International maritime conventions
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Wages (that seamen earn onboard, not for the master traditionally, but done by statute in the 1800’s in the UK for his wage and disbursements). This includes benefits, what is paid to government on his behalf (EI, union dues…). More tricky is severance pay, courts generally answered no (see CIBC v. Le Chêne No. 1, p. x). What about damages for wrongful dismissal? Logically, the answer should be no (that in the UK, see The Tacoma City, p. x), but yes was the answer given by Canadian courts. The wage-earner can take an action in rem. Same for masters (s. 86 Canada Shipping Act, p. 86). The wage-earner also has a maritime lien on the freight (money that the cargo owner pays to the ship to get the goods carried, usually payable upon arrival, that the seafarer has helped to earn), not on the cargo itself (doesn’t belong to the ship owner). The lien on the freight is enforced by arresting the cargo (which forces the owner of the cargo to pay the freight; can’t arrest something that is intangible in CL, like a bank account, would work if money in a chest). If the freight has already been paid, the wage-earner has lost that lien. According to O’Connor, it is very rare now to be able to arrest cargo now, freight being generally paid early.
With a true maritime lien, one gets paid before the banker. After the banker come other creditors, including quasi-maritime liens. There is an International Convention on Arrest of Ships (1999, not yet in force, the 1952 one is in force, p. 45). Its first section (art. 1) bears very strong resemblance to 22(2) in the Federal Court Act, id. for s. 1 (art. 3) and 43(3). The government of Canada will never sign, notably because of s. 2 (art. 2) which would preclude the creation of new maritime lien. There is also an International Convention on Maritime Liens and Mortgages (1993 soon in force, 1959 currently in force). Again, s. 1 (art. 4) bears much resemblance to 22(2). Once again, Canada has not signed on, notably due to limitations in art. 6. Many European countries have signed on to these conventions, some CL has been imported into CVL. January 25 Quasi-maritime liens get paid after the mortgage. The only advantage to having a quasi-maritime lien is not ranking, but it’s a right to arrest the ship without having to meet 43(3). As a creditor, one only gets the rank of every other creditor. Statutory rights in rem have the same status except that one must then meet 43(3): dealt with owner and same owner than at the time of dealing. If and when a ship is sold by a court, one must go after the money (often called res) then (if one does not know this is going on, too bad!), one (even the government) cannot action the next owner. In practice there are probably 5-6 ships sold by court in Canada every year. Two things to keep in mind:
The ranking of claims
Admiralty courts have complete discretion to change this ranking if they wish. Judges have traditionally done justice by putting wages before all other liens (sometimes included in court costs). Rules are basically the same in the UK. There are slight nuances in the US: US mortgages (registered in the country of flag) are distinguished over other mortgages (no such difference in Canada) and US mortgagors have priority over foreign liens. Remember to always check international conventions for foreign liens. For ex., has it been extinguished (see art. 6, p. 108)? Topic Four: Collisions and Limitation of Liability Important to differentiate: collision rules and collision convention. We will also discuss how to apportion liability and limitation of liability, an exception to the general rule which is actually a general rule in maritime law. A collision in maritime law involves more than one law. A ship hitting a dock is technically an allision and the collision convention does not apply. Also, there does not be to be contact between the hulls to have a collision: the result of emergency manoeuvres also fit in this category. Vessels are personified in that they can be sued directly in rem, just like fictitious ‘moral persons’. If a crew navigates a vessel negligently and causes damages, the crew but also the owner (company or physical person, action in personam) can be sued (vicarious liability). Even if the ship owner does not come forward, he is still liable in personam if the in rem action does not cover the entire damage. Negligent navigation is within the course of employment, so vicarious liability works in maritime law. Collisions Rules (p. 111) and the Collision Convention (p. 126) Collision Rules (1972, p. 111) in force worldwide: Resembles rules to drive a car, often called ‘Rules of the Road’, they attempt to prevent collisions. Each country can add rules for internal waterways. Note that the CB only contains a part of the Convention. Which rules apply also depends on visibility.
Note that the ‘stand-on’ vessel is the one that has priority, the other one being ‘give-way’. Collision Convention (1910, p. 126) in force in some countries, including Canada, but not the US: Determines who pays for damages caused when Collision Rules are not respected. Apportions liability in case of collision.
Canada had the Convention signed by the UK in 1911 and it was put into an act in 1934, of which the most recent version is the 2001 Marine Liability Act (p. 128). Among other things, it extends the apportionment rules to persons (no collision is needed) and not just ships (like in CVL, see s. 17(1) and (2)) while respecting the Convention. February 1 Fines and even imprisonment are possible for breaching collision rules. There are civil and criminal sides to these proceedings. The rules are most important, monetarily speaking, when there is much damage and an ensuing civil action. R. v. Stogdale (1996), p. 120 Good ex. of the penal rules. Stogdale was a captain of a coastguard ship which was placing buoys on Lake Erie early in the season. He proceeded at cruising speed in the fog due to his certainty that no one else was on the Lake due to the season. Radars did not pick up anything. A fishing boat was struck, sunk and all the fishermen on board died. He and the officer were charged of criminal negligence causing death (on top of fines). The officer was acquitted because he was under orders. Stogdale was declared guilty at trial but acquitted on appeal (government orders: no overtime for crew). “Stogdale lost his house, his job, had a heart attack, etc.”
