http://www.simsl.com

Sea Venture newsletter Issue 12

Introduction ..........................................3

Recoverable Damages and The“Achilleas” - A New Approach? ............4

Queen Mary 2 Reception ......................5

U.S. - Emerging Maritime Law on Punitive Damages ..................................6

Due Diligence - Obligation to Maintain ..........................7

Which Law Applies to My Contract?Rome Convention Replaced by New EU Regulation................................8

Steamship Mutual’s Loss Prevention Materials ............................10

U.S. Criminal Jurisdiction over MARPOL Offences ..............................11

Maritime London Officer CadetScholarship Scheme ............................11

EU Directive on Criminal Sanctions inRespect of Ship Source Pollution ........12

Arbitration Clauses in U.S. Crew Contracts....................................12

U.S. - Detention of Crew in MARPOL Violations..............................13

Bourbon Dolphin - a Case History......................................14

Nomination Notices under Contracts of Affreightment..................14

Shipbuilding Contract - Ability to Claim Damages at Common Law........15

Asbatankvoy - an Insight into theInterpretation of Clause 4(c) ................16

Cargo Claims for Economic Loss..........16

Filipino Crew Claims - 120 Day Update ..................................17

Demurrage and Laytime - Who is Responsible for Delay? ............18

Setting Aside English Default Judgment ..............................18

The Museum at the Top of the World ............................................19

The “Unsafe Port” Dilemma - Who is at Fault? ..................................19

Contractual Terms - Be Careful What You Sign ..................20

Requirement to Obtain Rightship Approval ..............................20

U.S. - Enforcement of Nontank VesselResponse Plan Requirements ..............21

Anti-Suit Injunctions Contrary to EU Law ............................................21

Structure under Construction - a Jones Act Vessel? ..............................22

Dubai Court of Cassation ConfirmsApplication of 1976 Convention ........22

Recent Publications ..............................23

Contents

2

Editorial TeamSue WatkinsNaomi Cohen Malcolm Shelmerdine

Sea Venture is available in electronic format. If you wouldlike to receive additional copies of this issue or futureissues in electronic format only please send your name andemail address to seaventure@simsl.com.

Feedback and suggestions for future topics should also besent to this address.

The world financial markets are currently facingunprecedented levels of turbulence. While it is generallyaccepted that high levels of market volatility will continueand that the impact of the credit crisis is likely to extendin to areas of the commercial world well beyond thebanking sector, there is no consensus amongcommentators on how severe, longlasting, or widespreadany resultant downturn in the world economy may be.This uncertainty carries with it warning signals for thecontinuing strength of the shipping markets, which couldimpact the operations of both owners and charterers andconsequently their P&I exposures as operating marginsnarrow, and claims and disputes increase.

The importance of the Club’s service is highlighted at suchtimes, not only in claims handling and dispute resolutionbut also in loss prevention initiatives, advice on legalissues, and the provision of information about topicalissues and legal developments that affect Members’trades. The Club's support is provided around the clock bythe staff in the Managers’ London, Hong Kong, and Riode Janeiro offices as well as by the Club’s worldwidenetwork of correspondents. The publication of SeaVenture, and information on the Steamship Mutualwebsite, are both key components of this service.

One of the issues affecting both owners and charterers inrecent times has been The “Achilleas”. The High Courtand Court of Appeal decisions, as well as a critique of theCourt of Appeal decision, have been covered in recenteditions of Sea Venture. The arguably novel approach ofthe House of Lords to the test of remoteness of damagesin The “Achilleas” is discussed in this edition of SeaVenture.

An issue attracting attention at the current time is theupsurge in pirate attacks and their consequences. With50 attacks reported in the Gulf of Aden and Indian Oceanalone this year and the IMB reporting seizures of shipsand sailors at their highest level since 1991, there is anever growing threat to human life. What are the issues ifa vessel is seized? Does the vessel remain on hire, or cancharterers be liable in damages for the delay? What arethe consequences for cargo claims where cargo is delayedor damaged? All these issues and more are discussed inan article on the Steamship Mutual website at

As ever, we are most grateful to all those that havecontributed to this edition of Sea Venture.

Malcolm Shelmerdine

1st October 2008

Introduction

Sea Venture newsletter Issue 12 3

www.simsl.com/Piracy0908.html

Sea Venture newsletter Issue 12

Recoverable Damages and The“Achilleas” - A New Approach?

4

In its recent well publicised judgment, aunanimous House of Lords overruled LordJustice Rix’s judgment in the Court ofAppeal, in Transfield Shipping Inc. vMercator Shipping Inc. The “Achilleas”,holding that an owner could not recoverloss of profit under a subsequent fixturefrom a charterer who redelivered late.

In an arguably novel approach toremoteness, based on assessingassumption of risk by interpreting thecontract as a whole against its commercialbackground, Lord Hoffmann and the restof the House limited the damages theowner could recover for late redelivery tothe difference between the contractualrate of hire and the prevailing market forthe period of the overrun.

The impact of this judgment on earlierwell-established decisions of lower courtsremains uncertain, but it is probable thata greater number of arbitrations will beappealed as a result of this uncertainty.Furthermore, the likelihood ofsuccessfully applying for leave to appeal

could increase in light of Lord Hoffmann’sconfirmation that the question ofwhether a given type of loss “is one forwhich a party assumed contractualresponsibility” is “like all questions ofinterpretation… a question of law”.

In an article written for the SteamshipMutual website Rajeev Philip(rajeev.philip@simsl.com) reviews theapproach of the House of Lords. Whilst ithas a number of policy considerations forit, and whilst the approach itself may notturn out to be a radical change in thelaw, it is a sufficient deviation fromestablished principles that it may prove agreater boost to legal practitioners thanto the commercial market, whoseinterests commercial law should serve.The article can be found at:

www.simsl.com/AchilleasHL0908.html

Sea Venture newsletter Issue 12 5

In Hamburg on Wednesday 30 July, the Club held aluncheon reception aboard Queen Mary 2 for itsGerman Members and their brokers. A cocktailreception took place on the 8th deck of the 1,132 ftlong world famous cruise liner followed by lunch inthe celebrated Todd English restaurant.

