1. The evolution of acceptable risk
2. Detention in Indonesia
3. Drug and alcohol guidelines
4. Pollution prevention
5. Net zero framework
6. Skills bootcamp
7. Brazilian judgment
8. Grain tariffs
9. Demurrage
10. Ever Given
Notices & Miscellany
Readersâ responses to our articles are very welcome and, where suitable, will be reproduced. Write to: contactus@themaritimeadvocate.com
1. The evolution of acceptable risk
By Michael Grey
One of the advantages (or perhaps disadvantages) of age is an ability to look back and see how custom and practice, behaviour and attitudes, have evolved over the years, mainly, it has to be said, to suit economic criteria. Risk taking has been part and parcel of seafaring since the dawn of time â we still speak of a âmarine adventureâ â although there are plenty of warnings in our navigation textbooks about how you had âold masters and bold masters,â but very rarely did you meet âold and bold masters.â The inference being that some prudence and caution were to be preferred to downright recklessness, which brought its gruesome reward.
A master was exhorted by the owner (maybe this is still the case) to prosecute the upcoming voyage with âexpedition,â albeit with the caveat that the safety of the ship and all on board should never be compromised. In the company in which I sailed, after joining my first ship in 1956, a master was never criticised for navigational caution, such as delaying an arrival until first light, slowing the ship to avoid damage from slamming or boarding seas, or obeying the rules for navigation in restricted visibility to the absolute letter, even if the tide was missed at the next port. Safety was the cast-iron defence.
You knew that was not the case in other operations. A second mate who had come out of the North Atlantic passenger liners told us that they would slow down only when fog, ice and night coincided. There were companies in which caution was disapproved of and there was an expectation that the ship would arrive on time. We shook our heads sadly at such behaviour.
But over the years, attitudes to what constituted acceptable risk have changed, and not in a way that has been entirely positive. Looking back you can see this erosion of standards as a series of steps, each of which appeared at the time to be questionable, but was accepted, invariably because of pressing economic advantage.
In our company, prudence took something of a knock when Head Office announced to the fleet that after dark the ship would remain on automatic pilot and a night helmsman would be no longer employed. We were appalled, although in retrospect our outrage might seem quaintly ridiculous, but we genuinely saw this as a retrograde, âanti-safetyâ move. Despite the protests of the masters, it went ahead.
But that was small beer compared with what was happening in the wider world. In the past an owner would build a ship to the dimensions that would comfortably fit into the range of ports in which the ship was expected to trade. Anyone who built a ship that would be too long, deep or wide would be considered quite barmy. But then, somehow the relationship between ports and owners changed â henceforth the owner would announce its intention to build a ship that would be too big to fit the port â so if the port wanted the business, it better get dredging!
There was professional astonishment when it was announced that laden VLCCs would be entering the Port of London, steaming up Sea Reach on the top of the tide, to sit in a dredged hole off the berth at Shellhaven. What might happen if the ship was caught half way, with the tide falling? Then, in the midst of the concern at âsuper-spillsâ after the Torrey Canyon, it was revealed that most of these monsters were steaming around with a single boiler, which would leave the vessel helpless in the event of a breakdown. There were no tugs powerful enough to haul them off a lee shore, as the Amoco Cadiz and several incidents off the Cape illustrated. Who remembers the ridiculous and ultimately futile attempts to invent a means of stopping a giant ship in a hurry? One daft idea involved huge doors which would be deployed on each side of the ship to act as a brake. But scaling up shipping was necessary, if the industry was to prosper, so the nay-sayers were promptly shut up.
There were serious concerns about the wisdom of putting containers three high on the foredeck of North Atlantic containerships. A prominent insurer expressed publicly aired doubts about whether the new 2500teu ACT ship then fitting out was âputting too many eggs in one basket.â Think of the level of claims!
It became perfectly acceptable to blast up the Channel in nil visibility at full sea speed. Why have radars been expensively fitted, if not to facilitate such conduct, even if the stick-in-the-mud regulations failed to recognise these modern realities? Ships berthed in marginal weather, because the master would otherwise be censured for unreasonable caution and the gangs had been ordered. Safety envelopes of all kinds shrank, because they could be, not because there had been any proper evaluation as to whether it might be wise to have an escort tug attached when shooting a bridge, or enough tug power on hand when swinging off a berth with half a dozen parked container cranes on the quay.
