Σάββατο 3 Οκτωβρίου 2020

Bunker supply contracts – key considerations for the buyer

Regardless of whether a buyer purchases fuel directly from physical suppliers or via brokers or traders and whether sale is under a global framework agreement or ad hoc on a port by port basis, a common feature is that the seller’s terms generally

On 1 January 2020, the lower sulphur limit imposed pursuant to IMO 2020 regulations came into effect. The new regulations have been written about extensively by Gard and others in the shipping and insurance industries.  However, the terms upon which bunkers are purchased is perhaps not given the consideration it deserves

Sellers' terms often incorporate fixed (often low) limits on sellers’ liability, exclusions for certain types of loss (e.g. loss of time, profit, indirect or consequential loss), short time bars for buyers’ claims, and evidential and law and jurisdiction clauses in sellers' favour. There have been moves to try and work towards standard bunker purchase contracts with BIMCO introducing BIMCO Bunker Purchase Terms in 2015 which were updated in 2018. These contracts are more balanced than typical sellers' standard terms, and representatives from owners, charterers and bunker companies were all involved in the drafting process.

From a commercial bargaining perspective, it may be easier to negotiate more balanced terms if they are agreed in advance as part of a worldwide framework agreement to buy bunkers from a single or small number of sellers.

Taking the BIMCO Terms as a starting point buyer may try to negotiate on some of the following checklist key items:

Bunker supply contracts – key issues checklist

·     Due diligence with respect to the seller: consider market reputation and financial standing of sellers, in terms of financial standing and insurance position (see below) and involvement in previous supply issues. Are they also a physical supplier or only an intermediary? How do they verify the quality of the fuel supplied? What are their supply chain quality management procedures?

·        Due diligence with respect to the fuel: consider what information you need about the fuel and its origin.  Are there any special parameters regarding storage, handling, treatment and use of the fuel on board? Do you require specific information in the Certificate of Quality?

·   Fuel specification: the contract should identify the correct specification of the fuel - for example by expressly stating the relevant ISO specification. For residual fuels, the most widely used specification is ISO 8217 Table 2.  The Table 2 specification for sulphur content is stated as per “statutory requirements” and, since 1 January 2020, the global MARPOL sulphur limit is 0.50% with lower limits set for SECAs. ISO 8217 is periodically revised and the industry guidance recommends the most recent version, ISO 8217 2017. Check whether the fuel specified in your bunker supply terms complies with IMO 2020 and that this also accords with charterparty requirements so it is back-to-back. A further point to consider adding is an express term that the fuel is free of contaminants, is fit for purpose and complies with MARPOL. 

·        Sampling and quality testing: the contract should specify the agreed sampling and quality testing regime, including for sulphur content. Ideally, a sample from each of the bunker supplier and the vessel should be analyzed as opposed to only the supplier's sample.  Again, insofar as possible, sampling and testing requirements need to match the charterparty so the buyer is not exposed to different test standards. Ideally, the sampling process should be set out in detail in the contract together with the agreed analysis regime that is to be used. Consideration should also be given as to whether preferred accredited labs for testing should be identified in the contract. In the event there is a dispute about the quality or characteristic of the particular stem, inability to agree to a lab for testing may complicate and delay resolution. 

·        Quality claims time bar: the contract should ideally include a quality claim time bar that allows sufficient time for quality testing to be performed, taking into consideration that testing might need to take place at an accredited lab located at a place other than the place of supply. In our experience, bunker contract time bars are normally far too short, especially given that bunkers may not be immediately used (for example bunker test results may be required under the charter before the bunkers are in fact used) and even when used promptly problems may not manifest themselves immediately. We have seen cases where the bunker recourse claim against the supplier is time barred before the bunkers have been used. It is recommended to link any time bar to 14 days after use of the bunkers or alternatively to have a much longer time bar period, for example 45 days.

·   Limitation of liability: standard bunker supply contracts usually include a low mutual limitation of liability figure (usually one or at most two times the invoiced value of the fuel). Consider negotiating increased limitation of liability sums to reflect the fact that losses arising from loading or consumption of off-specification fuel can be very high in value. It is suggested that at least twice the value of the fuel or more should be targeted where possible. An alternative option is to include reference to both a specific amount and at least twice the value of the fuel provision, with the highest of the two applying. Lastly, make sure that any limitation agreed applies mutually to both parties (rather than just the sellers).

·        The "OW Bunkers" issue: if buying direct from a physical supplier there is less risk, but if purchasing via a broker or trader there is a risk they may not have paid their counterpart for the bunkers which could, in the event of their insolvency, lead to competing payment demands and the risk for the buyer of having to pay twice.  It is sensible to include provisions under which the sellers warrant they have paid for the bunkers and the buyer has a right to request evidence from the sellers that they have paid any third parties for the bunkers before the buyer is required to pay the sellers' invoice, such that if no evidence is provided the buyer may withhold payment/hold sellers in breach.

It is further prudent to include a term that in the event of bankruptcy of the sellers, the buyer will be entitled to withhold payment for the fuel until the relevant court/tribunal determines whether sellers or the physical suppliers or any third parties have a claim directly against the buyer/vessel. If there is such a determination, the contract can also provide that payment to a party other than sellers for the fuel, as determined by the relevant court/tribunal, shall be deemed to subordinate the claim to the rightful party in order to safeguard the buyer from having to pay more than one party (and more than once!) for the fuel.

Consider also making the contract subject to the Sale of Goods Act 1979, so as to make the contract a contract of sale (thus bringing in the Act's protection so far as fitness for purpose and quality are concerned, and the requirement that the Sellers also have good title to the fuel at the time of sale to the buyer).  

·     Insurance: sellers should ideally have insurance in place and should be required to produce evidence of this. Such insurance may for example include credit, professional indemnity and product liability insurance.

·     Local rules and regulations: most standard term contracts incorporate local rules and regulations into the bunker supply contracts. Local rules and regulations can bring about surprises that the parties to the contract might not be aware of at the time of contracting. Consideration is accordingly recommended to be given to the exclusion of local rules and regulations either in their entirety or to limit their applicability to fuel sampling only.

·        Uniform bunker supply terms: ideally the same supply terms should be used across the board with all suppliers so as to have certainty over the risk allocation and to avoid the use of ad hoc supplier friendly terms. In effect, have a framework agreement/standard terms agreed with major suppliers.

·        Lien: try and avoid provisions that give the sellers a lien over the vessel or any rights of action against third parties (e.g. the owner if the charterer is the buyer) as this can cause serious issues under the charterparty. A further point to consider, is to add an express provision that the sellers must hold the buyer harmless and indemnify the buyer in the event that a third party asserts a lien or encumbrance on the vessel in relation to the fuel purchased from the sellers. Similarly, a clause can also be included by which the sellers warrant that no third party has any right to claim against the buyer in relation to the fuel, or exercise any right of lien, charge, encumbrance or arrest over the vessel or any sister vessels in respect of the fuel. Lastly, consider including a provision that if such a claim nevertheless arises, the sellers shall co-operate to allow interpleader proceedings. See also our comments on the OW Bunkers issue above.

·        Exclusions: consider whether you wish to exclude indirect or consequential loss (as this could extend to loss of time). Be careful of broad term exclusions that are usually found in bespoke sellers' contracts. Make sure that any exclusions apply mutually to both contractual parties if they are agreed.

·        Law and Jurisdiction: avoid the application of US law (due to maritime lien rights) and agree on a neutral law/jurisdiction that is not necessarily the sellers' choice.

These suggestions come from our experience in disputes and litigation involving bunker quality. It is important for buyers to understand the consequences of accepting sellers' terms and well worth the effort to attempt to negotiate a more balanced contract. Even when the terms are not negotiable, risks can be mitigated by exercising due diligence before selecting the seller.

 

 

Παρασκευή 2 Οκτωβρίου 2020

MAIB UK Investigation Reports / Lessons Learnt (02/2020)

 1-ECDIS is not an Alarm Clock

Narrative

It was a fine summer night and a live fish carrier was on passage; the bridge was manned by the OOW and an AB lookout. It was still dark at 0430 when the AB left the bridge to prepare painting materials for the next watch.

Thereafter, the OOW was alone and sitting in the bridge chair. The OOW did not feel tired but must have drifted off to sleep as he was suddenly woken by the ECDIS safety depth alarm indicating that the water depth was less than 10m.

The OOW applied astern power and turned to port in an attempt to avoid shallow water. But it was too late, and the vessel was still underway at 4kts when it grounded (see figure). The master was called to the bridge, and an initial assessment found no internal damage. The crew refloated the vessel using its own power around 30 minutes after the grounding and headed for harbour. Once the vessel was within mobile phone range, the coastguard was informed. An inspection by divers found some minor damage and the vessel proceeded to dry dock for repairs.

The Lessons

1. An alarm is only of value if it provides sufficient warning for the OOW to make sense of what is wrong and take action accordingly. In this case the depth alarm came too late to be effective as the seabed shelved steeply around the island and the water depth decreased rapidly. Neither the ECDIS off-track alarm, which would have alerted the OOW to the missed course alteration, nor the BNWAS, which would have alerted the crew to the inactivity on the bridge, had been set. Had either alarm sounded there might have been sufficient time to avoid the grounding.

2. There have been many incidents caused by lone watchkeepers falling asleep on the bridge. After a previous grounding incident under similar circumstances, the company involved in this case had required that a lookout be posted in the hours of darkness. When the lookout left the bridge to perform other duties while it was still dark the OOW was left alone and vulnerable to falling asleep.

3. Fatigue can creep up on you. Even if you do not feel tired it is important to recognize that falling asleep is a real risk when working at night, particularly in the pre-dawn hours where circadian rhythms mean the body is most primed for sleep.

4. Alerting the coastguard should be one of the first actions after an incident – not the last. Although the vessel was refloated without assistance, an early call to the coastguard would have been invaluable had the situation escalated. The ship was within VHF coverage and could easily have communicated with the coastguard without delay.

2-A Splash of Danger

Narrative

The crew of a cargo vessel were preparing for departure from their regular port, and a tug was connected at the bow and waiting to assist. All the mooring lines were still fast and the bosun was preparing to single up the forward lines, which would have included releasing the mooring winch brakes. However, instead of releasing the mooring winch brakes, the bosun released the port anchor windlass brake, inadvertently freeing the port anchor, which dropped into the water extremely close to the tug (Figure 1). There was no damage to either vessel, and the departure proceeded without further incident after the port anchor had been retrieved.

The Lessons

1. The brake release handles for the mooring winch and anchor windlass were next to each other (Figure 2). Tis arrangement is not unusual but does introduce the risk of inadvertent release of the wrong handle. On this vessel, the crew had painted the anchor release red to assist with distinguishing between the handles. Nevertheless, when preparing to depart from harbour the bosun operated the wrong handle, resulting in the accidental release of the anchor. This occurred because in all other respects the anchor was ready for letting go, removing any safety barrier to prevent inadvertent release.

2. The bosun was experienced and familiar with the mooring and anchor arrangements; it was daylight, good weather conditions and the crew were rested, so fatigue was not a factor. Therefore, there were no clearly identified causal factors for the bosun’s erroneous action. Events like this can happen, and it highlights the need for carefully following procedures, teamwork and maintaining high levels of supervision when working on deck. 

3. The anchor fell extremely close to the waiting tug. Had the tug been directly underneath the anchor with crew on deck, this accident could have had severe consequences. Tis serves as an excellent reminder of the hazards that exist for tugs, workboats or line handling boats when operating in close proximity to larger vessels.







 

Πέμπτη 1 Οκτωβρίου 2020

Use of MARPOL Electronic Record Books.

From 1 October 2020, IMO amendments to MARPOL Annexes I, II, IV and V (and the NOx Technical Code, 2008)* will permit the use of electronic record books (in lieu of hard copy records).

Record Books Covered
 
The IMO amendments and guidelines apply to the following record books:

  • Oil Record Book, parts I and II (MARPOL Annex I)
  • Cargo Record Book (MARPOL Annex II)
  • Garbage Record Book, parts I and II (MARPOL Annex V)
  • Ozone-depleting Substances Record Book (MARPOL Annex VI)
  • Recording of the tier and on/off status of marine diesel engines (MARPOL Annex VI)
  • Record of Fuel Oil Changeover (MARPOL Annex VI)
  • Record Book of Engine Parameters (NOx Technical Code, 2008)
Approval of New and Existing Electronic Record Books

To be used to comply with these record keeping provisions, new and existing installations of electronic record books shall be approved by the flag Administration, or LR (Lloyd's Register) where authorised by Flag, to the IMO’s Guidelines for the Use of Electronic Record Books under MARPOL. Where LR is carrying out the approval, it will consist of type approval of the software and a subsequent installation survey on board.
 
Ship's Installation
Any ship choosing to use MARPOL electronic record books is required to carry a ship-specific Declaration, that confirms the installation meets the requirements of the IMO guidelines. The Declaration may be issued by the flag Administration, or where authorised by flag may be issued by LR following an installation survey on board.

During MARPOL surveys or Port State Control inspections, the absence of such a Declaration means an electronic record book (and the records it contains) may not be accepted as fulfilling the record-keeping provisions of MARPOL and the NOx Technical Code, 2008.

Type approval
Where requested by electronic record book manufacturers, LR can type approve their software applications, in accordance with the IMO guidelines.

Further information


Τετάρτη 30 Σεπτεμβρίου 2020

List of jurisdictions restricting or banning scrubber wash water discharges

Last updated 18 August 2020 

The MARPOL convention allows for the use of Exhaust Gas Cleaning Systems1 (EGCS, more commonly referred to as scrubbers) as an alternative means of complying with the 2020 low sulphur regulations. However some jurisdictions have imposed local regulations which restrict or prohibit the discharge of wash water from scrubbers within their waters. The list below includes countries and ports where such restrictions are currently understood to be in place based on information received by the Association at the time of publication. However, the list should not be seen as necessarily complete and is for guidance only, in particular noting that local legislation can be subject to change at short notice. It is therefore important that Members monitor the current situation closely and always contact their local agent/representative prior to arrival. This should include seeking confirmation of the latest situation regarding any applicable requirements relating to the operation of scrubbers and any permission required from the relevant local authorities for their use.

Download pdf at,

https://britanniapandi.com/wp-content/uploads/2020/08/List-of-scrubber-discharge-restrictions-and-bans-Britannia-LP-08-2020-1.pdf

Τρίτη 29 Σεπτεμβρίου 2020

Safety first: Reconstructing the concept of seaworthiness under the MLC 2006

The concept of seaworthiness has evolved over many years, and in common with similar concepts (for instance, the definition and application of “prudent seamanship”), its precise meaning has varied considerably.

In this context, the Maritime Labour Convention 2006 (MLC 2006) can be regarded as focusing the concept in a manner that is not found elsewhere (whether in treaties or in case law). The implementation of the Convention will change shipowners' obligations to ensure ship safety and constitute an essential element of the standard of seaworthiness. Moreover, it is submitted that the MLC 2006 shifts the centre of emphasis in a manner that is both focused and necessary. These changes are tracked and critically examined in this paper and conclusions are submitted based on the relevant analysis.

1. Introduction

Seaworthiness deals with the fitness and readiness of a ship and its fundamental ability to sail safely to its destination. Its standard extends to all aspects of a ship-including the human

element, physical structure, documentation, cargo worthiness and so on. It is one of the most important concepts in the maritime regulatory regime, and takes many forms.

For instance, Article 94(1) of LOSC requires that flag States are under a categorical duty to exercise jurisdiction and control in relation to administrative, technical and social mattersover ships that are permitted to fly its flag. Seaworthiness is clearly a crucial element in relation to this duty and this is further set out in the remainder of the Article, particularly in Article 94 (3) and (4).

Similarly, in the commercial context of the carriage of goods by sea, the Hague/HagueVisby Rules require that the carrier has the obligation to exercise due diligence to make the ship seaworthy both before and at the beginning of the voyage. In marine insurance law, seaworthiness is an implied warranty of the shipowner, the breach of which results in the loss of insurance cover, even though there is no causal relationship between the breach and the loss.

In the law relating to seafarers' employment contract, seafarers are guaranteed of the protection that that originates from the legal implication that the ship on which he is employed to work is, in fact and law, seaworthy. For instance, section 458 of the UK Merchant Shipping Act (MSA) of 1894 has conferred upon seafarers a statutory right to an implied term of seaworthiness, which cannot be displaced or exempted by contractual agreement.

However, seaworthiness is not an absolute concept but a relative one, dependent on the particular context and facts. This is primarily dependent and determined by a variety of different contractual purposes and perspectives. A ship might be seaworthy as between the insurer and the shipowner, though unseaworthy as between shipowner and the shipper of a particular cargo (cargo worthiness). For instance, frozen cargo requires special freezing apparatus, though that does not affect the safety of the ship although it may impair seaworthiness under a marine insurance policy.

This was made clear in The Eurasian Dream, where it was held that seaworthiness is relative to the nature of the ship, to the particular voyage, or even to the particular stage of the voyage on which the ship is engaged.

It is in this context that the implementation of MLC 2006 will prove of greatest value, in increasing and giving legal backbone to the standards of due diligence and eventually reduce the chances of unseaworthy ships being sent to the sea. The importance of this to the maritime industry cannot be over-estimated. It should be emphasized, however, that this is not merely a case of adding to the bureaucracy of the regulatory frameworks that already exist (for instance in relation to port inspections and the various Memoranda of Understanding (MoUs)) in relation to Port State Control Regimes.

The introduction of the doctrine of seaworthiness into the MLC 2006 also has the significant commercial effect of improving productivity and efficiency. It will reduce maritime incidents and avoid damage to ship, cargo and people (including seafarers) on board. Also, it will reduce the insurance premiums due to improvement of due diligence standards.

In addition, the implementation of MLC 2006 requires shipowners to maintain proper documentation, which can be used by interested parties to prove their claims. This will contribute to the minimization of exposure to litigation in the event of a maritime incident and has the potential to increase settlement and alternative dispute resolution.

The evidential effect of the enforcement of MLC 2006 will be considerable in establishing the seaworthiness of a ship. It is likely that a finding of compliance with the MLC 2006 will support the necessary evidence required by the shipowner to prove, prima facie, that he has exercised the required due diligence.

This is important as the normal rules of evidence will impose the burden of proof on the shipowner and proof of compliance will support a contention that due diligence has been legally established.

On the other hand, non-compliance with the MLC 2006 requirements is likely to enhance the presumption of fault on the part of the shipowner; a presumption that the shipowner may great difficulty in refuting. Given the above concerns, this paper has a number of objectives:

1.     To review the development of the doctrine of seaworthiness in maritime law, in particular its important role in ensuring safety of ships in the context of the primacy of the human element in assessing seaworthiness of ships;

2.     To examine the implications of implementing the MLC 2006, particularly its role in improving ship safety;

3.     To analyse the extension of the meaning of seaworthiness under the impact of MLC 2006, in particular the changes of standards under the new requirements of MLC 2006;

4.     To assess the criticisms of this extension and an evaluation of the major obstacles that exist in law and practice.

2. Development of the doctrine of seaworthiness in maritimelaw

In marine insurance, seaworthiness had its origins in the common law at the beginning of 19th century, at least. In the case of Christie v. Secretan, the court held that compliance with a requirement of seaworthiness is a condition precedent to the underwriter's liability for a loss. The rationale of an absolute rule of seaworthiness in marine insurance was further expounded in the case of Wedderburn v. Bell. This rationale almost certainly matured around the mid-nineteenth century. In Dixon v. Sadler, the court held:

“… there is an implied warranty that the vessel shall be seaworthy, by which it is meant that she shall in a fit state as to repairs, equipment, and crew, and in all other respect, to encounter the ordinary perils of the voyage insured, at the time of sailing upon it”.

In Quebec Marine Insurance Co. v. Commercial Bank of Canada, the court drew the conclusion that the warranty of seaworthiness is attached to the contract is a law known to the parties who make contracts of this description. In Foley v Tabor and Danniels v Harris, the courts further held that the standard of seaworthiness varies according to the different voyages undertaken. In addition, if an adventure is divided into several stages, seaworthiness should be determined according to the circumstances of each stage, at the commencement thereof.

The meaning of seaworthiness has also been regulated by a

number of national laws and conventions. The US Harter Act of 1893 was the first attempt to balance the power between carriers and cargo owners. The Act set a limit on carriers' liability for loss due to negligence or failure to exercise due diligence to make the ship seaworthy.

The significance of this lies in the fact that the principles established in the Harter Act became in many ways the basis of liability in the Hague Rules and then followed by the Hague Visby, Hamburg and Rotterdam Rules.

According to Rule (1) of Article 3 of the Hague Rules and the HagueVisby Rules, the carrier has the obligations to exercise due diligence before and at the beginning of the voyage. These obligations include:

1)    make the ship seaworthy,

2)    properly man, equip and supply the ship, and

3)   make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

The Hamburg Rules and Rotterdam Rules have not changed these major obligations. However, the carrier's duty to make the ship seaworthyis replaced by make and keep the ship seaworthyunder the Rotterdam Rules.

As a result, the duty is extended to cover the entire voyage.  Despite its important role in maritime law, there is a lack of united definition of seaworthiness. According to section 39(4) of the Marine Insurance Act 1906, A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.

Based on numerous decisions, Tetley described seaworthiness in the following terms:

“Seaworthiness may be defined as the state of a vessel in such a condition, with such equipment, and manned by such a master and crew, that normally the cargo will be loaded, carried, cared for and discharged properly and safely on the contemplated voyage”.

However, there was no specific statutory definition which received universal recognition in the maritime industry. Therefore, maritime courts have to define seaworthiness on a case-by-case basis.

In a number of US and English cases, seaworthiness was defined as the condition in which a ship should be enabled to encounter whatever perils of the sea a ship of her kind, and laden as she is, may fairly be expected to encounter in performing the voyage concerned. In Australia, the judge in the case of Bunga formulated the definition of seaworthiness through the application of a number of English and US authorities.

For example, the vessel must be

a.     fit to encounter the ordinary perils of the voyage;

b.    it must be in a fit state to encounter the ordinary perils of the voyage insured;

c.     the state of fitness required must depend on the whole nature of the adventure.

In addition, the definition of seaworthiness has different meanings in different maritime law jurisprudence or in the admiralty courts in different jurisdictions.

For example, a ship considered seaworthy under the UN LOSC might or might not be considered seaworthy under The Hague Visby Rules. In Norway, the Seaworthiness Act, which was replaced by the New Ship Safety Act, defines seaworthiness as follows:

Ø  A ship is considered unseaworthy when, because of defects in hull, equipment, machinery or crewing or due to overloading or deficient loading or other grounds, it is in such a condition, that in consideration of the vessel's trade, the risk to human life associated with going to sea exceeds what is customary.

Even within a particular State's admiralty and maritime law, the definition of seaworthiness may be explained differently. For instance, in U.S. practice, the seaworthiness standard for maritime tort claims is different from that in cargo damage claims.

Nevertheless, and regardless of this divergence, it has been generally accepted that the meaning of seaworthiness should not be limited to merely the physical facilities of the vessel.

There are a number of general aspects in which a vessel must be considered to assess its seaworthiness. Soyer examined the main categories of matters to which seaworthiness of a ship should extend, which is described in the below table.


The above Table recognizes the human factor as one aspect of seaworthiness. However, the attention that has been paid to seafarers is far less than that on ship's structure (the so-called iron and steel factors), equipment and supplies. In practice, if a ship has a sufficient number of seafarers with valid certificates, the ship will be normally deemed properly staffed. However, in many cases, a sufficient number of seafarers do not necessarily mean the ship is adequately manned; a seafarer with valid certificates may not have the necessary skills and competency. In addition, the employment conditions on board also significantly influences seafarers' performance, which eventually affects the ship's seaworthiness.

This is an issue which is expressly dealt with in LOSC 1982, Article 94, dealing with flag state duties. This provides that the essential measures to be taken include:

è Under Article 94 (3) it is expressly stated that: Every State take such measures for ships flying its flag as are necessary to ensure safety at sea with regard, inter alia, to:

è the manning of ships, labor conditions and the training of crews, taking into account the applicable international instruments;

è While the requirement of Article 94(4) is that: each ship is in the charge of a master and officers who possess appropriate qualifications, in particular in seamanship, navigation, communications and marine engineering, and that the crew is appropriate in qualification and numbers for the type, size, machinery and equipment of the ship.

Since the middle of 1990 s, the human element in the maritime industry has drawn much more attention than ever before. In 1993 and 2002, the IMO adopted the International Safety Management Code (ISM Code) and the International Ship and Port Facility Security Code (ISPS Code) respectively.

Both these Codes have increased international carriers' responsibility in respect of seafarers' training and ship management. However, there are major disagreements regarding whether the two Codes have changed the operation of the principles of seaworthiness in maritime law. One view is that these Codes, counter-productively, assisted the owners in proving that they had exercised due diligence.

Opponents feared that a too severe burden would be place on the carrierif these Codes were included in the standard of seaworthiness.

3. The implication of introducing the doctrine of seaworthiness in the MLC 2006

The 94th International Labour Conference adopted the MLC 2006 at a maritime session in Geneva on 23 February 2006, with a Preamble stating its desire:

to create a single, coherent instrument embodying as far as possible all up-to-date standards of existing international maritime labour Conventions and Recommendations, as well as the fundamental principles to be found in other international labour Conventions, in particular.

The purpose of this Convention was to secure decent work for seafarers and ensure fair competition among employers. The Convention covers various aspects of labour conditions, crewing and social matters on ships. The MLC 2006 consolidates the major Conventions and Recommendations adopted by the ILO throughout its history of protecting and safeguarding labour, locating it firmly in a maritime context. More important, it also takes into consideration the various measures taken by the International Maritime Organisation (IMO), such as:

ü  the International Convention for the Safety of Life at Sea, 1974, as amended (SOLAS),

ü  the Convention on the International Regulation for Preventing Collisions at Sea, 1972, as amended (COLREG), and

ü  the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended (STCW).

The express intention, therefore, is that the implementation of the MLC 2006 will operate co-operativelywith the various IMO instruments in ensuring that all ships maintain proper standards in terms of maintenance, crew competence and safety management; these all

constitute an important aspect of seaworthiness.

The MLC 2006 is organised into five Titles and 16 articles (Articles IXVI). The first Title is Minimum Requirements for Seafarers to Work on a Ship. It sets up a series of minimum requirements, for instance, the minimum age for seafarers to be employed aboard, the obligation of each seafarer to have the relevant qualifications, training certificates, appropriate medical certificate and the appropriate procedures of recruitment and placement.

The second Title – “Conditions of Employment” – is concerned primarily with terms of employment, including wages, working hours and annual leave.

The third Title is Accommodation, Recreational Facilities, Food and Catering. To ensure seafarers' lives aboard, specific standards are stipulated in this section, such as the size and conditions of the living areas on board a ship.

The fourth Title is concerned with Health Protection, Medical Care, Welfare and Social Security Protection. Compliance and Enforcementis the last Title, which regulates the implementation and enforcement of the principles and rights set out in the Convention.

The responsibilities of flag States, port States and labour supply States are specified to improve and reintroduce effective state enforcement of the Convention.

Moreover, a special certificate compliance system and inspection system is mandated to

ensure that each Member's responsibility to be fully implemented and enforced.

As examined above, the Convention introduces a series of new requirements that are different in both form and character from the standards recognized before. Although some of these requirements are not expressly set out directly from the perspective of safety, they constitute an important supplement to the maritime regulatory regime.

First, the safety of the ship, cargo and environment is inseparable from the employment and labour conditions on board. A ship with a high level of good employment conditions tends to maintain a high standard of safety operation. Second, seafarers play a vital role in seaworthiness of any vessel. It has been generally accepted that a good master may save a poor ship, and a poor master may lose a good one (Soyer, 2006: 64).

Therefore, many shipowners are competing for qualified seafaring talent, which is always flowing to ships with better treatment and conditions. As a result, these ships are generally safer than those with poor labour conditions and inferior treatment of seafarers.

Third, as the MLC 2006 has entered into force, the standard of seaworthiness with which a ship must comply is now to be tested against the requirements of the Convention in combination with other requirements. If a shipowner fails to observe the requirements in the Convention, although it has complied with other requirements, it would still be difficult for the owner to prove that he has exercised due diligence to make the ship seaworthy.

It has to be noted, however, that no judicial view has yet been given on the potential impact of MLC 2006 on the standard of seaworthiness.

Nevertheless, there is a clear implication that the Convention is significantly relevant to many inquiries into matters of seaworthiness.

For example, preventing seafarer fatigue is an important subject linked to ensuring ship safety and avoiding the risk of maritime incidents. Excessive hours of work and inadequate rest result in seafarer fatigue, which is a major factor impairing the seaworthiness of a ship. In Title 2 Conditions of employment, MLC 2006 introduces a working time regulationto ensure that seafarers have maximum hours of work or minimum hours of rest over given periods.

Every ship shall maintain regulated shipboard working arrangements to ensure seafarers have sufficient period of rest. This is similar in both character and scope to the EU Working Time Directive.

In addition, records of such arrangements shall be maintained to allow monitoring of compliance. These requirements constitute an important part of the shipowner's responsibility of due diligence.

4. Extension of the meaning of seaworthiness under the MLC 2006

It has been generally recognized that the human element plays a crucial role in the safety of ship operation; it could not be otherwise. Since the middle of 1990s, the maritime industry has paid increasing attention to the human element in all its multifarious aspects, including seafarers' training, competency and management, as well as their labour and social rights.

Historically, this has long been seen as an essential aspect of the work of the work of the ILO. The ILO has adopted a large number of maritime labour Conventions and related recommendations to regulate seafarers' labour and social rights. When MLC 2006 was adopted, most of these documents were consolidated in the Convention.

In addition, this consolidation also took into consideration a variety of IMO and other United Nations instruments. As such, since its entry into force in August 2013, the Convention has had a significant impact on the maritime industry and its various stakeholders.

Importantly, its regulatory impact will be felt far beyond the range of those states that have ratified the MLC 2006.

For example, in China, many ports are taking various measures to attract more vessels calling. Since 2013, the Port of Shanghai, as the largest container port in the world, has intended to restrict the calling of ships using high sulphur fuel oil (HSFO) to reduce the emission of CO2.

However, considering the possibility that the restriction may compel many shipowners to choose other ports of call, the regulation came into force only in January 2018, until then the policy was that, ships were only encouragedto use low sulphur fuel oil when entering Shanghai port.

As the MLC 2006 has become a mandatory element in the maritime regulatory system, the standard of seaworthiness with which a vessel must comply should be tested against the requirements of the Convention. As mentioned above, seaworthiness is a relative term and its meaning extends to all aspects of a ship.

This not only includes the physical condition of a vessel (the iron and steel factors) but also involves other complementary factors, such as competency of crew, adequacy of provision and equipment and compliance with international standards.

MLC 2006 prescribes a series of obligations for shipowners, including providing a safe workplace, decent working and living conditions and health protection. Compliance with these obligations is not only relevant to seafarers' decent employment and wellbeing, but also to the seaworthiness of the ship.

To start with, in order to be considered as seaworthy, the ship must carry on board all certificates and documents necessary for the voyage.

For example, in The Madeleine case and re-affirmed in a number of cases such as The Derby, the ship was held to be unseaworthy because the documentation for the voyage was considered to be insufficient.

The national law of the ship's flag states generally requires these certificates and documents. Additionally, however, as part of the internationally recognized port inspection

regime, it may also be demanded by a port state pursuant to that port state's laws, regulations and lawful administrative practices. According to Regulation 5.1.3 of the Convention, ships engaged in international voyage shall carry and maintain a maritime labour certificate (MLC).

In addition, Regulation 5.1.4 of the Convention requires ships to carry and maintain a declaration of maritime labour compliance(DMLC).

Therefore, if a ship commences a voyage without a valid MLC and DMLC as required, a prima facie assumption arises that it is an unseaworthy vessel and should be classed as such, with all the subsequent legal and industry-wide connotations of such a classification.

However, it is clear that mere possessionof these documents is only a preliminary factor. There may be many ships with the required MLC and DMLC but still be in violation of the requirements under the MLC 2006. On the one hand, some flag states would lower its labour standards and issue certificates to substandard ships, by which to gain benefit through greater registrations.

This is both regrettable as well as a likely scenario on the basis of current flag state practice despite the increased efforts of the IMO Sub-Committee on Flag State Implementation. At the same time, full compliance with the Convention will account for a significant increase in operational costs. It is reasonable to assume that some irresponsible shipowners (even if in a minority) may not go on to comply with the detailed requirements of MLC 2006 once these documents (the MLC and the DMLC) have been obtained.

Therefore, although a ship is duly certified, she would still be considered as unseaworthy if there is any further violation of the Convention, regardless as to the characterization of this violation as extreme or otherwise.  

No matter whether the violation will endanger the ship, one major reason is that the ship might be detained or even arrested at a port of call because of her defects.

For instance, in The Faith, the crew were poorly supplied and underpaid. In addition, there were a large number of unsatisfied creditors who could apply for the seizure of the ship. Taking these factors into account, the judge held the ship to be unseaworthy. As the judgement read.

“If the owner leaves the vessel unprotected against the foreseeable seizure by creditors, she is just as liable to be stopped short of her destination as if she were left unprotected against the ordinary perils of the navigation”.

Moreover, it will not be an effective opting-out for a ship registered in a non-ratifying Convention flag state, in order to avoid the regulatory regime of the Convention. Such a ship, of course, has no legal obligation to comply with the Convention and to carry on board the MLC and DMLC.

According to Article V-7 of the Convention, the so-called no more favorable treatmentclause, the vessel does not receive more favorable treatment than the ships that fly the flag of any State that has ratified it. However, when the ship enters a foreign port of a state that has ratified the Convention, she would still need to observe the whole corpus of that State's national laws and regulations, which would now incorporate the requirements of the Convention. If a Port State Control (PSC) inspector finds any extreme violation of the Convention, the vessel can be detained.

Therefore, the vessel would be classed as unseaworthy due to the shipowner putting her at sea with a risk of detention.

Furthermore, good employment and labor conditions are also essential factors contributing to ship safety. Seafarers' sufficiency, efficiency and competency are vital in maintaining the safety of a vessel, and this has been widely recognized in the maritime industry.

However, stress, fatigue and similar complaints can lead to reduced performance which in turn brings about environmental damage, loss of life and property. On the other hand, good treatment and labor relations serve as essential motivating factors in increasing efficiency and diligence, and eventually improve safety operations and protection of ship and cargo. In this regard, if a shipowner fails to comply with the requirements of the Convention and provide decent working and living conditions on board, it is fair to consider that the shipowner has not exercised due diligence to make the ship seaworthy.

Therefore, under the regime of MLC 2006, the seaworthiness of a ship can be extended in a number of aspects.

5. Criticism of extending the meaning of seaworthiness

However, the change with regard to the standard of seaworthiness might find various opponents as well. The major critique is that it may have the effect of placing too severe a burden on the shipowner. The meaning of seaworthiness has always been interpreted in a narrow sense. In the Aquacharm, the Court of Appeal held that the word seaworthyin the Hague Rules is used in its ordinary meaning, and not in any extended or unnatural meaning. Shaw L.J. reaffirmed in the judgment that any artificial extension of the concept of seaworthinesswould be unacceptable.

In addition, the Court explained, seaworthiness connotes an inherent qualityand external factors cannot influence or affect the innate attribute of seaworthiness.

Also, although the MLC 2006 has entered into force, making it a mandatory principle of international public law for all ships within its application, it has no mandatory effect under private law. It is recognized that no law requires a shipowner to provide a perfect or an immaculate vessel. If a ship is found to have violated its provisions, there may be a fine or even arrest and detention.

However, it is disputable to compulsorily extend these obligations to private contract, such as contract of carriage of goods by sea, charterparty or marine insurance. When the International Safety Management (ISM) Code and the International Ship and Port Facility Security (ISPS) Code came into force, many commentators argued that these new requirements should not extend the concept of seaworthiness under the HagueVisby Rules and increase shipowner's obligations of seaworthiness.

Furthermore, introducing the requirements of MLC 2006 would conflict with the existing law of seaworthiness under the carriage of goods by sea, in particular the period of exercising due diligence.

For example, according to The Hague or HagueVisby Rules, the carrier shall exercise due diligence before and at the beginning of the voyage. However, according to paragraph 16 of Standard A 5.1.3 of MLC 2006, a maritime labor certificate shall be withdrawn, if there is evidence that the ship concerned does not comply with the requirements of the Convention.

Therefore, the shipowner shall maintain continuous compliance with the requirements of the Convention, which means there is a conflict between these two legal regulatory systems. However, the conflict could be resolved if Rotterdam Rules enter into force. According to Article 14 of Rotterdam Rules, the carrier is bound before, at the beginning of, and during the voyage by sea to exercise due diligence to make and keep the ship seaworthy.

In addition, it is claimed that the introduction of MLC 2006 into the concept of seaworthiness might result in unfair competition between different countries. There are commentators who claim that MLC 2006 has a number of weaknesses that may impair its

effective implementation.

Some countries might be strict in enforcing the Convention while other countries might not because of poor resources or simply due to lack cooperation. Therefore, those states who take their Convention obligations seriously may increase the standard of seaworthiness and eventually increase shipowners' obligations. On the contrary, some countries who do not wish to do so might be tempted to lower their standards in order to attract more tonnage registration.

6. Conclusion

The entry into force of MLC 2006 should prove to have a significant impact on the doctrine of seaworthiness. Under the new requirements of MLC 2006, the meaning of seaworthiness of a ship is given a firmer foundation and is also extended in a number of aspects. In this context, it is submitted that the MLC 2006 should be viewed as a re-calibration of the concept of seaworthiness and as an essential part of an evolutionary process that integrates the safety of seafarers with commercial necessity.

As a part of this process, the requirements under the MLC 2006 are minimum standards to be observed by any responsible shipowner. In addition, observation of these standards plays an essential contribution in improving the safety and efficiency of ship operations. The coming into force of the MLC 2006 and the incorporation of standards of seaworthiness is critical to this process. It is also submitted that the concept of seaworthiness, with all its accompanying ramifications, represents a new epoch of ship safety and has the capacity to permeate all aspects of safety and efficiency in the shipping industry.

The challenge is to ensure that the Convention moves from the rarefied heights of international law and translates into the everyday practices of the shipping industry. The truth is that legislation alone does not change anything. It is only when the shipping itself industry acts proactively that the compass dial shifts from maximizing profits towards ensuring seaworthiness and the safety of seafarers.

It is worthwhile to conclude by repeating the classic statement of Cresswell J in The Eurasian Dream that seaworthiness must be judged by the standards and practices of the industry at the relevant time. These standards and practices must now include the provisions of the MLC 2006.