During lunch Mr Otto Fritzner, Chairman of theSteamship Mutual Board, spoke to the guests aboutthe Club’s latest financial performance. He said theBoard was pleased that over the last financial year, theClub had achieved a strong operating surplus andincreased its free reserves by over 17% to a new all

time high. At the same time the Club hadincreased its total entered tonnage by over 9%,to 72 million gross tons. Mr Fritzner noted thatclaims in prior years had continued to improveover the first five months of the 2008 policy yearand, whilst it was still too early to be certain, theClub’s retained claims pattern for 2008 seemedto fall somewhere between those experienced in2006 and 2007. He advised the Members that

the Board expected the Club’s premium incomefor the year to exceed US$ 300 million for the firsttime. But Mr Fritzner added a cautionary note

stating that the level of free reserves woulddepend on the difficult investment markets.

The Club would like to express their gratitudeto Cunard and Carnival Corporation for makingthe vessel available for the reception and also totheir staff and crew who helped enormously toensure the guests enjoyed the occasion.

Article by Rupert Harris(rupert.harris@simsl.com)

Queen Mary2 Reception

From top to bottom, left to right:

Otto Fritzner, Nikolaus W Schues,

Markus Hempel, Capt. Bodo Franz,

Christian Ross, Ian Beveridge, Janin Tibke,

Klaus Bunnemann, Ulrich Kranich, Bernd Hansing,

Nicola Gerdes, Thomas Kuehl,

Annette Sabotke.

No one could blame owners of shipstrading to the United States for living in constant fear of the risk of punitivedamages in the event of a seriousmaritime casualty. Over the years, theUnited States has gained notoriety forunpredictably large punitive damagesawards aiming to punish bad actors anddeter others from repeating theirbehaviour. The case of the “Exxon Valdez”is by far the most notorious punitivedamages case in maritime circles.

In 1989, Exxon attained infamy when the“Exxon Valdez” ran aground and spilled11 million gallons of crude oil in PrinceWilliam Sound, Alaska. Although Exxonalready faced liability well in excess of $3 billion for clean up costs, fines,restitution, natural resources restoration,and compensation to private parties foreconomic losses, an Alaskan jury decidedthat Exxon should also pay thestaggering sum of $5 billion in punitivedamages. Presumably the jury wasmotivated to both punish Exxon anddeter other shipowners from allowingsuch an event to develop ever again.

Not surprisingly, Exxon appealed thepunitive damages award. After twosuccessive appeals, the United StatesCourt of Appeals for the Ninth Circuit cutthe award to $2.5 billion in 2007. Exxonsought further review by the UnitedStates Supreme Court, which acceptedthe appeal.

In late June 2008, the Supreme Courtissued its complicated decision in thecase, announcing a federal maritime lawguideline for maximum punitive damagesin circumstances like those presented inthe “Exxon Valdez” incident andaddressing two other issues which arelikely to be the subject of further punitivedamages litigation in other cases. Theruling offers some hope for reducingfears of punitive damages by makingmaximum awards somewhat morepredictable and identifying argumentswhich could eventually limit thecircumstances in which punitive damagesare available in maritime cases.

Robert Bocko and Jon Zinke of KeesalYoung & Logan review this importantdecision in an article written for theSteamship Mutual website at:

U.S. - Emerging Maritime Law onPunitive Damages

Sea Venture newsletter Issue 126

www.simsl.com/ExxonSupremeCt0908.html

Sea Venture newsletter Issue 12 7

Following on from the High Court judgment in GoldenFleece v ST Shipping last year, discussed in Sea Ventureissue 9 and on the Club website at:

the Court of Appeal has now ruled on owners’ appeal.

Readers will recall that the case focused on newMARPOL regulations which came into effect in April2005 concerning the carriage of fuel oil. With effectfrom October 2003, heavy grades of oil could only becarried within the EU in double-hulled vessels. As ofApril 2005 MARPOL regulation 13H required, intandem, that fuel oil cargoes be carried in double-hulled vessels only, save for an exemption whichessentially allows for vessels with “double-sides notused for the carriage of oil and extending to the entirecargo tank length.” A fully double-sided vessel is onewhere each cargo tank is protected on the outside byballast tanks, forming a barrier to the cargo tanks inthe event of a collision and thus reducing thelikelihood of breach.

Both parties essentially presented the same case to theCourt of Appeal, owners submitting that Cooke J hadfailed to refer to the background facts of the casewhen reaching his decision on construction of thecontract. The Appeal Court declined to agree.

Sian Morris (sian.morris@simsl.com) reviews theAppeal Court decision in an article written for theSteamship Mutual website at:

Due Diligence- Obligationto Maintain

www.simsl.com/GoldenFleece0908.html

www.simsl.com/GoldenFleece0807.html

Sea Venture newsletter Issue 128

Although not necessarily the first thoughtwhen drafting an agreement, it isimportant to give consideration to whatmay happen in the event of a disputearising under the contract or difficulty ininterpreting it. In such circumstances, andparticularly where the parties are based indifferent countries, it is desirable to knowwhich law shall apply. A particulargoverning law may give one of the partiesa defence or a right of action which mightnot be available under the laws of anothersystem. Businesses may also wish toensure that a chosen law will applyuniformly to their standard agreements.

The English courts (and those of othersignatory states) currently apply the RomeConvention on the Law Applicable toContractual Obligations (Rome Convention).This 1980 Convention was the product ofwork of the European Union aimed atestablishing uniform rules in this area.

In 2003 the European Commissionproposed that the Rome Convention 1980should be converted into a communityRegulation (“Rome 1”). Unlike anInternational Convention, which has to beratified and adopted by states, aRegulation has the force of lawthroughout the EU, save where an opt outis permitted. That work is now completeand the Rome 1 Regulation entered intoforce in July 2008. It will apply tocontracts concluded after 17 December2009 (see Articles 28 and 29) and willhave direct effect in all EU member statessave for Denmark and the UK. The UKhad opted out of the initial proposals in2005 but is now seeking the consent ofthe European Commission to participate inthe Regulation.

