramos ante una responsabilidad civil consecuencia del delito. Dejamos el ambito del derecho
penal para desplazamos al derecho civil resarcitorio de la infracción penal cometida” (“We are faced with civil
liability resulting from a crime. We leave the field of ciminal law to move across to the civil law arising from
the crime committed”).
26 See TS, Sentencia de 14 de enero 2016, Sexagésimo cuarto, p. 55: “[H]emos considerado al acusado
Benjamín Norberto autor de un delito imprudente contra el medio ambiente determinante de los daños pro-
ducidos consecuencia del vertido de la carga que transportaba el buque Prestige. Une imprudencia que hemos
calificados de grave, lo que es requisito del tipo penal que aplicamos, y en cuyo desarrollo el acusado hubo de
prever y representarse el riesgo que representaba su comportamiento y que se concretó en los daños producidos,
lo que permite entender que el mismo causó los mismos ‘temerariamente a sabiendas de que probablemente se
producirían’. Es decir, en condiciones que dejan sin efecto respecto a él la exención de responsabilidad civil que
prevé entre otros para el capitán el articulo 5.3 [sic] del CLC 92 al concurrir la excepción prevista en el mismo,
por lo que de conformidad con el artículo 116 CP, la responsabilidad civil que le incumbe habrá de fijarse en
relación a la totalidad de daños y perjuicios causados” (“We have considered the accused Benjamín Norberto
to be the perpetrator of a negligent crime against the environment which led to the damage suffered due to
the spillage of the cargo carried on board the Prestige. This is negligence which we have characterised as
gross, a requirement of the criminal type of negligence which we are dealing with here, in whose develop-
ment the accused must have foreseen and realised the risk involved in his behaviour, and which culminated
in the damage suffered. This permits us to infer that he caused the damage ‘recklessly and in the knowledge
that it would probably happen’. That is, in conditions that leave him unprotected by the exemption that
Art.5.3 [sic] of the CLC 1992 gives to the master and others so that the exception in that article applies, the
liability he incurs must extend to the entire extent of all loss and damage caused”).
35
professor dr olivier cachard
the master’s fault. The attempt to justify this reasoning is somehow desperate27. The
Tribunal Supremo deviated from the principle of coherent interpretation, suggesting
that the superior norm should be construed in conformity with the values of municipal
law28. The Tribunal also tried to borrow from Art.V.3 of the CLC the principle that the
recklessness of a party deprives it of the right to limitation. But this is a false analogy.
Had the Tribunal Supremo realised that the claim against the captain was to make
good damage within the meaning of Article II, then it would have been compelled to
refer to Art.III.4 of the Convention.
27 J.-S. Gabaldon, and M. Alba Fernadez, “Comentario”, 2016 Droit Maritime Français 338–351.
28 “La norma tiene que ser interpretada buscando su coherencia con el sistema en el que se inserta, que en
nuestro caso castiga penalmente tanto los comportamientos intencionales como aquellos que exteriorizaban la
versión mas grave de la imprudencia” (“The norm has to be interpreted by seeking to make it coherent with
the legal system into which it is introduced, which in our case equally criminalises deliberate behaviour and
behaviour exhibiting the grossest kind of negligence”).
29 This expression is borrowed from Professor Franco Ferrarri about the interpretation of the CISG.
30 A. Vialard, “Faut-il réformer le régime d’indemnisation de la pollution par hydrocarbures?”, 2003
Droit Maritime Français 435–451; “Responsabilité limitée et indemnisation limitée. La magie du droit mari-
time moderne”, in Liber amicorum Roger Roland, Larcier, 2003, p. 571.
31 F. Berlingieri, “Les sociétés de classification peuvent-elles bénéficier de la canalisation prévue à
l’article III para 2 de la CLC?”, 2012 Droit Maritime Français 1017.
36
oil pollution regimes
in the light of the recent judicial development of claims against classification socie-
ties. However, compared to other conventions applicable in shipping law, the CLC
is r elatively recent, not to mention its amendment in 1992 and the IOPC evolutions.
Thirdly, some of these opinions were perhaps skewed by a political opinion, however
respectable, that channelling and limitation are ceasing to be acceptable given the
magnitude of modern oil spills. However, this reflects academic opinion de lege ferenda
and not the law as it currently stands.
In order to interpret an international convention establishing uniform rules such as
the CLC, a national court should conform the international law of treaties, as restated
by the 1969 Vienna Convention32. This convention is binding for contracting states,
but also probably for non-contracting states as it is considered to reflect customary
international law in any case. Art.31 of the Vienna Convention first invites courts to
refer to the ordinary meaning of the wording of the treaty, considering its purpose.
Art.32 clearly states that “travaux préparatoires” are secondary sources to be used only
when other methods of interpretation lead to obscure, equivocal or absurd results.
This is not the case when the interpreter considers the wording and the purposes of
the CLC Convention.
37
professor dr olivier cachard
Secondly, there can be no serious doubt that classification societies exactly meet the
wording “without being a member of the crew”. Naturally, the classification socie-
ties do not act under the direct authority of the master of the vessel. Moreover, the
reasoning by analogy that the classification society should, like the pilot and the crew,
act permanently on board the vessel is inconclusive. Not only does it add a condition
that is not written, but it also distracts attention from the words of opposition that
differentiate the category from Art.III.4(b) and the pilot (“or any other person”) and
the crew (“without being a member”).
Thirdly, it is well established, both in European legislation and in the terms of regu-
larly used contracts, that classification societies indeed “perform service to the ship”,
be it when performing their statutory function of issuing official certificates or their
contractual mission to act for the benefit of shipowners and the insurance market. It
has already been shown that the so-called dualism of functions is rather superficial,
hiding a deep functional monism, since the same technical constraints are shaping the
exercise of both classification and certification missions. Moreover, the opinion that
classification societies shall not be understood as “performing services to the ship”
because it would open the benefit of channelling to a large number of contracting
parties is not convincing35: it is a purely apagogic36 reasoning. Indeed, the number of
parties bound by a contract of service provision to the ship is limited: it neither covers
ship brokerage (which is not properly speaking service to the ship but to the ship-
owner) nor shipbuilding (which is not a service contract).
Finally, the requirement of coherence between procedural issues and substantive
issues leads to the same conclusion. The Cour d’appel of Paris, affirmed by the Cour de
cassation, decided that this difference in nature between classification and certification
was not a valid ground to refuse the benefit of sovereign immunity to the RINA in its
classification activities. The reason was simply the waiver to the benefit of immunity,
as this defence had not been raised early enough during the criminal proceedings.
2.4 Conclusion
The quest for flexibility and substantial results may well explain the liberties taken with
international law by national courts in coastal states. Of course, it is not illegitimate
for justices to consider full compensation of damages. But there is no need for either
distortion of the scope or distortion of the wording of the CLC Convention. The
“recklessness exception” is a sufficient conventional tool to reach full compensation
when the liable party ignored criminal law rules, particularly as characterisation of
recklessness remains at the discretion of the Courts. Therefore, the attempts to distort
the CLC are rather regrettable. They are the result of a regressive approach towards
a primitive supremacy of national law. As far as international law is concerned, going
35 Ph. Delebecque, 2012 Droit Maritime Français, n° 747, “A suivre la Cour de cassation, toutes les
personnes qui seraient en relation contractuelle avec un armateur seraient protégées, à l’exemple du construc-
teur naval, du réparateur naval, voire du courtier d’affrètement” (“If we are to believe the Cour de Cassation,
every person in any contractual relationship with a shipowner would be protected, including for example the
shipbuilder, the ship-repairer or for that matter the chartering broker”).
36 Absurd rhetorical demonstration.
38
oil pollution regimes
back to the nineteenth century may not be a sign of legal sophistication, but rather
drifting towards the reef of legal nationalism …
La mer a ses écueils cachés, le temps aussi,
Et maintenant, parmi les profondeurs farouches,
Sous les vautours, qui sont de l’abîme les mouches,
Sous le nuage, au gré des souffles dans l’oubli,
De l’infini, dont l’ombre affreuse est le repli,
Sans que jamais le vent autour d’elle s’endorme,
Au milieu des flots noirs roule l’épave énorme.37
37 V. Hugo, La légende des siècles, 1859, n° XIV, XXème siècle, ll. 155–162.
39
COMPENSATION/LIABILITIES FOR OIL SPILLSDr Tabetha Kurtz-Shefford
CHAPTER 3
3.1 Context
Before the Torrey Canyon debacle in 1967, everyone assumed general maritime law
was sufficient to address ordinary maritime casualties, including pollution. Disillusion
came when the loss of the vessel, the mishandling of the spill and the ensuing damage
demonstrated that those rules were far from able to provide adequate remedies for
victims of oil pollution victims, especially on such a wide scale.1 The disaster led to
the International Convention on Civil Liability for Oil Pollution Damage in 1969
(CLC 69). This convention was the result of heavy compromise and strong political
will. Yet despite such support, it came into force amid scepticism and trepidation.
It was (then) revolutionary in channelling liability tightly through the shipowner. It
imposed strict liability2 (accepted only in exchange for strict tonnage limitation)3 and
required compulsory insurance up to the limit of liability,4 thereby ensuring third
parties were protected.5 Since 1969 the limit of liability has been raised at regular inter-
vals to keep up with the increases in tankers’ size and hence propensity for mischief;
in addition a direct action regime against the insurer has been introduced. A Fund
Convention6 and Supplementary Fund7 have also been developed to cope with ever-
bigger tankers and spiralling clean-up costs.
For almost half a century the CLC has successfully served its purpose, being one
of the International Maritime Organization’s more successful conventions – its
latest incarnation, the 1992 version (CLC 1992), having around 114 members. Its
approach to pollution liability has also influenced several other environment-based
40
compensation/liabilities for oil spills
liability regimes as well as the oil pollution damage liability legislation of states
8
which declined to become members of it.9 However in spite of its success and impact,
there remains an embarrassing gap as regards liability for oil pollution originating
not from tankers or bunkers but from offshore facilities. This is because there is no
equivalent convention which covers the issue. The CLC will only applies to ships,10 as
there defined; and thus victims of spills from offshore craft which do not fall under
its umbrella will only have the national laws of the relevant jurisdiction as recourse.
This is not necessarily problematic where relevant state law addressing such liability
actually exists and is actively enforced, in addition to being well-balanced enough
to compensate victims fairly and act as a deterrent to negligence without also being
overly detrimental to a lucrative industry. But, without wishing to cause offence, not
all oil-producing states are politically capable of achieving this. After the Montara
incident of 2009 in the Timor Sea11 and the larger, more publicised Macondo incident
off the United States in 2010,12 development of an international liability regime for
oil pollution damage from offshore facilities was discussed amongst several inter-
governmental bodies, including the International Maritime Organization (IMO) and
the EU. Little came of it:13 however obvious the benefits of a globally uniform regime
in this area, the political blocks which had previously prevented such a convention
from existing in the past remained.14 The gap therefore looks to remain open for the
foreseeable future and we are left with the current patchwork system of liability, with
the potential for victims from one state being better able to claim adequate remedies
for damage caused by an offshore facility spill than those in neighbouring states
affected by the same incident.15
One potential means of closing this gap would, of course, be to extend exist-
ing liability conventions for ships to include offshore facilities. While this might
not be a viable option for offshore facilities which do not resemble ships (usually
larger, permanently fixed structures vastly different from ships in both nature and
function), the issue is complicated by the fact that offshore facilities come in all
shapes and sizes. Although the term ‘offshore facility’ will usually conjure up images
of an enormous, very un-ship-like structure such as fixed platforms, spars or semi-
submersibles, there are also many other structures built and/or used in such a way as
to make the demarcation between ‘ship’ and ‘not-ship’ much more difficult. They may
be permanently or semi-permanently fixed to the seafloor, or temporarily moored
while also having the ability to dynamically reposition themselves; still others are
fitted with turret systems which allow them to weathervane. It is these facilities, and
8 In particular the Bunkers Convention 2001 and the HNS Convention 1996 (updated in 2010).
9 See, for example, the Oil Pollution Act 1990 in the United States.
10 The definition of which will be discussed later.
11 http://www.environment.gov.au/marine/marine-pollution/montara-oil-spill (last accessed April 2018).
12 https://www.nrt.org/sites/2/files/GPO-OILCOMMISSION.pdf. (last accessed April 2018).
13 Extension of the Environmental Liability Directive via the Offshore Safety Directive and guidelines
from the IMO as a framework for the development of regional conventions on oil pollution liability from
offshore facilities.
14 T. Kurtz-Shefford, ‘Liability for Offshore Facility Pollution Damage After the Deepwater Horizon?
What Happened to the Global Solution?’ (2012) 16 JIML 453.
15 Deepwater Horizon – Mexico suffered damage but could not claim, while US claimants received
large payouts.
41
dr tabetha kurtz-shefford
the oil pollution liabilities their owners and operators might face, which will be the
subject of this chapter.
Floating production has become a common staple of offshore petroleum produc-
tion over the past four decades. Although a wide variety of floating production systems
(FPSs) exists,16 this chapter will focus on one overarching type in particular: the float-
ing production, storage and offloading unit, or FPSO. First seen in 1976, FPSOs were
initially viewed as an economically viable means of extracting oil from marginal fields,
but they have since grown in importance and now account for a large portion of all
FPSs engaged in offshore activities (in 2017 there were nearly 200 FPSOs in operation
worldwide).17 The variety in their design, and the fact that many of them are ‘ship-
shaped’ or are ships which have been converted for other purposes, has resulted in
there being some confusion over whether they do in fact fall under the scope of the
CLC even though the latter was supposedly designed solely for ships. This chapter
discusses which regime a victim of an oil spill resulting from an FPSO (or one of its
derivatives) might potentially use to claim for his damage, who might be liable for such
damage and to what extent.
16 Floating production can refer to various systems of offshore production, but will usually include
tension leg platforms, spar platforms, semi-submersibles and FPSOs.
17 http://www.offshore-mag.com/content/dam/offshore/print-articles/volume-77/08/2017FPSO-
072017-Ads.pdf.
18 One such, indeed, was the bow section of the Torrey Canyon herself. This ended its life as a storage
unit in Malta: for its ignominious fate, see the decision in The Argonaftis [1989] 2 Lloyd’s Rep. 487.
42
compensation/liabilities for oil spills
The term ‘FPSO’ implies storage capacity. All FPSOs have it, albeit such storage
is almost invariably intended as temporary since the petroleum will be regularly
offloaded onto a shuttle tanker. This is also the case with an FDPSO (of which there is
currently one in operation) – that is, an FPSO with drilling capabilities. Other, similar
vessels exist which do not have production ability and these are known generally as
Floating Storage and Offloading units (FSOs). Typically, an FSO will be single-hulled
(although not always – this will obviously lessen with the decline of the single-hull
ship), potentially functioning as a shuttle tanker or a large offshore storage tank. FSOs
are usually permanently moored and will not undergo the same conversion processes
required for FPSOs as they will not produce any petroleum. This usually means that
they retain, at least in theory, their ability to navigate.19
All the above – even those which are new-builds – will almost certainly be ship-
shaped (since most of them will have been initially built as ships). Other forms of
FPS will not be, with the result that it is easier to establish that they are not ‘ships’ in
the traditional sense of the word (i.e. they do not look like ships, they cannot propel
themselves unassisted, they do not navigate from location to location and they are
either permanently or at least semi-permanently attached to the seabed). But FPSOs
are somewhat more complicated.
The above definition is a broadening of the original found in the CLC 1969: “‘Ship’
means any sea-going vessel and any seaborne craft of any type whatsoever, actually
carrying oil in bulk as cargo.”20
The 1992 version thus considers a vessel to be a ship so long as she is “constructed
or adapted” for the carriage of oil in bulk, without the 1969 version’s need to “actu-
ally” carry the oil in bulk as cargo. This would suggest that carriage is not necessarily
the main requirement for a vessel to be considered a ship, provided only that she is
capable of carrying oil.21 In principle this indicates that, so long as she is constructed
or adapted for the carriage of oil in bulk as cargo, any vessel may fall under the scope
of the CLC.22 Support for this theory can be found in the French version of the CLC
1992 text,23 which reflects the idea of transport more readily in the definition of a ship
19 They might differ from Floating Storage Units (FSUs) which perform the same function but usually
will store various forms of gas as opposed to oil.
20 Article 1.1. Civil Liability Convention 1969.
21 This was the logic followed in the case Άρειος Πάγος (Greek Supreme Court) 23/2006, but this case
is not widely approved of.
22 B. Soyer and A. M. Tettenborn, Pollution at Sea (Informa Law, 2012), p. 69.
23 See Article 1 “‘Navire’ signifie tout bâtiment de mer ou engin marin, quel qu’il soit, construit ou
adapté pour le transport des hydrocarbures en vrac en tant que cargaison, à condition qu’un navire capable de
43
dr tabetha kurtz-shefford
than its English counterpart, but this potential consequence was not in the original
contemplation of the drafters. The intention of this widening of the CLC’s scope,
which originates in the 1984 Protocol,24 was to allow its application to situations where
bunker fuel was spilled from oil tankers in ballast. At the time of the definition change,
FPSOs and similar offshore craft were not in wide use, but whether originally contem-
plated or not by the drafters, considering the construction and purpose of many of
these types of craft, it is not inconceivable to include FPSOs under the definition of
ship for the purposes of the CLC 1992. There would, however, still be uncertainties:
What if the vessel’s main purpose is not to carry oil, but to extract and process it? The
problem arises in acute form with an FPSO designed to graze various fields, and which
therefore often journeys between wells. Furthermore, if an FPSO is a converted oil
tanker, would it be enough that the vessel was originally constructed or adapted for the
carriage of oil in bulk as cargo? The processing equipment on FPSOs will often mean
that there is little storage space available on them, and any oil which is stored onboard
is only there until it can be offloaded onto another form of transport (usually a shuttle
tanker) – is it possible to class this as cargo?
The definition would also seemingly include tankers acting as sailing floating
storage,25 unless such tankers were capable of carrying products other than oil – in
such a situation, they would have to be “actually carrying oil in bulk as cargo”26 to
qualify as a ship, but there is no definition as to what is meant by ‘carrying oil’ and
whether this could include passive carriage (i.e. storage) and, if so, to what extent.
(Would a few days anchored while waiting to be told the port of destination be con-
strued as storage? Would a few weeks or months?)
In April 2016, to clarify the issue, the 1992 Fund Administrative Council and
the Supplementary Fund Assembly officially adopted guidelines put forward by the
Fund’s Working Group.27 When establishing whether a craft could be considered a
‘ship’ for the purposes of the CLC, the guidelines recommend a hybrid approach.28
They contain two non-exhaustive lists, one of vessels which the drafters suggest would
clearly fall within the definition, and the other of those that would not. If a craft has
similar characteristics to those listed, they may or may not fall within the definition,
depending on the circumstances, which would be considered by the 1992 Fund govern-
ing bodies on a case-by-case basis.29 When making this assessment, a guiding question
would be whether the spill originated from a craft operating during the ‘maritime
transport chain’.30
transporter des hydrocarbures et d’autres cargaisons ne soit considéré comme un navire que lorsqu’il trans-
porte effectivement des hydrocarbures en vrac en tant que cargaison et pendant tout voyage faisant suite à un
tel transport à moins qu’il ne soit établi qu’il ne reste à bord aucun résidu de ce transport d’hydrocarbures en
vrac.”
24 See Professor Lowe’s report on the interpretation of the term ‘ship’ in the 1992 Civil Liability
Convention, September 2011, paras 78–92 (IOPC/OCT11/4/4, Annex I).
25 Tankers, laden with oil, sailing at low speeds for potentially long periods of time while they await
their final destination.
26 Article 1.1. Civil Liability Convention 1992.
27 IOPC/APR16/9/1, para 4.1.13.
28 IOPC/APR16/9/1 Annex II, para 2.
29 IOPC/APR16/9/1 Annex II, “The Definition of ‘Ship’”, para 2.
30 IOPC/APR16/9/1 Annex II, “The Definition of ‘Ship’”, para 5.
44
compensation/liabilities for oil spills
The illustrative list of vessels falling clearly within the definition of ‘ship’ includes
two types of craft which are of interest here. One is offshore craft
that have their own independent motive power, steering equipment for sea-going navigation
and seafarer onboard so as to be employed either as storage units or carriage of oil in bulk as
cargo and that have the element of carriage of oil and undertaking a voyage.31
45
dr tabetha kurtz-shefford
have Blue Cards issued by their P&I Clubs.38 Care should be taken, however, since the
guidelines are not legally binding and are thus not authoritative means through which
the CLC and its by-products are definitively interpreted either by the IOPC Fund itself
or by the law of individual CLC member states. In any case, independently of the strict
requirements of the CLC, FPSO owners are sometimes required by state authorities to
maintain the Blue Card, issued. It is doubtful that these new guidelines will drastically
change this practice.
Although the 2016 guidelines might have no real bite to them, they do reflect a
general line of interpretation (with the exception of The Slops) that the CLC should
not, overall, extend to FPSOs. Unlike tankers, which potentially put each of the states
they sail past at risk of pollution damage, FPSOs and FSOs are, for the most part,
fixed in one location, thereby limiting their damage radius. This would make address-
ing the issue nationally or regionally more appropriate than an international conven-
tion. However, a counter to this point is that one cannot always rely on individual
states or regional groupings to have the political will to maintain high standards of
compensation and liability for oil pollution.
In addition, as was pointed out by Japan in October 201339 the IOPC Funds are
financed by oil receivers; hence compensation of victims is inherently limited by these
funds and their source. To extend compensation to spills caused by the production
and processing of oil, or even its mere storage, would unfairly burden receivers, who
would be forced to pay contributions which would be more appropriately covered by
other industries. For a state like Japan – which imports virtually all its oil and has very
little FPSO activity on its continental shelf – it would mean an eventual increase in
contribution amounts to accommodate the higher numbers of compensation payouts,
as well as the larger risks and size of the payouts themselves, without it receiving any
additional benefits.
It remains to be seen how useful these guidelines will be in interpreting the
Convention within national courts. As of writing this chapter, there has not been in
any state, as yet, a case which has addressed this issue.
38 The Blue Card is issued by a P&I Club which forms the basis for the issuance of the insurance
certificate from the flag state, as required by the CLC.
39 IOPC/OCT13/4/3/3, para 4.3.
40 MSA 1995, s.154(5).
41 These sections write the CLC 1992 and the Bunkers Convention 2001 respectively into English law.
46
compensation/liabilities for oil spills
and does so by emulating some of the Convention’s features, including strict liability
and the channelling of liability42 to the registered owner.43 Limitation of liability
is covered by the Convention on Limitation of Liability for Maritime Claims 1996
(LLMC 1996).44
There is no obligation for compulsory insurance under s.154. However European
legislation,45 enacted into English law,46 does require compulsory insurance for all
EU-registered vessels and all other vessels visiting EU ports. This requirement com-
prises all liabilities normally covered by P&I interests up to the limits of the LLMC
1976, as amended, though it is worth noting that this requirement only applies to
sea-going vessels.47
3.4.2 Negligence
Victims would also have recourse to a claim in negligence for damage to their property
as a result of an offshore spill, no matter whether the craft from which the spill origi-
nates is sea-going, or for that matter a ship at all. A negligence claim is fault-based and
thus the burden lies with the claimant to prove there was a duty of care owed by the
defendant,48 that the defendant breached this duty and that the damage caused as a
result of such a breach was foreseeable and thus not too remote.49 Successfully doing
so will allow them to claim damages for the damaged property itself and also any con-
sequential loss – so long as this latter loss is not also too remote. Moreover a claimant
can seek compensation from all or any one of the involved parties for the whole of the
damage, so long as they owed a duty of care and their fault caused the damage.50 This
means that all parties involved could theoretically be exposed to potentially unlimited
liability for a spill (though subject normally to detailed indemnity provisions), and
will have to protect themselves with insurance they would not have otherwise had to
maintain had liability been channelled to one party.
There are, however, several difficult issues when making this kind of claim for oil
spill damage. One is the identification of the defendant. Unless the spill occurs on
a large scale, it is unlikely that the claimant will be able to quickly or easily identify
the spill’s source – if it can be identified at all. Large-scale spills will usually include
government involvement and investigation, with important information being made
available to the public, but small spills, especially those which originate miles offshore,
are more difficult to identify. In the initial stages, the claimant would need to have
42 This protects the servants, agents, charterers, manager, operators, salvors and persons performing
services on board the ship or taking pollution prevention measures outside the ship as well as the servants
or agents of the latter three categories (see MSA 1995, s.156(2)).
43 MSA 1995, s.154(1). This is taken seriously: see s.156(2) (specifically excluding bareboat charterers).
44 See s.168. The Limitation Convention is enacted into English law in s.185, with the text being located
in Schedule 7, Part II of the MSA 1995.
45 Directive 2009/20/EC of the European Parliament and of the Council of 23 April 2009 on the insur-
ance of shipowners for maritime claims.
46 Merchant Shipping (Compulsory Insurance of Shipowners for Maritime Claims) Regulations 2012,
SI 2012/2267.
47 Sea-going vessels above 300 grt.
48 Donoghue v Stevenson [1932] AC 562.
49 Cf. the American decision in Lloyd’s v Conoco, 868 F.2d 447 (1989).
50 Clark v Newsam (1847) 1 Ex. 131 at 140.
47
dr tabetha kurtz-shefford
detailed information about its origin and how the oil was released, and would there-
fore potentially need to have the means to obtain samples of the oil and compare it to
those of potential candidates of the spill, at the very least. Furthermore, even if the
source of the spill is located, the parties involved will likely be numerous. An FPSO
will potentially have an owner who is different from the operator, who in turn might
be a different party to the licence holder. The operator might additionally have sub-
contracted work on the vessel. All or some of these parties might be shown to have a
duty of care to the claimant suffering damage, depending on the facts of the case. The
claimant may have difficulty in proving which of these parties was at fault, in which
case he is likely to fail; he may also fail to recover substantial damages if the party at
fault is insolvent and uninsured.
More challenging is the claimant’s need to prove causation and that the damage was
not too remote. Obtaining comprehensive information on the origin and cause of a
spill can be difficult even for expert entities – especially in the case of smaller spills –
let alone individuals or small business owners seeking compensation for pollution
damage. It can be even more complicated for claimants to then show that if reason-
able care had been taken the spill would not have happened and further prove that the
damage caused was a foreseeable consequence of the spill.51
If liability is established, then a claimant may seek damages for loss or damage to
property and consequential economic losses which are not too remote.52 For claims
involving damage to property, e.g. fishing boats and/or equipment, pollution of
private beaches, fish in a fish farm, and so on, English rules are therefore unproblem-
atic. But liability stops there. Pure economic loss, i.e. financial losses not caused as a
result of damage to one’s own property, are generally irrecoverable.53 Thus it seems
nothing would be recoverable for the killing of uncaught fish or loss of profits due to
a moratorium on fishing; a fortiori the cancellation of bookings at a beachfront hotel
as a direct result of the spill would equally be uncompensable. This makes a claim in
negligence for an oil spill from an FPSO less than ideal when most of them will likely
be purely economic in nature.54
51 The Wagon Mound (No2) [1967] 1 AC 617; Wright v Dunlop Rubber (1973) 13 KIR 255; Wallhead v
Ruston and Hornsby (1973) 14 KIR 285.
52 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557.
53 Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] AC 785; Hamble Fisheries
Ltd v L Gardner & Sons Ltd (The Rebecca Elaine) [1999] 2 Lloyd’s Rep I at para 4; Ultramares Corp v Touche
174 NE 441 (1932) at 444.
54 In the report “Civil Liability, Financial Security and Compensation Claims for Offshore Oil and Gas
Activities in the European Economic Area” published by Bio by Deloitte and Stevens Bolton LLP it was
estimated that 96 per cent of all claims submitted because of the Deepwater Horizon were pure economic
claims.
48
compensation/liabilities for oil spills
do mischief if it escapes. Although liability does not require the defendant to own
55
the land – occupation is enough56 – some difficulty might arise in the fact that pro-
prietary interest in the land is required.57 Exploration licences in the UK, it should
be remembered, are only to “search and bore for and get”58 oil within a licensed area
and do not imbue the licence holder with a real right over the area. This might well
be taken to mean that in the case of a spill originating from the well connected to an
FPSO (and therefore the subsea “land”59), the defendant did not have the necessary
property interest to satisfy the requirements. Should the spill originate from the craft
itself, however, it might produce a different outcome (e.g. if oil is being stored in an
FSO, or even in an FPSO). In Howard v Furness-Houlder Argentine Lines60 the claim
failed on other grounds, but a steamship was accepted as “premises” for the purposes
of a Rylands v Fletcher claim,61 so a claim based on oil spilling out of an FSO or an
FPSO might be plausible.
A Rylands v Fletcher claim would also have other issues involving non-natural use of
land and/or the collection and keeping of dangerous substances on the land. As for the
former issue, if the premises are a ship specifically designed to process and store oil (or
simply to store the oil, as with an FSO), then it would make little sense to argue that
the actual storage of the oil on board the vessel would constitute unnatural use of it.
The collecting and keeping of substances would also be difficult to prove within the
context of an FPSO as being ‘kept’ would suggest a retention of the thing for longer
periods than the short time oil is usually stored on an FPSO.
Finally, there are two additional points worth making from a practical perspec-
tive. First, a claim under Rylands v Fletcher would only allow for limited compensa-
tion: pure economic loss is not recoverable62 and even derivative economic loss is
precluded.63 Secondly, considering most oil production within the United Kingdom
occurs off the shores of Scotland64, Scots law – which prohibits claims under Rylands v
Fletcher 65 – is likely to be applicable.
55 Per Blackburn J in Rylands v Fletcher (1866) LR 1 265 at 279; affirmed by the HL in (1868) LR 3 HL
330.
56 Rainham Chemical Works v Belvedere Fish Guano Co [1921] 2 AC 465 at 479.
57 Transco v Stockport Metropolitan Borough Council [2003] UKHL 61.
58 Petroleum Act 1998, s.3(1).
59 The UN Convention on the Law of the Sea allows for sovereign rights over the continental shelf, but
the subsea is only owned by the Crown up to the territorial sea. See UNCLOS article 77(4).
60 Howard v Furness-Houlder Argentine Lines, Ltd. and A & R Brown, Ltd. [1936] 2 All ER 781.
61 Howard v Furness-Houlder Argentine Lines, Ltd. and A & R Brown, Ltd. [1936] 2 All ER 781 at 125.
62 Transco v Stockport Metropolitan Borough Council [2003] UKHL 61 at 9 (Lord Bingham) and at 35
(Lord Hoffman).
63 Cattle v Stockton Waterworks (1874–80) All ER Rep 220.
64 Oil and Gas Production Statistics released by the Official Statistics Publication for Scotland for
2016–2017 show that Scotland accounts for 82 per cent of the UK’s total oil and gas production. See http://
www.gov.scot/Topics/Statistics/Browse/Economy/oilgas1617 (last accessed April 2018).
65 RHM Bakeries (Scotland) Ltd v Strathclyde RC (1985) SC (HL) 17.
66 Colour Quest Ltd and others v Total Downstream UK plc and others [2009] All ER (D) 311 (Mar).
49
dr tabetha kurtz-shefford
liability tort. Although it is usual to base such claims on an ongoing state of affairs,
it is not impossible for a one-off event, such as an oil spill, to be sufficient.67 Indeed,
there are several ways in which a claim may take shape, though the most relevant to
an oil spill from an FPSO would be the causing of physical damage,68 or by unduly
interfering with another’s land,69 to the point where it interferes with the use or enjoy-
ment of that land by the owner.70 Compensation is relatively limited, although less
so than a claim under Rylands v Fletcher. Damage to the land itself and liability for
loss of enjoyment of the land will obviously be available – the latter of which will also
therefore include intangible losses as a result of this interference.71 These would also
seemingly include consequential loss, so long as they are a natural consequence of the
wrongful act.72 A claim may also be made for damage to chattels upon the property.73
One issue with such a claim might be the fact that most private nuisance cases involve
neighbouring properties, while an oil spill from an FPSO can potentially involve large
distances of sea travel. However, this seems to be dealt with by the decision in Wood v
Waud,74 which involved a contaminated stream and a claim by a distant downstream
owner – a wide range of liability that seems well justified in the circumstances.75
67 Colour Quest Ltd and others v Total Downstream UK plc and others [2009] All ER (D) 311 (Mar).
68 To constitute damage, there must be a “material injury to property” see St Helens Smelting Co v
Tipping (1865) 11 HLC 642 at 650 (Westbury LC).
69 The requirements of ‘inconvenience’ and ‘interference’ to land will depend on the scenario and facts.
70 Hunter v Canary Wharf [1997] AC 655.
71 Jan de Nul (UK) v NK Royal Belge [2000] 2 Lloyd’s Rep 700 at 716.
72 Grosvenor Hotel Co v Hamilton [1894] 2 QB 836 at 840.
73 Hunter v Canary Wharf Ltd [1997] AC 655 at 706.
74 (1849) 3 Ex 748.
75 G. Gordon, “Oil, water and law don’t mix: Environmental liability for offshore oil and gas operations
in the UK: Part I: Liability in the law of tort/delict and under the petroleum licence” (2013) 25 ELM 3, at 8.
76 For a thorough examination of oil spills within the context of public nuisance, see S. Rainey “‘To the
Great Damage and Common Nuisance of All Liege Subjects of Our Lady Queen’: Oil Pollution Claims and
Public Nuisance”, published as Chapter 6 in Pollution at Sea: Law and Liability (2012, Informa Law) and A.
Tettenborn “Marine Pollution: Unorthodox Suits and Unorthodox Defendants” published as Chapter 12 in
Pollution at Sea: Law and Liability (2012, Informa Law).
77 Mitchell and Others v Milford Haven Port Authority [2003] EWHC 1246 (Admiralty).
78 Mitchell and Others v Milford Haven Port Authority [2003] EWHC 1246 (Admiralty).
79 Attorney General v PYA Quarries [1957] 2 QB 169.
50
compensation/liabilities for oil spills
cross section of the class affected is required (it is not necessary to prove every member
of the class has been injuriously affected).80 As for the third requirement and the
need for ‘direct’ damage, it has been suggested that “It is likely, as is the case with
the practice of the IOPC Fund, that claims by fishermen and hotels in the affected
coastal area will be allowed as direct, but other claims will be rejected as secondary
and relational.”81
Academic opinion varies as to whether offshore platforms will ever fall under the
above definition85 but as there is no case law which specifically addresses this issue (let
alone that of FPSOs), there can be no conclusive answer to this question. The crucial
factor would appear to be “navigation as a ship or part of a ship” although it is unclear
as to the necessary extent of navigation required for this to be satisfied. There is, of
course, case law which analyses various offshore craft to see if they count as ships,
but these are all addressed within different contexts. A gas float was not a ship for the
51
dr tabetha kurtz-shefford
purpose of salvage as “It was not constructed for the purposes of being navigated
or of conveying cargo or passengers.”86 Neither was a floating crane mounted onto
a pontoon in Merchants’ Marine Insurance Co Ltd v North of England Protection &
Indemnity Association87 (which sought to decide whether it was a ship for the pur-
poses of the rules of the P&I Club involved in the dispute) since it appeared its main
function was not to navigate across water:
Whatever other qualities are attached to a ship or vessel, the adaptability for navigation, and
its use for that purpose, is in my judgment one of the most essential elements … yet having
regard to its history I am satisfied that movement is the exception in its career and not the
rule …88
Contrast this case, however, with the earlier Titan89 which held that, for the purposes
of limitation, a floating crane operating at rest was a ship.90
86 Wells v Owners of Gas Float Whitton (No 2) [1897] AC 337 (HL).
87 Merchants’ Marine Insurance Co Ltd v North of England Protection & Indemnity Association (1926)
25 Ll L Rep 446.
88 Merchants’ Marine Insurance Co Ltd v North of England Protection & Indemnity Association (1926)
25 Ll L Rep 446 at 447.
89 Swan, Hunter & Wigham Richardson, Ltd. (“Titan”) v “Benwood” And Others (1923) 14 Ll L Rep 484.
90 For detailed discourse on the issue, see B. Soyer and A. M. Tettenborn, Pollution at Sea (Informa
Law, 2012).
91 “OPOL – The Offshore Pollution Liability Association Ltd” (Opol.org.uk, 2018) http://www.opol.
org.uk (last accessed April 2018).
92 “Guidelines for Claimants” (OPOL – The Offshore Pollution Liability Association Ltd, 2018). http://
www.opol.org.uk/downloads/Claimant-Guidelines-Apr2016.pdf (last accessed April 2018).
93 T. Kurtz-Shefford, “Liability for Offshore Facility Pollution Damage after the Deepwater Horizon?
What Happened to the Global Solution?” (2012) 16 JIML p. 453.
52
compensation/liabilities for oil spills
its financial obligations, all remaining members agree to contribute towards payment
of outstanding claims. Initially effective in the UK, OPOL has been extended to cover
offshore facilities in countries generally surrounding the North Sea.94 In none of these
states outside the UK, however, is there the same regulatory duty to be a member of
the OPOL regime; and indeed membership outside the UK has declined in recent
years. It is also worth noting that although the Oil and Gas Authority (OGA) expects
all offshore operators to be members of OPOL and to register each of its separate
operatorships, this is only stated within the context of OGA’s assignment policy. In
addition, the OGUK Joint Operating Agreement (JOA) 2009, Cl.8.2 requires the
operator to be a member of OPOL and ensures that the joint venture is subject to its
provisions, but there is no legal requirement for this proforma document to be used.
The Agreement covers escapes and discharges of oil from offshore facilities within
the jurisdiction of any Designated State – these will include FSOs and FPSOs, whether
fixed or mobile (unless they are permanently abandoned).95 It imposes strict liability,96
channelling it to the operator.97 As with the CLC, there are caps to liability as well: an
overall limit of US$250 million per incident, divided equally into two parts, remedial
measures and pollution damage claims,98 although if the limit has been reached in one
category, it is possible to draw from the other category, up to its limit. It also requires
proof of financial responsibility.99 These features would all, theoretically,100 encourage
remedial action by operators and effectively facilitate compensation payouts to victims
of a spill, but since the agreement does not have the same legal prowess of interna-
tional conventions or even state legislation, it cannot take away a claimant’s right to
redress through the courts for losses which exceed the maximum recoverable amount,
nor can it impose compensation claims solely via its own rules – a claimant is free to
sue under different torts.
There are two other issues with OPOL: the limitation cap and the definition of
“direct loss or damage”.101 According to a study102 done by Oil and Gas UK (OGUK),
the oil and gas industry representative body for the UK, for most potential disaster
scenarios on the UK continental shelf, the limit of US$250 million would be a suffi-
cient amount to cover damage and clean-up of the spill for most but not all scenarios.
Should the costs of the spill exceed the limits in place, unlike the CLC, which incor-
porates a fund that can be accessed once limits of the Civil Liability Convention are
exceeded, payments will be made pro rata.103 Where the risk of a spill could potentially
reach billions in compensation claims,104 the current cap would prove to be far from
94 Denmark, Faroe Islands, France, Germany, Isle of Man, Netherlands, Norway and Republic of
Ireland.
95 OPOL, Cl I(8).
96 OPOL, Cl IV(A).
97 OPOL, Cl VII.
98 OPOL, Cl IV(A).
99 OPOL, Cl II(C)(1).
100 OPOL has never been tested.
101 OPOL, Cl I(14).
102 http://oilandgasuk.co.uk/wp-content/uploads/2015/04/Oil-spill-cost-study-120531.pdf (last accessed
April 2018).
103 OPOL, Cl IV(A)
104 As with the Deepwater Horizon in the United States.
53
dr tabetha kurtz-shefford
satisfactory. Although the limitation is in place to protect the operator in exchange
for their facing strict liability, one wonders, if a spill of some magnitude was to occur,
whether the operator would even attempt to maintain this cap in the face of the inevi-
table political pressure and media coverage.
OPOL also limits claims to those of direct loss or damage – with no real further
definition to act as guidance. Since OPOL was drafted in the UK, it would seem
important to question whether pure economic loss claims – which cannot be claimed
in the UK – would be recoverable under OPOL. The same OGUK study105 noted that
direct economic loss which was covered by the CLC would also be recoverable under
OPOL.106 The study is not a definitive source, nor is it legally binding, and considering
the decisions of the IOPC Fund administration are not binding on national courts
either, it is important to point out that there cannot be a definitive answer, at least for
UK purposes, until it has been addressed either by the UK government or in court.
54
ASSOC PROF LELOUDAS & PROF SOYER
CHAPTER 4
4.1 Introduction
Carriers of passengers enjoyed the benefits of “freedom of contract” until the latter
part of the twentieth century. They abused them shamelessly, often excluding their
liability to passengers in its entirety.1 All this changed with the introduction of an
international regime in 1974. The Convention relating to the Carriage of Passengers
and their Luggage by Sea of 13 December 1974 (commonly known as the Athens
Convention 1974), came into existence with a view to providing a uniform legal frame-
work for passengers carried on international sea voyages.2
The liability of the carrier under the Athens Convention 1974 is fault-based. When
death of or injury to a passenger, or loss of or damage to cabin luggage, arises from a
non-shipping-related incident (sometimes called a hotel-type incident), the passenger
has to prove both fault attributable to the carrier and a causal connection between
it and the damage.3 When, on the other hand, death, injury or cabin baggage loss
arises from a shipping-related incident, the burden of proof shifts; the carrier is
presumed to be at fault, and to avoid liability must prove that it took all necessary
precautions to avoid the accident.4 The carrier’s fault is also presumed in respect of
loss of or damage to hold baggage, irrespective of the nature of the incident from
* Member, Institute of International Shipping & Trade Law, Swansea Law School.
** Director, Institute of International Shipping & Trade Law, Swansea Law School.
1 Not so with air carriers. Right from the outset, the 1929 Warsaw Convention in Art. 23 nullified any
(contractual) provision relieving the carrier of liability or reducing the liability limits of the Convention.
This continued despite modifications, most notably in 1955 and 1961. The 1999 Montreal Convention
contains a similar prohibition in Art. 26: “[a]ny provision tending to relieve the carrier of liability or to fix a
lower limit than that which is laid down in this Convention shall be null and void ...”.
2 As of May 2018, the following countries are party to this Convention: Argentina, Bahamas, Barbados,
China, Congo, Dominica, Egypt, Equatorial Guinea, Estonia, Georgia, Guyana, Jordan, Liberia, Libya,
Luxembourg, Malawi, Nigeria, Poland, Russia, St Kitts & Nevis, Switzerland, Tonga, Ukraine, Vanuatu,
Yemen, Hong Kong and Macau (the last two as associate members). The 1974 regime has been incorpo-
rated, sometimes with higher limits, into the national laws of some states, such as Canada and Vietnam,
even though these states have not officially ratified the convention. Note that this list excludes a large
number of states that have now denounced the 1974 Convention and ratified the 2002 Protocol.
3 See Arts. 3(1) and (2) of the Athens Convention 1974.
4 Art. 3(3). This refers to an incident arising from or in connection with the shipwreck, collision,
stranding, explosion or fire or defect in the ship. The term “shipping-related incident” is an unofficial one.
55
assoc prof leloudas & prof soyer
which the loss or damage resulted.5 The 1974 Convention allows carriers to limit their
liability,6 though the limits are generally regarded as low by contemporary standards
(for instance, for personal injury and death claims the sum is 46,666 SDRs).7 It also
enacts a two-year time-bar,8 and provides a number of alternative jurisdictions in
which the passenger can bring an action, provided that the court is located in a State
Party.9
The Athens Convention 1974 was not perfect. In an attempt to improve the rights
of passengers and make the Athens regime more attractive for other states to ratify,
a Protocol10 to vary it was adopted in 2002 at a diplomatic conference in London
(the varied Convention being commonly known as the Athens Convention 2002).11
The Athens Convention 2002 did a number of things, such as introducing a compul-
sory insurance regime with direct actions against insurers,12 increasing the limits for
luggage losses,13 amending the time-bar regime to allow its suspension14 and allowing
supranational organisations such as the European Union (EU) to ratify it.15 Most
importantly, however, it introduced fundamental changes to the liability regime.16 The
new regime provides a two-tier liability system for a passenger’s death or personal
injury caused by shipwreck, capsizing, collision or stranding of the ship, explosion or
fire in the ship or defect in the ship.17 Under the first tier, the carrier is strictly liable
up to 250,000 SDRs,18 unless it proves that the accident was caused solely by an act
of war, hostilities, civil war, insurrection or some exceptional natural phenomenon,
or that it was wholly the result of an act or omission by a third party committed with
intent to cause it.19 Fault is otherwise irrelevant. Above 250,000 SDRs liability is fault-
based, with a reversed burden of proof, up to 400,000 SDRs (the maximum liability
expressed in the amended Art 7).20 No change is made, however, to the liability regime
56
temporal limits of the athens regime
for personal injury and death arising out of non-shipping incidents: these remain
subject to a simple fault regime.
The Athens Convention 2002 officially entered into force on 23 April 2014.21
However, for EU Member States matters were different, since the EU had already
adopted it into EU law by virtue of a 2009 Regulation.22 The Regulation, moreover,
did not only apply the uniform liability regime as laid down in the Convention. In
addition it extended the scope of application of the Convention regime to domestic
carriage and inland waterways;23 removed the power of Member States to apply higher
limitations of liability, although this was allowed in the Convention itself;24 and intro-
duced a system of interim payments for passenger injury and death.25
Currently, the Athens regime (either 1974 or 2002) plays a significant role in the
carriage of passengers, especially on international voyages. Apart from the fact that
the Athens Convention 2002 applies throughout EU and several non-EU states have
incorporated it into their legal systems, most carriage contracts issued by cruise lines
expressly incorporate the Athens Convention 1974.26 If the Athens regime is appli-
cable in a particular instance, it thus provides a comprehensive liability regime with
monetary limits and time-bars.
In cases where the Athens regime is not applicable by force of law or contrac-
tual agreement, the relevant national law is likely to be that of the first port of call.
This could potentially alter the balance between the carrier and the passenger by
introducing a different liability regime. Passengers might in some cases, for example,
benefit from bringing their claim outside the Athens regime, for example to escape
the short Athens time-bar. Conversely, carriers often prefer to respond to passenger
claims under the Athens regime so as to be able to benefit from that time-bar and the
monetary limits on liability.
Disputes concerning the temporal scope of the Athens regime have already given
rise to litigation and the authors are of the view that further difficulties are likely to
arise given the ambiguous nature of certain of its provisions. The purpose of this
chapter is not to provide a critical analysis on the Athens liability regime, something
already done elsewhere,27 but to discuss the awkward issue of when it will govern a
given passenger claim. In the course of the analysis, reference will also be made to
national and regional legislation, and also to some other international regimes dealing
with carriage of passengers by different modes of transport.
21 As of May 2018, the member states to the Athens Convention 2002 are: Albania, Belgium, Belize,
Bulgaria, Croatia, Denmark, Finland, France, Greece, Ireland, Latvia, Lithuania, Malta, the Marshall
Islands, Montenegro, Netherlands, Norway, Palau, Panama, Portugal, Romania, Serbia, Slovakia, Slovenia,
Spain, Sweden, Syria, the United Kingdom and the EU.
22 Council Regulation 392/2009 of 23 April 2009, on the Liability of Carriers of Passengers by Sea in
the Event of Accidents, 2009 O.J. (L 131) 24 also makes the following major changes in this area.
23 Art. 1.
24 Art. 4.
25 Art. 5.
26 See, for example, Royal Caribbean Cruise/Cruisetour Contract, cl 11 at https://secure.royalcaribbean.
com/content/en_US/pdf/CTC_Not_For_BR.pdf (last tested 1 March 2018).
27 See B. Soyer and G. Leloudas, “Carriage of Passengers by Sea: A Critical Analysis of the International
Regime”. forthcoming in 26 Michigan State University International Law Review (2018).
57
assoc prof leloudas & prof soyer
28 By virtue of Art. 2 of the Athens Convention 1974, the voyage must be of an international character
but it is open to Contracting States to extend the application of the Convention to domestic voyages. As
mentioned above, the EU Regulation does just this in respect of Member States.
29 Conversely, under Art. 1 of the Convention on the Contract for the International Carriage of
Passengers and Luggage by Road 1979, a passenger has been described as “any person who, in the perfor-
mance of a contract of carriage made by him or on his behalf, is carried either for reward or gratuitously
by a carrier”.
30 Merchant Shipping Act 1995, Sched. 6, Art. 9.
31 Note that the Merchant Shipping Act 1995, Sched. 6, Art. 9, merely refers to carriage “not for
reward”: in the converse case of carriage for reward, it does not say who must provide the reward. One
suspects this is intentional: if an employer buys a ticket for an employee, it would be bizarre if the latter
were not within the Athens regime merely because he had not personally paid. It is worth noting that the
Canadian enactment of the Athens Convention extends the application of the Convention to all passengers
of commercial or public craft carried by water, whether or not they are being carried pursuant to a contract,
see, s.37(2) of Marine Liability Act 2001. However, the Convention would not apply when a visitor makes
use of a boat for accommodation purposes: Buhlman v Buckley (2011), 330 D.L.R. 4th 755.
32 Art. 1 of the Montreal Convention and Art. 1(1) of the Warsaw Convention.
58
temporal limits of the athens regime
hire or reward”, a definition that is not particularly helpful in our case. A consensus 33
nevertheless seems to have developed among courts that to be an “air transport under-
taking”, the relevant entity or person is required to “provide air carriage as part of a
commercial enterprise even though aviation is not its principal activity”;34 or “even if
air transport is only a small or subordinate part of the whole business”.35 It has even
been suggested that the only flights excluded are “casual, isolated flights when a free
ride is afforded by an owner not engaged in the business (enterprise) of flying”.36 Still,
there is no doubt that a commercial air carrier would qualify as such and the trans-
port of an under-two-year-old for free would trigger the application of the aviation
conventions.
Similarly, Art. 1.1 of the Uniform Rules concerning the Contract of International
Carriage of Passengers by Rail (CIV) 1999 provides that the Rules are applicable “to
every contract of carriage of passengers by rail for reward or free of charge”.37 The
express wording makes it clear that in the context of international rail carriage the
holder of free ticket will be treated no differently from a paying passenger.38
A more difficult question arises when a pregnant woman sustains injuries while she
is carried on board a vessel that result in the child being later born with disabilities.
There is no doubt that under English law the child would be able to sue the carrier.39
But is such a claim within the Athens system? The claim will fall within the regime if
the unborn child can be regarded as being carried as a passenger, or possibly if it can
be viewed as a third-party beneficiary of the mother’s contract.40 Courts might be
attracted to this solution on the basis that it was unacceptable that a mother injured
during carriage should be subjected to a different legal regime from her unborn child.
But it seems difficult to justify as a matter of interpretation: a contract to carry a
pregnant woman would normally be regarded as a contract to carry one person, not
two (or more). If this is so, then the child’s claim is outside the Athens system alto-
gether.41 In England it will thus be able to sue under the relevant legislation,42 with
the disadvantage that it cannot take advantage of the strict liability provisions of the
33 See s.95(5) of the Transport Act 2000. The following more helpful definition was included in the Air
Navigation Order 2005 (SI 1970/2005), Art. 155: “Air transport undertaking means an undertaking whose
business includes the undertaking of flights for the purposes of public transport of passengers or cargo.”
But this disappeared in the Air Navigation Order 2009 (SI 2009/3015) and the current Air Navigation Order
2016 (SI 2016/765).
34 E. Giemulla et al, Montreal Convention (Kluwer Law, 9th Supp, 2014), paras.1–20.
35 D. McClean et al, Shawcross and Beaumont: Air Law (Lexis Nexis, Issue No. 159, 2018), Division
VII, at para.312.
36 Bates Block v Compagnie Nationale Air France, 386 F.2d 323, 333 (5th Cir. 1967).
37 Uniform Rules concerning the Contract of International Carriage of Passengers by Rail (CIV) –
Appendix A to the Convention concerning International Carriage by Rail (COTIF) 1999 (emphasis added).
38 It is interesting to note that the equivalent provision in the Uniform Rules concerning the Contract of
International Carriage of Goods by Rail (CIM) provides for the application of the convention only in con-
tracts of carriage of goods for reward. See Art. 1,1; Appendix B to the Convention concerning International
Carriage by Rail (COTIF) 1999.
39 Congenital Disabilities (Civil Liability) Act 1976. This was also the position at common law: see
Burton v Islington HA [1993] Q.B. 204 and cf X & Y v Pal (1991) 23 N.S.W.L.R. 26.
40 In English law under the Contracts (Rights of Third Parties) Act 1999. Note that s.1(3) stipulates:
“The third party… need not be in existence when the contract is entered into.”
41 See Art. 14 of the Athens Convention 1974
42 That is, the Congenital Disabilities (Civil Liability) Act 1976, referred to above.
59
assoc prof leloudas & prof soyer
Convention, but conversely will escape the effects of the Convention time-bar and can
rely on the global, rather than the Convention, limitation figures.43
The authors know of no reported cases of this nature under the aviation conven-
tions. Yet the recent decision of the ECJ in the Air Baltic case44 might be relevant, as it
confirmed that a contract of carriage by air can be concluded with a third party for the
benefit of the actual passenger.45 In this case the tickets were paid for by the employer,
but issued in the names of its employees, who were the actual passengers transported.
The air carrier was held liable to the employer for damage occasioned by delay to the
carriage of its employees.
Still, it would stretch the boundaries of the aviation conventions to use this decision
to argue that the unborn child was a beneficiary of the mother’s contract of carriage.
First, case law is clear that a passenger, gratuitous or otherwise, must have consented
to the carriage in question by means of a contract. The existence of such consent
explains why the aviation conventions have been held not to apply to “stowaways,
persons on the flight to be expelled from the state of departure, persons employed by
the carrier to carry out routine maintenance, flight attendants, and student pilots …
[T]hey have not contracted for carriage as such …”46 What the CJEU decision seems
to suggest is that, although it is irrelevant whether the third, contracting party is a pas-
senger or not, the beneficiary must qualify as a passenger. Secondly, air tickets usually
bear the name of the passenger and do not permit substitutions or transfers.47 As
such, it is difficult to identify the unborn child as a member of a class or of a particular
description under s.1 of the Contracts (Rights of Third Parties) Act 1999.
If the action under the aviation conventions fails, it is doubtful whether a claim
under the Congenital Disabilities Act 1976 would be successful. The concept of exclu-
sivity is central to the application of the aviation conventions.48 The prevailing view
argues that the claimant is precluded from bringing a claim against the carrier under
national law for an incident that took place during international carriage, even when
the carrier is not liable under the conventions. English courts have demonstrated
remarkable consistency in the application of the exclusivity principle.49 Most recently,
43 In maritime law, carriers can benefit from global limitation. This essentially allows carriers to limit
their liability for all claims emerging from an incident. The Athens Convention, on the other hand, allows
carriers to limit their liability with regard to each passenger claim (unit limitation). If a state is party both
to the Athens Convention and a global limitation regime, such as the 1976 Convention on Limitation of
Liability for Maritime Claims(LLMC 1976), if the combined amount of all the claims exceeds the fund set
by the global limitation regime, all the claims (including passenger claims under the Athens Convention)
will be reduced proportionately. Protocol of 1996 to Amend LLMC 1976 allows State Parties to make a
reservation with regard to passenger claims under the Athens Convention (96 Art. 15bis.3). This means
that the limits set by the Athens Convention will not be susceptible to further reduction under the global
limitation regime.
44 Air Baltic Corp. AS v Lietuvos Respublikos Specialiųjų Tyrimų Tarnyba (Case C-429/14) [2016] 3
C.M.L.R. 1; [2016] 1 Lloyd’s Rep. 407.
45 E. Giemulla et al, Montreal Convention (Kluwer Law, 9th Supp, 2014), paras.1–26.
46 See M. Clarke, Contracts of Carriage by Air (Lloyd’s List, 2nd ed., 2010), p.38 with reference to
case law.
47 See, e.g., condition 3.a of the General Conditions of Carriage of British Airways (BA) available at
https://www.britishairways.com/en-gb/information/legal/british-airways/general-conditions-of-carriage (last
tested on 1 March 2018).
48 Montreal, Art. 29; Warsaw, Art. 24.
49 See, e.g., Sidhu v British Airways Plc. [1997] AC 430, [1997] 2 W.L.R. 26 (HL).
60
temporal limits of the athens regime
the Supreme Court in the case of Stott v Thomas Cook Operators Ltd. dismissed 50
the claim of a disabled passenger against the tour operator brought under the UK
Disability Regulations.51 The relevant incident took place on board the aircraft, yet
the claim was brought under the Regulations because they permit recovery for injury
to feelings, which is not recoverable under the Montreal Convention (or the Warsaw
Convention). The Supreme Court was quick to dismiss the claim by applying the
principle of exclusivity:
Should a claim for damages for ill treatment in breach of equality laws as a general class, or,
more specifically, should a claim for damages for failure to provide properly for the needs of
a disabled passenger, be regarded as outside the substantive scope of the Convention? As to
the general question, my answer is no …52
It is clear that the matter (i.e. whether the international carriage regime(s) should
govern an action brought by an unborn child injured during the course of transit)
remains unsolved under both the sea and the air convention regimes. It is fair to say
that authorities in the context of carriage by air seem to suggest that the international
regime should govern such an action. This would be the preferred solution of the
authors under the Athens regime too.
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assoc prof leloudas & prof soyer
sea, or essential that it actually goes to sea.57 If the latter is correct, a vessel operated
within a harbour to provide sightseeing tours for tourists will possibly not be regarded
as sea-going. Therefore, there is a genuine possibility that in case of an accident, pas-
sengers who purchase a ticket for a ride on an inflatable raft in a harbour in Barbados
will be treated differently than those who enjoy a similar ride off the rugged coast of
Dominica (both of which states are parties to the Athens Convention 1974).
4.2.1.3 Carrier
A final point on the scope of the Athens Convention system relates to the definition of
a “carrier”. By virtue of Art. 1, a “carrier” means a person by or on behalf of whom
a contract of carriage has been concluded, whether the carriage is actually performed
by him or someone else (a “performing carrier”). The definition of “carrier” is very
wide, suggesting that anybody who has been involved in the process of establishing a
contractual relationship with the passenger could possibly, regardless of their status,
be regarded as the contractual carrier.58 Therefore, there is no reason why a tour
operator could not be treated as “carrier” under the Convention even though he does
not perform any part of the transport himself. In fact, authorities tend to agree that
a tour operator could be treated as a “contracting carrier” under the Athens regime
as long as it assumes responsibility for the performance of the contract including the
sea leg.59 But a travel agent who does not undertake, but merely arranges, carriage is
different.60
This is not necessarily an adverse development for passengers, as it enables them
in principle to bring an action against tour operators as well as carriers in cases of
mishaps occurring at sea. But some uncertainty may arise where the sea travel forms
part of a package holiday. Assume that a tour operator arranges a package holiday for
a consumer including sea carriage and the consumer is injured during the sea leg of
57 In Salt Union Ltd. v. Wood [1893] 1 QB 370 a river steamer used to carry salt on the rivers Weaver
and Mersey between Winsford and Liverpool was held to be a non sea-going vessel as the steamer
never set out to go anywhere other than inland waters. See also Union S.S. Co. of New Zealand Ltd. v
Commonwealth (1925) 37 CLR 130 and Kirmani v Captain Cook Cruises Pty Ltd. [No 1] (1985) 159 CLR
351 (Austl.).
58 Rather as under the Hamburg Rules 1978 on carriage of goods by sea, which provide for a similarly
expansive definition of the term “carrier”.
59 HHJ Hallgarten QC in Lee v Airtours Holidays Ltd. & Another [2004] 1 Lloyd’s Rep. 683 (Cent.
London Cty. Ct.) made the following observation, at [32]: “I do not consider that the [Athens] Convention is
concerned with status at all: there is nothing which confines its application to concerns in the nature of ship-
ping lines. Basically what emerge from the Convention are two categories: (1) the carrier—being the person
by or on whose behalf a contract of carriage has been concluded; and (2) the performing carrier—being
the person to whom such carriage is entrusted. As I see it, the essential question is whether, as between the
claimants and the [tour operators] there was a contract of carriage by sea: if so then the [tour operators]
assumed responsibilities as carriers, with the word carrier being used in a non-technical sense … The matter
is very largely one of impression, but for my part I see no difficulty in saying that the [tour operators] were
carriers, in that the agreement with the claimants included obligations pertaining to carriage by sea and to
that extent, it represented a contract for the carriage by sea of the claimants by the [tour operators] …” See
also Norfolk v My Travel Grp. Plc. [2004] 1 Lloyd’s Rep. 106 (Plymouth Cty. Ct.).
60 See Lawrence v NCL (Bahamas) Ltd (The Norwegian Jade) [2017] EWCA Civ 2222 whether a
travel agent or the ship operator was the contractual carrier under the Athens regime. The Court of
Appeal was of the firm view that the contractual carrier was the operator as the travel agent had duly
informed the passenger that it was acting as agent and the contract was subject to the operator’s terms and
conditions.
62
temporal limits of the athens regime
the journey as a result of negligence of the performing carrier. The consumer chooses
to bring an action against the tour operator under the Package Travel and Linked
Travel Arrangements Regulations 2018.61 Under Reg 15(3) of these Regulations, the
tour operator is liable to the consumer for any damage caused as a result of “lack of
conformity” which the traveller perceives during the performance of a travel service
included in the package travel contract.
“Lack of conformity” has been described in Regulation 2(b) as “a failure to perform,
or the improper performance of, the travel services included in a package.” In cases
where the tour operator is liable under the Regulations, it has been afforded an oppor-
tunity to limit its liability in accordance with relevant international conventions.62
So far so good. However, the EU Regulation applying the 2002 Athens regime
applies it to non-international voyages too. So what if a tour operator arranges a
package holiday that involves a trip from, say, Piraeus to Mykonos (also in Greece)
and the consumer is injured during that voyage? Can the tour operator, sued under the
Package Regulations, limit his liability? This was a problematic issue under the 1992
Regulations as no reference was made to the EU Regulation incorporating the Athens
Convention 2002 into EU law simply because the latter Regulation did not exist when
the Package Regulations 1992 was drafted. However, explicit reference to the rel-
evant EU Regulation was made in the Package Regulations 2018 in Regulation 16(10).
Therefore, the Package Regulations 2018 should be read in a manner that extends the
application of the Athens Convention to domestic carriage.
A more difficult question is how any conflict between the Package Regulations and
the Athens regime could be resolved if a passenger brings an action against the tour
operator for personal injury that occurs on the sea leg. Assuming that a tour operator
qualifies as a contracting carrier under the Athens regime, would the basis of its liabil-
ity be the Athens regime solely? Or should the role of the Athens regime be restricted
to the limitation provisions of the Athens regime, with all other matters, including
liability, being governed by the Package Regulations?
HHJ Hallgarten QC in Lee v Airtours Holidays Ltd63, considering the issue under the
Package Regulations 1992, held (wrongly we submit) that the latter solution was correct.
There, the claimants purchased from the tour operator a package holiday involving a
short stay in Singapore, a cruise on the liner Sun Vista and stays in Penang and Kuala
Lumpur. After a five-day stay in Singapore, the claimants boarded the Sun Vista; on the
voyage she caught fire and was abandoned, later sinking with all the claimants’ belong-
ings save for the clothing they stood up in (and a video camera). The claimants brought
an action against the tour operator under Regulation 15 of the Package Regulations
1992 seeking damages for personal injury, including p sychiatric damage, compensation
for loss of their possessions (including valuables) and damages for non-pecuniary loss
arising out of disappointment. The tour operator admitted liability but argued that its
61 SI 2018/634, hereinafter referred to as the Package Regulations 2018. These Regulations give effect
to the Package Travel Directive 2015 (Directive (EU) 2015/2301) and repeal the Package Travel, Package
Holidays and Package Tours Regulations 1992 (SI 1992/3288), hereinafter referred to as the Package
Regulations 1992.
62 Regulation 16(5) of the Package Regulations 2018.
63 [2004] 1 Lloyd’s Rep. 683.
63
assoc prof leloudas & prof soyer
liability for personal injury and loss of property was limited under Arts. 7 and 8 of the
Athens Convention 1974, incorporated into English law by s.183 of the MSA 1995, and
that liability for the loss of the valuables was excluded entirely by reference to Art. 5
of that Convention.64 Having recognised the existence of a potential conflict between
relevant provisions of the Package Regulations and the Athens Convention on liability
issues, the judge proceeded on the basis that in so far as domestic legislation conflicted
with regulation taking effect under s.2(2) of the European Communities Act 1972, the
latter had to prevail.65
The judge here clearly took the view that if and when the liability regime of the
Convention was set aside, all its ancillary provisions should also be disregarded.66 There
is some logic to this, if one considers that the main objective of the Athens Convention
is to provide a liability regime for passengers, that its ancillary provisions take colour
from this context and that if the underlying context is overridden, there is no longer
any role for them to play. On this approach, the only role the Athens Convention 1974
could play would be to give the tour operator the opportunity to incorporate one par-
ticular aspect of the Convention – that relating to limitation of liability – which, absent
Regulation 15(3) of the Package Regulations 1992, would be wholly inapplicable.
It is the view of the authors, however, that a tour operator who qualifies as a contract-
ing carrier should be able to take advantage of the entire set of provisions of the Athens
Convention, and not just its liability limitation provisions (which is what Reg 15(3) of
the Package Regulations 1992 prescribes).67 In that respect, we respectfully disagree
with the conclusion in Lee v Airtours Holidays Ltd that “the regulations represent an
alternative regime”68 to the Athens Convention. Our reasons are as follows.
First, Reg 15(3) of the Package Regulations 1992 opens the door to the application
of the limitation provisions of the Athens Convention to tour operators, in principle
prioritising the Convention over the application of the Regulation in cases where
the Convention is contractually incorporated. The draftsman possibly felt the need
to incorporate Reg 15(3) into the Package Regulations 1992 in order to afford tour
operators a monetary limitation that the international carriage regimes would have
afforded to them in a case when the relevant carriage convention did not apply by
force of law. On that premise, we agree with the sentiments of HHJ Hallgarten to the
extent that contractual incorporation of the Convention into the agreement does not
set the liability scheme of the Regulation aside, except for the provisions on limitation
of liability, if the tour operator is not to be regarded as the carrier under the relevant
convention. However, the matter is rather different when a tour operator qualifies as a
contracting carrier under the sea or air conventions. In that case, the tour operator can
64 “The carrier shall not be liable for the loss of or damage to monies, negotiable securities, gold,
silverware, jewellery, ornaments, works of art, or other valuables, except where such valuables have been
deposited with the carrier for the agreed purpose of safe-keeping in which case the carrier shall be liable
up to the limit provided for in paragraph 3 of Art 8 unless a higher limit is agreed upon in accordance with
paragraph 1 of Article 10.”
65 Following cases such as Hunt v London Borough of Hackney [2002] EWHC 195 (Admin), [2003]
Q.B. 151.
66 See [2004] 1 Lloyd’s Rep. 683, at [20].
67 The position is the same under the Package Regulations 2018. See, Regulation 16(5) of the Package
Regulations 2018.
68 [2004] 1 Lloyd’s Rep. 683, at [20].
64
temporal limits of the athens regime
take advantage of the respective convention in full even in the absence of its contrac-
tual incorporation into the agreement. Any contrary interpretation would amount to
a clear breach of the exclusivity provisions of the relevant conventions.
Therefore, it is submitted that the conflict is not between the domestic statute incor-
porating the Athens Convention into English law and the Package Regulations 1992 (or
Package Regulations 2018), but between the Regulations and the exclusive applicability
of the air and sea conventions. We believe that this conflict should be resolved in favour
of the conventions, on the basis that they provide the exclusive legal remedy to a claim-
ant for an incident that arises during carriage by air or sea In other words, “any action
for damages, however founded against the contracting or actual carrier can only be
brought subject to the conditions and limits of liability set out in the relevant treaty”.69
As we mentioned earlier, English courts have been consistent in applying the exclu-
sivity provisions of the Warsaw and Montreal Conventions,70 even in cases where they
hold that the carrier is not liable under the conventions, meaning that the claimant
loses out. In the leading case of Sidhu v British Airways Plc71 Lord Hope held that the
Warsaw Convention
extends … to all claims made by the passenger against the carrier arising out of international
carriage by air … The intention seems to be to provide a secure regime, within which the
restriction on the carrier’s freedom of contract is to operate … To permit exceptions, whereby
a passenger could sue outwith the Convention for losses sustained in the course of interna-
tional carriage by air, would distort the whole system, even in cases for which the Convention
did not create any liability on the part of the carrier.72
In that respect, we agree with the authors who argue that the reasoning of the Court in
Lee, if not the final decision, was wrong as it was made per incuriam in that Sidhu was
not cited and the arguments concerning the exclusive application of the Convention
were rejected without proper analysis.73
In the Sidhu case the application of the Warsaw system was preferred over a com-
mon-law negligence action against the carrier. One might be tempted to argue that the
issue under consideration here, i.e. where the conflict is between an instrument of EU
law and the Montreal Convention, is different than the matter in the Sidhu case where
the conflict was between an international legal regime and a common-law principle.
However, the UK Supreme Court in the case of Stott v Thomas Cook Operators Ltd74
emphasised that the international convention regime should prevail even over an EU
instrument. There, the Supreme Court dismissed the claim of a disabled passenger
against the tour operator brought under regulations implementing Regulation (EC)
1107/2006 on the rights of passengers with disabilities.75 The relevant incident took
69 D. McClean et al, Shawcross and Beaumont: Air Law (Lexis Nexis, Issue No. 159, 2018), Division
VII, at [405].
70 Arts. 24 and 29 respectively.
71 [1997] A.C. 430.
72 [1997] A.C. 430, 447.
73 D. Grant and S. Mason, Holiday Law: The Law Relating to Travel and Tourism (Sweet & Maxwell,
4th ed, 2007), p.429.
74 [2014] UKSC 15, [2014] A.C. 1347.
75 The Civil Aviation (Access to Air Travel for Disabled Persons and Persons with Reduced Mobility)
Regulations 1895/2007 implemented Commission Regulation (EC) 1107/2006 of 5 July 2006, concerning the
Rights of Persons with Reduced Mobility when Travelling by Air, 2006 O.J. (L 204) 1.
65
assoc prof leloudas & prof soyer
place on board the aircraft, yet the claim was brought under the Regulations because
they permitted recovery for humiliation and distress, which is not permissible under
the Montreal regime. The Supreme Court was quick to endorse Sidhu and dismiss
the claim. Lord Toulson regarded as crucial “the time and place of the accident or
mishap”,76 opining that the Convention was intended to deal comprehensively with the
carrier’s liability for whatever might physically happen to passengers between embar-
kation and disembarkation.77 This, he suggested, was so even if the causes of the death
or bodily injury of the passenger could be traced back to events before embarkation.
He was adamant that “[t]o hold otherwise would encourage deft pleading in order to
circumvent the purpose of the Convention”.78 He stressed that many if not most acci-
dents or mishaps on an aircraft were capable of being traced back to earlier operative
causes and
it would distort the broad purpose of the Convention explained by Lord Hope in Sidhu to
hold that it does not apply to an accident or occurrence in the course of international carriage
by air if its cause can be traced back to an antecedent fault.79
Most significantly, the Supreme Court unanimously held that the conflict in this
context was “whether the claim is outside the substantive scope and/or temporal scope
of the Montreal Convention”,80 stating that the answer to this question depended
entirely on the proper interpretation of the scope of that Convention.81 We believe
that in resolving any conflict between the Athens and Montreal Conventions and the
Package Regulations a similar approach should be adopted, as long as the tour opera-
tor qualifies as a carrier. This is so as the relevant international convention regime
attempts to regulate the liability of contracting and actual carriers for the death or
bodily injury of passengers in a comprehensive manner while the Package Regulations
deal with such claims in a coincidental manner and it only intervenes to enable tour
operators to benefit from limitation provisions of such carriage conventions when
such conventions do not apply to them by force of law.
In that respect, the case of Akehurst v Thomson Holidays Ltd & Britannia Airways
Ltd,82 although rightly decided, should be distinguished. There, following an air crash
at Girona in Spain, claimants brought suit for bodily injury and psychological damage
against the tour operator (Thomson Holidays) under the Package Regulations 1992
and against the air carrier (Britannia Airways) under the Warsaw Convention. The
airline admitted liability for the bodily injury under Art. 17 of Warsaw; yet the tour
operator conceded that it did not qualify as a carrier under the said Convention, a
qualification that would have triggered its application to the claim. As a result, the
76 Stott v Thomas Cook Operators Ltd. [2014] UKSC 15, [2014] A.C. 1347, at [60]–[61].
77 See [60]–[61].
78 See [60].
79 See [60].
80 See [59].
81 See [59].
82 Cardiff County Court – 6 May 2003 (unreported). The authors relied on the synopsis prepared by
Alan Saggerson for the Travel and Tourism Association Lawyers in December 2003, available at https://
www.travellawquarterly.co.uk/wp-content/uploads/resources/tatla_cases_2003.doc (last tested on 1 March
2018).
66
temporal limits of the athens regime
court did not entertain the question whether “the claimant’s rights under Regulation
15 were restricted by the Warsaw Convention”.83 Instead, the court turned its attention
to the question whether the Warsaw Convention was incorporated (via the airline’s
conditions) into the contract between the claimant and the tour operator, rightly
finding that it was not.84 As such, the decision in Akehurst by no means supports the
reasoning of HHJ Hallgarten in Lee v Airtours Holidays Ltd as the court did not get
the chance to rule on the potential conflict between the air law conventions and the
Package Regulations 1992.
HHJ Overend in Norfolk v My Travel Group plc.85 attempted to reconcile these
liability regimes (i.e. the Athens regime and Package Regulations 1992) by suggest-
ing that the liability of a tour operator ought to be regulated by the Athens regime
on matters where there was no conflict between these regimes. He was, therefore,
of the view that given that there was no provision with regard to time-bars in the
Package Regulations 1992, on such matters the Athens Convention should prevail.
However, the authors would like to point out that the decision of HHJ Overend
probably reflects the fact that he viewed the conflict as a conflict between a domes-
tic legislation (i.e. the Merchant Shipping Act 1995 which incorporated at the time
the Athens Convention 1974 into English law) and a legislation giving effect to an
EU Directive (i.e. Package Regulations 1992). Given that the Athens Convention
2002 is now incorporated into EU law with a Regulation, if there is a conflict with
the Package Regulations, the Convention regime should prevail as long as the tour
operator is treated as a contracting carrier under the Athens regime. Therefore, the
liability of the tour operator and the limits of such liability should be determined by
the Athens Convention 2002 and any provision of the Package Regulations, which
is in direct conflict with the Athens Convention 2002, e.g. Regs 15(1)–(3) (as they
establish a different liability regime), should be disregarded if the loss that the pas-
senger suffers arises at the sea leg of the tour. Needless to say, other provisions of the
Package Regulations 2018 remain intact. For example, the tour operator by virtue of
Regulation 15(8) of the Package Regulations 2018 is still under an obligation to offer
the traveler suitable alternative arrangements in cases where it is unable to provide a
significant proportion of the travel services as agreed in the package travel contract.
