Maritime Commerce Issues - Essay Example

CARRIAGE OF THE GOODS BY SEA TABLE OF CONTENTS PAGES PART I: Legal concepts regulating maritime commerce; application of legal theory for the resolution of problems; principles and techniques in dispute management; laws of maritime commerce and tools and resources they utilise. 1 I. Abstract 1 II. Introduction 1 III Legal theories and concepts and laws regulating maritime commerce 2 PART II: Report advising consignees on their legal claims under their contracts of carriage 7 I. Subject 7 II Problem 7 III Factors Bearing on the Problem 7 IV Discussion 7 V Conclusion 10 1 PART I: Legal concepts regulating maritime commerce; application of legal theory for the resolution of problems; principles and techniques in dispute management; laws of maritime commerce and tools and resources they utilise . Abstract As required by the assignment, this paper consists of two parts, the first one dwelling on the legal concepts that regulate maritime commerce; the application of legal theory for the resolution of problems; the principles and techniques involved in dispute management; the various laws of maritime commerce and the tools and resources these utilize. The second part devotes itself with the issuance of a report advising the consignees in a case involving an explosion within a vessel plying mid-ocean about their claims under the contract of carriage. This report follows the basic format of a staff study report. Introduction The late 17th century saw the entrenchment of the United Kingdom as the supreme master of the world seas. Specifically by 1880, UK had proudly showcased the world's largest naval and mercantile fleets as well as the biggest overseas empire the world has ever seen since Alexander the Great (Killingray 2004, p. 1). The Industrial Revolution and the expanding slave trade necessitated an increased exportation of manufactured goods. Outside UK, the rest of the world was flung in a global system of expanding commerce. All of these necessitated navigation laws, maritime trade laws and international conflict of laws to settle the increasing strife and contentions between the parties to maritime trade i.e. the common carriers , the shippers and the consignees who most of the time represented buyers or importers of products. Today, maritime trade has been complicated with the maritime transportation of hazardous cargoes that brings about degradation in the world ecological and environmental system not to mention wanton destruction, ruin and loss of lives. With the onset of globalisation, global maritime trade in goods has magnified three times in value and doubled in volume since 1970. In UK 600 million tonnes of freight pass through UK's harbors annually and the export 2 earnings in 2005 of the shipping sector reached an astounding 9.4 billion pounds. Inevitably, it caused a hectic maritime traffic that once in a while resulted to troubles and negligence in the shipment of hazardous materials. With 1,900 ships all agog to maximise their trade opportunities, there develops a need to control them and the nature of the cargoes they load in their vessels (Department for Transport, 2007). Such frenetic maritime traffic has spawned the shipment globally of more and more hazardous cargoes and steeply increased "maritime accidents and hazardous cargo spills" (Hekimoglu 2001). Legal Theories and Concepts and Laws Regulating Maritime Commerce The first major effort to regulate maritime commerce and trade came in 1889 when the Washington Conference "discussed regulations for preventing collisions, safety of life, shipwreck salvage and lanes for steamers" among others. It was followed by the establishment of the International Maritime Committee in 1897 which took up the legal aspects of merchant shipping and tackled the subject of globalisation of maritime law (Braithwaite & Drahos 2000, p.420). The UN Conference on Law of the Sea which engendered The Law of the Sea Convention was also determined to resolve these problems as some states pointed out the necessity of establishing regulatory measures that would diminish the occurrences of accidents involving hazardous cargoes while cracking down on substandard shipping. The Law of the Sea , already ratified by 155 nations, presented regulations that would "empower states to stop harmful pollution and ocean dumping caused by previously unregulated states". This treaty was significant because it provided a "unique dispute resolution mechanism that obligates nations to peacefully settle their differences "through the International Court of Justice, binding international arbitration procedures, or special arbitration tribunals with expertise in specific types of disputes" (Kraus 2007). In 1924, UK and a host of other countries realized the importance and necessity of setting up international rules for the carriage of goods by sea and thus the Hague Rules and its amendment the Brussels Protocol of 1968, better known as the Hague-Visby Rules came into being. It thus became a high milestone in the development of laws regulating maritime activities and resolving maritime disputes between parties. 