ARTICLE: Voyage Charters

Charterparties are contracts for the hire of a vessel (or part of, or space onboard, a vessel). Voyage charters are a type of charterparty where the charterer requires the vessel for one voyage only, i.e. if you needed to move 100 MT of iron ore from Brazil to China, you could charter a bulk carrier and use its holds to transport your cargo from Brazil to China.

As the charterer, you only need to provide the goods for shipment at the agreed time and pay the freight charges (‘freight’, not ‘hire’ as in time / bareboat charters). The shipowner will provide the ship, equipment, bunkers, Master and crew. They will also normally pay the port expenses, pilot fees etc.

Voyage charters are commonly used in the movement of bulk cargoes and normally the charterparty is entered into in advance of the goods actually being received and sometimes in advance of them being purchased by the shipper. Therefore when the goods are presented for shipment (at the ship’s rail) the Master will normally issue a Bill of Lading describing the type, amount and quality of cargo actually received. The Bill of Lading acts as a receipt only (rather than the contract of carriage itself – as in, for example, the Liner trades).

Many of the standard forms of voyage charter contain the suffix ‘voy’ (CEMENTVOY, ASBATANKVOY etc.), which gives a clue as to the type of charter they relate to, but a more extensive list of the main forms of voyage charter, and the cargoes commonly carried under them, is set out below:
GENCON 1976 (general bulk cargo)
GENCON 1994 (general bulk cargo)
ASBATANKVOY (oil and gas)
POLCOALVOY (coal)
AMWELSH 93 (coal)
SCANCON (Scandinavia cargo)
GRAINCON (grain)
NIPPONCOAL (coal)
OREVOY (ores)
NUBALTWOOD (wood from the Baltic)
GASVOY (liquid gas, but not LNG)
FERTIVOY 88 (fertilizer)
AUSTWHEAT 1990 (Australian wheat)
NORGRAIN 89 (North American grain)
HYDROCHARTER 1975 (phosphates etc.)

ARTICLE: Time Charters

Charterparties are contracts for the hire of a vessel (or part of, or space onboard, a vessel). Time charters are a type of charterparty where the charterer hires the vessel for a period of time. They normally hire the vessel with all its equipment, the Master and crew and in exchange the owner asks them to pay a ‘hire’ charge, which is paid daily or monthly.

Charterers in these situations may be buying and selling goods and require the use of a vessel for a number of months to transport goods in an area or in different parts of the world. Obtaining a vessel on time charter for a three month period and completing, say, seven voyages, would generally be much more cost effective than entering into seven seperate voyage charterparties with differnt ships.

Another scenario is where you identify potential demand for extra tonnage in acertain area (say bulk commodities being moved from northern Austrlia to Singapore and Hong Kong).You can then time charter a vessel from a shipowner and offer it for voyage charter on these routes. If successful, the freight you collect each week, or month, could far exceed the hire charges you are liable to pay to the shipowner and the admin costs of arranging the voyage charters.

Many of the standard forms of time charterparty contain the suffix ‘time’ (BALTIME, SHELLTIME etc.), which gives a clue as to the type of charter they relate to, but a more extensive list of the main forms of time charter, and the cargoes commonly carried under them, is set out below:
BALTIME 1939 (general)
SHELLTIME (offshore)
BARGEHIRE 94 (barges)
BOXTIME (containerships)
GENTIME (general)
NYPE 93 ‘New York Product Exchange’ (general)
SUPPLYTIME 89 (offshore)

ARTICLE: Bareboat Charters

Charterparties are contracts for the hire of a vessel (or part of, or space onboard, a vessel). Bareboat, or ‘demise’, charters are a type of charterparty where the charterer hires the vessel for a period of time and just hires the ship ‘bare’; in other words without a Master or crew. The charterer staffs the boat, supplies bunkers and is generally free to decide where to take the vessel and what to do with it (within the contractual limits set out in the charter). 

