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ShippingJanuary2012SHIPPING BULLETINWelcome to the January edition of our Shipping Bulletin.This month, our Bulletin leads with a piracy update. It considers the Best Management Practices 4which was issued recently in relation to Somali based piracy, the topical issue of armed guards, andthe US Executive Order 13536 (Somalia) of which those involved in the payment or reimbursementof ransoms should be aware. The issue of armed guards is considered further in a second articleconsidering the UK government’s approval of armed guards on board UK registered ships.Still on the theme of piracy, our third article looks at the CONWARTIME 2004 clause and the test fordetermining whether a master is entitled to take a different route from the one he is ordered by hischarterers. The nature of this test was recently clarified by the English Court in Pacific Basin IHX Ltd vBulkhandling Handymax AS.Our fourth article reviews the recent decision in “The Wren”, in which the English Court reviewed theapplicable measure of damages in the event of a vessel’s early redelivery in circumstances where amarket does not exist at the time of redelivery, but subsequently revives.The effect of the Amwelsh form strike clause, and its relationship with a WIBON provision, wasconsidered by the English Court in Carboex SA v Louis Dreyfus Commodities Suisse SA. Our fiftharticle reviews that decision.Finally, the revision to the Inter Club NYPE agreement in September last year is discussed in our sixtharticle. The revision is intended to enable parties facing a cargo claim to obtain security for a recourseaction under the ICA before the cargo claim is resolved and paid.David Morriss, Partner, david.morriss@hfw.comNick Roberson, Associate,

Piracy latestFollowing the end of the monsoonseason we have seen a resurgenceof pirate activity in the Indian Ocean,culminating in the hijacking in the lastfew days of the “ENRICO IEVOLI” on27 December 2011 and the “SAVINAAL-SALAAM” on 3 January 2012. Priorto these recent successful attacks therehad been only 3 hijacked vessels ofsignificance, the “MV JUBBA” on 16July 2011, the “FAIRCHEM BOGEY”on 20 August 2011 and the “LIQUIDVELVET” on 30 October 2011. The“FAIRCHEM BOGEY” was of particularnote as it was hijacked just outsidethe port of Salalah. It is fair to say thatattacks have increased in the pastweeks and as a result we have seenan increase in successful attacks overthe Christmas period as has beenthe case in previous years. Accordingto EUNAVFOR, as of 28 December2011, there are seven vessels held witharound 194 hostages.Best Management Practices 4On 18 August 2011, the 4th versionof the Best Management Practicesfor Protection against Somali BasedPiracy (“BMP 4”) was issued followingconsultation with many of the world’sleading maritime organisations. For thefirst time it is being issued in pocket formfor easy access. BMP 4 is a fundamentaldocument which all owners andoperators of vessels in the Indian Oceanshould be fully familiar with.BMP 4 highlights three issues inparticular which have always been partof the guide but are now described asThree Fundamental Requirements:1. Register with MSCHOA using aVessel Movement RegistrationForm.2. Report to UKMTO using a VesselReporting Form - Initial Report.3. Implement the Ship ProtectionMeasures described in the BMP asa minimum.BMP 4 goes on to provide ownersand Masters with an aide-mémoire toavoid being a victim of piracy. It listssix steps for mariners to keep in mindwhilst transiting at risk areas. BMP4 goes on to detail the methods ofattack and relevant factors to considerwhen undertaking a risk assessmentof a vessel. This is expanded into aCompany Planning checklist and aMaster’s Planning checklist. Protectionmeasures are considered in detail as iswhat to do in the event of an attack and/or military action.Armed guardsArmed guards continue to be acontentious topic for vessels transitingthe Indian Ocean and with increaseddemand comes an increased number oflower quality operators in this industry. Itis more important than ever that ownersconsider in detail the ramifications ofplacing armed guards on board theirvessels and fully vet the companies theyemploy. There is little regulation in thisindustry making it incumbent on ownersto investigate the credentials of thecontractors they choose. Membership ofthe British Association of Private SecurityCompanies may provide some guidanceand on an international level there isalso the recently established SecurityAssociation for the Maritime Industry(“SAMI”). SAMI aim to provide credibility,trust and respect in the industry bysetting quantifiable standards forsecurity companies. This is part of whatappears to be a wider acceptance ofarmed guards by Flag States includingGermany, the UK and Norway.In the meantime, owners canundertake their own investigations byrequesting details