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Legal analysis: Deep Sea Maritime Limited vs. Monjasa

Ananya Pratap Singh provides an in-depth legal analysis on the case involving the Hague rules.

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The following article has been written by Ananya Pratap Singh, an Indian lawyer and arbitrator, currently associated in international projects. He was called to the Bar Council of India in 2017 and to the Bar Council of Delhi, India in 2016; and has also been awarded the Member grade by the Chartered Institute of Arbitrators and the Singapore Institute of Arbitrators in 2018:

Article III, Rule 6 of the Hague rules provides that a carrier will be released from all liabilities except if the shipper sues the carrier within one year from the delivery (emphasis added) of the cargo thus creating a time bar.

But does the word 'delivery' include 'misdelivery' as well?

In a recent English case of Deep Sea Maritime Limited vs. Monjasa A/S EWHC 1495 (Comm), the court answered this question in affirmative.

In this case, Article III, Rule 6 was contractually incorporated into the bill of lading and the shipper discharged cargo to another ship without production of the relevant bill of lading thereby attracting a misdelivery claim.

Introduction
In the case of Deep Sea Maritime Limited vs. Monjasa A/S[2018] EWHC 1495 (Comm), the Commercial High Court (QB) dealt with the issue of whether the requirement in Article III Rule 6 that “suit is brought within one year after delivery of the goods or the date when the goods should have been delivered” can ever be satisfied if proceedings are commenced in the courts of one country, when the bill of lading incorporates a clause from a charterparty giving exclusive jurisdiction to the courts of another country. Detailed case analysis given below:

Factual Matrix
Owner of a Vessel, acknowledged shipment on board the vessel of some amount of bunker fuel by a bill of lading (Bill) for different purposes related with voyage. Monjasa was the shipper of the Cargo. Clause 1 of the Bill, printed on the reverse in the usual way, provided:
 

“All terms and conditions, liberties and exceptions of the Charter Party dated as overleaf, including the Law and Arbitration Clause are herewith incorporated”.

The Bill did not further identify the charterparty referred to. But later on it was agreed that this was a reference to a time charterparty between Owners and Unitaes Energy Sources Company Limited (“Unitaes”). Later, a company (Babecca) agreed to perform the obligations of Unitaes under the Charterparty.

Thereafter, Monjasa sold the Cargo to Unitaes under a contract of sale but payment under that letter of credit was declined due to alleged documentary discrepancies. Owners discharged the Cargo under instructions given pursuant to the Charterparty, without production of the Bill. Monjasa commenced four sets of proceedings in relation to the alleged non-delivery of the Cargo.

Arbitration Clause in Charterparty
Clause 46 of the Charterparty provided:
 

“This charter shall be governed and construed in accordance with English law and any dispute arising out of or in connection with this contract shall be referred to high court in London, England. In cases where neither claim nor any counterclaim exceeds the sum of united stated (sic) dollars 50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA small claims procedure current at the time when the arbitration proceedings are commenced”.

The words in clause 1 of the Bill were sufficient to incorporate clause 46 (“the Exclusive Jurisdiction Clause”) in the Charterparty into the Bill. The Hague Rules as set out in the 1924 Convention were incorporated into the Bill, taking effect as a matter of contract.

Applicable Legal Principles
Article III Rule 6 of the Hague Rules
 

“In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.”

Analysis
Citing Parker LJ from Hispanica de Petroleos SA v Vencedor Oceanica Navegacion S.A. (The Kapetan Markos NL) [1986] 1 Lloyd’s Rep. 211 at 213, the Court observed in certain circumstances a defence under Art. III, Rule 6, might be defeated by the fact that another suit had been brought elsewhere. It was explained by giving following example:

“Suppose for example that a cargo-owner were to sue in New York within time and that there was no doubt but that the New York Court had jurisdiction to hear the claim. Suppose further that the shipowner, whilst acknowledging jurisdiction, applied for a stay on the ground that New York was a forum non conveniens and that the forum conveniens was London. Finally suppose that the shipowner lost at first instance but won by a majority in the Court of Appeal and that, time having expired in the meantime, the cargo-owner then issued a writ in London. In such circumstances it would appear at least arguable that art. III, r. 6, did not apply. If such a situation ever arises the matter will then fall for decision.”

