Modern maritime law

MODERN

MARITIME LAW

THIRD EDITION

VOLUME 2: MANAGING RISKS AND LIABILITIES

Aleka Mandaraka-Sheppard

MARITIME AND TRANSPORT LAW LIBRARY

Modern Maritime Law: Volume 1:

Jurisdiction and Risks

third edition

by Aleka Mandaraka-Sheppard

(2013)

Modern Maritime Law: Volume 2:

Managing Risks and Liabilities

third edition

by Aleka Mandaraka-Sheppard

(2013)

Carriage of Goods by Sea Land and Air: Uni-Modal

and Multi-Modal Transport in the 21st Century

edited by Baris Soyer and Andrew Tettenborn

(2013)

Freight Forwarding and Multimodal Transport

Contracts

second edition

by David A. Glass

(2012)

The Law of Yachts and Yachting

by Filippo Lorenzon and Richard Coles

(2012)

Marine Insurance Clauses

fifth edition

by N. Geoffrey Hudson, Tim Madge

and Keith Sturges

(2012)

Pollution at Sea: Law and Liability

edited by Baris Soyer and Andrew Tettenborn

(2012)

Contracts of Carriage by Air

second edition

by Malcolm Clarke

(2012)

Place of Refuge: International Law and the

CMI Draft Convention

by Eric Van Hooydonk

(2010)

Maritime Fraud and Piracy

by Paul Todd

(2010)

The Carriage of Goods by Sea under the

Rotterdam Rules

edited by D. Rhidian Thomas

(2010)

International Carriage of Goods by Road: CMR

fifth edition

by Malcolm Clarke

(2009)

Risk and Liability in Air Law

by George Leloudas

(2009)

The Evolving Law and Practice of

Voyage Charters

edited by D. Rhidian Thomas

(2009)

The International Law of the Shipmaster

by John A. C. Cartner, Richard P. Fiske

and Tara L. Leiter

(2009)

The Modern Law of Marine Insurance

edited by D. Rhidian Thomas

(2009)

The Rotterdam Rules: A Practical Annotation

by Yvonne Baatz, Charles Debattista,

Filippo Lorenzon, Andrew Serdy,

Hilton Staniland and Michael Tsimplis

(2009)

Contracts of Carriage by Land and Air

second edition

by Malcolm Clarke and David Yates

(2008)

Legal Issues Relating to Time Charterparties

edited by D. Rhidian Thomas

(2008)

Bills of Lading and Bankers’

Documentary Credits

fourth edition

by Paul Todd

(2007)

Liability Regimes in Contemporary Maritime Law

edited by D. Rhidian Thomas

(2007)

Marine Insurance: The Law in Transition

edited by D. Rhidian Thomas

(2006)

Commencement of Laytime

fourth edition

edited by D. Rhidian Thomas

(2006)

General Average: Law and Practice

second edition

by F. D. Rose

(2005)

War, Terror and Carriage by Sea

by Keith Michel

(2004)

MODERN

MARITIME LAW

THIRD EDITION

Volume 2: Managing Risks and Liabilities

ALEKA MANDARAKA-SHEPPARD

Third edition published 2013

by Informa Law from Routledge

2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

and by Informa Law from Routledge

711 Third Avenue, New York, NY 10017

Informa Law from Routledge is an imprint of the Taylor & Francis Group,

an Informa business

© 2013 Dr Aleka Mandaraka-Sheppard

The right of Dr Aleka Mandaraka-Sheppard to be identified as author of this work

has been asserted by her in accordance with sections 77 and 78 of the Copyright,

Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised

in any form or by any electronic, mechanical, or other means, now known or

hereafter invented, including photocopying and recording, or in any information

storage or retrieval system, without permission in writing from the publishers.

While every effort has been made to ensure that the information contained in this

book is correct, neither the author nor Informa Law can accept any responsibility

for any errors or omissions or for any consequences arising therefrom.

Trademark notice: Product or corporate names may be trademarks or registered

trademarks, and are used only for identification and explanation without

intent to infringe.

First edition published by Cavendish Publishing Limited 2001

Second edition published by Routledge-Cavendish 2007;

reprinted by Informa Law 2009

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data

Mandaraka-Sheppard, Alexandra, 1949–

[Modern maritime law and risk management]

Modern maritime law / Aleka Mandaraka-Sheppard, Alan van Praag contributor

to Rule B attachment under US Law. – Third edition.

pages cm. – (Maritime and Transport Law Library)

Revision of the author’s Modern maritime law and risk management.

