Australia: Shipping News - July 2012

In brief - Roundup of maritime law reform, Australian cases and international cases

Several reforms to maritime law passed through Australian Federal Parliament and came into effect on 1 July 2012.

Colin Biggers & Paisley activities - Course on International Trade and Cargo Claims, May 2012

Colin Biggers & Paisley hosted the Institute of Maritime Law of Southampton University (UK) International Trade and Cargo Claims Course in our office on 21 to 23 May 2012. Katherine Jones and Michael Russell, Senior Associates, attended the course together with a number of other registrants.

Package of reforms of Australian Maritime Law comes into effect

In CBP Shipping News - April 2012 and our article Shipping reforms may not achieve desired results for Australian economy, we discussed the Australian federal government's package of reforms of maritime law. The reforms have now passed through the federal parliament and came into effect on 1 July 2012.

The following acts have been passed:

Reduced requirements for applying for a temporary licence

One of the most contentious changes the new legislation has made is to discontinue the single voyage permit system which had operated for a number of years. Presumably, in part to ameliorate that position, the requirements for applying for a temporary licence have been changed since the introduction of the Coastal Trading Bill 2012.

In its original form it required an applicant for a temporary licence to give information in relation to at least 10 voyages which it proposed to undertake during the succeeding 12 months, as well as the details of the cargo which it expected to carry. That has now been reduced to a requirement that only five voyages need to be identified. It is understood that a wide range of applicants are making such applications, including manufacturers, shipping agents and shipowners.

Ships predominantly used to engage in international trading

Another significant change that has been made to the draft Bill to amend the Shipping Registration Act and introduce the new Australian International Shipping Register is to include a new definition of the words "predominantly used to engage in international trading".

These words are defined as follows: "a ship is predominantly used to engage in international trading if, in a calendar year, the percentage of the time that the ship is used to engage in international trading exceeds the percentage of the time that the ship is used to engage in coastal trading or intra-state trading".

The significance of this definition is that the Registrar of Ships "must refuse to register the ship in the international register" if he is satisfied that:

"(a) the ship will not be predominantly used to engage in international trading..."

Application of the National Standard for Commercial Vessels

Also introduced into federal parliament in May 2012 were the Marine Safety (Domestic Commercial Vessel), National Law Bill 2012 and the Marine Safety (Domestic Commercial Vessel) National Law (Consequential Amendments) Bill 2012 which will replace the current state and territory laws governing the operational safety of domestic commercial vessels. These bills will apply the National Standard for Commercial Vessels throughout Australia. This reform will be implemented through subordinate legislation.

As the national regulator, the Australian Maritime Safety Authority is to be responsible for the development and implementation of national domestic commercial vessel standards covering construction, operation and crew qualifications.

Navigation Act being modernised to reflect contemporary maritime industry practice

The Navigation Bill 2012 was also introduced into federal parliament on 24 May 2012, the centenary of the original Navigation Act.

As described by the Minister in the Second Reading Speech, the bill is essentially a re-write of the Navigation Act 1912 and is intended to reflect contemporary maritime industry practice and to eliminate archaic and redundant provisions from the original Act.

The bill also introduces a civil penalty regime which expands the range of regulatory options available to the regulator for breaches of the legislation and allows for the development of an infringement notice scheme in regulations.

Maritime Legislation Amendment Bill 2012

The Maritime Legislation Amendment Bill 2012 has also been introduced into federal parliament to amend the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 to implement amendments to Annex IV, V and VI of the International Convention for the Prevention of Pollution From Ships (MARPOL), which will enter into force internationally on 1 January 2013. When passed, the bill will also repeal the Stevedoring Levy (Imposition) Act 1998 and the Stevedoring Levy (Collection) Act 1998. It also makes mandatory the Energy Efficiency Design Index and the Ship Energy Efficiency Management Plan for new ships over 400 gross tonnes. This applies to ships that are constructed after 1 January 2013.

Framework for exercise of maritime powers

On 30 May 2012 the Maritime Powers Bill 2012 and the Maritime Powers (Consequential Amendments) Bill 2012 were introduced into federal parliament. These establish a framework for the exercise of maritime powers and are intended to consolidate and harmonise existing maritime enforcement regimes.

