terminal operators face claims 'front line' - Holman Fenwick & Willan

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terminal operators face claims 'front line' - Holman Fenwick & Willan

Shipping &

Logistics

February

2010

London

Paris

Rouen

Brussels

Piraeus

Dubai

Hong Kong

Shanghai

Singapore

Melbourne

Sydney

TERMINAL OPERATORS FACE

CLAIMS ‘FRONT LINE’ IN

ROTTERDAM RULES

This article first appeared in the February 2010 issue of the Lloyd’s List, and is reproduced with

their kind permission. www.lloydslist.com

Port terminal operators will move into the “front

line” for insurance claims from cargo interests

and shippers under the still to be ratified

Rotterdam Rules cargo liability convention, a

top London maritime lawyer has warned, writes

Roger Hailey.

Holman Fenwick Willan partner Craig Neame

said: “If these rules come into effect, it will be

the first time that terminal operators have found

themselves subject to a mandatory convention.”

Mr Neame, who described the Rotterdam

Rules as “a cargo-friendly convention”, added

that their implementation would produce “a

very different claims environment” for global

port operators, which currently do not have a

contractual relationship with cargo interests.

“At the moment, port terminal operators have

a relatively small number of big customers, the

carriers themselves, and all claims are funnelled

through them. If the cargo interests come to you

directly, you tell them to go away and to speak

to their contractual counterparty,” he said.

“That funnel will disappear. Instead of the

carriers being the front line of claims, it will be

the terminal operators themselves.”

A legal counsel for Hutchison Ports UK,

Diana Whitney, characterised the current legal

position, where port operators have no direct

contract with the cargo interests, as “a situation

we very much like”, adding that there were very

few claims coming directly from shippers.

But under the Rotterdam Rules, which still

require 20 states to ratify them before they

enter into force, terminal operators become a

“maritime performing party”, having a joint and

several liability.

“It means that the cargo interests can cherry-pick

who they want to bring their claim against,” Ms

Whitney said. “Our view is that they will like to bring

their claim against Hutchison, a major terminal

operator. Our ability to limit our liability is fettered.”

Speaking at a Rotterdam Rules seminar

organised by HFW in London, Ms Whitney took


the view there would be “potentially”

more claims against terminal

operators, particularly if they had a de

minimus threshold inserted into the

terms and conditions of their terminal

services agreement.

Such claims are likely to be higher,

because the limits of liability have

been increased under the Rotterdam

Rules.

“We also think that, because of a

lack of case law, at least in the first

few years, there will be an increase

in the number of compromise cases,

probably settling at a higher level,”

she said.

Another concern is that cargo

interests bringing a claim have no

contractual relationship with the port

and thus no interest in settling the

cases quickly for the sake of any

commercial relationship.

“We could spend a lot longer fighting

every single claim because there is

no commercial nexus between us

and the claimant,” Ms Whitney said.

“More often than not, claims get

swept up in commercial settlements

at the end of each year with our

customers, because they are our

customers. And that won’t happen in

the future because they are not our

customers but the cargo interests.”

Ms Whitney envisaged “protracted

negotiations” with shipping lines

on the terminal services agreement

because so many more issues

following the implementation of the

Rotterdam Rules now need to be

included within it.

“We have heard about indemnities.

Great, if we can get them, but we all

know that the negotiations between

the shipping lines and terminal

operators tend to be pretty fierce.”

Other concerns raised included

potential “double counting” of

liability, confusion as to what

constitutes the port area and whether

warehousing facilities provided by

terminal operators are covered by the

Rotterdam Rules.

Ms Whitney said there was an

amount of “crystal ball gazing” about

the effects of the new rule.

Lawyers for international commerce hfw.com

HOLMAN FENWICK WILLAN LLP

Friary Court, 65 Crutched Friars

London EC3N 2AE

T: +44 (0)20 7264 8000

F: +44 (0)20 7264 8888

© 2010 Holman Fenwick Willan LLP. All rights reserved

“At the moment we know about our

risk. That is going to change with the

Rotterdam Rules and that means we

are going to have to take an increase

in risk, which means ultimately we

will be looking at higher insurance

spend.”

For more information, please contact

Craig Neame (pictured), Partner, on

+44 (0)20 7264 8338 or

craig.neame@hfw.com, or your usual

contact at HFW.

“If these rules come into effect, it will be

the first time that terminal operators have

found themselves subject to a mandatory

convention.”

Whilst 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 be

considered as legal advice.

Holman Fenwick Willan LLP incorporates the firm’s London, Paris, Rouen, Brussels and Shanghai offices. Holman Fenwick Willan Middle East LLP incorporates the

firm’s Dubai office. Holman Fenwick Willan International LLP incorporates the firm’s Piraeus office. Holman Fenwick Willan Singapore LLP incorporates the firm’s

Singapore office. Our practices in Hong Kong, Melbourne and Sydney remain as partnerships.

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contact Craig Martin on +44 (0)20 7264 8109 or email craig.martin@hfw.com

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