Includes bibliographical references.

1. Admiralty–Great Britain. 2. Risk management–Great Britain. I. Title.

KD1833.M36 2013

343.4109’6–dc23

2013011843

ISBN: 978–0–415–83906–8 hbk

ISBN: 978–0–415–84320–1 set

eISBN 978–1–31586–314–6 ebk

Typeset in Plantin

by Florence Production Ltd, Stoodleigh, Devon

Knowing the law is the beginning of a battle;

knowing how to apply it is winning the battle;

and knowing how to practise risk management

is winning the war.

To my son Emmanuel-John Sheppard and to the young

generation of shipping law and practice

This unique title examines in depth issues of jurisdiction, maritime law and practice

from a modern perspective and highlights the importance of risk management with

a view to avoiding pitfalls in litigation or arbitration and minimising exposure to

liabilities.

The third edition has been fully revised and restructured into two self-contained

volumes, the first covering jurisdictional issues and risks, and the second exploring

the diverse aspects of maritime law, risks and liabilities.

The second volume tackles the substantive maritime law, with a particular emphasis

on risk and liabilities, and analyses issues of contract, tort and criminal law, causation

and remoteness of damages.

Key features of Volume Two include:

• an analysis of the regulatory regime, new EU and IMO safety at sea legislation,

reforming practices for flag States and recognised organisations, vetting, codes

of good practice and International Conventions;

• an explanation of the rules of attribution of liability, the impact of the ISM Code

upon liabilities, including criminal, corporate manslaughter, and the new directive

for ship-source pollution;

• important developments in areas including:

– ship-managing risks, best endeavours and fiduciary duties;

– mortgagees risks and economic torts;

– new BIMCO standard terms of contracts;

– ship-sale risks – including sale ‘as is’ and ‘as she was’;

– shipbuilding risks – guarantees and performance bonds;

– new trends on wrongful acts of employees, collisions and measure of damages,

salvage issues, environmental salvage and towage contracts;

– piracy risks cases and general average;

– new perspectives on risks and liabilities of port authorities;

– pollution liabilities, including trends of prosecution of class societies and

charterers and new limits of liability under International Conventions.

FOREWORD TO

THE FIRST EDITION

The Rt Hon. The Lord Mustill

of Pateley Bridge

Anyone with knowledge of the boundless enthusiasm and apparently inexhaustible

energy displayed by Dr Aleka Mandaraka-Sheppard in the conception and evolution

of the London Shipping Law Centre is unlikely to be surprised at her successful

achievement of another daunting goal, namely to publish a new and comprehensive

work on shipping law.

There is of course nothing radical in itself about the idea of a modern work in this

field. As the author rightly acknowledges, several valuable works on individual aspects

of the general topic have been published in recent years, but there has long been the

need for a comprehensive work from which both the student (at various levels) and

the practitioner can gain a general perspective as well as concrete and detailed

information. Perhaps the late Professor Cadwallader, to whom the author pays

tribute, could if spared have tackled the task, but his former student has produced a

volume of which he would have been proud, the more so given the striking expansion

in volume of the law relating to ships and the sea that has occurred since his day.

Even a glance at the table of contents will show the extent of the author’s grasp of

contemporary legal issues, and the thoroughness with which they have been explored.

In addition to the general merits of this book, there is one particular theme that

calls for particular mention. That is, the emphasis laid on risk management. In recent

years this has become a commonplace of business law and practice in many areas,

but with a few notable exceptions it has been an absentee from study and practice in

the maritime world. Fortunately this is now changing, and Dr Mandaraka-Sheppard’s

focus on the subject will, it may be hoped, stimulate interest and promote a wider

appreciation of its cardinal importance.

Shelves now groan under the weight of legal textbooks, and inches of shelf-room

are at a discount, but place must be made for Modern Maritime Law, whose dimensions

belie its approachability while evidencing its scope. This is a book for the library, the

study and the office. I welcome it, and am sure that readers will do the same.

M.J. Mustill

June 2001

vii

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FOREWORD TO

THE SECOND EDITION

The Rt Hon. The Lord Clarke of

Stone-cum-Ebony

This is by any standards a magnum opus. Seven years have passed since Michael

Mustill wrote the foreword to the first edition of Modern Maritime Law. He paid tribute

to the boundless enthusiasm and apparently inexhaustible energy displayed by

Dr Aleka Mandaraka-Sheppard in the preparation of the first edition.

