English Law And Maritime Contracts

English Law And Maritime Contracts Presented by: M A Goldby Date: 22nd June 2020 Features of Maritime Contracts - Contracts for the use of a vessel: charterparties - Contracts insuring ship or cargo: marine insurance contracts - Performance of contractual obligations / risks transferred transcend national boundaries (movement between jurisdictions). - Contractual terms need to provide for complex factual situations. - Often contracts agreed by non-lawyers. - When disputes arise contracts must be interpreted and enforced. - English law and forum frequently chosen. Why? English Law - Main reasons for the choice: 1. Principles and rules of contractual construction favors commercially sensitive interpretations of maritime contracts. 2. Approach to consequences of breach of contract balances certainty and fairness. 3. System of precedent provides a high level of certainty and predictability. 4. Availability of cost-effective and comparatively efficient dispute resolution procedures. Rules of Interpretation Investors Compensation Scheme Ltd. v West Bromwich Building Society [1997] UKHL 28, per Lord Hoffmann - (1) Interpretation is the ascertainment of the meaning which a document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract - (2) The background includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man - (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. - (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. - (5) The rule that words should be given their 'natural and ordinary meaning' reflects the commonsense proposition that we do not readily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the background, the law does not require judges to attribute to the parties an intention which they plainly could not have had." Wünsche v Tai Ping Ins [1998] CLC 851 - Cargo insurance on canned vegetables produced in China - Cans transported in cartons from various canning plants in mainland China to Shenzhen. - At Shenzhen the cartons were put into containers which were taken to Hong Kong and put on board ocean vessels. - The insurance 'from Shenzhen, China to Hamburg' was placed before the containers were put on board the ocean vessel but the cover was expressed to include 'ex factory in PR of China to warehouse Hamburg'. - The cans suffered damage in transit between the canning plants and Shenzhen - The use of the word factory in contradistinction to warehouse and the reference to PR of China in contrast to Shenzhen were significant. They demonstrated that the provision was directed to the place where the goods were produced, i.e. the canning plant itself, rather than the place where they were re-packed or even in some cases re-labelled. Furthermore, the insurers must be taken to know that those factories were, or might be, some considerable distance from Shenzhen and accordingly the 'ex factory' term was construed as intending to insure the goods right from the factories to warehouse Hamburg. Consequences Of Breach - In charterparties and contracts of carriage, a repudiatory or renunciatory breach by one party gives rise to a right to terminate (see Grand China Logistics Holding (Group) v Spar Shipping AS [2016] EWCA Civ 982): - • Anticipatory breach • Breach of condition (essential term) • Sufficiently serious breach of innominate term For marine insurance, in the past a breach of warranty automatically brought the contract to an end (certainty). The Insurance Act 2015 has reformed the law to make it fairer. Spar Shipping AS [2016] EWCA Civ 982, [58]-[59] - [58] Certainty is plainly a consideration of major importance when construing commercial contracts such as the charterparties here. - [59] The key question, however, is striking the right balance. Classifying a contractual provision as a condition has advantages in terms of certainty; in particular, the innocent party is entitled to loss of bargain damages (such as they may be) regardless of the state of the market. Where, however, the likely breaches of an obligation may have consequences ranging from the trivial to the serious, then the downside of the certainty achieved by classifying an obligation as a condition is that trivial breaches will have disproportionate consequences. The Need For Certainty: NYPE 2015 cl. 11 (b) and (c) - (b) Grace Period • Where there is failure to make punctual payment of hire due, the Charterers shall be given by the Owners three (3) Banking Days (as recognized at the agreed place of payment) written notice to rectify the failure, and when so rectified within those three (3) Banking Days (as recognized at the agreed place of payment and the place of currency of the Charter Party) following the Owners' notice, the payment shall stand as punctual. - (c) Withdrawal • Failure by the Charterers to pay hire due in full within three (3) Banking Days of their receiving a notice from Owners under Subclause 11(b) above shall entitle the Owners, without prejudice to any other rights or claims the Owners may have against the Charterers:  (i) to withdraw the Vessel from the service of the Charterers;  (ii) to damages, if they withdraw the Vessel, for the loss of the remainder of the Charter Party. Predictability of Interpretation: Precedent - Supreme Court - binds all lower courts. From 1966 does not bind itself. - Court of Appeal - binds all lower courts and itself in civil cases unless earlier decision overruled or is inconsistent with European law. - High Court - not bound by its own decisions, but strong persuasive authority. Maritime Contracts And Precedent - Most maritime contracts are based on standard terms as a starting point, e.g.: • Charterparties: forms drafted by the Baltic and International Maritime Council (BIMCO) such as New York Produce Exchange Time Charter (NYPE). • Marine insurance: terms drafted by the International Underwriting Association, such as the Institute Cargo Clauses. - These terms are widely used and great value is placed upon predictability in the way they will be interpreted. Dispute Resolution: Maritime Arbitration - London Maritime Arbitrators Association • Maintains a list of members who are highly qualified maritime arbitrators. • Drafts and adopts standards which may be modified by agreement. • Arbitration is ad hoc, with minimal institutional involvement:  It is the parties who appoint the first two members of the panel who then appoint the third (where needed)  Fees determined by arbitrators  Arbitrators deliver (or "publish") award directly to the parties • Initiation of arbitration is by notice • Representation of parties by legal counsel permitted (and very common). • Arbitration by documents alone permitted if parties so agree. • Decision taken by a majority. • No "American Rule" as to the awarding of costs. • No mandatory evidentiary rules. • No right to pre-trial discovery as in American court litigation. • Panel often features industry experts. • Possibility of appeal to the English courts on a point of English law.