Crew numbers were reduced regardless of what those afloat had to say. Ship sizes grew and crews shrank to such a state that any on-board maintenance was quite impossible. We would repair it all at survey time, was the refrain, and we all knew how that ended up, in the bulk trades during the 80s and 90s. Flags competed with one another to minimise stuffy regulations. The inclination of regulators and class appeared to permit anything new, where in the past they would have erred on the side of caution. If flag state A or class society B did not want to bend the rules, you could shop around and find somewhere more pliable.
It is a never-ending process, with bigger ships in every trade, now with the several known unknowns of new and exciting fuels, de-rated machinery to placate the greens and environmental criteria seemingly elbowing out the primacy of safety at sea. And long after I am dead and gone, I expect some other elderly commentator to be noting some of the ways that caution and prudence have been further eroded during his or her long career. And that, I suppose, is progress.
Michael Grey is former editor of Lloydâs List.
2. Detention in Indonesia
Tatham & Co recently considered the issues of extortion, bribery and mitigation under a war policy following a detention in Indonesia.
Any case where the English Court gives some assistance on what a word or a definition means, or what a duty entails, is always most welcome, the law firm says in an opinion piece. Sometimes, a case is all the more interesting for practitioners when it looks like the Court is considering the interpretation of a word or words which â on the face of them â (a) appear straightforward and (b) which have never before been the subject of a court decision in all these hundreds of years of court decisions.
In the very recent judgment of the Commercial Court in Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2024] EWHC 719 (Comm), the Court considered a number of issues, including the definition of âdetentionâ and the scope of the duty to sue and labour in the marine insurance context.
In this case, the delightfully named Win Win had illegally anchored in Indonesian territorial waters and was then detained for over a year by the Indonesian Authorities. Under her insurance, she would be a CTL following six months of detention. Insurers rejected the claim inter alia claiming the vessel had not been fortuitously detained, since it should â at the very least â have been known that anchoring in the territorial waters in these circumstances would have had this result. Aside from holding that this had not been proven, it was decided that the arrest and detention were not the ordinary consequences of voluntary conduct arising out of the ordinary incidents of trading (ie merely anchoring in the territorial waters without permission).
However, could insurers reject liability on the basis that the policy excluded loss caused by, resulting from or incurred as a consequence of âArrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilitiesâ? The Court said no. The arrest in these circumstances was not similar to detentions under customs or quarantine regulations. Arguably, the most fascinating part of Mrs Justice Diasâ judgment comes at paragraph 107 where she remarks:
âThe critical question in this regard, on which the diligence of seven counsel has been unable to unearth any authority, either English or American, is the meaning of the word âsimilarâ.â
One of the other points covered (which will resonate factually, given the times we are living in) was the argument that insurers could reject the claim because it was âmaterially causedâ by the claimantsâ unreasonable conduct in breach of their duty to sue and labour (in laymanâs terms, the duty to try and mitigate/minimise loss). This was because they became âside-tracked into discussions with the Navy which involved considerations of a bribe or similarâ. Accepting that the claimants and the P&I insurers involved would never have paid a bribe, even though it would have been realised that a bribe might be demanded at some stage, Mrs Justice Dias found it was not unreasonable to continue discussions with the Navy until the claimants and the P&I Clubs were sure of the position. In other words, it was reasonable to continue discussions until it was known that the only alternative to allowing court proceedings to take their course was paying a bribe to secure the vesselâs release. The claimants were entitled to pursue all lines of enquiry to try and get the vessel released. Quoting the evidence of a witness, âIf they had not explored every option, they would not have been doing their job properlyâ.
Whilst not part of the findings of the Court, it is implied that there was some kind of demand for money which it was determined would (if paid) be a bribe. Indeed, the Judge suggests that others may have paid similar demands in the same circumstances; but as has been written before there is a difference between bribery and extortion. Each matter will turn on its facts. Extortion, like a ransom, could be paid and then claimed as sue and labour from war risk underwriters.