To a large extent the new Regulation hasreplicated the provisions of the existing

Rome Convention. Most importantly, thenew Regulation preserves freedom ofcontract. Article 3 provides that contractsshall be governed by the law chosen bythe parties. It is only where no choice oflaw is made, that the default provisions inthe other Articles of the Regulation willapply. Article 4 (applicable law in theabsence of choice) includes expressprovisions for certain types of contract.Thus a contract for the sale of goods shallbe governed by the law of the countrywhere the seller has his habitual residence;and a contract for the provision of servicesshall be governed by the law of a countrywhere the service provider has his habitualresidence. The habitual residence ofcompanies and other bodies corporate orunincorporated is defined as the place ofcentral administration, determined at thetime of the conclusion of the contract(Article 19).

In other cases, Article 4 provides that thecontract shall be governed by the law ofthe country where the party required toeffect the characteristic performance ofthe contract has his habitual residence.This requirement may be displaced whereit is clear from all the circumstances of thecase that the contract is manifestly moreclosely connected with the law of anothercountry, in which case the law of thatother country shall apply. Finally, wherethe applicable law cannot be determinedpursuant to these principles, the contractshall be governed by the law of thecountry with which it is most closelyconnected.

These provisions are similar to those whichappeared in the Rome Convention. Inaddition, special provisions apply tocontracts of carriage (Article 5), consumercontracts (Article 6), insurance contracts

Which Law Applies to My Contract?Rome Convention Replaced by NewEU Regulation

9Sea Venture newsletter Issue 12

(Article 7) and individual employmentcontracts (Article 8).

So far as concerns contracts for thecarriage of goods, Article 5 provides thatto the extent that the applicable law hasnot been chosen by the parties, the lawapplicable shall be that of the country ofthe habitual residence of the carrier,provided that the place of receipt or theplace of delivery or the habitual residenceof the consignor is also situated in thatcountry. If those requirements are notmet, the law of the country where theplace of delivery as agreed by the partiesis situated shall apply.

To the extent that the law applicable to acontract for the carriage of passengershas not been chosen by the parties, thelaw applicable shall be that of the countrywhere the passenger has his habitualresidence, provided that either the placeof departure or the place of destination issituated in that country. If theserequirements are not met, the law of thecountry where the carrier has his habitualresidence shall apply. In the absence of aclear choice of law in the contract ofcarriage, these provisions might mean, forexample, that a cruise operator could findthat differing systems of law could applyto standard passage contracts, dependenton the country of domicile of thepassengers embarked.

Unlike the Rome Convention, the newRegulation includes provisions regardinginsurance contracts. The current lawrelating to insurance contracts is complex.For contracts of direct insurance relating torisks situated within the European Union,the provisions of the EU life and non lifeinsurance Directives apply. For contracts ofdirect insurance relating to risks notsituated in the member states of theEuropean Union, and all reinsurancecontracts (wherever the risk be situated) theprovisions of the Rome Convention apply.

In its preparatory work for the newRegulation, the European Commissiondecided that it should provide a

comprehensive treatment to replace thechoice of law rules both in the RomeConvention and the two EuropeanDirectives. The new Regulation maintainsthe distinction in the European non lifeDirectives between insurance contractscovering “large risks” and those which donot. “Large risks,” as defined, include allliabilities arising out of the operation ofships, including carrier’s liability.

The Regulation applies to insurancecontracts covering a “large risk” whetheror not the risk covered is situated in amember state, and to all other insurancecontracts covering risks situated insidemember states (see Article 7.1). Article 7does not apply to reinsurance contracts,but these would appear to be covered bythe general provisions of the Regulationsince they are not excluded in Article 1.

The final text is broadly a consolidation ofthe current rules as contained in theexisting EU Directives, and therefore achoice of law in insurance contracts ismaintained where such a choice alreadyexists under the current Directives.Accordingly, an insurance contractcovering “large risks,” which include allliabilities arising out of the operation ofships, will continue to be governed by thelaw chosen by the parties. In the absenceof choice, then default provisions specifiedin Article 7 will apply.

Club Members should therefore ensurethat they provide in their contracts for anexpress choice of applicable law, and inthe EU, where the Rome Regulation willapply, this will have the additional benefitof avoiding any unwelcome impact of thedefault provisions in the Regulation.

Christine Gordon (christine.gordon@simsl.com) provides further comment,together with the full text of theRegulation, in an article written for theSteamship Mutual website at:

www.simsl.com/Rome10808.html

Sea News Volume 2

Following the earlier success of Volume 1(reported in issue 9 of Sea Venture),Volume 2 of Sea News has received anAward for Publication Excellence in theAPEX 2008 Competition. The APEXawards recognise achievement in graphicdesign, editorial content and overallcommunications excellence.

In the 20th annual competition Sea News2 won an award in the Special PurposeElectronic & Video Publications category.Further details can be found on the ApexAwards website at:

Sea News has been designed to keepseafarers informed on matters of topicalinterest and to examine case studies ofevents giving rise to liability, loss ordamage. The second edition focuses onenvironmental issues, for example thework of IMO on environmental matters,MARPOL violations involving Oily WaterSeparators, and also Seafarer safetywithin the dock area. It is produced bythe Managers in association withVideotel Marine International, with thesupport of the Ship Safety Trust.

Engine Room Waste Management – Oily Water and Separators

Oily Water and Separators is one of thefour components of the Engine RoomWaste Management training package, a practical aid designed to assist with

MARPOL regulation compliance. Alsoproduced in association with Videotel,this training program has received twoawards:

• Apex Award for PublicationExcellence in the category ofEducation & Training Electronic &Video Publications

• Cine Golden Eagle Award in theprofessional non-fiction division

The CINE Golden Eagle Awardacknowledges high quality production ina variety of content categories forprofessional, independent and studentfilmmakers. Each year, hundreds of jurorsjudge nearly 1,000 entries in 27categories. Further information about thecompetition, the awards and the winnersis available on the CINE website at:

As publicised in Club circulars B.459 andB.460, Engine Room Waste Managementand volumes 1 and 2 of Sea News can beobtained through Videotel. Members areentitled to special concessionary rates.

