Port Operations
4.6 PORT-RELATED CLAIMS AND LEGAL LIABILITIES .1 Conflict Resolution: Arbitration versus Court of Law
v. Claims, cargo damage: In case of any claims, for example, cargo damage, machinery breakdown, or other delay that would result into an off-hire, the agents administer off-hire and on-hire formalities, and the respective surveys.
vi. General average: Furthermore, the agents will support the ship and its cargo in case of general average. In this legal maritime principle, in case of an emergency, if freight needs to be jettisoned or any charges arise, the financial damage is shared by those involved with the ship and its freight, in proportion to the value of their contribution exposed to the common hazard.
vii. Logistics: While complying with the ship’s charter party agreement pertaining to the cargo transportation, as well as the cargo documents, the agent ensures the cargo follows the preplanned logistics route with the designated carrier.
viii. Cargo manifest: In the event of errors in freight estimations, cargo manifest cor- rections are made. Finally, once the agent has confirmed the cargo’s integrity and quality, plans are made for the subsequent port of call.
E) Vessel’s Sailing
The agents arrange the vessel’s clearance and sailing preparations with the master. Where necessary, pilots are arranged to escort the vessel to the outer port limits. Any outcomes pertaining to ship’s surveys, inspections, repairs, claims, cargo damage, and certificate renewals are forwarded to the ship’s principals, that is, the shipowners or charterers.
Pursuant to the ship’s sailing, the agents gather all the original invoices, vouchers, and supporting documents, and produce the D/A.
F) Ships’ Husbandry, Ship’s Protective Agency, and Ship Management
In maritime law, a protective agent provides ships’ husbandry services and is thereby referred to as “ship’s husband.” As their duties and the duration of their contractual agreements with their principals tends to extend in time, modern shipping agents tend to expand their activities by offering ship management services, thus increasing their involvement and control over the ship’s performance and commercial, technical, and financial operations. An interesting observation of the modern shipping market is the fact that owing to the ship agents’ deep and varied knowledge of shipping, more agencies become involved in relative services, such as crew agencies, ship management, and so on.
G) Ships’ D/As and Incident Investigation
As a conclusion, the examination of a ship’s D/As serves as a most detailed log book that offers ample evidence as to the ship’s overall performance and activities, encompassing its seaworthiness, repairs, inspections, crew changes and health issues, cargo handling operations, and so on. Ideally, a company’s incident investigation should also encompass the company’s accounts.
4.6 PORT-RELATED CLAIMS AND LEGAL LIABILITIES
clauses is not an easy task. Throughout a charter party’s life, both the charterers and the shipowners need to exercise due diligence in the performance of their assigned tasks.
Along the way, disputes may arise. In this case, typically the owners’ or charterers’
department that has identified a potential claim closely liaises with their company’s in-house legal and claims department. These professionals will evaluate the situation, usu- ally with the support of their Protection and Indemnity Club. In the best-case scenario, an amicable resolution is reached, where both parties seek for a solution that seems fair to both and continue their agreed partnership with minimum interruptions. In case an amicable resolution cannot be reached, the case will have to move through the legal path, that is, arbitration, or the court of law.
Arbitration has been the maritime industry’s most popular path for claims resolu- tion, as opposed to most other industries that seek a remedy in a court of law. A charter party’s arbitration clause will specify which legal system will apply for this agreement.
During the twentieth century, the British and US legal systems prevailed within the charter parties. Over the past few years, the emerging economies and the industry’s developments have introduced a number of other national judicial systems, that is, China, Canada, the Netherlands, and so on, as alternatives. In addition, the clause will stipulate in which ways the nonbreaching party may seek for remedy, that is, through arbitration or a court hearing. The principal difference between arbitration and a court hearing per- tains to maritime expertise, cost, formality, and simplicity. Most important, both parties involved would prefer arbitration rather than a court of law as a milder dispute resolution that will ideally not burn the commercial bridges among their companies. Upon deter- mining the merits of the case by an arbitration tribunal, an arbitration panel of maritime specialists will typically issue the arbitration decision and order the enforcement of an arbitration award. The most preferred arbitration seats are London, Paris, New York, Geneva, Zurich, Singapore, Stockholm, Tokyo, Hong Kong, and China, to name a few.
4.6.2 Port-Related Claims and Charter Party Clause Interpretation
In order to avoid unnecessary claims and legal disputes, contracts of carriage must be interpreted very strictly in order to conform to the required navigational, commercial, technical, operational, financial, and other aspects entailed.
