Maritime law in Maritime law in

IndiaIndia

Amitava Majumdar (Raja)

Partner

Bose & Mitra & Co

Overview of maritime practice in India and Overview of maritime practice in India and

recent updatesrecent updates

History and admiralty jurisdiction of the History and admiralty jurisdiction of the

High CourtsHigh Courts

International Conventions for the Arrest of International Conventions for the Arrest of

Ships Ships

Key regulations affecting foreign fleetsKey regulations affecting foreign fleets

Indian Council of arbitration for maritime Indian Council of arbitration for maritime

disputesdisputes

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Overview of maritime Overview of maritime

practice in India and practice in India and

recent updatesrecent updates

Sources of Indian Maritime lawSources of Indian Maritime law

� international custom transformed into Indian common law

� treaty law based on international conventions to which India is a party (as incorporated into the Indian domestic law by legislations)

� the decisions of the Indian courts and those of foreign countries as recognized by the Indian courts

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Indian Judicial SystemIndian Judicial System

� Common law followed in India

� Jurisdiction of courts is divided by territorial and pecuniary limits

� Suits to be instituted in the Courts of first instance.

� High Court of the relevant state is the court of appeal. In certain jurisdictions, such as Delhi, Kolkata, Chennai and Mumbai, the High Courts also exercise original jurisdiction and is the Court of first instance

� The Supreme Court of India is the final court of appeal

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Key Statutory RegulationsKey Statutory Regulations

◦ The Indian Bills of Lading Act, 1856

◦ Admiralty Act, 1861

◦ Indian Contract Act, 1872

◦ Colonial Courts of Admiralty (India) Act, 1891

◦ Indian Ports Act, 1908

◦ Indian Carriage of Goods by Sea Act, 1925

◦Merchant Shipping Act, 1956

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◦Marine Insurance Act, 1960

◦Customs Act, 1962

◦Major Port Trusts Act, 1963

◦Maritime Zones Act, 1976

◦Coast Guard Act, 1978

◦The Multimodal Transportation of Goods Act, 1993

◦Arbitration and Conciliation Act, 1996

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Law in relation to the Carriage of Law in relation to the Carriage of

Goods by Sea in IndiaGoods by Sea in India

English Colonial legislation - Carriage of Goods by Sea Act, 1925 which mirrors the Hague Rules

Although India has not adopted the Hague Visby Rules it has incorporated its provisions into the The Multimodal Transportation of Goods Act, 1993

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Indian COGSAIndian COGSA

� Section 2 of Indian COGSA:

“the rules set out in the Schedule shall have effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in Indian to any other port whether in or outside India.”

� The Supreme Court in M.V. Elisabeth v. Harwan Investment held that the Indian COGSA is also applicable also to inward cargo

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Limitation of LiabilityLimitation of Liability

�The Convention on Limitation of Liability for Maritime Claims, 1976

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Important International Safety Important International Safety

Conventions adopted in IndiaConventions adopted in India

◦ SOLAS Convention 1974 as amended.

◦ International Convention of Load Line 1966 & its Protocol.

◦ International Convention for Prevention of Marine Pollution from ships (MARPOL).

◦ International Convention of STCW 1978 as amended.

◦ International Regulations for preventing Collisions at sea (COLREG) 1972.

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Law relating to wreckLaw relating to wreckThe Indian Ports Act 1908;◦ 14. Raising or removal of wreck impeding navigation within limits of port.

◦ (1) If any vessel is wrecked, stranded or sunk in any port in such a manner as to impede or likely to impede any navigation thereof, the conservator shall give notice to the owner of the vessel to raise, remove or destroy the vessel within such period as may be specified in the notice and to furnish such adequate security to the satisfaction of the conservator to ensure that the vessel shall be raised, removed or destroyed within the said period: Provided that the conservator may extend such period to such further period as he may consider necessary having regard to the circumstances of such case and the extent of its impediment to navigation.

◦ (1A) Where the owner of any vessel to whom a notice has been issued under sub-section (1) fails to raise, remove or destroy such vessel within the period specified in the notice or the extended period or fails to furnish the security required of him, the conservator may cause the vessel to be raised, removed or destroyed.

