Name: Chua Rong Xuan
Course: FLR2888 Postgraduate Diploma in International Maritime Law
Assignment Subject: Maritime Insurance and Maritime Law
Submission Date: 24 Sep 2018
Part A (Word Count): 1346
Part B (Word Count): 1283
Pg.Dip. in International Maritime Law
DISTANCE LEARNING PROGRAMME
The role of the shipowner (‘O’), under voyage charter contract, is to provide a ship to transport a specific cargo from the chartered (‘VC’) between an agreed loading port and a discharging port at specified commercial terms or freight rate per carrying unit of cargo measurement. In this arrangement, VC charters the whole vessel for the carriage of the cargo by sea and is required to provide the agreed cargo alongside the vessel and pay for the cargo handling expenditures. VC is also required to pay the stated freight amount with other costs under O’s account.
The obligation or undertaking of O for the voyage charter would be
Proper description of the vessel during contractual negotiations
During the beginning of the voyage, ensuring that the vessel contracted is both seaworthy and cargo-worthy
During the loaded voyage, O’s vessel must normally proceed with ‘due despatch’ to the agreed destination port and without deviation from ports of loading and discharge (including rotation), stipulated dates of loading and discharge, voyage route and other agreed elements
Any defects that could arise after the cargo is shipped does not result in a breach of this undertaking as such VC can only claim damages for the losses caused by initial unseaworthiness. This is further reflected under GENCON Clause 2 – The owners are to be responsible for loss of or damage of the goods only in case the loss, damage or delay has been caused by the want of due diligence on the part of the owners …. to make the vessel seaworthy And the owners are not responsible for loss, damage or delay from any other cause whatsoever…..”
In the scenario, the resultant loss of cargo was due to expected perils of shipping (especially bad weather) and the initial refusal of refuge by the authorities which delayed salvage processes. As such, O is not deemed to be liable for the loss of the cargo and the outstanding freight due to O by VC cannot be offset from the damages from the loss of cargo that VC can claim against O.
The options of O to obtain freight payments from VC is either through lien on loaded cargo (as there are still remaining cargo) or through seeking of claims in the country of residency of VC. Given that VC resides and operates out of Greece and have no entity or representation in the UK, O will have to seek damages in the Greek courts. Given the transnational nature of the dispute, the Greek court will investigate which law would be applicable (in this case English contract law). O will be successful in making the claims against VC.
Given that salvage works on the principle of “no cure, no pay”, the salvage operations of Costa Lotta and the minimization of the environmental damages will be considered a successful operation and does entitled to compensation. The issues involving claims of a successful salvage operation will then typically include security, liability, limitation and jurisdiction issues.
The assistance provided by the salvor in this situation maybe due to causes liable to the vessel, however, clause K of the LOF 2000 states that “the Master or other person signing this agreement….enters into this agreement as agent for the respective owners…” which is an agreement between salvors and not a contract between shipowner and cargo owner. As such, salvor may still seek payment from VC for their proportion of the salvage services which VC can seek to recover this payment from shipowner or insurance through contract of carriage. In this situation, VC has already refused to pay for the freight claiming that the loss was caused by Master incompetence and wants the freight to be offset by the damages they will be seeking. It is likely that VC will also not pay for their portion of the salvage services and the salvor will have to seek legal recourse on their payments.
Although shipowner ‘O’ may refuse to admit liability on the possible basis that the Master accepted the salvage service without consultation and agreement (as per typical arrangements). Article 6.2 of the Salvage Convention legally gives the shipmaster the power to agree to salvage contracts in behalf of the owners/managers.
A typical security arrangement under LOF and SCOPIC would be that a security shall be provided for the protection of the salvor (sub-clause 3) 2 days upon invoking of the SCOPIC clause. Given that there was no mention in the scenario on any sort of security to cover the salvage claim, and the avoidance of O on the remuneration; the salvage company of Thunderbird may detain and refuse to release the Costa Lotta and the remaining cargo till security is provided. However, with the completion of sale of the Costa Lotta to Sergio Ltd, the non-release of the vessel for payments will not be legal.
Ship-sourced pollution, while could be contributed by accidents involving ships e.g. oil tankers, are mostly caused by intentional discharge of polluting substance by ships such as garbage, sewage or other dangerous cargoes with possibly the intention to avoid paying for handling services at port. Use of criminal law for such environmental violations are not new but several inherent problems reduces the effectiveness of such an approach.
Firstly, usage of criminal laws to regulate ship-source pollution should act as a deterrence for potential offenders rather than as a retributory measure. Given the range of personnel potential involved in such criminal actions and also the differing extend of the pollution accordingly to actions, it is thus not easy to define, design and implement relevant criminal laws targeted to reduce the number of pollution offences. Even while a system of dissuasive penalties have been established through Directive 2005/35/EC, there has not yet been any provisions made regarding the determination of the type and level of penalties applicable.
Secondly, even if a comprehensive criminal law framework is in place and adopted, the nature of shipping means that it is difficult in the enforcement of such laws due to challenges in monitoring compliance of discharge standards. This may be due to reasons such as technical impediments, intentional and remoteness of the ship from enforcement authorities which provides opportunities in the falsification of documentation involving such discharge.
Thirdly, the enforcement of such criminal laws does not effectively punish/convict the ‘real’ perpetrators for the offences. Given the complex ownership and ship-management structure of the shipping industry, the actual person responsible for the decision of the ship-source pollution can remain anonymous or otherwise remain safe from prosecution. As such, criminal sanctions are typically imposed on the ship’s Master and ship crew instead.