Increasingly vessels and crews are being held for geo-political reasons by capricious jurisdictions as well as by criminal gangs. Working out who is holding a vessel and whether they are doing so legally is a real challenge. Arbitrary detentions where the charges are contrived or not pursued in a legal way are leading increasingly to lengthy detentions which â as this case shows â can lead to a total loss and protracted litigation. But as the Court makes clear, an assured is entitled to take time to work through the options and investigate other solutions. They should not be penalised for doing so.
3. Drug and alcohol guidelines
The Oil Companies International Marine Forum (OCIMF) has recently published an updated information paper, Guidelines for the Control of Drugs and Alcohol in the Maritime Industry (2024), that provides guidance on how to manage the risks and potentially serious impacts associated with the use of drugs and alcohol in relation to marine operations.
The updated publication aims to provide general guidance and recommendations for the maritime industry (operators of tankers, barges, offshore vessels and terminals associated with the ship-shore interface) in developing and implementing controls for the use of drugs and alcohol.
In the guidelines, drug and alcohol use includes the use of prescribed and over-the-counter medication, self-medication, recreational drug or alcohol use, drug or alcohol dependency, and accidental exposure to drugs or alcohol.
When designing a policy and procedures in relation to the control of drugs and alcohol, OCIMF advises that legal and other medical professional advice should be sought on the specific circumstances, including a review of legal authority in the country or jurisdiction where workplace drug and/or alcohol testing may take place.
Saurabh Sachdeva, Publications and Advocacy Director, OCIMF, welcomed the updated guidelines:
âThe reasons behind substance use can be complicated. To address this issue, OCIMF places great importance on having a well-defined drug and alcohol policy encompassing preventive and supportive measures, a testing programme and disciplinary actions. It is crucial to foster an environment where individuals feel supported and comfortable seeking help to manage this risk effectively.â
These guidelines replace OCIMFâs Guidelines for the Control of Drugs and Alcohol Onboard Ship (1995). The scope of the updated guidelines has been expanded to cover ships, barges, terminals and the offshore industry and includes new information on sampling and testing methods. Details of substances to be tested are included and a human factors lens has been applied throughout the document.
OCIMF advises the industry to use all the documentation and training resources available on the OCIMF website. The paper can be downloaded here.
4. Pollution prevention
The International Salvage Unionâs recently released pollution prevention survey underlines once again the environmental benefit of the salvage industry.
Members of the ISU provided 173 services to vessels carrying 1.9 million tonnes of potentially polluting cargo and fuel during operations in 2023. It again demonstrates the vital role of professional salvors in protecting the marine environment.
The data come from the ISUâs Annual Pollution Prevention Survey for operations in 2023. President of the ISU, John Witte, said: âMore than ever, ESG requirements are at the top of the agenda for all industries and of course for shipping. The focus on emissions and climate change must be maintained but we must not lose sight of the importance of simply protecting the environment. It affects those providing services to shipping as much as the owners: the insurers and financiers as we see with the adoption of the Poseidon Principles.
âSustaining a viable professional salvage industry ready to respond to all kinds of incidents around the world is vital and that is recognised by insurers and owners but it needs to be properly funded.â
There were fewer services in 2023 compared with the previous year and that is in line with the downward trend of the ISU general industry statistics. But each year there can be significant variations in the quantities of pollutants in each category. That may be due to vessel size increasing so that, for example, one major containership case might significantly affect that category. The number of containers is lower than last year but, after bulk cargo, still represents the most significant category with ISU members providing services to vessels carrying 30,000 TEU amounting to some 400,000 tonnes of cargo. It compares with 187,000 tonnes of crude oil. Containers carrying a great variety of harmful and dangerous goods including plastic pellets (nurdles) represent one of the biggest threats to the marine environment.
John Witte added: âContainers continue to be difficult to deal with â offloading, storing and perhaps backloading. But the traditional threat from oils remains and there were also several cases of car carriers and RoRo fires and the carriage of Electric Vehicles (EVs) is an increasing concern. Salvors often do not know if there are EVs or batteries on board or the quantity.â
Cargoes of refined oil products increased significantly in the 2023 numbers as did chemicals. Dirty and hazardous bulk cargoes in 2023 were 770,000 – down from 1,236,000 the previous year. An increased number of the services in the survey did not record the quantity of bunkers or the cargo type meaning the reported numbers likely represent a more modest total than the reality.