83 Ibid.
84 Ibid.
85 [2004] 1 Lloyd’s Rep. 106. This was another County Court decision, this time from Plymouth.
67
assoc prof leloudas & prof soyer
provision ensure that the provisions of the Athens Convention apply when a claim is
brought by a third party against the carrier? This was the central issue in Feest v South
West Strategic Health Authority.86 There, the claimant was injured on a boat trip that
was arranged by her employers as part of a team-building exercise. She successfully
sued her employers for failing to undertake a proper risk assessment or implement a
safe system of work on the outing. After the expiry of the two-year time-bar in the
Athens Convention, the employers sought contribution against the owners of the boat
(i.e. the carriers). The carriers sought to strike out the claim on the basis that the
time-bar in Art. 16 of the Convention extinguished the cause of action, and, therefore,
the limitation period had expired prior to the commencement of the third-party
proceedings.
The first instance judge held that Art. 16 applied to actions for contribution and
struck out the third-party claim for contribution. The Court of Appeal disagreed,
holding that a claim for contribution under s.1(1) of the Civil Liability (Contribution)
Act 1978 was not a claim for damages for personal injury to a passenger brought
against a carrier and therefore not within the scope of the Convention or the time-bar
imposed by Art. 16. It also held that the effect of Art.16 was not to extinguish the
claimant’s right but merely to bar the remedy, thus defeating a technical argument
based on the interpretation of the 1978 Act itself.87
The Court of Appeal was thus of the view that a claim for contribution brought by
a third party to the carrier had a life of its own, deriving from the relevant English
domestic statutory entitlement. With respect, this reasoning unfortunately severs
the link between the Athens Convention and a claim for contribution, meaning that
the latter is not subject to the Convention time-bar, even though the carrier’s liabil-
ity to contribute is founded on its own liability to the passenger, which is governed
by time-bar! Taking this to its natural conclusion, in contribution proceedings the
Convention would be critical in determining the liability of the carrier and the limits
of such liability,88 but its time-bar provisions should simply be ignored and give way to
the time-bar provisions stipulated in national legislation. The carrier would therefore
lose much of the advantage of the time-bar.
The judgment clearly demonstrates that in some jurisdictions contribution claims
by third parties against the carrier could potentially be treated as distinct from the
Convention regime. The authors believe that this unfortunately opens the door to
bypassing the Convention regime and making carriers subject to a different legal
regime, an outcome which is clearly not in the spirit of Art. 14. This could have been
avoided if the time-bar provision in the Convention had been construed as extinguish-
ing the claimant’s right rather than simply barring the remedy. However, this was also
rejected by the Court of Appeal. Although in continental jurisdictions prescription
usually has the effect of extinguishing the claimant’s right, the Court of Appeal was
68
temporal limits of the athens regime
adamant that the wording used in Art. 16(1) of the Athens Convention would not have
the same effect under English law.89
Conversely, Art. 29 of the Warsaw Convention and Art. 35 of the Montreal
Convention leave no doubt that the time-bar provision extinguishes any right whatever:
The right to damages shall be extinguished if an action is not brought within a period of two
years, reckoned from the date of arrival at the destination, or from the date on which the
aircraft ought to have arrived, or from the date on which the carriage stopped.90
Courts have held that the right for an action is “completely destroyed and not
merely rendered unenforceable by action. It follows that it cannot be relied upon by
way of defence to an action brought by the carrier.”91 In that respect, the debate in the
Feest case would have been resolved in favour of the air carrier if such case had arisen
in the context of the air liability conventions. However, matters get complicated when
an indemnification action is filed from a liable carrier against third parties or is filed
against the air carrier by a liable third party. The reason for such uncertainty is that
there is little judicial consensus on how to treat such indemnification actions.
With the objective of achieving such consensus, Art. 37 of Montreal indicates that
“[n]othing in this Convention shall prejudice the question whether a person liable for
damage in accordance with its provisions has a right of recourse against any other
person”. The wording of Art. 37 makes clear that actions of indemnification initiated
by carriers against third parties which are not subject to the Convention do not come
into its scope, including the two-year limitation period, leaving their determination to
national laws.92
Still, the wording leaves open the question whether the Montreal Convention
applies to indemnification actions filed by liable third parties which are subject to
the Convention, such as a ground-handler or a contracting carrier, against an actual
carrier for damage falling into the Convention regime (e.g. the death of a passenger
on board an aircraft). With a few exceptions, a consensus seems to be developing here,
with courts in the US holding that such actions are not subject to the Convention on
the basis that they take on a life of their own and they are not any more actions for
damages.93 Still, these decisions have been criticised on the basis that they create an
artificial distinction between action for damages and indemnification.94 Under English
89 There are decisions of English courts which have construed time-bar provisions drafted in similar
fashion to Athens Convention 1974 as barring the remedy only. For example, Art. 7 of the International
Convention for the Unification of Certain Rules of Law with Respect to Collision Between Vessels 1910
was held to be barring the remedy only by Lord Wilberforce in Aries Tanker Corp. v Total Transp. Ltd. (The
Aries) [1977] 1 Lloyd’s Rep. 334 (HL). The relevant part of Art. 7 stipulates: “Actions for the recovery of
damages are barred after an interval of two years from the date of the casualty.”
90 Emphasis added.
91 D. McClean et al, Shawcross and Beaumont: Air Law (Lexis Nexis, Issue No. 159, 2018), Division
VII, para. 443.
92 Under English law the limitation period would be governed by s.10 of the Limitation Act 1980 which
provides that the limitation is “two years from the date on which that right accrued”.
93 See, e.g., Chubb Ins. Co. of Europe SA v Menlo Worldwide Forwarding Inc., 634 F.3d 1023 (9th Cir.
2011), United Airlines v Sercel [2012] NSWCA 24.
94 L.Chassot, “Le Domaine de La Responsabilité Du Transporteur Aérien International à La Lumière
de Deux Dédisions Rédentes”, (2016) 277 Revue Française De Droit Aérien et Spatial 5 ff.
69
assoc prof leloudas & prof soyer
law, s.5(2) of the Carriage by Air Act 1961 provides that the limitation provisions of
the aviation conventions do not apply “to any proceedings for contribution between
persons liable for any damage to which any of the Carriage by Air Conventions
relates”. As such, s.1(3) of the Civil Liability (Contribution) Act 1978 applies and
provides that the carrier remains liable to contribute until its own liability under the
aviation conventions is extinguished (i.e. replicates the two-year limitation period of
the aviation conventions).
The Warsaw Convention does not contain any provisions on the right of indemnifi-
cation, with the decision of the Supreme Court of Ontario in Connaught Laboratories
Ltd. v Air Canada being influential with respect to claims between air carriers:95
[s]uch claims are not included, nor does it appear that they are intended to be included,
within the purview of The Warsaw Convention which … deals with the claims of passengers,
consignors and consignees, and the liability of carriers therefore, it does not deal with the
claims of carriers inter se.96
Still, there is no judicial consensus with respect to indemnity claims, with conflicting
decisions been taken within the same jurisdiction:
In a number of Warsaw Convention cases in the United States it was held that art 29 of that
Convention applied to recourse actions against carriers and a French court, in a case in which
the principal claim was against a handling-agent who sought contribution from a carrier, held
that art 29 did apply, as it drew no distinction between principal and recourse actions. Some
decisions of US District Courts have held art 29 applicable to claims for contribution against
carriers and their handling agents; but it has been held in other District Court cases that the
Convention rule does not apply to a claim by a carrier against its own handling-agent though
it would to recourse actions against carriers. A decision of the French Cour de Cassation has
held that the Convention limitation provision does not protect handling-agents in actions for
contribution brought by carriers, even if the contract between the carrier and the handling-
agent incorporated the Warsaw Convention in general terms.97
Most recently, the French Cour de Cassation, in a heavily criticised decision,98 con-
firmed that an indemnification action filed by the aircraft manufacturer against the
air carrier (resulting from passengers’ death claims covered by the original Warsaw
Convention) is not subject to the two-year limitation period.
In the authors’ view, indemnification claims should also come under the air liability
regimes, as any contrary solution would have the effect of undermining the interna-
tional liability regime. It is interesting to see that disputes regarding the scope of an
international liability regime still arise, although it is expressly stipulated in the rel-
evant Conventions that the right to damages shall be extinguished. The aviation expe-
rience on the issue of indemnification claims highlights that the failure of the Athens
Convention regime to expressly stipulate the effect of its time-bar provisions has
invited controversy and possibly hindered the prospect of achieving u niformity. States
70
temporal limits of the athens regime
considering the ratification of the Convention should consider seriously addressing
this point in their implementing legislation.
4.3 Conclusions
Legal issues concerning the scope of an international convention often arise and are
not unique to the Athens regime. However, it is undeniable that the wording used in
the Athens regime on key terms, such as the meaning of “contract of carriage” or
“sea-going ship” makes such disputes more acute. The Athens regime does not provide
a satisfactory answer as to what these terms mean precisely and leaves the matter to
national laws. The authors highlight some of the problems that could arise and offer
solutions by making comparison with the manner in which similar issues have been
dealt with under other carriage of passenger conventions.
Also, the liberal definition of the term “carrier” in the Athens regime has the poten-
tial to create a conflict with domestic legislation, such as the Package Regulations
2018. Having analysed the difficulties that can emerge, the authors are of the firm view
that the Athens regime should prevail and be treated as the main legal instrument in
determining the liability of tour operators when passenger claims arise at the sea leg
of a tour as long as the tour operator assumes responsibility for the performance of
the contract.
Furthermore, in dualist legal systems, such as the UK, there is a risk that contribu-
tion claims brought against the carrier will be viewed as falling outside the remit of the
Athens regime putting sea carriers in a vulnerable position. This is partially due to the
wording used in the time-bar provisions of the Athens regime which seems to suggest
that claims are not extinguished once the time that is allowed to bring a claim under
the Athens regime, i.e. two years, has expired. This potentially means that in the UK
contribution claims can be brought against the carrier after the expiry of the Athens
time-bar period under the Civil Liability (Contribution) Act 1978. The authors are of
the view that this is against the spirit of the Athens regime and regret that the Court of
Appeal has recently not opted to construe the relevant provisions in a liberal manner
to avoid this undesired outcome. This seems to be a problem that could arise under the
Athens regime. Other carriage conventions, i.e. in air law, at times prevent contribution
claims from having a life of their own.
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dr frank stevens
CHAPTER 5
5.1 Introduction
There is nothing modern or recent about collecting and recording cargo information.
The Ordonnance de la Marine of 1684 already obliged the master to keep a ‘register’ in
which he had to record all relevant information concerning the voyage1, and this obli-
gation still exists today2. The ship’s log book is of course primarily known as a record
of nautical and navigational information, but cargo information is also recorded. On
any cargo ship, every (serious) incident relating to the cargo carried will be entered in
it3. Furthermore, for some cargoes, specific information will be recorded. On ships that
carry cargo that needs to be ventilated, for example, information on when and how
ventilation was carried out will be recorded in the log4.
Log entries are, however, limited in nature and do not provide a continuous picture.
In the twentieth century, technological progress made possible self-contained, easy-to-
use recording devices that could be attached to or placed inside the cargo. A well-known
example was the Ryan recorder, a temperature measuring device for use inside reefer
containers. The cooling unit on reefer containers often had its own recording device,
initially using paper charts, but later using digital storage of data.
Temperature is of course an obvious variable to be measured and recorded,
but recording devices for other purposes also existed (e.g. shock recorders, tilt
recorders, etc.).
Such recording devices were a step up from the simple log entry. They allowed for
(semi) continuous registering of information, but the data they recorded could only
72
smart containers
be collected and processed post factum, after the arrival of the vessel. The interested
parties could now look back and understand what had happened, but only after the
loss or damage had already occurred. In recent years, however, the progress that has
been made in sensor technology and in communication technology has allowed the
development of devices that are able to communicate ‘live’, in real time, with a shore
control unit.
It should be noted, though, that such devices, certainly on ships, often do not com-
municate directly to shore. There is no mobile coverage at sea – communication at sea
is by satellite, and equipping every sea container with satellite communication equip-
ment is generally not warranted5. The devices send their information to a data centre
on board the vessel, which then forwards it by satellite to shore. The consequence is, of
course, that if the ship’s data centre fails (or is shut down), the connection to the shore
is lost. The device will continue to collect data, but can no longer transmit it.
5 There are, however, dual-mode devices that have both cellular and satellite communication possibilities.
73
dr frank stevens
reefers can be equipped with multiple sensors that not only measure the temperature
inside the container, but also relative humidity, the percentage of ethylene gas present
(many fruits when ripening emit ethylene, which in turn stimulates and accelerates the
ripening process), etc. Based on the data provided by those sensors, the temperature
settings of the cooling unit can be adjusted during the ocean voyage, so that the fruit
arrives at destination at almost exactly the desired state of ripeness. Some containers
are even capable of controlling the atmosphere inside the container by measuring and
maintaining O2 and CO2 levels, or by injecting an inert gas (e.g. nitrogen).
Within the general category of ‘smart’ containers, there is therefore a distinction
to be made between those containers that only transmit data, and those that can be
remotely controlled. From a liability standpoint, each of these two groups has to be
divided into carrier owned and shipper owned containers.
6 JP Klausen & Co A/S, Kitzinger & Co (GMBH & Co KG) v Mediterranean Shipping Co SA [2013]
EWHC 3254 (Comm).
7 There was a data logger inside the container, however, which recorded the supply and return air
temperatures at hourly intervals during the voyage.
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smart containers
been unseaworthy because there were no procedures to check the air temperatures of
the reefers and take action when needed. Although the court agreed that there was no
single best monitoring practice8, it did hold that the air temperatures of the reefers
should indeed have been monitored and acted upon when necessary9.
If there is already such a duty in situations where monitoring reefer temperatures
requires a crew member to walk round the vessel and look at each container, there is
a strong argument that there is also a duty to monitor the information that is sent to
the ship’s computer or to the carrier’s office onshore. If there is no such monitoring, or
no appropriate response when the data indicates a problem, the vessel could be unsea-
worthy. In Seafood Imports Pty Ltd v ANL Singapore Pte Ltd10, the Federal Court of
Australia also raised the question whether the absence of a system to monitor the tem-
peratures and refrigeration performance of reefers’ containers could render a vessel
unseaworthy, but found it unnecessary to answer that question as the carrier’s liability
could more easily be based on a failure to properly care for the goods.
In addition to the carrier’ obligations with regard to seaworthiness (Art.3.1 of the
Hague-Visby Rules), there is also the duty to properly care for the cargo (Art.3.2). This
duty is quite broad and can encompass many different aspects, such as lining contain-
ers with kraft paper to reduce the impact of condensation, using sufficient dunnage
to protect steel coils from distortion, etc. The Federal Court of Australia in Seafood
Imports Pty Ltd v ANL Singapore Pte Ltd, referred to above, held that a carrier had
failed to properly and carefully care for the cargo because the vessel’s crew had failed
to detect and rectify problems with a reefer container11. Although there was conflicting
evidence in this regard, the Court found that these problems could and should have
been detected from the information on the reefer’s display panel. There was also an
interesting observation with regard to the temperatures displayed. Owing to the nature
of the problems the container had experienced, the Court considered it a possibility
that the temperature displayed had became ‘frozen’, i.e. unable to change. Although
the temperature shown was, in itself, normal, the lack of variation should itself have
alerted the crew members to the likelihood of a malfunction. The carrier, in other
words, had not only to monitor and record the container data, but also to be able to
put it in context and understand its significance.
If it can be accepted that the carrier is obliged to monitor, understand and act on
container data, is it possible to go a step further and say that he is obliged, when the
circumstances so require, to share the data with other parties, notably cargo interests?
At first sight, interpreting the duty to care for the cargo as including a duty to share
data when required seems acceptable. On further consideration, however, things are
not as simple as that. What data must be forwarded? At what point in time? To which
8 The expert evidence adduced in the Australian decision in Seafood Imports Pty Ltd v ANL Singapore
Pte Ltd [2010] FCA 702 suggested that taking temperature readings twice daily was then accepted good
practice in the reefer business.
9 Klausen v MSC [2013] EWHC 3254 (Comm) at [25]–[26]. In the end, part of the claim was still
dismissed because the court held that even if the crew had monitored the temperatures and noticed the
discrepancy, there was no proof that they could have done anything about it while the vessel was at sea.
10 [2010] FCA 702.
11 Seafood Imports Pty Ltd v ANL Singapore Pte Ltd [2010] FCA 702. An incompatibility between the
reefer’s controller and the software version used had led to the controller becoming stuck in defrost mode
for more than 77 hours.
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dr frank stevens
cargo interests? Should the carrier simply share all information the smart containers
transmit, or is he allowed (or possibly even obliged) to make a selection and only share
relevant information? If the carrier selects only a partial data set to be shared, that
will generally be done based on assumptions and average situations. But there might
be times when data that was not shared because it would normally not be pertinent
to cargo interests was in fact relevant to one particular cargo interest. Or should the
carrier discuss this matter with every single cargo interest separately and agree on
what data will be shared and what will not? When it is clear what data will be shared,
there is a further issue: at which point in time must the carrier forward the data to the
cargo interests? There is an obvious advantage to knowing immediately if something
has gone wrong with the cargo. If, for example, the temperature readings on a reefer
container loaded with fruit indicate that the fruit has gone bad or is starting to go bad,
the cargo interests can immediately order replacement goods and have them shipped
to them, even before the original container arrives in port. This advantage, however,
only exists if the information from the container is conclusive. Suppose, for example,
that a piece of machinery is shipped, packed in a container, and the data from the
container shows that it has been subjected to a heavy shock. This might mean that the
machinery itself is seriously damaged, in which case it would be efficient to reroute
the container and have it shipped back to the manufacturer as quickly as possible. It
is also possible, however, that upon inspection it is found that the damage was limited
and could easily and quickly have been repaired at the customer’s site. In that case,
sending the container back to the manufacturer has caused unnecessary costs and
loss of time. Inconclusive information, in other words, may lead to over-caution and
extra costs that, in hindsight, were not in fact required. Finally, with which party (or
parties) should the carrier share the container data? The carrier knows the identity of
the party that made the contract of carriage, but that party may no longer be primarily
interested. The risk might have passed to a buyer under a sale contract; for that matter
the shipper might not be interested at all, for example because he is a mere freight
forwarder. Until the bill of lading is presented at destination, the carrier generally
does not know the identity of the party that is currently holding it; and even then, the
holder might be a mere forwarder rather than the ultimate consignee really interested
in the container data. Most legal systems would probably require the forwarder in such
circumstances to send on the data to his principal, but this nevertheless adds another
possible point of failure (loss of data, corruption of data, breach of confidentiality,
etc.). Also, carriers would be well advised not to distribute their container data too
freely or too broadly12. Some information (e.g. the position of the container) is of
obvious interest to people with less savoury intentions, while other information, even
though seemingly innocent, may still provide such people with valuable clues, e.g.
about the contents of the container.
A further issue is to what extent the carrier can or must share the data collected by
his containers with the authorities (customs, police, etc.). It goes without saying that
such container data can also be useful for police and other investigations. In 2012, the
12 One could imagine, for example, that the tracking number, which is now used to obtain information
on the whereabouts of the container, would also give access to other data collected by the sensors in the
container.
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smart containers
Belgian Supreme Court confirmed a decision of the Antwerp Court of Appeal in a
13
case where a terminal operator had provided container tracking data to the customs
authorities, thus allowing the latter to monitor the movements of certain containers.
The case was a criminal law case and primarily about the claimant’s argument that, by
doing so, the customs authorities had in essence engaged in one of the regulated sur-
veillance methods, but without having obtained the required permission (the court held
that they had not), but the court also held that terminal operators and the like are free
to share the container data they collect with third parties, including police authorities.
The decision does not touch upon the question whether a terminal operator or carrier
could be liable to, for example, cargo interests for releasing data to the authorities. If
there is a statute that requires carriers to collect and keep certain information and that
defines under which conditions that information can be requested by the authorities,
the carrier will not be liable for complying with such statute. If there is no explicit
provision, however, the matter is far from straightforward. In spring 2017, there was
considerable disquiet in the Netherlands over the fact that Translink, the company
that operates the Dutch public transport smart card, had released data about the
travelling patterns of individual students to DUO, the authority in charge of providing
and checking student grants. The amount of those grants is different depending on
whether the student still lives with his parents or is living in the city where he is attend-
ing university. In an anti-fraud exercise and reportedly based on a risk profile analysis,
DUO had requested information about the card use of several hundred students, and
had so obtained proof that at least some of them, who had claimed to be living in their
university city, were in fact still living with their parents. One of them, who was fined
and had his grant revoked, successfully challenged these sanctions before The Hague
Court, which held that the travel information had not been legally obtained and could
not be used14. In this case, of course, the data involved was personal data as it related
to an identified natural person, and it was again not a liability case against the party
releasing the data (Translink). But several commentators argued that – even in these
circumstances, where the requesting entity is a public authority, which has a convinc-
ing reason for requesting the information – the party holding the information should
not release it, unless it is actually obliged to do so by law. It is submitted that even in
circumstances where the data involved is not (necessarily) personal data, this would be
the safest course to steer.
It hardly needs pointing out that today information has become a thing of value.
Even information that in itself is not particularly revealing becomes valuable when it
can be combined with other information in big datasets, which can be analysed in a
myriad of ways. With value, however, also comes responsibility and liability. Carriers
should realize that if they use smart containers, the data these containers collect and
transmit is a potential source of liability, and should develop a policy and/or proce-
dures on how and for how long the data will be stored, how it will be checked and
acted, how to protect it against unauthorized access, who will be granted access to the
data and under what conditions, etc.15
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dr frank stevens
As pointed out above, possessing data may cause liability. What about the opposite
end of the spectrum, however? Could the old-fashioned carrier, who only has plain
boxes, be held liable because he does not have information about the condition of the
containers and the cargo during the voyage? Currently, smart containers are prob-
ably not common enough to support such liability. Also, most carriage terms explic-
itly provide that the shipper must inspect and accept the containers provided by the
carrier. In the present state of affairs, shippers who require smart containers would be
well advised to explicitly coordinate their needs and requests with the carrier, and to
check (to the extent possible) that the container provided is indeed capable of provid-
ing the required data.
Another problem arises with regard to carriers that have both ‘dumb’ and smart
containers. Could a carrier be held liable because he has stuffed valuable cargo in a
dumb container, which does not offer tracking possibilities when it is stolen? If the
stuffing was at the shipper’s initiative and the latter did not request a smart container,
there would not seem to be a duty for the carrier to go above and beyond the ship-
per’s request and provide a smart container, even though the shipper himself did not
request one. When the shipper requests containerization of his cargo, the carrier must
provide a container that is proper and fit for the cargo to be carried, but to say that, in
general, a dumb container is not proper to carry valuable cargo is probably going too
far. Smart containers are not a miracle cure against theft and the like: the sensors and/
or transmitter can be deactivated or destroyed, the signal can be jammed, the cargo
can be taken out of the container, etc. If, on the other hand, it was the carrier who
took the initiative to containerize the cargo, the potential for liability might be larger.
In such cases, it is the carrier who has to decide which is the most appropriate type
of container in which to carry the cargo, without guidance or instructions from the
shipper. For the carrier to be actually held liable, however, a causative link would have
to be proven between the loss of the cargo and the fact that it was carried in a dumb
rather than in a smart container.
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smart containers
or arrive damaged at destination, the carrier will be presumed liable. He will, however,
find a defence in Art.4.2.(i) of the Hague Visby Rules (act or omission of the shipper
or owner of the goods, his agent or representative), provided of course that the carrier
can prove that the loss or damage was caused by the commands that cargo interests
sent to the container during the voyage. When the container is provided by the carrier,
the latter should in principle be able to recover the container data and the commands
that were sent to it, and thus should have the means to prove that the loss or damage
was caused by the remote control, if that was indeed the case.
16 He might, of course, have a recourse action against the container manufacturer or the software
developer.
17 Aix-en-Provence, 28 November 2013, n° 13/02884, SAS Magellan v SA CMA CGM.
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dr frank stevens
been carried in a reefer from Callao to Rotterdam and had arrived in over-ripe condi-
tion. The reefer was equipped with an AFAM+ system, which allowed the atmosphere
inside the container (O2 and CO2 levels) to be remotely controlled. The cargo inter-
ests requested the carrier to provide the full container data. At first, the carrier had
refrained from providing any data at all. Later, after the cargo interests had filed suit
to obtain an injunction against the carrier, the temperature data was provided but still
not the O2/CO2 data. The carrier invoked a series of arguments why he should not
be ordered to produce the data, including the argument that there were no explicit
instructions in the bill of lading on temperature, humidity or O2/CO2 levels and that
the data, even if provided, would not suffice to settle the cargo claim. Remarkably, the
carrier also argued that neither the law nor the bill of lading obliged it to release the
container data, and even argued that since a carrier is presumed to be liable in case of
cargo loss or damage, the cargo interests did not need the information to prove their
case. Ultimately, the Court of Appeal held that, for the time being, the temperature
data was sufficient and did not order the carrier to produce further data. It should be
noted, though, that these were ‘urgency’ proceedings (“en référé”), in which the court’s
task is limited to a prima facie appreciation of the case. It is possible, therefore, that
the court hearing the case on the merits would consider the atmospheric data relevant
and still order the production thereof.
Lastly, but certainly not least, is the issue of hacking. Once a dumb container is at
sea, there is actually very little anyone (including the crew) can do to it. However, if
the container is given the possibility to communicate, there are obviously benefits and
advantages, but the other side of that coin is new vulnerabilities. With data-only con-
tainers, the data could be intercepted, yielding important information about the where-
abouts or contents of the container, or otherwise manipulated18, etc. If the container
can be remotely controlled, the possibilities for a hacker are even bigger. A hacker who
manages to gain control of the containers can effectively hold the cargo to ransom,
threatening, for example, to raise the temperature within a reefer container, and so
extort money from cargo interests. As the June 2017 cyber attack against Maersk and
other companies demonstrated, the transport industry is certainly not immune from or
invulnerable to cyber attacks. If it is the carrier, therefore, who provides the smart con-
tainers and/or operates the shore control centres, the reliability and protection of these
systems against cyber attacks should be an issue of concern. Carriers who inadequately
address this issue risk liability if cargo is lost or damaged through cyber attacks.
18 A hacker could, for example, manipulate the data to make the consignee think that the cargo inside
the container has gone bad. This could lead the consignee to divert the container to a salvage or waste
facility, which could provide opportunities for the hacker to then intercept the container at or before those
facilities – with the cargo perfectly intact.
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smart containers
the shipper can – or must – share this data with other parties such as the carrier or
other cargo interests, or even third parties. If the data sent by the container indicates
that the temperature inside the container is rising, the carrier might also be interested
to know, especially when the goods stowed in the container are flammable or even
explosive. Similarly, the owners of containers stowed next to the container that is
heating up might also want to be informed. If the container is owned and operated
by the shipper, he will most likely have some right to the goods carried inside the
container. As pointed out above, container data will often not be ‘personal’ data
within the meaning of the data protection laws, but even if it is, it is in this hypothesis
the shipper’s own data. If the shipper wants to share this data with other parties, he
is free to do so. A more difficult question is whether there could be circumstances in
which the shipper must share this data with other parties and be liable if he fails to
do so. There is an obligation (at least implicitly) on the shipper not to damage the
carrying vessel or other cargo on board. Some aspects of that obligation have found
their way into the carriage conventions, in the form of the shipper’s duty to properly
pack and prepare the cargo for the voyage, to provide the carrier with all necessary
information regarding the goods, to comply with relevant laws and regulations, etc.19
Traditionally, most of these duties had to be complied with before the container
was loaded on the vessel, or even before it was handed over to the carrier. The duty
to provide information, however, continues throughout the carriage: if the carrier
needs additional information during the voyage, the shipper is obliged to provide
the requested information. If that is the case, it is not a very big step to say that if
the shipper has information from his containers that he knows, or should reasonably
know, to be relevant for the carrier, the shipper is obliged to communicate that infor-
mation of his own initiative to the carrier. To construe a similar duty vis-à-vis the
other cargo on board will be fraught with practical difficulties (how would the shipper
know where his container is stowed, which containers are stowed next to it and who
are the parties interested in those other containers?), but on a theoretical level, such a
duty is not entirely inconceivable.
19 See in this respect F. Stevens, “Duties of Shippers and Dangerous Cargoes”, in The Carriage of Goods
by Sea under the Rotterdam Rules, D.R. Thomas (Ed.), London, Informa, 2010, at p. 217 et seq.
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dr frank stevens
controlled . Clearly, however, that fact will often come to light during the subsequent
20
damage surveys. Once the carrier is aware that the container was remotely controlled
by the cargo interests during the voyage, there are several defences that could be rel-
evant. It could be argued, for instance, that this is a division of functions, agreed upon
by the parties, similar to the currently more common division of functions with regard
to the stowage of the goods in FIOST clauses. Such a division of liability, with each
party only being liable for the functions that it has itself performed, is accepted under
English law21. That then would make the cargo interests liable for the detrimental con-
sequences of their monitoring and controlling the container during the voyage. Other
legal systems, however, reject the liability consequences of a division of functions as
incompatible with the carrier’s duty to care for the cargo under Art. 3.2 of the Hague
Visby Rules. Where that is the case, however, the carrier has an alternative defence in
Art. 4.2.(i) of the Hague Visby Rules, acts or omissions of the cargo interests. In both
hypotheses, however, the carrier will be faced with issues of proof. Since the contain-
ers are shipper owned, how is the carrier going to prove that it was the cargo interests’
manipulating the container that caused the loss or damage? The burden of proof
lies with the carrier; it is indeed the carrier that is trying to set aside the presumption
of liability against him. There is, however, the last sentence of Art. 3.6 Hague Visby
Rules, providing that in case of loss or damage the carrier and the receiver shall give all
reasonable facilities to each other for inspecting and tallying the goods. It is arguable
that in an age of smart containers, that duty also extends to giving the carrier access to
the container data and the commands sent to the container during the voyage22. Also,
the rules of procedure and proof of the court seized with the case may provide tools
to the carrier to obtain such information from the cargo interests.
20 It could be imagined that, in the future, carriers in their terms of carriage will demand to be informed
if the container used by the shipper is a smart container. Also, that fact could be indicated on the bill of
lading: not only ‘shipper’s load, stow and count’, but also ‘container remotely controlled by shipper’. Such
an indication is, of course, not a complete or sufficient defence in itself, but it could still help the carrier.
21 R. Aikens, R. Lord & M. Bools, Bills of Lading, London, Informa, 2006, n° 10.142–10.143 at p. 253;
G. Treitel & F. Reynolds, Carver on Bills of Lading, London, Sweet & Maxwell, 2011 (3rd Ed.), n° 9-125 at
p. 658.
22 In its decision of 28 November 2013, the Court of Appeal of Aix-en-Provence explicitly held that
downloading the required information from the container (carrier owned) is part of the carrier’s duties, and
that therefore the costs of that operation cannot be charged to the shipper. (“L’extraction des données du
conteneur de la CMA CGM fait partie des obligations de ce transporteur maritime face aux demandes légitimes
d’information de sa cliente la société MAGELLAN, et c’est donc à tort que la première en réclame le paiement
à la seconde.”) (Court of Appeal of Aix-en-Provence, 28 November 2013, n° 13/02884, SAS Magellan v SA
CMA CGM.)
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smart containers
5.5 Conclusion
It hardly needs to be shown that smart containers, particularly remotely-controlled
containers, can provide substantial advantages for certain trades, such as the carriage
of chilled perishables (fruit). As always, however, with new possibilities come new
vulnerabilities. If the carrier or the shipper is given the possibility to remotely adjust a
reefer’s setting, that also gives an attacker the possibility to hack into the connection
and take over the container for his own purposes. Rather than wait for incidents and
learn the hard way, all parties involved would be well advised to analyse their processes
and the possible risks, and take preventive action accordingly.
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andrew chamberlain
CHAPTER 6
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wreck removal – nairobi and beyond
expensive and everyone is getting more cost-conscious, there is the issue of who bears
the costs involved in the marking and removal of hazardous wrecks and making
sure these costs are met.
3 See Art.3.2. A sizeable minority of States party have exercised this option, including the UK.
4 Art.1(d).
5 See Art.1(4).
6 See Art.1(5).
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andrew chamberlain
7 And only the coastal state. A wreck in the EEZ of State A but threatening the coast of State B cannot
be dealt with by the latter. Nevertheless State A must in such a case consult with the relevant authorities of
State B: Art.9.1(b).
8 See Art.9.2.
9 See Arts.9.1 and 9.6.
10 See Art.9.4. The coastal state may impose reasonable conditions here, for example to ensure that any
salvor appointed is respectable and responsible.
11 Arts.9.7 and 9.8.
12 Arts.1.1, 3.1 and 3.2. See above.
13 Arts.12.1, 12.11. See below.
14 Art.12.12. See below.
15 Art.5.
16 The question may arise whether failure to do this would give rise to a right to sue in a private party,
such as the owners of a vessel suffering damage because of a collision with a wreck not adequately marked.
The answer is probably no: cf generally the land-based case of Stovin v Wise [1996] A.C. 923.
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wreck removal – nairobi and beyond
17 Art.10.1(a).
18 Art.10.1(b).
19 Art.10.1(c).
20 See Art.11.1.
21 These include about half-a-dozen States party to the Nairobi Convention. Apart from the UK, these
include, significantly, France, Germany, Cyprus and Singapore.
22 Art.12(1).
23 Art.12.10.
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andrew chamberlain
of liability, or because her owners’ conduct disentitles them to invoke the right to limit,
the insurer may still restrict its direct liability to the limitation amount.24
6.4 Conclusion
When the Nairobi Convention came into force in 2015 the expectation was that the
world of wreck removal was about to change by way of the provision of stronger and
more explicit powers to coastal states in their battle against wreck abandonment by
uninsured or impecunious owners.
With one of the stated aims of the Convention being to establish a more uniform
international regime, making it simpler to establish the extent of owners’ liability for
wreck removal, the fact that coastal states do not uniformly extend the application of
the Nairobi WRC to territorial waters, complicates the picture somewhat. Further,
insofar as their remains a link to national limitation of liability regimes, as well as a
difference in whether or not the effect of the Nairobi WRC regime will voluntarily
extend to include territorial waters, there will undoubtedly remain a patchwork of
legislation which leaves significant scope for uncertainty which can only be resolved by
time-consuming and expensive local law investigations, ultimately leading to disputes.
At the time of writing, there are no reported instances of the Nairobi Convention
giving rise to litigation. It may be that it has been so perfectly drafted that it is being
followed without incident. It is more likely, however, that its restricted geographic
application (i.e. its limitation to State parties’ EEZ in most cases) means that there
have been relatively few casualties arise which have triggered the application of the
Nairobi WRC.
One further potential effect of the Nairobi WRC is worth noting. This is that in
future owners and their P&I Clubs are likely to co-operate in undertaking wreck
removals, rather than leaving these to national authorities, so as better to control their
potential costs exposure. Only time will tell.
24 Art.12.10.
25 Art.13. Note that this says that the right is extinguished, not merely the remedy barred. It follows that
matters that might otherwise preclude reliance on limitation of actions will often not do so here.
88
SAFE AND SOUND SHIP RECYCLINGdr henning jessen
CHAPTER 7
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dr henning jessen
recycling industry. However, although these guidelines do contribute significantly to
the general regulatory framework, they are legally non-binding.5
The Hong Kong Convention, which is the focus of this chapter, is still far from
entering into force.6 Effectively, it cannot enter into force internationally unless at least
three of the five major ship recycling states (China, India, Bangladesh, Pakistan and
Turkey) ratify the instrument.7 None had done so by 2018. Interestingly, however,
India at least started internal evaluations to ratify the instrument in 2017. This would
represent a major political push for its future entry into force. In late 2017, the Indian
government issued a pre-legislative consultation on a draft Safe and Environmentally
Sound Recycling of Ships Bill 2017, which would give effect to the provisions of the
Hong Kong Convention.8 Separately, the Indian Ministry of Shipping announced that
all Indian ship recycling facilities that wish to continue operating beyond July 2018 will
have to upgrade their infrastructure through the provision of an impermeable floor for
any secondary cutting.9
This chapter aims to shed some light on the possible liability of private parties
potentially arising in modern ship recycling. Under a tightening and more specific
legal framework, shipowners in particular could potentially be held accountable for
evasive measures and/or a continuation of unsustainable ship recycling practices.
However, the coverage will be limited. In particular, we will not discuss the inadequa-
cies and practical weaknesses of generally applicable international legal instruments,
like the Basel Convention10 or the relevant general waste management legislation of the
European Union (EU)11 in relation to ship recycling. This is because the practical reali-
ties of the global ship recycling business reflect the fact that these broader legal instru-
ments, in particular the Basel Convention, have been largely neglected or circumvented
by the maritime industry. The result has been widespread environmentally unsustain-
able ship recycling practices generally associated with the term “beaching” and with
a major geographical share of ships being demolished and scrapped at hundreds of
“beach yards” along the shallow coastlines of India, Pakistan and Bangladesh,12 which
5 This regulatory activity has resulted in the 2011 Guidelines for the Development of the Inventory
of Hazardous Materials; the 2011 Guidelines for the Development of the Ship Recycling Plan; the 2012
Guidelines for Safe and Environmentally Sound Ship Recycling; the 2012 Guidelines for the Authorization
of Ship Recycling Facilities; the 2012 Guidelines for the Survey and Certification of Ships under the HK
Convention; and the 2012 Guidelines for the Inspection of Ships under the Hong Kong Convention.
6 The very complicated entry into force requirements of the HK SRC are laid out in Article 17.1 of the
Convention. The combined requirements of a certain number of ratifying states, representing both global
gross tonnage and global ship recycling volume, present an enormous policy challenge for the entry into
force of the HK SRC.
7 See U. Engels, European Ship Recycling Regulation (Springer 2013), 54.
8 See https://www.maritime-executive.com/editorials/what-will-2018-bring-to-the-ship-recycling-indus
try (last tested May 2018).
9 Id.
10 “Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their
Disposal 1989”, 22 March 1989, U.N.T.S. 126 (entered into force 5 May 1992); for further information see
www.basel.int and the Basel Action Network (“BAN”) Amendment 1995 (the “BAN Protocol”).
11 See in particular Regulation (EC) No 1013/2006 of 14 June 2006 on shipments of waste.
12 See in general G. Samiotis et al., “Recent Developments in the Institutional Framework of Ship
Recycling and the Positive Impact on International Ship Dismantling Practices” (2013) 63 SPOUDAI
Journal of Economics and Business 158. For a long time, beaching practices in ship recycling have been
monitored and criticized, in particular, by environmental NGOs like Greenpeace (in cooperation with the
90
safe and sound ship recycling
in turn has led to a significant dependence of those national economies on the steady
influx of steel generated from these activities.13
Intentional (and entirely legal) circumvention of international, supranational and
domestic waste management legislation remains easy for the maritime industry. For
example, it is possible, and very common in global ship recycling practice, for shipown-
ers to bypass the rules by simply selling the vessel to be scrapped to an intermediate
“cash buyer”, at a price based on her so-called “light displacement ton” (LDT) value.
The cash buyer is typically situated in a non-OECD country, commonly Dubai or
Singapore. He acts as an intermediate party and/or as a broker, and is often an integral
part of global ship recycling transactions.14 Another (less common) alternative is for
the shipowner to disguise the final voyage of a commercial vessel as a normal cargo
voyage and then to sell the vessel directly to a scrapyard – thus not disclosing the
vessel itself as hazardous waste and making it very difficult (if not impossible ex ante)
for public authorities to prove his subjective intention to dispose of it as hazardous
waste.15
The general legal rules on transboundary transport of hazardous waste fail to ade-
quately address the practical realities of the global ship recycling business. This is for
reasons of geographic scope, insufficient domestic enforcement and the conceptual
weaknesses of the broader regulatory regime, based as it is on the assumption that
public authorities in both exporting and importing states have complete prior knowl-
edge about waste-related transactions. These global regulatory weaknesses have been
identified for quite some time. That is why this chapter chooses to concentrate on two
more specific legal instruments. One is the IMO’s Hong Kong Convention, already
mentioned but not yet in force. The other is EU Regulation No 1257/2013 on ship
recycling,16 adopted on 20 November 2013. Though more limited in scope (it applies
only in EU ports, or where a vessel flies the flag of an EU Member State), the EU SRR
gradually brings forward some of the requirements of the Hong Kong Convention,
contributing to accelerating its global entry into force while also introducing some
stricter local procedural and operational requirements.17
International Federation of Human Rights Leagues) or the “NGO Shipbreaking Platform”. See e.g. http://
www.greenpeace.org/international/en/publications/reports/end-of-life-the-human-cost-of. In addition, the
IMO continuously updates its openly accessible bibliography on various regulatory topics of interna-
tional shipping. For the area of ship recycling, see http://www.imo.org/en/KnowledgeCentre/InformationRe
sourcesOnCurrentTopics/RecyclingOfShips/Pages/default.aspx (last tested May 2013).
13 See e.g. Lloyd’s List, 7 February 2017 (“Government Ban Stifles Pakistan’s Recycling Market”) which
referred to the fact that “the absence of recycling activity at local yards has created a shortage of supply of
steel plates to domestic steel mills, which in turn is pushing demand and local steel prices higher”.
14 See A. Puthucherril, From Shipbreaking to Sustainable Ship Recycling: Evolution of a Legal Regime
(Martinus Nijhoff Publisher 2010), 20.
15 See e.g. M. Tsimplis, “Selling Ships for Scrap” [2004] LMCLQ 254, at pp.260, 263.
16 Regulation (EU) No 1257/2013 of 20 November 2013 on ship recycling (and amending Regulation
(EC) No 1013/2006 and Directive 2009/16/EC)OJ L330/1 of 10 December 2013): hereinafter the “EU SRR”.
17 The local introduction of stricter requirements is generally lawful: see Article 1(2) of the Hong
Kong Convention, stating that “no provision of this Convention shall be interpreted as preventing a Party
from taking, individually or jointly, more stringent measures consistent with international law, …”. The
EU SRR has widened the existing list of prohibited hazardous substances. Furthermore, the EU has also
introduced stricter requirements for ship recycling facilities, demanding that they operate “from built
structures”: see Article 13(1)(f) EU SRR. In practice, this requirement outlaws “beaching”, though not in
so many words.
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Be it in the near or far future, shipowners and their contractual partners (brokers,
cash buyers and/or ship recycling facilities) will eventually have to acknowledge that
their recycling activities will be scrutinized more intensively, by both public authorities
and environmental NGOs). Above all, the industry cannot deny that modernized legal
requirements for ship recycling have been adopted since 2009. As one of the conse-
quences, since 2015 well over 50 Indian ship recycling facilities have arranged for – and
have in fact received – official certification of classification societies in relation to their
adherence to the legal requirements of the Hong Kong Convention.18 Additionally,
some shipowners might seek to contractually anticipate the entry into force of the
Convention as part of their in-house corporate social responsibility policies.19
Public liability under domestic environmental law could arise as a result of a poten-
tial violation of the applicable administrative rules. For example, a shipowner might
opt to dispose of a vessel as hazardous waste by selling it directly to a ship recy-
cling yard which, in practical reality, did not operate an environmentally sound and
sustainable process. Very few domestic administrative cases of that kind have been
notified in the past under the generally applicable waste management legislation,20
though there have been some: indeed one even involved a state-owned vessel, the
decommissioned French aircraft carrier Clemenceau.21 Less prominently because of
a lack of any reported cases, liability could nevertheless also potentially arise under
private law. For example, there is potential for a liability scenario between a seller and a
buyer if they enter into a contract like the modern standardized RECYCLECON and
one party then breaches its obligations under that contract. This potential liability –
taking into account the regulatory developments at the IMO and EU level – will be
discussed shortly. Finally, an interesting new legal development in 2017 involved a pre-
viously untested liability scenario. An injured scrapyard worker knowingly subjected
to conditions notoriously dangerous to his health and safety could argue that his per-
sonal injury was causally linked to a former shipowner who deliberately sold his vessel
to be recycled under unsafe conditions. Whether this liability scenario overstretches
the legal boundaries of foreseeability and of established negligence and tort principles
is a question for the future. Nevertheless, it will be addressed later in this chapter.
18 See Lloyd’s List, 16 December 2015 (“Class NK Certifies Two More Ship Recycling Yards in
India”); Lloyd’s List, 29 September 2015 (“Asian Ship Owners Welcome certification of Indian Recycling
Yards”); also Tradewinds, 20 November 2015, p. 22 (“A Clear Line Has Been Drawn in the Alang Sand”).
19 In this respect a key question is whether a sustainability approach may legitimately include beaching,
or whether it should rather explicitly exclude this practice. For example Maersk, the world’s biggest shipping
company, has been heavily criticized by environmental NGOs for officially continuing to send decommis-
sioned vessels to Indian scrapyards while referring to the official certification of those yards in accordance
with the rules of the Hong Kong Convention. See http://www.maersk.com/en/the-maersk-group/about-us/
publications/maersk-post/2016-4/maersk-supports-responsible-ship-recycling (last tested May 2018).
20 One such decision is the 2007 Otapan case before the Dutch Raad van State (No 200606331/1,
21 February 2007). Another known Dutch decision is the Sandrien (Raad van State, No 200105168/2,
19 June 2002). Notably, both cases had been lodged by the Stichting Greenpeace Nederland as an “inter-
ested party”. This underlines the important function of environmental NGOs as “private watchdogs” in lieu
of the public authorities. For further (limited) case law see U. Engels, European Ship Recycling Regulation
(Springer 2013), at 173–174; and also the “Seatrade” convictions of March 2018 in which two top executives
of a Dutch shipping company were held criminally liable for illegal ship scrapping activities dating back
to 2012.
21 For a case study on the Clemenceau, see http://www.greenpeace.org/international/en/publications/
reports/the-clemenceau-case-potentia (last tested May 2018).
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7.2 The legal foundation for potential liability in ship recycling – modernized
public law requirements
At the outset, a discussion of potential public liability in contemporary ship recycling
must address the legal foundations under public law, by providing an overview of the
array of modern legal obligations. Three requirements should be highlighted. The
first is the necessity of an Inventory of Hazardous Materials (IHM) for all ships.
The second is the requirement for approval and/or certification of all ship recycling
yards by a domestic regulator. Thirdly, there is the requirement of a specific ship
recycling plan and the availability of complete written documentation in relation to
the plan. A brief discussion of these three elements is indispensable because the public
law terminology is applied by the standardized modern RECYCLECON contract for
sustainable private ship recycling transactions. On a wider scale, this public law frame-
work might also add to an updated understanding of generally accepted due diligence
obligations in sustainable and environmentally sound ship recycling.
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facilities on this list have had exclusive “legal access” to EU-flagged vessels destined
to be recycled. Thus, it is unlawful for a shipowner whose vessel flies an EU flag to
disregard the list and send a vessel to an unlisted yard, be it within or outside the
EU. Remarkably, however, none of the 18 approved facilities within the EU have a
track-record of being able to recycle even one “big” ocean-going vessel. Rather, they
specialize in recycling small boats, domestic and inland waterway vessels, which are all
outside the scope of the EU SRR and the Hong Kong Convention anyway. In sum,
there is currently an ironic gap between law and reality that cannot be overlooked.
Moreover, as already mentioned above, it is extremely easy for shipowners to circum-
vent these legal requirements by changing to a non-EU flag for recycling purposes.
What is more, shipowners might not even arrange for the re-flagging themselves but
they might simply sell the vessel while it is still operational. It would, to say the least,
be hard to prove the subjective intention of the seller to dispose of the vessel as
hazardous waste while it could – technically – still continue to trade.
By 2018, the European Commission had received 24 applications from ship recycling
yards located in third (non-EU) countries.27 While 11 out of those 24 applications
were from India, conspicuously absent among these petitioners to the Commission
were recycling facilities from Bangladesh or Pakistan, both of which have big recycling
sectors. The European Commission will review these applications in the next few years.
Its representatives will make technical visits to these sites to decide on their future
inclusion in the list. As of 2018, however, no decisions on a further expansion of the
“European List” had yet been taken. In this context, it is important to note that the
Hong Kong Convention under Article 2(11) defines the term “ship recycling facility”
to mean “a defined area that is a site, yard or facility used for the recycling of ships”.
However, the respective EU definition omits the term “site” and defines a “ship recy-
cling facility” as “a defined area that is a yard or facility located in a Member State or in
a third country and used for the recycling of ships”.28 The practical effect of the omis-
sion of the term “site” works against the inclusion of certain ship recycling companies
situated in Bangladesh, India or Pakistan (or other third countries) on the “European
List”.29 By expressly demanding a concrete structure (or other form of “defined area”
which is not a “site”) the EU thus sets out stricter standards as compared to the inter-
national accord. From a standards-based approach, however, it is still an open question
whether environmentally sound and sustainable ship recycling depends decisively on
whether a facility is a “site” or whether it should operate as a “yard” or “facility” from
“built structures”.30
In any case, ship-recycling yards – both within and outside the EU – also seek inclu-
sion on the “European List” as a quality mark for environmental sustainability. They
27 According to public reports, 22 non-EU facilities have applied (nine from India, seven from Turkey,
four from China and two from the US), none of which is expected to make the list before mid-2018: see
Lloyd’s List (online edition 27 Oct 2017, https://lloydslist.maritimeintelligence.informa.com/LL111985/
Is-the-EU-Ship-Recycling-Regulation-a-lame-duck) (last tested May 2018).
28 Article 3(1)(7) EU SSR.
29 See generally M. Tsimplis, “Recycling of EU Ships: From Prohibition to Regulation?” [2014] LMCLQ
415, esp. at 433.
30 See Article 13(1)(f) of the EU SRR and Regulation 3 of the Annex to the Hong Kong Convention.
The latter provision states: “Parties shall take measures to implement the requirements of the regulations
of this Annex, taking into account relevant and applicable standards, recommendations and guidance
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also seek private and/or public certification according to the standards of the Hong
Kong Convention. Interesting cases of doubt may arise if a non-EU recycling yard is
actually certified according to the Hong Kong standards but refused inclusion on the
“European List”. The potential result in such a case could be that a recycling facility
adhered to the global standards of the IMO but nevertheless violated the more strin-
gent regional standards of the EU. In any case, both the IMO and the EU demand
from recycling facilities that they prepare and implement a specific ship-recycling
facility plan. This is generally defined as
a plan prepared by the operator of the ship recycling facility and adopted by the board or
the appropriate governing body of the ship recycling company that describes the operational
processes and procedures involved in ship recycling at the ship recycling facility and that
covers in particular workers’ safety and training, protection of human health and the envi-
ronment, roles and responsibilities of personnel, emergency preparedness and response, and
systems for monitoring, reporting and record-keeping, taking into account the relevant IMO
guidelines and resolutions.31
7.3 The private law dimension: a new approach to liability in ship recycling?
It was necessary to discuss the situation under public law before turning to poten-
tial liability under private law. Above all, the specific contractual obligations under
RECYCLECON integrate to a very large extent the public law terminology of the
regulatory instruments discussed above; one cannot fully comprehend them without
being familiar with the Hong Kong Convention as its public law foundation.
developed by the International Labour Organization and the relevant and applicable technical standards,
recommendations and guidance developed under the Basel Convention on the Control of Transboundary
Movements of Hazardous Wastes and their Disposal”.
31 See Article 3(1)(17) EU SRR.
32 See Regulation 9 of the Annex to the HK SRC and Article 7 of the EU SRR.
33 See Article 7(2)(a) EU SRR.
34 See Article 7(2)(b) EU SRR. Further technical requirements are set out elsewhere, e.g., in Articles
7(2)–(4).
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In addition, several practical developments need to be highlighted to set the scene
for a discussion of the potential private liability of shipowners. By the end of 2017,
about half of the 160 recycling yards at the global ship recycling “hot spot” of Alang,
India, had invested heavily in infrastructural and procedural improvements and as a
result obtained a “Hong Kong Convention Statement of Compliance” from IACS
classification societies.35 These initiatives by the Indian ship recycling industry mani-
fest an ongoing transformation process to achieve the environmental sustainability
objectives of the twenty-first century in this area.36 As a practical consequence, there
is a good case for arguing that any shipowner who sells his former vessels directly
to a certified Hong Kong-compliant Indian yard could do so by using the modern
RECYCLECON standard contract.
At the beginning of 2018, indeed, the “sustainability gap” between Indian scrapy-
ards and those in Pakistan and Bangladesh seems to have widened. According to the
commercial fleet scrapping review NGO Shipbreaking Platform, Bangladesh emerged
as the preferred destination for scrapping old vessels in the third quarter of 2017.37
In a parallel development, however, in early 2018 the fund manager Norges Bank
implemented a decision to exclude four shipping companies from the Norwegian
“Government Pension Fund Global” (GPFG), which represents the world’s biggest
sovereign wealth fund. The reason for this disinvestment was that the companies had
knowingly scrapped vessels in Bangladesh and Pakistan where the relevant recycling
facilities employed “beaching”, and that this involved the risk of severe environmental
damage and serious or systematic violations of human rights, as was explained in
more detail in an official statement.38 The exclusion of all four companies had previ-
ously been proposed by the bank’s Council on Ethics in late June 2017.39 One of the
four shipping companies remarkably defended itself by stating that it had scrapped
only 3 out of 15 vessels in Bangladesh and Pakistan whereas 12 other vessels had
been scrapped in Alang, India, and the fund would seem to take no issue with that.40
Consequently, the exact location of a recycling yard and the locally applied sustain-
ability standards will most probably be of highest practical importance in the future
and it will not be enough to simply state that a vessel has been sold for recycling “on
the Indian sub-continent”.
35 See https://www.maritime-executive.com/editorials/what-will-2018-bring-to-the-ship-recycling-indus
try (last tested May 2018).
36 In another case, the certification of a particular scrapyard in Bangladesh has been subject to fierce
criticism from NGOs. See http://www.shipbreakingplatform.org/press-release-ngos-and-trade-unions-
denounce-certification-issued-to-php-yard-by-classifiction-society-rina (last tested May 2018).
37 See http://www.shipbreakingplatform.org/platform-publishes-south-asia-quarterly-update-14 (last
tested May 2018).
38 See https://www.nbim.no/en/transparency/news-list/2018/decisions-on-exclusion-and-observation-
from-the-government-pension-fund-global (last tested May 2018).
39 “The council considers that by disposing of ships for scrapping in this way, the companies can be said
to contribute to serious human rights violations and severe environmental damage. There are no indications
that the companies will cease disposing of ships by means of beaching”. See https://lloydslist.maritimeintel-
ligence.informa.com/LL1120867/Norwegian-fund-dumps-shipping-companies-in-ethics-push (last tested
May 2018).
40 See https://lloydslist.maritimeintelligence.informa.com/LL1120879/Precious-says-poor-communica
tion-behind-Norway-fund-decision (last tested May 2018).
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the general sustainability principles as stated in the SRFP. In order to forestall disa-
greement, Article 18 of RECYCLECON grants the sellers (or their representatives) a
right to visit the recycling facility to verify that the recycling of the vessel is conducted
in accordance with the SRP. However, the contract form does not provide both parties
with a solution to the situation where the sellers’ representatives visit the facility and
during this visit discover that the vessel is not being recycled sustainably as per the
requirements set out in the SRP. If a joint survey were to confirm this technical assess-
ment, a potential breach of Articles 17 and 18 of RECYCLECON would be at stake.
There is a good case that an unsustainable recycling process of a vessel, i.e. not as
agreed under RECYCLECON, would represent a fundamental breach of this con-
tract.41 However, at this late stage of the recycling of a vessel, it would be very difficult,
if not impossible, to terminate the contract. For this reason the sellers’ remedy would
be limited to a claim for damages. Thus, although RECYCLECON remains silent
on the matter, it could be concluded that if a vessel was in fact beached for recycling
under a contract governed by RECYCLECON, this could create a potential claim for
damages for the seller against the buyer in so far as the former could prove loss. In con-
trast to its predecessor (DEMOLISHCON), the most modern standardized contract
for recycling no longer includes a specific provision on beaching.42 Thus, the policy
expectation under RECYCLECON has simply changed over the years and especially
since 2015. This updated policy expectation may well have also guided the decision of
the Norwegian Government Pension Fund Global to pull out the investment in four
shipping companies, which was largely driven by the publicly known unsustainable
working conditions of the utilized “beaching yards” in Bangladesh and Pakistan.
The Fund argues furthermore that the practice of beaching is generally characterized
by workers performing very dangerous work hazardous to health, without adequate
training or safety equipment or basic safety measures. The accident rate would be
41 As generally understood in English law in accordance with the “construction approach” since Photo
Production Ltd. v Securicor Transport Ltd [1980] A.C. 827.
42 Compare Article 10 of DEMOLISHCON 2001.
43 See https://shippingwatch.com/carriers/article10210736.ece (last tested May 2018).
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high, and the same would apply to the risk of health issues. The fund also refers to
reports of the use of child labour for dangerous work.
Every year, several thousand tons of hazardous waste are carried by the ships to the beaches
in Chittagong and Gadani, where the waste is not handled responsibly. Heavy metals and
other toxic substances are not collected but are instead scattered in nature. The environmen-
tal and health damages from this pollution are very severe.44
Furthermore, the Fund cites reports which show that there has historically been
massive pollution tied to shipbreaking in Bangladesh. According to the fund, the
concentration of heavy metals such as lead, chromium and cadmium in the soil at
Chittagong has turned out to be several hundred thousand times higher than the
national limits allow, while surrounding fields and fish stocks have also suffered harm.
The pollution would be caused by the fact that the ships contain noxious hull coating,
oil residue and, in some cases, radioactive materials which are poorly handled when
the ships are dismantled directly on the beach. Moreover, between 1.000 and 2.000
deaths have been reported in relation to work accidents in Bangladesh since 1990. The
unreported numbers can be assumed to be much higher.
Most remarkably, the Council on Ethics of the Fund argues that use of cash
buyers (as discussed above) is irrelevant when it comes to holding shipowners morally
accountable for the negative environmental and human effects of beaching. It may be
recalled again that the use of a cash buyer means, in practice, that a shipowner is no
longer legally liable for the vessel after it embarks on its final voyage for demolition;
hence the shipowner has an opportunity to bypass existing legal rules and distance
himself if anything goes wrong en route or during the actual dismantling. According
to the Council, however, this does not relieve shipowners of responsibility for the
detrimental impact on the environment and on the affected workers triggered by the
scrapping of the vessels:
When a company sells a ship to a cash buyer it is basically clear that the ship is sold for the
sole purpose of being scrapped. And it is also clear to both parties that the agreed price
depends mainly on two factors: the amount of steel in the vessel and costs related to scrap-
ping. The cheapest shipbreaking method is beaching, and it thus gives the company the
highest price for the ship.45
Whether this practical “clarity” also involves elements of legal foreseeability and how
far this foreseeability extends when it comes to personal injury came close to being
tested in an English court. An injured worker at a scrapyard in Chittagong, Bangladesh
who was knowingly subjected to dangers to his health and safety, and ultimately
severely injured, argued that his injury was causally linked to a former (European) ship
manager’s action in deliberately selling the vessel for recycling under unsafe conditions
to a cash buyer who then, in turn, sold the vessel in question to one of the notorious
scrapyards in Chittagong.46 He argued that the former ship manager knew or ought to
have known that there was a foreseeable risk of physical harm to Bangladeshi workers
44 Id.
45 Id.
46 See for more details The Guardian, 2 December 2017, https://www.theguardian.com/global-develop
ment/2017/dec/02/chittagong-shipbreaking-yards-legal-fight: “‘This is the world’s cheapest place to scrap
ships’ – but in Chittagong, it’s people who pay the price” (last tested May 2018). The case eventually settled.
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when they allowed the vessel to be sold to the Chittagong yard through a cash buyer.
In sum, his case rested on the allegation of a legal duty of the former ship manager not
to sell any vessels via any contractors or cash buyers to shipyards in Bangladesh (or
Pakistan), since in doing so it would have known that the vessels would be dismantled
in unsafe conditions, and the higher price paid by the cash buyer was an indication
that the vessel would ultimately be beached.
In contrast, the former ship manager argued that the vessel was sold to a cash
buyer in circumstances where no injuries were reasonably foreseeable; that the accident
occurred four months after it sold the ship to the cash buyer; that it had not selected
the yard used to dismantle the vessel; that it had no control over working practices
there; and that the claim against it seeks to extend the law of negligence beyond its
recognized boundaries.
Whether this liability scenario overstretches the legal boundaries of established
negligence and tort principles is an open question for the future. Nevertheless, the
Norwegian fund has applied the “moral logic” that the higher LDT sale price indicates
positive knowledge about beaching as the cheapest method to dismantle the vessel
and that this also should imply a violation of a duty of care towards the environment
and towards the workers involved. The problem is, however, that the established legal
approach for reasonable foreseeability in personal injury cases has been largely estab-
lished in the statutory context of continuously updated national labour law.47 National
labour law, in particular Health and Safety Regulations, be it of the UK or any other
non-Bangladeshi origin cannot, however, apply to the case of the injured Bangladeshi
scrapyard worker. First, the former shipowner was clearly not the employer of the
injured worker and, second, Bangladeshi labour law would rather have to set the appli-
cable labour law standard in this case. The question remains whether the established
legal principles on reasonable foreseeability in personal injury cases in the country of
the defendant should also play a role in an international tort context. A legal test as,
for example, identified in Caparo Industries v Dickman48 would probably have to ques-
tion whether it is “fair, just and reasonable” that a duty of care should be imposed at
all on the defendant former shipowner. Second, the legal test would have to address
whether and how that duty of care was influenced by foreseeability and proximity.
This will ultimately result in a policy analysis whether freedom of contract carries with
it a reasonable duty of care not to sell a physical object which is potentially danger-
ous to a foreign buyer who is most probably reselling the dangerous object to another
foreign place where existing health and safety standards are highly likely to be violated
in practice due to lack of local enforcement capabilities and/or corruption.
7.4 Conclusion
In the view of the author of this chapter, there must remain a clear distinction between
a moral accusation and the violation of a legal duty which could trigger a claim for per-
sonal injury claims and financial damages. The Norwegian GPFG’s Council on Ethics
47 For example, in the UK, in relation to the Enterprise and Regulatory Reform Act 2013.
48 [1990] AC 465.
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has identified the moral duty of shipowners not to exploit a system which creates the
highest revenues for their outdated assets while negatively impacting human society
and the environment at the same time. In fact, the Norwegian fund has highlighted not
only a moral obligation but the existence and impact of the “Polluter Pays Principle”
in international environmental law.49 In addition, a modernized public and private
law framework – as discussed in this chapter –adds to an updated understanding of
generally accepted due diligence obligations in sustainable and environmentally sound
ship recycling. It is also a good development that a vigorous civil society is closely
monitoring the sales of vessels which are destined to be recycled and thereby promotes
more transparency in a largely confidential business. Nevertheless, in tort cases – and
all the more in a transnational context – the nature of a legal relationship between the
parties should not be neglected. It is, unfortunately, a fact that the former shipowner
neither has control over the enforcement of health and safety laws in a foreign country
nor does the former shipowner have any responsibility for the enforcement of health
and safety laws in a foreign country. However, whether or not a duty of care will be
imposed by law will ultimately depend on the particular nature of the relationship
between the parties and the factual basis upon which the party alleged to be under
that duty is required or empowered to exercise it in the particular circumstances. It is
hard to argue in the context of this chapter that there is any legal relationship between
a former shipowner in one part of the world and the workers at a ship recycling yard
in another part of the world. Anyone who takes a different legal view must take the
trouble to explain why – potentially – thousands of unknown legal relationships exist
between a (penultimate) shipowner and the workers at a foreign scrapyard – even
though the shipowner has not sold the vessel to the relevant scrapyard – and whether
a line should be drawn between different human activities at a scrapyard. Are the
relationships and the duty of care owed by the former shipowner identical to a cutter
and to a welder working simultaneously at the vessel? What about the passage of
time? Does it fall under the same legal category of foreseeability and owed duty of
care if a working accident occurs after two weeks in the demolition process or after
six months? And what if the vessel is not sold once but several times before it ends up
at the scrapyard?
In sum, it seems to go too far to impose liability for personal injury on former
(penultimate) shipowners. Such a development would risk shifting enforcement
responsibility from one competent jurisdiction to another place of the world and to
another, potentially more beneficial jurisdiction. “Forum shopping” in ship recycling
is probably not the solution to the pressing problems in this business area. There
is, on the other hand, a remaining responsibility of local authorities where modern
laws are often already in place (like in Bangladesh) but defective and inefficient local
enforcement seems to be the main problem. India and the ongoing transition process
in Alang now provide a good counterexample that a problematic situation can change
and improve over the years. Finally, as advocated in this chapter, it could also lead to a
“sustainability boost” in this area if shipowners were to refrain completely from selling
their old assets to cash buyers but if they would rather utilize modern contractual
49 On the “Polluter Pays Principle”, see, for example, L. Zhu, “Is the Polluter Paying for Vessel-Source
Pollution?” [2015] JBL 348.
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solutions like RECYCLECON. A modern public and private regulatory framework
is in place and available. In the twenty-first century, shipowners should make the stra-
tegic decision that safe and sustainable ship recycling forms an integral part of their
in-house corporate social responsibility policies. Any evasive practices will continue to
be exposed more and more openly to a critical public and to critical business leaders
and their customers in other areas.
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CHAPTER 8
8.1 Introduction
The shipping industry has been slower to adapt to cyber risk than some other areas of
commerce. This may in part have been due to a perception that cyber risk principally
concerned issues of data management and data loss. It may also have been a result of
the perception that ships trading at sea are relatively isolated and therefore immune
from the broader world of interconnected cyber networks.
There might have been some merit in this analysis ten years ago but, in the modern
era of greater connectivity and the industrial internet of things, it no longer holds true.
In addition, in a world in which unmanned ships are already sailing over the horizon,
the importance of cyber risk to the shipping world is only going to increase. Against
that background, this chapter will look at the following topics:
8.2 The nature of the cyber risk faced by the shipping industry
The risk from cyber events faces all the component parts of the maritime industry:
ships themselves, shore side operations, owners and operators, ports and terminals
and, as the events at Maersk illustrated,1 transport and logistics companies. Individual
seafarers are at risk too but are themselves also a major source of risk, as discussed
further below.
In recent years, this risk has increased exponentially with the networking of oper-
ating systems and information systems and their connection to the internet. This
increased connectivity has undoubtedly led to gains in efficiency by, for example, ena-
bling owners and operators to monitor ships and cargo remotely. It has, however, also
significantly increased the vulnerability of a ship to a cyber event.
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Increased interconnectivity means that anyone with access to the internet can,
with the right skills, access a ship’s operating systems including bridge computer
systems, engineering control systems, the AIS system and data such as manifests and
information about the location of cargo. This unauthorised access might take the
form of a direct hack but it is more likely to be triggered by something much more
mundane: a crew member plugging his personal computer into a ship’s internet system
or a visitor on board plugging a data stick or mobile phone into the ship’s computer
network. This exposes the ship to a number of dangers which include:
• Ransomware
Ransomware causes the locking or loss of control of some or all of a ship’s
systems through the introduction of malware. The master and crew can only
regain control through the payment of a ransom. This is usually denominated
in bitcoin and is often set at a relatively low figure to encourage a quick
resolution of the attack and avoid escalation to insurers or other external
interests. The problem is, of course, that once the attackers have understood
that a particular target is prepared to pay a ransom, the attack is likely to be
repeated. Sometimes these attacks will not actually disable the ship’s systems
but threaten to do so leaving owners and operators with a difficult decision of
whether to pay or call the attackers’ bluff.
The traditional secrecy of the maritime industry and the lack of any sector
wide reporting structure means that it is impossible to know how often attacks
of this nature have occurred to ships at sea or to shore based operations but
it is, without doubt, a risk to the shipping industry, just as it is to any other
business interest. 2017 was dubbed the “year of ransomware” and it seems
likely that attacks of this nature will continue to escalate.
• Theft
By gaining access to a ship’s or an operator’s computer network, thieves are
able to alter cargo manifests and hack into cargo handling systems so that
cargo is delivered to the thieves rather than to the rightful owners. There
have been a number of examples of this kind of attack. Perhaps the most
well known is the attack on the Port of Antwerp which continued from
2011 to 2013. This was carried out by a criminal syndicate which loaded
illicit drugs into containers carrying legitimate cargos from South America.
By hacking into the Port’s cargo handling systems, the criminals were able
to divert those containers on arrival in Antwerp and reclaim the drugs.
Accessing cargo handling systems in this way also, of course, allows thieves
to identify valuable cargos which can then be made invisible in the system
and stolen.
• Piracy
It is undoubtedly possible, technically, for a ship to be diverted by hackers
into the path of pirates – this is a particular concern in the development of
crewless ships. Somewhat less dramatically, however, it is also possible for
potential attackers to access cargo management systems both on board ship
and on shore so that they can identify ships and the location of containers
with the most valuable cargos and target attacks accordingly.
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• Theft of data
This is a particular risk for cruise ships and their owners and operators which
hold large amounts of personal data about passengers ranging from details
of bank accounts and credit cards through to potential health issues. Loss of
this data in a hacking attack can expose owners and operators to regulatory
penalties and to claims by the individuals concerned. Similarly, the owners
and operators of superyachts available for hire may have a wide range of
personal information and data about their clients. Owners and operators will
also hold personal data on their crews and staff which must be protected.
• Commercial sabotage
It has been estimated that up to 15 per cent of cyber-attacks are carried out by
competitors. An example of this was the 2011 attack on the Iranian shipping
line IRISL during which rates were falsified and the company lost track of its
containers; some were delivered to the wrong place, some were “cloaked” and
others were lost.
• Political attacks
Shipping is particularly vulnerable to political interference, whether it is gov-
ernments engaged in various forms of cold war and weapons development or
terrorists and political activists.
Two events in 2017 illustrate just how real this risk has become. First, on 22
June 2017, the US Maritime Administration posted a report of an incident
in the Black Sea.2 It described how the crew of a ship had discovered that its
GPS system was no longer working properly and, rather than place the ship at
its true location off the port of Novorossiysk, was showing it to be more than
32 kilometres inland at the Gelendzhik Airport. The ship’s captain contacted
some 20 other nearby ships and discovered that their AIS signatures placed
them all at the same inland location.
If confirmed, this will be the first successful spoofing of marine GPS
systems. An attack of this nature is of much more concern than a simple
jamming of GPS which had been considered previously to be a more likely
danger. The reason for this is that when a vessel loses contact with a GPS
system an alarm will normally sound alerting the crew to the problem. Where
the system is spoofed, however, so that it continues to operate but provides
misleading information, no such alert is provided. Although the source of this
spoof is unknown, it is rumoured to have been authorised, if not executed, by
the Russian Government testing its cyber warfare capabilities. That may be a
cause of concern in itself but, clearly, if the necessary technology comes into
the hands of terrorists or criminals one can imagine the chaos that may ensue.
The extent of this problem was highlighted by a series of incidents which
occurred hundreds of miles from the Black Sea off the Korean Peninsula.
Fleets of South Korean fishing boats were forced to return to port after their
GPS systems were jammed. Again, the source of the jamming is unknown but
almost certainly emanates from North Korea.
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• Regulatory penalties
It is important not to overlook the risk to owners and operators of failing to
comply with the wide range of new cyber regulations being introduced by reg-
ulators and governments around the world in an attempt to raise the standard
of cyber security. Failure to comply with these regulations will not only expose
mariners to an increased risk of a cyber event, it will also leave them exposed
to severe fines and penalties, the possible declassification of ships and the loss
of insurance cover. Again, we will look at this in more detail shortly.
• Class and seaworthiness
Finally, it is important not to overlook the possibility that inadequate cyber
security may bring into question both the ability to maintain a ship in class
and its seaworthiness.
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• Distributed denial of service attacks (or DDoS)
In these attacks the attacker overwhelms the target’s computer systems by
targeting a server or other network resource causing it to crash or become
inoperative. These attacks are often carried out using a “botnet” or network
of corrupted computers whose owners are entirely innocent and unaware of
the use to which their devices are being put. The computers could be domestic
machines or even part of the growing “internet of things”. Botnets can be
purchased for a couple of hundred dollars (in bitcoin) on the dark web or
“crime as a service” organisations can be hired to supply and implement the
technical know-how making these attacks relatively easy to carry out even for
unskilled attackers. The motives behind these attacks range from commercial
sabotage to blackmail, activism and revenge.
As noted, many of these techniques require the unwitting cooperation of
an individual either at sea or onshore to upload the malware on to the ship’s
or shore facility’s systems. This is a recurring theme in any discussion of cyber
risk and it is undoubtedly the case that one of, if not the, most important (and
cost effective) preventive measures is the proper education of staff and crew
so that they are aware of, and avoid, attacks of this nature.
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a mistaken conclusion. The necessary technology can be purchased or attacks “sub-
contracted” to organisations offering “crime as a service”.
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or less complex measures to ensure their cyber security. The Guidelines do, however,
recommend that owners and operators look to industry bodies for detailed guidance
and best practice standards.
Prominent among such standards are the Guidelines published by BIMCO which are
expressly “aligned” with the IMO Guidelines. The BIMCO document first appeared
in February 2016 under the title “Guidelines on Cyber Security on Board Ships” and
the aim of the Guidelines is: “to offer guidance to shipowners and operators on how
to assess their operations and put in place the necessary procedures and actions to
maintain the security of cyber systems on board their ships”.
The Guidelines are supported by a number of industry bodies including the
International Chamber of Shipping, INTERCARGO, INTERTANKO and CLIA
and may be seen as forming a base line standard of cyber security due diligence for
commercial shipping. The Guidelines were updated to version 2.0 in July 20177 and
are expressed to be “aligned with the IMO guidelines and [to] provide practical recom-
mendations on maritime cyber risk management covering both cyber security and
cyber safety”.
BIMCO states that its Guidelines are not intended to provide a basis for auditing
or vetting the approach to cyber security taken by individual companies or ships. It is
likely to be the case, however, that they will provide an important point of reference
in any such process.