This was termed as “enforced substitution” of proceedings in one forum for proceedings in another, where the action commenced by the claimant in a jurisdiction came to an end for reasons arising independently of the claimant’s conduct because a court decided that if the claim was to be pursued, it should be pursued in another forum.

The Court observed that one such context is where the bill of lading contract gives the parties, or the defendant, a right to elect in favour of arbitration after a dispute has arisen, and the election is exercised both after proceedings have been commenced timeously in court and after the expiry of the Article III Rule 6 period.

The other context in which there is enforced substitution of proceedings by reason of a court order is where proceedings are commenced in breach of an arbitration agreement, and a stay is sought under Section 9 English Arbitration Act.

The Court cited the case of Thyssen Inc v Calypso Shipping Corporation S.A. [2000] 2 Lloyd’s Rep. 243 where the Court considered the position when US proceedings had been brought in time but stayed in favour of London arbitration. It would have been possible to resolve the case by reference to the “enforced substitution”, with the claimant’s conduct in commencing the original proceedings in breach of the arbitration clause precluding the US proceedings from constituting the bringing of suit. However, the Court addressed the issue on a wider basis. It rejected the suggestion that the commencement of proceedings in a court with jurisdiction to determine the issue on the merits was sufficient, for all time, to prevent Article III Rule 6 operating in subsequent proceedings, describing this as a proposition “of breathtaking proportions” which would give “rise to absurd results”.

In the Thyssen case, the reference to arbitration occurred 7 days after the New York proceedings had been stayed, so that there was no point in the life of the second proceedings when the first set of proceedings remained “valid and effective”. This issue was considered in Fort Sterling Ltd and another v South Atlantic Cargo Shipping NV and others (The Finnrose) [1994] 1 Lloyd’s Rep. 559 in which cargo interests had responded to the application to strike out for want of prosecution by issuing fresh proceedings. In The Finnrose the Court inter alia held an action brought in breach of an exclusive jurisdiction or arbitration clause, is not, at any rate under English law, a nullity.

Conclusions
Drawing these strands together with regard to the issue of whether the English Court will regard proceedings commenced in a foreign court in breach of an exclusive jurisdiction or arbitration clause as “suit” for the purposes of Article III Rule 6 in respect of the issue of whether proceedings before the English Court are time-barred, the Court responded in negative holding ordinarily the English Court will not do so.

That will be the case even if the foreign court might itself allow the proceedings there to continue notwithstanding the clause (e.g. because they adopt a different test of incorporation of jurisdiction or arbitration clauses or because of different concepts of ordre publique).

The held that however, it does not follow that the English Court should always be willing to give a declaration that a claim brought in a foreign court in breach of an arbitration or exclusive jurisdiction clause is time-barred in the proceedings before a foreign court. In particular, it might be argued that the particular issue of what constitutes the bringing of “suit” in a jurisdiction involves questions peculiar to that jurisdiction, rather than simply issues of English law as the proper law of the bill of lading contract.

The Court further gave a reason for caution stating that it is possible to conceive of circumstances in which an English Court might allow proceedings commenced here in breach of an exclusive jurisdiction clause to continue, and, if it did so, it seems eminently arguable that those proceedings could be relied upon as an answer to any Article III Rule 6 defence advanced in that action.

Published: 6 July, 2018
 

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Winding up

Singapore: Liquidators schedule final meeting for Sejahtera Shipping and related companies

Final meetings will be held at 9 Raffles Place, #19-21 Republic Plaza Tower 2, Singapore 048619 for Sejahtera Shipping, Molek Shipping and Madu Shipping.

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The final meetings of Sejahtera Shipping Pte Ltd and its related companies have been scheduled to take place on 21 June, according to the company’s liquidators on a notice posted on Monday (20 May) on the Government Gazette.

The other companies are Molek Shipping Pte Ltd and Madu Shipping Pte Ltd. 

The meetings will be held at 9 Raffles Place, #19-21 Republic Plaza Tower 2, Singapore 048619 at the following times:

  1. Sejahtera Shipping at 11am
  2. Molek Shipping at 10.30am
  3. Madu Shipping at 10am

They will be held for the purposes of having accounts laid before the meeting showing the manner in which the winding-up has been conducted and the property of the company disposed of, and of hearing any explanation that may be given by the liquidator.

