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Each of these stages must beconsidered separately and in thestated order, since any choicemade by the parties ought to berecognised. However, the Courtemphasised that (1) and (2) wouldoften merge together and the impliedlaw of the arbitration agreement willoften be the same as the law of thesubstantive contract. However, theremay be factors that point a differentway and so in some cases the law ofthe arbitration agreement will not bethe law of the substantive contract.Judgment: English governing lawappliedThe Court of Appeal held thatthe proper law of the arbitrationagreement in this case was Englishlaw, despite the fact that the Policieswere expressly governed by Brazilianlaw. This was because, althoughthere were “powerful factors infavour of an implied choice ofBrazilian law as the governing law ofthe arbitration agreement”, the Courtwas persuaded by two importantfactors that pointed the other way.Firstly, the choice of London as thearbitral seat imported acceptancethat the arbitration would beconducted and supervised accordingto the Arbitration Act 1996.Secondly, the possible existence ofa rule of Brazilian law which wouldundermine the arbitration agreementindicated that the parties did notintend the arbitration agreement tobe governed by Brazilian law.The mediation clause (Clause 11)was too uncertain to give rise to alegal obligation of any kind. In orderfor a mediation agreement to beregarded as binding:1. There should be an unequivocalundertaking to enter intomediation.2. There should be clear provisionfor the appointment of amediator.3. The process of the mediationshould be clearly defined.Clause 11 did not meet theserequirements and accordingly,there was no binding agreement tomediate and Clause 11 was not aneffective precondition to arbitration.The anti-suit injunction was thereforeupheld.Certainty of arbitration lawThe Court of Appeal’s decision willgenerally be welcomed, as it bringsgreater clarity to the determinationof the proper law of an arbitrationagreement where there is doubt.Where there is no clear choice of lawin the arbitration clause itself, thethree stage test must be applied todetermine the governing law.However, while the Court of Appealhas set out a clear test, each casewill in practice continue to dependon its own circumstances and howeach particular judge interprets thetest. A substantial uncertainty, andtherefore litigation risk, will alwaysremain where there is no expresschoice of law in the arbitrationclause.Consequences for enforcementEnforcement difficulties are alsomore likely where there is no expresschoice of governing law in thearbitration clause itself. In particular,one common ground for refusing torecognise or enforce an award underthe New York Convention is wherethe arbitration agreement was notvalid “under the law to which theparties subjected it or, failing anyindication thereon, under the law ofthe country where the award wasmade”.Where there is no express choiceof arbitral law, and consequentlyuncertainty about the law governingthe arbitration agreement, therespondent is more likely tochallenge jurisdiction not only in thesubstantive proceedings themselves,but also in any enforcementproceedings. This Court of Appealdecision is unlikely to prevent suchchallenges, which will remain anissue.A different seat?In the majority of arbitration clauses,the seat will be in the country ofthe chosen governing legal system.For most contracts, this is the bestchoice and it reduces cost andremoves one potential cause ofinconsistency.However, for some contracts and/or contracting parties, the selectionof the law of one country and adifferent seat may be commerciallyadvantageous. For example, somecontracts for projects in the MiddleEast stipulate English law (to takeadvantage of well developed Englishconstruction law, for example) butprovide for DIFC-LCIA arbitration inDubai. This allows local companiesto arbitrate close to home if they arein a dispute.This Court of Appeal decisionwill not interfere with sucharrangements, which remain valid.However, clauses stating a differentShipping Bulletin 03

seat should be carefully drafted andappropriate local law advice taken toensure that they are valid under thelaw of the seat and the governinglaw.ConclusionContractual negotiations betweenparties naturally concentrate onthe key commercial terms, whichmeans that the wording of thedispute resolution clauses can oftenbe an afterthought. This Court ofAppeal decision has highlightedthe importance of including anexpress choice of governing law inarbitration clauses. The decisionalso demonstrates the importanceof careful drafting of multi-tieredor escalating dispute resolutionclauses, to ensure that each stageis effective and enforceable. Inthis case the insured were unableto enforce the mediation clauseas a binding obligation to mediateand were left unable to enforcea Brazilian exclusive jurisdictionclause.Clauses which do not expresslystate the governing law, or whichfail to achieve the desired ‘multitiered’process are more likely tolead to uncertainty, inconvenience,additional costs and delays in bothprogressing and enforcing theproceedings.For more information, please contactTara Johnson, Associate, on+44 (0)20 7264 8422, or your usualHFW contact.A version of this article was publishedon