There are several ex. of the civil side. In The Glucometer II (1989), p. 119, civil liability was found for removing a radar reflector on the mast of a sail boat. In The Lady Gwendolen (1965), p. xiv, a ship carrying Guinness on the Irish Sea went too fast (captain always went at the same speed irrespective of fog) and owners, which knew what was going on, also were found liable. Formerly, there was a 50-50 rule of apportionment in case of shared negligence… The Pennsylvania (UK: 1870), p. 129; (US: 1873), p. 132 Two ships collided at night in dense fog. The sailing vessel (Mary Troop), coming into NY harbour, immediately sunk. It had been ringing a fog bell rather than a horn (as mandated by the collision rules). If the Mary A. Troop had even .1% of the responsibility (because presumption that if breached a rule, at least partly liable), it was liable for 50% of the damage even if most of the liability laid with the steamship Pennsylvania, which was outgoing of NY. An English court (suit by owner of cargo in the UK) held that the Mary Troop was not liable due to a lack of causality between bell and damage (and unjust, the Pennsylvania was much more negligent). The USSC (suit by owner of boat in the US) found that the damages should be divided equally.
When the Convention came around in 1910, the presumption of liability was reversed. However, the US has never signed this Convention, therefore the presumption has remained there (and in Liberia, which adopted US law). It was decided in U.S. v. Reliable Transfer (1974), p. xii that the 50-50 rule was passé. Liability is now proportionate to fault, so the presumption does not have much effect anymore. Judges invented tools to get around the 50-50 rule: The “Agony of the moment rule” is similar to the CL “Last clear chance rule” which went around to the contributory negligence bar (person who has the last clear chance is 100% liable). The idea was that a ‘knee-jerk reaction’ which lead to a breach of the rules could be forgiven if it did not have much influence in the accident. This rule does not exist anymore… For Canada, see the Marine Liability Act (p. 128), s. 21, which abolished the rule for maritime law (as equivalent provincial laws do not apply). Effect of the Hague-Visby Rules Under the Hague-Visby Rules (that mandatorily apply to carriage of goods by ship, in almost every country), a shipowner is exonerated for a certain number of events causing cargo damage, including “peril of the seas”, “act of god” and “error of navigation”! Insurance policies are the only coverage one may have there. “Error of navigation” includes any infringement to the Collision Rules. However, one may sue the tortfeasor if it’s someone else or some other ship. This is why in the Collision Convention there is a difference between joint & several (physical person injured, innocent 3rd party) and individual (cargo) liability. Note that the “error of navigation” rule itself has some exceptions which we won’t cover. Cargo owners generally join into the actions of ship owners. In the US (which didn’t sign the Convention), one may sue the other ship / tortfeasor for 100% of the damages as one is jointly and severally liable for everything. In practice, however, every single bill of lading in the US has the “both to blame” (or B2B / “hold me harmless”) clause (used in Canada even if unnecessary) which is equivalent to the Convention disposition, in that it indemnifies the carrier for his share of the other tortfeasor’s damages. In US v. Atlantic Mutual Insurance Co. (1952), p. 122, such a clause was found invalid by the USSC because the ship was acting as a common carrier (government-granted monopoly usually), but this has been limited to this case. Note: One nautical mile is 6000 feet and divided in 10 cables (regular: 5,280). A knot is one nautical mile per hour. Saying that a ship heads 0º, it’s heading north; 90º: east, 180º: south, 270º: west. We look at lights and one case of collision (The Roseline, 1981 2 Lloyd’s Law Rep 410). The accident occurred in 1978: the Eleni V blew up as it was an oil tanker, so no one knows why it turned to port as it was almost facing the Roseline (which did not stop even if it put its propellers full astern), which was carrying bulk goods. They had seen each other on radar, but to no avail. Who’s liable? Both apparently went too fast given reduced visibility (see rule 19, so the appropriate rules apply, given that visual contact applies). The turn to port of the Eleni V was a major mistake. The judge also found that in the sea there was no reason to pass so closely. Also, neither of them used the proper lookout or radar procedure (Eleni V logs were found confirming this). The Eleni V undoubtedly has a larger share of liability according to O’Connor. The trial judge decided 60-40, according to O’Connor it should have been 66-33 or even 80-20, judges however seem to still tend towards the old 50-50 rule. If O’Connor gives us a collision fact pattern in the exam, it will be from a real case transposed in Canada. Once liability is ascertained, how do parties pay each other? See handout for today. Basically, the party owing more pays the net debt to the other: set-off. “Cargo and ship are two different animals.” - O’Connor. The Wagon Mound (No. 1: 1961, p. 142); (No. 2: 1967, p. 143) Fuel was then pumped in tanks until it spewed out of air vents. Welding at the same time causes a fire. In the no. 1 case, the ship-yard sues the re-fuelers. He lost because he did not dare plead foreseeability because of the contributory negligence bar. In the no. 2 case, the owner of the vessel being repaired (welding was on the dock) sued the re-fueler and was able to plea foreseeability.