Among the three major C/P types, it is the voyage charter and the time charter par- ties that require a high level of collaboration and unity in navigational, operational, and financial issues, in order to eliminate port-related clauses and claims.
The bareboat charter party is the type where the charterers have undertaken the operational, financial, and commercial management of the ship. As the ship’s control in these critical areas shifts from the shipowners to the demise charterers, disputes arising because of the operational decision making would usually be eliminated. On the other hand, bareboat disputes would arise owing to (i) hire payment disruptions, (ii) the ship’s deterioration caused by lack of maintenance or crew inefficiency, and finally (iii) breach of the cargo exemption or area exemption clauses.
Clause stipulation should be worded so as to avoid implications. However, the con- sistently high volume of claims, disputes, and arbitration instances suggests that even single-word amendments have the power to entirely alter the context of a charter party, with legal consequences arising therefrom. This section demonstrates a number of char- acteristic port-related cases, in order to examine the pitfalls of contractual interpretation and expand the readers’ perception to port claims.
4.6.3 Port or Berth Charter Party
A common issue for shipowners in voyage charter parties pertains to the false perception that by amending one clause, they can convert a berth charter party into a port charter party. Based on this assumption, conflicting laytime clauses are stipulated. Frequently, the owners agree to the nomination of busy ports of call, where the ship’s waiting time for berthing may range from a few days to over a month. As an outcome, not only are the owners burdened with the ship’s fixed and running costs, but charterers do not accept the owners’ demurrage claims. The general principle here is that even if a port is nominated, the presence of other clauses where a “safe berth” or “good and safe berth” is referred strongly implies that this is considered as a berth charter party in the court of law.
In the case of Novo Logistics SARL v Five Ocean Corporation (The Merida) (EWHC 2012b), M/V Merida (“the vessel”) was “fixed” under a voyage C/P to load steel plates from Xingang, China, to Cadiz and Bilbao, Spain. When the ship arrived at her loading port, she had to wait for 20 days in order to proceed to her berth. Shipowners would seek for a remedy through a demurrage exceeding half a million US dollars, under the supposition that this was a port charter party. When the written agreement among the two parties was examined, it was observed that the recap did not make any reference to a particular charter party form. It stipulated that the loading and discharge should take place between: “One good and safe charterers’ berth terminal 4 stevedores Xingang to one good and safe berth Cadiz and one good and safe berth Bilbao.” Clause 2 of the charter party pertaining to laytime contained both a designated berth and a port, that is,
“one good and safe port/one good and safe berth,” and concluded that all time including shifting from anchorage toward the berth will count as laytime. When reading the char- ter party as a whole, the court determined that this was a berth charter party.
4.6.4 Nominating a “Safe Port”
Numerous claims and legal cases have determined that a port can be a perfectly safe haven for most ships and yet may be unsafe for certain ships. Therefore, charterers should be cautious when nominating a port as “safe” and consider the particularities of each port, that is, its weather conditions, draft restrictions, berths, and so on, in combination with a ship’s type, design, particulars, and dimensions, among others.
Partederiet “Primo” versus “Crispin Co Ltd.”
M/T Primo is a 60,000 MT double-hull crude oil tanker ship that was fixed under Asba 11 C/P form to load at 1/2 safe ports in Argentina, with an option to discharge at numer- ous global ports. The charterers instructed the master to load a portion of the cargo at La Plata anchorage and the remaining at Loading Zone Charlie.
The Rio de la Plata is a shallow, wide estuary formed by the Parana and Uruguay riv- ers. It is broken down into an inner tidal river and an exterior estuarine area. Because of its landlocked shape, every time there are powerful winds from the southeast, the water level rises. In these conditions, low-lying areas along the right bank are affected by floods and heavy rainfall, regionally referred to as “sudestadas.” Damages in some cases have exceeded $250 million.
Because of the ship’s size, that is, beam and draft restrictions, the shipowner was reluctant to allow the ship to enter La Plata, anticipating maneuvering and navigational challenges. The ship’s draft limitations and the expected underwater impediment were a
serious area of concern, as the ship’s variable pitch propeller type was not as robust and sturdy as a fixed propeller.