The 173 services in 2023 included 43 wreck removal/marine services contracts; 19 Lloydâs Open Forms; 24 towage contracts; 10 Japanese Forms; 5 Lump Sum, 6 Day Rate contracts; 37 other contracts (including commercial terms and common law salvage and OPA 90 responses) and 29 Turkish Forms.
ISU is transparent about the fact that not all these potential pollutants were at immediate risk of going into the sea. Some cases will have had limited danger, but others will have carried a real risk of causing substantial environmental damage. In an era of âzero toleranceâ of any pollution, even the smaller cases represent a significant concern.
The survey was first conducted by ISU in 1994 and the methodology was updated in 2014 to include a wider range of potential pollutants including containers and hazardous and dirty bulk cargoes. In the period 1994 to end-2023, ISU members have provided services to casualty vessels carrying 43,397,100 tonnes of potential pollutants, an average of 1.5 million tonnes per year. For more details see the ISU website.
5. Net zero framework
IMO has agreed on an illustration of a possible draft outline of an âIMO net-zero frameworkâ for cutting greenhouse gas emissions (GHG) from international shipping.
This marks a step forward in the legal process towards adopting global regulations, referred to as âmid-term GHG reduction measuresâ, that will help achieve the targets contained in the 2023 IMO Strategy on the Reduction of GHG Emissions from Ships.
At the conclusion of the eighty-first session of the Maritime Environment Protection Committee (MEPC 81), held in London from 18 to 22 March 2024, IMO Secretary-General Mr. Arsenio Dominguez said: âYour Committee is indeed a forum to consider issues of critical relevance for all parts of the marine environment, and this week you made very important progress.â
The draft outline illustration of a possible IMO net-zero framework lists regulations under the International Convention for the Prevention of Pollution from Ships (MARPOL), which will be adopted or amended to allow for a new global fuel standard and a new global pricing mechanism for maritime GHG emissions.
These may include a proposed new Chapter 5 of MARPOL Annex VI containing regulations on the IMO net-zero framework, to include:
a goal-based marine fuel standard regulating the phased reduction of the marine fuelâs GHG intensity; and an economic mechanism(s) to incentivize the transition to net-zero.
The goal-based marine fuel standard and pricing mechanism are mid-term GHG reduction measures specified in the revised IMO Strategy on the Reduction of GHG Emissions from Ships, adopted in July 2023. Several different proposals of what these measures should entail are currently being considered.
The possible draft outline for the IMO net-zero framework will be used as a starting point to consolidate the different proposals into a possible common structure, to support further discussions with the understanding that this outline would not prejudge any possible future changes to it as deliberations progress.
Next steps on GHG emissions
In addition to progress on the legal framework, MEPC agreed on the following next steps, ahead of its next meeting (MEPC 82), scheduled for 30 September to 4 October 2024:
Comprehensive impact assessment on the impact of the proposed mid-term measures on Member States to be finalized and submitted to MEPC 82;
A two-day expert workshop (Fifth GHG Expert Workshop â GHG-EW 5) is to be held to discuss the preliminary findings of the comprehensive impact assessment, covering all aspects, including the modelling of revenue disbursement. The outcome will be reported to MEPC 82;
The Seventeenth Intersessional Working Group on Greenhouse Gas Emissions (ISWG-GHG 17) to meet to consider the outcomes of the comprehensive impact assessment, the GHG-EW5, and other submitted documents for further discussions around the development of mid-term measures, and report to MEPC 82;
ISWG-GHG 17 to develop draft terms of reference for a Fifth IMO GHG Study;
Establishment of a GESAMP Working Group on the Life Cycle GHG Intensity of Marine Fuels. GESAMP is the Joint Group of Experts on the Scientific Aspects of Marine Environmental Protection. The GESAMP-LCA WG will be tasked to provide best possible scientific and technical assessment of issues related to the implementation of the LCA Guidelines. These guidelines allow for the calculation of GHG emissions over the full production cycle and end-use of marine fuels, known as âwell-to-wakeâ;
Two correspondence groups have been established which will report to MEPC 83: the first group is tasked to develop a work plan on the development of a regulatory framework for the use of onboard carbon capture systems and to look into Tank-to Wake methane and nitrous oxide emissions; the second group will look into social and economic sustainability themes and aspects of marine fuels for possible inclusion in the LCA Guidelines.
