UK: Commodities Bulletin - July, 2009

Last Updated: 6 August 2009

Safe Port Warranties Must Be Explicit
By Alistair Feeney

The Court of Appeal's decision in Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (The "Reborn") (10 June 2009) makes clear that if shipowners wish charterers to warrant the safety of ports in charterparties such warranties must be explicit.

The case involved a claim by the owners of "Reborn" in respect of damage allegedly sustained by the vessel during loading of a cement cargo at Chekka, Lebanon due to the ship's hull being penetrated by an underwater projection at the berth nominated by the charterers.

The vessel had been chartered on an amended Gencon form. Clause 1 was amended to read, "the vessel shall proceed to the loading port(s) or place(s)...or so near thereto as she may safely get and lie always afloat". Under Clause 20 the owners warranted that the vessel, "shall fully comply with all restrictions whatsoever of the said ports...and that they have satisfied themselves to their full satisfaction with and about the ports specifications and restrictions prior to entering into this charterparty".

Chekka had been agreed as the load port, and it was for the charterers to nominate the berth at which the vessel was to be loaded. The charterparty contained no express warranty of safety in respect of either the port or the berth. However, the owners argued that the charterparty contained an implied warranty by the charterers that the loading berth they nominated would be safe.

The owners' claim failed. The Court held that a warranty of port safety will logically encompass a warranty of safety as to the port's berths, but that where a charterparty does not contain a warranty of port safety, there is unlikely to be any warranty as to safety of berths within the port. It also determined that the mere fact that the charterers were under a duty to nominate a berth did not of itself give rise to a warranty of berth safety.

The Court of Appeal took the opportunity to reiterate that the starting point in every voyage charter is that the vessel is operating at the owners' risk, and that the reason for including express warranties of port and/or berth safety was to shift some of that risk to the charterers. The Court identified the deletion of the word "safely" in Clause 1 together with the owners' warranty in Clause 20 as indicating that the owners had taken upon themselves responsibility for ascertaining whether ports and berths to which the vessel was directed were safe.

This decision will be welcomed by traders since it resists further expansion of the circumstances in which charterers will be found to have warranted port or berth safety. It follows a number of decisions, including AIC Limited v. Marine Pilot Limited (The "Archimidis") [2008] 1 LLR 29, in which the courts have found that charterers warranted port safety where there was more than an element of ambiguity in the charterparty terms. By rejecting the contention that safe port warranties may be implied into charters as a matter of course, the Court of Appeal has identified the limits of the protection that owners will be afforded in this area under English law.

Do Rats Make A Cargo Dangerous?
By Chris Swart

The case concerned the loading of a cargo of soyabean meal pellets on "Darya Radhe" at Paranagua in January 2004. There were nine different shippers. Bunge were the Charterers of the vessel. The cargo was to be discharged in Iran. Rats were found in the cargo during loading. It was subsequently decided in arbitration that between 14 and 20 rats had been loaded with the soyabean meal pellets.

Bunge claimed damages from the shippers on account of expenses and delay resulting from the infestation. Bunge argued that the shippers were liable under Article IV Rule 6 of the Hague Rules and at common law for shipping dangerous goods, and that the cargo in this case should be viewed as dangerous as a matter of law because it was liable to cause delay to the vessel and the carriage of other cargo.

Arbitrators found that, even though rats had been loaded with the cargo, the Bunge could not prove that any one of the shippers was responsible. They also found that in this case the presence of rats did not make the cargo legally dangerous.

Bunge appealed against the arbitrators' decision in the High Court, but were unsuccessful. The Court held that for a cargo to be dangerous it had to present a physical danger to the vessel or other cargoes, or to make delivery of the cargo impossible because of a legal obstacle imposed by local law at the discharge port. It was not enough that the cargo would cause delay.

This was sufficient to decide the case. The arbitrators had made findings (which could not be challenged in Court) that the infested cargo did not pose a physical danger to other cargo on the vessel, and did not pose a threat of damage to the vessel itself. They found that fumigation of the cargo would have been 100% effective in killing the rats, and, perhaps surprisingly, that the presence of mummified rats in the cargo after fumigation was "no more than a cosmetic problem".

The case is a useful reminder that the legal concept of "dangerous" goods is significantly wider than the scope of dangerousness in lay terms. It also clearly marks the boundaries of the concept.

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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