NAROTTAM MORARJEE

INSTITUTE OF SHIPPING

MUMBAI

STUDY MATERIAL

LAW OF SEA TRANSPORT

FINAL YEAR 2019

REGD. OFFICE
76, Jolly Maker Chambers No.2
Nariman Point, MUMBAI-400021 (INDIA)
Tele: +91-22-22024110 or +91-22-22022495
E-mail: [email protected]
Website: www.nmis.net
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING
MUMBAI

LAW OF SEA TRANSPORT FIINAL YEAR

CONTENTS

LESSON TOPIC TOTAL PAGE NO.

NO. PAGES
INDEX 1 1
- INSTRUCTIONS 2 2-3
- SYLLABUS 2 4-5
1 CHARTERPARTIES 13 6 – 18
2 BILLS OF LADING 6 19 – 24
3 INTERNATIONAL CONVENTIONS RELATING TO 3 25 – 27
BILLS OF LADING
4 COMPARISON OF THE INTERNATIONAL 5 28 – 32
CONVENTIONS RELATING TO BILLS OF LADING
AND MULTIMODAL ACT
5 SEAWORTHY VESSEL 2 33 – 34
6 CARE OF CARGO 2 35 – 36
7 DEVIATION 1 37
8 THE CARRIAGE OF GOODS BY SEA ACT, 1925. 3 38 – 40
9 MULTIMODAL TRANSPORTATION OF GOODS 10 41 – 50
ACT 1993 AS AMENDED IN 2000.
10 CUSTOMS ACT, 1962 7 51 – 57
11 ADMIRALTY JURISDICTION. 4 58 – 61
12 MARITIME FRAUDS. 5 62 – 66
13 SUPPRESSION OF UNLAWFUL ACTS AGAINST 18 67 – 84
THE SAFETY OF MARITIME NAVIGATION*
14 GENERAL AVERAGE AND YORK-ANTWERP 20 85 – 104
RULES
15 SALVAGE AND SALVAGE CONVENTIONS. 31 105 – 135
16 TOWAGE 5 136 – 140
17 COLLISION REGULATIONS. 4 141 – 144
18 OIL POLLUTION. 9 145 – 153
19 INTERNATIONAL CONVENTION ON CIVIL 15 154 – 168
LIABILITY FOR BUNKER OIL POLLUTION 2001*
20 LONDON DUMPING CONVENTION* 6 169 – 174
21 OPRC – HNS PROTOCOL* 3 175 – 177
22 ATHENS CONVENTION. 3 178 – 180
23 THE MERCHANT SHIPPING ACT, 1958. 25 181 – 205
24 CARGO CLAIMS. 6 206 – 211
25 WRECK REMOVAL 2 212 - 213
26 MLC 2006 1 214
3 MODEL TEST PAPERS (COLOUR PAGES) 4 215 – 218

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 NAROTTAM MORARJEE INSTITUTE OF SHIPPING, MUMBAI

INSTRUCTIONS

This guidance material is strictly for private circulation amongst the bonafied students and
members of the Narottam Morarjee Institute of Shipping only.

This material is merely for guidance. It is a skeleton and gives a bird’s eye-view of the
subject. The student must refer to prescribed text books.

Answers must be supported with case law and illustrations. However, full citation is not
essential. Neither is the section number. Nor the actual words of the section. The aim is that
the student understands and appreciates the basic concepts and principles of law: and
learns to apply them to factual situations. A student is not expected to cram or learn by rote.
Nor is the student expected to fill pages to get marks. Answer what is asked. Be precise and
relevant. Marks will not be allotted for quantity but for quality and correctness.

Any unauthorized use, copying or taking extracts of this material for any purpose in any form
without the written permission of the Institute is strictly forbidden and liable for action under
relevant laws.

Basic Readings:

1. The materials given in this course are prepared to provide broad readings on topics
and sub-topics included in the course. Experts in the area have collected the basic
information and thoroughly analysed the same in topics and sub-topics. Lucid/supportive
illustrations have been provided to make the student understand the concept. Relevant
legislative provisions are also included. Care has been taken to communicate information
required for clarity and understanding the concept. Efforts have been made to co-relate the
topics and sub-topics for broad understanding and applications of subjects as and when
required during the course or if you are in employment with shipping concern or related
activities, this exercise would reinforce cogitative process of learning and assist in solving
problems.

2. The reader is advised to read a least three times. The first reading, therefore
necessarily has to be very slow and extremely systematic. While so reading the reader has
to understand the implications of those information’s. In second reading the reader has to
critically analyse the material and link the information with other subjects in the 2nd year
course. It is advisable to jot down the main points in a separate note book points stated in
the material as well as the comments. A third reading shall be necessary to prepare a check
list if required that can be used afterwards for solving problems like a ready recokner. The
reader is required to purchase the key bare acts that are used by the ship or port operators
to move the shipments and executes the relevant contracts.

Supplementary Reading:

3. Several supplementary readings are suggested in the material. NMIs has good stock
of required books and journals etc for the student to refer on regular basis. Supplementary
readings are also required more than once and marginal notes, marking notes, analytical
notes and check list prepared. A reader requiring any extra readings not available at the
NMIS may request the course coordinator and course coordinator shall take prompt action
on receiving the request.

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Problems and Responses:

4. After reading the whole module which is divided into several topics and sub topics,
the reader has to solve the problems specified at the end of each lesson. While solving the
problems the reader is advised to use checklist, the notes and supplementary material or the
relevant bare acts. This would provide confidence to the reader and also in taking the
examination in a structured way and would ensure positive results. After completing the
exercise, the reader is directed to send the same to the course coordinator for evaluation.
The candidates are advised to complete these assignments before he appear for final
examination.

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 NAROTTAM MORARJEE INSTITUTE OF SHIPPING

LAW OF SEA TRANSPORT - SYLLABUS

Sr. LAW OF SEA TRANSPORT - SYLLABUS

No.
1. Charter-Parties: What is COA?; Type of Charter Parties; Important clauses in Charter Parties; Analysis of
certain clauses of charter parties; Effect of charterparty terms on third party Bill of Lading holders; Difference
between - Demise & Non-demise Charters, Voyage charter & Time charter, Charter party & Bill of Lading;
Formal requirement of charter party; construction of charter party – on what principle, by what law;
Frustration of charter party.
2. Bills of Lading : Detailed study of the Bill of Lading and the Indian Bills of Lading Act 1856, with critical
analysis of sections; Functions of Bill of Lading.
3. International Conventions relating to Bills of Lading : Detailed study of Hague Rules, the Hague-Visby
Rules 1968; Protocol amending HV Rules 1979; Hamburg Rules 1978 and UN Convention on International
Multimodal Transport of Goods, 1980.
4. Comparison of the International Conventions relating to Bills of Lading and Multimodal Act:

- Scope of Application of Hague & Hague-Visby Rules on – only Bills of Lading, Outward Bills of Lading,
Not applicable to deck cargo, applicable to deck cargo, not applicable to carriage of live animals,
seaworthy vessel;
- Scope of application of Hamburg Rules & Multimodal Act - All carriage contracts whether evidenced by
BL or not, Outward & inward BL, Applicable to deck cargo, Applicable to carriage of animals;
- Carrier’s Basic responsibility, Contractual & Actual Carrier, Period of Responsibility, Loss due to delay in
delivery, Notice of loss, Limits of liability under Hague & Hague-Visby Rules and Hamburg rules &
Multimodal Act.
- Interpretational problems, Limitation of Action; Jurisdiction, Arbitration under Hague & Hague-Visby
Rules and Hamburg rules & Multimodal Act.
5. Seaworthy Vessel : Definition of Seaworthiness; Unseaworthiness; Ship should be seaworthy on sailing;
Voyage in states; Obligation to exercise ‘due diligence’, Burden of Proof, Effect of Unseaworthiness;
Overriding obligation.
6. Care of Cargo : Care of cargo under Hague Rule; Hamburg Rules, Multimodal Transportation of Goods Act;
Delay in delivery; Period of Responsibility.
7. Deviation : Consequences of Deviation; Justifiable/Reasonable Deviation; Interpretation of deviation clauses;
Interpretation of deviation clauses; Deviation & Freight.
8. Carriage of Goods by Sea Act, 1925 : Purpose of enacting the Act? Application of the Act; Rights &
Liabilities of carriers under the Act; In what areas does the M.S. Act 1958 overrule the Indian Carriage of
Goods by Sea Act 1925.
9. Multimodal Transportation of Goods Act, 1993 as Amended In 2000 : Definition; Regulation of
Multimodal transportation; Multimodal transport document – Issuance, Document of title, contents,
reservation, evidentiary effect, responsibility of the consignor; Responsibilities & Liabilities of Multimodal
Transport Operator;
10. Customs Act, 1962 : Provisions relating to ships carrying imported/exported goods; Vessels carrying coastal
goods; Power to stop & search vessels; Power to confiscate vessel; Penalty for not accounting for goods;
Punishment for evasion of duty prohibitions;
11. Admiralty Jurisdiction: Introduction, Meaning, Origin, Development of Admiralty matters in India,
Admiralty jurisdiction; Composition. Methods of enforcement of maritime liens & arrest.
12. Maritime Frauds: Definition; International Maritime Bureau (IMB); Types of frauds; Phantom Ships;
Protecting against fraud.
13. Suppression of Unlawful Acts against the Safety of Maritime Navigation : League of nations; Harvard
draft; UNCLOS 1982; Convention for Suppression of Unlawful Acts Against the Safety of Maritime
Navigation 1988 [SUA Convention] and The Protocol Of 1988; Piracy Bill 2012.
14. General Average and York Anterwerp Rules 1974 as Amended In 2004 : What is General Average;
Examples of Sacrifice & Expenditure; Essential features; Contributory interests; Amounts made good;
Contributory values; General Average Procedure; York-Antwerp Rules.

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15. Salvage, International Salvage Convention 1989, of 2000, SCOPIC : Definition; Principles of Salvage,
Maritime property; Crew; Passengers, Salvage Agreements; Lloyd’s standard form; Salvage Convention 1989;
Development of SCOPIC (Special Compensation P&I Clause); Advantages & Disadvantages of SCOPIC; The
role of SCI (Special Casualty Representative); SCOPIC in practice; Lloyd’s Standard Form of Salvage
Agreement (LOF 2000).
16. Towage : Definition; Reasons – why does a tow need a tug?; General information; Implied terms; Special
towage contracts; Towhire; Towcon.
17. Collision Regulations : Definition; General guidelines; Steering & Sailing rules; Lights & shapes; Sound &
light signals; Alternative danger, Damages – when the ship is lost and when the ship is damaged but not lost.
18. Oil Pollution : Civil Liability Convention; Application; Strict Liability; Limitation of Liability; Compulsory
insurance, Fund Convention, MARPOL, US Oil Pollution Act 1990; Impact of OPA 90; TOVALOP (Tanker
Owners’ Voluntary Agreement concerning Liability for Oil Pollution), CRISTAL (Contract regarding an
Interim Supplement to Tanker Liability for Oil Pollution Damages).
19. International Convention On Civil Liability For Bunker Oil Pollution 2001 [Bunker Convention]:
Background/Objective for introduction of this Convention; Scope; Liability; Shipowner’s Right of Recourse;
Compulsory Liability Insurance; Direct action against the insurer; Limitation of liability.
20. London Dumping Convention : Convention on The Prevention of Marine Pollution by Dumping of Waste
and Other Matters 1972 [London Dumping Convention] and London Protocol 1996.
21. OPRC – HNS Protocol : International Convention on Oil Pollution Preparedness, Response and Co-
Operation 1995 [OPRS Convention] and The Protocol on Preparedness, Response and Co-Operation to
Pollution by Hazardous and Noxious Substances 2000 [OPRS-HNS Protocol]; What is the OPRC-HNSS
Protocol 2000?; What does the OPRC-HNS Protocol 2000 cover? What are the obligations of parties to the
OPRC-HNS protocol?
22. Athens Convention : Applicability of this Convention; Definitions; Liability of the carrier; Jurisdiction.
23. Merchant Shipping Act, 1958 : Introduction/Definition; Registration of ships; Collisions; Collision &
Limitation of Liability of shipowners; Wreck & Salvage; Civil Liability for Oil pollution damage; Prevention
& Containment of pollution of Sea by oil; Investigations & Inquiries.
24. Cargo Claims: Types of claims – Shortlanding & Partial Loss/damage; Who has the right to cargo claims?;
Time limit; Limitation of liability; Custom duty; Prevention of Loss of/damage to cargo.

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – I

CHARTERPARTIES

1.0 WHAT IS A CONTRACT OF AFFREIGHTMENT?

1.1 When a person agrees to carry goods by sea or to furnish a ship for the purpose of
so carrying, in return for a sum of money to be paid to him, such a contract is called a
Contract of Affreightment and the sum to be paid is called freight.

2.0 CHARTER PARTIES :

2.1 There are basically two types of charter parties:

(a) Bareboat or demise charters.

(b) Non-demise charters which in turn may be voyage or time charters.

2.2 There are many standard charter party forms in use in all the three types of charter parties.
The voyage charter party has most of these standard forms. Apart from the standard charter
parties, there are private or in-house charter parties; own forms of very large charterers and
large shipping companies. Most of these standard forms are very old and out-dated. Therefore,'
together with the above forms, many additional clauses or rider clauses are added depending on
the requirement of the parties. The presence of the additional clauses goes to show that the
standard forms do not fulfill hundred percent needs of the trade. While the old forms favour
ship owners, the recently evolved forms favour the charterers.

3.0 Bareboat or Demise Charters :

1. In the demise or bareboat charter the ship owner puts at the disposal of the
charterer-merely the ship (hence called the bareboat charter) for a specified period
of time, in some cases running into several years.

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 2. The charterer in this case, for all practical purposes, is considered the owner and
the possession and control of the vessel passes on to him for the specified period. He
becomes responsible for operation, management and navigation of the vessel and
the charterer appoints his own master and crew. Here the charterer is also called as a
"disponent owner".

3. The charterer appoints and pays for the master, officers and crew.

4. Master and crew are agents/servants of the charterer.

5. The charterer provides the cargo and also pays during the charter period all
expenses, such as technical surveys, maintenance, operation and all commercial
expenses except the capital cost and hull and machinery insurance premia which
the owner incurs.

6. The charterer takes over full control of the vessel as if he were the owner.

7. The charterer is the appropriate party to the contract vis-à-vis third party.

8. The actual registered ownership still remains with the original owner.

9. Bareboat chartering is not technically a contract for the carriage of goods by sea.
It is a "lease" of the ship, with an option to sell it to the charterer at an agreed
residual value after a period of time.

10. Under this charter the vessel is chartered without any restrictions as to trade
limits on the cargo to be carried.

11. Any damage to (or claims on) the cargo is to be solely made good by the
charterer.

12. The ship owner has lien on the cargo for his charter hire.

13. Any salvage earned by the vessel belongs to the charterer.

14. The owner of the vessel receives a relatively modest hire payment
commensurate with his reduced responsibilities and risks.

15. In times when shipbuilding costs are high, ship owners may resort to chartering
suitable tonnage from other owners on a bareboat-cum-demise basis to meet
their immediate requirements.

16. Financiers wishing to invest in ships but having no expertise to operate them find
this method suitable

17. Bareboat chartering was not common earlier. Hence there were no standard
bareboat C/P contract formats in the past. However, in 1974 BIMCO published
Barecon A and Barecon B which were later amalgamated in 1989 as BARECON,
1989.

4.0 Non-Demise Charters : Non demise charters may be time charters or voyage charters:

4.1 Time charter party:

4.1.1 The ship will be put under the disposal of the charterer with the master and the crew of the
owner rendering service to the charterer on behalf of the owner, for a certain period. The period

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could be either a trip or a period irrespective of the number of trips. Though the cargo is not specified,
generally the type of trade to be covered is mentioned. The payment is in the form of ‘hire' usually
payable on half-monthly basis, in advance.

4.1.2 Two most commonly used and the oldest dry cargo time charter parties are the
"Baltic and International Maritime Conference Uniform Time Charter (the Baltime)" and the
"New York Produce Exchange Time Charter (the NYPE)". The Baltime originated in 1909
and was last amended in 1974. The NYPE is the most commonly used dry cargo form and it
was first issued in 1913. The last revision was in 1993. Its version called ‘Asbatime' was
introduced in 1981. The 1946 version of NYPE is still very popular. Like the voyage charter
parties, even the time charter parties are antiquated, not practical in keeping with the change
of times. One example is a clause on fuel use in the NYPE C/P. It reads as below:

"Fuel used by the vessel while off-hire, also for cooking, condensing water, or for
grates and stoves to be agreed as to quantity and the cost of replacing same to be
allowed by owners."

4.1.3 The Court of Appeal in England had the following to say on the interpretation of the
clause:

"In 1913, which saw the birth of the widely used New York Produce Exchange form of
time charter, the main engines of ships were steam-driven and the boilers were coal
fired. Consequently with this situation, the crew's quarters were equipped with
"grates" for the burning of coal in open fires and "stoves" for doing so in closed fires.
Today, many ships are motor-driven and even when they are not steam is raised
using oil fuel instead of coal. Accordingly, a ship equipped with either a "grate" or a
"stove" must be a great rarity. Nevertheless, despite revision in 1921, 1931 and
1946, the New York Produce Exchange form obstinately continues to refer to "grates
and stoves" and we have been called upon to construe the phrase."

4.1.4 The above two charter party forms, in relation to other forms, are said to be biased
towards ship owners. They are generally said to be loosely worded, vague in concept and
obsolete. They also seem to be imprecise in stating the rights and duties which the parties to
the contract are to recognize with each other. The doors to litigation is thus left open. People
who use these forms have to be careful and it is better to bring in clear cut additional clauses
to avoid confusion but at the same time to take care that the different clauses are not in
conflict with each other.

5.0 Analysis of certain clauses of time charter parties:

5.1 London and New York happen to be the two places where most of the charter party
disputes are decided. The following clauses have posed problems and are contentious
(mainly an analysis of the Baltime and NYPE charter party clauses):

1. Speed and consumption clause

2. Safe port clause
3. Delivery clauses and in that condition of vessel delivery ~ Seaworthiness
4. Cancelling clauses
5. Maintenance clauses
6. Responsibility for loading, stowing and discharging cargo '
7. Inter-Club Agreement

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 8. Cargo responsibility clauses
9. Paramount clauses
10. Indemnity clause
11. Bills of lading issued under time charter parties
12. Payment of hire and withdrawal clauses pertaining to
(a) payment in cash
(b) payment in advance
(c) deduction from hire
(d) withdrawal
13. Off-hire clauses
14. Domestic fuel clauses
15. Re-delivery clauses
16. Lien clauses

5.2 Out of the above, some important clauses are discussed here to give an idea of the kind
of disputes that can arise due to ambiguous clauses.

6.0 Speed and Consumption clauses:

6.1 In the charter party, there is description of the vessel specially with regard to statements of
speed and fuel consumption. This is of importance to the time charterer since he takes over the
operation of the vessel and bears costs in respect of employment of the vessel. The time
charterer will have to provide for bunker fuel. Thus the bunker consumption has a major impact on
his expenditure. Also, since the hire paid by the charterer is related to the period of charter
irrespective of the number of voyages, the speed is an important factor of the contract. The
typical wordings as in Baltime - "Capable of steaming about ....knots in good weather and
smooth water on a consumption of about... .tons best Welsh coal, or about... .tons oil-fuel". The
words 'about', 'good weather', 'smooth water' are all problem areas. These are not defined
clearly. By good weather, it is not known whether it is Beufort Scale force 3,4,5 or 6. Similarly
smooth waters meaning virtually dead calm waters is rarely encountered. In effect, the ship
owner never gives assurance about the actual performance over time. Most of the time
charterparty forms have similar wordings.

7.0 Delivery clauses:

7.1 The Baltime, Linertime, NYPE all provide that 'the owners agree to let and the said
charterers agree to hire the said vessel, from the time of delivery'. These clauses determine the
period of hire i.e. when the vessel through the master and crew is placed at the disposal of the
charterer so that they can give the orders for employment. However, the charter parties use the
terms "delivery" and "let" ambiguously and which seem to be appropriate for lease or demise of a
vessel but not for a time charter. The charterers do not acquire the possessory rights.

7.3 There are always provisions regarding the ship owner's liability/undertaking to deliver the
vessel in a seaworthy condition. The specific wordings notwithstanding, under both the English and
American law, the absolute warranty of the seaworthiness of the vessel on delivery would be
implied even in the absence of express terms. However, the absolute warranty of seaworthiness on
delivery may be reduced by other clauses in the charter to a warranty that only due diligence has to
be exercised by the shipowner to make the ship seaworthy on or before delivery.

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7.4 The above reduction of absolute warranty can be cited in case of NYPE, where there
is incorporation of United States Carriage of Goods by Sea Act through paramount clause. It
reduces the obligation of the shipowner to an undertaking to exercise due diligence to make
the ship seaworthy, before and at the beginning of each voyage under the charter party. The
due diligence is also on the part of the servants and agents of the owner. There is also
considerable variation in national laws/approach in the matter of undertaking by the owners
to maintain the vessel in an efficient state through-out the service.

8.0 Paramount clauses:

8.1 The Hague rules (1924) or the Hague-Visby (1968) rules concerning the Bills of
Lading do not apply to charterparties and in fact not intended so. However, for most of the
time, they are incorporated to various extents into voyage and time charter parties by the
'Paramount clause'. By a specific clause when the Hague or the Hague-Visby rules are
incorporated into the charter-party, it means that the provisions of these rules have an
overriding effect on any express exemption or condition that is inconsistent with them. In the
context of varying national laws with regard to charterparties, such incorporation may have
different effects. For example, under the English law the incorporation into a time charter
may replace both the express absolute warranty of seaworthiness and the implied absolute
warranty of seaworthiness. Under American law however, it reduces the implied absolute
warranty of seaworthiness to an undertaking to exercise due diligence to make the vessel
seaworthy. It does not affect the express absolute warranty that the vessel to be delivered
should be 'tight, staunch, strong and in every way fitted for service".

9.0 Voyage charter party:

9.1 Under a voyage charter party the contract of carriage will be to transport a specified cargo
of a particular quantity over a single voyage or several voyages. The payment terms will be per ton of
cargo loaded/carried or lump-sum basis. The owner undertakes to carry the cargo.

9.2 The oldest charter party forms are the Baltic and International Maritime Conference;
Uniform General Charter (the Gencon), the Baltimore Berth Grain Charter Party (the
Baltimore Form C), the Chamber of Shipping River Plate Charter Party (the Ceritrocon) and
the Americanized Welsh Coal Charter (the Amwelsh). These are still in general use.

9.3 The Americanized Welsh Coal Charter was adopted in 1953 from the Chamber of
Shipping Welsh Coal Charter of 1896. It was amended in 1979. The demurrage clauses of
this charter party are opined to be ambiguous and capable of leading to different
interpretations. Similarly, the Centrocon, which was adopted in 1914 and amended in 1950,
has its strike clause which is very ambiguous. Coming to Gencon, a major criticism is that it
is not comprehensive and requires a number of additional clauses in every case. All in all,
the voyage charterparty forms have been criticized for their outdated and ambiguous clause
in numerous court judgments. All have been found to need total re-drafting.

10.0 Analysis of certain clauses of voyage charterparty:

10.1 The voyage charterparties have their own peculiarities. The analysis of the clauses is
mainly based on the GENERAL PURPOSE DRY CARGO VOYAGE CHARTER, the Uniform General
Charter (Gencon) and Multi-purpose Charter Party 1982, revised in 1986, i.e., Multiform
1982. The following are the clauses which are considered contentious and whose
interpretations have given to a number of disputes.

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 1. Lay time and Demurrage clauses:

(a) Commencement of lay time

(i) Arrived ship
(ii) Notice of readiness
(b) Calculation of lay time
(i) Time lost waiting for berth to count as lay time
(c) Lay time clauses in tanker charter parties
(d) Interruptions to lay time
(e) Demurrage
(f) Despatch money

2. Freight clauses
3. Cesser clauses
4. Deviation clauses
5. Cargo responsibility clauses
6. Arbitration clauses
7. Indemnity clauses

10.2 Analysis of some of the above clauses is presented below:

(a) Lay time and Demurrage clauses:

One of the risks prevalent in the voyage charterparty is the congestion at a port
resulting in waiting delay to vessel till a berth becomes vacant for loading/discharging
of cargo. While some of the modern standard forms like 'Norgrain' clearly spell out
how this risk of congestion is to be allocated, the older forms have the potential for
disputes due to imprecise drafting. Most of the disputes in voyage charterparties
pertain to lay time and demurrage clauses.

Lay time is the time available to the charterer for loading and discharging. Demurrage
is the liquidated or agreed damages for delay beyond lay time. If the charterer
completes the loading or discharging within the permitted lay time and saves time,
then he is entitled to 'despatch' money, which is generally half of the demurrage
money.

(b) Commencement of lay time:

Lay time would commence when the following conditions are fulfilled:

- Vessel has arrived at a pre-appointed place as in charterparty, constituting

'arrived ship'.
- Master/Owner has given notice of readiness to load/discharge cargo.

(c) Arrived ship

Depending on the charter party, whether it is a 'berth charterparty' or a 'port

charterparty', a ship becomes an 'arrived ship' when it arrives at that agreed
destination. In case of berth C/P, the berth is specified where the vessel is to report
for loading/discharging. Under a berth C/P, any time lost before the vessel arrives at
the specified berth, falls on the owners unless otherwise provided.

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While there is usually clarity as to what constitutes an 'arrived ship' under berth C/Ps,
things are not very clear if we go by the port C/Ps particularly the older ones. Some
C/Ps specially the tanker C/Ps do clearly specify that even when a ship arrives at
customary anchorage, a ship would be an 'arrived ship'.

However, most older C/Ps mention words such as, ' the vessel "to proceed to" a port'
which is not clear. These are always disputed as to what is meant by a 'port'--
whether it means the 'customary anchorage' or within the 'legal, commercial and
administrative' area limits of the port. There have been judgements giving different
interpretations.

(d) Notice of Readiness (NOR):

Once a ship has 'arrived', lay time would not begin till the 'notice of readiness' is not
given by the master/agent to the charterer or his representative, or as required by the
charter party. NOR has to be given within certain working office hours and in such a
manner as provided in the C/P. NOR can also be given orally or in writing as per the
C/P. The modern charterparties like 'Multiform 1982' provide the conditions of NOR in
detail and more or less in clear terms while older charter parties like 'Gencon' are
much less specific. C/Ps also make provisions for situations when the charterers start
loading even before the notice of readiness is given or before the lay time has begun.
Generally, such loading prior to NOR has no effect on the requirement of NOR.
Some charterparties spell what is meant by 'readiness'. The Amwelsh charterparty
stipulates that NOR is to be given only when it is 'completely discharged of inward
cargo and ballast in all her holds and ready to load'. The interpretations of the
English courts have been that a ship, in order to be ready to load 'must be completely
ready in all her holds....so as to afford the merchant complete control of every portion
of the ship available for cargo'. The other condition is also that the holds must be in a
fit state to receive the cargo.

(e) Calculation of lay time :

Those clauses which do not expressly fix the lay time but merely use general
references such as "as fast as steamer can receive/deliver", "with all despatch as
customary" etc., have given rise to numerous disputes. The terms and phrases. used
in the above clauses have various interpretations. For example, the phrases like
"weather permitting" and "weather working" have to be used with caution. "Weather
permitting" has been treated as words of exception, only interrupting lay time if
weather actually prevents work. On the other hand, the words "weather working day",
are considered as qualifying the length of the lay time and prevent lay time from
running if the weather would not have permitted work even if no work was intended
or planned. It has been stated by the Courts that " The status of a day as being a
weather working day, wholly or in part or not at all, is determined by its own weather
and not by extraneous factors such as the actions, intentions and plans of any
person.

(f) Demurrage :

According to one of the English courts,

"All overheads and a large proportion of the costs for the running of a ship are
incurred even if the ship is in port. Accordingly, the shipowner faces serious losses if
the processes take longer than he had bargained for and the carrying of freight on
the ship's next engagement is postponed. By way of agreed compensation for those

12
 losses, the charterer usually contracts to make further payments called demurrage at
a daily rate in respect of detention beyond the lay time."

Different national laws have adopted different approaches to the nature of demurrage.
These variations can lead to conflicting decisions by courts and arbitration tribunals. While
most of the charterparties do not limit the period of demurrage, very few charter parties
like the Gencon limit the demurrage period. If, either the charterparty does not contain
demurrage provisions and the lay time has exhausted or the demurrage period fixed is
exhausted before the loading or discharging, then the owner is entitled for the damages
for detention of the vessel. These damages again are determined by national laws, which
may differ widely. A question that would arise is whether the rule "once on demurrage,
always on demurrage" would also apply when a vessel already on demurrage at the
loading port is treated as on demurrage when she arrives at the discharging port? Another
question would be if the charterer is entitled to the benefit of the charterparty notice period
before demurrage recommences? While dry cargo standard forms do not contain express
provisions in this regard, some of the tanker charterparties provide that the demurrage
shall not run during the notice period.

However, some tanker charterparties provide for lay time exceptions to apply to time on
demurrage or provide certain preconditions when the demurrage rate can be reduced by
half. These conditions could include waiting for next high tide, break down of the vessel,
strike, bad weather conditions, fire or explosion, act of god etc.

The strike clauses which have an effect on demurrage, in dry cargo charter parties like
the Gencon, Centrocon, are dispute-prone as their wordings are outdated and ambiguous.
Cargo responsibility clauses

10.3 Voyage charter parties, have provisions regarding the owner's responsibility for loss of
or damage to cargo. In modern charter parties, this responsibility is based on the Hague or the
Hague-Visby rules. This is done through incorporation of a paramount clause or by way of
national enactments or by express clause. Articles III and IV of the Hague/Hague-Visby rules
pertain to cargo responsibility. They place a duty on the carrier to exercise due diligence to make the
ship seaworthy, this is an absolute obligation. However, the requirement of cargo care is subject to
exceptions in article IV. It has been explained earlier that the incorporation of paramount clause
creates difficulty as it is not meant for charterparties but only for bills of lading.

10.4 A number of standard forms do not have incorporated rules as above but contain a variety
of clauses restricting the owners' liability for loss or damage to cargo. One of the most criticised
clause is that of the Gencon (clause 2). The clause was generally taken to exempt the shipowner
from all liability in respect of cargo claims unless caused by bad stowage or by the personal
negligence of a director of tihe ship-owning company or its manager. Consequent to an English
Court judgement however, it was found that shipowners were exempted under the clause for
physical loss or damage to goods but not for financial loss. However the higher Courts carried
different view points on the financial loss. It has been opined that incorporation of a clause like in
Gencon or not, the shipowner will in any case be liable to the cargo owners to the extent of what is
provided in the Hague or the Hague-Visby rules.

11.0 Effect of charterparty terms on third party bill of lading holders:

11.1 Many of the standard voyage charterparty forms are recommended for use along with
standard bills of lading forms. The reason for the coupling of bill of lading forms and charterparty
forms is that the bill of lading incorporate terms of the charterparty. For example in 'CongenbilP-
a standard bill of lading for Gencon, it is stated on the reverse side of it" All terms and-conditions,
liberties and exceptions of the charterparty, dated as overleaf are herewith incorporated." This is to
make-the terms of the charterparty applicable to parties who have an interest in the cargo but who

13
are not charterers themselves. They may be the shippers, bankers or others who are not aware
of charterparty bills of lading. Since the copies of the charterparty do not usually accompany
the above referred charterparty bill of lading, when the shipping documents are negotiated or
transferred, bankers may not accept charterparty bills of lading. However, an endorsee of the
charterparty bill of lading is bound by the terms of a charterparty incorporated by reference into
bill of lading, even when he has not seen the charterparty. Even if the charterparty is available to
the endorsee of the bill of lading for reference, it may not be easy for such a third party to determine
which of the terms are incorporated in the bill of lading, without legal advice. In spite of
incorporation of "all conditions" of a charterparty into bill of lading, still the arbitration clause has to
be specifically incorporated into bill of lading as otherwise this does not apply automatically as
established by the English law. It is not also not a straight-forward matter to determine what other
provisions of the charterparty are incorporated into the a bill of lading by words "all conditions" or
"all terms", as other conditions apart from 'freight' may not effectively apply.

11.2 The charterparty terms relating to the loading, stowing and discharge of cargo may have
a profound effect upon the third party holders of charterparty bills of lading where the words of
incorporation are widely framed. In such a case, for example, the third party bill of lading may find it
difficult to claim damage to cargo in loading or stowage if the charterparty provides that the
shipowner is not responsible for loading and stowage. The other charterparty clauses which may
affect a third party bill of lading holder particularly are the law clauses, lay time and demurrage
clauses and the lien clause. In case of existence of a number of charterers, the reference will
always be made to the head charter.

11.3 It has been well established that where the charterer is the shipper, a bill of lading issued to
the charterer prima facie takes the effect only as a receipt for the goods. If the charterer holding the
bill of lading as a receipt "only, endorses the bill to a third party, the bill of lading there upon
becomes the contract between the third party and the ship owner.

12.0 DIFFERENCE BETWEEN DEMISE AND NON-DEMISE CHARTERS:

12.1 CHARTER BY DEMISE :

 Operates as a lease of the ship itself.

 Owner parts with the whole possession and control of ship to charterer.
 Charterer has a power and right independent of owner; and without reference to
the owner, the charterer can do what he pleases with regard to master, crew,
management and employment of the ship.
 Captain and crew are agents/servants of charterer.
 Charterer is the appropriate party to the contract vis-à-vis the third party.

12.2 CHARTER NOT BY DEMISE:

 The master, by agreement between the owner and charterer, may acquire
authority to sign bills of lading on behalf of the charterer but he nevertheless
remains in all other respects the servant of the ship-owner.
 In voyage charter, the charterer pays freight to ship-owner, which is calculated on
the amount of cargo carried.
 In time charter, the ship owner's remuneration is termed as ‘hire’ and is generally
calculated at a monthly rate on the tonnage of the ship.

14
13.0 DIFFERENCE BETWEEN VOYAGE CHARTER AND TIME CHARTER:

13.1 Voyage charter:

 Ship is chartered to carry an agreed quantity of cargo between two ports.

 freight is paid on per tonne basis or lumpsum.
 Full payment is usually made on loading of cargo or partly on loading and balance
on discharge.
 All port charges, canal dues, costs of bunkers, etc., are bome by the shipowner.
 Usually time allowed for loading/discharging called laytime is agreed. If
loading/discharging is completed after expiry of laytime demurrage is payable to the
shipowner and if the same is completed before expiry of laytime despatch is
payable to the charterer.

13.2 Time charter:

 Ship is chartered for a certain period of time, say, 1 month.

 "hire" is paid on 'per day' basis, that is, US$/Day.
 Payment is made in advance at regular, pre-determined intervals, say, every 15
or 30 Days.
 All port charges, canal dues, cost of bunkers, etc. are borne by the charterer.
 Ship goes "off-hire" for eventualities such as machines, engine / gear breakdown,
etc. as specified in the C/P Hire is not payable or only payable on pro-rata basis
for such periods.

14.0 DIFFERENCE BETWEEN CHARTER PARTY AND BILL OF LAIDING:

14.1 Charterparty:

 It is a contract by itself.
 Non-negotiable
 Used in tramp trade.
 Signed by both charterer and shipowner or by the respective brokers on their
behalf.
 Used for bulk cargoes usually in fqll Ship loads.
 Numerous C/P forms are in vogue depending on types and trades employed.
 The document extends into several pages.

14.2 Bill of lading:

 It is an evidence of contract, but not the contract itself..

 Quasi-negotiable Instrument.
 Generally used in liner trade.
 Signed by only the master or his agent.
 Used for small packages, pallets, containers, etc., in general cargo or "liner"
vessels.
 Normally standard formats of Bs/L are in vogue.
 Usually two sides of a single page

15
15.0 FORMAL REQUIREMENTS OF CHARTER PARTY:

 Formerly charter party made by deed.

 In modern times it is often made by word of mouth and then invariably reduced to
writing.
 Evidence of earlier or contemporaneous agreement(s) not admissible to
contradict, vary or add to written terms of charter party. [This is not so in the case
of BL]

16.0 CONSTRUCTION OF CHARTERPARTY – ON WHAT PRINCIPLE:

 Not unnecessarily strict.

 Best effectuate the expressed intention of parties.
 Court Line v. Finelvet [1966]1 Lloyd’s Rep 683.
 Intention to be collected from terms used and understood in their plain, ordinary
and popular sense unless they have acquired a peculiar meaning distinct from
their popular sense by a known usage of trade/port.
 A custom of trade may control the mode of performance of the contract but
cannot change its intrinsic character.
 It is admissible to explain ambiguity or to add incidents or to annex usual terms
which are not inconsistent with written contract, but not for any further purpose.
Refer to Hutchinson v. Tatham; British and Mexican Co. v. Lockett; Krall v.
Burnett, Hayton v. Irwin.

17.0 CONSTRUCTION OF CHARTERPARTY – BY WHAT LAW:

 Law, which the parties have expressly chosen as the proper law of contract.
 If no express choice of law, then the proper law of contract is that law with which
the contract has its closest and most real connection.
 Importance to be attached to what is to be done under the contract than to
consideration of the form and formalities of contract, example, where there is an
arbitration clause, fixing the place/venue of arbitration is a strong evidence
indicating that the parties wished the contract to be governed by the law of that
place.
 The presumption that law of the flag is the proper law of contract will apply only
as a last resort – Lloyd v. Guibert. In this case, C, a British subject chartered a
French ship at a Danish port for voyage from Hayti to France or England at
charterer’s option. Master at Portuguese port gave a bottomry bond. C paid under
the bond. Called upon ship-owner to indemnify him. Ship-owner abandoned the
ship and freight. This is a good defence under French law but not English law.
Held law of ship’s flag governed the contract.

16
18.0 FRUSTRATION OF CHARTERPARTY:

 Initial impossibility
 Subsequent impossibility or illegality
1. Change in law/legislative or administrative intervention, which renders further
performance of contract illegal.
2. Destruction of subject matter of contract, example, total loss of vessel under
demise charter or destruction by fire of majority of cargo charterer intended to
load. No frustration if cargo was not specific.
3. Non- occurrence of an event essential to the contract
4. Death or serious illness of the promisor (personal services)
5. Supervening circumstances render the contract impossible
a. War
b. Requisition of vessel
c. Blockade, etc. etc.

 To invoke frustration

1. The occurring event must go to the root of the contract

2. It must be unforeseen by both the parties/beyond their control
3. Not due to fault of one party/frustration must not be self-induced
4. Charter party terms should warrant frustration
5. Facts and circumstances must exist to terminate contract.

 Commercial hardship does not justify frustration

 Defence of frustration can be rebutted by proof of fault. Burden/onus of proof lies
on the party alleging.

18.1 The following cases on frustration of charter-parties are popular and oft-quoted:

1. Bank Line v. Arthur Capel.

2. Tamplin Steamship Co. v. Anglo-Mexican Petroleum.
3. Admiral Shipping v. Weidner, Hopkins & Co.
4. Fibrosa Spolka v. Fairbairn Lawson.
5. The Evia(No.2).
6. The Wenjiang.
7. Ocean Tramp Tankers v. Sovfracht.
8. Palmo Shipping v. Continental Ore.
9. Maritme'National Fish v.Ocean Trawlers.
10. Super Servant Two.
11. Joseph Constantine Steamship v. Imperial Smelting.

[Refer to the above cases in the prescribed book].

ooooo

17
 SELF-EXAMINATION QUESTIONS
(All answers should be brief and to the point)
1. What is a contract of affreightment?
2. How does a charter-party differ from a bill of lading?
3. What is the status of a bill of lading jssued under a charter-party?
4. Briefly mention the important characteristics of non-demise charter-parties.
5. What are the salient features of a bareboat-cum-demise charter-party?
6. How does a bareboat charter-party differ from a time and voyage charter-party?
7. List out the implied undertakings in a charter-party.
8 Under what circumstances can the "doctrine of frustration" apply to
charter-parties? Support your answer with appropriate case law.
9. Is commercial impossibility a ground for avoiding a C/P?
Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by
Dr. (Mrs.) Nilima Chandiramani - Chapter 2, Pages 3-10.

RECOMMENDED FOR FURTHER READING

I. Carriage of Goods by Sea - Hardy lvamy, 12"1 Ed., 1985.

The book is written in an easy,, straight forward style by an author whose experience as a
teacher has shown him exactly what is required by students.
Chapter 2 (Pages S-70) deals with Charterparties.

2 .Maritime Law - C.Hill, 4th Ed., 1995.

This thoroughly accessible book, published by Lloyd's List, has been completely revised.
Frequent references are made throughout the book to case law to illustrate how the law
operates in practice.

Charterparties are covered in great detail in Chapter 5 (Pages 185-247). Chapter 13 is also
useful for the paper on "Advanced Charterering & Shipbroking Practice."

3. Law Relating to Bs/L, C/Ps & COA - B.C. Mitra's, 2nd Ed., 1993.
It surveys almost the entire field of bills of lading, charterparties and contracts of
affreightment and focuses on essential features of practical importance.

4. Chorley & Ciles* Shipping Law ~ Gaskell, etc, 8th Ed., 1988.
A standard work used all over the world by students of maritime law. The book contains all
aspects of shipping law and is an excellent reference book.
Please refer to Part Two-Chapters 10,11 and 12.
Also useful for your paper on "Advanced Chartering & Shipbroking Practice".

5. Scrutton on Charterparties & Bills of Lading - Mocatta, etc., 18th Ed., 1974.
Considered as an authority on Charterparties & Bills of Lading. Recommended for serious
students who wish to study the subject in great detail.

6. Carver's Carriage by Sea Vol. 1 - RColinvaux, 12th Ed., 1971.

Also considered as an authority on carriage of goods by sea. However students are warned
that some of the cases discussed here may not be good law today in view of the recent
developments in maritime law, viz., Hague, Hague-Visby, Hamburg and U.N. Conventions
on Multimodal Transport
7. Chartering Documents- H.Williams, 3rd Ed, 1996
8. Laytime – M.Sumerskill, 3rd ed, 1982
9.Timecharters – Wilford, 1st ed, 1982

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18
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 2

BILLS OF LADING

1.0 As stated in the previous lesson a contract of affreightment may be contained in a

charter party or evidenced by a bill of lading.

1.1 In this lesson we shall discuss the law relating to bills of lading as well as the
functions of a bill of lading with the help of numerous case laws.

THE INDIAN BILLS OF LADING ACT, 1856

2.0 AN ACT TO AMEND THE LAW RELATING TO BILLS OF LADING:

2.1 Whereas by the custom of merchants a bill of lading of goods being transferable by
endorsement, the property in the goods may thereby pass to the endorsee but nevertheless
all rights in respect of the contract contained in the bill of lading continue in the original
shipper or owner and it is expedient that such rights should pass with the property and
whereas it frequently happens that the goods in respect of which bills of lading purport to be
signed have not been laden on board, and it is proper that such bills of lading in the hands
of a bonafide holder for value should not be questioned by the master or other persons
signing the same, on the ground of the goods not having been laden as aforesaid, it is
enacted as follows:-

1. Rights under bills of lading to vest in consignee or endorsee : Every

consignee of goods named in a bill of lading and every endorsee of a bill of lading to
whom the property in the goods therein mentioned shall pass, upon or by reason of
such consignment or endorsement shall have transferred to and vested in him all
rights of suit, and be subject to the same liabilities in respect of such goods as if the
contract contained in the bill of lading had been made with himself.

2. Not to affect right of stoppage in transitu or claims for freight : Nothing

herein contained shall prejudice or affect any right of stoppage in transitu or any right
to claim freight against the original shipper or owner, or any liability of the consignee
or endorsee by reason or in consequence of his being such consignee or endorsee,
or of his receipt of the goods by reason or in consequence of such consignment or
endorsement.

3. Bill of lading in hands of consignee, etc. conclusive evidence of the

shipment as against master etc.: Every bill of lading in the hands of a consignee or
endorsee for valuable consideration, representing goods to have been shipped on
board a vessel, shall be conclusive evidence of such shipment as against the master
or other person signing the same, notwithstanding that such goods or some parts
thereof may not have been so shipped, unless such holder of the bill of lading shall
have had actual notice at the time of receiving the same that the goods had not in
fact been laden on board;

19
 Provided that the master or other person so signing may exonerate himself, in
respect of such misrepresentation by showing that it was caused without any default
on his part, and wholly by the fraud of the shipper, or of the holder or some person
under whom the holder claims.

2.2 The enacting of the Bills of Lading Act was of great significance. Under the Common
Law of England the rights and duties between the parties to a contract were not freely
assignable (privity of contract). Consequently, whenever the bill of lading was transferred to
a consignee, the bill of lading did not actually transfer the legal rights and liabilities under the
carriage contract to the consignee. It merely transferred the title or ownership of the cargo to
the buyer. This situation was changed by the Section 1 of the Bills of Lading Act, 1856
under which the bill of lading not only becomes a document of title in the hands of a
consignee for value but it also passes to him the rights and liabilities under the contract of
affreightment after the cargo has been shipped. The Section though laudable fails to achieve
the desired objective where the vessel is carrying bulk and unascertained cargo or where the
property in the cargo has not passed to the consignee or the endorsee by virtue of
consignment or endorsement.

2.3 Section 2 of the Bills of Lading Act maintains that nothing in the Act will itself
prejudice in any way the right of an unpaid seller to stop the goods in transit and prevent
them from being passed on to the buyer or to the Bill of Lading holder. This right can arise
after the goods have been shipped on board the vessel and the purchase price of the goods
has not been paid in accordance with the sale of goods contract. This right can be exercised
as long as the goods are in transit. Similarly, nothing in this Act affects the right of the carrier
to claim freight against the original shipper or cargo owner.

2.4 Lastly, a harsh and unfair judgement of the court in Grant v. Norway in 1851 was
overruled by enacting Section 3 in the Bill of Lading Act.

2.5 In Grant v. Norway a bill of lading was signed by the master for 12 bales of silk which
the shipowner proved had not been loaded on board. Held that since the master had no
authority to sign for goods not shipped, the holder of the bill of lading had no claim against
the shipowner for non-delivery of these bales. Under common law the shipowner could
therefore escape liability by establishing that the goods were never loaded on board.

2.6 Now, under Section 3, every bill of lading in the hands of the consignee for valuable
consideration representing goods to be shipped on board shall be conclusive evidence of
such shipment against the master or other persons who sign the bill of lading. It warrants
noting that even under Section 3 of the Bill of Lading Act, the bill of lading is a conclusive
proof of shipment only against the master or the person signing it and not against the ship
owner.

3.0 FUNCTIONS OF A BILL OF LADING

[Reading the relevant chapter from the prescribed book is a must. What is
given below is a mere synopsis from the book]

A. Evidence of the Contract of Carriage.

B. Receipt for Goods.
C. Document of Title.
D. Quasi-Negotiable Instrument.

20
3.1 Evidence of Carriage Contract :

Bill of lading is a post shipment and post contractual document. It can be contradicted,
varied and added to by oral or other evidence. Shipper entitled to show that a prior
oral promise constituted the contract.

 The Ardennes (Owner of cargo) v. The Ardennes (Shipowner).

3.2 Receipt for Goods:

3.2.1 Bill of lading is a receipt that goods are received/shipped

Grant v. Norway
Heskell v. Continental Express Limited
The Nea Tyhi
The Saudi Crown

1. receipt as to "leading marks"

Parsons v. New Zealand Shipping Co.

2. receipt as to "quantity"

Smith v. Bedouin Steam Navigation Co.

Oricon Waren - Handels v. Intergraan.
Union Carbide v. Jayanti Shipping Co.
Pannalal Kishanlal v. OS. Kaisha
.
3. receipt as to "order and conditions of the goods"

The Peter der Grosse.

Silver v. Ocean S. S. Co. Ltd
The Skarp,
The Dona Mori
Brown Jenkinson & Co. v. Percy Dalton.
Hellenic Lines v. Chemoleum Corp.

3.3 Document of Title:

3.3.1 Possession of bill of lading is same as possession of goods

Horst Co. v. Biddell Bros

3.3.2 Payment when bill is in sets.

Sanders v. Maclean

3.3.3 Delivery of goods only against production of original bill of lading.

Sze Hai Tong Bank v. Rambler Cycle Co. Ltd
Trucks & Spares v. Maritime Agencies Ltd
The Sagona

3.3.4 Carrier not bound to inquire into title or about parts of the bill
Glyn Mills Currie and Co. v. East and West India Dock and Co.

21
3.4 Quasi-Negotiable Instrument:

3.4.1 Efficacy of bill of lading depends upon the ease with which the rights and liabilities under
carriage contract are transferred to the consignee or endorsee, which the Common Law did not allow
Thompson v. Dominy.
Sanders v. Vanzeller.

3.4.2 So to obviate this difficulty the Bill of Lading Act was enacted [see section 1 of the
Act]. But the section suffers from defects:

1. Transfer of rights depends on transfer of property in the cargo

The Aramis
The Elafi.
The Aliakmon.

2. Further property in cargo should pass ‘upon or by reason of consignment

or endorsement’

The Kapetan Markos.

The Sevonia Team.
The San Nicholas.

3. Section does not apply to bankers

Sewell v. Burdick
Brandt v. Liverpool.

ooooo

SELF-EXAMINATION QUESTIONS

1. Briefly state the different aspects of a bill of lading? What functions of a bill of lading
differentiate it entirely from a charter-party?

2. “Bill of Lading is a very good evidence of the contract but not the contract itself”
Elaborate supporting your answer with case law.

3. What was the decision of Grant v. Norway, a case decided in 1851, on the status of the
Bill of lading ? What legislative attempt was made to overrule this judgement?

4. What are the three essentials which a bill of lading highlights among other things?

5. When is the master not bound to state or show in the bill of lading marks, numbers,
quantity or weight?

6. When can the master show that the goods shipped were marked otherwise under the
Bill of Lading Act?

7. What is the role of the shipper in stating the leading marks, nature, number, weight and
quantity in the B/L?

22
8. What is the relevance of the statement "Shipped in good order and condition"?

9. "Possession of a B/L is the same thing as possession of the goods." Elucidate quoting
case law:
10. Why is the B/L considered as a quasi-negotiable document and not a negotiable
instrument under the Negotiable Instruments Act, 1881?

11. "Bill of Lading is described as the most important document in shipping." Elaborate.

12. What is the position of the B/L issued for undivided bulk cargoes? Explain with
reference to relevant case law.

13. "The holder of a B/L can transfer the possession of the goods by transferring a B/L."
Elaborate with supporting case law.

14. "The endorsement of only one B/L out of a "set" is sufficient to pass the property in the
goods." Substantiate with case law.

15. Match items in List A with case law in List B.

A B
a. Frozen carcasses of lamb i. Grant v. Norway
4
b. Copra cake ii. Smith & Co v. Bedouin SN Co.
c. Twelve bales of silk iii.Parsons v. New Zealand Shipping Co.
d. Sale of hops -iv.The Ardennes
e. Mandarin oranges v. Horst v. Biddell
f Bales of jute ~ vi.Oricon Warren-Handels v.Intergaan

16. Is the B/L an evidence of the feet that goods specified in it are shipped?

17. Critically examine the defects in Section 1 of the Bills of Lading Act. What mprovements
would you suggest in order to make the Section workable?

18. “A B/L is a receipt as to leading marks, quantity, weight, numbers, etc. and apparent order
and condition of the goods.” Discuss with help of case law.

PRESCRIBED BOOK
Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by
Dr. (Mrs.) Nilima Chandiramani - Pages 11 to 32 and 97 to 98.

RECOMMENDED FOR FURTHER READING

1. Chorley & Giles Shipping Law – Gaskell, etc, 8th Ed., Reprinted 1988.
An excellent standard volume on basic principles of shipping law recommended for studious
students of maritime law. The eighth edition has been updated to take account of new
statutes, case law and trade practices.
Chapter 13 (pages 239-270) covers in detail various aspects of the Bill of Lading. Also see
Chapter 10 (Pages 177-180) for Bill of Lading and relationship between C/P and B/L.

2. Carriage of Goods by Sea – Hardy Ivamy, 12th Ed., 1985.

Chapter 3 (Pages 71-117) covers at length Bills of Lading.

23
3. Bills of Lading Law – W. E. Astle, 1st Ed., 1988.
All international rules of law relating to bills of lading are detailed together with a brief
introduction to the history of each. An invaluable reference book to the Harter Act of the
United States. Is worth reading.

4. Bills of Lading – A. Mitchelhill, 1st Ed., 1982.

This book deals with the very heart of shipping documentation — the Bill of Lading -.-
explaining its history, development and practical applications. It explains in an easy to
understand manner all the aspects of this important document.
Chapter 1 deals on the evolution of the bill of lading — historical, the Act, development and
definition. Other chapters cover up the Rules, conventional and through bills of lading,
documentary credits, combined transport documents, letters of indemnity; related
documents, carriage of dangerous goods, etc. etc.

5. Bills of Lading – Capt D.E Driver, 2nd Print, 1995.

This small booklet of 24 pages is a handy guide covering functions of bills of lading, types,
definitions, law relating to carriage of goods by sea, duties and liabilities of a carrier under
COGSA, B/L issued pursuant to a C/P, etc.

6. Modern Bills of Lading – Paul Todd, 2nd Ed., 1990.

The aim of this book is primarily to explain in clear English the functions of the Bill of v Lading
as a negotiable document and the contractual relationship revolving around the bill of lading.
Following chapters are recommended reading, viz., Chapter 1 — Introduction; Chapter 9 ~
Duties of Cargo Owner; Chapter 1Q « Duties of Carrier; Chapters 12 & 13 — Transfer of
Rights & Liabilities,, and Chapter 14 — Grant v. Norway.

7. Carver’s Carriage by Sea Vol. 1 – ELCoIinvaux, 12th Ed., 1971.

Also considered as an authority on carriage of goods by sea. However, students are
cautioned that some of the cases discussed here may not be good law today in view of the
recent developments in maritime law, viz., Hague, Hague-Visby, Hamburg and U.N.,
Conventions on Multimodal Transport.

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24
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 3

INTERNATIONAL CONVENTIONS RELATING TO BILLS OF

LADING

1.0 INTERNATIONAL CONVENTIONS:

 Hague Rules 1924.

 Hague-Visby Rules 1968 (in force in 1977).
 Protocol amending HV Rules 1979 (in force in 1984).
 Hamburg Rules 1978 (in force 1992 November).
 UN Convention on International Multimodal Transport of Goods, 1980 (not yet
operative.)

1.1 HAGUE RULES 1924: (Also known as THE BRUSSELS CONVENTION 1924): The
historical background explains the reasons that gave rise to the demand for unification for
the liabilities and rights of the sea carrier by adopting a code of common international
rules relating to bills of lading. The rules were adopted finally in Brussels in 1924 that govern
liability for loss of damage to goods and are known as the Hague Rules or the Brussels
Convention, 1924.

1.1.1 Liability of the carrier under Common Law :

 Strict
 Insurer
 Whether negligent or not

1.1.2 Freedom of contract

 Contracted out of his liabilities and responsibilities

 Only liability was “liability to receive freight”

Demand for a law to restrict the freedom of the carrier to contract out of his minimum
liabilities in 19th century

 UK
 USA – Harter Act, 1893
 Australia, 1904
 Canada, 1910
 New Zealand, 1914
 Demand for unification/harmonization
 Hague Rules or Brussels Convention of 1924

25
1.2 SALIENT FEATURES OF HAGUE RULES:

 Applicable to bills of lading and not to charter parties

 Only contracts of carriage covered by bill of lading
 Outward cargo
 Not applicable to deck cargo and carriage of live animals
 Minimum responsibilities and liabilities of carrier such as providing a seaworthy
vessel, care of cargo, issuing a bill of lading if the shipper makes a demand and no
deviation
 Maximum rights and immunities of carrier such as limiting his liability, receiving
notice of loss, exemption from liability under the 17 exonerating clauses under
Article IV Rule 2
 Surrender of rights and increase of liabilities by the carrier
 Particular goods
 Limitation on application of Rules [tackle to tackle liability, i.e., liability only while the
goods are on board the vessel]
 Limitation of liability [the Rules not to affect the liability of a carrier under any law
such as the Merchant Shipping Act]
 Monetary units in gold value.

2.0 THE HAGUE - VISBY RULES, 1968:

2.1 In 1967, another international conference adopted some revisions to the Hague Rules
— specially affecting their limitation. The amended rules are known as the Hague-Visby Rules
or the Brussels Protocol, 1968.

2.2 The Hague-Visby Rules were further amended in by the Brussels Protocol of 1979 and
the amended rules came into force in 1984.

3.0 THE HAMBURG RULES, 1978:

3.1 In March 1978, at a further international conference in Hamburg, a new set of rules were
adopted termed as the "Hamburg Rules".

ooooo

SELF-EXAMINATION QUESTIONS
1. Mention some of the grievances of the shippers against the ship owners that led to the formation
of the Hague Rules, 1924.
2. Briefly summarise the salient provisions of the Hague Rules.
3. Under the Hague Rules when can the carrier and the shipper enter into a special agreement
regarding terms pertaining to responsibilities of the carrier.
4. What were the circumstances that led to the adoption of the Hamburg Rules?
5. Give the main differences between the Hamburg Rules and Hague-Visby Rules.

RECOMMENDED FOR FURTHER READING :

1. “Carriage of Goods by Sea & Multimodal Transport” by Dr. (Mrs.) Nilima Chandiramani.

***************************

26
27
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 4

COMPARISON OF THE INTERNATIONAL CONVENTIONS

RELATING TO BILLS OF LADING AND MULTIMODAL ACT

1.0 SCOPE OF APPLICATION :

1.1 Hague and Hague-Visby Rules:

 Only bills of lading.

1.2 Hamburg Rules and Multimodal Act:

 All carriage contracts whether evidenced by bill of lading or not.

2.0 SCOPE OF APPLICATION :

2.1 Hague and Hague-Visby Rules:

 Outward bills of lading.

2.2 Hamburg Rules and Multimodal Act:

 Outward and inward bills of lading.

3.0 SCOPE OF APPLICATION:

3.1 Hague and Hague-Visby Rules :

 Not applicable to deck cargo.

3.2 Hamburg Rules and Multimodal Act:

 Applicable to deck cargo.

4.0 SCOPE OF APPLICATION :

4.1 Hague and Hague-Visby Rules :

 Not applicable to carriage of live animals.

28
4.2 Hamburg Rules and Multimodal Act:

 Applicable to carriage of live animals.

5.0 CARRIER’S BASIC RESPONSIBILITY :

5.1 Hague and Hague-Visby Rules :

 Sea worthy vessel.

 Care of cargo subject to a list of 17 exemptions.

5.2 Hamburg Rules and Multimodal Act:

 General duty of care while goods are in charge of carrier.

6.0 CONTRACTUAL AND ACTUAL CARRIER:

6.1 Hague and Hague-Visby Rules:

 No differentiation between the contractual and actual carrier.

6.2 Hamburg Rules and Multimodal Act:

 Differentiation between the contractual and actual carrier.

7.0 PERIOD OF RESPONSIBILITY:

7.1 Hague Rules and Hague-Visby Rules:

 Tackle-to-tackle liability.

7.2 Hamburg Rules and Multimodal Act:

 While the goods are in his charge.

8.0 LOSS DUE TO DELAY IN DELIVERY:

8.1 Hague Rules and Hague-Visby Rules:

 Implied.

8.2 Hamburg Rules :

 Express.
 Consignee entitled to treat the goods as lost if not delivered within 60 consecutive
days.

29
8.3 Multimodal Act:

 Express.
 Consignee entitled to treat the goods as lost if not delivered within 90 consecutive
days.

9.0 NOTICE OF LOSS :

9.1 Hague Rules :

 Notice at time of removal of goods if loss is apparent and within 3 days if loss is
not apparent.

9.2 Hague-Visby Rules:

 Same as Hague Rules

9.3 Hamburg Rules:

 Notice on next working day if loss is apparent and within 15 consecutive days if
loss is not apparent

9.4 Multimodal Act:

 Notice at the time of handing over of the goods to the consignee if the loss is
apparent and within 6 consecutive days if loss is not apparent

10.0 LIMITS OF LIABILITY:

10.1 Hague Rules :

 100 pounds per package.

10.2 Hague-Visby Rules :

 10,000 francs Poincare per package or 30 francs per kilogramme of gross weight,
whichever is higher

10.3 Brussels Protocol, 1979 :

 666.67 SDR or 2 SDR

10.4 Hamburg Rules :

 835 SDR or 2.5 SDR.

10.5 Multimodal Act:

 666.67 SDR or 2 SDR

30
11.0 INTERPRETATIONAL PROBLEMS:

11.1 What is a package?

 Case law

 Gulf Italia
 S. S. Navigator
 Island Yacht Inc.
 Pacific Bear

11.2 Whether container is a package?

 Case law

 Leather’s Best
 Royal Typewriter
 Tindefjell

11.3 Clarification in Hague-Visby and Hamburg Rules – Bill of lading must state that the
container contains ‘n’ number of packages

12.0 LIMITATION OF ACTION:

12.1 Hague Rules :

 1 year.

12.2 Hague-Visby Rules :

 1 year but this period can be extended.

12.3 Hamburg Rules :

 2 years and can be extended by declaration or declarations

12.4 Multimodal Act:

 9 months

13.0 JURISDICTION:

13.1 Hague and Hague-Visby Rules:

 Jurisdictional clauses favour the carrier.

13.2 Hamburg and Multimodal Act

 Fair to both the parties.

31
14.0 ARBITRATION :

14.1 Hague and Hague-Visby Rules:

 No express provision for arbitration but the rules do not forbid arbitration clauses.

14.2 Hamburg and Multimodal Act :

 Express arbitration provision.

ooooo

SELF EXAMINATION QUESTIONS

1. Compare and contrast the Hague, Hague-Visby Rules and Hamburg Rules

2. Compare and contrast the international conventions relating to Bills of Lading and the
Multimodal Transportation of Goods Act

PRESCRIBED BOOK :

Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by
Dr. (Mrs.) Nilima Chandiramani - Refer pages 39 to 47.

32
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 5

SEAWORTHY VESSEL
Referring to the prescribed text-book on "Carriage of Goods by Sea & Multimodal
Transport" by Dr. (Mrs.) Nilima Chandiramani is a must. What is given below is a
mere synopsis of the relevant chapter.

1.0 The international conventions relating to Bills of Lading impose on the carrier certain
minimum responsibilities and liabilities. The first liability of the carrier is to exercise due diligence
in providing a seaworthy vessel.

2.0 Definition of Seaworthiness.

2.1 When is a ship said to be unseaworthy?

 Stanton v. Richardson.
 Elder Dempster & Co. v. Paterson, Zochnis & Co.
 Bond Connolly v. Federal S. N. Co.
 Tattersall v. Nationals. S. S. Co.
 Anglo Saxon Petroleum Co. v. Adamstos Shipping Co.

3.0 Ship should be seaworthy on sailing:

3.1 Voyage in stages:

 The Vortigen

3.2 Obligation to exercise ‘due diligence’:

 Riverstone Meat Co. v. Lancashire Shipping.

 Leesh River Tea Co. v. B.I.S.N. Co.

3.3 Burden of Proof

 The Europa

3.4 Effect of Unseaworthiness:

 Honkong Fir Shipping v. Kawasaki Kisen Kaisha Ltd.

33
4.0 Overriding Obligation:

 Marine Footwear Co. v. Canadian Govt. Merchant Marine.

ooooo

SELF-EXAMINATION QUESTIONS

1. When is a vessel said to be seaworthy?

2. Explain the term "unseaworthiness" by supporting your answer with case law.
3. (a) What do you understand by the term "due diligence".
(b) To what extent is the carrier expected to exercise "due diligence" to make
his vessel seaworthy. Quote at least one case law.
5. How does the shipper prove that the vessel is unseaworthy?
6. What is the effect of unseaworthiness?
7. Why is unseaworthiness considered an overriding obligation?

PRESCRIBED BOOK:

Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by Dr.
(Mrs.) Nilima Chandiramani - Chapter 6, pages 48 to 55.

*************************

34
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 6

CARE OF CARGO

1.0 Article III Rule 2 states that the carrier should properly and carefully load, handle,
stow, carry, keep, care for and discharge the cargo.

2.0 EXONERATING CLAUSES UNDER ARTICLE IV RULE 2 OF HAGUE RULE:

2.1 Neither the carrier nor the ship is liable if the loss is caused due to the following:

 Act, neglect, default in navigating/managing the ship

 Fire
 Perils of sea
 Act of God
 Act of war
 Act of public enemies
 Arrest/restraint by Princes/Rulers or seizure under legal process
 Quarantine restrictions
 Act or omission of the shipper
 Strikes or lockouts
 Riots and civil commotions
 Saving or attempting to save life or property at sea
 Wastage in bulk or weight
 Insufficiency of packing
 Inadequacy of marking
 Latent defects
 Any other cause without fault of carrier

[REFER TO DETAILS IN THE PRESCRIBED BOOK]

3.0 CARE OF CARGO UNDER HAMBURG RULES & MULTIMODAL TRANSPORTATION

OF GOODS ACT:

3.1 Exemption clauses found in the Hague and the Hague-Visby Rules are absent in the
Hamburg Rules and the Multimodal Transportation of Goods Act. Instead they are replaced by
a general rule which makes the carrier liable for loss or damage to goods carried or for delay in
delivery if the occurrence which causes the loss, damage or delay takes place while the- goods
are in the carrier's charge, unless he proves that he, his servants and agents took all measures
that could avoid the occurrence and its consequences.

35
4.0 DELAY IN DELIVERY:

4.1 Under the Hague and the Hague-Visby Rules there is an implied liability of the carrier for
damage caused to the cargo owner due to delay.

- East and West Steamship Co. v. S. K. Ramalingam AIR 1959 SC 1O58

- Goulandris Bros. v. Goldman and Sons.
- Anglo Saxon Petroleum co. v. Adamstos Shipping Co.

4.2 Hamburg Rules and the MTGA have imposed an express liability on the carrier for delay in
delivery. The consignee is entitled to treat goods as lost, if not located, within 60 consecutive
days following the expiry of the time for delivery under the Hamburg Rules and 90 days
under the MTGA.

4.3 Under the MTOG Act, the MTO is not only liable for the delay but also the consequential loss
or damage which may arise due to such delay. Here the consignee is entitled to treat the goods
as lost if not located within 90 consecutive days following the expiry of time for delivery.

5.0 PERIOD OF RESPONSBILITY:

5.1 Under the Hague and the Hague-Visby Rules the liability of the carrier to take care of
the cargo does not extend for the whole period the goods are in his possession. It is limited
to the period while the goods are on board the vessel.

5.2 Under the Hamburg Rules and MTGA the period of responsibility of the carrier is
extended for the whole period during which the goods are in the carrier's charge, from the
time of acceptance of the goods at the port of loading, during the carriage and till the goods
are discharged at the destination port.
ooooo

SELF-EXAMINATION QUESTIONS

1. State the various circumstances which exempt the carrier from responsibility under the
Hague and the Hague-Visby Rules for loss or damage to goods.
2. Write short notes on:
(a) Negligence in navigating and managing the vessel.
(b) Act of War.
(c) Strikes and lockouts.
3. Why is the carrier not responsible for ~
(a) Wastage in bulk
(b) Inherent defect in the goods, and
(c) Insufficiency of packing?
4. What is the carrier's responsibility for care of cargo under the Hamburg Rules and the
Multimodal Transportation of Goods Act, 1993?
5. How is delay in delivery of goods treated under International Conventions and the MTGA
Act, 1993?
6. What is the period of responsibility under the three Conventions?

PRESCRIBED BOOK :

Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by
Dr. (Mrs.) Nilima Chandiramani - Chapter 7, pp 56 to 67.

***************

36
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 7

DEVIATION

1.0 CONSEQUENCES OF DEVIATION.

2.0 JUSTIFIABLE DEVIATION.

- Kish v. Taylor.

3.0 REASONABLE DEVIATION.

- Stag Line v. Foscole, Mango & Co.

4.0 INTERPRETATION OF DEVIATION CLAUSES

(i) Leduc & Co. v. Ward
(ii) Glynn v. Margetson & Co.

5.0 DEVIATION PRIOR TO DAMAGE TO CARGO

- Joseph Thorley v. Orchis S. S. Co.

6.0 DEVIATION AND FREIGHT

- Hain S. S. Co. v. Tate dLyle.

ooooo

SELF-EXAMINATION QUESTIONS

1. Discuss with the help of case law the various consequences of deviation?
2. What do you understand by the terms —

(a) Justifiable deviation, and

(b) Reasonable deviation? Support your answers with case law.

3. How do courts view deviation even though the bill of lading mentions that the vessel is
allowed to deviate?
4. Why is the carrier not allowed to rely on an exemption clause even if cause of damage to
cargo has no connection with prior deviation? Quote any one case law to support your
answer.

PRESCRIBED BOOK
Please refer to the prescribed text-book on "Carriage of Goods by Sea & Multimodal Transport" by Dr.
(Mrs.) Nilima Chandiramani - Chapter 8, pp 68 to 71.

******************

37
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 8

THE CARRIAGE OF GOODS BY SEA ACT, 1925

1.0 This is an Act to amend the law with respect to the carriage of goods by sea.

1.1 The Indian legislature enacted the Indian Carriage of Goods by Sea Act, 1925, with
the purpose of establishing uniform rules for the liabilities and rights of the sea carrier. The
Act was based on the Hague Rules. In fact, the Rules form the Schedule to the Act. The Act
and the Schedule were amended by the Multimodal Transportation of Goods Act, 1993,
bringing the Indian law at par with some of the Hague-Visby Rules of 1968 as amended by
the Brussels Protocol of 1979.

1.2 Prior to the Hague Rules of 1924, the rights and liabilities of carriers by sea in India
were regulated by the English Common Law as administered in India. At common law, the
sea carrier was absolutely liable for any loss or damage caused to the goods carried by the
carrier except where the carrier was protected by a common law exceptions or where he had
contracted out of his liability. Consequently, under the garb of freedom of contract the carrier
contracted out of practically all his liabilities.

1.3 The main effect of the Act was that it changed the legal status of the shipowner by
imposing on him some definite liabilities and responsibilities and by stating precisely the
defined rights and immunities in place of the previous freedom.

2.0 THE ACT HAS 7 SECTIONS AS FOLLOWS:

2.1 This Act is called THE INDIAN CARRIAGE OF GOODS BY SEA ACT, 1925, and it
extends to the whole of India.

2.2 The rules affect the carriage of goods by sea in ships carrying goods from any port in
India to any other port whether in or outside India. It is essential that the port of loading must
be in India. But it is immaterial whether the port of discharge is a port in or outside India.
Thus the Act is applicable to coastal trade also.

2.3 Carriage within a port is not covered by the Act. Hence the carriage by
barges/lighters is not within the ambit of the Act.

2.4 At common law the liability of the carrier to provide a seaworthy vessel was absolute.
This absolute undertaking by the carrier to provide a seaworthy ship is done away with under
the Act. Now, the carrier is bound merely to exercise due diligence in providing a seaworthy
vessel.

2.5 The Rules do not apply to all contracts of carriage of goods by sea evidenced by a
bill of lading. They apply only to those bills of lading which contain an express clause that the
bills of lading are subject to the provisions of the Rules. Hence the Rules shall not cover
carriage of goods by sea if:-

(i) No bill of lading is issued; or

(ii) A bill of lading is issued but it does not incorporate a statement that the
carriage is subject to the Rules.

38
2.6 This section permits a carrier to either totally exempt himself from liability or to
reduce his liability with respect to carriage of particular goods, or ordinary commercial
shipments, in the normal course of trade, if:

(i) The goods are carried in a sailing ship from a port in India to any other port
whether in or outside India; or

(ii) The goods are carried in a ship from a notified port in India to a notified port
in Ceylon (now Sri Lanka).

2.7 Though the bill of lading is a prima facie evidence of the receipt of goods by the
carrier, it is not a prima facie evidence of the receipt of the goods of "the weight" mentioned
in it, if:
(i) The carriage is of bulk cargo;
(ii) There exists a custom of trade to have the weight of the bulk cargo
ascertained by a third party other than the carrier or the shipper; and
(iii) The weight so ascertained by the third party is stated in the bill of lading.

2.8 None of the provisions in the Act shall affect certain stipulations in the Merchant
Shipping Act, 1958.

3.0 The Merchant Shipping Act deals with the global limitation of liability of the carrier. It
speaks about the total liability of the carrier for the loss or damage. If the aggregate liability
of the carrier to all the shippers under the Indian Carriage of Goods by Sea Act is higher
than the amount arrived at on the basis of the Merchant Shipping Act, then the liability of the
carrier shall be further limited to the amount arrived at under the Merchant Shipping
Act,1958.

4.0 The Merchant Shipping Act also prescribes special precautions to be taken in the
carriage of dangerous cargo and grains. Failure to comply with these Rules will make the
person liable notwithstanding anything contained in the Indian Carriage of Goods by Sea
Act, 1925.

Schedule relating to bills of lading

 Applicable to bills of lading and not to charter parties

 Only contracts of carriage covered by bill of lading
 Outward cargo
 Not applicable to deck cargo and carriage of live animals
 Minimum responsibilities and liabilities of carrier such as providing a seaworthy
vessel, care of cargo, issuing a bill of lading if the shipper makes a demand and
no deviation
 Maximum rights and immunities of carrier such as limiting his liability, receiving
notice of loss, exemption from liability under the 17 exonerating clauses under
Article IV Rule 2
 Surrender of rights and increase of liabilities by the carrier
 Particular goods
 Limitation on application of Rules [tackle to tackle liability, i.e., liability only while
the goods are on board the vessel]
 Limitation of liability [the Rules not to affect the liability of a carrier under any law
such as the Merchant Shipping Act]
 Monetary units in gold value

ooooo

39
 SELF-EXAMINATION QUESTIONS

1. What was the purpose of enacting this Act?

2. Discuss the application of the Rules set out in the schedule to the Act.
3. Name the Rules on which the Act is based upon.
4. What is the status of "absolute warranty of seaworthiness" in the Act?
5. How were the Rules modified in relation to goods carried in sailing ships and by prescribed
routes?
6. In what areas does the Merchant Shipping Act, 1958, overrule the Indian Carriage of Goods
by Sea Act, 1925.
7. Write short notes on
(a) SDR
(b) Limitation of liability.
8. Say True or False. If false, give the correct answers:
(a) The Act also applies to deck cargo and live animals.
(b) Maximum loss payable by carrier per package/unit is 835 SDR.
(c) Charter-parties are outside the scope of the Act.
(d) "Carriage of Goods" covers the period when the goods are received by the agent of the
carrier.
(e) The carriage by a lighter or barge within a port is covered by the Act.
(f) The Act extends to whole of India and Sri Lanka.

RECOMMENDED FOR FURTHER READING:

1. “Carriage of Goods by Sea & Multimodal Transport” -- Dr. (Mrs) Nilima Chandiramani, 1st
Ed., 1996.
The Act is given in Appendix B Pages 99-113 along with commentary and notes.

*******************

40
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 9

MULTIMODAL TRANSSPORTATION OF GOODS ACT 1993

AS AMENDED IN 2000

THE MULTIMODAL TRANSPORTATION OF GOODS ACT, 1993

(No. 28 OF 1993)
[2nd April, 1993]

1.0 The Act regulates the multimodal transportation of goods, from any place in India to a
place outside India

2.0 Definitions.- In this Act, unless the context otherwise requires,--

(a) “carrier” means a person who performs or undertakes to perform for a hire, the
carriage or part thereof, of goods by road, rail, inland waterways, sea or air;

(b) “goods” means any property including live animals, containers, pallets or such
other articles of transport or packaging supplied by the consignor, irrespective of
whether such property is to be or is carried on or under the deck;

(c) “mode of transport” means carriage of goods by road, air, rail, inland waterways,
or sea;

(d) “multimodal transportation” means carriage of goods, by at least two different

modes of transport under a multimodal transport contract, from the place of
acceptance of the goods in India to a place of delivery of the goods outside India;

(e) “multimodal transport contract ” means a contract under which a multimodal

transport operator undertakes to perform or procure the performance of multimodal
transportation against payment of freight;

(f) “multimodal transport document” means a negotiable or non-negotiable document

evidencing a multimodal transport contract and which can be replaced by electronic
data
interchange messages permitted by applicable law;

(g) “multimodal transport operator” means any person who—

(i) concludes a multimodal transport contract on his own behalf or through

another person acting on his behalf;
(ii) acts as principal, and not as an agent either of the consignor, or consignee
or of the carrier participating in the multimodal transportation, and who
assumes responsibility for the
performance of the said contract; and
(iii) is registered under sub-section (3) of section 4;

(h) “negotiable multimodal transport document” means a multimodal transport

document which is –

41
 (i) made out to order or to bearer; or
(ii) made out to order and is transferable by endorsement; or
(iii) made out to bearer and is transferable without endorsement;

(i) “non-negotiable multimodal transport document” means a multimodal transport

document which indicates only one named consignee;

(j) “taking charge” means that the goods have been handed over to and accepted for
carriage by the multimodal transport operator;

3.0 REGULATION OF MULTIMODAL TRANSPORTATION :

3.1 S.3 No person to carry on business without registration.-

(1) No person shall carry on or commence the business of Multimodal

transportation unless he is registered under this Act;

(2) Provided that a person carrying on the business of multimodal transportation

immediately before the commencement of this Act, may continue to do so for a
period of three months from such commencement; and if he has made an application
for registration within the said period, till the disposal of such application.

3.2 S.4 Registration for multimodal transportation.-

(1) Any person may apply for registration to the competent authority to carry on
or commence the business of multimodal transportation.

(2) An application under sub-section (1) shall be made in such form as may be
prescribed and shall be accompanied by a fee of ten thousand rupees.

(3) On receipt of the application, the competent authority shall satisfy that the
applicant fulfils the following conditions, namely:-

(a) (i) that the applicant is a company, firm or proprietary concern, either
engaged in the business of Shipping, or freight forwarding in India or
abroad with a minimum annual turnover of fifty lakh rupees during the
immediately preceding financial year or an average annual turnover of fifty
lakh rupees during the preceding three financial years as certified by a
Chartered Accountant within the meaning of the Chartered Accountants
Act, 1949(38 of 1949);

(ii) that if the applicant is a company, firm or proprietary concern other

than a company, firm or proprietary concern specified in sub-clause (i),
the subscribed share capital of such company or the aggregate balance
in the capital account of the partners of the firm, or the capital of the
proprietor is not less than fifty lakh rupees;

(b) that the applicant has offices or agents or representatives in not less than
two other countries, -- and on being so satisfied, register the applicant as a
multimodal transport operator and grant a certificate to it to carry on or
commence the business of multimodal transportation; Provided that the
competent authority may, for reasons to be recorded in writing, refuse to grant
registration if it is satisfied that the applicant does not fulfill the said
conditions. Provided further that any applicant who is not a resident of India
and who is not engaged in the business of shipping shall not be granted
42
 registration unless he has established a place of business in India; Provided
also that in respect of any applicant who is not a resident of India, the
turnover may be certified by any authority competent to certify the accounts of
a company in that country;

(4) A certificate granted under sub-section (3) shall be valid for a period of three
years and may be renewed from time to time for a further period of three years at a
time.

(5) An application for renewal shall be made in such form as may be prescribed
and shall be accompanied by such amount of fees as may be notified by the Central
Government. Provided that such fees shall not be less than rupees ten thousand and
shall not exceed rupees twenty thousand.

(6) The competent authority shall renew the registration certificate granted under
sub-section (3) if the applicant continues to fulfil the conditions as laid down at the
time of registration.

3.3 S.5 Cancellation of registration -

The competent authority may, if it is satisfied at any time after Registration that –

(a) any statement in, or in relation to, any application under subsection (2) of section
4 or its renewal under sub-section (5) of that section, is incorrect or false in any
material particular; or

(b) any of the provisions of this Act or the rules made there under has been
contravened by the multimodal transport operator; or

(c) the multimodal transport operator has not entered into any multimodal transport
contract during the preceding two years after his registration, cancel by order the
certificate of registration Provided that no such registration shall be cancelled unless
the multimodal transport operator has been given a reasonable opportunity of
showing cause against the proposed action.

3.4 S.6 Appeal :

(1) Any person aggrieved by, refusal of the competent Authority to grant or renew
registration under section 4 or by cancellation of registration under section 5, may
prefer an appeal to the Central Government within such period as may be prescribed.

(2) No appeal shall be admitted if it is preferred after the expiry of the prescribed
period:

Provided that an appeal may be admitted after the expiry of the prescribed period if
the appellant satisfies the Central Government that he had sufficient cause for not
preferring the appeal within the prescribed period.

(3) Every appeal made under this section shall be made in such form and on
payment of such fees as may be prescribed and shall be accompanied by a copy of
the order appealed against.

(4) On receipt of any such appeal, the Central Government shall, after giving the
parties a reasonable opportunity of being heard and after making such inquiry as it
deems proper, make such order as it thinks fit.

43
4.0 MULTIMODAL TRANSPORT DOCUMENT :

4.1 S.7 Issue of multimodal transport document

(1) Where the consignor and the multimodal transport operator have entered into
a contract for the multimodal transportation and the multimodal transport operator
has taken charge of the goods, he shall, at the option of the consignor, issue a
negotiable or non-negotiable multimodal transport document. Provided that the
multimodal transport operator shall issue the multimodal transport document only
after obtaining, and during the subsistence of a valid insurance cover.

(2) The multimodal transport document shall be signed by the multimodal

transport operator or by a person duly authorized by him.

4.2 S.8 Multimodal transport document to be regarded as document of title :

(1) Every consignee named in the negotiable or non-negotiable multimodal

transport document and every endorsee of such document, as the case may be, to
whom the property in the goods mentioned there in shall pass, upon or by reason of
such consignment or endorsement, shall have all the rights and liabilities of the
consignor.

(2) Nothing contained in sub-section (1) shall prejudice or affect the right of the
multimodal transport operator to claim freight from the consignor or enforce any
liability of the consignee or endorsee by reason of his being such consignee or
endorsee.

4.3 S.9 Contents of multimodal transport document :

(1) The multimodal transport document shall contain the following particulars,
namely:--

(a) the general nature of the goods, the leading marks necessary for identification
of the goods, the character of the goods (including dangerous goods), the number of
packages or units and the gross weight and quantity of the goods as declared by the
consignor;
(b) apparent condition of the goods;
(c) the name and principal place of business of the multimodal transport
operator;
(d) the name of the consignor;
(e) the name of the consignee, if specified by the consignor;
(f) the place and date of taking charge of the goods by the multimodal transport
operator;
(g) the place of delivery of the goods;
(h) the date or the period of delivery of the goods by the multimodal transport
operator as expressly agreed upon between the consignor and the multimodal
transport operator;
(i) whether it is negotiable or non-negotiable;
(j) the place and date of its issue;
(k) freight payable by the consignor or the consignee, as the case may be, to be
mentioned only if expressly agreed by both the consignor and the consignee;
(l) the signature of the multimodal transport operator or of a person duly
authorised by him;
(m) the intended journey route, modes of transport and places of transshipment, if
known at the time of its issue;
(n) terms of shipment and a statement that the document has been issued
subject to and in accordance with this Act; and
44
 (o) any other particular which the parties may agree to insert in the document, if
any such particular is not inconsistent with any law for the time being in force.
Provided that the absence of any of the particulars listed above shall not affect the
legal character of the multimodal transport document.

4.4 S.10 Reservation in the multi-modal transport document:

(1) Where the multimodal transport operator or a person acting on his behalf
knows, or has reasonable grounds to suspect, that the particulars furnished by the
consignor in the multimodal transport document do not accurately represent the
goods actually taken in charge, or if he has no reasonable means of checking such
particulars, the multimodal transport operator or a person acting on his behalf shall
insert in the multimodal transport document a reservation specifying the inaccuracies,
if any, the grounds of suspicion or the absence of reasonable means of checking the
particulars.

(2) Where the multimodal transport operator or a person acting on his behalf fails
to insert the reservation in the multimodal transport document relating to the apparent
condition of the goods, he shall be deemed to have accepted the goods in apparent
good condition.

4.5 S.11 Evidentiary effect of the multimodal transport document:

Save as provided in section 10,--

(a) the multimodal transport document shall be prima facie evidence of the fact
that the multimodal transport operator has taken charge of the goods as described in
the document; and

(b) no proof to the contrary by the multimodal transport operator shall be

admissible if the multimodal transport document is issued in negotiable form and has
been transmitted to the consignee or transferred by the consignee to a third party, if
the consignee or the third party has acted in good faith relying on the description of
the goods in the document.

4.6 S.12 Responsibility of the consignor –

(1) The consignor shall be deemed to have guaranteed to the multimodal

transport operator the adequacy and accuracy, at the time the multimodal transport
operator takes charge of the goods, of the particulars referred to in clauses (a) and
(b) of section 9 as furnished by the consignor for insertion in the multimodal transport
document.

(2) The consignor shall indemnify the multimodal transport operator against loss
resulting from inadequacy or inaccuracy of the particulars referred to in sub-section
(1).

(3) The right of the multimodal transport operator under sub-section (2) shall in
no way limit his liability under the multimodal transport contract to any person other
than the consignor.

5.0 RESPONSIBILITIES AND LIABILITIES OF THE MULTIMODAL TRANSPORT

OPERATOR :

5.1 S.13 Basis of liability of multimodal transport operator.

(1) The multimodal transport operator shall be liable for loss resulting from—
45
 (a) any loss of, or damage to the consignment;

(b) delay in delivery of the consignment and any consequential loss or damage
arising from such delay, where such loss, damage or delay in delivery took place
while the consignment was in his charge; Provided that the multimodal transport
operator shall not be liable if he proves that no fault or neglect on his part or that of
his servants or agents had caused or contributed to such loss, damage or delay in
delivery: Provided further that the multimodal transport operator shall not be Liable
for loss or damage arising out of delay in delivery including any consequential loss or
damage arising from such delay unless the consignor had made a declaration of
interest in timely delivery which has been accepted by the multimodal transport
operator.

Explanation.—For the purposes of this sub-section, “delay in delivery” shall be

deemed to occur when the consignment has not been delivered within the time
expressly agreed upon or, in the absence of such agreement, within a reasonable
time required by a diligent multimodal transport operator, having regard to the
circumstances of the case, to effect the delivery of the consignment.

(2) If the consignment has not been delivered within ninety consecutive days
following the date of delivery expressly agreed upon or the reasonable time referred
to in the Explanation to sub-section (1) the claimant may treat the consignment as
lost.

5.2 S.14 Limits of liability when the nature and value of the consignment have
not been declared and Stage of trans-port where loss or damage occurred is
not known :

(1) Where a multimodal transport operator becomes liable for any loss of, or
damage to, any consignment, the nature and value where of have not been declared
by the consignor before such consignment has been taken in charge by the
multimodal transport operator and the stage of transport at which such loss of
damage occurred is not known, then the liability of the multimodal transport operator
to pay compensation shall not exceed two Special Drawing Rights per kilogram of the
gross weight of the consignment lost or damaged or 666.67 Special Drawing Rights
per package or unit lost or Damaged, whichever is higher.

“Explanation.—For the purpose of this sub-section, where a container, pallet

or similar article is stuffed with more than one package or units, the packages
or units enumerated in the multimodal transport document, as packed in such
container, pallet or similar article of transport shall be deemed as packages or
units”.

(2) Notwithstanding anything contained in sub-section (1), if the multimodal

transportation does not, according to the multimodal transport contract, include
carriage of goods by sea or by inland waterways, the liability of the multimodal
transport operator shall be limited to an amount not exceeding 8.33 Special Drawing
Rights per kilogram of the gross weight of the goods lost or damaged.

5.3 S.15 Limits of liability when the nature and value of the consignment have
not been declared and stage of transport where loss or damage occurred is
known :

(1) Where a multimodal transport operator becomes liable for any loss of, or
damage to, any consignment, the nature and value whereof have not been declared
by the consignor before such consignment has been taken in charge by the
46
 multimodal transport operator and the stage of transport at which such loss or
damage occurred is known, then the limit of the liability of the multimodal transport
operator for such loss of damage shall be determined in accordance with the
provisions of the relevant law applicable in relation to the mode of transport during
the course of which the loss or damage occurred and any stipulation in the
multimodal transport contract to the contrary shall be void and unenforceable.
Provided that the multimodal transport operator shall not be liable for any loss,
damage or delay in delivery due to a cause for which the carrier is exempted from
liability in accordance with the applicable law.

5.4 S.16 Liability of the multimodal transport operator in case of delay in delivery
of goods under certain circumstances:

(1) Where delay in delivery of the consignment occurs under any of the
circumstances mentioned in the Explanation to sub-section (1) of section 13, or any
consequential loss or damage arises from such delay, then the liability of the
multimodal transport operator shall be limited to the freight payable for the
consignment so delayed.

5.5 S.17 Assessment of compensation:

(1) Assessment of compensation for loss of or damage to, the consignment shall
be made with reference to the value of such consignment at the place where, and the
time at which, such consignment is delivered to the consignee or at the place and
time when, in accordance with the multimodal transport contract, it should have been
delivered.

(2) The value of the consignment shall be determined according to the current
commodity exchange price, or, if there is no such price, according to the current
market price, or, if the current market price is not ascertainable, with reference to the
normal value of a consignment of the same kind and quantity.

5.6 S.18 Loss of right of multimodal transport operator to limit liability:

(1) The multimodal transport operator shall not be entitled to the benefit of
limitation of liability under any of the provisions of this Chapter if it is proved that the
loss, damage or delay in delivery of consignment resulted from an act or omission of
the multimodal transport operator with intent to cause such loss, damage or delay or
recklessly and with knowledge that such loss, damage or delay would probably
result.

5.7 S.19 Limit of liability of multimodal transport operator for total loss of
goods:

(1) The multimodal transport operator shall not, in any case, be liable for an
amount greater than the liability for total loss of goods for which a person will be
entitled to make a claim against him under the provisions of this Act.

5.8 S.20 Notice of loss of or damage to goods:

(1) The delivery of the consignment to the consignee by the multimodal transport
operator shall be treated as prime facie evidence of delivery of the goods as
described in the multimodal transport document unless notice of the general nature
of loss of, or damage to, the goods is given, in writing, by the consignee to the
multimodal transport operator at the time of handing over of the goods to the
consignee.

47
 (2) Where the loss or damage is not apparent, the provisions of subsection (1)
shall apply unless notice in writing is given by the consignee of the loss of, or
damage to, the goods within six consecutive days after the day when the goods were
handed over to the consignee.

5.9 S.20A. The responsibility of the multimodal transport operator for the goods under
this Act shall cover the period from the time he has taken the goods in his charge to the time
of their delivery.

6.0 MISCELLANEOUS :

6.1 S.21 Special provision for dangerous goods:

(1) Where the consignor hands over the prescribed dangerous goods to a
multimodal transport operator or any person acting on behalf of such operator, the
consignor shall inform him of the nature of the dangerous goods and, if necessary,
the precautions to be taken while transporting such goods.

(2) Where the consignor fails to inform the multimodal transport operator or the
other person acting on behalf of such operator of the nature of the dangerous goods
and such operator or person does not otherwise have knowledge of the dangerous
goods—

(a) the consignor shall be liable to the multimodal transport operator or the other
person acting on behalf of such operator for all loss resulting from the multimodal
transportation of such goods; and
(b) the goods may at any time be unloaded, destroyed or rendered innocuous, as
the circum stances may require, without payment of compensation.

6.2 S.22 Right of multimodal transport operator to have lien on goods and
documents:

(1) The multimodal transport operator who has not been paid the amount of
consideration stipulated in the multimodal transport contract shall have a lien on the
consignment and on the documents in his possession.

(2) Notwithstanding anything contained in sections 13, 16 and 18, the period
during which the goods are in possession of the multimodal transport operator in
exercise of his right of lien referred to in sub-section (1) shall not be included for the
purposes of calculating the time of delay under any of those sections.

6.3 S.23 General average:

(1) Notwithstanding anything contained in any other provision of this Act, it shall
be lawful for the parties to the multimodal transport contract to include in the
multimodal transport document any provision relating to general average

Explanation.—For the purposes of this section, “general average” means

loss, damage or expense reasonably incurred in order to avert danger to
property in common peril and in the common interest involved in the
multimodal transportation.

48
6.4 S.24 Limitation on action:

(1) The multimodal transport operator shall not be liable under any of the
provisions of this Act unless action against him is brought within nine months of—

(a) the date of delivery of the goods, or

(b) the date when the goods should have been delivered, or
(c) the date on and from which the party entitled to receive delivery of the
goods has the right to treat the goods as lost under subsection (2) of section
13.

6.5 S.25 Jurisdiction for instituting action:

(1) Any party to the multimodal transport contract may institute an action in a
Court which is competent and within the jurisdiction of which is situated one of the
following places, namely:--
(a) the principal place of business, or, in the absence thereof, the habitual
residence, of the defendant; or
(b) the place where the multimodal transport contract was made, provided that
the defendant has a place of business, branch or agency at such place; or
(c) the place of taking charge of the goods for multimodal transportation or the
place of delivery thereof; or
(d) any other place specified in the multimodal transport contract and evidenced
in the multimodal transport document.

6.6 S.26 Arbitration:

(1) The parties to a multimodal transport Contract may provide therein that any
dispute which may arise in relation to multimodal transportation under the provisions
of this Act shall be referred to arbitration.

(2) The arbitration proceeding may be instituted at such place or in accordance with
such procedure as may be specified in the multimodal transport document.

6.7 S.28 Multimodal Transport Contract to be made in accordance with this Act:

(1) No person registered as a multimodal transport operator shall enter into any
contract for multimodal transportation except in accordance with the provisions of this
Act and any contract, to the extent it is inconsistent with the said provisions, shall be
void and unenforceable.

6.8 S.29. Act to override other enactments:

(1) The provisions of this Act shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this Act.

ooooooo

49
 SELF-EXAMINATION QUESTIONS

1. What are some of the proposed amendments to the Act?

2. What are the rules pertaining to the registration of an MTO?
3. Describe the MTD with reference to its issue, contents and the responsibility of the consignor.
4. What amendments were effected in the following Acts by the MTOG Act, 1993—
(a) The Carriers Act, 1865,
(b) The Indian COGSA, 1925, and
(c) The Sale of Goods Act, 1930.
5. Describe the responsibilities and liabilities of the MTO with specific reference to
(a) When nature and value of the consignment has not been declared and stage of transport
where loss occurred is (i) not known and (ii) is known.
(b) In case of delay in delivery of goods.
(c) Notice of loss or damage to goods.
6. Define the terms "carrier", "goods" and "delivery" as described in the Act.

RECOMMENDED FOR FURTHER READING:

Apart from the prescribed text-book please refer to "CONTA1NERISATION & MULTIMODAL
TRANSPORT IN INDIA" by Dr. K.V. Hariharan, 3rdRedivsed Edi. 2000 (Chapters 7 and 8). *-
.
For Law Relating to International Context, refer Multimodal Transport Carrier Liability and
Documentation, by Ralph De Wit (Lloyd's of London Press Ltd. 1995).

*******************************

50
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 10

CUSTOMS ACT, 1962

1.0 The object of Customs Act 1962, is:

1. Assessment, levy and collection of customs duty; and

2. Prevention, detection and punishment of smuggling activities.

1.1 Hence Customs Act is a fiscal statute as well as a preventive statute. Only some of
the sections relevant to shipping are dealt with hereunder.

2.0 VESSELS CARRYING IMPORTED/EXPORT GOODS:

Sections 29 to 42 of the Customs Act, 1962, deal with the provisions relating to vessels carrying
imported or export goods. They aim at prevention of smuggling activities.

2.1 Section 29: This section makes it obligatory for vessels coming to India from foreign ports
to call at a customs port only until all the passengers have disembarked and all imported cargo
has been unloaded.

2.1.1 The provisions do not apply in relation to a vessel which is compelled by accident, or
some unavoidable reasons, to berth at a non-customs port. In such cases, the person-in-charge of
vessel -

(a) Shall immediately report the arrival of the .vessel to the nearest customs officer or the
officer in charge of a police station and shall on demand produce to him the log book
belonging to the vessel.

(b) Shall not, without the consent of any such officer, permit any goods carried in the
vessel to be unloaded from the vessel.

(c) Shall comply with any directions given by such an officer, with respect of any such
goods, and no passenger or member of the crew shall without the consent of any such
officer leave the immediate vicinity of the vessel.

2.2 Section 30: The person in charge of the vessel carrying imported goods shall, within 24
hours after arrival, deliver to the proper officer an import manifest in the prescribed form.

2.2.1 The person delivering the import manifest shall make a declaration as to the
accuracy of its contents of the proper officer is satisfied that the import manifest or import
report is incorrect or incomplete but there is no fraudulent intention, he may permit it to be
amended or supplemented.

2.2.2 The statute provides one safeguard for the master of the vessel, namely, if he is an
innocent victim of an error in case where the goods have been clandestinely imported in his
vessel without his knowledge, he may be allowed to amend the manifest. If he refuses to
amend it then the consequences of filing an incorrect manifest lie with him.

51
2.3 Section 31: The master of a vessel shall not permit the unloading of any imported
goods until an order has been given by the proper officer granting entry inwards to such a
vessel. This will not be applicable to unloading of baggage accompanying a passenger or a
member of the crew, mail bags, animals, perishable goods and hazardous goods.

2.4 Section 32: This section provides that only those goods can be unloaded at a
customs station which are specified in the import manifest for being unloaded at that
custom station. This is to take care of the unauthorized landing of goods.

2.4 Section 33 : It provides that proper officer can allow unloading of imported and
loading of exported goods also at a place other than an approved landing place.

2.5 Section 34 : The unloading of imported goods or loading of exported goods shall be
done under the supervision of the proper officer.

2.6 Section 35: No imported goods are allowed to be water borne after being landed
from any vessel and no export goods which are not accompanied by a shipping bill are
allowed to be water borne for shipment, unless the goods are accompanied by a boat-note
in the prescribed form.

2.7 Section 36 : The unloading of imported goods or loading of exported goods shall
not be made on the holidays declared by the customs authorities.

2.8 Section 37: The proper officer can board and inspect the vessel and he can remain
on such a vessel for such period as he considers necessary.

2.9 Section 38: The person in charge of the vessel is required to produce the relevant
documents to the proper officer and to answer any questions in connection with the
export/import of goods.

2.10 Section 39: As per this section export goods are not to be loaded on the vessel until
entry outwards is granted.

2.11 Section 40: This provides that the loading of export goods can be made only after
the approval is granted by the proper officer for loading.

2.12 Section 41: The person-in-charge of the vessel must deliver to the proper officer
before departure of the vessel export manifest. The person-in-charge will sign the manifest
declaring it to be true.

2.12.1. The proper officer of customs has been empowered to permit amendment or
supplementation of export manifest if there was no fraudulent intention.

2.12.2 The time limit within which the export manifest may be delivered after the departure
of a vessel is now to be decided by the proper officer considering the needs of each case.

2.13 Section 42: This section provides that the person in charge of the vessel shall not
take out the vessel from the customs notified areas without the permission in writing of the
proper officer. Necessary conditions have been laid down for the issue of such an order,
namely,

(a) The person-in-charge has answered questions put to him u/s 38.

(b) Export manifest has been submitted to the proper officer.

(c) The shipping bills and any such document as the proper officer may require have
been delivered to him.

52
 (d) All duties leviable and all charges/penalties have been settled or the payment
secured by a guarantee or deposit as the proper officer may direct.

(e) The person-in-charge has satisfied the proper officer that no penalty is leviable on
him.

(f) If any export goods have been loaded without payment of export duty, the same
have to be unloaded or the Assistant Commissioner of Customs has to be satisfied
that it is impracticable to unload such goods.

3.0 VESSELS CARRYING COASTAL GOODS:

3.1 Sections 91 to 99 deal with coastal goods and vessels carrying coastal goods.

3.2 Coastal goods are goods, other than imported goods, transported in a vessel from one
port in India to another.

3.3 A new procedure has been devised as follows:

"The consignor of any coastal goods shall present a bill of coastal goods in the
prescribed form. After this has been passed by the customs officer, the goods will be
loaded and the bill handed over to the master of the vessel. If the charges and
penalties due have been paid, the vessel will be permitted to depart. At the port of
destination the master will hand over the respective bills of coastal goods to the
customs officer who will permit clearance of the goods if they correspond to the
entries in this bill."

3.4 New procedure is a big step forward in the speedy clearance of coastal goods. Salient
features of sections 91 to 99 are:

(a) The provisions do not apply to baggage and stores.

(b) The consignor of coastal goods has to present to the proper officer a bill of
coastal goods in the prescribed form.
(c) The consignor is required to sign the form as to the accuracy of the contents.
(d) The master is not supposed to load any coastal goods unless the bill relating to
such goods has been passed by the proper officer and handed over to the master by
the consignor.
(e) The master is supposed to carry all bills relating to various goods delivered to
him and present these to the proper officer at the port of destination.
(f) The proper officer at the port of destination will allow the clearance of the goods
provided they are entered in the bill of coastal goods.
(g) The master of a coastal vessel is supplied with an advice book by the customs.
In this book the proper officer at each port of call makes necessary entries and this
book is made available by the master for inspection at each port of call.
(h) Goods cannot be loaded/unloaded at any port other than a notified coastal or
customs port.
(i) No coasting vessel can leave without the written permission of the proper officer,
which is given only if certain stipulations are complied with.
(j) The Central Government is authorised to make rules for preventing the taking out
of any coastal goods the export of which is dutiable or prohibited.

3.5 Provisions of Sections 33,34,36,37,38 pertaining to imported/export goods are also

applicable to coastal goods as far as is applicable to them.

53
4.0 POWERS OF CUSTOMS OFFICERS :

4.1 Though Customs Officers are not police officers, they exercise vast powers while
discharging their duties. These powers are:

1. Power to search persons, premises and conveyances

2. Power to arrest
3. Power to seize
4. Power to interrogate
5. Power to confiscate
6. Power to impower penalty
7. Power to refer a matter for criminal prosecution.

4.2 As there are no constitutional safeguards to protect against illegal searches or

seizures, the Customs Act itself provides certain safeguards against abuse or mis-use of
powers by Customs Officers. Hence these powers are circumscribed by three limitations.
There are:

1. The customs officer can exercise the above powers only and only if he has
‘reason to believe’
2. The Proper Officer alone can exercise the power. No other officer can exercise
the power.
3. The Act prescribes the procedure to be followed by the officer before he
exercises the power.

5.0 POWER TO STOP AND SEARCH VESSELS:

5.1 Section 106 deals with the power to stop and search vessels.

5.2 The power is circumscribed by three limitations:

1. Proper officer to exercise the power;

2. Reason to believe must exist;
3. Procedure to be followed.

[Please refer to ‘Guide to Customs Act’ by Dr. Chandiramani pp 249-252, 264-266]

5.3 When the proper officer has reason to believe that any vessel in India or within the
Indian customs waters –

(i) has been,

(ii) is being, or
(iii) is about to be

used in the SMUGGLING of any goods or in the carriage of any goods which have been
SMUGGLED, he may at any time stop such a vessel, and

(a) Rummage and search any part of the vessel,

(b) Examine and search any goods in the vessel, and
(c) Break open the lock of any door or package for exercising the powers
conferred by clauses (a) and (b) if the keys are withheld.

54
5.4 The following procedure is used to compel a vessel to stop ~

(i) By using an international signal, code or any other recognized means.

(ii) Chasing the vessel. If this does not succeed, then by
(iii) Firing a gun as a signal. If this too fails, then by
(iy) Firing upon the vessel.

5.5 When the vessel has finally stopped, the proper officer can inspect the goods
and require information to be furnished to ascertain whether or not the goods carried
on board have been legally imported, exported or are likely to be illegally exported.

6.0 CONFISCATION OF VESSELS:

[Please refer to ‘Guide to Customs Act’ by Dr. Chandiramani pp320-326]

6.1 Section 115 deals with confiscation of vessels.

(1) A vessel is liable for confiscation, if

(a) It has been constructed or fitted in such a manner as to conceal goods.

(b) Goods have been thrown overboard or destroyed so as to prevent seizure.
(c) Any vessel having required to stop fails to do so.
(d) Goods cleared for exportation under a claim for duty drawback are
unloaded without permission of a proper officer.
(e) Any vessel carrying imported goods is found with the whole or substantial
portion of such goods missing.[S.115(1)]

(2) Further, under S.115(2) any vessel used in the activity of SMUGGLING is also
liable for confiscation, unless the owner, his agent or the person-in-charge of the
vessel proves—

(i) That it was used without his knowledge or connivance.

(ii) The master had taken all precautions against such use.

6.2 If vessel is used for the carriage of goods on hire, the owner shall be given an option
to pay in lieu of the confiscation of the vessel, a fine not exceeding the market price of the
goods which are sought to be smuggled. Market price means the market price on the date
when the goods were seized.

6.3 Section 115 (2) has been enacted primarily to control SMUGGLING and for giving
relief to owners who are innocent of such activities because they have to depend on their
servants to ply vessels on hire. In such events, even though the owner has nothing to do
with the illegal activity, yet he is not fully exonerated. However he can pay the fine in lieu of
confiscation and thereby save his vessel.

7.0 PENALTY FOR NOT ACCOUNTING FOR GOODS:

7.1 Section 116 deals with the penalty for not accounting for goods.

7.2 The section provides for penalty in case where goods loaded in a vessel for
importation into India or any goods transhipped under the provisions of the Act or coastal
goods are not unloaded at their place of destination or if the quantity unloaded is short of
the quantity to be unloaded and if the failure to unload is not accounted for to the
satisfaction of the proper officer.

55
7.3 The satisfaction of the officer is an objective satisfaction for he acts in a quasi-
judicial capacity when he imposes the penalty. He cannot impose a penalty if he fails to
satisfy himself, notwithstanding reasonable explanation rendered by the carrier.

7.4 If in the first report, the port authorities erroneously state that there was a short-
landing, but in its subsequent report clarify that there was no short-landing, then the penalty
imposed and paid in pursuance of the first report is liable to be refunded.

7.5 Short-landed goods are liable to penalty and not duty. The person-in-charge of the
vessel is given notice and an opportunity to offer his explanation. Only when the explanation
is unsatisfactory, the penalty is imposed u/s 116.

7.6 How is short-landing proved?

7.6.1 Relevant pieces of evidence are:

(a) The out-turn report and the manifest.

(b) The survey report, conduct of the parties arid the chemical analysis.
The survey report is to be concluded immediately after the goods are discharged and
not at a later date.

8.0 PUNISHMENT FOR EVASION OF DUTY PROHIBITIONS:

8.1 Section 135 deals with Evasion of duty or prohibitions.

8.2 Person will be punishable if

(a) He is knowingly a party in any fraudulent evasion or attempted evasion of any

duty or any prohibition imposed by the Act.
b) He acquires possession or in any other manner deals with any goods which he
knows are prohibited.

8.3 The punishment in various cases is as follows:

(i) If the offence is relating to certain goods, i.e., gold, diamonds, watches,
manufacture of gold, diamonds and the market price of those goods exceed one lack
of rupees then the accused will have to face imprisonment which may extend to FIVE
years and with fine. The minimum imprisonment is 6 months. But if he is able to
furnish special and adequate reasons for his act, then he can get the sentence
reduced.

(ii) In all other cases, he will have to face imprisonment for a term which may extend
to TWO years or with fine or with both.

8.4 If any person convicted of an offence under this section is again convicted under this
section, then, he shall be punishable for the second and for every subsequent offence with
imprisonment for a term which may extend to seven years and with fine.

8.5 The following shall not been considered as special and adequate reasons for
awarding an imprisonment of less than 6 months.

(i) The fact that the accused has been convicted for the first time for an offence
under this Act.

(ii) The fact that in any proceeding under this Act, other than a prosecution, the
accused has been ordered to pay a penalty or the goods have been ordered to be
confiscated or any other action has been taken against him.
56
 (iii) The fact that the accused was not the principal offender and was acting merely
as a carrier of goods or was a secondary party in the offence

(iv) The age of the accused.

ooooo

SELF-EXAMINATION QUESTIONS

1. In your own words quote the gist of sections relating to coastal goods.
2. What are the provisions relating to vessels carrying import and export goods?
3. When does a customs officer use his power to search a vessel?
What procedure is followed to compel a vessel to stop?
4. Under what conditions can a vessel be confiscated?
5. How does section 115 control smuggling? What are the
defences available to the shipowner?
6. What are the penalties for evasion of duty or for carrying prohibited goods?

RECOMMENDED FOR FURTHER READING:

1. The Customs Act, 1962 (Government of Indian Publications).

2. Commetaries on the Customs Act — T. P. Mukerjee, 3rd Ed, 1982.
3. A Guide to Customs Act --- Dr. Nilima Chandiramani.

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57
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 11

ADMIRALTY JURISDICTION

1.0 INTRODUCTION:

1.1 Shipping is an international industry where there is an interplay of various agencies like the
owners of ships, shipbuilders, ship financiers, cargo owners, ports, crew, etc. There are bound to
be disputes concerning them. In maritime disputes, for a claimant, it is not only the relief against
the owner of a ship that is sought but also the relief by way of arrest of a ship as it is the most
effective means by which claims could be enforced. This is specially so in case of a foreign ship
whose owner may not be available in India but his ship may be within the territorial limits of India
and thus under the jurisdiction of the Indian courts. The principal feature of admiralty actions is
the distinction between proceedings in rem and that in personam. In personam means the right
of a claimant to proceed against the owner of a ship; whereas in rem means right to proceed
against a ship or cargo.

2.0 MEANING:

2.1 In the context of what prevails in UK and USA, the term 'Admiralty' and 'Maritime' have
been regarded as almost synonymous. However, maritime law is wider and developed out of
practice of sea transportation which is as old as civilization.

2.2 Admiralty Jurisdiction depends for its existence on whether or not the cause involved is an
Admiralty matter. It may vary widely from country to country. There is no statutory definition of
Admiralty Law. However, it may be said that Admiralty Law is a branch of jurisprudence regulating
maritime matters of civil and criminal nature. According to Justice Thommen, ‘Power to enforce
claims against foreign ships is an essential attribute of Admiralty Jurisdiction and it is assumed
over such ships while they are within the jurisdiction of the High Courts by arresting and detaining
them. Thus, Admiralty Jurisdiction is an essential aspect of judicial sovereignty of a State.’

3.0 ORIGIN:

3.1 Admiralty Jurisprudence was introduced by the British along with Common Law.
Accordingly, Courts for administering of Maritime Law were established in most of the colonies.
These Admiralty Courts exercised their power conferred till they were replaced by local
legislation.

3.2 The Admiralty Law basically developed in England, because being an island, it carried most
of its commerce through the sea. At the beginning, Lord High Admiral and other Admirals were the
officers in England who were given charge of different areas of the waters around British Isles for
exercising disciplinary powers over vessels plying within their areas of jurisdiction. They were
the sole maritime authorities. The disputes, which came to them, were decided on the basis
of equity having regard to the custom and usage prevalent at that time in maritime affairs.
Later, a separate Admiralty Court was set up by appointing a Judge, who was a deputy to
Lord High Admiral. This Court Jurisdiction became separate jurisdiction of criminality and
eventually High Court of Admiralty Jurisdiction.

58
3.3 Owing to commonality to quite an extent in matters of exercising criminal jurisdiction,
there was always rivalry between the Common Law Courts and the Court of Admiralty
Jurisdiction. The British Parliament, therefore, in 1389 passed an Act, limiting the High
Court of Admiralty to deal with disputes only to those wholly and exclusively occurring upon
the sea. But the High Court of Admiralty continued to encroach upon even those areas
which were out of its jurisdiction.

3.4 Gradually, however, the High Court of Admiralty lost its importance during the 17 th
th
and 18 centuries till it again gained its highest importance. In 1840, the British Parliament
enacted the Admiralty Court Act improving the practice adopted therein, also extending the
jurisdiction.

3.5 The most important turnaround in this Act was that the Admiralty Court would also
deal with cases arising within the country on the same footing as Common Law courts. It
also included provisions relating to claims in respect of damage received by a ship.

3.6 In 1861, the Indian Admiralty Act was enacted. This Act extended the jurisdiction of
Admiralty Court by including in its ambit even cases of 'damage by a ship' and the provision
that the aggrieved party can move the Admiralty Court to exercise jurisdiction over
foreigners also, with regard on claims to cargoes corning into Great Britain but not outward
cargoes.

3.7 There were further Acts in 1873 and 1920. The 1873 Act tried to combine the
Admiralty Court with the High Court of Justice. The 1920 Act extended jurisdiction of the
Admiralty Court to claims pertaining to hire of a ship, carriage of goods in any ship and
claims in tort in respect of goods carried in any ship.

3.8 In 1925, a Consolidation Act was passed, consolidating all previous Acts and vested
the Admiralty Jurisdiction in all divisions of the High Court.

3.9 There have been further improvements through the 1956 Act and 1981 Supreme
Court Act. Admiralty Jurisdiction in England, as it stands today, is wide as it is derived from
Maritime Law, which in itself developed by custom coming through trade practices and
statutes which draw from the International Conventions which again brings into focus, the
practices of many maritime countries world over.

4.0 DEVELOPMENT OF ADMIRALTY MATTERS IN INDIA:

4.1 Three Mayor's Courts were functional at Madras, Bombay and Calcutta in the early
period of rule by the East India Company. Later in 1774, the Supreme Court of Judicature
was established at Calcutta with the powers to exercise civil, criminal and admiralty matters.
In 1861, High Courts were established at Calcutta, Bombay and Madras.

4.2 The Colonial Courts of Admiralty Act of 1890 was passed by the British Parliament and this
Act was meant for the British Colonies. This Act in effect empowered the Colonial Courts having
unlimited jurisdiction to exercise jurisdiction in the same manner and to the full extent as the High
Court in England. The Act also empowered the Colonial Legislature to enact law to further confer
partial or limited jurisdiction to any inferior Court. Consequently, through the 1891 Act of Colonial
Courts of Admiralty, the Indian Legislature declared the three High Courts in India as the Colonial
Courts of Admiralty.

4.3 As there has been no Act in independent India on Admiralty Jurisdiction, the above three
High Courts of India have continued to exercise Admiralty Jurisdiction granted as per the 1861/1891
Acts, by virtue of a saving clause in Article 372 of the Indian Constitution. The three High Courts

59
also are superior Courts under constitution and, therefore, with regard to Admiralty Jurisdiction
they set rules of procedure and practice.

4.4 The Admiralty Jurisdiction of our Courts is limited, as it was under the British rule, while in
England itself, the Admiralty Jurisdiction of its Courts have been extended to a considerable
extent through later statutes of the British Parliament. The result is that Admiralty Jurisdiction of
the High Courts in India does not exist beyond the ambit of the English Act of 1861. With the
result, the Admiralty jurisdiction in India had limitations in matters of arrest or detention of foreign
ships in an action in rem in respect of a cause of action relating to outward cargo as distinguished
from the inward cargo.

4.5 However, the Supreme Court in its recent judgment in the case of MV Elizabeth vs;
Harvan Investment and Trading Co. has in effect clarified that the High Courts in India, after
promulgation of the Constitution have Admiralty Jurisdiction uninhibited by the limitation of High
Courts power in England under the 1861 Act.

4.6 The facts of MV Elizabeth case are: The plaintiff, with his registered office in Goa, filed
a suit in rem invoking admiralty jurisdiction of Andhra Pradesh High Court against the
defendant’s ship when the ship entered port of Vishakapatnam for breach of duty [leaving
Marmagoa port without issuing bill of lading and for delivering cargo to consignees despite
plaintiff’s direction not to do so as price was not paid]. The defendant raised a preliminary
objection that the plaintiff’s suit against foreign ship owned by a foreign company not having
place of business in India was not liable to be proceeded against in admiralty jurisdiction by
an action in rem for a cause of action arising from carriage of goods from a port in India to a
foreign port.

4.7 Question raised in this case was whether Andhra Pradesh High Court, not being a
chartered High Court, had admiralty jurisdiction? The Supreme Court held that as Andhra
Pradesh High Court was a successor to Madras High Court [due to re-organization of
states] it had admiralty jurisdiction. But whether other non-chartered High Courts in India
had admiralty jurisdiction was not expressly decided. However the Supreme Court held that
High Courts in India after promulgation of the Constitution shall have admiralty jurisdiction
uninhibited by the limitation of the power of the High Court in England under the 1861 Act.

5.0 ADMIRALTY JURISDICTION:

5.1 The High Court, in its admiralty jurisdiction, shall hear or determine any of the
following questions or claims:

1. Possession or ownership or co-ownership of a ship;

2. Mortgage or charge on a ship;
3. Damage done by a ship;
4. Damage received by a ship;
5. Loss of personal effects, injury sustained as a consequence of a defect in ship or
her hull or in her owners or other persons having an interest in the ship;
6. Loss or damage to goods carried in a ship;
7. Agreement relating to the carriage of goods by a ship or use of hire of a ship;
8. Salvage;
9. Towage;
10. Pilotage;
11. Goods or materials supplied to a ship for her operation or maintenance;
12. Construction, repair or equipment of a ship or dock charges or fees, wages or
amounts recoverable by master or a member of crew of a ship;

60
 13. Disbursements on account of a ship; and
14. General average etc.

5.4 The action in an Admiralty court is different from other civil actions to the extent that
the action commences with an application for arrest of the ship after which the Admiralty
court orders the arrest of the concerned ship by issuing a warrant of arrest with directions to
all concerned like the ports and other authorities preventing the vessel from sailing. If the
owners want to see that their vessel is not prevented from sailing, they have to deposit
adequate security to cover all the claims by way of establishment of a fund or a bank
guarantee etc. Only on such a security the vessel will be allowed to sail. This way, the
claims are secured irrespective of the fact what happens to the vessel or its owner later on.
Where the owner or persons having an interest in the ship fail to put up security, the court
may sell the vessel to realize the funds to pay the claims after meeting the expenses
connected with the sale. The priority between the claims is subject to law, which in turn may
be according to the international conventions. For example salvage claims may rank first as
they make the property available for other claims to realize. The 'sister ship arrest' concept
is very important in that the claims are realizable by arresting a vessel other than the vessel
on which the claims arose, if the same owner beneficially owns the other vessel.

ooooo

SELF EXAMINATION QUESTIONS

1. How is a claim against a shipowner exercised in an Admiralty Court?

2. What is the difference between Admiralty Law and other branches of Civil Law.
3. Discuss the admiralty jurisdiction of the High Courts in India.
4. Critically examine MV Elizabeth’s case.

RECOMMENDED FOR FURTHER READING :

1. Arrest of Ships - C. Hill, 1st Edi., 1985

2. The Law Relating to Merchant Shipping in India with Admiralty Jurisdiction, by B.C Mitra, New
Edi. 2000. (The University Book Agency, Allahabad, 211001).
3. Maritime Law of India — in International Context (Bhandarkar Publications - 2nd Edi. 1998).
4. The Merchant Shipping Act, 1958-J.S. Gill, 1999.

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61
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 12

MARITIME FRAUDS
1.0 In December 1979, M.T. Salem set sail from Kuwait with a cargo of crude oil worth
USD 56 million, intended for Italy. The oil, however, never reached Italy, instead the vessel
diverted to South Africa and secretly discharged her cargo in defiance of existing sanctions.
She continued up the coast of Africa until her crew off Senegal scuttled her.

1.1 At this point meticulous planning and execution began to degenerate into farce. The
Salem sank but left no significant oil slick. Her, crew rescued from lifeboats, claimed they
had spent hours fighting an engine room fire, but were clean and neatly dressed. They were
all carrying passports and suitcases, but not the ship's log.

1.2 Salem is probably the most celebrated and extravagant example to date of a
maritime fraud. However, the range of crime in shipping is startlingly wide and is constantly
being expanded.

2.0 DEFINITION:

2.1 According to Section 17 of the Indian Contract Act ‘Fraud’ means and includes any
of the following acts committed by a party to a contract or with his connivance or by his
agent, with the intent to deceive another party or his agent or to induce him to enter into the
contract:

a) The suggestion of a fact that is not true by a person who knows it is untrue.
b) The active concealment of a fact by one having knowledge of the fact.
c) A promise made without any intention of performing it.
d) Any other act intended to deceive.
e) Any such act or omission as the law declares to be fraudulent.

2.2 Maritime fraud occurs when one of the parties involved in an international trade
transaction, that is to say, buyer, seller, shipowner, charterer, ship's master or crew, insurer,
banker, broker or agent, succeeds unjustly and illegally, in obtaining money or goods from
another party to whom, on the face of it, he has undertaken specific trade, transport and
financial obligations.

3.0 INTERNATIONAL MARITIME BUREAU :

3.1 In 1980 the International Chamber of Commerce with the support of commercial
interests worldwide,-embarked upon a major programme to control and prevent maritime
frauds and related suspect practices. The result was the establishment of the International
Maritime Bureau (1MB) in 1981.

3.2 The bureau collects and collates information concerning illegal practices and trends.
Thereafter, it would by dissemination of the intelligence gained, thwart future crimes and
formulate proposals for improved commercial practices.

3.3 The prime function of the 1MB is to serve as a focal point for the industry and serve
as a central clearinghouse for information. As a preventive function, the 1MB provides four
services - education through training, general information through publications, advice on

62
prospective trading partners and authenticating trading documents for banks and others that
may need such assistance.

3.4 The 1MB also provides remedial services. These would include activities like
searching a vessel that is untracked after loading the cargo. Also, carrying out in-depth
surveys into particular losses.

4.0 TYPES OF FRAUDS :

Frauds can be classified into: - '

4.1 DOCUMENTARY FRAUDS:

4.1.1 Involves the use of false or forged documents, usually the bills of lading and
commercial invoices. -

In an international transaction where payment is made by a Letter of Credit (L/C), the

buyer instructs his bank (issuing bank) to open a L/C in favour of the seller. The
issuing bank instructs the paying bank in the seller's country to hand over the
purchase price when the seller tenders documents confirming shipment of the goods.
The transaction relies on honesty in trading. A fraudulent seller can cash the L/C by
presenting bogus documents for a non-existent cargo. Alternatively, the cargo can be
of a lesser quantity or quality. Sometimes the same cargo is sold to two or more
buyers and payments collected from each.

4.1.2 Documentary fraud is easy to prove but it is difficult to prosecute the culprits,
particularly if several jurisdictions are involved.

4.2 CHARTERPARTY FRAUDS :

4.2.1 When one or more of the parties- shipowner, charterer or cargo owner fail to fulfil
their obligations, the result would be a business failure or a fraud. A fraud could for instance,
concern a time charter party under which hire is paid on a fortnightly basis in advance. The
first hire is paid and the vessel proceeds to load port where the cargo is loaded. The
shipowner authorizes the release of freight pre-paid bills of lading to the charterers who
pass them on to the cargo owner in exchange for freight. After sailing, the charterers
abscond with the entire freight collected. In such a situation the shipowner is contractually
bound to deliver the cargo under the bills of lading which he has issued, but he may not
have the resources to do so.

4.2.2 The most difficult type of fraud, yet one of the most common, is charter party fraud. It
is a fact that most chartering companies that fail are registered in the so-called "off-shore*
registries.

4.3 INSURANCE FRAUDS:

4.3.1 Frauds under this category are called what are known as "hull frauds".

4.3.2 A vessel loaded a cargo of steel in Italy worth USD 300000 for the UK. Ten days
later the vessel was reported sunk north of Morocco. The crew were picked up from lifeboats
by a Spanish ferry, saying that a leak had developed in the engine room.

4.3.3 The suspicion arose because the vessel had sunk in calm seas. She sank in the
early hours of the morning, when there was no other ship in sight but amongst busy shipping
lanes where survivors were certain to be picked up. Further, Moroccan industrialists had
made several approaches to the Italians to obtain the type of steel that the vessel was
carrying. One of the crew later admitted that the vessel was scuttled and the cargo had been

63
discharged earlier in Morocco. The vessel had been used regularly for drug smuggling and
had outlived its age.

4.4 CONTAINER FRAUD:

4.4.1 About container fraud it has been remarked-

" The container has made no difference to crime except that the goods are now gift
wrapped"

4.4.2 It is now becoming increasingly common for the theft, of a whole container to be
accomplished by altering paper work or, in this high tech age, the manipulation of a
computer entry. Besides, the theft of a whole container, theft of part contents has also been
on the increase.

4.4.3 Probably the most spectacular theft/fraud circumstances occurred towards the end of
1998 when 30 TEUs supposedly loaded with 996 cartons of canned mushrooms at an inland
depot in mainland Hong Kong.

4.4.4 These containers were then shipped on two different deep-sea vessels to
Rotterdam. From there four different feeder vessels shipped them to five different
consignees in Scandinavia.

4.4.5 Each one of the thirty containers was found to be empty. The insurers took the
understandable view that such a widespread total loss could not have been theft, and that
the only alternative, fraud on the part of the consignor in Hong Kong, made this a non-
insurable shortage. The various aggrieved consignees were left in the position where they
had to. take individual action to recoup their individuals losses from Hong Kong.

4.5 PHANTOM SHIPS:

4.5.1 A phantom ship is a vessel with a phantom identity. The vessel is registered on the
basis of false information provided to the registering authorities. Thus, on investigation after
the crime, no trace can be found of the ship, its owner and in most cases the crew.

4.5.2 The creation of phantom ship is facilitated by officials in ship registries who are
prepared to register vessels according to details provided without making any effort to verify
the information. This could be due to an inefficient system or in some cases due to a high
degree of corruption in the registration office.

4.5.3 The vessels involved are small bulk carriers or tween deckers under Honduran,
Panamian, Belize or St. Vincent flags. Most of these vessels are 15-20 years old and poorly
maintained. In addition, they do not have any hull and machinery insurance or P&I cover.
The owners are companies that exist only on paper. The crew employed are mostly
Burmese, Thai or Filipinos. The operation of Phantom ships is by and large restricted to Far
East. The skill that goes into the operation of a phantom ship indicates that it is not a simple
operation that can be undertaken by ordinary crooks. It has all the hallmarks of organized
crime.
4.5.4 Phantom ship operators are very selective about what cargoes to load. Typical
cargoes are very high value commodities, such as timber, plywood, palm-oil and in recent
times even diesel oil.

5.0 PROTECTING AGAINST FRAUD:

5.1 Most of the measures for protecting against fraud will considerably increase
transaction costs and delays.

64
5.2 Buyers should make inquiries and ensure they are dealing with reputable sellers.
They can demand certificates from independent survey firms that goods of the correct
quantity and quality are loaded. Another way of protecting himself is that the buyer can insist
on a performance guarantee or bond issued by a reputable bank, payable in the event of
default by the seller. Buyers can also take advantage of Lloyds Information or Lloyds
Shipping Intelligence to not only check on the existence of ships but also whether she is
capable of carrying the cargo. 1MB themselves can be contacted for this purpose. If the
ownership does not exist or is suspect, the answer is simple - simply keep away from the
transaction.

5.3 With documentary fraud it is the buyers who are usually the victims. One of the major
precautions they should take is to try and conclude the sales contract under FOB, which
means that they are in control of the actual shipment. They-should request a faxed Bill of
lading prior to presentation to the bank so that they can carry out preliminary checks of
whether the vessel is there and whether it is loaded. Victims of documentary frauds are
generally commodity traders. There are certain commodities that are targeted by
documentary fraudsters, commodities whose price fluctuates violently on the world markets,
such as sugar and urea.

5.4 Embassy Commercial Sections and Chambers of Commerce should make traders
aware of the risks in trade and make a minimum- series of checks before advising the
names of potential suppliers, buyers or freight carriers. Exporters in India should check
whether the carrying vessel is approved by GIC or not.

5.5 Once the phantom ship phenomenon has occurred there is very little the cargo owner
can do because the cargo is gone. Tracing phantom ships and their cargoes is very difficult.
That is all the more reason to advocate the culture of 'checking.

5.6 Likewise, owners should take advice on prospective time charterers. BIMCO and
INTERTANKO are some of the organizations providing help in this regard.

5.7 Masters should ensure that the cargo signed for is actually on board. They should
also ensure that cargo is only released against the original bill of lading. Where the
release of cargo is requested against a letter of indemnity, the same should be guaranteed
by a first class bank acceptable to the owners P&I club.

ooooo

SELF-EXAMINATION QUESTIONS

1. Define "fraud". When does maritime fraud occur?

2. What role does 1MB play in controlling fraud?
3. Name different types of maritime frauds.
4. Write short notes on:
(a) Documentary frauds
(b) Charterparty frauds
(c) Container fraud
5. Explain the following terms:
(i) Phantom ships
(ii) Insurance frauds
6. What steps are recommended for protection against maritime fraud?
7. Briefly explain any one notorious maritime fraud involving a vessel.

RECOMMENED FOR FURTHER READING

1. International Maritime Fraud - Ellen & Campbell
2. Containerization and Multimodal Transport in India by Dr. K. V. Hariharan, 3r Revised Edl, 2000 -
Chapter 13 "Maritime Frauds and Container Crimes", Pages 286-307.
3. Cases & Materials on the Bill of Lading - Paul Todd.
65
4. The Law of Contract- An Outline -by Dr. Nilima Chandiramani.
5. Marine underwriting - Insurance Institute of India

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66
 67

LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 13

SUPPRESSION OF UNLAWFUL ACTS AGAINST THE

SAFETY OF MARITIME NAVIGATION

1.0 One of the greatest threat to peaceful maritime navigation is piracy and robbery.
Piracy has assumed alarming proportions as it is rampant in many parts of the globe.

2.0 League of Nations:

2.1 The question of piracy was taken up as a topic for codification by the League of
Nations. It commissioned a report from a sub-committee of its Committee of Experts for the
Progressive Codification of International Law. The report restricted piracy to acts on the high
seas but excluded acts of State controlled vessels and acts for political purposes.

3.0 Harvard Draft :

3.1 Harvard Law School thereupon undertook to organize research into the international
law of piracy and to prepare a draft convention with a detailed commentary which was
published in 1932. The Harvard draft, the first to formalize customary law, recognized that
every State had jurisdiction over piracy which was constituted by any act of violence or
depredation with intent to steal or destroy property as long as acts were committed in
connection with an attack on another ship. Unlike the League draft, it permitted seizure of
pirates in the territorial sea of other States in certain circumstances. However, it clearly
excluded from piracy unlawful attacks on persons or property for public purposes, whether made
on behalf of States, recognized belligerent groups or unrecognized bands of revolutionaries.
Jurisdiction in these cases was reserved to the injured State or the State of domicile of the
offender.
UNCLOS 1982

4.0 Piracy is defined in Article 101 of UNCLOS as:

a) Any illegal acts of violence or detention or any act of depredation committed for
'private ends' by the crew or the passengers of a private ship or aircraft and directed:-

i) on the high seas, against another ship or aircraft or against persons or property on
board such ship or aircraft Journal of Indian Ocean Studies.

ii) against a ship, aircraft, persons or property in a place outside the jurisdiction of
any State.

b) Any act of voluntary participation in the operation of a ship or of an aircraft with

knowledge of facts making it a pirate ship or aircraft;

c) Any act of inciting or intentionally facilitating an act described in sub paragraph

(a) or (b) above.

______________________________________________
*http://www cns mils.edu/inventory/pdfs/aptmaritime.

67
 68

5.0 Some other Articles of UNCLOS:

 Approve commission of piracy by a warship whose crew has mutinied and

converted the ship to that purpose.

 Define pirate ship in terms of the interest of those controlling it; and

 Allow for retention of the ships nationality if its flag State so desires arid allow
every State to seize a pirate ship on the high seas using warships or
government vessels.

5.1 It would be evident from the above provisions in the UN Convention on the Law of
the Sea, 1982, the offence of piracy remains circumscribed both by geographical limitation
and restricted to acts for 'private ends'. This position has been made worse by the
emergence of following new jurisdictional zones as incorporated in UNCLOS 1982.

a) The 1982 Convention permits a territorial sea of 12 nautical miles and the use of
a system of straight baselines, the increasing use of which is pushing the outer l i m i t
of territorial sea further from the coast.

b) The Convention accepts the concept of archipelagic straight baselines

connecting the outermost islands of an archipelago and forming the baselines from
which the territorial sea is measured. The archipelagic States can regard the waters
enclosed as subject to their sovereignty. Thus, vast areas are now removed from the
operation of piracy, although some of these areas such as waters off Indonesia and
the Philippines are particularly vulnerable to piracy.

c) The UNCLOS also provides for an extended contiguous zone of 24 nautical

miles from the baselines as against 12 miles permitted in the Geneva Convention on
the Territorial sea & the Contiguous Zone. It does not specify piracy within the laws in
relation to which a State may exercise the control necessary to prevent violations in
the contiguous zone. This omission limits the exercise of the right of hot pursuit since R
cannot be exercised for piracy occurring in the contiguous zone.

d) Serious problems arise from the provisions permitting establishment of a 200-

mile exclusive economic zone from the baselines of territorial waters, within which the
coastal State has exclusive rights to exploit natural resources and over other economic
uses or jurisdictional rights. The situation is complicated because piracy provisions are in
Pan VI of the UNCLOS relating to the High Seas which states in article 86 that it applies
to all parts of the sea that are not included in the exclusive economic zone, in the territorial
sea or in the internal waters of a State or in the archipelagic waters. Article 58 of UNCLOS
states that in the EEZ, all States continue to enjoy the freedom of navigation and
communication and otherjawful uses of the sea related to them such as those
associated with the operation of ships. This article also adds that Articles 88 to 115 apply
to the exclusive economic zone so far ks they are not incompatible with this Part. So far
as piracy provisions are concerned, there is'no incompatibility and they should apply in
the Exclusive Economic Zone.

5.2 As the legal status of the EEZ is arguably sui generis since it is not clearly stated to be
either part of the high seas or the territorial waters; it is the responsibility of the coastal State to
protect navigation from piratical attacks. The position is. however, far from clear and may give
rise to conflicting interpretations since so much of the area formerly regarded as high seas is
withdrawn from this categorization. As a result, very few incidents of violence at sea have been
classed as piracy.

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6.0 Traditional piratical acts using new technology:

6.1 From the reports of the International Maritime Bureau produced for the International
Maritime Organization (1MO), it appears that most attacks against shipping take place in
particular geographical areas, i.e. off the West Coast of Africa.(especially Nigeria, Ghana and
Sierra Leone), off Brazil, in the Caribbean and in South-East Asia, particularly in the Straits of
Malacca and Singapore and the Phi Hip Channel, mostly on the Indonesian side where there are
many small islands. Pirates use radars to locate vessels, gather intelligence from radio and
from informers and carry out their attacks with fast motorized boats often armed with
sophisticated guns; they use modern boarding gear. Most of these pirates are land-based
and do not roam the seas as of old. According to International Maritime Organization, the
number of incidents of piracy and armed robbery against ships which occurred in 1997 was
252; an increase of 24 over the 1996 figure; the total number of such acts reported since
1984 amounted to 1207. It is likely that the actual number of incidents are much higher than
reported. According to the annual report of the International Maritime Bureau of the
International Chamber of Commerce on piracy and armed robbery, during 1997, 51 crew
members were killed, 30 were injured, 22 assaulted, 116 threatened and 412 were taken as
hostages. Indonesia is the area of highest risk with 47 attacks reported in 1997. Thailand
ranked second with 17 attacks reported and Brazil and the Philippines ranked third with 15
attacks reported.

6.2 The types of attack appear to vary from area to area, In West Africa, for example,
most of the incidents reported have involved ships at anchor, usually many miles off the
coast, while waiting for berth in port. In some part of South America, attacks have taken
place within port areas. In South East Asia, however, nearly all incidents have involved
ships that were underway. The attack invariably takes place at night and the pirates usually
board the ship at the stern which is the nearest point to the bridge and crew accommodation
yet offers the Best chance of getting aboard undetected.

7.0 IMO :

7.1 A number of recent incidences of violence at sea finally drew the attention of IMO to
the seriousness of the problem. Piracy was first brought to IMO's notice in 1983 when
Sweden asked the Maritime Safety Committee (MSC) to consider an alarming situation off
the coast of West Africa where ships were being attacked at anchor, usually at night by
armed robbers travelling in fast motor launches. After discussing the matter, the MSC
prepared a draft text, which was adopted as resolution A 545 (13) by the IMO, Assembly.
The resolution urged the member States to take, as a matter of highest priority, all measures
necessary to prevent and suppress acts of piracy and armed robbery from ships in or
adjacent to their waters, including strengthening of security measures. It further invited
Governments and interested organizations to advise shipowners, operators, ship masters on
measures to be taken to prevent acts of piracy and armed robbery and to inform IMO of the
action taken to implement the aims of the resolution. In November 1991, the IMO Assembly,
adopted a second resolution [A 683( 17)], which noted with great concern the increasing
number of incidents involving piracy and armed robbery against ships and the increasing
violence against personnel on board. Since May 1991 IMO has been analyzing all reports of
piracy and armed robbery and summaries are presented to the Maritime Safety Committee
for consideration. While this has helped to identify the areas, the number of incidents is still
alarming and attacks are becoming more ferocious.

7.2 Recent initiatives to address this problem have included the decision by IMO to send
missions of experts to those countries where acts of piracy and armed robbery have most
frequently been reported in order to further discuss the implementation in those countries of
the IMO Guidelines for Preventing and Suppressing Piracy and Armed Robbery Against
Ships. The missions are to be followed up by regional seminars intended to assist
Governments and officials in the countries concerned in enhancing their compatibility for
preventing and suppressing such unlawful acts in their waters. The first such seminar was
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held in Rio-de-Janeiro in October 1998, the second in Singapore in February 1999. The
shipping fraternity have welcomed the recent announcement that the International Chamber
of Commerce (ICC) is to publish piracy reports and information on its website. The reports will
be compiled from daily status bulletins broadcast via satellite by the ICC International Maritime
Bureau's Piracy Reporting Centre in Kuala Lumpur. The reports will contain details of location
and nature of attacks on shipping in the East and South East Asian region and will enable
companies to put their Ships' Masters on special alerts when navigating through waters in
which recent pirate attacks have been reported. The Ship masters can then carry out certain
procedures to protect its crews and cargoes.

8.0 CONVENTION FOR THE SUPPRESSION OF UNLAWFUL ACTS AGAINST THE

SAFETY OF MARITIME NAVIGATION 1988:

8.1 Concern about unlawful acts which threaten the safety of ships and the security of
their passengers and crews has developed fairly recently. A proposal by the United States that
measures to prevent such unlawful acts should be developed by IMO culminated in the
Assembly adopting resolution A.584 (14) which noted with great concern the danger to
passengers and crews resulting from the increasing number of incidents involving piracy,
armed robbery and other unlawful acts against or on board ships. In November 1986, the
Governments of Austria, Egypt and Italy proposed that IMO prepares a convention on the
subject of unlawful acts against the safety of maritime navigation. The Council of IMO
unanimously agreed and in March 1988, a conference held in Rome, adopted the Convention
for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation (also referred to
as the Rome Convention). The main purpose of the Convention is to eiiSlirs that appropriate
action is taken against persons committing unlawful acts against ships. These include:-

a) the seizure of ships by force; ;

b) acts of violence against persons on board ships ajid;
c) the placing of devices on board a ship which are likely to destroy or damage it.

8.2 A Protocol adopted simultaneously extends the requirements of the convention to

fixed platforms located on the continental shelf. Both the convention and the protocol entered
into force on 01 March 1992. The Convention includes provisions for the absolute and
unconditional application of the principle either to punish or extradite persons who commit
offences specified there in.

8.3 During the debates on the item "Oceans and the Law of the Sea", at the fifty second
session of the UN General Assembly, the representative of the Unites States, speaking on the
threat of piracy and armed robbery against ships had urged all States to become party to the
1988 Convention for the Suppression of Unlawful Acts Against the Safety of Maritime
Navigation and its related Protocol by the year 2000. It has been suggested that since the 1-988
convention requires States parties to make the offences covered by the convention punishable
under the domestic law and require them to extradite or submit for prosecution offenders found
within their jurisdiction, it provides another more useful vehicle for prosecution than the nineteenth
century piracy statutes.

8.4 India became a signatory to the 1988 SUA Convention on 15 Oct 1999.

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9.0 Convention for the Suppression of Unlawful Acts Against the Safety of
Maritime Navigation, 1988 :

Adoption: 10 March 1988

Entry into force: 1 March 1992

9.1 The main purpose of the convention is to ensure that appropriate action is taken
against persons committing unlawful acts against ships. These include

• the seizure of ships by force;

• acts of violence against persons on board ships; and
• the placing of devices on board a ship which are likely to destroy or damage it.

9.2 The convention obliges Contracting Governments either to extradite or prosecute

alleged offenders.

10.0 Protocol for the Suppression of Unlawful Acts Against the Safety of Fixed
Platforms Located on the Continental Shelf, 1988:

Adoption: 10 March 1988

Entry into force: 1 March 1992

 The Protocol extends the requirements of the Convention to fixed platforms such as
those engaged in the exploitation of offshore oil and gas.

 The provisions of the convention are as follows:

10.1 ARTICLE 1 : For the purposes of this Convention, "ship" means a vessel of any type
whatsoever not permanently attached to the sea-bed, including dynamically supported craft,
submersibles, or any other floating craft.

10.2 ARTICLE 2 :

1. This Convention does not apply to:

 a warship; or
 a ship owned or operated by a State when being used as a naval auxiliary or for
customs or police purposes; or
 a ship which has been withdrawn from navigation or laid up.

2. Nothing in this Convention affects the immunities of warships and other government
ships operated for non-commercial purposes.

10.3 ARTICLE 3 :

1. Any person commits an offence if that person unlawfully and intentionally:

1. seizes or exercises control over a ship by force or threat thereof or any other form
of intimidation; or

2. performs an act of violence against a person on board a ship if that act is likely to
endanger the safe navigation of that ship; or

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3. destroys a ship or causes damage to a ship or to its cargo which is likely to

endanger the safe navigation of that ship; or

4. places or causes to be placed on a ship, by any means whatsoever, a device or

substance which is likely to destroy that ship, or cause damage to that ship or its
cargo which endangers or is likely to endanger the safe navigation of that ship; or

5. destroys or seriously damages maritime navigational facilities or seriously

interferes with their operation, if any such act is likely to endanger the safe navigation
of a ship; or

6. communicates information which he knows to be false, thereby endangering the

safe navigation of a ship; or

7. injures or kills any person, in connection with the commission or the attempted
commission of any of the offences set forth in subparagraphs (a) to (f).

2. Any person also commits an offence if that person:

i. attempts to commit any of the offences set forth in paragraph 1; or

ii. abets the commission of any of the offences set forth in paragraph 1 perpetrated
by any person or is otherwise an accomplice of a person who commits such an
offence; or
iii. threatens, with or without a condition, as is provided for under national law, aimed
at compelling a physical or juridical person to do or refrain from doing any act, to
commit any of the offences set forth in paragraph 1, subparagraphs (b), (c) and
(e), if that threat is likely to endanger the safe navigation of the ship in question.

10.4 ARTICLE 4 :

1. This Convention applies if the ship is navigating of is scheduled to navigate into,

through or from waters beyond the outer limit of the territorial sea of a single State, or the
lateral limits of its territorial sea with adjacent States.

2. In cases where the Convention does not apply pursuant to paragraph 1, it

nevertheless applies when the offender or the alleged offender is found in the territory of a
State Party other than the State referred to in paragraph 1.

10.5 ARTICLE 5 : Each State Party shall make the offences set forth in article 3
punishable by appropriate penalties which take into account the grave nature of those
offences.

10.6 ARTICLE 6 :

1. Each State Party shall take such measures as may be necessary to establish its
jurisdiction over the offences set forth in article 3 when the offence is committed:

i. against or on board a ship flying the flag of the State at the time the offence is
committed; or
ii. in the territory of that State, including its territorial sea; or
iii. by a national of that State.

2. A State Party may also establish its jurisdiction over any such offence when:

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i. it is committed by a stateless person whose habitual residence is in that

State; or
ii. during its commission a national of that State is seized, threatened, injured or
killed; or
iii. it is committed in an attempt to compel that State to do or abstain from doing
any act.

3. Any State Party which has established jurisdic-tion mentioned in paragraph 2 shall
notify the Secretary-General of the International Maritime Organization (hereinafter referred
to as "the Secretary-General"). If such State Party subsequently rescinds that jurisdiction, it
shall notify the Secretary-General.

4. Each State Party shall take such measures as may be necessary to establish its
jurisdiction over the offences set forth in article 3 in cases where the alleged offender is
present in its territory and it does not extradite him to any of the States Parties which have
established their jurisdiction in accordance with paragraphs 1 and 2 of this article.

5. This Convention does not exclude any criminal jurisdiction exercised in accordance
with national law.

10.7 ARTICLE 7 :

1. Upon being satisfied that the circumstances so warrant, any State Party in the
territory of which the offender or the alleged offender is present shall, in accordance with its
law, take him into custody or take other measures to ensure his presence for such time as is
necessary to enable any criminal or extradition proceedings to be instituted.

2. Such State shall immediately make a preliminary inquiry into the facts, in accordance
with its own legislation.

3. Any person regarding whom the measures referred to in paragraph 1 are being taken
shall be entitled to:

i. communicate without delay with the nearest appropriate representative of the

State of which he is a national or which is otherwise entitled to establish such
communication or, if he is a stateless person, the State in the territory of which he
has his habitual residence;
ii. be visited by a representative of that State.

4. The rights referred to in paragraph 3 shall be exercised in conformity with the laws
and regulations of the State in the territory of which the offender or the alleged offender is
present, subject to the proviso that the said laws and regulations must enable full effect to be
given to the purposes for which the rights accorded under paragraph 3 are intended.

5. When a State Party, pursuant to this article, has taken a person into custody, it shall
immediately notify the States which have established jurisdiction in accordance with article 6,
paragraph 1 and, if it considers it advisable, any other interested States, of the fact that such
person is in custody and of the circumstances which warrant his detention. The State which
makes the preliminary inquiry contemplated in paragraph 2 of this article shall promptly
report its findings to the said States and shall indicate whether it intends to exercise
jurisdiction.

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10.8 ARTICLE 8:

1. The master of a ship of a State Party (the "flag State") may deliver to the authorities
of any other State Party (the "receiving State") any person who he has reasonable grounds
to believe has committed one of the offences set forth in article 3.

2. The flag State shall ensure that the master of its ship is obliged, whenever
practicable, and if possible before entering the territorial sea of the receiving State carrying
on board any person whom the master intends to deliver in accordance with paragraph 1, to
give notification to the authorities of the receiving State of his intention to deliver such person
and the reasons therefor.

3. The receiving State shall accept the delivery, except where it has grounds to
consider that the Convention is not applicable to the acts giving rise to the delivery, and shall
proceed in accordance with the provisions of article 1. Any refusal to accept a deli-very shall
be accompanied by a statement of the reasons for refusal.

4. The flag State shall ensure that the master of its ship is obliged to furnish the
authorities of the receiving State with the evidence in the master's possession which pertains
to the alleged offence.

5. A receiving State which has accepted the delivery of a person in accordance with
paragraph 3 may, in turn, request the flag State to accept delivery of that person. The flag
State shall consider any such request, and if it accedes to the request it shall proceed in
accordance with article 7. If the flag State declines a request, it shall furnish the receiving
State with a statement of the reasons therefor.

10.9 ARTICLE 9 : Nothing in this Convention shall affect in any way the rules of
international law pertaining to the competence of States to exercise investigative or
enforcement jurisdiction on board ships not flying their flag.

10.10 ARTICLE 10:

1. The State Party in the territory of which the offender or the alleged offender is found
shall, in cases to which article 6 applies, if it does not extradite him, be obliged, without
exception whatsoever and whether or not the offence was committed in its territory, to
submit the case without delay to its competent authorities for the purpose of prosecution,
through proceedings in accordance with the laws of that State. Those authorities shall take
their decision in the same manner as in the case of any other offence of a grave nature
under the law of that State.

2. Any person regarding whom proceedings are being carried out in connection with
any of the offences set forth in article 3 shall be guaranteed fair treatment at all stages of the
proceedings, including enjoyment of all the rights and guarantees provided for such
proceedings by the law of the State in the territory of which he is present.

10.11 ARTICLE 11:

1. The offences set forth in article 3 shall be deemed to be included as extraditable

offences in any extradition treaty existing between any of the States Parties. States Parties
undertake to include such offences as extraditable offences in every extradition treaty to be
concluded between them.

2. If a State Party which makes extradition conditional on the existence of a treaty

receives a request for extradition from another State Party with which it has no extradition
treaty, the requested State Party may, at its option, consider this Convention as a legal basis
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for extradition in respect of the offences set forth in article 3. Extradition shall be subject to
the other conditions provided by the law of the requested State Party.

3. States Parties which do not make extradition conditional on the existence of a treaty
shall recognize the offences set forth in article 3 as extraditable offences between
themselves, subject to the conditions provided by the law of the requested State.

4. If necessary, the offences set forth in article 3 shall be treated, for the purposes of
extradition between States Parties, as if they had been committed not only in the place in
which they occurred but also in a place within the jurisdiction of the State Party requesting
extradition.

5. A State Party which receives more than one request for extradition from States which
have established jurisdiction in accordance with article 7 and which decides not to prosecute
shall, in selecting the State to which the offender or alleged offender is to be extradited, pay
due regard to the interests and responsibilities of the State Party whose flag the ship was
flying at the time of the commission of the offence.

6. In considering a request for the extradition of an alleged offender pursuant to this

Convention, the requested State shall pay due regard to whether his rights as set forth in
article 7, paragraph 3, can be effected in the requesting State.

7. With respect to the offences as defined in this Convention, the provisions of all
extradition treaties and arrangements applicable between States Parties are modified as
between States Parties to the extent that they are incompatible with this Convention.

10.12 ARTICLE 12:

1. State Parties shall afford one another the greatest measure of assistance in connection
with criminal proceedings brought in respect of the offences set forth in article 3, including
assistance in obtaining evidence at their disposal necessary for the proceedings. 2. States
Parties shall carry out their obligations under paragraph 1 in conformity with any treaties on
mutual assistance that may exist between them. In the absence of such treaties, States
Parties shall afford each other assistance in accordance with their nation-al law.

10.13 ARTICLE 13:

1. States Parties shall co-operate in the prevention of the offences set forth in article 3,
particularly by:

i. taking all practicable measures to prevent preparations in their respective

territories for the commission of those offences within or outside their territories;

ii. exchanging information in accordance with their national law, and coordinating
administrative and other measures taken as appropriate to prevent the
commission of offences set forth in article 3.

2. When, due to the commission of an offence set forth in article 3, the passage of a
ship has been delayed or interrupted, any State Party in whose territory the ship or
passengers or crew are present shall be bound to exercise all possible efforts to avoid a
ship, its passengers, crew or cargo being unduly detained or delayed.

10.14 ARTICLE 14 : Any State Party having reason to believe that an offence set forth in
article 3 will be committed shall, in accordance with its national law, furnish as promptly as
possible any relevant information in its possession to those States which it believes would be
the States having established jurisdiction in accordance with article 6.

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10.15 ARTICLE 15 :

1. Each State Party shall, in accordance with its national law) provide to the Secretary-
General, as promptly as possible, any relevant information in its possession concerning:

i. the circumstances of the offence;

ii. the action taken pursuant to article 13, paragraph 2;
iii. the measures taken in relation to the offender or the alleged offender and, in
particular, the results of any extradition proceedings or other legal
proceedings.

2. The State Party where the alleged offender is prosecuted shall, in accordance with its
national law, communicate the final outcome of the proceedings to the Secretary-General.

3. The information transmitted in accordance with paragraphs 1 and 2 shall be

communicated by the Secretary-General to all States Parties, to Members of the
International Maritime Organization (hereinafter referred to as "the Organization"), to the
other States concerned, and to the appropriate international inter-governmental
organizations.

10.16 ARTICLE 16:

1. Any dispute between two or more States Parties concerning the interpretation or
application of this Convention which cannot be settled through negotiation within a
reasonable time shall, at the request of one of them, be submitted to arbitration. If, within six
months from the date of the request for arbitration, the parties are unable to agree on the
organization of the arbitration any one of those parties may refer the dispute to the
International Court of Justice by request in conformity with the Statute of the Court.

2. Each State may at the time of signature or ratification, acceptance or approval of this
Convention or accession thereto, declare that it does not consider itself bound by any or all
of the provisions of paragraph 1. The other States Parties shall not be bound by those
provisions with respect to any State Party which has made such a reservation.

3. Any State which has made a reservation in accordance with paragraph 2 may, at any
time, withdraw that reservation by notification to the Secretary-General.

11.0 PIRACY BILL 2012 *

11.1 India is a signatory to UNCLOS 1982 but this convention has not been incorporated
in to national legislation. The Indian Penal Code does not address the offence of piracy.
Further, India became a signatory to the SUA Convention 1988 on 15 Oct 1999.
Subsequently, India drafted the Piracy Bill.

11.2 According to the statement of objects and reasons, piracy as a crime is not included
in the Indian Penal Code (IPC). This has led to problems in prosecution of pirates presently
in the custody of Indian police authorities. The Piracy Bill intends to fill this gap and provide
clarity in the law.

11.3 The Bill prescribes that its provisions shall also extend to the Exclusive Economic
Zone of India.

11.4 The Bill defines ‘piracy’ as any illegal act of violence or detention for private ends by
the crew or passengers of a private ship or aircraft on high seas or at a place outside the
jurisdiction of any State. It also prescribes that any act which is held to be ‘piratical’ under
international law shall be included in the above definition.
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11.5 The Bill seeks to punish piracy with imprisonment for life. In cases where piracy
leads to death, it may be punished with death. The Bill also lays down punishments for
attempts to commit and abet piracy. Such acts shall be punishable with imprisonment up to
14 years and a fine.

11.6 The Bill provides that if arms/ ammunition are recovered from the possession of the
accused, or if there is evidence of threat of violence, the burden of proof for proving
innocence shall shift to the accused.

11.7 The Bill empowers the government to set up designated courts for speedy trial of
offences and authorizes the court to prosecute the accused regardless of his/ her nationality.
It also provides for extradition.

12.0 SUMMARY:

 One of the greatest threat to peaceful maritime navigation is piracy, which is rampant in
many parts of the globe.

 The League of Nations Report restricted piracy to acts on the high seas and excluded
acts of State controlled vessels and acts for political purposes.

 According to Harvard Draft:

 Any act of violence/depredation with intent to steal/destroy property as long as
the act is committed in connection with an attack on a ship
 Every State has jurisdiction over piracy
 Seizure of pirates in territorial sea of other State permitted
 Unlawful attack on persons/property for public purposes excluded.

 Piracy defined in Art. 101 of UNCLOS as :

a) Any illegal act of violence or detention or any act of depredation committed for
‘private ends’ by crew/passengers of a private ship/aircraft and directed:

(i) On the high seas, against another ship/aircraft or persons/property on such

ship/aircraft.
(ii) Against a ship/aircraft/persons/property in a place outside the jurisdiction of
any State.

b) Any act of voluntary participation in the operation of a ship/aircraft with knowledge of

facts making it a pirate ship/aircraft
c) Any act of inciting or intentionally facilitating an act discussed in (a) or (b) above

 Offence of piracy is therefore circumscribed both by geographical limitation and

restricted to acts for private ends.

__________________________________________________
*http://www prsindia.org-PRS/BillTrack/The Piracy Bill 2012

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Convention for Suppression of Unlawful Acts against the Safety

of Maritime Navigation 1988 [Rome Convention]

 IMO convened a Conference in Rome, where the Convention for Suppression of

Unlawful Acts Against the Safety of Maritime Navigation [also known as Rome
Convention] was adopted.

Adopted on : 10 March 1988

Entry into Force : 1 March 1992

 A Protocol adopted simultaneously extends the requirements of the Convention to fixed

platforms located on Continental Shelf.

 Aim/ purpose
Appropriate action is taken against persons committing unlawful acts against ships [ship
means a vessel of any type whatsoever]

 Unlawful acts include :

 Seizure of ship by force
 Acts of violence against persons on board the ship, and
 Endangering safe navigation of the ship by placing of devices on board the ship
likely to destroy/ damage it; or damaging its navigational facilities; or
communicating false information; etc.

 Convention obliges contracting governments either to extradite or prosecute alleged

offenders

 Convention does not apply to :

 Warships
 Ships owned/operated by State when used as a naval auxiliary or for customs or
police purposes
 Ships withdrawn from navigation or laid up.

 A person commits an offence if he unlawfully and intentionally :

 Seizes / exercises control over a ship by force/ threat/ intimidation; or
 Performs act of violence against person on board the ship if that act is likely to
endanger safe navigation of that ship; or
 Destroys ship or cause damage to ship/cargo likely to endanger safe navigation
of that ship ; or
 Places/causes to be placed on ship device likely to destroy ship or cause
damage to ship/cargo likely to endanger safe navigation of that ship ; or
 Destroys or seriously damages maritime navigational facilities or seriously
interferes with their operation, if the act is likely to endanger safe navigation of a
ship ,or
 Communicates information which he knows to be false, thereby endangering safe
navigation of a ship; or
 Injures or kills any person in connection with commission or attempted
commission of any of the above offences.

 An attempt, abetment and threat to commit the above offences is also an offence under
the Convention..

 Convention applies if ship is navigating or is scheduled to navigate into, through or from

waters beyond the outer limit of the territorial sea of a single State or the lateral limits of
its territorial sea with adjacent State.
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 Conventional also applies when the offender/alleged offender is found in the territory of
State Party

 Every State Party to make the offences punishable by appropriate penalties depending
on the gravity of offence

 Every State Party to adopt measures to establish its jurisdiction over offences when
committed:
 Against/on board a ship flying the flag of the State ; or
 In the territory of that State ; or
 By a national of that State; or
 By a Stateless person whose habitual residence is in that State; or
 During its commission, a national of that State is seized, threatened, injured or
killed; or
 It is committed to compel that State to do or abstain from doing any act

 Any State Party in the territory of which the offender/alleged offender is present shall
take him into custody or take other measures to ensure his presence to enable any
criminal or extradition proceedings to be instituted. It will also notify the States which
have established jurisdiction over the offence and report its finding to them.

 State Parties shall afford one another greatest measure of assistance with respect to
criminal proceedings, including assistance in obtaining evidence

 Any State Party having reason to believe that an offence will be committed shall furnish
relevant information in its possession to those States having established jurisdiction

 Disputes relating to interpretation or application of Convention shall be settled by

negotiation- if it fails then by arbitration at the request by one of them – if this fails then
by International Court of Justice

Piracy Bill, 2012

 India signatory to UNCLOS 1982 but Convention not incorporated into national
legislation
 IPC does not address the offence of piracy
 India signatory to SUA Convention of 1988
 Piracy Bill of 2012 to suppress piracy and to provide punishment for offence of piracy
and matters connected therewith

 Piracy means:
A) Any illegal act of violence or detention or any act of depredation committed for
‘private ends’ by crew/passengers of a private ship/aircraft and directed:
(i) On the high seas, against another ship/aircraft or person/property on such
ship/aircraft.
(ii) Against a ship/aircraft/persons/property in a place outside the jurisdiction of any
State.
B) Any act of voluntary participation in the operation of a ship/aircraft with knowledge of
facts making it a pirate ship/aircraft

C) Any act of inciting or intentionally facilitating an act discussed in (A) or (B) above

D) any act which is deemed piratical under customary international law

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 Pirate ship/ aircraft is one which has been used to commit piracy or intended to be used
for committing it.

 Punishment for Piracy:

 Imprisonment for life
 Death, if piracy results in death of a person
 Forfeiture of property involved in commission of offence
 Attempt to commit piracy is punishable with imprisonment for 14 years + fine
 Punishment to accomplice to piracy – 14 years + fine

 The Central Government may, by notification, confer on any Gazetted Officer the powers
of arrest, investigations & prosecution

 The designated court, that is, the Court of Session shall have jurisdiction to prosecute
regardless of nationality of the accused
 If arms/ ammunition are recovered from the possession of the accused, or there is
evidence of threat or violence, the burden of proving innocence shall shift to the
accused
 The accused shall not be released on bail or on his own bond unless the public
prosecutor has had an opportunity to oppose the application and the Court is satisfied
that there are reasonable grounds for believing that the accused is not guilty.

 The Bill provides for extradition

 The provisions extend to EEZ of India.

ooooooo

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Bill No. 34 of 2012

THE PIRACY BILL

1.0 An Act to make special provisions for suppression of piracy and to provide for
punishment for the offence of piracy and for matters connected therewith or incidental
thereto.

WHEREAS India is a signatory to the United Nations Convention on the Law of the Sea
adopted by the United Nations on the 10th December, 1982;

AND WHEREAS the aforesaid convention, among other things, states that all States shall
co-operate to the fullest possible extent in the repression of piracy on high seas or any other
place outside the jurisdiction of any State;

AND WHEREAS it is considered necessary to implement the provisions relating to piracy

contained in the Convention.

BE it enacted by Parliament in the Sixty-third Year of the Republic of India as follows:—

1. (1) This Act may be called the Piracy Act,.

(2) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.

2.0 Definitions..

2. (1) In this Act, unless the contest otherwise requires,—

(a) "Code" means the Code of Criminal Procedure, 1973;

(b) "Convention State" means a State party to the United Nations Convention of the Law
of the Sea 1982;
(c) "Designated Court" means a Court of Session specified as a Designated Court under
this Act;
(d) "notification" means a notification published in the Official Gazette;
(e) "piracy" means, —

(i) any illegal act of violence or detention, or any act of depredation, committed for
private ends by the crew or the passengers of a private ship or a private aircraft, and
directed —

(A) on the high seas, against another ship or aircraft, or against persons
or property on board such ship or aircraft;

(B) against a ship, aircraft, persons or property in a place outside the

jurisdiction of any State;

(ii) any act of voluntary participation in the operation of a ship or of an

aircraft with knowledge of facts, making it a pirate ship or aircraft;
(iii) any act of inciting or of intentionally facilitating an act described in
sub-clauses (i) and (ii);
(iv) any act which is deemed piratical under the customary international
law;
(f) "pirate ship or aircraft" means a ship or aircraft which, if, —

(i) it is intended by the persons in dominant control to be used for the

81
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purpose of committing one of the acts referred to in sub-clauses (i) to (iii) of

clause (e);
(ii) it has been used to commit any such act, so long as it remains under
the control of the persons guilty of that act.

(2) The words and expressions used in this Act and not defined but defined in the
Indian Penal Code or the Code shall have the meanings respectively assigned to them in
those Codes. (45 of 1860)

(3) Any reference in this Act to a law which is not in force in any area, shall, in relation
to that area, be construed as a reference to the corresponding law, if any, in force in that
area.

3.0 Punishment for piracy :

3.1 Whoever commits an act of piracy shall be punished with imprisonment for life
except where the accused has caused death in committing the act of piracy or attempt
thereof in which case he may be punished with death and in addition the Designated Court
may also subject to any restitution or forfeiture of property involved in the commission of
the offence.

4.0 Attempt to commit piracy:

4. 1 An attempt to commit piracy or any unlawful attempt intended to aid, abet, counsel
or procure for the commission of an offence of piracy shall also constitute an offence and is
liable on conviction to be punished with imprisonment for a term which may extend to
fourteen years and shall also be liable to fine.

5.0 Punishment to accomplice to piracy”

5.1 Every person who is an accomplice to an act of piracy shall be liable on conviction
to be punished with imprisonment for a term which may extend to fourteen years and shall
also be liable to fine.

6.0 Conferment of power of investigation:

(1) Notwithstanding anything contained in the Code, for the purposes of this Act, the
Central Government may, by notification, confer on any Gazetted officer of that Government
or of a State Government the powers of arrest of any person, investigation and prosecution
exercisable by a police officer under the said Code.(.)

(2) The Designated Court shall have jurisdiction to prosecute—

(a) any person who apprehended by or in the custody of the coast guard vessel or an
Indian naval warship regardless of the nationality or citizenship of such person and is
accused of committing an act punishable under this Act;

(b) when a person is accused of committing an act of piracy is a citizen or national of

India or is a resident foreign national in India or is a stateless person;

(c) when an offence under this Act is committed on board a foreign flag ship, where
the law enforcement or other public authority of the port or place where the ship is
located has been requested to intervene by the State whose flag the vessel is
entitled to fly, or by the owner of the ship or its master or other person on board the
ship: Provided that nothing in this sub-section shall apply if the ship in question is a
warship or auxiliary ship or is a government owned ship employed in non-commercial

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 83

service and under the control of the government authorities at the time of the act of
piracy otherwise giving rise to jurisdiction to the Court.

(3) Notwithstanding anything contained in any other law for the time being in force, the
Designated Court shall have the jurisdiction to try a proclaimed offender in absentia.

7.0 Presumption:

7.1 In any prosecution of an offence under this Act, if it is proved :

(a) that the arms, ammunition, explosives and other equipments were recovered
from the possession of the accused and there is a reason to believe that such arms,
ammunition, explosives or other equipments of similar nature were used in the
commission of the offence; or

(b) that there is evidence of use of the force, threat of force or any other form of
intimidation caused to the crew or passengers of the ship in connection with the
commission of the offence; or

(c) that there is evidence of an intended threat of using bomb, arms, firearms,
explosives or committing any form of violence against the crew, passengers or cargo
of a ship, the Designated Court shall presume, unless the contrary is proved that the
accused had committed such offence and the burden of proof that the accused has
not committed such offence shall shift to the accused.

8.0 Provisions as to bail :

(1) Notwithstanding anything contained in the Code, no person accused of an offence

punishable under this Act shall, if in custody, be released on bail or on his own bond unless

(a) the Public Prosecutor has been given an opportunity to oppose the
application for such release; and

(b) where the Public Prosecutor opposes the application, the Court is satisfied
that there are reasonable grounds for believing that he is not guilty of such offence
and that he is not likely to commit any offence while on bail.

(2) Nothing contained in this section shall be deemed to affect the special powers of the
High Court regarding grant of bail under section 439 of the Code.

9.0 Provision as to extradition:

(1) The offence under this Act shall be deemed to have been included as extraditable
offences and provided for in all extraditable treaties made by India.

(2) In the absence of a bilateral extradition treaty, the offences under this Act shall be
extraditable offences between India and other Convention States on the basis of
reciprocity.

(3) For the purposes of application of the provisions of the Extradition Act, 1962 to the
offences under this Act, any ship registered in a Convention State shall, at any time while
that ship is plying, be deemed to be within the jurisdiction of that Convention State whether
or not it is for the time being also within the jurisdiction of any other country.

(4) For the purposes of this section, the provisions of section 188 of the Code shall
apply.

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 84

10. Arrest and seizure of property:

(1) On the high seas, or in any other place outside the jurisdiction of any State, every
State may seize a pirate ship or aircraft, or a ship or aircraft taken by piracy and under the
control of pirates, and arrest the persons and seize the property on board.

(2) A seizure on account of piracy may be carried out only by warships or military
aircraft, or other ships or aircraft clearly marked and identifiable as being on government
service and authorized to that effect.

11.0 Geographic scope :

(1) For the purposes of geographic scope, the provisions of this Act shall also extend to
the exclusive economic zone of India.

(2) In this section, the expression "exclusive economic zone of India" shall have the
same meaning as assigned to it in section 7 of the Territorial Water, Continental Shelf,
Exclusive Economic Zone and Other Maritime Zones Act, 1976.

ooooo

SELF-EXAMINATION QUESTIONS

1. What are the provisions of UNCLOS relating to Piracy?

2. Discuss in brief the provisions of SUA Convention?
3. How effective are the provisions of SUA Convention in combating unlawful acts again
safety of maritime navigation?
4. How effective is the Indian Piracy Bill of 2012 in suppressing unlawful acts on the seas?

***********************

84
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 14

GENERAL AVERAGE AND YORK-ANTWERP RULES

1.0 What is General Average?

1.1 It is early form of marine insurance.

1.2 When the ship or cargo are exposed to a common danger and voluntary extraordinary
sacrifice is made or expenditure incurred by the ship or cargo for the benefit of the
whole adventure then such a sacrifice or expenditure is a general average act; and it is
subject to a general average contribution.

1.3 Without the need to show liability in tort or contract, general average contribution is
made by all those interests which have benefitted by the general average act. The
amount of contribution payable by each interest is made on the basis of York Antwerp
Rules [YAR].

1.4 The YAR were first promulgated in 1890. They have been amended several times. The
latest version is of 2004. However YAR 1994 remain popular.

1.5 Usually a clause is inserted in the contract incorporating the YAR.

2.0 Conditions under which general average contribution can be claimed:

 Danger common to whole adventure.

 Danger must be real.
 Danger not due to default of the interest claiming contribution.
 Sacrifice or expenditure must be real, intentional, necessary and voluntary.
 Interest called upon to contribute must have been saved.

2.1 General Average therefore is a system by which losses voluntarily incurred for the
safety of the common marine adventure are shared by all interests (ship, freight and cargo
saved).

2.2 General Average has been defined by Justice Lawrence in an English case (Birkley V.
Presgrave, 1801) as follows;

"All loss which arises in consequence of extraordinary sacrifices made, or expenses

incurred, for the preservation of the ship and cargo comes within general average, and
must be borne proportionately by all who are interested "

2.3 York-Antwerp Rules, 1974 define a general average act as follows:

"There is a general average act when and only when, any extraordinary sacrifice or
expenditure is intentionally and reasonably made or incurred for the common safety for
the purpose of preserving from peril the property involved in a common maritime
adventure." (Rule A).

2.4 A general average loss caused by a general average act may be either a sacrifice or an
expenditure.

NOTE: This lesson is also relevant to the paper on Risk Management & Marine Insurance.
85
3.0 EXAMPLES OF SACRIFICE :

(a) Ship:

i) Anchors/and or cables may be lost or damaged in efforts to refloat a vessel

which has stranded.

ii) Damage to machinery and boilers in endeavouring to refloat a stranded vessel.

iii) Burning of ship's materials and stores as fuel for the common safety at a time of
peril.

(b) Cargo:

i) Jettison of cargo, i.e., throwing overboard of cargo to lighten the ship.

ii) Water used to extinguish fire on ship or cargo may cause damage to other cargo
not on fire.
iii) Part of the cargo burnt to keep the engines going.

(c) Freight: '

Freight is not pre-paid but paid on delivery. If cargo is sacrificed, the shipowner "cannot
collect the freight. This is sacrifice of freight.'

4.0 EXAMPLES OF EXPENDITURE :

i) The expense of hiring tugs to tow a vessel to a port of refuge.

ii) The cost of discharging storing and reloading cargo at the port of refuge where
repairs are carried out.""

5.0 ESSENTIAL FEATURES:

5.1 The essential features of general average are:

(a) The common adventure must be threatened by a "real1 and "imminent" danger.

(b) The general average act must be voluntary and intentional and not inevitable.

(c) Sacrifice and expenditure must be prudent, fair and reasonable.

"Reasonableness" is frequently encountered in legal judgements. The test of

reasonableness is applied in the light of facts and circumstances existing at the time the
act was performed.

(d) The loss must be extraordinary in nature.

This may effect means that losses which occur in the ordinary course of the prosecution,
of the voyage are not general average losses. Normal measures taken to fulfil the
contract of affreightment are not general average nature, because it is the duty of the
master to ensure due performance of the voyage.

86
 (e) The adventure must be saved.

The essence of General average is sacrifice of expenditure by one or more interests to

save all interests.

If cargo is jettisoned to save a vessel in danger and subsequently the vessel sinks, there is no
general average.

(f) The loss must be directly consequential on the general average act.

Demurrage and loss of market are in the nature of consequential losses which cannot be
treated as general average losses and are not admitted as general average.

6.0 CONTRIBUTORY INTERESTS :

6.1 All property which is on board at the time of the general average act and which arrives safely is
liable to contribute towards the general average losses incurred on the voyage, viz., ship, freight
and cargo.

6.2 The exceptions are mails, crew's effects, passengers' personal effects and luggage not
shipped under bills of lading.

7.0 AMOUNTS MADE GOOD:

7.1 The object of the general average system is to "make good" the loss suffered by the injured
party, that is, the interest which has been sacrificed or which has incurred expenditure, by recovering
contributions from the interests saved. The amounts used for this purpose are known as "made
good amount."

7.2 In respect of general average expenditure the amount made good is the expenditure itself. In
respect of general average sacrifices the amounts made good are determined on certain principles
as follows:

(a) Ship :

The amount to be made good in respect of sacrifices of ship, her machinery, etc., is the actual
reasonable cost of repairing or replacing the damage or loss and the amount made good is
subject to the usual deductions for depreciations "new for old", to preserve the principle of
indemnity as the shipowner may benefit where all materials or parts are replaced by new.

(b) Cargo :

Where cargo is not delivered because it is sacrificed, e.g., jettison, the amount made good is
the "net' arrived value" on the day of discharge from the vessel.

When cargo is delivered at destination, the consignee has to incur certain charges such as
duty, landing charges, etc. These charges are deducted from the estimated arrived value of
the cargo. This means that general average makes good only what has been lost, i.e., the
estimated arrived value less all charges such as duty, landing charges, etc., which would have
been incurred had the cargo been delivered.

87
 Example:

Cargo sacrificed due to general average act is estimated to have a gross arrived value
of Rs. 2,00,000/- and charges payable at destination would be Rs. 50,000/-. The
amount made good would, therefore, be –

Gross Arrived Value Rs.2,00,000.00

(Less) Charges Rs. 50,000.00
--------------------
(Amount made good) Rs. 1,50,000.00
--------------------

(c) Freight :

If freight is paid in advance it is not at the risk of the shipowner and is included in the
value of the cargo, and contribution to general average will be based upon the value of
the cargo at destination which includes the amount of freight also.

If the freight is payable at destination, it is at the risk of the shipowner and contributes to
general average as a separate interest.

If cargo on freight payable at destination is not delivered because it is sacrificed, the

shipowner suffers loss due to sacrifice of freight on such cargo. The amount made good
is the gross freight lost less any charges which would have been incurred but are, in
fact, not incurred because of the sacrifices.

The amount made good is therefore arrived as follows:

a. Freight is payable at destination at Rs.500/- per barrel.

b. Consignment consists of 5000 barrels.
c. 100 barrels are lost at sea and not delivered

Freight on 100 barrels at Rs.500/- each Rs.50,000.00

(Less) Expenses saved to the shipowner

at Rs.50/- per barrel , Rs. 5,000.00
------------------
Contributory Value Rs. 45,000.00
------------------

8.0 CONTRIBUTORY VALUES :

8.1 The interests saved contribute on their net arrived value at the port where the voyage
ends, i.e., either at destination or at an intermediate port where the voyage is abandoned.

8.2 The. amount payable by each interest is called "contribution" and the values on which
this contribution is assessed are known as the "contributory values". The amounts made good
are also added to the contributory values as is illustrated in the following example:

8.3 This is fair and equitable because the interests making the sacrifice would be relatively
better off by being reimbursed for a loss which the other interests are bearing. This may be
illustrated as follows:

88
 In General Average Act cargo B sacrificed is valued at Rs. 1,00,000.00

Contributory Value Contribution to make

good the loss on cargo B

Ship 2,00,000.00 50,000.00

Cargo A 1,50,000.00 37,500.00
Freight 50.000.00 12.500.00
4,00,000.00 1,00,000.00 (Cargo B
Amount made good)

This is not fair and equitable because the interests making sacrifices will be in a better
position than the interests making the contributions which is evident from the following
calculations:

Net Saving

Ship 2,00,000 less 50,000 1,50,000 75%

Cargo A 1,50,000 less 1,37,500. 1,12,500 75%
Freight 50,000 less 12,500 37,500 75%

It will be observed that cargo B has been reimbursed in full for the sacrifice, whereas
other interests by contribution have only had a net saving of 75%. Therefore, the
amount made good also contributes to maintain equity, as follows:

Contributory Values Contribution to make

good the loss

Ship 2,00,000 40,000 20%

Cargo 1,50,000 30,000 20%
Freight 50,000 10,000 20%
Made good (Cargo B) 1,00,000 20,000 20%
Total Made good 5,00,000 1,00,000 20%

All interests therefore have a net saving in the same proportion, viz., 80%.

8.4 Ship

The contributory values of the ship is its value at the place where the voyage ends, as
assessed by a ship valuer and if the ship has suffered particular average and general
average sacrifice the cost of repair of such damage is deducted from the sound value
and to the balance is added the amount made good for general average sacrifice.

8.5 Cargo

The contributory value of cargo is determined in a similar way as the "made good" for
sacrifice is calculated, i.e., the gross value at destination less the charges incurred
subsequently to the G. A. Act. The amount made good is added to the figure.

If two identical bags are shipped and one is jettisoned and the other safely delivered,
the contributory value of the delivered bag should be equal to the amount made good
for the bag jettisoned to maintain equity.

89
 Example
Contributory Value Amount Made Good
Bag 1 (delivered safely) Bag 2 (jettisoned)

Gross Arrived Value Rs. 1,000 Estimated Gross Market Value Rs. 1,000
(Less) Charges Rs. 100 (Less) Charges Rs. 100
Contributory Value Rs. 900 Rs. 900
------------ ----------

It will be observed that cargo contributes to general average on its actual net arrived
value at the port of destination, after deduction of freight, if any, payable on delivery and
such other expenses which are borne by the owner in the event of delivery, such as
landing charges, duty, etc., which would not be incurred in the event of total loss.

8.6 Freight

Freight contributes on the net of freight saved by sacrifice, i.e., the gross amount at the
risk of the shipowner, less the expenses of earning it such as wages of crew, port
charges, etc. as would not have been incurred if the ship had been lost at the time of
sacrifice: Any amount made good must, of course, be added.

Example

Freight payable at destination on a consignment of 100 barrels of oil at Rs.100 p/barrel.

30 barrels are delivered safe.

Freight at risk of shipowner on 70 barrels jettisoned }

at Rs.100 per barrel } Rs. 7,000.00
Deduct

Port charges, crew wages etc. Rs. 2,000.00

Cost of discharge Rs. 1.000.00 Rs. 3.000.00
Contributory Value Rs. 4,000.00

9.0 EXAMPLE OF GENERAL AVERAGE :

9.1 The loss suffered and expenses incurred are:

Shipowner

a) Damage to machinery which occurred during efforts to refloat the vessel Rs.30,000.00
b) Costs of unloading cargo into barges, warehousing arid reloading
to lighten the vessel 5,000.00
c) Cost of services of tugs 65.000.00
Total * 1,00,000.00

Cargo Owners

a) Net value of cargo jettisoned 35,000.00

b) Damage to cargo due to forced discharge, }
storage and reloading } 15.000.00 50.000.00
Total 1,50,000.00

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ADJUSTMENT

Ship (contributory value):

a) Value of damaged ship at destination 2,70,000.00

b) (Add) Amount made good (machinery damage) 30.000.00
3,00,000.00
Cargo (Contributory Value):

i) Gross Value of damaged cargo at destination 11,57,000.00

ii) (Deduct) Landing Charges 7,000.00
11,50,000.00
iii) (Add) Amount made good
a) Jettison loss 35,000.00
b) Damage due to forced discharge 15.000.00 50.000.00
12,00,000.00
Therefore, total Rs. 15,00,000 pays Rs. 1,50,000

The general average liability is, in this example, to the extent of 10% of the contributory value.
Therefore:
Ship pays Rs. 30,000.00
Cargo pays Rs. 1.20.000.00
Total Rs. 1,50,000.00

Final Position

Ship
Loss Rs. 30,000.00
Expenses Rs. 70,000.00 Rs. 1,00,000.00
Contribution to G.A. Rs. 30.000.00
Balance to be paid Rs. 70,000.00
--------------------
Cargo :

Contribution to G. A. Rs. 1,20,000.00

Losses Rs. 50,000.00
Balance to be paid . Rs. 70,000.00
-----------------------

Therefore the cargo owners have to pay the shipowners Rs.70,000/-.

********************

10.0 GENERAL AVERAGE PROCEDURE :

10.1 Adjustment of general average is the responsibility of the shipowner. For this purpose
Average Adjusters, who are skilled professionals, are appointed.

10.2 Declaring a general average is the decision of the master of the vessel, which he takes
depending upon the gravity of the situation and the threat to the common adventure. On declaration
of general average, the master communicates with the shipowner at the earliest.

10.3 An Average Adjuster is appointed at an early date. His first task is to make estimates of
contribution that the various interests have to make, especially cargo. At common law, the shipowner
has a lien on the cargo by virtue of which he can insist on payment of G.A. contribution before

91
delivery of the cargo. On the basis of the best information available, the adjuster advises the likely
amounts of contribution from cargo owners.

10.4 If the amount of contribution is small, the cargo is delivered subject to consignees signing an '
Average Bond, usually on Lloyd's Form, which has been approved by the insurers.

10.5 By signing this form the consignees agree:

i) to pay freight due on delivery,

ii) to pay the proper proportion of any general average and salvage charges, and
iii) to furnish correct particulars of the value of the goods delivered to them.

10.6 When cash deposits are paid, a General Average Deposit Receipt is issued on Lloyd's Form.
The form shows particulars of the casualty, the position of net arrived value of the goods (which are
identified by marks and numbers and a general description), the Bill of Lading number and names of
the Trustees issuing the receipt. The receipt is never issued in duplicate, and refund of the deposit,
if any, is made only to the bearer on surrender of receipt.

THE YORK-ANTWERP RULES

1.0 A group of directives relating to uniform bills of lading and governing the settlement of
maritime losses among the several interests, including ship and cargo owners.

2.0 Maritime law includes international agreements, national laws on shipping, and private
agreements voluntarily adhered to by the parties involved in shipping contracts. The York-
Antwerp Rules of General Average are the best known example of such private agreements, as
they establish the rights and obligations of the parties when cargo must be jettisoned from a
ship.

3.0 Under the law of general average, if cargo is jettisoned in a successful effort to refloat a
grounded vessel, the owners of the vessel and the cargo saved are required to absorb a
proportionate share of the loss, in order to compensate the owner of the cargo that has been
singled out for sacrifice. All participants in the maritime venture contribute to offset the losses
incurred. The law of general average became an early form of marine insurance.

4.0 The York-Antwerp Rules were first promulgated in 1890 and have been amended
several times, most recently in 1994 and then in 2004. They are the result of conferences of
representatives of mercantile interests from many countries. The rules provide uniform
guidelines on the law of general average that are included in private shipping agreements and
depend upon their voluntary acceptance by the maritime community. These international rules
ensure uniformity and determine the rights and obligations of the parties.

5.0 The rules are incorporated by reference into most bills of lading (documents given by a
shipping company that list the goods accepted for transport and sometimes list the terms of the
shipping agreement), contracts of affreightment (a contract with a ship owner to hire the ship, or
part of it, for the carriage of goods), and marine insurance policies.

6.0 The York-Antwerp Rules attempt to cover many types of expenses associated with an
imperiled ship. For example, the rules provide for recovery by the ship owner of the costs of
repair, loading and unloading cargo, and maintaining the crew, if these expenses are necessary
for the safe completion of the voyage. Claims are generally made against the insurer of the
cargo and the ship owner's insurance underwriters.

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 York-Antwerp Rules 1974 (Revised 1994)

Rule of interpretation :

In the adjustment of general average the following lettered and numbered Rules "shall apply to
the exclusion of-any Law and Practice inconsistent therewith.

Except as provided by the numbered Rules, general average shall be adjusted according to the
lettered Rules.

Rule A

There is a general average act when, and only when, any extraordinary sacrifice or expenditure
is intentionally and reasonably made or incurred for the common safety for the purpose of
preserving from peril the property involved in a common maritime adventure.

Rule B

General average sacrifices and expenses shall be borne by the different con-? tributing
interests on the basis hereinafter provided.

Rule C

Only such losses, damages or expenses which are the direct consequence of the • general
average act shall be allowed as general average.

Loss or damage sustained by the ship or cargo through delay, whether on the voyage or
subsequently, such as demurrage, and any indirect loss whatsoever, such as loss of market,
shall not be admitted as general average.

Rule D

Rights to contribution in general average shall not be affected, though the event which gave
rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the
adventure; but this shall not prejudice any remedies or defences which may be open against or
to that-party .in respect of such fault.

Rule E

The onus of proof is upon the party claiming in general average to show that the loss or
expense claimed is properly allowable as general average.

RuIe F

Any extra expense incurred in place of another expense which would have been allowable as
general average shall be deemed to be general average and so allowed without regard to the
saving, if any, to other interests, but only up to the amount of the general average expense
avoided.

Rule G

General average shall be adjusted as regards both loss and contribution upon the basis of
values at the time and place when and where the adventure ends.

This rule shall not affect the determination of the place at which the ayerage statement is to be
made up.
93
Rule I. Jettison of Cargo :

No jettison of cargo shall be made good as general average, unless such cargo is carried in
accordance with the recognized custom of the trade.

Rule II. Damage by Jettison and Sacrifice for the Common Safety :

Damage done to a ship and cargo, or .either of them, by or in consequence of a sacrifice made
for the common safety, and by water which goes down a ship's hatches opened or other
opening made for the purpose of making a jettison for the common safety, shall be made good
as general average.

Rule III. Extinguishing Fire on Shipboard:

Damage done to a ship and cargo, or either of them, by water or otherwise, including damage
by beaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made
good as general average; except that no compensation shall be made for damage by smoke, or
heat however caused.

Rule IV. Cutting away Wreck:

Loss or damage sustained by cutting away wreck or parts of the ship which have been
previously carried away or are effectively lost by accident shall not be made good as general
average.

Rule V. Voluntary Stranding:

When a ship is intentionally run on shore for the common safety, whether or not she might have
been driven on shore, the consequent loss or damage shall be allowed as general average.

Rule VI. Salvage Remuneration*:

Expenditure incurred by the parties to the adventure on account of salvage, whether under
contract or otherwise, shall. be allowed in general average to the extent that the salvage
operations, were undertaken for the purpose of preserving from peril the property involved in
the common maritime adventure.

*Salvage expenses paid as special compensation to the salvor are no longer allowed as general
average as a result of the International Salvage Convention 1989. Sec Chapter 10, "Salvage".

Rule VII. Damage to Machinery and Boilers :

Damage caused to any machinery and boilers of a ship which is ashore and in a position of
peril, in endeavouring to refloat, shall be allowed in general average when shown to have
arisen from an actual intention to float the ship for the common safety at the risk of such
damage; but where a ship is afloat no loss or damage caused by working the propelling
machinery and boilers shall in any circumstances be made good as general average.

Rule VIII. Expenses lightening a Ship when Ashore and Consequent Damage:

When a ship is ashore and cargo and ship's' fuel and stores or any of them are discharged as a
general average act, the extra cost of lightening, lighter hire and reshipping if incurred and the
loss or damage sustained thereby, shall be admitted as general average.

94
Rule IX. Ship's Materials and Stores Burnt for Fuel:

Ship's materials and stores, or any of them, necessarily burnt for fuel for the common safety at
a time of peril, shall be admitted as general average, when and only when an ample supply of
fuel has been provided; but the estimated quantity of fuel that would have been consumed,
calculated at the price current at the snip's last port of departure at the date of her leaving, shall
be credited to the general average.

Rule X. Expenses at Port of Refuge, etc.:

(a) When a ship shall have entered a port or place of refuge, or shall have returned to her
port or place of loading in consequence of accident, sacrifice or other extra ordinary
circumstances, which render that necessary for the common safety, the expenses of entering
such port or place shall be admitted as general average; and when she shall have sailed
thence with her original cargo, or a part of it, the corresponding expenses of leaving such port
or place consequent upon such entry or return shall likewise be admitted as general average.

When a ship is at any port or place of refuge and is necessarily removed to another port or
place because, repairs cannot be carried out in the first port or place, .the provisions of this
Rule shall be applied to the second port or place as if it were a port or place of refuge and the
cost of such removal including temporary repairs and towage shall be admitted as general
average. The provisions of Rule XI shall be applied to the prolongation of the voyage
occasioned by such removal.

(b) The cost of handling on board or discharging cargo, fuel or stores whether at a port or
place of loading, call or refuge, shall be admitted as general average, when the handling or
discharge was necessary for the common safety or to enable damage to the ship caused by
sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the
voyage, except in cases where the damage to the ship is discovered at a port or place of
loading or call without any accident or other extra ordinary circumstance connected with such
damage having taken place during the voyage.

The cost of handling on board or discharging cargo, fuel or stores shall not be admissible as
general average when incurred solely for the purpose of re-stowage due to shifting during die
voyage unless such re-stowage is necessary for the common safety.

(c) Whenever the cost of handling or discharging cargo, fuel or stores is admissible as general
average, the costs of storage, including insurance is reasonably incurred, reloading and
stowing of such cargo, fuel or stores shall likewise be admitted as general average.

But when the ship is condemned or does not proceed on her original voyage storage expenses
shall be admitted as general average only up to the date of the ship's condemnation or of the
abandonment of the voyage or up to the date of completion of discharge or cargo if the
condemnation or abandonment takes place before that date.

Rule XI. Wages and Maintenance of Crew and other Expenses bearing up for and in a
Port of Refuge, etc.:

(a) Wages and maintenance of master, officers and crew reasonably incurred and fuel and
stores consumed during the prolongation of the voyage occasioned by a ship entering a port, or
place of refuge or returning to her port or place of loading shall be admitted as general average
when the expenses of entering such port or place are allowable in general average in
accordance with Rule X(a)"

(b) When a ship' shall have entered or been detained in any port or place in consequence of
accident, sacrifice or other extraordinary circumstances which render that necessary for the
common safety, or to enable damage to the ship caused by sacrifice or accident to be repaired,
95
if the repairs were necessary for the safe prosecution of the voyage, the wages and
maintenance of the master, officers and crew reasonably incurred during the extra period of
detention in such port or place until the ship shall or should have been made ready to proceed
upon her voyage, shall be admitted in general average.

Provided that when damage to the ship is discovered at a port or place of loading or call without
any accident or other extraordinary circumstance connected with such damage haying taken
place during the voyage, then die wages and maintenance of master, officers and crew and fuel
and stores consumed during the extra detention for repairs to damages so discovered shall not
be admissible as general average, even' if the repairs are necessary for die safe prosecution of
the voyage.

When die ship is condemned or does not proceed on her original voyage, wages and
maintenance of die master, officers and crew and fuel and stores consumed shall be admitted
as general average only up to die date-of the ship's condemnation or of the abandonment of die
voyage or up to the date of completion of discharge of cargo if die condemnation or
abandonment takes place before that date.

Fuel and stores consumed during die extra period of detention shall be admitted as general
average, except such fuel and stores as are consumed in effecting repairs not allowable in
general average. "

Port charges incurred during the extra period of detention shall likewise be admitted as" general
average except such charges as are incurred solely by reason of-repairs not allowable in
general average.

(c) For the purpose of this and the other Rules wages shall include all payments made to or for
the benefit of the master, officers and crew, whether such payments be imposed by law upon
the shipowners or be made under the terms or articles of employment.

(d) When overtime, is paid to the master, officers or crew for maintenance of the ship or repairs,
the cost of which is not allowable in general average, such over time shall be allowed in
general average only up to the saving in expense which would have been incurred and
admitted as general average, had such over time not been incurred. . -

Rule XII. Damage to Cargo in Discharging, etc.:

Damage to or loss or cargo, fuel or stores caused in the act of handling, discharging, storing,
reloading and stowing shall be made good as general average, when and only when the cost of
those measures respectively is admitted as general average.

Rule XIII. Deductions from Cost of Repairs :

Repairs to be allowed in general average shall not be subject to deductions in respect of "new
for old”' where old material or parts are replaced by new unless the ship is over fifteen years old
in which case there shall be a deduction of one third. The deductions shall be regulated by the
age of the ship from the 31st December of the year of completion of construction to the date of
the general average act, except for insulation, life and similar boats, communications and
navigational apparatus and equipment, machinery and boilers for which the deductions shall be
regulated by the age of the particular parts to which they apply
.
The deductions shall be made only from the cost of the new material or parts when finished and
ready to be installed in the ship.

No deduction shall be made in respect of provisions, stores, anchors and chain cables.

Drydock and slipway dues and costs of shifting the ship shall be allowed in full.
96
The cost of cleaning, painting or coating of bottom shall not be allowed in general average
unless the bottom has been painted or coated within the twelve months preceding the date of
the general average act in which case one half of such costs shall be allowed. '

Rule XIV. Temporary Repairs :

Where temporary repairs are effected to a ship at a port of loading, call or refuge, for the
common safety, or of damage caused by general average sacrifice, the cost of such repairs
shall be admitted as general average.

Where temporary repairs of accidental damage are effected in order to enable the adventure to
be completed, the cost of such repairs shall be admitted as general average without regard to
the saving, if any, to other, interests, but only up to the saving in expense which would have
been incurred and allowed in general average if such repairs had not been effected there.

No deductions "new for old" shall be made from the cost of temporary repairs allowable as
general average.

Rule XV. Loss of Freight :

Loss of Freight arising from damage to or loss of cargo shall be made good as general
average, either when caused by a general average act, or when the damage to or loss of cargo
is so made good,

Deduction shall be made from die amount of gross freight lost, of the charges which the owner
thereof would have incurred to earn such freight, but has, in consequence of the sacrifice, not
incurred.

Rule XVI. Amount to be made good for Cargo Lost or Damaged by Sacrifice:

The amount to be made good as general average for damage to or loss of cargo sacrificed
shall be the loss which has been sustained thereby based on the value at the time of discharge,
ascertained from the commercial invoice rendered to the receiver Or if there is no such invoice
from the shipped value- The value at die rime of discharge shall include the cost of insurance
and freight except insofar as such freight is at the risk of interests other than the cargo.

When cargo so damaged is sold and the amount of the damage has not been otherwise
agreed, the loss to be made good in general average shall be the difference between the net
proceeds of sale and the net sound value as computed in the first paragraph of this Rule.

Rule XVH. Contributory Values :

The contribution to a general average shall be made upon the actual net value of the property
at the termination of die adventure except that the value of cargo shall be the value at the time
of discharge, ascertained from die commercial invoice rendered to the receiver or if there is no
such invoice from the shipped value. The value of the cargo shall include the cost of insurance
and freight unless and insofar as such freight is at the risk of interests other than the cargo,
deducting therefrom any loss or damage suffered by The cargo prior to or at the time of
discharge. The value of die ship shall be assessed without taking into account the beneficial or
detrimental effect of any demise or time charterparty to which the ship may be committed.

To these values shall be added the amount made good as general average for property
sacrificed, if not already included, deduction being made from the freight and passage money at
risk of such charges and-crew's wages as would not have been incurred in earning the freight
had the ship and cargo been totally lost at the date of the general average act and have not
been allowed as general averages deduction being also made from the value of the property of
97
all extra charges incurred in respect thereof subsequently to the general average act, except
such charges as are allowed in general average.

Where cargo is sold short of destination, however, it shall contribute upon the actual net
proceeds of sale, with the addition of any amount made good as general average.

Passengers' luggage and personal effects, not shipped under Bill of Lading shall not contribute
in general average.

Rule XVIII. Damage to Ship :

The amount to be allowed as general average for damage or loss to the ship, her machinery
and/or gear caused by a general average act shall be as follows:

(a) When repaired or replaced,

The actual reasonable cost of repairing or replacing such damage or less, subject to
deduction in accordance with Rule XIII;

(b) When not repaired or replaced, -

The reasonable depreciation arising from such damage or loss, but not' exceeding the
estimated cost of repairs. But where the ship is an actual total loss or when the cost of
repairs of the damage would exceed the value of the ship when repaired, the amount to be
allowed as genera! average shall be the difference between the estimated sound value of
the ship after deducting therefrom the estimated cost of repairing damage which is not
general average and the value of the ship in her damaged state which may be
measured by the net proceeds of sale3 if any.

Rule XIX. Undeclared or Wrongfully Declared Cargo:

Damage or loss caused to goods loaded without the knowledge of the shipowner or his agent
or to goods willfully mis-described at time of shipment shall not be allowed as general average,
but such goods shall re- main liable to contribute, if saved. Damage or loss caused to goods
which have been wrongfully declared on shipment at a value which is lower than their real value
shall be contributed for at the declared value, but such goods shall contribute upon their actual
value.

Rule XX. Provision of Funds :

A commission of 2% on general average disbursements, other than the wages and

maintenance of master, officers and crew and fuel and stores not replaced during the voyage,
shall be allowed in general average. The capital loss sustained by the owners of goods sold for
the purpose of raising funds to defray general average disbursements shall be allowed in
general average. The cost of insuring general average disbursements shall also be admitted in
general average.

Rule XXI. Interest on Losses made Good in General Average:

Interest shall be allowed on expenditure, sacrifices and allowances in general average at the
rate of 7% per annum, until three months after the date of issue of the general average
adjustment, due allowance being made for any payment on account by the contributory
interests or from the general average deposit fund.

98
Rule XXII. Treatment of Cash Deposits :

Where cash deposits have been collected in respect of cargo’s liability for general average,
salvage or special charges, such deposits shall be paid without any delay into a special account
in the joint names of a representative nominated on behalf of the shipowner and a
representative nominated on behalf of the depositors in a bank to be approved by both. The
sum so deposited, together with accrued interest, if any, shall be held as security for payment
to the parties entitled thereto of the general average, salvage or special charges payable by
cargo in respect to which the deposits have been collected. Payments on account or refunds of
deposits may be made if certified to in writing by the average adjuster. Such deposits and
payments or refunds shall be without prejudice to the ultimate liability of the parties.

Rule XXIII. Time Bar for Contributions to General Average :

(a) Subject always to any mandatory rule on time limitation contained in any applicable law:
(i) Any rights to general average contribution, including any rights to claim under general
average bonds and guarantees, shall be extinguished unless an action is brought by the
party claiming such contribution within a period of one year after the date upon which
the general average adjustment was issued. However, in no case shall such an action
be brought after six years from the date of the termination of the common maritime
adventure.

(ii) These periods may be extended if the parties so agree after the termination of the
common maritime adventure.

(b) This Rule shall not apply as between the parties to the general average and their
respective insurers

THE YORK-ANTWERP RULES 2004

The Committee Maritime International at its conference held in Vancouver 31 May-4 June 2004
has completed a revision of the York-Antwerp Rules 1994 and approved a new text to be
referred to as York-Antwerp Rules 2004. These new rules are set out below.

The CMI has published a printed version of the new rules. In summary the amendments made
are the following:

RULE VI. SALVAGE REMUNERATION

has been amended to exclude the allowance of salvage from G.A., except in cases where one
party to the salvage has paid all or any of the proportion of salvage due from another party.

RULE XI. EXPENSES AT PORT OF REFUGE:

has been amended to exclude the allowance in G.A. of wages and maintenance of master,
officers and crew while the vessel is detained at a port of refuge.

RULE XIV. TEMPORARY REPAIRS:

A second sentence has been added to Rule IV b), the effect of which is that recovery in G.A. of
the cost of temporary repairs of accidental damage at a port of refuge is limited to the amount
by which the estimated cost of the permanent repairs at the port of refuge exceeds the sum of
the temporary repairs plus the permanent repairs actually carried out. This capping of the
amount allowed as temporary repairs has sometimes been referred to as the "Baily" method.

99
RULE XX. PROVISION OF FUNDS:

has been amended to abolish commission on G.A. disbursements.

RULE XXI. INTEREST ON LOSSES:

has been amended to the effect that the Interest charged is no longer a fixed rate, but a rate
that will be fixed each year by the Assembly of the CMI. The CMI will publish this on its website
www.comitemaritime.org.

The Plenary Session of the Vancouver Conference adopted the following guidelines for fixing
the rate of interest:

"Guidelines for the Assembly of the Comité Maritime International when deciding the
annual interest rate provided for in YAR Rule XXI.

The Assembly is empowered to decide the rate of interest based upon any information or
consideration, which in the discretion of the Assembly are considered relevant, but may take
the following matters into account:

The rate shall be based upon a reasonable estimate of what is the rate of interest charged by a
first class commercial bank to a ship owner of good credit rating.

Due regard shall be had to the following:

 That the majority of all G.A. adjustments are drawn up in USD.

 That therefore the level of interest for one-year USD loans shall be given particular
consideration.
 That most adjustments, which are not drawn up in USD, are drawn up in GBP, EUR or
JPY.
 That, if the level of interest for one year loans in GBP, EUR or JPY differs substantially
from the level of interest for one year loans in USD, this shall be taken into account.
 That readily available information about the level of interest such as USD - prime rate
and LIBOR shall be collected and used.
 Any amendment of these guidelines shall be made by a decision of a conference of the
CMI."

RULE XXIII. TIME BAR:

A new rule has been added Into the YAR 2004 providing for any rights to G.A. contribution to
be time-barred after a period of one year after the date of the G.A. adjustment or six years after
the date of termination of the common maritime adventure whichever comes first. The rule
recognizes that its provisions may be invalid in some countries.

TIDYING UP THE TEXT OF THE YAR:

Interchangeable terms have been standardized such as "admitted in", "allowed in" and
"admitted as" now all become "allowed as". Some terms have been modernized and a
consistent numbering of paragraphs has been introduced.

The Plenary Session of the Vancouver Conference adopted the following resolution:

BIMCO SPECIAL CIRCULAR

NO. 1 -July 2007 ‘
100
 GENERAL AVERAGE: REVISION OF YORK-ANTWERP RULES

This Special Circular, originally published 24 February 2005, is being reissued with an
important new recommendation.

BIMCO Charter Parties currently contain General Average Clauses that refer either to the
York-Antwerp Rules 1974 or to the York Antwerp Rules 1994. While general average is still
adjusted, in a number of cases, in accordance with the 1974 Rules, BIMCO’s recommendation
in respect of new and revised charter parties is that general average should be adjusted in
accordance with the 1994 Rules.

On the 31" of December 2004 a new set of York-Antwerp Rules were published. The revised
provisions are known as the York-Antwerp Rules 2004 and became available for the
adjustment of claims in general average from 1 January 2005. For the reasons set our below
BIMCO is of the view that the new set of Rules is less favourable to shipowners than the 1994
or 1974 Rules. While BIMCO acknowledges that the choice of which set of York-Antwerp
Rules should be applied to the adjustment of general average is a matter for the parties to
agree, we recommend that Members give careful consideration to the following comments
before agreeing to be bound by the most recent edition of the Rules.

BIMCO’s Documentary Committee agreed at the November 2004 meeting that all new and
revised BIMCO Charter Parties will be published with a reference to adjustment in accordance
with the York-Antwerp Rules 1994.

Following a request by the authors of the YAR 2004 for Bl1\/ICO to reconsider its
position, the Documentary Committee has reviewed the rules and concluded that its
position remains unchanged.

Ever since the 1994 revision of the York-Antwerp Rules (YAR), cargo underwriters, through the
International Union of Marine Insurance (IU1\/II), have been pressing their case for further
reductions in the scope of allowable recoveries. A radical change restricting general average
allowances to common safety and thereby excluding recovery in relation to common benefit
was promoted. BIMCO has opposed the suggested changes in principle and, also, because of
insufficient practical experience of the latest rules which, in any event, have not been
universally accepted with many contracts of affreightment still requiring settlement under the
YAR 1974. At a meeting in Vancouver in 2004 a new set of York-Antwerp Rules were
published, mainly with the support of insurance interests.

The most potentially contentious change to the Rules is to Rule VI (Salvage Remuneration).
Under English law, salvage is not recoverable in general average although it is in civil law
countries. In order to ensure uniformity of law, a rule was introduced in 1974 (and updated in
1994 to reflect provisions in the Salvage Convention) expressly providing for recovery in cases
of salvage. Cargo underwriters supported removing the allowance arguing that salvage
adjustments can result in an unnecessary, and expensive, duplication of apportionment and
should be excluded. The case in favour of retention, put forward by the shipping industry and
some delegations, is a fairer settlement, the avoidance of serious injustices if salvage is
allowed to lie where it falls, the need to refine tentative assessments based on rough figures
and addressing the balance where one party achieves a favourable settlement with salvors on
behalf of other parties. One side effect of this amendment to the Rule is that the change
reverses the position for civil law countries where, when applying the YAR, salvage will now no
longer be considered a general average expense.

101
The following is a summary of the other changes to the YAR 1994:

 Rule XI Wages and Maintenance of Crew and Other Expenses Putting into a Port of
Refuge etc: the costs of wages and maintenance of the Master, officers and crew will no longer
be allowed during the period a vessel is in a port or place of refuge undergoing repairs
recoverable in general average. Fuel and stores consumed will continue to be allowable
expenses;

 Rule XIV(b) Temporary Repairs: after considerable discussion, it was agreed to add a
so-called “Bailey Clause” to restrict the advantage to the owner (in practice his hull insurer)
where temporary repairs make it possible to effect permanent repairs at a place Where such
repairs can be made more cheaply than at or near the place of refuge;

 Rule XXIII: despite reservations, and to the extent permitted by domestic law, a time-
bar provision was inserted extinguishing rights to claim general average contributions one year
after an adjustment has been issued or six years after the termination of the “common maritime
adventure”;

However, BIMCO remains unconvinced about the need for change and the changes produced
will no doubt result to some extent in a transfer of costs between insurers. There is also likely to
be uncertainty, and resulting questions of interpretation, about the new provisions. Many
operators today use absorption clauses, particularly in trades involving numerous cargo
receivers and/or for smaller claims. This is a helpful means of keeping down administrative
costs and has seen a reduction in the number of general average declarations.

The 2004 York-Antwerp Rules are not mandatory and will only apply on a contractual basis.
Owners continuing to incorporate general average arrangements into their contracts of
afireightment may wish to review the new provisions, probably guided by whether existing more
comprehensive cover can be maintained at no additional cost, before taking a decision as to
whether or not to apply the new rules or stay with the YAR 1994, or even YAR 1974.

BIMCO has decided all new and revised BIMCO charter parties will refer only to “York-Antwerp
Rules l994”. The previously used additional text to the effect of “or any subsequent modification
thereto” will no longer be used. Although BIMCO considers the YAR 2004 to be a new set of
Rules and not in anyway a modification or amendment of the 1994 Rules (a View shared by the
authors of the new Rules), it is felt that the clarification of the text will help avoid any possible
misinterpretation of BIMCO’s position.

BIMCO recommends that, in view of the above, all members give careful consideration to the
wording referring to the York-Antwerp Rules contained in their charter parties and bills of lading
and satisfy themselves that the wording reflects the set of Rules that they wish to be bound by.
In particular, BIMCO strongly recommends that its members remove references to “any
subsequent amendments thereto” (or similar wording) after “York-Antwerp Rules 1994”
in any charter parties they conclude.

ooooo

102
 SELF-EXAMINATION QUESTIONS

1. In your own words tell us what the term " General Average" implies. Give some examples
Of general average sacrifices and expenditure.
2. Explain the essential features of a general average act. Substantiate with examples.
3. What are the contributory interests in a general average act? What is the meaning of the
phrase "amount made good"? What classes of property are exempted from contributing to
general average?
4. Describe briefly the general average procedure.
5. Write a note on the York-Antwerp Rules, 1974 (Revised in 1990).
6. Say whether the following losses/expenditure can be claimed as general average. Give
reasons.

(a) A ship is grounded in an estuary in calm waters. It is expected to refloat by the

change of tide. However, to save time the Master decides to use the engines to refloat
the vessel. In the process the engines get damaged. (Damage of engines).
(b) The vessel is stranded on a coast. A mob compels the Master to sell some of the
corn (cargo) below its value to prevent their suffering in time of scarcity. (Loss due to
sale of cargo at a concessional price).
(c) Smoke is seen coming from a cargo hold. The captain orders water to be pumped
into the hold. The cargo becomes wet and is therefore damaged. On arrival no evidence
of fire is found. (Damage of cargo).
(d) Hire of a tug with fire fighting equipment to extinguish a fire on board a vessel.
(e) Warehouse rent while repairs are being effected in a port of refuge.
(f) Cargo is jettisoned to save a vessel in danger. However the vessel sinks.(cargo
loss).
(g) A stranded vessel which is refloated starts leaking badly and is in danger of sinking.
It is towed to the nearest dock but due to unsuitable tide both the Master and the! Pilot
anticipate that the vessel would hit the dock which indeed it does. Both the vessel and
the pier are damaged. -
(h) An auxiliary schooner is damaged by collision with an iceberg. Temporary repairs
are effected in a port of refuge and the vessel proceeds on her voyage by use of
auxiliary steam power. Extra cost is incurred due to consumption of coal. (Cost of extra
fuel).
(i) Cargo is to be jettisoned to lighten a vessel in time of real danger. To save gold bars
carried by the vessel extra expenses- are incurred to remove gold bars and to load them
in another vessel for same destination. (Extra expenses incurred).
(j) A fire occurs in the hold of a vessel and a hole is cut in another hold to gain access to
the fire to put it out. The cargo not on fire is damaged. (Loss to cargo not on fire)
7. It cargo sacrificed has a gross arrived value of Rs. 30,000/-, what would be the "amount
made good"?
8. Consignment consists of 1500 bales. Freight payable at destination is Rs.200 per bale. Cost
of discharge to the shipowner is Rs.30 per bale. 150 bales are lost at sea and not delivered.
What is the amount made good?
9. At the time of general average act the vessel had unrepaired damage from a previous
accident of Rs.l lac. The sound value of the vessel on arrival at destination was Rs. 1 crore.
The damage sustained on the current voyage was, say, Rs. 2 lacs. What would be the
contributory value of the vessel?

103
RECOMMENDED FOR FURTHER READING:

1. Marine Insurance Clains — Insurance Institute of India, Revised Ed., Reprinted 1994.
Though basically recommended for the paper on Risk Management & Marine Insurance,
Lessons IX & X deal with General Average and contain several worked-out examples. Lesson
IX (Pages 193-212) is more applicable for the paper in "Law of Sea Transport".

2. Templeman on Marine Insurance — R. X Lambeth, 6th Ed., 1986.

Templeman has always been regarded as an authoritative text in its field. The Chapter on
General Agerage and The York-Antwerp Rules (Chapters 9 & 10, Pages 287-364) is readily
comprehensible and clear.

3. Carverfs Carriage by Sea, Vol.2 - R. Colinvaux, 12th Edl, 1971.

At one time considered as the most reliable work on maritime law. Volume 2, Chapter 14,
pages 849-973, covers in detail all aspects of General Average.

4. Res' Chartering & Shipping Terms - 1st Ed., 1992.

Chapter 9 (Pages 509-511) deals with General Average.

****************************

104
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 15

SALVAGE AND SALVAGE CONVENTIONS

1.0 INTRODUCTION :

1.1 The word salvage is derived from the Latin word meaning to save'.

1.1 In legal terms, salvage means the preservation of a vessel which has been wrecked,
stranded or is in distress. The lives of persons on the vessel or the cargo or apparel of such a
vessel could be under threat.

1.2 The principles of salvage are almost similar to those of general average. In general
average, act or sacrifice must be made voluntarily and the property saved must have been in real
danger.

1.3 In short in legal terms :

 It means preserving a vessel that has been wrecked, stranded or in distress.

 Life of persons on the vessel, her apparel, cargo must be under threat.
 Law of salvage was developed to encourage voluntary acts of assistance to
property in danger at sea.
 It is legal liability of the owner of the property salved to reward/ remunerate those
who have salved his property.
 Volunteer/salvor not eligible for consideration but certainly for an award.

2.0 PRINCIPLES OF SALVAGE:

There are four basic principles, viz.,

(a) The service must be to maritime property.

(b) The service must be voluntary.
(c) The maritime property must be in real danger.
(d) The operation must be successful.

2.1 MARITIME PROPERTY :

2.1.1 Maritime property includes the vessel, her apparel, cargo or wreck and also freight.
Nowadays even salvage of an aircraft and of a hovercraft is considered as the salvage of
maritime property.

2.1.2 When life has been saved a question arises whether this should be considered as
maritime property or not, as funds to pay the salvors are raised only from salved property. The
value of human life has no price attached to it as long as the person is alive. The Court awards
compensation only after the death of a person. As such funds cannot be raised from the life of the
person(s) saved. Therefore, salvage on life saved cannot be paid. This is also as per
International Convention on Salvage, 1989. But at the same time, if any national law considers
that saving of human life should be remunerated then the Convention agrees to abide by that.
When cases of salvage are studied, it would be found that human life alone has never been
105
threatened unless maritime property, such as the vessel, is in imminent danger. Thus, it would be
found that life and maritime property are saved in the same operation. It is generally a practice to
give a higher award where life has also been saved. Again it would be prudent to point out that
just because there is no award for life salvage it does not mean that there should be no effort
concerning rescue operations pertaining to saving of human life.

2.1.3 In fact, an article of the Convention points out that it is the duty of the Master to render
assistance to any person in mortal danger at sea, without endangering his own vessel and crew.

2.2 The service must be voluntary:

2.2.1 There should be no pre-existing duty to save maritime property on part of the salvors. This
means it should not be an obligatory duty to render assistance. Examples:

a) Harbour authorities cannot claim to be salvors as it is their contractual duty to provide

help. If the ship has dragged anchor and run aground and the harbour authority has
deployed tugs to set her free, then in such cases salvage cannot be claimed.

b) A pilot cannot claim salvage unless some extraordinary service has been provided.
This is because he is employed by the shipowner to preserve the ship and her cargo from
danger.

2.2.2 In the case of "The Sandefjord" the vessel was stranded on the Goodwin Sands. The
Master accepted the advice of the pilot that offers of assistance by tugs should be rejected and
that a kedge anchor should be laid by a lifeboat. The court found that the pilot's services were
salvage services and upheld his claim for salvage. Not only did the pilot take a personal risk in
giving this advice, because had his recommendations eventually proved disastrous he could
have put his personal reputation and even job in jeopardy, but also he relieved the ship owners of
the almost certain alternative of a vast salvage award for tug assistance.

CREW :

2.2.3 Crew is not entitled for salvage award unless the maritime property has been duly
abandoned and their employment with respect to that vessel has been terminated effectively. This
is so because it is crew's normal duty to save and preserve the ship from imminent danger.

2.2.4 The famous case was that of "The San Demetrio". In this case, a tanker was severely
damaged in the North Atlantic by gunfire from a German warship. She was fully loaded with a
cargo of petrol. The Master gave the order to abandon the ship. The whole crew left in three
lifeboats. Subsequently the tanker, caught fire after being hit again. The following day the tanker,
still on fire, was sighted again by one of the lifeboats. Under command of the second officer, the
boats' crew reboarded the ship and, with great skill and courage, brought the vessel several
hundred miles through bad weather to safety on the Clyde. The crew claimed salvage awards.

2.2.5 Held that the vessel had been properly abandoned under the orders of her Master.
Therefore under the circumstances the vessel's own crew was entitled to claim salvage.

2.2.6 While claiming the salvage award crew should be able to prove that abandonment was
neither intentional nor fear or panic had been the catalytic agent causing the temporary
abandonment. In short, there should be no hope or intention of the crew returning to the ship.

PASSENGERS :

2.2.7 When it is a question of saving one's own life and property, then the question of salvage
does not arise. But if passengers stay back on a stricken ship and voluntarily help in saving or
preserving the vessel, whereas they had the choice of abandoning ship, then they are entitled for a
salvage award.
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2.3 Real danger :

2.3.1 Those who claim to have carried out a salvage service must be able to prove that when
the salvage service began, the maritime property was in real danger. Here the real danger
does not mean imminent danger of total loss. The danger should however not be remote as to be
a mere possibility of the same.
2.3.2 Lately courts have taken a liberal view of the interpretation of the meaning of the term
"real danger". When a ship decides to proceed to a port of refuge and does not require outside
help to reach there, then she is not in real danger. But if she requires outside help then she is in real
danger. Therefore, while awarding the claim, the Court will determine whether the property is in
danger by considering all the circumstances of the case including the location, weather conditions,
damage sustained, any chances of self-help, if help had not come in time what would have been
the consequences, etc.

2.4 The operation must be successful:

2.4.1 The principle of salvage has been that the remuneration is payable on the value of the
property salvaged. Thus, however expensive the service may be, if there has been no property
saved then there is no remuneration payable. This means "No Cure - No Pay". However, at the
same time, the service rendered need not be totally successful. For example, suppose the ship has
run aground and is set free and towed to a safe port, but in the process she has suffered bottom
damage and is therefore sold as scrap. In this case salvage operation has not been totally
successful. However, the person who has contributed to the salvage is entitled to some
remuneration.

2.4.2 In another case involving "The Rene" a call for assistance was answered by another
vessel and she proceeded to help. While trying to carry out salvage operation she collided with
the Rene which was already in danger. This further worsened the situation. Subsequently the
Court rejected the claim made by the salvor on the grounds that, collision was due to the salvor
fault and in effect there was no salvage.

2.4.3 Both these instances show that the operation must be successful wholly or partially.

3.0 SALVAGE AGREEMENTS:

3.1 Salvage claims arise basically due to any of the following reasons:

 Firstly, where the Master or shipowner enters into an agreement with the salvors
knowingly under a salvage contract.
 Secondly, if services of a salvage nature are provided but no terms are set out prior to
providing assistance.

3.2 As per the law of salvage, salvor is the one who without any particular relations to the
ship in distress proffers useful service and gives the same as a volunteer without any pre-existing
covenant that connected him with the duty of employing himself for the preservation of that ship.

3.3 The law of salvage has been developed as a means of encouraging voluntary acts of
assistance to property in danger at sea. Therefore, it can be said that a volunteer is not eligible for
consideration but he is certainly eligible for an award. Again award can be given if the job is
successfully completed. Thus, the concept of "No Cure - No Pay" is further strengthened.
Nevertheless, a salvor voluntarily offering service to a vessel in distress may stipulate the
acceptance of certain contractual terms to govern the performance of service and payment of
remuneration.

3.4 In the absence of salvage agreement, a reward for rendering salvage services may
be claimed under common law.
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4.0 LUMPSUM OR DAILY RATE BASIS:

4.1 This type of agreement is a specially-made document for the assignment to be

undertaken, wherein either a total lump sum or daily rate is agreed upon. In this case, the
shipowner is normally responsible for the payment to the salvor. In case the vessel has
cargo on board, then the shipowner may declare general average in order to recover part of
the cost from the cargo owners or underwriters of cargo on board.

4.2 Generally the shipowner and the Master will try and work out the minimum cost of
assistance by negotiating with the salvors a fixed price or tariff. But it is very important to
realize the degree of danger or urgency. Negotiations should not result in an inordinate
delay. The Master being the man in charge has to decide the degree of risk and danger
involved and if the need arises, he should act as an agent of necessity.

5.0 LLOYDS STANDARD FORM / SALVAGE CONVENTION 1989 / SCOPIC *:

Lloyd’s Open Form and the Special Compensation P & I Clause (SCOPIC).

5.1 The Development of Lloyd’s Open Form:

5.1.1 Under English law claims for salvage may be brought under the terms of a contract
or in common law. Contractual terms may be agreed prior to the commencement of salvage
services, during the course of such services, indeed, even after the services have been
completed. One of the advantages of having an agreed form of contract, particularly Lloyd's
Open Form in its various manifestations, is that in an emergency no time need be lost in
agreeing the terms under which the salvage services are provided but if no contract has
been agreed a claim for the saving of property may be pursued at common law.

5.1.2 The most widely used salvage contract is Lloyd's Open Form of Salvage Agreement
which incorporates the principle of "no cure - no pay". Lloyd's Open Form provides for
English jurisdiction and London arbitration. Other forms of contract are used from time to
time and for example Japan, Russia, China and Turkey use their own standard contracts.

5.1.3 In England, the Admiralty Court has developed as a specialist branch of the
Commercial Court in order to hear disputes or to consider claims involving salvage,
collisions and maritime cases generally. An Admiralty judge may, as an alternative, hear
salvage cases as the Lloyd's arbitrator.

5.1.4 LOF Salvage contracts have been used for more than 100 years. The first standard
form was approved by the Committee of Lloyd's in 1892. Following revisions which were
approved in 1908 the agreement was given the name by which it is known today. Various
further revisions have taken place over the years but the most significant occurred with the
publication of Lloyd's Open Form 1980.

5.1.4.1 Lloyd’s Open Form (LOF) in short :

 The most widely used salvage agreement is LOF, incorporating
 No Cure – No pay principle.
 Provides for English Jurisdiction and London Arbitration
 (Japan, Russia, China & Turkey use their own standard agreements)
 Since its inception more than 100 years ago LOF undergone several revisions most
significant revision occurred with LOF 1980. Current version is LOF 2000.
 Advantage of LOF is that in an emergency no time lost in agreeing to the terms under
which salvage services will be rendered.

_______________________________________
*IMO/International Convention on Salvage
*http://www the free dictionary .com
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5.1.5 LOF 80 introduced the first movement away from the principle that remuneration
should be based solely upon the value of property salved. This form provided that the salvor
might still be paid, even if there was no cure, if the services were rendered to a laden oil
tanker which was a threat to the environment. Except perhaps with the agreement of the
P&I clubs concerned, salvors had not previously been entitled to payment under such
circumstances. LOF 80 introduced a new concept. This provided that the shipowners
should reimburse the salvor for his expenses, plus a supplement up to an additional 15 per
cent which would be dependent upon the value of the result of the salvors' efforts. This term
was referred to as the "safety net" and its introduction reflected an ever-increasing
awareness worldwide of the effects of oil pollution on the environment. A number of
headline incidents only served to reinforce the general concerns which were being
expressed by governments and environmental organizations.

5.1.6 Although LOF 80 introduced significant changes to the standard salvage contract,
major pollution incidents during the 1980s ensured increasing pressure from
environmentalists which eventually lead to further significant change in the salvage industry.

5.1.7 LOF 1980 in short :

 Traditionally salvor’s remuneration assessed by reference to degree of success of

salvage operation.
 LOF 1980 was the first movement away from the principle that remuneration should be
based solely upon the property salved.
 Salvor can be paid even if there is no cure if services were rendered to a laden oil tanker
which was a threat to environment.
No cure-no pay principle provides no incentive to salvor to undertake difficult & costly
salvage operations involving incidents causing threat to environment.
 ‘Safety net’ remuneration payable to salvor representing their reasonably incurred
expenses plus an increment of up to 15% of those expenses (dependant upon the value
of the result of the salvors’ efforts).
 Compensation to be paid no matter where the incident occurred .
 Duty of salvor was to use his best endeavours to prevent escape of oil.

5.2 The International Convention on Salvage 1989:

5.2.1 An international conference in 1989 agreed a new salvage convention which made a
profound change in the nature of salvage. The previous convention of 1910 had been based
on the traditional principle of "no cure no pay". The awards were paid pro-rata by hull and
cargo underwriters in proportion to the respective salved values and the P&I clubs were not
involved. The fear under the old convention was that salvors might think twice about
attempting to salve a ship where the risk of failure was great and the costs likely to be
incurred were also great. The intention of the Salvage Convention 1989 was to encourage
salvors to act in cases where there is a threat to the environment.

5.2.2 Under the Convention the main salvage award is still based upon "no cure no pay",
but the award will take into account "the skill and efforts of the salvors in preventing or
minimizing damage to the environment", as well as the traditional factors of salved value,
danger, out of pocket expenses, success, time, and skill. The basic "no cure no pay" award
is dealt with under Article 13 but the Convention provides a safety net for a salvor who has
worked on a ship or cargo which threatens damage to the environment but has failed to earn
sufficient reward under that Article. In such circumstances, he is entitled to special
compensation under Article 14, based upon the cost of his tugs and personnel and his out-
of-pocket expenses, plus an uplift of 30-100 per cent if he has prevented or minimized

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environmental damage. The hull and cargo underwriters continue to pay Article 13 awards,
even if they are increased because of environmental factors, but the P and I clubs cover
Article 14 awards.

5.2.3 Article 14 extended the "safety net" concept beyond laden tankers to include any
vessel carrying bunkers or other polluting materials on board. However, whereas LOF80
provided that this compensation might be paid no matter where the incident occurred,
LOF90, which incorporated various provisions from the 1989 Convention, restricted special
compensation payments to "coastal or inland waters or areas adjacent thereto".

5.2.4 With the introduction into English law of the 1989 Convention by means of the
Merchant Shipping (Salvage and Pollution) Act 1994, Lloyd's Open Form was further
amended to LOF 1995 and incorporated other significant revisions as follows:

(a) that the master is entitled to conclude contracts for salvage on behalf of the ship
and the cargo without fear of challenge by the cargo interests if the terms are
reasonable;

(b) that the salvors must exercise "due care" compared with using their "best
endeavours" under LOF80;

(c) that when circumstances so dictate the salvors should seek assistance from
other salvors; and

(d) that the shipowner acquires a stronger duty to ensure that security is provided
before cargo is released.

5.2.5 ‘International Convention on Salvage, 1989’ in short :

 Ushered in profound changes in the nature of salvage.

 Earlier Convention of 1910 based on traditional principle of ‘No cure – no pay’ hence
awards paid pro-rata by hull & cargo underwriters. P&I clubs were not involved.
 Aim of 1989 Convention was to motivate salvage operations in case where there was
damage to environment.
 Art. 1(a) defines salvage operation as ‘any act/activity undertaken to assist a vessel or
any other property in danger in navigable water or any other waters whatsoever .
 Art. 1(d) defines damage to environment as ‘substantial physical damage to human
health or to marine life or resources in coastal or inland waters or areas adjacent thereto
caused by pollution, contamination, fire explosion or similar incidents’.
 Pure economic loss to local population not to be taken into account nor physical damage
to an individual unless there is potential damage of environment as a whole.
 Main salvage award is still based upon ‘No cure – no pay principle’.
 But the award will take into account ‘the skill and efforts of the salvors in preventing or
minimising damage to environment.
 Basic ‘No cure- no pay award dealt under Art. 13 .
 Art. 14 provides the safety net for salvors who have worked on ship/cargo which
threatens damage to environment but have failed to earn sufficient award under Art.13
 Art. 14 provides for special compensation based upon cost of tugs and personnel and out
of pocket expenses plus an uplift of 30-100% if salvor has prevented/ minimised
environmental damage.
 Hull and Cargo underwriters pay Art.13 award and P&I clubs cover Art.14 awards
 Further Art 14 extends “safety net” concept beyond laden tankers to include vessels
carrying bunkers or other polluting materials on board.

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5.3 LOF 1990 :

 Intention of LOF 1990 was to bring into immediate effect the provisions of
Salvage Convention of 1989 which expanded the ‘safety net’ concept.
 Duty of salvor under LOF 80 to use his best endeavour to prevent escape of oil
is widened under LOF 1990 to have prevented/minimised damage to
environment.
 Under LOF 80 compensation to be paid no matter where the incident occurred.
 Under LOF 90 ‘special compensation’ payments to ‘coastal or inland waters or
areas adjacent thereto’.

Art.13 – refer
Art.14 – refer

5.4 LOF 2000 :

 It is a single sheet, double sided document.

 Simpler and more concise.
 Only contains those provisions which relate to services and rights and obligations
of parties.
 Provisions relating to procedural and administrative matters contained in a set of
standard clauses – Lloyds Standard Salvage and Arbitration (LSSA) Clauses and
Lloyd’s Procedural Rules – to be incorporated into the contract by reference.

5.5 Interpreting Articles 13 and 14

The texts of Articles 13 and 14 of the Salvage Convention read as follows:

A. Article 13 – Criteria for fixing the reward:

1. The reward shall be fixed with a view to encouraging salvage operations, taking into
account the following criteria without regard to the order in which they are presented below:

(a) the salved value of the vessel and other property;

(b) the skill and efforts of the salvors in preventing or minimizing damage to the
environment;

(c) the measure of success obtained by the salvor;

(d) the nature and degree of the danger;

(e) the skill and efforts of the salvors in salving the vessel, other property and life;

(f) the time used and expenses and losses incurred by the salvors;

(g) the risk of liability and other risks run by the salvors or their equipment;

(h) the promptness of the services rendered;

(i) the availability and use of vessels or other equipment intended for salvage
operations;

(j) the state of readiness and efficiency of the salvor's equipment and the value
thereof.
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 2. Payment of a reward fixed according to paragraph 1 shall be made by all of the
vessel and other property interests in proportion to their respective salved values. However,
a State Party may in its national law provide that the payment of a reward has to be made by
one of these interests, subject to a right of recourse of this interest against the other interests
for their respective shares. Nothing in this article shall prevent any right of defence.

3. The rewards, exclusive of any interest and recoverable legal costs that may be
payable thereon, shall not exceed the salved value of the vessel and other property.”

B. “Article 14 - Special compensation:

1. If the salvor has carried out salvage operations in respect of a vessel which by itself
or its cargo threatened damage to the environment and has failed to earn a reward under
article 13 at least equivalent to the special compensation assessable in accordance with this
article, he shall be entitled to special compensation from the owner of that vessel equivalent
to his expenses as herein defined.

2. If, in the circumstances set out in paragraph 1, the salvor by his salvage operations
has prevented or minimized damage to the environment, the special compensation payable
by the owner to the salvor under paragraph 1 may be increased up to a maximum of 30% of
the expenses incurred by the salvor. However, the tribunal, if it deems it fair and just to do
so and bearing in mind the relevant criteria set out in article 13, paragraph 1, may increase
such special compensation further, but in no event shall the total increase be more than
100% of the expenses incurred by the salvor.

3. Salvor's expenses for the purpose of paragraphs 1 and 2 means the out-of-pocket
expenses reasonably incurred by the salvor in the salvage operation and a fair rate for
equipment and personnel actually and reasonably used in the salvage operation, taking into
consideration the criteria set out in article 13, paragraph 1 (h), (i) and (j).

4. The total special compensation under this article shall be paid only if and to the extent
that such compensation is greater than any reward recoverable by the salvor under article
13.

5. If the salvor has been negligent and has thereby failed to prevent or minimise damage
to the environment, he may be deprived of the whole or part of any special compensation
due under this article.

6. Nothing in this article shall affect any right of recourse on the part of the owner of the
vessel.”

5.5.1 Salvage claims which have arisen in circumstances where there is no threat to the
environment are settled in accordance with the criteria set out under Art.13. The size of the
award will take account of the salved value of ship and cargo, the skill and efforts of the
salvors, the nature and degree of the danger, the time and expenses used and incurred, etc,
etc.

5.5.2 Where there is a threat to the environment and the salvor has failed to earn sufficient
reward under Art.13, the salvor is entitled to special compensation from the owner equivalent
to his expenses as defined within the Art.14. A key point is that the salvor may not have
prevented damage to the environment but during the course of the operation there may have
been a threat of damage. If the salvor had actually prevented or minimized damage to the
environment he is entitled under Art.14.2 to receive an additional sum equivalent to a
maximum of 30 per cent of his expenditure. The arbitrator may in fact increase the award up
to 100 per cent if the salvor has achieved an exceptional result. Only the owner of the ship
is liable to pay special compensation. Cargo interests are not liable for special compensation
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but will contribute to the overall payment to the salvors in the event of an award under
Art.13. The calculation of owner's special compensation will be based upon the award under
Art.14 less the amount payable under Art.13, in accordance with Art.14.4.

5.2.3 P&I Clubs extended their cover to provide for reimbursement of a shipowners'
liabilities under Art.14.

5.3 Difficulties experienced under Articles 13 and 14:

5.3.1 A number of problems became apparent with the operation of Articles 13 and 14,
some of which concerned shipowners and the clubs, and others concerned salvors. The
clubs were worried that the safety net gave the salvors an incentive to prolong the operation
as long as possible and allowed the property underwriters to delay the decision as to
whether the ship would be accepted as a CTL, with little that the club or shipowner could do
to influence the situation. Salvors in turn were concerned that Article 14 only applied if there
was a threat to the environment, which had to be proved, and that Article 14 was not
relevant outside “coastal or inland waters or areas adjacent thereto”, a geographical
restriction. They often also remained unsecured for this element of their remuneration. The
salvors were also concerned by a decision of the English courts, in the case of the
NAGASAKI SPIRIT, that the rates for equipment and personnel should not include any
element of profit. Profit was to be limited to the uplift, which only applied if damage to the
environment was minimized or prevented. All these issues lead to arbitration under Article
14 being long and expensive, costs generally being for the account of the shipowners and
the clubs.

5.3.2 For their part club managers had been concerned that the interaction of Articles 13
and 14 in LOF gave rise to an inherent conflict of interest between hull underwriters and P&I
clubs and that owners and their clubs were potentially exposed to abuses by salvors of the
special compensation regime with little possibility of control.

5.3.3 These developments took place during a period of rapidly increasing sensitivity of
governments and local authorities to the potential environmental hazards posed by any
casualty. In response, the clubs wished to take an increasingly participative role in casualty
management in order to ensure that the exposure to environmental damage claims was
minimized, wherever possible.

6.0 The development of SCOPIC (Special Compensation P&I Club Clause) :

6.1 Dissatisfaction with the uncertainties of the current system lead to serious
discussions between representatives from leading salvors and a number of P and I clubs
and amongst the clubs themselves. One idea was given the tentative title of 'Salvage 2000'
and would be designed for use by shipowner Members of a new 'Salvage Federation',
modelled on ITOPF, for whom participating salvors would provide services at a daily rate
according to a pre-determined and generous tariff. The salvage services would be fully
underwritten by P&I clubs in the first instance, but mechanisms would be developed to
obtain appropriate contributions from hull and cargo underwriters in cases where property
was salved. This was a radical proposal and it is fair to say that doubts were expressed as
to whether it would ultimately prove viable as acceptance by property insurance interests
seemed unlikely.

6.2 However, before this and other ideas could be developed, an approach was made to
the International Group of P and I Clubs by the President of the International Salvage Union
(ISU). In a meeting which followed there was an encouraging recognition that the clubs had
justifiable grounds for concern in respect of the way in which cases involving Article 14 had
been seen to operate, and the ISU conceded that the clubs should have a greater say in
what actions were taken in relation to incidents where P&I liability was likely to be involved.
They wished to move towards a flexible approach to contracting which would not give rise to
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the replacement of LOF but rather the integration of "Salvage 2000" terms within it. It was
accepted that the clubs had no interest in becoming involved in those incidents where it was
clear from the outset that there would be no environmental threat. There were, however,
instances where the extent of the environmental threat and the potential value of any salved
property remained unclear in the early days of a casualty and where a degree of flexibility
would be required.

6.3 There was a general feeling around the table that it might be possible to move
forward to contractual terms which were based upon LOF, but excluding Article 14, which in
appropriate cases could be enhanced to encompass the general principles of the "Salvage
2000" discussion document. The new contract terms would incorporate payment on a daily
rate basis, with the rates being agreed in advance, combined with the club/shipowner being
entitled to appoint a salvage manager who would have the authority to exercise a measure
of influence over the salvage operation. It was felt that the salvor should have the option to
invoke the "Salvage 2000" provisions and that notice could be given at any stage of the
operation. Any payments assessed under this element would be reduced according to the
amount awarded under Article 13 of LOF in respect of property.

6.4 The meeting was wholly constructive and amicable. It was clear that salvors had
recognized that the Clubs wished to consider options for change which would give them and
their members greater awareness of changing events and a measure certainty on costs in
salvage cases.

6.5 The next series of discussions included representatives from the property
underwriters. They initially expressed concern with the concept of an expert attending at the
scene of the casualty on behalf of the shipowners, believing that the expert would, in many
instances, be controlled by the P&I club concerned and possibly to the detriment of the
property interests. These worries were largely overcome in the interests of achieving a
simplified framework for special compensation which would promote a fast response to
casualties but reduce the potential for legal disputes. After many meetings, draft texts and
redrafts an agreement was reached on substituting the method of assessing special
compensation under Article 14 by the SCOPIC provisions. For a trial period of two years the
SCOPIC clause would be incorporated by reference into LOFs signed between members of
the ISU and owners entered in an International Group club, and the clubs would recommend
their members to contract on these terms. If the trial period was successful it was intended
that LOF be formally amended. The main provisions of SCOPIC would be as follows:

(i) The contractor would have the option to invoke the special provisions of the
SCOPIC Clause at any time of his choosing, regardless of the circumstances. He
would not have to prove an environmental threat and there would be no geographical
restriction. The assessment of the SCOPIC remuneration commences from the time
of that notice. Prior to the invocation salvage would remain on a pure "no cure no
pay" basis, without a safety net. Under Article 14 the calculation of the safety net
commences with the start of the salvage.

(ii) The shipowner would provide security within two working days in the sum of
$3 million. If at any time thereafter the shipowner believed that this was too much or
the contractor believed that it was too little, an adjustment to a reasonable sum would
be made. Upon a failure to provide security within the two working days the
contractor may withdraw from the provisions of the SCOPIC Clause and revert to his
rights under Article 14.

(iii) Rates. SCOPIC remuneration would be based on time and materials, plus an
uplift in all cases of 25 per cent. The clubs reached agreement with the ISU on rates
for tugs, personnel and equipment which were "profitable" for salvors. Charges for
portable equipment being capped at 1.875 x the replacement cost of the equipment.
If the salvor had to contract in for equipment and the price exceeded the applicable
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 tariff rates then the contractor would be entitled to the contracted-in price plus an
uplift of 10 per cent on the tariff rates, or the tariff rate plus 25 per cent, whichever
was the greater. It was impossible to tell whether these SCOPIC rates are higher or
lower than the Article 14 rates, because, since the decision in the NAGASAKI
SPIRIT, Article 14 rates depend on how much the tug is used in any particular year.

(iv) Salvage services would continue to be assessed in accordance with Article

13, even if the contractor invoked the SCOPIC Clause. SCOPIC remuneration would
be payable only to the extent that it exceeded the total Article 13 award. If the
contractor invoked the SCOPIC Clause and the Article 13 award was greater that the
SCOPIC remuneration, then the Article 13 award would be discounted by 25 per cent
of the difference between it and the amount of the SCOPIC remuneration that would
have been assessed had the SCOPIC provisions been invoked on the first day of the
services. If there was no potential Article 13 award then the undisputed amount of
SCOPIC remuneration would be paid by the shipowner within one month of the
presentation of the claim. If there was a claim for an Article 13 award then 75 per
cent of the amount by which the assessed SCOPIC remuneration exceeded the total
Article 13 security would be paid by the shipowner within one month.

(v) The contractor could terminate the services if he reasonably anticipated that
the total cost of past and future services would exceed the value of the property
capable of being salved and his SCOPIC remuneration. Shipowners could terminate
the SCOPIC agreement by giving five days notice.

(vi) The shipowner was to have the right to send on board a casualty
representative (SCR) and hull and cargo underwriters would each have the right to
send on board one special hull and special cargo representative. These
representatives would be selected from a panel appointed by a committee made up
of three representatives from the International Group, three representatives from the
ISU, three representatives from IUMI and three representatives from the ICS. The
salvage master would send daily reports to Lloyd's and the shipowner until the SCR
arrived on site, and after that only to the SCR. The SCR may disagree with the daily
salvage report and prepare a dissenting report. If the SCR gives a dissenting report
then the initial payment by the shipowner would be based only on what the SCR
considers the appropriate equipment or procedures until any dispute is resolved.
(The role of the SCR is set out in detail in appendix B of the SCOPIC Clause).

(vii) A non-binding Code of Practice was agreed between the ISU and the
International Group. In this the clubs confirm that although they expect to provide
security for SCOPIC, it is not automatic. The clubs will not refuse to give security
solely because the contractors cannot obtain security in any other way. The clubs
confirm that they will be willing to consider the provision of security to a port authority
to permit a ship to enter a port of refuge and will not refuse to give security solely
because the contractors cannot obtain such security in any other way.

7.0 The advantages and disadvantages of SCOPIC:

7.1 The advantages for shipowners and clubs are summarised as follows:

(a) In future there should be little need for arbitrations on special compensation
awards. The problem areas (environmental threat, geographical restriction, tug
rates, and uplift) have all been settled.

(b) Owners/clubs have much more control, or at the very least, knowledge of what is
happening during a salvage operation.

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 (c) The shipowners' right to terminate under Clause 9 of SCOPIC is clearer than the
right under Clause 4 of LOF.

(d) The uplift is capped at 25 per cent.

7.2 The disadvantages for shipowners/clubs are as follows:

(a) The salvors may recover more for the agreed tug rates than they would under the
NAGASAKI SPIRIT decision, but this is not certain because of the different
utilisation factors.

(b) Shipowners/clubs have given up the environmental threat and geographical

restriction defences.

7.3 The advantages for salvors are as follows:

(a) It is no longer necessary for salvors to prove that there was an environmental
threat or to overcome any geographical restriction defence.

(b) Salvors will be paid profitable tug rates.

(c) Cash flow problems will be eased.

(d) Security is more certain.

7.4 The disadvantages are:

(a) Salvors can never recover more than a 25 per cent uplift.

(b) There is a greater risk that the owner terminates the contract.

7.5 The London Property Underwriters Market Working Group recommended acceptance
of the SCOPIC text. The International Chamber of Shipping (ICS) indicated that whilst
supporting the main objectives of SCOPIC, namely to provide clarity and thereby reduce the
need for expensive and time consuming litigation, some ICS members indicated that they
would have preferred a more modest approach which would have avoided sacrificing the
principles reflected in the 1989 Salvage Convention. Some also questioned whether the
discount provision would introduce sufficient disincentive to salvors invoking SCOPIC on
every occasion. In view of the concerns expressed by some of its members the ICS
welcomed the fact that SCOPIC would initially be introduced on a two-year trial basis,
following which its operation in practice would be reviewed.

8.0 The role of the SCR:

8.1 One of the key changes brought about by the introduction of SCOPIC was the
acquisition of the right by the shipowners to send an expert to the scene of the casualty, and
where practicable to attend on board the ship, or the salvage craft in order to be in a position
to report the circumstances and the progress made by the salvor. The initial SCR title,
however, lead to unfortunate misunderstandings as to his status. In fact the SCR’s reports
are made widely available and he is not reporting exclusively and confidentially to the
shipowner. The title was amended to the Special Casualty Representative.

8.2 At the instigation of the SCR Committee, which is responsible for the appointment of
SCRs and the regular reviewing of the tariff rates for craft, personnel and equipment, a new
document was produced to assist SCRs in properly defining their role and obligations.

116
8.3 In general terms the role of the SCR is 333defined within the document in the
following terms “……. to monitor the salvage services and liabilities and provide a Final
Salvage Report which forms the basis for the settlement of any claim in SCOPIC
remuneration which the salvor might have against the shipowner.”

8.4 Advice is given within the Guidelines concerning the duties which are to be
performed, including the receipt of daily reports from the salvage master and the production
of daily cost schedules. These reports are to be sent to all parties. It is made clear, so far
as his powers are concerned, that he may consult with the salvage master but may not
attempt to direct the salvage operation. His powers are limited by the description contained
within the guidelines. He cannot bind any party, including the shipowner, the cargo interests
or the insurers and if he disapproves of the conduct of the salvage operation or the
employment of craft, personnel or equipment he should merely inform the salvage master in
writing and include a dissenting report in his daily and final reports.

8.5 The Guidelines also define the SCR’s relationship and obligations to any special
representatives appointed by hull or cargo with whom he should co-operate and to whom he
should provide copies of the salvage master’s daily reports and his own comments.

8.6 Detailed advice is given as to what should be included within the SCR’s Final
Salvage Report which should include information to assist with the assessment of an award
under Article 13 but it should not seek to attribute a cause which lead to the casualty. The
report should contain facts and not opinions as it was felt that with the SCR’s reports being
circulated to all interested parties it should be based solely upon his own, neutral,
observations of the facts. It should be for the various parties to interpret these observations
and to investigate by other means matters of causation and liability which may need to be
dealt with at a later date. In certain given circumstances the findings of the SCR will lead to
decisions being taken concerning the prospective success of the salvage operation and
whether that operation should be terminated in favour of an alternative means of solving the
problem.

8.7 The final report is to be produced within one month of the completion of the salvage
services.

8.8 The attendance of a SCR should provide an improved means by which local, port
and national maritime authorities are able to communicate with all interested parties. This
pivotal figure, as opposed to numerous other experts and representatives who might also be
present at the scene, provides the best means for authorities seeking information and
seeking to discuss courses of action to conduct discussions and hopefully achieve
consensus in the most efficient and swift manner.

8.9 The best definition of the role of the SCR is contained both within Appendix B of the
SCOPIC and within the SCR Guidelines themselves, namely as follows:

“The primary duty of the SCR shall be the same as the Contractor, namely
to use his best endeavours to assist in the salvage of the vessel and the
property thereon and in so doing to prevent and minimise damage to the
environment”.

9.0 SCOPIC in practice:

9.1 After only a few years in place it had become clear that Article 14 was not providing a
satisfactory answer to the needs of the shipowners, salvors and the interested insurers, nor
indeed to the interests of maritime and port authorities. It says much about the extent of
these concerns that such disparate interests could get together to overcome their differences
and compile such a detailed solution by means of the SCOPIC clause. Besides overcoming
the perceived major problems inherent in the use of Article 14 it has been designed to be
117
adaptable as the introduction of SCOPIC 2000 shows, together with the annual review of
tariff rates and the setting up of an SCR panel. So far, it has proven to be a far better means
of accessing “special compensation” and by doing so provides encouragement to salvors,
and indirectly should engender piece of mind for maritime authorities worldwide.

9.2 The clause was put in place in 1999, initially for a trial period of two years. P and I
Clubs in the International Group recommended to their members that it should be
incorporated into all future LOF contracts. Partly as a consequence of Lloyd’s Form Working
Party producing a new version in the form LOF 2000, there was in any event a need to
revise SCOPIC which specifically referred to LOF 95. The revised SCOPIC 2000 can now
apply to any LOF agreement which incorporates the provisions of Article 14 of the
International Convention on Salvage 1989. However, if a salvage is undertaken on the basis
of a LOF agreement incorporating SCOPIC, the traditional Article 14 safety net will not apply,
even if SCOPIC has not been invoked.

9.3 According to other amendments:

 The salvor’s right of withdrawal from the SCOPIC provisions for a failure to
provide SCOPIC security within two working days does not apply if that security
is provided before notice of withdrawal is given;

 SCOPIC remuneration is only payable in excess of any potential Article 13

award, even if no such award is sought or paid;

 Termination provisions have been re-worded in order to achieve clarity;

 Various amendments have been made to the tariffs in Appendix A in order to

make clear how remuneration for personnel, for craft during mobilization and
demobilization, for portable equipment on the tug etc is to be calculated.

9.4 During the ten years leading up to the introduction of SCOPIC there had been a
steady decline in the number of salvage contracts performed under LOF. In 1990 there were
178 cases and in 1998 100 cases. The early years where SCOPIC has been an option
indicate an increase in the use of LOF. The statistics available are presently immature and
this may be pure coincidence. Indeed, these figures in isolation from comparison with the
number of all other salvage contracts, perhaps on day rate or lumpsum terms, or on other
forms of contract, are obviously difficult to analyse. It is believed to be the case, however,
that at least one salvor who did not previously wish to make use of LOF contracts has since
done so because of the security provisions available under SCOPIC. In other ways SCOPIC
has proved adaptable to such an extent that casualties which might otherwise have been
treated as potential wreck removals from the outset have largely been solved under LOF
with SCOPIC. One or two of the cases within the speaker’s presentation fall into that
category.

9.5 In the years for which figures are available there were:

123 LOF cases in 1999; SCOPIC was invoked in 14 cases,

133 cases in 2000; SCOPIC was invoked in 16 cases,
108 cases in 2001; SCOPIC “ “ “ 23 cases,
104 cases in 2002; SCOPIC “ “ “ 18 cases,
89 cases in 2003; SCOPIC “ “ “ 27 cases
91 cases in 2004; SCOPIC “ “ “ 13 cases

9.6 To June there have been 52 LOF cases in 2005 and SCOPIC has been invoked 7
times

118
9.7 It is not possible to compare the number of occasions when Article 14 became
relevant in the past but present figures suggest that SCOPIC is being invoked in about 20
per cent of cases.

9.8 One of the main benefits of SCOPIC is that cases are capable of being resolved
swiftly and lengthy, and costly arbitrations can more often be avoided.

9.9 As previously indicated, the presently available statistics are insufficient in

themselves to enable valid conclusions to be drawn and to do so would be to risk being
reminded of the expression “lies, damned lies and statistics”. There does, however, appear
to be a significant increase in the use of LOF contracts since the introduction of SCOPIC and
one of the additional reasons for this is the elimination of the complications created by Article
14, this being one of the main difficulties identified by all sides of the industry.

9.10 From a more practical perspective there has been a fundamental change in the flow
of information from the scene of the casualty. Salvage operations conducted before the
introduction of SCOPIC were often conducted in isolation from many parties who had a
direct interest in the prospective outcome. There was no routine flow of information from the
salvor to the liability underwriters and as a consequence independent consultants and
experts were regularly instructed to report to P and I clubs concerning claims which might
potentially flow from the incident, including oil pollution and wreck removal, both of which
could represent losses which far exceeded the value remaining in the property which might
be salved. These experts would not have an official place around the table where important
decisions were taken regarding the casualty. This situation was not ideal from any party’s
viewpoint, least of all local or national authorities confronted with difficult decisions
concerning anti-pollution measures, actions to be taken if the salvage operation was
unsuccessful and the operation turned into a wreck removal or on a more positive note if
consultations were required in respect of salvor’s request to allow the ship into a port of
refuge.

9.11 Before the introduction of SCOPIC those insuring the hull would have appointed a
surveyor to determine the extent of the damage but any feedback would not necessarily
have been immediate as the underwriters would, quite naturally, be able to rely upon the
professional salvor whose instinct would be to ensure the preservation of the highest
possible value in the property in order to enhance the ultimate award – an objective wholly in
the interest of the underwriters.

9.12 Underwriters were initially suspicious of the changes proposed and the motivation of
the P and I clubs. Would there be an inclination in certain situations to sacrifice property in
order to reduce potential pollution and wreck removal liabilities? That could never be an
acceptable standpoint, although, from time to time difficult decisions must be taken by
salvors, and others, often in consultation with local and national authorities. In any event, on
many occasions the P and I club would have pertinent reasons for wishing the property to be
saved, being the insurer of cargo liability for the shipowner, for example. The P and I clubs
would have no wish to sacrifice value needlessly.

9.13 As more experience has been gained with the passing of time it is noticeable that the
property underwriters views have changed radically and they too recognise the advantages
which have been achieved. One of the leading Lloyd’s underwriters, who actively
participated in the discussions which lead up to the introduction of SCOPIC recently
expressed a positive view in the following terms:

“SCOPIC has been a very worthwhile development. Salvors are responding to

difficult casualties with greater confidence. The Special Casualty Representative has
been a useful development. So far, the SCRs have been well chosen, but this high
standard must be maintained. We have been monitoring the performance of SCRs

119
 with interest and I am pleased that they have demonstrated a very high degree of
objectivity”.

9.14 Through the appointment of the SCR there is a structured chain of communication,
all parties – the shipowners, the salvors, the property and liability insurers being kept fully
informed and authorities can expect to receive better informed and swifter responses when
key decisions need to be taken.

9.15 SCOPIC has introduced improved opportunities for co-operation and communication
and a reduction in confrontation. Through the SCR there is better knowledge of changing
events, a much improved element of certainty over expenditure and when necessary a
measure of influence over events.

10.0 SCOPIC - In short :

10.1 SCOPIC – Special Compensation P&I Club Clause :

 Operation of Arts 13 & 14 gave rise to a no. of problems.

 P&I clubs worried that the safety net’ gave the salvors an incentive to prolong the salvage
operation.
 Salvors worried because Art.14 applied only if there was a threat to environment, which
had to be proved. Also worried about geographical restriction as Art. 14 was not relevant
outside ‘coastal or inland waters or areas adjacent thereto’. Further profit was to be
limited to the uplift only if damage to environment was minimised or prevented. Further
still the House of Lords in Nagasaki Spirit(1997) held that the ‘rates for equipment &
personal’ should not include element of profit. It means only expenditure. All these issues
lead to arbitration (under Art.14) which is lengthy and expensive.
[ Nagasaki Spirit carrying 40,154 tons of crude oil collided with Ocean Blessing – 12000
tons of crude released into sea & caught fire – only 2 members of NS survived – all of OB
lost their lives – Semco salvage agreed to salve NS & her cargo on LOF 90 terms –
mobilised tugs – extinguished fire – NS towed from Malaysian Coast to Indonesia – cargo
transmitted – NS redelivered to Singapore owners. Salvors (contractors) claim against
cargo owners settled but claim against NS owners for salvage remuneration was referred
to arbitration].
 Discussion between international groups of P&I clubs and International salvage
union(ISU).
 Agreement reached on substituting the method of assessing special compensation under
Art. 14 by the SCOPIC provisions.

10.2 Main provisions of SCOPIC :

 Contractor (Salvor) has the option to invoke SCOPIC clause at any time of his choosing,
regardless of circumstances.
 Contractor not to prove environmental threat.
 No geographical limitation/ restriction to apply.
 SCOPIC remuneration commences from the time of notice and not from start of salvage
as U/A.14.
 Ship owner to provide $ 3 million security within 2 working days, failing which contractor
may withdraw from SCOPIC and revert to Art. 14[Adjustment to a reasonable sum
possible].
 SCOPIC remuneration/rates based on time and materials, plus an uplift in all cases of
25%.
 SCOPIC remuneration payable only if it exceeds the total Art. 13 award. So salvage
services would continue to be assessed in accordance with Art.13.

120
  If Contractor has invoked SCOPIC, and Art. 13 award is greater than SCOPIC
remuneration, Art. 13 award to be discounted by 25% of the difference between it and the
amount of SCOPIC remuneration.
 Contractor can terminate ‘services of he anticipates the total cost of past and future
services will exceed value of property capable of being salved and SCOPIC
remuneration.
 Ship owner can terminate SCOPIC agreement by giving 5 days notice.
 Ship owner has the right to send on board a special casualty representative(SCR). So
also the hull & cargo underwriters
 The salvage master to send daily reports to SCR who may disagree with the salvage
report and prepare a dissenting one.
 If dissenting report given by SCR, the initial payment by ship owner to be based only on
what SCR considers appropriate equipment or procedure until dispute is resolved.

ooooo

SELF-EXAMINATION QUESTIONS

1. Define salvage. Briefly describe principles of salvage?

2. Give any two cases regarding salvage and the ruling by the court.
3. Write a short note on Salvage Agreements.
4. Discuss with reference to salvage salient features of IMO 89 Convention,
LOF 90, LOF 2000 and SCOPIC

RECOMMENDED FOR FURTHER READING

1. International Salvage Law — E. Vincenzini, 2nd Ed, 1992.

2. Shipping Law - Chorley & Giles, 8th Ed, J 987.
3. Shipping Law Handbook — M. Bundock, 1977.

**************************

121
 Lloyd's Open Form 9i)
H.5 LLOYD'S OPEN FORM 90
LOF 1990
LLOYD'S NOTES efO^urj
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MtiillMiJiii

STANWRDFORMOF
SALVAGE
AGREEMENT
(APPROVED AND
PUBLISHED BY THE
COUNCIL OF
LLOYD'S)
NO CURE - NO PAY

122
 STANWRDFORMOF
SALVAGE AGREEMENT
(APPROVED AND PUBLISHED BY THE COUNCIL OF LLOYD'S)
NO CURE - NO PAY
On board the ……………………………
Dated……………………..
See
Note 1 IS HEREBY AGREED between Captain ...............................
for and on" behalf of the Owners of the " .......... „ ............... _ ........... "
her cargo freight bunkers stores and any other property thereon
(hereinafter collectively called "die Owners")
and .................................................................... ....«.,_....„.. for and on
behalf of............................................................. _ .............. -.—— ....
See
Note 2 ... „ ............ _(hereinafter called 'the Contractor"') that:-
1 (a) The Contractor shall use bis best endeavours:"
(i) to salve the'... .................. „..... …………………………and/or her
cargo freight See Note 3 bunkers stores and any other property thereon
and take them to ..................... . ……...or to such other place is may
hereafter be agreed either place to be deemed a place of safety or if no
such place is named or agreed to a place of safety and

(ii) while performing the salvage services to prevent or minimize

damage to the environment.
(b) Subject to clause 2 incorporating Convention Article 14 the
services shall be rendered and accepted as salvage services upon
the principle of "no cure - no pay."
(c)The Contractor's remuneration a shall be fixed by Arbitratic in London
in the manner here in after prescribed and any other difference arising
out of this Agreement or the operations there under shall be referred to
Arbitration in the same way.
(d) In the event of the services referred to in this Agreement or any part of
such services having been already rendered at the date of this Agreement
by the Contractor to the said vessel and/or her cargo freight bunkers
stores and any other property there on the provisions of this Agreement
shall appty to such services.
(e) The security to be provided to the Council of Lloyd's (herein after called
"the Council”) thee Salved
Value(s) the Award and/or any Interim Award(s) and/or any Award on
Appeal shall be in
----------------------------------------- currency.
(f) If clause 1(e) is not completed then the security to be provided and die
Salved Value(s) die Award and/or Interim Award(s) and/or Award on
Appeal shall be in Pounds Sterling.
(g)This Agreement and Arbitration thereunder shall except as otherwise
expressly provided be """governed by the law of England, including the
English law of salvage
PROVISIONS AS TO THE SERVICES

2. Articles 1(a) to (e). 8,13.1,13.2 first sentence, 13.3 and 14 of

the International Convention on Salvage 1989 ("the Convention
Articles") set out hereafter are hereby incorporated into this
Agreement. The terms "Contractor" and "services" / "salvage
services" in this Agreement shall have the same meanings as the
123
terms "salvor(s)" and "salvage operation (s)" in the Convention
Articles.
3. The Owners their Servants and Agents shall co-operate fully
with the Contractor in and about the salvage including obtaining
entry to the place named or (he place of safery as defined in clause
1. The Contractor may make reasonable use of the vessel's
machinery gear equipment anchors chains stores and other
appurtenances during and for the purpose of the salvage services
free of expense but shall not unnecessarily damage abandon or
sacrifice the same or any property the subject of this
Agreement.

PROVISIONS AS TO SECURITY

4. (a) The Contractor shall immediately after the termination of the

services or sooner notify the Council and where practicable the
Owners of the amount for which he demands security (inclusive of
costs expenses and interest) from each of the respective Owners.
(b) Where the exception to the principle of "no cure - no pay" under
Convention Article 14 becomes likely to be applicable the owners
of the vessel shall on the demand of the Contractor provide security
for the Contractor's special compensation.
(c)The amount of any such security shall be reasonable to the
light of the time when the demand is made. Unless otherwise
agreed such security shall be provided (i) to the Council (ii) in a
form approved by the Council and (iii) by persons firms or
corporations either acceptable to the Contractor or resident in the
United Kingdom and acceptable to the Council. The Council shall not
be responsible for the sufficiency (whether in amount or otherwise) of
any security which shall be provided nor for the default or insolvency
of any person firm or corporation providing the same.
(d) The owners of the vessel their Servants and Agents shall use
their best endeavours to ensure that the cargo owners provide
their proportion of security before the cargo is released.
5. (a) Until security has been provided as aforesaid the Contractor shall
have a maritime lien on the property salved for his remuneration. The
property salved shall not without the consent in writing of the Contractor
(which shall not be unreasonably withheld) be removed from the place to
which it has been taken by the Contractor under clause 1(a).
(b) The Contractor shall not arrest or dciain the property salved
unless:-
(i) security is not provided within 14 days (exclusive of Saturdays and
Sundays or other days observed as general holidays at Lloyd's) after
the date of the termination of the services or
(ii) he has reason to believe that the removal of the property salved
is contemplated contrary to clause 5(a) or
(iii) any attempt is made to remove the property salved contrary to
clause 5(a).
(c) The Arbitrator appointed under clause 6 or the Appeal
Arbitrator(s) appointed under clause 11(d) shall have power in their
absolute discretion to include in the amount awarded tol the

124
Contractor the whole or part of any expenses reasonably incurred
by the Contractor in:
(1) ascertaining demanding and obtaining the amount Of security
reasonably required in accordance with clause4
(ii) enforcing and/or protecting by insurance or otherwise or taking
reasonable steps to enforce and/or protect his lien.

PROVISIONS AS TOARBITRATION

6. (a) Where security is provided to the Council in whole or in part

the Council shall appoint an Arbitrator in respect of the property
covered by such security.
(b) Whether security has been provided or not the Council shall an
appoint an Aabitrator upon receipt of a written request made by
letter telex facsimile or in any other permanent form provided that
any party requesting such appointment shall if required by the
Council undertake to pay the reasonable fees and expenses of the
Council and/ or any Arbitrator or Appeal Arbitrator(s)
(c) Where an Arbitrator has been appointed and the parties do not
proceed to arbitration the Council may recover any fees costs and/or
expenses which are outstanding and thereupon terminate the
appointment of such Arbitrator.

7. The Contractor’s remuneration shall be fixed by the Arbitrator

appointed under clause 6. Such remuneration shall not be diminished
by reason of the exception to the principle of ‘no cure-no pay’ under
convention Article 14.

REPRESENTATION

8. Any party to this Agreement who wishes to be herd or to adduce

evidence shall nominate a person in the United Kingdom to represent him
failing which the Arbitrator or Appeal Arbitrator(s) may proceed as if such
party had renounced his right to be heard or adduce evidence.

CONDUCT OFTHE ARBITRATION

9. (a) The Arbitrator shall have power to :-

(i) admit such oral or documentary evidence or
information as he may think fit
(ii) conduct the Arbitration in such manner in all respects as
he may think fit subject to such Procedural rules as the Council may
approve
(iii) condemn the Contractor in his absolute discretion in
the whole or part of the Expense excessive, security and deduct the
amount in which the Contractor is so Condemned from the salvage
remuneration and/or special compensation

125
 (iv) make Interim Award (s) on such terms as may be fair
and just
(v) make such orders as to costs fees and expenses
including those of the Council charged Under clauses 9(b) and 12(b) as
may be fair and just

(b ) The Arbitrator and the Council may charge reasonable

fees and expenses for their services Whether the Arbitration proceeds to
a hearing or not and all such fees and expenses shall be treated as part of
the Arbitration.

(c) Any Award shall (subject to Appeal as provided in this

Agreement) be final and binding on all the parties concerned whether
they were represented at the Arbitration or not

INTEREST

10. Interest at rates per annum to be fixed by the Arbitrator shall (subject
to Appeal as provides in this Agreement) be payable on any sum
awarded taking into account any sums already paid :-
(i) from the date of termination of the services unless the
Arbitrator shall in his a Absolute discretion otherwise decide until the
date of publication by the council of the Award and/or Interim
Awards(s) and

(ii) from the expiration of 21 days (exclusive of Saturday

and Sundays or other days Observed as general holidays at Lloyd’s )
after the date of publication by the Council of the Award under and/or
Interim Awards(s) until the date payment is received by the Contractor
or the Council both dates inclusive
.
PROVISIONS AS TO APPEAL

11(a) Notice of .Appeal if any shall be given to the Council within 14 days
(exclusive of Saturday and Sundays or other days observed as
general holiday at Lloyd’s) after the date of publication by the
Council of the Award under and/or Interim Awards(s)
(b) Notice of Cross-Appeal if any shall be given to the Council
within 14 days ( exclusive of Saturday Sundays or other days
observed as general holiday at Lloyd’s) after notification by the
council to the parties of any notice of appeal. such notification if sent
by post shall be deemed received on the working day following the
day of posting.

(c) Notice of Appeal or Cross-Appeal shall be given to the council

by letter telex facsimile or in any other permanent form.
(d) Upon receipt of Notice of Appeal the Council shall refer the Appeal to
hearing and determination of the Appeal Arbitrator(s) selected by it
(e) If any Notice of Appeal or Cross-Appeal is withdrawn the appeal
hearing shall never the less proceed in respect of such Notice of
Appeal or Cross-Appeal as may remain.

126
 (f) Any Award on Appeal shall be final and binding on all the parties to
that Appeal Arbitration whether they were represented either at the
Arbitration or at the Appeal Arbitration or not.

CONDUCT OFTHE APPEAL

12. (a) The Appeal Arbitrator(s) in addition to the powers of the Arbitrator
under clauses 9(a) and 10 shall have power to :-
(i) admit the evidence which was before the Arbitrator together with the
Arbitrator's notes and reasons for his Award and/or Interim Award(s) and
any transcript or evidence and such additional evidence as he or they
may think fit
(ii) confirm increase or reduce the sum awarded by the Arbitrator and to
make such order as to the payment of interest on such sum as he or
they may think tit
(iii) confirm revoke or vary any order and/or Declaratory Award made
by the Aribltralor.

(b)The Appeal Arbitrator(s) and the Council may charge reasonable

fees and expenses for the services in connection with the Appeal
Arbitration whether it proceeds to a hearing or not and all such fees and
expenses shall be treated as part of the costs of the Appeal
Arbitration.

PROVISIONS AS TO PAYMENT

13. (a) In case of Arbitration if no Notice of Appeal be received by the

Council in accordance with clause 11(a) the Council shall call upon the
party or parties concerned to pay the amount awarded and in the event of
non-payment shall subject to the Contractor first providing to the Council a
satisfactory Undertaking to pay all the costs thereof realize or enforce the
security and pay therefrom to the Contractor (whose receipt shall be a
good discharge to it) the amount awarded to him together with interest if
any. The Contractor shall reimburse the parties concerned to such extent
as the Award is less than any sums paid on account or in respect of
Interim Award(s).

(b) If Notice of Appeal be received by the Council in accordance with

clause 11 it shall as soon as the Award on Appeal has been
published by it call upon the party or parties concerned to pay the amount
awarded and in the event of non-payment shall subject to the Contractor,
first providing to the COUNCIL a satisfactory Undertaking to pay all the
costs of realize or enforce the security and pay therefrom to the Contractor
(whose receipt shall be a good discharge to it) the amount awarded to him
together with interest if any. The Contractor shall reimburse the parties con-
cerned to such extent as the Award on Appeal is less than any sums paid
on account or in respect of the Award or Interim Award(s).
(c) If any sum shall become payable to the Contractor as remuneration for
127
his services and/or interest and/or costs as the result of an agreement
made between the Contractor and the Owners or any of them the Council
in the event of non-payment shall subject to the Contractor first providing to
the Council a satisfactory Undertaking to pay all the costs thereof realize or
enforce the security and pay therefrom to the Contractor (whose receipt
shall be a good discharge to it) the said sum.
(d) If the Award and/or Interim Award(s) and/or Award on Appeal provides
or provide that the costs of the Arbitration and/or of the Appeal Arbitration
or any part of such costs shall benefit by the Contractor such costs may
be deducted from the amount awarded or agreed before payment is made
to the Contractor unless satisfactory security is provided by the
Contractor for the payment of such costs.:
(e)With out prejudice to the provisions of clause 4(c) the liability of the
Council shall be limited in any event to the amount of security provided
to it.

GENERAL PROVISIONS

14.The Master or other person signing this Agreement on behalf of the

property lobe salved enters into this Agreement as agent for the vessel
her cargo freight bunkers stores and any other property thereon and the
respective Owners thereof and binds each (but not the one for the other or
himself personally) to the due performance thereof.
15.In considering what sums of money have been expended by the
Contractor in rendering the services and/or in fixing the amount of the
Award and/or Interim Award(s) and/or Award on Appeal the Arbitrator or
Appeal Arbitrators) shall to such an extent and in so far as it may be fair
and just in all the circumstances give effect to the consequences of any
change or changes in the relevant rates of exchange which may have
occurred between the date of termination of the services and the date on
which the Award and/or. Interim Award(s) and/or Award on Appeal is
made.
16.Any Award notice authority order or other document signed by the
Chairman of Lloyd's or any person authorized by the Council for the purpose
shall be deemed to have been duly made or given by the Council and shall
have the same force and effect in all respects as if it had been signed by
every member of the Council.
17.The Contractor may claim salvage and enforce any Award or
agreement made between the Contractor and the Owners against sccuriiy
provided under c'lause4 if any in the name and on behalf of any Sub-
Contractors Servants or Agents including Masters and members of the
crews of vessels employed by him or by any Sub-Contractors in the
services provided that he first provides a reasonably satisfactory indemnity
to the Owners against all claims by or liabilities to the said persons.
18.When there is no longer any reasonable prospect of a useful
result leading to a salvage rewards in accordance with Convention
Article 13 the owners of the vessel shall be endued loteiiuiitateihe
services of the Contractor by giving notice to the Contractor in writing.
19.No person signing this Agreement or any party on whose behalf it is
signed shall at any time or in any manner what so ever offer provide make
128
give or promise to provide demand or taken any form of inducement for
entering into
this Agreement.

THE CON VENTION ARTICLES

Article 1

Definitions
(a) Salvate operation means any act or activity undertaken TO assist a
vessel or any other property in danger in navigable waters or in any
other waters whatsoever
(b) Vessel means any ship or craft, or any structure capable of navigation
(c) Property means any property not permanently and inicinonaOy
attached to the shoreline and includes freight at risk
(d) Damage to the environment means substantial physical damage to
human health or to marine life or resources in coastal or inland waters
or areas adjacent there to, caused by pollution, contamination, fire,
explosion or similar major incidents
(e) Payment means any reward, remuneration or compensation due under
this Convention
Articles 8
Duties of the Salvor and of the Owner and
Master
1.The salvor shall owe aduty to the owner of the vessel or other
property in danger
(a) to carry out the salvage operations with due care;
(b) In performing the duty specified in subparagraph (a), to exercise due
care to prevent or minimize damage to the environment;
(c) whenever circumstances reasonably require, to seek assistance from
other salvors; and
(d) to accept the intervention of other salvors when reasonably
requested to do so by the owner or master of the vessel or other
property in danger; provided however that the amount of his reward
shall not be prejudiced should be found that such a request was
unreasonable
2.The owner and master of the vessel or the owner of odier property a
danger shall owe a duty to the salvor
(a) to co-operate fully with him during the course of the salvage
operations;
(b) in so doing, to exercise due care to prevent or minimize damage to
thr environment: and
(c) when the vessl property has been brought to a place of safety, to
accept redelivery when reasonably requested by the salvor to do
so.

Article 13
Criteria for fixing the reward
1. The reward shall be fixed with a view to encouraging salvage
operations, taking into account the following criteria without regard to the
order in which they are presented below:
129
(a) the salved value of the vesse and other property;
(b) the skill and efforts of the salvors in preventing or minimizing damage to
the environment;
(c) the measure of success obtained by the salvor;
(d) the nature and degree of the danger,
(e) the skill and efforts of the salvors in salving the vessel,other
property and life;
(f) the time used and expenses and losses incurred by the
salvors;
(g) the risk of liability and other risks run by the salvors or their equipment;
h) the promptness of the services rendered;
i) the availability and use of vessels or other equipment intended for
salvage operations;
(j) the state of readiness and efficiency of the salvor's equipment and
the value thereof

2. Payment of a reward fixed according to paragraph 1 shall be made by all

of the v,csscl and other property interests in proportion to their respective
salved values
3. The rewards, exclusive of any interest and recoverable legal costs Out
may be payable thereon, sliall not exceed Ltic salved value of the vessel
and other property

Article 14
Special Compensation
1. If the.salvor has carred out salvage operations in respect of a vessel
which by itsdfer its cargo threatened damage to die environment and has
failed to corn a reword under Article 13 at least equivalent to the special
compensation assessable In accordance with this Article, he shall be
entitled to special compensation from the owner of that vessel equivalent
to bis expenses as herein denned
2. If, in the circumstances set out In paragraph 1, die salvor by his salv'age
operations has prevented or mtnunized damage to the environment, the
special compensation payable by the owner to the salvor under paragraph
1. may be increased up taa maximum of 30* of the expenses Incurred by
the; salvor. However, the Tribunal, If (ideerrii ft fair and just to do so and
bearing in mind the relevant criteria set out In Article 13, paragraph 1, may
increase such special compensation further, but in no event shall the total
Increase be more than 100% of the expenses Incurred by the salvor
3. Salvor's expenses for the purpose of paragraphs 1 and 2 means the
out-of-pocket expenses reasonably incurred by the salvor in the salvage
operation and a fair rate for equipment and pcisormel actually and
reasonably used in the salvage operation, taking into consideration the
criteria set out in Article 13, paragraph 1(h), (i) and(j)
4. Thciolal special compensation underthis Article shall be paid only if and
to the extent that such compensation is greater than any reward
recoverable by the salvor under Article 13

130
5. If the salvor has been negligent and has thereby railed to prevent or
minimize damage to the environment, he may be deprived of die whole or
part of any special compensation due under this Article
6. Nothing in this Article shall affect any right of recourse on the part of die
owner of the vessel

For and on behalf of the For and on behalf of the

Contractor Owners of property to be
salved.

------------------------------------------------- -----------------------------------------
(To be signed either by the Contractor --To be signed by the Master or
personally or by the Master of the other person whose name is
salving vessel or omcr person whose inserted in line 1 of this
name is inserted in line 4 of this Agreement.)
Agreement.)

131
LOF 2000
LLOYD'S

LLOYD'S STANDARD FORM OF

SALVAGE AGREEMENT
(APPROVED AND PUBLISHED BY THE COUNCIL OF LLOYD’S)
---------------------------------
NO CURE - NO PAY
---------------------------------

1. Name of the salvage Contractors: 2. Property to be salved.

The vessel:

her cargo freight bunkers stores and

any other property
thereon but excluding the personal
effects
(referred to in this agreement as “the or baggage of passengers master or
Contractors”) crew
(referred to in this agreement as “the
property”)
3. Agreed place of safety: 4. Agreed currency of any arbitral award
and security
(if other than United States dollars)
5. Date of this agreement: 6. Place of agreement:
7. Is the Scopic Clause incorporated into this agreement? State alternative: Yes/No
8. Person signing for and on behalf of the 9. Captain
Contractors or other person signing for and on behalf of
the
property

Signature: Signature:

A. Contractors’ basic obligation: The Contractors identified in Box l hereby agree to use their
best endeavours to salve*
the property specified in Box 2 and to take the property to the place stated in Box 3 or to such
other place as may
hereafter be agreed. If no place is inserted in Box 3 and in the absence of any subsequent
agreement as to the place
Where the property is to be taken the Contractors shall take the property to a place of safety.

B. Environmental protection: While performing the salvage services the Contractors shall also
use their best endeavours
to prevent or minimise damage to the environment.

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C. Scopic Clause: Unless the word “No” in Box 7 has been deleted this agreement shall be
deemed to have been made
on the basis that the Scopic Clause is not incorporated and forms no part of this agreement. If
the word “No” is deleted
in Box 7 this shall not of itself be construed as a notice invoking the Scopic Clause within the
meaning of sub-clause
2 thereof.

D. Effect of other remedies: Subject to the provisions of the Intemational Convention on

Salvage 1989 as incorporated
into English law (“the Convention”) relating to special compensation and to the Scopic Clause
if incorporated the
Contractors' services shall be rendered and accepted as salvage services upon the principle
of “no cure - no pay” and
any salvage remuneration to which the Contractors become entitled shall not be diminished
by reason of the exception
to the principle of “no cure - no pay” in the form of special compensation or remuneration
payable to the Contractors
under a Scopic Clause.

E. Prior services: Any salvage services rendered by the Contractors to the property before and
up to the date of this
agreement shall be deemed to be covered by this agreement.

F. Duties of property owners: Each of the owners of the property shall cooperate fully with the
Contractors. In particular:
(i) the Contractors may make reasonable use of the vessel's machinery gear and equipment
free of expense provided
that the Contractors shall not unnecessarily damage abandon or sacrifice any property on
board;

(ii) the Contractors shall be entitled to all such information as they may reasonably require
relating to the vessel or
the remainder of the property provided such information is relevant to the performance of
the services and is
capable of being provided without undue difficulty or delay;
(iii) the owners of the property shall co-operate fully with the Contractors in obtaining entry to
the place of safety
stated in Box 3 or agreed or determined in accordance with Clause A.

G. Rights of termination: When there is no longer any reasonable prospect of a useful result
leading to a salvage reward
in accordance with Convention Articles 12 and/or 13 either the owners of the vessel or the
Contractors shall be
entitled to terminate the services hereunder by giving reasonable prior written notice to the
other.

H. Deemed performance: The Contractors' services shall be deemed to have been performed
when the property is in a

133
 safe condition in the place of safety stated in Box 3 or agreed or determined in accordance
with Clause A. For the
purpose of this provision the property shall be regarded as being in safe condition
notwithstanding that the property
(or part thereof) is damaged or in need of maintenance if (i) the Contractors are not obliged to
remain in attendance to
satisfy the requirements of any port or habour authority, governmental agency or similar
authority and (ii) the continuation
of skilled salvage services from the Contractors or other salvors is no longer necessary to
avoid the property becoming
lost or significantly further damaged or delayed.

I. Arbitration and the LSSA Clauses: The Contractors' remuneration and/or special
compensation shall be determined
by arbitration in London in the manner prescribed by Lloyd’s Standard Salvage and Arbitration
Clauses (“the LSSA
Clauses”) and Lloyd’s Procedural Rules. The provisions of the LSSA Clauses and Lloyd’s
Procedural Rules are
deemed to be incorporated in this agreement and fonn an integral part hereof Any other
difference arising out of this
agreement or the operations hereunder shall be referred to arbitration in the same way.

J. Governing law: This agreement and any arbitration hereunder shall be governed by English
law.

K. Scope of authority: The Master or other person signing this agreement on behalf of the
property identified in Box 2
enters into this agreement as agent for the respective owners thereof and binds each (but not
the one for the other or
himself personally) to the due performance thereof.

L. Inducements prohibited: No person signing this agreement or any party on whose behalf it
is signed shall at any
timeor in any manner whatsoever offer provide make give or promise to provide or demand or
take any fonn of
inducement for entering into this agreement.

IMPORTANT NOTICES :

1. Salvage security. As soon as possible the owners ofthe vessel should notify the owners of
other property on board
that this agreement has been made. If the Contractors are successful the owners of such
property should note that it
will become necessary to provide the Contractors with salvage security promptly in
accordance with Clause 4 of the
LSSA Clauses referred to in Clause I. The provision of General Average security does not
relieve the salved interests
of their separate obligation to provide salvage security to the Contractors.

2. Incorporated provisons. Copies of the Scopic Clause; the LSSA Clauses and Lloyd’s
Procedural Rules may be

134
 obtained from (i) the Contractors or (ii) the Salvage Arbitration Branch at Lloyd’s, One Lime
Street, London EC3M
7HA.

135
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 16

TOWAGE

1.0 DEFINITION :

1.1 A towage service may be described as the employment of one vessel to expedite the
voyage of another, when nothing more is required than the accelerating of her progress.

1.2 Towage is a service by one vessel to another for a fixed remuneration. The reason for
one vessel to require such a service is that, for one reason or another, it lacks its own motive
power.

1.3 Towing is any operation performed by a tug in connection with the holding, pushing,
pulling, moving, escorting, guiding or standing by a hirer's vessel.

1.4 The vessel which needs the assistance of another to be manoeuvred is called the "tow"
and the "tug" provides the necessary and required assistance of manoeuvring it.

2.0 WHY DOES A TOW NEED A TUG ?

2.1 Some of the reasons are:

(a) As stated above, the tow could be a craft without its own motive power, e.g. a dumb
barge. A barge owner needs a tug to push the barge.

(b) A large vessel may stop its engines for fear of damaging the quay (pronounced
"key") by the sheer strength of its propelling power and may need tugs to enable her to
berth gently.

(c) A ship which has been just constructed and emerges from a dockyard may still
not be operational and may, therefore, need assistance.

(d) A vessel may be too big to manoeuvre in narrow and restricted waters and may need
assistance for crossing the waters smoothly.

(e) For towage of drilling (oil) rigs from one position to another.

(f) Whenever the ship's engines breakdown.

(g) When the vessel goes aground and has to be pulled out.

3.0 GENERAL INFORMATION:

3.1 The contract between tug and tow is one of "service". Most tug-owners' contracts
contain exclusions and indemnities.

136
3.2 The tug operator may be an independent operator or contractor. The shipowner will
make an agreement with a tug-owner. Ordinarily, the master and crew of the tug are the servants
of the tug-owner and not the servants of the owner of the tow.

3.3 In case of an accident in most cases it is possible to make the tow and the tug liable. This
makes the tug-owner unhappy as he is liable for torts (acts of negligence) committed by the master
and crew of the tug even though control has passed to the owner of the tow. It is for this
reason that the tug-owner will seek to obtain some form of indemnity in his towage contract.

3.4 The tug-owner protects himself by inserting into the contract that the tug-master
and crew, whilst carrying out the operation of the towage service, are the servants of the
tow (or its owner) and not of the tug-owner.

3.5 This basic transfer of responsibility allows the tug-owner to escape responsibility for
any damage or loss caused by his employees through any act, neglect or default either to
his own craft or to the hirer's vessel (or to any third vessel or party) and may also give the
tug-owner the right to seek indemnity from the hirer wherever this is applicable.

3.6 In some countries, towage contracts which purport to exclude the tug's liability for
negligence may be void as being against public policy.

3.7 Prima facie the tug-owner while towing the tow is responsible for any collisions
which happen during the conduct of the work. This is the law in the case of towage of dumb
barges as the whole of the motive power is in the tug.

3.8 In cases where the tow is fully manned, often with a pilot on board, it is the tow
which is supposedly in command of the towage and the tug is expected to obey the orders
of the tow. Failure to control the tug is treated as negligence on the part of the tow.

3.9 However, these contractual arrangements between the tug and the tow do not
usually affect third parties where the tug's master and crew remain the employees of the
tug-owner.

3.10 A clause which has given rise to disputes is that which defines the period of towage
and which fixes the appropriate time when, the requirements in the towage agreement
commence and the precise time when they cease. This is important as this is the period
when the tow assumes full responsibility for any damage to the tow, tug or third parties.

4.0 IMPLIED TERMS:

4.1 Inspite of the detailed express terms, the courts have implied terms into towage
contracts. Some of the implied terms are:

(a) It is the duty of the shipowner to disclose information as to what type of service is
expected of him from the tug-owner.

4.2 This principle bears similarity to the principle of uberrima fidei (utmost good faith)
between an assured and an insurer under policies of marine insurance.

4.3 In the Elliot Steam Tug Co v New Medway Steam Packet Co. a tug was hired for
towing an 800-tons1 lighter. When the tug reported for work it was found that it could not
reach the lighter because of insufficient water and the narrow channel. This information was
not revealed by the lighter's owner to the tug-owner.

137
4.4 The court held that it was the duty of the lighter's owner to inform the tug-owner about the
situation and put the lighter in a position that the tug of this size could handle it successfully. The
tug-owner was therefore eligible for claiming damages for breach of an implied contractual term.

(b) The tug must be fit (seaworthy) to carry out the assigned towage contract. This implied
warranty of fitness extends to the tug, its crew, tackle and equipment

4.5 The Marechal Suchet was towed from Fulmouth to London by the tug Guiana. The tug
was unfit for the voyage and a strong wind drove both the tug and tow off-course with the result
that the tow grounded.

4.6 The tug refloated the tow with the assistance of other vessels and later all of them
including the Guiana claimed a salvage award.

4.7 The Guiana's claim was denied as there was an implied warranty that the tug should be
efficient (fit).

(The above case is not conclusive as the decision was in a salvage case and not in one where
the owners of the tow claimed damages against the tug).

5.0 SPECIAL TOWAGE CONTRACTS:

 UKSTC, 1986.
 Towhire.
 Towcom.

5.1 UKSTC, Revised 1986:

5.1.1 UK STANDARD CONDITIONS FOR TOWING AND OTHER SERVICES (UKSTC) were
devised mainly for towage -services in harbours and ports. They are used extensively in UK and
several other countries, such as South Africa and Australia.

5.1.2 These conditions place almost all the risks of towing on the tow. UKSTC reflect the
bargaining power of the tug-owners in ports. They extend extra protection to the tug-owner. The
tug-owner is entitled to arrange for a substitute tug to perform the service.

5.1.3 The contract is between the "hirer" and the tug-owner. If the hirer is not the owner of the
vessel it is assumed that he has authority to bind the owner. If he has no authority he is liable for
breach of warranty of authority.

5.1.4 The towage service does not commence until the tow ropes have been passed. The tug-
owners, are entitled to the special protection only during the time the tugs are of special proximity to
the tow so that they can receive orders "direct" and the tugs are within hailing distance. The above
claims can be made only when the tug is in a position of proximity to the tow.

5.1.5 The tug-owner's liability for damage done by the tug from any cause including negligence
or unseaworthiness of the tug is excluded. The tow also indemnifies the tug for any loss.or
damage including sums paid to third parties and damage to the tug even if both were caused by
the tug's negligence. The tug may be obliged to pay a third party for negligence, but afterwards it
can claim an indemnity for this amount from the tow.

5.1.6 Exclusions in this contract and the tug do not bind the third party or vessel.

5.1.7 The relationship of the tug to the tow is governed by the towage contract. The third
party is not usually interested in the towage contract. The tug is usually obliged to pay a third
party for negligence, but afterwards he can claim an indemnity for this amount from the tow.

138
5.1.8 UKSTC exclude liability for war strikes and delays. But they do not affect any claim by the
tug-owner or his servants for salvage.

5.1.9 The claims are not applicable either if the tow can prove that they resulted directly and
solely from personal failure of the tug-owner to make the tug seaworthy.

5.1.10 In the case of ocean or coastal towage other contracts are used, specially due to
competition from numerous Contractors. UKSTC is sometimes used but is then amended.

5.1.11 Two new ocean towage agreements were formulated in 1985 called, "TOWHIRE" and
"TOWCON". These agreements are similar to time and voyage charterparties in form and they
contain all the detailed terms of the contract, as opposed to the UKSTC which deal with liability but
not price or description of tug and tow.

5.1.12 UKSTC – UK Standard Conditions for Towing and Other Services - in Short:

 Devised mainly for services in harbours and ports in UK, South Africa and Australia.
 Reflects bargaining power of tug-owners.
 All risks of towing on tow.
 Tow to indemnify tug for any loss including sums paid to third parties and damage to tug
even if both caused by tug’s negligence.
 Contract between ‘hirer’ and tug owner. If hirer is not the owner he is assumed to have
authority to bind owner. If he has no authority, liable for breach of warranty of authority.
 Towage service does not commence until the tow ropes have been passed.
 Tug- owner’s liability for damage done by tug from any cause, including negligence or
unseaworthiness of tug excluded.
 Liability for war, strikes, delays excluded.

5.2 TOWHIRE :

5.2.1 Part I contains.43 boxes. These contain details of the tug and tow such as gross tonnage,
flag and place of registry, Classification Societies and P & I liability insurers. The tow declares its
maximum length, breadth and towing drafts. The" tug gives information about its indicated
horsepower and certificated bollard pull. The latter is important in assessing the tug's capacity for
the operation, particularly when tugs of several operators are engaged in the towing.

5.2.2 Part II contains 25 general terms. Like a time-charter, it regulates the conditions of
payment and additional charges or costs which arise. Thus the hirer has to pay port expenses
and pilotage charges. The tug and tow owners undertake to use "due diligence" to make their
vessels seaworthy, although it allows the tug-owner to provide a substitute tug.

5.2.3 The tow-owner has the right to cancel prior to departure (subject to a cancellation fee). The
contract also allows the tug-owner to withdraw his tug from the service on specified grounds.

5.2.4 It deals with the respective liabilities of the two owners and it is important to note that it is
different from the UKSTC (1986). Essentially it deals with liabilities on a 'knock-for-knock' basis.
This means that the tug-owner will pay for all personal claims made by his employees (e.g. the
tug's crew) or those on board the tug. He also pays for loss or damage to the tug and loss or
damage caused by the tug to third parties, e.g., by contact with the tug. The tow-owner undertakes
a similar responsibility for his vessel and employees.

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5.2.5 Of course, this contract does not directly affect a third party. It provides a fairly simple
method for allocating risks between the tug-owner and the tow-owner. If the third party sues
the tow for negligent control of the tug which causes the tug to collide with the third party's
vessel, the tow must pay the claim. However, it would then be entitled to an indemnity under
the ‘knock-for-knock’ agreement as the damage resulted from contract with the tug.

5.2.6 TOWHIRE also contains a Himalaya clause and a war clause.

5.3 TOWCON :

5.3.1 This is a lump-sum towage agreement and many of its clauses are identical to TOWHIRE. The
main difference is that the tug-owner gets paid in a different way. It makes the lump- sum fully and
irrevocably earned according to the various stages of the contract. Thus, the sum could be
payable in instalments, e.g. on signing the agreement, on departure, on arrival, etc.

5.3.2 Like voyage charters, TOWCON has to deal with the allocation of the risks of delay. It allows
the tow-owner an agreed amount of laytime, i.e., 'free time’. Thereafter he must pay an agreed
'delay payment' (i.e., demurrage). The tow-owner must give the tug-owner notice, within agreed
periods, as to when the tow will be ready to depart. If slow steaming is requested by the hirer, the
tug-owner is entitled to extra compensation.

NOTE: TO UNDERSTAND VARIOUS TERMSS AND CONDITIONS, IT IS IMPORTANT

THAT YOU READ THE THREE TOWAGE CONTRACTS ATTACHED AS ANNEXURE TO
THIS LESSON.

ooooo

SELF-EXAMINATION QUESTIONS

1. What is "towing"?
2. Define “tow” and “tug”.
3. What are the different circumstances under which a tow needs assistance of a tug?
4. Quoting a suitable case law, state one implied term which is a part of every
towage contract.
5. State some of the salient features of UKSTC, 1986.
6. Write notes on (a) TOWHIRE and (b) TOWCON. Why are they preferred over UKSTC, 1986?

RECOMMENDED FOR FURTHER READING :

1. Maritime Law — Christopher. Hill.

2. Shipping Law — Charley &. Giles.

**********************

140
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 17

COLLISION REGULATIONS
1.0 INTRODUCTION :

1.1 A collision at sea gives rise to a tort of negligence. The defaulting shipowner has to
pay damages to other property involved. The plaintiff, to obtain the award, would have to
prove that the defendant owed a duty of care, there was a breach of that duty and there was
a damage as a result of that breach.

1.2 A set of rules called the Collision Regulations have been framed to prevent collisions
at sea. The rules were first framed in 1960. In 1972 the Convention on the International
Regulations for Preventing Collisions at Sea were framed by the IMO. These rules were
further amended in 1981.

1.3 Introduction in short :

 Liability for collision at sea arises from a tort of negligence

 The plaintiff must prove :
 The tortfeasor owed a duty of care to the plaintiff
 There was breach of that duty
 The plaintiff suffered damage due to breach of duty
 Usually term ‘collision’ implies contact/impact between vessels
 However a vessel can cause damage by its negligence to another vessel without actual
contact – The Carnival (1994)
 Good defence to a charge of negligence by the tortfeasor is that the tort was committed
solely in the ‘agony of the moment’ e.g. where the master of the ship had no time to even
think of an alternative action to avoid the imminent danger
 Under the common (maritime) law, damages resulting from a collision were divided
equally regardless of any specific percentage of fault attributed against other vessel[Both
to Blame Clause]
 Then in 1910, a Convention was held at Brussels to apportion the blame arising from
Collisions
 Under the 1910 Collision Convention, damages are to be borne by vessels in proportion
to their fault
 Many European Countries ratified the 1910 Collision Convention
 UK enacted the Maritime Convention Act, 1911 under which apportionment of liability is in
proportion to the degree in which each vessel was at fault. Where it is not possible to
determine the degree of fault, liability is to be apportioned equally.
 USA did not ratify 1910 Collision Convention.

1.4 Anomalous situation created by Both to Blame Clause:

1.4.1 Cargo lost due to collision – Cargo owner sues vessel owner carrying the
cargo(carrying vessel) – defence (of ship owner) of error in navigation/management under
Hague or HV Rules) – so cargo owner sues the owner of other ship involved in collision(
non- carrying shipowner) in tort of negligence who pays and then claims 50% contribution
from carrying vessel (both to blame equally concept) even if he is 1 % at fault. Therefore
ship owners protect themselves with a clause in carriage contract which entitles them to
reimburse from shipper 50% contribution paid to the non- carrying vessel owner.
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2.0 Alternative Danger :

2.1 The doctrine of Alternative Danger provides that if a ship is in grave danger due to
the negligence of another ship, and the master on the spur of the moment takes a course of
action which he feels would avert the imminent collision, the master of this ship would not be
liable. It is the negligent ship which will bear the loss.

3.0 Rules relating to damages :

3.1 Aim of awarding damages in tort is to put the injured party in the same position in
which he was as if the tort had not occurred.

3.2 Damages which the tortfeasor must pay should not be too remote from the wrong he
has committed.

 In Re Polemis (1921) – Plaintiff can recover all direct loss i.e. loss that is the
direct consequences of defendant’s negligence. Pure economic losses not
connected with defendant’s negligence not recoverable.

 In Liesbosch Dredger v S.S. Edison (1933) – due to negligence of vessel Edison,

Liesbosch, which was performing harbour dredger work under a contract which
provided severe penalties for delay, was dragged from her mooring into the open
sea – financial position of Liesbosch not such to purchase a new dredger – so
hired a replacement – Liesbosch claimed damages +cost of hiring replacement.
Held damages for hiring replacement was the direct result of claimants financial
instability and not defendants negligence and hence not recoverable. However
court held claimant entitled to value of Liesbosch as a going concern.

 Then in ‘The Wagon Mound(No1) (1961), Re Polemis over – ruled. Test of

remoteness for damages is now one of ‘reasonable foreseeability’. Plaintiff can
recover all damages which are reasonably foreseeable as a result of defendant’s
negligence, whether or not the injury caused was a direct result of negligence.

3.3 When the ship is lost:

The compensation is limited to place the injured parry in the same position as he was
earlier. Therefore the damage would be the market value of the ship at the time of
the loss. However, this can be difficult to assess and hence the value of the damages
could be taken as the value of that ship to its owner as a 'going concern*. The
defendant -need not pay so much so as to enable the plaintiff to buy a new ship. The
accountants would value the ship in such a situation as its original cost less the
depreciated value.

With regards to the loss of use of the vessel, the owner can claim chartered freight if
the ship was under charter.

3.4 When the ship is damaged but not lost:

In such a situation the injured party should be put back into the same financial
position as he was immediately before the damage occurred (restituto in
integrum). By doing so, however, the value of the ship might increase; this is
acceptable. For repairing the ship the affected party must act reasonably. The
affected party may also recover consequential losses as a result of the collision
including profits as long as these are not too remote or speculative. The loss of
recoverable profit is one, which is a direct and immediate consequence of the
injury.

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4.0 THE REGULATIONS :

First framed in 1960 to prevent collision at sea. In 1972, IMO framed the Convention on the
International Regulations for Preventing Collision at Sea. Amended in 1981. The
regulations are in 5 parts- A to E having 38 rules, besides there are 4 Annexes. A brief of
these is provided below:

4.1 PART A :

4.1.1 Contains the general guidelines. As per Rule 1 the regulations apply to all vessels on
the high seas .and in all waters connected therewith, navigable by sea going vessels. As per
Rule 2 nothing shall exonerate the vessel, master, owner or crew from the consequences of
neglect or any precaution required by the ordinary practice of seamen or by special
circumstances. Hovercraft and seaplanes are included in the regulations as per Rule 3.

4.2 PART B (Steering and Sailing Rules) :

4.2.1 Section 1: Deals with the general conduct in any condition of visibility. For instance in
fog ships must not rely only on the radar; traditional lookout cannot be dispensed with.

Rule 6 deals with safe speed and Rule 7 with the proper use of the radar. Rule 10 talks
about traffic separation schemes. Maintenance and cable laying vessels are exempted from
full compliance of traffic separation rules.

4.2.2 Section 2: Pertains to rules of vessels in sight of each other. For instance Rule 12
provides regulations for vessels on opposite courses: windward must keep out of the way of
the leeward. Rule 13 provides that the overtaking vessel should keep out, of the way of the
vessel being overtaken. For a head on situation, Rule 14 provides that each vessel should
alter course to starboard and pass port to port. While crossing a vessel should give way to
another on her starboard side.

4.2.3 Section 3: Deals with the conduct of vessels in restricted visibility.

4.3 PART C (Lights and Shapes):

4.3.1 The rules here prescribe the strength and kind of lights for pilot vessels, vessels at
anchor, tugs, fishing vessels etc.

4.4 PART D (Sound and Light Signals):

4.4.1 Rules prescribe equipment for such signals along with the required number of
whistles and blasts.

4.5 PART E:

4.5.1 Allows exemption regarding lights for certain older vessels.

4.5.2 There needs to be strict compliance to the regulations. Compliance is encouraged by

making breach a criminal offence and also by making breach useful evidence of negligent
navigation in a civil case for damages.

ooooo

143
 SELF-EXAMINATION QUESTIONS

1. What is the purpose behind Collision Regulations?

2. What does Part 13' in the above Convention deal with? Give salient features
of various sections.
3. What do you mean by "Alternate Danger"?
4. What are the damages under Colregs when (i) the ship is lost, and (ii) the ship
is damaged but not lost.

RECOMMENDED FOR FURTHER READING :

Maritime Law in India — in International Context (Bhandarkar Publications) Td Edi. 1998, Pages
35-44.

********************

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 18

OIL POLLUTION

1.0 As the transportation of oil and petroleum products is on the increase, so are the
risks of accidents and pollution. A major marine casualty due to collision or explosion or
even dumping of waste into the waters can cause marine pollution. A tour around the docks
will convince one how prevalent is the practice of letting out oil from the bilges.

1.1 To start with, pollution prevention was restricted to imposing fines or inflicting
punishment on unwary, careless or unscrupulous masters who were in the habit of cleaning
ship tanks and bilges within the territorial waters of a country. It was not until 1967 when the
Torrey Canyon disaster took place that it was realized that how much damage is done from
one oil spill. Today the situation is such that it might not be wrong to say that the world will
not be able to cope with the cost of cleaning/damages after, major, oil spill at sea. Even after
nine years of the incident, Exxon is still paying damages after the catastrophe of Exxon
Valdez in 1989.

1.2 This chapter will touch upon :

 Three International Conventions :

 CLC
 Fund Convention
 MARPOL

 US Law – OPA 1990

 Two Voluntary schemes (both wound up) :

 TOVALOP
 CRISTAL

1.3 Compensation from damage caused by oil spills from laden tankers is governed by
two international conventions, the 1969 International Convention on Civil Liability for Oil
Pollution Damages (Civil Liability Convention) and the 1971 International Convention on the
Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund
Convention). These conventions were elaborated under the auspices of the IMO.

2.0 Why the Conventions/Law ?

 Transportation of oil & petroleum products on increase.

 Risks of accidents & pollution to marine world.
 Torrey Canyon disaster of 1967 made the world realise how much damage can
be caused from one oil spill from one vessel .
 10 million gallons of crude oil spill from EXXON Valdez 1989--damages paid for
more than a decade.
 Incidents continue to occur – Eleni V (Split in two), Braer, Sea Empress, etc.

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3.0 The International Convention on Civil Liability for Oil Pollution 1992[CLC]:

3.1 CLC came on the scene in 1969 (after Torrey Canyon catastrophe in 1967) --- came
into effect in 1975 and amended by Protocol 1992.

3.2 Objectives of the Convention:

 To establish an international regime on a uniform basis of liability for damage

done by pollution caused by escape/discharge of oil; and includes.
 Cost of measures taken reasonably to mitigate such damage.

3.3 Application :

 Oil pollution damage resulting from spills of persistent oils from laden tankers
[persistent oils means crude oil and heavy fuel oil]
 Damage caused by lighter factions like gasoline, light diesel and kerosene not
covered.
 Vessel involved should be carrying persistent oil in bulk as cargo
 Convention not applicable if there is spill of bunker fuel on a ballast voyage. But
it will apply to a bunker spill if the vessel is laden at that time.
 Covers only owners liability and not of charterers
 Convention applies only to damage caused or measures adopted after the
incident has occurred.
 1969 Convention does not apply to pure threat removal measures. But under the
1992 Convention compensation is also payable for expenses incurred in taking
successful measures against a grave and imminent threat of pollution.
 Area where the spill occurred is irrelevant. CLC will apply if the territory affected
by pollution is in contracting State.

3.4 Nature of Liability :

 Strict Liability of the tanker owner – not dependant on fault

 Owner may escape liability if he can prove damage resulted from:
o Act of war or hostility.
o Act of God
o Intentional act/ omission of third party
o Negligence by public authorities in maintaining lights or other navigational
aids.

3.5 Limitation of Liability :

 Under 1969 CLC – 133 SDR/ton of ship’s tonnage or 14 million SDR whichever is
less
 Under 1992 CLC limits of liability depend on the size of the vessel:

o Under 5000 GT – 3 million SDR

o 5000 to 140000 GT – 3 million SDR plus 420 SDR/GT
o Over 140000 GT - 59.7 million SDR.

 Claims to be made only against registered owners. No claims against servants/

agents of owner

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3.6 Loss of Limitation of Liability :

 Owner will forfeit his right to limit liability if damage occurs due to his default,
recklessness or intent to cause damage

3.7 Compulsory Insurance :

 Owner of a tanker carrying more than 2000 tons of persistent oil as cargo
obliged to maintain insurance to cover his liability
 Tanker owner to carry on board certificate to that effect

4.0 Fund Convention :

4.1 The International Convention on the Establishment of an International Fund for Oil
Pollution was adopted in 1971 but came into effect in 1978. Only states which are party to
the CLC can become a party to the Fund Convention. The Fund Convention takes over
where the CLC leaves off. The Convention has a similar application to the CLC, although
the oil that spills and pollutes may be either cargo or bunkers.

4.2 Objective :

 To provide supplementary compensation to those who cannot obtain full

compensation for oil pollution damage under CLC.
 To enable vessel owners to apply to the Fund for reimbursement for expenditure
incurred through entering into voluntary cleaning up operations in excess of CLC
limits.

4.3 Application :

 Like CLC, if applies when the vessel involved is carrying persistent oil in bulk as
cargo although the oil that pollutes may be either cargo spill or bunker spill.

4.4 Contributions to the Fund :

 Made by importers of crude oil by sea and who are residents in the States which
are parties to the Fund Convention and who have received in the preceding
calendar year more than 150000 tons of crude/heavy fuel oil
 An ‘initial’ contribution is payable when a State becomes a member. Then
‘Annual’ contributions are levied to meet anticipated compensations/
indemnifications/administrative expenses
 The International Oil Pollution Compensation [IOPC] Committee decides the
amount of levy each year
 India is a contributor to the fund

4.5 Fund pays compensation when :

 Ship owner is exempt from liability under one of the exemptions under CLC
 Ship owner is financially incapable of meeting his obligations under CLC and/or
his insurance his inefficient
 Damage exceeds ship owners liability under CLC

4.6 Fund not to pay compensation when :

 Damage in a State, not party to IOPC Fund.

 Damage result of war, hostilities, civil war, insurrection.
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  Damage result of spill from warship, or vessel on Government service.
 Claimant unable to prove the source of spill was a ship.
 Damage wholly/partially from intentional or negligent act of claimant

4.7 Fund’s Maximum Liability:

 33SDR for each ton of ship’s tonnage; higher amounts for ships over 83333 tons;
for ships over 105000 tons the maximum is 5667000SDR

4.8 Extinguishing of action against Fund:

 Action to be brought within 3 years from the date when damage occurred
 Under no circumstances can an action be brought later than 6 years after date of
incident which caused damage

5.0 MARPOL 73/78 :

5.1 The International Convention for the Prevention of Pollution from Ships, was adopted
by the International Conference on Marine Pollution convened by IMO in 1973, This
Convention was subsequently modified by the Protocol of 1978 relating thereto adopted by
the International Conference on Tanker Safety and Pollution Prevention (TSPP Conference)
convened by IMO. This Convention, as modified by-the Protocol, is known. as the
International Convention for the Prevention of Pollution from Ships, 1973, as modified by the
Protocol of 1978 relating thereto or, in a short form, MARPOL 73/78. Regulations covering
the various sources of ship generated pollution are contained in the five Annexes of the
Convention which deal with the following:

1) Annex I - Regulations for the Prevention of Pollution of Oil

2) Annex II - Regulations for the Control of Pollution by Noxious Liquid

substances

3) Annex XII - Regulations for the Prevention of Pollution by Harmful

Substances in Packaged forms

4) Annex IV - Regulations for the Prevention of Pollution by Sewage

5) Annex V - Regulations for the Prevention of Pollution by Sewage

5.2 The salient features of Annex I are as given below:

a) MARPOL 73 introduced the requirements for COW. The merits of COW in

reducing pollution have been well accepted by the tanker industry over the years.
Newly built crude carriers exceeding 20000 DWT are required to be fitted with both
Segregated Ballast Tanks (SBT) and COW. Existing crude oil carriers of 40000 DWT
or 'over must be fitted with either SBT or COW. The Convention also called for SBT
to be fitted for new tankers of 80000 DWT or over.

b) The Convention also called for any vessel of 10000 GRT or more to be fitted with
an oil discharge monitoring and control system.

5.3 The 1978 Protocol introduced additional rules made the existing rules more stringent.
The Protocol introduced new methods for washing oil cargo tanks that have helped to
minimize operational pollution. Other measures have reduced the threat of accidental

148
pollution, by putting limits on the size of cargo tanks, and making mandatory the use of IGS,
which cut the danger of explosions.

5.4 Other salient features of MARPOL 73/78 are:

a) New tankers of 20000 DWT or more to be fitted with SBT and further, that the
SBTs be protectively located, i.e. positioned in such a manner as to insulate the
cargo tanks from the effects of a collision or grounding.

b) Stringent regulations were introduced regarding inspection and certification. This

includes periodic surveys at intervals not greater than five years, an initial survey
before the ship goes into service, or if it is an existing ship before the issuing to it of
an 'International Oil Pollution Prevention Certificate'.

c) Governments of contracting countries to provide adequate reception facilities for

oily residues in:

(i) all ports and terminals in which crude oil is loaded into oil tankers
where such tankers have immediately prior to arrival completed a ballast
voyage of not more than 72 hours or not more than 1200 nautical miles.

(ii) All ports and terminals in which oil other than crude oil in bulk is
loaded at an average quantity of more than 1000 metric tons per day.

(iii) All ports having ship repair yards or tank cleaning facilities.

(iv) All ports and terminals which handle ships provided with sludge
tanks.

(v) All ports in respect of oily bilge waters and other residues.

(vi) All ports which load bulk cargoes in respect of oil residues from
combination carriers.

d) Any discharge of oil or oily mixture into the sea is prohibited for oil
tankers except when the following conditions are satisfied:

(i) the tanker is not within a 'special area' (Mediterranean Sea area, Baltic
Sea area, Black Sea area, Red Sea area, the Gulfs area, the Gulf of Aden
area and the Antarctic area).

(ii) The tanker is more than 50 nautical miles from the nearest land.

(iii) The tanker is proceeding en route.

(iv) The instantaneous rate of discharge of oil content does not exceed 60
litres per nautical mile, (revised to 30 litres per nautical mile as per 1992
amendment)

(v) The quantity of oil discharged into the sea does not exceed for existing
tankers 1/15000 and for new tankers 1/30000 of the total quantity of the
particular cargo of which the residue formed a part.

(vi) The tanker has in operation an oil discharge monitoring and control
system and a slop tank arrangement. As per 1992 amendments, any ship of
10000 gt and above shall be provided with an oil filtering equipment, and with

149
 arrangements for an alarm and for automatically- stopping-any discharge of
oily mixture when the oil content in the effluent exceeds 15 parts per million.

e) Regulation 15 of MARPOL deals with various rules with regard to 'Retention of oil
on board'. The 1994 and 1995 amendments call for an additional interpretation -

" In the case of ships retaining their residues on board and proceeding to
ports or terminals under the jurisdiction of other Parties to the Convention, the
Government of the receiving party is advised to inform the next port of call of
the particulars of the ship and cargo residues, for their information and
appropriate action for the detection of violations and enforcement of the
Convention"

5.5 Countries whose fleets make up more than 80 % of world tonnage have ratified
MARPOL 73/78. Figures issued by the International Tanker owners' Pollution Federation
indicates that the number of oil spills since 1980 has been reduced by more than 70 %.
Since Annexes II, III and V are now also in force, meaning that the oceans are also being
protected against pollution from substances other than oil.

5.6 In 1997 an extra Annex was added to MARPOL dealing with Air Pollution. Further,
IMO is considering adding a seventh, designed to prevent the unwanted carriage of toxic
marine life in ballast water.

5.7 Salient Features of MARPOL - in short :

 Introduces the requirement of COW to reduce pollution.

 Newly built crude carriers > 20000 DWT to be fitted with both Segregated Ballast Tanks
(SBT) & COW.
 Existing crude oil carriers of 40000 DWT or over to be fitted with either SBT or COW.
 SBT to be fitted for new tankers of 80000 DWT or over (to avoid discharge into sea of
dirty ballast water).
 Vessel of 10000 GRT or more to be fitted with oil discharge monitoring and control
system.
 SBTs to be protectively located/ positioned to insulate cargo tanks from effects of collision
or grounding[MARPOL 1978].
 Stringent inspection and certification regulations[MARPOL 1978].
 Governments of contracting countries to provide adequate reception for oily residues at
certain categories of ports.
 Any discharge of oil or oily mixtures into the sea prohibited for oil tankers except when
certain conditions are satisfied.
 In case of ships retaining their residues on board and proceeding to ports/terminals under
jurisdiction of other parties to the Convention, the receiving party to inform next port of call
of the particulars of the ship and cargo residues, for their information and appropriate
action for detection of violations.
 Each contracting State to prescribe penalties within their own legal framework for non-
compliance of Convention.

6.0 US OIL POLLUTION ACT 1990 [US-OPA 1990]:

6.1 The US in 1990 came up with its-own set of regulations which apply not only to
vessels but also to onshore and offshore facilities. Following are the salient features of the
legislation:

1) Statutorily recoverable amounts now include third party damages, in addition to

government clean up costs. As a result of the same, if P&I clubs gave their
certificates, they could be directly sued. Therefore, this aspect of the Act is highly
controversial.

150
 2) The Act applies to:

a) vessels over 300 GRT

b) vessels using any port in the USA or any offshore facility

c) vessels of any size within the economic zone of 200 NM used to tranship or
lighter oil destined for a place subject to US jurisdiction, and combines
requirements for financial liabilities for pollution clean up costs and damages
both under OPA and CERCLA (Comprehensive Environmental Response,
Compensation and Liability Act).

Evidence of financial responsibility may be established by any one, or a combination

of evidence of insurance, surety bonds, guarantee, letter of credit, qualification as a
self insurer or other evidence of financial responsibility.

3) OPA requires evidence of financial responsibility of US$ 600 per GRT

or US$ 500,000, whichever is greater, for non-tankers and a two tier
level for tankers:

a) For tankers between 300 and 3000 GRT, the greater of US$ 1200 per GRT
or US$ 2 million and

b) For tankers over 3000 GRT the greater of US $ 1200 per GRT or US $ 10
million. CERCLA requires US $ 300 per GRT or US $ 5 million, whichever is
greater.

4) LIABILITY: A 'responsible party' for a vessel is defined as any person

owning, operating or demise chartering a vessel is strictly liable for:

a) the costs to prevent, minimize or mitigate oil pollution

b) all removal costs and damages

c) Liability for damage includes destruction or loss of natural resources,

economic loss from the destruction of real or personal property, loss of
subsistence use of natural resources, loss of revenue to government, loss of
profits or impairment of earning capacity and costs of added public services
provided during or after removal activities.

d) Liability can however, be avoided if it could be proved that the damage

occurred due to an act of God, An act of War or due to an act or omission of
a third party.

e) There will be unlimited liability if the incidence was caused by willful

misconduct or gross negligence, violation of applicable regulations and failure
or refusal to report the incident or cooperate in a removal action.

6.2 The Impact of OPA 90 :

6.2.1 Legislation as strict as OPA 90 is bound to bring about a major upheaval in the
market, tanker market in particular. The issue no doubt is debatable. However, following are
views of experts on the issue:

151
6.2.2 First are the tangible changes. There has been a dramatic shift in new building
orders to double hull ships. Likewise, in the chartering markets also a definite interest for-
tankers with double hulls had emerged,, maybe at a premium too.

6.2.3 A direct impact of OPA 90 is the appearance of P&I surcharges on ships trading to
the US. These extra costs have obviously been built up in the Worldscale rates.

6.2.4 Another obvious result of the Act was that several owners pulled out their ships out
of the US market. However, US still meets its demand for oil and there are many others who
started trading there as the demand was too large to be ignored.

6.2.5 Second are the intangible changes. These lie in the attitude of the way the business
is done. Earlier a ship was being used as long as she was in class and did not have a
particularly bad reputation. Today the charterers look at the condition of the ship, the
charterers relationship with the owner has become more important, the owner's history of
operation is considered besides his financial standing. Conversely the owners have taken a
similar view of the charterers they deal with.

6.2.6 Oil majors and charterers have thus become choosier. Unfortunately though, it is not
necessary that a tanker that is EXXON approved would also be CHEVRON approved.
Owners are no longer waiting for the phone to ring for an order, they have started marketing
their activities. However, in spite of the controls one aspect remains- one catastrophic spill
which could bankrupt the owner.

7.0 VOLUNTARY SCHEMES :

7.1 Till recently there were two voluntary schemes also operating. The Tanker Owners'
Voluntary Agreement concerning Liability for Oil Pollution (TOVALOP) and The Contract
regarding an Interim Supplement to Tanker Liability for Oil Pollution Damages (CRISTAL)
were two voluntary agreements funded by the tanker and oil industries which came to an
end on 20th February 1997. These had come into force voluntarily to ensure the availability
of adequate compensation for oil spill damage, pending the widespread international
application for a legal structure governing such compensation.

7.2 Over the years the relevance of TOVALOP and CRISTAL has progressively eroded,
as countries around the world have embraced the international legal system for
compensation under CLC and Fund Convention. The schemes were different in the sense
that these applied to all tankers and cover a major part of the cargoes besides having global
application. Also, these covered certain risks not at present covered by the international
conventions. For instance, these covered 'pure threat situations' i.e. preventive measures
taken if no oil is actually spilled. Of course, after the discontinuation of TOVALAP and
CRISTAL, states would have to consider ratifying the 1992 protocols of the CLC.

7.3 TOVALOP :

 Established in 1969 after Torrey Canyon disaster and prior to CLC & Fund Convention
 Established to provide compensation for damage caused by polluting tankers.
 Owner/bare boat charterer obliged either to clean up the oil or reimburse others who
cleaned up the .oil or who suffered pollution damage.
 Maximum liability US $ 160 per ton or US $ 16.8 million, whichever is less.
 Owner required to demonstrate adequate financial capability by acquiring insurance cover
for oil pollution.
 Administered by International Tanker Owners Pollution Federation (ITOPF).
 Came to an end on 20 February 1997.

152
7.4 CRISTAL :

 Established by oil companies to provide additional compensation over and above the
limits available under TOVALOP when cargo was owned by a party to CRISTAL.
 Maximum compensation increased to US $ 70 million depending on tonnage of vessel.

ooooo

SELF-EXAMINATION QUESTIONS

1. What areas of application of oil pollution and damage are covered under CLC?
2. With reference to CLC, what do you understand by the following terms:
(a) Strict Liability
(b) Limitation of Liability
(c) Compulsory Insurance.
3. What is the latest scenario with regard to CLC?
4. What is the objective of FC? Under what circumstances does IOPC Fund
(i) Pay compensation,
(ii)Refuse payment of compensation.
5. (a) What is the maximum liability under IOPC Fund?
(b) How does FC build up its finance?
6. Write short notes on TOVALOP and CRISTAL.
7. State the five "annexes" of MARPOL 73/78.
8. Discuss some of the compulsory requirements for MARPOL 73/78.
9. With reference to MARPOL 73/78 '
a) State types of ports required to comply with adequate reception facilities for oily
residues, .
b) Conditions under which a tanker can discharge oily mixtures into the sea?
10. Discuss the salient features of OPA, 1990, with reference to
(i) Application,
(ii) Evidence of financial responsibility,
(iii) Liability.
11. What is the impact of OPA, 1990, on the world tanker market?

RECOMMENDED FOR FURTHER READING :

1. Limitation of Liability of Maritime Claims — Griggs.

2. The Merchant Shipping Act, 1958 –J.S.Gill, 1999.
3. Maritime law — C. Hill.
4. Shipping Law — Charley & Giles.
5. Shipping Law Handbook – M. Bundock
6. Maritime Law of India – in International Context (Bhandarkar Publications, Td Edi. 1998).

**********************

153
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 19

INTERNATIONAL CONVENTION ON CIVIL LIABILITY FOR

BUNKER OIL POLLUTION 2001

1.0 Oil tankers are not the only vessels that cause oil pollution damage at sea. There
have been numerous heavy fuel oil spills from non-tankers as a result of escape or
discharge of bunker oil from them. There have been incidents involving bulk carriers where
escape of bunker oil caused significant damage to the environment and economic losses to
third parties. Some of them, such as the “Kandalashka” in 1993, the “Borodinskye Polye” in
1993, and the “Cita” which ran aground off the Isles of Scilly in 1997 caused extensive
environmental damage and left large amounts of uncompensated losses to their victims.

1.1 The problems associated with the cost and damages recovery following a bunker
pollution incident had to do with one or more of the following reasons:

i. claimants should prove fault where a spill involved a persistent oil;

ii. the vessel was flagged in another State and it might have been difficult to
enforce a judgment;

iii. there was no automatic right to pursue a claim in the State where the spill
occurred;

iv. the legal costs of pursuing a claim could be prohibitive;

v. the shipowner, usually a single-ship company owning a valueless ship, had

no other assets (and was usually insolvent);

vi. the registered shipowner had no insurance; and

vii. the vessel was insured but the insurer, with an insolvent shipowner unable to
pay, was sheltered behind the “pay to paid” clause and/or any other policy
coverage defences to avoid payment.

1.2 In response to the above problems and with the desire to fill the gap in a uniform way
at international level, the IMO adopted the “International Convention on Civil Liability for
Bunker Oil Pollution Damage 2001” (the “Bunker Convention”). It was developed as a
preventive measure for the reduction and control of pollution to marine environment as well
as a mechanism for providing compensation for damage caused by bunker pollution. The
Bunker Convention is in force from the 21st November 2008 .

___________________________________________
*IMO/International Convention Civil Liability for Bunker Oil Pollution
* http://www gov.UK
* http://www reedsmith.com

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2.0 Scope of the Convention :

2.1 Bunker Convention Versus Civil Liability Convention – A comparison:

2.1.1 The Bunker Convention follows in many ways the CLC regime. However, it is
different from the CLC/ Fund model in the following respects:

i. it has a different definition of “oil”;

ii. there is no second tier “Fund”;
iii. claims are not channelled only to the “registered owner” ;
iv. there is no civil liability responder immunity ;
v. it sets out no limits of its own (unlike the CLC/ Fund Conventions) but links to limits
set out by the LLMC 1967/96 and
vi. the compulsory insurance requirement is set at over 1,000 gt regardless of the
type of ship (and not to ships carrying a minimum of 2,000 tonnes of oil cargo) .

2.2 Spatial Applicability of the Bunker Convention:

2.2.1 According to Art.2, the Bunker Convention applies exclusively to “Pollution Damage”
caused by “Bunker Oil” of a “Ship” in the territory, including the territorial sea, of a State
Party, and in the Exclusive Economic Zone (EEZ) of a State party or, if no EEZ is
established in accordance with international law, in the equivalent zone of 200 n. miles from
the baselines from which the breadth of its territorial sea is measured. It applies also to
“Preventive Measures”, wherever taken, to prevent or minimize such damage.

2.2.2 Provided all the other constituent ingredients, as defined below, are present, the
Bunker Convention is applicable. There is no need for the pollution “Incident” to take place
within the territorial sea or the EEZ. It suffices that “Pollution Damage” has been suffered
within these jurisdictional zones, even though the bunkers were actually spilled in the High
Seas by a vessel whether in innocent passage or not. It is arguable, however, that provisions
of the Bunker Convention on compulsory insurance and certificate inspection are not
applicable to a ship on innocent passage; this would be in direct conflict with the concept of
innocent passage.
.
2.3 Definition of “Ship”:

2.3.1 “Ship” is defined as “any seagoing vessel and seaborne craft, of any type
whatsoever”.

2.3.2 There is much case law as to what is or is not a “ship” under various regimes and it is
not unlikely that the above definition will become, sooner or later, subject to interpretation by
a national court. The definition is wide enough to include any ship whatsoever (no matter
her size and her type: bulk carrier, container ship, passenger ship, tug, fishing vessel, launch
etc.) provided it is seagoing. The main restriction built into the definition is the reference to
“seagoing”. Should the vessel be “seagoing” physically (i.e. capable to sail at sea), legally
(i.e. permitted and documented to sail at sea), or actually employed at sea? For in the latter
case, the definition would probably not cover a river vessel or a vessel which never in
practice left a port or harbour (e.g. a small harbour tug which assists ships just near the dock
during the berthing/unberthing operation). Another issue, in this respect, relates to air-
cushion vehicles and offshore units. An air-cushion vehicle and a FPSO (Floating
Production, Storage & Offloading) vessel or drilling unit can be argued to fit the very wide
definition of a “Ship” under the Bunker Convention in which case any liability for Bunker
Pollution would be strict but unlimited because the LLMC 1976/96 do not apply to such
vessels.

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2.4 Definition of “Bunker Oil”:

2.4.1 “Bunker Oil” is defined as “any hydrocarbon mineral oil, including lubricating oil, used
or intended to be used for the operation or propulsion of the ship, and any residues of such
oil”.

2.4.2 This definition is again wide so as to include HFO, IFO and lighter fuels such as
MDO, MGO as well as lube oil, which in mariners‟ common parlance are not bunkers, and
engine room oily bilges, which usually are admixtures of water, bunker and lube oil.
Solidified tank umpumpables, sludges or bunker that clings to a tank‟s wall would be
probably covered under the term “residues”, though this term is not further defined. The only
restriction here is the „test‟ of use or intention to use for the operation or propulsion of the
ship. The distinction between cargo and oil is based on the demonstration of intention. If it is
stored in bunker tanks or pipelines this would probably be evidence for such use but where
the oil is stored in other tanks, this may not prove as easy to demonstrate. Naturally, the very
reason of a ship‟s bunkering is her operation or propulsion and, by necessity, bunker oil,
wherever stored, is used or intended to be used so. But the escape of HFO from the storage
tanks of an AHST (Anchor Handling Supply Tank) which is below 1,000 gt and carries below
2,000 m.t. of such HFO as cargo is not covered by the compulsory insurance scheme of
either the Bunker Convention or the CLC 1992.
.
2.5 Definition of “Pollution Damage”, “Preventive Measures” & “Incident”:

2.5.1 “Pollution Damage” is defined as :

“(a) loss or damage caused outside the ship by contamination resulting from the
escape or discharge of bunker oil from the ship, wherever such escape or discharge
may occur, provided that compensation for impairment of the environment other than
loss of profit from such impairment shall be limited to costs of reasonable measures
of reinstatement actually undertaken or to be undertaken; and

(b) the costs of preventive measures and further loss or damage caused by
preventive measures.”

2.5.2 Apart from the substitution of the word “oil” with “bunker oil”, the definition is identical
to that in the CLC 1992.

2.5.3 Paragraph (a) of the definition covers loss or damage “by contamination resulting
from the escape or discharge” of bunker oil. It certainly covers basic clean up costs caused
by contamination. According to the definition, the “compensation for impairment of the
environment…… shall be limited to costs of reasonable measures of reinstatement actually
undertaken or to be undertaken”. This applies to actual costs and not to hypothetical, for, on
its strict interpretation, claims related to general damage to the environment which is
unquantifiable are presumably not recovered.26 The definition also recognizes that there
may be recovery of economic losses in the form of loss of profit from impairment of the
environment. The CLC experience has shown that, in practice, economic loss claims by
commercial interests usually exceed the costs of the environment‟s reinstatement. It looks
that in a system that was designed originally for environmental protection far more attention
has been paid to tourist or fishing industries than in developing principles of environmental
reinstatement. Obviously, damage or loss by explosion or fire presumably is not covered.
Also, death or injury is not covered, although it is accepted that injury actually caused by
contamination would be covered. Exclusion, however, of such claims is arguably subject to
the interpretation of the Bunker Convention by national courts.

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2.5.4 Paragraph (b) of the definition covers the so-called „threat removal costs‟. The
applicability of para. (b), however, depends on whether “Preventive Measures” actually took
place and, therefore, must be read in conjunction with the definition of “Preventive
Measures” which means “any reasonable measures taken by any person after an incident
has occurred to prevent or minimize pollution damage”. Provided that an incident has taken
place, the cost of these measures, as long as the measures are reasonable, is covered. This
in turn begs the question of what constitutes an “Incident” for the purposes of the Bunker
Convention. This is defined as “any occurrence or series of occurrences having the same
origin, which causes pollution damage or creates a grave and imminent threat of causing
such damage”. Compensation, therefore, for pro-active mobilization of equipment, even
when no Bunker Oil actually leaked from the ship would be covered under the provision of
the “grave and imminent threat of causing such damage”. What is “actual and imminent
threat” in borderline cases with no escape of oil will probably be subject to the interpretation
of the Bunker Convention by national courts.
.
2.6 Time Limits in the Bunker Convention:

2.6.1 Art. 8 of the Bunker Convention is identical with Art. VIII of the CLC 1992 and
provides for a time limit for action under the convention of 3 years from the date when the
damage occurred and, in any event, 6 years from the date of the incident which caused the
damage. Where the incident consists of a series of occurrences, the 6 years‟ period shall
run from the date of the first such occurrence.

2.7 Exclusions from the Application of the Bunker Convention:

2.7.1 Art.4(1) provides that the Bunker Convention does “not apply to pollution damage as
defined in the Civil Liability Convention, whether or not compensation is payable in respect
of it under that Convention”.

2.7.2 The Bunker Convention has been developed for the purpose of filling the gap left
open by the CLC/Fund scheme in respect of oil pollution caused from bunkers and not as an
alternative or additional scheme to the CLC/Fund. Art.1(4) preserves this balance.

2.7.3 Therefore, pollution damage caused by tankers (either from their cargoes of
“persistent” oil or their bunkers) where the CLC/Fund regime is applicable is covered by the
CLC/Fund scheme only. Claimants cannot look at the Bunker Convention for recovery of
damages caused by oil pollution from such ships because adequate compensation (or
compensation at all) cannot be retrieved under the CLC/Fund scheme.

2.7.4 Also, the Bunker Convention does not apply to warships, naval auxiliary or other
ships owned or operated by a State and used, for the time being, only on Government non-
commercial service unless a State Party decides otherwise. In such a case the State Party
must notify the Secretary-General of IMO and shall be subject to suit in the jurisdictions
provided by the Bunker Convention.

3.0 The Liability under the Bunker Convention:

3.1 Who is liable?

3.1.1 Unlike the CLC/Fund regime where the liability is channelled only to the “‘registered’
owner of the ship”, the “Shipowner” in the Bunker Convention is defined as “the owner,
including the registered owner, bareboat charterer, manager and operator of the ship”.

3.1.2 These categories of persons could all expect to have an interest in the way the ship
is run (as opposed to the voyage or time charterer). There is no definition of the “manager”

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and “operator”. It is suggested, however, that guidance could be sought from other
comparable environmental liability conventions, such as the “Wreck Removal Convention
2007” (not yet in force) which gives, for instance, the definition of the “Operator” (i.e. the
owner or any other person or organization, manager, bareboat charterer, “who has assumed
the responsibility for the safe operation from the owner of the ship…….”). “Manager” could
be an associated company to the single shipowning company or a professional
shipmanagement company that manages several ships from various owners under a
shipmanagement agreement. A person or company that had the ISM functions could be the
operator or a manager of the ship. Either of the above categories could now be liable for
Pollution Damage caused entirely by the negligent acts of the master or chief engineer
employed by the shipowner.

3.1.3 However, the channelling of liability to several defendants [as opposed to the
CLC/Fund regime and the HNS regime (not yet in force) where the liability is channelled to
the registered owner only] cannot not be seen as a means of recovering the same losses
several times from each defendant or as a scheme of recovering losses in excess of the
ship‟s Limitation Fund in the way it works in the two-tiered CLC/Fund scheme. Further, the
additional defendants cannot take the place of the Fund, when, under the CLC/Fund
scheme, its liability extends down to cover the entire claim where there is a defence to the
registered owner under Art.3 of the CLC 1992. Clearly the obvious defendant is the
registered owner who has compulsory insurance and the additional liability might
conceivably be relevant where the registered owner and its insurer are insolvent, or where
the there is intentional or reckless conduct by one defendant, but not another.

3.2 Strict liability :

3.2.1 Art.3(1) of the Bunker Convention provides that the “shipowner at the time of an
incident shall be liable for pollution damage caused by any bunker oil on board or originating
from the ship…… ”.

There is no requirement of fault for the liability to arise, i.e. the “Shipowner” is under
strict liability for “Pollution Damage” caused by anyone onboard the ship provided
bunker oil was “on board or originating from the ship”. The consequence of this is
that, for instance, a bulk carrier may suffer a fracture damage at one of her bunker
tanks whilst berthed on the dock as a result of a collision with a harbour tug, entirely
caused by the tug. The bulk carrier will be liable for bunker pollution under the
Bunker Convention and the claimants can go against the bulk carrier, despite the fact
that the tug was 100% to blame.

3.3 Joint & Several Liability:

3.3.1 Art.3(2) provides that “[w]here more than one person is liable in accordance with
paragraph 1, their liability shall be joint and several”.

3.3.2 The above provision, in essence, means that the damaged third party or state
authorities can ignore litigation between the parties falling under the definition of “Shipowner”
and recover in accordance to the best option available from the financially healthiest
shipowner. However, the number of persons potentially liable under the Bunker Convention
may create difficulties in situations where the damage was caused partly by “Bunker Oil” and
partly by another substance covered by another convention (e.g. the HNS Convention)
where the liability is channelled only to registered owner. An early assessment as to the
cause of the damage may be in need. Whilst the registered owner would be clearly the
obvious defendant, the other parties falling within the definition of the “Shipowner” under the
Bunker Convention would run the risk of paying damages arising by other substances.

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3.3.3 Art.5 deals with situations of incidents involving two or more ships. It provides that
“[when an incident involving two or more ships occurs and pollution damage results
therefrom, the shipowners of all the ships concerned, unless exonerated under article 3,
shall be jointly and severally liable for all such damage which is not reasonably separable ”.

3.3.4 The above provision refers to “Pollution Damage” within the meaning of the Bunker
Convention caused by two or more ships and provides for joint and several liability when the
damage is not “reasonably separable”. All the ships involved must be covered by the Bunker
Convention. Where, for instance, damage caused by one ship is covered by the Bunker
Convention while damage caused by the other is covered by another Convention (the
obvious example is bunker pollution by a tanker covered by the CLC 1992), Art. 5 does not
apply and there is no joint and several liability even if the damage is not separable. In such a
case, the claimant could presumably go against each ship separately, trying to quantify the
damage suffered and showing the degree of fault. Such litigation may present difficulties and
if takes place in several jurisdictions, there may be peculiarities such as double recovery.

3.4 Defences to the Shipowner:

3.4.1 The Shipowner‟s liability is strict but not absolute. The Bunker Convention follows the
CLC/Fund scheme and provides for the same defences to the Shipowner. Art.3(3)-(4)
provide as follows:

“……………..

3.4.2 No liability for pollution damage shall attach to the shipowner if the shipowner proves
that:

(a) the damage resulted from an act of war, hostilities, civil war, insurrection or a
natural phenomenon of an exceptional, inevitable and irresistible character; or

(b) the damage was wholly caused by an act or omission done with the intent to
cause damage by a third party; or

(c) the damage was wholly caused by the negligence or other wrongful act of any
Government or other authority responsible for the maintenance of lights or other
navigational aids in the exercise of that function.
…………”

3.4.3 If the shipowner proves that the pollution damage resulted wholly or partially either
from an act or omission done with intent to cause damage by the person who suffered the
damage or from the negligence of that person, the shipowner may be exonerated wholly or
partially from liability to such person.

3.4.4 As there is no requirement for the “natural phenomenon of an exceptional, inevitable

and irresistible character” to be unforeseeable as well, it could be argued that the availability
of weather forecasts and warnings would not deprive the benefit of this defence to the
Shipowner.

4.0 Immunity from other Suit but no „Responder Immunity‟ – Salvors Beware! :

4.1 Art.3(5) provides that “[n]o claim for compensation for pollution damage shall be
made against the shipowner otherwise than in accordance with this Convention”.

4.2 Like the CLC/ Fund regime, the immunity of the Shipowner from suit otherwise than
under the Bunker Convention (e.g. in tort) is maintained. The Bunker Convention is the only

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way to claim against the Shipowner but, in this respect, differs fundamentally from the CLC
1992. In contrast with the equivalent restriction of the CLC 1992, the channelling of claims
within the Bunker Convention is restricted only to the Shipowner. Thus, parties which have
been included in the CLC 1992 equivalent provision and protected from a lawsuit have been
left out by the Bunker Convention. Parties, therefore, other than the registered owner,
bareboat charterer, manager and operator of the ship (that is the Shipowner) are vulnerable
to lawsuit by claimants out of the Bunker Convention regime (most obviously in tort but
perhaps also under national instruments providing for strict liability). Parties left exposed
include the servants and agents of the shipowner, all crew members, any pilot or other
person performing services to the ship, any charterer (other than the bareboat charterer) and
anyone taking preventive measures and their servants and agents (the so-called “Responder
Immunity” – most notably state authorities and professional salvors). A time charterer, for
instance, could be sued in tort for ordering a ship to an unsafe port.

4.3 The responder‟s immunity point, in particular, was strongly debated during the
negotiations as there was joint reaction by the industry with a joint submission by ITOPF,
BIMCO, CMI, INTERTANKO, IAPH, ISU, ICS, OCIMF, and the International Group of P&I
Clubs whereby they sought to re-introduce the responder immunity provision. This was not
accepted and instead a draft Resolution was agreed giving specific recommendation and
urging the State Parties to legislate on a national level for such immunity to persons taking
measures to prevent or minimize the effects of bunker oil pollution. Many scholars have seen
this omission as a serious mistake. The consequence of this is that there is no protection
from civil suit (or criminal prosecution)for persons such as salvors and those performing
clean-up operations. This is a very real possibility, as is shown by the arrest of the salvage
tugs and the detainment of the salvage master by the Pakistani authorities in the Tasman
Spirit case in 2003.

4.4 Shipowner‟s Right of Recourse:

4.1 Art.3(6) provides that “[n]othing in this Convention shall prejudice any right of
recourse of the shipowner which exists independently of this Convention”.

4.2 Like the equivalent provision of the CLC 1992, the Shipowner has the right of
recourse against any other party at fault if liability arose to him under the strict regime of the
Bunker Convention as a result of that party‟s fault. Thus, he may have a recourse claim
against a time charterer for ordering his ship to an unsafe port or, in the example with the
harbour tug given earlier, against the tug and her owners (in the latter example, however,
when damages exceed the relevant limits, limitation of liability may prevent full recovery of
losses suffered by the bulk carrier owner as generally the tugboat‟s limits will be much
lower). Naturally, the right of recourse between the parties falling within the definition of the
Shipowner is preserved and, for such new liability, it would be expected that contractual
arrangements be in place between them.

5.0 The Compulsory Liability Insurance & the Direct action against the Insurer:

5.1 Which Ships must be Insured?

5.1.1 Art.7 of the Bunker Convention provides for compulsory insurance or other financial
security in much the same way as the CLC 1992 does. The obligation is prescribed only for
registered owners58 of ships greater than 1,000 gross tonnage.

5.1.2 The 1,000 gt threshold for the applicability of the compulsory insurance requirement
was much debated as it excludes most tugs and long-distance fishing vessels which have
the potential of carrying large amounts of bunkers. Some countries wanted a lower threshold
(e.g. 400 gt or 300 gt) whereas some shipowning countries, in an attempt to reduce the

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impact of the compulsory insurance provision on their fleets, wanted a higher threshold (e.g.
5,000 gt). Some statistics (based on data of Lloyd‟s Register of Shipping which, however,
refer to limited types of ships) were presented showing that when general cargo ships and
bulk carriers are considered the average capacity for bunkers is about 1,000 tons for a
10,000 gt registered vessel and also that vessels smaller than 2,000 tons use mainly diesel
oil as fuel. Also, the inclusion of vessels smaller than 1,000 gt would entail increased
administrative burden on the certifying State Parties and, in this respect, worries voiced by
some of them. The 1,000 gt figure was a political compromise by the diplomatic conference
as part of a larger final package which included three elements: (i) the gross tonnage figure,
(ii) the relatively high entry into force requirements of Art.14, and (iii) the inclusion of
Art.7(15) relating to the right of a State Party to exclude vessels on domestic voyages from
the compulsory insurance requirement.

5.1.3 Under Art.7(15), a Member State may declare that the provisions of compulsory
insurance do not apply to vessels sailing within its territorial water.

5.2 Who must be Insured?

5.2.1 Under Art.7(1), it is the registered owner alone who must have insurance cover.
Whereas any of the parties falling within the definition of Shipowner may be sued and held
liable under the Bunker Convention, only the registered owner must have insurance for such
purposes. The managers and operators, at least, would want to cover this new liability
through contractual undertakings from the ship‟s owner and this right of contractual recourse
is preserved by Art.3(6). In practice, however, any bareboat charterer, manager or operator
would probably want some form of insurance cover in case of insolvency of the registered
owner. It would be expected that some form of joint cover (or P&I entry) could be arranged
or for cover to be expressly extended to these other parties.
.
5.3 The level of Insurance Cover:

5.3.1 According to Art.7(1), the insurance or other financial security must be enough “to
cover the liability of the registered owner for pollution damage in an amount equal to the
limits of liability under the applicable national or international limitation regime, but in all
cases, not exceeding an amount calculated in accordance with the Convention on Limitation
of Liability for Maritime Claims, 1976, as amended”.

5.3.2 The amount insured is limited upwards by the limits set by the LLMC 1976 as
amended; this is, at most, around one third of the total limitation fund because the Bunker
Convention does not cover claims in respect of death or personal injury (this amount is
approx. double to that in respect of any other claims). However, there is no provision for
minimum insurance as this was left to the “applicable national or international limitation
regime” of the State Party which is the ship‟s Flag State. There is no uniformity therefore on
the level of cover. This may lead to situations where two ships (in all respects identical) have
different levels of insurance cover but still both being properly certificated under the Bunker
Convention scheme.

5.4 Evidence of Insurance:

5.4.1 Not unexpectedly, the Bunker Convention follows the CLC 1992 certification scheme
in this respect too. Art 7(2) provides that “[a] certificate attesting that insurance or other
financial security is in force in accordance with the provisions of this Convention shall be
issued to each ship after the appropriate authority of a State Party has determined that the
requirements of paragraph 1 have been complied with…… ”.

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5.4.2 Provided at least 3-month notification is given to the IMO, delegation by the State
Party of the certificate issuing function to authorized institutions is allowed by Art.7(3).
However, “[i]n all cases, the State Party shall fully guarantee the completeness and accuracy
of the certificate so issued and shall undertake to ensure the necessary arrangements to
satisfy this obligation”.

5.4.3 According to Art.7(5), “[t]he certificate shall be carried on board the ship and a copy
shall be deposited with the authorities who keep the record of the ship's registry or, if the
ship is not registered in a State Party, with the authorities issuing or certifying the certificate”.

5.4.4 Art.7(8) & (9) provide as follows:

“……………..

Nothing in this Convention shall be construed as preventing a State Party from

relying on information obtained from other States or the Organization or other
international organizations relating to the financial standing of providers of insurance
or financial security for the purposes of this Convention. In such cases, the State
Party relying on such information is not relieved of its responsibility as a State issuing
the certificate required by paragraph 2.

Certificates issued or certified under the authority of a State Party shall be accepted
by other States Parties for the purposes of this Convention and shall be regarded by
other States Parties as having the same force as certificates issued or certified by
them even if issued or certified in respect of a ship not registered in a State Party. A
State Party may at any time request consultation with the issuing or certifying State
should it believe that the insurer or guarantor named in the insurance certificate is not
financially capable of meeting the obligations imposed by this Convention.

……….”

5.4.5 According to the above provision, the administration of a State Party is bound to
recognize all the certificates issued by the State Parties, even if the insurer is completely
unknown and not a member of the International Group of the P&I Clubs. As to the financial
standing of the insurer or other guarantor, an issuing State Party may rely on information by
other States or organizations but that does not relieve that State from its responsibility as the
issuer of the Certificate. When the financial standing and credibility of the insurer or other
guarantor is in question a State Party may request consultation with the issuing State Party.
This provision, without further defining of how “consultation” is to be conducted, is not very
helpful. Which should be the proper course of action by Member States if, after consultation
has been conducted, the financial ability of the insurer or other guarantor remains is
question? Is the issuing State Party under an obligation to withdraw the certificate? Should
the State Party which requested consultation accept the certificate or could unilaterally
demand the issuance of a certificate with a different insurer or guarantor? Unfortunately, the
Bunker Convention does not deal with such issues.

5.5 Consequences if no Insurance is in place:

5.5.1 Art.7(11) provides that “[a] State Party shall not permit a ship under its flag to which
this article applies to operate at any time, unless a certificate has been issued under” the
provisions of the Bunker Convention. Further, Art.7(12) provides that “… each State Party
shall ensure, under its national law, that insurance or other security, to the extent specified in
paragraph 1, is in force in respect of any ship having a gross tonnage greater than 1000,
wherever registered, entering or leaving a port in its territory, or arriving at or leaving an
offshore facility in its territorial sea”.

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5.5.2 This, in effect, means that ships over 1,000 gt not registered in State Party without
insurance shall not be allowed to use the ports or offshore facilities in the territorial sea of a
State Party and ships registered in State Party shall not be allowed to operate at all. This
provision applies only to the territorial waters and not to the EEZ. Pollution damage,
however, within the EEZ is covered by the Bunker Convention and under Art.9 jurisdiction is
given to the coastal State Party. But the coastal State Party cannot exclude uninsured ships
from its EEZ. As a matter, further, of international law, a coastal state cannot stop a foreign
flagged vessel to inspect certificates if she is merely exercising the right of innocent passage
to transit national waters. All the above necessarily imply that some of the damages will be
uninsured.

5.5.3 Naturally, administrative sanctions and penalties for failure to comply with the
compulsory insurance requirement are provided for by national legislations. In the UK, for
instance, sub-sections 5-7 of Reg.17 of „The Merchant Shipping (Oil Pollution) (Bunker
Convention) Regulations 2006”, provide for:

or conviction on indictment with no statutory maximum fine in case a ship enters or

leaves (or attempts to enter or leave) a UK port or terminal and does not carry a
State Certificate as provided for by the Bunker Convention (ss.5);

fails to carry, or the master of the ship fails to produce, a State Certificate (ss.6); &

‟s detention where the obligation to maintain insurance is not met or a

State Certificate is not carried on board a ship (ss.7).

5.6 Who can provide Insurance Cover?

5.6.1 The CLC 1992 experience showed that about 95% of the world‟s tanker fleet is
entered with a P&I Club member of the International Group. It is anticipated that P&I Clubs
and providers of P&I Insurance will be the main providers of the financial security required
under the Bunker Convention. For competition reasons, it was unlikely to reach an
agreement for recognition only of the International Group certificates. Of course, there is
always a risk for undercapitalized insurers entering the market and attaching themselves to
flag of convenience States which exercise little or no administrative control. P&I Clubs cover
a whole range of liability risks and the cover for bunker pollution is probably a simple
automatic addition to the normal cover. It remains to be seen whether other insurers arise to
meet the demand of a market that may really see the Bunker Convention certificate as
passport to enter foreign ports rather than for its insurance protection. P&I Clubs can issue,
in the normal way, the so-called “Blued Card” to their members evidencing that there is
insurance in place meeting the liability requirements of the Bunker Convention.

6.0 Direct action against the Insurer:

6.1 Art.7(10) provides as follows:

“……………..
10. Any claim for compensation for pollution damage may be brought directly against
the insurer or other person providing financial security for the registered owner’s
liability for pollution damage. In such a case the defendant may invoke the defences
(other than bankruptcy or winding up of the shipowner) which the shipowner would
have been entitled to invoke, including limitation pursuant to article 6. Furthermore,
even if the shipowner is not entitled to limitation of liability according to article 6, the

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 defendant may limit liability to an amount equal to the amount of the insurance or
other financial security required to be maintained in accordance with paragraph 1.
Moreover, the defendant may invoke the defence that the pollution damage resulted
from the wilful misconduct of the shipowner, but the defendant shall not invoke any
other defence which the defendant might have been entitled to invoke in proceedings
brought by the shipowner against the defendant. The defendant shall in any event
have the right to require the shipowner to be joined in the proceedings.
……….”

6.2 Direct action against the insurer is a fundamental protection for the claimant. This, in
fact, removes one of main difficulties many claimants had in past bunker pollution incidents
to recover their costs and damages. The claimant can directly sue the insurer whether the
Shipowner is solvent or not and whether the Shipowner is in breach of his insurance contract
and he cannot, therefore, recover under it. The insurer, of course, can rely on all Art.3
defences open to the Shipowner himself and the limits of liability as allowed in Art.7. Further,
the insurer is entitled to limit liability even if the Shipowner is not. This may be either
because no limits are recognized by a State or because the insured Shipowner was guilty of
intentional or reckless conduct. In the latter case, however, the insurer may have the
complete defence of “willful misconduct” which is the only policy defence of the insurer if
sued on the basis of the certificate under the above provision. Other policy defences, such
as breach of warranty, non-disclosure, misrepresentation, breach of good faith etc., are not
allowed to the insurer for avoiding liability against third parties. Of course, the insurer, if
sued, is given under the above provision explicitly the right to join the Shipowner in the
proceedings.

7.0 The Limitation of Liability.

7.1 Art.6 deals with limitation of liability and provides as follows:

“……………..
Nothing in this Convention shall affect the right of the shipowner and the person or
persons providing insurance or other financial security to limit liability under any
applicable national or international regime, such as the Convention on Limitation of
Liability for Maritime Claims, 1976, as amended.
……….”

7.2 Linkage to existing applicable national or international limitation of liability regimes

unavoidably leads to the huge and complex topic of limitation of liability, the analysis of
which is outside the scope of this speech. A brief outline only of some of the concerns raised
by this linkage is given below.

7.3 The risk of Unlimited Liability.

7.3.1 It is expressly stated in the Preamble of the Bunker Convention that imposition of
strict liability should be linked to appropriate limitation levels. The Bunker Convention neither
sets new limits, nor affects the right of the Shipowner or his insurer to limit liability “under any
applicable national or international limitation regime”. LLMC 1976 is expressly given as an
example and “such as” as an example only could be probably interpreted. The wording of
the above provision and in particular the reference to the “applicable national or international
limitation regime” was characterised by a scholar as “unusual and perhaps unfortunate”.
.
7.3.2 Problematic areas are the following:

(a) In effect, the above provision allows a State Party to choose which limitation
regime to apply and Shipowners in some states may face no limit at all. Further,

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 States not party to the LLMC 1976 or 1996 might well have provisions which
themselves do not cover bunker pollution damage at all.

(b) The claims for which liability may be limited under the LLMC 1976 are set out in
sub-paragraphs (a) to (f) of Art.2(1) and the approach of the courts has been for the
shipowner to bring himself strictly within the terms of Art.2. If there is any doubt, or if
there is a claim which is clearly not within the provision, the Shipowner then is unable
to limit.

(c) Sub-par. (a) includes claims for loss or damage to property and sub-para (c)
refers to claims in respect of loss resulting from infringement of rights. There have
been strong arguments that the LLMC 1976 may give no general right to limitation for
bunker pollution claims which do not involve physical damage to property or result to
infringement of rights because such claims cannot be brought within the existing
wording of the above sub-paragraphs of Art.2(1) of the LLMC 1976. An example is
economic losses arising from disruption of business caused by bunker oil spill. Such
claims are the claims by fishing and tourist industries which are unrelated to any
damage to property. First, there may be no “property” damaged apart from the sea
itself or the beaches. Secondly, a more natural reading of the relevant provision is
that it refers to the consequential loss of the person whose property has been
damaged. That would not probably apply to the hotelier (unless he owned the beach
or the marina).

(d) There is indeed difficulty with regard to the coastal clean-up operations and the
cost of re-instatement; under which sub-paragraph do they fall? The stronger
candidates are sub-par. (c) mentioned above (infringement of rights) and sub-par.(d)
which refers to claims for “….rendering harmless of a ship which is sunk, wrecked,
stranded abandoned, including anything that is or has been on board such ship”. But
there may be situations (e.g. operational discharges) or casualties (e.g. a minor
collision) that do not fall within the quoted words; such an example is The Wagon
Mound case. Further, under Art. 18(1) of LLMC 1976 the State Parties can opt-out of
limitation under Art.2(1)(d).

7.4 The risk of under-compensation – Dilution of the Limitation Fund:

7.4.1 By not providing, through the Bunker Convention, a separate free standing fund
exclusively for bunker pollution claims, the claimants will have to prove their claims against
any available limitation fund alongside and in competition with other property claims arising
out of the same incident. With the strict liability, the Bunker Convention, in effect, expands
the scope of damages to those related to non-physical loss. This expansion of claims for
which compensation is available is welcome when the liability is unlimited or the limits of
liability increase accordingly. The expansion of the number of claims only could lead to
reduction in the recovery of other claims. The submission of further claims and the
application of strict liability essentially restricts the ability of other claimants to recover. This
was recognized by the diplomatic conference and a Resolution was agreed which urges all
States to ratify or accede to the 1996 Protocol to the LLMC 1976 increasing thus the fund
available for all claims, including bunker pollution claims.

8.0 Jurisdiction & Enforcement of Judgements:

8.1 Jurisdiction :

8.1.1 According to Art.9(1), the Courts of State that suffered damage within its territory or
EEZ have jurisdiction to hear any claim against the shipowner or the insurer or other
guarantor. Some conflicts between neighbouring coastal states with no jurisdictional

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agreement may arise in this respect. Between EU countries where the Brussels Regulations
is in force, the court first seized of the dispute will have jurisdiction. Also, where the bunker
pollution gives the right to arrest the ship and she is arrested in another State, the Arrest
Convention 1952 gives jurisdiction at the place of arrest if the national law so provides. In
this respect, the Bunker Convention and the Arrest Convention 1952 are in direct conflict
and the ordinary rules for conflict of laws should then be applicable.

8.1.2 Art.9(2) provides that reasonable notice of any action taken under the Bunker
Convention shall be given to each defendant.

8.2 Recognition & Enforcement:

8.2.1 Art.10 deals with recognition and enforcement and provides as follows:

“……………..
1. Any judgement given by a Court with jurisdiction in accordance with article 9 which
is enforceable in the State of origin where it is no longer subject to ordinary forms of
review, shall be recognised in any State Party, except:

(a) where the judgement was obtained by fraud; or

(b) where the defendant was not given reasonable notice and a fair
opportunity to present his or her case.

2. A judgement recognised under paragraph 1 shall be enforceable in each State

Party as soon as the formalities required in that State have been complied with. The
formalities shall not permit the merits of the case to be re-opened.
……….”

8.2.2 Final judgements from a State will be recognized and will be enforceable in all State
Parties irrespective of which limitation regime is applicable in the State where the
enforcement is sought. It appears that, with the exceptions only mentioned in the above
provision, no other reason, whether related to public policy or otherwise, would allow a State
Party to fail to recognize a foreign judgement. This would be probably the case even the
party suffered pollution damage was under a contract with the Shipowner and the contract
contained an exclusive jurisdiction clause. This clause would be unenforceable; and, if
enforced, the resulting judgement would be in breach of the Bunker Convention.

9.0 Conclusions :

9.1 The Bunker Convention was developed as a preventive measure for the reduction
and control of pollution to marine environment as well as a mechanism providing
compensation for damage caused by bunker pollution. It is an international convention which
is hoped will fill a legislative gap left by the other pollution regimes, namely the CLC/Fund
1992 and the HNS 1996 – not yet in force (the Wreck Removal Convention 2007 is hoped to
be the last piece of legislation by IMO towards a complete international legislative regime on
pollution compensation).

9.2 Although, however, the Bunker Convention establishes strict liability in all State
Parties, neither the limits of liability nor the amount of compulsory insurance are uniform.
Any improvement for claimants under the Bunker Convention depends on the pre-existing
national compensations regimes. It is heavily depended upon the LLMC 1976/1996 regime
and without a second tier (similar to the Fund) safeguarding the availability of funds, the
claimants‟ ability to recover depends on national law inasmuch as the limitation of liability is
concerned as also the type of environmental damage that can be recovered. This is because
the Bunker Convention does not clarify whether environmental claims other than those

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related to restoration or reinstatement of the environment are included or excluded from the
definition of damage and whether it prohibits recovery in relation to such claims under
national law. What is, also, unclear is whether Art.2(1) LLMC 1976 covers damage from
bunker oil when no physical damage has been sustained. There is a risk, therefore, that, in
jurisdictions where it will be taken not to cover such type of damage, the Bunker Convention
will establish strict liability with no limitation applicable for such claims. This is obviously
against the spirit of the Bunker Convention. On the whole, it may well be that the level of
many bunker pollution claims does not warrant the need for a second tier, but it is equally
clear that the effect of Art.6 on limitation of liability is problematic; linkage to the LLMC may
well mean that pollution claimants have to share in a rather limited fund with other
commercial claimants.

9.3 The undermining of the principle of “responder immunity” for salvors appears
particularly unfortunate and lawsuits against bareboat charterers, managers and operators
(i.e. the categories included in the Shipowner‟s definition) may lead to complications and
extra costs, though the wish to have them included is partly explained by the uncertainty
about whether the limits of liability will be sufficient.

9.4 Whilst in theory there might be, in some cases, unlimited liability, this in practice will
be restricted by the maximum liability of the insurer under the direct action provisions. The
compulsory insurance provision is, perhaps, the really new thing the Bunker Convention
introduces on an international level. Though the level of compulsory insurance depends on
national law, hence not uniform, the advantage now is that the Bunker Convention allows for
a standard, internationally accepted, compulsory insurance certificate. This adds one more
to the many other certificates of a ship, one more compliance check for the registered owner,
an additional cover element for the P&I Clubs, a business opportunity for other P&I liability
insurers and a further administrative burden for State Parties in issuing the required
certificate. Most obviously, Port State controls will ensure compliance of ships with this
provision.

10. Summary of the Bunker Convention :

 Oil tankers not the only vessels that cause oil pollution damage at sea.
 Numerous heavy fuel oil spills from non-tankers due to escape/discharge of
bunker oil [Kandalashka 1993, Borodinskye Polye 1993, Cita 1997] caused
extensive environmental damage and uncompensated losses to third parties.
 Heavy fuel oil spills worse pollutants and environmental hazards than crude oil
because it is extremely sticky and hard to clean up.
 Hence IMO adopted the above Convention, popularly known as Bunker
Convention.
 In force from 21 November 2008.
 Aim is, one to reduce and control pollution to marine environment and, two to
provide compensation for damage caused by bunker pollution.
 Purpose is to fill the gap left open by the CLC/Fund Scheme in respect of oil
pollution caused from bunkers.
 It is not an alternative or additional Scheme for CLC/Fund.
 Though Bunker Convention follows CLC regime in many ways, it departs from
CLC/Fund model in several aspects such as its applicability; has no second tier
fund; claims are not channelled only to ‘registered owner’; it sets out no limits of
its own; and the compulsory insurance requirement is set over 1000 gt regardless
of the type of ship.

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  It applies exclusively to pollution damage caused by ‘bunker oil’ of a ship in the
territory, including territorial sea of a State Party and in the EEZ of a State Party.
 Area of bunker spill irrelevant. Convention will apply if pollution damage is in the
Contracting State [same as CLC].
 Applies to any ship whatsoever irrespective of her size, type (bulk carrier,
container ship, passenger ship, tug, fishing vessel, launch, etc ) provided it is
seagoing.
 Does not apply to warships, naval auxiliary or other ships owned/operated by a
State & used only on Govt. non-commercial service.
 Unlike CLC/Fund regime where liability is channelled only to registered owner of
the ship, under the Bunker Convention the owner includes the registered owner,
bareboat charterer, manager and operator of the ship.
 Shipowner is strictly liable for pollution damage provided bunker oil was “on board
or originating from the ship”. Example if a bulk carrier suffers a fracture damage
at one of her bunker tanks while berthed on the dock as result of collision with
harbour tug, entirely caused by tug. Bulk owner liable though tug was 100% to
blame.
 Liability strict but not absolute. Same defences available to shipowner as under
CLC Fund regime.
 Requires compulsory insurance/ financial security (same as CLC). However
obligation only for registered owners of ships greater than 1000 gross tonnage.
Note, it is the registered owner alone who must have insurance cover and not
others who fall within the definition of shipowner.
 The level of insurance cover should be enough to cover the liability for pollution
damage in an amount equal to the limits of liability under the applicable national
and international regime [Convention does not set out its limits of liability unlike
CLC].
 Shipowner to carry an board certificate attesting that insurance/financial security
is in force [like CLC] .
 If no such certificate is there, the State party shall not permit the ship under its
flag to operate.
 Time limits in Bunker Convention similar to CLC – 3 years from date when
damage occurred and in any event 6 years from date of incident which caused
damage.
 Courts of State that suffered damage within its territory/EEZ have jurisdiction to
hear any claims against shipowner or insurer or guarantor.

ooooo

SELF-EXAMINATION QUESTIONS

1. Give the essential features of the Bunker Convention

2. What is the difference between the Bunker Convention and the Civil Liability
Convention and Fund Convention so far as the applicability is concern.

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 20

LONDON DUMPING CONVENTION*

 Convention on the Prevention of Marine Pollution by Dumping of Wastes and

Other Matter.
 Adoption: 13 November 1972; Entry into force: 30 August 1975;
 London Protocol 1996: Adoption: 7 November 1996; Entry into force: 24 March
2006.

1.0 The Inter-Governmental Conference on the Convention on the Dumping of Wastes at

Sea, which met in London in November 1972 at the invitation of the United Kingdom,
adopted this instrument, generally known as the London Convention. The London
Convention, one of the first international conventions for the protection of the marine
environment from human activities, came into force on 30 August 1975. Since 1977, it has
been administered by IMO.

1.1 The London Convention contributes to the international control and prevention of
marine pollution by prohibiting the dumping of certain hazardous materials. In addition, a
special permit is required prior to dumping of a number of other identified materials and a
general permit for other wastes or matter.

1.2 "Dumping" has been defined as the deliberate disposal at sea of wastes or other
matter from vessels, aircraft, platforms or other man-made structures, as well as the
deliberate disposal of these vessels or platforms themselves. Annexes list wastes which
cannot be dumped and others for which a special dumping permit is required.

1.3 Amendments adopted in 1993 (which entered into force in 1994) banned the
dumping into sea of low-level radioactive wastes. In addition, the amendments phased out
the dumping of industrial wastes by 31 December 1995 and banned the incineration at sea
of industrial wastes.

1.4 In 1996, Parties adopted a Protocol to the Convention on the Prevention of Marine
Pollution by Dumping of Wastes and Other Matter, 1972 (known as the London Protocol)
which enter edition to force in 2006.

1.5 The Protocol, which is meant to eventually replace the 1972 Convention, represents
a major change of approach to the question of how to regulate the use of the sea as a
depository for waste materials. Rather than stating which materials may not be dumped, it
prohibits all dumping, except for possibly acceptable wastes on the so-called "reverse list",
contained in an annex to the Protocol.

________________________________________
*IMO/Convention on the prevention of marine pollution by dumping of water and other matter

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1.6 The London Protocol stresses the “precautionary approach”, which requires that
“appropriate preventative measures are taken when there is reason to believe that wastes or
other matter introduced into the marine environment are likely to cause harm even when
there is no conclusive evidence to prove a causal relation between inputs and their effects”.
It also states that "the polluter should, in principle, bear the cost of pollution" and
emphasizes that Contracting Parties should ensure that the Protocol should not simply result
in pollution being transferred from one part of the environment to another.

1.7 The Contracting Parties to the London Convention and Protocol have recently taken
steps to mitigate the impacts of increasing concentrations of CO2 in the atmosphere (and
consequently in the marine environment) and to ensure that new technologies that aim to
engineer the climate, and have the potential to cause harm to the marine environment, are
effectively controlled and regulated. The instruments have, so far, been the most advanced
international regulatory instruments addressing carbon capture and sequestration in sub-sea
geological formations and marine climate engineering such as ocean fertilization.

1.8 The 1996 Protocol restricts all dumping except for a permitted list (which still require
permits).

1.9 Article 4 states that Contracting Parties "shall prohibit the dumping of any wastes or
other matter with the exception of those listed in Annex 1."

2.0 The permitted substances are:

1. Dredged material.
2. Sewage sludge.
3. Fish waste, or material resulting from industrial fish processing operations.
4. Vessels and platforms or other man-made structures at sea.
5. Inert, inorganic geological material.
6. Organic material of natural origin.
7. Bulky items primarily comprising iron, steel, concrete and similar unharmful
materials for which the concern is physical impact and limited to those
circumstances, where such wastes are generated at locations, such as small islands
with isolated communities, having no practicable access to disposal options other
than dumping.
8. CO2 streams from CO2 capture processes.(added under the amendments
adopted in 2006, which entered into force in 2007).
.

3.0 CONVENTION ON THE PREVENTION OF MARINE POLLUTION BY DUMPING

OF WASTES AND OTHER MATTER :

Some of the important provisions of the convention are reproduced below :

3.1 Article I :

3.1.1 Contracting Parties shall individually and collectively promote the effective control of
all sources of pollution of the marine environment, and pledge themselves especially to take
all practicable steps to prevent the pollution of the sea by the dumping of waste and other
matter that is liable to create hazards to human health, to harm living resources and marine
life, to damage amenities or to interfere with other legitimate uses of the sea.

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3.2 Article II :

3.2.1 Contracting Parties shall, as provided for in the following articles, take effective
measures individually, according to their scientific, technical and economic capabilities, and
collectively, to prevent marine pollution caused by dumping and shall harmonize their
policies in this regard.

3.3 Article III:

3.3.1 For the purposes of this Convention:

1. (a) "Dumping" means:

(i) any deliberate disposal at sea of wastes or other matter from vessels,
aircraft, platforms or other man-made structures at sea;
(ii) any deliberate disposal at sea of vessels, aircraft, platforms or other
manmade
structures at sea.

(b) "Dumping" does not include:

(i) the disposal at sea of wastes or other matter incidental to, or derived from
the normal operations of vessels, aircraft, platforms or other man-made
structures at sea and their equipment, other than wastes or other matter
transported by or to vessels, aircraft, platforms or other man-made structures
at sea, operating for the purpose of disposal of such matter or derived from
the treatment of such wastes or other matter on such vessels, aircraft,
platforms or structures;
(ii) placement of matter for a purpose other than the mere disposal thereof,
provided that such placement is not contrary to the aims of this Convention.

(c) The disposal of wastes or other matter directly arising from, or related to the
exploration, exploitation and associated off-shore processing of sea-bed mineral
resources will not be covered by the provisions of this Convention.

2. "Vessels and aircraft" means waterborne or airborne craft of any type whatsoever.
This expression includes air cushioned craft and floating craft, whether self-propelled or not.

3. "Sea" means all marine waters other than the internal waters of States.

4. "Wastes or other matter" means material and substance of any kind, form or
description.

5. "Special permit" means permission granted specifically on application in advance and

in accordance with Annex II and Annex III.

6. "General permit" means permission granted in advance and in accordance with

Annex III.

7. "The Organization" means the Organization designated by the Contracting Parties in

accordance with article XIV(2).

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3.4 Article IV :

1. In accordance with the provisions of this Convention Contracting Parties shall

prohibit the dumping of any wastes or other matter in whatever form or condition except as
otherwise specified below:

(a) the dumping of wastes or other matter listed in Annex I is prohibited;

(b) the dumping of wastes or other matter listed in Annex II requires a prior special
permit;
(c) the dumping of all other wastes or matter requires a prior general permit.

2. Any permit shall be issued only after careful consideration of all the factors set forth
in Annex III, including prior studies of the characteristics of the dumping site, as set forth in
sections B and C of that Annex.

3. No provision of this Convention is to be interpreted as preventing a Contracting

Party from prohibiting, insofar as that Party is concerned, the dumping of wastes or other
matter not mentioned in Annex I. That Party shall notify such measures to the Organization.

3.5 Article V :

1. The provisions of article IV shall not apply when it is necessary to secure the safety
of human life or of vessels, aircraft, platforms or other man-made structures at sea in cases
of force majeure caused by stress of weather, or in any case which constitutes a danger to
human life or a real threat to vessels, aircraft, platforms or other man-made structures at
sea, if dumping appears to be the only way of averting the threat and if there is every
probability that the damage consequent upon such dumping will be less than would
otherwise occur. Such dumping shall be so conducted as to minimize the likelihood of
damage to human or marine life and shall be reported forthwith to the Organization.

2. A Contracting Party may issue a special permit as an exception to article IV(1)(a), in

emergencies, posing unacceptable risk relating to human health and admitting no other
feasible solution. Before doing so the Party shall consult any other country or countries that
are likely to be affected and the Organization which, after consulting other Parties, and
international organizations as appropriate, shall, in accordance with article XIV promptly
recommend to the Party the most appropriate procedures to adopt. The Party shall follow
these recommendations to the maximum extent feasible consistent with the time within
which action must be taken and with the general obligation to avoid damage to the marine
environment and shall inform the Organization of the action it takes. The Parties pledge
themselves to assist one another in such situations.

3. Any Contracting Party may waive its rights under paragraph (2) at the time of, or
subsequent to ratification of, or accession to this Convention.

3.6 Article VI :

1. Each Contracting Party shall designate an appropriate authority or authorities to:

(a) issue special permits which shall be required prior to, and for, the dumping of
matter listed in Annex II and in the circumstances provided for in article V(2);
(b) issue general permits which shall be required prior to, and for, the dumping of all
other matter;

172
 (c) keep records of the nature and quantities of all matter permitted to be dumped
and the location, time and method of dumping;
(d) monitor individually, or in collaboration with other Parties and competent
international organizations, the condition of the seas for the purposes of this
Convention.

2. The appropriate authority or authorities of a contracting Party shall issue prior

special or general permits in accordance with paragraph (1) in respect of matter intended for
dumping:

(a) loaded in its territory;

(b) loaded by a vessel or aircraft registered in its territory or flying its flag, when the
loading occurs in the territory of a State not party to this Convention.
.
3. In issuing permits under sub-paragraphs (1)(a) and (b) above, the appropriate
authority or authorities shall comply with Annex III, together with such additional criteria,
measures and requirements as they may consider relevant.

4. Each Contracting Party, directly or through a Secretariat established under a

regional agreement, shall report to the Organization, and where appropriate to other Parties,
the information specified in sub-paragraphs(c) and (d) of paragraph (1) above, and the
criteria, measures and requirements it adopts in accordance with paragraph (3) above. The
procedure to be followed and the nature of such reports shall be agreed by the Parties in
consultation.

3.7 Article VII :

1. Each Contracting Party shall apply the measures required to implement the present
Convention to all:

(a) vessels and aircraft registered in its territory or flying its flag;
(b) vessels and aircraft loading in its territory or territorial seas matter which is to be
dumped;
(c) vessels and aircraft and fixed or floating platforms under its jurisdiction believed to
be engaged in dumping.

2. Each Party shall take in its territory appropriate measures to prevent and punish
conduct in contravention of the provisions of this Convention.

3. The Parties agree to co-operate in the development of procedures for the effective
application of this Convention particularly on the high seas, including procedures for the
reporting of vessels and aircraft observed dumping in contravention of the Convention.

4. This Convention shall not apply to those vessels and aircraft entitled to sovereign
immunity under international law. However, each Party shall ensure by the adoption of
appropriate measures that such vessels and aircraft owned or operated by it act in a manner
consistent with the object and purpose of this Convention, and shall inform the Organization
accordingly.

5. Nothing in this Convention shall affect the right of each Party to adopt other
measures, in accordance with the principles of international law, to prevent dumping at sea.

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3.8 Article VIII :

In order to further the objectives of this Convention, the Contracting Parties with common
interests to protect in the marine environment in a given geographical area shall endeavour,
taking into account characteristic regional features, to enter into regional agreements
consistent with this Convention for the prevention of pollution, especially by dumping. The
Contracting Parties to the present Convention shall endeavour to act consistently with the
objectives and provisions of such regional agreements, which shall be notified to them by the
Organization. Contracting Parties shall seek to co-operate with the Parties to regional
agreements in order to develop harmonized procedures to be followed by Contracting
Parties to the different conventions concerned. Special attention shall be given to co-
operation in the field of monitoring and scientific research.

ooooo

SELF-EXAMINATION QUESTIONS

1. Discuss the salient features of the London Dumping Convention

2. Highlight the features of London Protocol 1996 and how is it an improvement
over The London Dumping Convention.

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 21

OPRC - HNS PROTOCOL*

 Protocol on Preparedness, Response and Co-operation to Pollution Incidents by

Hazardous and Noxious Substances, 2000 (OPRC-HNS Protocol).
 Adoption: 15 March 2000; Entry into force: 14 June 2007

1.0 INTERNATIONAL CONVENTION ON OIL POLLUTION PREPAREDNESS,

RESPONSE AND CO-OPERATION :

1.1 In 1990 IMO adopted the International Convention on Oil Pollution Preparedness,
Response and Co-operation (OPRC) which aimed at providing a global framework for
internal co-operation in combating major incidents or threats of marine oil pollution. The
Convention entered into force in May 1995. Parties to the OPRC convention are required to
establish measures for dealing with pollution incidents either nationally or in co-operation
with other countries. Ships are required to carry a shipboard oil pollution emergency plan
and report incidents of pollution to coastal authorities.

1.2 The Protocol on Preparedness, Response and Co-operation to pollution Incidents by

Hazardous and Noxious Substances (OPRC-HNS Protocol) follows the principles of the
OPRC Convention and was formally adopted by States already Party to the OPRC
Convention at a Diplomatic Conference held at IMO headquarters in London in March 2000.

1.3 Like the OPRC Convention, the OPRC-HNS Protocol aims to establish national
systems for preparedness and response and to provide a global framework for international
co-operation in combating major incidents or threats of marine pollution. Parties to the
OPRC-HNS Protocol are required to establish measures for dealing with pollution incidents,
either nationally or in co-operation with other countries. Ships are required to carry a
shipboard pollution emergency plan to deal specifically with incidents involving hazardous
and noxious substances.

1.4 The OPRC-HNS Protocol ensures that ships carrying hazardous and noxious
substances are covered by preparedness and response regimes similar to those already in
existence for oil incidents.

1.5 For the purposes of the HNS Protocol, a Hazardous and Noxious Substance is
defined as any substance other than oil which, if introduced into the marine environment is
likely to create hazards to human health, to harm living resources and marine life, to damage
amenities or to interfere with other legitimate uses of the sea.

Note: It should be noted that the definition of an HNS as defined by the OPRC-HNS Protocol
2000 differs widely from the definition of an HNS under the International Convention on
Liability and Compensation for Damage in Connection with the Carriage of Hazardous and
Noxious Substances (HNS) by sea, otherwise knows as the HNS Convention.
________________________________________
*IMO/Protocol on preparedness, Response & Co-operation to pollution incidents by
Hazardous. *http://www imo.org

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2.0 What is the OPRC-HNS Protocol 2000?

2.1 The Protocol on Preparedness, Response and Cooperation to Pollution Incidents by

Hazardous and Noxious Substances (HNS), 2000 or the OPRC-HNS Protocol, aims to
provide a global framework for international co-operation establishing systems for
preparedness and response in combating incidents or threats of marine pollution involving
HNS at the national, regional and global levels; in improving scientific and technological
understanding and knowledge in this field; in promoting technical cooperation in response
techniques; and in developing specialized training programmes.

2.2 The OPRC-HNS Protocol was adopted to expand the scope of the 1990 International
Convention on Oil Pollution Preparedness, Response and Co-operation (OPRC Convention
1990), which entered into force on 13 May 1995, to apply, in whole or in part, to pollution
incidents by hazardous substances other than oil. The OPRC-HNS Protocol was formally
adopted in March 2000 by States already Party to the OPRC Convention and entered into
force on 14 June 2007.

3.0 What does the OPRC-HNS Protocol 2000 cover?

3.1 Under the OPRC-HNS Protocol 2000, hazardous and noxious substances or HNS
are defined as “any substance other than oil which, if introduced into the marine
environment, is likely to create hazards to human health, to harm living resources and
marine life, to damage amenities or to interfere with other legitimate uses of the sea”, and
include:

 Oil derivatives;
 Liquid substances which are noxious or dangerous;
 Liquefied gases;
 Liquids with flashpoints not exceeding 60°C;
 Packaged dangerous, harmful and hazardous materials; and
 Solid bulk material with associated chemical hazards.

3.2 The Protocol covers pollution incidents or a threat of a pollution incident from HNS,
such as a discharge, release or emission of HNS including those from fire or explosions,
which pose or may pose a threat to the marine environment, or coastline, and would
therefore, require emergency action or an immediate response.

3.3 What are the potential benefits of being a Party to the OPRC-HNS Protocol 2000?
States acceding to the OPRC-HNS Protocol will derive benefits such as:

 Access to an international platform for cooperation and mutual assistance in

preparing for and responding to major HNS pollution incidents and a mechanism
for establishing co-operative arrangements with other State Parties.
 A means for urgently accessing relevant technical assistance and response
resources in the event of an HNS incident.
 A framework for the development of national and regional capacity to prepare for
and respond to HNS incidents.
 Participation in a network for the exchange of new research and development
information, best practices and practical experiences in HNS response.

176
  Access to training and support for developing the essential preparedness and
response structures and legislation at national and regional levels through IMO’s
Integrated Technical Co-operation Programme.

3.4 Such benefits will contribute to the enhanced protection of a State’s coastal zone and
marine environment including human health and resources.

4.0 What are the obligations of Parties to the OPRC-HNS Protocol?

4.1 States acceding to the OPRC-HNS Protocol must meet certain basic obligations as
required under the Protocol, including:

 A national system for responding to HNS, including a designated national

authority, a national operational contact point and a national contingency plan.
This needs to be backstopped by a minimum level of response equipment,
communications plans, regular training and exercises.

 Requiring ships that are entitled to fly its flag to carry a shipboard pollution
incident emergency plan and for seaports and offshore units, floating production
and related facilities that are within its jurisdiction to also have similar
arrangements, which must be coordinated with national systems for responding
promptly and effectively to HNS pollution incidents.

 Providing assistance, to the extent possible and feasible, to other States in the
event of a pollution emergency, with a provision for the reimbursement of any
assistance provided.

4.2 States should also try to conclude bilateral or multilateral agreements for
preparedness for and response to pollution incidents. This would act as a 'topping up'
mechanism for accessing additional resources over and above what is available at the State
level in the event of a pollution incident and for facilitating co-operation with other States, the
shipping industry, industries dealing with HNS and other entities.

4.3 IMO has developed a wide array of tools, including model training courses, manuals
and guidance documents, to assist countries in developing capacity for HNS and meeting
their obligations under the Protocol. States may also request assistance from IMO, through
its Integrated Technical Co-operation Programme, in meeting these obligations and in
implementing the provisions of the Protocol
.
5.0 What are the Potential Costs of Membership?

5.1 Only Parties to the OPRC Convention 1990 can accede to the OPRC-HNS Protocol
2000. There are no membership fees. However, States must be able to meet the basic
obligations required in order to become parties to the OPRC-HNS Protocol.

ooooo

SELF-EXAMINATION QUESTIONS

1. What is the objective of OPRC-HNS Protocol?

2. What does the OPRC-HNS Protocol cover?
3. What are the obligations of the parties to the OPRC-HNS Protocol?

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 22

ATHENS CONVENTION
1.0 The Athens Convention 1974 is an international convention on the Carriage of
Passengers and their Luggage by Sea. The contract of carriage of a passenger by sea is
based on common law, that is, there has to be an offer, an acceptance backed up by
consideration and other essential elements to convert an agreement into a contract.

1.1 Given a choice the ship-owners would like to exempt themselves from all liabilities.
The Athens Convention is an effort to protect the interest of the passengers. However, the
Convention does permit the ship-owner to limit his liability with respect to death and injury to
passengers and damage to their luggage.

1.2 Historically, the case of Adler v Dickenson (1954) bears significance. A passenger
while travelling on the ship 'Himalaya' suffered injury due to negligence of the crew. Due to
an exclusion clause on the ticket, she was unable to sue the ship-owner. Nevertheless, she
could sue the negligent crew in tort. It was this case, which gave rise to the famous
"Himalaya Clause', which allow the servants of the carrier to have the same
benefits/defenses as the carrier himself has. Today, the owners have to take reasonable
steps to bring to the attention of the passenger the fact that a ticket contains certain
contractual terms. Importantly, this must be done before the contract is concluded. The
carrier would be required to give notice to passengers of specific provisions of the Athens
Convention. Notice has to be given before departure and, where practicable, it must be
given on the ticket itself.

2.0 TO WHOM DOES THE CONVENTION APPLY?

A) To ships of contracting states performing international voyages or,

B) If the contract was made in the state party to the convention or,
C) Where the state of departure or arrival is a party to the convention.

3.0 DEFINITIONS AS PER THE CONVENTION :

3.1 Passenger : Person carried on a ship under a contract including those

accompanying live animals with the carrier's consent.

3.2 Luggage : The term excludes goods carried under a charter-party or a bill of lading.
It also does not include live animals, for instance a pet cat being accompanied by her
owner. The claim for luggage can be lodged with the carrier if they are not delivered within a
reasonable time after the ship's arrival. Delay on account of labour disputes are outside the
purview of the claim.

3.3 Period of Cover : From embarkation to disembarkation. Luggage is covered from

the time the carrier takes charge of it.

4.0 LIABILITY OF THE CARRIER:

4.1 The liability of the carrier is based on fault. The onus of proving that there was a fault
by the carrier or his employees or servants lies on the passenger. However, if the passenger

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dies or is inflicted by injury or there is a loss/damage to his luggage as a result of shipwreck
by collision, stranding, explosion or fire, or defects in the ship, the burden of proof lies on the
carrier. In such a situation if the carrier has to avoid any penalty, he has to show that there
was no fault on his part; for instance by proving that the collision was solely the fault of the
other vessel.

4.2 Limits of Liability :

4.2.1 It must be remembered that the carrier faces no liability in respect of monies or
jewellery unless they are deposited for safekeeping. In such a situation, as mentioned above
his liability would be limited as per the rules of the convention unless a higher amount was
agreed. Students should note that there is no provision to reduce his liability from what has
been provided in the convention. The limits of liability are as given below:

CLAIM SDR
1. Death or personal injury to passenger 46666
2. Loss/damage to cabin luggage per passenger 833
3. Loss/damage to vehicles/contents per passenger 3333
4. Loss/damage to other luggage per passenger 1200

4.2.2 As you would observe from the above the limits are quite low. In 1990 the same were
revised to 17500.0, 1800, 10000, 2700 SDR.

4.2.3 The carrier would lose his right of limitation if it is proved that the damage resulted
from an act or omission of the carrier, done with an intent to cause such damage, or
recklessly and with knowledge that such damage would probably result.

4.3 Limitation Period :

4.3.1 A period of two years is set within which the claimant must bring about an action.
The period would commence:

a) From the date of disembarkation of the passenger, or

b) In the case of death, from the date when the deceased would have disembarked.
If death occurs as a result of an injury then the period would start from the date of the
death provided that the period does not exceed three years from the date of
disembarkation.

5.0 JURISDICTION :

5.1 The claimant can sue the defendant at any one of the following courts:

a) At the defendant's principal place of business.

b) At the place of departure or destination.
c) At the place of the claimant's domestic or personal residence, provided that the
defendant has a place of business in that state.
d) At the place where the contract was made, provided that the defendant
has a place of business in that state.
e) At any place acceptable to both parties.
ooooo
SELF-EXAMINATION QUESTIONS
1. To whom does the above Convention apply?
2. What are the definitions of "Passenger", "Luggage", and Period of Cover" as per the
Convention?
3. What is liability (in SDRs) for various claims under the Convention?

RECOMMENDED FOR FURTHER READING

Maritime Law of India — in International Context (Bhandarkar Publications) 2nd Edn. 1998.
179
Annexure 49, pages 907-913.
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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 23

THE MERCHANT SHIPPING ACT, 1958

1.0 With the ideal geographical location for sea trade and the fact that it is a
peninsular, India has acquired a glorious maritime history and tradition. The Indian
people therefore have also been sea-faring by tradition. The Indian sail-ships, which in
those days carried the Indian commerce, enabled prosperous trade with countries in Asia
and the Middle East. The advent of the British saw the decline and more or less
strangled Indian shipping through discriminative laws which gave preferential treatment to
British shipping. The British law, which was applicable to Indian ships, required that the
Indian ships should be under UK laws and thus these ships became British ships, though
registered in India. The Indian Merchant Shipping Law at that time was not well
developed. Though some Acts were brought in, the first and a fairly comprehensive
piece of legislation was the Indian Merchant Shipping Act of 1923. Then there was the
1938 Bombay Coasting Vessels Act; the 1950 Amendments Act amending the 1841
Registration of Ships Act. Seamen (Litigation) Act 1946, and the Control of Indian
Shipping Act, 1947.

1.1 The 1947 Act only consolidated the earlier Acts. But there was no revision of the
merchant shipping law of the country which was very much a need of the time, because
of too many shortcomings owing-to the long passage of time carrying the colonial legacy.
Soon after the independence, there was a National Reconstruction Policy Committee
which went into all policy aspects of independent India. As a consequence, due to the
international development in the field of maritime safety by entering into force of the
SOLAS 1948 and Load Lines 1930 Conventions (which India ratified later on), and to suit
the contemporary maritime needs of India, the Merchant Shipping Act, 1958, was
enacted.

1.2 The Act of 1958 is development-oriented as India needed a growth-oriented

legislation to upgrade its shipping, not only to carry on its own trade but also to get a
legitimate share in the world trade and shipping. The Act is the first national legislation on
Merchant Shipping. The Act has a number of rules published from time to time under
various parts/sections in order to cover the procedural and other matters of detail for fuller
implementation.

1.3 Since its enactment, the Act has undergone several major amendments to bring it
in line with International Conventions such as the Limitation of Liability of Maritime Claims,
1976; Collision Regulations 1988; Maritime Pollution from Ships-MARPOL 1973/78; Fund
Convention 1971; etc.

1.4 The intent and purpose of the Act has been brought out in its preamble as follows:

"An Act to foster the development and ensure the efficient maintenance of an Indian
mercantile marine in a manner best suited to serve the national interests and for that
purpose to establish a National Shipping, Board and a Shipping Development Fund, to
provide for the registration of Indian ships and generally to amend and consolidate the law
relating to merchant shipping."

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1.5 MSA 1958 in short :

 MSA governs matters related to shipping in India

 Main objective is to ensure development and efficient maintenance of the Indian
mercantile marine to serve Indian interest
 Act amended time to time in the light of experience gained in its implementation and also
to give effect to International Conventions acceded to by India

1.6 Act divided into 18 Parts.

2.0 Part I – Preliminary :

Title
Commencement
Application
1. Any vessel registered in India
2. Any vessel required by the Act to be registered
3. Any other vessel which is owned wholly by (i) citizen of India; or (ii) company
established under Central/State Act; or (iii) registered co-operative society [(a) (b) (c )
of S.2]

Definitions [S. 3]

3.0 Part II – National Shipping Board:

 Composition [6 elected by Parliament + 16 representing C.G., ship owners and

seamen]
 Function - Advice C.G. on shipping matters

4.0 Part III – General Administration:

 Director General Shipping, Mercantile Marine Department, Surveyors, Radio

Inspectors, etc

5.0 Part IV – Shipping Development Fund [Omitted by Act of 1986]

6.0 Part V - Registration of Indian Ships:

6.1 The registration of a ship serves the following three purposes:

(i) Evidence of the right to fly the flag of a state

(ii) Right of ownership, and
(iii) Mortgages.

6.2 The concept of registration is important as registration of a ship affords it a proof of

title and accords it nationality. The national merchant shipping legislation along with
requirements provides the precise procedure of registration. There are two basic
ingredients to registration:

(i) Making of necessary entries in the Register of Ships.

(ii) Issuance of a Certificate of Registry.

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6.3 In the MS Act 1958, part V lays down the procedure for registration of sea going
Indian ships. Important sections in this part viz., sec 21, 22, 42, and 51 underwent
amendments in 1993.

6.3.1 Registration of Indian Ships applies only to sea-going ships fitted with means of
propulsion [S.21].

6.3.2 Obligation to register [S.22] : Every Indian ship to be registered except a ship not
exceeding 15 tons net and employed solely in navigation on coasts of India.

6.4 The amendments were necessitated by the requirements of the lending institutions
in granting loans to Indian shipowners. There were elements of restriction in these sections
regarding the foreclosure of mortgages and realization of the loan amount by the lending
institutions in case of default. The restrictions were in respect of registration,' transfer of
ships and rights of mortgagees. They served as impediments to the rights of the lenders
and came in the way of extending credit by international financial institutions and other
lenders and therefore it became increasingly difficult for the Indian shipowners to finance
their acquisitions. Also, shipping being an international industry, fast decisions have to be
taken in sale and purchase of ships in line with the fluctuations in their prices in the
international market.

6.5 To take advantage of the rapid changes, a shipowner had to take quick decisions.
However, no transfer of ship could be possible in the above circumstances without the prior
approval of the Government/decree from the High Court, which inevitably involved delay
and uncertainty. The liberalization process having started in India by then, this legal
impediment was removed by bringing the necessary amendments on fast track. Thus the
amendments to the above mentioned sections.

6.6 Section 21 defines the ownership of a ship. The three kinds of eligible owners are any
citizen, a company or a body and a co-operative society. Here the basic requirement is that of
business presence in India. This is essential to ensure 'genuine link between the flag and the
ship' as already mentioned. Accordingly, the ship is subject to control by the Indian Maritime
Administration and tax controls of the Indian State. The ship in bound by the standards laid
down by the Indian administration to undertake any voyage.

6.7 Section 22 makes it obligatory on the part of the owner to register his ship and possess
the 'Certificate of Registry' so important to prove the ship's identity and its flag.

6.8 Section 23 states that the ports of registry are Mumbai, Chennai and Calcutta. The
Mercantile Marine Departments at these places are offices holding the registry and registrar.
Some other ports have also been made the ports of registry under this section.

6.9 From Section 23 till Section 33 the procedure of registration is brought out.

(a) Ports of registry.

(b) Registration of Indian ships.
(c) Register Book.
(d) Application for registry.
(e) Survey and measurement of tonnage to be ascertained by surveyor before registry.
(f) Permanent and conspicuous marking of ship.
(g) Declaration of ownership.
(h) Builder’s certificate – denomination and tonnage of ship, time and place where built,
name of person for whom built.

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 (i) Instrument of sale, if any.
(j) Registrar to enter in Register Book, name of ship, name of port to which she belongs,
ship’s identification no., details given in surveyor’s certificate, particulars of her origin
stated in declaration of ownership, name and description of her registered owner(s).
(k) Registrar to retain builder’s certificate, surveyor’s certificate, declaration of ownership and
instrument of sale, if any.

6.10 Sections 34 to 40 deal the matters connected with the issuance of the Certificate of
Registry.

6.11 Section 42 of the Act pertains to transfer of ships or share or interest in the ship.
According to it, only under certain conditions of external aggression or war, the transfer cannot
take place unless approved by the Central Government. The Government also reserves the right
to refuse the transfer it the same is not in the interest of conservation of national tonnage. The
most important condition in this section is that transfer of a ship can take place only when all
wages and other, amounts due to the seamen are paid. It may be noted that wages of crew
constitutes a Hen on the ship. This particular section ensures no seafarers are left in lurch with
regard to wages or other amounts like their provident fund, etc., and thus offers them a
protection.

6.11.1 Transfer of ships, shares, etc [Ss 42 – 43]:

(a) No transfer when security of India threatened by war unless approval of C.G. obtained.
(b) C.G. to refuse transfer to conserve tonnage of Indian shipping.
(c) Transfer not valid unless all wages to seamen paid and notice of transfer given to Director
General.
(d) Transfer only by an instrument in writing, containing description of ship as contained in
surveyor’s certificate, executed by transferor, attested by 2 witnesses.
(e) Executed instrument of transfer to be produced to registrar.
(f) Registrar to enter in Register Book name of transferee and endorse on instrument of
transfer the fact of entry with day and hour.

6.11.2 Transmission of property in Indian ships on death/insolvency [S. 44] :

(a) Person to authenticate transmission by making and signing declaration, identifying the
ship, manner in which transmitted, person to whom transmitted.
(b) If transmission consequent on insolvency – declaration of transmission to be
accompanied by proof of such claim.
(c) If transmission consequent on death—declaration of transmission to be accompanied by
succession certificate/ probate/ letter of administration.
(d) Registrar to enter in Register Book name of person entitled under transmission as owner.

6.11.3 Order for sale when ship has ceased to be an Indian ship [S. 45]:

(a) Registrar to report to C.G. when ship has ceased to be an Indian ship by reason of
transmission.
(b) C.G. to apply to High Court for direction to sell ship to Indian citizen, company or co-
operative society.
(c) High Court to pass such an order or reject application if ship has not ceased to be an
Indian ship.
(d) Sale proceeds, after deducting the expenses, to be paid to person entitled under
transmission.

6.12 Section 47 permits mortgage of the ship or share. And under Section 50 mortgagee is
not deemed to be the owner of the ship and the mortgagor is deemed to continue as the owner of
the ship. Section 51 provides right to the first mortgagee to recover the amount due to him in

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case of any default. In case of more than one mortgagee, a decree will have to be obtained
from the High Court for sale of the ship and recovery of amounts. Here also, there is an obligation
to ensure that all payments due to crew have already been done before the sale of the ship.

6.12.1 Mortgage:

(a) Instrument in prescribed form [S. 47].

(b) Registrar to record the order of time in which mortgages are produced to him [S. 47].
(c) Registrar, by memorandum under his hand, to notify on each mortgage that it has been
recorded by him stating the day and hour of record [S. 47].
(d) Registrar to make an entry in the register book when mortgage is discharged [S. 48].
(e) Priority of mortgages – according to date on which each mortgage is recorded in register
book and not according to date of each mortgage itself [S. 49].
(f) Mortgagee not to be owner [S. 50].
(g) Right of mortgagee – to sell ship/ share in it [S. 51].
a. Only 1 registered mortgagee – without approaching Court.
b. 2 or more registered mortgagees – approach Court.
c. Mortgagee intending to sell ship/ share to give 15 days advance notice to
Registrar, accompanied with proof of payment of wages.
(h) Mortgage not affected by insolvency committed by mortgagor after date of record of
mortgage [S. 52].
(i) Transfer of mortgage – instrument in prescribed form, Registrar to record transfer in
Register book, notify on the instrument the fact that transfer has been recorded by him
stating day and hour of record [S. 53].
(j) Transmission of interest in mortgage – transmission to be authenticated by declaration of
person to whom interest is transmitted, Registrar to record fact of transmission [S. 54].

6.12.2 Name of Ship [S. 55] :

(a) Ship to be described by name she is registered.

(b) Registrar to refuse if name is already borne by another ship or is so similar as is
calculated to deceive.
(c) No change in name except in prescribed manner.
(d) Violation – ship detained until provisions complied with.

6.13 National character of a ship and national colours for Indian ships, etc are dealt with
by Sections 63 to 67.

6.13.1 National Character & Flag :

(a) National colours for Indian ships to be declared by C.G.

(b) Different colours for different classes of ships.
(c) Proper officer to board ship on which colours are hoisted contrary to Act. Seize colours –
forfeited to C.G. [S. 63].
(d) No person on board a ship which is not an Indian ship will use Indian national colours to
make it appear as an Indian ship [S. 64].
(e) No owner/ master of Indian ship shall do anything to conceal Indian character of ship [S.
65].
(f) Indian ship to hoist national colours on entering/ leaving Indian port (of 50 tones gross
tonnage or more)/ foreign port; and on a signal being made to her by any vessel of Indian
navy [S. 66].
(g) Customs Collector not to grant clearance unless and until master declares her national
character.

7.0 Part VI – Certificates of Competency to be held by masters, mates, engineers,

etc.

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8.0 Part VII – Seamen & Apprentices:

 Classification of Seamen.
 Minimum manning scale of seamen.
 Engagement.
 Employment of young persons.
 Discharge of seamen.
 Payment of wages.
 Rights of seamen in respect of wages.
 Mode of recovering wages.
 Power of Court to rescind contracts.
 Property of deceased seamen and apprentices.
 Distressed seamen.
 Provisions, health and accommodation.
 Protection of seamen with respect to other matters.
 Provisions as to discipline.
 Official logs.
 National Welfare Board for Seafarers.

9.0 Part VIII - Passenger Ships :

9.1 Part VIII of the MSA exclusively and exhaustively deals with passenger ships issues
such as survey of passenger ships; keeping order in passenger ships; special trade
passenger ships and pilgrim ships.

9.2 Application [S. 219]:

 Sea going passenger ships fitted with mechanical means of propulsion

 Special trade passenger ships carrying more than 30 unberthed passengers
 Special trade passenger ships carrying special trade passengers to/ from any port/ place
in India

9.3 No ship to carry passengers without a certificate of survey [S.220]:

(a) No ship shall carry more than 12 passengers between ports or places in India or to or
from any port or place in India from or to any port or place outside India unless she has a
certificate of survey applicable to her voyage.
(b) No customs collector shall grant port clearance nor shall any pilot be assigned to the ship
unless the owner or agent or master produces the certificate of survey. And if the ship
leaves or attempts to leave the port without the certificate of survey, the customs collector
or pilot on board may detain her until she obtains the certificate.

9.4 Surveyor and Declaration of survey [Ss. 221 and 223]:

(a) The surveyor may go on board the ship and inspect her [S.221]
(b) After the survey, the surveyor may deliver to the owner a declaration of survey containing
the following particulars:

(i) Hull equipment and machinery are in good condition.

(ii) The master, mates, engineers etc possess the required certificates
(iii) The time (if less than 1 year) for which the hull, machinery and equipment of the
ship will be sufficient;
(iv) The voyage for which the ship is fit to ply;
(v) The no. of passengers which the ship is fit to carry on the deck, in the cabins,
etc.[S.223]

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9.5 Sending of declaration by owner/ agent/ master to C.G [S.224]:

 Owner to send to C.G the declaration within 14 days of receipt of declaration. For failure
to so, the owner to pay fine of Rs.5 per day of delay.

9.6 Grant of certificate of survey by C.G in duplicate[S.225].

9.7 Power of C.G to order second survey [S.226]:

 The C.G may order second survey by another surveyor if:

(i) first surveyor refuses to give a declaration of survey.

(ii) gives a declaration with which the owner is dissatisfied.

9.8 Duration of certificate of survey [S.227]:

 Valid for one year from date of issue.

9.9 Cancellation or suspension of certificate of Survey by C.G [S.228]:

(i) declaration by surveyor was fraudulent or erroneous.

(ii) certificate has otherwise been issued upon false or erroneous information.

9.10 Certificate of survey to be affixed in conspicuous part [S.231]:

 It should be easily read by all persons on board.

9.11 Ship not to carry passengers in contravention of Act [S.232]:

 If master or officer of ship is a licensed pilot, his license as a pilot shall be cancelled or
suspended for such period as C.G directs.

9.12 Special trade passenger ships and pilgrim ships :

(a) Such ships to depart / proceed on voyage only from an appointed port.
(b) Master to give notice to C.G of day of sailing.
(c) After notice the ship shall be inspected by the appointed officer.
(d) Ship shall not sail without Certificates A and B. Certificate A to be exhibited on a
conspicuous part of ship.
(e) Contents of certificate A – ship is seaworthy; ship is properly equipped, fitted and
ventilated; no. of special trade passengers the ship is certified to carry.
(f) Contents of certificate B – Voyage which the ship is to make; proper complement of
officers and seamen, master to hold proper certificates, proper no. of medical officers and
attendants, prescribed quantity of food, fuel and water on board, has sufficient protection
against bad weather, etc.
(g) No. of passengers not to exceed that allowed by or under this Part.
(h) Berths to be provided for passengers if voyage extends to 72 hours.
(i) Space to be provided for passengers if voyage does not extend to 72 hours.
(j) Medical inspection and permission required before embarkation of pilgrims.
(k) Pilgrims to possess return tickets before going on board.

10.0 Part IX - Safety :

10.1 The provisions of part IX i.e. from Sections 283 to 344 are based on the International
Convention on Safety of Life at Sea, 1974 (SOLAS 1974) and the International Convention on

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Load Lines, 1966 (LL 1966). India has ratified both these conventions. This part provides for
prescription of rules for construction of ships, Convention of Collision, provisions of life
saving appliances and fire appliances, radio requirement, stability information to be carried
on ships, grant of certificate of construction, safety equipment, load line and radio
installation, navigational aid, requirement of timber and dangerous goods, loading/carriage,
grain carriage etc. All these are designed to ensure safety of ship, life on board ships and
passenger/cargo carried on ships.

10.2 Section 331 of the MS Act pertains to the carriage of dangerous goods and lays
down the conditions of carriage of these goods on ships. It provides for classification,
packing, labeling and marking of these goods and their stowage including stowage plans;
fixation of maximum quantity of dangerous goods which can be carried in different ships of
classes of ships, etc. It brings out the obligation of Master or agents of the ship to declare
carriage of these goods. The parameters of carriage like packing, labeling and marking etc.
are as per conditions laid down in IMDG Code published by the IMO.

10.3 Appropriate rules have been formed under these sections and in combination with
other sections pertaining to carriage of timber cargo and carriage of grain vide a Govt.
notification in December 1995.: The rules bring out the exact definition of "dangerous
cargoes as per the IMDG Code".

10.4 In Part III of the rules the different classes of dangerous goods have been mentioned
as per the IMDG code. The rules also define the shipping documents to be prepared by the
shipper including the special manifest, which would also include the location where these
goods are stored on board ships. Non-adherence to rules has a penalty in the Act.

10.5 Part IX – Safety - In short :

10.5.1 India has ratified International Convention on Safety of Life at Sea [SOLAS 1974]. Objective
of SOLAS is to specify minimum standards for construction , equipment and operation of ships,
compatible with their safety. The Convention came into force in 1980. It was amended in 1988 to
stream line and harmonize the survey of ships and their equipment to ensure safety of ships
proceeding on sea voyage. The Convention on Load Lines 1960 as amended in 1988 deals with
harmonized system of survey of ships and their certification.

 Construction of ships
Requirements of hull, equipment, machinery

 Prevention of collision
Rules relating to lights, shapes, and fog and distress signals

 Life saving appliances and fire appliances

 Radio equipment
a. Radio direction finder
b. Radio log
c. Radio inspector to inspect the ship

 Signaling lamps

 Safety certificates, safety equipment certificates, safety radio certificates [Inserted

by Am Act of 2002]
a. C.G. to issue such certificates – valid for one year

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  Load lines:
a. No ship to proceed to sea unless surveyed in accordance with load line rules,
marking of deck line and load line, load line certificate

 Unseaworthy ships.

 Detention of unsafe ships by C.G.

 Cost of detention and incidental costs.

10.5.2 Part IX A – Nuclear Ships:

10.5.3 Part IX B – Security of Ships & Port Facilities [Inserted by Am Act of 2007]:

 There are 11 Codes that are made mandatory under SOLAS 1974.
 One of the last Code is ‘International Code for Security of Ships and Port Facility’ [ISPS].

 Objectives of ISPS Code:

1. Establish International framework involving co-operation between contracting
States, Government agencies, local administrations and shipping and port
industries to detect or assess security threats and preventive measures
against security incidents affecting ships or port facilities in international trade;
2. Establish roles and responsibilities at national/international level for ensuring
maritime security;
3. Ensure collation and exchange of security related information;
4. Provide methodology for security assessment; and
5. Ensure adequate maritime security measures.

 Clause 44 –A added to Section 2 of MSA defining ‘security’.

 Part IX B added to MSA which deals with:

1. Security measures to be adopted by ships and port facilities serving the ships;
2. Ship identification number
3. Port facility assessment
4. International ship security certificate
5. Ship security alert system
6. Control measures and compliances

11.0 Part X - Collisions, Accidents at Sea and Liability:

11.1 Collisions and accidents at sea, division of loss in case of collision, damages for
personal injury, right of contribution, duty of the master to assist in case of collision,
collisions to be entered in official log, accidents to be reported to Central Government and
notice of loss of Indian ships to Central Government are dealt with by Sections 345 to 352F
under Parts X and XA of the MSA.

11.2 Division of loss in case of collision [S. 345] :

1. In proportion to the degree in which each ship was at fault

2. If not possible to establish different degrees of fault then liability apportioned equally
3. No ship liable for loss not caused due to her fault
4. Loss includes salvage and other expenses
5. Nothing to affect:
a. Liability of any person under any contract; or
b. Impose liability upon any person from which he is exempt; or
c. Right of any person to limit his liability

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11.3 Damages for personal injury [S. 346]:

1. Liability of owners of ship(s) concerned shall be joint and several

2. Nothing in this Section to be construed as:
a. Depriving any person of any right of defence; or
b. Depriving any person entitled to sue in respect of such loss of life; or
c. Affect right of any person to limit his liability

11.4 Right of contribution [S. 347]:

1. Available to owner of ship against other owners for amount of excess paid by him

11.5 Duty of master to assist in collision.

11.6 Collision to be entered in official log.

11.7 Report the accident to C. G. within 24 hours.

11.8 Notice of loss of Indian ship to be given to C. G.

12.0 Part X A - Limitation of Liability:

12.1 Part XA of the M.S. Act pertains to a limitation of liability of shipowners. Shipping
stands apart from other branches of the industry and commerce with respect to limitation of
liability. Whenever a ship collides with and damages another ship and causes loss of life or
personal injury, the owner of the negligent ship does not necessarily have to fully
compensate. He can generally limit his liability depending on the size of the ship.

12.2 The exact objective of this limitation of liability is to enable the insurer of a shipowner
to calculate precisely the maximum exposure to risk of their client shipowner, so that the
shipowner can obtain adequate insurance cover for third party claims.

12.3 In effect when a shipowner sends his ship to sea, he as well as his underwriter run a
calculable risk thus resulting in lower premium, than it would be if the liability were to be
unlimited.

12.4 India has ratified the Convention on the Limitation of Liability for Maritime Claims
1957 (LLMC 1957). These provisions have been incorporated in the MS Act in Part XA (i.e.
Section 352 to 352F). In essence, the provisions of Part XA which are based of the above
Convention, places a fault-based liability on a shipowner, ship operator, charterer or their
servants in respect of:

(a) Loss of life or personal injury, or loss of or damage to any property, on board;

(b) Loss of life or personal injury, or loss of or damage to any property whether on
land or on water caused by negligence or default of any employees of owners on board;

(c) Obligation/liability imposed by any liability relating to wreck removal.

 India an active member of IMO

 IMO has adopted International Convention on Limitation of Liability for Maritime

Claims [LLMC] on 19 November 1976

 Under LLMC limitation tonnage is the gross tonnage of the vessel

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 Limitation of liability extended to include charterers, managers, operators and any
person for whose neglect/default the ship owner or salvor is responsible.

 Limitation of liability barred if loss results from personal act/omission of the ship
owner/ salvor with the intent to cause such loss or committed recklessly and with
knowledge that such loss would probably result.

 Sections 352, 352 A to 352 E amended to implement LLMC 1976. New Section 352
FA added to empower CG to frame rules.

 Consequent to amendment of Section 352A, Section 116 of Major Port Trust Act,
1963 amended to provide for recovery of damage to port authorities in accordance
with Part XA of MSA.

12.5 Definitions [Section 352]

 Limitation of liability for damage in respect of certain claims [S. 352A]:

1. Ship owner, salvor, any person for whose act/neglect/default the ship owner/salvor is
responsible, insurer may limit his liability under section 352B in respect of:

a. Claims arising from loss of life/ personal injury or loss/damage to property

(including damage to harbor works, basins and water ways and aids to navigation)
occurring on board or in direct connection with operation of ship/salvage operations
and consequential loss;
b. Claims arising out of loss resulting from delay in carriage by sea of cargo and
passengers or their luggage;
c. Claims arising out of other loss resulting from infringement of rights (other than
contractual rights), occurring in direct connection with the operation of the ship or
salvage operations;
d. Claims of person (other than person liable) in respect of measures taken in order to
avert or minimize loss for which the person liable may limit his liability in
accordance with the provisions of the LLMC 1976 or rules made in this behalf and
such further loss caused by such measures;
e. Claims for the loss of life/personal injury to passengers in a ship brought by or on
behalf of any person –
i. Under the contract of passenger carriage; or
ii. Who, with the consent of the carrier, is accompanying a vehicle or live
animals which are covered by a contract for the carriage of goods carried in
that ship.

2. Limits for passenger claim not applicable to passengers carried in/ around coast of India.

3. Limitation of liability applicable even for indemnity.

4. Nothing in this Section will apply to:

a. Claims for salvage or contribution in general average
b. Claims for oil pollution under CLC 1992
c. Claims by servants (including their heirs) of ship owner/ salvor if under their service
contract the ship owner/ salvor not entitled to limit his liability or permitted to limit his
liability to a greater amount
d. Claims subject to any International Convention/ Indian laws governing/ prohibiting
limitation of liability for nuclear damage
e. Claims against ship owner of nuclear ship for nuclear damage

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12.6 Limitation of liability [S. 352B] :

Rules to be framed by the Central Government in accordance to LLMC Convention.

• LLMC Convention

1. 1976 Convention
a. Personal claim – 333000 SDR if ship does not exceed 500 tons +
additional amt. based on tonnage exceeding 500 tons
b. Property claim – 167000 + additional ……….

2. Protocol of 1996
a. Personal claims – 2 million SDR if ship does not exceed 2000 gross
tonnage
For each ton from 2001 – 30000 tons – 800 SDR
For each ton from 30001 – 70000 tons – 600 SDR
For each ton in excess of 70001 – 400 SDR
b. Property claims – 1 million SDR and for larger ships 400, 300 and 200
SDR respectively

3. Amendment to 1996 Protocol (will come into force on 8/6/2015)

a. Personal claims 3.02 million SDR and for larger ships 1208, 906 and 604
SDR respectively.
b. Property claims 1.51 million SDR and for larger ships 604, 453 and 302
SDR respectively.

12.7 Limitation Fund and consolidation of claims [S. 352C]:

(a) Person to apply to High Court for setting up the Fund

(b) High Court to determine the amount of liability and require deposition of the amount or
bank guarantee
(c) No person to proceed against any other assets of owner after setting up of the Fund.
(d) High Court to distribute amount rateably and stay pending proceedings
(e) Insurer, who has paid, will have rights of subrogation
(f) High Court to provisionally set aside amount from Fund to enable a person to enforce
claim in future
(g) Owner entitled to set-off

12.8 Release of Ship, etc [S. 352D].

13.0 Part X B – Civil Liability for Oil Pollution:

The civil liability of the owner of a ship for oil pollution damage, the limits of liability, the
constitution of limitation fund and maintaining a compulsory insurance/other financial
guarantee by the owner of Indian ship are set out is Section 351I - 352N.

13.1 Part added to give effect to India’s accession to International Convention on Civil
Liability for Oil Pollution Damage 1992 [CLC].

13.2 Deals with payment for oil pollution damage by any ship in Indian waters up to limits
of EEZ and by any Indian ship abroad [S. 352G].

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13.3 Definitions [S. 352H] :
1. Incident – any occurrence/ series of occurrences having same origin, which
causes pollution damage or creates a grave and imminent threat of causing such
damage.
2. Oil – any persistent hydro carbon mineral oil such as crude oil, fuel oil, heavy
diesel oil, lubricating oil whether carried on board a ship as cargo or in the bunker
of such ship.
3. Owner – person registered as owner; in absence of registration person owning
the ship or in case of ship owned by a foreign company person registered in that
State as operator of ship.
4. Person – individual, partnership, public/ private body whether corporate or not
including State or any of its constituent.
5. Pollution damage –
a. Loss/ damage caused outside the ship resulting from escape/discharge of
oil from ship, wherever such escape/discharge occurs, provided that
compensation for impairment of the environment other than losses from
such impairment shall be limited to costs of reasonable measures of
reinstatement actually undertaken or to be undertaken;
b. Costs of preventive measures and further loss/ damage caused by such
measures.
6. Preventive measures – any reasonable measure taken by any person after
incident to prevent/ minimize pollution damage.

13.4 Liability of owner [S. 352I]:

1. The owner at the time of an incident shall be liable for pollution damage caused by oil
which has escaped/ discharged from the ship as a result of the incident

2. Owner not liable for pollution damage:

a. Resulting from an act of war/ hostilities/ civil war/ insurrection/ natural phenomenon of
exceptional, inevitable and irresistible character; or
b. Wholly caused by act/ omission done with intent to cause damage by any other
person; or
c. Wholly caused by negligence/ wrongful act of government/ authority responsible for
maintenance of navigational aids

3. Where 2 or more ships are liable for pollution damage, their liability shall be joint and
several for all damage not reasonably separable

4. No claim for compensation made against –

a. Servants/ agents/ crew members
b. Pilot
c. Charterer (including bare boat charterer) manager or operator
d. Any person performing salvage operations with consent of owner/ public authority
e. Any person taking preventive measures
f. Any servant/ agent of persons in c. d. or e

13.5 Limitation of liability [S. 352J]:

In exercise of powers conferred by S. 352R, the CG has made The Merchant Shipping [Civil
Liability for Oil Pollution Damage] Rules 2008.

Rule 3 permits the owner to limit his liability for oil pollution damage in respect of any one
incident to an aggregate amount of:

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 a. 45, 10, 000 SDR where ship’s tonnage does not exceed 5000 units of tonnage;
b. 631 SDR for every additional unit of tonnage, where tonnage exceeds 5000 units
Provided that the said aggregate shall not in any event exceed 8, 97, 70000 SDR.

13.6 Loss of limitation:

Owner’s personal act/omission made with intent to cause such damage or recklessly and with
knowledge that such damage would probably result

13.7 Constitution of limitation fund [S. 352K]:

a. Owner to apply to HC for constitution of Fund.
b. Deposit sum/provide bank guarantee.

13.8 Consolidation of claims and distribution of fund [S. 352M]

HC to consolidate all claims and distribute amongst all claimants in proportion to their
established claims.

13.9 Compulsory insurance/ financial security [S. 352N]:

(a) 2000 tonnes or more oil in bulk cargo

(b) Amount of insurance/ security – 133 SDR per ton or 14 million SDR, whichever is lower
(c) Certificate by DG to ship which maintains insurance/ security
(d) Certificate to foreign ship
(e) Certificate issued by competent authority to ship registered in convention country
acceptable in India

13.10 Ban on entering/ leaving Indian port without certificate {S. 352P].

13.11 Exemptions [S. 352Q]:

War ships, government ships used for non commercial purposes.

13.11 CG has power to make rules {S. 352R].

14.0 Part XC – International Oil Pollution Compensation Fund:

14.1 Part inserted to give effect to India’s accession to Fund Convention 1992.

14.2 Fund Convention 1992 provides a second tier of compensation regime where a
claimant can proceed against the fund located in London that pays for damages.

14.3 Section 352S to 352ZA inserted in MSA.

14.4 Definition [S. 352S]:

Contributing oil means crude oil and fuel oil.

14.5 Contribution to fund [S. 352T]:

(a) Contributions in respect of contributing oil carried by sea to ports/ terminal installations in
India, shall be payable in accordance with Arts 10 and 12 of Fund Convention
(b) Contributions to be paid whether or not contributing oil is imported and notwithstanding
that contributions are payable to Fund in respect of carriage of same contributing oil on a
previous voyage
(c) Contributions also payable when contributing oil first received in any installation in India
after having been carried by sea and discharged in a port/ terminal installation in a
country which is not a Fund Convention country;

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 (d) Person liable to pay contribution –
(i) Contributing oil imported into India – importer;
(ii) Any other case – person receiving in India.
(e) No liability to pay contribution if contributing oil imported/ received in any year does not
exceed 1, 50, 000 metric tons.

14.6 Contributions payable by persons to fund for any year [S. 352U]:

(a) Amount determined by Assembly of Fund u/A 10 and 12 of Fund Convention.

(b) In instalments.
(c) If unpaid, interest to be paid.
(d) CG to require financial security.

14.7 Power to call for information [S. 352V]:

CG, for purpose of transmitting to the Fund names, addresses of persons liable to contribute
and the quantity of contributing oil, may serve a notice on such person to furnish information.

14.8 Liability of the Fund [S. 352W]:

Where a person suffering pollution damage is unable to obtain full and adequate
compensation under Liability Convention, he may claim under the Fund Convention.

14.9 Jurisdiction [S. 352X]:

High Court.

14.10 Extinguishment of claims [S. 352Y]:

(a) Within 3 years from date when damage occurred.

(b) However not later than 6 years from date of incident.

14.11 Subrogation [S. 352Z]:

Fund subrogated to rights which person compensated would have enjoyed.

14.12 Power of Central Government to make rules [S. 352 ZA]:

In exercise of powers, CG has enacted The Merchant Shipping [International Fund for
Compensation for Oil Pollution Damage] Rules 2008.

14.13 The Merchant Shipping [International Fund for Compensation for Oil Pollution
Damage] Rules 2008:

a. Administration of Fund [R3] :

Claim to be settled and distributed in accordance with decision and approval of Assembly
of all Contracting States to the Convention.

b. Liability of Fund [R4]:

1. Fund liable to pay to person suffering pollution damage where:
i. Liability of owner for pollution damage does not arise under Section 352-I
ii. He is unable to obtain full and adequate compensation under Section 352J
iii. Person liable is financially incapable of meeting his obligations in full
iv. Financial security u/S 352N is insufficient
v. Pollution damage has resulted from a natural phenomenon of exceptional,
inevitable and irresistible character

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 2. Fund not liable :
i. Pollution damage resulted from war, etc or discharge from warship/ ship
owned/ operated by Government for non commercials service
ii. Claimant cannot prove that pollution damage resulted from incident involving
one or more ships
iii. Claim made after 6 years

c. Limitation of liability of Fund [R5]:

Aggregate amount of compensation payable w.r.t. any one incident be so limited that the
total sum of amount of compensation paid by Fund and the amount of compensation
actually paid u/S 352-I does not exceed 135 million SDR. Incident occurring on or after
1/11/2003 – amount not exceeding 203 million SDR

15.0 Part XI – Navigation:

 Method of giving helm orders

 Duty of master to report dangers (ice, storm, etc) to navigation
 Communication of intelligence regarding dangers to navigation
 Obligation to render assistance on receiving distress signals

16.0 Part XI A – Prevention & Containment of Pollution of Sea by Oil:

In order to prevent pollution of sea by oil, there are statutory provisions prohibiting discharge
of oil and or oil mixtures into the sea, mandatory equipments in ships to prevent oil pollution,
maintaining oil record book, permitting inspection of ships, etc. are found in Section 356A-
356I. Further the Act also provides for containment of accidental pollution [Section 356J-
356O]

 Part XI A, comprising Section 356-A to 356-K and 356-O, amended to give effect to
India’s accession to Annexure III, IV and V of MARPOL 73/78

 IMO adopted MARPOL 1973 and Protocol 1978, which seek to achieve:
1. Complete elimination of pollution of marine environment by oil and other harmful
substances; and
2. Minimization of accidental discharge by oil and other harmful substances
by prescribing a package of requirements of:
a. Design
b. Construction
c. Survey, and
d. Certification norms
with respect to discharge of sewage and garbage into sea.

16.1 Application [S. 356A]:

Part to apply to:

1. Oil tankers of 150 tons gross or more;
2. Other ships of 400 tons gross or more;
3. Off-shore installations; and
4. Incidents of marine casualty or acts relating to such casualty occurring with grave and
imminent danger to Indian coast line or related interest from pollution or threat of
pollution in the sea by deliberate/ negligent/ accidental release of oil/ ballast water/
noxious liquid/ other harmful substances into sea including such incidents occurring
on high seas

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 Part not applicable to war ships or ships owned/ operated by Government for non
commercial purposes.

16.2 Definitions:

1. Cargo includes ballast and ship’s stores and fuel

2. Coast includes any island forming part of India
3. Coastal waters means any part of territorial waters of India or any adjacent marine area
under Act of 1976
4. Oil means petroleum in any form including crude oil, fuel oil, heavy diesel oil, sludge, oil
refuse and refined products

16.3 Issue of pollution preventive certificates [S. 356C]:

Vessels not to proceed to sea unless they possess the required pollution prevention
certificate.

16.4 Issue of certificates for foreign ships in India and Indian ships in foreign
countries [S. 356D].

16.5 Requirement for construction and equipment in ships to prevent pollution [S.
356E]:

CG to make rules requiring Indian oil tankers and other Indian ships to be fitted with such
equipments and to comply with requirements for construction, survey of equipment and
structure of oil tankers/ other ships and specify conditions for making survey prior to issuing
an international pollution prevention certificate

16.6 Record books [S. 356F]:

To be maintained by the ship regarding the substance carried.

16.7 Inspection and control of oil tankers/ other ships [S. 356G]:

16.8 Information regarding contravention of provisions of Convention [S. 356H]:

If, on report of surveyor inspecting oil tanker/ other ship, the Director General is satisfied that
there is contravention by the oil tanker/ other ship within coastal waters, he may:
1. Detain oil tanker/ ship until causes of contravention are removed; and
2. Proceed against oil tanker/ ship for recovery of cost of pollution damage if any
and cost of prevention of pollution damage and cleaning of such pollution.

16.9 Reception facilities at ports in India [S. 356I].

16.10 Provisions for Containment of Accidental Pollution:

 Power of CG to give notice to owner, etc of polluting ship [S. 356J]:

1. Where CG is satisfied that –

a. Oil or noxious liquid substance (NLS) is escaping/ likely to escape from a
tanker/ other ship/ off-shore installation; and

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 b. Oil or NLS so escaped/ likely to escape is causing/ threatens to cause
pollution to any part of coast/ coastal waters of India
it may, for minimizing pollution caused/ preventing pollution threatened require:
a. Owner/ agent/ master/ charterer of tanker/ other ship;
b. Owner/ agent/ master/ charterer/ operator of a mobile off-shore
installation;
c. Owner/ operator/ lessee/ licensee of off-shore installation of any other
type
or all or any of them, by notice, to take such action as specified in the notice.

2. CG may by the above notice prohibit the removal of the tanker/ ship/ mobile off-
shore installation/ other off-shore installation or of any cargo/ stores from the
tanker, etc

 Power of CG to take measures for preventing/ containing oil/ NLS pollution

[S. 356K]
1. Where person served notice fails to comply with directives, CG may carry out
directives and contain/ prevent pollution.
2. Expenditure incurred by CG recovered from person served notice and shall be a
charge upon tanker/ ship, etc which may be detained by CG till amount is paid.

 Power of CG to give directions to certain ships to render services [S. 356L].

 Oil Pollution Cess [S. 356M] :

1. To be levied at a rate not greater than 50 paise per ton of oil for oil imported by a ship
into India in bulk as cargo; and oil shipped from any place in India in bulk as cargo
2. No levy if vessel has paid the same at other port in India within 3 preceding months
3. Cess to be utilized for providing oil reception facilities and equipments for combating
oil pollution

 No port clearance if cess not paid or security not given [S. 356N].

 Power of CG to make rules [S. 356O].

 CG has made the following rules

1. The Merchant Shipping (Prevention of Pollution by Sewage from Ships) Rules
2010
2. The Merchant Shipping (Prevention of Pollution by Harmful Substances carried
by Sea in Packaged Form) Rules 2010
3. The Merchant Shipping (Prevention of Pollution by Garbage from Ships) Rules
2009
4. The Merchant Shipping (Control of Pollution by Noxious Liquid Substances in
Bulk) Rules 2010
5. The Merchant Shipping (Prevention of Pollution by Oil from Ships) Rules, 2010

 The Merchant Shipping (Prevention of Pollution by Sewage from Ships) Rules 2010:

Ship equipped with a sewage treatment plant/ holding tank and discharge pipeline in
compliance with regulations – survey of ships to ensure they fully comply with the
Rules – certificate to that effect – discharge of sewage where and at what rate
specified in the Rules

 The Merchant Shipping (Prevention of Pollution by Harmful Substances carried by

Sea in Packaged Form) Rules 2010:

Carriage of harmful substances (HS) by ship prohibited except in accordance with the
Rules – ship to comply with requirements of International Maritime Dangerous Goods
[IMDG] Code – empty packages carrying HS also HS unless they contain no harmful
residue harmful to marine environment – HS to be marked and labelled with correct

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 technical name, trade name, IMDG Code no. and must be indicated that it is a
‘marine pollutant’ – shipping documents must indicate words ‘MARINE POLLUTANT’
– storage as per Rules – quantity to be carried regulated – jettison of HS prohibited
except to save life and ship at sea

 The Merchant Shipping (Prevention of Pollution by Garbage from Ships) Rules

2009:

Garbage means all kinds of victual, domestic and operational wastes excluding fresh
fish – disposal outside special areas – special requirements for disposal – reception
facilities at ports/ terminals for garbage – vessel to display placards (to notify crew
and passengers of disposal requirement rules), maintain garbage management plans
and garbage record- keeping

 The Merchant Shipping (Control of Pollution by Noxious Liquid Substances in

Bulk) Rules 2010:

All ships certified to carry NLS in bulk under obligation to prevent pollution of sea by
NLS; categorization and listing of NLS; survey and certification of ships carrying NLS
in bulk; design, construction, equipment and operation of ships certified to carry NLS
in bulk; control of discharges of residues of NLS; cargo record book; shipboard
marine pollution emergency plan for NLS; reception facilities at ports/ terminals

 The Merchant Shipping (Prevention of Pollution by Oil from Ships) Rules 2010:

Every ship under obligation to prevent pollution of sea by oil; survey (oil tanker of 150
gross tonnage and above and every other ship of 400 gross tonnage) of all ships,
certification, tanks for oil residues/sludge; oil filter equipment; control of discharge of
oil, oil record book; crude oil tankers to be provided with segregated ballast tanks;
machinery and equipment requirements; shipboard oil pollution emergency plan,
reception facilities at ports/ terminals.

17.0 Part XII – Investigation and Inquiries:

Part XII of MSA deals with shipping casualties, reporting of shipping casualties to Central
Government, application to Court for formal investigation, and the procedure to be followed
thereafter [Sections 357 to 372].

17.1 Definition [S. 357]:

‘Coast’ includes coast of creeks and tidal rivers.

17.2 Shipping casualties [S. 358]:

1. Shipping casualty deemed to occur when:

a. On/ near coast of India, any ship is lost, abandoned, stranded or materially damaged;
b. On/ near coast of India, any ship causes loss/ material damage to any other ship;
c. Any loss of life ensues by reason of any casualty happening to or on board any ship
on/ near coast of India;
d. In any place, any such loss, abandonment, stranding, material damage or casualty as
above mentioned occurs to or on board any Indian ship and any competent witness
thereof is found in India;
e. Any Indian ship is lost/ supposed to have been lost and any evidence is obtainable in
India as to circumstances under which she proceeded to sea or was last heard of.

2. Notice of shipping casualty to be immediately given to officer appointed by CG

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17.3 Report to CG [S. 359]:

Proper officer to forward report to CG and proceed to make a preliminary inquiry into the
casualty.

17.4 Application to Court for formal investigation [S. 360]:

Proper officer may and where the CG directs he shall make an application to Court requesting
it to make a formal investigation.

17.5 Court has power to enquire into charges of incompetency/ misconduct of

master/ mate/ engineer [Ss.362 & 363].

17.6 Person to have opportunity of making defence [S.364].

17.7 Court has the same powers as a court of criminal jurisdiction [S.365].

17.8 Court can constitute assessors conversant with maritime matters [S.366].

17.9 Court to send report to CG [S.369].

17.10 Power of Court to censure master/ mate/ engineer as well as remove master
and appoint a new one [Ss.371 & 372].

17.11 Marine Board (Outside Inside) Ss 373-376:

1. Convening Marine Boards outside (S. 373):

Indian Consular Officer/Naval Officer may, in his discretion, convene a Board of Marine
enquiry to investigate:
 Complaint by master/crew of Indian ship to the Consular Officer / Naval Officer
 Interest of owner of Indian Ship or cargo thereof requires it
 Allegation of incompetency /misconduct against master/officer of Indian Ship to
Consular Officer / Naval Officer;
 loss, abandonment or standing of Indian ship at or near the place where Consular
Officer / Naval Officer is;
 loss of life/serious injury to any person on board Indian ship at or near the place
where Consular Officer/Naval Officer is.
2. Constitution and Procedure of Marine Board (s.374)
 Consular Officer/Naval Officer convening the Marine Board shall appoint 2 other
members from among persons conversant with maritime /mercantile affairs;
 Consular Officer/Naval Officer to be the presiding officer;
 Marine Board to have power to regulate its own procedure.

3. Decision of Marine Board to be my majority [s. 375].

4. Powers of Marine Board [s.376] :

• Remove the master and appoint another qualified one – if it is the interest of safety of
Indian ship or her cargo or crew or owner of ship or owner of cargo.
• Suspend the certificate of master/officer for stated period
• Discharge a seaman and order wages to be forfeited
• Decide questions as to wages, fines forfeiture arising between parties to proceedings
• Orders survey of ship under investigation
• Orders costs of proceedings
• Order compensation for frivolous complaints
All orders made by Marine B to be entered in log book and sign by presiding officer

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18.0 Part XII – Wreck & Salvage :

18.2 Part XIII pertains to provisions concerning Wreck and Salvage (Section 309 to Section
404). What constitutes a wreck has been defined under Section 3(58) of the Merchant Shipping
Act as it exists today. The provisions mainly centre around the removal of the wreck by a
e<
Receiver of Wreck" appointed by the Central Govt.

18.2 The Receiver of Wreck may be appointed for different localities/areas on the Indian
coast. The entire responsibility of the removal of wreck and the expenses connected thereof is on
the Receiver of Wreck. Whenever an owner of a wreck wants to claim his property, his has a right
to do so, satisfying the Receiver of the Wreck appointed after paying up all expenses which have
been incurred by the receiver till then. These may include the salvage and other charges or cost
of the process of selling the wreck to recover the expenses. Under the Limitation of Liability,
Section 352 A covers the subject of removal of wreck also. There is a clear departure from the
limitation otherwise available to an owner in this particular section. The sub-section (3) takes away
the right of limitation to the owner or other liable parties in respect of any claim arising out of
obligation or liability imposed by any law relating to the removal of wreck and allied expenses. The
above provision notwithstanding, the Indian law, i.e., the Merchant Shipping Act does not have
any provision which places any obligation on the owner to remove a wreck. However, as per
general law, the owner of a wreck has an obligation towards removal of this wreck. The part XDI
Section 404 allows the Central Govt, to make rules in respect of wreck and salvage.

Wreck

 Under Section 3(58) of MSA ‘wreck’ includes the following when found in sea,
tidal waters and on the shore:
a. Goods cast into sea and then they sink and remain under water;
b. Goods cast or fall into sea and then remain floating on surface;
c. Goods sunk in sea but attached to floating objects so that they may
be found again;
d. Goods thrown away or abandoned and
e. Vessel abandoned without hope or intention of recovery.
 CG to appoint wreck receiver of wreck and take possession [S. 391]

 Duty of receiver to take command and assign duties; but not to interfere between
master and crew with respect to management of vessel [S. 392]

 Power of persons assisting to pass over adjoining lands and to deposit cargo.
Damage to land owner shall be a charge on the vessel/ cargo [S. 393]

 Power of receiver to suppress plunder/ disorder by force [S. 394]

 Person finding a wreck shall give notice to the receiver [S. 395]

 Receiver to investigate into matters such as name, description of vessel, names of

master, etc, names of cargo owners, ports from and to which vessel is bound,
occasion of wrecking, services rendered, etc [S. 396]

 Receiver to give notice of wreck [S. 397]

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 Immediate sale of wreck by receiver
a) Less than Rs 500;
b) So damaged/ perishable that there is no advantage in keeping it;
c) Not of sufficient value for warehousing

Sale proceeds, after defraying expenses, held by receiver [S. 398]

Salvage

 Where services are rendered:

1. Wholly or in part within the territorial waters of India in saving life from any
vessel; or elsewhere in saving life from a vessel registered in India; or
2. In assisting a vessel or saving the cargo/ equipment of a vessel wrecked,
stranded or in distress at any place on or near coast of India; or
3. By any person other than the receiver of wreck in saving any wreck
there shall be payable to the salvor by the owner of the vessel/ cargo/ equipment/ wreck a
reasonable sum for salvage [S. 402]

 Salvage payable for preservation of life to have priority over all other claims of salvage

 Where salvage services rendered by Government, Indian Navy, Coast Guard then
Government, shall be entitled to salvage

 Any dispute regarding amount due for salvage to be determined upon an application
made by either of the disputing parties to Judicial Magistrate of First Class/ Metropolitan
Magistrate where amount claimed does not exceed 10,000; and to the High Court where
amount exceeds Rs 10,000

 Nothing to affect any Treaty/ Arrangement with foreign country to which India is a party
with reference to disposal of proceeds of wreck on their respective coast

19.0 Part XIV – Coasting Trade:

19.1 Application [S.405]:

Part applies only to sea-going ships fitted with mechanical means of propulsion of not less
than 150 tons gross.

19.2 Indian ships or chartered ships to be licensed [S.406]:

(a) No Indian ship and no other ship chartered by a citizen of India or company or co-op
society shall be taken to sea from a port or place within or outside India except under a
license granted by D.G
(b) The C.G, may in public interest, by notification in O.G, exempt any class of ships
chartered by a citizen of India or company or co-op society from these provisions.
(c) The license granted may be a general license, or a license for whole or part of the
coasting trade of India, or a license for a specified period or voyage.

19.3 Licensing of ships for coasting trade [S.407]:

(a) No ship other than an Indian ship shall engage in coasting trade of India except under
license granted by D.G.
(b) License may be for a specified period of voyage.

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19.4 Revocation or modification of License [S.408]:

D.G has the power to revolve or modify the license granted u/Ss 406 and 407 after giving the
person a reasonable opportunity of representation.

19.5 Licenses to be surrendered to D.G without reasonable delay when they cease
to be valid [S.409]:

19.6 No port clearance until license is produced [S.410]:

20.0 Part XV – Sailing Vessels :

20.1 Application [S.415]:

Part applies to every sea-going sailing vessel owned by a citizen of India or company or co-op
society which satisfies requirements of clause (b) or clause (c) of S.21.

20.2 Certificate of registry [S.417]:

(a) Every sailing vessel other than a sailing vessel solely engaged in fishing for profit shall be
registered.
(b) The owner of the vessel shall make an application in the prescribed form to the registrar
for grant of certificate of registry.
(c) The owner shall cause the tonnage of vessel to be ascertained
(d) The Registrar shall enter in the register the following particulars:

(i) name of vessel, place where built, port to which she belongs,
(ii) rig, type and tonnage of vessel;
(iii) name, occupation and residence of owner
(iv) number assigned to vessel
(v) mortgage(s), if any, effected by owner, etc
(e) The registrar shall grant the certificate of registry.

20.3 Particulars to be painted[S.418]:

The owner of every registered sailing vessel shall, before the vessel begins to take any cargo
or passengers, paint permanently on conspicuous part of the vessel the :
(i) name by which the vessel is registered
(ii) the no. assigned to her by the registrar;
(iii) the port to which she belongs

20.4 Prevention of over-loading or over-crowding [S.420]:

(a) C.G to make rules regulating carriage of cargo or passengers in sailing vessel and
protection of life or property on board vessel.
(b) Any sailing vessel which proceeds to sea without free board making or is so loaded to
submerge such marking may be detained until such markings are made or vessel is so
loaded that marking is not submerged.

20.5 Certificate of Inspection [S.421]:

No sailing vessel to ply without certificate of inspection specifying:

(a) name and tonnage of vessel
(b) name of owner and tindal of the vessel
(c) max number of crew and max number of passengers, the vessel is fit to carry
(d) limits within which vessel may be used
(e) particulars of the free board assigned to vessel
The certificate must also state that her hull, equipment, etc are in good condition

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20.6 Cancellation or re-issue or alteration of certificate [S.422-423]:

After issue of inspection certificate, if the vessel is not fit to ply, or has undergone material
alteration, the certificate of inspection may be cancelled or re-issued if fit to ply.

20.7 Transfer of registry [S.424]:

Registry of a sailing vessel may be transferred from one port to another in India on application
of the owner or tindal of the vessel.

20.8 Closure of registry [S.425]:

If vessel is lost or destroyed or unfit for service, the registrar shall have the registry of vessel
closed.

20.9 Restriction on transfer of sailing vessel [S.426]:

No person shall transfer or acquire any registered sailing vessel or any interest in it without
previous approval of C.G

20.10 Mortgages of sailing vessels [S.427]:

(a) Every mortgage of sailing vessels to be registered with Registrar.

(b) Registrar to enter every mortgage in register in the order in which it is registered with him.
(c) If more than one mortgage, priority according to date on which each mortgage is
registered and not according to date of mortgage.

20.11 Insurance of members of crew [S.434-A]:

(a) Owner of vessel to maintain a policy of insurance whereby all members of crew are
insured against death or personal injury caused by accident in the course of employment.
(b) Maximum amount owner to pay by way of premium per year shall not exceed:

(i) Rs.150 where number of members of crew is not more than ten;
(ii) Rs 15 per member where number of members of crew is more than ten.
(c) No vessel to ply till policy of insurance is in force.

21.0 Part XV A – Fishing Boats:

21.1 Definition:

Indian fishing boat means:

(a) every fishing vessel as defined in S.3 of the Act.
(b) every sailing vessel whether or not fitted with mechanical means of propulsion, solely
engaged in fishing for profit.
(c) every boat or craft used solely for fishing which C.G by notification in Official Gazette,
specifies to be a fishing boat; and which is owned wholly by persons under clauses (a) (b)
(c) of S.21.

21.2 Obligation to register [S.435-C].

21.3 Port of registry [S.435-D].

21.4 Registration of Indian fishing boats [S.435-E].

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21.5 Application of registry [S.435-F].

21.6 Certificate for registry [S.435-G].

21.7 Particulars to be painted [S.435-H].

21.8 Certificate of Inspection [S.435-K].

21.9 Cancellation, re-issue of certificate of inspection [S.435-L].

21.10 Transfer of registry [S.435-O].

21.11 Closure of registry [S.435-P].

21.12 Restriction on transfer of Indian fishing boats [S.435-Q].

21.13 Mortgages [S.435-R].

22.0 Part XVI – Penalties & Procedures.

Section 443 under Part XVI pertains to penalties and procedure. Under this Section
power is granted to Port Authorities to detain a foreign ship if it has caused damage.
Whenever damage is caused to property belonging to the Government or citizen of India
or company by a foreign ship due to the misconduct of its master of member of the crew
anywhere in the world; and if there after such a ship is found within Indian jurisdiction,
the High Court has a right on application by the aggrieved person to detain such a ship
until the claim in respect of the damage is satisfied or security is given.

23.0 Part XVII – Miscellaneous.

24.0 Part XVIII – Repeals & Savings.

ooooo

SELF-EXAMINATTON QUESTIONS
1. Give a bird’s eye view of the Merchant Shipping Act
2. What is the importance of the Merchant Shipping Act?
3. What are the provisions of the Act regarding the registration of ships?
4. What are the provisions of the Act regarding the passenger ships?
5. What are the provisions of the Act regarding the safety measures to be observed by ships?
6. What are the provisions of the Act regarding collision?
7. What are the provisions of the Act regarding civil liability for oil pollution damage and prevention
and containment of pollution of the sea by oil?
8. How is the liability of personal injury and property claims apportioned?
9. Write short notes on:
(a) Receiver of wreck.
(b) Carriage of dangerous goods.

RECOMMENDED FOR FURTHER READING

1. Merchant Shipping Act - by Copt. J.S. Gill, J999.

2. The law Relating to Merchant Shipping in India, by B. C. Mitra, New Edition, 2000.

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LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 24

CARGO CLAIMS

1.0 TYPES OF CLAIMS:

There are two types of cargo claims:

I. CLAIMS FOR SHORTLANDING:

1.1 If some packages of the consignment are found missing while taking delivery,
consignee/ clearing and forwarding agent has to write to the shipping company to report the
missing packages and enquire about their whereabouts and lodge a formal claim.

1.2 The shipping company will take up with the stevedores and the port authorities for
tracing the packages and if not traceable at the port, the shipping company will send out tracers
to the port of shipment and other ports of call of the vessel.

1.3 Port authorities, as bailees, will receive the goods landed from the ship and deliver the
goods to consignees after collecting from them dues on the cargo.

1.4 As receipt of goods, the port authorities will issue to the shipping company tally sheets
and remarks' list. While the tally sheets will record the quantity of cargo landed, the remarks' list
will show the condition in which the cargo has landed.

1.5 If the port authority's tally of. a consignment is short and the missing packages are not
traced in the port and the shipping company confirms that the missing goods are not traced at
other ports of call of the vessel and that the port of shipment has confirmed the shipment in full,
then the port authorities will out-turn the missing goods as shortlanded and issue a shortlanding
certificate to the consignee/his clearing and forwarding agents.

1.6 The consignee has to submit to the shipping company claim documents in respect of
shortlanding, some of which are as under:

(i) Claim bill (4 copies) for c.i.f value of the shortlanded packages.
(ii) Invoice showing c.i.f. value, packing list, if necessary.
(iii) Shortlanding certificates issued by port authorities, and
(iv) Bill of Lading.

1.7 In case of inordinate delay, consignee can submit claim under his insurance policy, to
his underwriters and accept payment after signing a letter of subrogation. This means that the
cargo interests subrogate all their rights of recovery to the underwriters. The underewriters
(insurance company) in turn will approach the shipping company and seek settlement of the
claims. In such an event, a letter of subrogation is also required.

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II. CLAIMS FOR PARTIAL LOSS/DAMAGE :

1.1 If part of a consignment is found defective on landing the consignee or his clearing and
forwarding agent has to apply to the shipping company in writing requesting to hold a ship's
survey on the defective goods.

1.2 A ship's survey (survey by surveyors appointed by the shipping company) will be granted
if a survey is sought within three days from the date of landing of the goods. A carrier normally
grants ship's survey for three days from the last date of discharge of cargo from the ship. This
will be deemed to have been surveyed within the customary time limit. If applied for a ship's
survey thereafter, normally a time-barred ship's survey will be granted upto two weeks. Ship's
surveyors visiting the docks daily will survey the goods and issue a survey report, a copy of
which will be given to the consignee/his clearing and forwarding agent. The surveyors will
investigate and determine:

(a) The cause.

(b) Nature, and
(c) Extent of damage/loss.

1.3 There is every advantage in trying to arrange joint surveyors with representatives from
both sides (carrier and consignee or the underwriters as the case may be) in attendance. This
will not only keep the overall cargo claim costs down but will also save time, trouble and
documentation and will introduce a measure of cooperation between the concerned parties.

1.4 The consignee/his clearing and forwarding agent thereafter can clear the goods and
submit to the shipping company a claim for partial loss/damage. The claim bill is to be made out
on c.i.f. value of the goods missing/damaged.

1.5 Refund of customs duty is to be claimed from customs within six months from the date of
landing.

1.6 Along with the claim bill (4 copies) other documents to be submitted are:

(a) Invoice showing c.i.f. value

(b) Bill of Entry;
(c) Copy of Ship's Survey Report;
(d) Bill of Lading,
(e) Letter of Subrogation if claimed by underwriters.

1.7 It is common practice to adjust claims as between cargo and shipowning interests upon
the c.i.f. value and this would appear to be a most desirable arrangement in that the value of
any loss on this basis can be easily assessed. The legal position, however, is very much
different. It has been well established in law that the measure of damages in respect of any loss
or damage for which the ship may be liable is the sound arrived market value. Therefore, the
appropriate measure of damages is the invoice price plus freight, duty and the profit on the
resale less the salvage value of the goods, if any. Many underwriters attempt to claim the
insured value but this is not correct.

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2.0 WHO HAS THE RIGHT TO CARGO CLAIMS?

2.1 The endorsee of the bill of lading, the innocent holder for value, acquires rights to sue direct
under the contract of carriage evidenced by the bill of lading. The cargo claimant must establish a prima
facie case of loss or damage within the period of carriage, i.e., the loss or damage took place while the
goods were in the care of the carrier.

3.0 TIME LIMIT:

3.1 It should be remembered that under the Indian Carriage of Goods by Sea Act, 1925, claims
in respect of shipments are to be settled within one year from the date of landing or the date by which
the goods should have landed, otherwise the claims become statutorily time-barred. If a suit is to
be filed against the carrier in a Court of Law, it should be done within one-year's time limit. In actual
practice, cargo claimants apply in writing to the shipping company, seeking suitable extension of the
time limit till the claims are finally disposed of.

4.0 LIMITATION OF LIABILITY:

4.1 In accordance with the Indian Carriage of Goods by Sea Act, unless the value and nature of the
goods are declared and inserted in the Bill of Lading, before the goods are shipped, liability of the
carrier is limited to 100 Pounds Sterling per package or unit or the equivalent of that sum in another
currency. This Act, however, further adds that the monetary units are to be taken to be of gold value.
However in practice this is not so.

4.2 The gold value of 100 Pounds Sterling in 1924 clearly meant the intrinsic value of the gold
coin to which the holder of 100 Pounds Sterling in notes was, in theory, entitled— namely, 100 gold
sovereigns. The advantage was that not only the figure was uniform all over the world, but the gold
standard was a proof against inflation.

4.3 However in 1925 the Pound lost its convertibility into gold. It, therefore, became arguable
whether 100 Pounds referred to 100 Pounds gold value or 100 Pounds Sterling. The difficulty was
aggravated by some" Contracting States expressly adopting a cash value in their municipal
legislation; for example, in the United States the figure of $500 was adopted. In India each State
converted the 100 Pounds in its own way, leading to totally conflicting decisions. The Kerala High Court
opined that the figure of 100 Pounds referred to gold sovereigns; while the Bombay City Civil Court held
that 100 Pounds referred to 100 Pounds Sterling.

4.4 In a recent judgement, Hobhouse J. held, the figure 100 Pounds in the Hague Rules
referred not to 100 Pounds in today's money but to 100 Pounds Sterling gold value in 1924.

4.5 Under the auspices of the British Maritime Law Association, the famous Gold Clause
Agreement of 1950 was reached whereby a limit of Pounds Sterling 200 in paper currency per
package or unit was substituted for the Pounds 100 limit. This was, later increased to 400 Pounds in
1977. Being a domestic agreement of U.K. it could not be an effective agency to alter the provisions of
the Indian Carriage of Goods by Sea Act..

4.6 The issue of revision of Pounds 100 limit has been under constant discussion and
review and this has been revised by the Hague-Visby Rules.

208
4.7 The Visby Amendments of 1968 attempted to resolve the problem. They replaced the
amount of 100 Pounds with 10,000 Francs Poincare - a notional gold unit. To avoid very low
limitation in case of large containers a second choice for the shipper was added. He could
choose, instead of the 10,000 Francs per package, a limit of 30 Francs Poincare per
kilogramme of gross weight of the goods.

4.8 After the 1979 protocol to the Visby Amendments, this amount was calculated with
reference to the Special Drawing Rights (SDR) as defined by the International Monetary Fund. It
is now set at 666.67 units of account per package; or 2 SDR per kilogramme of gross weight of
the goods. This amount is converted into the national currency on the basis of the value of that
currency on a date to be determined by the law of the Court seized of the. case. The conversion
value of an SDR on a particular date can be determined from the Reserve Bank of India.

4.9 Under the Multimodal Act, the liability of a carrier for loss of or damage to goods is
limited to 666.67 SDR per package or 2 SDR per kilogramme of gross weight of the goods lost
or damaged when the nature and value of the consignment have not been declared and stage
of transport where loss or damage occurred is not known. Where the stage of transport where
loss of damage occurred 75 known, the limit of liability is determined in accordance with the
provisions of the relevant law applicable in relation to that mode of transport during the course
of which the loss occurred. For delay in delivery, the liability of the multimodal transport operator
is limited to the freight payable for the consignment so delayed.

4.10 The maximum limits of carrier's liability are not of an absolute character. Though the
maximum limits cannot, by agreement, be reduced below the prescribed limits, they can be
increased provided that:-

i) the shipper before shipment makes a declaration, of the nature and the
value of the shipped goods, to the carrier; and
ii) this declaration is inserted in the bill of lading.

5.0 CUSTOM DUTY :

5.1 The Customs Act 1962 stipulates that duties of the Customs shall be levied on dutiable
goods at such rates as may be specified under the Customs Act. Accordingly, Customs duty will
have to be paid by the importer on dutiable goods imported into India. A consignee can also
claim refund of duty paid by him for goods lost or missing.

The Customs will refund the duty, but thereafter they will levy penalty on the shipowner for the
cargo lost or destroyed which the shipowner will have to bear.

6.0 PREVENTION OF LOSS OF / DAMAGE TO CARGO:

6.1 Stowage is very specialized function wherein the carrier is expected to know the
characteristics, nature and behaviour of the cargo, their suitability or otherwise to be stowed with
other cargo, the space it will occupy to make a ton (stowage factor), precautions and care necessary
to preserve the cargo in its proper condition and to handle it safely while loading and discharging. This
function should be carried out with utmost care and knowledge.

6.2 Documentation, which exposes the cargo to the risk of theft, is also a major contributor to cargo
loss. Circulation of documents must be restricted to those directly concerned with the movement and

209
storage of the cargo. Accurate checking of the cargo against the shipping documents should be
maintained where the cargo is being transferred or stowed. Failure to do so will result in shortages in
cargo tallies and subsequently claims for stolen goods.

6.3 It has been pointed out that containerization offers the cargo owners protection by way of
anonymity. Most containers do not bear outward markings to indicate the nature of their contents, the
contents not known until the container is broken open. At any rate containerization has helped in
reducing pilferage or petty theft.

6.4 Port is considered a bailee according to the Major Port Trusts Act under whose custody the
cargo is discharged by the carrier. For the cargo received into their custody the port authorities issue
to the carrier receipts in the form of tally sheets and remarks lists. Experience shows that tallies of
Port Trusts are often far short of the actual package discharged into their custody.

6.5 An ideal situation is where the port authorities issue 100 per cent tally for all the cargo
discharged into their custody as the tally of the port authorities, being that of a bailee is legally more
acceptable.

6.6 Often difficulties have been experienced to secure supplementary tallies or receipts from the
port authorities though the cargo concerned has been traced.

6.7 Piece-rate system of cargo handling has now been adopted in all the major ports of India.
Although this system helps to increase the productivity of the port labour, the hasty handling tends to
increase the risk of damage to the goods. For example, use of hooks on bagged cargo results in
damage and pilferage.

7.0 The following suggestions are made to reduce the losses:

(1) Packing the goods in the best possible way, making the package absolutely "strong
enough to withstand the handling in transit.

(2) Marking the package (particularly of goods prone to theft/pilferage) with code words or
numbers without disclosing the contents.

(3) Marking the package with indelible ink or quality paint, so that marks remain on'the
package till it reaches the consignee.

(4) Strict supervision and careful handling at the time of loading and discharging of
cargo.

(5) Proper stowage and carriage of cargo during the voyage.

(6) Proper tallying of cargo.

(7) Proper stacking of cargo after discharge from the.ship consignment-wise, avoiding
mix-up of cargoes. This problem becomes acute when the landing shed is
congested with the cargoes of exports and imports. This should be avoided as far as
possible. When the cargo is removed to uncleared warehouse, stacking of cargo
should be in order — shipwise and consignment-wise.

210
 (8) Restricted circulation of cargo documents only to those directly concerned with the
movement and storage of cargo.

(9) Efficient security measures for guarding the cargo while in the custody of the
carrier/port. However, any security system is only as good as the people who
organize and run it.

ooooo

SELF EXAMINATION QUESTIONS

1. (a) What are the different types of claims?

(b) What is the procedure for handling a claim for short-landing?
2.What is the procedure for settlement of partial loss/damage claim and on what basis is the
payment effected?
3. How is limitation of liability handled in the Hague and the Hague-Visby Rules and the MTOG
Act, 1993?
4. Discuss the ways and means to prevent loss/damage to cargo.
5. Can a claim be put for recovery of customs duty for goods'losfor missing?

RECOMMENDED FOR FURTHER READING:

1. Carriage of Goods by Sea ^Multimodal Transport — Dr. (Mrs.) Nilima Chandiramani,

1997.
1. Limitation of Liability of Maritime Claims — Griggs, 2ndEd, 199L
2. Bills of Lading - A. Mitchehill, 1st Ed, 1982.
3. Cases and Materials on the Carriage of Goods by Sea —M. Dock, 1st Ed, 1987.

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211
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 24

WRECK REMOVAL

1.0 INTRODUCTION :

1.1 The Nairobi International Convention on the Removal of Wrecks enters into force on
Tuesday (14 April 2015). The Convention places strict liability on owners for locating, marking
and removing wrecks deemed to be a hazard and makes State certification of insurance, or
other form of financial security for such liability, compulsory for ships of 300 gt and above. It also
provides States Parties with a right of direct action against insurers.

1.2 The Convention fills a gap in the existing international legal framework by providing a set
of uniform international rules for the prompt and effective removal of wrecks located in a
country’s exclusive economic zone or equivalent 200 nautical miles zone. The Convention also
contains a clause that enables States Parties to “opt in” to apply certain provisions to their
territory, including the territorial sea.

1.3 The Convention provides a legal basis for States Parties to remove, or have removed,
wrecks that pose a danger or impediment to navigation or that may be expected to result in
major harmful consequences to the marine environment, or damage to the coastline or related
interests of one or more States. The Convention also applies to a ship that is about, or may
reasonably be expected, to sink or to strand, where effective measures to assist the ship or any
property in danger are not already being taken.

2.0 Provisions in the Convention include:

• a duty on the ship’s master or operator to report to the “Affected State” a

maritime casualty resulting in a wreck and a duty on the Affected State to warn mariners
and the States concerned of the nature and location of the wreck, as well as a duty on
the Affected State that all practicable steps are taken to locate the wreck;

• criteria for determining the hazard posed by wrecks, including depth of water
above the wreck, proximity of shipping routes, traffic density and frequency, type of
traffic and vulnerability of port facilities. Environmental criteria such as damage likely to
result from the release into the marine environment of cargo or oil are also included;

• measures to facilitate the removal of wrecks, including rights and obligations to

remove hazardous wrecks, which set out when the shipowner is responsible for
removing the wreck and when the Affected State may intervene;

• liability of the owner for the costs of locating, marking and removing wrecks - the
registered shipowner is required to maintain compulsory insurance or other financial
security to cover liability under the convention;

• settlement of disputes.

212
3.0 The Convention was adopted by a five-day International Conference at the United
Nations Office at Nairobi (UNON), Kenya, in 2007.

3.1 The States Parties to the treaty as at 14 April 2015 are: Antigua and Barbuda, Bulgaria,
Congo, Cook Islands, Denmark, Germany, India, Iran (Islamic Republic of), Liberia, Malaysia,
Marshall Islands, Morocco, Nigeria, Palau, and the United Kingdom.

3.2 The Convention has come into force for Malta on 18 April 2015 and for Tuvalu on 17
May 2015.

3.3 Merchant Shipping Act 1958 (India) is being amended to incorporate the provisions of
Wreck Removal Convention. The Rules would also be made to implement this Convention in
India. The Rules would be available on D.G. Shipping’s web site ‘www.dgshipping.gov.in’.

ooooo

213
LAW OF SEA TRANSPORT FINAL YEAR

LESSON – 26

MARITIME LABOUR CONVENTION (MLC) 2006

1.0 INTRODUCTION :

Maritime Labour Convention (MLC)2006, which is considered as the “fourth pillar” of International
Maritime Law and ‘bill of rights’ for the seafarers provides them not only their fundamental rights as
workers, but also provide minimum international standards for living and working conditions,
including such things as food, accommodations, medical care, repatriation, social security, and
recruiting. The convention comes into force with effect from 20.08.13. The convention is in its
advanced stage of ratification by India. In order to keep the Indian flag ships and Indian seafarers in a
comfortable position, when the convention comes into force internationally, the Indian Maritime
Administration had facilitated the Indian Ships, owners to subject their ships to a voluntary
inspection for MLC, 2006, vide M.S. Notice No. 07 of 2013(F. No. 16(5)/CR/2010) dated 01.02.13, so
that a ‘Statement of Compliance’ for MLC 2006 can be issued to such ships which will enable these
ships to receive favorable treatment under MLC regime in foreign ports till the ratification of the
convention by India.

ooooo

214
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING

Three Model Test Papers have been

kept below for each subject.

Every Correspondence Student is to

compulsorily answer two Test
Papers on each subject and send
them back to the Institute before 31st
December, 2020 in order to be
eligible to take up March - 2021
Examination.
£
*******

215
 NAROTTAM MORARJEE INSTITUTE OF SHIPPING

FINAL YEAR

LAW OF SEA TRANSPORT

THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND IN NO WAY
REFLECTS THE PATTERN OF THE ANNUAL EXAMINATION QUESTION PAPER.

TEST PAPER 1
1. (a) "The bill of lading though not containing the carriage contract is a strong evidence of the terms of the contract".
Examine the statement.
(b) Discuss the role of the bill of lading as a document of title to the goods.

2. (a) What is a contract of affreightment?

(b) Differentiate a charterparty from a bill of lading.
(c) State and explain the different types of charterparties.
(d) Enumerate and discuss the implied undertakings in a charterparty.

3. Discuss the salient features of COGS A 1925 and examine them in the contract of modern development in the law.

4. (a) Under what circumstances can a vessel be searched under the Customs Act?

(b) What is the procedure to be followed to stop such a vessel?

(c) Is the customs officer empowered to immobilise the person-in-charge of the vessel
in order to stop the vessel?
(d) Discuss the provisions of the Customs Act relating to coastal goods and vessels
carrying such goods.

5. (a) Define freight. When is it payable?

(b) By whom is freight payable?
(c) Explain the different types of freight.

6. (a) What is the object of the Convention on the Facilitation of International Maritime Traffic?
(b) How does the Convention purport to achieve this object?
(c) What is the scope and application of the Convention?

7. What is maritime fraud? When does it occur? Critically exarnine the measures adopted to prevent such frauds.

8. Write short notes on any three of the following:

(a) Athens Convention, 1974 (b) Marine pollution
(c) Salvage (d) Towage
(e) Historical background of the Hague Rules.

9. Discuss the provisions of the Merchant Shipping Act, 1958, relating to registration of ships and safety.

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216
 MAROTTAM MORARJEE INSTlTUTE OF SHIPPING

FINAL YEAR

LAW OF SEA TRANSPORT

THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND IN NO WAY
REFLECTS THE PATTERN OF THE ANNUAL EXAMINATION QUESTION PAPER.

TEST PAPER 2
1. Discuss the role of the bill of lading as a receipt for goods vis-a-vis the Bill of Lading Act 1856, the Hague
Rules 1924, and the Hague-Visby Amendments 1968.

2. What is a charterparty? With the help of case law explain fully frustration as applicable to a charterparty.

3. Explain the main features of the Multimodal Transportation of Goods Act, 1993. Is it an improvement over the
Hague, the Hague-Visby and the Hamburg Rules?

4. Explain briefly any two of the following

(a) Freight (b) Maritime lien

(c) Maritime fraud (d) Maritime arbitration

5. (a) What is General Average? Discuss the essential features of a General Average Act.
(b) What is General Average Loss ? Give examples of losses allowable and non-allowable in General
Average.

6.- (a) Explain circumstances in which a vessel can be confiscated under the Customs Act? What are the defences
available to the owner/master? (b) _What is the penalty imposed on the Master for not unloading the cargo at
its place of destination in India?

7. (a) What is me difference between the Indian Ports Act and the Major Port Trusts Act as far as the application
of the Acts are concerned? (b) State the responsibility of the Board under the Major Port Trusts Act for
the loss/destination of goods. Discuss the Board's right to claim for damage to port property and its right of lien
and right to sell the gootjs.

8. (a) Trace the origin of admiralty law.

(b) Outline the development of admiralty jurisdiction in India.
(c) Discuss the procedure for the arrest of a ship.

9. (a) What is an Indian ship?

(b) How can a merchant ship be registered in India?
(c) Is registration compulsory?
(d) What are the documents required for registration?
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 NAROTTAM MORARJEE INSTITUTE OF SHIPPING

FINAL YEAR

LAW OF SEA TRANSPORT

THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND IN NO
WAY REFLECTS THE PA TTERN OF THE ANNUAL EXAMNA TION QUESTION PAPER.

TEST PAPER 3
1. "The efficiency of the bill of lading as a negotiable instrument depends upon the ease with which the rights and
liabilities under the carriage contract are transferred to the consignee or indorsee." Critically examine the statement
in the light of Section 1 of the Bill of Lading Act.

2. Compare and contrast the Hague, Hague-Visby and Hamburg Rules.

3. The Customs Act contains specific provisions for proper control over vessels entering or leaving India and carrying
imported or exported goods. State and discuss these provisions fully.

4. "The doctrine of frustration in case of charterparties has a limited scope". Explain the statement.

5.. Write notes on any three:

(a) Collision (b) LOF

(c) UKSTC (d) Admiralty jurisdiction
(e) Liability of the Carrier under the Athens Convention

6. The Torrey Canyon disaster in 1967 triggered the international drive to combat oil pollution on sea. How was this
achieved?

7. (a) What is maritime lien?

(b) Enumerate and explain the claims giving rise to maritime hen.
(c) State the priorities of these claims.

8. (a) State and discuss the powers of the Deputy Conservator of a major port and me Port Officer of a minor port.
(b) What terms are implied in a towage contract?
(c) Trace the role of 1MB in preventing maritime frauds.

9. (a) What is arbitration ? Does it have an advantage over litigation?

(b) Is arbitration an effective method of settling maritime disputes?
(c) What maritime contracts may be subject to arbitration?
(d) How is an arbitration award enforced?

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