◦ (1B) Notwithstanding anything contained in the foregoing sub- sections, if the conservator is of the opinion that any vessel which is wrecked, stranded or sunk in any port is required to be immediately raised, removed or destroyed for the purpose of uninterrupted navigation in such port, he may, without giving any notice under sub-section (1), cause the vessel to be raised, removed or destroyed.]

◦ (2) If any property recovered by a conservator acting under sub-section(1A) or sub-section (1B) is unclaimed or the person claiming it fails to pay the reasonable expenses incurred by the conservator under that sub-section and a further sum of twenty per cent. of the amount of such expenses, the conservator may sell the property by public auction, if the property is of a perishable nature, forthwith, and, if it is not of a perishable nature, at any time not less than 1*[thirty days] 3* after therecovery thereof.

◦ (3) The expenses and further sum aforesaid shall be payable to the conservator out of the sale-proceeds of the property, and the balance shall be paid to the person entitled to the property recovered, or, if no such person appears and claims the balance, shall be held in deposit for payment, without interest, to any person thereafter establishing his right thereto: Provided that the person makes his claim within three years from the date of the sale.

◦ (4) Where the sale proceeds of the property are not sufficient to meet the expenses and further sum aforesaid, the owner of the vessel at the time the vessel was wrecked, stranded or sunk shall be liable to pay the deficiency to the conservator on demand, and if the deficiency be not paid within one month of such demand the conservator may recover the deficiency from such owner in the manner laid down insub-section (2) of section 57 for recovery of expenses and damages or in any other manner according as the deficiency does not or does exceed one thousand rupees.

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Law in relation to Harbors and Law in relation to Harbors and

Ports in IndiaPorts in India

Major Ports – Administered by the Central Government

Minor Pots – Administered by the State Government

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UPDATE UPDATE -- Luga Bay CaseLuga Bay Case

� The Supreme Court held that the owners of the vessel will have to pay the Indian harbor authorities their alleged claim to secure the release of the vessel and file a suit against the Indian harbor authorities for the recovery of their amount

� A suit for before Indian Courts can take up to 5 to 10 years before a decree is passed !!!!

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UPDATE UPDATE -- Shakti Bhog V. Kola Shakti Bhog V. Kola

ShippingShipping

� c/p fixed on a fixture note is valid

� “Fixtures are frequently recorded in a telex or fax recapitulating the terms finally agreed ( a recap). Thus a recap telex or fax may constitute the Charterparty referred to in another contract.”

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UPDATE UPDATE –– Legislations in the Legislations in the

pipelinepipeline

� Admiralty Bill, 2005

� The Nairobi International Convention on the Removal of Wrecks, 2007

� International convention on civil liability for bunker oil pollution damage, 2001

� 1996 Limitation of Liability Protocol

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History of Admiralty Jurisdiction of the High Court

Admiralty Jurisdiction

Statute: Admiralty Court Act, 1861

M.V. Elisabeth 1993 Suppl (2) SCC 433: Application of 1952 Convention of

Arrests

M.V. Sea Success (2004) 9 SCC 512:

Application of 1999 Convention of Arrests

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� High Courts exercise Admiralty jurisdiction are Courts of first instance for the institution of Admiralty Suits

� The High Courts of Gujarat, Bombay, Karnataka, Kerala, Madras, Andhra Pradesh, Orissa and Calcutta exercise Admiralty jurisdiction

� The High Courts of Bombay and Calcutta exercise Admiralty jurisdiction all over India – An application can be made to the High Court of Calcutta to arrest a vessel currently in Kandla (Gujarat)

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International International

convention for the convention for the

arrest of ships arrest of ships

M.V. ELISABETHM.V. ELISABETHINTRODUCTION OF 1952 CONVENTION IN INDIA

Paragraph 84

“No Indian statute defines a maritime claim...…although India has not adopted the

various Brussels Conventions, the provisions of these Conventions are the result of

International Unification and development of the maritime laws of the world, and

can, therefore, be regarded as the International common laws or transnational law

rooted in and evolved out of the general principles of national laws, which, in the

absence of statutory provisions, can be adopted and adapted by courts to supplement

and complement national statues on the subject. In the absence of a general maritime

code, these principles aid the courts in filling up the lacunae in the Merchant

Shipping Act and other enactments concerning shipping.”

