Shipping 2021

The new Shipping 2021 guide covers 23 jurisdictions. The guide provides the latest information on port state control, marine casualties and owners' liability, cargo claims, maritime liens and ship arrests, passenger claims, ship-owners' income tax relief and the implications of COVID-19.

Last Updated: February 24, 2021

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Harris & Co Shipping & Maritime Law has two experienced lawyers at its head, acquiring precedents in court judgments, professional articles, lectures and conferences. It follows English law and judgments of other foreign jurisdictions and uses these to strengthen its arguments and/or to contend with local judgments. Harris & Co has deep and wide legal knowledge, and with the clarity and sharpness of its written and verbal pleadings, demonstrates the highest quality of cross-examination, acting promptly in obtaining arrest orders and liens, within very short timeframes, and resolves never to concede, if the legal position so warrants, in order to protect clients' rights. The firm has extended its involvement in Supreme Court and Haifa Maritime Court precedents, the variety of maritime matters it handles and of its academic presence, both in publishing articles, lecturing, and contributing to international shipping and maritime law publications.


The WHO Director General's opening remark on the mission briefing on COVID-19, on 12 March 2020, that "the global COVID-19 can now be described as a pandemic" was in fact a formal announcement reflecting a global health economic and political crisis, which is still pending, even after more than a year.

On that date, the reports of the Ministry of Health of the People's Republic of China reporting 7,711 confirmed and 12,167 suspected cases and the WHO's reports of "83 cases in 18 countries, of these only 7 had no history of travel in China" seems somewhat naïve, when currently the world is facing 4.7 million new cases a week and a cumulative total of 93 million reported cases, with over two million deaths globally since the start of the pandemic (WHO's weekly report on 19 January 2021).

One of the symbols of the outbreak of the pandemic was the quarantining of the cruise ship Diamond Princess on 4 February 2020 at the Port of Yokohama, Japan, after one of its passengers, who disembarked in Hong Kong on January 25th, was found six days later to have tested positive for COVID-19. When the vessel arrived in Japanese territorial waters a few days later, ten passengers were diagnosed with COVID-19. As of March 16th, 712 of the 3,711 passengers and crew were found to have tested positive with the virus. On May 16th, the Diamond Princess departed the Port of Yokohoma. On November 2nd, Carnival Corporation & Plc (the owners, through its subsidiary Princess Cruises, of the Diamond Princess) issued a formal notice of the extension of the pause of its North American operations and the cancellation of the remaining voyages which were scheduled to depart during December 2020.

The outbreak of the pandemic was also notable in the fall of demand for oil in the first months of 2020, which led both to a fall in the price of the oil and to a shortage of storage areas, with no empty space to store all of the oil which was produced, given no demand. The result was tankers turning into floating storage facilities.

According to the United Nations Conference on Trade and Development (UNCTAD), reports based on data provided by "Marine Traffic" (https://unctad.org/news-search) soon after the date of the WHO's characterisation of COVID-19 as a pandemic in mid-March 2020, container ships' arrival started to fall below 2019 levels. Recovery was recorded only towards the end of June 2020, corresponding with the easing of lockdowns in some countries.

One outcome of vessels navigating and calling at ports during a global pandemic, and with governmental restrictions on the entry, embarking and calling at their countries, was the crew-change crisis.  According to the International Transport Workers' Federation's (ITF) statement of 17 July 2020, based on extrapolating the latest data from ITF-covered ships, the number of seafarers world-wide trapped working aboard ships due to governments' COVID-19 border and travel restrictions was estimated at 300,000 and an equal number of unemployed seafarers were waiting to replace them on those ships, which means that 600,000 seafarers were thus affected by the pandemic. 

As can be evidenced for example by the wording of Article IV clauses 2 (d), (g) and (h) of the Hague-Visby Rules, an "Act of God", "Arrest or restraint of princes, rulers or people, or seizure under legal process" and "Quarantine restrictions" were not first introduced in the current COVID-19 pandemic crisis. These kinds of restrictions have been imposed upon shipping and vessels for ages. Carver's Carriage of Goods by Sea, by Thomas Gilbert Carver, presents the early example of Miller vs Law Accident Insurance [1903] when a discharge of diseased cattle was forbidden by the Buenos Aires authorities and, on the following day, the ministry issued a general order forbidding the discharge of any cattle arriving from the United Kingdom. The ship therefore left the dock at Buenos Aires with the cattle and they were trans-shipped outside the port and landed in Montevideo. It was held that the loss of the voyage to Buenos Aires was by "restraint of people".

In fact, as explained by Joe Schwarcz PhD (on www.mcgill.ca on 6 February 2020), the term "quarantine" derives from "quaranta giorni", meaning 40 days, and can be traced back to the 14th century when, as an act of protection against the spreading of the Great Plague (also referred as the Black Death) which at that time had devastated Europe, the city of Dubrovnik ordered that all ships and people had to be isolated for 40 days  before entering the city.

The words "force majeure" appear in Article 1148 of the Code Napoleon, which provides: "There is no occasion for damages where, in consequence of force majeure or cas fortuit, the debtor has been prevented from conveying or doing that to which he was obliged or has done what he was debarred from doing". Accordingly, in the year 1934, when a French vendor who contracted to deliver wine "by the end of February" found on the last days of that month, when attempting to deliver the wine, that all the roads were impassable due to flooding, he received the French Court's protection which excused him from performance of his obligation (Force Majeure and Frustration of Contract, page 7, by Ewan Mckendrick).