In Rivtow Marine v. Washington Iron Works (1974), p. 144, Laskin J’s dissent in this case later became the law. The Lake Winnipeg (1991), p. 144 established the difference between steel damage and loss of profit. The Jervis Crown (1992), p.147 is an exception allowing the non-owner of goods to sue for loss of profit (in Quebec the rule is direct causation). Many maritime law cases have set rules in damage evaluation see p. xiii. Remember: Tort law broadly applies to maritime law when it comes to the evaluation of damages. February 8 In last week’s collision ex., there was damage to ship, cargo and injury to crew. Crew is a form of third party, but it could have been a bridge, dock, water skier, pollution… Ship and cargo owners are insured through brokers. There are different types of insurance in the marine world (which invented insurance), as for cars. There is usually ‘hull’ or ‘steel’, liability, injury, etc. insurance. Hull insurers pay for ship damage (minus a deductible) regardless of who is at fault and are then automatically subrogated and may go after tortfeasors themselves. In Quebec, since 1978, it was decided that a subrogated insurer has to sue under his own name (unlike in the rest of the world), but this does not apply to maritime law which is federal (certainly don’t need to do it in Federal Court, may want to do it in Superior Court as a safeguard even if probably unnecessary). Cargo insurers pay for cargo damage. They are usually not the same insurers as the hull insurers. They are subrogated, but remember that they can’t sue the carrying ship, only the other one for his portion of liability. Premiums are adjusted to compensate for the increased risk. Liability insurers who pay off damages to third parties are called P&I clubs (protection and immunity association) which are mutual insurers, that don’t turn a profit. There are about a dozen of them in the world (have existed for about 150 years), mostly in the UK (one in the US, one in Japan, three in Scandinavia). P&I claims are limited to $1B US for pollution. Most hull and cargo insurers are on Lloyd’s market, Lloyd’s is actually selling fractions of insurance policies to underwriters and then issues a policy. Limitations of liability In very few fields of law are there general limitations of liability. It is the case in maritime and air law. This has existed for over 200 years, to promote commercial shipping, although it is contested. The idea is that shipping is inherently dangerous and that investment should be facilitated. Previously, the limitation was the value of the ship and cargo. But this was seen as arbitrary. It is now done according to gross tonnage of the vessel (which has to do with cargo carrying capacity, in the broad sense including passengers). Larger ships earn more money and should thereby be more liable, it is a fairly linear relationship (calculated in SDRs, about $2 Canadian, art. 9). Per the Marine Liability Act (s. 28), p. 178, the limitation is $1M for personal injury / death, $0.5M for other damage (cumulative: max. $1.5M) for a boat under 300 tons. Note that limitations even apply to pleasure crafts (see Whitbread v. Walley et al. (1990), p. 151). In The Rhône v. The Peter A.B. Widener (1992), p. 153 and Bayside Towing Ltd. v. CPR (2001), p. 159 courts have not really decided what would happen if a boat being towed caused damage. The law is unsettled, as it is for what happens if there is a “flotilla”. Ship owners only benefit from limitations in some circumstances. The first test invented for this was “fault & privity”, ‘privity’ meaning ‘to have knowledge’ in 17th C. English. It basically said there was no limitation in case of intentional wrongdoing (hiring unqualified crew, not having up-to-date charts as in The Marion, 1984, p. xiv [where an oil pipeline was ruptured by an anchor], letting the crew always go too fast as in The Lady Gwendollen…). Limitation was contested in every single case (questions like: who has to know?). This was a difficult rule, which has fallen to the wayside with the Convention (although it comes up in other areas of law occasionally). The new test for breaking limitation: proof that done on purpose, recklessly knowing that damage was likely (s. 30(4) Marine Liability Act, p. 179 and art. 4, p. 181). These tests are much more onerous and limitations are now rarely contested. In exchange, the amount per ton was doubled. This is good according to O’Connor: better compensation and less litigation. The Agean Sea (1998), p. 156 Here the question was: To whom does the limit apply? Specifically, does it apply between owner and charterer of the ship? In this case, the owner paid damage and sued the charterer. It was held that it did not apply unless the limitation was available to the charterer if sued directly. So limitation is mostly for tort claims brought by third parties. The Darfur (2004), p. 171 touches on the same issue. The Tojo Maru (1972), p. 223 The Tojo Maru was damaged in a collision and was taking in water. Salvors attempted to afix a steel plate under water on the side of the ship to later pump the water out. Bolting was attempted and the boat, which was carrying oil, caught fire. The salvors pleaded when sued by the owner that limitations applied but the court rejected this argument. This has since been added to the Convention.
