Scandinavian Maritime Law

Thor Falkanger - Hans Jacob Bull Lasse Brautaset Scandinavian Maritime Law The Norwegian Perspective Universitetsforlaget

Contents 1 INTRODUCTION 23 1.1 What is maritime law? 23 1.2 The unique characteristics of maritime law 23 1.3 The topics to be examined 24 1.4 Sources of law 26 1.41 The Maritime Code and other legislation 26 1.42 Interpretation of Statutes 28 1.43 Contracts and their interpretation 29 1.44 Case law, including arbitration awards 31 1.45 Legal literature 32 1.46 Conventions 33 1.5 Jurisdiction and choice of law 33 1.51 Court jurisdiction and rules dealing with forum 34 1.52 Jurisdiction agreements 34 1.53 Choice of law 35 1.54 Arbitration 38 1.55 Satisfaction of judgments and arbitration awards - enforcement 39 1.56 Arrest of ships and cargo 40 2 SHIPS, NATIONALITY AND REGISTRATION 43 2.1 Ships - definition 43 2.11 Characteristic features 43 2.12 When does a construction become a ship and when does this Status cease? 45 2.13 Appurtenances of a ship 46 2.14 Identification of ships 46 2.2 Nationality and registration 48 2.21 The significance of nationality 48 2.22 When is a ship considered Norwegian? The rules under international law 50 2.23 The Norwegian International Register (NIS) 53 2.24 The two purposes of registration 55

10 CONTENTS 2.25 Conditions for registration in the ordinary Norwegian ships' register (NOR) 56 2.26 Conditions for registration in the NIS 58 2.27 Particular implications of registration in the NIS 61 2.28 Structure of the registers, registration procedures and legal protection associated with registration 63 2.29 Registration of ships under construction 69 SHIP CONTROL AND CLASSIFICATION 71 3.1 The Seaworthiness Act of 9 June 1903 72 3.11 The Seaworthiness Act and its scope of application 72 3.12 The purpose of the Act 74 3.13 Requirements in respect of individual ships 74 3.14 The exercise of public control 77 3.15 International co-operation 78 3.2 Classification 79 SHIPBUILDING AND REPAIR CONTRACTS 83 4.1 Shipbuilding - legal background 83 4.2 The Shipbuilding Contract 84 4.21 Negotiations and contracting 84 4.22 Description of the ship (art. II) 85 4.23 Change orders 87 4.24 The building phase: Approval of plans; supervision and tests; risk allocation 88 4.25 Tests and trials 90 4.26 Delivery date and delivery 91 4.27 Price and payment terms 93 4.28 Builder's default 95 4.29 Additional comments regarding registration, financing and insurance 99 4.3 Repair of ships - generally 101 4.4 The main features of the repair contract of 1985, revised 1997... 102 4.41 The scope and quality of work 102 4.42 Delivery time 102 4.43 Price and manner of payment 103 4.44 Sanctions available for breach of contract 103 4.45 Other damages 105

CONTENT 1 1 5 PURCHASE AND SÄLE OF SHIPS 107 5.1 Introduction 107 5.2 The basic problem: What is purchased? Description and inspection. 107 5.21 The buyer's need to inspect the ship 107 5.22 The three-stage alternative 108 5.23 "Outright sale" 110 5.3 Description of the ship 110 5.4 What is included in the sale 113 5.5 Time of delivery 114 5.6 Price and method of payment 115 5.7 Disputes - choice of law and forum 115 5.8 Sale of ships for demolition 115 6 MORTGAGES, ENFORCEMENT LIENS, MARITIME LIENS AND RIGHTS OF RETENTION 118 6.1 Introduction: The vessel as security for Claims 118 6.2 Maritime liens - general description and historical background... 119 6.3 What Claims are secured by a maritime lien and what are the priorities? 120 6.31 Claims secured 120 6.32 Priority of maritime liens 124 6.33 Foreign maritime lien Claims 124 6.4 Maintenance of maritime liens. Limitation period 125 6.5 Ship mortgages 127 6.51 The mortgagee's position - particular risks 127 6.52 The scope of mortgage rights 128 6.53 The mortgagee's legal protection as against third parties... 129 6.54 Mortgaging a vessel share 130 6.55 Additional comments on mortgages of ships under construction 130 6.6 Enforcement liens 131 6.7 Foreclosure 132 6.71 Introduction 132 6.72 Grounds for enforcement 132 6.73 Default 133 6.74 Forced sale 133

12 CONTENTS 6.75 Forced use 135 6.76 Enforcement on the basis of foreign rights. Auction abroad. 136 6.8 The right of retention (possessory lien) 137 7 WAYS OF STRUCTURING SHIPOWNING ENTTTIES 139 7.1 "Shipowner" and "shipowning Company" - definition 139 7.11 A preliminary note on Norwegian terminology 139 7.12 Everyday usage 140 7.13 The legal significance of the terms 140 7.14 Summary 143 7.2 Forms of Organisation employed in ship ownership and Operation.. 143 7.21 Registration of companies 143 7.22 Sole proprietorships 144 7.23 Part-owners/partnerships/joint ownership 144 7.24 Limited partnerships 147 7.25 Limited liability companies or corporations 150 7.26 The forms of Organisation in practice 150 7.27 Transfer of the shipowner's functions 151 7.28 The international perspective 151 7.3 Pool agreements and Joint ventures 152 7.4 Management agreements 154 7.5 Other intermediaries and assistants 155 7.51 Agents 155 7.52 Stevedores 156 7.53 Pilots and tugboats 156 7.54 Suppliers 156 7.55 Shipyards and travelling squads 157 7.56 Brokers 157 7.57 Freight forwarders and liner agents 157 8 LIABILITY 160 8.1 Types of damage and causation 160 8.2 Ordinary principles of liability 161 8.21 The tortfeasor's liability for negligence 162 8.22 The shipowner's vicarious liability 162 8.23 Strict liability 163 8.24 Claims for personal injury 165 8.25 Liability arising out of contract 165 8.26 Limitation of liability. Indexing 168

CONTENT 13 8.3 The scope of the shipowner's vicarious liability 169 8.31 Introduction 169 8.32 The legal relationship between shipowner and assistant... 170 8.33 The nature of the Service provided 172 8.34 Categories of assistants 174 8.4 Scope of the shipowner's contractual liability 175 8.5 Limitation of actions - an overview 176 9 LIMITATION OF SHIPOWNERS' LIABILITY 179 9.1 Background 179 9.2 When do the rules in MC Chapter 9 apply? 181 9.21 Who can invoke the rules? 181 9.22 What counts as a ship in this context? 182 9.3 The scope of limitation 183 9.31 In general 183 9.32 The individual Claims 183 9.33 "Privity" 185 9.34 The principle of Single liability 187 9.4 How liability is limited in practice 188 9.41 The principles 188 9.42 Limitation funds - guidelines 188 9.43 The limitation fund - Special rules 189 9.44 One or more incidents? 190 9.45 An example 190 9.46 Claims by the owner against the limitation fund 191 9.5 Procedural rules. Effect of the establishment of a fund 192 9.51 Limitation without establishment of a fund 192 9.52 Establishment of a limitation fund 192 9.6 Other limitation rules 193 9.61 Contracts of Affreightment 193 9.62 Oil pollution 193 10 OlL POLLUTION AND ENVIRONMENTAL LIABILITY 195 10.1 Introduction 195 10.2 The international rules on liability for oil pollution, background and development 196 10.3 Overview of the Norwegian rules on liability for oil pollution 198 10.4 Convention-based liability under MC Chapter 10 200

14 CONTENTS 10.41 Scope of application 200 10.42 Strict liability 201 10.43 Channelling of liability 202 10.44 Limitation of liability 203 10.45 Compulsory insurance 204 10.46 The international compensation fund 205 10.47 Limitation of actions 206 10.5 Non-convention-based liability for oil pollution 206 10.6 Liability for oil pollution damage subject to global limitation 207 10.7 Liability for oil pollution pursuant to the Petroleum Act 208 10.8 Other environmental liability 209 11 LIABILITY FOR COLLISIONS 212 11.1 Introduction 212 11.2 The central rules on liability 213 11.21 When only one ship is at fault 213 11.22 When both are to blame 213 11.23 Accidental collisions 214 11.24 Collisions between three or more ships 215 11.25 Liability for actions based on necessity 215 11.26 Cross or single liability? 216 11.3 Liability for cargo claims 217 11.31 The Maritime Code 217 11.32 American law 217 11.4 Liability for personal injury 219 11.5 The evaluation of fault 220 11.51 Introduction 220 11.52 The Rules of the Road 220 11.6 The measure of damages 223 11.7 Prescription, maritime liens and insurance cover 224 11.8 Collisions with other structures 224 12 THE LEGAL POSITION OF THE CREW 227 12.1 Introduction 227 12.2 The employment contract 229 12.3 Duration of the contract 230

CONTENT 15 12.4 Rights and obligations 232 12.5 Circumstances which may change the date of termination or give the seaman a right to take leave 233 12.6 The master 234 12.7 Particular provisions applicable to NIS-registered ships 236 13 CONTRACTS OF AFFREIGHTMENT - AN OVERVIEW 238 13.1 Ways of employing a ship in trade 238 13.11 The two extremes 238 13.12 The liner trade 238 13.13 Chartering 239 13.14 A wide-ranging transfer of functions: Leasing 239 13.15 Options to purchase 240 13.2 Contracts of Affreightment 240 13.21 The term 240 13.22 Bills of lading and sea waybills 243 13.23 Voyage Charters 244 13.24 Time Charter party 245 13.25 Bareboat Charter party 246 13.26 Tramp bills of lading 246 13.3 The parties to a contract of affreightment 246 13.4 The use of the forms of contract in practice 247 13.5 Sources of law 249 14 BILLS OF LADING AND WAYBILLS: LIABILITY FOR DAMAGE, LOSS AND DELAY; INCORRECT DESCRIPTION OF GOODS 251 14.1 Introduction 252 14.11 The liability of the carrier 252 14.12 The underlying sale and the bill of lading 254 14.13 Procedure for delivery of the goods to the carrier 258 14.14 A summary of the functions of the bill of lading 259 14.15 Alternatives to bills of lading 260 14.2 The liability of the carrier: background and content 260 14.21 Historical development 260 14.22 The main rules relating to carrier liability for damage and delay 265 14.23 The scope of liability 287 14.24 A note on bürden of proof, notice and time bars 291 14.25 Liability for delay 292

16 CONTENTS 14.26 Deviation 294 14.27 Risk allocation and insurance 296 14.3 Can the rules on liability in MC 274 (13:24) et seq. be avoided by contract or otherwise? 297 14.31 The scope of application for MC Chapter 13 pursuant to 252 (13:2) 298 14.32 To what extent are the Norwegian rules mandatory? 302 14.4 Description of the goods in the bill of lading. Consequences of mis-description 309 14.41 The problem 309 14.42 The information to be included in the bill of lading 310 14.43 Carrier's duty to check that the information in the bill of lading is correct - duty to investigate and make reservations pursuant to 298 (13:48) 314 14.44 Carrier's liability for information in the bill of lading 316 14.45 Shipper's liability to carrier 321 14.46 Shipper's need for a "clean" bill of lading - "back letters".. 321 14.47 Are the rules on the content of bills of lading and liability for incorrect description mandatory? 322 14.5 Liability for wrongful delivery 322 14.6 Sea waybills 323 14.61 Introduction 323 14.62 What is a waybill? 324 14.63 What are the consequences of issuing a sea waybill? 325 14.64 When are sea waybills issued and whom are they issued to?. 328 14.65 If the requirements for a sea waybill are not satisfied 328 14.66 So-called "document-free carriage" 328 14.67 Waybills used in coastal carriage 329 14.7 Questions relating to freight and expenses 330 14.8 Liability for cargo damage against persons other than the contracting carrier, including vessel personnel 331 14.81 An overview 331 14.82 Cargo Claims against crew, stevedores etc 331 14.9 Contractual and actual carrier - use of third party tonnage. Combined carriage 333 14.91 Introduction 333 14.92 Entitlement to use a sub-carrier 334 14.93 Consequences of authorised use of a sub-carrier - subject to mandatory rules? 335

CONTENT 17 14.94 Obligations of the contractual carrier when a sub-carrier is used 335 14.95 The obligations and liability of the actual carrier (sub-carrier) 338 14.96 Joint and several liability of the contractual carrier and sub-carrier - 287 (13:37) 338 14.97 Several carriers - an example 339 14.98 Combined or multimodal transports - The Geneva Convention of 1980 340 15 VOYAGE CHARTERING 344 15.1 Introduction 344 15.11 Definition and legal sources 344 15.12 Standard contracts and fixture procedure 346 15.2 The ship 348 15.21 Named or unnamed ship clause 348 15.22 The ship's cargo capacity 350 15.23 Loading/discharging equipment etc 351 15.24 Seaworthiness 352 15.3 Time allowed for Performance of the voyage. Performance of the voyage. Deviation 354 15.31 The time factor 354 15.32 When should loading commence? 355 15.33 Performance of the voyage. Deviation 358 15.4 Ports of loading/discharging and places of loading/discharging... 361 15.41 Distinction between port of loading and place of loading... 361 15.42 Safe port/berth. Damage to the ship 361 15.43 "Near" clauses and some related Charter clauses 363 15.5 The cargo 364 15.6 The loading and discharging process 366 15.61 The loading process and associated expenses 366 15.62 Loading time: laytime, demurrage 367 15.7 Freight and allocation of expenses 375 15.71 Calculation of freight 375 15.72 Freight risk and liability for cargo damage 375 15.73 Who is the freight debtor? 379 15.74 Security for the freight claim 381 15.75 Voyage expenses 383 15.8 Issues relating to cargo damage 383 15.81 The rules of the Maritime Code 383

18 CONTENTS 15.82 Is the Maritime Code mandatory? 384 15.83 Freedom of contract 385 15.9 Bills of lading issued under voyage Charters. Indemnity Claims... 387 15.91 Issuance of bills of lading and consequences thereof 387 15.92 Incorporation of Charter party terms into the bill of lading.. 388 15.93 Indemnity actions brought by the owner against the charterer 389 16 TIME CHARTERING 393 16.1 Introduction 393 16.2 The ship and its description 394 16.21 Cargo capacity and loading/discharging equipment 394 16.22 Speed and consumption 395 16.23 Seaworthiness 398 16.3 Duration 401 16.31 "Delivery" and "redelivery" procedures 401 16.32 "Redelivery" 402 16.33 "Overlap" and "underlap" 403 16.34 Charterer's options 404 16.4 Trading area, cargo options and individual voyages 405 16.41 Trading area 405 16.42 Permitted cargo 406 16.43 Performance of the individual voyages 407 16.5 Allocation of operational responsibilities and costs 407 16.6 Charter hire - amount, payment and risk 409 16.61 Calculation of hire 409 16.62 Method and place of payment 410 16.63 Default in payment of hire 411 16.64 Security for hire payments - the "lien" clauses 415 16.65 Rules concerning off hire 417 16.66 Off-hire clauses in selected Charter parties 419 16.67 Settlement of off hire 422 16.7 Liability for damage to cargo 422 16.71 Introduction 422 16.72 Cargo damage Claims brought by the time charterer 422 16.73 Liability under bills of lading 423 16.74 Recourse against the time charterer 425

CONTENT 19 17 OTHER CONTRACTS OF AFFREIGHTMENT 427 17.1 Charter party for consecutive voyages 427 17.2 Quantity contracts 430 17.3 Bareboat Charter 434 18 CARRIAGE OF PASSENGERS AND LUGGAGE 437 18.1 Contract and statutory rules 437 18.2 The carrier's obligations 439 18.3 The passenger's obligations 440 18.4 The owner's right to compensation 440 18.5 Liability for personal injury and delay 441 18.51 Standing to sue 441 18.52 Basis of liability and bürden of proof 441 18.53 Right of limitation 441 18.54 Tort claims. The contracting carrier and performing carrier.442 18.55 Compulsory insurance 442 18.6 Luggage 443 18.61 What is luggage? 443 18.62 The right to bring luggage 444 18.63 The carrier's obligations 444 18.64 The carrier's liability for lost, damaged or delayed luggage.444 18.7 Limitation of actions 445 19 SALVAGE 446 19.1 Introduction 446 19.2 Conditions for obtaining a salvage award 447 19.21 What property or interests can be subject to salvage? 447 19.22 The salved property must be "wrecked" or "in danger" 450 19.23 The principle of "no eure no pay" 453 19.24 Salvage agreements 454 19.3 The right to salve 454 19.4 Assessment of the salvage award 456 19.5 Special compensation 457 19.6 Actions by the salvor which may result in loss or reduetion of the salvage award or Special compensation 459

20 CONTENTS 19.7 Apportionment of the salvage award 461 19.8 Liability for salvage awards and Special compensation. Security, maritime liens and insurance cover. Limitation of actions 462 20 GENERAL AVERAGE 465 20.1 Introduction 465 20.2 What is a general average act 467 20.21 The principle of coramon safety 467 20.22 The principle of common benefit 467 20.23 If the danger is caused by one of the participants 468 20.3 What is compensated in general average 469 20.4 Determining the value of the contributing interests 470 20.5 General average contributions; liability for general average contributions; and insurance cover 471 21 MARINE INSURANCE - OVERVIEW AND GENERAL QUESTIONS 473 21.1 Introduction 474 21.2 The sources of law 476 21.3 The insurance contract 478 21.31 The parties to an insurance contract 478 21.32 Concluding the insurance contract 479 21.33 Jurisdiction and choice of law 480 21.34 Insurance period 480 21.4 Insurable interest, insurable value and sum insured 481 21.41 The interest insured 481 21.42 Insurable value and sum insured 482 21.5 Scope of cover: Perils insured against, causation and losses covered 483 21.51 Scope of cover 483 21.52 Perils insured against 484 21.53 Causation 485 21.6 The duties of disclosure and due care 487 21.61 Overview 487 21.62 The duty of disclosure 489 21.63 Alteration of the risk 490 21.64 Casualties caused by the assured 491 21.65 Unseaworthiness 493 21.66 Safety regulations 495

CONTENT 21 21.67 Duty to notify and duty to avert or minimise the loss 497 21.68 Identification 498 21.7 Costs of measures to avert or minimise the loss 501 21.71 Introduction 501 21.72 Insurance cover of general average contributions 502 21.73 Particular measures taken to avert or minimise loss 503 21.8 The relationship between maritime law and marine insurance law: An example 505 22 THE INDIVIDUAL TYPES OF INSURANCE 509 22.1 Introduction 509 22.2 Hüll insurance 509 22.21 What objects are covered by hüll insurance? 509 22.22 Scope of cover: an overview 510 22.23 Total loss 511 22.24 Damage 514 22.25 Liability of the assured arising from collision and striking.. 520 22.3 Total loss insurances 522 22.31 Introduction 522 22.32 Main features of the cover 523 22.33 Restrictions on the right to effect separate total loss insurances 524 22.4 War insurance 525 22.41 Introduction 525 22.42 Scope and termination 526 22.43 Total loss 526 22.44 Damage 527 22.45 Loss of time 527 22.46 Owner's liability 528 22.47 Occupational injury insurance 528 22.5 Loss of hire insurance 528 22.51 Introduction 528 22.52 Main rules regarding the insurer's liability 529 22.53 Calculation of the loss 530 22.54 The insurance settlement 530 22.6 P&I Insurance 532 22.61 Introduction 532 22.62 The general rules concerning the scope of cover 533 22.63 Liability for claims related to persons 534 22.64 Liability connected to cargo 535

22 CONTENTS 22.65 Liability for collision and striking 536 22.66 Pollution liability 536 22.67 Other liability 536 22.68 The position of the injured party: Direct action 537 22.7 Cargo insurance 538 22.71 Introduction 538 22.72 Who is the beneficiary of the insurance? 538 22.73 Total loss 539 22.74 Shortage 540 22.75 Damage 540 22.76 Insurance settlement 541 22.77 Subrogation claims against third parties 543 23 MARITIME INQUIRIES 545 23.1 Introduction 545 23.2 Mandatory maritime inquiries 546 23.21 Criteria for the holding of a maritime inquiry 546 23.22 Exceptions to the duty to hold a maritime inquiry 548 23.3 Maritime inquiries held upon request 548 23.4 Maritime inquiries for foreign ships 548 23.5 Procedural rules 549 23.51 Generally 549 23.52 Collisions 549 23.6 Commissions of inquiry 550 Abbreviations 552 Table of cases 556 Table of Statutes 569 Index 598