In contrast to the French concept of force majeure, it seems that the only possibility available under English law permitting the non-performance of contractual obligation is the concept of "frustration", applicable when the performance would render the obligation radically different from that for which it was originally contracted. The "frustration" relates more to occurrences which were not foreseeable at the time of conclusion of the contract, whilst force majeure circumstances are capable of being foreseen and allow the parties to suspend performance until the force majeure circumstances have passed; the English concept of frustration is more limited to the giving rise to an immediate termination of the contract.

English law recognises that, if the contracting parties have agreed that extraneous circumstances, not under the control of the parties, allow the suspension and even cancellation of the contract, such a contractual understanding should be enforced. It seems, therefore, that the English law "force majeure" is not a pure English law legal concept, but rather the giving of effect to contractual undertakings of the parties.

The foregoing can be illustrated, for example, in Arbitration 2/19, when a loading ship was required by the Mississippi Port authority to leave the terminal due to an approaching hurricane and to be anchored in an anchorage area. It was held that the ship was not compelled to leave the terminal because of the hurricane itself, but rather due to an anticipation of the hurricane and the need to "catch" an anchorage spot, with the result that the ship indeed "caught" the last anchorage. The matter was not recognised as a force majeure and, allegedly, the charterers would have had to pay demurrage for the delay in the loading operations. However, in that matter, due to an additional clause in the agreement, which stated that if the ship was delayed for any reason whatsoever not under the control of the charterers, the "lost time" would be on the account of the charterers, the owners' claim for demurrage was denied.

In another matter, also relating to the Mississippi river and a hurricane, a ship presented for loading a cargo of soya which was held in barges ready for loading was damaged by the storm and it took 15 days until the ship was righted. The cargo of soya was damaged, too, and the charterers could not provide an alternative cargo. The charterers contended that the inability to load the cargo was an "Act of God", entitling them to rely on force majeure. It was held that, in the agreement, the cargo was described as "soya beans" and was not further specified as being the specific cargo which was damaged. Therefore, the charterers were obliged to provide an alternative cargo (instead of the one which was damaged) and were not entitled to cancel the agreement. As the agreement was, accordingly, unlawfully cancelled by the charterers, it was held that they should pay the owners damages of hundreds of thousands of US dollars (Arbitration 3/19). In the matter of Classic Maritime Inc vs Limbungan Makmur Sdn Bhd and Others, it was held that the fact that a protecting dam protecting an iron mine had collapsed and the mine had ceased activities did not release the charterers from their liability to supply iron pallets as cargo. It was held that the matter was not a matter of an "Act of God" or "accident of the mine" which would have excused the charterers. This was because the real reason that the charterers did not supply the iron pallets was because of their commercial dispute with another mine which could have provided them with the required pallets. The court held that the charterers should pay owners compensation of USD19.8 million.

Returning to the case of the French vendor, it seems that if his matter had been decided under English law he would have been obliged to deliver some wine other than that which he could not deliver due to the flooded roads, not to mention that it was only during the last days of February that he decided to start to fulfil his obligation, which he could have done earlier that month. Thus, it might have well been that under English law the matter would not have been considered to be a case of force majeure.

Besides the diversity and differences between the French concept of force majeure and the attitude of English law, another element should also be considered, which is the foreseeability.

Could it really be contended that, when a formal announcement of a global pandemic has been declared in mid-March 2020 and governmental regulations and restrictions have been published, quarantines, restraints and other events relating to the pandemic are unforeseeable?

Obviously, the matter of a cruise vessel such as the Diamond Princess which was "caught" by the virus during its voyage, is different from that of a ship-owner's, charterer's or cargo interest who were contracting after mid-March 2020 and from that of ship-owners who had begun their vessel's voyage being aware, for example, of the crew-change crisis and, having that awareness, should "properly man, equip, and supply the ship" (Hague-Visby Rules, Article III, clause 1 (b)).

In relation to knowledge of facts existing before the beginning of a voyage, reference can be made to another example presented in Carver's Carriage of Goods by Sea: a ship proceeded from Mombasa, a plague-contaminated port, to Naples, where she loaded lemons for carriage to London. At Marseilles, the ship was disinfected with sulphur in accordance with a decree of the French Government requiring disinfection owing to her having come from a plague-contaminated port. The lemons were damaged by the sulphurous fumes. It was held that the damage to the cargo was not caused by the exception of "restraint of princess" (Ciampa vs British India S.N. Co. [1915]).

It seems, therefore, that the COVID-19 pandemic will contribute, or in fact does contribute, its part to the development of the legal concepts of force Majeure and frustration. However, just as it influences almost every aspect of day-to-day life, it seems that this virus also touches many aspects of shipping.

It can be shipyards and building, managing, manning, chartering, container vessels or bulk carriers, ports and governmental regulations or passengers and cruises that are affected. Relevant and updated clauses are drafted and implemented in the relevant agreements. Some commercial activities are set aside or placed on hold, and others are still maintaining their routes in navigating through these times of uncertainty. It is all happening now, in these days, and it is probable that there will be more interesting developments to come in the future.

Authors



Harris & Co Shipping & Maritime Law has two experienced lawyers at its head, acquiring precedents in court judgments, professional articles, lectures and conferences. It follows English law and judgments of other foreign jurisdictions and uses these to strengthen its arguments and/or to contend with local judgments. Harris & Co has deep and wide legal knowledge, and with the clarity and sharpness of its written and verbal pleadings, demonstrates the highest quality of cross-examination, acting promptly in obtaining arrest orders and liens, within very short timeframes, and resolves never to concede, if the legal position so warrants, in order to protect clients' rights. The firm has extended its involvement in Supreme Court and Haifa Maritime Court precedents, the variety of maritime matters it handles and of its academic presence, both in publishing articles, lecturing, and contributing to international shipping and maritime law publications.