<Vol.36 No.1, April 2014> 1. The Review of Package Limitation - Concerning Interpretation of Gold Value, Package and Customary Freight Unit -

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1 <Vol.36 No.1, April 2014> 1. The Review of Package Limitation - Concerning Interpretation of Gold Value, Package and Customary Freight Unit - The Hague Rules 1924, which is the first international convention on the extent of ocean carrier s liability, the Carriage of Goods by Sea Act ( COGSA ) of the United States, and the Hague Visby Rules 1968 are still effective as the paramount clause in the bill of lading issued by the carrier. However, the meaning of gold value, which is the monetary unit used in liability limitation under the Hague Rules, is interpreted in different way under legal system of countries. Also, the interpretation of U.S. Courts on the meaning and extent of package and customary freight unit under the COGSA has differed among U.S. Circuit courts. Therefore, the purpose of this article is to examine the core legal concept in the paramount clause mentioned above that limits carrier s liability. 1) With respect to the meaning of gold value under Article IV(5) and IX of the Hague Rules, in Rosa S (1988) decision by the U.K. Court, the Court held that the gold value to be used in the liability limitation is the current value equivalent to the gold value at the time of legislating the Hague Rules. The Courts in Australia, Canada, etc. also followed the decision by the U.K. Court. The lower court in Korea rendered an opposite decision, but this interpretation of the law needs to be re evaluated considering that the U.K. decision is still valid. 2) With respect to the meaning of package, majority (the Second, Eleventh and Fifth Circuit) interpreted it as measures to facilitate transportation or protect the cargo regardless of cargo s size, shape or weight and found that it does not have to completely conceal or surround the cargo, but the 9th Circuit held that cargo bolted to skid is not package in its plain meaning. Also, package can be determined documents other than bill of lading such as dock receipt or invoice. As for containerized cargo, small package (e.g carton) inside the container is often considered as package, but in some cases, the Court held a container itself as a package when package was not clearly stated but the cargo itself or number of the cargo such as plant or piece was used. Where a smaller unit such as carton is inside a larger unit such as pallet, the smaller unit is considered package. Customary freight unit, which is applied to cargo not shipped in packages, means the unit of quantity, weight or measurement of the cargo customarily used as the basis for the calculation of the freight rate to be charged.

2 Even though The Rotterdam Rules was signed on September 23, 2009 based upon effort of several countries, the rules is still not in force. Therefore, in present, the rationales and court decisions in the United States concerning COGSA is worth the review by the Korean Court with respect to the interpretation of the law, and various discussion as well as development in this area of law is expected. In addition, further in depth analysis and study on the above conflict between the Paramount Clause and Governing Law Clause and their extent of application will be necessary. Active discussion and development on this issue is also expected. Paramount Clause, Gold value, Package, Customary Freight Unit, Package limitation, Shipping Unit, US COGSA

3 2. Comparative Review on the Principle of the Fixed Compensation for Damages under the Korean Maritime Law -Focused on Interpretative Analysis on Legal Nature of It- The carrier is liable for damages sustained in the event of the destination or loss of, damage to any goods, if the destruction which caused the damage so sustained took place during the carriage by sea. If a carrier fails to prove that he or the crew or other employee of a ship exercised his duty of care in reception, loading, stowage, carriage, keeping, discharging and delivering of the goods, he shall be liable to compensate for damages caused by loss, damage or delay in delivery of the goods. If the goods have been lost totally or have been delayed in delivery in arrival, the amount of damages shall be determined by the market value prevailing at the destination on the day on which they were delivered. Incase of a partial loss of or injury to the goods, the amount of damages shall be determined by the value prevailing at the destination on the way on which they were delivered. Where the loss, injury and delay in delivery in arrival of the goods have arisen from the intention of or gross negligence of the carrier, he shall be liable for all damages under the Article 137 of the Korean Commercial Code. Article 137 declares the arrived value principle, which means that in order to calculate the value of the performance that a consignee should have received under the contract of carriage the decision maker looks to the value that the goods would have had if they had arrived safely at the contractually agreed place of delivery when they were supposed to arrived there. This mirrors the existing practice as well as the legal framework provided for by Article 4(5)(b) of the Hague Visby Rules. Article 137 does not expressly mention limitation of liability, but its purpose seems to unify the rules generally followed to calculate damages in case of loss or damage or delay in delivery of the goods carried by sea. The amounts calculated by this formula are not a forfeit compensation. The exclusion of consequential damages is not an issue of limitation but rather than an issue of measure of damages. The cargo interests must prove that they have actually suffered loss or damage up to this amount. If Article 137 (5) will clarify what was not applied in a uniform manner under Article 4(5)(b) of the Hague Visby Rules the compensation calculated by applying the formula of Article 137 (1) and (2) is effectively a limitation of liability because no compensation higher than the amounts calculated pursuant to Article 137 can be claimed by the cargo interests.

4 the principle of the fixed compensation for damages, measure of damages, limitation of liability, arrived value, loss or damage, delay in delivery, general damage, consequential damages, Article 4(5)(b) of the Hague Visby Rules

5 3. Incorporation of Arbitration Clause under Voyage Charterparty into Charter Party Bill of Lading -Focused on The Seoul High Court s Judgment of 11 Dec The incorporation of charterparty arbitration clause in a charter party bill of lading and the validity of an arbitration agreement against non-signatories frequently a source of international maritime dispute. In the Seoul High Court Judgement(Docket No gahap 61217), the voyage charterparty provided that arbitration, if any, in Hong Kong and English law to be applied. The charter party bill of lading was in CONGENBILL(1994) form and identified the date of the incorporated charterparty on the front side. The court ruled that the English law was the governing law in determining the validity of the charterparty arbitration clause against the holder of CONGENBILL. The court then agreed with the defendant ship owners contention that the incorporation clause of the CONGENBILL was sufficient to incorporate the Hong Kong arbitration clause of the charterparty under English law and the court did not have a jurisdiction over the merits of the disputes. This article evaluates the legitimacy of this Seoul High Court judgment through the statues and the principle derived from the various authorities in U.K. Incorporation Clause, Arbitration Clause, Voyage Charterparty, Charterparty Bill of Lading

6 4. Study on the Early Redelivery in the Time Charterparty under the Rehabilitation Procedure Chan Young Kim As the shipping market has been deteriorated in the recent years, a part of major marine companies commenced the rehabilitation procedure with the result that social attentions were drawn. However, due to the specialty of marine business, it is thought that the in-depth studies have not been sufficiently issued as to the marine company under the rehabilitation procedure. Recognizing the problem, this article, subject to the presumption that a marine company under the rehabilitation procedure stands as the charterer s position in the time charterparty, will firstly analyze the shipowner s damage claims and other claims arising out of the early redelivery in accordance with the English law which the charterparty sets as the governing law. In the second place, considering the case where the shipowner participates in the rehabilitation procedure, this article will classify the shipowner s damages claim and other claims into rehabilitation claims or common-benefit claims and review the method of recovery. Meanwhile, in the situation where, at the time of the early redelivery, the shipowner, as per the charterparty, should settle the value of bunker remaining on board the vessel which the charterer supplied, the shipowner would prefer to set off the debt of the bunker value against his rehabilitation claims, in order to reduce the substantial loss. In line with it, this article will survey on the governing law in relation with the set-off and the limitations which are imposed by the Debtor Rehabilitation and Bankruptcy Law. Debtor s Rehabilitation and Bankruptcy Law, Rehabilitation Procedure, Time Charterparty, Early Redelivery, Rehabilitation Claims, Common-benefit Claims, Set-off

7 5. Redelivery of Vessel in Bareboat Charter Party -Focus on the Barecon The commencement and termination of charter means delivery and redelivery of the vessel in bareboat charter. Therefore, the essence of legal issues relating to termination of the charter is definition of redelivery, condition of redelivery, early redelivery, late redelivery, especially liability of compensation for matters associated with obligations to restore the vessel. In bareboat charters, Barecon 2001 is the only standard form being used in shipping industries, this form constitutes of Part II for present vessel, Part III for new building vessel, etc. Referring to the article 30 of Barecon 2001, the parties of contract can choose English law, American law, or even other nation s law as governing law and arbitration. Thus, adopting Korean law as governing law is possible in Barecon However, when adopting Korean law, it is necessary to consider whether problems on efficiency of the article would occur and different results it will bring to prevent legal unsteadiness and problems on availability in chartering market. Fortunately, bareboat charter in Korean commercial law and lease contract of movable property in Korean civil law do not seem to have great difference on interpretation and effect. I expect to adopt Korean law as governing law in Barecon bareboat charter, redelivery, redelivery survey, charter period, late redelivery, early redelivery, compensation

8 6. Comparative analysis on the some provisions of 2003 International Hull Clauses and Korea Shipping Association's Ship Mutual Insurance Clauses The ITCH of 1983 had been used as the standardized clause of insurance for hull insurance for 20 years until 2003 when the more modernized International Hul Clauses were prepared. This new International Hull Clauses were composed of three sections and 50 clauses, with the warranty terms alleviated a little but the risk coverage expanded. They also alleviated the requirements of constructive total loss but put the special clauses and wording which had been used in practices up to then into their terms and conditions. On the other hand, they have stricter duty to notice by the insured. Korean Shipping Association which were established in 1949 started to revise the current Ship Mutual Insurance Clauses which were affected by ITCH of The contents of 2003 IHC, which is the replacement of 1983 ITCH, are likely to greatly affect the contents of revised Ship Mutual Insurance Clauses. The followings shall be considered in revising the Ship Mutual Insurance Clauses. The risk coverage needs to be expanded and the exclusion clauses shall be more specific. Related to the compensation liability of collision, the direct right of action and the defense of pay to be paid rule shall be more specific with priority put on the direct right of action. As far as the payment of premium is concerned, the period of peremptory notice and notice of termination shall be added to be more specific. Also the revision is required to the starting point of reckoning and the effect of breach of duty related to the notice of accident. Finally, the risk coverage needs to be expanded as in case of 2003 IHC in which the 80% of the agreed insurable value is deemed to be the value after completion of repair International Hull Clauses, Ship Mutual Insurance Clauses, Institute Time Clauses~Hulls, Bursting of boilers, Breakage of shafts, Latent defection in the machinery or hull, 3/4ths collision liability, Running Down Clause, Constructive total loss, English law governing clauses, Pay to be paid clauses, Agreed insurable value(vlaued policy), Protection & Indemnity Club

9 7. Comments on the Korean Court's Maritime Law Cases during the year of 2013 In the Changwon District court Docket No. 2012na5173, whether the seaman had a maritime lien against the shipowner or not was at issue. The court decided the Korean law as the governing law because Korea had the substantial relation with the case even though the flag of the vessel was Panama. In the Seoul Central District Court case Docket No. 2013chag2decision, the carrier's right to limit its liability was denied. In the Inchon District court case Docket No. 2011gahap17126, the double limitation proceeding for the shipowner continued. The court did not admitted the effect of the decision of the Japanese limitation court. The case highlighted the urgent need for Korea's ratification of the 1976 LLMC. In the Korean Supreme Court case Docket No. 2011da16431, the court decided that the carrier's name should be inserted together with the agent's signature on half of the carrier. In the Inchon disctrict court case Docket No. 2011gahap 19740, the carrier's right to invoke fire exemption was denied. In the Korean Supreme Court case Docket No 2011da81190, the court decided that the abandonment of the insured was not fully effected and thus the insurer did not have duty to pay insurance money. In the Seoul Southern District Court Docket No. 2012gahap 7046, the court rendered that the governing law for the direct action was the English law because the direct action was derived from the insurance contract and thus the English law rather than the Korean law became the governing law for the direct action. In the Korean Supreme court case Docket No. 2011da13838, after the court admitted the liability of the Pusan Port Authority, the court decided that the expense for damage assessment fells upon the insurer and therefore it is not the subject of the subrogation for the benefit of the insurer. In the Seoul Central District Court case Docket No. 2011gahap98377, the court decided that the pure economic loss can be compensated by the defendant. In the Korean Supreme Court case Docket No. 2009da77754 the court decided that the Korean court has the jurisdiction if the case has the substantial connection with Korea even though the defendant had domicile in a foreign country. Flag of Convenience Vessel, Limitation of Liability, Wrongful Delivery of Cargo, Bill of Lading, Fire Exemption, Abandonment, Subrogation, Jurisdiction, Governing Law.

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