Often this is done as an alternative to buying a ship, whch can be a huge commitment. Say if a small shipping company is receiving more demand than it’s current fleet can supply, it may not want to order a new build ship or obtain a ship mortgage to buy a second hand vessel as both are very long term commitments and there is no guarantee that the demand will be sustained. Instead they may choose to pay six months’ or a year’s hire for a ship, crew it and capitalise on the upturned interest in this way. If the market remains high they can always increase the charter period or even make an offer to purchase the vessel, and if the interest fades then they can merely return the ship with no further commitment (and not suffering from any loss in hull value due to depreciation or lower freight rates).

Indeed, some shipping companies will never purchase their own fleet, preferring to hire vessels on long-term bareboat charters. In these companies it is not uncommmon for them to be allowed to paint the ship in their own livery whilst it is on charter so it does appear that they do in fact own it.

Many of the standard forms of time charterparty contain the prefix ‘bare’ (BARECON for example), which gives a clue as to the type of charter they relate to, but a more extensive list of the main forms of bareboat charter is set out below:
BARECON 2001

ARTICLE: The World’s Top Ship Registries (Flag States)*

ARTICLE: Common Suit Time Limits (“Time Bars”)

Below is a “cheat sheet” of the most common time limits to bring a claim in shipping law (based on English law). Generally it is necessary to issue legal proceedings before the relevant time limit expires (or appoint an arbitrator where that is allowed), and not doing so typically extinguishes both the cause of action and the claim itself. In other words not only can;t you bring the claim to court but you lose the right to the remedy at all so you cannot even use it as a counterclaim or set off in a claim made against you.


CARGO CLAIMS
HAGUE RULES – 1 YEAR
HAGUE VISBY RULES – 1 YEAR
HAMBURG RULES – 2 YEARS
INLAND TRANSIT RULES – 1 YEAR


COLLISION
GENERALLY – 2 YEARS


FFO 
GENERALLY – 6 YEARS (BASIC TORT / CONTRACT LIMIT)


PERSONAL INJURY
GENERALLY – 3 YEARS
OF PASSENGER CARRIED UNDER ATHENS CONVENTION – 2 YEARS


POLLUTION
GENERALLY – 3 YEARS

OTHER CONTRACT / TORT
GENERALLY – 6 YEARS

Q: Can you Avoid Contractual Exclusions and Limitations by Issuing Proceedings in Tort?

Often, thanks to the precise drafting of legal contracts, the parties to a dispute concerning shipping law find their remedies severely limited or excluded as a result of the wording of the contract. A common question to shipping lawyers is therefore whether a party can avoid the unhelpful exclusion or limitation by issuing proceedings under another cause of action, say in bailment or tort. 


Although generally the Claimant is free to take their choice of multiple causes of action, where there are multiple causes, in these circumstances the answer would usually be no. The reasoning for this and the fine detail of this area of law is extremely nuanced and complicated (known as ‘concurrent liabilities’) and has remained the cause of continued debate and confusion for some time. However, A short guide to my understanding of the English law position, with examples, follows.


CARGO CLAIM IN BAILMENT (I.E. LIMITATION SITUATION)
Were a cargo Claimant to wish to avoid the weight limitation in a cargo claim they may consider issuing proceedings in Bailment (a cause of action which arises where someone is in possession of goods which belong to another and fail to care for them appropriately causing them to be damaged). 


If some cargo is in the care of a shipowner during carriage and it is damaged the owner of that cargo may issue proceedings under Bailment, but to do so would essentially be pointless. I say this because a claim for bailment would be more difficult to prove then a breach of contract claim and the court would allow the terms of the contract of carriage to be written into the bailment claim in any case (known as ‘bailment on terms’) allowing the limitation to apply anyway.* 


CARGO CLAIM IN TORT (I.E. LIMITATION SITUATION)
Cargo claimants also sometimes refer to issuing proceedings in tort to avoid contractual defences and limitations. Although there is not the same legal precedence for ‘tort on terms’ such a claim would not get out of the starting blocks in English law because of the provisions of the Hague Visby Rules. The Rules have force of law under English law and therefore where a cargo transit meets the requirements the carrier, and cargo interests, will be bound automatically by the provisions of the Rules, despite what the contract of carriage said.