For further details about pricing and howto place orders contact:

Videotel Marine International84 Newman Street, London W1P 3LD

Tel: +44 207 299 1800Fax: +44 207 299 1818Email: mail@videotelmail.comWebsite: www.videotel.com

Sea Venture newsletter Issue 1210

Steamship Mutual’s Loss PreventionMaterials

www.apexawards.com

www.cine.org/index.php

Sea Venture newsletter Issue 10 11Sea Venture newsletter Issue 12 11

With finance from the Ship Safety Trust, SteamshipMutual is currently sponsoring the training of anavigating officer cadet under the administration ofthe Maritime London Officer Cadet ScholarshipScheme (MLOCS). The purpose of this support is two-fold: First, it is a positive move to address, albeit in asmall way, the current shortage of officers in theindustry. Second, there has always been a requirementfor the staff of Steamship Mutual to includeindividuals with the skills and experience gained fromtime served at sea and this sponsorship helps topreserve that pool of resources for the future.

Steamship Mutual’s cadet, Gregory Taylor, has justsuccessfully completed his latest spell of shore basedtraining at Warsash and recently visited AquaticalHouse prior to embarking upon the next sea-goingphase of his training. We hope to hear news ofGregory's experiences at sea over the coming monthsand we wish him every success with his future training.

Further details of the MLOCS scheme can be found on the following link:

MaritimeLondonOfficer CadetScholarshipScheme

www.maritimelondoncadet.com/train.html

Gregory Taylor (left) and Chris Adams at Aquatical House, the London office of Steamship Mutual

The Fifth Circuit Court of Appeals (which covers Texasand Louisiana) recently upheld the right of the U.S. toprosecute a foreign-flagged ship owner (and itsengineer) for falsification of an Oil Record Book(“ORB”), even when such falsification took placeoutside of U.S. ports or navigable waters, as a breachof the U.S. legal duty to maintain an ORB. It furtherheld that international law did not prohibit suchprosecution.

In an article written for the Steamship Mutual websiteJeremy Harwood of Blank Rome reviews the importantdecision in United States v Jho And OverseasShipholding Group Inc from one of the United States’leading appellate courts.

U.S. CriminalJurisdictionoverMARPOLOffences

www.simsl.com/OSG0908.html

Sea Venture newsletter Issue 1212 Sea Venture newsletter Issue 1212

In Freudensprung v Offshore TechnicalServices Inc the U.S. Court of Appeals forthe Fifth Circuit gave useful guidance onthe question of whether arbitrationclauses in employment contractsproviding for arbitration outside the U.S.are enforceable for U.S. crew.

The plaintiff in Freudensprung usedvarious tactics in his attempt to avoid thearbitration provision in his contract withOTSI. In reaching its decision the courthad to consider the interplay betweenthe U.S. Federal Arbitration Act, theConvention on the Recognition andEnforcement of Foreign Arbitral Awards,the impact of neither party being “notAmerican” and the relevance of a foreignelement to the contract.

Plaintiffs in general may be motivated to argue that such arbitration clauses in the contracts of U.S. nationals areunenforceable because they remove acrewmember’s right to a jury trial.However, as evidenced in Freudensprung,the U.S. courts will not underminecontractual terms unless there is goodreason to do so.

In an article written for the SteamshipMutual website Paul Brewer(paul.brewer@simsl.com) looks at the various factors considered by thecourt in Freudensprung in reaching itsdecision that the arbitration provisionwas enforceable:

www.simsl.com/Freudensprung0908.html

Arbitration Clauses in U.S. CrewContracts

The Advocate General’s opinion andEuropean Court of Justice (ECJ) judgmentrelating to the EU Directive on ShipSource Pollution (2005/35/EC) and the EUFramework Decision (2005/667/JHA)respectively were discussed in Sea Ventureissue 10 and in further detail at:

The ECJ recently issued a decision inwhich it ruled that the validity of theDirective cannot be assessed by referenceto MARPOL as the EU itself (unlike itsmember states) is not a party to MARPOLand is therefore not bound by theConvention. Moreover, in its view thereis nothing in the Directive, and inparticular the term “serious negligence”,that is in conflict with the generalprinciple of legal certainty under EU law.Accordingly, this EU Directive will remain in force, albeit subject to theinterpretation provided by the AdvocateGeneral. The coalition, comprisingINTERTANKO and others in the shipping

industry, which instituted proceedings iscurrently considering its position in thelight of the ruling.

At the same time, the EuropeanCommission applied successfully to theECJ to annul the Framework Decision,arguing that it was adopted on thewrong legal basis. As a consequence theEuropean Commission has issued a newShip-Sourced Pollution Directive,amending the existing Directive in orderto strengthen the obligation on memberstates to introduce criminal penalties forship-source pollution committed eitherintentionally or as a result of grossnegligence. In line with the ECJ rulingthat it was not within Communitycompetence, the new text will not setcommon levels of sanctions. However,implementation of the new text willrequire member states to introduce“effective, dissuasive and proportionate”criminal sanctions against offenders.

Article by Colin Williams

(colin.williams@simsl.com)

EU Directive on Criminal Sanctionsin Respect of Ship Source Pollution

www.simsl.com/EUPollution1207.html

Sea Venture newsletter Issue 12 13

When a vessel is detained in a U.S. port on suspicionof a MARPOL violation the U.S. Coast Guard generallyrequire the owner to “retain” crew members who maybe material witnesses in the U.S., at the owner’sexpense, pending conclusion of the investigation andpossible prosecution.

