The Rotterdam Rules – A Brief Summary of the current position taken from the UNCITRAL website
The General Assembly on 11 December 2008 adopted, the “Rotterdam Rules” officially known as the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea. The Rotterdam Rules establish a uniform and modern legal regime governing the rights and obligations of shippers, carriers and consignees under a contract for door-to-door carriage that includes an international sea leg. The Convention builds upon, and provides a modern alternative to, earlier conventions relating to the international carriage of goods by sea, in particular, the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (Brussels, 25 August 1924) (”the Hague Rules”), and its Protocols (”the Hague-Visby Rules”), and the United Nations Convention on the Carriage of Goods by Sea (Hamburg, 31 March 1978) (”the Hamburg Rules”).
The basic premises of the Rules is a “Door-to door regime”, to make provision to allow for carriers to subcontract obligations; to cover all transport documents, covers all goods and impose general carriage obligations for all carriers and specific obligations for maritime performance parties.
The Rotterdam Rules provide a legal framework that takes into account the many technological and commercial developments that have occurred in maritime transport since the adoption of those earlier conventions, including the growth of containerization, the desire for door-to-door carriage under a single contract, and the development of electronic transport documents. The Convention provides shippers and carriers with a binding and balanced universal regime to support the operation of maritime contracts of carriage that may involve other modes of transport.
Sixteen nations indicated their intent to ratify the treaty by signing the Rules at the signing ceremony on 23rd September 2009. Signatories include major maritime and trading nations such as the U.S., Norway, Greece, France and the Netherlands. Other signatories were Congo, Denmark, Gabon, Ghana, Guinea, Nigeria, Poland, Senegal, Spain, Switzerland, and Togo. Together the signatories account for approximately one-third of world trade.
The Rules will come into force one year after it has been ratified by 20 nations. Within the first month of the Rules this threshold was met when Armenia, Cameroon, Madagascar and Niger signed the convention.
Ship-owner groups have generally welcomed the Rotterdam Rules whereas European shippers and freight forwarders, supported by the European Shippers’ Council, have attacked the new rules for being too complicated and favoring ship owners at the expense of the cargo owning interests.
Professor John Hare’s Second Edition of Shipping Law and Admiralty Jurisdiction in South Africa Published
The Second Edition of Professor John Hare’s Shipping Law and Admiralty Jurisdiction in South Africa Textbook was published in 2009 and is a thoroughly updated and more comprehensive version of his first edition. Below is the foreword written for this book by the Honourable Mr Justice Ian Farlam, Judge of the Supreme Court of Appeal of South Africa.
2009 MLA AGM and Conference – Pumula Beach Hotel
An excellent MLASA AGM and Conference for 2009 was held at the Pumula Beach Hotel in Kwazulu Natal where a much deserved presentation was made to Attorney Roger Gifford for his service to the MLA.
A summary report on the Conference is set out below together with some pictures of the event:
The Maritime Law Association of South Africa, an organization consisting of lawyers specializing in the field of maritime law as well as members from the commercial and government sectors, held its Conference and Annual General Meeting at Pumula Beach Hotel on the weekend of the 5 – 7 June 2009. The theme of the conference focused on piracy and its impact on shipping, a topic that has been in the news often of late given the upsurge in attacks on vessels traversing the Gulf of Aden and the north east coast of Africa.
The Association was honoured to have the conference officially opened by Judge Malcolm Wallis, formerly a senior counsel specializing in maritime law and shortly to take up an appointment at the Supreme Court of Appeal. Judge Wallis impressed the delegates with a light hearted but well researched talk on the origins of piracy and laid to rest many of the Hollywood movie myths such as the eye – patch, wooden leg and parrot on the shoulder!
The conference session on Saturday was privileged to boast speakers of the calibre of Dr Henri Fouche, a lecturer at the Tshwane University of Technology (TUT) and Johan Swart, a partner at the Cape Town office of Shepstone & Wylie. Both these speakers focused on particular cases of pirate attacks, the mode of attacks, the laws applicable and the cost to the shipping industry.
Michelle Lindermann and Ian Maclean of London law firm Ince & Co., followed with a very informative presentation on the insurance and general average implications of pirate attacks, as well as methods of avoiding attack. Being personally involved in ransom negotiations for the release of vessels and crew, their presence was invaluable. It was particularly noteworthy that the average time period for a ransom to be negotiated was estimated to be 45 days, during which time the vessel is not working but is still consuming rations and bunkers, the cargo is not going anywhere and the crew is in potential danger.
Finally, there were two speakers from the Defence Force, Colonel Steve Bekker of the South African Air Force and Captain Andre Katorinic of the South African Navy who spoke with humour and some feeling, on the capability and resources of the Defence Force to assist the current forces off Somalia and to combat pirate attacks should they occur closer to our shores.
The highlight of the dinner on Saturday evening was the presentation made to Roger Gifford, in honour of his many years of service to the Maritime Law Association. Roger Gifford is the third such recipient of this honour, his predecessors being Advocate Douglas Shaw QC and Advocate Gys Hofmeyr SC. The presentation to Roger Gifford, who served as President of the MLA for six years, was delivered by Shane Dwyer, senior partner at Shepstone & Wylie and concluded with the handing over of an engraved barometer.
After a late Saturday night, it was time get back to serious issues as the association’s annual general meeting got under way on Sunday morning. Having dealt with the business of the MLA, Andrew Robinson, the President of the MLA, proposed that the MLA continue the work of the conference and to take the issue of piracy forward, particularly in terms of a revised definition of piracy. Section 24 of the Defence Act 2002 defines piracy as any illegal act of violence or detention, or any act of depredation, committed for private ends by the crew, including the master, or the passengers of a private ship and directed on the high seas, against another ship or against persons or property on board such ship, against a ship, person or property in a place outside the jurisdiction of any state.
As stated by Dr Fouche, perpetrators of attacks on ships in ports and harbours can thus not be prosecuted for piracy, but, in the case of an attack with weapons, for armed robbery.
It was resolved at the AGM that the MLA would constitute a subcommittee to work with various stakeholders to review the current international and domestic legislation with a view to drafting a revised definition of piracy for consideration by the membership and subsequent submission to government.
The Maritime Law Association welcomes applications for membership and all enquiries in this regard may be directed to the Secretary, Anisa Govender at govendera@wylie.co.za.
MLA AGM and Conference 2010
At a recent Exco Meeting of the MLA held on 4 December 2009 it was resolved that due to the 2010 soccer world cup in South Africa, the AGM and Conference would be moved from 4 June 2010 – 6 June 2010 to the 22, 21 and 22 August 2010.
The Conference is to be held at the Le Franschhoek Hotel which promises to be an outstanding venue for the Conference. If you would like to view the hotel and its facilities please go to www.lefranschhoek.co.za. The MLASA would like as many people to attend the conference as possible and those of you who are interested are urged to book these dates in your diary. In due course the MLASA will send out a formal invitation to the Conference together with an agenda and details as to costs and bookings. We hope to see you all at the Conference.
The End of the Bounty of “Rule B” – The Shipping Corporation of India Ltd v Jaldhi Overseas PTE Ltd
On 16th October 2009, The Shipping Corporation of India Ltd v Jaldhi Overseas PTE Ltd the United States Court of Appeal for the Second Circuit with the consent of all judges of the Court in active service, overruled the infamous decision of Winter Storm, Ltd v TPI 310 F.3d 263, 278 (2d Cir. 2002) .
Both decisions were concerned with Rule B(1)(a) of the Admiralty Rules which states:
“If a defendant is not found within the district, when a verified complaint praying for attachment and the affidavit required by Rule B(1)(b) are filed, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property-up to the amount sued for- in the hands of a garnishee named in the process.”
By emphasizing the “tangible or intangible” nature of the property The Winter Storm decision had vested the United States District Court of the Southern District of New York with jurisdiction when an electronic fund transfer (“EFT”) momentarily passed through an intermediary New York bank electronically. An EFT is simply an instruction to transfer funds from one account to another. An intermediary bank is used when the originator and beneficiary have accounts in different banks. In theses circumstances, the EFT is completed when the intermediary bank debits that account of the originator’s bank held by it and credits the account of the beneficiary’s bank held by it.
The result of The Winter Storm decision was a flood of Rule B attachments from foreign claimants seeking security for their claims. The Court of Appeal for the Second Circuit gave an example of the “unforeseen consequences” by stating that a total of $1.35 billion had been sought to be attached by maritime plaintiffs who had filed 962 lawsuits in the preceding four months of the hearing which added to the burden of the 800 to 900 writs already served daily on the District’s banks.
The Court of Appeal for the Second Circuit readily accepted that such activity “has threatened the usefulness of the dollar in international transactions” and introduces “uncertainty into the international funds transfer process”. Although acknowledging that the overturning of The Winter Storm would dramatically affect maritime attachments in the jurisdiction it noted earlier decisions which attempted to limit the scope and application of The Winter Storm decision.
In addition to these policy considerations, the Court of Appeal for the Second Circuit identified the salient question as being “whose assets (ETA) are they while in transit?” The Court found the question of ownership to be critical because “as a quasi in rem , the validity of a Rule B attachment depends entirely on the determination that the res at issue is the property of the defendant at the moment the res is attached.” By analysing state law the Court concluded that EFT’s are neither the property of the originator nor the beneficiary while briefly in the possession of the intermediary bank and are therefore not subject to attachment.
The Court of Appeal for the Second Circuit decision is confined to EFTs where the Defendant is the beneficiary, as the question of whether an EFT where the Defendant is the originator was remanded to the District Court. However it is suggested that the District Court will readily follow suit and reach a similar decision.
With the advent of the Jaldhi Overseas judgment, traditional “arrest- friendly” jurisdictions may become more attractive which in theory should lead to increased arrest activity in South Africa.
The MV “Ioannis NK” – Taking of Crew Evidence on Commission in South Africa
The MV “Ioannis NK” sank some 98 nautical miles off Cape Columbine on her way to a port in India. The MV “Ioannis NK” was Panamanian and her crew where employed by Greek ship managers. The applicant was the owner of the 22 500 tons of raw sugar cane on board the vessel valued at $ 8 572 500.00.
On 6th August 2009, the Cape Town High Court confirmed a rule nisi granted earlier which was the first to grant leave for evidence to be taken on commission in terms of section 5(5)(a)(i) and (iv) coupled with an order restraining the prospective witnesses from leaving the jurisdiction of the court until their evidence was taken.
Section 5( 5) of the AJRA reads:
“(a) A court may in the exercise of its admiralty jurisdiction at any time on the application of the interested person or on its own motion-
if it appears to the court to be necessary or desirable fro the purpose of determining any maritime claim, or any defence to any such claim, which has been or may be before a court, arbitrator or referee in the Republic, make an order for the examination, testing or inspection by any person of any ship cargo, documents or any other thing and for taking if the evidence of any person;…
in exceptional circumstances, make such order as it is contemplated in subparagraph (i) with regard to a maritime claim which has been or brought before any court, arbitrator, referee ot tribunal elsewhere than in the Republic, in which case sub-paragraphs (ii) and (iii) shall then mutatis mutandi apply.
The applicant believed that the vessel’s side plating had parted and the most probable cause for this was the corrosion of the side plating and underlying structure. The applicant sought to commence arbitration proceedings in London against the owner for breach of his obligation to exercise due diligence to provide a seaworthy vessel.
The owners stance from the onset was that the South African Maritime Safety Authority (“SAMSA”) did not have the authority to commence a preliminary enquiry by virtue of the fact that the vessel was foreign flagged and had sunk 98 nautical miles off the South African coast.
In order for the provisions of section 5(5)(a)(iv) to operate there must be “exceptional circumstances” and the Court must elect to exercise it’s discretion in favour of the applicant. This was identified by Cleaver J as the “crisp issue” of the matter.
Cleaver J referred to the judgment of “The Urgup” in which Thring J described that the purpose of section 5(5) was to provide a litigant or prospective litigant with relief which is more akin to an Anton Piller order. He dismissed the suggestion that Thring J’s comments in “The Urgup” inferred that a claimant must first meet the requirements of the Anton Piller order or that an application under section 5(5)(a)(iv) should be equated with an Antol Piller application.
Cleaver J approved the dictum of “The Ais Mamas”2002 (6) SA 150(C) in which Thring J concluded that “to be exceptional within the meaning of the subparagraph the circumstances must be ‘markedly unusual or specially different’, and that applying the test must be carefully examined.”
In doing so Clever J rejected the judgment of “The C Tashin” which proposed that the need to preserve evidence may constitute the very exceptional circumstances required by the section. Cleaver J required that the applicant should show that there is a real possibility that the specific evidence may be lost.
Clever J confirmed the approach by Jones J in “The Askania Nova” that in deciding whether there are “exceptional circumstances” each case must be considered on its own merits and that in deciding the issue the Court must have regard to a whole series of events which lead to the application.
The circumstances that Cleaver J noted was that the vessel sank rapidly without any explanation, the scarcity of evidence as to the cause of the sinking other than evidence of the crew and the uncooperative conduct of the owner and crew.
Clever J approved of the approach adopted in “The C Tashin” in respect of the invasion of crew members’ rights to freedom of movement, dignity and privacy. In this regard the Judge in that case said:
“ There is no indication on the papers when their evidence will be heard, who will hear the evidence, in which manner it will be heard and how long the process will take. In the absence of these particulars and more detailed allegations to justify the invasion of the crew members’ rights for the convenience of litigation, I am of the view that the crew should not be restrained from going home to their families and friends as soon as possible to recover from what must have been a rather frightening experience at sea.”
In the case at hand Cleaver J found that the appellant had taken heed of the Courts concern in the “The C Tashin”.
The respondents further argued that evidence of the sinking was available from third parties and that at the time of contracting the parties would have contemplated that it would be necessary for witnesses residing outside of the English jurisdiction to be available at an arbitration.
However, the Court took notice that the crew and owner had not indicated any willingness to attend the arbitration proceedings and that the owner did not allow the crew members to be interviewed in the presence of the applicant’s representatives prior to the application.
In conclusion Cleaver J found that there had been exceptional circumstances. He further concluded that the conduct of the owner and crew members after the sinking of the vessel made it likely that the crew members would not give evidence at the arbitration and that the applicant had satisfied the Court that the evidence would be lost if it was not taken on commission .