As the ship arrived at La Plata, the master anticipated the charterers to provide solutions pertaining to the ship’s navigation through the channel by the assistance of tugs. When the charterers announced they would cancel the charter, the ship’s master agreed to enter by a letter of protest and is accompanied by three tugs. Upon comple- tion of loading operations, a further 26-hour delay was incurred, as the master had to wait for the high tides in order to proceed for lightering. The shipowners’ demur- rage claims exceeded $200,000 for time lost, whereas the charterers’counter-claims exceeded $2 million.
To solve this case, the arbitrators had to determine if La Plata was a safe port for M/T Primo. Initially, the master’s reservations in entering La Plata and navigating with a note of protest were considered reasonable. Subsequently, it was verified that M/T Primo was a larger vessel compared to the typical ship sizes that navigate in La Plata. It was decided that the charterers had to reimburse the shipowners with the claimed amount (Maritime Advocate 2013; Society of Maritime Arbitrators 2013).
The lesson learned from this case study is that safety at a specific port or berth should be examined for each ship separately, depending on its size, design, technology, and so on. An area may be perfectly safe for certain ships but not for others.
In the case of the M/V Eastern Eagle, a port may be considered unsafe in case the master has carefully calculated the sea route, yet its ranging water draft is not accu- rately mapped and the port’s navigational aids, including buoys, pilotage, and so on, are insufficient. In this case, there is a breach of contractual condition on behalf of the charterers, related to their safe port obligation.
Based on the case of the M/V Adamastos SMA 3416 (SMANY 1988), the claims and legal process following a ship’s accident while at port and owners’ claims that the port is unsafe should focus on the following key points:
1. Based on the existing risk of hazard, it must be established whether the accident could have been preventable, pursuant to optimum shipboard navigation and safety practices.
2. The communication channels are examined, in particular between (a) the char- terers and the owners, (b) the port authorities and the charterers, and (c) the port authorities and the owners. In case of an accident, it is elementary for all parties concerned to communicate effectively without depriving any party of any devel- opment or physical access to the scene of the incident.
3. Objective evidence examined includes log books and official documentation signed and exchanged between these three entities. The authorities duly evaluate the consistency, quality, and reliability of documented information. In case of discrepancies or inconsistencies, the court of law or the arbitration will consider this information as unreliable, which will be to the party’s disfavor.
4.6.5 When a “Safe Port” Becomes “Temporarily Unsafe”
Under certain conditions, a perfectly safe port may temporarily become unsafe, owing to unanticipated hazards, for example, as a result of an act of God, which may subsequently lead to equipment failure and impose hazards to the ships and their cargoes. In the best- case scenario, an unsafe port may cause delays in the cargo operations and prolong the
ship’s stay at port. In worst-case scenarios, crew and port employee accidents, as well as damage to ships, their cargoes, and to the port assets, may occur. In these cases, the instructions given to the master throughout the ship’s navigation and entry toward the port will be considered. In essence, the charterers need to prove that the port’s unsafe characteristics did not preexist at the time they nominated the port.
In the M/V Hermine case (Unitramp vs. Garnac Grain Co Inc.) (Lloyd’s Rep.
1979) and the M/V Count case (Independent Petroleum Group Limited vs. Seacarriers
“Count” Pte Limited [2006], EWHC 3222 Comm), the ports were unsafe for a long period, which commenced before the charterers’ port nomination.
In the case of M/V Count, the ship was delayed in reaching her loading port, as the channel was obstructed because of an inbound ship, the M/V British Enterprise, which grounded, and a few days after the port’s emergency response, the ship grounded again.
The M/V Count moved toward its berth of discharge a few days later, yet its outbound sailing was obstructed because of M/V Pongola’s grounding in a position close to the previous vessel’s grounding. The M/V Count was again delayed, and the shipowner filed for a claim on the grounds of a breach of contract on behalf of the charterer, per- taining to the harbor’s safety. The judge decided that the port’s unsafe characteristics preexisted at the time of nomination. It is these characteristics that imposed a sustain- able risk to the ships. In this case, both the arbitration and the court of appeals rejected the charterers’ claims on the port’s temporary lack of safety owing to bad weather (EWHC 2006).