Australian maritime cases

Foreign arbitration clauses in voyage charter parties

We recently published the case note Foreign arbitration clauses in voyage charter parties held not to be effective, dealing with the Federal Court case Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd [2012] FCA 696. This is a significant decision of Foster J, holding that an arbitration clause in a voyage charter party requiring arbitration to be held in a foreign jurisdiction is null and void under the Carriage of Goods by Sea Act 1991.

Definition of a "resources installation" under the Migration Act

The Federal Court case Allseas Construction S.A. v Minister for Immigration and Citizenship [2012] FCA 529 examined the question of whether two vessels, Solitaire and Lorelay were "resources installations" within the meaning of section 5(13) of the Migration Act 1958 (Cth) while they were wholly or principally engaged in operations relating to the installation of offshore pipelines for the Gorgon and Jansz gas fields.

This had the result that non-citizens working on or otherwise aboard those vessels while they were engaged in the works pursuant to a contract entered into by Allseas Constructions S.A. and Chevron Australia Pty Ltd, would not be working within the "migration zone" and the company would not be committing any offence in employing non-citizens.

The Gorgon field is about 65kms north-west of Barrow Island and Jansz is about 130kms north-west of Barrow Island. The company was involved in pipe laying services. Justice McKerracher held that the vessels did not come within the definition of a "resources installation" under the legislation as they were neither a "resources industry fixed structure" or a "resources industry mobile unit" because of an exemption in section 5(13), as they were used "wholly or principally in: ...(b) manoeuvring a resources installation, or an operation relating to the attachment of resources installation to the Australian sea bed".

Writ for the arrest of a vessel set aside, damages claimed

The Federal Court case Transfield ER Futures Limited v The Ship "Giovanna Iuliano" [2012] FCA 548 involved a decision of Justice Gordon to set aside a writ pursuant to which the vessel had been arrested. A claim for damages was also made under section 34 of the Admiralty Act 1988.

The arresting party sought to assert that the claim was within section 4(3)(f) of the Admiralty Act, namely "a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charter party or otherwise".

The vessel had been arrested in order to obtain security for the enforcement of a judgment which had been obtained in London arising from what were described as FFAs (Freight Forward Swap Agreements). Justice Gordon held that none of the FFAs in issue in those proceedings had a "reasonably direct connection with the activity of carriage of goods by a ship" and therefore did not come within section 4(3)(f).

His Honour found that "there is a need for a relationship between the claim and the particular ship, the subject of the application in rem. Here, there was no relationship". (Jurisdiction in rem assumes the property or status is the primary object of the action, rather than personal liabilities not necessarily associated with the property.)

The judgment does not deal with the claim for damages for wrongful arrest under section 34 of the Admiralty Act 1988, which has not been the subject of any decided case.

Limitation period on in rem proceedings irrelevant to in personam proceedings

The Federal Court case Geraldton Port Authority v The Ship "Kim Heng" 1888 (No. 2) [2012] FCA 353 involved a proceeding in rem by the Geraldton Port Authority against three ships in respect of collisions by each of those ships with berths at Geraldton over two days in 2005. The Port Authority sought to discontinue those proceedings and proceed on in personam claims which had been commenced separately.

The defendants to the in rem proceedings asserted that they had been commenced out of time and the dismissal of those proceedings, by reason of being out of time, would have the effect of dismissing the in personam proceedings. Justice McKerracher did not agree with those arguments.

His Honour followed the decision of Allsop J in Commandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] 157 FCR 45, in which Justice Allsop had disagreed with the views expressed by the House of Lords in Republic of India & Anor v India Steamship Co Ltd (No. 2) 1998 AC 378 as to the nature of the action in rem.

As Justice McKerracher said, "the parties are entirely in agreement that after an unconditional appearance is filed by a named defendant in an in rem proceeding, then the proceeding continues both in rem but also against that person on an in personam basis. This is the Australian position as reinforced by the Full Court in Commandate. It does not necessarily follow from this however, that what would be a six year limitation period for any in personam claim in that proceeding is converted to a three year limitation simply because the proceeding was initially issued in rem only against the ship".

Recovery of charges in respect of shipping containers

In the case Cosco Container Lines Co Ltd & Five Star Shipping Agency Company Pty Ltd v Unity International Cargo Pty Ltd (unreported judgment, 29 March 2012) in the District Court of NSW, the plaintiff shipowners sought recovery of charges in respect of shipping containers which had not been returned by the consignee. The claim was based upon an agreement entered into between the plaintiffs and the consignee called an ImportNet Agreement for the delivery and loan of containers.