The details of the liquidators are as follows:

Cheng Sam Tai Catherine
Liquidator
c/o Crowe Horwath First Trust Corporate Advisory Pte. Ltd.
9 Raffles Place, #19-20 Republic Plaza Tower 2, Singapore 048619

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the company. The instrument appointing a proxy must be deposited at the Registered Office of the company not less than 48 hours before the time set for holding the meeting.

Related: Singapore: Sejahtera Shipping and related companies to be wound up voluntarily

 

Photo credit: Benjamin-child
Published: 21 May 2024

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Winding up

Singapore: Final meeting scheduled for World Fuel Singapore Holding Company I

Final meeting will be held on 19 June at 4pm at 8 Marina View, #40-04/05, Asia Square Tower 1, Singapore 018960.

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The final general meeting of World Fuel Singapore Holding Company I, has been scheduled to take place on 19 June, according to the company’s liquidator on a notice posted on Friday (17 May) on the Government Gazette.

The meeting will be held at 4pm at 8 Marina View, #40-04/05, Asia Square Tower 1, Singapore 018960. 

It will be held for the purposes of having accounts laid before the meeting showing the manner in which the winding-up has been conducted and hearing any explanations that may be given by the liquidators.

The details of the liquidator are as follows:

Ho May Kee
Liquidator
c/o 8 Marina View
#40-04/05, Asia Square Tower 1
Singapore 018960

An Annual Report of World Fuel Services Corporation, before it was renamed to World Kinect Corporation, was filed on 24 February 2023 on the US Securities and Exchange Commission website. 

According to the report, World Fuel Singapore Holding Company I was listed as one of its subsidiaries.

Related: World Fuel Singapore Holding Company I to be wound up voluntarily, creditors to submit claims

 

Photo credit: Jo_Johnston from Pixabay
Published: 20 May 2024

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Bunker Fuel

Allianz: ‘Shadow fleet’ of tankers involved in at least 50 incidents including oil spills

Vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills; shadow tankers also participate in ‘dangerous practice of STS transfers in the open ocean’.

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Allianz Commercial marine experts shared some of the major consequences of growing volatility and uncertainties from war and geopolitical events, climate change risk, including the threat the rise of the ‘shadow fleet’ poses to vessels and the environment and the multi-faceted impacts of rerouting. 

The following are excerpts from the original expert risk article by insurer Allianz :

Recent incidents in the wake of the conflict in Gaza have demonstrated the increasing vulnerability of global shipping to proxy wars and disputes. Between November 19, 2023, and the beginning of April 2024, there were more than 50 attacks against merchant shipping in the Red Sea by Houthi militants in response to the conflict. We have also seen the first total loss of a vessel, the first fatal attack, as well as signs that the crisis may have spread following the seizure of a container ship by Iranian forces in the Strait of Hormuz, the world’s most important chokepoint for oil shipping. The Houthi military group has also warned it would target any ships heading to Israeli ports if they are within range.

Disruption to shipping has persisted longer than expected and is likely to remain for the foreseeable future, says Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial. “While we have seen sporadic attacks in the past, the conflict in Gaza has opened the flood gates. Even if a political solution is reached, we may see attacks continue as there is clearly now an opportunity for those wishing to disrupt shipping in the Red Sea and beyond. Ultimately, shipping has become a ripe target for those wishing to wage a proxy war. It opens avenues for terrorists or militia groups to get recognition and hit global markets.”

Rerouting brings supply chain, trade, risk, inflation, and environmental challenges

Attacks against shipping in the Red Sea and Middle East waters, closely following on from the ongoing disruption caused by drought in the Panama Canal, have amounted to a double strike for shipping, causing yet more issues for global supply chains, as well as significantly adding to the distance vessels must sail.

The attacks in the Red Sea have severely impacted Suez Canal transits, while a lack of rain and the El Nino phenomenon contributed to the second driest year in the Panama Canal’s history, also affecting transits.  Both routes are critical for the transport of manufactured goods and energy between Asia, Europe, and the US East Coast.