7 http://www.ics-shipping.org/docs/default-source/resources/safety-security-and-operations/guidelines-
on-cyber-security-onboard-ships.pdf ?sfvrsn=16 (last tested May 2018).
8 https://www.gov.uk/government/publications/ship-security-cyber-security-code-of-practice (last tested
on 1April 2018).
9 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/546160/cyber-security-
for-ports-and-port-systems-code-of-practice.pdf (last tested 1 April 2018).
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The guidelines also recommend the appointment of a cyber security officer (CySO)
to liaise with the existing company security officer in relation to cyber risks. Similarly,
a cyber security operations centre and plan should be developed in conjunction with
existing security operations planning.
Although these guidelines are non-mandatory, it is likely that they will be seen
as setting a baseline standard of good practice for UK shipowners and operators.
Significantly, the guidelines state explicitly that they are intended to be read by board
members of owning and operating companies as well as by senior ship’s officers includ-
ing the master, first officer and chief engineering officer.
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staff became aware of the cyber failure prior to the collision but failed to take reason-
able and appropriate remedial actions which would have reduced the chances of an
accident, it is difficult to see how the collision could be classified as “inevitable” and one
would then be involved in the familiar exercise of apportioning liability.
What will be the position of crewless ships in these circumstances? It is said that
75–96 per cent of casualties are the result of human error.10 Removing the human
factor (or “carbon element” as it is sometimes called) would presumably make such
vessels safer than conventional, crewed vessels. One imagines that crewless vessels will
need to have an SMS in place in the same way as crewed ships – albeit that the require-
ments in respect of cyber safety and security are likely to be even stricter – and that
the commercial consequences of an inadequate SMS will be the same as for a crewed
vessel. The position in relation to civil liability, however, may be rather less clear cut.
One proposal is that on becoming aware of a cyber incident, a crewless ship would
be programmed to steam in circles until rescued. This may or may not be a useful
defence against pirate attack but one wonders what the position would be in relation to
civil liability if the circling, crewless vessel collided with another ship or fixed object?
A defence of inevitable accident may be difficult in these circumstances because the
cyber incident may no longer be the sole proximate cause of the collision – not least
because the vessel has been deliberately programmed to adopt this course. The answer
to this conundrum might perhaps depend on whether the pre-programmed circling
manoeuvre was the only reasonable response to the cyber-attack, whether the operator
had any ability to alter course to avoid collision once the circling had begun and, if
not, why not.
8.5.5 GDPR
As the name suggests, the GDPR, which came into force in May 2018, is concerned
with the treatment and security of personal data. One may think that this is unlikely
to be a cause of concern for shipowners and operators; unfortunately, however, that is
not the case. Since the penalties for non-compliance with the GDPR can reach as high
as €20 million or 4 per cent of annual turnover, it requires serious attention.
Owners and operators will have to comply with the GDPR in respect of personal
information that they gather and retain in connection with crew members and other
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staff. More significantly, however, cruise ship operators are likely to gather and retain
information on hundreds or thousands of individuals who participate on their cruises
as passengers. This information is likely to include personal details such as full name
and date of birth and perhaps details of any illnesses, together with financial infor-
mation. All of this is prime material for criminal organisations and it is likely to be
stored electronically; it is, therefore, an attractive target for cyber theft. Any operator
which loses this data will be exposed to regulatory penalties and also to personal
claims by the individuals concerned. In sufficiently serious cases – particularly where
cyber security has been inadequate – directors may also be exposed to claims by
shareholders alarmed by the bad publicity and penalties associated with losses of this
nature.
Even though the GDPR is a piece of European legislation, the indications are that
the UK Government will continue with a very similar provision after the UK has left
the European Union (EU).
Owners and operators situated outside the EU should not think that they can avoid
this legalisation because it is a “long arm” statute which will apply to any organisation
holding data on EU citizens wherever that organisation is based. Accordingly, a cruise
operator based in Asia which provides services to EU travellers will have a potential
exposure.
8.5.6 NIS
The NIS is a very different piece of legislation which requires “essential services” to
develop certain standards of cyber security. The Directive leaves it to individual EU
Member States to decide how to implement its requirements in their own domestic law
and the publication of a government consultation paper13 sets out the UK’s proposals
in that regard.
Maritime transport is listed as one of the “essential services” to which the Directive
will apply. Not all operators in this sector, however, will be affected directly by the
current proposals which are intended to apply only to the largest operations with
headquarters in the UK.
In the UK context, that will mean harbour authorities and ports with annual pas-
senger numbers greater than 10 million or with 15 per cent of the UK’s Ro-Ro or Lo
Lo traffic or which account for 10 per cent of UK liquid bulk or 20 per cent of UK
bio-mass fuel. Under the Government proposals, the NIS will also impact “water
transport companies” which handle more than 30 per cent of freight at any UK port
in scope and 5 million tonnes of annual freight in UK ports as a whole. NIS will also
apply to companies with 30 per cent of annual passenger numbers at any individual
UK port in scope and more than 2 million passengers at all UK ports. Currently, the
term “water transport companies” has not been defined.
In addition, the Government is proposing to retain a reserve power to include within
the scope of the Directive, specific operators which do not meet the thresholds set out
above but which are still considered to provide an essential service.
13 https://www.gov.uk/government/consultations/consultation-on-the-security-of-network-and-infor-
mation-systems-directive (last tested May 2018).
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Failure to comply with the Directive will, it is proposed, expose companies to very
significant financial penalties of up to €20 million or 4 per cent of global turnover
whichever is the greater. Operators will be exposed to these fines if they “fail to imple-
ment appropriate and proportionate security measures”. It is to be noted that these
requirements are in addition to other provisions relating, for example, to GDPR.
The consultation paper does not set out in any detail the measures which the
Government will expect to see implemented. Rather, the Government proposes to “set
out the high level security principles which will be complimented by more detailed
guidance, that will be either generic or sector specific. … These principles describe
the mandatory security outcomes that all operators will be required to achieve.” The
Government’s view is that operators of essential services are responsible for managing
their risks and will need to implement security measures in line with the high level
principles established for the purposes of NIS, having regard to the more detailed
sector-specific and generic guidance to be published by the relevant NIS competent
authorities which, for marine transport, it is proposed should be the Department
of Transport. The Government also emphasises, however, that it intends that there
should be a high level of dialogue between the marine sector and the Government in
developing these standards and it will be interesting to see how closely they mirror
the IMO and ISM standards. What is clear, however, is that the new rules will cover
governance, risk management, asset management and supply chain issues. In addition,
there will be a mandatory incident reporting regime (which will be in addition to exist-
ing reporting requirements and recommendations).
The consultation closed on 30 September 2017 and the scheme went live in
May 2018. Although NIS is an EU directive, it is clear that its implementation by the
UK Government will not be affected materially by the UK’s departure from the EU.
Other countries are adopting similar measures with the US Coast Guard, for
example, recently issuing draft Guidelines for Addressing Cyber Risks14 which are
currently open for consultation and comment.
8.6.1 Underwriting
Under section 3 of the Insurance Act 2015, an insured is obliged to make “a fair pres-
entation of the risk” to insurers at placement of the policy. In essence this requires
the insured to disclose all information about the risk that it “knows or ought to
know”. That will include information known to the senior management or to those
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responsible for the insurance as well as information which would be revealed by a
reasonable search. In the circumstances, it seems very likely that an insured would
be expected to disclose any apparent and material inadequacy in its cyber security
arrangements; certainly, one might expect disclosure of any breaches of the IMO
Guidelines or IMS Code of which the insured is, or ought to be, aware. Disclosure
of such matters may mean that only very limited insurance is available until remedial
steps have been taken or that cover is written on terms or with subjectivities; a failure
to make full disclosure, however, leaves the insured open to avoidance of its policy
ab initio.15
8.6.2 Coverage
8.6.2.1 Exclusions
Most marine insurances (other than those designed specifically to cover cyber risk)
contain a cyber exclusion clause; often the Institute Cyber Attack Exclusion Clause
CL380. There are a number of variations to this clause but its essence is this:
in no case shall this insurance cover loss damage liability or expense directly or indirectly
caused by or contributed to by or arising from the use or operation, as a means of inflicting
harm, of any computer, computer system, computer software programme, malicious code,
computer virus or process or any other electronic system.
(Emphasis added)
It will be seen that this clause seeks to exclude both direct and indirect damage. It
might apply, therefore, to circumstances in which a ship’s navigation systems are disa-
bled resulting in a collision but also to a situation, as in Malaysia, in which hackers
attacking the shore side operation caused funds to be diverted through a “social engi-
neering” attack on a crew member.
It seems, therefore, that the exclusion is intended to be broad and does not apply
only where the proximate cause of loss is computer or software related. The weakness
of the clause from that perspective is in the words: “means of inflicting harm”. As with
most exclusions, it will be for insurers to prove that CL380 applies to exclude any given
loss; that means it will be for them to show, on the balance of probabilities, that in any
given circumstance the computer, etc. was used as a means of inflicting harm.
As far as I am aware, CL380 has never been the subject of judicial interpretation
and so there is uncertainty as to how this language will be construed. The use of the
word “inflicting”, however, suggests that a degree of deliberation and intent to cause
harm is required for the clause to bite. This is reinforced by the words “cyber attack”
in the clause’s title and by reference to “malicious code” in the body of the clause. In
the circumstances, there are good arguments to be made that the exclusion does not
extend to loss arising from an innocent misuse of a computer or software.
What is unclear, however, is whether the insured has to be the intended target of
any perpetrator or whether the exclusion is also applicable where the insured is the
victim of collateral damage from an attack aimed at a third party. The relevance of this
15 This is subject to evidence from the insurer as to what it would have done had it received a fair pres-
entation at the outset: Schedule 1 Insurance Act 2015.
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c onsideration was highlighted by the recent “NotPetya” attacks which affected Maersk
among many others. There is a widespread belief that this attack was launched by
Russia or by Russian nationalists against the Ukraine as part of the ongoing conflict
between those two countries and the damage to Maersk and others was incidental to
the attackers. If the exclusion does not require any attack to be directed at the insured,
therefore, CL380 would effectively exclude losses of this nature.
It certainly seems to be the view in the market that the clause does operate in this
way and that may be one reason why various attempts have been made to redraft the
clause – which is discussed further below.
CL380 usually includes a second paragraph which creates a carve-out where the
clause appears in war and related policies. The relevant section is as follows:
Clause 1.1 shall not operate to exclude losses (which would otherwise be covered) arising
from the use of any computer, computer system or computer software programme or other
electronic system in the launch and/or guidance system and/or firing mechanism of any
weapon of war.
On balance, therefore, this clause seeks to restore cover for some normal perils of the
sea even in circumstances in which a computer is involved.16
16 Interestingly, the clause also includes a write back for damage caused by earthquake, volcanic erup-
tion or lightning and it is interesting to speculate what kind of computer misuse might give rise to losses of
that nature. Nuclear explosion might be one answer but that seems to be written back independently.
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8.6.2.2 Warranties
Cyber security may directly or indirectly also be the subject of various insurance
warranties. Section 39 Marine Insurance Act 1906 (MIA 1906) requires certain “war-
ranties” to be implied into voyage policies. These include an implied warranty that a
ship is “seaworthy” and this requires the ship to be “reasonably fit in all respects to
encounter the ordinary perils of the seas of the adventure insured”.
It is interesting to consider whether a ship without adequate cyber security would
satisfy this test. On first glance the lack of cyber security may not make it unfit to face
the perils of the sea; if, however, it loses control of its navigational aids because of that
inadequate cyber security the position may be different and it is clearly arguable that
the ship would be unseaworthy within this definition.
Where the ship is insured under a time policy, there is no warranty of seaworthiness
but if a ship is sent to sea in an unseaworthy state and a loss occurs which is attribut-
able to that lack of seaworthiness, section 39(5) MIA 1906 provides that underwriters
are not liable for any loss if the insured was privy to the lack of seaworthiness.
It may not be straightforward in the context of cyber risk for insurers to establish
that the insured was privy to the lack of seaworthiness when the ship was sent to sea.
Thus, it may well be necessary to show that the relevant “Designated Person” under the
ISM Code had actual or blind eye knowledge of the inadequacies in the ship’s cyber
defences and that his or her knowledge can be imputed to the insured. Interestingly,
if knowledge of inadequate cyber security can be imputed to the insured’s senior
management or the person(s) responsible for the insurance, it may give rise to a further
defence based on breach of the duty to make a fair presentation of the risk at place-
ment. The viability of this defence may well depend on when the knowledge was (or
should have been) acquired by the relevant personnel at the insured.
Section 40(2) MIA 1906 provides that a voyage policy on goods will also include an
implied warranty that the ship is not only seaworthy but fit to carry the goods to their
destination. It is conceivable that a ship lacking in appropriate cyber security will fall
foul of this provision but there are unlikely to be many circumstances in which this
implied warranty is breached in the context of cyber security and the warranty of
seaworthiness is not also breached.
It is, of course, possible that in addition to these implied warranties, insurances on
marine risks including ports and shore side operations will include express warranties.
Prior to the coming into force of the Insurance Act 2015, any breach of warranty
in a contract of insurance automatically terminated the insurance contract from the
date of breach. That position has now changed, however, and section 10 Insurance
Act 2015 provides that a breach of warranty merely suspends the contract which
may come back into force if the breach is remedied. Furthermore, if the warranty is
designed to limit the occurrence of losses of a particular kind, at a particular place
or which occur in a particular way, underwriters may still be liable for the loss even
during a period of breach if the insured can demonstrate that its breach of warranty
did not increase the risk of the loss occurring in the circumstances in which it occurred
(s.11 IA15).17 This latter provision does not, however, apply to warranties that go to
17 For a detailed analysis of the changes introduced by the IA 2015 in this area see B. Soyer, “Risk
Control Clauses in Insurance Law: Law Reform and the Future” 75 (2016) Cambridge Law Journal 109–127.
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the risk as a whole (s.11 IA15). It is unclear how this language will be interpreted by
the Courts but, a warranty in relation to cyber security measures may well be one
which goes to the risk as a whole.
8.7 Conclusion
Cyber risk is here to stay in the maritime world – as it is in most other areas of com-
merce. The sources of the risk are many and varied while the methods and forms of
attack continue to evolve at an alarming speed. It is hard for the industry to keep up
with these changes but the steps taken by industry bodies and regulators show that the
maritime sector is now alive to the risk and the need to address it.
Insurers have also woken up to the extent of their potential cyber exposure which
is now viewed by market authorities to have a potential for aggregation as big as the
largest natural catastrophes. Policy wordings are catching up and issues of “silent
cyber” cover are being addressed. It would be naive, however, to think that these
exposures can be immediately brought under control; the continuing evolution of
the risk means that adaptability and innovation by both insureds and insurers will be
necessary for the foreseeable future.
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CHAPTER 9
9.1 Introduction
In September 2014 the United States Maritime Law Association sent a letter to the
Comité Maritime International (CMI)and proposed that CMI “. undertake a new project
to study the meaning and uses of the terms ‘ship’, ‘vessel’, ‘watercraft’ or other relevant
terms for marine property subject to international agreements and national laws”.
Thereupon and following the usual in-house procedures, CMI established an
International Working Group (IWG) during its İstanbul Meeting in June 2015, the
“IWG on Ship Nomenclature”.1
Before proceeding any further, it looks appropriate, at this stage, to make a few brief
remarks to pave the way for some of the forthcoming discussions.
Economics may still be conceived, as it was conventionally defined, the science of
allocating scarce resources between unlimited needs, but actually it looks rather more
a practice of exploitation of diminishing resources by extremely self-interested actors.
The primary objective of the investors is to increase the return on their capital and
accomplish this within the shortest possible time and without assuming much risk.
During the planning stages, the investors thus search for places where they can operate
as efficiently and cost-effectively as possible and maximise their profits. One factor in
such search is the tax regimes of the alternatives at hand. Actually, information on
tax rules usually occupies the first place on investors’ list of important characteristics.
True, tax havens are not known for having particularly sophisticated or investor-
friendly legal systems. Nevertheless, one can easily observe that many investors are
quite in the habit of setting up companies or other ventures in countries where the legal
system does not look very respectable or dependable, to say the least. This tendency
increases the probability (quite a worrying one) of coming across several ‘habitual
residences’ or ‘loci damni’, in cases where Rome I2 or Rome II 3 becomes applicable and
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is it a ship or not?
consequently escalate the risk of applicability of some questionable legal systems. It
would be an exaggeration to call this situation a ‘clash of civilisations’ but it certainly
means that we may come face to face with a clash of legal systems, as regards their
quality.
As I will try to illustrate through the scenarios in the following pages, when an
object is not recognised as a ship but merely as an ordinary movable property by a
court seised of a case under the rules of its lex fori, but a foreign element in the case
requires the court to apply the relevant provisions of Rome I or Rome II, some less
than desirable consequences may ensue. Such a probability may occur either because
of the silence of the lex fori on the point in question or owing to its bad drafting or
lack of clarity.
One way of countering such risk could be to agree on the definition of ship. But the
prevailing situation as well as the past experiences suggests this objective is unattain-
able. So we are looking for a next-best solution by at least concurring on the criteria
by the application of which one can define a ship.
Of course where an express definition of “ship” exists in the rule that is applicable to
a specific conflict, that definition must of course prevail. But we also need a definition
that can be used where there is simply a legislative reference to a “ship”; for example,
as in Art.1(2) of the 1976 International Convention on Limitation of Liability for
Maritime Claims.
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Most probably these are the reasons why almost all national legal systems, as well as
most international conventions, contain provisions defining what is meant by a “ship”;
it is necessary to have a concrete definition available to handle at least some specific
situations without having to return to first principles. These provisions, however, are
typically drafted to serve a limited purpose connected with the scope of application
of the national law or international convention, and therefore fall short of providing
a comprehensive definition. Furthermore, quite a number of these definitions conflict
with each other.
Clearly, if in any individual conflict a clear and unambiguous definition for a ship
exists in the applicable domestic legislation or in an international convention, as the
case may be, such definition shall be taken into regard. Where no such definition exists,
then the alternative approach for the court seised of the case will be to rely on its
domestic law and try to elicit applicable rules by which it can decide whether the object
in question could – or should – be recognised as a ship or not.
On the other hand, when one starts groping around to find a solution because a
clear definition does not exist, could there be certain criteria, or may there be common
denominators, that can be taken into regard in deciding whether the disputed object
can be identified as a ship or not? It is this groping to find an answer to this question
that is the focus of this chapter.
Taking into regard several definitions in the international conventions and national
laws, as well those offered by academics7, which are mostly based, quite understand-
ably, on the definitions existing in their respective legislation or prominent court deci-
sions, I would like to propose the following definition and assume that it will serve as
a succinct, but for the moment sufficient, starting-point:
A ship is a navigable seaborne craft, used or capable of being used for the carriage of pas-
sengers and/or goods.
In this definition, I do not take into regard the shape or design of the object as a
criterion. This is because any seaborne craft, to be both navigable and suitable to
carry passengers and/or goods, has to be built in such a way that it can respond to the
requirements of sea voyages as well as be capable of overcoming the forces of nature
and consequently be eligible to be recognised as a ship. Admittedly there are a number
of definitions in which the shape or design of a craft is taken as a relevant factor. In
this connection it is worth dwelling for a moment on the one suggested in the Lozman
case8, where the Supreme Court of the United States clearly referred to design, form
and appearance as a factor that has to be taken into regard when deciding whether an
7 See, for instance, A. Chircop et al., Canadian Maritime Law, 2nd ed (Toronto 2016), p. 279: “In
summary, for a vessel to qualify as a ship in Canada, the vessel must have a design that permits the per-
formance of a maritime function and have the capability of being navigated, even if this occurs with the
assistance of another vessel”; S. Gahlen, “Ships Revisited: A Comparative Study”, (2014) 20 JIML 252, 255:
“floating structure, which is capable of controlled movement on water, has the capacity to carry goods or
persons beyond its own mass, and that it engages in maritime, as opposed to river or inland water, naviga-
tion”; D. Jackson, Enforcement of Maritime Claims, 4th ed (London 2005), 3 (referring to the Supreme Court
Act 1981, s.24(1) and Merchant Shipping Act 1995, s.313(1)): “any description of vessel used in navigation”;
N. Meeson and J. Kimbell, Admiralty Jurisdiction and Practice, 4th ed (London 2011), Para.2.7: “essence of
a ship is that it is a seagoing vessel in the sense of being a navigable object”; T. Schoenbaum, Admiralty and
Maritime Law, 4th ed (St. Paul 2004), 36: “a structure built to transport goods and passengers over water”.
8 Lozman v City of Riviera Beach, Florida, 133 S. Ct. 735 (2013).
120
is it a ship or not?
object could be recognised as a ship or not . And one must admit that it is to a certain
9
extent understandable that the appearance of the object in question might recall to an
onlooker the image fostered by the perceptions accrued over thousands of years.
Therefore, it is submitted that ability to navigate and capacity to carry are the two
essential defining features of ships; consequently, to be a ship an object in question
must be able to navigate through the sea and have the capacity to carry passengers
and/or goods over the sea. It follows that capacity to carry and navigability be taken
as criteria to determine, in cases of dispute or where no definition exists, whether or
not an object could be defined as a ship10.
9 “We believe that a reasonable observer, looking to the home’s physical characteristics and activities,
would not consider it to be designed to any practical degree for carrying people or things on water. And we
consequently conclude that the floating home is not a vessel.” (emphasis added) (Breyer J at 133 S. Ct. 735,
739 (2013)). The Court, however, did not take the shape or design of the object as an isolated (stand-alone)
criterion, but looked upon it as a necessary condition for the object in question to be able to fulfil the func-
tions expected of a ship, namely carriage of persons and/or goods on water. Although I do no on principle,
object the use of this criterion, with due respect, oppose the proposition of leaving the decision to the man
in the street, who is likely to be a mere land-lubber.
10 It must still be emphasised, however, as stated above, that in cases where an applicable rule, taking
place be it in an international convention or a national law, provides an unambiguous and mandatorily valid
definition, such definition should, inescapably, be taken into account, even though the object in question
may not meet these two criteria.
11 Cf T. Schoenbaum, Admiralty and Maritime Law, 4th ed (St. Paul 2004), 450: “A vessel consists of ...
the hull, engines, tackle, apparel, and furniture ...”.
12 In English law, the concept of a “ship” includes all the property on board, except that belonging to
third parties: see The Silia [1981] 2 Lloyd’s Rep. 534, 537.
13 In the same way as we say that a tortoise does not carry its shell, but that the shell is part of it.
14 See S. Gahlen, “Ships Revisited: A Comparative Study”, (2014) 20 JIML 252, 263.
15 I refrain from giving detailed information on the material facts of these cases, since they are well
known by the members of the maritime lawyers’ fraternity. But, it is a pleasure for me to refer the reader to
121
dr jur. bülent sözer
i) The Von Rocks . The craft in question was a dredger. The service it provided
16
was dredging and therefore had nothing to do with carriage, even though it
went back and forth to dump whatever it brought up from the seabed in a
defined area or on board another vessel. This carriage was not pursued under
a contract of carriage of goods by sea, but was merely ancillary to the princi-
pal function of the vessel.
ii) R (Canada) v St John Ship Building & Dry Dock Co17. The vessel in question
here was a crane barge, able to carry goods and in fact used to carry cargoes
owned by different people between the shore and the ships lying at anchor.
To the extent that arrangements made with third parties to carry their cargo
under a contract of carriage were taken as the determining factor, the decision
can be looked upon as sound; but it it is difficult to justify the holding that it
was a ship because it was carrying the crane; the latter was actually an integral
part of it.
iii) The Mac18: A hopper barge was accepted to be a “ship” simply because it
was used to carry mud and gravel to a certain defined point. But this activity
consisted of the performance of a dredging contract and was not undertaken
pursuant to a contract of carriage, and therefore the decision stands out as
another example of failure to recognise the difference between carrying goods
for others and carrying material in the course of employment.
iv) The Gas Float Whitton (No. 2)19. The opinions delivered in this case refer to
three criteria at once: carriage, navigation and construction. It is still acknowl-
edged as one of the milestone decisions. With regard to our present topic,
however, since the object in question, because of the way it was constructed,
could not be used for carriage, whether of goods or persons, it was found that
it cannot be qualified as a “ship” and settled the dispute at hand in a more
radical manner.
v) The Slops20: The Slops was an old oil tanker, permanently anchored in Piraeus
harbour to receive and store waste oil from ships berthing in the port. The
Slops was stripped of its capacity to move and the oil stored in its tanks was
periodically unloaded by other vessels. The court at first instance decided that
the Slops was not a “ship” because it was not used to carry oil. But the Greek
Supreme Court overturned this judgment and decided that it was being used
to carry oil and therefore was a “ship”. With respect, this is a case where the
concept of carriage was not properly interpreted 21.
two scholarly articles. These are, first, S. Rainey, QC, “What is a ‘Ship’ Under the 1952 Arrest Convention?”,
[2013] LMCLQ 50; and secondly, S. Gahlen, “Ships Revisited: A Comparative Study”, (2014) 20 JIML 252.
16 [1998] IR 41; [1998] 2 Lloyd’s Rep. 198. Although the decision is quite in conformity with the local
law, it is submitted that it should not be taken as a valid premise in describing ships in general.
17 (1981) 126 DLR (3d) 353.
18 (1882) 7 PD 38.
19 [1897] AC 337.
20 Unreported decision of the Areios Pagos (Greek Supreme Court), but referred to by S. Gahlen,
“Ships Revisited: A Comparative Study”, (2014) 20 JIML 252, 265.
21 See the scholarly report by Professor Vaughan Lowe, QC, delivered in connection with this case to the
International Oil Pollution Compensation Funds. IOPC/OCT 11/4/4/, Annex 1.
122
is it a ship or not?
9.3.2 Carriage of passengers
Carriage of persons should also be treated in a similar manner. Ships do not carry
their crew. Master, officers and crew ‘belong’ to the ship. They are employed by the
shipowner. They are on board because they have to be pursuant to their contract of
employment; they do not pay to be on board, but they are paid to be on board. By
contrast, a passenger is someone who pays for passage and acquires the right to be on
board and transported to the destination as determined by the contract of carriage.
Consequently, the presence of persons on board a ship does not by itself comport car-
riage of them, unless they were present because they were entitled to be there pursuant
to a contract of carriage between themselves and the carrier22.
As above regarding carriage of goods, I would like to refer to some decisions involv-
ing carriage of persons.
i) Steedman v Scofield 23. This conflict involved a jet-ski. The court decided that
riding on, or driving, a jet-ski had nothing to do with carriage of passen-
gers. This is entirely understandable; you do not have to enter into a contract of
carriage in order toride a jet-ski. The owner simply hands over the device to the
other party for the latter’s enjoyment; neither party envisages an undertaking of
transportation from a point of embarkation to disembarkation. (This case also
involves an issue about “navigation”; this aspect is treated separately below.)
ii) R. v Goodwin 24. This was a case involving a “waverunner”, a craft somewhat
similar to a jet-ski. Besides other arguments, which we shall deal with below, it
was also taken into account that a waverunner was not employed for carrying
persons under a contract of carriage.
iii) Addison v Denholm 25. The dispute was centred on a “flotel”, a floating craft
used to accommodate the personnel working on an oil rig. The court decided
that since the flotel was suitable to accommodate persons and also protect them
against natural hazards, it should be recognised as a ship. But this is doubtful.
The flotel was not carrying anybody; nor were the workers accommodated on
it staying there pursuant to a contract of carriage of passengers by sea.
Accordingly, we can sum up the position as follows. Carriage of goods should be
understood as transporting goods under a contract of carriage entered into between
the carrier and the shipper; and carriage of passengers should mean transporting
people under a contract of carriage of passengers entered into between the carrier and
the relevant person. Our conclusion is as follows:
It is respectfully submitted that it is, from the legal point of view, not correct to
define a sea-borne craft as a ship, by merely taking into regard:
i) The machinery/equipment/tools on board her, if they are used to perform
the services/tasks which the craft in question is allocated to and therefore not
carried as cargo under a contract of carriage;
22 Military personnel are also not carried as passengers, but transported pursuant to particular rules
and under the direction of the relevant authority.
23 [1992] 2 Lloyd’s Rep. 163.
24 [2005] EWCA Crim 3184; [2006] 1 Lloyd’s Rep. 432.
25 [1997] ICR 770.
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dr jur. bülent sözer
ii) The presence on board her of persons who are employed to discharge the
functions of that particular craft and therefore not transported as passengers
under a contract of carriage.
9.3.3 Navigation
The other criterion which I would like to propose to be used in determining whether a
given object can be defined as a ship or not, is its navigability, or capability to navigate.
No object or craft, even if it can be seaborne, can be recognised as a ship, unless it is
able to navigate26. Following the popular saying, which all maritime lawyers are famil-
iar with, navigation is not the same as messing about in boats 27. Navigation, speaking
in rather general terms, consists of a broad range of acts of seamanship28; or in more
precise terms, “[n]avigation is the nautical art or science of conducting a ship from
one place to another … and … [n]avigation is … [an] ordered movement of ships on
water …”29.
Navigation is also not merely floating on water or being able to remain buoyant; it
is therefore not an equivalent of “floatability”. It is the steering of a seaborne craft
according to a plan and following certain rules, with the objective of reaching a deter-
mined point30. The purpose of such a voyage may be to be ready at the port of loading
to pick up a cargo or arrive at the port of discharge to deliver a cargo or, speaking in
a wider sense, rushing to salvage a ship in distress31.
Looking into the matter from the perspective of the decisions dealing with error in
navigation, in the context of the Hague-Visby Rules, one can safely suggest that navi-
gation includes: planning for and executing the voyage, plotting the course32, ensuring
suitable fuelling, proper berthing of the vessel33, arranging for loading operations34,
ensuring proper stowage of and looking after the cargo35, and in the meanwhile
bearing in mind also the objectives of the voyage from the point of view of the owner
or the charterer as well as the cargo interests.
Based on the foregoing, I would like to propose – actually following the conclusion
reached by Scrutton36 – that navigation basically covers the whole adventure that the
shipowner undertook to perform and therefore encompasses the span of time between
26 See Merchants’ Marine Insurance v North of England P & I Association (1926) 26 Ll. L. Rep. 201.
Similar views have been expressed in respect of Canadian law: see A. Chircop et al., Canadian Maritime
Law, 2nd ed (Irwin Law 2016), 279.
27 A phrase popularised in Kenneth Grahame’s The Wind in the Willows, first published in 1908.
28 J. Hare, Shipping Law & Admiralty Jurisdiction in South Africa, 2nd ed (Juta 2016), 799.
29 Steedman v Scofield [1992] 2 Lloyd’s Rep. 162, 166.
30 “There is hardly any doubt that a structure can only be a ‘ship’ if it is capable of undertaking planned
voyages”, S. Gahlen, “Ships Revisited: A Comparative Study” (2014) 20 JIML 252, 269. See also N. Meeson
and J. Kimbell, Admiralty Jurisdiction and Practice, 4th ed (Informa 2011), Para.2.8.
31 D. Jackson, Enforcement of Maritime Claims, 4th ed (Informa 2005), 484.
32 “[d]etermin[ing] the future course or courses to be steered to reach the intended destination”: see
Steedman v Scofield [1992] 2 Lloyd’s Rep. 163, 166.
33 Laurie v Douglas (1846) 15 M & W 746
34 Norman v Binnington (1890) 25 QBD 475
35 Hayn Roman & Co v Culliford (1879) 4 CPD 182; see too Carver on Carriage by Sea, 13th ed (Sweet &
Maxwell 1982), 147–148; Carver on Bills of Lading, 4th ed (Sweet & Maxwell 2017), 693.
36 See Scrutton on Charterparties and Bills of Lading, 23rd ed (London 2015), 273.
124
is it a ship or not?
the initial planning of the voyage up to the final stage and making fast alongside.
Therefore, it is submitted that in order to determine what activities or endeavours
may be qualified as navigation, one need simply look at the court decisions as well as
the scholarly definitions dealing with ‘error in navigation’ within the context of the
Hague-Visby Rules. They amply delimit what is navigation and what is not.
Although navigation is not identical with mere floating, it should also not be con-
fused with mobility; a seaborne craft may have mobility either because it has its own
means of propulsion or may be towed from place to place, to the extent that its
structure allows. But, evidently, this is not navigating in the proper sense of the word.
To be recognised as a “ship”, the object in question has to be steered across the water
to perform a planned voyage in an orderly manner, responding to the requirements,
as well as the forces, of nature. In other words, the subject craft must possess all the
characteristics as well as the capacity to properly perform the tasks mentioned in the
preceding paragraphs37.
In other words, navigation should be identified with performing a voyage, with the
main objective of reaching a planned destination38; hence mere ability to move on
water in order to perform or facilitate a defined function, such as drilling or dredging,
should not amount to navigation39.
It would be worthwhile at this stage to look at some court decisions:
i) Merchants’ Marine Insurance Co Ltd v North of England P & I Association40.
The court here concluded that adaptability for navigation and use for that
purpose were two of the most essential criteria to determine whether an object
was a ship, but did not describe what one should one understand by navigation.
ii) Polpen Shipping Co Ltd v Commercial Union Assurance Co Ltd41. The court
defined, quite correctly it is submitted, that navigation meant “free and
ordered movement from one place to another. 42.
iii) The Gas Float Whitton (No 2)43. The court in this case defined navigation as
moving the ship in a controlled way and concluded that any object not built
to be used in a controlled manner on water cannot be defined as a ship.
iv) R. v Goodwin44. The case involved a “waverunner”, and the court empha-
sised that navigation meant ordered progression over water from one place to
another. The “waverunner” was therefore not a ship.
v) Clark (Inspector of Taxes) v PerksClark (Inspector of Taxes) v Perks45. The
court found that as long as a craft is capable of navigating, it can be recognised
37 See also chapter 4 in B. Soyer and A.Tettenborn (eds.), Pollution at Sea, Law and Liability (Informa
2012), 67–68.
38 The voyage need not necessarily be for carriage of cargo; a tug sailing to rescue a ship in distress or
simply to lead one into the port under tow should also qualify as a voyage and contain an element of naviga-
tion. See Carver on Bills of Lading, 4th ed (London 2017), 693.
39 For an extensive discussion on this aspect, see chapter 4 in B. Soyer and A.Tettenborn (eds.), Pollution
at Sea, Law and Liability (Informa 2012), 64 et seq.
40 (1926) 26 Ll. L. Rep. 201
41 (1942) 74 Ll. L. Rep. 157.
42 (1942) 74 Ll. L. Rep. 157, 161.
43 [1897] AC 337.
44 [2005] EWCA Crim 3184; [2006] 1 Lloyd’s Rep. 432.
45 [2001] EWCA Civ 1228; [2001] 2 Lloyd’s Rep. 431.
125
dr jur. bülent sözer
as a ship, although the defining function of that craft may be a more special-
ised one, such as dredging or drilling.
It is respectfully submitted therefore that, being able to be moved around on water
to facilitate the performance of an otherwise specifically defined service, which is the
subject matter of a particular contract, should not be regarded as navigation.
46 On the other hand, once an object is properly acknowledged as a ship, temporary incapacitation will
not deprive it of its status as a ship.
47 133 S. Ct. 735 (2013).
48 “in our view, a structure does not fall within the scope of this statutory phrase unless a reasonable
observer, looking at the home’s physical characteristics, would consider it designed to any practical degree for
carrying people or things on water” (emphasis added) (133 S. Ct. 735, 739 (2013)).
49 S. Rainey, QC, The Law of Tug and Tow and Offshore Contracts, 2nd ed (Informa 2011), Paras.2.69
et seq. and 2.78.
126
is it a ship or not?
The alternative is being towed or pushed , i.e. to rely upon the motive power of
50
another seaborne craft that is fully capable of navigating. Even then, to accept the craft
under tow as a ship, it should still possess the features – other than motive power –
necessary for navigability51. It could be suggested in this regard that it may be necessary
to distinguish between towage and – for want of a better word – dragging52. Towing a
craft, in relation to which sea could easily be looked upon as its milieu, and therefore
which one may assume to be “towable” – if this expression is found acceptable – should
be different from towing an object to which the sea is something alien53.
To conclude what has been said above, carriage, in the legal sense of the word, is
an undertaking to perform the obligations assumed by a contract of carriage by sea.
Therefore, the seaborne craft utilised for this purpose ought to have the capacity to
discharge this function properly54, i.e. be able to carry passengers and/or cargo.
Such seaborne craft should also have the ability to perform the intended voyage,
therefore must be able to navigate. Navigation is planned and controlled movement
on water to perform the functions to which the craft in question was assigned by the
contract of carriage.
Although possession of motive power may not be regarded as a determining factor,
such craft must nevertheless be navigable and while being towed still be capable of
responding to and following the manoeuvres the tug was making to execute the voyage
and keep in her wake.
Otherwise, the craft in question could not be defined as a ship, but as a kind of
seaborne object and be treated as any mobile/movable property; save, of course, where
a specific and expressive rule defines it as a ship.
Consequently, the legal nature of the contracts made for the movement of goods
and/or passenger as well as the one concerning the towage may have to be qualified
differently and be subject to different rules.
9.4 Scenarios
In this section, I would like to try to illustrate, through a couple of hypothetical situa-
tions, what the consequences might be of a decision that an object is or is not definable
as a “ship”.
Case 1
Let us assume that a seaborne craft ABC prior to receiving permission to enter a
port – which I will choose to call “Colourful Expectations”, out of respect to the senti-
ments of seafarers while approaching a port – causes damage to some offshore facility.
127
dr jur. bülent sözer
For example, it collides with a buoy or damages underwater cables when dropping
anchor. Thereupon the port authority of Colourful Expectations starts legal proceed-
ings against the ABC’s owner in the local court. For these purposes we will assume
that Colourful Expectations is situated in a state that has ratified the Limitation
Convention 1976 and the Protocol of 1996, and that the defendant owner immediately
declares its readiness to constitute a fund under the convention55.
Pursuant to Art.1.2 of the Limitation Convention, its regime is applicable only if
the object involved in any given dispute is a “seagoing ship”56. As the convention does
not go into details concerning the meaning of “seagoing ship,” the court seised of the
case will have to decide whether the ABC can be defined as a seagoing ship or not. It
would take into regard the provisions of the lex fori when making this decision.
Assume the court decides that the ABC cannot be treated as a seagoing ship in
accordance with the provisions of the lex fori and thus that the Limitation Convention
is not applicable, so that there is no legal basis for the owner of the ABC to limit
liability. It will therefore refuse any application to constitute a limitation fund. And
since no legal relation has as yet been formed between the owner of the ABC and the
port management of Colourful Expectations, the claim by the management will be
subject to the provisions of the lex fori governing tortious cases.
The court will then need to determine whether a foreign element is involved or not.
First, let us assume that no foreign element is involved, so that the court has to apply
the provisions of its national legislation. In this case the court may have a choice, based
on the relevant rules of its lex fori. One possibility is to give prominence to the particu-
lar provisions of the lex fori regulating the tortious liability of shipowners, after taking
into regard that the ABC is, after all, something that is floating and moving on water,
and seek to apply them by analogy. Alternatively, the court may simply classify the
case as one related to a dispute involving movable property and proceed to apply the
general rules of its lex fori regulating the tortious liability of the owners of movables
for damage inflicted on third parties.
Secondly, let as assume that a foreign element is involved. Then the court would
first have to apply the conflict of law rules of the lex fori on tortious liability. Most
contemporary legal systems apply the lex loci delicti commissi as the applicable conflict
of law rule for torts (as did the Member States of the European Union before Rome II
came into force)57. If this rule prevails in our case also, the court will apply the relevant
provisions of its national law. If the court resolves that Rome II should apply, then the
applicable law falls to be determined in accordance with the lex loci damni pursuant
to Art.4(1) of that Regulation. In fact in this case, most probably it could again be
the local law, i.e. the lex fori, being the legal system of the country where the loss and
damage materialised.
128
is it a ship or not?
However, let us assume that the port is operated by an international consortium
or a similar type of multinational company, whose habitual residence and central
administration (that is, its paramount authority: see Art.23 of Rome II)58, is situ-
ated in Ruritania. In that case the consequences of the damage will be reflected and
materialise in Ruritania because the cost of the necessary repairs were paid out of the
assets there; hence Ruritania will become the locus damni since that is where the loss
and injury took place59.
Let us further assume that Ruritania is a state without much in the way of a sound
and dependable legal system60. This makes no difference. Art.3 of Rome II stipulates
that any law specified by it “shall be applied whether or not it is the law of a Member
State”. Therefore, any law indicated by Rome II applies without regard to its quality.
Case 2
Let us now assume that the ABC, while docking after entering the port, causes damage
to the pier. Again, the management of Colourful Expectations starts legal proceedings
against the owner in the local court. Yet again, we assume that the port is situated in
the country of a state that has ratified the Limitation Convention; that the owner of
the ABC immediately declares its readiness to constitute a limitation fund.
The court, we will assume, decides that the ABC is not a “seagoing ship” and con-
cludes that the Limitation Convention is not applicable. Consequently it resolves that
the owner of the ABC cannot rely on the limitation provisions of the Convention and
therefore there is no basis to constitute a limitation fund.
In this situation, a contractual relation was formed between owner of the ABC and
the port management; it follows that the provisions of the lex fori governing claims
arising out of contract become applicable.
The court will, in the meantime, have to determine whether a foreign element is
involved or not. If the answer is no, the court then will have an alternative that is
similar to the situation in case 1. The court, accordingly, may either (i) take into regard
the particular provisions of the lex fori regulating the liability of the ship-owners
arising from a contract and apply them by analogy, or (ii) characterise the conflict as
simply one involving movables and apply the general rules of the lex fori regulating the
contractual liability of chattel owners.
58 See A. De Sousa Gonçalves, “The Application of the Rome II Regulation on the Internet Torts”
(2013) 7 Masaryk University Journal of Law & Technology 35, 40–41; Dicey, Morris & Collins on the Conflict
of Laws, 14th ed (London 2006) 1335–1338.
59 It may be appropriate to emphasise in passing that Art.4(1) of Rome II refers not to the place where
the physical tortious act took place, but to that where the actual injury, harm or loss directly resulting
from that incident materialised. See J. Ahern and W. Binchy (eds.), The Rome II Regulation on the Law
Applicable to Non-Contractual Obligations (Leiden 2009), 87, as well as the comments on pp. 278–280; also
A. Dickinson, The Rome II Regulation – The Law Applicable to Non-Contractual Obligations (Oxford 2008),
307 and 308, commenting on the ECJ decision in Bier v Mines de Potasse d’Alsace [1976] ECR 1553; and see
further A. De Sousa Gonçalves, “The Application of the Rome II Regulation on the Internet Torts” (2013)
7 Masaryk University Journal of Law & Technology 35, 40–41 in relation to internet torts. Put colloquially,
the locus damni is not the place where the punch landed, but the place which caused the ouch.
60 Thus perhaps causing us to re-christen Colourful Expectations Dreadful Anticipations.
129
dr jur. bülent sözer
If the court decides that a foreign element is involved, the court would first apply
the conflict of law rules of the domestic law on contractual liability. Conventionally
the point of contact for contractual conflicts was the lex loci contractus. However,
most contemporary legal systems favour the lex loci solutionis, essentially today the
law of the country where the party that will effect the characteristic performance has
its habitual residence. In any case, the applicable law shall be determined in accordance
with the conflict rules of the lex fori.
Alternatively, if the court is in the EU it would apply the provisions of Rome I61. In
this case the following probabilities arise:
i) The legal relation between the port and the owner of the ABC could be quali-
fied as a contract for the provision of services. The applicable law will then
be the law of the country where the service provider has its habitual residence
(Rome I, Art.4.1(b)) or speaking more precisely, the law of the country where
its central administration is located (Rome I, Art.19.1)62, assuming that in
most cases such an organisation would be a juridical person. In this case, lex
fori would be the applicable law, since most probably the port management
would have its habitual residence there.
ii) However, if the port is managed by an international company or a multina-
tional corporation, as the case may be, then the laws of the place where this
company has its central administration are likely to apply. In this connection,
there should be no need to add that such place could easily be situated any-
where in the world, particularly where advantages such as lack of taxation
are offered to capital and there may not be a well-regulated legal system.
Nevertheless, if the conditions set forth by Art.19.2 of Rome I materialise,
then the local law could become applicable.
iii) Otherwise, pursuant to Art.4.2, the law of the country where the party
required to effect the characteristic performance of the contract has its central
administration will apply. In this case, the port management is the party pro-
viding the typical services and therefore one would expect that local law would
apply, because one could assume that the port management would have its
central administration situated at the port. But, if the port is being run by an
international consortium, then the law of the country where the port man-
agement has its central administration will be the applicable law; with all the
probable consequences referred to above. On the other hand, Art.19.2 could
be applicable here also, if the conditions required were fulfilled.
Let us, on the other hand, assume that the ABC was a dredger engaged by the port
company to provide dredging services and caused damage to some underwater cables
while the contractual duties were being discharged.
61 See, in general, M. McParland, The Rome I Regulation on the Law Applicable to Contractual
Obligations (OUP 2015).
62 G.-P. Calliess (ed.), Rome Regulations – Commentary (Rome I+II+III), 2nd ed (Alphen aan den
Rijn 2015), 385 et seq.; V. Behr, “Rome I Regulation” 29 Journal of Law and Commerce 233, 263 (2010);
F. Garcimartín Alférez, “The Rome Regulation: Much Ado About Nothing”, [2008] 2 The European Legal
Forum 61, 69. See for a detailed analyses M. McParland, The Rome I Regulation on the Law Applicable to
Contractual Obligations (Oxford 2015), 167–169.
130
is it a ship or not?
Assuming that the court did not accept the dredger as a ship in the suit filed by the
port and decided to apply Rome I, then under Art.4.1(b) of Rome I, the law of the
country where the owner of the dredger had its central administration would apply,
since here its owner, and not the port authority, would be the party required to provide
the services envisaged by the contract.
9.5 Conclusion
As I have already stated, where in any conflict a clear definition for a ship exists in the
applicable provisions, such definition shall, necessarily, be taken into regard. Clear
and unambiguous definitions undoubtedly bind the courts; unless of course some
overriding mandatory provision of a lex fori precludes a court from applying the rule
containing such definition63.
But, where no such definition exists, it looks rather worthwhile to have available cri-
teria to decide whether an object could be defined as a ship or not, instead of yielding
to the referral of the local courts to the provisions of the lex fori in reaching a decision.
If this proposition is found acceptable, it is respectfully submitted that where no
clear definition exists,
i) navigability and/or
ii) capacity to carry
could be taken as the criteria to decide whether the object in question is a ship or not,
rather than leaving the matter to the unpredictable rules of the lex fori.
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CHAPTER 10
There have been a number of notable developments in the United Kingdom and other
common law jurisdictions in recent years in relation to the law relating to the limita-
tion of liability for maritime claims. The main purpose of this chapter is to analyse
the impact of these developments on law and practice. Limitation of liability remains
a very important issue in the context of maritime law as it has implications for the
availability and pricing of liability insurance and the concept is likely to be with us for
a foreseeable period of time.
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pursuant to the Merchant Shipping Act 1995 Amendment Order 2016 to incidents 4
The English court has now held that the underlined words in the article below allow
greater flexibility in the manner in which a limitation fund can be constituted in
the UK since Art.11.2 of the Convention, which has “the force of law” in the UK
4 SI 2016/161.
5 Owners of the Steam Tanker Miraflores v Owners of the Steam Tanker Abadesa (No.2) [1968] 1 Lloyd’s
Rep. 493.
6 When reference is made in this article to the “1976 Limitation Convention” the latter term is intended
to apply also to the 1996 Protocol thereto and the amended 1996 Protocol limits that came into force in the
UK pursuant to the Merchant Shipping Act 1995 Amendment Order 2016 (SI 2016/1061) on 30 November
2016 (emphasis added).
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professor richard williams
ursuant to s.185(1) of the Merchant Shipping Act (MSA) 1995, provides that the
p
person seeking to limit may do so by other means. Art.11.2 provides that:
A fund may be constituted, either by depositing the sum, or by producing a guarantee accept-
able under the legislation of the State Party where the fund is constituted and considered to
be adequate by the Court or other competent authority.
The Court of Appeal went on to overrule the judgment that was given at first instance
maintaining the traditional rule and concluded that this was no longer necessary
in relation to a limitation fund that is to be constituted under the 1976 Limitation
Convention since Art.11.2 of the 1976 Limitation Convention provides expressly that
the person seeking to limit may do so by other means. The court held that the words
of Art.11.2 that have been highlighted above provided a party seeking to limit with an
option whether to constitute the fund in cash or by way of an acceptable guarantee
and that this was now the position under the law of England and Wales.
The alternative method of constituting the fund proffered by the owners and P&I
Club of The Atlantik Confidence was a P&I Club Letter of Undertaking (LOU) and,
therefore, given the fact that the court had concluded that there was now nothing in
principle that prevented the constitution of a fund other than by way of cash, it was
necessary for the court to consider whether a P&I Club LOU did indeed constitute “a
guarantee acceptable under the legislation of the State Party where the fund is con-
stituted and considered to be adequate by the Court or other competent authority”.
The court recognised that if a P&I Club LOU was to satisfy the requirements of the
Convention two separate components had to be satisfied, viz:
i) It was “a guarantee acceptable under the legislation of the State Party where
the fund is constituted”; and was
ii) considered to be adequate by the Court or other competent authority.
At first instance, the court had concluded that since there was no “specific statutory
provision (in the UK) that a guarantee is acceptable the rule remains that a fund may
only be constituted by making a payment into court”.8 However, the Court of Appeal
disagreed with this approach. It concluded that there was no need for there to be any
specific enabling legislation; provided that the proffered means of constituting the
fund did not contravene the provisions of any existing UK statute there would be no
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limitation of liability
bar to its acceptability as such. Lady Justice Gloster referred to two general UK stat-
utes regulating the provision of guarantees and concluded that the constitution of a
limitation fund by the provision of a P&I Club LOU did not contravene the provisions
of either statute. She said that:9
A guarantee which satisfied the requirements of the Statute of Frauds – because the
guarantee itself, or some note or memorandum of it, was in writing and signed by the
guarantor or his authorised agent – would be likely to be regarded as “acceptable” as a
guarantee for the purposes of the 1995 Act (at least, under English and Welsh legislation),
because it was enforceable.
…
In particular circumstances, in order to qualify as “acceptable”, a guarantee might also
have to satisfy other requirements of United Kingdom legislation. For example, if the
guarantee were one given by an institution in the course of carrying on insurance business,
then, in order to be “acceptable”, the guarantee would also have to be provided by a person
who was duly authorised by The Prudential Regulation Authority under the relevant
provisions of the Financial Services and Markets Act 2000 to carry on insurance business
of that type in the United Kingdom (as indeed owners’ P&I Club is in the present case).
The second requirement that the proffered form of guarantee must be “adequate” does
not provide undue difficulty since as stated by Gloster LJ:10
So far as the second condition of adequacy is concerned, the wording of the provision
presents no problem in this context. It simply contemplates that a guarantee constituting a
limitation fund will need to be “considered to be adequate” by the court or other competent
authority. In the absence of any defined criteria in the CPR, this merely means that a court
approving the constitution of the limitation fund will need to be satisfied that the guarantee
provides “adequate” security for the fund. Thus the court will need to be satisfied as to the
financial standing of the guarantor, the practicality of enforcement and as to the terms of the
guarantee instrument itself. That is the type of question which judges of the Admiralty Court
or the Commercial Court consider every day when deciding issues such as the adequacy of a
cross-undertaking in damages.
Therefore, the Court of Appeal concluded that there was nothing in principle which
prevented the constitution of a limitation fund in the UK under the 1976 Limitation
Convention by means of a P&I Club LOU and, having come to this conclusion,
agreed that “detailed consideration of the adequacy of the LOU offered by The
Standard Club Europe Ltd will be dealt with by the Admiralty Court”.11 Therefore,
the court will normally have the discretion to approve or reject the terms of the prof-
fered guarantee depending on the particular situation. However, it can be expected
that a guarantee provided by a P&I Club that is a member of the International Group
of P&I Clubs would normally be considered to be “adequate” subject to approval of
its terms. The relevant terms need to be sufficient to satisfy the requirements of the
1976 Convention whilst at the same time restricting the liability of the guarantor to
claims in respect of which limitation can be invoked. Further commentary on this
issue follows in the next section.
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professor richard williams
10.1.2.2 What happens to a guarantee that has been provided to establish
a limitation fund if a limitation decree is subsequently refused?
Art.10.1 of the 1976 Convention provides clearly that “[l]imitation of liability may be
invoked notwithstanding that a limitation fund as mentioned in Art.11 has not been
constituted”.12 Furthermore, Art.1.7 of the 1976 Limitation Convention provides that
“[t]he act of invoking limitation shall not constitute an admission of liability”.
Therefore, a person who believes that a claim may be brought against him can com-
mence limitation proceedings without constituting a limitation fund in the knowledge
that by doing so, he will not be deemed to have admitted liability. Indeed, the English
court has held that there is nothing in the language of the Convention, or of the Senior
Courts Act 1981 (which regulates the jurisdiction of the English court) or the Civil
Procedure Rules, which requires a person who wishes to limit his liability to wait until
a claimant had started proceedings in England before invoking his right to limit – i.e.
that person can take pre-emptive action to seek “a declaration that they were not liable
and, in the alternative for a declaration (or decree) that, if they were liable they were
entitled to limit their liability”.13
However, a person who decides to commence limitation proceedings in such a way
without constituting a limitation fund runs the following risks:
• Under Art.8.1 of the 1976 Convention the value of the SDR is fixed “at
the date the limitation fund shall have been constituted, payment made or
security is given”. Therefore, the person potentially liable runs the risk that
the quantum of the required limitation fund may increase with the passage of
time before he constitutes the fund.
• The various rights in Art.13 that are designed to protect the other assets of
the person invoking limitation apply only after “a limitation fund has been
constituted”.
Therefore, there are strong commercial reasons why a person who seeks to limit liabil-
ity may wish to constitute a limitation fund as soon as possible particularly if such a
fund can be constituted by means of a P&I Club LOU or similar form of guarantee if
it is not obligatory to deposit a cash fund. However, it does not automatically follow
that the relevant P&I Club will be prepared to offer such a LOU. P&I cover is provided
on a “pay to be paid” basis, i.e. the member is obliged to pay the claim first and the
Club will then indemnify him subject to the provisions of the relevant P&I Rules. For
example, Rule 87 of the Gard Rules 2018 provides that:14
1. Unless the Association shall in its absolute discretion otherwise determine, it is a
condition precedent to a Member’s right to recover from the Association in respect
of any liability, loss, cost or expense that he shall first have discharged or paid the
same.
12 See Seismic Shipping Inc v Total E&P UK Plc (The Western Regent) [2005] EWCA Civ 985; [2005] 2
Lloyd’s Rep. 359, at [16].
13 Ibid at [40], per Lord Justice Clarke.
14 The Rules can be found at: http://www.gard.no/web/publications/document/781871/gard-rules-2018
(last tested 1 April 2018).
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limitation of liability
Therefore, since the provision of a P&I Club LOU would oblige the Club as guaran-
tor to settle directly any liability that may be established against the Member by the
relevant court or arbitration, the provision of such a LOU would undermine the “pay
to be paid” principle. Consequently, the Rules of the Clubs that are members of the
International Group of P&I Clubs emphasise that they are not obliged to provide such
LOU on behalf of their members but simply have a discretion to do so. For example,
Rule 88 of the Gard Rules 2018 provides that:15
1. The Association shall be under no obligation to provide any guarantee, certificate,
bail or other security or undertaking (“security”) on behalf of a Member or to pay
the costs of such provision.
2. The Association may at its discretion provide security or pay the cost of such
provision in relation to liabilities within the scope of a Member’s cover, and may
recover any costs incurred thereby from the Member.
Therefore, the decision whether or not to provide such a LOU may require some
thought on the part of the relevant P&I Club. The Club will normally have to decide
first whether the relevant claims for which the Member wishes to limit liability are
claims for which the Member is insured under the Club Rules. In this regard, the
Rules of the International Group Clubs provide inter alia in one way or another
that if the Member is guilty of conduct that will prevent him from limiting his
liability under the 1976 Limitation Convention, the Club is not liable to indemnify
the Member in respect of such claims. For example, Rule 72 of the Gard Rules 2018
provides that:16
The Association shall not cover any liabilities, losses, costs or expenses arising or incurred
in circumstances where there has been wilful misconduct on the part of the Member, such
misconduct being an act intentionally done, or a deliberate omission by the Member with
knowledge that the performance or omission will probably result in injury, or an act done
or omitted in such a way as to allow an inference of a reckless disregard of the probable
consequences.
However, in many instances, the Club will be required to decide whether or not to
agree to assist the Member to constitute a limitation fund by the provision of a LOU
before the full facts are known and, therefore, run the risk that a court will decide in
due course after such a LOU has been provided that the Member is not entitled to
limit his liability because of the kind of conduct described above.17 In most cases, the
risk that will be run by the Club is likely to be a low one since there is a presumption
that a person to whom the right to limit liability is extended by Art.1 of the 1976
Limitation Convention is entitled to limit his liability unless the party challenging the
right to limit proves that “the loss resulted from his personal act or omission, commit-
ted with the intent to cause such loss, or recklessly and with knowledge that such loss
would probably result”. That burden of proof has been repeatedly described as a “very
15 Ibid.
16 Ibid.
17 Indeed, the matter may be further complicated if the decision of the Canadian Supreme Court in the
Case of the Peracomo Inc v Telus Communications Co (The Realice) 2014 SCC 29; [2014] 2 Lloyd’s Rep. 333
is correct. See the relevant part of this contribution (Developments in Canada) below.
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professor richard williams
heavy burden” and that because of the nature of the conduct which must be proved
18
in order to break the right to limit, “it is likely that only truly exceptional cases will give
rise to any real prospect of defeating an owner’s right to limit”19 and that breaking the
limit is “a high hurdle to jump and is very rarely jumped with success”.20
Indeed, there have been only two reported cases in the UK in which the right to
limit has been denied. In the case of the The Saint Jacques II,21 Gross J held on an
application for summary judgment that there was sufficient evidence of recklessness
with knowledge that loss or damage was likely to result to justify the matter going to
full trial. However, more importantly, following the constitution of a limitation fund
by the provision of a P&I Club LOU, the English court subsequently held at a later
hearing that the owners of The Atlantik Confidence were not in fact entitled to limit
their liability to the owners of cargo which had been lost as a result of the foundering
of the vessel because the vessel had been deliberately sunk at the request of the alter
ego of the shipowning company.Teare J held that:
The vessel was deliberately sunk by the master and chief engineer at the request of Mr
Agaoglu, the alter ego of the Owners. In those circumstances the loss of the cargo resulted
from his personal act committed with the intent to cause such loss.22
Therefore, what is to happen to a limitation fund that a P&I Club has constituted
on behalf of its Member in such circumstances? The answer may lie in the words of
Art.11.1 of the 1976 Convention which provides that “[a]ny fund thus constituted shall
be available only for the payment of claims in respect of which limitation of liability
can be invoked”. These words suggest that if limitation cannot be invoked in respect
of the relevant claims, the LOU does not provide any form of security for claims that
are not limitable and can, consequently, be recovered by the Club that has provided
the LOU. It can also be logically argued that the same would apply even if the fund
had been constituted in cash and that, therefore, the provision of a LOU is no less
“adequate” for the purposes of Art.11.1 than a fund constituted in cash. Nevertheless,
it may be sensible for the Club when providing the LOU in the first place to ensure
that its wording restricts the Club’s liability to the provision of security for claims that
can be limited and not as security for liability generally (i.e. whether limitable or not).
10.1.3 Can the right to limit liability be waived and, if so, what impact does that have
on P&I cover for the claim?
Although those persons who are entitled to limit their liability under the 1976
Limitation Convention will normally wish to do so for obvious reasons, there may be
18 The Bowbelle [1990] 1 Lloyd’s Rep. 532, at 535, per Sheen, J. and Schiffahrtsgesellschaft MS Merkur
Sky mbH & Co KG v MS Leerort Nth Schiffahrts GmbH & Co KG (The Leerort) [2001] EWCA Civ 1055;
[2001] 2 Lloyd’s Rep. 291, at [10].
19 Margolle and another v Delta Maritime Co Ltd and others (The Saint Jacques II) [2002] EWHC 2452
(Admlty); [2003] 1 Lloyd’s Rep. 203, at [18].
20 Bahamas Oil Refining Co International Ltd v Owners of the Cape Bari Tankschiffahrts DMBH & Co
KG (Bahamas) (The Cape Bari) [2016] UKPC 20; [2016] 2 Lloyd’s Rep. 469, at [15], per Lord Clarke.
21 [2002] EWHC 2452 (Admlty); [2003] 1 Lloyd’s Rep. 203, at [18].
22 Kairos Shipping Ltd v Enka & Co (The Atlantik Confidence) [2016] EWHC 2412 (Admlty); [2016] 2
Lloyd’s Rep. 525, at [317].
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limitation of liability
some circumstances in which for commercial or other reasons such persons may agree
to waive their right to limit or be obliged to do so. Such a situation arose for considera-
tion by the Privy Council in the case of Bahamas Oil Refining Co. Int. Ltd v The Owners
of the Cape Bari Tankschiffahrts GMBH & Co (The “Cape Bari”)23 and the court was
asked to consider whether the Convention allows waiver of such limitation rights.
This question is important not just in relation to the issue of limitation but also for
the wider issue of liability cover. Such cover is normally provided by P&I Clubs on a
mutual basis and the Rules of such Clubs normally provide that cover is not available
for liabilities that would not normally have arisen at law but have arisen simply because
of the terms of a contract or indemnity that has been entered into by the Member. For
example, Rule 55 of the Gard Rules 2018 provides that:24
The Association shall not cover under a P&I entry liabilities, losses, costs or expenses:
a) which would not have arisen but for the terms of a contract or indemnity entered into
by the Member, or by some other person acting on his behalf, unless the terms have
previously been approved by the Association, or cover for such liabilities, losses, costs or
expenses has been agreed between the Member and the Association, or the Association
decides, in its discretion, that the Member should be reimbursed.
This Rule is a reflection and a recognition of the principle of mutuality that is the foun-
dation of P&I insurance. Cover is made available only for those risks that are regularly
and routinely encountered by the majority of the membership. Consequently, the risks
that are routinely encountered by the majority of the members by virtue of contrac-
tual terms that are commonly and regularly used in the industry should be, and are,
shared between the membership as a whole. However, if a Member incurs a liability
that arises solely as a result of contractual terms that are not regularly and routinely
used by the majority of the membership, such risks should not be, and are not, shared
by the membership as a whole. A contractual agreement to waive a Member’s right to
limit liability is likely to be viewed as such a provision with the consequential result
that the Member may not only face unlimited liability but also uninsured unlimited
liability.
The decision of the Privy Council in The Cape Bari must therefore, be considered
in the light of this danger The facts of the case are as follows: whilst berthing at
Freeport in the Bahamas on 25 May 2012, the Cape Bari collided with the berth
owned by the Bahamas Oil Refining Company International Ltd (BORCO) and
caused damage totalling US$ 22 million. The owners of the vessel sought to limit
their liability to US$ 16.9 million pursuant to the provisions of the 1976 Limitation
Convention as incorporated into the law of the Bahamas by its Merchant Shipping
(Maritime Claims Limitation of Liability) Act 1989. However, before entering the
port, the parties had concluded a contract for the use of the terminal, clause 4 of
which provided as follows:
If in connection with, or by reason of, the use or intended use by any vessel of the ter-
minal facilities or any part thereof, any damage is caused to the terminal facilities or any
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professor richard williams
part thereof from whatsoever cause such damage may arise, and irrespective of weather
[sic] or not such damage has been caused or contributed to by the negligence of BORCO
or its servants, and irrespective of whether there has been any neglect or default on
the part of the vessel or the Owner, in any such event the vessel and the Owner shall
hold BORCO harmless from and indemnified against all and any loss, damages, costs
and expenses incurred by BORCO in connection therewith. Further, the vessel and her
Owner shall hold BORCO harmless and indemnified against all and any claims, damages,
cost and expenses arising out of any loss, damage or delay caused to any third party arising
directly or indirectly from the use of the terminal facilities or of any part thereof by the
vessel …
The Bahamas court at first instance held that although it was permissible under the
1976 Limitation Convention and the local statute to contract out of the right to
limit, the wording of clause 4 of the contract was not clear enough to do so. The
matter was appealed to the Bahamas Court of Appeal who reversed the decision at
first instance but on the different ground (that had not been argued before it) that it
was not permissible to contract out of the right to limit under the 1976 Limitation
Convention.
BORCO appealed to the Privy Council which observed that there was nothing in the
wording of the 1976 Limitation Convention or in principle which disallowed a waiver
of the right to limit. Lord Clarke emphasised that Chapter 1 of the Convention speaks
of the “Right of Limitation” and that Art.1.1 provides that “Ship owners and salvors,
as hereinafter defined, may limit their liability …”. In other words, Lord Clarke
emphasised that the Convention confers rights rather than duties on the persons who
are entitled to limit and that, consequently, there was no reason in principle why they
could not waive such rights.25 In this respect the Privy Council were not differing from
the views expressed earlier by the House of Lords in Clarke v Earl of Dunraven (The
Satanita)26 in relation to the right to limit under the Merchant Shipping Act 1894.
Lord Clarke explained that the relevant principle was that stated in the case of Wilson
v McIntosh, namely that “a man may by his conduct waive a provision of Parliament
intended for his benefit”.27
Having found that it is possible in principle to contract out of the right
to limit under the 1976 Limitation Convention, the Privy Council then went
on to consider whether the wording of clause 4 of the BORCO contract had that
effect.
In considering the matter, the Privy Council emphasised first that Art.2(2) of the
1976 Limitation Convention clearly provides that claims “shall be subject to limitation
of liability even if brought … for indemnity under a contract”. Therefore, subject to
other considerations, the shipowners would clearly normally be entitled to limit their
liability for claims arising under the relevant contract. The Board also emphasised that
the parties would have entered into the contract in the knowledge that such a right to
limit would normally be available to the guilty party. This formed an important element
of the factual matrix in which the issue of construction was to be considered28 since,
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limitation of liability
as stated by Vaughn-Williams LJ in Ingram and Royle Ltd v Services Maritimes du
Treport:
Shortly my judgment is this, that prima facie there is included in the bill of lading the statu-
tory protection of the shipowners under section 502.29 If the protection is not expressly or
impliedly excluded, it follows that one starts with the proposition that the conditions in this
bill of lading are accompanied by the provision contained in s.502 for the protection of the
shipowners. I have therefore to see if I can find anything in the words of this bill of lading
which excludes the operation of that protection. I can find nothing.30
Similarly, Lord Warrington said in Tempus Shipping Co Ltd v Louis Dreyfus & Co that
the statutory provision was as much written out in the contract as if the parties had
written it out in the contract itself.31
Therefore, the Privy Council adopted the dictum of Willmer J in Alsey Steam Fishing
Co Ltd v Hillman (The Kirknes) to the effect that “the parties should be assumed to be
contracting in accordance with the known state of the law”.32
It also referred to several other statements of the English court to the same effect
including the following dictum of Moore-Bick LJ:
The court is unlikely to be satisfied that a party to a contract has abandoned valuable
rights arising by operation of law unless the terms of the contract make it sufficiently clear
that that was intended. The more valuable the right, the clearer the language will need
to be.33
Therefore, the Privy Council concluded that it “accepts the submission that, for a
party to be held to have abandoned or contracted out of valuable rights arising by
operation of law, the provision relied upon must make it clear that that is what was
intended”.34 Against that background, the Privy Council concluded that “There is
nothing in clause 4 which contains even a hint that the owners were agreeing to waive
their right to limit their liability under the Convention”.35 Given the fact that clause 4
provides that the shipowner “shall hold BORCO harmless from and indemnified
against all and any loss, damages, costs and expenses incurred by BORCO in con-
nection with” the use of the terminal that conclusion might be viewed as surprising
particularly since in the earlier case of The Satanita the House of Lords had held
that a term obliging the guilty party to “pay all damages” and to “be liable for all
damages arising therefore” was sufficient to deprive the guilty party from the right
to limit liability. However, the various dicta that were given in The Satanita made
it plain that it was a special case dependant on special facts and that the decision
should be viewed in that light. In brief, the case involved a yacht race the participants
in which had all been required to agree to terms including those quoted above. The
court accepted that this was a very different scenario from that of a merchant vessel
29 I.e. s.502 of the Merchant Shipping Act 1894 which was the then current limitation statute in the UK.
30 [1914] 1 KB 541, at 553.
31 [1931] AC 726 at 733–734 and 741.
32 [1956] 2 Lloyd’s Rep. 651, at 656–657.
33 Stocznia Gdynia SA v Searbulk Holdings Ltd [2009] EWCA Civ 75; [2009] 1 Lloyd’s Rep. 461, at [23].
34 [2016] UKPC 20; [2016] 2 Lloyd’s Rep. 469, at [31]. See also the dictum of Lord Diplock in Gilbert-
Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd (1974) AC 689 at 717–718.
35 Ibid at [38].
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professor richard williams
engaged not in racing but in executing a commercial adventure. For example, Lord
Halsbury said:
but the conditions under which merchant ships sail and yachts sail are different. Merchant
ships must be on the seas at all times and in all weathers, both by day and by night, and it
may well be that the considerations that would induce people, so to say, to diminish the stakes
upon which they were running their vessels would not be applicable to the case of yachts,
which presumably are intended to race in conditions of light and of weather in which they
are not exposed to the same risks.36
Therefore, the Privy Council concluded in The Cape Bari that clause 4 merely estab-
lished the breadth of the obligation to indemnify BORCO but did not go far enough
to say that such right of indemnity was to be unlimited. It stated that “[i]n the opinion
of the Board, if the parties had intended to agree that the owners should not be enti-
tled to exercise their right to limit their liability in accordance with article 1 they would
have so provided”.37
This dictum suggests that a clear express statement excluding the right to limit
would normally be required if this result were to be achieved. However, the Privy
Council also stated that:
Although … the Board accepts that it would not be necessary to provide expressly for such a
conclusion, it would have to be clear from the language of the clause construed in its context
that the parties intended to exclude the right to limit.38
Nevertheless, it appears clear that if a person who is entitled to limit liability under the
1976 Convention is to lose that right it would normally be necessary to say so expressly
since the current public policy appears to be to maintain the right to limit unless there
is no doubt that the person entitled to limit has agreed to forego that right. Such a
conclusion is no doubt good news for persons who are entitled to limit under the 1976
Limitation Convention since it now appears to be extremely difficult to contractu-
ally waive the right to limit with the added consequence that it is far less likely that a
Member may be held to have prejudiced his P&I liability cover.
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charterers may be liable even if there is no negligence on their part in that they did
not know of the danger and could not even have found out about the danger if they
had acted with due diligence.39 Consequently, it is important to ascertain whether a
charterer can limit liability for such a claim.
It now appears to be settled under English law that a charterer is not entitled to
limit his liability for such a claim. The decision of the Court of Appeal in CMA CGM
SA v Classica Shipping Co Ltd (The CMA Djakarta)40 has now been upheld by the
Supreme Court in Gard Marine & Energy Ltd v China National Chartering Co Ltd
(The Ocean Victory).41 In that case the Supreme Court considered an unusual situa-
tion that had occurred at the port of Kashima in Japan. The vessel suffered damage
whilst leaving the port in a severe gale and was forced onto the end of a breakwater,
went aground and later broke apart. The owners claimed that Kashima had been
prospectively unsafe for a Capesize bulk carrier as there was a risk that, if such vessels
were forced to leave port in bad weather, there was no system in place to ensure that
they could do so safely. The trial judge agreed at first instance but the Court of Appeal
reversed his judgment since, on the day of casualty, there had been a severe northerly
wind and an exceptional long wave swell (in terms of its rapid development, duration
and severity). The court held that a combination of these two factors was not a regular
or even an occasional occurrence since no casualty of a similar nature had occurred
at Kashima at any time during the prior 35 years and was, consequently, deemed to
be an abnormal occurrence. The Supreme Court agreed with this analysis. In such
circumstances, it was not strictly necessary for the Supreme Court to consider whether
charterers would have been entitled to limit their liability had they been found to be
liable. However, because of the importance of the issue to the shipping industry gener-
ally, they considered it necessary to do so.
The Court unanimously agreed with the judgment of Lord Clarke to the effect that
limitation was not available to a charterer for such claims. Lord Clarke adopted the
phrase used by David Steel J at first instance in The CMA Djakarta to the effect that:
the vessel cannot be both the victim and the perpetrator and that the “property” envisaged
in the article must be the property of a third party either on board the vessel (eg cargo) or
external to the vessel, for example an SBM.
and that “the ordinary meaning of article 2.1(a) does not extend the right to limit to
a claim for damage to the vessel by reference to the tonnage of which limitation is to
be calculated.42
However, although this particular issue now appears to have been firmly settled, it
is also clear that provided a party qualifies as a “person entitled to limit” under Art.1
of the 1976 Convention, that party is still vulnerable to other forms of liability and,
in particular, to liability for loss of or damage to cargo carried under bills of lading
under which such party acts as carrier. It is, therefore, necessary to consider which
kind of “persons” are entitled to limit in such circumstances.
39 Effort Shipping Co Ltd v Linden Management SA (The Giannis NK) [1998] 1 Lloyd’s Rep. 337 and
Lensen Shipping v Anglo-Soviet Shipping (1935) 52 Lloyd’s Rep. 141.
40 [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep. 460.
41 [2017] UKSC 35; [2017] 1 Lloyd’s Rep. 521.
42 Ibid at [84].
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professor richard williams
Art.1.1 of the 1976 Limitation Convention states that the “persons entitled to limit
liability” include the following:
• owner,
• charterer,
• manager,
• operator
of a seagoing ship, and
• any person for whose act, neglect or default such persons are responsible.