the Steamship Mutual websiteand will appear in their Sea Venturenewsletter in due course.Slow steaming ahead: theimpact of economic conditionsand environmental scrutinyThe shipping industry has seen areturn to slow steaming since thecredit crunch in 2008, as a result ofreduced freight and increased bunkerrates. Together with the increasedfocus on environmental efficiency, thishas thrown up a number of complexlegal and commercial issues.Slow steaming raises a number oflegal issues, most notably in relationto the implied charterparty obligationof due despatch and deviation fordelay under bills of lading.There is an obvious conflict betweenan obligation to prosecute a voyagewith utmost despatch and anobligation to slow steam. The newBIMCO fuel efficiency terms fortime and voyage charters recognisethis issue and provide that if theMaster exercises due diligence in theperformance of his/her instructions,he/she will not be in breach of thereasonable despatch obligation.However, the problem does not endthere. The utmost despatch obligationmay also be on a contractual footingunder the bill of lading. This exposescarriers to the risk of claims fordeviation by delay. The BIMCO fuelefficiency terms seek to redress thisby obliging charterers to ensure thatthe terms of the bill of lading, waybillsand other documents evidencingthe contract of carriage issuedon or behalf of owners state thatcompliance by owners with the fuelefficiency clause will not constitutea breach of the contract of carriage.The clause also requires charterersto indemnify owners against allconsequences and liabilities arisingunder the bill of lading to the extentthat such liabilities have resulted fromowners’ breach of the obligation toproceed with utmost despatch or areheld to be a deviation. It is foreseeablethat disputes will arise where there is afailure to incorporate the terms.Owners seeking to slow steamunder a voyage charter that doesnot incorporate the BIMCO termsshould pay particular attention tothese dangers as they are exposingthemselves to claims for breachof both the charterparty and bill oflading. Whilst it may be possibleto obtain retrospective agreementfrom charterers, this is unlikely to befeasible under the bill of lading. Thesame risk, in terms of bill of ladingclaims, applies to time charters.Despite these potential pitfalls,slow steaming remains an attractiveoption given increased environmentalscrutiny as well as the obviouseconomic benefits. The benefitsof fuel efficiency have long beenrecognised in the container industry.However, with the financial recessionand bunker rates now exceedingUS$700 per tonne, slow steaming hasbecome more widespread, includingin the dry bulk and tanker sector.There has also been increasedpressure on the shipping industryto reduce the 3-4% of global CO 2emissions from international shipping,as well as sulphur emissions. Thispressure is likely to increase with theIMO’s sulphur requirements due tocome into force in 2015 for EmissionControl Areas.Despite the current oversupply oftonnage and low charter rates insome sectors, the combined effect ofincreased environmental regulation04 Shipping Bulletin

and spiralling bunker costs has seenowners who are in the market for newvessels, ordering eco-ships. Ownerswill no doubt seek to invest in morefuel-efficient vessels in the long-term,as efficient vessels have a commercialadvantage.This change in attitude has alsoseen a renewed call to retro-fit oldervessels with fuel efficient technology,involving engine modifications andmodern hull coatings. A barrier to thishappening widely is the current splitof incentives between owners andcharterers, where the charterer of aretrofitted vessel stands to save onbunker costs, but the owner sees thecapital investment as a risk, becausehe is not certain of gaining a shareof the savings if charter rates do notincrease. The Sustainable ShippingInitiative is currently developingmethods to align incentives for retrofitsby reapportioning the risks andfuel cost savings between owners,charterers, banks and technologyproviders.In summary, owners who are keen toimplement slow steaming practiceswill find the BIMCO fuel efficiencyterms a useful starting point. However,owners will also want to be aware ofthe increased scrutiny of the shippingindustry and ensure that their fleetsare ready to meet the more stringentenvironmental regulations. Despitethe difficult financial conditions, someowners appear to be rising to thesedemands by looking to bring ecovesselsinto charter.For more information, please contactDaisy Rayner, Associate, on+44 (0)20 7264 8751, or your usualHFW contact.A version of this article appears in TheBaltic, Winter 2012 (magazine of TheBaltic Exchange).