The following section of the Hague Visby Rules, at Article IV (1), will then prevent any attempt to escape the limits by issuing proceedings in tort: ‘The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort.‘.


TOWAGE CLAIM (I.E. EXCLUSION SITUATION)
Let us say that a towed vessel enters a towage contract with a tug which contains a clause essentially noting that the tow will not take any action against the tug for damaged caused to the tow by the tug during the towage operation (part of a ‘knock for knock’ clause). The tug arrives and in the opinion of the tow negligently collides with the tow’s hull, in such a way that it causes significant damage to it. In the circumstances the owner of the tow may wish to bring a legal action against the tug owner for compensation. However under the terms of their contract such an action would not be allowed. 


The tug owner may therefore enquire whether they can simply bring a basic negligence action in tort, stating their case at common law; that the tug was another vessel on the river and therefore owed a duty of care to all other vessels there, and that it breached that duty when it damaged the vessel’s hull. On the face of it there is no reason why such a claim should not succeed in tort, but unfortunately for the tow owner in these circumstances the tortious claim would probably not be considered in a legal vaccum, i.e. the court would also look to the contractual relationship. In other words, if the tug owners adduced evidence of the towage contract clause, stating that no such action would be brought against the tug, then the court would likely allow this to bar the claim in tort. 


The case which comes to mind is “Henderson v Merrett Syndicates Ltd“, in which Lord Scarman essentially noted that he was happy for a Claimant to have a choice of causes of action, except where the claim in tort would be “so inconsistent” with the contractual position, that it should not be allowed. Scarman LJ held: ‘I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortuous duty is so inconsistent with the applicable contract that…the parties must be taken to have agreed that the tortious remedy is to be limited or excluded.’ 


Essentially this upholds the freedom for commercial parties to be as flexible as possible when negotiating contract terms. However it is important to note that were the contract not between two similar commercial parties the courts may consider such an exclusion an unfair contract term and refuse to let it affect any claim in tort.

* This is not to say that a party who was unable to bring a claim in contract might not wish to bring a claim in bailment. Say where the owner of the goods at the time of their damage had no right to claim under the contract of carriage because that right has been transferred to another party. However, in these circumstances there would be no ‘concurrent liabilities’ as the shipowner would not technically have a liability in contract to this Claimant. 

GUIDE: Hull & Machinery Insurance

Hull and Machinery insurance is a form of marine insurance which pays the owner for damage done to the ship itself or the equipment which forms part of it (for instance, cranes, hydraulic winches etc.). it is often simply known as hull insurance or hull cover.

It is possible to buy a much cheaper insurance (‘TLO’) for the hull risk, which covers Total Loss Only. In other words, if the vessel is damaged you must repair it at your own cost; the policy will only respond if the vessel is a total loss (by paying you what it was worth so that you can purchase a new one).

Most hull brokers will be able to obtain the best overall cover by blending an H&M policy which excludes total loss with a standalone Total Loss Only policy. The latter policy would find most vessels never making a claim and could therefore be bought relatively cheaply and as the H&M policy excludes the largest risk possible (for loss of the vessel) it too would be comparatively cheap.

The rationale from an underwriting side is that both insurers can more accurately identify the risk in what they are underwriting and can therefore be more specific in how much premium they charge.