There are several limitation conventions. The one in force today is the 1976 Convention, per s. 26 of the Marine Liability Act (p. 178). Also, the Federal Court has exclusive jurisdiction (s. 32(1)) and liens do not confer priority over such claims (s. 33(3)). At p. 181, arts. 1-3 define who is entitled to limitation and to which claim it applies. Also, the limitation only applies to the set-off debt. To benefit from a limitation, one must be included in the statement of defence. Judges can also invoke it. One can also pre-empt a boat arrest or action by paying money into court to keep sailing. Topic Nine: Personal Injury and Fatal Accidents The personal injury ‘pot’ is the harder one to calculate. There is an added limitation in the Marine Liability Act (approx. $4M or $0.35M x # of passengers on board, whichever is greater) for passengers (defined at s. 29(4), art. 7 Convention) in vessel at 29(1) (p. 178) for ships that are meant to carry less than 12 people which have no certificate, unlike 28.1(a) which applies separately to third parties. For a ship licensed to carry more than 12 people, the limitation $0.35M x authorized # of passengers for non-passengers. Passengers on larger ships are covered by the Convention (art. 7, can be above $1B). So the passengers have the right to a different ‘pot’ or ‘through’, which gets shared proportionately if necessary. This limitation can be negated according to the aforementioned test. Note that according to the Convention, lower contractual limitations are void. Also, passenger injury includes the entire quantum (suffering, income loss, etc.). Obviously, no one will talk about limitation if the claim is certainly inferior to the limitation. We will see later that other ‘pots’ exist for other types of damage: pollution, nuclear, etc. Time bars are different depending on the ‘pot’, although it is usually 2 years, see p. 332. Limitation conventions benefit ship owners as to quantum but do not otherwise affect liability. The Athens Convention (referred to at p. 333 for internal use of the international agreement, see p. 334) helps to protect passengers. It introduces presumptions of fault in certain conditions (art. 3(3), p. 335): shipwreck, collision, stranding, explosion, fire, ship defect. Also, art. 7(1) introduces individual ‘pots’ worth $0.35M (“175,000 units of account per carriage”). On average, this yields the same result as the Convention, but it favours smaller claimants over large ones. Since both the Athens Convention and the other Convention apply in Canada, one has to go to the Athens Convention as a passenger, given presumptions and given the exclusionary nature of art. 14 (p. 336). But the Athens Convention does not modify carrier rights and duties which exist otherwise (art. 19, p. 337). These two provisions are somewhat contradictory, the federal government’s position according to O’Connor is that the Athens Convention applies… a judge may have discretion to give what is advantageous to the passenger. Canada is the only country in the world that enacted the 1990 Protocol to the Athens Convention. The 2002 Athens Convention (p. 339) is not in force anywhere yet but raises the limit to $0.5M or $0.8M in case of proven fault, but also provides a few absolute defences (ex. war). It keeps the ‘small pots’ approach. When this last Convention is ratified, the Limitation Convention rules will probably be modified accordingly. Also, the law of the flag will apply unless overridden by local law. The US is not party to these conventions and is governed by a fault and privity statute (1851) which courts tend to nullify because limitations are very low, for passengers it tends to be a contractual issue (see The Titanic (1914), p. 186, The Rebecca, 1831, p. xiv). In The Western Regent (2005), p. 176, the issue is whether limitation proceedings can be taken elsewhere than were the action is taken. This was allowed by the UK Court of Appeal but may yet go to the House of Lords. February 15 Topic Five: Salvage and Wreck For salvage to occur:
In maritime law, salvage is considered to be a binding agreement / contract when it occurs, even if there was no actual communication. This is unlike traditional common law which did not recognize such ‘quasi-contracts’. Salvage involves saving lives or property. Note that the ship does not have to be sinking. For ex., a ship that no longer has an engine is in peril even if it’s not sinking, because ultimately it will be in danger. Anything from running aground, a fire, piracy, enemy capture during war can give rise to salvage. The ship can also have sunk and be raised from the bottom of the ocean. Note that cargo can be salved as well. Salvage is to encourage people, usually another ship, to save lives or property at sea as this is good for shipping. Some companies do it, but they’re not under contract. At one time, this was done with man power (can’t tow with a sail boat), now it’s mostly done with horsepower. Originally, it was mostly the master and crew who could claim salvage (owner got a nominal amount usually), who could get an award even if the salved boat had the same owner (owner got nothing). Today, the master and crew get a nominal amount and the owner of the salving vessel gets the bulk. Remember that these services are insured… If more than a ship shows up, the Convention says that they must cooperate. It’s not necessary to touch the ship to salve it. In The Meandros (1925), p. 188, a ship was stuck on a sand bar and there was a chance it would be captured (war). Another ship used its engines to wash away the sand and that was considered salvage. The Kafiristan (1938), p. 191 Salvage costs can be claimed as part as collision damages, like steel damage, loss of profit and personal injury. In this case, the Empress of Britain hit the Kafiristan in the Gulf of St. Lawrence. Liability was split 75-25. The larger cruise vessel stood by until assistance arrived, which was a tugboat also owned by the Empress Line (The Beaver Fur). It was decided that The Beaver Fur should also get a salvage award, of which The Kafiristan could recover 75% from the Empress of Britain. All of this was insured… The judge was probably inspired by the 1910 Convention. Generally speaking, hull insurers pay for salvage. If applicable, cargo insurers will also pay a fraction. P&I insurers also get involved in certain instances. The Roxana Bank (2004), p. 197 Normally, charterers are not compensated for salvage. However, here, there was successful salvage of a ship drifting towards an oil rig off South Africa. Except that the salvage claim was from a ‘sister’ company in the Swire Group that had not even a charter party but was operating / paying for the ship. It was argued that they did not have standing. At first instance, the argument was accepted, it was refused at appeal: the list of people who can claim salvage is not closed.
If the salvage operation is unsuccessful, there is no claim whatsoever: no cure, no pay. Something has to be salved and then there is a claim against it: it can be only the cargo or only the hull, etc. Note that whatever is salved must have value if a claim is to be successful: ‘wet junk’ won’t work! There is one exception to this rule, recently added to the Convention: salvage operation that prevented pollution, environmental damage. One may have managed to pump oil worth nothing but preventing an environmental disaster. This is a form of ‘cure’ but previously there was no claim for this. The subject of salvage One must salve an actual ship or cargo. In The Gas Float Whitten #2 (1897), p. xv, no salvage award was granted. According to O’Connor, this case would probably be decided differently today, as it was required for navigation. Early Recovered Resources v. Gulf Log Salvage (2005), p. 200 Here, some logs were ‘salved’ by a woman who got $200 per log (logs freely floating, escaped from logging companies; paid by the provincial government or the company if identified). She started arguing that it was federal maritime law, which would grant her about $600 per log (salvage instead of provincial scheme which would be unconstitutional). “Judges are widening the horizon of what can be salved, but there are limits.” - O’Connor. The Federal Court came to the conclusion that it was not salvaged: not shipping or navigation, just property and civil rights. This decision has been appealed, but it will probably stand. Brooks Aviation v. Boeing SB-17G (2005), p. 210 In, a flying fortress crashed after WWII in a Labrador lake. It was located, someone claimed the right to salve. The Federal Court found that it was a wreck, with special rules. It toyed with the US idea of exclusive right to salvage (attempted for The Titanic, granted conditionally). Not done here, but may come at some point.