Ship-source pollution can be considered multi-national in nature; with multiple countries involved possibly given that vessel ownership, flag state, occurrence location and crew nationality may be different and all have differing approaches in the prosecution of such offences. Given that international laws can only shape the domestic criminal law practices, there may be cases where states may not impose criminal law on such incident. For example, for DIRECTIVE 2005/35/EC, which addresses the punitive side for non-compliance of International Convention for the Prevention of Pollution from Ships (MARPOL), 1973/78, enforcement only applies to member states and not internationally.
The main principle in the law of marine insurance is the idea of “proximate cause” but the determining of the cause has always been disputable.
The English Marine Insurance Act 1906 s55 states that “Subject to the provisions of this Act, and unless the policy otherwise provides, the insurance 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”
Although the MIA 1906 is a statutory provision, the requirements is still subjected to parties; agreement in the policy which allows for the freedom to exclude the effect of the doctrine of proximity through clear wordings of the policy. Therefore how the ‘proximate cause’ is being determined will affect the whether the insurance is liable for the insured peril especially in cases where there are multiple causes with equal influence with insured and exclude perils. This leads to situation where the insurers can narrow their liabilities to only loss proximately caused by insured perils; a situation well established in English courts vis-à-vis marine insurance due to the compliance to freedom of contract.
Before the Marine Insurance Act 1906 (MIA 1906), the law of marine insurance for English courts depended mainly on common law. Per Willes J in Ionides v The Universal Marine Insurance Co, it was mentioned that ‘you are not to trouble yourself with distant causes…… but you are to look exclusively to the proximate and immediate cause of the loss’. Thus, the interpretation of the cause of loss element in this era is recognized based on the time order of the immediate cause of the loss when determining liability.
However, with the further development of the concept of causation, to consider the ‘immediate’ cause based on time order does not fairly determine the liability of the underwriter. The approach gradually changed in early 20th century with landmark cases such as Leyland Shipping Co v Norwich Union Insurance Co 1918 AC355. It was stated by Lord Shaw ‘To treat proxima causa as if it was the cause proximate to time, as I said, out of the question. The cause that is truly proximate is that which is proximate in efficiency’. Hencefore, the “test of efficiency: became the solution in assessing the real proximate cause; rendering the ‘proximate in time test’ obsolete. Causa proxima non remota spectatur (the immediate, and not the remote cause is to be considered) became the maxim of causation to be applied. In addition to the test of efficiency for proximate causes, the test of common sense was also employed to assist monitor the efficiency test case; with English courts taking account both tests to justify and determine liabilities in marine insurance cases.
Post MIA1906, there were attempts to further refine the definition of the proximate cause and through several landmark cases, it is accepted that the proximate cause must be, dominant and efficient, regardless whether there may be other competing and/or intervening causes. As such, it is easy to apply the proximate cause doctrine when there is only one proximate cause and to determine whether the cause is an insured peril. However, in most cases, there are multiple causes (either in succession, simultaneous, separate or combining) contributing to the loss, and the court have to judge on the different level of influence between the causes and decide which is the most influential. This is worsen in situation when there are two or more causes of equal influence although there seems to be no evidence of decisions to exclude the admittance of concurrent causes in marine insurance claims.
In such cases where there are concurrent proximate causes, the approach on the application of the doctrine differs based on the exact wordings in the commercial contract. For the case of ‘Miss Jay Jay’, given that that both the weather and defective design was concurrent proximate cause for loss; with an included peril (adverse weather) and a peril (defective design) which was not expressly excluded by the policy, the underwriters were liable and the assured can recover from insurance. Yet, in other cases, it seems that the approach in determining the liability to be “skewed” towards the interest of the insurance especially in the case of ‘Wayne Tank v Employers Liability Insurance 1973, where one of the concurrent proximate causes is expressly excluded by the policy, the assured will not be able to recover.
The approach of the English court was to balance the rights of both the insurance and the insured. In the cases of multiple proximate causes, the approach by the English courts to distinguish the intention of the actions behind to determine the proximate cause reflects a fair determination of liability. This can be seen in the application of extended sub-rules such as Colinvaux’s rules (from precedence cases).
Kacianoff v. China Traders Insurance Co Ltd- Action was taken in apprehension of a peril, no recovery can be made as the proximate cause was the action and not the exact peril. Per Lord Reading CJ “I entertain no doubt about this case. It seems to me that the peril insured against had never begun to operate”
Canada Rice Mills Ltd. v Union Marine & General Insurance Co. Ltd – Action was in response of an insured peril to avoid, mitigate or minimize the damages. As such, the approach of the English court is fair that such actions/intentions will not supplant the original peril as the proximate cause and recovery can be made for the losses incurred.
The wide extent of the proximate cause doctrine applied by English courts allows for varying but fair judgement of the cases. However, in the case of determining liability of concurrent proximate cause, the English court still stands by the “winner-takes-all” principle. As compared to Belgium’s causation rule in concurrent cause where liability is apportion against all contributing factors which may or may not include excluded perils. The Belgium approach does arguably provide more flexibility and equitability when settling liability disputes between assured and insurance. The English approach of “freedom of contract” ensures that expressed terms is more important than the ability to apportion liability. The significance of proximate cause in English law is further mentioned by Viscount Sumner in Wayne Tank v Employers, “loss is not apportionable”.