Linked Insurances 
Increased Value – For well known reasons, the Marine Insurance Act only allows you to buy cover for things in which you have an ‘insurable interest’.  For this reason, H&M insurance is limited to the market value of your vessel. However, it was gradually realised that as a shipowner, if you lose your vessel, you will incur a great deal of costs which exceed the mere cost of buying a new one. Therefore, a new insurance became available, calling ‘hull interest’ or ‘increased value’ or ‘IV’, to provide cover for this. It generally entitles you to a payment of 20% – 25% of the vessel’s value in the event the vessel is a total loss. This will be paid in addition to the main H&M settlement for the vessel’s value.

War & Strikes – Losses related to war and strikes are excluded from normal H&M cover, but you can buy an additional cover which replaces this exclusion (albeit some elements of the exclusion like Nuclear cannot be bought back).

K&R – Kidnap and ransom insurance became more popular again in the 2000s, with an upsurge in attacks in Somalia, South East Asia and West Africa. It pays the cost of negotiating release of the crew and / or ship, in the event they are taken by pirates.

RDC/FFO – Most H&M policies include only 3/4ths cover for collision risk, and none for FFO (damage to fixed of floating objects) risk. However, today many H&M insurers allow you to add full cover for collision risk or cover for FFO risks to their policy. It is important to ensure your P&I then excludes these risks, in a way which dovetails with your additional H&M cover, as otherwise you will have a Double Insurance position, which will be procedurally and legally problematic in the event of a claim; and you will obviously not be paying premium efficiently if you are paying to insure the same risk twice, but can only claim once.

Acronyms

AB – Able-Bodied Seaman. A general crewmember onboard a vessel, in good health and with a general knowledge of working onboard a ship.

AIS – Automatic Identification System. This is a modern system for identifying ships and their exact locations / movements. Ships have AIS equipment onbaord which transmits information which gives the ships details and GPS coordinates. This information can be used by VTS operators, ports etc. for day to day interaction with the ship and logged by ship tracking systems (Seaweb, Lloyds MIU etc.) for long term records of a ships movements.

AOV – Any One Vessel.


AUV – Autonomous Underwater Vehicle. This is a subcategory of UUV submersible craft which can function without an operator at all, scanning the seabed using set parameters, for example.

AWIWL – Always Within Institute Warranties Limits.

CBA – Collective Bargaining Agreement. This is a document which acts as an extension to a group of employment contracts, usually for crewmembers onboard vessels. In general an employer who has a certain number of staff will be approached by a representitive of the employees as a group, who will negotiate terms which will be incorporated into all their agreements. It typically acts to fix compensation for injuries or provision of care for employees who fall ill.

C/M – Crewmember. A common industry shorthand.

DO – Diesel Oil. To distinguish from ship’s bunkers.

ETA – Estimates Time of Arrival. Where followed by a location the time estimated to arrive at that location (e.g. ETA Liverpool 14:00 GMT).

ETD – Estimated time of Departure.


FFO – Fixed or Floating Object. This term is used to describe an incident where a ship hits something fixed or floating (but not another vessel, that would be a collision) and causes damage to it; for instance where a ship crushes a wooden pier (fixed) or dents a navigational buoy (floating). You will hear people talk of an ‘FFO claim’ accordingly. Some insurance policies will use the term ‘fixed or moving object’, to encompass claims where a ship damages third party property which is neither fixed nor floating (i.e. a delivery truck ashore).


IRTC – Internationally Recognised Transit Corridor. This is an area which has been marked out in the Gulf, in order to try to prevent Pirate attacks on vessels off the East-Coast of Africa. Discussions narrowed down the most popular route, furtherst from the cost and with least risk of attack and it is now recommended that all vessels use this when navigating the area for safety.

LS – Lump Sum.

MFV – Motor Fishing Vessel. Most ships powered mainly by engine are referred to as ‘MV’ so this is just a more specific title where the vessel is used for fishing.

NLRC – National Labour Relations Commission. The equivelant of an employmetn tribunal in the Philippines

OFC – Office.