“However, owners will also want tobe aware of the increased scrutiny ofthe shipping industry and ensure thattheir fleets are ready to meet the morestringent environmental regulations.Despite the difficult financial conditions,some owners appear to be rising to thesedemands by looking to bring eco-vesselsinto charter.”The impact of EU Regulation392/2009 on carriage ofpassengers by sea in Franceand wider implications for therest of EuropeThe entry into force of the new EURegulation on the liability of carriersof passengers by sea in the event ofaccidents (the Regulation) will makemajor changes to the legal regimecovering carriage of passengers bysea in Europe. The Regulation comesinto force on 31 December 2012. Wesummarise the main changes below.The new Regulation brings into forcethe 2002 Protocol to the AthensConvention on the Carriage ofPassengers and their Luggage bySea 1974 (the Athens Convention)for all EU member states, despite the2002 Protocol not having been ratifiedinternationally. This means that forthose countries which are alreadyparty to the Athens Convention, therewill be some changes (although somecountries, such as the UK, alreadyhave limits of liability which exceedthe Protocol requirements), but someother EU member states, notablyFrance and Italy, are not parties tothe Athens Convention and this willtherefore produce some importantchanges across Europe as the AthensConvention and 2002 Protocol comeinto force in those countries.Application of the 2002 Protocol inFranceFrance has ratified most of themajor maritime conventions, butsurprisingly has never ratified theAthens Convention or any amendingProtocol. France ratified the BrusselsConvention of 29 April 1961, but thendenounced it in 1975. Therefore,carriage of passengers by sea was,Shipping Bulletin 05

until the entry into force of the newRegulation, exclusively subject tothe French law dated 18 June 1966,recently enacted in the Code destransports (order n°2010-1307 dated28 October 2010).Unlike the Athens Convention,neither the 1966 law nor the Codedes transports provide for specificlimitations of liability in case ofpersonal injury or death. The Codeonly refers to those limits containedin the Convention on Limitation ofLiability for Maritime Claims 1976(LLMC 1976) as amended by the 1996protocol.New limits of liabilityThe Regulation, which incorporatesthe Athens Convention as amendedby the 2002 Protocol, containslimitations per passengers in caseof death or personal injury (strictliability up to the limit of SDR 250,000per passenger in case of a shippingincident and a global limitationof liability of SDR 400,000 perpassenger). Furthermore, the newRegulation increases substantially thelimit of liability currently contained inthe French Code des transports incase of loss of or damage to luggage.The key changes to limits of liabilityare summarised in the table below:Athens Convention,1974 (including the1976 Protocol)Code destransportsCode du Tourisme(French packagetravel regulations)2002 ProtocolEC Regulation392/2009Death or personalinjury46,666 SDR, perpassenger on eachdistinct occasion.Reference to theLLMC: 175,000SDR, per passengermultiplied bythe number ofpassengers whichthe ship is authorisedto carry according tothe ship’s certificate.Compensation islimited in accordancewith the internationalconventionsgoverning theservices, accordingto Article 5.2. of thePackage Travel ECDirective.400,000 SDR, perpassenger on eachdistinct occasion.Strict liability up to250,000 SDR, incase of shippingincident.Loss of or damageto luggageCabin luggage:833 SDR,Vehicles including allluggage carried in oron the vehicle:3,333 SDR,Other luggage:1,200 SDRCabin luggage:1,440 €Personal effects:460 €Vehicles includingall luggage carriedin or on the vehicle:4,600 €Other luggage:1,520 €Cabin luggage:2,250 SDR,Vehicles includingall luggage carriedin or on the vehicle:12,700 SDR,Other luggage:3,375 SDR,Possible deductible:149 SDREffect on cruise marketThe new Regulation will also impacton the liability of cruise operators.English and French courts currentlytake the view that cruises shouldbe regarded as package travel and,as such, subject to the strict liabilityprovided by the EU package travelregulations (implemented in Franceunder the “Code du Tourisme”and otherwise in the EU by ThePackage Travel, Package Holidaysand Package Tours Regulations1992). Whether this strict liabilityshould also apply to damages inrelation to the carriage itself (andnot only to the tourist services) isnot a straightforward question inFrance. As from 1 January 2013, theFrench Courts will have to apply theRegulation to cruise operators and theclaimant will have to prove the fault orthe negligence of the cruise operatorwhen the damage is in relation tothe carriage, provided that it was notcaused by a shipping accident.06 Shipping Bulletin

InsuranceThe Regulation provides forcompulsory insurance of not lessthan 250,000 SDRs per passenger,per occasion, and the ship’s registrymust issue a certificate to evidencethis. In France, this has alreadybeen implemented in the “Code destransports” (article L51232, which willalso enter into force on 31 December2012).Application to French domesticcarriageFrance has already confirmed that itwill apply the Regulation to domesticcarriage on board ships A and B asfrom 31 December 2012.For more information, please contact,Stephanie Schweitzer, Partner, on+33 (0)1 44 94 40 50, oryour usual HFW contact.