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M.V. ELISABETHM.V. ELISABETHINTRODUCTION OF 1952 CONVENTION IN INDIA

“ India has also not adopted the International Convention relating to the Arrest of Sea-going Ships, Brussels, 1952. Nor has India adopted the Brussels Conventions of 1952 on civil and penal jurisdiction in matters of collision; nor the Brussels Conventions of 1926 and 1967 relating to maritime liens and mortgages. India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships.”

“No Indian statute defines a maritime claim. The Supreme Court Act 1981 of England has catalogued maritime claims with reference to the Unified Rules adopted by the Brussels Convention of 1952 on the Arrest of Sea-going Ships. Although India has not adopted the various Brussels Conventions, the provisions of these Conventions are the result of International Unification and development of the maritime laws of the world, and can, therefore, be regarded as the International common laws or transnational law rooted in and evolved out of the general principles of national laws, which, in the absence of statutory provisions, can be adopted and adapted by courts to supplement and complement national statues on the subject.”

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M.V. SEA SUCCESSM.V. SEA SUCCESS

INTRODUCTION OF 1999 CONVENTION IN INDIA

The court held that the Geneva Arrest of Ships Convention,

1999, although not ratified by a requisite number of nations, would

be applicable to the Admiralty Courts in India. The bench held that

what has been observed by the Supreme Court in M.V.Elisabeth

regarding the applicability of 1952 convention is equally applicable

to the Geneva Arrest of Ships Convention, 1999.

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M.V. SEA SUCCESSM.V. SEA SUCCESS“The advancement in Law would be evident from the 1999 Arrest

Convention whereby significant changes to the law relating to in rem claims and arrest has been made”

“ M.V. Elisabeth is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied”.

“Application of the 1999 convention in the process of interpretive changes, however, would be subject to : (1) domestic law which may be enacted by the Parliament; and (2) it should be applied only for enforcement of a contract involving public law character.”

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MV QI LIN MENMV QI LIN MEN

� Applying the propositions of law laid down by the Supreme Court in the M.V. Sea Success case the Bombay High Court had arrested a vessel under article 1(v) of the Arrest Convention 99 i.e. a maritime claim in relation to a dispute pertaining to a sale of a ship.

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INDIAN COURTS POWERS ARE NOT INDIAN COURTS POWERS ARE NOT LIMITED OR RESTRICTEDLIMITED OR RESTRICTED

As per dicta of Apex Court in M.V. Sea Success I:-

“The jurisdiction of the Courts in India, in view of the decision of this Court in M.V. Elisabeth is akin to the jurisdiction of the English Courts but the same would not mean that the Indian High Courts are not free to take a different view from those of the English Courts. As regard application of a statute law the Indian High Courts would follow the pre-independence statute but Indian Courts need not follow the judge-made law.”

M.V. Elisabethdefines the jurisdiction of the Court but does not limit or restrict it.

THE APEX COURT CONSIDERED:AMERICAN LAW --- In M.V. Sea Success

AUSTRALIAN LAW – in M.V. Al Quamar

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In so far as Arbitration In so far as Arbitration M.V.Golden ExpressM.V.Golden Express

“ Section 9(ii)(b) of Act of 1996 cannot be construed so as to read into it in rem jurisdiction. This provision does not cover the arrest of the ship or the keeping of a ship under arrest in the exercise to the court jurisdiction in rem at all. What is provided by Section 9(ii)(b) is securing the amount in dispute in the arbitration by way of an interim measure which in our considered view does not include the arrest of vessel.”

“ ….,we have no hesitation in holding that an application under Section 9 of the Arbitration and Conciliation Act, 1996 is not maintainable for the arrest of the vessel and that Section 9(ii)(b) 'securing the amount in dispute in the arbitration' cannot be held to be referable to the arrest of the ship.”

