SHIPPING & COMMODITIES: An Introduction

Contributed by Simon Rainey QC and Ruth Hosking of Quadrant Chambers

2017-18 has been yet another busy year for shipping and commodity practitioners and the trend looks set to continue. We have seen important decisions at all levels and cases are making their way through the appellate system.

In terms of the market throughout 2017 there has been an acceleration in the digital transformation of the maritime industry. Chinese e-commerce giant Alibaba entered into a number of digital partnerships with carriers and container lines including Maersk, CMA CGM and Cosco. This follows Amazon China becoming a licensed freight forwarder in 2016.

2017 was also a year of technological firsts. In an agreement, believed to be the first in the marine sector, Rolls-Royce partnered with Google to study autonomous shipping and introduced Augmented Reality Software as part of their remote operation solutions. A prototype of the world’s first class approved ship’s propeller was produced by Damen Shipyards Group, RAMLAB, Promarin, Autodesk and Bureau Veritas, using 3D printing techniques. DNV GL carried out their first drone inspection of a vessel and Wilhelmsen commenced testing of drone deliveries to vessels.

Blockchain has also been prominent. Tech start-up Wave reduced the processing time for a letter of credit from between seven and ten days to 2.5 hours using a blockchain platform in partnership with Spanish bank BBVA. They also completed a blockchain pilot for paperless bills of lading in co-operation with container operator ZIM. Maersk used IBM blockchain technology to digitalise trade.

2017 was also the year of the largest cyber-attack in maritime history when Maersk were hit by a ransomware attack in the last week of the second quarter. Thus whilst 2017 has been an exciting year for technical advances in the maritime and trade sector it has also highlighted potential risks with the increased use of technology. These technological advances may give rise to new issues to come before arbitrators and the courts.

Environmental issues have also been at the forefront of the sector. Maritime transport currently emits around 1 billion tonnes of CO2 annually and is responsible for about 2.5% of global greenhouse gas emissions (3rd IMO GHG study). Consequently from 1 January 2018 large ships using EU ports have been required to report their verified annual emissions and other relevant information, and there are further steps to try and reduce maritime transport’s impact on the environment coming into force in the coming years.

Lastly, it is incumbent on any consideration of the market these days to mention Brexit. The industry is poised to see what happens in relation to customs arrangements post the UK leaving the EU. Whilst the future is currently uncertain we watch and wait to see what steps contracting parties take to try and plan for an uncertain outcome: it is this decade’s millennium bug/Y2K clause.

2017/2018 has seen the courts considering a wide range of shipping and commodities issues. On the Hague/ Hague-Visby Rules the Court of Appeal has considered when the Hague-Visby Rules are compulsorily applicable if no bill of lading is issued (The Maersk Tangier [2018] EWCA Civ 778) and the proper construction of package or unit in the Hague Rules (The Aqasia [2018] 1 Lloyd’s Rep. 530). The High Court has considered the definition of barratry and whether an owner can nonetheless rely on the fire and/or catch all exceptions in Article IV Rule 2 (The Lady M [2017] EWHC 3348) and more recently whether the Hague Rules time limit applies to misdelivery claims (The Alhani [2018] EWHC 1495 (Comm)).

There have been important decisions on the NYPE Interclub Agreement: see Agile v Essar [2018] EWHC 1055 (Comm) on apportionment of liability under clause 8(b) and amendments “similar” to adding “and responsibility”; and Transgrain v Yangtze [2017] EWCA Civ 2107 on the proper construction of the word “act” in clause 8(d).

The Court of Appeal has considered whether a shipping company was in breach under a bill of lading by providing electronic PIN codes to authorise collection of cargo, where two containers had been misappropriated (MSC Mediterranean Shipping Co SA v Glencore International AG [2017] 2 Lloyd’s Rep. 186). This case has particular ramifications given the increased use of electronic bills (and similar delivery documents).

In The Longchamp [2018] 1 All ER 545 the Supreme Court considered Rule F of the York-Antwerp Rules 1974 and whether where a ship had been hijacked by pirates, and the shipowners had negotiated a much-reduced ransom than initially demanded, the vessel operating expenses incurred during the negotiation period were allowable in general average. By majority (Lord Mance dissenting) the Justices held they were allowable.

Later in 2018 the Supreme Court will be hearing the much-anticipated appeal in Volcafe Ltd v CSAV (Court of Appeal judgment at [2017] QB 915) on the burden of proof in relation to the application of Article IV(2)(a) to (p) of the Hague-Visby Rules. This is one for all practitioners in this area to watch.