of a contractor’sliability insurance, selection process ofpersonnel and corporate informationsuch as their solvency, legalincorporation and status of Directors.For more details on the latest from the UKgovernment on armed guards, please seethe article on page six of this Bulletin.US Executive Order 13536 (Somalia)On 29 July 2011, the Office for ForeignAssets Control in the USA addedtwo new names to their SpeciallyDesignated Nationals list, that of OmarHammami and Hassan Mahat Omar.These are both identified by OFACas being key al-Shabaab figures, oneof whom is alleged to be involvedin recruiting for al-Shabaab in theUSA. Those involved in the paymentor reimbursement of ransom shouldundertake due diligence to establish thatnone of the individuals (or al-Shabaab)who are listed on the revised ExecutiveOrder are involved in a hijacking.Despite uncorroborated assertions tothe contrary, there is still no evidence tosuggest a link between Somalia piratesand terrorism. This was confirmed byMajor General Howes, OperationalCommander of the European Union NavalForce Somalia, when he gave evidenceto the House of Commons, ForeignAffairs Select Committee on Piracy offthe Coast of Somalia in June 2011, andhis view was endorsed by Dr CampbellMcCafferty, Head of Counter-Terrorismand UK Operational Policy, Ministry ofDefence before the same Committee.For more information, please contactAlex Kemp, Associate, on +44 (0)207264 8432 or, oryour usual contact at HFW.02 Shipping Bulletin

How much to claim indamages?The normal measure of damagesthat a shipowner or charterer canhope to recover in the event ofearly repudiation of a time charter,as set out in The Elena D’Amico 1 ,is assessed by reference to thedifference between the rate agreedin the charter and the market ratefor a reasonably similar fixture at thetime of the repudiation. Implicit inthat assessment is that the wrongedparty has mitigated its loss and thatthere is a causative link betweenthe repudiatory breach and the losssuffered. Such an approach draws aline under the matter and promotescertainty of result.However, if there is no availablemarket at the time of repudiation,another method of assessment isclearly required. Arguably closer tothe contractual requirement thatdamages should compensate thevictim of a breach of contract forthe loss of his contractual bargain,the compensatory principle seen inThe Griparion (No. 2) 2 fills this gap.Here, the focus is on the actual losssuffered, rather than on the deemedloss by reference to market rates.Subsequent cases have sought toadd nuance to the two contrastingmechanisms for the assessmentof damages. For example, in TheGolden Victory 3 , in which the relevantcharterparty contained a provisionpermitting the termination of thecharter in the event of war breakingout between certain countries, itwas held that supervening eventssuch as the commencement of theSecond Gulf War subsequent to thetermination of the charter, but prior to1. [1980] 1 Lloyd’s Rep. 752. [1994] 1 Lloyd’s Rep. 533the end of the contractual charterterm, could be taken into accountwhen assessing damages. Thus,on the basis that no performanceunder the charter would have beenrequired after war broke out (as thecharterparty would in all probabilityhave been terminated), the ownerswere unable to recover damages inrespect of the period after that point.However, the extent to whichsupervening events can and shouldbe taken into account was calledinto question in the recent case ofThe Wren 4 . The vessel was charteredfor a minimum of 36 months. As aresult of the collapse in the market inthe wake of the 2008 financial crisis,the charterparty was terminatedin November 2008. At the time oftermination, there was no availablemarket for a period charter of aduration that corresponded to thebalance of the charterparty. Eightmonths later, in July 2009, anavailable long-term charter market forthe equivalent of the unexpired periodof the charter emerged.The question therefore arose as tothe correct measure of damages tobe awarded. In arbitration, the ownersclaimed damages based on theiractual losses up to the date when theavailable long-term market emergedand, thereafter, by reference to themarket rate. The arbitrators agreedwith this approach. The charterersappealed the award, objecting tothe “windfall” profit that the ownerswould make as a result and pointingto the lack of any case authority tosupport such an approach.Taking into account another recentcase, Zodiac Maritime Agencies Ltd vFortescue Metals Group Ltd 5 , the3.[2007] 2 Lloyd’s Rep. 1644.[2011] EWHC 1819 (Comm)5.