SHIPPING & COMMODITIES: An Introduction

Contributed by Robert Thomas QC and Benjamin Coffer of Quadrant Chambers

The last year has been one of the busiest in recent times 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.

This period has seen a continued interest in autonomous shipping and the legal issues to which it gives rise. The events in the Gulf have drawn wide attention both from within the industry and more broadly. Sanctions also continue to give rise to disputes, particularly in connection with Venezuela.

The industry has been heavily focused on preparing for the arrival of the sulphur cap on 1 January 2020 under IMO 2020. There has been intense debate on the use of scrubbers and, at the time of writing, issues are emerging on (amongst other things) the reliability of some types of scrubber as well as the congestion caused in shipyards as owners attempt to meet the looming deadline. It remains to be seen whether there will be sufficient compliant fuel.

Mention has to be made of Brexit. At the time of writing, the future is uncertain and we watch and wait to see what steps contracting parties take to try to plan for an uncertain outcome.

2018/2019 has seen the courts considering a wide range of shipping and commodities issues. The Supreme Court has also provided important guidance on the proper approach to assessing whether a vessel is a constructive total loss in In The Renos [2019] UKSC 29. In its decision in Classic Maritime Inc v Limbungan [2019] EWCA, the Court of Appeal grappled with the nature of a force majeure clause, whether and to what extent the party relying on it must show that it would have performed but for the relevant force majeure or excepted event and the application of the compensatory principle in such circumstances. And in Eleni Shipping Ltd v Transgrain BV [2019] EWHC 910 (Comm), the Commercial Court considered the scope of off-hire provisions in the context of piracy.

After The Maersk Tangier [2018] EWCA Civ 778 and The Aqasia [2018] 1 Lloyd’s Rep. 530, the flurry of recent decisions concerning the Hague and Hague-Visby Rules continues. In The Lady M [2019] EWCA 388, the Court of Appeal considered the definition of barratry and whether an owner can nonetheless rely on the fire exception in Article IV Rule 2.

Arguably the most significant case of the year has been the much-anticipated decision of the Supreme Court in Volcafe Ltd v CSAV [2018] UKSC 61 on the burden of proof in relation to the application of Article IV(2)(a) to (p) of the Hague-Visby Rules. The Supreme Court held that, as a bailee, the carrier is liable for loss or damage during the voyage unless it proves on the balance of probabilities that it was not caused by any breach by it of its Article III Rule 2 duties or that one of the Article IV Rule 2 defences applies. To bring itself within one of the Article IV Rule 2 defences, the carrier must also prove that loss or damage was not caused by its own negligence or breach of Article III Rule 2. The Court also dealt with the nature of the inherent vice defence but arguably the importance of the decision lies in the Court’s confirmation that, in effect, the burden is on the carrier to disprove causative negligence. It remains a matter of lively debate between practitioners as to whether this decision simply reflects the orthodoxy or is a mis-step. On any view, it provides welcome clarification.

In The CMA CGM Libra [2019] EWHC 481 (Admlty) the High Court considered the circumstances in which a defective passage plan might render a vessel unseaworthy under the Rules and the inter-relationship with the negligent navigations defence and issues of due diligence. The Court of Appeal will consider the case in February 2020, so this is one to watch for the coming year. Later in the year, the Supreme Court is also due to hear an appeal in The Alexandra 1 and the Ever Smart [2018] EWCA Civ 2173, the first collision case to reach the Supreme Court.