A person can be salved, but generally there is no specific or separate award. Why wouldn’t the courts give compensation for this? The way courts have done it is to ‘tack it on’ property if applicable. The problem is that it’s hard to evaluate… Who can render the services? Like tugboats under contract, pilots usually can’t claim, unless they do something extraordinary. Akerblom v. Price (1881), p. 216 and The Helenus and Montagua (1982), p. 219 are two such exceptional cases. Salvage agreements Salvage agreements are not necessary, but they are common. This is not to establish the price, but to identify the relationship (to preclude claims that it wasn’t salvage) and which law will apply. The Lloyd’s Open Form (LOF), see LOF 2000 (p. 236), is used worldwide. Duties of the parties After signing, all parties have to make a reasonable effort in the salvage operation, even if it’s not really a contract per se. Salvors can be liable for negligence (The Tojo Maru (1972), p. 223), but can also limit their liability. The salvage conventions In 1910, the UK signed the first salvage convention (p. 225) on behalf of Canada. O’Connor reads through it… There is an obligation to render assistance to people, but not to ships or cargo. The more recent Convention dates back to 1989 (p. 227) and is very similar (replaced the 1910 one de facto). Note that the absolute limit for salvage under the Convention is the value of the property, normally never more than 50% (13(3)). One innovation is compensation for “preventing or minimizing damage to the environment” (13(1)b and 14). These articles were introduced upon pressure of the P&I clubs (mostly in the context of oil spills), as being mutually advantageous. One problem is that it only covers actual expenses and not lost profit: see The Nagasaki Spirit (1997), p. 231 which is the only major case on article 14. The idea was good, but the compensation is too limited for an incentive to be created. Post-Nagasaki Spirit, the P&I clubs decided to replace art. 14 contractually, which is possible according to the Convention. This is known at the SCOPIC (Special Compensation P&I Clause) Clause (p. 238). It involves a detailed ‘payment schedule’ for equipment used, wages paid. This is much broader than out-of-pocket, third party expenses. This regime has to be triggered, to agree to it on the LOF grants the option of using it (“You’d be silly to refuse it.” - O’Connor). It grants a standard mark-up of 25% on prices. Only owners of the vessel contribute (cargo has no P&I insurance). It is also a remedy to “no cure – no pay” if triggered, so it should be done right away if it looks likely the ship is not salvable. Also, this does not apply to only environmental damage. Salvors have a choice but cannot fully double-dip. There is always an art. 13 assessment, which is zero if the ship goes down. SCOPIC (art. 6) only pays if it exceeds the art. 13 award, there is no double-coverage of insurance. However, if SCOPIC is invoked and art. 13 turns out to be more advantageous, there is a 25% penalty of the difference between the art. 13 award and the potential SCOPIC award if it had been triggered on day 1 (may have been triggered later). P&I clubs want a good evaluation to be made and don’t want automatic triggering. March 1 SCOPIC The SCOPIC clause was created to replace art. 14, which was very hard to amend (75-100 countries involved). It is now an option in the LOF and is a more modern scheme. This clause was a trade-off between the salvage unions (professional salvors) and P&I clubs, liable for art. 14 awards. SCOPIC 2000 (p. 238) is the current version. It still contains two typos: ‘submitted’, corrected to ‘substituted’ in casebook (cl. 1) and at cl. 7 (see below). Beyond its ‘tariffs’ (cl. 5), it also involves a 25% automatic mark-up. Cl. 6 and 7 are key: SCOPIC has to be ‘invoked’. There is always a parallel art. 13 calculation, as SCOPIC only pays above and beyond art. 13 (what’s under is paid by parties that pay otherwise: ship, cargo owners). If the ship goes down, the art. 13 award is zero. So hull and cargo insurers are still governed by ‘no cure no pay’. Cl. 7 is somewhat tricky. It is involved when the art. 13 award is higher than SCOPIC. Salvors are penalized for triggering SCOPIC unnecessarily: 25% of the difference between art. 13 and the full theoretical SCOPIC. Bracket [the said … and], according to O’Connor it should say “the amount, if any, by which the said art. 13 award or settlement exceeds”. This avoids a very small SCOPIC award getting discounted into being negative. Note that SCOPIC can be terminated as well (cl. 9). “SCOPIC is different from old-fashioned salvage, in that the value of what’s salved is irrelevant, it is not limited to environmental damage, ‘no cure no pay’ does not apply. It also allows companies with less expertise to enter the market, as the risk is lower.” - O’Connor. Good exam question: how did SCOPIC change salvage? The first (and probably only so far) SCOPIC case in Canada was on the St. Lawrence in 1999. A company triggered it and were successful in the operation. The art. 13 award was low because of damage to the ship so they got paid full SCOPIC. Example 1: Suppose a 20 day salvage operation, where costs are equal every day or linear (not always the case), which would have brought in $4M ($200K / day) total under SCOPIC. Suppose that SCOPIC is invoked on day 1. If the ship sinks, it’s easy. But if there is success? Assume the art. 13 award would be $500K. The salvor will get $4M ($500K from cargo & hull insurers pro-rated on the value of what was saved, $3.5M from P&I clubs), as there is no discount (art. 13 < SCOPIC). Example 2: Re-use the same ex., where SCOPIC is invoked on day 5/20. The award will be $3M, the P&I clubs paying $2.5M and cargo/hull $500K. If it is invoked on day 15/20, the figures will be $1M/$500K. What if the art. 13 assessment was $5M and the SCOPIC assessment $1M? The penalty will be 25% x (art. 13 - full/theoretical/virtual SCOPIC), here 25% x (5M – 4M) = $250K. Note that there is no difference in the penalty whether SCOPIC was invoked on day 1 or 19. If the difference is huge, the calculation churns out a negative number, and the salvor probably gets nothing (wouldn’t have to pay). According to O’Connor, this has never happened yet. Note that SCOPIC awards (cl. 14) are not part of general average. Also, disputes on SCOPIC are to be arbitrated (cl. 15) as contentious art. 13 claims.