It is now clear that the word “charterer” is “an expression otherwise unqualified”43 and
includes a time charterer,44 a voyage charterer45 and a slot charterer46 irrespective of
whether the charter is for the whole of the ship or for part of the ship. It would also
appear to include sub-charterers of all kinds. For example, Lord Justice Clarke said in
The Tychy, albeit in a different context, that:
it is common to have a string of charter-parties. There might be a demise charterer, a time
charterer, a sub-time charterer, a sub-sub time charterer, a voyage charter and even a sub
voyage charter. There is no difficulty in describing each of the charterers under each of those
contracts as the charterer of the ship.47
However, what about other types of “persons” such as NVOCCs (Non Vessel Owning
Common Carriers) who play an important part in relation to the carriage of goods by
sea? Such persons will normally arrange for the carriage of cargo on behalf of their
customers and provide such customers with a bill of lading covering the whole of the
transit in which the NVOCC acts as carrier. In some cases such NVOCCs are slot
charterers of the carrying vessel and the relationship between them and the shipowner
is governed by the terms of the slot charter. However, in other cases, the NVOCC has
no pre-existing contract with the shipowner and simply takes from the shipowner a
bill of lading covering the sea transit in which the NVOCC appears as cargo owner. In
both cases, the NVOCC may be held liable to the actual cargo owner under the terms
of the bill of lading that it has given to the cargo owner as carrier and may wish to limit
such liability. If the NVOCC is a slot charterer then, as stated above, it has now been
held that it is a “person” who is entitled to limit liability under the 1976 Limitation
Convention. However, there is no decision of the court to date which confirms that a
NVOCC that is not a slot charterer is entitled to the same privilege.
It has been recognised both in The CMA Djakarta and in the The MSC Napoli that
the object or purpose of the 1976 Limitation Convention is to encourage the provision
of international trade by way of sea carriage48 and this aim would not be achieved if
43 See The CMA Djakarta [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep. 460, at [13] and The Ocean
Victory, ibid at [71] and [78].
44 The CMA Djakarta, ibid.
45 Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep. 39.
46 Metvale Ltd v Monsanto International Sarl and others (The MSC Napoli) [2008] EWHC 3002
(Admlty); [2009] 1 Lloyd’s Rep. 246.
47 [1999] 2 Lloyd’s Rep. 11, at 22.
48 See also The Ocean Victory [2017] UKSC 35; [2017] 1 Lloyd’s Rep. 521, at [76].
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limitation of liability
parties could not limit their liability to cargo claims. Therefore, the Court of Appeal
said in The CMA Djakarta that:
the main (if not the sole) purpose of according a charterer the right to limit his liability must
have been to enable him to limit his liability to a cargo owner in just the same way as a ship-
owner had previously been able to limit his liability.49
Therefore, there would appear to be good policy reasons why a NVOCC that is not
a slot charterer should also enjoy the same privilege since the risk that such a carrier
faces is the same as that of a NVOCC that is a slot charterer. However, notwithstand-
ing this fact, such a privilege can exist only if it can be said that such a person is a
“charterer” for the purpose of Art.1.1.
Longmore LJ said in The CMA Djakarta, “I would therefore not give any
gloss to the word ‘charterer’ in art. 1(2) and give it what seems to me its ordinary
meaning”.51
However, the court did not go on to discuss what is in fact its “ordinary meaning”.
It is noteworthy in this regard that Julian Cooke emphasised in his article entitled
“Charterparties – Is There a Need for Mandatory Legislation?”, which was given at
the IX Hasselby Colloquium 2001, that:
English law has no satisfactory, or even unsatisfactory definition of a charterparty … So, at
the risk of being ridiculed as a person who calls himself a shipping lawyer but who doesn’t
know what a charterparty is, I maintain that the distinction between a charter party and
these other kinds of contract will, as a matter of legal analysis, be very difficult to draw, and
a source of much dispute.52
Prophetic words indeed! The concept promulgated by Thomas J in Aegean Sea Traders
Corporation v Repsol Petroleo SA and Another (The “Aegean Sea”)53 and David Steel J
at first instance in The CMA Djakarta54 that a charterer should for the purposes of the
1976 Limitation Convention be someone who, like a shipowner,” if they have no benefi-
cial or possessory interest in a vessel, are nonetheless in a real sense directly concerned
in the operation of the vessel and have incurred liability as such” has subsequently been
rejected by the Court of Appeal in The CMA Djakarta and by the Supreme Court in
The Ocean Victory. Therefore, there is currently no specific guidance from the English
49 [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep. 460, at [16], per Longmore LJ.
50 [2008] EWHC 3002 (Admlty); [2009] 1 Lloyd’s ‘[17].
51 [2004] EWCA Civ 114; [2004] 1 Lloyd’s [18].
52 Modern Law of Charterparties (Jure AB, 2003) at p 12.
53 [1998] 2 Lloyd’s Rep. 39.
54 [2003] EWHC 641 (Comm); [2003] 2 Lloyd’s Rep 50, at [31].
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professor richard williams
court as to what is meant by “charterer”. The best description (rather than definition)
appears to be the following dictum of Donaldson LJ in The Span Terza:
So I come back to the question of the meaning of the word “charterer”. It seems to me
that there are quite a number of forms of charterer; you can have a voyage charterer; you
can have time charterers; you can have consecutive voyage charterers and no doubt there
are a large number of other varieties of charterer, all of whom fall into one broad category,
namely, that they are contracting for the services of a ship with a crew, being run and
managed by the owner of the ship or somebody who is in the position of the owner of a
ship.55
Therefore, although the English court does not seem to have defined the meaning
of “charterer”, the common link between time, voyage and slot charters is that, in
one way or another, they enter into a contract with the shipowner that gives them
the right to control the carrying capacity of the ship for a particular purpose.56 This
should be distinguished from contracts such as bills of lading or seawaybills which,
whilst giving the holder of such contracts the right to have their cargo carried, do
not give any wider rights over the use of the ship. Perhaps an analogy can be drawn
by the distinction between a taxi ride and a bus ride. The relationship between the
taxi driver and the passenger gives the latter the right to use the carrying capacity
of the vehicle as he wishes, i.e. either to use the taxi to be carried himself or for the
carriage of other passengers in his retinue, and to go where ordered by the passenger.
However, although the bus ticket gives the holder the right to be carried, it gives him
no wider right to utilise the carrying capacity of the bus to carry other passengers or
to go anywhere other than along the usual bus route. In this analogy, the taxi ride is
the equivalent of the charterparty whilst the bus ride is the equivalent of the bill of
lading or seaway bill.
If this is indeed the relevant demarcation line then it would appear that a NVOCC
that is not a slot charterer does not have the right to limit his liability. For similar
reasons, it is unlikely that such a NVOCC would be considered to be an “operator”
of the ship for the purposes of Art.1.1 of the 1976 Limitation Convention. Although
there does not appear to be any English decision on the meaning of “operator”, it
is likely that an English court would follow the approach adopted by the Australian
court57 that an “operator” is someone who has substantial control over the day-to-day
management of the commercial, technical and crewing requirements of the ship.58
If this conclusion is correct this would be an unfortunate result since there would
seem to be no reason in principle why such a distinction should be drawn, and it
may be a matter of chance in many instances whether the NVOCC is a charterer or
not. However, it may be necessary for this issue to be resolved by an amendment to
the Convention itself.
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10.2 Developments in Hong Kong
10.2.1 “Can claimants to a limitation fund object to the rights of other claimants to
claim against the fund?” and “What is the relevant time limit for claims against the
limitation fund?”
In the case of Eleni Maritime Ltd v Heing-A Shipping Co. Ltd and Others (The
Eleni),59 the Hong Kong High Court was asked to consider the following issues:
i) Can a party that wishes to share a proportion of a limitation fund contest
the right of another party to recover from the fund so that, by doing so, the
objecting party is able to recover a greater proportion of the fund?
ii) Does a time limit for submitting claims against the limitation fund still apply
if claims are brought after expiry of such a time limit but within the time limit
that is otherwise applicable for establishing liability against the party that is
seeking to limit liability?
As a result of a collision between the Eleni and the Heung-A Dragon, the latter was
sunk and the owners of the vessels agreed that liability would be apportioned 70 per
cent against the Eleni and 30 per cent against the Heung-A Dragon. The owners of The
Eleni commenced a limitation action in Hong Kong and constituted a limitation fund
following the issuance of a limitation decree by the Hong Kong court. The decree also
provided that claims against the fund should be filed within a period of six months
which was subsequently extended. However, following expiry of that extended period
but before the expiry of the two year time limit within which claims for loss or damage
resulting from a collision had to be brought,60 22 other claimants submitted claims
against the fund and commenced proceedings against the owners of The Eleni in order
to preserve the statutory time limit for collision claims. These claimants also applied to
the Hong Kong court for an extension of the time within which to submit their claims
against the limitation fund. The owners of The Eleni did not object to the application
but the owners of The Heung-A Dragon did so on the basis that since the time limit
for submitting claims against the limitation fund was time-barred before commence-
ment of the proceedings that had been commenced against the owners of The Eleni to
establish liability, the latter proceedings were also time-barred with the result that such
claims could not be made against the limitation fund.
Art.12.1 of the 1976 Limitation Convention states that “the fund shall be distrib-
uted among the claimants in proportion to their established claims against the fund”
(emphasis added).
There does not seem to be any clear guidance from the court as to the meaning of
this article. However, in the old case of The Disperser, Hill J said:
If each claimant against the fund must establish a legal right against the limiting owner, and if
each claimant may raise against the other any defence which the limiting owner could raise, I
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professor richard williams
find it impossible to distinguish a defence given by s 8 of the Maritime Conventions Act from
other defences, and it seems to me that it must be open to a rival claimant to contend that
another claimant’s action is barred by the effect of s 8.
… It is further clear that a claimant cannot establish any right against the fund unless he
can establish a good cause of action against the limiting owner.61
It is clear from these dicta that a claim is not “established” against the fund unless
and until it is proved that the particular claimant has a right at law to recover such
a claim from the shipowner subject to the latter’s right to limit his liability for the
claim. Therefore, it follows if that claimant does not have such a right at law, that that
proportion of the fund that reflects the irrecoverable part of the claim should be made
available for distribution to the other claimants that can establish a legal right against
the shipowner. Consequently, it is logical that “each claimant may raise against the
other any defence which the limiting owner could raise” to ensure that the principle of
“established” claims is honoured. Indeed, Hill J went on to say:
it seems to me quite clear that in the reference which follows a limitation decree it is open
to any claimant to dispute the right of any other claimant against the fund. … The limiting
owner in general ceases to have any interest in disputing anybody’s claim because he is liable
only for the amount he has paid in, and that being so, all rival claimants to the fund must be
entitled to dispute one another’s claims.62
It is perhaps, surprising that this issue has not been considered in other cases before
the English court. However, the principle appears to be well established and consistent
with public policy to ensure that claimants are entitled to recover that proportion of
the fund that is afforded to them by law.
The Hong Kong High Court adopted this reasoning in the case of The Eleni and
held first that it was open to the owners of The Heung-A Dragon to object to the
admittance of the claims that the 22 “new” claimants wished to make against the fund
since, although the owners of The Heung-A Dragon had not established the fund, they
had an interest in ensuring that the fund was distributed properly between claims that
were entitled to share it.
The Hong Kong court then went on to consider the relationship between the statu-
tory time limit for the collision action and the time limit for submitting claims to the
limitation fund. If, as stated by Hill J in The Disperser, “a claimant cannot establish
any right against the fund unless he can establish a good cause of action against the
limiting owner”, it follows that if the relevant liability claim against the shipowner
is time-barred, that claim cannot be made against the limitation fund. However, the
crucial question is: what is the relevant time limit? Is it the time limit that is applicable
for the claim that is to be brought on the merits against the shipowner (which would
be two years for a claim resulting from a collision)63 or the time limit specified by the
court pursuant to the limitation decree for submission of claims against the limitation
fund? Hill J said in The Disperser that:
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limitation of liability
.I cannot myself see my way to saying that the effect of the limitation decree is to destroy
the effect of Sect. 864 as an answer to a claim when the claim is brought in any limitation
proceeding.65
The facts of The Disperser differed from those in the case of The Eleni since no pro-
ceedings on the merits had been commenced within the statutory time limit of two
years. However, it seems clear from the dictum of Hill J that has just been quoted that
he was of the view that if such proceedings had been commenced within that period,
the relevant claims would not have been considered to be time-barred for the purposes
of claims against the limitation fund.66 This reasoning was adopted by the Hong Kong
court in the case of The Eleni albeit in the context of the relevant Hong Kong statutory
provisions. Deputy Judge To distinguished between the nature of the two relevant time
limits as follows:
The deadline fixed in the decree for filing of claim is one fixed by the court in the exercise of
its case management powers for the better and proper conduct of the claims and administra-
tion of the fund. It is a procedural time limit or “administrative deadline” as Mr Alder calls it.
No court would, when imposing such an administrative deadline, contemplate that it should
have the effect of overriding the limitation period fixed by law, thereby rendering the defence
of time-bar unavailable to a defendant.67
The judge then went on to consider whether the court should exercise the discretion
that it had under the relevant Hong Kong legislation68 to extend the time for submit-
ting claims against the limitation fund and decided that it was appropriate to do so in
the particular circumstances since:
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• There was no prejudice to the owners of the Eleni by allowing the claims to
be made against the fund since its liability was capped by the fund no matter
how many claimants were allowed to claim against the fund;
• The fact that the owners of the Heung-A Dragon would recover a smaller
proportion of the fund as a result of the admittance of the additional claims
did not amount to prejudice.
The judge then concluded by saying that “Eleni Maritime and Heung-A Shipping, in
particular, should not be allowed to benefit from their omission, at the expense of the
innocent additional claimants”.69
Although there appears to be little judicial guidance in relation to these issues, the
decisions of the English ourt and Hong Kong court in the Disperser and the Eleni
respectively appear to be sensible and consistent with legal principle.
10.3.1 Even if a shipowner is entitled to limit his liability can his liability insurers still
refuse to indemnify him?
The Canadian Supreme Court delivered a judgment in the case of Peracomo Inc and
others v Telus Communications Co and others (The Realice)71 relating to the inter-
connection between the right to limit liability and insurance cover for such liability
which can perhaps be described as “a curate’s egg”, that is to say, it is good in parts –
but possibly not in all parts!
The facts of the case were as follows:
The Realice is a fishing vessel which was operated in the St Lawrence River by Real
Vallee who, as sole shareholder, was effectively the owner of the vessel through his
company Peracomo Inc. The vessel’s fishing gear became entangled with a fibre-optic
submarine cable and Mr Vallee raised the cable to the surface and proceeded to cut it.
He appreciated that there was a possible risk that the cable was still in use but formed
the view that it was not currently in use based on a quick reading of the handwrit-
ten word “abandonée” that he had seen on a map on a museum wall the year before.
However, the cable was live and the owners brought a claim against Mr Vallee and his
company for almost US$ 1 million by way of repair costs. Mr Vallee’s company was
found to be liable for the loss and Mr Vallee himself was also found to be personally
liable. However, the vessel’s limit under the 1976 Limitation Convention was US$
500,000 and Mr Vallee and his company sought to limit their liability to such a sum
and to claim an indemnity for such limited liability from their liability insurers the
Royal & Sun Alliance Insurance Co. of Canada.
The Canadian Supreme Court found that Mr Vallee acted recklessly when cutting
the cable since whilst appreciating that there was a risk that the cable could still be
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live, he did not consult any of the relevant marine charts which he was obliged to do
pursuant to the Canadian Charts and Nautical Publications Regulations 1995 and
did not “communicate with marine traffic control to make inquiries as to the nature
and use of the cable”. However, the court also found that since Mr Vallee had believed
that the cable had been abandoned, “he did not actually know that his actions would
probably result in damaging someone’s property who would then have to repair it”.
Consequently, by a majority of four to one, the Supreme Court found that Peracomo
Inc. and Mr Vallee were entitled to limit their liability but were not entitled to an
indemnity for that limited liability from their liability insurers. The dissenting judge
(Wagner J) agreed that Peracomo Inc. and Mr Vallee were entitled to limit their liabil-
ity but held that they were entitled to an indemnity from their insurers.
In essence, the majority of the judges drew a distinction between the sort of wrong-
doing that is required to break limit and the sort of wrongdoing that is required to
debar insurance cover. The court concluded that limitation is broken under the 1976
Convention only if the wrongdoer when committing the relevant wrongful act or
omission, whether intentional or reckless, also foresees the type of loss that will prob-
ably result. However, the court concluded that in order to debar insurance cover all
that is required is wrongdoing, whether intentional or reckless, which foresees that
damage or injury could result but not necessarily with foresight of the loss that actu-
ally resulted. Consequently, situations could arise, as in this case, where the wrongdoer
is entitled to limit his liability because he did not foresee the actual type of loss that
resulted from his conduct but is nevertheless, because his conduct does constitute
intentional or reckless wrongdoing, not entitled to be indemnified by his liability insur-
ers for that limit.
The decision is welcome in relation to the right to limit in that the Canadian
Supreme Court unanimously overturned the earlier decisions of the lower courts
holding that there was no right to limit and its reasoning for doing so is consistent
with the approach that has been adopted in other jurisdictions, thereby enforcing the
understanding that a shipowner has an “almost indisputable right to limit”72 and that
“it is likely that only truly exceptional cases will give rise to any real prospect of defeat-
ing an owner’s right to limit”.73
However, the comments of the majority decision in relation to insurance cover is
surprising since it has generally been assumed in the shipping and insurance industry
that should a defendant have the right to limit liability, the defendant will be entitled to
be indemnified for such liability under P&I and other similar forms of liability insur-
ance. That understanding is important since maritime claims can be very high value
claims which often exceed the value of the shipowner’s assets. Therefore, the availabil-
ity of liability insurance is something that benefits both the shipowner and the claim-
ant in that they both have the comfort of knowing that claims are u nderwritten up
to the limit by a creditworthy third party that has the ability to provide the necessary
compensation promptly. Indeed, this linkage between the right to limit and the avail-
ability of liability insurance is now the cornerstone of the very effective compensation
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scheme that the industry and governments have developed over many years through
the IMO to regulate maritime claims of many different kinds. Therefore, if a defend-
ant that is entitled to limit liability for a maritime claim is, nevertheless, not entitled to
be indemnified under his liability insurance, that would seem to undermine the delicate
balance that underpins the integrity of the scheme as a whole. Somewhat ironically, the
decision would seem to have the consequence that even though the guilty defendant’s
conduct is not deemed sufficiently serious to offend against public policy in relation
to his right to limit liability, it is deemed sufficiently offensive to deprive the innocent
claimant of the protection that is afforded to it by liability insurance (in some cases
compulsory liability insurance).
Therefore, why did the majority of the judges come to this surprising conclusion?
They believed that a distinction should be drawn between the right to limit and the
existence of insurance cover for the following reasons:
i) The two provisions have different purposes;
ii) The terminology of the 1976 Limitation Convention and the Marine
Insurance Act is very different and emphasises the different purposes.
74 Such requirements exist pursuant to pollution conventions such as the CLC, Bunkers and HNS
Conventions and pursuant to passenger liability conventions such as the Athens Conventions. Such require-
ments also exist under the national laws of countries such as the USA.
75 For a detailed explanation of the rationale behind the need for compulsory insurance see Compulsory
Maritime Insurance by Prof Erik Rosaeg in the Scandinavian Institute of Maritime Law Yearbook 2000
(http://folk.uio.no/erikro/WWW/corrgr/insurance/simply, last accessed 5 July 2018).
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the right of the insurer to refuse compensation if the relevant loss or damage resulted
from the misconduct of the assured itself (see below).
However, s.55 of the UK Marine Insurance Act (MIA) 190677 states that:
(1) Subject to the provisions of this Act, and unless the policy otherwise provides, the
insurer is liable for any loss proximately caused by a peril insured against, but, subject as
aforesaid, he is not liable for any loss which is not proximately caused by a peril insured
against.
(2) In particular, –
(a) the insurer is not liable for any loss attributable to the wilful misconduct of the
assured but unless the policy otherwise provides, he is liable for any loss proxi-
mately caused by a peril insured against, even though the loss would not have
happened but for the misconduct or negligence of the master or crew; …
(Emphasis added)
Although it is true that the underlined words could be read to suggest that the miscon-
duct that is required to debar the right to limit liability should relate more specifically
to the particular resulting loss than the more general provisions of the MIA, that
distinction is likely to be relevant in very few cases. The fact findings that caused the
Canadian Supreme Court to consider such a distinction were at best unusual and
could, furthermore, be open to criticism as is clear from the comments of the dissent-
ing judge, Wagner J. Furthermore, the author is not aware of any case in which a P&I
Club that is a member of the International Group has sought to rely on s.55 of the
MIA 1906 in a case where the owner’s right to limit liability has been upheld in relation
to a claim that otherwise qualifies for cover. It is believed that the circumstances would
have to be extraordinary for this to happen.
Furthermore, whatever be the correct interpretation of the relevant terminology of
the MIA 1906 it should nevertheless be emphasised that in order to debar the right
to be covered by insurance, the relevant wrongdoing must be that of the assured itself
rather than that of an employee or servant of the assured.78 Therefore, if the loss or
76 Emphasis added. Other conventions have similar wording but the issue is complicated by the fact that
the terminology that is used to debar the right to limit is not uniform. Some conventions require conduct
that foresees the specific loss or damage (The Hamburg Rule (Art.8), The Rotterdam Rules (Art.61) Rules,
CMR (Art. 29), CIM-COTIF (Art. 44), The Budapest Convention (Art. 21), The Athens Convention
(Art.13), CLC 92 (Art. 6 (2) and the HNS Convention (Art. 9 (2)) whereas other conventions merely require
conduct that refers generically to non-specific loss or damage (The Hague-Visby Rules (Art.IV Rule 5
(e)), the amended Warsaw Convention (Art. 25 of the Hague Protocol) and Art. 22 (5) of the Montreal
Convention).
77 The wording of s,53(2) of the Canadian Marine Insurance Act 1993 that was applicable in the case
of the REALICE differed slightly but not materially (emphasis added): “Without limiting the generality
of subsection (1), an insurer is not liable for any loss attributable to the wilful misconduct of the insured nor,
unless the marine policy otherwise provides, for ...”
78 See s.55(2)(a) of the MIA 1906. This is a long-standing rule of the common law (see Thompson v
Hopper (1858) E.B. & E. 1047 and Trinder v Thames and Mersey Ins. Co (1898) 2 QB 114).
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professor richard williams
damage is caused by the intentional or reckless acts of a crew-member, that would
not normally be sufficient to prevent the assured from claiming under the policy since,
insofar as the assured itself was concerned, the loss or liability had nevertheless been
caused by the fortuitous operation of an insured peril.
However, the situation is often somewhat more complicated since, in most cases,
the assured is a corporation which conducts its business through human agencies.
Therefore, a potential dichotomy can arise if the loss or liability has been caused
by the wilful misconduct of one of its servants or agents: is such misconduct to be
considered to be that of a servant or agent of the assured or is it the conduct of the
assured itself ? The traditional solution79 is to ascertain whether the relevant person
can be considered to be the “directing mind” or alter ego of the assured.80 If so, then
the conduct is deemed to be that of the assured itself and, in such circumstances, the
insurers are not liable since the law will not permit someone to take advantage of their
own wrong.81 In the majority of cases, that enquiry is not difficult since the relevant
misconduct relates to one aspect of the corporation’s business (often management
aspects). However, in some rare cases, the relevant person is acting in two capacities
and it is necessary to ascertain in which capacity the misconduct was committed. The
classic example is where (as in the Realice case) the wrongdoer is both the master and
the de facto owner of a (usually small) ship.
Perhaps surprisingly, this issue does not seem to have been considered by the
Canadian Supreme Court. The court found that Mr Vallee had been personally reck-
less and, consequently, it is not surprising that he personally could not recover an
indemnity under the policy. However, the court also held that Peracomo Inc. was not
protected by the policy since Mr Vallee, as the sole shareholder in, and de facto owner
of, Peracomo Inc., was also the “directing mind” or alter ego of Peracomo Inc. and
that his recklessness also debarred Peracomo Inc. from recovering under the policy.
However, the facts would suggest that when acting recklessly in cutting the cable, Mr
Vallee was acting more in his capacity as a master/navigator than as the “directing
mind” or alter ego of the company. In such circumstances, the predominant view in
most countries appears to be that his conduct should be considered to be personal
conduct rather than that of Peracomo Inc.82 and that, consequently, Peracomo Inc.
should have been entitled to be indemnified under the policy.
79 This is predominantly the rule that has been used in the context of the limitation of liability but it is
likely that a similar approach would also be adopted in relation to insurance cover (see, for example, para-
graph 18.25 of Marine Insurance Law and Practice by Professor Francis Rose (2nd edition, Informa, 2012)
and pages 112–113 of O’May on Marine Insurance (Sweet & Maxwell, 1993).
80 Historically, such a person was likely to be a senior officer of the corporation (see Lennard’s Carrying
Co v Asiatic Petroleum Co. (1915) AC 705 and The Lady Gwendolen (1965) p. 294). However, with the advent
of the requirement of the Designated Person (DP) pursuant to the ISM and ISPS Codes, it may be that
such person may also be considered to be the alter ego in relation to the matters for which the DP has the
ultimate responsibility no matter what that person’s ranking may be in the corporate personnel structure.
Furthermore, under US law, the relevant conduct need only be that of a “managing officer”, i.e. someone
who actually manages or directs the relevant aspect of the company’s affairs (Coryell v Phipps 317 US 406 –
Supreme Court 1943).
81 This principle is applied in all branches of insurance.
82 See The Annie Hay (1968) p. 341. A similar view is taken under Norwegian law – see the Norwegian
Supreme Court decision in the M/K HADSELØ v M/K POLLY (Rt-1957-624).
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limitation of liability
However, although there does not appear to be any express comment to this effect
in the judgment, the Canadian Supreme Court may, when coming to the conclusion
that Peracomo Inc. was also not entitled to be indemnified under the policy, have been
influenced by the fact that Peracomo Inc. and Mr Vallee were very closely connected
and joint assured under the policy. In these circumstances, there is authority which
suggests that where two persons who have effectively the same interest in the same
property or adventure are jointly insured by one policy, the misconduct of one assured
can debar the right of both assured to be indemnified. This issue was considered by
the English House of Lords in the well-known insurance case of Samuel v Dumas and
Viscount Cave held that:
My Lords, there is force in this argument, but I am not prepared to say that in the present
case it should prevail.83 It may well be that, when two persons are jointly insured and their
interests are inseparably connected so that a loss or gain necessarily affects them both,
the misconduct of one is sufficient to contaminate the whole insurance (Phillips’ Law of
Insurance, Vol. I, s.235).84
The fact that Mr Vallee was also the sole shareholder in Peracomo Inc. would suggest
that “their interests” could indeed be considered to be “inseparably connected so
that a loss or gain necessarily affects them both”, in which case, what appears at first
impression to be a surprising conclusion of the Canadian court in relation to insur-
ance cover may be justifiable given the somewhat unusual facts of the Peracomo case.
The decision of the Canadian Supreme Court is welcome insofar as it unanimously
re-emphasises the difficulty that a claimant has in breaking limit under the 1976
Limitation Convention. However, the decision of the majority of the court (Wagner
J dissenting) is surprising to the extent that it suggests that, notwithstanding the fact
that a defendant is entitled to limit his liability, the defendant may not be entitled to be
indemnified by insurance. It can be argued that the decision is supportable on public
policy grounds on the basis that the concept of moral hazard should not be diluted by
the availability of insurance. However, such a desire is counter-balanced by the need
to ensure that sufficient funds are available to indemnify the innocent claimants that
suffer loss or damage as a result of the wrong-doing. In any event, the decision runs
contrary to the understanding and expectation of the shipping and insurance industry
and some of the conclusions reached by the majority are open to question but may be
explainable by the somewhat unusual facts.
83 The reason why Viscount Cave made this comment was because the two co-assured in that case were
mortgagor and mortgagee and the court concluded that the two assured did not have the same interest in
the insured property.
84 (1924) 18 Ll.L.Rep. 211, at 214. See also R. Merkin, Marine Insurance Legislation (Lloyd’s List, 2000)
at p 76 and J. Hill (ed), O’May on Marine Insurance (Sweet & Maxwell, 1993) at p 114.
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CHAPTER 11
11.1 Introduction
Belgium1 is a signatory of the London Limitation of Liability for Maritime Claims
Convention of 1976. Like many other countries, Belgium has taken advantage of opting
out for claims in relation to wreck removal: Art.2(d) claims in respect of the raising,
removal, destruction or the rendering harmless of a ship which is sunk, wrecked,
stranded or abandoned, including anything that is or has been on board such ship and
Art.2(e) claims in respect of the removal, destruction or the rendering harmless of the
cargo of the ship. This possibility to opt out is provided by Art.18.1 of the convention.2
That does not mean, however, that limitation for claims relating to wreck removal
including cargo removal is not possible in Belgium. On the contrary: the parliamentary
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the law of wrecks
travaux préparatoires clearly demonstrate that Belgium did want limitation to apply
also to wreck removal claims.3 The government was indeed of the opinion that it
was to the advantage of the Belgian shipping industry to have the possibility for
vessel owners to limit their liability for wreck removal claims emanating from the
government or public authorities. Rather than having the possibility to limit under the
LLMC Convention, however, it was felt more appropriate to have a separate limitation
fund under national legislation especially covering these types of claims.
In 1989, as a consequence, together with the ratification of the London 1976 LLMC
Convention and its implementation into internal Belgian law, Belgium also introduced
its own legislation allowing vessel and cargo owners who were under a duty to remove
stranded wrecks and cargo to limit their liability in relation to these claims. The official
name of this special statute was the Wrakkenwet4 (Statute on Wrecks). It is applicable
to seagoing vessels stranded or wrecked in Belgium or its territorial seas following a
navigational incident. The vessel owner and/or the cargo owner are under a liability to
remove their wrecked vessel and its cargo on board when they are hindering navigable
waterways (Art.13). That liability is a strict liability regime regardless of who is to
blame for the navigational incident. If the owner does not proceed forthwith with the
removal of the wreck on the instruction of the public authorities, the government can
proceed with the removal at the expense of the owners (Art.14). The public authorities
are entitled to claim a sufficient advance payment for these removal costs.
Separately from the issue of liability for the removal of the wrecks and its
cargo, the owners are also given the possibility to limit their liability (Art.18). The limi-
tation amount is established in relation to the size of the vessel on the basis of a sliding
scale; it is a “tonnage” limitation. The King, meaning the government, is entitled to
fix and adapt the tonnage tariffs in line with economic developments; nevertheless, the
tonnage limitation under the Wrakkenwet is significantly higher than under the 1976
LLMC Convention. The statute also clearly says that the government can never claim
more from the owner than the maximum of his limitation amount (Art.15, §2).
The statute largely follows the scheme of the LLMC Convention: like that conven-
tion, it provides for limitation per ton according to a sliding scale, with loss of the
right to limit if the stranding or sinking has been caused intentionally or recklessly
(Art.18, §5). At first sight the system, which is dealt with by seven articles in Chapter V
of the statute, is covered by a “blanket of simplicity”. At least that is what one would
have thought and hoped; however, on account of Belgian case law, the statute was con-
strued in such an extraordinary way that its object was entirely defeated, and the vessel
owner had much more to pay above his limitation amount. In other words, the entire
limitation proceedings were being frustrated by adverse case law: indeed one could
easily claim that the Belgian “statute on wrecks” had become a “wreck” in its own right.
Luckily enough, however, a recent decision of the Belgian Court of Cassation,5
reversing an earlier decision by the same court, has set the record straight so that one
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can hope for a more just and logical application in the future of this statute contrary
to what happened in the past. In the following paragraphs we will try to explain what
happened in the sad case of the MV Flinterstar. The stage is now set to explain how
the drama unfolded in 2015.
6 Captain Seynaeve, court expert, noted in his report that the Flinterstar navigated a correct course
whereas the Al Oraiq deviated from her proper course by not steering sufficiently to starboard at buoy S3.
She hit the Flinterstar on her starboard side. He also noted that the navigational authorities (agents of the
Belgian government) had failed to issue a warning to all shipping traffic about the approach of an LNG
tanker, as they were required to do, and also had failed to police the movements of the Al Oraiq. Navigation
in this area is regulated by the Joint Vessel Traffic Services VTS Scheldt.
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the law of wrecks
immunity, while the pilot himself can only be held personally liable for intentional
7
wrongdoing and even then his liability is limited to a nominal amount of 500.000
Belgian francs. Furthermore, an action against the owners of the Al Oraiq was prob-
ably also doomed to fail as the owners of this vessel would certainly be able to invoke
the benefit of limitation of liability under the LLMC Convention, with the result that
the major part of the expenses advanced by the owner would not be recoverable.
11.2.2 The Pilotage Service in Flanders, compulsory pilotage8 and the immunity
of the Flemish Pilotage Service
The pilotage service in Belgian territorial waters and on the River Scheldt is reserved
to the government. With the latest Belgian constitutional revision, the organisation
of the pilotage service was entrusted to the Flemish Government which was given
the task of organising and operating the pilotage service. As the River Scheldt is an
international river, the pilotage service is provided by the Flemish as well as the Dutch
Pilotage Service.9 On the strength of somewhat questionable arguments, these two
public law pilotage services were able to convince the European Union (EU) competi-
tion authorities in Brussels that they could lawfully split the market among themselves
in fixed percentages, the major share being reserved to the Flemish service. The Belgian
statute of 3 November 1967 regulates the operation of the pilotage service, and states
clearly that the service bears no responsibility for navigational accidents. Should a
pilot himself have caused damage by intentional or wilful wrongdoing, his possible
liability is limited to 500,000 Belgian francs (approximately €12.500).10
7 Statute on the Pilotage Service of 3 November 1967, Art.3bis, §1, Mon. Belge 5 January 1968; also
Art.3bis §1 n° 3, second sentence.
8 Decree Flemish Region 8, 15 July 2002, Mon. Belge 23 August 2002.
9 Verdrag van 21 december 2005 tussen het Vlaams Gewest en het Koninkrijk der Nederlanden inzake het
gemeenschappelijk nautisch beheer in het Scheldegebied (Treaty of 21 December 2005 between the Flemish
region and the Kingdom of the Netherlands relating to joint nautical management in the Scheldt estuary –
author’s translation).
10 Statute on the Pilotage Service of 3 November 1967, Art.3bis, §1, Mon. Belge 5 January 1968 and
Art.3bis, §1 n° 3, second sentence.
11 The Nairobi International Convention on the Removal of Wrecks of 1 May 2007 came into force on 14
April 2015. It was ratified by Belgium under a Belgian statute of 8 January 2017; see Mon. Belge 18 July 2017.
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of the Nairobi Convention provides for limitation, but imports the regime under the
LLMC convention and offers no separate limitation rules of its own.
11.2.4 The first procedural steps: guarantees requested, and a limitation fund
constituted by the Flinterstar
The day after the incident, the Belgian Government demanded from the Flinterstar
companies a guarantee up to the maximum amount provided for in the Wrakkenwet.
On 14 October 2015 the owners of the Flinterstar applied for the opening of the
limitation proceedings before the President of the Commercial Court in Antwerp.
The President ruled that the application was admissible and allowed the owners to
proceed. By a decision of 16 October 2015 it was established that the limitation fund
had been validly constituted (well over €3,000,000) under the Wrakkenwet; this deci-
sion was published in the Moniteur Belge (the official Belgian State journal) on 21
October. Such a limitation fund is in fact constituted solely to cover possible claims
by the public authorities in relation to wreck removal expenses and consequently the
Belgian State submitted a claim (under “reservation”) to the liquidator. The Belgian
Government made a similar guarantee request for the owners of the MV Al Oraiq,
who submitted a guarantee of €40,000,000 in favour of the government.
12 The Nautical Commission attached to the Commercial Court of Antwerp is a most important
institution instrumental in assisting the courts to solve maritime litigation. The nautical commission is a
body of experts and traces its origins to Napoleon. When the Belgian territories were invaded by the French
Revolutionary armies in 1792 the provinces were made part of France. Napoleon’s intent was to develop
the port of Antwerp as a naval base with yards to build warships to act as a “pistol” pointed at the heart
of England. In 1802 a committee of experienced master mariners was formed. The purpose of this body
was to assist the courts in maritime litigation and also to inspect vessels calling at the port of Antwerp
regarding safety requirements and their fitness for the intended maritime journeys. Today this committee is
composed of a number of master mariners who are regularly appointed by the President of the Court as a
fact-finder charged with providing the court with an opinion which, although not binding, greatly assists the
court in deciding on the factual issues of the case. The experts of this committee never act at the request of
private parties but only upon the motion of the Courts of Justice to whom these experts owe their loyalty.
See S. Baudez, Zeeexperts geven Advies, and S. Dewulf, Zending en Opdracht van de Nautische Commissie
bij de Rechtbank van Koophandel te Antwerpen (Larcier, 2006); A. Kegels, “Maritime Fact Finding by the
Nautical Commission with the Antwerp Court of Commerce” in 1802–2002, De Nautische Commissie bij de
Rechtbank van Koophandel te Antwerpen (Antwerp, 2002), 11–23.
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the law of wrecks
to the Court that at best the removal of the wreck could only be implemented by 31
October 2016, a year later than the time the government had originally had in mind.
The removal claim introduced in court on 16 October 2016 by the Belgian Federal
Government was to some extent contradicted by a press release released by the then
incumbent Secretary of State on the same day, informing the public that it was the Federal
Government itself that would proceed with the salvage and removal of the Flinterstar.
13 See D. Lindemans, Kort geding (Kluwer Rechtswetenschappen, 1985), 385; also C. Dadomo &
S. Farran, The French Legal System, 2nd ed. (Sweet and Maxwell, 1996), 179 (“as mentioned previously in
chapter four, Presidents of ordinary courts enjoy specific powers, in particular those of making ordonnances
de référé by which the judge may order urgent, interim or provisional measures. Application for a référé is
made by assignation. Hearings take place at fixed intervals or, in the case of extreme urgency, immediately
at a fixed time in court or at the residence of the judge, even on a public holiday … The judge may only take
temporary measures. Along with a condemnation, he may impose an astreinte, a daily fine for delay in the per-
formance of the contract or payment of a debt and rule on the costs. These ordonnances are appealable … ”.
14 See Art.584 of the Code of Civil Procedure.
15 See Art.1039 of the Code of Civil Procedure.
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and give his reasoned opinion as to the causes and circumstances of the collision. It
has to be stressed, however, that his opinion is non-binding. The court is never obliged
to follow it, though in practice a well-reasoned fact-finding opinion by a neutral court-
appointed expert certainly carries high persuasive authority. In the common law legal
system, court appointed experts are not known; experts are always adduced to the
court as expert witnesses acting at the request of one of the parties.
11.2.7 Urgent procedural measures imposed by the President of the Commercial Court
in Bruges on 8 December 2015
The President delivered a ruling on the claims introduced by the writ of 16 October
2015 served at the request of the Belgian Federal Government. Despite the fact that
the owners of the Flinterstar had constituted a limitation fund in compliance with
the Wrakkenwet, they were nonetheless ordered to proceed with the removal of their
wrecked vessel. The owners and the charterers appealed his decision; the government
for its part cross-appealed.
16 See Book II, Arts.222 et seq. of the Belgian Commercial Code.
17 See S. Hodges, Law of Marine Insurance (Cavendish, 1996), 28.
18 International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, signed in London
on 23 March 2001. This convention became applicable in Belgium by the statute of 12 July 2009: Mon.
Belge, 30 October 2009.
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light of the earlier Antwerp decisions permitting them to constitute a limitation fund.
This decision, they said, had become final as no appeal or opposition had ever been
raised against this decision.
Secondly, the owners argued that the decision violated Arts.584 and 1039 of the
Belgian Code of Civil Procedure, in that the order to proceed with the removal of
the wreck was not a temporary measure but was in reality a final decision against the
owners. Even if proceedings on the merits did eventually hold a third party liable for
the collision, with the consequence that the third party would have the duty to pay the
removal costs, the owners’ chances of actually recouping the monies extended on a
so-called “temporary” basis were likely to be non-existent. Indeed, in all likelihood the
owners of the Al Oraiq would invoke limitation under the LLMC Convention, while
the Flemish Government and Flemish Pilotage Service, responsible for the proper
operation of the pilotage service, enjoyed quasi- immunity, as did the pilots on board
who had obviously been negligent in discharging their duties.19
Thirdly, in obliging the owners to proceed with the removal of the wreck despite
their having constituted a limitation fund, it was argued that the decision of the judge
below had violated Arts.13 and 18 of the Wrakkenwet allowing owners to limit their
liability for wreck removal expenses.
The government cross-appealed and demanded that owners and charterers be
ordered to contract with a capable salvage company to remove the wreck, under
penalty of €300.000 per day.
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the removal. These articles were very arguably not connected; the order to remove the
wreck was purely temporary, and thus had no bearing on the merits of the case when,
at a later stage, a decision would have to be rendered on the liability and limitation
issues.
21 This reads as follows (author’s translation): “Decisions in urgent proceedings (Procédure en référé)
do not cause prejudice to the case itself; they can be executed notwithstanding opposition or appeal … .”
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decisions by which the limitation proceedings were opened and in which the President
of the Antwerp Commercial Court found the limitation fund of the Flinterstar validly
constituted.
A very serious impediment to the obtaining by the appellants of a revision by the
Court of Cassation was a fairly recent earlier decision in the Court of Cassation,
rendered in similar circumstances. This case is known as the Luxembourg river barge
case.22 However, the appellants engaged in some skillful distinguishing – a British
speciality – and pointed out that the Belgian statute specifically dealt with seagoing
vessels and not, as in the previous case, with river barges. They also stressed that the
holding of the Belgian Court in Cassation in the Luxembourg river barge case had to
be distinguished from the present case as the actual points litigated were different.
The submission also referred to a critical (if diplomatic) comment by Professor
Frank Stevens23 on the Luxembourg decision, in which he argued in favour of an
intervention by the legislator to make clear whether the right to limit (Art.18) took
priority over the duty to raise the wreck (Art.13). In that way one could argue that
the earlier decision by the Court of Cassation was not well received by the legal com-
munity and did not establish legal peace, so that the ruling of that decision could still
be reconsidered on a proper occasion.
22 Cass.23 January 2014, AR C.12.0603. N, Arresten van Cassatie 2014, n° 61, with conclusions by
Procureur Général Leclercq.
23 F. Stevens, Noot Beperking van aansprakelijkheid vs verplichte wrakopruiming: cassatie houdt de boot
af. T.B.H.2014/9 887–888.
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earlier and was now being repeated. As one might say, Errare humanum est, perseverare
diabolicum. This leads us to a comment on this by the late Professor William Tetley
who added: “And to get paid for it, is divine”.
the appeal judges, in holding that it follows from Art.13 of the Wrakkenwet that the vessel
owner can be obliged to proceed with the removal of the vessel even though the owner has
limited his liability in conformity with Art.18 of the statute, do not legally justify their deci-
sion. The objection is justified.
The decision only says what the statute says. Very courageously, this recent decision by
the Court of Cassation has now set the record straight and retracted a previous course
of case-law that went in the wrong direction because in reality it annihilated the vessel
owner’s right to limit. Were this to be an English decision in the Supreme Court, in
all likelihood one would have faced a very long text, containing a few hundred pages
with many quotations of previous cases. Not so in French and Belgian procedural
practice when it comes to the Court of Cassation. The Court of Cassation never
quotes decisions but only refers to articles of the written law. A decision by the Court
of Cassation is always something very impersonal; it reflects the collegiate opinion of
the court, and thus does not mention the opinion of individual judges.
As Professor Gutteridge, the eminent professor of comparative law at Cambridge
University, wrote24 that such a case can only be understood by the explanations given
by commentators on these cases. In trying to understand this cassation case, we were
helped by the submissions of the Procureur and of course by the submissions by the
lawyers and by the appeal to the court, spelling out the various legal issues.
It is remarkable that the Court of Cassation has only decided the entire issue on one
solid argument, indeed the violation of Art.13 of the Wrakkenwet, whereas the other
24 See H. C. Gutteridge, Le droit comparé, 2nd ed. (Cambridge University Press, 1949). In the chapter
entitled “La Jurisprudence des tribunaux et le droit comparé” he says: “Le trait caractéristique d’un recueil
continental de jurisprudence, comparé à un recueil anglais, est sa brièveté. Les faits ne sont relatés que som-
mairement; l’argumentation des avocats n’est pas rapportée et les décisions auxquelles la Cour est parvenue
sont parfois données en quelques phrases. La décision judiciaire sur le continent est quelque chose d’absolument
impersonnel; c’est la décision du tribunal en entier, et l’opinion du juge mis en minorité n’est jamais rapportée ….
Le résultat, comme dit Allen ..., est qu’il y a beaucoup à lire entre les “lignes” et que les décisions françaises
sont “très denses” et “pas toujours faciles à comprendre pour un juriste qui n’est pas familiarisé avec les codes
français et autres lois et leurs méthodes d’interprétation ….”
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the law of wrecks
arguments solid and convincing as they may have been, were not met by the Court
of Cassation. That is a very normal practice. Indeed, once the Court has come to the
conclusion that the decision of the lower court cannot stand, on account of this one
argument, there is no need to consider other arguments, because this cannot lead to a
different or better result.
11.3 Conclusions
In our opinion the legal community can be satisfied by the outcome of these proceed-
ings as the Court redressed a situation where there was a real danger under previous
existing case law that owners of a wrecked vessel were at risk of being denied the
benefit of limitation (under the guise of a temporary measure) which benefit had
been explicitly granted to them by the legislator. The previous case law amounted to
a limitation to limitation and that has now been redressed by the present decision of
the Court of Cassation.
It is tragic to note that this decision, however, remains cold comfort for the owners
of the wrecked Flinterstar. The Flinterstar companies apparently had a very hard
time to survive in a very difficult depressed charter market. The drama they went
through was one too many to allow them to survive; the three Flinterstar companies
were ultimately declared bankrupt and went into liquidation. As for the main stake-
holder or shareholder, a distinguished Dutch gentleman living in Antwerp by the
name Mr Bert Otto (Drs. A.H.J Bert Otto), he suffered a heart attack and passed away
before the decision of the Court of Cassation was rendered. This chapter is written in
honour of his memory.
167
DIRECT ACTION AGAINST INSURERS & P&I CLUBS peter macdonald eggers qc
CHAPTER12
12.1 Introduction
A contract of marine insurance is a commitment by the insurer to indemnify the
assured against marine losses. Such losses are those which are incident to a marine
adventure,1 meaning those losses which might arise where ships, goods or other mova-
bles are exposed to maritime perils, which expose the relevant assured to risks of prop-
erty losses, financial losses or legal liabilities.2 By definition, a contract of contingency
insurance is not a marine insurance contract, because it is not a contract of indemnity.
The insurer’s undertaking of indemnity embodied by the insurance contract rep-
resents a contractual assumption of risk which is otherwise borne by the assured: it
is a personal commitment assumed by the insurer and owed to the assured. They are
in a contractual relationship. The assured who has suffered a loss which falls within
the scope of cover afforded by the insurance contract has a right of action against the
insurer.
The existence of the insurance contract may nevertheless be of direct or indirect
benefit to persons other than the assured, whether such persons are associates of the
assured, financiers, lenders, employees, service-providers, contractors, sub-contractors,
joint venturers, partners or guarantors. However, even though the insurance contract
may be of benefit to such third parties, it does not necessarily follow that such third
parties have rights of action against the insurer. Indeed, at common law, the general
rule is that a third party who has no privity to the contractual relationship with the
insurer cannot enforce any contractual promises made by the insurer even if such
promises might directly or indirectly benefit the third party.
That said, there are mechanisms which may arise by agreement, by the general
law or by statute which enable such third parties to enforce contractual promises of
indemnity made by the insurer under an insurance policy. The rights of third parties
are often determined by the nature of the insurance policy – whether it is a policy
indemnifying property losses, financial losses or legal liabilities.
* Barrister, 7 King’s Bench Walk; Visiting Fellow at the Institute of International Shipping and Trade
Law, Swansea.
1 Section 1 of the Marine Insurance Act (MIA) 1906.
2 Section 3 of the MIA 1906.
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direct action against insurers & p&i clubs
Policies of insurance which indemnify property losses and/or financial losses are
policies insuring “first party” losses because they are losses which are represented
immediately by the assured upon the occurrence of the relevant event. In this sense,
the immediacy is not necessarily a temporal concept such that when the insured peril
occurs, a loss instantaneously results. Sometimes it does, but sometimes it does not. A
loss may be delayed, for example where there is crew or a repairer’s negligence in over-
tightening a screw which increases tension in an item of machinery, but which does not
result in property damage for some weeks or months afterwards. Immediacy in this
context means that the loss which occurs is suffered by the assured in the first instance.3
By contrast, a policy of insurance which indemnifies the assured against legal
liabilities is a policy insuring against “third party” losses in that the relevant loss is
immediately – in the first instance – suffered by the third party who seeks to hold the
assured legally responsible for that loss.
If the policy insures against first party losses, the third party’s rights of action are
influenced by this consideration. A third party may be a co-assured under the relevant
policy – meaning a party to the insurance contract – such that the third party is enti-
tled to an indemnity in respect of the loss which that third party has suffered. In this
context, the third party co-assured is not really a third party at all. The third party may
be a co-assured because it is named as such in the policy, it is included in the class of
“assureds” described in the policy or the named assured has concluded the contract of
insurance on behalf of the third party either as a disclosed or undisclosed principal.4
However, a third party’s rights against the insurer may not be independent of the
assured but derive from the assured, for example as a legal or equitable assignee. If the
assured assigns to a third party his or her rights under the policy (as opposed to the
policy itself) insuring first party losses in respect of a loss suffered by that assured, that
third party may enforce the right of action against the insurer in respect of the loss
suffered, not by the third party, but by the assured. Similarly, if the assured insures a
vessel against property loss or damage and the insurer agrees to pay any claim to a
mortgagee bank as a “loss payee”, the loss payee may be entitled to enforce the insur-
er’s promise to pay the loss payee pursuant to the Contracts (Rights of Third Parties)
Act 1999 in respect of the loss or damage sustained by the assured’s vessel.5 In such
cases, even though the third party is enforcing a promise made by the insurer to indem-
nify the assured, and not by the third party, the third party’s interest in the insured
subject-matter may be very similar to or identical with the interest of the assured.6 The
point remains, however, that the third party is in fact enforcing the insurer’s obligation
of indemnity in respect of the assured’s loss, not the third party’s loss.
3 See, e.g., Cultural Foundation v Beazley Furlonge Ltd [2018] EWHC 1083 (Comm), [425–448]; cf.
Tarbuck v Avon Insurance [2002] Lloyd’s Rep IR 393, 395–396.
4 National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; O’Kane v Jones [2003]
EWHC 2158 (Comm); [2004] 1 Lloyd’s Rep 389; Talbot Underwriting Ltd v Nausch Hogan & Murray [2005]
EWHC 2359 (Comm); [2006] 2 Lloyd’s Rep 195, [28–34] (Cooke J)); affd [2006] EWCA Civ 889; [2006] 2
Lloyd’s Rep 195.
5 Assuming that the operation of the 1999 Act is not excluded by the relevant insurance policy. In many
cases, there is a Contracts (Rights of Third Parties) Act 1999 exclusion clause in the policy, which is given
effect pursuant to sect. 1(2).
6 Petrofina (UK) Ltd v Magnaload Ltd [1983] 2 Lloyd’s Rep 91, 95–96; The State of the Netherlands v
Youell [1997] 2 Lloyd’s Rep 440, 448–450.
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peter macdonald eggers qc
The position in respect of third party risks – liability insurance – is different, because
in many cases the third party may be entitled to sue the assured and his or her interest
in proceeding against the insurer reflects a concern to enforce the assured’s entitlement
to an indemnity by the insurer of the assured’s legal liability to the third party. In
this sense, the third party’s rights against the insurer are geared towards obtaining an
indemnity which directly or indirectly relates to the loss immediately suffered by the
third party, not by the assured or as well as the assured.
This chapter will consider the ways in which such third parties, whoever they may be,
may enforce the assured’s rights of action under a marine insurance policy – which are
necessarily contracts of indemnity – issued by an insurer. The mechanisms by which a
third party may proceed directly against a liability insurer include the following:
(i) A provision in the policy by which the insurer promises to provide an indem-
nity or other benefit directly to the third party;
(ii) A contractual letter of undertaking or guarantee issued by the insurer directly
to the third party;
(iii) A contractual or voluntary assignment of the assured’s rights against the
insurer to the third party;
(iv) A statutory assignment of the assured’s rights against the insurer to the third
party;
(v) Rights of action under international conventions;
(vi) Rights of direct action under foreign statutes or laws;
(vii) Rights of contribution under the Civil Liability (Contribution) Act 1978.
In all such cases, as marine policies are contracts of indemnity, the insurer’s obliga-
tion is limited to indemnifying the assured or third party, as the case may be, against
losses sustained such that over-indemnification will, at least in the ordinary case, not
be permitted. There is, however, a further consideration which may be relevant in this
context, namely the obligation on the insurer to compensate the assured or third party
in respect of consequential or further losses sustained by reason of the unreasonably
late payment of an insurance claim in breach of the implied term of the insurance
contract introduced by s. 13A of the Insurance Act (IA) 2015 (which applies as from
4 May 2017). In considering the third party’s rights of action against the insurer, it
may also be relevant to consider the third party’s right to claim damages for the late
payment of an insurance claim in breach of the policy’s statutorily implied term,
although in that event the question arises whether or not the loss to be compensated is
that suffered by the assured or by the third party.
12.2 Provisions in the policy requiring direct payment to the third party
Policies which insure against “first party” property or financial loss risks will often
include provisions identifying third parties with an insurable interest in the relevant
property which recognise the interest of that third party. At its height, the third party
would be named as a co-assured or would fall within the description of a class of
assureds. As a co-assured, the third party could claim an indemnity under the policy
for damage to its own insurable interest. In the context of a liability policy, the third
party as a co-assured could claim an indemnity directly from the insurer in respect
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of the third party’s own legal liability to others, because the third party is a party to
the insurance contract. The positions of each of the co-assureds vis à vis the insurer
may be affected by the rights of the insurer to exercise rights of subrogation against
a co-assured after indemnifying another co-assured, although such rights are curtailed
either where the insurer is obliged to indemnify both co-assureds in respect of the loss
or where there is an express or implied term restricting such rights of subrogation.7
There are occasions where the third party’s interest will be noted in the policy, but
the third party is not a party to the insurance contract. The common instance of this
is that the third party is identified as the “loss payee”, meaning that in the event of
a recoverable claim, the insurance proceeds must be paid by the insurer to the third
party directly. There are other contractual mechanisms which might result in the con-
ferral of a benefit on the third party (e.g. a cut-through clause).
However, given the doctrine of privity of contract at common law, traditionally the
third party could not enforce that promise of payment to the third party directly and
would have to rely on the other contracting parties – the assured – to enforce such
a promise. However, such limitations on the position of the third party were swept
aside with the entry into force of the Contracts (Rights of Third Parties) Act 1999. By
s. 1(1), where a contract – including an insurance contract – provides that a third party
is entitled to enforce a term of the contract or otherwise confers a benefit on a third
party,8 that third party is entitled to enforce that contractual term directly against the
insurer, provided that the third party is expressly identified in the contract by name, as
a member of a class or as answering a particular description (s. 1(3)). However, such
rights might be prejudiced by the rights of subrogation available to the insurer against
the third party, although such rights may be restricted if it is demonstrated that the
insurance was procured for the benefit of the third party.9 Further, such right of third
party enforcement does not exist under the 1999 Act in the case of a contractual term
conferring a benefit on the third party if on the true construction of the insurance
contract it was intended by the contracting parties that the relevant term would not be
enforceable by the third party (s. 1(2)). Many marine policies do contain terms – such
as the Contracts (Rights of Third Parties) Act 1999 exclusion clause – excluding the
operation of the 1999 Act, which essentially means that a third party could not enforce
a term conferring a benefit on that third party.
The enforcement of a contractual term by the third party entails such means of
enforcement as are available to the assured. Section 1(5) of the 1999 Act provides that
7 National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582, 603–604, 612–615; Rathbone
Brothers plc v Novae Corporate Underwriting [2013] EWHC 3457 (Comm); [2014] Lloyd’s Rep IR 203,
[60–72]; [2014] EWCA Civ 1464; [2015] Lloyd’s Rep IR 95; Gard Marine & Energy Ltd v China National
Chartering Co Ltd [2015] EWCA Civ 16; [2015] Lloyd’s Rep IR 295, [74–92]; [2017] UKSC 35; [2017] Lloyd’s
Rep IR 291, [135–142] (Lord Toulson); contra [53–57], [89] (Lord Clarke), [98–100] (Lord Sumption).
8 In Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC
716 (Comm); [2009] 2 Lloyd’s Rep 123, [74–75], the Court held that a P&I Club letter of undertaking did not
confer a benefit on a third party merely because it improved the position of the third party. In that case, the
third party was merely an agent for the receipt of payment due to the third party’s principal.
9 Mark Rowlands Ltd v Berni Inns Ltd [1986] 1 QB 211; National Oilwell (UK) Ltd v Davy Offshore Ltd
[1993] 2 Lloyd’s Rep 582, 604–606; Quirkco Investments Ltd v Aspray Transport Ltd [2011] EWHC 3060
(Ch); [2013] 1 Lloyd’s Rep IR 55, [43–45]; Frasca-Judd v Golovina [2016] EWHC 497 (QB); [2016] Lloyd’s
Rep IR 447; Cape Distribution Ltd v Cape Intermediate Holdings plc [2016] EWHC 1119 (QB); [2016]
Lloyd’s Rep IR 499, [184–190].
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peter macdonald eggers qc
there shall be available to the third party any remedy that would have been a vailable
to him or her in an action for breach of contract if he or she had been a party to the
contract (and the rules relating to damages, injunctions, specific performance and
other relief shall apply accordingly). This may mean that, with the passage of s. 13A
of the Insurance Act 2015, which allows an assured to claim damages from the insurer
in the event that there has been unreasonable delay in the payment of insurance claims
in breach of a statutorily introduced implied term, the third party should be entitled
to avail itself of this right. A third party can enforce a contractual term conferring a
benefit on the third party but only subject to and in accordance with the terms of the
contract (s. 1(4)). Accordingly, the third party’s rights against the insurer under the
policy cannot be greater than if the assured were enforcing the term. The interesting
question which arises in respect of a third party’s entitlement to enforce a term of the
insurance policy is the point of time at which such third party is subject to the terms
of the contract. For example, if there is a jurisdiction agreement in the insurance
contract, the question arises whether the third party must comply with that agreement
only when it purports to sue the insurer or at any earlier time when it seeks to rely on
the terms of the policy, for example by making a claim under the policy.10 The 1999
Act prevents the principal parties to a contract from rescinding or varying the con-
tract, without the third party’s consent, if the third party has communicated his or her
assent to the term to the promisor, or if the promisor is aware that the third party has
relied on the term, or if the promisor can reasonably be expected to have foreseen that
the third party would rely on the term and the third party has in fact relied on it (s. 2).
A “loss payee” provision commonly exists in property policies, often in favour of
mortgagee banks such that in the event of a claim for damage to the mortgaged
and insured vessel, the mortgagee could enforce the policy term requiring payment
of a relevant indemnity to the bank. It might be thought that “loss payee” provi-
sions are less common in liability policies because the interest being protected by such
policies is the legal liability of the assured to third parties and the position of the insurer
is potentially at odds with the third party claimant against the assured. Nevertheless,
there are marine policies which insure against both “first party” (e.g. property) loss
and “third party” (i.e. liability) loss. This is true in respect of hull policies – which also
insure against collision liability – and P&I Club insurances which insure against both
first party and third party losses. It is possible therefore that any indemnities available
to the assured for such legal liability may be payable to the third party.
In the absence of a “loss payee” or similar provision, the question may arise whether a
person to whom an assured is legally liable may be a person who could enforce the
assured’s right to an indemnity under a liability policy, pursuant to the Contracts
(Rights of Third Parties) Act 1999. For example, if a company is an assured under an
employer’s liability insurance policy, could it be said that that company’s employees
are third parties who are entitled to enforce the terms of the employer’s liability policy
under the 1999 Act? The answer is likely to be “no”, because the employer’s liability
policy does not objectively intend to confer a benefit on the employee, for example
10 Aspen Underwriting Ltd v Kairos Shipping Ltd [2017] EWHC 1904 (Comm); [2017] Lloyd’s Rep IR
635, [48–51]. See also D. Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed.,
2015), [4.51–4.56].
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direct action against insurers & p&i clubs
as a recipient of the insurance proceeds; the mere fact that the employee’s position is
improved in a general sense is not sufficient to engage the rights afforded by the 1999
Act.11 Moreover, the provisions of a liability policy often include claims-handling or
claims-control provisions, which may set the insurer at odds with the third party.
11 Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC 716
(Comm); [2009] 2 Lloyd’s Rep 123, [74–75].
12 See, e.g., The Puerto Acevedo [1978] 1 Lloyd’s Rep 38; The Good Herald [1987] 1 Lloyd’s Rep 236;
The Kapetan Markos NL (No. 2) [1987] 2 Lloyd’s Rep 321; The Rio Assu [1999] 1 Lloyd’s Rep 201; The
Oakwell [1999] 1 Lloyd’s Rep 249; ISS Machinery Services Ltd v Aeolian Shipping SA [2001] EWCA Civ
1162; [2001] 2 Lloyd’s Rep 641; The Juntha Rajprueck [2003] EWCA Civ 378; [2003] 2 Lloyd’s Rep 107;
Canmer International Inc v UK Mutual Steamship Assurance Association (Bermuda) Ltd [2005] EWHC
1694 (Comm); [2005] 2 Lloyd’s Rep 479; Almatrans SA v The Steamship Mutual Underwriting Association
(Bermuda) Limited [2006] EWHC 2223 (Comm); [2007] 1 Lloyd’s Rep 104; Dolphin Maritime & Aviation
Services Ltd v Sveriges Angfartygs Assurans Forening [2009] EWHC 716 (Comm); [2009] 2 Lloyd’s Rep 123;
Viscous Global Investment Ltd v Palladium Navigation Corporation [2104] EWHC 2654 (Comm); [2014] 2
Lloyd’s Rep 600; Aline Tramp SA v Jordan International Insurance Co [2016] EWHC 1317 (Comm); [2017]
1 Lloyd’s Rep 467.
13 Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good Luck) [1992]
1 AC 233.
14 The Aga [1968] 1 Lloyd’s Rep 431; The Evje [1973] 1 Lloyd’s Rep 509; The Corinthian Glory [1977]
2 Lloyd’s Rep 280; Metall Market OOO v Vitorio Shipping Co Ltd [2013] EWCA Civ 650; [2013] 2 Lloyd’s
Rep 541.
15 Kairos Shipping Ltd v Enka & Co LLC [2014] EWCA Civ 217; [2014] 1 WLR 3883.
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peter macdonald eggers qc
the third party. Such an assignment in respect of marine policies may be effected in
one of three ways.
First, the policy may be assigned as a whole pursuant to s. 50 of the MIA 1906.
By s. 50, a marine policy is assignable, before or after a loss, unless it contains terms
expressly prohibiting assignment.16 In order that the policy is effectively assigned
pursuant to s. 50 of the MIA 1906, the following requirements must be satisfied:
(a) the assured must have, and have retained, an insurable interest in the subject-matter
insured;17 if the policy is assigned to a third party before loss, that third party will
require an insurable interest in order to be entitled to be indemnified for a loss; (b) the
assignment must be of the “whole beneficial interest” in the policy;18 if the assured
purports to retain some interest in the policy, there will have been no effective assign-
ment for the purposes of s. 50; (c) the assignment must have been effected by indorse-
ment on the policy or in some other customary manner;19 and (d) the policy must not
provide that the policy is not assignable.
If the assignment is effective under s. 50, the assignee (the third party) is entitled
to sue on the policy in his or her own name and in his or her own interest. However,
the insurer is entitled to raise any defence as against the assignee that could have been
raised had the claim been made by the assignor (the original assured) (s. 50(2)). The
reason for this is that the assignee’s interest in the policy is merely derivative of the
assignor’s interest; and the assignee cannot be placed in a better position, by reason
of the assignment, than the assignor. Accordingly, if the insurer could have avoided
the insurance contract by reason of the assignor’s breach of the duty of fair presenta-
tion of the risk, the insurer can still avoid the insurance contract even if the claim is
presented by the assignee.20 Moreover, if the assured scuttled the insured vessel or pro-
cured the loss by some other means of wilful misconduct, the assignee cannot recover
under the policy.21 If the policy is void for illegality, the policy does not become valid
in the hands of an assignee.22
Second, a right of action under an insurance contract may be legally assigned
pursuant to s. 136(1) of the Law of Property Act 1925. For there to be an effective
16 A prohibition in the policy against an assignment will not prevent the assignor and assignee from
creating a trust in respect of the rights under the policy: Barbados Trust Co Ltd v Bank of Zambia [2007]
EWCA Civ 148; [2007] 1 Lloyd’s Rep 495. It may be that the policy will impose conditions before an effec-
tive assignment can take place (e.g. notice to the insurer: see Institute Time Clauses 1/11/95, clause 21;
International Hull Clauses, clause 23). Ordinarily, notice is not a requirement of an assignment under sect.
50 (Baker v Adam (1910) 15 Com Cas 227, 234).
17 Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81, 105; Raiffeisen Zentralbank Österreich AG v
Five Star Trading LLC [2001] EWCA Civ 68; [2001] QB 825, [64–65]; sect. 51 of the MIA 1906.
18 Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81; The Evelpidis Era [1981] 1 Lloyd’s Rep 54;
Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] EWCA Civ 68; [2001] QB 825, [63],
[67–73]. Cf. The Surf City [1995] 2 Lloyd’s Rep 242.
19 Quaere whether mere delivery of the policy without more would suffice: Baker v Adam (1910) 15 Com
Cas 227; Safadi v Western Assurance Co (1933) 46 Ll L Rep 140, 144.
20 William Pickersgill & Sons Ltd v London & Provincial Marine & General Insurance Co Ltd [1912]
3 KB 614; The Litsion Pride [1985] 1 Lloyd’s Rep 437, 517–519. However, the assignee does not bear any
independent duty of the utmost good faith to the insurer (The Good Luck [1988] 1 Lloyd’s Rep 514, 546–547;
[1990] 1 QB 818, 889–890).
21 Graham Joint Stock Shipping Co Ltd v Merchants’ Marine Insurance Co Ltd (1922) 13 Ll L Rep 509;
[1924] AC 294.
22 Bank of New South Wales v South British Insurance Co Ltd (1920) 4 Ll L Rep 266, 384.
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direct action against insurers & p&i clubs
legal assignment under s. 136(1), the following conditions must be satisfied: (a) the
assignment must be absolute;23 unlike s. 50 of the MIA 1906, however, the assignment
may relate to all of the rights under a policy or to any particular right (e.g. a right to
make an individual claim) under the policy; (b) the assignment must be of an exist-
ing, and not a future or unaccrued,24 cause of action; (c) the assignment must be in
writing; and (d) notice of the assignment must be given to the obligor.25 As with an
assignment under s. 50 of the MIA 1906, any defence available to the insurer in respect
of any claim which could have been brought by the assignor is available to the insurer
in respect of any claim brought by the assignee.
Third, an existing or future right of action under an insurance policy may be assigned
in equity.26 As assignments were not valid at common law, contractual or voluntary
assignments were recognised only in equity, unless a statute specifically recognised the
validity of the assignment. Accordingly, contractual or voluntary assignments per-
mitted by statute are often referred to as legal assignments; all other assignments are
referred to as equitable assignments. An equitable assignment may relate to a legal or
an equitable cause of action. There are no formal requirements which must be satisfied
for an assignment in equity. All that appears to be required is that the assignor does
all that is required to assign the right of action (i.e. the contractual right) either by
informing the assignee of the assignment or by informing the obligor, i.e. the insurer,
that the right of action is to be discharged by payment to the assignee. Although
notice to the insurer is not a requirement of an equitable assignment, the insurer who
has had no such notice is entitled to discharge the debt by payment to the assignor.27
The beneficial interest or rights assigned in equity will be subject to the same defences
as are available to the insurer as if the original assured (the assignor) were bringing the
claim. An equitable assignee can sue the insurer in his or her own name, but there is a
rule of practice that the assignor (who retains the legal title) should be joined if there
is a risk that the assignor might bring his or her own claim.28
If an assignee seeks to enforce the right to an indemnity under a marine insurance
contract against the insurer or a P&I Club, as the assignee’s rights are necessarily
derived from the rights of the assignor, the assignee’s rights are subject to the terms
agreed in the policy between the assignor (the assured) and the insurer, including
dispute resolution provisions. In Schiffahrtsgesellschaft Detlev Von Appen GmbH v
23 Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] EWCA Civ 68; [2001] QB 825,
[74–75]; Bexhill UK Ltd v Razzaq [2012] EWCA Civ 1376.
24 Raiffeisen Zentralbank Osterreich AG v Five Star General Trading LLC [2001] EWCA Civ 68; [2001]
Lloyd’s Rep IR 460, [60–62], [76–85]; Arnould: Law of Marine Insurance and Average (18th ed., 2013), paras.
8–48; Chitty on Contracts (32nd ed., 2015), para. 19-040; A. Guest, Law of Assignment (2nd ed., 2015),
paras. 3-24–3-26.
25 Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81, 105–106.
26 Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 1 WLR
1140; Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] EWCA Civ 68; [2001] QB 825,
[76–83].
27 Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 1 WLR
1140.
28 Three Rivers District Council v Bank of England [1996] QB 292, 304, 313, 315; Raiffeisen Zentralbank
Österreich AG v Five Star Trading LLC [2001] EWCA Civ 68; [2001] QB 825, [60]; Roberts v Gill [2010]
UKSC 22; [2011] 1 AC 240, [67] [127]. See also Chitty on Contracts (32nd ed., 2015), para. 19-040.
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peter macdonald eggers qc
Wiener Allianz Versicherungs AG (The Jay Bola),29 having reviewed the authorities
Hobhouse, LJ said:
These authorities confirm that the rights which the insurance company has acquired are
rights which are subject to the arbitration clause. The insurance company has the right to
refer the claim to arbitration, obtain if it can an award in its favour from the arbitrators,
and enforce the obligation of the time charterers to pay that award. Likewise, the insurance
company is not entitled to assert its claim inconsistently with the terms of the contract. One
of the terms of the contract is that, in the event of dispute, the claim must be referred to
arbitration. The insurance company is not entitled to enforce its right without also recogniz-
ing the obligation to arbitrate.
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direct action against insurers & p&i clubs
are transferred or assigned to the third party. However, as the right to an indemnity
under a liability policy does not accrue unless and until the existence and amount of
the assured’s liability to the third party is established or ascertained by a judgment,
arbitration award or an agreement with the assured, the third party acquires no rights
to proceed directly against the insurer under the 1930 Act unless and until the assured’s
liability is established by judgment, award or agreement.32 As the 1930 Act operates
to assign such rights of action as belong to the assured to the third party, that third
party’s rights of action against the insurer cannot, under the 1930 Act, be any greater
than the assured’s rights. Accordingly, any defences available to the insurer against a
claim for indemnity brought by the assured are available to the insurer against a direct
claim brought by the statutory assignee.33
Applying this approach, the availability of cover afforded by the liability policy is
exhausted as and when such liabilities are established, meaning that with respect to a
policy insuring against liabilities up to US$10,000,000 in the aggregate will respond
to a liability established on 1 April 2015 for US$10,000,000 and will not respond to a
further independent liability for the same amount established on 2 April 2015.34
By s. 1(3) of the 1930 Act, the parties cannot effectively contract out of the 1930
Act by purporting, directly or indirectly, to avoid the insurance or to alter the rights
of the parties under it on the assured’s insolvency.35 In addition, by s. 3, the rights of
the third party cannot be overridden by an agreement made between the insurer and
the insolvent assured after the liability has been incurred to the third party. However,
an insurance containing a provision requiring the assured to have paid the third party
before he or she becomes entitled to an indemnity under the insurance policy has been
held not to infringe s. 1(3) or s. 3. Such provisions are commonly referred to as “pay
to be paid” clauses and are frequently found in P&I Club policies.36 The 1930 Act
required the assured or the insurer to provide information relating to the policy,37 even
before the assured’s liability to the third party was established.38
Various shortcomings identified in the operation and effect of the 1930 Act were the
subject of reform by the Third Parties (Rights against Insurers) Act 2010, which came
that a third party will be able to make a direct claim against the insurer even if the insurance covered liabili-
ties voluntarily-incurred by the insured.”
32 Post Office v Norwich Union Fire [1967] 2 QB 363; Bradley v Eagle Star [1989] 1 Lloyd’s Rep 465.
See also Sea Voyager Maritime Inc v Bielecki [1999] Lloyd’s Rep IR 356; William McIlroy (Swindon) Ltd v
Quinn Insurance Ltd [2011] EWCA Civ 825; [2012] 1 All ER (Comm) 241.
33 Farrell v Federated Employers’ Assurance Association [1970] 1 WLR 1400; CVG Siderurgica de
Orinoco SA v London Mutual Steamship Owners Assn Ltd (The Vainqueur José) [1979] 1 Lloyd’s Rep 557;
Pioneer Concrete (UK) Ltd v National Employers’ Mutual General Insurance [1985] 2 All ER 395; Centre
Reinsurance International Co v Curzon Insurance Ltd [2004] EWHC 200 (Ch); [2004] 2 All ER (Comm) 28.
34 Cox v Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437; Cox v Deeny [1996] LRLR 288, 299;
Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd [2011] EWCA Civ 1570; [2012] Lloyd’s Rep IR
315; [2013] UKSC 57; [2014] Lloyd’s Rep IR 56. If the liabilities are established at the same time, the policy
will respond on a pro rata basis.
35 A provision dealing with claims control does not infringe sect. 1(3): see Centre Reinsurance
International Co v Freakley [2005] EWCA Civ 115; [2005] Lloyd’s Rep IR 303.
36 Firma C-Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1.
37 Section 2 of the 1930 Act.
38 Re OT Computers (In Administration) [2004] Lloyd’s Rep IR 669.
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peter macdonald eggers qc
into force several years after its passage on 1 August 2016.39 The 2010 Act applies to
any case where (a) the assured (i) becomes a “relevant person”, meaning a person who
is in one of several defined insolvent states, and (ii) incurs a liability to the third party,
and (b) either of these conditions is satisfied on or after 1 August 2016.40 Section 1(2)
of the 2010 Act transfers the assured’s rights against the insurer under the insurance
contract to, and vests them, in the third party to whom the assured is legally liable,
which liability is insured against under the policy in question. By s. 1(3) of the 2010
Act, the third party may bring proceedings to enforce the rights against the insurer
without having first established the relevant person’s liability; but the third party may
not enforce those rights without having established that liability. This represents an
alteration of the position which applied under the 1930 Act. The 2010 Act also extends
the meaning of when a liability is established, namely not only where the liability is
established by a judgment, award or agreement, but also by a declaration obtained
pursuant to s. 2(2) of the 2010 Act, meaning a declaration that the assured is liable
to the third party. Such a declaration may be sought and obtained whether or not the
assured is a party to the proceedings.41 Section 2(2) also permits the third party to
claim a declaration that the insurer is potentially liable to the third party, but this only
means that the insurer is liable to the third party in respect of the assured’s liability
to the third party, if established.42 As with the 1930 Act, by s. 17, provisions which
purport to terminate the policy on the assured’s insolvency are ineffective.