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� “The application of Article VII of 1999 Arrest Convention, in admiralty jurisdiction in our view, would be purposive and preferable. The applicability of Arrest Convention, 1999 in the absence of any domestic law or inconsistency with the domestic law would be more in regard to the international general principles and interaction between the arbitration agreement and in rem action. Such purposive interpretation would be in consonance with broadly accepted international procedure by which the security obtained by the arrest of the ship in the action in rem is retained to satisfy the judgment and award of arbitral tribunal.”

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Maritime Liens in India Maritime Liens in India -- M.V. WON M.V. WON

FU FU

The Supreme Court of India in the case of MV Wong Fu recognized a small

cluster of claims to constitute a maritime lien:

� Damage done by a ship

� Salvage

� Seamen's wages

� Master's wages and disbursements

� Bottomry and Respondentia

� The Supreme Court of India had recognised international Conventions such as the International Convention for Unification of Certain Rules relating to Maritime Liens and Mortgages 1993 (although India was not a party to the convenrion) to determine what constitutes a maritime lien under Indian law.

� The Supreme Court had refused to recognise a maritime lien over a party alleging a breach of a contract

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M.V. Al Quamar v. Tsavliris M.V. Al Quamar v. Tsavliris

Salvage Salvage � London Arbitral Award in relation to salvage services rendered to the vessel.

� The London arbitral award was sought to be enforced in India.

� The Supreme Court had held that the award holder would have a maritime lien over the vessel despite the change in its name

� The Supreme Court held that a claim is personam could be enforced by an action in rem

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License for chartering a foreign License for chartering a foreign

flagged vessel flagged vessel

� Section 406 of the Merchant Shipping Act, 1958

Foreign Shipowners should ensure that the Indian Charterers have obtain a license from the Director General of Shipping

� Section 407 of the Merchant Shipping Act 1958 requires Foreign Owners to obtain license if they wish to trade in the coats of India.

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Port State Control in IndiaPort State Control in India

Indian domestic law empowers port officers to inspect foreign vessels calling in ports to verify that the condition of the ship and its equipment comply with the requirements of international regulations and that the vessels are manned and operated in compliance with international regulations

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Corporate Income Tax in IndiaCorporate Income Tax in India

• Domestic shipping/ Offshore companies are subject to income tax on all sources of income and capital gains wherever arising.

• Foreign companies are subject to income tax only on their income from Indian sources.

• Company Tax is Levied as Follows: Rates– Domestic companies 33.99%– Foreign companies 42.23%

• Note: Where the total income of the domestic or foreign company does not exceed Rupees ten million, no surcharge is levied. In such cases, the effective rate of tax for domestic companies and foreign companies is 30.9% and 41.2% respectively.

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Tonnage Tax in IndiaTonnage Tax in India

• A shipping company incorporated India operating “qualifying ships” can opt for Tonnage Tax Scheme under 115 V to 115VZC.

• “Qualifying Ships” has been defined as – a sea going ship or vessel of 15 net tonnage or more.

–A ship registered under Merchant Shipping Act, 1958 or a ship registered outside India in respect of which license has been issued under Section 406 and 407 of Merchant Shipping Act, 1958

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Impact of Tonnage Tax Scheme on Impact of Tonnage Tax Scheme on

Shipping CompaniesShipping CompaniesCorporate Tax

• Company A

• Registered Tonnage – 15, 0000 Tonnes

• Freight – Rs 1000

• Days the Ship Operates – 365

• Income – 365 X 1, 000 = 3, 65, 000

• Assuming Expenditure is –1, 00, 000

• Taxable Income – 2, 65, 000

• Tax Payable = 33.99% of 3, 65, 000 = 90, 073. 50

Tonnage Tax

• Company B

• Registered Tonnage- 15, 000 Tonnage

• No. of days the Ship operates –365

• If Tonnage exceeds 10.000 tonnes but not more than 25, 000 tonnes then Taxable Income is 3610 + Rs 28 for each 100 tonnes exceeding 10, 000 tonnes)