[2010] EWHC 903 (Comm)Court in The Wren reversed thearbitrators’ ruling, holding that itwould constitute a departure fromthe principle that the owners wereentitled to damages such as wouldput them in the same financialposition as if the contract had beenperformed if an assessment ofdamages was made by reference toa late-emerging market, rather thanby reference to the owners’ actuallosses. Further, while it was also heldthat “the revival of the market at alater date may be a factor to take intoaccount in calculating future loss”,that revival is quite unrelated to theposition at the time of terminationand is thus an arbitrary andpotentially unfair point at which to fixthe level of remaining damages.While we understand the judgment tobe under appeal, The Wren, even asit currently stands, provides a usefulsummary of the English law positionin relation to the complex issue of thedamages awardable for repudiatorybreach of charter where there isno available market at the dateof termination, but such a marketrevives at a later date.For more information, please contactMatthew Davey, Associate, on+44 (0)20 7264 8571, or yourusual contact at HFW.“The questiontherefore arose as tothe correct measureof damages to beawarded.”Shipping Bulletin 03

Strikes - who pays for delays?Time to revisit your charterwordingStrikes are part of the commercialrisks associated with sea transport,but with a spate of recent strikescausing costly delays to shippingin a number of Australian portsand the threat of ongoing maritimeunion action in Australia in comingmonths, a recent case in the EnglishCommercial Court 1 comes as atimely reminder to owners andcharterers to revisit their charterterms. With tight margins and the riskof potentially lengthy delays, ownersand charterers need to check whobears the risk if a vessel is delayeddue to strike action: has berth or portcharter been agreed? What doesthe specific strike clause cover?What are the laytime provisions andare they relevant to strikes? Thelonger a strike lasts, the higher thecost of delay, the more inventivecontract partners can become in theirinterpretation of charter clauses andhow they inter-relate.The recent English Commercial Courtcase involved a berth charter on anamended AmWelsh form.Amwelsh form clause 9 of the charterprovided:“in case of strikes, lock outs,civil commotions or any othercauses including but not limited tobreakdown of shore equipment oraccidents beyond the control of theCharterer’s consignee which preventor delay the discharging, such timeis not to count unless the vessel isalready on demurrage.”A typed additional clause 40provided:“at port of discharge... if the berthis not available when vessel tendersNotice of Readiness but providedvessel/Owners not at fault in relationthereto, then lay time shall commencetwelve (12) hours after firstpermissible tide, Notice of Readinessreceived and accepted, whether inberth or not whether in free pratiqueor not whether...”Both parties agreed on the facts thatthe vessel arrived as the strike endedand was unable to berth due tocongestion caused by the strike.Owners argued that the combinedeffect of clauses 9 and 40 meantthat charterers were only protectedagainst strike if the strike occurredonce the vessel had berthed. Thecentral issue was the effect of theinclusion of the “WIBON” (whether inberth or not) provision in the laytimeprovision at clause 40, which allowedNOR to be served and laytime to runwhether the vessel was in berth ornot. Owners argued that the WIBONprovision indicated the risk of delaydue to congestion at the dischargeport, including congestion caused bystrike, was for the charterers’ accountbecause the strike clause had to beread in conjunction with the laytimeclause. They argued that, becauseof clause 40, unless the vessel wasactually in the berth and delayed atthe berth due to the strike, clause 9did not apply. It was argued that thewording of clause 9 was not wideenough to interrupt the running of laydays where the vessel was unable toberth due to congestion caused bystrike.Charterers argued that clause 9should be read as a standaloneprovision that was clearly designedto protect charterers of a vessel thatcould not berth due to congestioncaused by strike. It should be read inthe ordinary sense, without referenceto the content of the separate laytimeprovision, which should not beinterpreted as overriding the standardform strike clause.The original arbitrators acceptedthe owners’ arguments, but thecourt preferred the charterers’interpretation of the strike clauseas a standalone clause to be readindependently and confirmed thatthe WIBON provision in the laytimeclause did not operate to restrictthe application of the strike clause.Laytime did not therefore commenceuntil the congestion caused by thestrike cleared and the berth becameavailable.The court’s decision affirms whathad been the general understandingof the application of the AmWelshstrike clause, but the decision mayoperate to deter similar attempts toargue for alternative interpretationsof commonly used standard formclauses. In any event, it is a reminderthat parties need to be alert topotential conflict where tailor madeclauses are introduced into standardform charters.For more information, please contactHazel Brewer, Partner, on+61 (0)8 9422 4702, or your usualcontact at HFW.1. Carboex S A v Louis Dreyfus Commodities Suisse SA[2011] EWHC 116504 Shipping Bulletin