The 2010 Act introduced further reforms, including restricting some of the condi-
tions which may have been inserted into the policy requiring fulfilment by the assured
as a prerequisite for a valid claim. First, where the policy requires the assured to fulfil
such a condition, it is sufficient if the third party fulfils it.43 Second, any condition
requiring the assured to provide information or assistance to the insurer – other
than a condition requiring the notification to the insurer of the existence of a claim
under the insurance contract – will not apply if the condition cannot be fulfilled
because the assured has ceased to exist (i.e. if the individual assured has died or if
the corporate or unincorporated assured has been dissolved).44 Third, any condition
requiring the prior discharge by the assured of his or her liability to the third party – a
“pay to be paid” provision – will not be effective, unless the policy is a marine policy
insuring anything other than liability for death or personal injury.45 In addition,
the duty to provide information is considerably expanded by the 2010 Act: the Act
contains extensive provisions as to the third party claimant’s rights to information
concerning the insurance policy and claims made thereunder.46 Section 14(1) of the
39 Third Parties (Rights against Insurers) Act Commencement Order 2016 (SI 560/2016). Amendments
were made to the 2010 Act by the IA 2015, sect. 19, 20 and Sched. 2, and the Third Parties (Rights against
Insurers) Regulations 2016 (SI 570/2016).
40 Section 1(1), 20 and Sched. 3, para. 1 of the 2010 Act. See Redman v Zurich Insurance plc [2017]
EWHC 1919 (QB); [2018] 1 WLR 280.
41 Section 2(9) of the 2010 Act. See BAE Systems Pension Funds Trustees Ltd v Bowmer and Kirkland
Ltd [2017] EWHC 2082 (TCC); [2018] 1 WLR 1165.
42 Section 2(11) of the 2010 Act.
43 Section 9(2) of the 2010 Act.
44 Section 9(3), (4) of the 2010 Act.
45 Section 9(5), (6) of the 2010 Act.
46 Section 11 and Sched. 1 of the 2010 Act. See Peel Port Shareholder Finance Co Ltd v Dornoch Ltd
[2017] EWHC 876 (TCC); [2017] Lloyd’s Rep IR 374.
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direct action against insurers & p&i clubs
2010 Act provides that insofar as the assured’s right of action is transferred to the
third party, that third party cannot proceed against the assured for any sum which is
recoverable from the insurer.
An interesting question arises in the context of some of the insuring provisions
often found in a P&I Club’s Rules of Entry. Section 1 of the 2010 Act applies only in
respect of contracts of insurance. It was, at least in the past, a common practice for
P&I Clubs’ Rules to contain a provision that whether or not an insurance indemnity or
benefit was payable depended on the discretion to be exercised by the P&I Club’s man-
agers or board of management. The existence of such a discretion has the real poten-
tial to deprive the relevant P&I Club Entry of its character as an insurance contract,
at least to the extent that the discretion is incorporated into the relevant insuring
provision. In order to constitute an insurance contract, the insurer’s undertaking or
promise of indemnity is one by which the insurer is obliged to provide the promised
benefit to the assured in case the specified insured event occurs.47 If the undertaking is
not obligatory (e.g. because it is discretionary), it is not an insurance contract,48 with
the consequence that the relevant contract is not an insurance contract and the 2010
Act (or the 1930 Act for that matter) would not apply.
There are other statutes which provide for the transfer of rights of action against the
insurer either expressly or less directly, by requiring an insurer to honour judgments
obtained against the assured in respect of insured liabilities. However, it is unlikely
that such statutory provisions are relevant in the context of maritime liabilities.49 Such
statutes, and the Third Parties (Rights against Insurers) Acts 1930 and 2010, endow
third parties with rights of direct action against the insurer; such rights are necessarily
shaped by the contours of the cover afforded by the policy issued by the insurer to the
assured who is liable to the third party, meaning that the third party’s rights against
the insurer are dependent on the availability of the assured’s right of action against
the insurer.
47 Re Digital Satellite Warranty Cover Ltd [2013] UKSC 7; [2013] 1 WLR 605, [18–19].
48 Medical Defence Union Ltd v Department of Trade [1980] Ch 82; CVG Siderurgicia del Orinoco SA
v London Steamship Owners’ Mutual Insurance Association Ltd (Vainqueur José) [1979] 1 Lloyd’s Rep 557,
580.
49 Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1794/1981); Road
Traffic Act 1988, ss. 151–152.
50 London Steam Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain (The Prestige)
(No 2) [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep 33.
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peter macdonald eggers qc
Shipping (Oil Pollution) (Bunkers Convention) Regulations 2006 (SI 1244/2006);51
(c) article 12(8) of the International Convention on Liability and Compensation for
Damage in Connection with the Carriage of Hazardous and Noxious Substances
by Sea 2010, incorporated into English law by ss. 182A–B and schedule 5A of the
Merchant Shipping Act 1995;52 and (d) article 12(10) of the Nairobi International
Convention on the Removal of Wrecks 2007, which has been incorporated into English
law by s. 255P of the Merchant Shipping Act 1995.53
The third party rights which are provided for under such international conventions
tend to adopt the same format in that they (a) require the assured to procure insur-
ance (or other financial security) up to the sums prescribed in accordance with rights
of limitation provided for under the relevant international convention; (b) allow for
third party claiming compensation for damage to bring such claims directly against
the insurer insuring the assured’s liability for such damage; (c) entitle the insurer to
benefit from the limits of liability prescribed by the international convention, even if
the assured is not entitled to rely on such limits of liability; (d) entitle the insurer to
invoke the defences which the assured would have been entitled to invoke in answer
to the third party’s claim (although in some cases, it is provided that such defences
do not include bankruptcy or winding up of the assured); (e) allow the insurer to
invoke the defence that the damage resulted from the assured’s wilful misconduct;
and (f) provide that the Third Parties (Rights against Insurers) Acts 1930 and 2010
do not apply.
Most of these conventions do not provide that the insurer is not entitled to rely
on defences available to the insurer under the terms of the policy or as a matter of
law. Thus, in London Steam Ship Owners’ Mutual Insurance Association Ltd v The
Kingdom of Spain (The Prestige) (No 2),54 the Court of Appeal held that the insurer
was entitled to rely on a “pay to be paid” provision in a policy in proceedings brought
by a third party claimant.
By contrast, article 12(8) of the International Convention on Liability and
Compensation for Damage in Connection with the Carriage of Hazardous and
Noxious Substances by Sea 2010 has an additional provision which prohibits the
insurer from invoking any other defence which the insurer might have been entitled to
invoke in proceedings brought by the assured against the insurer, although the insurer
may be entitled to require the assured to be joined in the proceedings. This raises inter-
esting questions about how this provision interacts with statutory defences available
to the insurer (for example, under ss. 39–41 and 43–48 of the MIA 1906) and with the
avoidance of the policy by reason of an unfair presentation of the risk under ss. 17–20
of the MIA 1906 or ss. 3–8 of the IA 2015.
51 Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association (Bermuda) Ltd
[2010] EWHC 2661 (Comm); [2011] 1 Lloyd’s Rep 195. By s. 153(7)(a) of the Merchant Shipping Act 1995,
it is provided that “references to a discharge or escape of oil from a ship are references to such a discharge
or escape wherever it may occur, and whether it is of oil carried in a cargo tank or of oil carried in a bunker
fuel tank”. See also s. 153A of the 1995 Act.
52 Merchant Shipping and Maritime Security Act 1997 (Commencement No. 2) Order 1997
(SI 1539/2007), art. 2.
53 See Wreck Removal Convention Act 2011.
54 [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep 33, [24–30], [82] (Moore-Bick, LJ).
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12.7 Foreign direct action statutes
Like the UK legislation referred to above, there is legislation in many countries around
the world which grants third parties rights of direct action against insurers who
insure persons who are legally liable to those third parties. This legislation has been
considered in a number of cases before the English courts, very often in the context of
a dispute as to whether the appropriate jurisdiction in which such third party claims
against the insurers should be determined is that of the State in which the right of
direct action arises or England being the forum chosen by the insurer and assured
under a jurisdiction or arbitration agreement, or as to the application of English law
as the law applicable to the policy. This very often also involves an assessment whether
the third party’s right of action is governed by the system of law of which the foreign
direct action legislation forms part or the law governing the insurance contract (which,
in these disputes, is often English law).
In such cases, the court has held that if the foreign right of action given to the third
party is essentially a right to enforce the contract between the insurer and the assured,
such right of action must necessarily be subject to the terms of that contract, includ-
ing the choice of law clause and the jurisdiction or arbitration agreement. If, however,
the right of action operates independently of the terms of the insurance contract, the
system of law governing the right of action is likely to be that of the foreign direct
action statute.
This position was confirmed recently by the Court of Appeal in The Yusuf
Cepnioglu.55 In that case, a container vessel was time-chartered for a container liner
service between Turkey and North Africa and was insured by a P&I Club against third
party liabilities. During the charter service, the vessel grounded on the Greek island of
Mykonos and became a total loss. Cargo claims were notified to both the time charter-
ers, who issued the relevant bills of lading, and the owners of the vessel. The charterers
commenced arbitration proceedings in London against the owners in accordance with
the charterparty arbitration clause, but commenced proceedings against the Club in
Turkey relying on the right of direct action granted by Part 2, Chapter 1(B) of the
Turkish Insurance Contract Law. The Club sought an injunction from the English
Court restraining the foreign proceedings.
It was argued that the charterers’ right of action against the Club was an independ-
ent right of action, not a contractual right of action, because the Turkish legislation
was part and parcel of a statutory provision that such liability insurance cover was
compulsorily required and because certain provisions of the insurance contract were
unenforceable, in particular the “pay to be paid” clause in the insurance contract (in
the same way that such provisions are not enforceable under ss. 9(5) and (6) of the
Third Parties (Rights against Insurers) Act 2010, although not in respect of a marine
policy of this nature).
The Court of Appeal held that the first step is to characterise the nature of the
right of direct action arising under the foreign statute, having regard to its content,
rather than the circumstances in which the right arose. Thus, if the right of action
is contractual in nature, the law governing that right must be the law governing the
55 [2016] EWCA Civ 386; [2016] 1 Lloyd’s Rep 641, [14–21] (Longmore, LJ), [40–47] (Moore-Bick, LJ).
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insurance contract, in this case English law; but if the right of action was independent,
and not contractual, in nature, the law governing the right was the law of the foreign
statute. This was an issue which the Court had considered on earlier occasions.56
Moore-Bick, LJ summarised the approach as follows:57
Most, if not all, shipowners obtain liability insurance by becoming members of a P & I club,
the rules of which embody the terms of cover. They usually contain an arbitration clause and
often a “pay to be paid” clause, under which the club’s liability to indemnify the member is
conditional upon the member’s having paid the claim against it. Such clauses are enforceable
under English law in accordance with their terms … In such cases, as The Hari Bhum (No 1)
[2005] 1 All ER (Comm) 715 and The Prestige (No 2) [2015] 2 Lloyd’s Rep 33 demonstrate,
therefore, unless the injured person can pursue his claim against the club free of the arbitra-
tion clause and the “pay to be paid” clause, his claim will fail altogether. Whether in the view
of English law the claimant can do so depends on the system of law which governs the right
he seeks to enforce, as that is characterised by English conflicts of laws rules. If that right is
governed by a system of law other than that which provides a direct right of action, the latter
will not be regarded under English law as capable of modifying it. Thus, if in the present case
the right to obtain compensation from the insurer is viewed as a right to enforce an obligation
governed by English law, the English courts will not regard Turkish legislation as capable of
affecting it. Characterisation of the right to sue the insurer is thus an essential first step in decid-
ing whether the claimant can enforce it free of the incidents which would otherwise attach to it,
such as an arbitration clause or a “pay to be paid” clause … I am satisfied that the charterers’
right to recover damages against the club is essentially contractual in nature, despite the fact
that it arises under or by virtue of Turkish legislation. The question in this case … is not how the
charterers obtained a right to recover against the club, but what right they obtained. The judge’s
findings show that the charterers’ right to recover against the club was essentially circumscribed
by, and reflected, the cover provided under its rules. It is true that the legislation purported to
invalidate certain defences that the club might have raised in answer to a claim by the insured,
but those are of largely peripheral relevance. In essence the charterers became entitled under the
legislation to enforce for its own benefit the contract between the insured and the club … It is
now well-established that a person who becomes entitled to enforce a contractual obligation can
do so only in accordance with its terms. The club rules expressly provided that the contract with
its members was to be governed by English law. Accordingly, the obligation which the charter-
ers seek to enforce is governed by English law and cannot be affected by Turkish legislation.
The club’s rules also provide for arbitration in London and it is now well established that a
person who becomes entitled to enforce an obligation which is subject to an arbitration clause
must do so by arbitration in accordance with the clause: see Schiffahrtsgesellschaft Detlev Von
Appen GmbH v Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyd’s Rep 279 …
Mr Lewis sought to distinguish the position of a person who becomes entitled to enforce an
obligation by virtue of an assignment or other transfer (as was the case in The Jay Bola ) from
that of a claimant who obtains a statutory right to recover damages direct from an insurer.
In my view, however, there is no real distinction. As was made clear in the The Jay Bola, the
arbitration agreement becomes binding on the claimant because it forms an integral part of
the contract giving rise to the obligation, a circumstance which is not affected by the manner
in which the claimant obtained the right to enforce it. Accordingly, if it becomes necessary to
enforce the obligation by proceedings, that must be done by arbitration.
56 Notably, in Youell v Kara Mara Shipping Co Ltd [2001] Lloyd’s Rep IR 553, [56–61] (Louisiana,
USA); Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd (The
Hari Bhum) (No 1) [2004] EWCA Civ 1598; [2004] 1 Lloyd’s Rep 206 (Finland); Markel International Co
Ltd v Craft (The Norseman) [2006] EWHC 3150 (Comm); [2007] Lloyd’s Rep IR 403, [26–29] (Tunisia);
London Steam Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain (The Prestige)
(No 2) [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep 33 (Spain).
57 [2016] EWCA Civ 386; [2016] 1 Lloyd’s Rep 641, [40–41], [45–47] (Moore-Bick, LJ).
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One wonders what the foreign direct action statute must provide in order for it not to
operate as a statutory assignment such that the right of action is not contractual in
nature. Most such statutes are likely to provide the third party claimant with rights
against the insurer by reference to the insurance contract issued by the insurer, and the
terms of that contract.
The relevance of the governing law may be side-lined in EU cases of jurisdiction,
because of what is now the Brussels I Recast Regulation (EU) 1215/2012. Article
13(1) allows the insurer to be joined as a defendant to proceedings instituted by the
third party claimant against the assured. More importantly, article 13(2) provides that
articles 10, 11 and 12 apply to actions brought by the third party claimant against
the insurer where such direct actions are permitted. Article 11(1)(b) provides that
proceedings may be brought in the claimant’s domicile, where the claimant is “the
policyholder, the insured or a beneficiary”, but makes no reference to a third party
claimant who is an injured party. Nevertheless, in FBTO Schadeverzekeringen NV v
Odenbreit,58 the European Court of Justice held that the reference to what is now
article 11(1)(b) under the earlier Regulation
is to be interpreted as meaning that the injured party may bring an action directly against
the insurer before the courts for the place in a Member State where that injured party is
domiciled, provided that a direct action is permitted and the insurer is domiciled in a Member
State.
The position has now been expressed in article 13(2) of the Brussels I Recast Regulation
which provides that “Articles 10, 11 and 12 shall apply to actions brought by the injured
party directly against the insurer, where such direct actions are permitted”. Thus, the
third party claimant may bring proceedings in his or her own domicile which is a
Member State, provided that the insurer is domiciled in a Member State, and provided
that direct actions are permitted, presumably by the law applied by the State in which
the action is brought.59 The operation of these provisions may nevertheless be affected
by jurisdiction agreements which are permitted by articles 15–16, including contracts
of marine insurance, and by arbitration agreements. If there is no jurisdiction or
arbitration agreement in the policy requiring suit in England, any choice of law clause
in favour of English law will not be determinative in such cases.
The position referred to above must be considered in light of the recent decision of
the European Court of Justice in Assens Havn v Navigators Management (UK) Ltd
(C-368/16),60 where the issue arose whether a third party claimant, who was a party
injured by the assured, was subject to a jurisdiction agreement included in the policy.
The Court held that the insurance provisions of the Regulation were an autonomous
code provided for jurisdiction and that such a third party claimant, who was an injured
party, was not bound by such a jurisdiction agreement, even one in a marine policy which
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is ordinarily not subject to restrictions on the parties’ freedom of contract under articles
15–16, given the protection of the interests of the “weaker party”. The Court held that:61
The view must therefore be taken that an agreement on jurisdiction made between an insurer
and an insured party cannot be invoked against a victim of insured damage who wishes to
bring an action directly against the insurer before the courts for the place where the harmful
event occurred … or before the courts for the place where the victim is domiciled …
This judgment raises important questions about whether a party who is an assignee or
entitled to exercise third party rights as a loss payee would be subject to a jurisdiction
agreement included in the policy. It is likely that an assignee who agrees to the transfer
to it of rights under a policy by way of a contractual or voluntary assignment will be
taken to have agreed to the jurisdiction agreement, although the position is less clear in
respect of named beneficiaries.62 It is likely to depend on how those beneficiaries came
to be named as a beneficiary under the policy.
12.8 Rights of contribution under the Civil Liability (Contribution) Act 1978
By s. 1(1) of the Civil Liability (Contribution) Act 1978, any person liable in respect
of any damage suffered by another person may recover contribution from any other
person liable in respect of the same damage (whether jointly with him or otherwise).
Section 6(1) of the 1978 Act defines the meaning of a person being liable for the “same
damage” as follows:
A person is liable in respect of any damage for the purposes of this Act if the person
who suffered it … is entitled to recover compensation from him in respect of that damage
(whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or
otherwise).
There are certain savings and exceptions provided for in s. 7 of the 1978 Act,63 but it
otherwise provides that the right to contribution under the Act overrides any other
legal right to contribution, other than an express contractual right.
There is an interesting question whether or not the right to contribution by one
double insurer against another (provided for in s. 80 of the MIA 1906) is affected by
the 1978 Act. In the context of non-marine insurance, in International Energy Group
Ltd v Zurich Insurance plc UK Branch,64 the majority of the Supreme Court expressed
some scepticism:
It suffices to say that, if insurance contract liabilities are viewed as sounding in damages, it
appears somewhat surprising if the 1978 Act could operate as an alternative statutory remedy
with different effect in a case of true double insurance in respect of post-commencement
liabilities.
One would have thought that this scepticism must be more pronounced in the case of
marine insurance, where there is a statutory right of contribution in s. 80 of the MIA
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1906, there being no suggestion in the 1978 Act that s. 80 is repealed or amended. 65
Nevertheless, even though it may not override the insurer’s right of contribution
under s. 80, or in equity, it does not mean that the insurer may not have an independent
right of contribution under the 1978 Act against another insurer or any other person
who is liable to the assured. The insurer may have such rights against a third party
pursuant to its rights of subrogation, but if such rights of subrogation do not exist or
have been waived, the right to a contribution under the 1978 Act may still exist.
The more apposite question to this chapter is whether a third party who has com-
pensated an assured for damage sustained by the assured, whether that third party is
a wrongdoer or an indemnifier, is entitled to claim a contribution from the liability
insurer pursuant to the 1978 Act, in that they are both liable in respect of the same
damage.66 It appears that an indemnity insurer may well be a person liable for the “same
damage” within the meaning of s. 1(1) of the 1978 Act. Such a claim was allowed in
Greene Wood McLean LLP v Templeton Insurance Ltd,67 in circumstances where the
third party claimant was not negligent and therefore the assessment of the level of
contribution did not have to be based on the claimant bearing all or most of the loss.
However, the position may become complicated where the insurer would have
rights of subrogation against the third party – who is in this scenario equally liable
for the damage sustained by the assured – had the insurer indemnified the assured
in respect of that damage. If the insurer had paid the assured an indemnity for such
loss, it could have used the assured’s rights of action against the third party by way
of subrogation (s. 79 of the MIA 1906). How does this consideration affect the third
party’s right of contribution under the 1978 Act where the third party, not the insurer,
has compensated the assured in the first instance? The answer must be that in those
circumstances the third party would be primarily responsible for the loss and would
or should not have any entitlement to a contribution against the insurer under the
1978 Act. This appears to be inherent in the decision of Cooke, J in Greene Wood
McLean LLP v Templeton Insurance Ltd,68 where he assumed that the negligence
of the third party would have been an answer to the claim for statutory contribu-
tion. However, in that case the third party was liable for the damage even if it had not
been negligent under a contractual guarantee. An indemnity insurer would potentially
be entitled to be subrogated to the rights of the assured under such a guarantee unless
the guarantee was co-ordinate with the insurance policy or unless the indemnity insur-
ance contract was intended to be the primary recourse available to the assured. In that
case, the Court held that the indemnity insurance was the primary recourse.69
65 O’Kane v Jones [2003] EWHC 2158 (Comm); [2004] 1 Lloyd’s Rep 389, [186–189].
66 Greene Wood McLean LLP v Templeton Insurance Ltd [2009] EWCA Civ 65; [2009] Lloyd’s Rep IR
505, [21–28].
67 [2010] EWHC 2679 (Comm); [2011] Lloyd’s Rep IR 557, [67–84].
68 [2010] EWHC 2679 (Comm); [2011] Lloyd;s Rep IR 557, [79–80]. See also Caledonia North Sea Ltd
v British Telecommunications plc [2002] UKHL 4; [2002] 1 Lloyd’s Rep 553; Rathbone Brothers plc v Novae
Corporate Underwriting [2013] EWHC 3457 (Comm); [2014] Lloyd’s Rep IR 203, [60–72]; [2014] EWCA Civ
1464; [2015] Lloyd’s Rep IR 95.
69 [2010] EWHC 2679 (Comm); [2011] Lloyd’s Rep IR 557, [60–61].
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12.9 Conclusion
Insurance is a commercial imperative in a risky world. Notwithstanding centuries of
refinement and statutory reform, many of the fundamental principles of insurance
law are still to be developed, often against the background of other legal topics or
systems of law. The rights of third parties against insurers remains an important topic
for consideration. There is specific legislation in the United Kingdom, the European
Union, internationally and elsewhere dealing with third party rights against insur-
ers, especially those areas where vulnerable parties are concerned (not least motor
insurance). The realm of commercial insurance, including marine insurance, is more
complex and gives rise to difficult issues which require thought and resolution on a
case by case basis. In any event, the certainty of the legal position is more valuable
in many respects than any continuing uncertainty. In many respects, the position is
clear, but the fairness of the position must continue to be tested. In other respects,
the position is less clear. Such cases can pose real difficulties which require careful
handling, given the insurers’ requirement to make adequate reserves and to keep
claims files open to reflect their potential exposure not only to assureds but also to
third parties.
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PART II
13.1 Introduction
The object of having international maritime conventions, as Patrick Griggs nicely put
itin 2003, is to reflect the fact that “those involved in the world of maritime trade need
to know that wherever they trade the applicable law will, by and large, be the same”.1
In this chapter I want to look at the ship arrest conventions – the highly popular pact
of 19522 and the less widely adopted but actually rather similar one of 1999.3 These
are certainly popular, in that they are not only widely ratified but in addition applied
in practice by a number of other states which have chosen not to sign them but have
nevertheless passed legislation embodying their rules.4 Furthermore, they indubitably
cleared up a number of issues that had troubled maritime lawyers in the early twenti-
eth century. But that is now past history. On an increasing number of contemporary
questions where there is no substantial agreement5 they have nothing to say. It follows
that unless we are happy to regard them in the future in much the same light as
Dr Johnson regarded remarriage – a triumph of hope over experience6 – something
further may need to be done.
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13.2 History
A little background history of the 1952 and 1999 Conventions may help to start with.7
The movement to harmonise at least some of the law affecting arrest began seriously
after the First World War. The first widely accepted convention was the liens and mort-
gages convention of 1926;8 admittedly this did not deal directly with arrest, but it
affected it indirectly in a very important way, by requiring the holders of certain
maritime lien-style claims to be given priority over other arresting claimants when
it came to dividing up the proceeds.9 Following the success of this treaty, in 1930 the
CMI turned its mind to questions of arrest specifically: in particular, who should be
entitled to arrest a vessel, which vessels he should be allowed to arrest, for what claims,
how release from arrest should be regulated and whether arrest for a claim that proved
groundless should attract compensation. These were areas where there was noticeable
disagreement, due in particular to a fundamental difference in outlook between civil
and common lawyers.10 Civil law jurisdictions regarded the right of arrest as essen-
tially ancillary to an action in personam,11 similar in some ways to the (later) English
freezing injunction12 though by no means identical with it.13 It was thus natural to
regard it as available in respect of any property of the defendant, whether or not
a ship, and available to support any claim against him, whether or not maritime in
nature, but for the same reason limited to cases where the courts of the relevant state
already had jurisdiction over the defendant.14 The common law, by contrast, put arrest
of ships in a separate category of “claims in rem”, a concept unknown to civil lawyers;
it also limited its use to maritime claims, and confined its exercise to the ship in respect
of which the specific claim arose and her appurtenances.15
The matter of unification between these disparate positions was discussed at confer-
ences in 1933 and 1937 (when the issue of arrest for groundless claims was dropped as
beyond any possibility of agreement),16 left on ice for obvious reasons between 1939
and 1945 and revived shortly afterwards. In 1949 the present provisions of the 1952
7 See the excellent account in F. Berlingieri, The Arrest of Ships (6th ed), (Informa Law, 2016), Ch 1.
8 International Convention for the Unification of Certain Rules of Law Relating to Maritime Liens and
Mortgages, Brussels, 10 April 1926. It has been ratified by something over 20 states, mainly European but
with a scattering of South American ones as well.
9 See Art.3 (“National laws may grant a lien in respect of claims other than those referred to in the said
last-mentioned Article, so, however, as not to modify the ranking of claims secured by mortgages, hypoth-
ecations, and other similar charges, or by the liens taking precedence thereof ”).
10 W. Tetley, “Arrest, Attachment, and Related Maritime Law Procedures”, 73 Tul LR 1895 (1999).
11 A. P. Trichardt, “Arrest as Security and Security Arrest” (paper delivered at an International
Colloquium on Arrest, Singapore, November 2016, on file with the author), 32–34.
12 Ironically the freezing injunction did not exist in England at that time, its unavailability being thought
to follow from the now discredited Lister v Stubbs (1890) 45 Ch.D. 1. Its gestation is normally dated from
Mareva Compañía Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep. 509; the jurisdiction to
give it is now statutory, deriving from the Senior Courts Act 1981, s.37(1) and CPR 25.1(f).
13 For example, in some countries it might create a form of secured status. This has never been true
of the freezing order: see e.g. The Angel Bell [1981] 1 Q.B. 65, 72 (Robert Goff J); Flightline Ltd v Edwards
[2003] EWCA Civ 63; [2003] 1 W.L.R. 1200 at [47] (Jonathan Parker L.J.).
14 As still is the case in France, where arrest cannot itself found jurisdiction. See the excellent
A. Leborgne, Droit de l’exécution (2/e), No 2979. However, this feature was not universal. Scotland in
particular allowed a procedure known as arrest ad fundandam jurisdictionem to create its own jurisdiction
in personam.
15 For the detailed history see D. Jackson, Enforcement of Maritime Claims (3rd ed), (LLP, 2000), Ch 1.
16 Hence the present Art.6 leaving such liability up to the forum arresti.
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Convention limiting the right of arrest to maritime claims and allowing the arrest of
sister-ships were finalised, together with rules about jurisdiction and a few other minor
matters;17 and it was the 1949 text that was adopted essentially unaltered in May 1952.
The result was a treaty that reconciled the worst disagreements between common
and civil lawyers by: (a) limiting arrest to a numerus clausus of maritime claims; (b2)
allowing arrest of the vessel concerned or any other ship in the same ownership; and
(c) laying down conditions for release.
The 1999 Convention later developed by the CMI was not radically innovative. It
was in essence a modernised version of the 1952 one, dating from a draft first appear-
ing at the CMI’s Lisbon conference in 1985 and later updated for UNCTAD in 1997.18
Its main innovations were a requirement to apply its rules to all vessels and not simply
to those flagged in other States party (as had been the case with the 1952 Convention);
a slight extension of the class of arrestable claims (to cover, for instance, insurance
premiums and pollution liabilities); and an explicit requirement for the forum arresti
to take jurisdiction over the substantive issue, a matter only partly dealt with under
the 1952 Convention and otherwise left up to the lex fori. It also cleared up some
other minor points, including a problem arising in civil law jurisdictions over arrest of
vessels not owned by the person who would have been liable on the claim in personam19
(which was specifically limited to cases where execution would be leviable against the
vessel if the claim remained unpaid).20
17 For example, re-arrest, now to be found in Art.3(3), and the need for minimum procedural safeguards
(Art.4).
18 See N. Gaskell & R. Shaw, “The Arrest Convention 1999” [1999] LMCLQ 470, 470–472;
“Comment on the New International Convention for the Arrest of Ships, 1999”, 55 U Miami L.Rev 453,
461 (2001).
19 For an excellent account of the problems caused by this in one civil law jurisdiction (Belgium), see B.
Insel, “Le cas de OW devant les juridictions belges: Point de vue du fournisseur“ DMF 2016, 124. Essentially
the problem was that the 1952 Convention gave a right of arrest, but apparently no right of sale if the claim
remained unpaid, thus in theory leaving the vessel in limbo until the Last Trump.
20 The problem does not arise in common law jurisdictions, since arrest automatically creates a security
right allowing sale of the vessel, irrespective of whether the owner could have been sued in personam.
21 To take an example at random, container hire: The River Rima [1988] 2 Lloyd’s Rep 193.
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Both Conventions essentially agree to paper over this rather large crack by leaving
arrest procedure to the law of the arresting court. Another concerns compensation for
arrests based on facts that turn out not to have been established: must the arresting
party (a) pay, and/or (b) put up security for, compensation to the shipowner and, if
so, should liability be automatic or should it depend on fault? Again, practice varies
enormously,22 and both Conventions faute de mieux leave this highly important issue
up to the lex fori arresti.
On the other hand, there remain at least three issues not covered by either Convention
and not seriously discussed at the time, but which are of considerable potential impor-
tance today. These are: (a) the security function of an arrest; (b) the geographical reach
of arrest orders; and (c) the effect of international insolvency law on arrest.
22 In England, liability here depending on a showing of bad faith or gross negligence in the arresting
claimant: The Kommunar (No.3) [1997] 1 Lloyd’s Rep 22. In many civil law jurisdictions compensation is,
by contrast, automatic.
23 Art.7.
24 1952 Convention, Art.6; 1999 Convention, Art.2.4.
25 We are not concerned here with the freezing injunction, though we touch on it in a different context
below.
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c laimant-friendly in not requiring a prima facie case to arrest, or obliging arresters
26
to compensate shipowners if the claim is ill-founded;27 more importantly, they give the
claimant a proprietary interest in the ship from the moment he issues his claim. Even
before any physical arrest, he has a security interest in the vessel, good against not only
general creditors28 but subsequent purchasers as well,29 and enforceable against the
vessel herself even if the owner is not liable at all in personam.30 This interest, moreo-
ver, may also support not only an English judgment but also an arbitration award,31
and is realisable by a special procedure for court-supervised sale. The only substantial
effect of the 1952 Convention on all this is to add a right to arrest sister-ships as well
as the vessel in respect of which the claim arose. There are only three restrictions. First,
to obtain security the claim must have been commenced before formal insolvency
proceedings have started: it is too late once the insolvency regime has kicked in.32
Secondly, an administration order or corporate rescue measure might impose some
restrictions on the right of an arresting party,33 though these are unlikely to be sig-
nificant in practice.34 Thirdly, any security over the ship has to be shared with anyone
else who could have arrested her and intervenes in time, according to the accepted
scheme of priorities (liens, then mortgages, then other claims): to this extent the vessel
is regarded as a separate notional patrimony.35
By contrast, the civil law tradition of treating ships as nothing special, and their
arrest as a mere ancillary to an ordinary claim in personam,36 often tends tend to devalue
the arresting claimant’s rights. A classic instance, very much at the other end of the
spectrum from England, is France. There the right of arrest (saisie-conservatoire) is,
saving the effects of the 1952 Convention, largely based on the general law,37 itself said
to be “based on a personal liability conception of creditors’ rights,” under which “any
26 Since Admiralty proceedings can be issued as of right, and since 1986 a warrant of arrest has been
generally available as of right: cf The Varna [1993] 2 Lloyd’s Rep 253 and see now CPR 61.
27 Liability here depending on a showing of bad faith or gross negligence in the arresting claimant: The
Kommunar (No.3) [1997] 1 Lloyd’s Rep 22.
28 Technically on the basis that leave needs to be given for any proceeding against an insolvent company,
but will invariably be given: Re Aro Co Ltd [1980] Ch 196.
29 See The Monica S [1968] p. 741
30 For example, in the case of bunkers supplied to a bareboat charterer: Senior Courts Act 1981, s.21(4).
31 Arbitration Act 1996, s.11. It seems, however, that an arrest aimed simply at supporting the award of
a foreign court will be vacated: The Vasso.
32 Compare The Zafiro [1960] P 1 and Re Aro Co Ltd [1980] Ch 196 with The Oriental Baltic [2011] 1
SLR 487.
33 Under the rule that in administration proceedings, as against liquidations, some restrictions on the
exercise of third-party proprietary rights may be appropriate: Re Atlantic Computer Systems Ltd [1992] Ch
505, 525 et seq (Nicholls LJ), and Cosco Bulk Carrier Co Ltd v Armada Shipping SA [2011] EWHC 216 (Ch)
at [49] (Briggs J).
34 Because restrictions on a secured creditor’s rights in an administration are justified only in so far as
they will aid the company to trade its way out of difficulties. In practice, once matters have reached the stage
of ship arrest this will rarely if ever be the case.
35 It is this feature which perhaps best justifies the assertion that an action in rem is best regarded as
being against the ship herself.
36 E.g. A. Leborgne, Droit de l’exécution (2/e), No 2953 et seq; H. Puttfarken, Seehandelsrecht, No 799
(“(Dinglicher) Arrest bei uns ist ein allgemeiner Titel gegen den Schuldner, den der Gläubiger nach seiner Wahl
in Gegenstände dessen gesammten Vermögens vollziehen kann“).
37 See Code de Commerce, Art.R5114-115 (“Les modalités selon lesquelles les navires peuvent faire l’objet
de saisies conservatoires sont régies par les dispositions générales du code des procédures civiles d’exécution,
sous réserve de l’application des conventions internationales ...”).
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professor andrew tettenborn
vessel belonging to the debtor can be arrested, on the basis of the creditors’ general
right to satisfaction from the debtor’s property”, in respect of “all claims, including
non-maritime ones”.38 This has a number of important results. One is that, unlike
the action in rem, a saisie-conservatoire as such confers no right to have the vessel
sold; for this another procedure (saisie-exécution) has to be used, involving proof of
a valid claim in personam and the right to levy execution against the vessel to satisfy
it.39 Another is that arrest is divorced from security.40 This means that, although a
claimant may demand the provision of a bank guarantee or other security as the price
of lifting an arrest, arrest as such technically gives him no security over anything: he
must therefore stand aside in the case of formal insolvency proceedings, whose effect
is to deprive the creditor of his normal means of recourse against the debtor and his
property.41 A third is that, since arrest is in theory merely ancillary to an action in per-
sonam, difficulties can arise over vessels being arrested (except in the case of maritime
liens) where there is no in personam liability in the owner. Logically this should not
be allowed, and indeed France refuses to permit it in cases where the vessel has been
sold to someone else.42 A few decisions in civil law jurisdictions take the logic further
and, despite the fact that the 1952 Convention specifically allows arrest in respect of
obligations incurred by demise or other charterers, bar it where there is no underlying
liability in the owner:43 the French tendency, however, is to temper logic with pragma-
tism here and allow arrest in these cases, apparently on the basis that there should be
read into these provisions an implicit provision allowing the vessel exceptionally to be
sold in respect of the debt of another.44
But, just as common law jurisdictions are not uniform, neither are civil law ones.
Thus although much of the theory underlying the German law of arrest is similar
to that in France,45 Germany does give the creditor a security interest in the ship,
38 A. Leborgne, Droit de l’exécution (2/e), No 2955 (author’s translation here and below). It is sig-
nificant that this account appears in a book on civil procedure and not one on maritime law. See too the
(slightly dated) account in W. Tetley, “Arrest, Attachment, and Related Maritime Law Procedures” 73 Tul
LR 1895, 1940 (1999) et seq. It follows that here, far from extending rights of arrest, the 1952 Convention
(to which France is a party) is largely effective as a restriction, in respect of ships flagged in Convention
countries.
39 A. Leborgne, Droit de l’exécution (2/e), No 2953 (“[such a procedure] can be set in motion, where the
owner is proved to be insolvent, but this is an entirely separate procedure”). See below for the problems this
causes under Art.3.4 of the 1952 Convention.
40 Until December 2016 legislation made this clear: Décret 67-967 de 1967, Art.30 (“[Arrest] stops the
ship from departing. It does not affect the rights of her owner in any way”); but this still seems to remain
the case. See too J. Ligonie, Forage: contrats et statut de l’engin maritime, 167, citing R. Rodière, Précis de
Droit Maritime, No 179.
41 See Code de Commerce, Arts.622-21 and 632-1. Compare J. Ligonie, Forage: contrats et statut de
l’engin maritime, 167, citing R. Rodière, Précis de Droit Maritime, No 179 (“[La saisie conservatoire]
suppose un armateur insolvable mais qui n’est pas déclaré en liquidation des biens, ni mis en état de règlement
judiciaire, parce que ces procédures suspendraient les voies de droit individuelles contre l’armateur“).
42 Aix-en-Provence 24 May 2002, Grand Seaways Limited v. Total Fina Elf - The “Renai I” and “Renai
II” 2002 DMF 772. See too Rouen 22 May 2003 (MV Skaufast) 2003 DMF 737.
43 F. Berlingieri, The Arrest of Ships (6th ed), (Informa, 2016), 272–273.
44 See the decisions in Cass Civ 13.12.1994, 92-14307; Montpellier 1.12.2003 (Sargasso), 2004 DMF
435 (demise charterer); Rennes, 25.9.2012, 12/00623, 2013 DMF 335 (time charterer). See generally
F. Berlingieri, The Arrest of Ships (6th ed), (Informa, 2016), 271.
45 See H.Puttfarken, Seehandelsrecht, No 799.
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albeit only from the actual arrest, and only on the basis that it may be vulnerable to
46
subsequent insolvency proceedings.47 The difficulty arising from the contrasting posi-
tions just described is not hard to see. However much the 1952 and 1999 Conventions
may have unified world arrest law by guaranteeing a right of arrest, this does not mean
very much unless there is also some degree of uniformity over what that right actually
gives the claimant. But this is simply not present: currently what the claimant gets out
of this right is essentially a ticket for a lottery, depending on which 1952 (or 1999)
jurisdiction he happens to be able to arrest in. If the object of the arrest conventions is
to reduce as far as possible the differences between such jurisdictions, there is a strong
case for more uniformity on the question of the security effect of an arrest – perhaps a
minimum requirement that on physical arrest the rights of the arresting party should
from then on be regarded as secured on the vessel, subject only to other rights available
to other potential arresting parties.
46 ZPO, § 930.1 (Die Vollziehung des Arrestes in bewegliches Vermögen wird durch Pfändung bewirkt);
see too ZPO, § 931.1.
47 This being because, even though the arrest creates a hypothec (Pfändung), it is still regarded as a
means of execution (Zwangsvollstreckung), and any security obtained within one month before the com-
mencement of insolvency through measures of execution is invalidated: see InsO, § 88.1. It may even be
that provisional measures taken before the formal opening of proceedings can force the lifting of an arrest
under ZVG, § 30d: compare the decisions in LG Bremen, 14.08.2011, 2 T 435/11 (yes) with AG Hamburg,
03.03.2015, 67a IN 400/14, IPRax 2016, 72 (no).
48 Derby v Weldon (No 3) [1990] Ch. 65; S. Gee, Commercial Injunctions (6th ed), (Sweet & Maxwell,
2016) paras.12-37–12-41. See generally L. Collins, “The Territorial Reach of Mareva Injunctions” (1989)
105 L.Q.R. 262. Under the revised s.25 of the Civil Jurisdiction and Judgments Act 1982, moreover, such
orders can now be given in support of proceedings anywhere in the world.
49 The Rena K [1979] Q.B. 377 confirms that a freezing injunction may apply to ships. As regards ships
abroad, an example seems to be Royal Bank of Scotland plc v FAL Oil Co Ltd [2012] EWHC 3628 (Comm);
[2013] 1 Lloyd’s Rep 327. Another possible instance is E v M [2013] EWHC 895 (Comm) (though the need
to anonymise the parties to the proceedings in the report makes it a little difficult to tease out the facts).
50 Decision of the Πρωτοδικείο Πειραιώς (High Court of Piraeus), 2716/1988; see G. Theocharidis,
“Jurisdiction for Provisional Relief under the Brussels Convention in Maritime Context” (2002) 55 Rev
Hellénique de Droit International 453, 491.
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professor andrew tettenborn
On the first question, the point is not clearly answered by the Conventions’ defini-
tion of arrest: “detention of a ship by judicial process to secure a maritime claim”
(1952 Convention, Art.1(1)), or “detention or restriction on removal of a ship by order
of a Court to secure a maritime claim” (1999 Convention, Art.1(2)). Nevertheless, it
is submitted that the better view is that such “long-arm” proceedings do not come
within it. This is not because such orders are fundamentally different from an action
in rem, being mere orders ancillary to other claims with no security implications.51
Such a parochially common law based view ignores the fact that the French saisie-
conservatoire and the German Arrest are conceptually nearer to the freezing injunction
than the claim in rem and yet are accepted universally to be covered by the Convention
definition. Rather it is because the phrase “detention … by judicial process” in Art.1(1)
(in the equally authentic French version, “immobilisation … avec l’autorisation de
l’autorité judiciaire”) and its equivalent in the 1999 Convention52 would seem to imply
at least an order physically enforceable in some way in the jurisdiction where the ship
happens to be.53 Had the Convention meant to encompass any order of any court
anywhere, even if enforceable only in personam and with no direct coercive effect on
those in physical charge of the vessel, it is suggested that the word “detention” would
not have been used.
If this is right, “long-arm” arrests, not being the subject of the Conventions at all, are
not controlled by them and hence are not impermissible. However, it is also suggested
that the same conclusion follows even if they are technically “arrests”. The question
then is whether they are permitted. The relevant article here is Article 4 of the 1952
Convention, which provides that a ship “may only be arrested under the authority of
a Court or of the appropriate judicial authority of the contracting State in which the
arrest is made”.54 This phrase could be construed narrowly, as meaning simply that a
Convention State must not physically, manu militari, keep a ship in a port in its jurisdic-
tion to answer a civil claim without a local judicial order of some kind. On the other
hand, it could be interpreted more widely, as providing that where a ship is physically
present in a contracting State,55 only the courts of that state are to have jurisdiction to
issue any orders preventing its movement, with the implication that other Convention
States agree that their courts will not issue “long-arm” decrees having the same effect.56
Thus (for example) worldwide freezing orders under English law would on this inter-
pretation be banned in so far as they affected ships in other 1952 Convention countries,
51 So that (for example) the fact that proceedings in rem fall to be dismissed does not prevent the claim-
ant obtaining a freezing injunction to support the same claim: see The Rena K [1979] Q.B. 377.
52 In Art.1.2, “detention or restriction on removal of a ship by order of a Court” (French: “toute immo-
bilisation ou restriction au départ d’un navire en vertu d’une décision judiciaire“).
53 Hence this is assumed to be necessary in A. P. Trichardt, “Arrest as Security and Security Arrest”
(paper delivered at an International Colloquium on Arrest, Singapore, November 2016, on file with the
author), 27.
54 Art.2 of the 1999 instrument is in similar terms. Art.2.2 says: “A ship may be arrested or released
from arrest only under the authority of a Court of the State Party in which the arrest is effected”.
55 If the vessel is in a third country, the Convention cannot apply anyway.
56 So held, apparently, in Italy: Genoa, 21.5.2004 (European Stars), 2006 Dir. Mar. 537 (Art.4 of the
1952 Convention barred saisie-conservatoire proceedings in Italy against ship then docked in Barcelona).
See too Genoa, 24.4.2004 (European Vision), 2006 Dir. Mar. 524; F. Berlingieri, The Arrest of Ships (6th ed),
(Informa, 2016) para.7.21.
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or possibly anywhere other than England. Of these two interpretations, the marginally
better one is, it is suggested, the former: that is, that Art.4 does not as such restrict the
territorial reach of state court orders. There is little doubt that the aim of the article was
simply the prevention of mere rubber-stamp or administrative arrests by a guarantee
of judicial intervention before a vessel was forcibly prevented from leaving a port in a
contracting State. The need to prevent “long-arm” proceedings by courts in third states
remote from the scene of the action does not seem to have been in the draftsman’s mind
at the time, so as to suggest any wider application.
In summary, therefore, the law is uncertain, but it is probable that there is no
Convention prohibition on “long-arm” arrests. Both propositions are problematical.
Unclarity in a convention aimed at international uniformity is a clear defect. More
to the point, however, it is suggested that the probable position under the present
convention is not satisfactory. A court order not to leave a given port is a hazard to a
shipowner, whether it is potentially enforceable by a gunboat’s shot across the bows or
by sequestration of his hard-won assets in some other jurisdiction many miles away. If
the owner is to receive protection against immobilisation of his ship, there is much to
be said for the idea that he should need to regard only the legal system of the port he
is visiting, without having to consider in addition a series of faxes containing orders
from ports half-way across the globe. Proceedings of that kind should be concen-
trated in the jurisdictions which have the power to act under the 1952 Convention and
enforce their decisions there and then.
57 For further details see A. Tettenborn, “International Insolvency Law: Its Effect on the Arrest of
Ships” in O. Fotinopoulou-Basurko & J. Martín Osante (eds), New Trends in Maritime Law (Aranzadi, 2017),
101–123; S. Derrington, “The Interaction between Admiralty and Insolvency Law” (2009) 23 ANZ Mar Law
Jo 30, 33.
58 In The Halcyon Isle [1981] AC 221. Admittedly earlier authority had long suggested this was so: e.g.
The Tagus [1903] p. 44.
59 See The Pacific (1864) Br & Lush 243, 246 (Dr Lushington), as interpreted in The Monica S [1968]
p. 741, 746 et seq (Brandon J). It should be remembered that a right of arrest other than to enforce a mari-
time lien or mortgage did not exist in England until the Admiralty Court Act 1840 came into force.
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But this comfortable stability is now well and truly upended, courtesy of two vital
twenty-first century developments: the UNCITRAL Model Law on Cross-Border
Insolvency,60 and the European Union (EU) Insolvency Regulation.61
The UNCITRAL Model Law is a UN-sponsored template for legislation sus-
ceptible to adoption in varying flavours,62 adopted in some form or other by over
40 jurisdictions, including Australia, Canada, Greece, Japan, Korea, New Zealand,
Singapore, South Africa, the UK and the US63 (though not China, Hong Kong or
most of Western Europe). In essence it requires recognition elsewhere of insolvency
proceedings64 commenced in a companys “centre of main interests” or COMI (effec-
tively its home jurisdiction),65 a requirement that encompasses an automatic standstill
of proceedings against the debtor and its property,66 Subsequently, the courts of the
recognising jurisdiction have a more general jurisdiction to grant appropriate relief to
effectuate the foreign insolvency.67
It is beyond doubt that the Model Law requirement of a stay of proceedings covers
ship arrest, presumptively annulling both it and any security granted by it, whatever
the position under the arresting jurisdiction.68 But enacting states are entitled to intro-
duce exceptions,69 for example to ensure that the stay merely parallels that applica-
ble in domestic insolvency proceedings;70 furthermore recognising courts have a large
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iscretion as to any subsequent measures taken to give the foreign proceedings effect.
d
The extent to which jurisdictions invoke these powers varies greatly. Some (notably the
US),71 have hardly done so: as a result, any automatic priority afforded the arresting
claimant has largely gone, with the question of priorities left to be decided almost
exclusively by the courts of the debtor’s COMI.72 By contrast, the UK assimilates the
automatic effect of a foreign insolvency to that of a winding-up order in England,73 and
for good measure prevents it affecting security rights.74 Further, it has been made clear
that the subsequent jurisdiction to give effect to the foreign proceedings will merely
apply the rules of the nearest equivalent English procedure.75 Australia76 and New
Zealand77 are much the same. The result is that except in the case of corporate rescue,
priority available under the arresting jurisdiction is not taken away merely because the
law of the debtor’s centre of main interests might not recognise it;78 and even in the
case of corporate rescue the arrester will lose his right of enforcement only in the cir-
cumstances when he would have lost it under English law, which are rather limited.79 In
short, by and large the status of an arresting party in the local jurisdiction is preserved.80
Turning to the EU insolvency regime,81 the contrast is very noticeable. The Recast
Insolvency Regulation,82 applicable to insolvent debtors in any EU member State
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where the debtor’s COMI is situated elsewhere in the EU,83 starts like the Model
Law with insolvency proceedings controlled in the first instance by the courts of a
debtor’s COMI.84 But it goes much further: almost no margin of appreciation is given
to the host state, and the rules of the COMI have close to full effect throughout the
EU,85 including questions of what assets form part of the estate,86 the distribution of
assets87 and the staying of actions against the debtor or its property.88 This clearly
includes ship arrest; it means, for example, that where a German-owned ship is arrested
in England but the owner is insolvent and German insolvency law bars enforcement
proceedings,89 the arrest must be lifted.90 True, there is an ill-drafted protection for
third party rights in rem in respect of assets in other member States,91 but it seems clear
that these are not apt to protect what is regarded in European terms as procedural
advantages stemming from arrest.92
The difficulty with all this is easily expressed: in this area of the law the arrest con-
ventions have simply been overtaken by events. The issue of transborder insolvency,
vital to the rights of claimants, has injected a new kind of non-uniformity into the law,
of a kind intended to be prevented by them, and thus in part defeated their object.
of aspects of it with the UNCITRAL Model Law, see P. Omar, “The Extra-territorial Reach of the
European Insolvency Regulation” (2007) 18 I.C.C.L.R. 57.
83 Save for Denmark, which has opted out of co-operation in matters of justice.
84 A concept which must be regarded as EU-autonomous: Interedil Srl v Fallimento Interedil Srl
(C-396/09) [2011] E.C.R. I-9915 at [44].
85 Art.17 (“opening of proceedings in the debtor’s COMI ‘shall, with no further formalities, produce the
same effects in any other Member State’ as would apply under the law of the COMI”).
86 Insolvency Regulation, Art.4.2(b).
87 Insolvency Regulation, Art.4.2(i).
88 Insolvency Regulation, Art.4.2(f).
89 See InsO, § 89.
90 As a number of decisions interpreting the Regulation make clear: notably the two French decisions in
CA Aix, 29.6.2001, and Aix, 7.12.2012; and the Italian decision in Celia, Il Diritto Maritimo, 2013 II 690.
91 Insolvency Regulation, Art.5.
92 See Puglia di Navigazione SpA v Cambiaso & Risso Marine SpA, DMF 2012, 131 (Aix, 29.6.11) and
La Spezia, 09.08.2013, Il Diritto Marittimo 2013, 690.
93 For a useful discussion, see W. Tetley, “Uniformity of International Private Maritime Law - the Pros,
Cons, and Alternatives to International Conventions - How to Adopt an International Convention”, 24 Tul.
Mar. L.J. 775, 815 (2000).
94 As pointed out in, e.g., P. Griggs, “Obstacles to Uniformity of Maritime Law” (2003) 34 JMLC
191, 194.
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of arrest in certain cases, limit it in others and lay down a few procedural requirements.
The differences between them, for example in the cases where arrest is permissible95 or
in procedural matters,96 lie in fairly minor matters of detail. It would be perfectly pos-
sible to draft a further convention, dealing with the matters discussed in this chapter,
which would be consistent with both of them, able to be signed in addition by those
jurisdictions that wished to do so, and called something like the “Supplementary Arrest
Convention”. Although detailed matters would be up for negotiation, its aim would
be to deal in short order with the three problems discussed here. As regards questions
of territoriality, it would provide for States party to agree that their courts would not
issue orders purporting to prevent the departure of ships, except in respect of vessels
in their own territory. Concerning the effect of arrest on other creditors, the essence
would be an agreement that certain acts of arrest should create security over the vessel
in favour of those entitled to arrest her, and render her immune from that moment on
to any other claims based on insolvency law, unless and until all claims by arresting
parties had been satisfied. And as regards international insolvency law, it would be
agreed that the rights of any arresting party remained unaffected by the insolvency law
of any state other than the arresting jurisdiction. In order to encourage acceptance,
it might be further provided that States party could pick and choose between these
provisions: a matter which would, for example, make it easier for EU member States
to join were the EU to veto any limitation on the effect of the Insolvency Regulation
(which for obvious reasons would have to be sidelined). The details, as we have said,
might perhaps be left till later. But the principle would be as outlined. Perhaps for
once this is an improvement that we could get without introducing the complexity,
uncertainty and inconvenience which normally accompanies such changes.
95 For example, the cases of canal dues and claims arising from sale contracts, allowed under Art.1(n)
and (v) of the 1999 Convention but not that of 1952.
96 For example, jurisdiction: see the guarantee of substantive jurisdiction in the arresting state in Art.7
of the 1999 Convention, not present in that of 1952.
201
JURISDICTION & APPLICABLE LAW AFTER BREXITprofessor simon baughen
CHAP TER 14
On 23 June 2016 the people of the United Kingdom (UK) voted in a referendum
to leave the EU. Notice to leave the EU under Art. 50 of the Treaty was given on 29
March 2017, following passing of the European Union (Notification of Withdrawal)
Act 2017, with the effect that after two years, at 11 pm on 29 March 2019, the UK
will cease to be a member of the EU. EU legislation takes effect in the UK legal order
through the European Communities Act 1972. Section 2(1) ensures that rights and
obligations in some types of EU law, such as the EU treaties and regulations, are
directly applicable in the UK legal system, without the need for the UK Parliament
to pass specific domestic implementing legislation. Section 2(2) provides a delegated
power to allow for the implementation of EU obligations, for example obligations in
directives, by way of secondary legislation (through statutory instrument).
With the repeal of the European Communities Act 1972 all EU legislation –
regulations, and secondary legislation implementing directives pursuant to the powers
granted by s. 2(2) of the European Communities Act 1972 – will then cease to have
effect in the UK. From the EU perspective, Article 50(3) provides that:
the Treaties shall cease to apply to the state in question from the date of entry into force of
the withdrawal agreement, or failing that, two years after the notification [of withdrawal]….
unless the European Council, in agreement with the Member State concerned, unanimously
decides to extend this period.
The Treaties are the Treaty on European Union (TEU) and the Treaty on the
Functioning of the European Union (TFEU).
A substantial percentage of the UK’s laws derive from EU legislation, either directly
from regulations, or indirectly from implemented directives.1 To avoid the legal chaos
* Professor of Shipping Law.,Institute of International Shipping and Trade Law, Swansea University.
1 According to the EU’s Eur-lex website there are at present nearly 20,000 EU legislative acts in force.
These are mainly directives, regulations, decisions and international agreements, but they include a range of
other instruments. Of these, around 5,000 EU regulations are directly applicable in all EU Member States
(Briefing Paper 7863, ”Legislating For Brexit: Directly Applicable EU Law“), 12 January 2017, and around
7,900 statutory instruments have implemented EU legislation (Briefing Paper 7867, ”Legislating for Brexit:
Statutory Instruments Implementing EU Law”, 16 January 2017).
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jurisdiction & applicable law after brexit
that would occur with their abrupt disappearance at 11 pm on 29 March 2019, the 2
2 At the time of writing, 13 December 2017, it appears that there may be transition period after this
date during which the UK will remain subject to existing EU regulatory, budgetary, supervisory, judiciary,
enforcement instruments and structures.
3 Clause 4. Examples of these EU Treaty Rights are provided in the Explanatory Notes, at pp. 24–25,
and include the following provisions of the Title VII Chapter 1 of the TFEU relating to competition – Arts.
101(1) and 102, 106(1) and (2), 107(1), 108(3).
4 Clause 6(3).
5 Clause 6(1).
6 Clause 6(2).
7 Clause 6(4).
8 Clause 6(5).
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professor simon baughen
14.1 Brexit and English shipping law
How will Brexit affect shipping law? Substantively, not a great deal. English dry
shipping is based on common law, and a few key statutes, such as the Carriage of
Goods by Sea Act 1992, and the implementation of international carriage conven-
tions through domestic legislation – such as the Carriage of Goods by Sea Act 1971
with the Hague-Visby Rules. With wet shipping, the 1992 CLC and the Fund,9 and
the 2003 Supplementary Fund,10 are part of our national law through domestic law
implementing international conventions. And similarly with the Nairobi International
Convention on the Removal of Wrecks 2007, the International Convention on Salvage
1989 and the Convention on Limitation of Liability for Maritime Claims 1976.
Nothing European here, so plus ça change.11
However, shipping litigation is profoundly affected by EU regulations in the field
of jurisdiction and the enforcement of judgments, and applicable law in contract and
in tort. EU involvement in these fields began with the conclusion of an international
treaty between the six then members of the European Economic Community (EEC),
the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in
Civil and Commercial Matters. The Convention and the two Regulations that have
since superseded it exclude arbitration12 and insolvency.13
All new Member States, such as the UK, acceded to the Convention through
Accession Conventions14 and implemented it through domestic legislation.15 With
the accession of Austria, Finland and Sweden in 1996 the parties to the Convention
stood at 15. A parallel regime, the 1988 Lugano Convention, was concluded by the
Member States and the European Free Trade Association (EFTA) States. In 1980 the
Member States of the EEC concluded a further treaty among themselves, the Rome
Convention on the law applicable to contractual obligations. This was implemented
through domestic legislation, in the case of the UK through the Contracts (Applicable
Law) Act 1990 which came into effect on 1 April 1991.
9 The International Convention of 27 November 1992 on Civil Liability for Oil Pollution Damage
(the 1992 CLC) and the International Convention of 27 November 1992 on the Establishment of an
International Fund for Compensation for Oil Pollution Damage (the 1992 Fund).
10 The 2003 Protocol establishing an International Oil Pollution Compensation Supplementary Fund.
11 However, the Bunker Oil Pollution Convention 2001 is affected because it was implemented in
the UK by delegated legislation pursuant to the powers given to the Secretary of State by s. 2(2) of the
European Communities Act 1972. Absent the EUWB, the Convention will cease to be part of UK law on
30 March 2019.
12 Arbitration will not be affected by Brexit. The enforcement of arbitration awards by private parties is
governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York,
1958) (the New York Convention) to which the UK and all the Member States are parties.
13 Insolvency is subject to a jurisdiction and enforcement regime in the European Insolvency Regulation
1346/2000 and the European Insolvency Regulation (Recast) 2015/848 which applies to insolvency pro-
ceedings opened on or after 26 June 2017. As with the Brussels I Regulation and the Brussels I (Recast)
Regulation there is an issue with reciprocity. The UK can apply the Regulation as part of its domestic law,
but the 27 will no longer apply the Regulation as regards the UK once it ceases to be a Member State. The
UK, Poland, Greece, Slovenia and Romania are also parties to the 1997 UNCITRAL Model Law on Cross
Border Insolvency which will continue to apply as between them after Brexit.
14 The 1978 Accession Convention for the UK, Denmark and the Republic of Ireland. There were
further Accession Conventions for Greece in 1982, for Spain and Portugal in 1989 and for Austria, Finland
and Sweden in 1996.
15 In the case of the UK through s.1(4) of the Civil Jurisdiction and Judgments Act 1982 which took
effect on 1 January 1987.
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In 1999 the Treaty of Amsterdam transferred judicial co-operation in civil and
c ommercial matters from the third pillar to the first pillar which gave the EU compe-
tence to conclude secondary legislation operating between the Member States.16 The
result has been four regulations and two treaties with third parties. These are: the
Brussels I Regulation 44/2001;17 the Brussels I (Recast) Regulation 1215/2012;18 the
Rome I Regulation 593/2008;19 the Rome II Regulation 864/2007;20 the 2005 Hague
Convention on Choice of Court Agreements; and the 2007 Lugano Convention.21
The transfer of competence has also had an effect on the competence of Member
States to ratify or accede to international conventions. If these contain provisions on
jurisdiction and enforcement of judgments, as many of the liability conventions do,
this will make the conventions an area of shared competence between the EU and the
Member States, and EU authorization is required if the Member States are to sign up to
the conventions. The EU has authorized the Member States to ratify the 2001 Bunker Oil
Pollution Convention and the 2010 HNS Convention, subject to their making a declara-
tion preserving the effect, as between Member States that are party to the convention, of
the provisions of Brussels I relating to the recognition and enforcement of judgments. A
consequence of this shift in competence is that the 2001 Bunker Oil Pollution Convention
was implemented in the UK by statutory instrument pursuant to the powers given to
the Secretary of State by s. 2(2) of the European Communities Act 1972. Absent, the
EUWB the Convention would cease to be law in the UK on Brexit day.
This chapter will look at each of these Regulations and Conventions, with a view
to ascertaining what will be the position on Brexit day 30 March 2019. First, I shall
examine the default position if no legislation is introduced to deal with the effect of
existing EU regulations under domestic law. Secondly, I shall consider the position if
the EUWB is enacted before Brexit day. Thirdly I shall consider possible options for
ratifying other international agreements relating to jurisdiction and enforcement of
judgments where reciprocity with the remaining 27 Member States of the EU may be
thought desirable.
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was modified by the Brussels I Recast Regulation 1215/2012 which applies to legal
proceedings instituted on or after 10 January 2015.23 The Recast Regulation applies to
all Member States, including Denmark.24 The main changes in the Recast Regulation
are as follows:
Article 25 gives exclusive jurisdiction to the courts of a Member State that the
parties have agreed are to have jurisdiction to settle any disputes which have
arisen or which may arise in connection with a particular legal relationship,
irrespective of the domicile of the parties.
Article 31(2) of the Recast Regulation now provides that where an EU
Member State court, in favour of which an exclusive jurisdiction clause exists,
is seised, then any other EU Member State court shall stay its proceedings and
this is reinforced by Recital 22.
Recital 12 deals with the arbitration exception and confirms the free-standing
nature of the process. In particular it states that a court’s decision that an
arbitration clause is void does not preclude its award on the substance being
enforced under the Regulation and so reverses the decision in The Wadi Sudr.25
Articles 33 and 34 give EU Member State courts a discretion to stay proceed-
ings brought before them where the same or related matters are already before
the courts of a non-EU state, but only where the non-EU proceedings are
first in time and where jurisdiction in the EU proceedings is based on Arts. 4
(domicile), 7, 8 or 9 (special jurisdiction) of the Recast Regulation. The judg-
ment of the non-EU court must also be capable of recognition and enforce-
ment in the EU Member State seized.
Article 39 abolishes exequatur, i.e. the procedure for the declaration of
enforceability of a judgment in another Member State.
Absent any legislation such as the EUWB, the position on leaving the EU would be
as follows. Section 1(4) of the Civil Jurisdiction and Judgments Act 1982 (CJJA) gave
the force of law to the 1968 Brussels Conventions and its 1991 amendment gave the
force of law to the 1988 Lugano Convention. The amendments to s. 1(4) of the CJJA
adding in references to the Regulation in place of the former, and to the 2007 Lugano
Convention in place of the latter, have both been implemented by secondary legisla-
tion deriving from s. 2(2) ECA 197226 and will therefore cease to have effect when that
Act is repealed. This will leave us with the original CJJA 1982 applying the Brussels
Convention together with the 1991 amendment which gave the force of law to the 1988
Lugano Convention. This would not be particularly desirable, as we would be applying
the original 1968 Convention, without the benefits of the improvements introduced
23 The Brussels I Regulation continues to apply to legal proceedings commenced between 1 March 2002
and 9 January 2015.
24 Although Recital 41 states that “Denmark is not taking part in the adoption of this Regulation and
is not bound by it or subject to its application” the Recast Regulation was implemented by Denmark by
Danish Law No. 518 of 18 May 2013 which entered into force on 1 June 2013.
25 [2010] 1 Lloyd’s Rep 193.The Recital does not refer to the issue of anti-suit injunctions issued by
courts in support of arbitral proceedings, and the ECJ’s decision in Case C-185/07 Allianz SpA and Generali
Assicurazioni Generali SpA v West Tankers Inc, The Front Comor will continue to prevent such injunctions
being granted.
26 The Civil Jurisdiction and Judgments Order 2001 SI 3929/2001.
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first with the 2001 Regulation, and then, more significantly, with the 2012 Brussels 1
(Recast) Regulation which largely addresses the menace of the Italian Torpedo. 27
With the enactment of the EUWB the Brussels I (Recast) Regulation would con-
tinue to apply as UK law from the moment of exit from the EU, as converted legisla-
tion, but would require corrections to make it work, such as adding a reference to the
UK to every reference to Member State. The CJJA would maintain its current wording
due to the effect of the provisions of the EUWB on preserved legislation, so as far as
the UK is concerned. Similarly the 2007 Lugano Convention would continue to apply
as UK law in relation to Norway, Switzerland and Iceland.
However, this may work for the UK, but there will be no reciprocity as regards the
remaining 27 Member States of the EU.28 Its provisions on jurisdiction and enforce-
ment of judgments will cease to have effect as regards the UK once it leaves the EU.
With regard to enforcement of judgments, there is a lacuna with respect to the applica-
tion of the Regulation where proceedings are commenced before withdrawal and the
resulting judgment is delivered after withdrawal. The Commission’s position paper
of 12 July 2017, TF50 (2017) 9/2, states. “(4) The relevant provisions of Union law
applicable on the withdrawal date on recognition and enforcement of judicial deci-
sions should continue to govern all judicial decisions given before the withdrawal date”
(emphasis added). By contrast the UK’s response in “Providing a crossborder civil
judicial cooperation framework. A future partnership paper” states that these rules
should also apply to “judicial decisions given after the withdrawal date in proceedings
which were instituted before that date” (emphasis added).29 With regard to choice of
court agreements, the Commission’s position is as follows.
(2) The relevant provisions of Union law applicable on the withdrawal date establishing
the Member State whose courts are competent should continue to govern all legal proceed-
ings instituted before the withdrawal date.
(3) Choices of forum made prior to the withdrawal date should continue to be assessed
against the provisions of Union law applicable on the withdrawal date.
The reciprocity issue will be the same as regards the three non-Member States that
are parties to the 2007 Lugano Convention. The UK is not a party to the Convention
in its own right, but only as a member of the EU.30 I will now consider a variety of
27 The obtaining of exclusive jurisdiction by commencing proceedings for a negative declaration of
liability in the courts of the Member State in which the defendant is domiciled, contrary to the provisions
as to arbitration or jurisdiction in the contract between the parties.
28 A sliver of reciprocity would remain in relation to the lis alibi pendens provisions in Arts. 33 and 34
regarding parallel proceedings in non-Member States, which is what the UK will be after Brexit, which are
commenced before proceedings in a Member State.
29 Annex A para 7.
30 In Opinion 1/03, ECLI:EU:C:2006:81, the Court of Justice determined that the conclusion of the new
Lugano Convention fell within the Community’s exclusive competence. Under Art. 216(2) TFEU, interna-
tional agreements concluded by the EU are binding upon the institutions of the EU and on its Member States.
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options that may be available to enable the UK to have at least some form of reciprocal
agreement in place on exiting the EU.
For new Member States Art. 63 provided that the Convention should form the basis
for negotiations by way of fulfilling their Art. 220 obligations. All new Member States
admitted before 1999 have acceded to the Convention. Member States were initially
given the right to extend the scope of the Convention to their non-metropolitan
territories by way of declaration. The Netherlands did so in respect of Aruba, and
France in respect of French New Caledonia and French Polynesia. The Convention is
accompanied by the 1971 Protocol which provides for the supervisory jurisdiction of
the Court of Justice.
The 1999 Treaty of Amsterdam amended the European Treaties so that the
Community obtained legislative competence in the area of jurisdiction and judgments.
At this time there were 15 Member States who were parties to the Brussels Convention.
The Brussels Convention was then replaced by the Brussels I Judgments Regulation
2001. Article 68 of the 2001 Brussels Regulation provides:
1. This Regulation shall, as between the Member States, supersede the 1968 Brussels
Convention, except as regards the territories of the Member States which fall within the ter-
ritorial scope of that Convention and which are excluded from this Regulation pursuant to
Article 299 of the Treaty.
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interpretation set out in the 1969 Vienna Convention on the Law of Treaties which 31
the UK ratified in 1971 and which entered into force on 27 January 1980. The treaty
has not been implemented by legislation but will enter the domestic UK legal order
as it is clear that it constitutes customary international law.32 There are five provisions
which might provide an answer to this question.33
14.2.1.1 Article 54
This deals with termination of or withdrawal from a treaty under its provisions or by
consent of the parties.34 This may be done either in conformity with the provisions of
the treaty, which clearly does not apply to the Brussels Convention, or at any time by
consent of all the parties after consultation with the other Contracting States. It could
be argued that the necessary consent for withdrawal of all the then members of the
Community was provided with the implementation of the 2001 Regulation, given the
reference in Art. 68 to the supersession of the Convention. However, the Regulation
did not provide for complete supersession and allowed for the continuance of the
Convention as regards non-metropolitan territories of the Member States so there
was in fact no withdrawal from the Convention, but only a substantial modification
of its effect.
14.2.1.2 Article 56
This deals with denunciation or withdrawal from a treaty containing no provision
regarding termination, denunciation or withdrawal. It provides:
1. A treaty which contains no provision regarding its termination and which does not
provide for denunciation or withdrawal is not subject to denunciation or withdrawal unless:
(a) It is established that the parties intended to admit the possibility of denunciation
or withdrawal; or
(b) A right of denunciation or withdrawal may be implied by the nature of the treaty.
2. A party shall give not less than twelve months’ notice of its intention to denounce or
withdraw from a treaty under paragraph 1.
The right of denunciation of a party that was no longer a member of the EU would
be implied by the nature of the treaty, given that it was a treaty exclusively between
members of what was then the EEC. This would allow the UK to denounce or with-
draw from the Convention, on giving the necessary 12 months’ notice, which would
have to be given after leaving the EU.
14.2.1.3 Article 59
This provides for termination or suspension of the operation of a treaty implied by
conclusion of a later treaty, as follows:
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1. A treaty shall be considered as terminated if all the parties to it conclude a later treaty
relating to the same subject-matter and:
(a.) It appears from the later treaty or is otherwise established that the parties intended
that the matter should be governed by that treaty; or
(b.) The provisions of the later treaty are so far incompatible with those of the earlier
one that the two treaties are not capable of being applied at the same time.
2. The earlier treaty shall be considered as only suspended in operation if it appears from
the later treaty or is otherwise established that such was the intention of the parties.
This provision would not apply because there has been no subsequent treaty, unless
the Regulation can be regarded as a treaty. It also contemplates termination/suspen-
sion of the treaty in full, whereas partial termination would be contemplated given the
continued operation of the Convention in relation to the non-metropolitan territories
of France and the Netherlands.
14.2.1.4 Article 62
This provides for the effect of fundamental change of circumstances on a treaty, as
follows:
1. A fundamental change of circumstances which has occurred with regard to those existing
at the time of the conclusion of a treaty, and which was not foreseen by the parties, may not
be invoked as a ground for terminating or withdrawing from the treaty unless:
(a.) The existence of those circumstances constituted an essential basis of the consent
of the parties to be bound by the treaty; and
(b.) The effect of the change is radically to transform the extent of obligations still to
be performed under the treaty.
2. A fundamental change of circumstances may not be invoked as a ground for terminating
or withdrawing from a treaty:
(a) If the treaty establishes a boundary; or
(b) If the fundamental change is the result of a breach by the party invoking it either
of an obligation under the treaty or of any other international obligation owed to
any other party to the treaty.
3. If, under the foregoing paragraphs, a party may invoke a fundamental change of cir-
cumstances as a ground for terminating or withdrawing from a treaty it may also invoke the
change as a ground for suspending the operation of the treaty.
35 See Andrew Dickinson, “Back to the Future: the UK’s EU Exit and the Conflicts of Laws”, 12(2)
Journal of Private International Law 2016, pp. 195–210.
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14.2.1.5 Article 40
This provides for the amendment of treaties.
1. Unless the treaty otherwise provides, the amendment of multilateral treaties shall be
governed by the following paragraphs.
2. Any proposal to amend a multilateral treaty as between all the parties must be notified
to all the contracting States, each one of which shall have the right to take part in:
(a) the decision as to the action to be taken in regard to such proposal;
(b) the negotiation and conclusion of any agreement for the amendment of the treaty.
3. Every State entitled to become a party to the treaty shall also be entitled to become a
party to the treaty as amended.
4. The amending agreement does not bind any State already a party to the treaty which
does not become a party to the amending agreement; article 30, paragraph 4(b), applies in
relation to such State.
5. Any State which becomes a party to the treaty after the entry into force of the amend-
ing agreement shall, failing an expression of a different intention by that State:
(a) be considered as a party to the treaty as amended; and
(b) be considered as a party to the unamended treaty in relation to any party to the
treaty not bound by the amending agreement.
It is arguable that the process by which the Member States ceded competence to the
EU in this area with the Treaty of Amsterdam amounted to a pre-emptive consent by
all of them to any subsequent change in their mutual obligations under the Brussels
Convention with the change then being executed through the Brussels I Regulation.36
36 This is the preferred solution in the paper put forward by Richard Hoyle and Lucas Bastin “Jurisdiction
and Judgments: Replacement Regimes and the Default Regime (in the absence of a Replacement Regime)
from the perspective of Public International Law.” December 2016 [66]. https://101r4q2bpyqyt92eg41tusmj-
wpengine.netdna-ssl.com/wp-content/uploads/2017/01/Brexit-Conflicts-Sub-Group-International-Law-
Aspects.pdf (accessed 9 July 2018).
37 The Convention was made an EU “Act” by the Council Decision of 15.12.2007: [2007] OJ L339/3.
38 See Art. 216(2) of the TFEU and s.2(1) ECA 1972.
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14.2.3 Ratify the 2005 Hague Convention on Choice of Court Agreements?