• Thus taxable income is = 3610 + (28 X 50) 1400 = 5610

• Tax Payable = 33.99% of 5610 = 1906. 83

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TAX ON FOREIGN VESSELS IN TAX ON FOREIGN VESSELS IN

INDIAN WATERSINDIAN WATERS

� Shipping business of a Non-Resident in India is taxable in India as per Section 44B of the Income Tax Act. As per the provisions of this section, 7.5% of the receipts from shipping business are deemed to be the income accrued in India. The tax payable by foreign companies is 40% plus 2.5% surcharge, which works out to 41%Thus percentage-wise tax on total receipts of MV Ocean Prince = 41% of 7.5%, which roughly works out to 3%This is the 3% deducted by the payer as TDS.

� Freight Tax under Section 176 of the Finance Act

� Vessels involved only in coastal trade, and moving from one Indian port to another Indian port cannot be considered as "International traffic". Therefore Vessel Owning company cannot take relief under the DTAA.

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Indian Council of Indian Council of

Arbitration for Arbitration for

Maritime Maritime

DisputesDisputes

Arbitration in IndiaArbitration in India

� The Arbitration and Conciliation Act, 1996 (the “Indian Arbitration Act”) is based upon, but is not identical, to the UNCITRAL Model Law.

� The Indian Council for Arbitration is the main national arbitration institution (http://www.ficci.com/icanet).

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What are the formal requirements for What are the formal requirements for

an enforceable arbitration agreement?an enforceable arbitration agreement?

� An arbitration agreement must be in writing, but need not be signed, stamped or sealed. An arbitration agreement is in writing if it is in the form of an arbitration clause contained in an agreement; in exchange of letters, telex, telegram or other means of telecommunications.

� In the case of Shakti Bhog V. Kola Shipping recognized the validity of an arbitration agreement on a fixture note.

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Can the court refuse to stay litigation if Can the court refuse to stay litigation if

there is a valid arbitration agreementthere is a valid arbitration agreement??� The Court has no discretion to stay domestic arbitrations and isunder an obligation to refer the parties to arbitration. P. AnandGajapathi Raju v. PVG Raju

� N Radhakrishna v. Maestro Engineers & Ors. 2009(4) ALR 210 (SC) – A matter cannot be referred to arbitration in an section 8 application if the case relates to fraud

� International Arbitration – SUIT FILED IN INDIAN COURTS. The Indian Courts will on an application for reference being made by a party makes a prima facie determination on the existence and validity of an arbitration agreement. In an event the court comes to a prima facie finding on the existence of an arbitration agreement it is under an obligation to refer the parties to arbitration. Shin-Etsu Chemical v. Aksh Optifibre

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Does Indian law contain substantive requirements Does Indian law contain substantive requirements

for the procedure tofor the procedure to

be followed during an arbitration?be followed during an arbitration?

� The Indian Arbitration Act reflects the Model Law in that it contains few detailed procedural requirements.

� The parties are free to agree the procedure to be followed by the tribunal.

� For maritime arbitrations administered by the Indian Council of arbitration the arbitrators are under an obligation to comply with the procedure stipulated in the Rules for Maritime Arbitration Rules.

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Maritime Arbitration Rules of the Maritime Arbitration Rules of the

Indian Council of ArbitrationIndian Council of Arbitration

� Provides a timeframe within which the Tribunal is to be constituted

� Stipulated the procedure to be followed in the arbitration proceedings

� Imposes an obligation upon the Tribunal to pass the award within six months from the date of the reference subject to the maximum limit of two years from the date of commencement of the arbitral proceedings.

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Grounds on which the Indian Courts Grounds on which the Indian Courts

can intervene during an arbitrationcan intervene during an arbitration

� Indian Courts may intervene to grant appropriate interim measures such as maintaining the status quo, or order a party to provide security to securing the amount in dispute

� The Courts may also intervene, at the request of the tribunal or at the request of a party, to provide assistance in taking evidence.

� The Chief Justice of a High Court or the Chief Justice of India may intervene to help with the constitution of the arbitral tribunal.