At the start of 2024 transits in the Suez and Panama canals were down by more than 42% and 49% respectively, compared to their peaks. Whichever route vessels take, they face lengthy diversions and increased costs. For example, avoiding the Suez Canal adds at least 3,000 nautical miles and 10 days sailing time to each trip, rerouting via the Cape of Good Hope.

Businesses that source goods and components from factories in China and South-East Asia have faced delays and higher costs from longer transit times. Some reported rises of 300% for container hire, and logistical delays, adding up to three to four weeks to delivery times, creating cashflow difficulties, and component shortages on production lines.

Such experiences have thrown the shipping industry and the issue of supply chain resilience into the public consciousness, says Khanna.

“Supply chains have been disrupted by a series of events in recent years, from extreme weather and climate incidents, container ship fires and groundings, through to the pandemic and conflicts in Ukraine and the Middle East, not forgetting the recent Baltimore bridge collapse.

“How should the shipping industry and its customers address this challenge? In today’s interconnected environment it is even more important to have a ‘Plan B’ and alternative options. An unexpected event can have a domino effect globally. Shippers around the world should consider diversification of their supply chains and in some cases nearshoring and onshoring might be an option.”

Increased transparency is also part of the solution, particularly when it comes to tracking cargo. While the global risk environment for shipping has changed significantly in recent years, the average shipper still knows very little about the location of their cargo, which makes it very difficult for them to put effective contingency plans in place to minimize disruption. Ultimately businesses will need to update their approach to cargo risk management and business continuity planning, says Régis Broudin, Global Head of Marine Claims, Allianz Commercial.

Rerouting will also require a shift in the shipping industry supply chain, if large numbers of vessels switch to alternative routes around the Cape of Good Hope for a prolonged period. Container lines tend to ply the same established trade routes, but rerouting will require alternative bunkering, supply, repair, and maintenance facilities. The risk environment could be impacted suggests Wayne Steel, Senior Marine Risk Consultant, Allianz Commercial. For example, storms and rough seas could be more challenging for smaller vessels used to plying coastal waters, especially where crews may not be sufficiently trained and equipped for such conditions.

Other areas impacted include container capacity, older vessels being kept in service as longer journeys means an increasing demand for ships, inflation – according to Allianz Trade analysis, a prolonged period of disruption in the Red Sea could cause it to increase by +0.5% – as well as the environment. The disruption in the Red Sea, combined with factors linked to the Panama Canal and the Black Sea in the wake of the Ukraine war, could erode the environmental gains achieved through ‘slow steaming’, as rerouted vessels increase speeds to cover longer distances. The longer distances caused by rerouting container ships from the Suez Canal to the Cape of Good Hope result in an estimated 70% increase in greenhouse gas emissions for a round trip from Singapore to Northern Europe. Shipping diversions from the Red Sea are already cited as being a primary cause of a 14% surge in the carbon emissions of the EU shipping sector during the first two months of 2024.

Ukraine war: ‘shadow fleet’ risk to vessels and environment

A gradual tightening of international sanctions on Russian oil and gas exports over the past three years since its invasion of Ukraine has resulted in the emergence of a sizable ‘shadow fleet’ of tankers, mostly older vessels that operate outside international regulation and often without proper insurance. This situation presents serious environmental and safety risks in key chokepoints where oil is shipped.

Russia is not the only country to operate a shadow fleet. Iran and Venezuela have used such tankers to circumvent sanctions and maintain oil exports. Estimates put the size of the dark fleet at between 600 to 1,400 vessels, roughly a fifth of the overall global crude oil tanker fleet.

Much of the shadow fleet is likely poorly maintained and may not have undergone appropriate inspections. Shadow tankers also participate in the dangerous practice of ship-to-ship transfers in the open ocean, as well as turning off Automatic Identification System (AIS) transponders to obscure their identity. Vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills. The cost of dealing with these incidents often falls on governments or other vessels’ insurers if one is involved in an incident.

“As long as there are sanctions on countries like Russia and Iran, the shadow fleet looks here to stay,” says Justus Heinrich, Global Product Leader Marine Hull, Allianz Commercial. “Given the age of the vessels in the shadow fleet, safety is a big concern. Often these vessels are at the end of their operational lives and are used in a high-risk business.”

Note: The full article by Allianz can be found here

 

Photo credit: Shaah Shahidh on Unsplash
Published: 20 May 2024

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