OWS – Oily Water Separator. Most commercial ships have bilge wells which collect bilge water; a combination of water drained off from various sources on board which can include water from mechanical leaks and it normally contains oily residues. Bilge water generally needs to be pumped overboard to maintain the ships stability, but in line with international conventions (MARPOL) the oil in the water must be separated before thesis done. This is then normally done by an overboard pipe.

PDPR – Per Dar Pro Rata. This normally appears in charterparty wordings against an amount. ‘USD 1,000 PDPR’ means that if you are referring to 2 hours the relevant amount is USD 83.

POEA – Philippines Overseas Employment Administration. An organisation which represents Filipino crewmembers on foreign vessels. They assist mainly with the creation of collective bargaining agreements and providing standard contract terms for employment.

RDC – Running Down Clause. An old fashioned term for a a collsion with another vessel is ‘running down’, and therefore the clause in a marine insurance policy which relates to collision claims is often called the ‘Running Down Clause’ or ‘RDC’.

ROB – Remaining on Board. Use in vessel shorthand, for instance, ‘bunker spill occurred, ship now grounded and leakage stopped, 10 mt of Bunkers ROB.

PAX – Passenger. A commonly industry shorthand, i.e. ‘hit by rogue wave, some damage to stern windows, no PAX injuries’.

ROV – Remotely Operated Vehicle. This is a description of a category of small machines which are designed to operate underwater without a controller onboard, but being operated by someone onboard a larger vessel on the surface, usually they will use a remote control of some form linked to the unit by electrical cable. It is a subcategory within the UUV group of marine equipment and includes, for instance, robots which can film deep sea wrecks.

SITREP – Situation Report. Shorthand for an update provided on a particular situation.

TTL – Total. Commonly used in fixture notes for charterparties.

TEU – Twenty-foot Equivelant Unit. This is the term for measurement of how many containers a ship can take onboard based on the maximum number of original twenty foot long container units it could carry. Of course sometimes a 40 foot container or other structure may be used in some areas of the ship, so a 10,000 TEU ship may be full laden but carrying a lot less than 10,000 individual containers, so giving the number of TEU it is capable of carrying is a better way of comparing it with other ships. Some people use the words Totally Enclosed Unit instead but it refers to the same thing.


UUV – Unmanned Underwater Vehicle. This is a group of small submerged craft, designed to be operated from a surface vessel, but with with no one actually onboard (not including, for instance, mini-submarines). This group of underwater equipment includes ROVs and AUVs.

VSL – Vessel – A commonly industry shorthand.

VTS – Vessel Traffic Services. This is the term for an organisation which controls vessel traffic in a given area. Usually controlling movement of ships and boats on a busy river or near a port.

WP – Generally this means Without Prejudice, which is a short for of saying without prejudice to our rights or position in law (i.e. if someone accuses you of a wrong against them you may feel that you did not commit it or do not know whether it happened but wish to get rid of the problem by offering them some money but you would do so ‘WP’, i.e. if they didn’t accept it you would not want them showing the offer of money to the judge as proof that you did commit the wrong, the offer would be without prejudice, or damage, to, your rights). However, I have also seen this used in c/p’s to mean ‘Weather Permitting’ (i.e. vessel to begin loading WP, 10/10/2012).

WWWW – This is a term often found in charterparties. It sets out the conditions when a Notice of Readiness can be tendered, to confirm that a vessel has arrived in port for the purposes of commencement of laytime. As an acronym of four separate acronyms it can be quite confusing. It means WIBON (whether in berth or not), WCCON (whether customs cleared or not), WIFPON (whether in free pratique or not) and WIPON (whether in port or not).

GUIDE: Cargo Claims

Cargo claims are claims for compensation made against a carrier for loss of or damage to cargo which they carried for reward. These claims are usually brought by owners of the cargo, in contract, based on an allaegation that by damaging the cargo whilst in their custody the carrier breached an express or implied term of the contract.