3 It first clarified concepts by defining key terms. It defines a 'carrier' as including "the owner or the charterer who enters into a contract of carriage with a shipper" (Art. 1a) and the 'contract of carriage' as pertaining exclusively to "contracts of carriage covered by a bill of lading or any similar document of title" (Art. 1b). It also defined 'carriage of goods' as that period beginning :from the time when the goods are loaded on to the time they are discharged from the ship" (Art. 1e) and that such carriage of goods holds a concomitant responsibility and liability as well as an obligation to exercise due diligence (Art. 2&3). The Hague-Visby Rules also set the liabilities of the carrier and the shipper with respect to loss or damage of goods as it absolves from liability the carrier in instances of force majeure (specifically fire, which however, brings liability to the carrier when it is guilty of actual fault or privity that resulted to the fire); act of enemy; act or omission of those given the obligation to navigate and manage the ship; and perils, dangers and accidents of the sea", riots and strikes; insufficiency of packing and inadequacy of marks as well as latent defects not discernible by due diligence (Art. 4(2). To effectuate the provisions of the amended Hague-Visby Rules, the UK Carriage of Goods by Sea Act of 1971 was enacted and thus repealed the 1924 Hague Rules (Laryea 2003,p.56). However, it had been the consensus of many that the Hague-Visby Rules suffered from many shortcomings such as it covers only outgoing shipments from UK and not ingoing or imports and that it applies only to contracts evidenced by bills of lading or similar documents such as mate's receipt which had been traditionally accepted (Kum v Wah Tat Bank Ltd). Because of such and other shortcomings, the UN organized in 1978 the UN Convention on the Carriage of Goods by Sea in Hamburg, Germany and the resultant set of rules became known as the Hamburg Rules (Yiannopoulos 1995, p. 8). This time it covers all contracts for the carriage of goods by sea whether evidenced by or not by a bill of lading (Art.2) and to all carriage of goods whether exports or imports (Gillies & Moens 1998,p. 183). This time too, charter parties are excluded from its ambit as it emphasises exclusivity for contracts with common carriers (Art. 2(3). An innovation also involved the inclusion of deck cargo and live animals within the ambit of the Hamburg Rules. Previously the carrier escapes liability when deck cargo and live animals perish during the voyage but the Hamburg Rules changed that. As for example, the carrier was made to answer for the loss of a tractor that was washed overboard from its position in the deck despite the presence of a clause releasing him from liability in case 4 of loss or destruction of goods stored in the deck (Svenska Tractor v Maritime Agencies). While before the carrier was at full liberty to store goods in the deck, the Hamburg Rules put a rein on such liberty and required the carrier to seek out an agreement with the shipper that the goods be stored in the deck. The exception is if the regulations, rules or usage allow the storage of such goods in the deck. The Hamburg Rules stood out because it clearly provides the liabilities involved in the shipment of dangerous cargo. The Hamburg Rules increases the liabilities and responsibilities of the carrier over the cargo. This is a departure from the Hague-Visby Rules which exonerated the carrier from liabilities in so many instances. As for example in the case Pyrene Co. Ltd v Scindia Navigation Co. Ltd., the carrier had to answer liability for the damage of goods even if such occurred before the goods had crossed the rails of the ship. This was because the Hamburg Rules dictates that carrier has responsibility over the goods from the time of the receipt of goods to the time of its discharge. The Hague-Visby Rules is less harsher as it rules that its responsibility over the goods commences from the moment it loads up to the moment it discharges from the ship (Yiannopoulos 1995, p. 106). The carrier's liability also encompasses all damages done to the cargo while it is in the control of the carrier even if such damages are the result of negligence by ship repairers hired to fix the ship to make it seaworthy prior to ship departure (Riverstone Meat Co. Ltd v Lancashire Shipping Co. Ltd.). The Hamburg Rules widens