The ultimate consignee had gone into liquidation and the forwarder that had entered into that agreement with the carrier was not reimbursed for the charges which were due to the shipowners. His Honour Judge Rolfe of the District Court found that the defendant was liable under the agreement to pay the charges and rejected an argument to the effect that those charges were a penalty and therefore unenforceable.

International legal developments

Amendments to Limitation of Liability for Maritime Claims Convention

The Limitation of Liability for Maritime Claims Convention 1976 and its Protocol of 1996 were amended at the recent session of the Maritime Legal Committee of the International Maritime Organisation in London in May. These amendments were made at the urging of the Australian government after the Pacific Adventurer bunker spill in Queensland in 2009.

The amendments will not come into force until 19 April 2015. The amendments which were agreed at the meetings in London were not as substantial as had been sought by Australia.

Calculation of cargo claim for damage to a crane

On 20 March 2012 the US Court of Appeals for the Second Circuit handed down its judgment in Edso Exporting LP v Atlantic Container Line AB. The Appeals Court overturned the first instance decision that the "customary freight unit" for the purposes of limitation in a cargo claim for damage to a crane was each cubic metre of the crane.

On appeal it was held that the "customary freight unit" was on a per item basis and not the measurement customarily used to calculate the rate to be charged, so that where freight is calculated on a lump sum basis "it is irrelevant that the parties have calculated freight based on the weight or volume measurements of the goods".

Owners decline to accept redelivery of time chartered ship

The UK High Court recently considered the case Isabella Shipowner SA v Shangang Shipping Co Ltd [2012] EWHC 1077. Ordinarily where one party to a contract commits a repudiatory breach, the innocent party can elect to keep the contract alive, unless the guilty party's co-operation is needed to enable completion of the contract, or where the innocent party has no legitimate interest in performing the contract other than claiming damages.

In this case the owners declined to accept redelivery of their time chartered ship and sought hire for the remaining period of the charter. Unlike the arbitrator, who did not permit the owners to succeed because it fell within the two exceptions to the general rule, on appeal Cooke J allowed the owners to succeed. He found that the owners did not need the charterers to do anything under the charter. They could leave the vessel where it was awaiting charterer's orders. The High Court held that owners did have a legitimate interest in keeping the charter alive. Rather than suing for damages for breach of the charter and having to establish that they had mitigated their loss, they could simply collect the charter hire due to them.

Somali pirates unsuccessfully appeal life sentences

On 23 May 2012, the US Court of Appeals for the Fourth Circuit handed down its judgment in United States of America v Abdi Wali Dire and Others. The facts of this case are well captured in the opening sentence of the judgment of Circuit Judge King:

In the early morning hours of April 1st 2010, on the High Seas between Somalia and the Seychelles (in the Indian Ocean off the East Coast of Africa), the defendants ... imprudently launched an attack on the USS Nicholas, having confused that mighty Navy frigate for a vulnerable merchant ship.

The defendants were apprehended and then transported to the United States where they were convicted of the crime of piracy and various other offences and sentenced to life imprisonment.

On appeal the defendants had contended that their attack did not constitute piracy under 18 U.S.C. 1651 which reads:

Whoever on the high seas, commits the crime of piracy as defined by the law of nations, and is afterwards brought into or found in the United States, shall be imprisoned for life.

They contested their convictions on the basis that piracy has been narrowly defined under that provision so as to require robbery at sea. It was argued that as they had only boarded the ship as captives and took no property, they were not guilty of piracy.

This was rejected by the Appellate Court with reference both to other decisions of the US Courts, the Privy Council and, significantly, the Geneva Convention on the High Seas 1958 and the Law of the Sea Convention (UNCLOS) 1982 which define piracy as "any illegal acts of violence, detention or any act of depredation...".

Rights of owner once vessel is withdrawn for non-payment of charter hire

UK Supreme Court: Petroleo Brasileiro v ENE Kos 1 Limited [2012] UKSC 17. This decision, of the UK's highest court, concerns an owner's rights once it has withdrawn a vessel for non-payment of charter hire. The charter had been a Shelltime 3.

At the time of withdrawal there was cargo on board and the owners claimed detention costs for the period taken by the charterer to discharge the cargo, including the bunkers consumed. The Supreme Court held they were entitled to do so, by reason, inter alia, of clause 13, the employment and indemnity clause.

Stuart Hetherington
Trade and transport
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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