The Coast Guard’s power comes from several sourcesand includes the authority to grant clearance to avessel being detained upon the posting of a bond or“other satisfactory security”. In this way the CoastGuard typically requires the vessel owner to enter intoa Security Agreement whereby, as a condition for therelease of the vessel, the owner agrees to:

• post a surety bond

• cooperate with the ongoing criminal investigation and

• maintain the employment of certain crew membersconsidered to be either persons of interest ormaterial witnesses while they are “retained” in theU.S at the owner’s expense pending completion ofthe investigation and then to repatriate them at the conclusion.

This crew “retention” policy imposes economicburdens on the owner and even more substantialburdens on the individual crew members themselves.It is extremely difficult to avoid a Security Agreementor to seek judicial relief if the period of crew detentionis extended, particularly if the owner wishes tochallenge the government’s allegations.

In an article written for the Steamship Mutual website,Patrick Cooney of Royston Razor discusses the sourcesof the Coast Guard’s authority, possible ways to seekrelief and some of the tactical and strategicconsiderations:

U.S. -Detention ofCrew inMARPOLViolations

www.simsl.com/USCrewDetMARPOL0908.html

“It is extremely difficult

to avoid a Security

Agreement or to seek

judicial relief…”

On Friday 12 April 2007 the AnchorHandling Tug Supply (AHTS) vessel“Bourbon Dolphin” was engaged inanchor handling operations for the semi-submersible drilling rig “TransoceanRather” in the Rosebank oilfield to thewest of the Shetland Islands.

Due to the prevailing environmentalfactors the “Bourbon Dolphin” haddrifted considerably away from theplanned track for mooring and thetension in the mooring system limitedmanoeuvrability. The AHTS “HighlandValour” was dispatched to assist but the“Bourbon Dolphin” was found to be stilldrifting away from the planned anchortrack. There then followed a tragicsequence of events leading ultimately to

the capsize of the “Bourbon Dolphin”.Of the crew of 14, only 7 were saved.Those who were lost included the Masterand his 14 year old son.

The possible impact of vesselunsuitability, lack of vessel stability,limited personnel experience, lack ofplanning and attention to detail in the rigmove procedure, and human error in thisincident are discussed in an article byCaptain Simon Rapley (simon.rapley@simsl.com) of the Club’s LossPrevention Department on the SteamshipMutual website at:

Bourbon Dolphin - a Case History

Sea Venture newsletter Issue 1214

www.simsl.com/BourbonDolphin0908.html

A recent decision in the English HighCourt has upheld the ruling in The“Jasmine B” that once a charterer hasmade his nomination for loading ordischarging under a Contract ofAffreightment those terms are effectivelyincorporated into the charterparty asthough they had been original terms and the charterer has no right to changethe nomination.

The case was an appeal from anarbitration award by claimant chartererswho attempted to change the terms oftheir nomination for loading a cargo ofcoal. The tribunal found charterers to bein repudiatory breach, thereby releasingthe owners from any further duties underthe charterparty. The charterers hadsought to delay the laycan period due tothe unavailability of cargo.

The appeal was dismissed. Steele J heldthat once the laycan notice was given, it could not be changed save byagreement. The nomination notice waseither revocable or irrevocable. There wasno room for charterers to pick andchoose the terms of the nominationwhich were irrevocable, this being theonly method of achieving a commerciallycertain outcome.

This decision is discussed in more detailin an article by Sarah McGuire(sarah.mcguire@simsl.com) on theSteamship Mutual website at:

www.simsl.com/Nomination0908.html

Nomination Notices under Contracts ofAffreightment

Sea Venture newsletter Issue 12 15

In Stocznia Gydnia SA v Gearbulk Holdings Ltd theshipyard had contracted with Gearbulk to build threebulk carriers but the hulls were not delivered at all.The arbitrator had found that the shipyard was inrepudiatory breach of contract. Gearbulk hadterminated the contracts under contractual provisionsand enforced the Refund Guarantees, recovering thepre-delivery instalments it had paid. Gearbulk alsosought damages at large and were initially awardedthem by the arbitrator.

On appeal to the Commercial Court, Burton Joverturned the arbitration award.

The contract provided for price reductions for delay indelivery, but after a delay of 150 days Gearbulk hadthe right to terminate the contract and upon suchtermination the shipyard were to repay all thecontractual instalments paid to date by Gearbulk withinterest thereon.

Three questions were addressed by the Court, whichGearbulk needed to overcome to maintain their awardof damages:

1. Did the contractual termination provisionsconstitute a complete code thus excludingcommon law rights of termination for these events?

2. Did the contract exclude a claim for damages inrespect of these events?

3. Whether Gearbulk were precluded from claimingto having terminated at common law given itsreliance on the contractual termination provisions?

The decision in is discussed in more detail by SianMorris (sian.morris@simsl.com) in an article on theSteamship Mutual website at:

ShipbuildingContract -Ability toClaimDamages atCommon Law

www.simsl.com/Gearbulk0908.html

The recent judgment in Antiparos Ene vSK Shipping Co Ltd and Others (The“Antiparos”) concerned a dispute as towhether owners were entitled, underclause 4(c) of the Asbatankvoy Form, to recover extra costs incurred as a directconsequence of charterers’ change inload port nomination where those extracosts arose in relation to bunkeringarrangements.

On 9 March 2007, the owners of the“Antiparos” fixed the vessel for a voyagefrom the Arabian Gulf to either SouthKorea or Japan on the AsbatankvoyForm. Clause 4(c) provided that “anyextra expense incurred in connectionwith any change in loading ordischarging ports (so named) shall bepaid for by the charterer and any timethereby lost to the vessel shall count asused lay-time”.

The charterers ordered the vessel toproceed for loading at Ras Laffan andMina Al-Ahmadi. The owners madearrangements to stem bunkers for thevoyage at Mina Al-Ahmadi at US$ 301per mt. Some days later, the chartererschanged the nomination and ordered

the vessel to proceed to Ras Laffan andRas Tanura. The owners had alreadyplaced a bunker stem at Mina Al-Ahmadiand held the charterers liable for anyadditional costs they would have to incurarising from this charge, pursuant toclause 4(c) of the charterparty.