the concept of who the carrier is while the Hague-Visby Rules limits the identity of the carrier to the actual ship owner who inked the contact of carriage of goods, the former embraces everyone who performs the role of carrier of the carriage of goods. Thus such should include the owner of the lighter vessel to which the goods are deposited from the port for transferral to the carrier's vessel as well as the time charterer who also performs the duties of a carrier (Canastrand Industries Ltd v The Lara S). While the Hague-Visby Rules provides for 17 instances where the carrier is exempted from liability over the goods, the Hamburg Rules only provide three and these are in the areas of live animals, fire and deviation. Naturally, common carrier firms strongly advocate for the use of the Hague-Visby Rules while the Hamburg Rules gains support from the shippers (Gillies & Moens 1998,p.179) because the provisions of the Hague-Visby Rules and the Hamburg Rules are used to settle disputes between the shipper and the carrier. Most of the major trading nations like 5 USA, Japan and most EU countries are proponents of the Hague-Visby Rules while Australia and most of the developing nations like the African countries accept the Hamburg Rules (Gillies & Moens 1998, p.178). One possible explanation for this trend is that developed nations tend to foster and support their shipping industry, which will be greatly affected when cargo owners or their subrogated insurers file legal action against the common carriers, whose liabilities are increased under the Hamburg Rules (Berlingieri 1994,p.30). Other than the use of the Hague-Visby Rules and the Hamburg Rules, maritime disputes are also settled by local courts such as English courts, using the principle of lex fori and marine arbitrators such as the London Maritime Arbitration Association arbitrators who also play active roles in international maritime dispute settlements (Berlingieri 1994, p 630. These international arbitrators who are esteemed solicitors or barristers with a minimum of 5 years experience as such, elevate maritime arbitration as art and science and base their decisions on the provisions of Arbitration Act 1996, the Small Claims Procedure of 2002 , Fast and Low Cost Arbitration (FALCA) and Mediation Terms 2002. The Association has reaped resounding success evidenced by the fact that in 2006 alone, 2,500 new arbitration cases had been submitted to it for resolution and that more maritime disputes are proffered to it than to any other place where services in arbitation are offered (London Maritime Arbitrators Association, 2009). The techniques and procedures used are similar to court procedures making use of claims and counterclaims fully buttressed by documentary and oral evidence as well as pleadings. Another technique is the so-called ADR or alternative dispute resolution, which is defined as "any process that leads to the resolution of a dispute through the agreement of the parties without the use of a judge or arbitratotr" (Blackshaw & Asser 2002,p.7). The enactment of the UK's Carriage of Goods by Sea Act 1992 marks another milestone in maritime regulation and dispute settlement. For the first time, possession of a sea waybill by either shipper or consignee was deemed a valid contract for carriage of goods by sea. Prior to this, both the Hague Rules and the Hague-Visby Rules excluded seaway bill from negotiable documents of title like a bill of lading that gives validity to a claim made by a shipper or consignee. The consignee who is a legitimate holder of a bill of lading is now authorised to sue the carrier in contract despite the fact that it doesn't suffer the loss and doesn't eventually become the owner of the goods. This Act also legitimises the International Safety Management 6 Code or ISM Code as a valid international standard of ship operation. The ISM Code demands that the carrier and all its personnel follow the standards and adopt a Safety Management System for their vessels, which among others include procedures that would entail promotion of environmental protection and navigation safety as well as a reporting and remedying of deficiences. Failure to any of these constitutes failure of due diligence with regard to its seaworthiness (Maxine Footwear Case 1959). The Carriage of Goods by Sea Act 1992 also validates the safety provisions contained in the Marine Liability Act 2001 and the Carriage of Goods by Water Act 1993. To ensure effective regulation of all carriers engaged in commercial trade with the end view of forming a more socially responsible shipping industry which implements higher global standards of safety and with better conditions aboard, the Maritime Labour Convention was convened in Geneva in 2006 (Christodoulou-Varotsi 2007, p.301). This promptly became the 'fourth pillar of the international regulatory regime for quality shipping. 