Agreement 1996 (as amendedSeptember 2011).The new ICA applies to allcharterparties entered into after 1September 2011 that refer to thecalled Inter-Club New York ProduceExchange Agreement 1996 (asamended September 2011) or “ICA1996 or amendments thereto” or suchsimilar wording. Owners/charterersare advised to check their standardcargo claim clause wording to ensureit refers specifically to the full title newICA (and any future amendments) or atlast ICA 1996 (as amended).If the intention is to incorporate thenew ICA into older long-term chartersthen the parties will need to do this byway of an addendum to the charter.It will clearly be in the interests of theparty issuing bills of lading, and hencemost likely to face cargo claims, tomake this amendment as soon aspossible.For more information, please contactRory Butler, Partner, on+44 (0)20 7264 8310, or your usualcontact at HFW.UK government approvesarmed guards on board UKregistered shippingDavid Cameron announced on 30October 2011 that UK registered shipscan be licensed to have armed guardson board, should the shipownersor operators choose to do so. Thisis in direct contrast with previousgovernment policy, which was thatthe carriage and use of firearmson board UK registered ships wasstrongly discouraged, the reasoningbeing that the carriage of firearmscould escalate an already dangeroussituation and the firearms on boardcould themselves become the targetor purpose of an attack.The announcement itself was not new- the change in policy and introductionof new legislation has been reportedfor some time - but a declarationof this kind by the Prime Minister isencouraging because it suggests thatthe change in legislation is imminentand also that the issue of piracy, andSomali piracy in particular, is finally onthe radar at a high government level.The prime minister did not go intoany detail on the new legislation tobe introduced but it is expected thatit will resolve the issues arising fromthe carriage of firearms on boardUK commercial vessels under theFirearms Act 1968 and also clarifyexactly which licenses private securitycompanies and ship owners/operatorswill need to obtain in order to carryfirearms, ammunition and otherequipment on board UK registeredvessels.In his announcement, Cameronendorsed the use of armed guardsas an effective anti-piracy measure,with the evidence showing that shipswith armed guards on board do notget attacked or hijacked. Whilst it iswidely reported that no vessels witharmed guards on board have beensuccessfully hijacked, it should benoted that the presence of armedguards does not appear to deterpirates from continuing to make everyeffort to attack and capture vessels.Accordingly, the risks of the escalationof pirate tactics and the increase inthe use of violence remain very realconcerns.Cameron was challenged duringhis announcement that the UKgovernment would effectively belicensing non-military UK civilians toshoot to kill. This raises the importantpoint that whilst the UK governmentpolicy will change, there has been nosuggestion so far that the governmentwill take any steps to regulate themaritime private security industrywhich means, in effect, the industrymust continue to regulate itself.Shipowners and operators mustcontinue to carry out due diligenceto carefully vet private securitycompanies. Importantly, a privatesecurity company’s Rules for the Useof Force must be carefully analysed toensure they provide for the legal andproportionate escalation of force.Cameron made it clear in hisannouncement that the placement ofarmed guards on board commercialvessels was intended as a shorttermmeasure and not the solution topiracy. The government will continueto focus efforts on Somalia, currentlythe world’s most failed state, totackle the causes of piracy. It wasalso implied that the UK would assistother countries, the Seychelles andMauritius in particular, to detain andprosecute pirates. In the meantime,the UK government’s position nowappears to be that the fastest andmost effective anti-piracy measureavailable to UK registered ships isthe deployment of armed guards onboard.For more information, please contactJames Gosling, Partner, on +44 (0)207264 8382 or,or Richard Neylon, Partner, on+44 (0)20 7264 8100, orSally Buckley, Associate, on +44 (0)207264 8558 or,or your usual contact at HFW.06 Shipping Bulletin