Wreck Whenever a salvage operation fails, there’s a wreck. The Canada Shipping Act (part VII, p. 247) designates ‘receivers of wreck’ which take in wrecks (found in Canada, i.e. within 12-mile limit, or brought into Canada) and returns them to their owner if possible. An award is paid (acts as an arbitrator, usually <50%, never more than 100%), formally part of salvage, even though it does not come under the convention. The Lusitania (1986), p. 243 Here, it was decided that if found outside the UK, it could be brought in ‘tax free’, because of slightly different wording. “Judges are very harsh on Crown attorneys when it comes to treasure, the act has to be met perfectly.” In the US, the system is very different and the rule is basically finders-keepers (even if there is a true owner). See for ex. the Titanic case, where courts held that they had jurisdiction. Topic Six: General Average and the York-Antwerp Rules General average has to do with the crew and captain saving cargo and ship, unlike salvage which involves a third party. The easiest ex. is jettison: voluntarily throwing cargo overboard, to attempt to save the ship, perhaps other cargo and/or lives. General average is extremely old (3-4,000 years). It was already in Justinian’s code. If there is a loss or expense incurred voluntarily by the ship / crew because it is facing a peril, which ‘saves the day’, general average applies as long as there is a “common adventure”. There has to be more than one interest saved and something actually saved. Especially for thousands of container ships, thousands of interests can be at stake. The idea is that everyone will pay something to those who suffered a loss. This is based on fairness. There is a whole profession of “general average adjusters” which make determinations. This is a really ancient form of insurance and risk-sharing, although now supported by insurers. Sacrifice usually involves cargo, but it can also involve the ship (cutting down a mast, running it aground to prevent it from sinking). General: Common adventure. Average: Partial loss, comes from “avarie”. If only one interest is involved, the term is “particular average”, in which only insurers may be involved. Necessary elements of general average:
Note that unforeseen dangerous cargo can be discarded without incurring general average. Also, the cargo need not be jettisoned. For ex., general average would apply to cargo wetted in extinguishing a cargo. The Captain makes all the decisions. The York-Antwerp Rules (p. 251) This is not a ‘code’ of general average or at least definitely not a full statement. It is a list of principles, which got progressively expanded since about 1860, as new problems came up. The goal of these is to clarify rules as to what is part of a general average expenditure. In Canada, these supplement national general average rules. The version we have was adopted in Vancouver in 2004, it’s about the 20th version. O’Connor strongly recommends that we read them! The ‘lettered’ rules are general, the ‘numbered’ rules are precise and have priority. The 2004 rules also include a new rule (VI) so that salvage costs could not be adjusted in general average (before, this led to complicated calculations). Pollution / damage to the environment also cannot be part of general average (ex. jettison of oil will be, but not the clean-up costs) (rule added in Sydney in 1994, as pollution is now subject to complete regime). Delay is not covered either. Fault of another party can also only be used as a defence at time of payment. Towing can be part of general average if it’s cheaper than off/re-loading for repairs. March 8 The York-Antwerp Rules are not a convention, they are private rules incorporated into contracts (bills of lading and charter-parties). All major trading nations incorporate these rules. Insurers (especially P&I clubs) recommend that ‘members’ use the most up to date version and only insure to that extent. Some people use old rules to include pollution (ex. oil, 1974 rules) in GA. It’s a bad idea according to O’Connor and he has never seen ‘mix-and-match’ given how arcane the system is (although this is legally possible). A common maritime adventure, common extraordinary peril, a voluntary and reasonable expenditure or sacrifice are requirements to invoke general average (some points in common with salvage). O’Connor highlights sacrifice (ex. jettisoning cargo, burning cargo for fuel, grounding the ship) and expenditure (spending money: ex. hiring a towing vessel, going to a port of refuge, offloading cargo for repairs). Note that salvage is no longer associated with GA, and SCOPIC don’t apply to it. It has been held in Quebec that non-separation agreements are against public order. They are now rare per rule G.3. Imagine ship C with cargo A and B. Say A is thrown overboard in an extraordinary situation. Assume all interests have the same value ($1M). Everyone has to contribute for jettisoned cargo, including the one whose cargo was jettisoned (333,3 K / interest).