4.6.6 When Communication Becomes a Prerequisite to Port Safety
The Dagmar case (Tage vs. Montoro SS) (Lloyd’s Rep. 1968) verifies that if a port pro- duces and makes available weather reports and relevant statements are circulated in a consistent manner, it is necessary for the ships’ side to obtain them. A Baltime charter party contract stipulated that M/V Dagmar would be trading among safe ports. The ship navigated to her loading port, Cape Chat, Quebec, and two days after her loading operations, extreme weather conditions, that is, strong winds and high seas, caused the ship’s grounding. The court discovered that the port’s weather forecasting process was satisfactory, and yet the port became unsafe for the shipowners and the ship, as they did not receive the weather broadcast from their agents. This case study verifies that a port’s weather conditions can be mitigated if ships receive correct weather forecasting through the appropriate communication channels. It was the charterers’ responsibility to provide weather forecasts, and failure to do so rendered the port unsafe for the ship, at charterers’
fault.
In the case of Slebent Shipping vs. Associated Transport (SMANY 2003), the Star B by SMANY, M/V Star B, is a general cargo ship “fixed,” under an NYPE time charter party of 1999, to load her cargo from Brazil to her three discharging ports, namely, San Juan (Puerto Rico), Rio Haina (Santo Domingo), and Kingston (Jamaica). Because of congestion at the ship’s second discharging port, the charterers nominated an alternative port to Rio Haina, that is, the proximate port of Boca Chica. As the ship navigated into the channel to Boca Chica in the escort of pilots, the ship grounded and suffered exten- sive damage as a result. The shipowners initiated an arbitration hearing process against the charterers, on the grounds that their instructions for the ship to enter the port of Boca Chica violated the “safe port warranty” stipulation of their charter party. The own- ers’ objective evidence provided support that the port was unsafe even during pilotage,
owing to “deficiencies in the entrance buoys, the range markers, the charts, the naviga- tion guides.” The arbitrators’ tribunal focused on the issue of liability and on postponing the issue of damages, if relevant, to a later hearing. The arbitrators established that the liability for the grounding should be distributed among the parties, with no reference as to the parties’ percentage of liability.
The lessons learned pertain to the two contractual parties: the first major issue in the case lies with the owners and the ship’s master, and his right to either refuse to enter an unsafe port or enter with a note of protest, holding the charterers liable for any and all damages incurred. The second major issue pertains to the charterers and their capacity to prove that the accident was not due to the port’s lack of safety but due to the master’s poor seamanship.
4.6.7 Stevedore Damage and Bills of Lading Stipulations
Rabaul Stevedores Ltd vs. Seeto [1984] PGNC43; [1984] PNGLR248; N483 (October 5, 1984) is a characteristic case pertaining to the B/L exemption clause, referring to the protection of stevedores while performing services of contract, and their exclusion from any liability referring to damage or pilferage (PACLII 1984).
During loading and unloading operations in different parts of the world, incidents of stevedore damage or pilferage are not uncommon. Correspondingly, other parties such as subcontractors, agents, ship chandlers and other “servants” may be involved in a claim case. Regardless of whether they are union or nonunion members, the contract of affreightment, that is, the charter party or a bill of lading, may stipulate their level of liability or totally exempt them from any liability whatsoever.
In most voyage charter parties, the stevedores are the charterers’ servants, yet they are supervised by the ship’s master and officers. The stevedore damage clauses are typi- cally formulated in two options.
In the first option, in case of stevedores’ damage, the charterers assist the owners in settling the damage claim or dispute. A shipowner initiating a claim or dispute against stevedores in an overseas legal system may not be an appealing option. Hence, in case that the stevedores cause cargo damage or fail to comply with the instructions of the master, the latter has the right to hand over to the charterers a notice of protest, seeking for remedy for damages suffered by their servants, that is, the stevedores. This complex communication process of uncertain outcome requires a thorough drafting of the steve- dore damage clause both for voyage and for time charter parties.
In the second option, any such damage is for the charterers’ account; this clause is most desirable for shipowners who shift the responsibility to the charterers. This shift of liability to the charterers eventually forces them to closely monitor and control the stevedores’ performance. In the world’s most established ports, stevedores will cover any and all expenses for damages, even after the ship’s departure from the specific port of call. However, in certain developing or less developed markets, stevedores are unlikely to cover the damages after the ship’s departure, the reason for this being a generous cash refund on behalf of their insurance company.
In time charter parties, the charterers are legally liable to supervise the stevedores, and therefore their performance is more efficient.
In order to avoid stevedore damage claims and complications, both parties, that is, the owners and the charterers, should ensure that the C/P clause stipulation is in line with the bill of lading, with a duly reference to the C/P.