7 PART II: Report Advising Consignees on their Legal Claims Under their Contracts of Carriage I. To: BTV Trading, Holder Mfg., Boeing and El Amigo Sweets From: Subject: Legal claims under the contracts of carriage Date: II PROBLEM: All client companies hereinabove had paid for consignments via letters of credit through HSBS Bank but such consignments were never received due to explosion in the ship which destroyed all consignments. The problem is how to recoup their financial losses by claiming for damages. III. FACTORS BEARING ON THE PROBLEM: It had been discovered that the source of explosion was the concentrated bleach chloride sent by shipper-exporter GSA Traders. Likewise because the carrier Ocean Auspree carried the consignments and because evidences are strong that it failed to exercise due diligence in the reception, acceptance, screening and carrying of a potentially exclusive chemical, it must also be named as a co-defendant with GSA Traders. Because the bills of lading neglected to mention the forum where the complaint must be heard, the proper jurisdiction should belong to an English court because Article 5 par.3 of the Hague-Visby Rules provides that "tort disputes may also be brought before the courts of the Member State where the harmful event occurred or may occur", the harmful event referring to the loading of the bleach chloride where it will be alleged that the carrier committed an act of unseaworthiness by loading such cargo. Thus the jurisdiction belongs to the place where the cargo was loaded (Sea Maas case). Article 5 par. 1 which says that it must be where the goods are delivered cannot be utilised because the goods were never delivered (Baughen & Simon 2004,p.355). Because UK, France, Netherlands and Spain are proponents of the Hague-Visby Rules, the provisions of such must govern. Also because England has natural jurisdiction of the case, then the UK Carriage of Goods Act 1992 must also be utilised IV.DISCUSSION; I would advise Boeing to utilise the UK Carriage of Goods by Sea Act 1992 because through it, it can claim damages despite holding a seaway bill instead of a bill of 8 lading. The Hague-Visby Rules rejects a seaway bill on grounds that it is not a negotiable document of title and thus does not evidence a contract of carriage. I would insist that Boeing should hold Ocean Auspree answerable for the destruction of its rubber seal consignment because such was under its care and it was destroyed while under the supposed contractual protection and care of the carrier. There is therefore prima facie evidence of the lack of due diligence of Ocean Auspree in making the ship seaworthy prior to departure because of the presence of a hazardous cargo that has potential to explode and destroy because of improper packing and all this can be traced to its allowing the loading of a cargo of potentially explosive chemicals. Such lack of due diligence overcomes the defense that shipper did not sufficiently pack and properly label its cargo (Art. 4(2) Hague-Visby Rules) because both mistakes are not latent but are too overt and obvious to the naked eye and can be easily corrected had carrier exercised due diligence. The label "bleach' is too general and thus questionable and prior to releasing bills of lading or in Boeing's case seaway bill, carrier should have inquired as to the nature of the bleach and its concentration and should have investigated whether such chemical is safe or potentially harmful. Had it known that it was a concentrated bleach chloride or a chloride of lime or mainly calcium hypochlorite, which had previously caused explosion of a factory in China called Jiangsu Sopo Corp. on June 11, 2007 (China Chemical Reporter) by the simple process of investigating and questioning, it had 2 options i.e. to deny its loading in its vessel or to ensure it was properly and meticulously packed that leaves no chance for it to explode. By simple research, the carrier should have known that dry or powdered chloride of lime "undergoes self-heating and rapid decomposition accompanied b the release of toxic chlorine gas, heat and oxygen and it being concentrated, insufficient packing could result to explosion (http:chemicalland21.con/industrialchem/inorganic/CALCIUM_HYPOCHLORITE.htm) For such reasons therefore, the Ocean Auspree remains liable for the lack of due diligence or utter negligence. Article 3c of Hague-Visby Rules further damns the carrier because it released a clean bill of lading to the consignees by which action, it is estopped from denying that there is insufficient packing or improper labelling. The bills of lading it issued were in 9 effect, a rebuttable presumption and a