“In France, thishas already beenimplemented inthe “Code destransports” (articleL51232, whichwill also enterinto force on 31December 2012).”Speed and performance -London 2012Notwithstanding that two of the leadingcases on Speed and Performancewere heard two decades ago (TheDidymi [1988] 2 LLR 108 and The GasEnterprise [1993] 2 LLR 352) thesetypes of dispute remain common inarbitration.In those two cases, the Court ofAppeal held that a vessel’s speed andperformance should be determinedby assessment in periods of goodweather, and reasoned that if the vesselunderperformed in good weather, thenshe would also have underperformedin bad weather.Two recent arbitrations reported in theLondon Maritime Law Newsletter (3/12and 4/12) have shed more light on theprinciples contained in the Didymi andGas Enterprise.London Arbitration 3/12 and 4/12In general, charterparties will expresslydefine what is meant by goodweather. In 3/12 and 4/12, it includedweather “up to/including BeaufortForce 4 and Douglas Sea State”.The charter also provided that thevessel should “maintain on all seapassages from seabuoy to seabuoyspeed and consumption as pervessel’s description... figures... alwaysabout and... always in good weatherconditions and no adverse currents”.London Arbitration 3/12 and 4/12have three main lessons:1. Subject of assessment: entireperiod or each voyage?When their Charterers deductedsums from hire because of allegedunderperformance during 2 outof 17 voyages, the Owners tooka novel approach by arguing thatit was necessary to assess the“average performance” of thevessel over the full charter period(i.e. 17 voyages). Owners said thatin order to calculate the “averageperformance” it was necessary toconsider a reasonably sufficientnumber and spread of goodweather periods (i.e. the fullperiod of the charter). On Owners’calculation the vessel did notunderperform.The Arbitrators, however, agreedwith Charterers that as the warrantywas “on sea passages fromseabuoy to seabuoy” the correctinterpretation was for each voyageto be considered separately whenanalysing whether the vesselunderperformed. As a result, therewas underperformance.2. Off-setting bunker saved againstunderperformance claimsOwners also argued that theyhad a right to off-set a saving infuel consumption “across theCharter” against the Charterers’deduction for hire resulting fromthe underperformance.The Arbitrators found that at mostOwners could off-set the underconsumptionof say IFO againstan overconsumption of MDO butnot off-set the savings in bunkers(if any) against underperformanceclaims.3. “Half an eye on the charterwarranties”Both arbitrations dealt withan issue that often arises -Shipping Bulletin 07

inconsistencies between thelog book records and those of aweather bureau report concerningthe weather conditions.The arbitrators commented in 3/12,“The assessment of sea conditionswas not an accurate science and logentries were at times made with halfan eye on charter warranties.”In London Arbitration 4/12 theArbitrators found that there wasa sufficient inconsistency of over0.5 on the Beaufort scale onaverage to justify the applicationof a charterparty provision givingpriority to the evidence contained inindependent bureau reports wherethere was a pattern of discrepancy.Key points when fixing a charterfrom Owners’ perspectiveWhile each case that is arbitratedis very fact dependent, there are anumber of points that Owners maygenerally wish to consider whenfixing their vessels:1. Endeavour to ensure thatthe vessel is able to performaccording to the warranty.2. Preface any warranty given with“about” - e.g. “about 12 knots onabout 40 mt.” This will generallygive a 0.5 knot speed margin and a5% mt consumption margin eitherside of the warranted quantity.3. If possible preface the warrantywith “Without Guarantee”, whichwill allow an argument that thewarranty has no contractual effect.4. Clearly define what constitutes“Good Weather”.5. Insert a clause providingthat adverse currents and/orcondition of the bottom of thevessel are taken into accountwhen assessing performance.6. Ensure that Owners are entitledto a credit for fuel or hire savedshould the vessel overperformand detail how the credit shouldbe applied.7. Insert a clause that provides forthe evidence of log books to takeprecedence over that of weatherbureau reports.Key points when fixing a charterfrom Charterers’ perspectiveAs is true in most negotiations,the Charterers should largely betaking the opposite position toOwners in relation to any speed andconsumption warranty provided byOwners (e.g. not agree to “about” or“without guarantee” if possible.)Charterers should also be aware thatif the definition of good weather istoo narrow there may never be “goodweather” against which a speed andperformance claim can be measured,which could make it close to impossiblefor the Charterer to make a claim.For more information, please contactEdward Waite, Associate, on +44 (0)207264 8266 or,or your usual HFW contact.NewsHolman Fenwick Willan boostsAsia-Pacific capabilities with PartnerpromotionsWe are delighted to announce thepromotion of shipping lawyersDominic Johnson and Nic vander Reyden to Partner, effective 1November 2012.Conferences & EventsMaritime passenger transport: whatnew challenges?Paris(6 December 2012)Stephanie SchweitzerSalvage Law and Practice Seminar -LOF claim exerciseLondon(10 December 2012)Toby StephensSalvage & Wreck RemovalLondon(12 December 2012)Andrew ChamberlainLawyers for international commerce hfw.comHOLMAN FENWICK WILLAN LLPFriary Court, 65 Crutched FriarsLondon EC3N 2AEUnited KingdomT: +44 (0)20 7264 8000F: +44 (0)20 7264 8888LMA: Bills of LadingHotel Pullman, Dubai(12-13 December 2012)Simon Cartwright, Sam Wakerley,Yaman Al Hawamdeh and Nejat Tahsin© 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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