The 2005 Hague Convention on Choice of Court Agreements (the Hague Convention)
was ratified by the EU (excluding Denmark) and came into effect on 1 October 2015.
Two other states have ratified the Convention, Mexico, and Singapore (ratifying on 2
June 2016). The Convention applies only to wholly exclusive jurisdiction agreements
in favour of the courts of one Contracting State (or one or more courts within one
Contracting State). Its provisions are similar to those in Art. 25 of the 2012 Brussels
I (Recast) Regulation. The Convention also provides for the reciprocal enforcement
of judgments given in disputes resulting from qualifying exclusive jurisdiction agree-
ments. Currently the UK is a party to the Convention through the EU, and is not
a party in its own right. Accordingly on exit day it will cease to be a party to the
Convention and would have to apply to ratify in its own right, a process that should
take about three months.
The Convention is more limited than the Recast Regulation in that it only applies to
exclusive jurisdiction agreements and does not apply to interim protection measures.
Furthermore, the Convention does not apply to: consumer or employment contracts;
insolvency; carriage of passengers or goods; maritime pollution; anti-trust/competi-
tion; rights in rem in immovable property, and tenancies of immovable property;
the validity, nullity or dissolution of legal persons, and the validity of decisions of
their organs; various matters concerning the validity or infringement of intellectual
property rights; the validity of entries in public registers; arbitration and related
proceedings.
Temporally the Convention only applies to exclusive choice of court agreements
concluded after its entry into force in the state of the chosen court and only to
proceedings instituted after its entry into force. For the EU and Mexico that date
is 1 October 2015 and for Singapore 1 October 2016. With the UK ratifying in its
own right it would apply to exclusive jurisdiction agreements entered into from that
date, and to proceedings instituted after that date but there would be uncertainty as
to the position with regard to exclusive jurisdiction agreements entered into after 1
October 2015 when the UK participated in the Convention through the EU. At the
very least there would be a three month gap from the depositing of the UK’s instru-
ment of ratification after Brexit day to the coming into force of the Convention for
the UK.
39 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and Belgium (signed on 2 May 1934) (1936) UK Treaty Series (UKTS) No 31.
40 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and Italy (signed on 7 February 1964), with amending Protocol (signed on 14 July 1970) (1974)
UKTS No 5.
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the Netherlands, Austria, Germany and France . Effect is given to the treaties
41 42 43 44
via the Foreign Judgments (Reciprocal Enforcement) Act 1933, although the regime
applies only to money judgments. Article 55 of the Brussels Convention provides for
such agreements to be superseded by the Convention, with Art. 56 providing that the
treaties “shall continue to have effect in relation to matters to which this Convention
does not apply”. There is uncertainty as to whether these treaties will revive on Brexit.
The arguments as regards their revival are similar to those canvassed in relation to the
revival of the Brussels Convention. It is likely that the effect of Art. 56 is that the agree-
ments are superseded where they cover the same ground as the Brussels Convention
but remain in force where they cover matters which fall outside the Convention. There
is similar uncertainty as regards the UK’s treaty with Norway given similar provision
in Art. 65 of the Lugano Convention 2007.
14.2.5 Negotiate a new jurisdiction and judgments treaty with the EU and Denmark
based on the Recast Regulation?
For many, this would be the preferred solution. A template already exists in the form
of the 2005 treaty between the EU and Denmark, a Member State, which applied first
the Brussels I regime, and then the Recast regime. However, the treaties provided for
the supervisory role of the CJEU, something which might prove politically impossible
for the UK, always assuming that the EU was prepared to negotiate such a treaty.
A compromise on this issue could be found in the Lugano Convention’s provisions
as regards the courts of the three non-EU States who are merely required to ‘take
account of’ decisions of the CJEU. Whether the 27 would be willing to make such a
compromise is another matter, let alone agree to enter a jurisdiction and judgments
agreement with a former Member State. This must be doubtful given the prospect that
the ending of the Recast regime as regards the UK may be seen as an opportunity to
attack England’s position as a jurisdiction of choice in commercial contracts, with a
subsequent transfer of business to the jurisdiction of other Member States.45
41 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and the Netherlands (signed on 17 November 1967) (1969) UKTS No 97.
42 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and Austria (signed on 14 July 1961), with amending Protocol (London, 6 March 1970) (1962)
UKTS No 70.
43 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and Germany (signed on 14 July 1960) (1961) UKTS No 64.
44 Convention for the reciprocal enforcement of Judgments in Civil and Commercial Matters between
the UK and the French Republic (signed on 18 January 1934) (1936) UKTS No 18.
45 A view expressed by Professor Burkhard Hess and Professor Marta Requejo-Isidro in their blog “Brexit –
Immediate Consequences on the London Judicial Market” of 24 June 2016 on Conflict of Laws dot Net.
http://conflictoflaws.net/2016/brexit-immediate-consequences-on-the-london-judicial-market (accessed 13
December 2013).
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rules on jurisdiction. The basic Brussels rule of jurisdiction based on the defend-
46
Therefore, the Convention will not revive as regards the UK when it ceases to be a
Member State, although it will continue to govern relations between the UK and
Denmark and the non-metropolitan territories excluded from the Regulation.
The Rome I Regulation applies to all contracts concluded as from 17 December
2009. Rome I essentially replicates the 1980 Rome Convention as an EC Regulation,
and, as with the Convention, is of universal application.49 The Regulation contains the
following important differences from the Convention.
46 A prospect enthusiastically endorsed by Professor Adrian Briggs (QC) in “Secession from the
European Union and Private International Law: The Cloud with a Silver Lining”. Paper given to the
Commercial Bar Association 24 January 2017. https://app.pelorous.com/media_manager/public/260/
Prof%20Adrian%20Briggs%20QC%20Brexit%20lecture%2024.1.17.pdf (accessed 12 December 2017).
47 C-412/98 Universal General Insurance Co v Groupe Josi Reinsurance Co SA [2000] ECR I-5925.
48 [2008] OJ L177/6.
49 See Art. 2 of the Convention “Any law specified by this Convention shall be applied whether or not it
is the law of a Contracting State” and Art. 2 of the Regulation “Any law specified by this Regulation shall
be applied whether or not it is the law of a Member State.”
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(a) Article 3(1) on “Freedom of Choice” now provides that “The choice shall
be made expressly or clearly demonstrated by the terms of the contract or
the circumstances of the case”, in contrast to the equivalent provision in the
Rome Convention, which provided that “The choice must be expressed or
demonstrated with reasonable certainty by the terms of the contract or the
circumstances of the case.” Article 3(4) prevents the circumvention of man-
datory Community law by the parties’ choosing the law of a non-Member
State.50
(b) Article 4 on “Applicable Law in the Absence of Choice” has a different struc-
ture to its equivalent in the Rome Convention but is likely to have a similar
effect. If no law is chosen under Art. 3, paragraph 1 then states the law that
will govern various specific types of contract, listed in headings (a)–(h). For
example, contracts for the sale of goods or for services are governed by the
law of the habitual residence of the seller and service provider respectively. If
the contract does not fall within this list, or falls under more than one of the
headings, then paragraph 2 applies “the law of the country where the party
required to effect the characteristic performance of the contract has his habit-
ual residence”. The law specified in these two paragraphs will not, however,
necessarily govern the contract. Paragraph 3 provides that “Where it is clear
from all the circumstances of the case that the contract is manifestly more
closely connected with a country other than that indicated in paragraphs 1 or
2, the law of that other country shall apply”. Where the applicable law cannot
be determined under paragraphs 1 and 2, paragraph 4 applies the law of the
country with which the contract is most closely connected.
(c) The provisions relating to the law applicable to contracts for the carriage of
goods have been removed from Art. 4 and now appear in Art. 5(1) as follows:
To the extent that the law applicable to a contract for the carriage of goods has not
been chosen in accordance with Article 3, the law applicable shall be the law of the
country of habitual residence of the carrier, provided that the place of receipt or the
place of delivery or the habitual residence of the consignor is also situated in that
country. If those requirements are not met, the law of the country where the place
of delivery as agreed by the parties is situated shall apply.
Unlike Art. 4 of the Rome Convention, this article refers to the place of
“receipt” and “delivery” rather than to the place of “loading” and “dis-
charge”. The second sentence of Art. 5(1) is new. Article 5(2) contains provi-
sions regarding applicable law in contracts for the carriage of passengers.
Article 5(3) is in the same terms as Art. 4(3).
(d) Article 7 deals with contracts of insurance. Under the Rome Convention,
contracts of insurance covering risks within the Community were excluded
under Art. 1(3), as were contracts of reinsurance under Art. 1(4). Article 7
50 “Where all other elements relevant to the situation at the time of the choice are located in one or more
Member States, the parties’ choice of applicable law other than that of a Member State shall not prejudice
the application of provisions of Community law, where appropriate as implemented in the Member State of
the forum, which cannot be derogated from by agreement.” A similar provision is to be found in Art. 14(3)
of Regulation (EC) 864/2007 on the law applicable to non-contractual obligations (Rome II).
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(1) provides that the article applies to large-risk insurance contracts referred
to in paragraph 2, wherever the risk is situated, and to all other insurance
contracts covering risks situated within the territory of the Member States.
The article does not apply to contracts of reinsurance, and these would
be subject to the general rules in the Regulation. Article 7(3) provides
that insurance contracts covering a large risk are to be governed by the
law chosen by the parties in accordance with Art. 3. If no law is chosen,
the insurance contract shall be governed by the law of the country where
the insurer has his habitual residence. Where it is clear from all the circum-
stances of the case that the contract is manifestly more closely connected
with another country, the law of that other country shall apply. With non
large risks, there are restrictions on the law that the parties may choose in
accordance with Art. 3.51 In the absence of a choice of applicable law, the
contract is to be governed by the law of the country where the insurer has
his habitual residence; but, if it is clear from all the circumstances of the
case that the contract is more closely connected with another country, that
country’s law shall apply.
(e) Article 9 contains provisions on overriding mandatory provisions. Paragraph
2 provides: “Nothing in this Regulation shall restrict the application of the
overriding mandatory provisions of the law of the forum.” Paragraph 3
provides:
Effect may be given to the overriding mandatory provisions of the law of the country
where the obligations arising out of the contract have to be or have been performed,
in so far as those overriding mandatory provisions render the performance of the
contract unlawful. In considering whether to give effect to those provisions, regard
shall be had to their nature and purpose and to the consequences of their applica-
tion or non-application.
Without this amendment, the UK would have been unable to opt in to the
Regulation, as the required uniform application of Council Regulations
would not have been subject to any reservation by a Member State.
51 (a) the law of any Member State where the risk is situated at the time of conclusion of the contract;
(b) the law of the country where the policy holder has his habitual residence;
(c) in the case of life assurance, the law of the Member State of which the policy holder is a national;
(d) for insurance contracts covering risks limited to events occurring in one Member State other than the
Member State where the risk is situated, the law of that Member State;
(e) where the policy holder of a contract falling under this paragraph pursues a commercial or industrial
activity or a liberal profession and the insurance contract covers two or more risks which relate to those
activities and are situated in different Member States, the law of any of the Member States concerned or
the law of the country of habitual residence of the policy holder.
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(f) The Regulation refers to the “habitual residence” of a party, as opposed to its
“principal place of business”, as was the case under the Rome Convention.52
The default position is that as far as the UK is concerned we would return to the
Contracts (Applicable Law) Act 1990 giving effect to the 1980 Rome Convention. The
Act has not been repealed but was amended to give effect to Rome I by the insertion
of s. 4(A) providing “(1) Nothing in this Act applies to affect the determination of
issues relating to contractual obligations which fall to be determined under the Rome
I Regulation.”53 A point to note is that s. 3 of the 1990 Act stipulates that decisions of
the ECJ (now CJEU) on the interpretation of the Rome Convention are binding on
UK courts.
Under the EUWB the Regulation will continue to apply after Brexit as converted
legislation and the insertion of ss. 4A and 4B into the 1990 Act will remain pursuant
to the provisions on preserved legislation. Unlike the Judgments Regulation there is no
issue of reciprocity. Under Art. 2 the Regulation is of universal application, whether
or not the relevant law is that of a Member State.
Section 12(1) then provided for the general rule to be displaced if the law of another
country was substantially more appropriate as the applicable law. In determining
52 Article 19(1) defines the “habitual residence” of a party as being the principal place of business of a
natural person acting in the course of his business activity. The “habitual residence” of companies and other
bodies, corporate or unincorporated, is the place of their central administration. The place of “habitual
residence” is determined at the time the contract is concluded.
53 This applies as regards England, Wales and Northern Ireland. A similar provision in respect of
Scotland was made by the insertion of s. 4B.
54 [2007] OJ L199/40.
55 [1971] A.C. 356.
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this, s. 12(2) required account to be taken of “factors relating to the parties, to any of
the events which constitute the tort or delict in question or to any of the circumstances
or consequences of those events”. The Act did not apply to torts committed on the
high seas which were not subject to the rules in ss. 11 and 12 which refer to the law of
a “country”, or to torts committed in England. These continued to be governed by the
common law rules.
There were two situations in which the courts would not apply a foreign law, not-
withstanding that this was indicated by the application of the analysis undertaken
under ss 11 and 12. First, s. 14(3)(a) provided that a foreign law would not be applied if
to do so would involve a “conflict with principles of public policy”. Secondly, s. 14(3)
(b) provided that nothing in Part III of the Act should affect “any rules of evidence,
pleading or practice” or authorise “questions of procedure in any proceedings to be
determined otherwise than in accordance with the law of the forum”. Questions relat-
ing to quantification of damages56 and the right to limit liability under the limitation
conventions57 were categorised as questions of procedure.
Tort proceedings arising out of events giving rise to damage occurring on or after
11 January 2009 fall under Rome II.58 The scope of the Regulation is limited to situa-
tions involving a conflict of laws in relation to non-contractual obligations in civil and
commercial matters. The Regulation does not apply to Denmark. Article 3 provides
for the universal application of any law specified by the Regulation, whether or not
it is the law of a Member State.59 The general rule is to be found in Art. 4.1, and
specifies the law of the country where the damage occurred as opposed to the general
rule in s. 11(1) of the 1995 Act which specifies the law of the country where the events
constituting the tort or delict occurred. Where the claimant and the defendant both
have their habitual residence in the same country at the time the damage occurs,
Art. 4.2 then applies the law of that country. An ‘escape route’ from these rules is
provided in Art. 4.3 which provides:
‘Where it is clear from all the circumstances of the case that the tort/delict is manifestly more
closely connected with a country other than that indicated in paragraphs 1 or 2, the law of
that other country shall apply. A manifestly closer connection with another country might be
based in particular on a pre-existing relationship between the parties, such as a contract, that
is closely connected with the tort/delict in question.’
Where a claim is made in respect of environmental damage, Art. 7 provides for the
application of Art. 4.1 but gives the claimant the option of basing the claim on the law
of the country in which the event giving rise to the damage occurred.60
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jurisdiction & applicable law after brexit
The default position following repeal of the European Communities Act 1972
is that the UK would return to the Private International Law (Miscellaneous
Provisions) Act 1995. The Act has not been repealed and was amended to give
effect to Rome II by the insertion of s. 15A providing: “(1) Nothing in this Part
applies to affect the determination of issues relating to tort which fall to be deter-
mined under the Rome II Regulation.”61 All the amending provisions were made by
Statutory Instruments62 pursuant to the Secretary of State’s powers under s. 2(2) of
the European Communities Act 1972. Consequently, the amendments will fall away
on repeal of the Act, leaving the two Acts in their original form.
Under the EUWB the Regulation will continue to apply after Brexit as converted
legislation and the insertions of ss. 15A and 15B into the 1995 Act will remain pursu-
ant to the provisions on preserved legislation. Unlike the Judgments Regulation there
is no issue of reciprocity. Under Art. 3 the Regulation is of universal application,
whether or not the relevant law is that of a Member State.
14.5 Conclusion
Assuming that the EUWB becomes law before Brexit day, it might be thought that
the immediate effect of Brexit on jurisdiction, enforcement of judgments and con-
flict of laws will be negligible. The relevant EU Regulations will from Brexit day be
transformed into domestic UK law, with whatever amendments are necessary to make
them work in their new context. There is no problem with the domestication of the
two conflicts regulations, Rome I and Rome II, as their rules on applicable law are of
universal application. A French court will still apply English law where that has been
chosen by the parties to the contract. Article 2 of Rome I does not distinguish between
the law of a Member State and that of a non-Member State. The position is the same
with ascertaining the applicable law in tort claims under Rome II. If the Regulation
points to English law then that is what the court of the Member State hearing the tort
claim will apply.
However, reciprocity is required with the 2001 Brussels I Regulation and the 2012
Brussels I (Recast) Regulation. By converting these Regulations into domestic UK
law, the UK courts will continue to apply the Brussels regime, but the same will not
apply as regards the courts of the other 27 Member States. The UK on Brexit day will
cease to be a Member State and the only part of the Regulations that the EU Member
States will continue to apply will be the provisions on parallel proceedings in non-
Member States that were introduced in Arts 33 and 34 of the 2012 Brussels 1 (Recast)
Regulation. A French judgment will be enforced in the UK under the provisions of
the converted Regulation, but enforcement of an English judgment in France will now
that questions of damages are covered by the applicable law under the Regulation, so reversing the previous
position under English law where such issues were dealt with under the law of the forum; Art. 16 preserves
the application of the mandatory rules of the law of the forum; Art. 26 preserves the application of the
public policy of the forum.
61 Again, similar provision was made in relation to Scotland by the insertion of s. 15B.
62 As regards England, Wales and Northern Ireland, by The Law Applicable to Contractual Obligations
(England and Wales and Northern Ireland) Regulations 2009 (S.I. 2009/3064).
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professor simon baughen
have to be effected under the domestic law of France, and not under the automatic
procedure in the Regulation.
This chapter has set out various options available to the UK whereby some reci-
procity with the EU might be obtained, but all have disadvantages. Signing up to the
2007 Lugano Convention would mean the application of the Brussels I regime rather
than the Brussels I (Recast) regime. It would also require the unanimous agreement
of the treaty parties, the EC, Iceland, Switzerland and Norway. There is no assurance
that this would be forthcoming. We could, and should, sign up to the 2005 Hague
Convention on Choice of Court Agreements which it would be free to do after Brexit.
However, the Convention excludes important areas, such as contracts for the carriage
of goods. It is possible that a treaty may be possible between the UK and the EU
which sees the continuation of the Brussels I (Recast) regime but this might founder on
the interpretative role of the CJEU. As for the 1968 Brussels Convention, I cannot see
this reviving to form the basis of relations between the UK and the other 14 Member
States as at the date of the last Accession Convention in 1996. The EU won’t want
this and will point to Art. 68 and the superseding of the Convention by the Brussels
1 Regulation. The UK won’t want it either, as the Brussels Convention comes with its
Protocol establishing the supervisory jurisdiction of what is now the CJEU. At most
the Convention will still govern relations between the UK and the non-metropolitan
territories of France and the Netherlands.
Post Brexit the UK Government will be free to review the converted and preserved
EU legislation that has been turned into domestic UK law. It could decide to amend or
repeal parts of this inherited corpus of EU law. I think it unlikely that the domesticated
Rome I will be amended or repealed as it is an improved version of what was there
before, the Rome Convention. I cannot imagine there is any great appetite to revert to
the common law. The same is probably true of Rome II. The regime is substantially
different from what was there before, the Private International Law (Miscellaneous
Provisions) Act 1995, but it seems to have worked well and I do not foresee any move
to return to the 1995 Act or, heaven forbid, to the common law.
The domesticated Brussels I Regulations are another matter. There is a stronger
argument for repealing these, if no new jurisdiction and judgments treaty can be con-
cluded with the EU. The UK will cease to have any of the advantages of portability
of judgments within the EU, and the recognition of English jurisdiction clauses by the
courts of the Member States. Yet the UK will continue to give automatic recognition
to judgments from courts in Member States and to apply the jurisdiction rules in the
Regulations. The advantages of reverting to the common law would be the expansion
of jurisdiction that would come through applying rule based on presence and service
out of the jurisdiction, as opposed to the regulation default rule which is based on
the defendant’s domicile. The courts would reclaim their discretion to stay proceed-
ings against defendants domiciled in the UK, on grounds of forum non conveniens.
The courts would also be able to issue anti-suit injunctions in support of arbitration
agreements where proceedings have been brought before the courts of an EU Member
State.
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ARBITRATION & MARITIME INSOLVENCYprofessor lia athanassiou
CHAPTER 15
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recently replaced by the Recast Regulation 2015/8483 (hereinafter the Insolvency
2
29 mai 2000 relatif aux procédures d’insolvabilité (2008), P. Nabet, La coordination des procédures
d’insolvabilité en droit de la faillite internationale et communautaire (2010). Also Dicey, Morris & Collins on
the Conflict of Laws, 15th ed. (2012), Vol 2, 1605 et seq. and 1729–1774.
2 As from 27 June 2017.
3 See G. Moss, I. Fletcher & S. Isaacs, The EC Regulation on Insolvency Proceedings: A Commentary and
Annotated Guide, above; L.Sautonie-Laguionie (ed), Règlement (UE) No 2015/848 du 20 mai 2015 relatif
aux procédures d’insolvabilité, commentaire article par article (2016); R. Bork & R. Mangano, European
Cross-Border Insolvency Law (2016).
4 Inter alia, I. Fletcher, Insolvency in Private International Law: National and International Approaches,
2nd ed. (2005), 446 et seq.; B. Wessels, R. Markell & J. Kilborn, International Cooperation in Bankruptcy and
Insolvency Matters (2009), 197 et seq.
5 Forty-five jurisdictions have already adopted legislation incorporating the Model Law. For example,
see (USA) 11 USC Chapter 15, (UK) Cross-Border Insolvency Regulations SI 2006/1030, (Greece) Law
3858/2010, (Japan) Law on Recognition and Assistance in Foreign Insolvency Proceedings 2001, (South
Africa) Cross-Border Insolvency Act 2000 and, very recently, (Singapore) the Companies Amendment Act
2017. For the incorporation in major jurisdictions, see L. Chan Ho (ed), Cross-Border Insolvency, 3rd ed.
(2012).
6 It means the place where the debtor conducts the administration of its interests on a regular basis
and is therefore ascertainable by third parties (art. 3 para. 1 Reg. 2015/848 and previously Recital 13 Reg.
1346/2000). See also art. 2(b) ML.
7 Art. 19 Reg. 2015/848.
8 M. Virgós & F. Garcimartín, The European Insolvency Regulation: Law and Practice, 51–52.
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arbitration & maritime insolvency
for an insolvency proceeding to get recognition ; non-main proceedings may be used
9
as a tool for limiting the extraterritorial effects of the main procedure. Finally, the
Insolvency Regulation goes further than the ML, in that it establishes conflict–of-law
rules: it gives leverage to the lex fori concursus10, while it leaves space for a handful of
specific exceptions (for instance, rights in rem)11.
International arbitration is situated at the extreme opposite pole from insolvency
procedure. It is an institution not permanently associated with any specific country,
mainly governed by the principle of party autonomy and generally considered more
flexible in the selection of the applicable law and the management of the procedure,
practised by members who have greater expertise and are less subject to external influ-
ences. Although different theories have been developed regarding the legal nature of
arbitration – c ontractual, jurisdictional, hybrid – it is more or less accepted today that a
significant number of aspects of any arbitration are determined by the parties’ agreement
(e.g. the substantive applicable law), while some others are regulated by the State12.
It is quite common for parties to international commercial transactions to opt for
the resolution of their disputes through arbitration in a renowned centre such as
London, Geneva, Paris or New York. This is very much the rule regarding interna-
tional maritime disputes. Although safe statistics are not available, information from
the industry indicates that around 70 per cent of the maritime arbitrations are located
in London, around 15 per cent in New York, around 10 per cent in Singapore and
other centres in the Far East and very few in Greece (despite its strong presence in
global tonnage capacity). It thus becomes very likely, under the persistent adverse
financial conditions, that a maritime company will find itself subject to a cross-border
insolvency procedure while at the same time being party to parallel arbitration pro-
ceedings in a third country. In such a case, two main questions have to be addressed:
first, whether the arbitration should be allowed to continue, and secondly, which law
should be used to determine this issue. These issues will be examined, on the one hand,
in an intra-EU scenario governed by the Insolvency Regulation, on the other hand, in
an international scenario governed by the UNCITRAL ML.
15.2 The intra–EU scenario: defining the law applicable to the effects
of a cross-border insolvency
Different scenarios triggering the application of the EU Insolvency Regulation may be
envisaged. For example, a maritime arbitration may be pending in London or Paris,
while main cross-border insolvency proceedings against one of the parties are opened
in Greece or Italy. The EU legislator has cautiously provided for conflict-of-law rules
aiming at defining the law which governs the insolvency’s effects. In order to coordi-
nate those rules, it is necessary to have previously clarified the legal characterization of
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the relevant insolvency effect; it is also important to measure the degree of discretion
left to the party autonomy with respect to the shaping of the insolvency impact.
15.2.1 Coordinating the lex fori concursus and lex arbitri under the Insolvency
Regulation
15.2.1.1 The relevant provisions
The crucial provisions are provided for in arts 19, 20, 7 and 18 of the Insolvency Regulation.
The two first establish the principle according to which any judgment opening insolvency
proceedings shall be recognized in all other Member States, as from the time it becomes
effective in the opening State, and shall produce automatically and unconditionally the
same effects as in the opening State. Because of this automatic effect, the opening of the
insolvency proceeding has an immediate impact on any arbitration having its seat in
the territory of a Member State13. The content and extent of such impact depends on the
applicable law, and consequently, on the coordination of arts 7 and 18.
Art. 7 provides the general conflict-of-law rule14; according to para. 1: “Save as
otherwise provided in the Regulation, the law applicable to insolvency proceedings
and their effects shall be that of the Member State within the territory of which such
proceedings are opened (the ‘State of the opening of proceedings’).”
Para. 2 of the same article clarifies that the lex fori concursus determines the condi-
tions for the opening, the conduct and the closure of those proceedings. In the non-
exhaustive catalogue of the issues falling under the scope of the lex fori concursus are
explicitly included:
(e) the effects of insolvency proceedings on current contracts to which the debtor is a
party;
(f) the effects of the insolvency proceedings on proceedings brought by individual credi-
tors, with the exception of pending lawsuits; …
Regarding pending lawsuits15, the Insolvency Regulation has indeed provided for a
specific conflict-of-law rule. Pursuant to art. 18,
The effects of insolvency proceedings on a pending lawsuit or pending arbitral proceedings
concerning an asset or a right which forms part of a debtor’s insolvency estate, shall be
governed solely by the law of the Member State in which the lawsuit is pending or in which
the arbitral tribunal has its seat.
(Emphasis supplied)
The new wording of art. 18 (ex art. 15) explicitly covers arbitral proceedings, thus
putting an end to the debate developed under Reg. 1346/2000 as to whether the term
13 According to the prevailing view, arbitral tribunals having their seat in a Member State applying
the Insolvency Regulation have automatically to recognize the cross-border insolvency opened in another
Member State (S. Vorburger, International Arbitration and Cross-Border Insolvency, 79, 177, C. Seraglini &
J. Ortscheidt, Droit de l’arbitrage interne et international (2013), 573).
14 See, inter alia, R. Bork & R. Mangano, European Cross-Border Insolvency Law, 117 et seq.
15 The term “pending lawsuit” refers to actions aiming to determine the existence, validity, content or
extent of a claim and does not include individual enforcement actions (arrest, execution, attachment, etc.);
the latter remain within the scope of art. 4 (2)(f). See G. Moss, I. Fletcher & S. Isaacs, The EC Regulation on
Insolvency Proceedings: A Commentary and Annotated Guide, para. 4.44; R. Bork & R. Mangano, European
Cross-Border Insolvency Law, paras 4.120–4.121.
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“lawsuits” should be construed in such a wide manner as to include arbitrations . The 16
view which prevailed17 opted for an autonomous and extensive interpretation, based
both on the letter and the legislative purpose of the relevant provisions, taking also into
account the functional equivalence of arbitrations and judicial proceedings. Although
the Recast Regulation clarified the issue, it did not profit from the opportunity to define
the scope of the exception in art. 18. A number of issues therefore remain open.
16 P. Durat, “Art. 18”, in L. Sautonie-Laguionie (ed), Règlement (UE) No 2015/848 du 20 mai 2015
relatif aux procédures d’insolvabilité, 149–151.
17 See mainly M. Virgós & F. Garcimartín, The European Insolvency Regulation: Law and Practice,
142; G. Moss, I. Fletcher & S. Isaacs, The EC Regulation on Insolvency Proceedings: A Commentary and
Annotated Guide, para. 4.44; P. Wagner, “When Two Worlds Collide – the Dilemma Between Insolvency and
Arbitration” [2012] Yearbook on International Arbitration, Vol. II, 119 et seq. Contra, K. Pannen, European
Insolvency Regulation: Commentary (2011), 300. The same interpretation was adopted by the English arbi-
tral and national courts in the case of Syska v Vivendi Universal SA [2009] EWCA Civ. 677; [2009] 2 All E.R.
(Comm) 891 (see paras [17]–[19]).
18 See art. 7 para. 2(e).
19 R. Bork & R. Mangano, European Cross-Border Insolvency Law, paras 4.120–4.121.
20 S. Vorburger, International Arbitration and Cross-Border Insolvency, 90.
21 See also L. Athanassiou, Maritime Cross-Border Insolvencies (2017), 186 et seq.
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as the suspension and/or discontinuation of arbitration proceedings22. In contrast,
the substantive matters (such as capacity, arbitrability of the subject, validity of the
arbitration agreement) should continue to be governed by lex fori concursus. This
reading seems enhanced by the letter of art. 7para. 2(e), providing that the law of the
opening State shall determine the insolvency effects on current contracts to which the
debtor is party (logically including the arbitration agreement). This first view, mainly
supported by Eastern European jurisdictions, clearly favours the insolvency forum but
also increases the importance of the legal characterization of the effects; it increases,
thus, the risk of positive conflicts respecting the applicable laws (when the law of the
State of the opening of proceedings considers an issue to be substantive, while lex
arbitri qualifies it as procedural).
The second – more prevalent – approach adopts an extensive reading of art. 18 in order
to include all issues arising in relation to the pending arbitration following the opening
of the insolvency proceedings. That means that lex arbitri directly determines both the
substantive and procedural effects on the arbitration, such as the validity of arbitration
clauses, the arbitrability of the subject, the capacity of the parties and the stay or discon-
tinuation of the arbitration proceedings23. This (pro-arbitration) view enhances certainty
and legal predictability, reduces the importance of legal characterization24 and supports
the principle of the autonomy of the parties, which is deemed essential in arbitration.
That is why it is mainly followed in legal orders with powerful arbitration centres (such
as the UK). The main disadvantage is rather obvious, and has to do with the encour-
agement of forum shopping, as the parties can in practice be allowed to circumvent the
prohibition to dispose of the effects of insolvency by opting for a specific place of arbi-
tration25; this situation may, in its own turn, feed a reluctance by courts in jurisdictions
where the defendant has assets to enforce the award, which is normally implemented in
the State where the debtor holds its assets. The most illustrative implementation of this
approach is met in the well-known Vivendi case, discussed below.
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Vivendi case . That case concerned a dispute between a Polish company Elektrim
26
(substantial shareholder in the Polish telecom company PTC) and the French group
Vivendi27. The dispute related to an investment agreement regarding the acquisition
of shares in the first company, governed by Polish law, and containing an arbitration
clause referring to arbitration under the rules of the London Court of International
Arbitration (LCIA) seated in London. In 2003, Vivendi commenced arbitration,
asserting that Elektrim had breached its obligations resulting from the above agree-
ment. In 2007, while the arbitration was still pending, Elektrim was declared insol-
vent by an order of the Warsaw District Court; in spite of this, the tribunal rendered,
by majority, the award. The insolvency administrator of Elektrim sought to set
aside the award before the English courts, arguing that the arbitration agreement
ceased to have effect as from the declaration of bankruptcy according to Art. 142
of the Polish Bankruptcy and Reorganization Act; pursuant to that provision “[a]
ny arbitration clause concluded by the bankrupt shall lose its legal effect as at the date
bankruptcy is declared and any pending arbitration proceedings shall be discontinued”.
The challenge was dismissed by the High Court28 and afterwards on appeal by the
Appeal Court29, both ruling that English law should apply as lex arbitri, rather
than Polish (lex fori concursus). The High Court accepted that there was indeed a
potential conflict between the general conflict-of-law rule and the exception in art.
18 (ex Art. 15), and thought that that conflict should be resolved on the basis of the
principle that a particular p
rovision prevails over a general one. The Court of Appeal
adopted a slightly modified approach based on a complementary reading of the
general rule and of the exception to it30. It ruled that each article had its own sphere
of operation, and once it was clear that there was a lawsuit pending, the question
whether the lawsuit should continue or be discontinued by reason of the insolvency
was to be determined by English law, as the law of the Member State in which the
suit was pending. That solution, the court thought, reflected the natural expectation
of business people31. Interestingly enough, neither of the above decisions clarified
26 See J. Chuah, “Resolving unresolved relationship problems: The case of cross border insolvency
and pending arbitrations” (2011) 8 Eur. Co & Fin. L.Rev 423, 424–426; A. Bĕlohlávek, “Impact of
Insolvency of a Party on Pending Arbitration Proceedings in Czech Republic, England and Switzerland
and Other Countries” [2010] Yearbook on International Arbitration 145, 159–166; D. Draguiev, “The Effect
of Insolvency on Pending International Arbitration: What Is and What Should Not Be”, 32 Journal of
International Arbitration 511, 537–541.
27 See J. Chuah, “Resolving Unresolved Relationship Problems: The Case of Cross Border Insolvency
and Pending Arbitrations” (2011) 8 Eur. Co & Fin. L.Rev 423, 424–426; A.Bĕlohlávek, “Impact of
Insolvency of a Party on Pending Arbitration Proceedings in Czech Republic, England and Switzerland
and Other Countries” [2010] Yearbook on International Arbitration 145, 159–166; D.Draguiev, “The Effect
of Insolvency on Pending International Arbitration: What Is and What Should Not Be” 32 Journal of
International Arbitration 511, 537–541 (2013).
28 Syska v Vivendi Universal SA [2008] EWHC 2155 (Comm); [2009] 1 Lloyd’s Rep. 59, at [94] et seq.,
esp at [102].
29 Syska v Vivendi Universal SA, [2009] EWCA Civ. 677; [2009] 2 All E.R. (Comm) 891; [2009] 2 All
E.R. (Comm) 891.
30 J. Chuah, “Resolving Unresolved Relationship Problems: The Case of Cross Border Insolvency and
Pending Arbitrations” (2011) 8 Eur. Co & Fin. L.Rev 423, 426–430, and for critical comments, D.Draguiev,
“The Effect of Insolvency on Pending International Arbitration: What Is and What Should Not Be”, 32
Journal of International Arbitration 511, 537–38 (2015).
31 See [2009] EWCA Civ. 677; [2009] 2 All E.R. (Comm) 891; [2009] 2 All E.R. (Comm) 891 at [16], [18].
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which substantive provision of the English law should be applicable in the actual
case and what the legal consequences would be of such application. The question
of whether a temporary stay should have been granted because of the opening of
the insolvency proceedings, in order to facilitate the case management process, was
also totally ignored, despite (or perhaps because of) the size of the award (almost
$US2 bn)32.
As already mentioned above, the extensive interpretation of art. 18 entails the risk
of provoking negative reactions at the stage of recognition and/or enforcement. That
is exactly what happened when Vivendi sought to have the LCIA award enforced in
Poland. By its decisions of May, July and August 2009, a district court in Warsaw
denied enforcement of the damages element and recognition of the jurisdiction element
of the award, pursuant to arts V(1)(a) and V(2)(b) of the New York Convention.
Essentially it held that the validity of the arbitration agreement was contested, and
that the incapacity of the debtor to act in arbitration as aresult of its bankruptcy was
a matter of Polish public policy. Regarding the scope of the former art. 15, it ruled
that the provision was too narrow to cover arbitration proceedings. Fortunately, the
Warsaw Court of Appeal overturned the decisions of the first instance court and
granted recognition and enforcement of the LCIA awards33. It held that “incapacity”
referred to art. V(1)(a) of the New York Convention was restricted to defects existing
at the time of the formulation of the agreement and not to any subsequent loss of
incapacity; more importantly, it confirmed that the recognition of the award rendered
after a declaration of bankruptcy of a Polish party in a state whose laws allow for
continuation of arbitration does not infringe public policy, adopting thus a narrow
vision of the public policy exception.
It is worth noting that a similar dispute between the same parties had a com-
pletely
different outcome in the context of an arbitration in Switzerland. The
arbitral tribunal there, upheld by the Supreme Court, characterized the insol-
vency declaration as an issue affecting the corporate capacity of the debtor; it then
turned to the general conflict-of-law rules of the Swiss Federal Law on Private
International Law, according to which the capacity of a legal person had to be deter-
mined by lex incorporationis34. Polish law was the lex incorporationis in that case35,
and, based on its provisions, Elektrim had lost its subjective capacity to be a party in
arbitration proceedings; therefore, the arbitral tribunal was deprived of jurisdiction.
Interestingly, if the issue had been characterized as relating to the validity of the
arbitration agreement, the pending arbitration would not have been affected by the
foreign insolvency proceeding pursuant to the in favorem principle applicable under
Swiss law!
32 See L. Westbrook, “International Arbitration and Insolvency”, 29 Penn State Int’l L. Rev. 635, esp
at 645–647 (2011).
33 Information on both decisions was found at: uk.practicallaw.thomsonreuters.com (last tested May
2018).
34 Loi fédérale sur le droit international privé du 18 décembre 1987, at.154.
35 Bundesgericht 31.3.2009, 4A_428/2008, ASA Bulletin 1/2010.104; D. Draguiev, “The Effect
of Insolvency on Pending International Arbitration: What Is and What Should Not Be”, 32 Journal
of International Arbitration 511, 539–540 (2015); and the critical comments of A.Bĕlohlávek, “Impact of
Insolvency of a Party on Pending Arbitration Proceedings in Czech Republic, England and Switzerland and
Other Countries” [2010] Yearbook on International Arbitration 145, 162.
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arbitration & maritime insolvency
15.3 Is there a place for party autonomy?
A final issue concerns whether the parties could possibly agree on the applicable
law, and subsequently decide whether the arbitration or an EU cross-border insol-
vency proceeding should prevail36. Such a clause may, for example, stipulate that the
arbitration agreement shall remain valid despite the commencement of insolvency
proceedings, that the parties waive in advance the insolvency defense, that any request
for the opening of insolvency proceedings should first be agreed by the parties or that
the parties would decide in common on the insolvency effects that would pertain. It
should be clarified that, under the EU regime, such agreements are not permissible, or
at least not enforceable, as the Insolvency Regulation is considered to protect matters
of public interest through mandatory provisions, such as those respecting the equal
treatment of creditors37. The conflict-of-law rules in the Regulation, both the general
rule and the exceptions, are of a mandatory nature because they establish a balance
between the interests involved and discourage forum shopping. If an arbitral tribunal
validates such an agreement, the award could be set aside or denied enforcement as
violating EU public policy.
36 P. Wagner, “When International Insolvency Law Meets International Arbitration” (2009) 3 Disp.
Resol. Int’l 56, esp at 59–60).
37 Wagner, above, 60; S.Vorburger, International Arbitration and Cross-Border Insolvency, 86–87.
38 See L. Westbrook, “International Arbitration and Insolvency”, 29 Penn State Int’l L. Rev. 635, 648
(2011).
39 See the previous note.
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Surprisingly enough, the UNCITRAL ML does not contain any reference to arbi-
tration proceedings, as was the case with the first version of the Insolvency Regulation.
This is rather strange, if one takes into account that UNCITRAL has long been
involved in the preparation and drafting of legislation and guidelines in both interna-
tional arbitration and multinational insolvency: in addition to the 1997 Model Law on
International Cross-Border Insolvency, it has drafted the Model Law on International
Commercial Arbitration (1985), the UNCITRAL Arbitration Rules (revised in 2010)
as well as a guide in respect of the New York Convention (2006). In spite of this
double expertise, no attempt was made to introduce a clear solution in either of the
above documents40.
Some helpful indications are, nonetheless, provided in the UNCITRAL Guide to
Enactment and Interpretation Regarding the Insolvency Model Law, on which we focus
in the present chapter. It is stated therein that the automatic stay of individual actions
laid down in art. 20 para.1 of the ML also covers actions before an arbitral tribunal41.
According to that provision: “Upon recognition of a foreign proceeding that it is a
foreign main proceeding: a) commencement or continuation of individual actions or
individual proceedings concerning the debtor assets, rights, obligations or liabilities is
stayed …” (emphasis added).
Consequently, when a foreign (main) proceeding is recognized, the opening or con-
tinuation of pending arbitration proceedings is in principle prevented. Such limitations
are not contrary to the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards of 1958. This procedural effect, set out in a uniform way
under the UNCITRAL regime, is compounded by other possible limitations of a
substantive nature that may exist under the national law of the state of recognition,
which may restrict the freedom of the parties to agree on arbitration, or may affect the
capacity of the parties. The law of the state of recognition and/or the lex arbitri apply
to these issues.
40 N. Hannan, “International Commercial Arbitration and Cross-Border Insolvency”, 17 Int’l Trade &
Bus. L.Rev. 447, esp at 449–450 (2014).
41 UNCITRAL ML with Guide to Enactment and Interpretation, 2014, para. 180 (www.uncitral.org/
pdf/english/texts/insolv/1997-Model-Law-Insol-2013-Guide-Enactment-e.pdf).
42 See note 41 above.
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or termination in respect of the stay and suspension referred to in paragraph 1 of this
article].
(Emphasis supplied)
A number of States that adhere to the UNCITRAL ML have, indeed, made use of
this discretion. That means that the effect of the foreign insolvency on the arbitration
agreement or the pending arbitration proceeding is a question to be decided by the
State of recognition. As will be demonstrated later on, in many jurisdictions, the stay
and suspension effects are aligned to that produced by a domestic insolvency procedure43.
At first sight, the above provisions and interpretative guidelines seem unsatisfactory,
as they do not promote uniformity of outcome, predictability and therefore legal cer-
tainty. A certain vagueness may, nevertheless, be justified, due to the fact that a balance
of policy objectives is required on the basis of parameters that usually differ from
one case to the next44. The standard benefits of arbitration include predictability for
the parties to multinational transactions, neutrality of the forum and elaborate and
thorough proceedings. Seen from the policy point of view of insolvency law, however,
the above virtues are transformed into disadvantages: the predictability offered to
the parties to the arbitration agreement denies transparency to the other creditors of
the debtor, who may have legitimately relied upon the law of the COMI; the elabo-
rated arbitration proceedings are simultaneously expensive and time-consuming,
characteristics contradicting the need for concentrated45 and expeditious insolvency
proceedings. In addition, if the insolvency estate is of a medium or low value, such
expenses may seem disproportionate and detrimental to other creditors’ claims. On the
other hand, if the arbitration proceedings are close to resolution, it may seem more
appropriate to allow the pending arbitration to be finished, instead of imposing the
additional cost and time of redoing the process46. All these variables cannot be easily
assessed ex ante and in abstracto, in order to decide which result is the best policy. The
only workable solution would be to introduce a uniform and explicit conflict-of-laws
rule, as with the Recast European Regulation. However, this would be hindered by
the scope of the ML itself which is confined only to procedural issues and does not
address questions of private international law; in any case, it would more difficult to
be implemented at the international level than the EU level, due to the lack of mutual
trust similar to that governing the intra-European relations. In view of the above,
43 In addition to the jurisdictions analysed below (UK, Greece, USA), reference should be made also
to the Australian ML. In Australia the stay granted under the enacted ML has been equated to the stays
provided for under the Bankruptcy Act 1966 and Chapter 5 of the Corporations Act 2001 (see N. Hannan,
“International Commercial Arbitration and Cross-Border Insolvency”, 17 Int’l Trade & Bus. L.Rev. 447,
473–474 (2014)).
44 L.Westbrook, “International Arbitration and Insolvency”, 29 Penn State Int’l L. Rev. 635, 640–642
(2011).
45 The argument of concentration of disputes is more convincing in the UNCITRAL context than in the
EU context. In the latter framework, if the lex arbitri decides the stay or discontinuation of arbitration, the
general rules on jurisdiction (included both in the Insolvency Regulation and the Brussels I Regulation) will
apply; therefore, actions based on general civil and commercial law will not be joined to the insolvency pro-
ceedings, but will remain subject to the jurisdiction rules of the Brussels I Regulation (see G. Moss, I. Fletcher
& S. Isaacs, The EC Regulation on Insolvency Proceedings: A Commentary and Annotated Guide, 461–462).
46 G. Moss, I. Fletcher & S. Isaacs, The EC Regulation on Insolvency Proceedings: A Commentary and
Annotated Guide, 642.
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although reverting to the discretion of the contracting States may not appear as the
optimum solution, it remains, at the present stage of the international regulation, a
realistic way out of the problem.
As already mentioned, the above realistic approach has the disadvantage that
it tolerates a slippery movement from the initial uniformity goal back to national
regulatory diversification. Thus, in order to clarify the impact of a foreign insol-
vency on an arbitration pending in another State, we should need to check in each
case the domestic solutions of the State where the arbitration takes place; and here
the answers may well vary. Experts on international arbitration47 propose a sys-
tematization of national solutions based on a broad threefold distinction. The first
category includes jurisdictions that impose an absolute prohibition on arbitration
by insolvent entities, on the basis of rules of substantive validity, of capacity or
of non-arbitrability (e.g. Latvia, Poland, Netherlands, Portugal)48. The second cat-
egory includes jurisdictions which preserve in principle the validity of pre-existing
arbitration agreements, while activating the public policy tool of a mandatory stay
depending on the nature of the dispute49 (e.g. Switzerland, France50, Germany).
Finally, the third category of jurisdictions adopt a case-by-case approach, taking into
consideration the circumstances of the particular insolvent parties, the nature of the
dispute, the arbitration agreement and the proceedings to which they are party51. Two
of these jurisdictions which have adhered to the UNCITRAL ML and where a case-
by-case analysis repays study, will be more specifically addressed below.
47 G. Born, International Commercial Arbitration, 2nd ed. (2014), Vol I, 995 et seq.
48 Ibid, pp. 996–997.
49 Ibid, pp. 997–998.
50 In French Law, the arbitrability and the competence of the international arbitral tribunal is not in
principle affected as far as pre-existing contractual relationships are concerned; the creditor has to declare
its claim to the bankruptcy judge and simultaneously invoke the existence of the arbitration agreement; the
arbitration will continue with the trustee succeeding in the role of the insolvent company – debtor. Disputes
closely related to the insolvency process or functions may not, to the contrary, be resolved by arbitration.
Generally speaking, eventual restrictions are founded on the conception of “ordre public”; the mandatory
stay of proceedings by creditors (including arbitration proceedings) is a matter of both domestic and
international public policy; it applies even where the arbitration, while being held in France, is not subject
to French law (Cass Civ. 1re, 5.2.1991, Bull. Civ. I, no 44; Cass Civ. 1re 6.5.2009, JCP G 2009, I, 2167 no
7, obs. J. Béguin; CA Paris 7.4.2011, Rev. arb. 2011, 747, note S. Bollé & B. Haftel. See also C. Saint-Alary-
Houin, Droit des entreprises en difficulté, 9th ed. (2014), 420–421). If the principle of mandatory stay is
not respected in the context of a foreign arbitration, the French judge will refuse the exequatur, due to the
violation of the “lois de police du for”. Due to the effect of the mandatory stay, the object of the arbitration
is transformed: the arbitral tribunal may decide on the validation and the quantification of the claims but
cannot order their payment. C. Seraglini & J. Ortscheidt, Droit de l’arbitrage interne et international (2013),
572–574, 738–739, 754–755, 816–819.
51 E.g., Spain, UK, Singapore, USA (G. Born, International Commercial Arbitration, 2nd ed. (2014),
Vol I, 998–1003).
52 SI 2006/1030.
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provided by it. Art. 20(2) of the CBIR explicitly provides that the stay and suspension
effect shall be the same in scope and effect as if the debtor had been the subject of a
winding up order under the Insolvency Act 1986, and that the court shall have the
same powers as in domestic procedures. Art. 20(4) also provides that the automatic
stay does not affect the right to commence individual actions or proceedings to the
extent necessary to preserve a claim against the debtor. Finally, art. 20(6) further
enhances the power of the court by conferring the discretion to modify or terminate
the stay and suspension, upon request or at its own motion, on such terms and con-
ditions as it thinks fit53. English courts used this discretion in the Armada Shipping
case (2011)54 to allow the continuation of maritime arbitral proceedings pending in
London55, as would have been the case under a local insolvency procedure.
In this case, a bankruptcy order was issued in Switzerland in respect of Armada
Shipping SA, which was later recognized in the UK under art. 17 of ML. At the time
of the commencement of the proceedings, the shipping company was the charterer
of the M/V Spar Spirious under a time charter concluded with Cosco as the dispo-
nent owner. Armada had sub-chartered the vessel to STX. Both the time charter and
the sub-charter contained London arbitration clauses and provided that any dispute
arising thereunder should be governed by English law. Armada defaulted in bunker
payments and the vessel was arrested by the suppliers. Cosco paid the suppliers to
release the vessel and then instituted arbitration proceedings against STX seeking
to be directly paid the sub-hire due to Armada, by invoking the lien clause under
the first charterparty. STX commenced a separate arbitration against Armada. The
main question put to the court was whether the dispute between Cosco and Armada
should be settled by the Swiss bankruptcy court (as Armada’s liquidators claimed) or
by London arbitration. Pursuant to art. 20(2) of the UK ML, the stay resulting from
recognition of the foreign main proceeding should be the same in effect and scope as if
there were domestic proceedings under the Insolvency Act 1986, and the powers of the
court should be determined accordingly. English insolvency law confers on the court
the discretion to grant relief from the stay of individual actions, provided that certain
requirements are met (see s.130(2) of the Insolvency Act 1986). The court took the
course of deciding whether it should exercise that discretion, but did not address the
issue of whether the stay of arbitral proceedings flowed automatically from recogni-
tion. The answer given was that relief ought to be granted, on the basis of arguments
based on private will, justice, convenience and speedy and efficient progress of the
proceedings (mainly because all the legal issues were subject to English law, in relation
to which English arbitrators are experienced). The liquidators’ submissions based on
cost-efficiency and the desirability of concentration of jurisdiction were rejected56.
The only condition was that the debtor shall join the arbitration and, in the event that
it was unable to do so, it was entitled to apply to the court for further relief. Moreover,
53 The Court of Appeal set out, in Re Atlantic Computer Systems Ltd [1992] 1 All ER 476, 501–502,
12 factors to be used as guidelines by a court in determining whether to grant leave. See N. Hannan,
“International Commercial Arbitration and Cross-Border Insolvency”, 17 Int’l Trade & Bus. L.Rev. 447,
460–461 (2014).
54 Cosco Bulk Carrier & Armada Shipping SA [2011] EWHC 216 (Ch); [2011] 2 All ER (Comm) 481.
55 See at [63]–[64].
56 See at [58]–[61].
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a stay of enforcement of the final arbitral award was granted until the court examined
whether the arbitrators had addressed all the aspects of the creditors’ and liquidators’
interests.
Arbitration proceedings could also be justified under art. 20(4) in the event that a
contractual time-bar provision requires arbitration to be commenced within a certain
period to preserve a claim57.
For the time being the CBIR 2006 applies only to the recognition of foreign insol-
vency proceedings outside the scope of the EU Insolvency Regulation. However, in
view of the forthcoming Brexit, it is probable that the above law will acquire a wider
scope of application58. According to the plans for EU withdrawal, all direct EU legisla-
tion (including thus the cross-border insolvency rules), so far as operative immediately
before exit day, will be incorporated as domestic law. However, even within that model,
the truth is that the UK will no longer be a party to the Insolvency Regulation system
and, consequently, there will no longer be automatic recognition of UK insolvency
proceedings in EU Member States and vice-versa. Although the picture is not yet
fully clarified, it results from the above that future relationships would need to rely on
reciprocity. To achieve this end, the tool of CBIR 2006 adapted to address Brexit’s dif-
ficulties may provide (under conditions) a comprehensive alternative, mainly through
the judicial recognition of foreign proceedings.
57 Bank of Tokyo–Mitsubishi UFJ v MV Sanko Mineral [2014] EWHC 3927 (Admlty); [2015] 2 All ER
(Comm) 979. The case, cited in L. Chan Ho (ed), Cross-Border Insolvency, 3rd ed. (2012) at p.160, concerned
a cargo claim against a shipowner subject to insolvency proceedings in Japan, which would become time-
barred unless arbitration was commenced within 12 months of discharge, as agreed in the charterparty in
question, the time-bar had elapsed.
58 For the time being, art. 3 of CBIR makes it clear that the provisions of the EU Regulation prevail
over its provisions (i.e. of the CBIR), where there is any inconsistency.
59 Exceptions from the automatic stay are constructed by reference to concrete provisions of the Greek
Bankruptcy Code, none of which addresses the pending arbitration issue.
60 G. Orfanides, “Bankruptcy and Arbitration”, in In Memoriam L.Georgakopoulos II (2016), 653 et seq.
61 So decided by the Supreme Court (Areios Pagos) 1183/1985, Nov 1985, 1257.
62 See also L. Kotsiris & E. Kotsiris, The UNCITRAL Model Law on Cross-Border Insolvency
Proceedings – the Judicial Perspective for a Uniform Interpretation (2012), 545 (in Greek); Supreme Court
(Areios Pagos) 2234/2009, ChrID 2011, 121, EllDni 2010, 411 (where it was held that the arbitration agree-
ment is enforceable even though one of the parties is in bankruptcy, and that the provisions regarding the
stay of individual actions are not of a public policy character under art. 33 of the Civil Code, and therefore
that an arbitration award issued after the party has been adjudged bankrupt cannot be vacated).
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arbitration (the degree of its connection with the bankruptcy proceedings) . The stay 63
of proceedings is granted (or not) based on the status of the creditors (secured or
unsecured) and on the nature of the dispute. The arbitral award64 in respect of the
claims to be satisfied in the bankruptcy context is only regarded as validation and
quantification of the claims, and cannot be executed65.
If this were to be applied in the context of the ML regime, it would mean that,
once the cross-border insolvency proceeding is recognized, the automatic stay
applies in principle, in the same way as in a domestic procedure. Pending arbitra-
tions would be allowed to continue (and new arbitrations to commence) only in
the following cases: (i) if they relate to secured creditors; (ii) if the debtor is the
plaintiff; or (iii) if they concern claims that would not be satisfied in the context of
bankruptcy.
63 The arbitral tribunal is not entitled to decide on matters arising in or closely related to bankruptcy,
such as a claim to set aside a contract detrimental to creditors, since such matters fall within the general
jurisdiction of the bankruptcy court (art. 53 of the Bankruptcy Code). See E. Perakis, Bankruptcy Law, 3rd
ed. (2017), 259–260.
64 The liquidator who prosecutes arbitral proceedings that have already commenced is vested with
all the rights and duties arising out of the proceedings, and is entitled to reasonable additional time to
exercise in the most efficient manner the right to be heard and to counsel. Finally, having been entrusted
with the administration of the debtor’s estate, the liquidator has the power to enter into a new agreement
(see S. Koussoulis, Arbitration: Interpretation per article (2004), 9; also C. Seraglini & J. Ortscheidt, Droit de
l’arbitrage interne et international (2013), 100–101).
65 Cf the English decision in Cosco Bulk Carrier & Armada Shipping SA [2011] EWHC 216 (Ch); [2011]
2 All ER (Comm) 481 at [64].
66 11 USC, Chapter 15. This was introduced as part of the Bankruptcy Abuse Protection and Consumer
Protection Act 2005 (Pub.L. 109–8; 119 Stat. 23) and became effective on 17 October 2005 (see among
others S. Melnik, “United States”, in L.Chan Ho, A Commentary on the UNCITRAL Model Law, 3rd ed.
(2012), 437 et seq.).
67 S. Vorburger, International Arbitration and Cross-Border Insolvency, 59, 98.
68 See 9 USC, Chapter 1.
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ecentralized approach towards dispute resolution; on the other hand, the Federal
d
Bankruptcy Code (USC Title 11) which exerts, equally with strong judicial approval,
an inexorable pull towards centralization for the coordinated management of the
bankruptcy case69. Attempting to resolve the issue, the Supreme Court established, in
the landmark McMahon case70, a disjunctive three-prong test (the “arbitrability test”)
pursuant to which courts were to assess whether, in a particular case, a claim should
remain arbitrable despite the bankruptcy and whether arbitration should be contin-
ued. More precisely, the Supreme Court held that the party opposing enforcement of
an arbitration agreement had the burden of proving congressional intent to create an
exception to the Arbitration Act, in light of another federal statute71.
Such intent may be discerned by taking into account: (i) the text of the other statute
on which the claim is based; (ii) the legislative history of the other statute; and (iii) an
inherent conflict between arbitration and the underlying purposes of the other statute.
Due to the lack of any legislative guidance in either the FAA or the Bankruptcy Code,
the courts had to focus on the last criterion of the test, i.e. the “inherent conflict”
prong; it is on this basis that the case-law has been built.
69 A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599, esp at
599–602 (2016), also Société Nationale Algérienne v. Distrigas, 80 B.R. 606, 610 (D. Mass. 1987).
70 Shearson/American Express, Inc. v McMahon 482 US, 220 (1987). See also A. Resnick, “The
Enforceability of Arbitration Clauses in Bankruptcy”, 15 Am. Bankr. Inst. L.Rev. 183, 201–202 (2007).
71 A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599, 607 (2016).
72 Northern Pipeline Construction Co. v Marathon Pipe Line Co, 458 US 50 (1982). The issue was whether
the bankruptcy court had jurisdiction to adjudicate a lawsuit commenced by a debtor in possession against
an adverse party seeking recovery through action based on State law. The Supreme Court held that the system
established by the Bankruptcy Reform Act of 1978 was unconstitutional, on the grounds that the legislation
conferred powers on bankruptcy judges that could constitutionally be exercised only by judges appointed to
courts created in conformity with art. III of the Constitution (F.Kennedy, “Jurisdictional Problems between
Admiralty and Bankruptcy Courts”, 59 Tul. L. Rev. 1182, 1186–1187 (1985); also R. McCullough, “Law
Wars: The Battle between Bankruptcy and Admiralty”, 32 Tul. Mar. L.J. 457, 476–477 (2008); G.Staring,
“Bankruptcy: An Historical View”, 59 Tul. L. Rev. 1157, 1169–1170 (1985)).
73 The Bankruptcy Reform Act of 1978 (Pub.L. 95–598, 92 Stat. 2549) granted bankruptcy courts
broad jurisdiction, including jurisdiction over admiralty cases. In particular, they were granted exclusive
jurisdiction over all cases under Chapter 11, as well as original (but not exclusive) jurisdiction over all
civil proceedings arising in or related to cases under Chapter 11. Following the Marathon case (see above),
Congress adopted the Bankruptcy Amendments and Federal Judgeship Act 1984 (Pub. Law 98–353), still in
force, which dealt with the issue on the following basis: (a) comprehensive and original bankruptcy jurisdic-
tion was granted to the federal district courts and federal district judges, appointed under art. III of the
Constitution, without the bankruptcy judges being explicitly named; (b) bankruptcy courts were classified
as units of the federal district court; and (c) internal referral was established of bankruptcy matters to the
bankruptcy courts (facilitated by the restructuring). Referral became therefore the central coordination
instrument of the current regime.
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the proceedings that bankruptcy courts can hear. It is again used in our context for a
different purpose: that is, to define the margin of discretion available to bankruptcy
courts in refusing to compel arbitration74.
The powers of bankruptcy courts are defined on the basis of the classification
of disputes into two main categories: those that only exist as a direct result of a
bankruptcy case, which therefore are explicitly defined as core proceedings75; and those
that, although not owing their existence to bankruptcy claims, are otherwise related to
bankruptcy proceedings (non-core proceedings). Non-core proceedings do not there-
fore need to be actions against the insolvent debtor or estate. It is sufficient that their
outcome could conceivably have any effect on the estate that is being administered
in bankruptcy76. To the above, one may add disputes that are completely unrelated
to bankruptcy proceedings and have no effect on the outcome of bankruptcy. Legal
characterization is required for each dispute, as the powers accorded to bankruptcy
courts change accordingly77. In the case of core proceedings, the bankruptcy court
is granted general jurisdiction, which authorizes it to hear the case and issue orders
and final judgments. In related non-core proceedings, the bankruptcy court submits
proposed findings on the facts and conclusions of law to the district court. Finally, the
unrelated proceedings fall completely outside the bankruptcy jurisdiction.
The above classification provides a relatively workable model allowing us to delineate
the relationship between recognized cross-border insolvencies and a rbitrations78. The
scope of the automatic stay set out in Chapter 15, §362, includes, in principle, inter-
national and domestic arbitrations located in the USA79. Once the insolvency pro-
ceeding has been recognized, the stay applies to all individual domestic proceedings;
however, the US court has discretion to lift the stay and/or decide on the enforcement
of the arbitration clause, according to the following lines:
74 A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599, 607 (2016).
75 The definition of core proceedings includes not only the petition to open insolvency proceedings,
but also matters or disputes relating to a Chapter 11 or Chapter 7 case. In accordance with the indicative
list contained in 28 U.S.C. §157(b)(2), core proceedings include, but are not limited to, matters concerning
the administration of the estate, allowance or disallowance of claims and counterclaims against the estate,
drawing up and confirming a reorganizational plan, potential counterclaims by the estate, orders in respect of
obtaining credit or turning over property to the estate, motions to terminate, annul or modify the automatic
stay of actions, the determination of the validity, extent and ranking of liens and securities, orders approving
the use, lease or sale of property, avoidance and recovery of preferences and fraudulent conveyances, etc.
76 In re Pacor, Inc. v Higgins, 743 F.2d 984, 994 (3rd Cir. 1984); see also G. Seitz, “Interaction between
Admiralty and Bankruptcy Law: Effects of Globalization and Recurrent Tensions”, 83 Tul. L. Rev. 1339,
1361 (2009).
77 Exceptionally, it is provided that federal courts could “abstain” in order to permit resolution of a dispute
in a state court with respect not only to core, but also to non-core proceedings, either voluntarily (in the inter-
ests of procedural expediency and comity with state courts) or (rarely) mandatorily with regard to non-core
proceedings opened in the state court and thereafter removed to the federal court (Chapter 15, §1334(c)(1)(2)).
78 Another research path would be to envisage the arbitration agreements as executory contracts;
this approach largely exceeds the scope of the present chapter. See, inter alia, A. Albertini, “Arbitration
in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599, 632–634 (2016); P. Kirgis, “Arbitration,
Bankruptcy and Public Policy: A Contractarian Analysis”, 17 Am. Bankr. Inst. L. Rev. 53 (2009);
A. Leventhal & R. Elias, “Competing Efficiencies: The Problem of Whether and When to Refer Disputes to
Arbitration in Bankruptcy Cases”, 24 Am. Bankr. Inst. L. Rev. 133, esp at 153 et seq. (2016).
79 An arbitration award rendered in disregard of the automatic stay is considered void (S. Vorburger,
International Arbitration and Cross-Border Insolvency, 181–182).
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(i) As far as non-core proceedings are concerned, the courts lack discretion to deny
enforcement of the arbitration clause since such proceedings do not present an
inherent conflict with the underlying policies of the Bankruptcy Code80.
(ii) Where core proceedings are involved, a clear rule is still missing: some deci-
sions deny automatic enforcement, while others consider it necessary to
screen ad hoc any potential conflict in light of the purpose and provisions
of the Bankruptcy Code81. In an attempt to systematize existing case-law,
some scholars further refine the distinction by subdividing core proceedings
into “substantially core” and “procedurally core”82. For the substantially core
issues (those that arise under bankruptcy rules or whose resolution in arbi-
tration would jeopardize the core functions of the Bankruptcy Code), it is
beyond doubt that courts have discretion to deny enforcement of an arbitra-
tion clause; for the procedurally core ones (those handling claims that arise
out of non-bankruptcy law, though they would have no existence outside of
bankruptcy) case-law is uncertain: some district courts consider that there is
no judicial discretion as to the enforcement of the arbitration clause, while
others allow the exercise of such discretion83.
It results from the above short description, that the US discretion-based model84
generates uncertainties and inefficiencies at both levels: first, whether a claim should be
classified as core or non-core and, secondly, once it has been classified, how it should
be resolved by arbitration or by the bankruptcy judge. Interestingly enough, in the
maritime context, it has been held that an action for a declaratory judgment concern-
ing contractual obligations under a marine insurance policy is integral to insolvency
proceedings, even though the policies were entered into prior to the petition, because it
directly affects the rights of the debtor, and therefore the administration of the estate
and the distribution of the proceeds among the creditors85. On this basis, the bankruptcy
80 A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599, 609 et seq.
(2016); see also Hays & Co. v. Merril Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d, 1159.
81 See the judicial analysis in Α. Resnick, “The Enforceability of Arbitration Clauses in Bankruptcy”,
15 Am. Bankr. Inst. L.Rev. 183, 200 et seq. (2007).
82 See A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr. L.J. 599,
609–612 (2016).
83 For examples, see A. Albertini, “Arbitration in Bankruptcy: Which Way Forward?”, 90 Am. Bankr.
L.J. 599, 612–13 (2016).
84 G. Seitz, “Interaction between Admiralty and Bankruptcy Law: Effects of Globalization and
Recurrent Tensions”, 83 Tul. L. Rev. 1339, 1374 (2009).
85 In the present case, among the US Lines creditors were 12,000 employees, who filed claims arising
from asbestos-caused injuries sustained while working aboard various ships belonging to the debtor. The
debtor-company’s trust had been insured by four domestic and four foreign mutual insurance clubs. The
proceeds of the relevant policies were the only funds available to cover the employees’ claims. At the heart of
the dispute was the “pay to be paid” clause, which is usually inserted into marine insurance policies, accord-
ing to which the insurer is not liable to pay until the insured pays the creditor’s claim. The liquidator and a
group of claimants entered into a settlement that was approved by the court, and then the liquidator filed an
action seeking a declaratory judgment of the insurance clubs’ obligations in the light of the settlement. The
unanimous opinion that such action constitutes a core proceeding, despite the fact that each judgment was
based on different grounds, was further strengthened by the highly complex factual scenario and the massive
number of claims brought. (U.S. Lines, Inc. v Am. S.S. Owners Mut. Prot. & Ind. Ass’n (In re U.S. Lines,
Inc.), 197 F. 3d 631, 2000 AMC 784 (2d Cir 1999)). On this case, see also, G. Seitz, “Interaction between
Admiralty and Bankruptcy Law: Effects of Globalization and Recurrent Tensions”, 83 Tul. L. Rev. 1339,
1362–1366 (2009).
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arbitration & maritime insolvency
court entered a final judgment and denied enforcement of the arbitration clause
inserted in the insurance policy. In US law, issues concerning the insurance coverage
of debtors are generally considered core proceedings, particularly in cases where the
insurance coverage represents a substantial portion of the debtor’s estate. Similarly,
it has been found that a pending charterparty dispute arising after the judicial sale of
the vessel ordered by the bankruptcy court qualifies as a core bankruptcy proceeding.
The examination focuses on whether the contractual obligation is antecedent to the
bankruptcy, and the degree to which the dispute is independent of the reorganization
proceedings (or in other words, if it is either directly affected by the reorganization, or
directly affects a core reorganization function)86. The same applies to all pending bilat-
eral contracts concerning the exploitation of the ship. In contrast, disputes relating to
claims by seafarers for personal injury or death are explicitly outside the jurisdiction of
bankruptcy courts, because they are generally governed by the provisions of State law87.
15.5 Conclusions
1. As it derives from the two scenarios examined above, the treatment of the
pending arbitration depends mainly on the lex arbitri under both the EU and
the UNCITRAL regimes, although to variable degrees and through different
mechanisms. The first regime relies on the lex arbitri, via a European conflict-
of-laws rule; the second reaches the same result, by referring to the national
legislative discretion.
2. However, the difficulties that may arise in relation to the enforcement of the
award should not be disregarded in both scenarios. Although it is questionable in
legal terms whether the arbitral tribunal has an obligation to issue an enforceable
award, there is no doubt, from a practical viewpoint, that the main legitimate
expectation of the parties is that the award will be recognized and enforced.
This will have to take place in the State where the debtor’s assets are located,
which frequently coincides with the State of the opening of proceedings88. Thus,
irrespectively of any issues of legal characterization, it is doubtful whether the
provisions of the lex fori concursus may completely be disregarded, taking into
account that they may be invoked, on the basis of the public policy exception,
as a defence to recognition of a foreign award89. Art. V (2)(b) of the New York
Convention allows a court to look at issues of public policy at the time the
party is seeking enforcement against an insolvent entity; although the public
policy exception has to be construed narrowly90 as a basis both for annulling
an award or for denying enforcement, it is accepted in most jurisdictions that
the infringement of certain insolvency law provisions of a mandatory nature
86 Jam. Shipping Co. v Orient Shipping Rotterdam, B.V. (In re Millenium SeaCarriers, Inc., Millenium
II), 458 F. 3d 92, 2006, AMC 2376, 2377–2378 (2d Cir. 2006).
87 US Chapter 15, §157(b)(2)(Β), (Ο) and (b)(5); and G. Seitz, “Interaction between Admiralty and
Bankruptcy Law: Effects of Globalization and Recurrent Tensions”, 83 Tul. L. Rev. 1339, 1380–1382 (2009).
88 L. Athanasssiou, Maritime Cross-Border Insolvency, 193.
89 G. Born, International Commercial Arbitration, Vol. I, 895–896.
90 G. Born, International Commercial Arbitration, Vol. III, 3312 et seq.
239
professor lia athanassiou
may indeed constitute a violation of public policy as this may confer upon such
party an undue benefit or priority to the detriment of the other creditors91.
3. Going a step further, some scholars suggest that the best solution, in line
with the logic of the modified universalism, would be to choose the law of
the main insolvency proceedings as the most appropriate to govern the legal
issues that may arise concerning the debtor and its assets92; it should not be
forgotten that contractual relationships which were originally bilateral, as the
arbitration agreement, are de facto transformed into a multilateral one, once
the insolvency of one party is declared. Although we are still a long way from
a commonly accepted solution, and even further from a universal legisla-
tive proposal, no one could object that arbitrators should be careful when
examining their ability to arbitrate in cases involving insolvent entities. They
also need to take into account the lex fori concursus and consider whether the
arbitration proceedings should continue or be suspended, in order to avoid
issuing a vulnerable award93.
91 UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration,
164; see also G.Born, International Commercial Arbitration, Vol. III, 3322, N. Hannan, “International
Commercial Arbitration and Cross-Border Insolvency”, 17 Int’l Trade & Bus. L.Rev. 447, 476 (2014).
92 L. Westbrook, “International Arbitration and Insolvency”, 29 Penn State Int’l L. Rev. 635, 649
(2011).
93 D. Draguiev, “The Effect of Insolvency on Pending International Arbitration: What Is and What
Should Not Be”, 32 Journal of International Arbitration 511, 542 (2015).
240
APPENDIX 1
Article I
For the purposes of this Convention:
1. “Ship” means any sea-going vessel and seaborne craft of any type whatsoever constructed
or adapted for the carriage of oil in bulk as cargo, provided that a ship capable of carrying oil
and other cargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo
and during any voyage following such carriage unless it is proved that it has no residues of such
carriage of oil in bulk aboard.
2. “Person” means any individual or partnership or any public or private body, whether
corporate or not, including a State or any of its constituent subdivisions.
3. “Owner” means the person or persons registered as the owner of the ship or, in the absence
of registration, the person or persons owning the ship. However in the case of a ship owned by a
State and operated by a company which in that State is registered as the ship’s operator, “owner”
shall mean such company.
4. “State of the ship’s registry” means in relation to registered ships the State of registration
of the ship, and in relation to unregistered ships the State whose flag the ship is flying.
5. “Oil” means any persistent hydrocarbon mineral oil such as crude oil, fuel oil, heavy diesel
oil and lubricating oil, whether carried on board a ship as cargo or in the bunkers of such a
ship.
6. “Pollution damage” means:
(a) loss or damage caused outside the ship by contamination resulting from the escape or
discharge of oil from the ship, wherever such escape or discharge may occur, provided
that compensation for impairment of the environment other than loss of profit from
such impairment shall be limited to costs of reasonable measures of reinstatement
actually undertaken or to be undertaken;
(b) the costs of preventive measures and further loss or damage caused by preventive
measures.
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7. “Preventive measures” means any reasonable measures taken by any person after an
incident has occurred to prevent or minimize pollution damage.
8. “Incident” means any occurrence, or series of occurrences having the same origin, which
causes pollution damage or creates a grave and imminent threat of causing such damage.
9. “Organization” means the International Maritime Organization.
10. “1969 Liability Convention” means the International Convention on Civil Liability for
Oil Pollution Damage, 1969. For States Parties to the Protocol of 1976 to that Convention, the
term shall be deemed to include the 1969 Liability Convention as amended by that Protocol.
Article II
This Convention shall apply exclusively:
(a) to pollution damage caused:
(i) in the territory, including the territorial sea, of a Contracting State, and
(ii) in the exclusive economic zone of a Contracting State, established in accordance with
international law, or, if a Contracting State has not established such a zone, in an area
beyond and adjacent to the territorial sea of that State determined by that State in
accordance with international law and extending not more than 200 nautical miles
from the baselines from which the breadth of its territorial sea is measured;
(b) to preventive measures, wherever taken, to prevent or minimize such damage.
Article III
1. Except as provided in paragraphs 2 and 3 of this Article, the owner of a ship at the time
of an incident, or, where the incident consists of a series of occurrences, at the time of the first
such occurrence, shall be liable for any pollution damage caused by the ship as a result of the
incident.
2. No liability for pollution damage shall attach to the owner if he proves that the damage:
(a) resulted from an act of war, hostilities, civil war, insurrection or a natural phenom-
enon of an exceptional, inevitable and irresistible character, or
(b) was wholly caused by an act or omission done with intent to cause damage by a third
party, or
(c) was wholly caused by the negligence or other wrongful act of any Government or
other authority responsible for the maintenance of lights or other navigational aids in
the exercise of that function.
3. If the owner proves that the pollution damage resulted wholly or partially either from an
act or omission done with intent to cause damage by the person who suffered the damage or
from the negligence of that person, the owner may be exonerated wholly or partially from his
liability to such person.