The owners managed to find bunkers atRas Tanura, but at US$ 355 per mt,which would make overall bunkers US$217,721.52 more expensive than at MinaAl-Ahmadi. Owners claimed for thisdifference under clause 4(c).

The court ruled in favour of the ownersand judged that (a) there was no clearbasis on which to allow an impliedoption to charterers for changing anomination and (b) that, on the trueconstruction of clause 4(c), the additionalcosts incurred in having to purchase themore expensive bunkers would beregarded as an expense under the saidclause.

This decision is discussed in moredetail by Francis Vrettos(francis.vrettos@simsl.com) in an article written for the Steamship Mutual website at:

Asbatankvoy - an Insight into theInterpretation of Clause 4(c)

Sea Venture newsletter Issue 1216

www.simsl.com/Antiparos0908.html

The English courts have recently handeddown two important decisions which mayimpact on claims by cargo owners foreconomic loss.

The “Limnos” considers the extent to whichcarriers may limit their liability under ArticleIV Rule 5(a) of the Hague-Visby Rules incircumstances where the cargo has beenboth physically and economically damaged.

Of relevance to the latter head of claim isthe recent House of Lords decision in

The “Achilleas”, which is discussed at page4 of this issue of Sea Venture and concernsthe test for remoteness in contractualclaims.

These issues, and in particular the decisionin The “Limnos”, are discussed in an articleby Wagner Mesquita (wagner.mesquita@simsl.com) on the Steamship MutualWebsite at:

Cargo Claims for Economic Loss

www.simsl.com/EconomicLoss0908.html

Sea Venture newsletter Issue 12 17

As previously reported in earlier issues of Sea Venturethe Philippine Labor Code states that a disabilitylasting continuously for more than 120 days should beconsidered “total and permanent disability”. In theCrystal Shipping (October 2005) and Remigio (April2006) cases, the Philippine Supreme Court ruled thatseafarers are subject to the Labor Code concept ofpermanent disability. Hence in both cases seafarerswho were unable to perform their customary work formore than 120 days were awarded the maximumcompensation for permanent disability of US$ 60,000.

However, shipowner interests argued that the LaborCode “120 day rule” should not apply to seafarers’claims which are governed by the Philippines OverseasEmployment Agency (POEA) Standard EmploymentContract. Fortunately, in February 2007, the SupremeCourt issued a resolution which clarified that thedegree of disability in POEA claims should bemeasured by medical assessment, rather than numberof days of incapacity. Further background informationis available on the Steamship Mutual website at:

Nevertheless, the clarifying ruling had not been fairlyapplied by the National Labor Relations Commission(NLRC), the arbitration forum for determiningseafarers’ claims. As a result, owners were at risk ofunfavourable rulings that the maximum compensationwas payable even where there was expert medicaladvice that the seafarer was not permanently disabled.

However, three recent NLRC decisions handled by DelRosario & Del Rosario have correctly followed theSupreme Court’s resolution, which indicates thatowners have reason to hope that future arbitrationawards will respect the disability gradings evaluatedbased on the POEA contract.

Article by Del Rosario & Del Rosario, Manila.

FilipinoCrew Claims- 120 DayUpdate

“...the Supreme Court

issued a resolution which

clarified that the degree of

disability in POEA claims

should be measured by

medical assessment…”

www.simsl.com/120Philippines1107.html

Sea Venture newsletter Issue 1218

In a recent London arbitration (6/08) thetribunal considered issues of bad stowageand stevedores’ incompetence whenconsidering an owner’s claim fordemurrage and deadfreight. The charterwas on an amended Gencon form andwas fixed for the carriage of 6,500 mtflyash, 5% more or less in charterer’soption, stowed in jumbo bags, eachweighing between 1.0-1.5 mt. 5,350jumbo bags weighing a total of 5,977 mtwere loaded.

The charterer’s allegations were mainlybased on the inefficiency of the vessel’sgear, which they alleged reduced theloading rate, and on the master’sinterference with loading, after heordered the stevedores to shift and dragthe jumbo bags in the holds so as to fillup the spaces that were difficult to accessfrom the hatch squares. This, theyalleged, also caused delay at the disport.The charterers also contended that there

was no scope for the vessel to load thefull quantity of 6,500 mt.

The tribunal found that on the balance ofprobabilities, notwithstanding theinefficiency of the vessel’s gear, there wasinsufficient evidence to show thatinefficiency caused the relevant delay. Thetribunal further found that the stevedoreshad been incompetent in not loadingefficiently or using the proper equipment.

The dispute also raised questionsregarding the reversibility of laytime andwhen laytime/demurrage may beconsidered to end where the charterprovided for two loadports and no cargoor insufficient cargo was available at thefirst port.

This award is discussed in more detail byEffie Koureta (effie.koureta@simsl.com)on the Steamship Mutual website at:

www.simsl.com/JumboStow0908.html

Demurrage and Laytime - Who isResponsible for Delay?

Setting Aside English Default Judgment

The recent case of Shandong ChenmingPaper Holding Ltd v Saga Forest Carriersconsidered the circumstances in which adefendant is entitled to set aside a defaultjudgment entered against him.

Under Civil Procedure Rule 13.3 the court has the power to set aside adefault judgment if the defendant has areal prospect of successfully defendingthe claim and if his application to setaside the default judgment has beenmade promptly.

On the facts of the case, the court heldthat the defendants had a real prospect

of successfully defending the claim on thebasis of time bar and as they had madetheir application promptly, ordered thatthe default judgment be set aside. Incoming to their decision, the courtconsidered not only the defendants’promptness in applying to set aside thedefault judgment but also the claimants’own promptness in issuing proceedings.

The decision is discussed in further detailin an article written by Laura Alston ofHill Dickinson for the Steamship MutualWebsite at:

www.simsl.com/Shandong0908.html

Sea Venture newsletter Issue 12 19

During a recent visit to Murmansk Shipping Co.,Steamship Mutual's Chris Adams, Sarah Chase andNeil Gibbons had the opportunity to visit theMurmansk Shipping Museum.