Revised greenhouse gas life cycle guidelines adopted
MEPC adopted revised Guidelines on life cycle GHG intensity of marine fuels (LCA Guidelines). The updated guidelines include revised calculations for default emission factors; updated appendix 4 on template for well-to-tank default emission factor submission; and new appendix 5 template for Tank-to-Wake (TtW) emission factors.
Other environmental issues
On other agenda items, MEPC:
Approved the establishment of two new Emission Control Areas (ECAs), in Canadian Arctic Waters, for Nitrogen Oxides, Sulphur Oxides and Particulate Matter; and in the Norwegian Sea for Nitrogen Oxide and Sulphur Oxides. These will be submitted to MEPC 82 for adoption;
Approved new recommendations for the carriage of plastic pellets by sea in freight containers, covering stowage, packaging and correct transport/cargo information;
Endorsed, in principle, the draft action plan for the reduction of underwater noise from commercial shipping, with a view to further consideration and final endorsement at MEPC 82;
Endorsed the updated work plan for the development of guidelines for new alternative fuels, including the development of guidelines for hydrogen and ammonia as fuels, low flash-point fuels and mandatory instruments for methyl/ethyl alcohols;
Endorsed the list of provisions and instruments for revision and/or development under the Ballast Water Management Convention and approved the interim guidance on the application of the BWM Convention to ships operating in challenging water quality conditions, as well as the Guidance for the temporary storage of treated sewage and/or grey water in ballast water tanks.
The full MEPC 81 summary will be available shortly on the IMO website.
6. Skills bootcamp
TRS has launched a brand new Skills Bootcamp in collaboration with the British International Freight Association (BIFA) to support employers in the freight forwarding sector.
This bootcamp provides an introduction to the importing and exporting of products, suited to those already involved in freight forwarding or those wishing to step into the sector. Subsidised by the West Midlands Combined Authority, the discounted training course is for individuals living or working within the combined authorityâs catchment area.
Kevin Birch, Managing Director at TRS, says, “We are very excited about the launch of our International Freight Forwarding Skills Bootcamp. Thanks to funding from the West Midlands Combined Authority, we can offer an essential industry skills course at a greatly reduced rate. We are very proud to be running this programme in conjunction with BIFA, which will be delivering some of the essential modules.”
Spread over five weeks, the 60-hour online course is delivered with the flexibility to ensure minimal impact on work commitments. The curriculum comprises technical workshops and employment skills, including Freight Forwarding Essentials, Customs Essentials, and Dangerous & Hazardous Goods, along with Customer Service Standards, Complaint Handling Processes, and Business Relationship Techniques.
Businesses interested in boosting their workforce capacity through this Skills Bootcamp can contact TRS for further details by emailing info@trstraining.net or calling 01744 809 010.
7. Brazilian judgment
A recent decision by the Brazilian Supreme Court may point to a new trend that will end judicial inconsistency over limitation of liability in aviation cargo claims says a viewpoint by HFW.
The Supreme Federal Court (STF) recently rendered a decision during a plenary session in the Sura v. Cargolux (1) claim, affirming the enforcement of cargo liability limits. Seven STF Justices supported the application of the limitation of liability under the Montreal Convention 1999 (MC99) while three opposed it, including the reporting STF Justice.
Hopefully this trend will continue and the STF, along with the Superior Tribunal of Justice (STJ), the two higher courts in Brazil, will finally settle the judicial inconsistency over limitation of liability in aviation cargo claims, being filed by cargo owners and subrogated insurers. Brazil has long been a signatory of the major aviation liability conventions (Warsaw/Hague and Montreal) but has often been out of step with other jurisdictions when it comes to applying them. For more details see the HFW website.