4. No claim for compensation for pollution damage may be made against the owner other-
wise than in accordance with this Convention. Subject to paragraph 5 of this Article, no claim
for compensation for pollution damage under this Convention or otherwise may be made
against:
(a) the servants or agents of the owner or the members of the crew;
(b) the pilot or any other person who, without being a member of the crew, performs
services for the ship;
(c) any charterer (how so ever described, including a bareboat charterer), manager or
operator of the ship;
(d) any person performing salvage operations with the consent of the owner or on the
instructions of a competent public authority;
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(e) any person taking preventive measures;
(f) all servants or agents of persons mentioned in subparagraphs (c), (d) and (e);
unless the damage resulted from their personal act or omission, committed with the intent
to cause such damage, or recklessly and with knowledge that such damage would probably
result.
5. Nothing in this Convention shall prejudice any right of recourse of the owner against third
parties.
Article IV
When an incident involving two or more ships occurs and pollution damage results there from,
the owners of all the ships concerned, unless exonerated under Article III, shall be jointly and
severally liable for all such damage which is not reasonably separable.
Article V
1. The owner of a ship shall be entitled to limit his liability under this Convention in respect
of any one incident to an aggregate amount calculated as follows:
(a) 4,510,000 units of account2 for a ship not exceeding 5,000 units of tonnage;
(b) for a ship with a tonnage in excess there of, for each additional unit of tonnage, 631
units of account2 in addition to the amount mentioned in sub-paragraph (a);
provided, however, that this aggregate amount shall not in any event exceed 89,770,000 units of
account.
2. The owner shall not be entitled to limit his liability under this Convention if it is proved
that the pollution damage resulted from his personal act or omission, committed with the intent
to cause such damage, or recklessly and with knowledge that such damage would probably
result.
3. For the purpose of availing himself of the benefit of limitation provided for in paragraph 1
of this Article the owner shall constitute a fund for the total sum representing the limit of his
liability with the Court or other competent authority of any one of the Contracting States in
which action is brought under Article IX or, if no action is brought, with any Court or other
competent authority in any one of the Contracting States in which an action can be brought
under Article IX. The fund can be constituted either by depositing the sum or by producing a
bank guarantee or other guarantee, acceptable under the legislation of the Contracting State
where the fund is constituted, and considered to be adequate by the Court or other competent
authority.
4. The fund shall be distributed among the claimants in proportion to the amounts of their
established claims.
5. If before the fund is distributed the owner or any of his servants or agents or any person
providing him insurance or other financial security has as a result of the incident in question,
paid compensation for pollution damage, such person shall, up to the amount he has paid,
acquire by subrogation the rights which the person so compensated would have enjoyed under
this Convention.
6. The right of subrogation provided for in paragraph 5 of this Article may also be exercised
by a person other than those mentioned therein in respect of any amount of compensation for
pollution damage which he may have paid but only to the extent that such subrogation is permit-
ted under the applicable national law.
7. Where the owner or any other person establishes that he may be compelled to pay at a later
date in whole or in part any such amount of compensation, with regard to which such person
would have enjoyed a right of subrogation under paragraphs 5 or 6 of this Article, had the
243
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c ompensation been paid before the fund was distributed, the Court or other competent author-
ity of the State where the fund has been constituted may order that a sufficient sum shall be pro-
visionally set aside to enable such person at such later date to enforce his claim against the fund.
8. Claims in respect of expenses reasonably incurred or sacrifices reasonably made by the
owner voluntarily to prevent or minimize pollution damage shall rank equally with other claims
against the fund.
9. (a) The “unit of account” referred to in paragraph 1 of this Article is the Special Drawing
Right as defined by the International Monetary Fund. The amounts mentioned in
paragraph 1 shall be converted into national currency on the basis of the value of that
currency by reference to the Special Drawing Right on the date of the constitution of
the fund referred to in paragraph 3. The value of the national currency, in terms of the
Special Drawing Right, of a Contracting State which is a member of the International
Monetary Fund shall be calculated in accordance with the method of valuation applied
by the International Monetary Fund in effect on the date in question for its operations
and transactions. The value of the national currency, in terms of the Special Drawing
Right, of a Contracting State which is not a member of the International Monetary
Fund shall be calculated in a manner determined by that State.
(b) Nevertheless, a Contracting State which is not a member of the International
Monetary Fund and whose law does not permit the application of the provisions of
paragraph 9(a) may, at the time of ratification, acceptance, approval of or accession
to this Convention or at any time there after, declare that the unit of account referred
to in paragraph 9(a) shall be equal to 15 gold francs. The gold franc referred to in this
paragraph corresponds to sixty-five and a half milligrammes of gold of millesimal
fineness nine hundred. The conversion of the gold franc into the national currency
shall be made according to the law of the State concerned.
(c) The calculation mentioned in the last sentence of paragraph 9(a) and the conver-
sion mentioned in paragraph 9(b) shall be made in such manner as to express in the
national currency of the Contracting State as far as possible the same real value for
the amounts in paragraph 1 as would result from the application of the first three
sentences of paragraph 9(a). Contracting States shall communicate to the depositary
the manner of calculation pursuant to paragraph 9(a), or the result of the conversion
in paragraph 9(b) as the case may be, when depositing an instrument of ratification,
acceptance, approval of or accession to this Convention and whenever there is a
change in either.
10. For the purpose of this Article the ship’s tonnage shall be the gross tonnage calcu-
lated in accordance with the tonnage measurement regulations contained in Annex I of the
International Convention on Tonnage Measurement of Ships, 1969.
11. The insurer or other person providing financial security shall be entitled to constitute a
fund in accordance with this Article on the same conditions and having the same effect as if it
were constituted by the owner. Such a fund may be constituted even if, under the provisions of
paragraph 2, the owner is not entitled to limit his liability, but its constitution shall in that case
not prejudice the rights of any claimant against the owner.
Article VI
1. Where the owner, after an incident, has constituted a fund in accordance with Article V,
and is entitled to limit his liability,
(a) no person having a claim for pollution damage arising out of that incident shall be
entitled to exercise any right against any other assets of the owner in respect of such
claim;
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appendix 1
(b) the Court or other competent authority of any Contracting State shall order the
release of any ship or other property belonging to the owner which has been arrested
in respect of a claim for pollution damage arising out of that incident, and shall
similarly release any bail or other security furnished to avoid such arrest.
2. The foregoing shall, however, only apply if the claimant has access to the Court adminis-
tering the fund and the fund is actually available in respect of his claim.
Article VII
1. The owner of a ship registered in a Contracting State and carrying more than 2,000 tons
of oil in bulk as cargo shall be required to maintain insurance or other financial security, such
as the guarantee of a bank or a certificate delivered by an international compensation fund, in
the sums fixed by applying the limits of liability prescribed in Article V, paragraph 1 to cover his
liability for pollution damage under this Convention.
2. A certificate attesting that insurance or other financial security is in force in accordance
with the provisions of this Convention shall be issued to each ship after the appropriate author-
ity of a Contracting State has determined that the requirements of paragraph 1 have been
complied with. With respect to a ship registered in a Contracting State such certificate shall be
issued or certified by the appropriate authority of the State of the ship’s registry; with respect
to a ship not registered in a Contracting State it may be issued or certified by the appropriate
authority of any Contracting State. This certificate shall be in the form of the annexed model
and shall contain the following particulars:
(a) name of ship and port of registration;
(b) name and principal place of business of owner;
(c) type of security;
(d) name and principal place of business of insurer or other person giving security and,
where appropriate, place of business where the insurance or security is established;
(e) period of validity of certificate which shall not be longer than the period of validity
of the insurance or other security.
3. The certificate shall be in the official language or languages of the issuing State. If the
language used is neither English nor French, the text shall include a translation into one of
these languages.
4. The certificate shall be carried on board the ship and a copy shall be deposited with
the authorities who keep the record of the ship’s registry or, if the ship is not registered in a
Contracting State, with the authorities of the State issuing or certifying the certificate.
5. An insurance or other financial security shall not satisfy the requirements of this Article
if it can cease, for reasons other than the expiry of the period of validity of the insurance or
security specified in the certificate under paragraph 2 of this Article, before three months have
elapsed from the date on which notice of its termination is given to the authorities referred to
in paragraph 4 of this Article, unless the certificate has been surrendered to these authorities or
a new certificate has been issued within the said period. The foregoing provisions shall similarly
apply to any modification which results in the insurance or security no longer satisfying the
requirements of this Article.
6. The State of registry shall, subject to the provisions of this Article, determine the condi-
tions of issue and validity of the certificate.
7. Certificates issued or certified under the authority of a Contracting State in accord-
ance with paragraph 2 shall be accepted by other Contracting States for the purposes of this
Convention and shall be regarded by other Contracting States as having the same force as cer-
tificates issued or certified by them even if issued or certified in respect of a ship not registered
in a Contracting State.
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A Contracting State may at any time request consultation with the issuing or certifying State
should it believe that the insurer or guarantor named in the certificate is not financially capable
of meeting the obligations imposed by this Convention.
8. Any claim for compensation for pollution damage may be brought directly against the
insurer or other person providing financial security for the owner’s liability for pollution damage.
In such case the defendant may, even if the owner is not entitled to limit his liability according to
Article V, paragraph 2, avail himself of the limits of liability prescribed in Article V, paragraph 1.
He may further avail himself of the defences (other than the bankruptcy or winding up of the
owner) which the owner himself would have been entitled to invoke. Furthermore, the defendant
may avail himself of the defence that the pollution damage resulted from the wilful misconduct
of the owner himself, but the defendant shall not avail himself of any other defence which he
might have been entitled to invoke in proceedings brought by the owner against him. The defend-
ant shall in any event have the right to require the owner to be joined in the proceedings.
9. Any sums provided by insurance or by other financial security maintained in accordance
with paragraph 1 of this Article shall be available exclusively for the satisfaction of claims under
this Convention.
10. A Contracting State shall not permit a ship under its flag to which this Article applies to
trade unless a certificate has been issued under paragraph 2 or 12 of this Article.
11. Subject to the provisions of this Article, each Contracting State shall ensure, under its
national legislation, that insurance or other security to the extent specified in paragraph 1 of
this Article is in force in respect of any ship, wherever registered, entering or leaving a port in its
territory, or arriving at or leaving an off-shore terminal in its territorial sea, if the ship actually
carries more than 2,000 tons of oil in bulk as cargo.
12. If insurance or other financial security is not maintained in respect of a ship owned by a
Contracting State, the provisions of this Article relating there to shall not be applicable to such
ship, but the ship shall carry a certificate issued by the appropriate authorities of the State of the
ship’s registry stating that the ship is owned by that State and that the ship’s liability is covered
within the limits prescribed by Article V, paragraph 1. Such a certificate shall follow as closely as
practicable the model prescribed by paragraph 2 of this Article.
Article VIII
Rights of compensation under this Convention shall be extinguished unless an action is brought
there under within three years from the date when the damage occurred. However, in no case
shall an action be brought after six years from the date of the incident which caused the damage.
Where this incident consists of a series of occurrences, the six years’ period shall run from the
date of the first such occurrence.
Article IX
1. Where an incident has caused pollution damage in the territory, including the territorial sea
or an area referred to in Article II, of one or more Contracting States or preventive measures
have been taken to prevent or minimize pollution damage in such territory including the ter-
ritorial sea or area, actions for compensation may only be brought in the Courts of any such
Contracting State or States. Reasonable notice of any such action shall be given to the defendant.
2. Each Contracting State shall ensure that its Courts possess the necessary jurisdiction to
entertain such actions for compensation.
3. After the fund has been constituted in accordance with Article V the Courts of the State
in which the fund is constituted shall be exclusively competent to determine all matters relating
to the apportionment and distribution of the fund.
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Article X
1. Any judgment given by a Court with jurisdiction in accordance with Article IX which is
enforceable in the State of origin where it is no longer subject to ordinary forms of review, shall
be recognized in any Contracting State, except:
(a) where the judgment was obtained by fraud; or
(b) where the defendant was not given reasonable notice and a fair opportunity to present
his case.
2. A judgment recognized under paragraph 1 of this Article shall be enforceable in each
Contracting State as soon as the formalities required in that State have been complied with. The
formalities shall not permit the merits of the case to be re-opened.
Article XI
1. The provisions of this Convention shall not apply to warships or other ships owned
or operated by a State and used, for the time being, only on government non-commercial
service.
2. With respect to ships owned by a Contracting State and used for commercial purposes,
each State shall be subject to suit in the jurisdictions set forth in Article IX and shall waive all
defences based on its status as a sovereign State.
Article XII
This Convention shall supersede any International Conventions in force or open for signature,
ratification or accession at the date on which the Convention is opened for signature, but only
to the extent that such Conventions would be in conflict with it; however, nothing in this Article
shall affect the obligations of Contracting States to non-Contracting States arising under such
International Conventions.
Transitional provisions
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Final clauses
The final clauses of this Convention shall be Articles 12 to 18 of the Protocol of 1992 to amend
the 1969 Liability Convention. References in this Convention to Contracting States shall be
taken to mean references to the Contracting States of that Protocol.
Final Clauses of the Protocol of 1992 to amend the 1969 Civil Liability Convention
Article 12
Article 13
248
appendix 1
in respect of the Protocol of 1992 to amend the 1971 Fund Convention may also make a decla-
ration in accordance with this paragraph at the same time.
3. Any State which has made a declaration in accordance with the preceding paragraph may
withdraw it at any time by means of a notification addressed to the Secretary-General of the
Organization. Any such withdrawal shall take effect on the date the notification is received,
provided that such State shall be deemed to have deposited its instrument of ratification, accept-
ance, approval or accession in respect of this Protocol on that date.
4. For any State which ratifies, accepts, approves or accedes to it after the conditions in para-
graph 1 for entry into force have been met, this Protocol shall enter into force twelve months
following the date of deposit by such State of the appropriate instrument.
Article 14
Article 15
249
appendix 1
increased by 6 per cent per year calculated on a compound basis from 15 January
1993.
(c) No limit may be increased so as to exceed an amount which corresponds to the limit
laid down in the 1969 Liability Convention as amended by this Protocol multiplied
by 3.
7. Any amendment adopted in accordance with paragraph 4 shall be notified by the
Organization to all Contracting States. The amendment shall be deemed to have been accepted
at the end of a period of eighteen months after the date of notification, unless within that period
not less than one quarter of the States that were Contracting States at the time of the adoption
of the amendment by the Legal Committee have communicated to the Organization that they
do not accept the amendment in which case the amendment is rejected and shall have no effect.
8. An amendment deemed to have been accepted in accordance with paragraph 7 shall enter
into force eighteen months after its acceptance.
9. All Contracting States shall be bound by the amendment, unless they denounce this
Protocol in accordance with Article 16, paragraphs 1 and 2, at least six months before the
amendment enters into force. Such denunciation shall take effect when the amendment enters
into force.
10. When an amendment has been adopted by the Legal Committee but the eighteen-month
period for its acceptance has not yet expired, a State which becomes a Contracting State during
that period shall be bound by the amendment if it enters into force. A State which becomes a
Contracting State after that period shall be bound by an amendment which has been accepted in
accordance with paragraph 7. In the cases referred to in this paragraph, a State becomes bound
by an amendment when that amendment enters into force, or when this Protocol enters into
force for that State, if later.
Article 16
Denunciation
1. This Protocol may be denounced by any Party at any time after the date on which it enters
into force for that Party.
2. Denunciation shall be effected by the deposit of an instrument with the Secretary-General
of the Organization.
3. A denunciation shall take effect twelve months, or such longer period as may be specified in
the instrument of denunciation, after its deposit with the Secretary-General of the Organization.
4. As between the Parties to this Protocol, denunciation by any of them of the 1969 Liability
Convention in accordance with Article XVI thereof shall not be construed in any way as a
denunciation of the 1969 Liability Convention as amended by this Protocol.
5. Denunciation of the Protocol of 1992 to amend the 1971 Fund Convention by a State
which remains a Party to the 1971 Fund Convention shall be deemed to be a denunciation of
this Protocol. Such denunciation shall take effect on the date on which denunciation of the
Protocol of 1992 to amend the 1971 Fund Convention takes effect according to Article 34 of
that Protocol.
Article 17
Depositary
1. This Protocol and any amendments accepted under Article 15 shall be deposited with the
Secretary-General of the Organization.
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2. The Secretary-General of the Organization shall:
(a) inform all States which have signed or acceded to this Protocol of:
(i) each new signature or deposit of an instrument together with the date thereof;
(ii) each declaration and notification under Article 13 and each declaration
and communication under Article V, paragraph 9, of the 1992 Liability
Convention;
(iii) the date of entry into force of this Protocol;
(iv) any proposal to amend limits of liability which has been made in accordance
with Article 15, paragraph 1;
(v) any amendment which has been adopted in accordance with Article 15, para-
graph 4;
(vi) any amendment deemed to have been accepted under Article 15, paragraph
7, together with the date on which that amendment shall enter into force in
accordance with paragraphs 8 and 9 of that Article;
(vii) the deposit of any instrument of denunciation of this Protocol together with
the date of the deposit and the date on which it takes effect;
(viii) any denunciation deemed to have been made under Article 16, paragraph 5;
(ix) any communication called for by any Article of this Protocol;
(b) transmit certified true copies of this Protocol to all Signatory States and to all States
which accede to this Protocol.
3. As soon as this Protocol enters into force, the text shall be transmitted by the Secretary-
General of the Organization to the Secretariat of the United Nations for registration and publi-
cation in accordance with Article 102 of the Charter of the United Nations.
Article 18
Languages
This Protocol is established in a single original in the Arabic, Chinese, English, French, Russian
and Spanish languages, each text being equally authentic.
Done at London this twenty-seventh day of November one thousand nine hundred and
ninety-two.
In witness whereof the undersigned, being duly authorized by their respective Governments
for that purpose, have signed this Protocol.3
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ANNEX
CERTIFICATE OF INSURANCE OR OTHER FINANCIAL SECURITY IN RESPECT OF
CIVIL LIABILITY FOR OIL POLLUTION DAMAGE
Issued in accordance with the provisions of Article VII of the International Convention on Civil
Liability for Oil Pollution Damage, 1992
This is to certify that there is in force in respect of the above-named ship a policy of insur-
ance or other financial security satisfying the requirements of Article VII of the International
Convention on Civil Liability for Oil Pollution Damage, 1992.
Type of security...........................................................................................................................
...................................................................................................................................................
Duration of Security....................................................................................................................
...................................................................................................................................................
Name and Address of the Insurer(s) and/or Guarantor(s)............................................................
Name..........................................................................................................................................
Address.......................................................................................................................................
This certificate is valid until.........................................................................................................
Issued or certified by the Government of....................................................................................
..................................................................................................................................................
............................................................... (Full designation of the State)
At....................................................... On........................................................................
(Place) (Date)
....................................................................................................................................
Signature and Title of issuing or certifying official
Explanatory Notes
1. If desired, the designation of the State may include a reference to the competent public
authority of the country where the certificate is issued.
2. If the total amount of security has been furnished by more than one source, the amount of
each of them should be indicated.
3. If security is furnished in several forms, these should be enumerated.
4. The entry “Duration of Security” must stipulate the date on which such security takes effect.
252
APPENDIX 2
Being parties to the International Convention on Civil Liability for Oil Pollution Damage,
adopted at Brussels on 29 November 1969,
Conscious of the dangers of pollution posed by the world-wide maritime carriage of oil in
bulk,
Convinced of the need to ensure that adequate compensation is available to
persons who suffer damage caused by pollution resulting from the escape or discharge of oil
from ships,
Considering that the International Convention of 29 November 1969, on Civil Liability
for Oil Pollution Damage, by providing a régime for compensation for pollution damage in
Contracting States and for the costs of measures, wherever taken, to prevent or minimize such
damage, represents a considerable progress towards the achievement of this aim,
Considering however that this régime does not afford full compensation for victims of oil
pollution damage in all cases while it imposes an additional financial burden on shipowners,
Considering further that the economic consequences of oil pollution damage resulting from
the escape or discharge of oil carried in bulk at sea by ships should not exclusively be borne by
the shipping industry but should in part be borne by the oil cargo interests,
Convinced of the need to elaborate a compensation and indemnification system supplemen-
tary to the International Convention on Civil Liability for Oil Pollution Damage with a view to
ensuring that full compensation will be available to victims of oil pollution incidents and that
the shipowners are at the same time given relief in respect of the additional financial burdens
imposed on them by the said Convention,
Taking note of the Resolution on the Establishment of an International Compensation Fund
for Oil Pollution Damage which was adopted on 29 November 1969 by the International Legal
Conference on Marine Pollution Damage,
General Provisions
Article 1
For the purposes of this Convention:
1. “1992 Liability Convention” means the International Convention on Civil Liability for Oil
Pollution Damage, 1992.
1bis. “1971 Fund Convention” means the International Convention on the Establishment
of an International Fund for Compensation for Oil Pollution Damage, 1971. For
253
appendix 2
States Parties to the Protocol of 1976 to that Convention, the term shall be deemed to
include the 1971 Fund Convention as amended by that Protocol.
2. “Ship”, “Person”, “Owner”, “Oil”, “Pollution Damage”, “Preventive Measures”, “Incident”,
and “Organization” have the same meaning as in Article I of the 1992 Liability Convention.
3. “Contributing Oil” means crude oil and fuel oil as defined in sub-paragraphs (a) and (b)
below:
(a) “Crude Oil” means any liquid hydrocarbon mixture occurring naturally in the earth
whether or not treated to render it suitable for transportation. It also includes crude
oils from which certain distillate fractions have been removed (sometimes referred to
as “topped crudes”) or to which certain distillate fractions have been added (some-
times referred to as “spiked” or “reconstituted” crudes).
(b) “Fuel Oil” means heavy distillates or residues from crude oil or blends of such materi-
als intended for use as a fuel for the production of heat or power of a quality equiva-
lent to the “American Society for Testing and Materials’ Specification for Number
Four Fuel Oil (Designation D 396–69)”, or heavier.
4. “Unit of account” has the same meaning as in Article V, paragraph 9, of the 1992 Liability
Convention.
5. “Ship’s tonnage” has the same meaning as in Article V, paragraph 10, of the 1992 Liability
Convention.
6. “Ton”, in relation to oil, means a metric ton.
7. “Guarantor” means any person providing insurance or other financial security to cover
an owner’s liability in pursuance of Article VII, paragraph 1, of the 1992 Liability Convention.
8. “Terminal installation” means any site for the storage of oil in bulk which is capable
of receiving oil from waterborne transportation, including any facility situated off-shore and
linked to such site.
9. Where an incident consists of a series of occurrences, it shall be treated as having occurred
on the date of the first such occurrence.
Article 2
1. An International Fund for compensation for pollution damage, to be named “The
International Oil Pollution Compensation Fund 1992” and hereinafter referred to as “the
Fund”, is hereby established with the following aims:
(a) to provide compensation for pollution damage to the extent that the protection
afforded by the 1992 Liability Convention is inadequate;
(b) to give effect to the related purposes set out in this Convention.
2. The Fund shall in each Contracting State be recognized as a legal person capable under the
laws of that State of assuming rights and obligations and of being a party in legal proceedings
before the courts of that State. Each Contracting State shall recognize the Director of the Fund
(hereinafter referred to as “The Director”) as the legal representative of the Fund.
Article 3
This Convention shall apply exclusively:
(a) to pollution damage caused:
(i) in the territory, including the territorial sea, of a Contracting State, and
(ii) in the exclusive economic zone of a Contracting State, established in accordance
with international law, or, if a Contracting State has not established such a zone,
in an area beyond and adjacent to the territorial sea of that State determined by
that State in accordance with international law and extending not more than 200
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nautical miles from the baselines from which the breadth of its territorial sea is
measured;
(b) to preventive measures, wherever taken, to prevent or minimize such damage.
Compensation
Article 4
1. For the purpose of fulfilling its function under Article 2, paragraph 1(a), the Fund shall
pay compensation to any person suffering pollution damage if such person has been unable to
obtain full and adequate compensation for the damage under the terms of the 1992 Liability
Convention,
(a) because no liability for the damage arises under the 1992 Liability Convention;
(b) because the owner liable for the damage under the 1992 Liability Convention is finan-
cially incapable of meeting his obligations in full and any financial security that may
be provided under Article VII of that Convention does not cover or is insufficient to
satisfy the claims for compensation for the damage; an owner being treated as finan-
cially incapable of meeting his obligations and a financial security being treated as
insufficient if the person suffering the damage has been unable to obtain full satisfac-
tion of the amount of compensation due under the 1992 Liability Convention after
having taken all reasonable steps to pursue the legal remedies available to him;
(c) because the damage exceeds the owner’s liability under the 1992 Liability Convention
as limited pursuant to Article V, paragraph 1, of that Convention or under the terms
of any other international Convention in force or open for signature, ratification or
accession at the date of this Convention.
Expenses reasonably incurred or sacrifices reasonably made by the owner voluntar-
ily to prevent or minimize pollution damage shall be treated as pollution damage for
the purposes of this Article.
2. The Fund shall incur no obligation under the preceding paragraph if:
(a) it proves that the pollution damage resulted from an act of war, hostilities, civil war
or insurrection or was caused by oil which has escaped or been discharged from a
warship or other ship owned or operated by a State and used, at the time of the inci-
dent, only on Government non-commercial service; or
(b) the claimant cannot prove that the damage resulted from an incident involving one or
more ships.
3. If the Fund proves that the pollution damage resulted wholly or partially either from an
act or omission done with the intent to cause damage by the person who suffered the damage
or from the negligence of that person, the Fund may be exonerated wholly or partially from its
obligation to pay compensation to such person. The Fund shall in any event be exonerated to
the extent that the shipowner may have been exonerated under Article III, paragraph 3, of the
1992 Liability Convention. However, there shall be no such exoneration of the Fund with regard
to preventive measures.
4. (a) Except as otherwise provided in sub-paragraphs (b) and (c) of this paragraph, the
aggregate amount of compensation payable by the Fund under this Article shall
in respect of any one incident be limited, so that the total sum of that amount and
the amount of compensation actually paid under the 1992 Liability Convention for
pollution damage within the scope of application of this Convention as defined in
Article 3 shall not exceed 203,000,000 units of account.
(b) Except as otherwise provided in sub-paragraph (c), the aggregate amount of compen-
sation payable by the Fund under this Article for pollution damage resulting from a
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natural phenomenon of an exceptional, inevitable and irresistible character shall not
exceed 203,000,000 units of account5.
(c) The maximum amount of compensation referred to in sub-paragraphs (a) and (b)
shall be 300,740,000 units of account5 with respect to any incident occurring during
any period when there are three Parties to this Convention in respect of which the
combined relevant quantity of contributing oil received by persons in the territories of
such Parties, during the preceding calendar year, equalled or exceeded 600 million tons.
(d) Interest accrued on a fund constituted in accordance with Article V, paragraph 3, of
the 1992 Liability Convention, if any, shall not be taken into account for the compu-
tation of the maximum compensation payable by the Fund under this Article.
(e) The amounts mentioned in this Article shall be converted into national currency on
the basis of the value of that currency by reference to the Special Drawing Right on
the date of the decision of the Assembly of the Fund as to the first date of payment
of compensation.
5. Where the amount of established claims against the Fund exceeds the aggregate amount
of compensation payable under paragraph 4, the amount available shall be distributed in such
a manner that the proportion between any established claim and the amount of compensation
actually recovered by the claimant under this Convention shall be the same for all claimants.
6. The Assembly of the Fund may decide that, in exceptional cases, compensation in accord-
ance with this Convention can be paid even if the owner of the ship has not constituted a fund
in accordance with Article V, paragraph 3, of the 1992 Liability Convention. In such case para-
graph 4(e) of this Article applies accordingly.
7. The Fund shall, at the request of a Contracting State, use its good offices as necessary
to assist that State to secure promptly such personnel, material and services as are necessary
to enable the State to take measures to prevent or mitigate pollution damage arising from an
incident in respect of which the Fund may be called upon to pay compensation under this
Convention.
8. The Fund may on conditions to be laid down in the Internal Regulations provide credit
facilities with a view to the taking of preventive measures against pollution damage arising from
a particular incident in respect of which the Fund may be called upon to pay compensation
under this Convention.
Article 5
(deleted)
Article 6
Rights to compensation under Article 4 shall be extinguished unless an action is brought there-
under or a notification has been made pursuant to Article 7, paragraph 6, within three years
from the date when the damage occurred. However, in no case shall an action be brought after
six years from the date of the incident which caused the damage.
Article 7
1. Subject to the subsequent provisions of this Article, any action against the Fund for com-
pensation under Article 4 of this Convention shall be brought only before a court competent
under Article IX of the 1992 Liability Convention in respect of actions against the owner who is
or who would, but for the provisions of Article III, paragraph 2, of that Convention, have been
liable for pollution damage caused by the relevant incident.
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2. Each Contracting State shall ensure that its courts possess the necessary jurisdiction to
entertain such actions against the Fund as are referred to in paragraph 1.
3. Where an action for compensation for pollution damage has been brought before a court
competent under Article IX of the 1992 Liability Convention against the owner of a ship or
his guarantor, such court shall have exclusive jurisdictional competence over any action against
the Fund for compensation under the provisions of Article 4 of this Convention in respect of
the same damage. However, where an action for compensation for pollution damage under the
1992 Liability Convention has been brought before a court in a State Party to the 1992 Liability
Convention but not to this Convention, any action against the Fund under Article 4 of this
Convention shall at the option of the claimant be brought either before a court of the State
where the Fund has its headquarters or before any court of a State Party to this Convention
competent under Article IX of the 1992 Liability Convention.
4. Each Contracting State shall ensure that the Fund shall have the right to intervene
as a party to any legal proceedings instituted in accordance with Article IX of the 1992
Liability Convention before a competent court of that State against the owner of a ship or his
guarantor.
5. Except as otherwise provided in paragraph 6, the Fund shall not be bound by any judg-
ment or decision in proceedings to which it has not been a party or by any settlement to which
it is not a party.
6. Without prejudice to the provisions of paragraph 4, where an action under the 1992
Liability Convention for compensation for pollution damage has been brought against an
owner or his guarantor before a competent court in a Contracting State, each party to the pro-
ceedings shall be entitled under the national law of that State to notify the Fund of the proceed-
ings. Where such notification has been made in accordance with the formalities required by the
law of the court seized and in such time and in such a manner that the Fund has in fact been in
a position effectively to intervene as a party to the proceedings, any judgment rendered by the
court in such proceedings shall, after it has become final and enforceable in the State where the
judgment was given, become binding upon the Fund in the sense that the facts and findings in
that judgment may not be disputed by the Fund even if the Fund has not actually intervened in
the proceedings.
Article 8
Subject to any decision concerning the distribution referred to in Article 4, paragraph 5, any
judgment given against the Fund by a court having jurisdiction in accordance with Article 7,
paragraphs 1 and 3, shall, when it has become enforceable in the State of origin and is in that
State no longer subject to ordinary forms of review, be recognized and enforceable in each
Contracting State on the same conditions as are prescribed in Article X of the 1992 Liability
Convention.
Article 9
1. The Fund shall, in respect of any amount of compensation for pollution damage paid by
the Fund in accordance with Article 4, paragraph 1, of this Convention, acquire by subroga-
tion the rights that the person so compensated may enjoy under the 1992 Liability Convention
against the owner or his guarantor.
2. Nothing in this Convention shall prejudice any right of recourse or subrogation of the
Fund against persons other than those referred to in the preceding paragraph. In any event the
right of the Fund to subrogation against such person shall not be less favourable than that of an
insurer of the person to whom compensation has been paid.
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3. Without prejudice to any other rights of subrogation or recourse against the Fund
which may exist, a Contracting State or agency thereof which has paid compensa-
tion for pollution damage in accordance with provisions of national law shall acquire by
subrogation the rights which the person so compensated would have enjoyed under this
Convention.
Contributions
Article 10
1. Annual contributions to the Fund shall be made in respect of each Contracting State by
any person who, in the calendar year referred to in Article 12, paragraph 2(a) or (b), has received
in total quantities exceeding 150,000 tons:
(a) in the ports or terminal installations in the territory of that State contributing oil
carried by sea to such ports or terminal installations; and
(b) in any installations situated in the territory of that Contracting State contributing
oil which has been carried by sea and discharged in a port or terminal installation
of a non-Contracting State, provided that contributing oil shall only be taken into
account by virtue of this sub-paragraph on first receipt in a Contracting State after
its discharge in that non-Contracting State.
2. (a) For the purposes of paragraph 1, where the quantity of contributing oil received in
the territory of a Contracting State by any person in a calendar year when aggregated
with the quantity of contributing oil received in the same Contracting State in that
year by any associated person or persons exceeds 150,000 tons, such person shall pay
contributions in respect of the actual quantity received by him notwithstanding that
that quantity did not exceed 150,000 tons.
(b) “Associated person” means any subsidiary or commonly controlled entity. The ques-
tion whether a person comes within this definition shall be determined by the national
law of the State concerned.
Article 11
(deleted)
Article 12
1. With a view to assessing the amount of annual contributions due, if any, and taking
account of the necessity to maintain sufficient liquid funds, the Assembly shall for each calendar
year make an estimate in the form of a budget of:
(i) Expenditure
(a) costs and expenses of the administration of the Fund in the relevant year and
any deficit from operations in preceding years;
(b) payments to be made by the Fund in the relevant year for the satisfaction of
claims against the Fund due under Article 4, including repayment on loans
previously taken by the Fund for the satisfaction of such claims, to the extent
that the aggregate amount of such claims in respect of any one incident does
not exceed four million units of account;
(c) payments to be made by the Fund in the relevant year for the satisfaction of
claims against the Fund due under Article 4, including repayments on loans
previously taken by the Fund for the satisfaction of such claims, to the extent
258
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that the aggregate amount of such claims in respect of any one incident is in
excess of four million units of account;
(ii) Income
(a) surplus funds from operations in preceding years, including any interest;
(b) annual contributions, if required to balance the budget;
(c) any other income.
2. The Assembly shall decide the total amount of contributions to be levied. On the basis of
that decision, the Director shall, in respect of each Contracting State, calculate for each person
referred to in Article 10 the amount of his annual contribution:
(a) in so far as the contribution is for the satisfaction of payments referred to in para-
graph 1(i)(a) and (b) on the basis of a fixed sum for each ton of contributing oil
received in the relevant State by such persons during the preceding calendar year; and
(b) in so far as the contribution is for the satisfaction of payments referred to in para-
graph 1(i)(c) of this Article on the basis of a fixed sum for each ton of contributing oil
received by such person during the calendar year preceding that in which the incident
in question occurred, provided that State was a Party to this Convention at the date
of the incident.
3. The sums referred to in paragraph 2 above shall be arrived at by dividing the relevant
total amount of contributions required by the total amount of contributing oil received in all
Contracting States in the relevant year.
4. The annual contribution shall be due on the date to be laid down in the Internal Regulations
of the Fund. The Assembly may decide on a different date of payment.
5. The Assembly may decide, under conditions to be laid down in the Financial Regulations
of the Fund, to make transfers between funds received in accordance with Article 12.2(a) and
funds received in accordance with Article 12.2(b).
Article 13
1. The amount of any contribution due under Article 12 and which is in arrears shall bear
interest at a rate which shall be determined in accordance with the Internal Regulations of the
Fund, provided that different rates may be fixed for different circumstances.
2. Each Contracting State shall ensure that any obligation to contribute to the Fund arising
under this Convention in respect of oil received within the territory of that State is fulfilled and
shall take any appropriate measures under its law, including the imposing of such sanctions as
it may deem necessary, with a view to the effective execution of any such obligation; provided,
however, that such measures shall only be directed against those persons who are under an
obligation to contribute to the Fund.
3. Where a person who is liable in accordance with the provisions of Articles 10 and 12 to
make contributions to the Fund does not fulfil his obligations in respect of any such contribu-
tion or any part thereof and is in arrear, the Director shall take all appropriate action against
such person on behalf of the Fund with a view to the recovery of the amount due. However,
where the defaulting contributor is manifestly insolvent or the circumstances otherwise so
warrant, the Assembly may, upon recommendation of the Director, decide that no action shall
be taken or continued against the contributor.
Article 14
1. Each Contracting State may at the time when it deposits its instrument of ratification or
accession or at any time thereafter declare that it assumes itself obligations that are incumbent
under this Convention on any person who is liable to contribute to the Fund in accordance with
259
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Article 10, paragraph 1, in respect of oil received within the territory of that State. Such declara-
tion shall be made in writing and shall specify which obligations are assumed.
2. Where a declaration under paragraph 1 is made prior to the entry into force of this
Convention in accordance with Article 40, it shall be deposited with the Secretary-General
of the Organization who shall after the entry into force of the Convention communicate the
declaration to the Director.
3. A declaration under paragraph 1 which is made after the entry into force of this Convention
shall be deposited with the Director.
4. A declaration made in accordance with this Article may be withdrawn by the relevant State
giving notice thereof in writing to the Director. Such notification shall take effect three months
after the Director’s receipt thereof.
5. Any State which is bound by a declaration made under this Article shall, in any proceed-
ings brought against it before a competent court in respect of any obligation specified in the
declaration, waive any immunity that it would otherwise be entitled to invoke.
Article 15
1. Each Contracting State shall ensure that any person who receives contributing oil within
its territory in such quantities that he is liable to contribute to the Fund appears on a list to be
established and kept up to date by the Director in accordance with the subsequent provisions
of this Article.
2. For the purposes set out in paragraph 1, each Contracting State shall communicate, at a
time and in the manner to be prescribed in the Internal Regulations, to the Director the name
and address of any person who in respect of that State is liable to contribute to the Fund pursu-
ant to Article 10, as well as data on the relevant quantities of contributing oil received by any
such person during the preceding calendar year.
3. For the purposes of ascertaining who are, at any given time, the persons liable to
contribute to the Fund in accordance with Article 10, paragraph 1, and of establishing,
where applicable, the quantities of oil to be taken into account for any such person when
determining the amount of his contribution, the list shall be prima facie evidence of the facts
stated therein.
4. Where a Contracting State does not fulfil its obligations to submit to the Director the
communication referred to in paragraph 2 and this results in a financial loss for the Fund, that
Contracting State shall be liable to compensate the Fund for such loss. The Assembly shall, on
the recommendation of the Director, decide whether such compensation shall be payable by that
Contracting State.
Article 16
The Fund shall have an Assembly and a Secretariat headed by a Director.
Assembly
Article 17
The Assembly shall consist of all Contracting States to this Convention.
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Article 18
The functions of the Assembly shall be:
1. to elect at each regular session its Chairman and two Vice-Chairmen who shall hold office
until the next regular session;
2. to determine its own rules of procedure, subject to the provisions of this Convention;
3. to adopt Internal Regulations necessary for the proper functioning of the Fund;
4. to appoint the Director and make provisions for the appointment of such other personnel
as may be necessary and determine the terms and conditions of service of the Director and
other personnel;
5. to adopt the annual budget and fix the annual contributions;
6. to appoint auditors and approve the accounts of the Fund;
7. to approve settlements of claims against the Fund, to take decisions in respect of the dis-
tribution among claimants of the available amount of compensation in accordance with Article
4, paragraph 5, and to determine the terms and conditions according to which provisional
payments in respect of claims shall be made with a view to ensuring that victims of pollution
damage are compensated as promptly as possible;
8. (deleted).
9. to establish any temporary or permanent subsidiary body it may consider to be necessary, to
define its terms of reference and to give it the authority needed to perform the functions entrusted to
it; when appointing the members of such body, the Assembly shall endeavour to secure an equitable
geographical distribution of members and to ensure that the Contracting States, in respect of which
the largest quantities of contributing oil are being received, are appropriately represented; the Rules of
Procedure of the Assembly may be applied, mutatis mutandis, for the work of such subsidiary body;
10. to determine which non-Contracting States and which inter-governmental and interna-
tional non-governmental organizations shall be admitted to take part, without voting rights, in
meetings of the Assembly and subsidiary bodies;
11. to give instructions concerning the administration of the Fund to the Director and sub-
sidiary bodies;
12. (deleted);
13. to supervise the proper execution of the Convention and of its own decisions;
14. to perform such other functions as are allocated to it under the Convention or are other-
wise necessary for the proper operation of the Fund.
Article 19
1. Regular sessions of the Assembly shall take place once every calendar year upon convoca-
tion by the Director.
2. Extraordinary sessions of the Assembly shall be convened by the Director at the request
of at least one third of the members of the Assembly and may be convened on the Director’s
own initiative after consultation with the Chairman of the Assembly. The Director shall give
members at least thirty days’ notice of such sessions.
Article 20
A majority of the members of the Assembly shall constitute a quorum for its meetings.
Articles 21–27
(deleted)
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Secretariat
Article 28
1. The Secretariat shall comprise the Director and such staff as the administration of the
Fund may require.
2. The Director shall be the legal representative of the Fund.
Article 29
1. The Director shall be the chief administrative officer of the Fund. Subject to the instruc-
tions given to him by the Assembly, he shall perform those functions which are assigned to him
by this Convention, the Internal Regulations of the Fund and the Assembly.
2. The Director shall in particular:
(a) appoint the personnel required for the administration of the Fund;
(b) take all appropriate measures with a view to the proper administration of the Fund’s
assets;
(c) collect the contributions due under this Convention while observing in particular the
provisions of Article 13, paragraph 3;
(d) to the extent necessary to deal with claims against the Fund and carry out the other
functions of the Fund, employ the services of legal, financial and other experts;
(e) take all appropriate measures for dealing with claims against the Fund within the
limits and on conditions to be laid down in the Internal Regulations, including the
final settlement of claims without the prior approval of the Assembly where these
Regulations so provide;
(f) prepare and submit to the Assembly the financial statements and budget estimates for
each calendar year;
(g) prepare, in consultation with the Chairman of the Assembly, and publish a report of
the activities of the Fund during the previous calendar year;
(h) prepare, collect and circulate the papers, documents, agenda, minutes and
information that may be required for the work of the Assembly and subsidiary
bodies.
Article 30
In the performance of their duties the Director and the staff and experts appointed by him shall
not seek or receive instructions from any Government or from any authority external to the
Fund. They shall refrain from any action which might reflect on their position as international
officials. Each Contracting State on its part undertakes to respect the exclusively international
character of the responsibilities of the Director and the staff and experts appointed by him, and
not to seek to influence them in the discharge of their duties.
Finances
Article 31
1. Each Contracting State shall bear the salary, travel and other expenses of its own delega-
tion to the Assembly and of its representatives on subsidiary bodies.
2. Any other expenses incurred in the operation of the Fund shall be borne by the Fund.
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Voting
Article 32
The following provisions shall apply to voting in the Assembly:
(a) each member shall have one vote;
(b) except as otherwise provided in Article 33, decisions of the Assembly shall be by a
majority vote of the members present and voting;
(c) decisions where a three-fourths or a two-thirds majority is required shall be by a
three-fourths or two-thirds majority vote, as the case may be, of those present;
(d) for the purpose of this Article the phrase “members present” means “members
present at the meeting at the time of the vote”, and the phrase “members present and
voting” means “members present and casting an affirmative or negative vote”.
Members who abstain from voting shall be considered as not voting.
Article 33
The following decisions of the Assembly shall require a two-thirds majority:
(a) a decision under Article 13, paragraph 3, not to take or continue action against a
contributor;
(b) the appointment of the Director under Article 18, paragraph 4;
(c) the establishment of subsidiary bodies, under Article 18, paragraph 9, and matters
relating to such establishment.
Article 34
1. The Fund, its assets, income, including contributions, and other property shall enjoy in all
Contracting States exemption from all direct taxation.
2. When the Fund makes substantial purchases of movable or immovable property, or has
important work carried out which is necessary for the exercise of its official activities and the
cost of which includes indirect taxes or sales taxes, the Governments of Member States shall
take, whenever possible, appropriate measures for the remission or refund of the amount of
such duties and taxes.
3. No exemption shall be accorded in the case of duties, taxes or dues which merely constitute
payment for public utility services.
4. The Fund shall enjoy exemption from all customs duties, taxes and other related taxes on
articles imported or exported by it or on its behalf for its official use. Articles thus imported shall
not be transferred either for consideration or gratis on the territory of the country into which
they have been imported except on conditions agreed by the Government of that country.
5. Persons contributing to the Fund and victims and owners of ships receiving compensation
from the Fund shall be subject to the fiscal legislation of the State where they are taxable, no
special exemption or other benefit being conferred on them in this respect.
6. Information relating to individual contributors supplied for the purpose of this
Convention shall not be divulged outside the Fund except in so far as it may be strictly neces-
sary to enable the Fund to carry out its functions including the bringing and defending of legal
proceedings.
7. Independently of existing or future regulations concerning currency or transfers,
Contracting States shall authorize the transfer and payment of any contribution to the Fund
and of any compensation paid by the Fund without any restriction.
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Transitional Provisions
Article 35
Claims for compensation under Article 4 arising from incidents occurring after the date of entry
into force of this Convention may not be brought against the Fund earlier than the one hundred
and twentieth day after that date.
Article 36
The Secretary-General of the Organization shall convene the first session of the Assembly. This
session shall take place as soon as possible after entry into force of this Convention and, in any
case, not more than thirty days after such entry into force.
Article 36 bis
The following transitional provisions shall apply in the period, hereinafter referred to as the
transitional period, commencing with the date of entry into force of this Convention and ending
with the date on which the denunciations provided for in Article 31 of the 1992 Protocol to
amend the 1971 Fund Convention take effect:
(a) In the application of paragraph 1(a) of Article 2 of this Convention, the reference to
the 1992 Liability Convention shall include reference to the International Convention
on Civil Liability for Oil Pollution Damage, 1969, either in its original version or as
amended by the Protocol thereto of 1976 (referred to in this Article as “the 1969
Liability Convention”), and also the 1971 Fund Convention.
(b) Where an incident has caused pollution damage within the scope of this Convention,
the Fund shall pay compensation to any person suffering pollution damage
only if, and to the extent that, such person has been unable to obtain full and
adequate compensation for the damage under the terms of the 1969 Liability
Convention, the 1971 Fund Convention and the 1992 Liability Convention, pro-
vided that, in respect of pollution damage within the scope of this Convention in
respect of a Party to this Convention but not a Party to the 1971 Fund Convention,
the Fund shall pay compensation to any person suffering pollution damage only
if, and to the extent that, such person would have been unable to obtain full and
adequate compensation had that State been party to each of the above-mentioned
Conventions.
(c) In the application of Article 4 of this Convention, the amount to be taken into
account in determining the aggregate amount of compensation payable by the Fund
shall also include the amount of compensation actually paid under the 1969 Liability
Convention, if any, and the amount of compensation actually paid or deemed to have
been paid under the 1971 Fund Convention.
(d) Paragraph 1 of Article 9 of this Convention shall also apply to the rights enjoyed
under the 1969 Liability Convention.
Article 36 ter
1. Subject to paragraph 4 of this Article, the aggregate amount of the annual contributions
payable in respect of contributing oil received in a single Contracting State during a calendar
year shall not exceed 27.5% of the total amount of annual contributions pursuant to the 1992
Protocol to amend the 1971 Fund Convention, in respect of that calendar year.
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2. If the application of the provisions in paragraphs 2 and 3 of Article 12 would result in
the aggregate amount of the contributions payable by contributors in a single Contracting
State in respect of a given calendar year exceeding 27.5% of the total annual contributions, the
contributions payable by all contributors in that State shall be reduced pro rata so that their
aggregate contributions equal 27.5% of the total annual contributions to the Fund in respect
of that year.
3. If the contributions payable by persons in a given Contracting State shall be reduced
pursuant to paragraph 2 of this Article, the contributions payable by persons in all other
Contracting States shall be increased pro rata so as to ensure that the total amount of contribu-
tions payable by all persons liable to contribute to the Fund in respect of the calendar year in
question will reach the total amount of contributions decided by the Assembly.
4. The provisions in paragraphs 1 to 3 of this Article shall operate until the total quantity
of contributing oil received in all Contracting States in a calendar year has reached 750 million
tons or until a period of 5 years after the date of entry into force of the said 1992 Protocol has
elapsed, whichever occurs earlier.
Article 36 quater
Notwithstanding the provisions of this Convention, the following provisions shall apply to the
administration of the Fund during the period in which both the 1971 Fund Convention and this
Convention are in force:
(a) The Secretariat of the Fund, established by the 1971 Fund Convention (hereinafter
referred to as “the 1971 Fund”), headed by the Director, may also function as the
Secretariat and the Director of the Fund.
(b) If, in accordance with sub-paragraph (a), the Secretariat and the Director of the 1971
Fund also perform the function of Secretariat and Director of the Fund, the Fund
shall be represented, in cases of conflict of interests between the 1971 Fund and the
Fund, by the Chairman of the Assembly of the Fund.
(c) The Director and the staff and experts appointed by him, performing their duties
under this Convention and the 1971 Fund Convention, shall not be regarded as con-
travening the provisions of Article 30 of this Convention in so far as they discharge
their duties in accordance with this Article.
(d) The Assembly of the Fund shall endeavour not to take decisions which are incompat-
ible with decisions taken by the Assembly of the 1971 Fund. If differences of opinion
with respect to common administrative issues arise, the Assembly of the Fund shall
try to reach a consensus with the Assembly of the 1971 Fund, in a spirit of mutual
co-operation and with the common aims of both organizations in mind.
(e) The Fund may succeed to the rights, obligations and assets of the 1971 Fund if the
Assembly of the 1971 Fund so decides, in accordance with Article 44, paragraph 2,
of the 1971 Fund Convention.
(f) The Fund shall reimburse to the 1971 Fund all costs and expenses arising from
administrative services performed by the 1971 Fund on behalf of the Fund.
Article 36 quinquies
Final clauses
The final clauses of this Convention shall be Articles 28 to 39 of the Protocol of 1992 to amend
the 1971 Fund Convention. References in this Convention to Contracting States shall be taken
to mean references to the Contracting States of that Protocol.
265
appendix 2
Final Clauses of the Protocol of 1992 to amend the 1971 Fund Convention
Article 28
Article 29
Article 30
266
appendix 2
during the preceding calendar year a total quantity of at least 450 million tons of
contributing oil.
2. However, this Protocol shall not enter into force before the 1992 Liability Convention has
entered into force.
3. For each State which ratifies, accepts, approves or accedes to this Protocol after the condi-
tions in paragraph 1 for entry into force have been met, the Protocol shall enter into force twelve
months following the date of the deposit by such State of the appropriate instrument.
4. Any State may, at the time of the deposit of its instrument of ratification, acceptance,
approval or accession in respect of this Protocol declare that such instrument shall not take
effect for the purpose of this Article until the end of the six-month period n Article 31.
5. Any State which has made a declaration in accordance with the preceding paragraph may
withdraw it at any time by means of a notification addressed to the Secretary-General of the
Organization. Any such withdrawal shall take effect on the date the notification is received, and
any State making such a withdrawal shall be deemed to have deposited its instrument of ratifica-
tion, acceptance, approval or accession in respect of this Protocol on that date.
6. Any State which has made a declaration under Article 13, paragraph 2, of the Protocol
of 1992 to amend the 1969 Liability Convention shall be deemed to have also made a declara-
tion under paragraph 4 of this Article. Withdrawal of a declaration under the said Article 13,
paragraph 2, shall be deemed to constitute withdrawal also under paragraph 5 of this Article.
Article 31
Article 32
267
appendix 2
Article 33
268
appendix 2
by an amendment when that amendment enters into force, or when this Protocol enters into
force for that State, if later.
Article 34
Denunciation
1. This Protocol may be denounced by any Party at any time after the date on which it enters
into force for that Party.
2. Denunciation shall be effected by the deposit of an instrument with the Secretary-General
of the Organization.
3. A denunciation shall take effect twelve months, or such longer period as may be speci-
fied in the instrument of denunciation, after its deposit with the Secretary-General of the
Organization.
4. Denunciation of the 1992 Liability Convention shall be deemed to be a denunciation of
this Protocol. Such denunciation shall take effect on the date on which denunciation of the
Protocol of 1992 to amend the 1969 Liability Convention takes effect according to Article 16
of that Protocol.
5. Any Contracting State to this Protocol which has not denounced the 1971 Fund Convention
and the 1969 Liability Convention as required by Article 31 shall be deemed to have denounced
this Protocol with effect twelve months after the expiry of the six-month period mentioned in
that Article. As from the date on which the denunciations provided for in Article 31 take effect,
any Party to this Protocol which deposits an instrument of ratification, acceptance, approval
or accession to the 1969 Liability Convention shall be deemed to have denounced this Protocol
with effect from the date on which such instrument takes effect.
6. As between the Parties to this Protocol, denunciation by any of them of the 1971 Fund
Convention in accordance with Article 41 thereof shall not be construed in any way as a denun-
ciation of the 1971 Fund Convention as amended by this Protocol.
7. Notwithstanding a denunciation of this Protocol by a Party pursuant to this Article, any
provisions of this Protocol relating to the obligations to make contributions under Article 10 of
the 1971 Fund Convention as amended by this Protocol with respect to an incident referred to in
Article 12, paragraph 2(b), of that amended Convention and occurring before the denunciation
takes effect shall continue to apply.
Article 35
269
appendix 2
days before the date on which the denunciation takes effect, denounce this Protocol with effect
from the same date.
Article 36
Termination
1. This Protocol shall cease to be in force on the date when the number of Contracting States
falls below three.
2. States which are bound by this Protocol on the day before the date it ceases to be in force
shall enable the Fund to exercise its functions as described under Article 37 of this Protocol and
shall, for that purpose only, remain bound by this Protocol.
Article 37
Article 38
Depositary
1. This Protocol and any amendments accepted under Article 33 shall be deposited with the
Secretary-General of the Organization.
2. The Secretary-General of the Organization shall:
(a) inform all States which have signed or acceded to this Protocol of:
(i) each new signature or deposit of an instrument together with the date
thereof;
(ii) each declaration and notification under Article 30 including declarations and
withdrawals deemed to have been made in accordance with that Article;
(iii) the date of entry into force of this Protocol;
(iv) the date by which denunciations provided for in Article 31 are required to be
made;
(v) any proposal to amend limits of amounts of compensation which has been
made in accordance with Article 33, paragraph 1;
(vi) any amendment which has been adopted in accordance with Article 33, para-
graph 4;
(vii) any amendment deemed to have been accepted under Article 33, paragraph
7, together with the date on which that amendment shall enter into force in
accordance with paragraphs 8 and 9 of that Article;
270
appendix 2
(viii) the deposit of an instrument of denunciation of this Protocol together with
the date of the deposit and the date on which it takes effect;
(ix) any denunciation deemed to have been made under Article 34, paragraph 5;
(x) any communication called for by any Article in this Protocol;
(b) transmit certified true copies of this Protocol to all Signatory States and to all States
which accede to the Protocol.
3. As soon as this Protocol enters into force, the text shall be transmitted by the Secretary-
General of the Organization to the Secretariat of the United Nations for registration and publi-
cation in accordance with Article 102 of the Charter of the United Nations.
Article 39
Languages
This Protocol is established in a single original in the Arabic, Chinese, English, French, Russian
and Spanish languages, each text being equally authentic.
Done at London this twenty-seventh day of November one thousand nine hundred and
ninety-two.
In witness whereof the undersigned, being duly authorized by their respective Governments
for that purpose, have signed this Protocol.
271
APPENDIX 3
CONSCIOUS of the fact that wrecks, if not removed, may pose a hazard to navigation or
the marine environment,
CONVINCED of the need to adopt uniform international rules and procedures to ensure
the prompt and effective removal of wrecks and payment of compensation for the costs therein
involved,
NOTING that many wrecks may be located in States’ territory, including the territorial sea,
RECOGNIZING the benefits to be gained through uniformity in legal regimes governing
responsibility and liability for removal of hazardous wrecks,
BEARING IN MIND the importance of the United Nations Convention on the Law of the Sea,
done at Montego Bay on 10 December 19821, and of the customary international law of the sea,
and the consequent need to implement the present Convention in accordance with such provisions,
HAVE AGREED as follows:
Article 1
Definitions
For the purposes of this Convention:
1. “Convention area” means the exclusive economic zone of a State Party, established in
accordance with international law or, if a State Party has not established such a zone, an area
beyond and adjacent to the territorial sea of that State determined by that State in accordance
with international law and extending not more than 200 nautical miles from the baselines from
which the breadth of its territorial sea is measured.
2. “Ship” means a seagoing vessel of any type whatsoever and includes hydrofoil boats, air-
cushion vehicles, submersibles, floating craft and Wreck Removal Convention Act 2011 (c. 8)
Schedule — Wreck Removal Convention 11 floating platforms, except when such platforms are
on location engaged in the exploration, exploitation or production of seabed mineral resources.
3. “Maritime casualty” means a collision of ships, stranding or other incident of navigation,
or other occurrence on board a ship or external to it, resulting in material damage or imminent
threat of material damage to a ship or its cargo.
4. “Wreck”, following upon a maritime casualty, means:
(a) a sunken or stranded ship; or
(b) any part of a sunken or stranded ship, including any object that is or has been on
board such a ship; or
273
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(c) any object that is lost at sea from a ship and that is stranded, sunken or adrift at sea;
or
(d) a ship that is about, or may reasonably be expected, to sink or to strand, where effec-
tive measures to assist the ship or any property in danger are not already being taken.
5. “Hazard” means any condition or threat that:
(a) poses a danger or impediment to navigation; or
(b) may reasonably be expected to result in major harmful consequences to the marine
environment, or damage to the coastline or related interests of one or more States.
6. “Related interests” means the interests of a coastal State directly affected or threatened by
a wreck, such as:
(a) maritime coastal, port and estuarine activities, including fisheries activities, constitut-
ing an essential means of livelihood of the persons concerned;
(b) tourist attractions and other economic interests of the area concerned;
(c) the health of the coastal population and the wellbeing of the area concerned, includ-
ing conservation of marine living resources and of wildlife; and
(d) offshore and underwater infrastructure.
7. “Removal” means any form of prevention, mitigation or elimination of the hazard created
by a wreck. “Remove”, “removed” and “removing” shall be construed accordingly.
8. “Registered owner” means the person or persons registered as the owner of the ship or, in
the absence of registration, the person or persons owning the ship at the time of the maritime
casualty. However, in the case of a ship owned by a State and operated by a company which in
that State is registered as the operator of the ship, “registered owner” shall mean such company.
9. “Operator of the ship” means the owner of the ship or any other organization or person
such as the manager, or the bareboat charterer, who has assumed the responsibility for opera-
tion of the ship from the owner of the ship and who, on assuming such responsibility, has
agreed to take over all duties and responsibilities established under the International Safety
Management Code, as amended2.
10. “Affected State” means the State in whose Convention area the wreck is located. Wreck
Removal Convention Act 2011 (c. 8) Schedule — Wreck Removal Convention 12
11. “State of the ship’s registry” means, in relation to a registered ship, the State of registra-
tion of the ship and, in relation to an unregistered ship, the State whose flag the ship is entitled
to fly.
12. “Organization” means the International Maritime Organization.
13. “Secretary-General” means the Secretary-General of the Organization.
Article 2
2 Refer to the International Management Code for the Safe Operation of Ships and for Pollution,
adopted by the Assembly of the International Maritime Organisation by resolution A.741(18), as amended.
274
appendix 3
4. The application of this Convention within the Convention area shall not entitle a State
Party to claim or exercise sovereignty or sovereign rights over any part of the high seas.
5. States Parties shall endeavour to co-operate when the effects of a maritime casualty result-
ing in a wreck involve a State other than the Affected State.
Article 3
Scope of application
1. Except as otherwise provided in this Convention, this Convention shall apply to wrecks in
the Convention area.
2. A State Party may extend the application of this Convention to wrecks located within
its territory, including the territorial sea, subject to article 4, paragraph 4. In that case, it shall
notify the Secretary-General accordingly, at the time of expressing its consent to be bound
by this Convention or at any time thereafter. When a State Party has made a notification to
apply this Convention to wrecks located within its territory, including the territorial sea, this
is without prejudice to the rights and obligations of that State to take measures in relation to
wrecks located in its territory, including the territorial sea, other than locating, marking and
removing them in accordance with this Convention. The provisions of articles 10, 11 and 12 of
this Convention shall not apply to any measures so taken other than those referred to in articles
7, 8 and 9 of this Convention.
3. When a State Party has made a notification under paragraph 2, the “Convention area” of
the Affected State shall include the territory, including the territorial sea, of that State Party.
4. A notification made under paragraph 2 above shall take effect for that State Party, if made
before entry into force of this Convention for that State Wreck Removal Convention Act 2011
(c. 8) Schedule — Wreck Removal Convention 13 Party, upon entry into force. If notification is
made after entry into force of this Convention for that State Party, it shall take effect six months
after its receipt by the Secretary-General.
5. A State Party that has made a notification under paragraph 2 may withdraw it at any
time by means of a notification of withdrawal to the Secretary-General. Such notification of
withdrawal shall take effect six months after its receipt by the Secretary-General, unless the
notification specifies a later date.
Article 4
Exclusions
1. This Convention shall not apply to measures taken under the International Convention
relating to Intervention on the High Seas in Cases of Oil Pollution Casualties, 19693, as
amended, or the Protocol relating to Intervention on the High Seas in Cases of Pollution by
Substances other than Oil, 19734, as amended5’6.
2. This Convention shall not apply to any warship or other ship owned or operated by a State
and used, for the time being, only on Government non-commercial service, unless that State
decides otherwise.
275
appendix 3
3. Where a State Party decides to apply this Convention to its warships or other ships as
described in paragraph 2, it shall notify the Secretary-General, thereof, specifying the terms and
conditions of such application.
4. (a) When a State Party has made a notification under article 3, paragraph 2, the follow-
ing provisions of this Convention shall not apply in its territory, including the territo-
rial sea:
(i) Article 2, paragraph 4;
(ii) Article 9, paragraphs 1, 5, 7, 8, 9 and 10; and
(iii) Article 15.
(b) Article 9, paragraph 4, insofar as it applies to the territory, including the territorial
sea of a State Party, shall read: Subject to the national law of the Affected State, the
registered owner may contract with any salvor or other person to remove the wreck
determined to constitute a hazard on behalf of the owner. Before such removal com-
mences, the Affected State may lay down conditions for such removal only to the
extent necessary to ensure that the removal proceeds in a manner that is consistent
with considerations of safety and protection of the marine environment.
Article 5
Reporting wrecks
1. A State Party shall require the master and the operator of a ship flying its flag to report to
the Affected State without delay when that ship has been involved in a maritime casualty result-
ing in a wreck. To the extent that the reporting obligation under this article has been fulfilled
either by the master or the operator of the ship, the other shall not be obliged to report. Wreck
Removal Convention Act 2011 (c. 8) Schedule — Wreck Removal Convention 14
2. Such reports shall provide the name and the principal place of business of the registered
owner and all the relevant information necessary for the Affected State to determine whether the
wreck poses a hazard in accordance with article 6, including:
(a) the precise location of the wreck;
(b) the type, size and construction of the wreck;
(c) the nature of the damage to, and the condition of, the wreck;
(d) the nature and quantity of the cargo, in particular any hazardous and noxious sub-
stances; and
(e) the amount and types of oil, including bunker oil and lubricating oil, on board.
Article 6
Determination of hazard
When determining whether a wreck poses a hazard, the following criteria should be taken into
account by the Affected State:
(a) the type, size and construction of the wreck;
(b) depth of the water in the area;
(c) tidal range and currents in the area;
(d) particularly sensitive sea areas identified and, as appropriate, designated in accord-
ance with guidelines adopted by the Organization7, or a clearly defined area of the
exclusive economic zone where special mandatory measures have been adopted pur-
suant to article 211, paragraph 6, of the United Nations Convention on the Law of
the Sea, 1982;
276
appendix 3
(e) proximity of shipping routes or established traffic lanes;
(f) traffic density and frequency;
(g) type of traffic;
(h) nature and quantity of the wreck’s cargo, the amount and types of oil (such as bunker
oil and lubricating oil) on board the wreck and, in particular, the damage likely to
result should the cargo or oil be released into the marine environment;
(i) vulnerability of port facilities;
(j) prevailing meteorological and hydrographical conditions;
(k) submarine topography of the area;
(l) height of the wreck above or below the surface of the water at lowest astronomical
tide;
(m) acoustic and magnetic profiles of the wreck;
(n) proximity of offshore installations, pipelines, telecommunications cables and similar
structures; and
(o) any other circumstances that might necessitate the removal of the wreck.
Article 7
Locating wrecks
1. Upon becoming aware of a wreck, the Affected State shall use all practicable means,
including the good offices of States and organizations, to Wreck Removal Convention Act 2011
(c. 8) Schedule — Wreck Removal Convention 15 warn mariners and the States concerned of the
nature and location of the wreck as a matter of urgency.
2. If the Affected State has reason to believe that a wreck poses a hazard, it shall ensure that
all practicable steps are taken to establish the precise location of the wreck.
Article 8
Marking of wrecks
1. If the Affected State determines that a wreck constitutes a hazard, that State shall ensure
that all reasonable steps are taken to mark the wreck.
2. In marking the wreck, all practicable steps shall be taken to ensure that the markings
conform to the internationally accepted system of buoyage in use in the area where the wreck
is located.
3. The Affected State shall promulgate the particulars of the marking of the wreck by use of
all appropriate means, including the appropriate nautical publications.
Article 9
277
appendix 3
interested party, shall provide the competent authority of the Affected State with evidence of
insurance or other financial security as required by article 12.
4. The registered owner may contract with any salvor or other person to remove the wreck
determined to constitute a hazard on behalf of the owner. Before such removal commences, the
Affected State may lay down conditions for such removal only to the extent necessary to ensure
that the removal proceeds in a manner that is consistent with considerations of safety and pro-
tection of the marine environment.
5. When the removal referred to in paragraphs 2 and 4 has commenced, the Affected State
may intervene in the removal only to the extent necessary to ensure that the removal proceeds
effectively in a manner that is consistent with considerations of safety and protection of the
marine environment.
6. The Affected State shall:
(a) set a reasonable deadline within which the registered owner must remove the
wreck, taking into account the nature of the hazard determined in accordance with
article 6; Wreck Removal Convention Act 2011 (c. 8) Schedule — Wreck Removal
Convention 16
(b) inform the registered owner in writing of the deadline it has set and specify that, if the
registered owner does not remove the wreck within that deadline, it may remove the
wreck at the registered owner’s expense; and
(c) inform the registered owner in writing that it intends to intervene immediately in
circumstances where the hazard becomes particularly severe.
7. If the registered owner does not remove the wreck within the deadline set in accord-
ance with paragraph 6(a), or the registered owner cannot be contacted, the Affected State may
remove the wreck by the most practical and expeditious means available, consistent with consid-
erations of safety and protection of the marine environment.
8. In circumstances where immediate action is required and the Affected State has informed
the State of the ship’s registry and the registered owner accordingly, it may remove the wreck by
the most practical and expeditious means available, consistent with considerations of safety and
protection of the marine environment.
9. States Parties shall take appropriate measures under their national law to ensure that their
registered owners comply with paragraphs 2 and 3.
10. States Parties give their consent to the Affected State to act under paragraphs 4 to 8,
where required.
11. The information referred to in this article shall be provided by the Affected State to the
registered owner identified in the reports referred to in article 5, paragraph 2.
Article 10
278
appendix 3
2. Nothing in this Convention shall affect the right of the registered owner to limit liability
under any applicable national or international regime, such as the Convention on Limitation of
Liability for Maritime Claims, 19768, as amended9.
3. No claim for the costs referred to in paragraph 1 may be made against the registered owner
otherwise than in accordance with the provisions of this Convention. This is without prejudice
to the rights and obligations of a State Party that has made a notification under article 3, para-
graph 2, in relation to Wreck Removal Convention Act 2011 (c. 8) Schedule — Wreck Removal
Convention 17 wrecks located in its territory, including the territorial sea, other than locating,
marking and removing in accordance with this Convention.
4. Nothing in this article shall prejudice any right of recourse against third parties.
Article 11
Exceptions to liability
1. The registered owner shall not be liable under this Convention for the costs mentioned in
article 10, paragraph 1 if, and to the extent that, liability for such costs would be in conflict with:
(a) the International Convention on Civil Liability for Oil Pollution Damage, 196910, as
amended11’12’13;
(b) the International Convention on Liability and Compensation for Damage in
Connection with the Carriage of Hazardous and Noxious Substances by Sea, 199614,
as amended;
(c) the Convention on Third Party Liability in the Field of Nuclear Energy, 196015, as
amended16’17’18, or the Vienna Convention on Civil Liability for Nuclear Damage,
196319, as amended; or national law governing or prohibiting limitation of liability
for nuclear damage; or
(d) the International Convention on Civil Liability for Bunker Oil Pollution Damage,
200120, as amended;
provided that the relevant convention is applicable and in force.
2. To the extent that measures under this Convention are considered to be salvage under
applicable national law or an international convention, such law or convention shall apply to
questions of the remuneration or compensation payable to salvors to the exclusion of the rules
of this Convention.
7 Refer to the revised Guidelines for the Identification and Description of Particularly Sensitive Sea
Areas, adopted by the International Maritime Organisation by resolution A.982(24), s amended.
8 Treaty Series No. 013 (1990) Cm 955
9 Miscellaneous Series No. 006 (1997) Cm 3581
10 Treaty Series No. 106 (1975) Cmnd 6183
11 Treaty Series No. 026 (1981) Cmnd 8238
12 Miscellaneous Series No. 008 (1986) Cmnd 9927
13 Treaty Series No. 086 (1996) CM 3432
14 Miscellaneous Series No. 005 (1997) Cm 3580
15 Treaty Series No. 069 (1968) Cmnd 3755
16 Treaty Series No. 044 (1975) Cmnd 5948
17 Treaty Series No. 017 1992 Cm 1832
18 Treaty Series No. 006 1989 Cm 659
19 Miscellaneous Series No: 009 (1964) Cmnd 2333
20 Miscellaneous Series No: 008 (2005) Cm 6693
279
appendix 3
Article 12
280
appendix 3
institution or organization shall report such withdrawal to the State on whose behalf
the certificate was issued.
4. The certificate shall be in the official language or languages of the issuing State. If the
language used is not English, French or Spanish, the text shall include a translation into one
of these languages and, where the State so decides, the official language(s) of the State may
be omitted.
5. The certificate shall be carried on board the ship and a copy shall be deposited with the
authorities who keep the record of the ship’s registry or, if the ship is not registered in a State
Party, with the authorities issuing or certifying the certificate.
6. An insurance or other financial security shall not satisfy the requirements of this article
if it can cease for reasons other than the expiry of the period of validity of the insurance or
security specified in the certificate under paragraph 2 before three months have elapsed from
the date on which notice of its termination is given to the authorities referred to in paragraph 5
unless certificate has been surrendered to these authorities or a new certificate has been issued
within the said period. The foregoing provisions Wreck Removal Convention Act 2011 (c. 8)
Schedule — Wreck Removal Convention 19 shall similarly apply to any modification, which
results in the insurance or security no longer satisfying the requirements of this article.
7. The State of the ship’s registry shall, subject to the provisions of this article and having
regard to any guidelines adopted by the Organization on the financial responsibility of the reg-
istered owners, determine the conditions of issue and validity of the certificate
8. Nothing in this Convention shall be construed as preventing a State Party from relying
on information obtained from other States or the Organization or other international organiza-
tions relating to the financial standing of providers of insurance or financial security for the
purposes of this Convention. In such cases, the State Party relying on such information is not
relieved of its responsibility as a State issuing the certificate required by paragraph 2.
9. Certificates issued and certified under the authority of a State Party shall be accepted by
other States Parties for the purposes of this Convention and shall be regarded by other States
Parties as having the same force as certificates issued or certified by them, even if issued or certi-
fied in respect of a ship not registered in a State Party. A State Party may at any time request
consultation with the issuing or certifying State should it believe that the insurer or guarantor
named in the certificate is not financially capable of meeting the obligations imposed by this
Convention.
10. Any claim for costs arising under this Convention may be brought directly against the
insurer or other person providing financial security for the registered owner’s liability. In such
a case the defendant may invoke the defences (other than the bankruptcy or winding up of the
registered owner) that the registered owner would have been entitled to invoke, including limita-
tion of liability under any applicable national or international regime. Furthermore, even if the
registered owner is not entitled to limit liability, the defendant may limit liability to an amount
equal to the amount of the insurance or other financial security required to be maintained in
accordance with paragraph 1. Moreover, the defendant may invoke the defence that the mari-
time casualty was caused by the wilful misconduct of the registered owner, but the defendant
shall not invoke any other defence which the defendant might have been entitled to invoke in
proceedings brought by the registered owner against the defendant. The defendant shall in any
event have the right to require the registered owner to be joined in the proceedings.
11. A State Party shall not permit any ship entitled to fly its flag to which this article applies
to operate at any time unless a certificate has been issued under paragraphs 2 or 14.
12. Subject to the provisions of this article, each State Party shall ensure, under its national
law, that insurance or other security to the extent required by paragraph 1 is in force in respect
of any ship of 300 gross tonnage and above, wherever registered, entering or leaving a port in its
territory, or arriving at or leaving from an offshore facility in its territorial sea.
281
appendix 3
13. Notwithstanding the provisions of paragraph 5, a State Party may notify the Secretary-
General that, for the purposes of paragraph 12, ships are not required to carry on board or to
produce the certificate required by paragraph 2, when entering or leaving a port in its territory,
or arriving at or leaving from an offshore facility in its territorial sea, provided that the State
Wreck Removal Convention Act 2011 (c. 8) Schedule — Wreck Removal Convention 20 Party
which issues the certificate required by paragraph 2 has notified the Secretary-General that it
maintains records in an electronic format, accessible to all States Parties, attesting the existence
of the certificate and enabling States Parties to discharge their obligations under paragraph 12.
14. If insurance or other financial security is not maintained in respect of a ship owned by
a State Party, the provisions of this article relating thereto shall not be applicable to such ship,
but the ship shall carry a certificate issued by the appropriate authority of the State of registry,
stating that it is owned by that State and that the ship’s liability is covered within the limits pre-
scribed in paragraph 1. Such a certificate shall follow as closely as possible the model prescribed
by paragraph 2.
Article 13
Time limits
Rights to recover costs under this Convention shall be extinguished unless an action is brought
hereunder within three years from the date when the hazard has been determined in accordance
with this Convention. However, in no case shall an action be brought after six years from the
date of the maritime casualty that resulted in the wreck. Where the maritime casualty consists
of a series of occurrences, the six-year period shall run from the date of the first occurrence.