conclusive evidence that there is "apparent order and condition of the goods". Article 4 further provides that issuance of such bills of lading are prima facie evidences that the goods were received by the carrier in good order and condition (Art.4). As for Holder Mfg., which is a recipient of the bill of lading who acts in good faith by virtue of its purchase of one container of the concentrated bleach chloride, it should outrightly reject the defense of insufficient packing and improper labelling and must hold Ocean Auspree solely responsible for the damage because Art. 4 also provides that "proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith (Art. 4). BTV Trading can only rightfully claim damages to only one container because it had transferred its rights to Holder Mfg when it sold one container of the bleach. I would also advise it to hold Ocean Auspree liable for its losses not only because it failed to exercise due diligence but the destruction evidenced that carrier failed to"carefully load, handle, stow, carry, keep, care for and discharge the goods carried" and thus violated its contract of carriage with the consignees, who are in valid possession of the bills of lading (Art. 2). I would also advise El Amigo Sweets that like the other consignees it should ask indemnity directly from the carrier and that the law on indemnification claims is expressed by Article 5 of the Hague-Visby Rules which says "the right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper "and such person refers to the consignee. I would inform all consignees that the carrier is also given the right to ask for indemnity from the shipper GSA Traders for all the losses, damages and expenses resulting from the shipper's improper labelling and insufficient packing which are the proximate causes of the explosion (Art. 5). I would further inform the consignees that the carrier is estopped from denying liability and thus indenmnification to the consignee on the basis of Article IV (2)b,I,n,o which frees the carrier from liability on the contention that the carrier is without fault and 10 privity because the shipper caused the damage due to its insufficient packing and improper labelling but as we had earlier emphasised the carrier is guilty of neglect and lack of due diligence which violated its contract of carriage with the consignees and as such it loses the right to push these exempting circumstances as its defenses. However because the cost of salvage and repair and the cost of cargo claims may possibly send Ocean Auspree to bankruptcy, I would also advise the consignees to include the shipper as a co-defendant who may be held jointly and severally liable with Ocean Auspree on the basis of Art. 5 which requires the shipper to pay indemnity to the carrier. But when carrier loses the capacity to pay damages to the consignees, consignees may ask the court that such indemnity be paid to them directly. V. CONCLUSION Due to the failure of the carrier Ocean Auspree to exercise due diligence, which is required of it as a non-delegable obligation to the consignees in its contract of carriage with them and because it had the chance to investigate and check the condition and the identity and safety of the chlorinated beach chloride consignment and yet it did not, violating its contract of exercising due diligence, I would advise the 4 consignees to ask the High Court of England for damages and indemnifications due to their losses. In such case that there is failure to get such damages, I would advise them to sue Ocean Auspree under torts and culpa contractual obligations. 11 REFERENCES Baughen, S 2004, 'Shipping law', Routledge Berlingieri, f 1994, 'The Hamburg Rules', Maklu Blackshaw,I.S., Asser, TMC 2002, 'Mediating sports disputes', Cambridge Univ. Press Braithwaite, J & Drahos,P 2000, 'Global business regulation', Cambridge University Press Canastrand Industries Ltd. v The Lara S (19923) 2FC 553 (1993) 60 FTR China Chemical reporter 2007, 'Explosion in Jiangsu SOPO', June 26, 2007. Christodoulou-Varotsi 2007 'Maritime work law fundamentals', Springer Department of Transport 2007, 'Speech for the Nautilus marine trade union biennial meeting', 16 May 2007http://dft.gov.uk/press/speechesstatements/speeches/nautilusmar Gillies, P., & Moens, G 1998, 'International trade and business', Routledge Hekimoglu, L 2001, 'Globalization, coastal states and the Turkish straits', http://denizhukuku.bilgi.edu/tr/doc/ibuconferencepaper_1h%5BI%SD.doc Killingray, D., Lincoln, M., & Rigby, N 2004, 'Maritime empires: British imperial maritime in the 19th century', Boydell Press. Kraus, D. 2007, 'Time to ratify the law of the sea, June 6, 2007. http;//www.fpif.org/fpiftxt/4286 Kum v Wah Tat Bank Ltd. 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