Murmansk is the biggest city in the Arctic circle and despite its northerly location remains ice freethroughout the year owing to the effect of the gulf stream. The life of the city is closely linked with shipping.

The Murmansk Shipping Museum charts the history of the company from its foundation in 1939 to thepresent day. Originally the company was concernedprincipally with transportation in the Arctic regionsand many of the exhibits show the difficultiesencountered by seafarers in the climatic extremesfound in such latitudes. Nowadays the company tradesworldwide but still retains a significant presence andexpertise in its home region.

The museum, housed in a building in centralMurmansk, has many exhibits of ship and crewequipment, ship models and photographs of varioussenior political and royal visitors. The visit was made allthe more enjoyable by the evident pride andenthusiasm shown by our guide Valentina Karepova.We would like to thank her and Mr Roman Arbuzov ofMurmansk Shipping for their hospitality.

Article by Neil Gibbons (neil.gibbons@simsl.com)

From left to right: Chris Adams, SarahChase and Neil Gibbons

The Museumat the Top ofthe World

Picture the scene: A vessel makes contact with a berthresulting in damage and pollution. Who is at fault? Wasno one at fault? Was it an error of navigation by the Pilotor Master? Was it a mistake to order the vessel to theport because of dangers that could not have beenavoided by the exercise of good navigation andseamanship? The answers to these questions will helpdetermine whether the owners or the charterers are liablefor the significant financial consequences that may ariseout of the incident, such as salvage, general average, hulldamage, pollution, loss of use and cargo claims.

The arguments are likely to centre on whether, byordering the vessel to the port, the charterers were inbreach of any "safe port warranty" in the charterparty.In an article written for the Steamship Mutual website,Richard Neylon of Holman Fenwick Willan examineswhy litigation frequently arises under this warranty,considers how the actions of owners, charterers andthird parties, both before and after the incident, helpdetermine who is at fault and highlights what practicalsteps can be taken to help minimise liability:

The "UnsafePort"Dilemma -Who is atFault?

www.simsl.com/SafePort0908.html

Sea Venture newsletter Issue 1220

The recent English High Court decision inPT Berlian Laju v Nuse Shipping highlightsthe importance of drafting a contract onprecise terms and the importance ofchecking carefully that the drafted termsreflect those agreed, in a recap orotherwise, before signing.

The case concerned a dispute relating tothe sale of a ship on the amendedNorwegian Saleform 1993 terms. The salefell through because the sellers claimedthe buyers had repudiated the contract byfailing to remit the full purchase price tothe correct account by the closing date.The buyers claimed damages allegingthey had complied with their obligationsand it was, in fact, the sellers who werein repudiatory breach. The dispute was

arbitrated with the tribunal deciding infavour of the seller.

On appeal the High Court looked at theprinciples of construction, the availabilityof rectification as a remedy and the finalcontract Aikens J found that thearbitrators had erred in law in key parts oftheir decision. Nevertheless, bound bytheir arguably unusual findings of fact, hehad to dismiss the appeal and uphold theaward in favour of the sellers. His reasonsfor doing so, and the impact of thejudgment are considered in an article byBengi Ljubisavljevic (bengi.ljubisavljevic@simsl.com) on the Steamship Mutualwebsite at:

www.simsl.com/Berlian0908.html

Contractual Terms - Be CarefulWhat You Sign

Rightship is a ship approval systemmaintained by three of the majoroperators in the coal and iron ore market- BHP, Cargill and Rio Tinto. Its aim is toidentify suitable vessels for that trade.Significant dry bulk operators in, forexample, Australia and Brazil, requirevessels to be approved by Rightship.Rightship rate vessels in three categories:

• Three, four or five star rating meansthe ship is an acceptable risk

• Two star rating means Rightship mustbe contacted for further review and

• One star rating means a moredetailed investigation is required.

The rating is compiled on algorithmsoftware which takes account of 50factors. Of those factors that are known,these include such things as yard, owner,PSC history and ISP certificates. Vesselsover 18 years of age are automaticallydowngraded to a two star rating andrequire a physical inspection.

Steel J recently gave judgment on appealfrom a London arbitration award on therequirement to obtain that approval. Thecharter made no mention expressly of arequirement to have Rightship approval.However, the charter did contain theusual NYPE obligations as to keeping thevessel in a thoroughly efficient state interms of “hull, machinery andequipment, with all certificates necessaryto comply with current requirements ofall ports of call.”

The decision in Seagate Shipping Ltd vGlencore International AG “The SilverConstellation” is reviewed by Sian Morris(sian.morris@simsl.com) in an article onthe Steamship Mutual website at:

Requirement to Obtain RightshipApproval

www.simsl.com/Silver0908.html

Sea Venture newsletter Issue 12 21

Anti-SuitInjunctionsContrary toEU Law

In an article in issue 8 of Sea Venture of May 2007,the implications of the House of Lords referral of the“Front Comor” to the European Court of Justice(“ECJ”) to decide whether English courts can issueanti-suit injunctions (“ASIs”) preventing a party to anarbitration agreement from submitting a dispute to acourt in another EU member state were discussed;

The English courts continue to issue ASIs to protectarbitration despite their obligation under the ECJudgments Regulation to allow EU courts seized earlierto determine their jurisdiction first. English Judges sayarbitration proceedings are expressly excluded fromthe Judgments Regulation and so court proceedings toprotect arbitration are also excluded.

Subsequent to the referral of the “Front Comor” theECJ asked its Advocate General to prepare an opinion.This was published on 4 September 2008.

The view of the Advocate General is that an EU court,which would otherwise have jurisdiction over adispute, has the right to decide whether it shoulddecline jurisdiction in favour of arbitration. An ASIgranted by the court of another member state is aninterference with that right, notwithstanding the factthat ASIs are designed to protect arbitrationproceedings. They are therefore impermissible.