GAFTA
HFW has also considered the recent case of Ayhan Sezer Yag Ve Gida Endustrisi Ticaret Limited Sirket v Agroinvest SA1 where the English Commercial Court considered two issues on appeal from a GAFTA arbitration appeal award, one being the determination of the date of default and the other as to the finality of an advance payment. See the firmâs website for the complete judgment.
8. Grain tariffs
The European Commission is proposing to increase the tariffs on imports into the EU of cereals, oilseeds, and derived products from Russia and Belarus, including wheat, maize, and sunflower meal. These tariffs, while high enough to suppress such imports into the EU in practice, would not affect exports to third countries.
The measures are designed to achieve several objectives:
to prevent EU market destabilisation through any future significant redirection of Russian grain products onto the EU market. The EU farming community has, in particular, expressed concerns about this risk – Russia’s role as a leading global grain exporter, coupled with its willingness to use food exports as a geopolitical tool, shows that it is high.
to tackle Russian exports of illegally appropriated grain produced in the territories of Ukraine, some of which has been illegally exported to the EU market deliberately mislabelled as âRussian’. The tariffs proposed will ensure that this illicit export method is no longer profitable.
to prevent Russia from using revenues from exports to the EU – of both Russian and illegally appropriated Ukrainian grain products – to fund its war of aggression against Ukraine. As Russia exported some 1.3 billion euros’ worth of such products to the EU in 2023, these EU tariffs will cut off another important source of profit for the Russian economy and, by extension, the Russian war machine.
European Commission President, Ursula von der Leyen, said: “We propose the imposition of tariffs on these Russian imports to mitigate the growing risk to our markets and our farmers. They will reduce Russia’s capacity to exploit the EU for the benefit of its war machine. And we maintain our commitment to preserving global food security, especially for developing countries. We are striking the right balance between supporting our economy and farming communities. At the same time, we maintain our unyielding support for Ukraine. “
The increased tariffs would also apply to Belarus in light of the country’s close political and economic ties to Russia. Moreover, by including Belarus in the new measure, the EU will prevent Russia from using Belarus to circumvent the new tariffs and channel its goods onto the EU market.
The transit of cereals, oilseeds and derived products from Russia and Belarus to third countries is unaffected by the proposal. This shows that the European Union remains fully committed to promoting food security globally, especially when it comes to developing countries.
More than two years after the start of Russia’s full-scale war of aggression against Ukraine, Europe is united and determined to continue defending its values and founding principles, the EU says.
The proposal will now be considered by the Council of the European Union. Once adopted by the Council, the tariffs will immediately be applied.
9. Demurrage
The US Federal Maritime Commission (FMC) recently published its final rule on demurrage and detention billing requirements. It becomes effective May 28, 2024, except for two provisions that are delayed.
See 89 Fed. Reg. 14330 and 46 CFR Part 541. The final rule requires common carriers and marine terminal operators to include specific minimum information on demurrage and detention invoices, outlines certain detention and demurrage billing practices, and sets timeframes for issuing invoices, disputing charges with the billing party, and resolving those disputes. The new regulation applies to ocean common carriers trading to or from the US, including vessel-operating common carriers (VOCCs) and non-vessel-operating common carriers (NVOCCs), and to marine terminal operators (MTOs). For more details see the HFW website.
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10. Ever Given
In the most recent case involving the Ever Given, the Court of Appeal agreed that no binding salvage contract was concluded. Hill Dickinson has looked at the case in the opinion piece below, to be found on the firmâs website.
The refloating of the Ever Given has returned to the fore, as the Court of Appeal has been asked to consider the contractual relationship between the Owners of the vessel, (the Appellants) and the Salvors, (the Respondents).
As will be recalled, at first instance in the Admiralty Court, Baker J. concluded that there was no legally binding services contract between the Appellants and Respondents for refloating services. He found that instead, the Respondents were entitled to bring a claim for salvage under the terms of the International Convention on Salvage 1989 and/or at common law.
The Appellants appealed, arguing that there was a refloating contract in place which would preclude any claim for salvage remuneration by the Respondents. In a unanimous decision, the Court of Appeal dismissed the appeal.