Article 14
Amendment provisions
1. At the request of not less than one-third of States Parties, a conference shall be convened
by the Organization for the purpose of revising or amending this Convention.
2. Any consent to be bound by this Convention, expressed after the date of entry into force
of an amendment to this Convention, shall be deemed to apply to this Convention, as amended.
Article 15
Settlement of disputes
1. Where a dispute arises between two or more States Parties regarding the interpretation
or application of this Convention, they shall seek to resolve their dispute, in the first instance,
through negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to
regional agencies or arrangements or other peaceful means of their choice.
2. If no settlement is possible within a reasonable period of time not exceeding twelve
months after one State Party has notified another that a dispute exists between them, the
provisions relating to the settlement of disputes set out in Part XV of the United Nations
Convention on the Law of the Sea, 1982, shall apply mutatis mutandis, whether or not the
States party to the dispute are also States Parties to the United Nations Convention on the
Law of the Sea, 1982.
3. Any procedure chosen by a State Party to this Convention and to the United Nations
Convention on the Law of the Sea, 1982, pursuant to Article Wreck Removal Convention Act
282
appendix 3
2011 (c. 8) Schedule — Wreck Removal Convention 21 287 of the latter, shall apply to the settle-
ment of disputes under this article, unless that State Party, when ratifying, accepting, approving
or acceding to this Convention, or at any time thereafter, chooses another procedure pursuant
to Article 287 for the purpose of the settlement of disputes arising out of this Convention.
4. A State Party to this Convention which is not a Party to the United Nations Convention on
the Law of the Sea, 1982, when ratifying, accepting, approving or acceding to this Convention
or at any time thereafter shall be free to choose, by means of a written declaration, one or
more of the means set out in Article 287, paragraph 1, of the United Nations Convention on the
Law of the Sea, 1982, for the purpose of settlement of disputes under this Article. Article 287
shall apply to such a declaration, as well as to any dispute to which such State is party, which is
not covered by a declaration in force. For the purpose of conciliation and arbitration, in accord-
ance with Annexes V and VII of the United Nations Convention on the Law of the Sea, 1982,
such State shall be entitled to nominate conciliators and arbitrators to be included in the lists
referred to in Annex V, Article 2, and Annex VII, Article 2, for the settlement of disputes arising
out of this Convention.
5. A declaration made under paragraphs 3 and 4 shall be deposited with the Secretary-
General, who shall transmit copies thereof to the States Parties.
Article 16
Article 17
Article 18
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2. For any State which ratifies, accepts, approves or accedes to this Convention after the con-
ditions in paragraph 1 for entry into force have been met, this Convention shall enter into force
three months following the date of deposit by such State of the appropriate instrument, but not
before this Convention has entered into force in accordance with paragraph 1.
Article 19
Denunciation
1. This Convention may be denounced by a State Party at any time after the expiry of one
year following the date on which this Convention comes into force for that State.
2. Denunciation shall be effected by the deposit of an instrument to that effect with the
Secretary-General.
3. A denunciation shall take effect one year, or such longer period as may be specified in the
instrument of denunciation, following its receipt by the Secretary-General.
Article 20
Depositary
1. This Convention shall be deposited with the Secretary General.
2. The Secretary-General shall:
(a) inform all States which have signed or acceded to this Convention of:
(i) each new signature or deposit of an instrument of ratification, acceptance,
approval or accession, together with the date thereof;
(ii) the date of entry into force of this Convention;
(iii) the deposit of any instrument of denunciation of this Convention, together
with the date of the deposit and the date on which the denunciation takes
effect; and
(iv) other declarations and notifications received pursuant to this Convention;
(b) transmit certified true copies of this Convention to all States that have signed or
acceded to this Convention.
3. As soon as this Convention enters into force, a certified true copy of the text shall be trans-
mitted by the Secretary-General to the Secretary-General of the United Nations, for registration
and publication in accordance with Article 102 of the Charter of the United Nations23.
Article 21
Languages
The Convention is established in a single original in the Arabic, Chinese, English, French,
Russian and Spanish languages, each text being equally authentic.”
DONE IN NAIROBI this eighteenth day of May two thousand and seven.
IT WITNESS WHEREOF the undersigned, being dully authorised by their respective
Governments for that purpose, have signed this Convention.
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ANNEX
CERTIFICATE OF INSURANCE OR OTHER FINANCIAL SECURITY IN RESPECT OF
LIABILITY FOR THE REMOVAL OF WRECKS
Issued in accordance with the provisions of article 12 of the Nairobi International Convention
on the Removal of Wrecks, 2007
This is to certify that there is in force, in respect of the above-named ship, a policy of insurance
or other financial security satisfying the requirements of article 12 of the Nairobi International
Convention on the Removal of Wrecks, 2007.
Type of Security..........................................................................................................................
Duration of Security...................................................................................................................
Name and address of the insurer(s) and/or guarantor(s)
Name…......................................................................................................................................
Address ………………………………………..............................................................................
...................................................................................................................................................
This certificate is valid until .............................................................................
Issued or certified by the Government of ........................................................
........................................................................................................................
(Full designation of the State)
OR
The following text should be used when a State Party avails itself of article 12, paragraph 3:
The present certificate is issued under the authority of the Government of................ (full des-
ignation of the State) by …............................................ (name of institution or organization)
At ….................................................... On …................................................
(Place) (Date)
….....................................................................................
(Signature and Title of issuing or certifying official)
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Explanatory Notes
1 If desired, the designation of the State may include a reference to the competent publicau-
thority of the country where the Certificate is issued.
2 If the total amount of security has been furnished by more than one source, the amount
ofeach of them should be indicated.
3 If security is furnished in several forms, these should be enumerated.
4 The entry “Duration of Security” must stipulate the date on which such security takeseffect.
5 The entry “Address” of the insurer(s) and/or guarantor(s) must indicate the principal place
of business of the insurer(s) and/or guarantor(s). If appropriate, the place of business where the
insurance or other security is established shall be indicated.
286
APPENDIX 4
(Consolidated text of the Athens Convention relating to the Carriage of Passengers and their
Luggage by Sea, 1974 and the Protocol of 2002 to the Convention)
Article 1
Definitions
In this Convention the following expressions have the meaning hereby assigned to them:
1. (a) “carrier” means a person by or on behalf of whom a contract of carriage has been
concluded, whether the carriage is actually performed by that person or by a perform-
ing carrier;
(b) “performing carrier” means a person other than the carrier, being the owner, char-
terer or operator of a ship, who actually performs the whole or a part of the carriage;
(c) “carrier who actually performs the whole or a part of the carriage” means the per-
forming carrier, or, in so far as the carrier actually performs the carriage, the carrier;
2. “contract of carriage” means a contract made by or on behalf of a carrier for the carriage
by sea of a passenger or of a passenger and his luggage, as the case may be;
3. “ship” means only a seagoing vessel, excluding an air-cushion vehicle;
4. “passenger” means any person carried in a ship,
(a) under a contract of carriage, or
(b) who, with the consent of the carrier, is accompanying a vehicle or live animals which
are covered by a contract for the carriage of goods not governed by this Convention;
5. “luggage” means any article or vehicle carried by the carrier under a contract of carriage,
excluding:
(a) articles and vehicles carried under a charter party, bill of lading or other contract
primarily concerned with the carriage of goods, and
(b) live animals;
6. “cabin luggage” means luggage which the passenger has in his cabin or is otherwise in his
possession, custody or control. Except for the application of paragraph 8 of this Article and
Article 8, cabin luggage includes luggage which the passenger has in or on his vehicle;
7. “loss of or damage to luggage” includes pecuniary loss resulting from the luggage not
having been re-delivered to the passenger within a reasonable time after the arrival of the ship
on which the luggage has been or should have been carried, but does not include delays resulting
from labour disputes;
8. “carriage” covers the following periods:
(a) with regard to the passenger and his cabin luggage, the period during which the pas-
senger and/or his cabin luggage are on board the ship or in the course of embarkation
or disembarkation, and the period during which the passenger and his cabin lugga
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ge are transported by water from land to the ship or vice-versa, if the cost of such
transport is included in the fare or if the vessel used for this purpose of auxiliary
transport has been put at the disposal of the passenger by the carrier. However, with
regard to the passenger, carriage does not include the period during which he is in a
marine terminal or station or on a quay or in or on any other port installation;
(b) with regard to cabin luggage, also the period during which the passenger is in a
marine terminal or station or on a quay or in or on any other port installation if that
luggage has been taken over by the carrier or his servant or agent and has not been
re-delivered to the passenger;
(c) with regard to other luggage which is not cabin luggage, the period from the time of
its taking over by the carrier or his servant or agent on shore or on board until the
time of its re-delivery by the carrier or his servant or agent;
9. “international carriage” means any carriage in which, according to the contract of car-
riage, the place of departure and the place of destination are situated in two different States, or
in a single State if, according to the contract of carriage or the scheduled itinerary, there is an
intermediate port of call in another State;
10. “Organization” means the International Maritime Organization.
11. “Secretary-General” means the Secretary-General of the Organization.
Article 1 bis
Annex
Article 2
Application
1. This Convention shall apply to any international carriage if:
(a) the ship is flying the flag of or is registered in a State Party to this Convention, or
(b) the contract of carriage has been made in a State Party to this Convention, or
(c) the place of departure or destination, according to the contract of carriage, is in a
State Party to this Convention.
2. Notwithstanding paragraph 1 of this Article, this Convention shall not apply when the
carriage is subject, under any other international convention concerning the carriage of pas-
sengers or luggage by another mode of transport, to a civil liability regime under the provisions
of such convention, in so far as those provisions have mandatory application to carriage by sea.
Article 3
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If and to the extent that the loss exceeds the above limit, the carrier shall be further liable unless
the carrier proves that the incident which caused the loss occurred without the fault or neglect
of the carrier.
2. For the loss suffered as a result of the death of or personal injury to a passenger not caused
by a shipping incident, the carrier shall be liable if the incident which caused the loss was due
to the fault or neglect of the carrier. The burden of proving fault or neglect shall lie with the
claimant.
3. For the loss suffered as a result of the loss of or damage to cabin luggage, the carrier shall
be liable if the incident which caused the loss was due to the fault or neglect of the carrier. The
fault or neglect of the carrier shall be presumed for loss caused by a shipping incident.
4. For the loss suffered as a result of the loss of or damage to luggage other than cabin
luggage, the carrier shall be liable unless the carrier proves that the incident which caused the
loss occurred without the fault or neglect of the carrier.
5. For the purposes of this article:
(a) “shipping incident” means shipwreck, capsizing, collision or stranding of the ship,
explosion or fire in the ship, or defect in the ship;
(b) “fault or neglect of the carrier” includes the fault or neglect of the servants of the
carrier, acting within the scope of their employment;
(c) “defect in the ship” means any malfunction, fa ilure or non-compliance with applica-
ble safety regulations in respect of any part of the ship or its equipment when used
for the escape, evacuation, embarkation and disembarkation of passengers, or when
used for the propulsion, steering, safe navigation, mooring, anchoring, arriving at or
leaving berth or anchorage, or damage control after flooding; or when used for the
launching of life saving appliances; and
(d) “loss” shall not include punitive or exemplary damages.
6. The liability of the carrier under this Article only relates to loss arising from incidents
that occurred in the course of the carriage. The burden of proving that the incident which
caused the loss occurred in the course of the carriage, and the extent of the loss, shall lie with
the claimant.
7. Nothing in this Convention shall prejudice any right of recourse of the carrier against
any third party, or the defence of contributory negligence under Article 6 of this Convention.
Nothing in this Article shall prejudice any right of limitation under Articles 7 or 8 of this
Convention.
8. Presumptions of fault or neglect of a party or the allocation of the burden of proof to a
party shall not prevent evidence in favour of that party from being considered.
Article 4
Performing carrier
1. If the performance of the carriage or part thereof has been entrusted to a performing
carrier, the carrier shall nevertheless remain liable for the entire carriage according to the provi-
sions of this Convention. In addition, the performing carrier shall be subject and entitled to the
provisions of this Convention for the part of the carriage performed by him.
2. The carrier shall, in relation to the carriage performed by the performing carrier, be liable
for the acts and omissions of the performing carrier and of his servants and agents acting within
the scope of their employment.
3. Any special agreement under which the carrier assumes obligations not imposed by this
Convention or any waiver of rights conferred by this Convention shall affect the performing
carrier only if agreed by him expressly and in writing.
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4. Where and to the extent that both the carrier and the performing carrier are liable, their
liability shall be joint and several.
5. Nothing in this Article shall prejudice any right of recourse as between the carrier and the
performing carrier.
Article 4bis
Compulsory insurance
1. When passengers are carried on board a ship registered in a State Party that is licensed
to carry more than twelve passengers, and this Convention applies, any carrier who actually
performs the whole or a part of the carriage shall maintain insurance or other financial security,
such as the guarantee of a bank or similar financial institution, to cover liability under this
Convention in respect of the death of and persona l injury to passengers. The limit of the com-
pulsory insurance or other financial security shall not be less than 250,000 units of account per
passenger on each distinct occasion.
2. A certificate attesting that insurance or other financial security is in force in accordance
with the provisions of this Convention shall be issued to each ship after the appropriate author-
ity of a State Party has determined that the requirements of paragraph 1 have been complied
with. With respect to a ship registered in a State Party, such certificate shall be issued or certi-
fied by the appropriate authority of the State of the ship’s registry; with respect to a ship not
registered in a State Party it may be issued or certified by the appropriate authority of any State
Party. This certificate shall be in the form of the model set out in the annex to this Convention
and shall contain the following particulars:
(a) name of ship, distinctive number or letters and port of registry;
(b) name and principal place of business of the carrier who actually performs the whole
or a part of the carriage;
(c) IMO ship identification number;
(d) type and duration of security;
(e) name and principal place of business of insurer or other person providing financial
security and, where appropriate, place of business where the insurance or other finan-
cial security is established; and
(f) period of validity of the certificate, which shall not be longer than the period of valid-
ity of the insurance or other financial security.
3. (a) A State Party may authorize an institution or an organization recognised by it to issue
the certificate. Such institution or organization shall inform that State of the issue of
each certificate. In all cases, the State Party shall fully guarantee the completeness
and accuracy of the certificate so issued, and shall undertake to ensure the necessary
arrangements to satisfy this obligation.
(b) A State Party shall notify the Secretary-General of:
(i) the specific responsibilities and conditions of the authority dele gated to an
institution or organization recognised by it;
(ii) the withdrawal of such authority; and
(iii) the date from which such authority or withdrawal of such authority takes
effect.
An authority delegated shall not take effect prior to three months from the date from
which notification to that effect was given to the Secretary-General.
(c) The institution or organization authorized to issue certificates in accordance with this
paragraph shall, as a minimum, be authorized to withdraw these certificates if the
conditions under which they have been issued are not complied with. In all cases the
290
appendix 4
institution or organization shall report such withdrawal to the State on whose behalf
the certificate was issued.
4. The certificate shall be in the official language or languages of the issuing State. If the
language used is not English, French or Spanish, the text shall include a translation into one
of these languages, and, where the State so decides, the official language of the State may be
omitted.
5. The certificate shall be carried on board the ship, and a copy shall be deposited with the
authorities who keep the record of the ship’s registry or, if the ship is not registered in a State
Party, with the authority of the State issuing or certifying the certificate.
6. An insurance or other financial security shall not satisfy the requirements of this Article if
it can cease, for reasons other than the expiry of the period of validity of the insurance or secu-
rity specified in the certificate, before three months have elapsed from the date on which notice
of its termination is given to the authorities referred to in paragraph 5, unless the certificate has
been surrendered to these authorities or a new certificate has been issued within the said period.
The foregoing provisions shall similarly apply to any modification which results in the insurance
or other financial security no longer satisfying the requirements of this Article.
7. The State of the ship’s registry shall, subject to the provisions of this Article, determine the
conditions of issue and validity of the certificate.
8. Nothing in this Convention shall be construed as preventing a State Party from relying on
information obtained from other States or the Organization or other international organiza-
tions relating to the financial standing of providers of insurance or other financial security for
the purposes of this Convention. In such cases, the State Party relying on such information is
not relieved of its responsibility as a State issuing the certificate.
9. Certificates issued or certified under the authority of a State Party shall be accepted by
other States Parties for the purposes of this Convention and shall be regarded by other States
Parties as having the same force as certificates issued or certified by them, even if issued or certi-
fied in respect of a ship not registered in a State Party. A State Party may at any time request
consultation with the issuing or certifying State should it believe that the insurer or guarantor
named in the insurance certificate is not financially capable of meeting the obligations imposed
by this Convention.
10. Any claim for compensation covered by insurance or other financial security pursuant
to this Article may be brought directly against the insurer or other person providing financial
security. In such case, the amount set out in paragraph 1 applies as the limit of liability of the
insurer or other person providing financial security, even if the carrier or the performing carrier
is not entitled to limitation of liability. The defendant may further invoke the defences (other
than the bankruptcy or winding up) which the carrier referred to in paragraph 1 would have
been entitled to invoke in accordance with this Convention. Furthermore, the defendant may
invoke the defence that the damage resulted from the wilful misconduct of the assured, but the
defendant shall not invoke any other defence which the defendant might have been entitled to
invoke in proceedings brought by the assured against the defendant. The defendant shall in
any event have the right to require the carrier and the performing carrier to be joined in the
proceedings.
11. Any sums provided by insurance or by other financial security maintained in accord-
ance with paragraph 1 shall be available exclusively for the satisfaction of claims under this
Convention, and any payments made of such sums shall discharge any liability arising under
this Convention to the extent of the amounts paid.
12. A State Party shall not permit a ship under its flag to which this Article applies to operate
at any time unless a certificate has been issued under paragraphs 2 or 15.
13. Subject to the provisions of this Article, each State Party shall ensure, under its national
law, tha t insurance or other financial security, to the extent specified in paragraph 1, is in force
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in respect of any ship that is licensed to carry more than twelve passengers, wherever registered,
entering or leaving a port in its territory in so far as this Convention applies.
14. Notwithstanding the provisions of paragraph 5, a State Party may notify the Secretary-
General that, for the purposes of paragraph 13, ships are not required to carry on board or to
produce the certificate required by paragraph 2 when entering or leaving ports in its territory,
provided that the State Party which issues the certificate has notified the Secretary-General
that it maintains records in an electronic format, accessible to all States Parties, attesting the
existence of the certificate and enabling States Parties to discharge their obligations under
paragraph 13.
15. If insurance or other financial security is not maintained in respect of a ship owned by a
State Party, the provisions of this Article relating thereto shall not be applicable to such ship, but
the ship shall carry a certificate issued by the appropriate authorities of the State of the ship’s
registry, stating that the ship is owned by that State and that the liability is covered within the
amount prescribed in accordance with paragraph 1. Such a certificate shall follow as closely as
possible the model prescribed by paragraph 2.
Article 5
Valuables
The carrier shall not be liable for the loss of or damage to monies, negotiable securities, gold,
silverware, jewellery, ornaments, works of art, or other valuables, except where such valuables
have been deposited with the carrier for the agreed purpose of safe-keeping in which case the
carrier shall be liable up to the limit provided for in paragraph 3 of Article 8 unless a higher limit
is agreed upon in accordance with paragraph 1 of Article 10.
Article 6
Contributory fault
If the carrier proves that the death of or personal injury to a passenger or the loss of or damage
to his luggage was caused or contributed to by the fault or neglect of the passenger, the Court
seized of the case may exonerate the carrier wholly or partly from his liability in accordance with
the provisions of the law of that court.
Article 7
292
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Article 8
Article 9
293
appendix 4
Article 10
Article 11
Article 12
Aggregation of claims
1. Where the limits of liability prescribed in Articles 7 and 8 take effect, they shall apply to the
aggregate of the amounts recoverable in all claims arising out of the death of or personal injury
to any one passenger or the loss of or damage to his luggage.
2. In relation to the carriage performed by a performing carrier, the aggregate of the
amounts recoverable from the carrier and the performing carrier and from their servants and
agents acting within the scope of their employment shall not exceed the highest amount which
could be awarded against either the carrier or the performing carrier under this Convention,
but none of the persons mentioned shall be liable for a sum in excess of the limit applicable to
him.
3. In any case where a servant or agent of the carrier or of the performing carrier is
entitled under Article 11 of this Convention to avail himself of the limits of liability
prescribed in Articles 7 and 8, the aggregate of the amounts recoverable from the carrier, or the
performing carrier as the case may be, and from that servant or agent, shall not exceed those
limits.
Article 13
294
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Article 14
Article 15
Article 16
295
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Article 17
Competent jurisdiction
1. An action arising under Articles 3 and 4 of this Convention shall, at the option of the
claimant, be brought before one of the courts listed below, provided that the court is located in
a State Party to this Convention, and subject to the domestic law of each State Party governing
proper venue within those States with multiple possible forums:
(a) the Court of the State of permanent residence or principal place of business of the
defendant, or
(b) the Court of the State of departure or that of the destination according to the con-
tract of carria ge, or
(c) the Court of the State of the domicile or permanent residence of the claimant,
if the defendant has a place of business and is subject to jurisdiction in that
State, or
(d) the Court of the State where the contract of carriage was made, if the defendant has
a place of business and is subject to jurisdiction in that State.
2. Actions under article 4bis of this Convention shall, at the option of the claimant, be
brought before one of the courts where action could be brought against the carrier or perform-
ing carrier according to paragraph 1.
3. After the occurrence of the incident which has caused the damage, the parties may agree
that the claim for damages shall be submitted to any jurisdiction or to arbitration.
Article 17bis
Article 18
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in Article 17, paragraphs 1 or 2, shall be null and void, but the nullity of that provision shall
not render void the contract of carriage which shall remain subject to the provisions of this
Convention.
Article 19
Article 20
Nuclear damage
No liability shall arise under this Convention for damage caused by a nuclear incident:
(a) if the operator of a nuclear installation is liable for such damage under either the
Paris Convention of 29 July 1960 on Third Party Liability in the Field of Nuclear
Energy as amended by its Additional Protocol of 28 January 1964, or the Vienna
Convention of 21 May 1963 on Civil Liability for Nuclear Damage, or any amend-
ment or Protocol thereto which is in force; or
(b) if the operator of a nuclear installation is liable for such damage by virtue of a
national law governing the liability for such damage, provided that such law is in all
respects as favourable to persons who may suffer damage as either the Paris or the
Vienna Conventions or any amendment or Protocol thereto which is in force.
Article 21
Article 22
Declaration of non-application
1. Any Party may at the time of signing, ratifying, accepting, approving or acceding to this
Convention, declare in writing that it will not give effect to this Convention when the passenger
and the carrier are subjects or nationals of that Party.
2. Any declaration made under paragraph 1 of this Article may be withdrawn at any time by
a notification in writing to the Secretary-General.
Article 22bis
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References in this Convention to States Parties shall be taken to mean references to States
Parties to that Protocol.
Final Clauses
[Articles 17 to 25 of the Protocol of 2002 to the Athens Convention relating to the Carriage of
Passengers and their Luggage by Sea, 1974.]
Article 17
Article 18
298
appendix 4
t erritorial unit respectively in which the ship is registered and which issues or certifies
the certificate;
(b) references to the requirements of national law, national limit of liability and national
currency shall be construed respectively as references to the requirements of the law,
the limit of liability and the currency of the relevant territorial unit; and
(c) references to courts, and to judgments which must be recognised in States Parties,
shall be construed as references respectively to courts of, and to judgments which
must be recognised in, the relevant territorial unit.
Article 19
Article 20
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months after the date of deposit by such State of the appropriate instrument, but not before this
Protocol has entered into force in agreement with paragraph 1.
Article 21
Denunciation
1. This Protocol may be denounced by any State Party at any time after the date on which
this Protocol comes into force for that State.
2. Denunciation shall be effected by the deposit of an instrument to that effect with the
Secretary-General.
3. A denunciation shall take effect twelve months, or such longer period as may be specified
in the instrument of denunciation, after its deposit with the Secretary-General.
4. As between the States Parties to this Protocol, denunciation by any of them of the
Convention in accordance with Article 25 thereof shall not be construed in any way as a denun-
ciation of the Convention as revised by this Protocol.
Article 22
Article 23
Amendment of limits
1. Without prejudice to the provisions of Article 22, the special procedure in this Article shall
apply solely for the purposes of amending the limits set out in Article 3, paragraph 1, Article
4bis, paragraph 1, Article 7, paragraph 1 and Article 8 of the Convention as revised by this
Protocol.
2. Upon the request of at least one half, but in no case less than six, of the States Parties to
this Protocol, any proposal to amend the limits, including the deductibles, specified in Article 3,
paragraph 1, Article 4bis, paragraph 1, Article 7, paragraph 1, and Article 8 of the Convention
as revised by this Protocol shall be circulated by the Secretary-General to all Members of the
Organization and to all States Parties.
3. Any amendment proposed and circulated as above shall be submitted to the Legal
Committee of the Organization (hereinafter referred to as “the Legal Committee”) for consid-
eration at a date at least six months after the date of its circulation.
4. All States Parties to the Convention as revised by this Protocol, whether or not Members
of the Organization, shall be entitled to participate in the proceedings of the Legal Committee
for the consideration and adoption of amendments.
5. Amendments shall be adopted by a two-thirds majority of the States Parties to the
Convention as revised by this Protocol present and voting in the Legal Committee expanded
as provided for in paragraph 4, on condition that at least one half of the States Parties to the
Convention as revised by this Protocol shall be present at the time of voting.
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6. When acting on a proposal to amend the limits, the Legal Committee shall take into
account the experience of incidents and, in particular, the amount of damage resulting there-
from, changes in the monetary values and the effect of the proposed amendment on the cost of
insurance.
7. (a) No amendment of the limits under this Article may be considered less than five
years from the date on which this Protocol was opened for signature nor less than
five years from the date of ent ry into force of a previous amendment under this
Article.
(b) No limit may be increased so as to exceed an amount which corresponds to the limit
laid down in the Convention as revised by this Protocol increased by six per cent
per year calculated on a compound basis from the date on which this Protocol was
opened for signature.
(c) No limit may be increased so as to exceed an amount which corresponds to the limit
laid down in the Convention as revised by this Protocol multiplied by three.
8. Any amendment adopted in accordance with paragraph 5 shall be notified by the
Organization to all States Parties. The amendment shall be deemed to have been accepted at
the end of a period of eighteen months after the date of notification, unless within that period
not less than one fourth of the States that were States Parties at the time of the adoption of the
amendment have communicated to the Secretary-General that they do not accept the amend-
ment, in which case the amendment is rejected and shall have no effect.
9. An amendment deemed to have been accepted in accordance with paragraph 8 shall enter
into force eighteen months after its acceptance.
10. All States Parties shall be bound by the amendment, unless they denounce this Protocol
in accordance with Article 21, paragraphs 1 and 2 at least six months before the amendment
enters into force. Such denunciation shall take effect when the amendment enters into force.
11. When an amendment has been adopted but the eighteen- month period for its acceptance
has not yet expired, a State which becomes a State Party during that period shall be bound by
the amendment if it enters into force. A State which becomes a State Party after that period shall
be bound by an amendment which has been accepted in accordance with paragraph 8. In the
cases referred to in this paragraph, a State becomes bound by an amendment when that amend-
ment enters into force, or when this Protocol enters into force for that State, if later.
Article 24
Depositary
1. This Protocol and any amendments adopted under Article 23 shall be deposited with the
Secretary-General.
2. The Secretary-General shall:
(a) inform all States which have signed or acceded to this Protocol of:
(i) each new signature or deposit of an instrument of ratification, acceptance,
approval or accession together with the date thereof;
(ii) each declaration and communication under Article 9, paragraphs 2 and 3,
Article 18, paragraph 1 and Article 19, paragraph 4 of the Convention as
revised by this Protocol;
(iii) the date of entry into force of this Protocol;
(iv) any proposal to amend the limits which has been made in accordance with
Article 23, paragraph 2 of this Protocol;
(v) any amendment which has been adopted in accordance with Article 23, para-
graph 5 of this Protocol;
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(vi) any amendment deemed to have been accepted under Article 23, paragraph 8
of this Protocol, together with the date on which that amendment shall enter
into force in accordance with paragraphs 9 and 10 of that Article;
(vii) the deposit of any instrument of denunciation of this Protocol together with
the date of the deposit and the date on which it takes effect;
(viii) any communication called for by any Article of this Protocol;
(b) transmit certified true copies of this Protocol to all States which have signed or
acceded to this Protocol.
3. As soon as this Protocol comes into force, the text shall be transmitted by the Secretary-
General to the Secretariat of the United Nations for registration and publication in accordance
with Article 102 of the Charter of the United Nations.
Article 25
Languages
This Protocol is established in a single original in the Arabic, Chinese, English, French, Russian
and Spanish languages, each text being equally authentic.
DONE AT LONDON this first day of November 2002.
IN WITNESS WHEREOF the undersigned, being duly authorised by their respective
Governments for that purpose, have signed this Protocol.
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ANNEX
CERTIFICATE OF INSURANCE OR OTHER FINANCIAL SECURITY IN RESPECT OF
LIABILITY FOR THE DEATH OF AND PERSONAL INJURY TO PASSENGERS
Issued in accordance with the provisions of Article 4bis of the Athens Convention relating to
the Carriage of Passengers and their Luggage by Sea, 2002
Name of Ship Distinctive IMO Ship Port of Name and full address
number or Identification Registry of the principal place of
letters Number business of the carrier
who actually performs
the carriage.
This is to certify that there is in force in respect of the above-named ship a policy of insurance
or other financial security satisfying the requirements of Article 4bis of the Athens Convention
relating to the Carriage of Passengers and their Luggage by Sea, 2002.
Type of Security .........................................................................................................................
Duration of Security ..................................................................................................................
Name and address of the insurer(s) and/or guarantor(s)
Name .........................................................................................................................................
Address ......................................................................................................................................
...................................................................................................................................................
This certificate is valid until .............................................................................
Issued or certified by the Government of .........................................................
........................................................................................................................
(Full designation of the State)
OR
The following text should be used when a State Party avails itself of Article 4bis, paragraph 3:
The present certificate is issued under the authority of the Government of .................................
(full designation of the State) by .................................................... (name of institution or
organization)
At ................................ On ....................................
(Place) (Date)
.........................................................................................
(Signature and Title of issuing or certifying official)
Explanatory Notes
1. If desired, the designation of the State may include a reference to the competent public
authority of the country where the Certificate is issued.
2. If the total amount of security has been furnished by more than one source, the amount
of each of them should be indicated.
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3. If security is furnished in several forms, these should be enumerated.
4. The entry “Duration of Security” must stipulate the date on which such security takes
effect.
5. The entry “Address” of the insurer(s) and/or guarantor(s) must indicate the principal place
of business of the insurer(s) and/or guarantor(s). If appropriate, the place of business where the
insurance or other security is established shall be indicated.
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APPENDIX 5
Article 1
305
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Article 2
Article 3
306
appendix 5
Article 4
Article 5
Counterclaims
Where a person entitled to limitation of liability under the rules of this Convention has a claim
against the claimant arising out of the same occurrence, their respective claims shall be set off
against each other and the provisions of this Convention shall only apply to the balance, if any.
Article 6
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5. For the purpose of this Convention the ship’s tonnage shall be the gross tonnage calculated
in accordance with the tonnage measurement rules contained in Annex I of the International
Convention on Tonnage Measurement of Ships, 1969.
Article 7
Article 8
Unit of Account
1. The Unit of Account referred to in Articles 6 and 7 is the Special Drawing Right as
defined by the International Monetary Fund. The amounts mentioned in Articles 6 and 7 shall
be converted into the national currency of the State in which limitation is sought, according to
the value of that currency at the date the limitation fund shall have been constituted, payment is
made, or security is given which under the law of that State is equivalent to such payment. The
value of a national currency in terms of the Special Drawing Right, of a State Party which is a
member of the International Monetary Fund, shall be calculated in accordance with the method
of valuation applied by the International Monetary Fund in effect at the date in question for its
operations and transactions. The value of a national currency in terms of the Special Drawing
Right, of a State Party which is not a member of the International Monetary Fund, shall be
calculated in a manner determined by that State Party.
2. Nevertheless, those States which are not members of the International Monetary Fund
and whose law does not permit the application of the provisions of paragraph 1 may, at the
time of signature without reservation as to ratification, acceptance or approval or at the time of
ratification, acceptance, approval or accession or at any time thereafter, declare that the limits of
liability provided for in this Convention to be applied in their territories shall be fixed as follows:
(a) in respect of Article 6, paragraph 1(a), at an amount of
(i) 30 million monetary units for a ship with a tonnage not exceeding 2,000 tons;
(ii) for a ship with a tonnage in excess thereof, the following amount in addition to
that mentioned in (i):
for each ton from 2,001 to 30,000 tons, 12,000 monetary units;
for each ton from 30,001 to 70,000 tons, 9,000 monetary units; and
for each ton in excess of 70,000 tons, 6,000 monetary units; and
(b) in respect of Article 6, paragraph 1(b), at an amount of:
(i) 15 million monetary units for a ship with a tonnage not exceeding 2,000 tons;
(ii) for a ship with a tonnage in excess thereof, the following amount in addition to
that mentioned in (i):
for each ton from 2,001 to 30,000 tons, 6,000 monetary units;
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for each ton from 30,001 to 70,000 tons, 4,500 monetary units; and
for each ton in excess of 70,000 tons, 3,000 monetary units; and
(c) in respect of Article 7, paragraph 1, at an amount of 2,625,000 monetary units multi-
plied by the number of passengers which the ship is authorized to carry according to
its certificate.
Paragraphs 2 and 3 of Article 6 apply correspondingly to subparagraphs (a) and
(b) of this paragraph.
3. The monetary unit referred to in paragraph 2 corresponds to sixty-five and a half mil-
ligrammes of gold of millesimal fineness nine hundred. The conversion of the amounts referred
to in paragraph 2 into the national currency shall be made according to the law of the State
concerned.
4. The calculation mentioned in the last sentence of paragraph 1 and the conversion men-
tioned in paragraph 3 shall be made in such a manner as to express in the national currency
of the State Party as far as possible the same real value for the amounts in Articles 6 and 7 as
is expressed there in units of account. States Parties shall communicate to the depositary the
manner of calculation pursuant to paragraph 1, or the result of the conversion in paragraph 3,
as the case may be, at the time of the signature without reservation as to ratification, acceptance
or approval, or when depositing an instrument referred to in Article 16 and whenever there is a
change in either.
Article 9
Aggregation of claims
1. The limits of liability determined in accordance with Article 6 shall apply to the aggregate
of all claims which arise on any distinct occasion:
(a) against the person or persons mentioned in paragraph 2 of Article 1 and any person
for whose act, neglect or default he or they are responsible; or
(b) against the shipowner of a ship rendering salvage services from that ship and the
salvor or salvors operating from such ship and any person for whose act, neglect or
default he or they are responsible; or
(c) against the salvor or salvors who are not operating from a ship or who are operating
solely on the ship to, or in respect of which, the salvage services are rendered and any
person for whose act, neglect or default he or they are responsible.
2. The limits of liability determined in accordance with Article 7 shall apply to the aggregate
of all claims subject thereto which may arise on any distinct occasion against the person or
persons mentioned in paragraph 2 of Article 1 in respect of the ship referred to in Article 7 and
any person for whose act, neglect or default he or they are responsible.
Article 10
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3. Questions of procedure arising under the rules of this Article shall be decided in accord-
ance with the national law of the State Party in which action is brought.
Article 11
Article 12
Article 13
310
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such claim against any other assets of a person by or on behalf of whom the fund has been
constituted.
2. After a limitation fund has been constituted in accordance with Article 11, any ship or
other property, belonging to a person on behalf of whom the fund has been constituted, which
has been arrested or attached within the jurisdiction of a State Party for a claim which may be
raised against the fund, or any security given, may be released by order of the Court or other
competent authority of such State. However, such release shall always be ordered if the limita-
tion fund has been constituted:
(a) at the port where the occurrence took place, or, if it took place out of port, at the first
port of call thereafter; or
(b) at the port of disembarkation in respect of claims for loss of life or personal injury;
or
(c) at the port of discharge in respect of damage to cargo; or
(d) in the State where the arrest is made.
3. The rules of paragraphs 1 and 2 shall apply only if the claimant may bring a claim against
the limitation fund before the Court administering that fund and the fund is actually available
and freely transferable in respect of that claim.
Article 14
Governing law
Subject to the provisions of this Chapter the rules relating to the constitution and distribution
of a limitation fund, and all rules of procedure in connexion therewith, shall be governed by the
law of the State Party in which the fund is constituted.
Article 15
1. This Convention shall apply whenever any person referred to in Article 1 seeks to limit his
liability before the Court of a State Party or seeks to procure the release of a ship or other prop-
erty or the discharge of any security given within the jurisdiction of any such State. Nevertheless,
each State Party may exclude wholly or partially from the application of this Convention any
person referred to in Article 1 who at the time when the rules of this Convention are invoked
before the Courts of that State does not have his habitual residence in a State Party or does not
have his principal place of business in a State Party or any ship in relation to which the right of
limitation is invoked or whose release is sought and which does not at the time specified above
fly the flag of a State Party.
2. A State Party may regulate by specific provisions of national law the system of limitation
of liability to be applied to vessels which are:
(a) according to the law of that State, ships intended for navigation on inland waterways
(b) ships of less than 300 tons.
A State Party which makes use of the option provided for in this paragraph shall inform the
depositary of the limits of liability adopted in its national legislation or of the fact that there
are none.
3. A State Party may regulate by specific provisions of national law the system of limitation
of liability to be applied to claims arising in cases in which interests of persons who are nationals
of other States Parties are in no way involved.
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3bis Notwithstanding the limit of liability prescribed in paragraph 1 of Article 7, a State
Party may regulate by specific provisions of national law the system of liability to be applied
to claims for loss of life or personal injury to passengers of a ship, provided that the limit of
liability is not lower than that prescribed in paragraph 1 of Article 7. A State Party which makes
use of the option provided for in this paragraph shall inform the Secretary-General of the limits
of liability adopted or of the fact that there are none.
4. The Courts of a State Party shall not apply this Convention to ships constructed for, or
adapted to, and engaged in, drilling:
(a) when that State has established under its national legislation a higher limit of liability
than that otherwise provided for in Article 6; or
(b) when that State has become party to an international convention regulating the
system of liability in respect of such ships.
In a case to which sub-paragraph (a) applies that State Party shall inform the depositary
accordingly.
5. This Convention shall not apply to:
(a) air-cushion vehicles;
(b) floating platforms constructed for the purpose of exploring or exploiting the natural
resources of the sea-bed or the subsoil thereof.
Article 16
Article 17
312
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reservation as to ratification, acceptance or approval, shall take effect on the date of entry into
force of the Convention or on the first day of the month following the ninetieth day after the
date of the signature or the deposit of the instrument, whichever is the later date.
3. For any State which subsequently becomes a Party to this Convention, the Convention
shall enter into force on the first day of the month following the expiration of ninety days after
the date when such State deposited its instrument.
4. In respect of the relations between States which ratify, accept, or approve this Convention
or accede to it, this Convention shall replace and abrogate the International Convention relating
to the Limitation of the Liability of Owners of Sea-going Ships, done at Brussels on 10 October
1957, and the International Convention for the Unification of certain Rules relating to the
Limitation of Liability of the Owners of Sea-going Vessels, signed at Brussels on 25 August 1924.
Article 18
Reservations
1. Any State may, at the time of signature, ratification, acceptance, approval or accession, or
at any time thereafter, reserve the right:
(a) to exclude the application of Article 2, paragraphs 1(d) and (e);
(b) to exclude claims for damage within the meaning of the International Convention on
Liability and Compensation for Damage in Connection with the Carriage of Hazardous
and Noxious Substances by Sea, 1996 or of any amendment or protocol thereto.
No other reservations shall be admissible to the substantive provisions of this Convention.
2. Reservations made at the time of signature are subject to confirmation upon ratification,
acceptance or approval.
3. Any State which has made a reservation to this Convention may withdraw it at any time by
means of a notification addressed to the Secretary-General. Such withdrawal shall take effect on
the date the notification is received. If the notification states that the withdrawal of a reservation
is to take effect on a date specified therein, and such date is later than the date the notification is
received by the Secretary-General, the withdrawal shall take effect on such later date.
Article 19
Denunciation
1. This Convention may be denounced by a State Party at any time one year from the date on
which the Convention entered into force for that Party.
2. Denunciation shall be effected by the deposit of an instrument with the Secretary-General.
3. Denunciation shall take effect on the first day of the month following the expiration of one
year after the date of deposit of the instrument, or after such longer period as may be specified
in the instrument.
Article 20
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3. After the date of the entry into force of an amendment to this Convention, any instrument
of ratification, acceptance, approval or accession deposited shall be deemed to apply to the
Convention as amended, unless a contrary intention is expressed in the instrument.
Article 21
Article 22
Depositary
1. This Convention shall be deposited with the Secretary-General.
2. The Secretary-General shall:
(a) transmit certified true copies of this Convention to all States which were invited to
attend the Conference on Limitation of Liability for Maritime Claims and to any
other States which accede to this Convention;
(b) inform all States which have signed or acceded to this Convention of:
(i) each new signature and each deposit of an instrument and any reservation
thereto together with the date thereof;
(ii) the date of entry into force of this Convention or any amendment thereto;
(iii) any denunciation of this Convention and the date on which it takes effect;
(iv) any amendment adopted in conformity with Articles 20 or 21;
(v) any communication called for by any Article of this Convention.
3. Upon entry into force of this Convention, a certified true copy thereof shall be transmitted
by the Secretary-General to the Secretariat of the United Nations for registration and publica-
tion in accordance with Article 102 of the Charter of the United Nations.
Article 23
Languages
This Convention is established in a single original in the English, French, Russian and Spanish
languages, each text being equally authentic.
DONE AT LONDON this nineteenth day of November one thousand nine hundred and
seventy-six.
IN WITNESS WHEREOF the undersigned being duly authorized for that purpose have
signed this Convention.
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APPENDIX 6
[Preamble Omitted]
Article 1
In this Convention the following words shall have the meanings hereby assigned to them:
1. “Maritime Claim” means a claim arising out of one or more of the following:
(a) damage caused by any ship either in collision or otherwise;
(b) loss of life or personal injury caused by any ship or occurring in connexion with the
operation of any ship;
(c) salvage;
(d) agreement relating to the use or hire of any ship whether by charterparty or otherwise;
(e) agreement relating to the carriage of goods in any ship whether by charterparty or otherwise;
(f) loss of or damage to goods including baggage carried in any ship;
(g) general average;
(h) bottomry;
(i) towage;
(j) pilotage;
(k) goods or materials wherever supplied to a ship for her operation or maintenance;
(l) construction, repair or equipment of any ship or dock charges and dues;
(m) wages of Masters, Officers, or crew;
(n) Master’s disbursements, including disbursements made by shippers, charterers or
agent on behalf of a ship or her owner;
(o) disputes as to the title to or ownership of any ship;
(p) disputes between co-owners of any ship as to the ownership, possession, employment,
or earnings of that ship;
(q) the mortgage or hypothecation of any ship.
2. “Arrest” means the detention of a ship by judicial process to secure a maritime claim, but
does not include the seizure of a ship in execution or satisfaction of a judgment.
3. “Person” includes individuals, partnerships and bodies corpo-rate, Governments, their
Departments, and Public Authorities.
4. “Claimant” means a person who alleges that a maritime claim exists in his favour.
Article 2
A ship flying the flag of one of the Contracting States may be arrested in the jurisdiction of any
of the Contracting States in respect of any maritime claim, but in respect of no other claim; but
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nothing in this Convention shall be deemed to extend or restrict any right or powers vested in
any governments or their departments, public authorities, or dock or habour authorities under
their existing domestic laws or regulations to arrest, detain or otherwise prevent the sailing of
vessels within their jurisdiction.
Article 3
1. Subject to the provisions of para. (4) of this article and of article 10, a claimant may
arrest either the particular ship in respect of which the maritime claim arose, or any other ship
which is owned by the person who was, at the time when the maritime claim arose, the owner
of the particular ship, even though the ship arrested be ready to sail; but no ship, other than
the particular ship in respect of which the claim arose, may be arrested in respect of any of the
maritime claims enumerated in article 1, (o), (p) or (q).
2. Ships shall be deemed to be in the same ownership when all the shares therein are owned
by the same person or persons.
3. A ship shall not be arrested, nor shall bail or other security be given more than once in any
one or more of the jurisdictions of any of the Contracting States in respect of the same mari-
time claim by the same claimant: and, if a ship has been arrested in any of such jurisdictions,
or bail or other security has been given in such jurisdiction either to release the ship or to avoid
a threatened arrest, any subsequent arrest of the ship or of any ship in the same ownership by
the same claimant for the maritime claim shall be set aside, and the ship released by the Court
or other appropriate judicial authority of that State, unless the claimant can satisfy the Court
or other appropriate judicial authority that the bail or other security had been finally released
before the subsequent arrest or that there is other good cause for maintaining that arrest.
4. When in the case of a charter by demise of a ship the charterer and not the registered
owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such
ship or any other ship in the ownership of the charterer by demise, subject to the provisions of
this Convention, but no other ship in the ownership of the registered owner shall be liable to
arrest in respect of such maritime claim. The provisions of this paragraph shall apply to any
case in which a person other than the registered owner of a ship is liable in respect of a maritime
claim relating to that ship.
Article 4
A ship may only be arrested under the authority of a Court or of the appropriate judicial
authority of the contracting State in which the arrest is made.
Article 5
The Court or other appropriate judicial authority within whose jurisdiction the ship has been
arrested shall permit the release of the ship upon sufficient bail or other security being fur-
nished, save in cases in which a ship has been arrested in respect of any of the maritime claims
enumerated in article 1, (o ) and (p). In such cases the Court or other appropriate judicial
authority may permit the person in possession of the ship to continue trading the ship, upon
such person furnishing sufficient bail or other security, or may otherwise deal with the operation
of the ship during the period of the arrest. In default of agreement between the parties as to the
sufficiency of the bail or other security, the Court or other appropriate judicial authority shall
determine the nature and amount thereof. The request to release the ship against such security
shall not be construed as an acknowledgment of liability or as a waiver of the benefit of the legal
limitations of liability of the owner of the ship.
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appendix 6
Article 6
All questions whether in any case the claimant is liable in damages for the arrest of a ship or for
the costs of the bail or other security furnished to release or prevent the arrest of a ship, shall
be determined by the law of the Contracting State in whose jurisdiction the arrest was made or
applied for.
The rules of procedure relating to the arrest of a ship, to the application for obtaining the
authority referred to in Article 4, and to all matters of procedure which the arrest may entail,
shall be governed by the law of the Contracting State in which the arrest was made or applied
for.
Article 7
1. The Courts of the country in which the arrest was made shall have jurisdiction to deter-
mine the case upon its merits if the domestic law of the country in which the arrest is made gives
jurisdiction to such Courts, or in any of the following cases namely:
(a) if the claimant has his habitual residence or principal place of business in the country
in which the arrest was made;
(b) if the claim arose in the country in which the arrest was made;
(c) if the claim concerns the voyage of the ship during which the arrest was made;
(d) if the claim arose out of a collision or in circumstances covered by article 13 of the
International Convention for the unification of certain rules of law with respect to
collisions between vessels, signed at Brussels on 23rd September 1910;
(e) if the claim is for salvage;
(f) if the claim is upon a mortgage or hypothecation of the ship arrested.
2. If the Court within whose jurisdiction the ship was arrested has not jurisdiction to decide
upon the merits, the bail or other security given in accordance with article 5 to procure the
release of the ship shall specifically provide that it is given as security for the satisfaction of any
judgment which may eventually be pronounced by a Court having jurisdiction so to decide; and
the Court or other appropriate judicial authority of the country in which the claimant shall
bring an action before a Court having such jurisdiction.
3. If the parties have agreed to submit the dispute to the jurisdiction of a particular Court
other than that within whose jurisdiction the arrest was made or to arbitration, the Court or
other appropriate judicial authority within whose jurisdiction the arrest was made may fix the
time within which the claimant shall bring proceedings.
4. If, in any of the cases mentioned in the two preceding paragraphs, the action or proceeding
is not brought within the time so fixed, the defendant may apply for the release of the ship or of
the bail or other security.
5. This article shall not apply in cases covered by the provisions of the revised Rhine
Navigation Convention of 17 October 1868.
Article 8
1. The provisions of this Convention shall apply to any vessel flying the flag of a Contracting
State in the jurisdiction of any Contracting State.
2. A ship flying the flag of a non-Contracting State may be arrested in the jurisdiction of any
Contracting State in respect of any of the maritime claims enumerated in article 1 or of any
other claim for which the law of the Contracting State permits arrest.
3. Nevertheless any Contracting State shall be entitled wholly or partly to exclude from the
benefits of this convention any government of a non-Contracting State or any person who has
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not, at the time of the arrest, his habitual residence or principal place of business in one of the
Contracting States.
4. Nothing in this Convention shall modify or affect the rules of law in force in the respective
Contracting States relating to the arrest of any ship within the jurisdiction of the State of her
flag by a person who has his habitual residence or principal place of business in that State.
5. When a maritime claim is asserted by a third party other than the original claimant,
whether by subrogation, assignment or other-wise, such third party shall, for the purpose of this
Convention, be deemed to have the same habitual residence or principal place of business as the
original claimant.
Article 9
Nothing in this Convention shall be construed as creating a right of action, which, apart from
the provisions of this Convention, would not arise under the law applied by the Court which was
seized of the case, nor as creating any maritime liens which do not exist under such law or under
the Convention on maritime mortgages and liens, if the latter is applicable.
Article 10
The High Contracting Parties may at the time of signature, deposit or ratification or accession,
reserve:
(a) the right not to apply this Convention to the arrest of a ship for any of the claims
enumerated in paragraphs (o ) and (p) of article 1, but to apply their domestic laws to
such claims;
(b) the right not to apply the first paragraph of article 3 to the arrest of a ship within their
jurisdiction for claims set out in article 1 paragraph (q).
Article 11
The High Contracting Parties undertake to submit to arbitration any disputes between States
arising out of the interpretation or application of this Convention, but this shall be without
prejudice to the obligations of those High Contracting Parties who have agreed to submit their
disputes to the International Court of Justice.
Article 12
This Convention shall be open for signature by the States represented at the Ninth Diplomatic
Conference on Maritime Law. The protocol of signature shall be drawn up through the good
offices of the Belgian Ministry of Foreign Affairs.
Article 13
This Convention shall be ratified and the instruments of ratification shall be deposited with the
Belgian Ministry of Foreign Affairs which shall notify all signatory and acceding States of the
deposit of any such instruments.
Article 14
(a) This Convention shall come into force between the two States which first ratify it, six
months after the date of the deposit of the second instrument of ratification.
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(b) This Convention shall come into force in respect of each signatory State which ratifies
it after the deposit of the second instrument of ratification six months after the date
of the deposit of the instrument of ratification of that State.
Article 15
Any State not represented at the Ninth Diplomatic Conference on Maritime Law may accede
to this Convention.
The accession of any State shall be notified to the Belgian Ministry of Foreign Affairs which
shall inform through diplomatic channels all signatory and acceding States of such notification.
The Convention shall come into force in respect of the acceding State six months after the
date of the receipt of such notification but not before the Convention has come into force in
accordance with the provisions of Article 14(a).
Article 16
Any High Contracting Party may three years after coming into force of this Convention in
respect of such High Contracting Party or at any time thereafter request that a conference be
convened in order to consider amendments to the Convention.
Any High Contracting Party proposing to avail itself of this right shall notify the Belgian
Government which shall convene the conference within six months thereafter.
Article 17
Any High Contracting Party shall have the right to denounce this Convention at any time after
the coming into force thereof in respect of such High Contracting Party. This denunciation shall
take effect one year after the date on which notification thereof has been received by the Belgian
Government which shall inform through diplomatic channels all the other High Contracting
Parties of such notification.
Article 18
(a) Any High Contracting Party may at the time of its ratification of or accession to this
Convention or at any time thereafter declare by written notification to the Belgian Ministry of
Foreign Affairs that the Convention shall extend to any of the territories for whose international
relations it is responsible. The Convention shall six months after the date of the receipt of such
notification by the Belgian Ministry of Foreign Affairs extend to the territories named therein,
but not before the date of the coming into force of the Convention in respect of such High
Contracting Party.
(b) A High Contracting Party which has made a declaration under paragraph (a ) of this
Article extending the Convention to any territory for whose international relations it is responsible
may at any time thereafter declare by notification given to the Belgian Ministry of Foreign Affairs
that the Convention shall cease to extend to such territory and the Convention shall one year after
the receipt of the notification by the Belgian Ministry of Foreign Affairs cease to extend thereto.
(c) The Belgian Ministry of Foreign Affairs shall inform through diplomatic channels all
signatory and acceding States of any notification received by it under this Article.
DONE in Brussels, on May 10, 1952, in the French and English languages, the two texts being
equally authentic.
319
APPENDIX 7
Article 1
Definitions
For the purposes of this Convention:
1. “Maritime Claim” means a claim arising out of one or more of the following:
(a) loss or damage caused by the operation of the ship;
(b) loss of life or personal injury occurring, whether on land or on water, in direct con-
nection with the operation of the ship;
(c) salvage operations or any salvage agreement, including, if applicable, special compen-
sation relating to salvage operations in respect of a ship which by itself or its cargo
threatened damage to the environment;
(d) damage or threat of damage caused by the ship to the environment, coastline or
related interests; measures taken to prevent, minimize, or remove such damage; com-
pensation for such damage; costs of reasonable measures of reinstatement of the
environment actually undertaken or to be undertaken; loss incurred or likely to be
incurred by third parties in connection with such damage; and damage, costs, or loss
of a similar nature to those identified in this subparagraph (d);
(e) costs or expenses relating to the raising, removal, recovery, destruction or the render-
ing harmless of a ship which is sunk, wrecked, stranded or abandoned, including
anything that is or has been on board such ship, and costs or expenses relating to the
preservation of an abandoned ship and maintenance of its crew;
(f) any agreement relating to the use or hire of the ship, whether contained in a charter
party or otherwise;
(g) any agreement relating to the carriage of goods or passengers on board the ship,
whether contained in a charter party or otherwise;
(h) loss of or damage to or in connection with goods (including luggage) carried on
board the ship;
(i) general average;
(j) towage;
(k) pilotage;
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(l) goods, materials, provisions, bunkers, equipment (including containers) supplied
or services rendered to the ship for its operation, management, preservation or
maintenance;
(m) construction, reconstruction, repair, converting or equipping of the ship;
(n) port, canal, dock, harbour and other waterway dues and charges;
(o) wages and other sums due to the master, officers and other members of the ship’s
complement in respect of their employment on the ship, including costs of repatria-
tion and social insurance contributions payable on their behalf;
(p) disbursements incurred on behalf of the ship or its owners;
(q) insurance premiums (including mutual insurance calls) in respect of the ship, payable
by or on behalf of the shipowner or demise charterer;
(r) any commissions, brokerages or agency fees payable in respect of the ship by or on
behalf of the shipowner or demise charterer;
(s) any dispute as to ownership or possession of the ship;
(t) any dispute between co-owners of the ship as to the employment or earnings of the
ship;
(u) a mortgage or a “hypothèque” or a charge of the same nature on the ship;
(v) any dispute arising out of a contract for the sale of the ship.
2. “Arrest” means any detention or restriction on removal of a ship by order of a Court to
secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction
of a judgment or other enforceable instrument.
3. “Person” means any individual or partnership or any public or private body, whether
corporate or not, including a State or any of its constituent subdivisions.
4. “Claimant” means any person asserting a maritime claim.
5. “Court” means any competent judicial authority of a State.
Article 2
Powers of arrest
1. A ship may be arrested or released from arrest only under the authority of a Court of the
State Party in which the arrest is effected.
2. A ship may only be arrested in respect of a maritime claim but in respect of no other claim.
3. A ship may be arrested for the purpose of obtaining security notwithstanding that, by
virtue of a jurisdiction clause or arbitration clause in any relevant contract, or otherwise, the
maritime claim in respect of which the arrest is effected is to be adjudicated in a State other than
the State where the arrest is effected, or is to be arbitrated, or is to be adjudicated subject to the
law of another State.
4. Subject to the provisions of this Convention, the procedure relating to the arrest of a ship or
its release shall be governed by the law of the State in which the arrest was effected or applied for.
Article 3
322
appendix 7
(c) the claim is based upon a mortgage or a “hypothèque” or a charge of the same nature
on the ship; or
(d) the claim relates to the ownership or possession of the ship; or
(e) the claim is against the owner, demise charterer, manager or operator of the ship and
is secured by a maritime lien which is granted or arises under the law of the State
where the arrest is applied for.
2. Arrest is also permissible of any other ship or ships which, when the arrest is effected, is
or are owned by the person who is liable for the maritime claim and who was, when the claim
arose:
(a) owner of the ship in respect of which the maritime claim arose; or
(b) demise charterer, time charterer or voyage charterer of that ship.
This provision does not apply to claims in respect of ownership or possession of a ship.
3. Notwithstanding the provisions of paragraphs 1 and 2 of this article, the arrest of a ship
which is not owned by the person liable for the claim shall be permissible only if, under the law
of the State where the arrest is applied for, a judgment in respect of that claim can be enforced
against that ship by judicial or forced sale of that ship.
Article 4
323
appendix 7
Article 5
Article 6
324
appendix 7
Article 7
Article 8
Application
1. This Convention shall apply to any ship within the jurisdiction of any State Party, whether
or not that ship is flying the flag of a State Party.
2. This Convention shall not apply to any warship, naval auxiliary or other ships owned or
operated by a State and used, for the time being, only on government non-commercial service.
3. This Convention does not affect any rights or powers vested in any Government or its
departments, or in any public authority, or in any dock or harbour authority, under any interna-
tional convention or under any domestic law or regulation, to detain or otherwise prevent from
sailing any ship within their jurisdiction.
4. This Convention shall not affect the power of any State or Court to make orders affecting
the totality of a debtor’s assets.
5. Nothing in this Convention shall affect the application of international conventions providing
for limitation of liability, or domestic law giving effect thereto, in the State where an arrest is effected.
325
appendix 7
6. Nothing in this Convention shall modify or affect the rules of law in force in the States
Parties relating to the arrest of any ship physically within the jurisdiction of the State of its flag
procured by a person whose habitual residence or principal place of business is in that State, or
by any other person who has acquired a claim from such person by subrogation, assignment or
otherwise.
Article 9
Article 10
Reservations
1. Any State may, at the time of signature, ratification, acceptance, approval, or accession, or
at any time thereafter, reserve the right to exclude the application of this Convention to any or
all of the following :
(a) ships which are not seagoing;
(b) ships not flying the flag of a State Party;
(c) claims under article 1, paragraph 1 (s).
2. A State may, when it is also a State Party to a specified treaty on navigation on inland
waterways, declare when signing, ratifying, accepting, approving or acceding to this Convention,
that rules on jurisdiction, recognition and execution of court decisions provided for in such trea-
ties shall prevail over the rules contained in article 7 of this Convention.
Article 11
Depositary
This Convention shall be deposited with the Secretary-General of the United Nations.
Article 12
326
appendix 7
Article 13
Article 14
Article 15
Article 16
Denunciation
1. This Convention may be denounced by any State Party at any time after the date on which
this Convention enters into force for that State.
2. Denunciation shall be effected by deposit of an instrument of denunciation with the
depositary.
3. A denunciation shall take effect one year, or such longer period as may be specified in
the instrument of denunciation, after the receipt of the instrument of denunciation by the
depositary.
327
appendix 7
Article 17
Languages
This Convention is established in a single original in the Arabic, Chinese, English, French,
Russian and Spanish languages, each text being equally authentic.
DONE AT Geneva this twelfth day of March, one thousand nine hundred and ninety-nine.
IN WITNESS WHEREOF the undersigned being duly authorized by their respective
Governments for that purpose have signed this Convention.
328
INDEX
329
index
carriers, smart container liability 74–80 Directive 112–13; phishing 106; political
“charterer”, definition of 142–6 attacks 105; ransomware 104; regulatory
Civil Liability Convention 1969 & 1992 see penalties 106; seaworthiness issues 106;
CLC ship class maintenance issues 106; smart
class (of ship) see ships containers 80; social engineering methods
classification societies: channelling of liability 106–7; sources of risk 107–8; spear
36, 37–8; liability 30 phishing 106; state-sourced attacks 107;
CLC: 1969 CLC 4; 1992 CLC 4; adoption types of risk 103–6; UK Code of Practice
40; applicability 15–16, 33–6, 41; applica- 109–10; water holing 106
tion 36–8; basis of liability 20–1; captain’s
liability 35–6; channelling of liability 23–4, data recording see smart containers
36, 37–8; compensation, layers of 26–8; data theft 105
criticisms 28; damage recoverable, types of distributed denial of service attacks
9–15; enforcement of judgments 26; exclu- (DDoS) 107
sion by national law 35–6; FPSOs 40–54;
insurance issues 24–5; interpretation 36–7; enforcement of judgments: Brexit 26;
jurisdiction 26; limitation of liability 21–3; Brussels Convention 1968 208–11; CLC 26;
main elements 7–8; non-inclusion of off- Lugano Convention 2007 211; reciprocal
shore facilities 15, 41; and offshore sector treaties 212–13
liability regime 15–29; persons liable 19–20; Erika incident 30
pollution damage 4, 7–8, 33–9; Protocols 4; EU law: and Athens Convention 56, 57,
pure ecological loss 34–5; “ship”, definition 63; Brexit and 202–20; Brussels I Recast
of 15, 43; success 28, 40; text 241–52; time Regulation 205–14; carriage of pas-
bar on claims 25–6 sengers 63; CLC and 15; contracts of
compensation: layers of 26–8; time bar on carriage 58; contractual obligations
claims 25–6 (Rome I Regulation) 214–17; definition
computer-based crime see cyber attacks of “ship” 118, 130; FPSOs 54; General
contracts of carriage 58–61, 71 Data Protection Regulation (GDPR)
contracts of insurance see insurance 111–12; Insolvency Regulation see
contractual obligations (Rome I Regulation) Insolvency Regulation (EU); insurance
214–17 claims by third parties 183; jurisdiction
contribution claims 67–71 and enforcement of judgments (Brussels
Convention relating to the Carriage of I Recast Regulation) 205–14; Network
Passengers and their Luggage by Sea see and Information Systems (NIS) Directive
Athens Convention 112–13; non-contractual obligations (Rome
conventions see international rules II Regulation) 217–19; “polluter-pays”
craft: definition 45; as ships 44 principle 9, 22, 34, 101; pollution damage
cyber attacks: “collateral damage” 107; 4, 9–11; Ship Recycling Regulation see
commercial sabotage by competitors 105; Ship Recycling Regulation (EU)
computer-based piracy 104; computer-
based theft 104; data theft 105; distributed Flinterstar case: Bruges Commercial Court
denial of service attacks (DDoS) 107; proceedings 162; bunker oil, removal of
General Data Protection Regulation 162; causes of collision with Al Oraiq
(GDPR) 111–12; IMO Guidelines 108–9; 158–9; Court of Cassation proceedings
inadequate security, consequences of 164–7; facts of case 158; final decision by
110–11; increased risk 103; individuals, Court of Cassation 166–7; first proce-
attacks by 107; insurance implications dural steps 160; Ghent Court of Appeal
113–17; ISM Code 108; means of attack proceedings 162–4; limitation fund 160;
106–7; national standards on security 111; Nairobi Wreck Removal Convention
Network and Information Systems (NIS) 2007, inapplicability of 159–60; nautical
330
index
surveyor’s assessment 160–1; owners’ insolvency: arbitration and 221–40; arbitra-
notice of abandonment, insurer’s right to tion contrasted 223; arrest and 197–200;
decline 162; Pilotage Service in Flanders Insolvency Regulation (EU) 199, 221,
159; procédure en référé 161–2 223–9; mandatory character of insolvency
floating production, storage and offloading rules 221; progressive internalization of
units (FPSOs): definition 42–3; EU law 54; insolvency law 221; UNCITRAL Model
exclusion from CLC 15, 41; introduction Law on Cross-Border Insolvency 198, 222,
42; limitation of liability 51–2; negligence 229–39; universalism and 221
claims 47–8; “offshore craft”, definition of Insolvency Regulation (EU): adoption 221;
45; OPOL 52–4; private nuisance claims arbitration not yet initiated, choice of
49–50; public nuisance claims 50–1; UK forum 225; arbitration pending, choice of
regime 45 forum 225–6; automatic and unconditional
France: and arrest conventions 193; arrest recognition of decisions 222; choice of
orders 196; contribution claims 70; oil forum 224–6; divergent legal outcomes
pollution regime 30–3; ship recycling 92; based on legal characterization 226–8;
smart container liability 79 insurance claims by third parties 199; and
Fund Convention: 1971 Fund Convention parties’ choice-of-law agreements 229;
4; 1992 Fund Convention 4; applicability triggering 223–4; UNCITRAL Model Law
15–16; basis of liability 21; compensation, compared 222
layers of 26–8; criticisms 28; damage recov- insurance: applicable policies 117; CLC
erable, types of 16–19; main elements 7–8; 24–5; contract of marine insurance 168;
and offshore sector liability regime 15–29; contractual assignments 173–6; contrac-
Protocols 4; success 28; text 253–71 tual letters of undertaking or guarantee
173; contribution rights 184–5; Cyber
General Data Protection Regulation (GDPR) Attack Exclusion Clause CL380 114–15;
(EU) 111–12 cyber attacks 113–17; direct action by
Germany: and arrest conventions 194; arrest third parties 168–86; “fair presentation
orders 196 of the risk” 113–14; liability insurers’
Greece: arrest orders 195; definition of “ship” refusal to indemnify shipowners 150–5;
122; insolvency proceedings, assimilation owners’ notice of abandonment, insurer’s
of foreign and domestic 234–5 right to decline 162; policy provisions
requiring direct payment to third party
hacking see cyber attacks 170–3; pollution damage claims 24;
Hague Convention on Choice of Court statutory assignments or transfers 176–9;
Agreements 2005 212 third party contractual rights 168; third
“hazard” (wreck-related), definition of 85 party rights, continuing development in
Hong Kong, limitation funds 147–50 186; third party rights under interna-
Hong Kong Ship Recycling Convention 2009: tional conventions 179–80; third party
adoption 89; approved and/or certified ship statutory rights 181–4; voluntary assign-
recycling facilities 93–5; entry into force 90, ments 173–6; warranties 116–17; wreck
91; Inventory of Hazardous Materials (IHM) removal 85, 87–8
93; ratification 90; ship recycling facility International Maritime Organization
plans 93–5; ship-specific recycling plans 95 see IMO
International Safety Management (ISM)
IHM see Inventory of Hazardous Materials Code 108
IMO: Guidelines on Maritime Cyber Risk International Working Group (IWG) on Ship
Management 108–9; and pollution damage Nomenclature 118
3, 5–6 Internet see cyber attacks
India, ship recycling 90 Inventory of Hazardous Materials
information technology see smart containers (IHM) 93
331
index
jurisdiction: Brexit and 202–20; Brussels I notice of abandonment, insurer’s right to
Recast Regulation (EU) 205–14; CLC 26; decline 162
Hague Convention on Choice of Court nuisance claims, FPSOs 50–1
Agreements 2005 212; reciprocal treaties
212–13; see also applicable law; enforce- offshore facilities see FPSOs
ment of judgments Offshore Pollution Liability Agreement 1974
see OPOL
Limitation Convention 1976: Protocol 1996 offshore sector liability regime, proposal for 3
132; text 305–14 oil pollution see pollution damage
limitation of liability: Canada 150–5; OPOL: adoption 4; FPSOs 52–4
carriage of passengers 56; “charterer”, owners see shipowners
definition of 142–6; CLC 21–3;
FPSOs 51–2; Hong Kong 147–50; liability P & I Clubs: direct action by third
insurers’ refusal to indemnify shipown- parties 168–86; insurance provision 24;
ers 150–5; Limitation Convention 1976 International Group 25; mutuality 24
132; limitation funds 133–8, 147–50, passenger carriage see carriage of passengers
160; limits of liability, increase in 132–3; personal injury liability, ship recycling
persons entitled to limit liability 144; 98–100
right to limit liability, waiver of 138–42; phishing 106
UK 51–2, 132–46, 153; wreck removal piracy, cyber attacks 104
156–67 “polluter-pays” principle 9, 22, 34, 101
London Limitation of Liability for Maritime pollution damage: CLC 4, 7–8, 33–9, 241–52;
Claims Convention 1976, opt out for wreck definition 16, 34; EU law 4, 9–11; existing
removal claims 156 liability regimes 9–15; FPSOs 40–54; Fund
Lugano Convention 2007 211 Convention 4, 7–8, 253–71; IMO conven-
tions 3; IMO deliberations 5–6; national
masters see ship’s captains laws 12–15, 30–9; Norwegian liability
motive power of ships 126–7 regime 12–13; offshore sector liability
regime see offshore sector liability regime;
Nairobi Wreck Removal Convention 2007: OPOL 4, 11–12; UNCLOS 3; US liability
adoption 84; aims and objectives 84, 86; regime 13–15
applicability 85, 86; compulsory liability Prestige incident 30
insurance 85, 87–8; current impact 88; private nuisance claims, FPSOs 49–50
“hazard”, definition of 85; inapplicabil- procédure en référé 161–2
ity of 159–60; key features 85; main Protection and Indemnity Associations see P
provisions 85–8; marking and warning & I Clubs
obligations 86; owners’ liability 87; public nuisance claims, FPSOs 50–1
principles 85; reporting obligations 86;
right to remove wrecks 85; text 273–86; ransomware 104
time bar on claims 88; “wreck”, RECYCLECON contract 92, 93, 95–8
definition of 85 regional laws see EU law
navigability of ship 124–6 Remote Container Management (RCM) see
negligence claims, FPSOs 47–8 smart containers
Network and Information Systems Directive Rome I Regulation (EU) 214–17
(EU) 112–13 Rome II Regulation (EU) 217–19
non-contractual obligations (Rome II Rylands v Fletcher 48–9
Regulation) 217–19
Norway: offshore sector liability regime “sea-going” ships, definition 61–2
12–13; ship recycling, personal injury seaworthiness: cyber security implications
liability of former shipowners 98–100 106; insurance warranties 116–17
332
index
ship recycling: approved and/or certified ship social engineering 106–7
recycling facilities 93–5; EU Regulation Spain: exclusion of CLC 35–6; oil pollution
see Ship Recycling Regulation (EU); Hong regime 30–3
Kong Convention see Hong Kong Ship spear phishing 106
Recycling Convention 2009; Inventory
of Hazardous Materials (IHM) 93; key tanker oil spills see pollution damage
liability issues summarized 100–2; legal third parties see insurance
framework for liabilities 89–92; private time bar: compensation claims 25–6; wreck
law liability 89, 90, 95–100; private removal liability claims 88
liability of former shipowners for personal
injury 98–100; public law liability 89, 93–5; UNCITRAL Model Law on Cross-Border
RECYCLECON contract 92, 93, 95–8; Insolvency: arrest and insolvency 198;
ship recycling facility plans 93–5; ship- assimilation of foreign and domestic
specific recycling plans 95; and trans- proceedings 232–9; automatic stay of
boundary transport of hazardous waste proceedings, exceptions to 230–2; auto-
rules 91; and waste management rules 90 matic stay of proceedings, principle of
Ship Recycling Regulation (EU): adop- 229–30; Insolvency Regulation (EU)
tion 91; approved and/or certified ship compared 222
recycling facilities 93–5; Inventory of UNCLOS, pollution damage 3
Hazardous Materials (IHM) 93; ship United Kingdom: arrest and insolvency
recycling facility plans 93–5; ship-specific 199; and arrest conventions 192; arrest
recycling plans 95 orders 195; and Athens Convention 58;
shipowners: channelling of liability 23; Brexit 202–20; carriage of passengers 63;
liability insurers’ refusal to indemnify “charterer”, definition of 142–6; Civil
150–5; notice of abandonment, insurer’s Liability (Contribution) Act 1978 184–5;
right to decline 162; ship recycling, Contracts (Rights of Third Parties) Act
personal injury liability 98–100; wreck 1999 169, 171; contracts of carriage 58;
removal liability 87 contribution claims 68; Cyber Security for
shippers, smart container liability 80–2 Ships, Code of Practice 109–10; definition
ships: capacity to carry 121–4; carriage of “ship” 122, 123, 125; FPSO regime
of goods 121–2; carriage of passengers 46–52; General Data Protection
122–4; concept of “ship” 119–21; conse- Regulation (GDPR) 111–12; insolvency
quences of object defined or not defined proceedings, assimilation of foreign
as a ship 127–31; craft as 44; definition and domestic 232–4; insurance claims
of “ship” 15, 43, 61–2, 71, 118–31; by third parties 168–86; insurance risk,
International Working Group (IWG) on “fair presentation of ” 113–14; insur-
Ship Nomenclature 118; maintenance ance warranties 116–17; limitation funds
in class, cyber security implications 106; 133–8; limitation of liability 51–2, 132–46,
motive power 126–7; navigability 124–6; 153; limits of liability, increase in 132–3;
need for clear definition 118–19; “sea- Merchant Shipping Act 1995, s. 154 46–7;
going” ships, definition 61–2; see also negligence claims 47–8; Network and
seaworthiness Information Systems (NIS) Directive
ship’s captains, liability 35–6 112–13; private nuisance claims 49–50;
smart containers: capability of 73–4; cargo public nuisance claims 50–1; right to
information, recording of 72; carrier limit liability, waiver of 138–42; Rylands
liabilities 74–80; cyber attacks 80; data- v Fletcher 48–9; smart container liability
only containers, liability for 74–8, 79–80, 74; Third Parties (Rights against Insurers)
80–1, 82; development of 72–3; remotely- Act 2010 177, 181
controlled containers, liability for 78–80, United Nations Convention on the Law of
81–2; shipper liabilities 80–2 the Sea see UNCLOS
333
index
United States: arrest and insolvency 199; clas- definition of 85; limitation of liability,
sification societies 31; definition of “ship” Belgian law 156–67; London Limitation of
120, 126; insolvency proceedings, assimi- Liability for Maritime Claims Convention
lation of foreign and domestic 235–9; 1976 156; Nairobi Wreck Removal
offshore sector liability regime 13–15 Convention 2007 84–8, 159–60, 273–86;
owners’ notice of abandonment, insurer’s
water holing 106 right to decline 162; reasons for 84; right
wreck removal: bunker oil, removal of to remove wrecks 85; “wreck”, definition
162; Flinterstar case 157–67; “hazard”, of 85
334