Although the ECJ is not bound to follow the opinionof the Advocate General it is probable it will do sowhen the judgment is issued in a few months. If so,and while the English courts may retain power to issuean ASI against conflicting proceedings outside the EU,there will be consequences for contractually agreeddispute resolution clauses providing for arbitration ifproceedings are commenced in another member stateof the EU.

Article by David Semark of Reed Smith.

The U.S. Coast Guard (USCG) has given notice that with effect from 22 August 2008 it will enforce therequirement for the owner and operator of U.S. or foreignflag nontank vessels of 400 GT and above operating inU.S. waters to prepare and submit a nontank vesselresponse plan (NTVRP). Plans must be submitted no lessthan 30 days prior to operating in U.S. waters.

An email alert sent to Members in July gave noticeabout the commencement of the enforcement regime.Operational controls exercised by the USCG mayinclude: denial of port entry until the NTVRP issubmitted, requirements for additional preventionmeasures, a penalty for non-compliance.

Further information, including background to theregulations and recommendations to ensure compliance,is available on the Steamship Mutual website at:

U.S. -Enforcementof NontankVesselResponse PlanRequirements

www.simsl.com/USNontankEnforce0708.html

www.simsl.com/FrontComor0407.html

Sea Venture newsletter Issue 1222

In Rocky Cain v Transocean Offshore USAInc. the question as to what constitutes a vessel and, in turn, whether an injuredindividual can pursue a Jones Act claimfor damages in tort when working on a structure under construction was considered.

Rocky Cain, a toolpusher, was assignedto the construction of a semi-submersiblerig called the “Cajun Express”. Heworked on the structure whilst it wasunder construction, under tow and whilemoored in a floating shipyard.

Cain allegedly suffered injury when he hithis head on a light fixture and suedTransocean under the Jones Act. Heclaimed that the “Cajun Express” shouldbe deemed a vessel under the Jones Act.Transocean countered that it could notbe considered to be a vessel as, while it

could perform its intended functionunder limited conditions, it was not fitfor its purpose of drilling a deepwaterwell in the Gulf of Mexico.

The District Court for the Western Districtof Louisiana held that the “Dutra”definition of a “vessel” applied to the“Cajun Express” and that Cain couldtherefore maintain his claim as a JonesAct seaman. The Fifth Circuit reversedthe District Court’s decision upon appealfrom Transocean.

In an article written for the Club’swebsite Richard Allen (richard.allen@simsl.com) reflects upon this importantFifth Circuit ruling, the earlier rulings in“Dutra” and “Holmes”, a further relevantauthority, and the ongoing considerationof what constitutes a Jones Act vessel:

Structure under Construction - a JonesAct Vessel?

www.simsl.com/Cain0908.html

The UAE ratified the Convention on theLimitation of Liability for Maritime Claims("the 1976 Convention") in 1997 (FederalDecree No. 118 of 1997). For that reasonit might not be expected that it would becontentious as to whether or not the UAEcourts would enforce a carrier's right tolimit under the 1976 Convention.

Traditionally, however, the UAE courtshave been reluctant to uphold theconcept of limitation, which runs contraryto well established religious, moral andlegal customs that require harm to becompensated in full. In addition, separatelimitation provisions already exist in theUAE Maritime Code.

For these reasons it was uncertainwhether the local courts would apply the1976 Convention at all. However, a recent

judgment of the Dubai Court of Cassationhas now confirmed that the 1976Convention has the force of law in theUAE and accordingly must be applied bythe lower courts. The judgment has alsoacknowledged a defendant's right to limitliability, subject to a claimant advancingevidence to defeat that right.

Issues remain, however, and it has yet tobe seen whether the lower courts will givefull effect to the meaning and intent ofthe 1976 Convention.

The position is discussed in more detail in an article written by Simon Cartwrightand Ann Mazzucco of Holman Fenwick & Willan for the Steamship Mutualwebsite at:

Dubai Court of Cassation ConfirmsApplication of 1976 Convention

www.simsl.com/UAELimit0908.html

Sea Venture newsletter Issue 12 23

Website Articles

• U.S. - Rule B Prevailswww.simsl.com/RuleBConsub0908.html

• Georgia - War Riskswww.simsl.com/GeorgiaWR0808.html

• California - New Low-Sulphur Fuel Regulationwww.simsl.com/CARBNewRegs0708.html

• South Africa – Repatriating Stowaways www.simsl.com/SAStowaway0708.html

• U.S. NVMC – New eNOA/D Website Addresswww.simsl.com/USeNOAD0708.html

• Chittagong – Indian White Sugar Testingwww.simsl.com/IndianWhiteSugar0708.html

• U.S. Coast Guard Requirements for HydrostaticTesting of Bunker Lines www.simsl.com/USBunkerLineTest0708.html

Circulars

• Entry into force of the Bunker Convention – State Certification

The Club recently issued circular B.475 giving guidanceto owners of vessels registered in non-party states as tothe circumstances in which state parties to theConvention are prepared to issue certificates for suchvessels. In order to ease the administrative burden onstate parties, Members who own or operate suchvessels are encouraged to contact the Club as soon aspossible to assist in determining the most appropriateissuing state and to allow the Club to issue the BlueCards. In addition, a revised “Financial Responsibility inRespect of Pollution” pollution charterparty clause,amended to reflect the Bunker Convention coming intoforce, was annexed to the circular. Members shouldensure that the necessary certification is in place beforethe clause is used. Further details, including a list ofcontracting states, can be found in the circular at:

www.simsl.com/Circulars-Bermuda/B.475.pdf

In addition, the International Group Secretariat hasproduced a list with contact details for all state partiesfor the purposes of obtaining certificates. This can befound at:

www.simsl.com/BunkerCerts0808.html

RecentPublications

For further information please contact:

Steamship Insurance Management Services LimitedAquatical House,39 Bell Lane, London E1 7LU. Telephone: +44 (0)20 7247 5490 and +44 (0)20 7895 8490 Email: seaventure@simsl.com

Website: www.simsl.com