A to Z of Shipping Law

This post is inspired by Bharath Chugh’s A to Z of IBC. This is not an exhaustive list of words but a quick reference for those readers who are new to the Shipping industry. The attempt is to simplify the terms and make them sound easier than rocket science.

Arrest – Arrest is an order by the High Court under Section 5 of Admiralty (Jurisdiction and Settlement of claims) Act, 2017. In simple terms, it is a direction to a vessel to remain within the territory of the Court and not to sail away till the order is lifted.  A High Court can order for Arrest of a vessel if there is a maritime claim as per Section 4 of the Admiralty Act,2017.

Bill of Lading – Bill of Lading is an instrument which is issued by a Carrier upon receipt of Cargo. It would contain details such as the name of Consignor, Consignee, Cargo details, Port of Discharge etc.

Consignor – Important parties in a bill of lading are the three ‘C’s. consignor, consignee and the carrier. For example, if Ramu is sending a container full of cashew nuts to Shamu through Maersk Line. Then, Ramu is the consignor and Shamu is the consignee. Maersk is the Carrier.

Demurrage– Demurrage is the charge which is imposed on the time taken to unload the Cargo. Usually the Carriers will provide a free period for unloading the cargo and after that the demurrage charges will be imposed on each day as agreed in the bill of lading. For example, the container reaches the Port at Tuticorin on 1 April,2020. The free period is 14 days. From 15th April, Shamu will be liable to pay demurrage charges till he takes delivery of the Cargo and returns the empty container.

Extended Suit time – The carrier and the ship is discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. This time period can be extended for another three months with the leave of the court. The provision is in the Indian COGSA, 1925.

Freight Charges– Freight Charge is the amount paid to the Carrier for the transport of Cargo.

Ground rent – Ground rent is the charge imposed by whoever stores the container till the consignee takes delivery. It can be either the port or the Container Freight Station (CFS).

Hague Visby Rules– Hague visby rules are international rules for carriage of goods by Sea laying down the rights between parties. In simple terms, it is an international version of Indian COGSA. 

Intermodal Transport – When more than one mode of transport is used, it is called Intermodal Transport.

Joint Survey – An inspection of cargo conducted together by the parties when the Cargo arrives in order to record the state of cargo at its destination when there is a damage is called Joint Survey. This report is a key document when there is  a claim arising from damage to the cargo.

Knot – Unit for speed of the ship

Lien – Maritime Liens are Maritime Claims which have priority over other claims. Section 9 of the Admiralty Act, 2017 lays down what are maritime liens. For example, if a vessel is sold, the priority of claims will decide who will be paid first and what will be the amount that is paid. Maritime Liens have higher priority over other claims. Most Maritime Liens expire in one year. 

Maritime Claim – Maritime Claims are claims that arise from transactions with a ship or due to operation of a ship. The list of Maritime Claims are provided in Section 4 of the Admiralty Act, 2017.

Note of Protest – A note of protest is basically a declaration from the party that their conduct will not be considered acceptance. For example, delivery of cargo is taken by paying certain charges. A note of protest is made so that it can be claim for refund can be made later on. A note of protest is also means a declaration under Oath by the Master of the Ship.

Off-hire – Off hire is the period when the hire is not payable as per charterparty.

Port Charges- Port Charges are the charges paid by operators to the Port for using the facilities of Port.  

Quay – It is a platform like structure for loading and unloading a vessel.

Re-delivery – As per the Charter Party, the vessel will have to be returned to the owner at the place decided  agreed between them in the same condition as it was taken. This returning of the vessel is called re-delivery. If there is a delay in re-delivery, it may be included in the Charter period.          

Salvage – Salvage is rescuing of a wrecked or disabled ship or its cargo. There are parties who provided such specialised services and they are called  ‘salvors’.

Time Charter Party – Charter Party in layman terms is like a rent agreement for a ship. Time charterparty is when ship is hired for a fixed period of time. For example, I hire a ship for a period of three months to go around the world to wherever I please, it would be a time charterparty. If I hire the ship to travel from India to Mauritius, then it would be voyage charterparty. In time charterparty and voyage party, the owner has control over the crew and such matters. In a bareboat charterparty, the Charterer steps into the shoes of the owner and manages everything.

Unseaworthiness – Unseaworthiness means that a ship is not fit to be used for a voyage. It is an important concept in Marine Insurance.

Vessel – Vessel is the term used for Ships, yachts, dredgers etc. Admiralty Act, 2017 defines it as “to include any ship, boat, sailing vessel or other description of vessel used or constructed for use in navigation by water, whether it is propelled or not, and includes a barge, lighter or other floating vessel, a hovercraft, an off-shore industry mobile unit, a vessel that has sunk or is stranded or abandoned and the remains of such a vessel.

Way bill – Way bill is similar to bill of lading but it does not confer title. Unlike bill of lading, it is not negotiable. The purpose of way bill is to avoid the delay and need not be presented in original while taking delivery of the cargo.

X Letter – X letter in International Code of Signals means “Stop carrying out your intentions and watch for my signals”.

York Antwerp Rules  – The York Antwerp Rules are a set of rules that outlines the rights and obligations of both ship and cargo owners in the case that cargo must be jettisoned in order to save a ship. Jettison means to abandon a cargo or to discard it. In such a situation, the cargo owner will be the ‘General Average’ which is the compensation. In simple terms, the loss is divided proportionally between all the parties. York Antwerp rules elaborate on the concept of General average.                                         

Zone – The Maritime zones are divided into territorial waters, exclusive economic zone, contiguous zone and continental shelf. The first 12 nautical miles is the territorial waters of India. The Courts in India will have jurisdiction to arrest a vessel only when the ship enters with in this 12 nautical miles.

So these are some of the common terms in shipping and there are many more terms which I have left out, which will be explained in another post some other day.

Grenada Private Power Limited vs. GRENADA

I recently authored the case summary of Grenada Private Power Limited and WRB Enterprises, INC v. Grenada (ICSID Case No. ARB/17/13) in TDM IACL. The Award examines an issue of occurrence of ‘Repurchase events’ and is definitely, an interesting read. A brief summary is here below:

In 1994, Government of Grenada privatised GRENLEC and sold a controlling interest in GRENLEC Grenada Electricity Services Company Limited to the claimants. The privatization package included a Share Purchase Agreement signed between the Respondent and the Claimants which provided that upon the happening of a “Repurchase Events”, the Claimants would have the right to “put” their shares to the Government of GRENADA(GOG), and the GOG would be obliged to repurchase them at a price calculated in accordance with the Second Schedule of the 1994 ESA. Twenty-two years later, the incoming NNP Government decided to restructure the electricity sector through sweeping changes to its regulation, production and distribution. The result, the Claimants say, was to trigger an obligation on the part of GOG to repurchase the Claimants’ shares in GRENLEC. The Claimants put their GRENLEC Shares to the GOG for repurchase, claiming compensation of EC $182,100,000, pursuant to the statutory valuation formula in the Second Schedule. Claimant brought an action against rejection of any obligation to repurchase the shares and refusal to pay the claim.

Read the Case Summary in detail here.

Lockdown: Release of Cargo without Claiming demurrage

All over India, various Courts are occupied with the question Whether the Shipping Lines are entitled to claim demurrage for the period of extended lockdown. There are Applications under Section 9, Arbitration and Conciliation Act, 1996 filed in High Court of Delhi, Writ Petitions filed in High Court of Kerala and other Courts are also deciding on the same. It is safe to say that the General tendency of Court is not to grant a waiver of demurrage on the basis of High Court of Delhi’s refusal to provide a relief under Section 9 and High Court of Kerala’s refusal to provide a waiver in a similar writ petition. The case of Rashmi Cement Ltd. vs. World Metal & Alloys is a quick and comprehensive read to understand the dispute between importers and shipping Lines. The case is briefly summarised here below:

On 18.06.2020, the High Court of Delhi in Rashmi Cement Ltd. vs. World Metal & Alloys (FZC) and Ors. dismissed  an application filed under Section 9 (Arbitration and Conciliation Act, 1996) which was filed in order to seek release of cargo without claiming any demurrage. The Claimant contended the delay in having the cargo discharged was a direct consequence of the national lockdown and the sudden and unexpected suspension of all commercial establishments and transport services due to lockdown constituted a force majeure event as per the contract between the parties. The respondent contended that it was open for the petitioner, who was always aware of its own contractual liability for payment of demurrage, to take delivery of the cargo if it so desired and force majeure is not applicable in the present situation.  The Respondent relied on M/s. Haliburton Offshore Services Inc. Vs. Vedanta Limited & Anr. OMP(I) (COMM.) 88/2020 and M/s. Polytech Trade Foundation Vs. Union of India & Ors. WP(C) 3029/2020, wherein the Court, while dealing with a similar plea by a petitioner claiming exemption on account of the same circulars on which the petitioner is seeking to rely, found the same to be wholly misplaced by holding that these circulars were merely advisories and could not exempt parties from performing their obligations under a valid contract.

After hearing the parties, the Honourable Court found that applicability of Force Majeure clause cannot be decided in the abstract and has to be decided after an examination of the facts and circumstances of each case. Mere difficulty in performing the contractual obligations cannot be a ground for invoking a Force Majeure Clause and it has to be decided in the Arbitration.

The Petitioner prayed that the goods may be released on the furnishing of Bank Guarantee. The Court held that it is only when, in the opinion of the Court, the party seeking interim reliefs under Section 9 of the Act satisfies the three pronged test for grant of the same, viz., prima facie case in its favour, balance of convenience in its favour and, most importantly, that it would suffer irretrievable injury unless such relief is granted, that interim protection is granted under this provision and these requirements are not met by the Petitioner. Even the petitioner’s offer to furnish a bank guarantee in exchange for payment of demurrage, is not a convincing ground in support of its case considering that the liability of paying demurrage has been placed on the petitioner under the express stipulations of the contract between parties.

The Court held that it would not be fair to direct the respondent to await conclusion of arbitration to receive demurrage as per the contract. This Court has to respect the sanctity of the contract signed between the parties and cannot, at this stage, permit demurrage payment to be substituted with a bank guarantee of the same amount, when the contract does not provide for it.

Thus, the Court dismissed the application with a direction stating that in case it were to be held in the arbitration proceedings that no demurrage was in fact payable by the petitioner or it turns out that the vessel owner is exempted from the liability of paying demurrage, the amount paid by the petitioner to the respondent by way of demurrage would be refunded with interest at a rate determined by the learned Arbitrator.

The Courts denial to provide a waiver without detailed hearing is welcoming as the financial crunch it would have caused would have resulted in adverse effects on the global supply chain. It would be interesting to see how the Arbitrators and Courts decide the question of Force Majeure.