On 23 March 2021, while part of the morning northbound convoy in the Suez Canal, Ever Given ran aground, blocking the canal at one of its narrowest points. The Respondents assisted in re-floating the vessel and brought a claim for salvage. The Appellants argued that the parties had concluded a contract for services in respect of the re-floating, and the payment for services should be based on the terms of that contract. The Respondents argued there was no binding services contract, and that payment should be based on the criteria for fixing salvage remuneration.
A critical point about salvage remuneration is that the law applies a financial uplift to encourage the provision of salvage services. Consequently, a salvor can expect to receive more in the context of salvage renumeration than pursuant to a negotiated services agreement for the same operation.
The Admiralty Court decision
The question before the Court at first instance was whether a contract had been concluded.
A contract is a legally enforceable agreement. For there to be a contract, there must be: (a) an offer; (b) acceptance; (c) consideration, (d) the intention to create legal terms; and (e) certainty of terms.
The Court has said:
âThe basic requirements of a contract are that: (i) the parties have reached an agreement, which (ii) is intended to be legally binding, (iii) is supported by consideration, and (iv) is sufficiently certain and complete to be enforceable⌠In general, the agreement necessary for a contract is reached either by the parties signing a document containing agreed terms or by one party making an offer which the other accepts. Acceptance may be by words or conduct.â
Critically, in examining the evidence, Baker J. stated: âAn intention to be bound cannot be found where it is not the only reasonable connotation of the partiesâ exchanges and conduct, taken as a whole. Exchanges and conduct not consistent only with an intention to be bound are ambiguous, and a contract can only be found in and constructed from unambiguous communication.â
Finally, and expressed colloquially, it is insufficient for parties to âagree to agreeâ on the terms and conditions, the parties must âagreeâ on what it is that they have agreed upon. The law does not recognise in such a context, a âcontract to enter into a contract.â
If it were the case that no services contract had been agreed, the question would be, did the assistance fall with the scope of salvage services?
The Court quoted from the practitioner text, Brice on Maritime Law of Salvage, 5th Ed.:âIn English law a right to salvage arises when a person, acting as a volunteer (that is without any pre-existing contractual or other duty so to act) preserves or contributes to preserving at sea any vessel, cargo, freight or other recognized object of salvage from danger.â
It is well settled law that, ââŚat seaâŚâ includes tidal river or canal waters, so therefore the Suez Canal falls within the definition.
Key here is the word âvolunteerâ. If the Appellants and the Respondents had concluded a legally binding services contract, then the Respondents were not volunteers and could not claim a salvage reward, they could only seek payment based on the terms of the agreed contract.
The International Convention on Salvage 1989, (the Convention), to which the UK is a contracting party and consequently is part of English domestic law, reflects Briceâs definition, expanding the assistance part of the definition slightly to:
âSalvage operation means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever.â
With respect to danger, the Court has held that there must be danger or the apprehension of danger. In this context, it would be sufficient that the vessel would not have come free without the provided services.
In the Admiralty Court, Mr Justice Baker was satisfied that, whilst the parties had reached agreement on the remuneration terms for a contract, they were still negotiating the contract terms by which they were willing to be bound, when the vessel was refloated on 29 March 2021. The Court found, based on the foregoing, that no contract for services had been concluded, leaving the Respondents free to pursue a claim for salvage.
The Court of Appeal decision
The Appellants concentrated their appeal on three ultimatums given by Smit on the morning of 26 March 2021, the first by phone and then two by email as follows:
âAs discussed we need to have an agreement with Owners by 12:00 Dutch time today. Otherwise we will have to take a firm position and stand down our operations to protect our interest.â
and
âWith the world watching us and presently having our hands tied behind our backs failing the requested confirmation of either a commercial agreement or LOF we may be left with little choice [but to stand down] as relayed by Jody.â
The first verbal ultimatum is reported to be in a similar vein to the two written ultimatums.
Approximately one hour after the email containing the third ultimatum was sent, the parties agreed terms on several fronts, including remuneration. However, agreement had not been reached on several significant issues such as the scope of services to be provided, the standard of care which the Respondents would be obliged to undertake, and the payment terms.
Following agreement in respect of remuneration, the Respondents took various steps in furtherance of the efforts to refloat the vessel, including the chartering of two tugs, at considerable expense.