Subrogation
Most cargo claims against shipowners are brought not by the owners of damaged cargo but by their insurers. As covered in our ‘Cargo Insurance’ guide, when a party moves cargo they will normally take out insurance to protect them against its loss or damage. These insurance policies typically state that claims will be paid once the cost of the loss or damage to the cargo is known (i.e. they do not require the cargo owner to pursue any legal recourse against the responsible party first).

The reason for this is that most of these policies have a ‘subrogation’ clause, whcih requires the assured to allow the insurer to pursue a claim against any responsible party where a claim is paid under the policy. The insurance compamny will not have a dircet legal recourse, in contract or tort, against a responsible carrier so any claim they bring would have to be brought in the name of the cargo owner, for which the insurance company would clearly require their permission and cooperation.

Subrogated rights can be evidenced on a form of subrogation signed by the cargo owner / insured and addressed to their insurer. These forms are often sent along with claim settlement cheques where the insurer considers that there may be a legal recourse for damage done to property during tranit.  

Terms
Responsibility for cargo loss / damage will generally turn on evidence of causation and terms of the contract. The contract terms will generally be found in the Bill of Lading, Charterparty or other prevailing carriage document and will usually be subject to one of the main international conventions on the carriage of goods by sea (Hague Rules, Hague Visby Rules, Hamburg Rules etc.). Which convention applies will depend on the countries of transit and the proposed law and jurisdiction of the contract.  

ARTICLE: The Difference Between Admiralty, Marine, Maritime, Shipping Law etc.?

There are many terms to describe the law of ships and shipping; some of which have broad, and others quite specific, meanings. A brief guide to the correct uses and distinctions follows:

Admiralty – Traditionally ‘admiralty law’ referred only to contractual and tortious disputes arising from the operations of ships (named after the typical work of the Admiralty Court in England). It would not, for instance, cover governmental or international shipping regulations. However, the description has become more loosely used over time and today it is interchangeable with ‘Maritime Law’ as a term describing all law related to ships.

Boating Law – This is a US term, which essentially means the same as ‘admiralty law’, although it is often used to describe smaller level admiralty law (yacht fees, radio requirements etc.).

Carriage of Goods Law – This specifically relates to the law of moving cargo. It is not restricted to marine cargo (unless referred to as ‘Carriage of Goods by Sea Law’) and will cover goods being moved by sea, road, rail, air and multimodal (by more than one means).

Law of the Sea – This is an area of public international law (deals with relationships between countries, rather than private people or companies). It provides rules on sea borders, pollution, ownership of natural resources at sea etc. The United Nations Convention on the Law of the Sea (UNCLOS) provides much of the law in this area.

Marine Law – This is perhaps the most broad of the terms and encompasses all law related to the sea or waterways. It would cover international agreements on sea borders, laws on fishing quotas and the law governing transport of goods or the operation of ships (i.e. it is a catch-all term for Law of the Sea and Maritime Law).

Maritime Law – Describes all law related to ships and shipping; including the building, navigation, crewing, operation and other activities and incidents related to ships. Although now used interchangeably with the term ‘Admiralty Law’, Maritime Law is preferable as the more common term.

Shipping Law – This is perhaps the best term to describe the law relating to ships. Shipping law covers the building and operation of ships and is split into two categories: wet and dry. ‘Wet’ shipping law involves things happening on water, like ships sinking, colliding with other ships or objects and other casualties at sea. ‘Dry’ shipping law refers to things happening on paper like disputes about charterparty clauses or shipbuilding contracts. Many lawyers who deal with wet shipping matters only consider that dry shipping disputes can be boring as they are not linked to any real wolrd event.

Trade Law (aka ´International Trade Law´) – This refers to the law of trade between countries and the international conventions governing that trade. It is only loosely related to ships, via international conventions like UNCITRAL (United Nations Convention for International TRAde Law).

Transport Law – This is a catch-all term for the laws covering all types of transport, incluing sea, road, rail and air transport. It may proscribe something like that a certain product must be carried by sea, and not by air.

A diagram laying out the main distinctions above: