For contract cases, such as Salvage, Towage and General Average, we recommend the incorporation of comprehensive choice of law and jurisdiction clauses, these can be tailored to your preferences. Collisions and fixed and floating claims require a negotiation to achieve a mutual dispute resolution procedure.
In our opinion an English choice of law and jurisdiction clause is preferable for the following reasons:
- English courts are independent and impartial.
- English court decisions are transparent and predictable.
- English court judgments are respected internationally.
- An English judgment can be enforced in many key international jurisdictions.
In fact, the English High Court announced in October 2015 the Shorter Trials Pilot Scheme designed to offer dispute resolution ‘on a commercial time scale’ with cases managed by docketed judges with the aim of reaching trial within 10 months of the issue of proceedings and judgment within 6 weeks thereafter. All cases participating in the pilot scheme have achieved conclusion within the 10 months with judgment following within 4 weeks.
English courts deter weak or speculative claims through the rules of 'loser pays' and 'pay as you go' and an absence of jury trials and punitive damages.
Access to the court and the judiciary is subject to a nominal fee for court administration and the English Court maintains a strict case management system, thus cases commonly complete within 12 months.
High Court or Arbitration
The following issues need to be taken into consideration when choosing between High Court and Arbitration:
- Arbitrations are personal contracts, thus third parties who may indeed be responsible for the problem cannot be brought into the arbitration.
- The High Court has powers to bring in third parties by service of legal proceedings upon 'fit and proper parties' allowing Joinder of parties domestically and Joinder of overseas parties by virtue of long arm jurisdiction.
- High Court actions have the additional benefits of Part 36 Offers which are a very powerful negotiating tool and provide a great incentive to settle. Failure to accept a winning Part 36 Offer produces interest on the claim at up to 10% above UK bank rates, indemnity costs and interest on costs from the expiry of the offer at up to 10% above UK bank rates.
- The Part 36 Offer regime has no applicability to Arbitrations. Indemnity costs will not be ordered even where the winning party beats his own sealed offer.
- The English High Court has the power to enforce its judgments, whether interlocutory or final and whether concerned with procedural issues or matters involving principal, interest or costs. Similarly, the English High Court has the power to indirectly sanction a party for failure to comply with the Court’s Order.
- Arbitrators do not have the power to enforce Awards, whether interlocutory or final and whether concerned with procedural issues or matters involving principal, interest or costs. Similarly, arbitrators do not have the power to directly or indirectly sanction a party for failure to comply with the Tribunal’s Orders, which, in our view makes an arbitration action somewhat ineffective.
Rights of Arrest
Arrest is a right, an entitlement, so long as the claim falls within the High Court's jurisdiction (which is contained in S.20(2) of the Senior Courts Act 1981). The applicant does not have to seek the courts leave or apply for permission, but simply complete the following forms: first issue a Claim Form and then the two documents that are required to be filed in court are:
- An application and undertaking for arrest, and
- A declaration in support.
Following their completion, the Admiralty Marshall affects the arrest. The arrest continues until security is in place. Breach of arrest is contempt of court. The court has the power to Order the amount and form of security to be provided and will be looking for the following issues to be covered:
- The Surety must be of an English or EU registered company (note, post Brexit, EU companies may not be acceptable) of good standing, subject to such good standing being questioned by claimants.
- Security is granted for an open-ended period of time (i.e unlimited).
- The sum secured is an amount covering assessment of the claim, interest and costs up to judgment on basis of our 'best reasonably arguable case'.
- Failure to post adequate security will result in the Admiralty Marshal selling the vessel pending litigation and paying the proceeds into court.
Once Jurisdiction is founded, the second step is to obtain Security. There is no point in proceeding in an unsecured claim, only the minimum of costs should be expended until the claim is secured. Acceptable security is limited to a Lloyd's Bond posted through Lloyd's of London, or placement of the security into an escrow account on standard terms with a London bank, or a LOU on standard form from a P&I club that is a member of the International Group.
The claimants are entitled under Admiralty Law to restrain assets to provide adequate security on the basis of the claimant’s best arguable case. In essence security is obtained against threats of arrest actions in English and other convenient jurisdictions against a ship or sister ship, cargo or freight and, in certain jurisdictions, bunkers on time-chartered vessel. Security in an acceptable form is not always available, forcing us to seek an order for appraisement and sale following arrest. A consideration of the law in relation to the doctrine of Priorities is essential here.
COLLISIONS, SALVAGE, TOWAGE & GENERAL AVERAGE
Collision in its common law sense is no more than the use of the tort of negligence to cover a situation where damage is caused to one vessel by another in circumstances where the law demands that reparation be made to the innocent party.
Although the very word 'collision' (from the Latin) implies contact and/or impact between vessels, it need not necessarily be between their respective hulls; contact with an anchor chain or with the fishing net of a trawler has been held to be contact within the meaning of the expression. Indeed a vessel may cause damage by its negligence to another vessel without actual contact.
To avoid negligent navigation and to ensure that all users of the sea will abide by a basic set of principles a number of international conferences have been held from which have come a series of Collision Regulations the latest of which is the International Regulations for Preventing Collisions at Sea 1972, the latest amendments to which came into force internationally on 29 November 2003.
In collision actions everything turns upon the initial first steps of investigation:
- Agree Jurisdiction
- Agree Security, there is absolutely no purpose to proceed without security being in place.
- The collection of evidence.
Since 1911, English Law has adopted a cross-liability system of apportionment. Cross-liability means that the loss is to be divided in proportion to the degree of blame of each ship. This is now encapsulated in S.187 of the MSA 1995 which provides as follows:
"(1) Where by the fault of two or more ships, damage or loss is caused to one or more of those ships, to their cargoes or freight, or to any property on board, the liability to make good the damage or loss shall be in proportion to the degree in which each ship was at fault."
The definition of salvage is:
"A service which saves or helps to save a recognised subject of salvage when in danger, if the rendering of such service is voluntary in the sense of being solely attributable neither to pre-existing contractual or official duty owed to the owner of salved property, nor the interest of self preservation"
The recognised subjects of salvage are:
- Ship and its apparel
Lloyd's Open Form (LOF) 2011
There are two changes made to the LOF itself. First, under LOF clause 3, the details of LOF awards are to be made available on the Lloyd’s website albeit only by subscription. This provision changes, in our view for the better, the traditional confidentiality that parties to a LOF Salvage Arbitration enjoyed. The Council of Lloyd’s justifies this change as part of a general policy of transparency and it is accompanied by a new procedure for appointment to the LOF Panel of Arbitrators, also designed to enhance transparency. One further step in this admirable transparency is that Lloyd’s is also making copies of the Appeals Awards publicly available. Second, under LOF clause 4, Lloyd’s now requires that all agreements using the LOF shall be reported to Lloyd’s.
Panel of Lloyd’s Salvage Arbitrators:
- Elizabeth Blackburn QC
- Simon Kverndal QC
- Lionel Persey QC
- Vasanti Selvaratnam QC
- Jeremy Russell QC (Appeals)
In matters of towage our legal services will be able to assist in relation to Towage contracts including UK standard towage conditions which we recommend shipowners seek to avoid. Issues of the authority of the master, performance and payment, relationship between tug & tow, 'commencement of tow', specific performance of indemnities, General Average and towage, towage insurance considerations, indemnification of the tug owner and finally, towage under the law of salvage.
GENERAL AVERAGE (GA)
In essence, GA will be governed by the GA provision appearing within the relevant contract of carriage, normally this will incorporate into the contract a version of the York Antwerp Rules.
Rule A of the York-Antwerp Rules defines 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."
Our principle involvement in this field is recovering cargoes' contribution to General Average on behalf of the shipowner.
The position is set out below.
Note on recoVery of General Average Contributions
The GA Incident
The starting point is that a vessel suffers a General Average incident, the Master declares GA and thus the Owners suffer costs and expenses on behalf of the whole adventure. Thereafter the Owners appoint Average Adjusters.
Prior to the vessel's arrival at the various discharge ports, the Consignees and their Cargo Insurers would be contacted by the Owner's appointed Average Adjusters and, against a threat of the Owner exercising their GA lien and refusing to discharge the cargo, Lloyd’s Average Bonds and Average Guarantee would be completed by Consignees and their Cargo Insurers respectively. The form of these bonds and guarantees are supplied by the Owner’s Average Adjusters.
We at RR&CO consider it part of the Average Adjusters duty to ensure that the Lloyd’s Average Bonds and the Average Guarantees contain an exclusive choice of law and jurisdiction clause (preferably English law and jurisdiction). Failure to include such a law and jurisdiction clause makes the bonds and guarantees virtually worthless.
Recovery of GA Contributions
The Average Adjusters complete the General Average Adjustment and send an email request to the Cargo Insurers for payment under the Average Guarantees. If they fail to pay then we are instructed to recover the sums outstanding.
We always begin with a consideration of the appropriate jurisdiction in which to bring the claim. We email and phone the insurers to enforce the Average Guarantees and if we are unable to obtain a sensible response, given that the failure to pay amounts to a breach of the Lloyd’s Bonds, breach of the Cargo Insurers' Average Guarantees and a breach of the contract of carriage, we next seek enforcement, preferably in the English High Court.
Enforcement of Securities
In such a case, we would intend to enforce the Average Guarantees against the Cargo Insurers without disturbing the Consignees.
It is a simple and inexpensive matter to start an action in the English High Court to enforce such guarantees. If however the Average Adjusters have failed to specify the law and jurisdiction of the bonds/guarantees then we must commence action under the contract of carriage, which may be more expensive and problematic in foreign jurisdictions.
We would add that whilst we have been forced to commence action in the appropriate court on a large number of occasions such commencement has prompted Cargo Insurers to swiftly pay their outstanding contributions without the need to incur wasted costs.