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Do arbitrators have powers to grant interim Do arbitrators have powers to grant interim

relief in Maritime Arbitrations administered relief in Maritime Arbitrations administered

by the Indian Council of Arbitration?by the Indian Council of Arbitration?

� the tribunal may order a party to provide appropriate security in connection with an interim measures.

arbitrators do not have the power to enforce their orders directly or through judicial intervention.

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Grounds on which an Indian arbitral Grounds on which an Indian arbitral

award can be appealed in an Indian Courtaward can be appealed in an Indian Court

The Indian Arbitration Act does not provide for an appeal against an award. However, an Indian court may “set aside” a domestic and foreign award on grounds such as:

1. a party was under some incapacity;

2. the arbitration agreement was invalid;

3. the party was not given proper notice of appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present their case;

4. the award deals with a dispute outside the terms of submission or contains a decision on matters beyond the scope of the submission;

5. the arbitral tribunal or the procedure was not in accordance with the agreement of the parties;

6. the subject matter of the dispute was not capable of settlement by arbitration under Indian law; or,

7. the award conflicts with the public policy of India.

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Venture Global Engineering v. Satyam Venture Global Engineering v. Satyam

Computer Services LtdComputer Services Ltd

� The Supreme Court of India has held that an application can be made to an Indian Court to set aside a foreign arbitral award

� As a consequence, a party can apply to an Indian court to set aside a foreign arbitral award even before the foreign arbitral award is enforced anywhere in the world

� Indian Courts have the power to pass interim orders restraining the enforcement of the foreign arbitral award in anywhere in the world pending the determination of the setting aside application by the Indian Court

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Suggested clauses to nullify the Suggested clauses to nullify the

Satyam ComputerSatyam Computer decisiondecision

� “it is expressly agreed between the parties that the previsions of Part 1 of the Indian Arbitration and Conciliation Act, 1996 (including but not limited to section 34) except Sections 9 and 17 shall not apply and are hereby excluded from application to the arbitration proceedings and the award made pursuant thereof under the present arbitration agreement”

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Enforcement of foreign arbitral Enforcement of foreign arbitral

awards in Indiaawards in India

� The party seeking enforcement of a foreign award must produce:

� the original award or a copy authenticated in the manner required by the law of the country where the award was made;

� the original agreement of arbitration or a certified copy

� a certified English translation of the arbitral award or arbitration agreement (where the same is not in English).

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� Enforcement may be resisted on the ground stipulated in the New York Convention 1958 or, as the case may be, the Geneva Protocol and Convention. If the Indian Court is satisfied that the foreign arbitral award suffers from such a defect, it may refuse the enforcement of such an award.

� Once an award is found to be enforceable, it is deemed to be a decree of the court. The Indian Court can proceed to take further effective steps for enforcement of the foreign arbitral award, by ordering coercive sanctions such as seizure and attachment of the properties, bank accounts and other assets of the party against whom the award is sought to be enforced.

� Section 48, 49 and 50 of the Indian Arbitration Act

� Fuerst Day Lawson Ltd. vs. Jindal Exports Ltd

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Difference between S34 & S48Difference between S34 & S48

� 48(1)(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made

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FOR ENFORCEMENT OF AWARD FOR ENFORCEMENT OF AWARD

OR DECREE THERE HAS TO BE OR DECREE THERE HAS TO BE

RECIPROCITYRECIPROCITY

� The Indian Government may declare a foreign country to be a reciprocating country.

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Can a successful party recover its Can a successful party recover its

costs?costs?� Costs are at the discretion of the Indian Court/ Arbitral Tribunal unless otherwise agreed by the parties.

� As a general practice costs are not recoverable in Indian litigations and arbitrations

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Alternative dispute resolution in Alternative dispute resolution in

IndiaIndia

� Courts are empowered to direct parties to a litigation to consider alternative dispute resolution. However, there cannot be a reference to mediation without the consent of the parties.

� Indian Arbitration Act, 1996 provides that the arbitral tribunal may try to have the dispute settled by conciliation.

� The Maritime Arbitration Rules of the Indian Council of Arbitration allows the parties to opt for conciliation

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Thank YouThank You

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