The Appellants argued that the conduct of the Respondents, which now was expanding their activities, and no longer issuing ultimatums, demonstrated that the Respondents were satisfied that a contract had been concluded, providing them with the security they needed to progress their work to refloat the vessel.
In response, Counsel for the Respondents highlighted the expressed preference of the Respondents for âno-cure no-payâ LOF terms in early correspondence, submitting that the Respondentsâ approach was consistent and highlighting that it was typical for a salvor to mobilise on speculation, prior to an agreement being concluded. Furthermore, the Respondents contended that the correspondence evidenced the terms for a detailed contract, which once agreed to, would leave nothing further to be addressed, implying that the Respondentsâ intention to be bound would only be crystallised following an unambiguous acceptance of those terms.
The Respondents further submitted that correspondence between the parties in which the Appellants referenced, âironing out the termsâ of the services agreement was evidence of the Appellantsâ contemplation that further terms, beyond remuneration, were yet to be agreed.
Following the Appellantsâ counteroffer in respect of a refloatation bonus, it was the position of the Respondents that while agreement of remuneration was a necessary step towards the conclusion of a contract it could not be viewed, and was not intended to be, the culmination of negotiations.
The Respondents argued that the ultimatums did not bear the weight attributed to them by the Appellants, as the pressure to conclude a binding contract was on the Appellants not the Respondents.
The Court of Appeal decision
In dismissing the appeal, the Court of Appeal held (unanimously) that the Appellants had fallen considerably short of their burden to evidence that the partiesâ exchanges demonstrated an unequivocal intention to enter into a binding contract. The Court was satisfied that, notwithstanding the content of the various ultimatums, the Respondents did not at any time indicate that they would be satisfied to be bound after dealing with remuneration only, it being clear that they had in mind to address several other terms as well.
The Court of Appeal accepted that, whilst there was urgency to conclude a contract, which dissipated after agreement was reached on remuneration, this in no way indicated that the Respondents considered negotiations to be complete.
Furthermore, the Court of Appeal agreed that the decision to fix additional tugs after remuneration was agreed was not made because of contractual certainty, but in response to the failure of the refloating attempt of 26 March 2021, which put the Respondents in a strong commercial position, giving them a reasonable expectation of a salvage award, if the parties did not conclude a contract.
Comment
Given the Respondentsâ submission that there was no dispute as to the legal principles to be applied, the question whether a contract had been concluded depended on an evaluation of the partiesâ communications, in their context, and in a changing situation. This required an exercise of judgment by the trial judge with which the Court of Appeal should not interfere unless the judgeâs decision was plainly wrong or outside the bounds within which reasonable disagreement was possible. This was not the case. In the circumstances, a short, concise judgement on a review of the facts was to be expected.
In the absence of an executed contract, to determine whether a binding contract is in place, one must consider the intention and contemplation of the parties, based on their communications and conduct.
The decision (together with that of the Admiralty Court, at first instance) provides insight into the Courtâs analysis of pre-contractual correspondence between parties, to determine whether a contract has been concluded.
In this case, it was clear that the Respondents did not intend to be bound once agreement had been reached in respect of remuneration but had yet to be agreed in respect of other terms. It also serves to demonstrate the complexities of, and difficulties of, negotiating a services contract for a refloating operation where time is of the essence.
It is also worth noting the Courtâs finding that while linguistic qualifiers such as âsubject to contractâ can indicate there is no intention to be bound, there is no rule of law that the lack of such qualifying words indicates an intention to be bound, and that the Court will assess intentions based on an analysis of the substantive content of correspondence.
Notices and Miscellany
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And finally,
With thanks to Paul Dixon
If the cops arrest a mime, do they tell him he has the right to remain silent?
What do you get when you cross a humming bird with a doorbell? … A humdinger.
What do you get when you cross a pit bull with a collie? A dog that runs for help … after he bites your leg off.
The world’s full of apathy, but I don’t care.
I’m still not sure if I understand ambiguity.
I have a twin brother; he’s identical, but I’m not.
Don’t be redundant by repeating yourself. Twice.
I am becoming increasingly worried and concerned that there isn’t enough anxiety in my life.
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