Charterama Masterclass 2022
Charterers Liability online knowledge event
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Q&A from the Masterclass
Under normal circumstances in case of cargo damage or shortage on delivery of cargo, the cargo interest will be indemnified for their loss by their cargo insurance. The cargo insurance will be subrogated and will seek recourse against Shipowners under the Bill of Lading. Depending on the Charter Party terms the Shipowner can hold Charterers liable, and Charterers can be found liable for (part of) the claim. If cargo interest and Charterers are the same company then they will be indemnified for their loss under the cargo insurance but still end up with the claim in their capacity as Charterer. To avoid an insured claim coming back through the Charter Party chain, the Charterer in their identity as trader, Shipper or Receiver should request a waiver of recourse from cargo underwriters, which stops the recourse action. We do face both situations, i.e. with and without a waiver of recourse and it is important to check your Charterers’ Liability Insurance policy if this is Including or Excluding Cargo Liability. In our policy the assured will be covered for the cargo claim even when they are the same company as the cargo interest, provided cover is taken out Including Cargo Liability.
Floating Storage units are frequently seen in the storage of oil products with their own specific risk exposures. The risk depends on the Charter Party used. Sometimes we see private forms with specific agreements and clauses, sometimes we see standard forms (like Shell Time). The exposure could lie in double banking, but also in pollution if and when transshipping cargo. The mooring could be an exposure if under Charterers’ responsibility.
It is not the standard operation for a typical Charterers’ Liability Insurance; there are exposures for Charterers and the insurability and terms depend on the charter contract, type of vessel and cargo, geographical area, etc.
War risk insurance is an extension which can be added to the Charterers’ Liability Insurance. It is a contingent risk for Charterers. Normally Shipowners are insuring their ship (hull) and have additional War Risk covered if the vessel trades to excluded areas. Usually Charterers are contractually bound to pay for this additional premium under the Charter Party. So when a vessel trades an excluded high risk area and Charterers paid for the additional premium, it would be difficult for an Owner to hold a Charterer liable for an unsafe port situation for example.
However, when a ship is damaged by an (unexpected) war like situation, or a civil unrest in a port which is not listed as a high risk area, where Owners are not paying additional premium, Shipowners could turn against Charterers for an unsafe port.
It depends on the trade. English law recognizes this clause when inserted on Bills of Lading however the Carrier cannot rely on it when he has reasonable means of checking the weight, measure, quantity, quality and/or condition of the cargoes. Much depends on the applicable law of course, but let’s assume English law. Under the Hague-Visby Rules a Carrier is obliged, if so requested by the Shipper, to issue a Bill of Lading which states the number or quantity or weight of the cargo and its apparent order and condition. The Bill of Lading will be conclusive evidence in the hands of a third party to whom the Bill of Lading has been transferred in good faith (proof to the contrary becomes inadmissible). Therefore, Carriers will often qualify the representations in the Bill of Lading in order to protect themselves. A “weight and quantity unknown” clause is such qualification and it deprives the Bill of Lading of any evidential force regarding the weight and quantity of the cargo shipped in a cargo claim. The Bill of Lading cannot be construed as giving an assertion or representation of the weight and quantity in fact shipped. So the cargo Receiver claiming shortage will have to prove the quantity in which the goods were discharged, but also the quantity in which the goods were shipped. The Carrier’s entitlement to use and rely on such qualification is, however, limited by article III rule 3 of the Hague-Visby Rules which states that the Carrier must have “reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking”. If the Carrier had reasonable means of checking the weight or quantity of the cargo at the loading port, he cannot rely on it. The effect of this clause can therefore be different and requires an evaluation on a case-by-case basis.
E.g. In the container liner service, if the merchant is responsible for the packing and sealing of the container and the container is delivered by the Carrier with an original seal as affixed by the Merchant then the Carrier shall not be liable for any shortage of goods. But if you are loading 10 cars on the vessel which can easily be counted then the Carrier cannot rely on this clause if only 5 cars are discharged/delivered.
Or when a ships loads 10,000 mt of bagged rice in 200,000 bags of 50 kg. The Carrier can count the number of bags but cannot check the weight of each individual bag.
We have to assume that the question refers to delay in delivery of cargo to Receivers. The question is very general and delay could have many reasons. The normal situation is that the Receiver or cargo interest and the Owner (not the Charterer), are legally bound by a Bill of Lading. Under the normal cargo conventions like Hague-Visby Rules, consequential damage can normally not be passed on under the Bill of Lading. Only under the Hamburg Rules there may be situations. Only if Owners are found liable under the Bill of Lading, the liability may be passed on down the contractual chain towards Charterers, however, the delay must then of course be attributable to Charterers.
There are two court decisions (The Imvros & The Elin) in which the Shipowner/Carrier was not liable for losses to the cargo carried on deck caused by the unseaworthiness of the vessel and/or the Carrier’s negligence based on the inclusion of a clause stating “the Carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising.”
It depends on the true construction of the Charter Party. Under the Hague-Visby Rules the Owner is bound to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage. The Hague-Visby Rules also state that clauses in contracts of carriage which lessen the Carrier’s liability otherwise than as provided in the Hague-Visby Rules shall be null and void and of no effect (article III rule 8 Hague-Visby Rules). So one has to look at the Charter Party as a whole in order to determine whether Owners’ seaworthiness clause (which lessens liability in respect of seaworthiness) in the time Charter Party will have force. If it can be concluded that the incorporation of the Hague-Visby Rules is overriding, the result is that Owners’ seaworthiness clause will be rendered void.
During the COVID-19 pandemic, now for 2 years, we have hardly seen any incidents with any impact on Charterers other than a small number of disputes about delays. The issues of time counting and quarantine are usually defined in the Charter Party and in most cases the vessel Owner pays for the costs, unless agreed otherwise. Apart from COVID-19 there are, and have been, many communicable diseases in the world and especially in ports. There have been outbreaks of Yellow Fever, Ebola, etc. The vessel Owner should and is obliged to take protective measures to protect its crew. With a pandemic going around the world one could hardly shift the liability to one party who happens to hire a ship, like it cannot be expected to declare a port free from COVID-19. In principle in any port in the world one could assume the presence of COVID-19. If a port would be unsafe and with the infection rate in Europe it would mean that every port in Europe is unsafe. We would argue it is not.
In order to shift responsibility to Master/Owners when the Charter Party states that operations are to be done “under the supervision of the Master”, the Charterers will have to prove that the Master has actively interfered with the loading/discharging operations or that the Master negligently failed to intervene in the operations to ensure the seaworthiness and cargoworthiness. The act or omission of the Master should be the immediate and proximate cause of the loss.
One of the characteristics of a Bill of Lading is a Contract of Carriage. This means that it is a contract between cargo interest and Carrier, whereby the Carrier has the duty to deliver the goods in good condition. If the Receiver of the goods receives damaged cargo, they may have a claim under the Bill of Lading. If a Charterer act as Carrier under the Bill of Lading, they will be claimed against first. If the Owner is the Carrier, the Owner will receive the claim and the Charter Party will define if and to what extend the Charterer can be held liable. E.g. claims as a result of unseaworthiness, poor navigation, water ingress or weather conditions could be claims under the Bill of Lading but should rest with the Owner and not the Charterer.
We assume that the loading operations are Charterers’ responsibility. In addition to that, it is Charterers’ responsibility to provide that amount of cargo contractually agreed under the Charter Party. If too much cargo is loaded, Charterers are likely in breach of the Charter Party and consequential losses will be for their account. It depends on the exact circumstances, but we find it difficult to think of a situation wherein the Master is to blame for this.