CONWARTIME 2004 - Was thelong way round the wrong wayround?Pacific Basin IHX Limited vBulkhandling Handymax ASRegrettably piracy attacks andhijacks of ships remain a significantthreat to world shipping. A recentEnglish High Court judgment providesguidance on the test to be appliedwhen considering whether, under theterms of the CONWARTIME clause, avoyage or routing order given undera time charter is invalid and can berejected because of the risk of piracythat it entails. In Pacific Basin IHXLimited v Bulkhandling HandymaxAS [2011] EWHC 2862 (Comm), onappeal from arbitration, the main issuebefore the court concerned the natureof the test for determining whether,in the reasonable judgment of themaster, the vessel may be or is likelyto be exposed to acts of piracy on theproposed voyage.The case concerned a chain ofcharters of a geared bulk carrier, the“TRITON LARK”. It arose in relationto the refusal of the disponentowner, Bulkhandling Handymax(“Bulkhandling”), to comply with theorder of their time charterer (PacificBasin) to carry a cargo of potash inbulk from Hamburg to China via Suez,which Pacific Basin had contracted totransport (as disponent owner) underthe terms of a sub voyage charter onthe GENCON form. The order wasrefused on the grounds that the routevia Suez involved transiting the Gulf ofAden which would expose the vessel,cargo and crew to the risk of attackby pirates. Instead the vessel went thelong way round via the Cape of GoodHope to avoid the risk. This resulted inan extra cost of US$462,221.40 in hireand bunkers. Pacific Basin pursuedBulkhandling for the extra cost. Thetribunal rejected their claim.To read the full briefing, please visit: more information, please contactJames Mackay, Partner, on+44 (0)20 7264 8513, or yourusual contact at HFW.NewsHFW hires aviation team and opensoffice in São PauloFollowing the conclusion offormalities, we are delighted towelcome the eight partner teamformerly making up Barlow Lyde &Gilbert’s (BLG) well respected globalaerospace and aviation group. Theeight partners will work across fiveoffice locations - London, HongKong, Singapore, São Paulo andDubai - and add significantly toHFW’s international commerceoffering, giving it a new, leadingposition in the market for aerospaceand aviation law.The partners are: Sue Barham(London), Peter Coles (HongKong), Richard Gimblett (Londonand Dubai), Mert Hifzi (Singapore),Nicholas Hughes (London), GilesKavanagh (London), Keith Richardson(Singapore) and Jeremy Shebson(London and São Paulo). In additionto the partners, 16 associates alsojoin with them.As a result of this team hire, HFWhas opened an office in SãoPaulo, providing clients with corecapabilities in aviation and insurance,as well as acting as a regionalhub serving shipping, oil and gas,offshore, mining and commoditiesclients.HFW hires shipping PartnerWe are delighted to announce therecruitment of partner Simon Chumas,who joins the firm’s London office.Simon, formerly a partner of 17 yearswith BLG, joins the firm’s shippingpractice. He specialises in handlingmarine claims and contractualdisputes arising from the full rangeof marine casualties. He acts forshipowners and their insurers andhandles both hull and P&I coveragedisputes.HFW Partner hiresHFW has made three recent Partnerhires which will strengthen its energy,trade and arbitration expertise.Susan Farmer has joined the firm’sLondon office in the Corporate,Projects & Finance group. Susanrepresents clients in the energy,natural resources and electric powersectors in the structuring, negotiationand documentation of oil and gasand other natural resource projecttransactions, acquisitions anddispositions.Folkert Graafsma, who has joinedour Brussels office, specialises ininternational trade law, general ECand WTO law and customs law. He isa recognised author on internationaltrade topics and speaks regularly atindustry conferences.Shipping Bulletin 07

Matthew Parish has joined our Genevaoffice. He specialises in internationaldispute resolution, international trade,foreign investment, emerging marketsand public international law. He hasrepresented clients in many courts andtribunals, including under ICC, LCIAand UNCITRAL rules. His practiceinvolves a number of industry sectors,including banking, international trade,energy and infrastructure, insurance,financial services and shipping.Conferences & EventsBlending on board: legal andpractical issuesGeneva(10 January 2012)Jeremy DaviesMaritime London networking eventHFW, London(11 January 2012)Andrew ChamberlainLMA Time & Voyage Charterpartiesand A Practical Guide to Laytime &DemurrageDubai(29 January - 1 February 2012)Simon Cartwright, Yaman AlHawamdeh, Nejat Tahsin andSam WakerleyChamber of Shipping DinnerLondon(6 February 2012)Marcus BowmanTradewinds Ship Recycling ForumSingapore(13 March 2012)Stephen DruryLawyers for international commerce hfw.comHOLMAN FENWICK WILLAN LLPFriary Court, 65 Crutched FriarsLondon EC3N 2AET: +44 (0)20 7264 8000F: +44 (0)20 7264 8888© 2012 Holman Fenwick Willan LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not beconsidered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences pleasecontact Craig Martin on +44 (0)20 7264 8109 or email

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