The shipping industry is huge. One part of the industry impacts and services another. I am a maritime lawyer and arbitrator and have been for the past three decades. As this is my inaugural column as a member of the Board of Industry Experts, Maritime Fairtrade, it might be opportune to summarize the issues I have advised some stakeholders of the industry.
Contracts are meant to be read. If you can enter into a contract, you can read the terms BEFORE you enter into the contract. Many contracts used in the industry have standard forms e.g., BIMCO Charters. There is no good argument when you are faced with a claim you raised that your counterparty never highlighted terms you deemed oppressive. Judges will not buy that excuse. Your appointed lawyer may be hamstrung. It does not mean that he cannot do anything but it does limit his options.
In many of these contracts, a clause can drastically shift the risk. Are you entering into a Port or Berth Charter? What may be called a Berth Charter may, with other clauses, be an effective Port Charter. If your chartered vessel arrives at a congested port that required three weeks to wait, you have to pay demurrage. Demurrage at a daily rate of US$5,000 is common. Larger vessels will have much higher rates.
Do you know what is the effect of a laycan clause? You offer a vessel which is not yours, and a chain of charters are involved. You are committed and your sub-chartered cannot arrive in time. What happens? You will be embroiled in a chain of arbitrations. Can you avoid this? Yes, if you plan properly and know well the parties you contract with.
Legal advice? You stinge on this and rely on advice from the internet. Good strategy? Stinge on US$5,000 for advice, then get caught up in an arrest of your vessel, then pay US$200,000 to resolve the dispute.
Surveys and evidence
You have a large consignment arriving. You have insurance. You must be at the port to await the consignment together with your surveyors. That way, you can survey the out-turn and inspect and record any anomalies. In fact, for large shipments, your insurers may insist. Another benefit? Your surveyors can conduct a joint survey with the owners or their P&I surveyors. That would go a long way to prove your losses.
Insurance is not a panacea. Insurance has limits, and you need to know the limits. Same with P & I. Read the terms, same points as above. There are duties of declaration. You need a good broker or agent.
Insurance policies, for the most part, are customizable. Your broker or agent can assist. I defended a case involving a Total Loss Only (TLO) Marine Hull Policy. The vessel was only four years old. The shipowner could take up a full normal policy but wanted to save on costs by taking up a TLO policy.
What happened in the case? The vessel was damaged and the costs of repairs was 60 percent of the sum assured. TLO policies do not cover repairs and the owner tried to manipulate the repair costs to 110 percent to meet a constructive total loss threshold. I caught the witnesses in cross examination and the court threw out the claim.
Another misconception is if you have insurance, you still have to take action to mitigate your loss and to preserve your claim against the carriers. This is in fact a condition in most cargo insurance policies.
You pay for what you get. You need proper advice and you have to pay for good advice. Maritime contracts and charters have clauses you need to be aware of. You need to read the terms and you need advice on those terms. You may have an inhouse legal officer, but do they have the experience to advise?
Arbitration clauses are ubiquitous. Why? Because court judgements have very limited enforceability outside your country. However, arbitration awards are widely recognized and enforceable in more than 165 countries under the New York Convention.
I will touch upon some of these issues in my future columns.
Photo credit: iStock/ SHansche