We don’t have to consider the other rules, just I-XII and XIV. The Bijela (1994), p. 256 The Bijela accidentally hit the bottom. Permanent repair of accidental damage never goes into GA. The issue was whether temporary repairs could be included in GA. The House of Lords held that it was the case, correctly given the then York-Antwerp Rules. Now, the result may have been different depending on how much the permanent repairs would have cost. So this case may not always be good law.
Under Rule D, one may refuse to pay GA after the exercise if the ship owner is at fault. One may not complain if the fault is excused in the contract of carriage (ex. error of navigation waiver under the Hague-Visby Rules). Fault is a question of fact (see Western Canada Steamship (1960), p. 276), so are ‘general practices of shipping’ (see Ever Lucky Shipping (2004), p. 283). Note that the “fault” portion will be covered by a P&I insurer if the cargo insurer doesn’t have to chip in. The USA has GA. But they never adopted the Collision Convention, which limits joint and several liability for cargo damage (both to blame rule), which is circumvented by so-called both to blame clauses. There is also the Jason clause. In The Irrawady (1898), p. 287 the USSC said that error of navigation was an unconscionable waiver with respect to GA (under the Harter Act, before the Hague Rules), unlike Canadian CL decisions. But The Jason (1912), p. 287 said that it was OK as a contractual clause. These clauses bring the USA in line with the rest of the world. These clauses are in almost every bill of lading, even in Canada. The ship-owner has a possessory lien for GA over the cargo. But he doesn’t have a maritime lien unlike for salvage. “There are rarely cases when someone litigates a case for GA payment as possessory liens are always exercised.” - O’Connor. Only the ship can declare GA. In practice, it always will do it, otherwise it gets sued for the full amount for voluntary and unnecessary ‘cancelling’ of cargo. In doubt, masters of vessels declare GA. March 15 Topic Ten: Marine Environment and Pollution Pollution is a subject that only appeared recently, it became an issue in the 1970’s. Think of The Wagon Mound were oil was pumped out in Sydney harbour with no consequence. It only became an offence to pollute water in Canada in 1973. Southport v. Esso Petroleum Co. (1954), p. 349 This was a case which included jettisoning a large quantity of oil. Lord Denning struggled with what tort law could apply to pollution: trespass, public nuisance, negligence, etc. None of the categories really worked. No real interest for trespass, preserving the ship was not negligent, there was a defence of necessity for public nuisance… The Queen v. Sun Diamond (1964), p. 350 In this case, the public nuisance argument was accepted. O’Connor thinks this case was decided incorrectly. A regime to allow the Crown to claim for pollution had been created, but it was unwieldy: clean-up required an order-in-council. There was no OIC and public nuisance was accepted. This allegation is always made now in pollution cases…
The landmark case in Canada was The Arrow (1970) which polluted a vast area of the East Coast. Legislation was enacted in 1971, which kicked in in 1973. It followed the 1969 Convention that Canada had signed but not ratified (Civil Liability Convention). A compensatory fund was created, with an attached strict liability regime. The Maritime Pollution Claims Fund still exists, although it is now called the SSOPF (Ship-Source Oil Pollution Fund). So there is strict liability with the usual limitation, supplemented by the fund which comes from a duty to receivers of oil. This is limited to hydrocarbons. It also has to do with civil liability only. There is an international penal convention (MARPOL, Marine Pollution) which we do not study which aims to avoid pollution and in which States commit to create offences of pollution, with a preventative objective. The essence of the two conventions that Canada used for civil questions as models is simple:
“One channels and limits, the other one pays if necessary.” - O’Connor. Note that the US is party to neither convention and have their own fund with a $US 1B cap (reaction to the Exxon Valdez). O’Connor thinks them joining would be advantageous for the US and others. International Convention on Civil Liability for Oil Pollution Damage POIBAC: Persistence Oil In Bulk As Cargo. The conventions only apply to these products. Persistent oil is oil that is not sufficiently volatile to evaporate (there is a scientific definition): crude oil (may sink in the water), heavy fuel oil... In bulk: means that the only thing that contains the cargo is the steel of the ship: no containers, barrels, etc. As cargo: means that it has to be carried as cargo and not as fuel. Note that Canadian law applies even to PO in barrels or other containers. If it is POIBAC that is carried, it is a so-called ‘convention ship’ in Canada. See art. I.1, p. 352. Canadian legislation covers both convention and non-convention ships. Convention ships include those (usually on return voyages) carrying residue (art. I.1). The convention mostly covers damage done in an EEZ, but also to preventative measures elsewhere (art. II). There is no clean-up on the high seas: no good technology, very expensive, uncontrollable weather… It does apply to pollution that flows in. Strict liability (art. III) is only excusable by war, terrorism, natural phenomenon or government negligence. For convention ships only, there is no other claim (art. III.4). There is joint and several liability in case of collision or more than one ship being responsible (art. IV). Limits are set up at art. V, the absolute top is approx. 182M$. According to art. VII, not other assets may be seized to pay for cleanup. Insurance is compulsory for ships above 2,000 tons and a certificate must be on board (art. VII). The insurer can be sued directly, even if the company has evaporated (art. VII.8). Even when a tanker is empty, it still carries bunkers. All convention ships cover all POIBAC, including their own bunkers. POIBAC is the identity test, but the oil that comes out is irrelevant. Ships also carry marine diesel for manoeuvring, but it evaporates so is not really a consideration. International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage Art. 4 (p. 359) says that compensation will be given if it cannot be recovered otherwise. It may be because there is no liability (exception), the ship owner and his insurer are insolvent, or most likely the damage exceeds the owner’s liability. The ship owner can be compensated if he spent money to prevent pollution. Acts of war are not covered (art. 4.2a), for ex. during the Iran-Iraq war. It must also be proved that it was from a ship (art. 4.2b) and not intentionally done by the person who suffered the damage (art. 4.3). The fund will pay up to approx. 400M$ (art. 4.4a). Anything paid by the owner will be subtracted from this amount (“aggregate amount”). Art. 10 says who contributes to the fund: basically oil majors, who receive more than 150,000 tons annually (about a shipload) in a country. So the risk is spread between ship owners and oil receivers (pay about 50-50 according to a study, obviously their insurers). There is a supplementary fund created (2003) in reaction to the cases of the Erica and the Prestige, accidents which occurred within less then two years. In both cases, cleanup costs busted the fund cap and cost about $750M in one case and over $1B in the other. They were also only tiny ships with low limitation, carrying the ‘gunk’-iest type of oil. So the size-damage liability relationship had to be adjusted. A supplementary fund level was created, to increase the cap from $400M to $1.5B (art. 4.2, p. 366). This fund is voluntary, countries do not have to be a party even if they ratified the convention (all of the EU has joined). Canada has indicated its intention to join, but hasn’t done so yet. The US is not part of the system, a decision made post-Exxon Valdez (1989, $5B). Their current limit is US $1B, today less than the 750M SDRs of the supplementary international fund. Their act is somewhat difference, although there are similar principles: strict liability, etc. Marine Liability Act (p. 382) In Canada, certain principles were extended to all ships and all pollution stemming from oil. It includes strict liability with very narrow defences (act of war, terrorism, extraordinary weather, misplaced aid to navigation by the government), which have never been applied so far. This is without prejudice to recourses by the owner to other people who may be liable. The Convention is respected, but extended: refined gasoline, bunker, in barrels, etc. The advantage of the Convention applying is that limitations are higher and there is international funding for cleanup. It has recently agreed that the minimum limitation is 90 million SDRs. Ships are also covered on empty trips, if they have residues, and their bunkers are covered as long as the ships are otherwise covered by the Convention. Generally, other ships are unlikely to cause major damage. Note that for non-Convention ships, others than the owner can be sued. This Act mirrors the convention closely, but tends to be broader. It includes all pollution, not only oil damage and applies to all ships in Canada. There is also a possibility to enforce rules in the name of another convention party (ex. arrest of a ship that caused damage, never happened according to O’Connor). The SSOPF compensates for any oil (persistent or not, s. 84, almost only country in the world to do that, there is now a bunkers convention creating a similar strict liability system elsewhere) damage in Canada. S. 51 and following are key to that part of the Act. Per s. 55, liability is capped even for non-convention ships. There are special rules for convention ships (s. 56 et seq.). Any convention ship (i.e. that fits that definition) has to be insured when sailing in Canada (s. 60). For that reason, Canada will issue certificates for ships from non-convention countries, as convention countries (over 90 of them) may seize a ship for a minimum of 30 days, which means a huge loss for a shipowner. Insurance companies are never liable over the limitation, even if the ship cannot benefit from it for some reason (s. 62). Non-convention ships do not need certificates as it is not as likely that they will cause severe damage. The bunkers convention, however, says that there has to be insurance for bunkers. It’s not in force yet. “The system is closing in on all oil pollution.” - O’Connor. The SSOPF is still there (s. 84) to fill some ‘gaps’, notably for pollution of an unknown source. Canada has the advantage of applying strict liability for all oil pollution and having a fund as a ‘backstop’ for what is not covered by the convention. The fund will pay currently a maximum of $140M per event (s. 91). Receivers of the fund pay in. Note that since inception of the current international regime (1980’s), the SSOPF no longer collects money as it has (virtual) assets of about $500M (potential liability of the consolidated revenue fund, which actually took the money). It also pays Canadian contributions to the international regime, since the capital was created by contributions of oil majors in the 1970’s. However, if its payouts were to increase heavily (ex. from joining the supplementary fund), it could collect money again. New Convention: Bunker convention Canada is the only country that has integrated the system (strict liability, etc.). So we didn’t care whether it was bunker, diesel, etc. However other countries weren’t covered, and so passed convention that creates strict liability for bunker skills. There are many other acts of Parliament concerning pollution: Fisheries Act, Canadian EPA, Migratory Birds Act, etc. In many cases, there’s a problem of overlapping liability. Prosecutors tend to pile on all kinds of allegations, which gets confusing… Many other substances can pollute water: hazardous and noxious substances (HNS), basically chemicals, which can be much more dangerous than oil (and harder to clean up). There is a new 1996 convention, which Canada is joining, entering into force in either 2006 or 2007. It’s a mirror image of the current system for oil, with the HNS fund (actually the same organization as for oil). Penal Liability Offences and punishment in Directory: pubdocs -> files files -> Chapter 1: Property as rights, not thing files -> Insurance Law – May 4 files -> Contractual Obligations – Prof. Helge Dedek Introduction 1 files -> Constitutional Limits on Criminal Law 1 files -> Antonio Iacovelli Winter 2005 Advanced Criminal Law files -> Private International Law – Prof. Walsh Summer 2005 files -> Part I: conceptualizing and justifying ip space 3 files -> Part I – general 5 The Sources of Int’l Air Law 5 Q? How does customary law relate to int’l law? files -> Topic One Seaworthiness and Common Venture, chapter 15 Download 171.28 Kb. Share with your friends:
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