Both the enthusiasm and the energy are evident again in the preparation of the

second edition. I cannot pretend that I have read every word of its 1,000 pages. It

would have been impossible to do so in the time available. However, those parts that

I have been able to absorb have persuaded me, and I am sure will persuade students

and practitioners in maritime law in the future, that this is a vital work for everyone

interested in shipping law to have on their shelves. It has a breathtaking range. Try

as I might, I have not been able to think of anything like it. Having spent some five

years as the Admiralty judge and having before that practised for many years at the

Admiralty and Commercial Bar, I am delighted that Aleka has had the time and energy

to produce a second edition of her great work.

Like Michael Mustill, I am particularly struck by her focus on risk management,

especially in the context of the management of ships and the ISM Code. The

importance of risk management was brought home to me when I had the privilege

of conducting the Thames Safety Inquiry and then the Formal Investigation into the

collision between the Marchioness and the Bowbelle with its consequent loss of life. I

hope that this book will help to underline this aspect of the legal responsibilities of

ship-owners, managers and charterers alike.

Finally, I especially appreciate the section on Admiralty Jurisdiction and Procedure,

because it brings back many happy days in front of the then Admiralty judge, Mr

Justice Brandon, in the 1970s, when the likes of the present Admiralty judge,

Mr Justice David Steel, and I were kept on our mettle by the intellectual rigour of

the judge.

Future practitioners will have the great benefit of Dr Mandaraka-Sheppard’s book

with which to educate future Admiralty judges.

Sir Anthony Clarke

August 2007

ix

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FOREWORD TO

THE THIRD EDITION

The Rt Hon. Sir Bernard Rix

This splendid work has now reached its third edition in only a dozen years, a

considerable compliment in itself to the achievement of Dr Aleka Mandaraka￾Sheppard in creating what amounts to a modern, comprehensive treatise on the

responsibilities of commercial shipowners. It is a personal pleasure to have been asked

to follow in the line of Lord Mustill and Lord Clarke of Stone-cum-Ebony as the

writer of the foreword to this latest edition.

The author’s insight, which represents the distinctive feature of this work, is her

understanding that international conventions, regulations and codes of good practice,

working together with the developing principles of the commercial common law of

England and the lessons to be learned from the science of business risk management,

have in the modern world revolutionised the conduct of shipowning. Her analysis of

modern maritime law in the light of techniques of risk management is highlighted

in the opening chapter of the second volume of this work, and runs like a leitmotiv

through both its volumes. She seeks to demonstrate that a responsible shipowner needs

to approach his business with a holistic assessment of the risks inherent in it. She

enumerates those risks as encompassing the corporate structure, the financial model,

the operational performance, the human dimension, the trading, and the potential

liabilities of the company, be those liabilities in terms of personal injury, damage to

property, commercial losses, or criminal offences, or also the large costs inherent

in disputes and their resolution. Thus she correctly observes that shipowners, who

necessarily use contracts for the allocation of risks, can by means of better

draughtsmanship and more perceptive evaluation of those risks seek to avoid the costs

and liabilities involved in litigation.

This, then, is a work that goes much wider than the traditional textbook on carriage

of goods by sea exemplified by the law of charterparties and bills of lading. Indeed,

there are no chapters which are devoted to those subject-matters. I note, however,

that a third volume is indicated, which, as I understand it, would apply the technique

of risk management analysis to the formulation of contracts and thus to their

interpretation. Such a volume would be eagerly awaited. For the present, however,

Dr Mandaraka-Sheppard is here primarily concerned with the basic tools and

responsibilities of the shipowner, with the purchase, building or financing of his ships,

the ownership structure of his business and its management, with the dangers of the

seas found in collisions and like accidents and their consequences by way of salvage,

xi

towage and general average, and with the demands of international conventions and

maritime authorities. Moreover the first volume of this work contains a comprehensive

review of what might be described as the legal shoals and dangers inherent in

shipowning – of the admiralty jurisdiction, maritime claims, the law of arrest, conflict

of laws, forum shopping and the anti-suit injunction.

Woven into her treatment of all these topics the author finds time for a careful

analysis of leading principles and authorities of English and European law. The reader

will find here careful and illuminating discussions of modern cases such as The Front

Comor, The Achilleas, and OBG v Allan, to name but a few.

Dr Mandaraka-Sheppard is that rare author who is or has been variously an

academic, a practitioner, an arbitrator and mediator, and, in her creation of the

London Shipping Law Centre, something of an entrepreneur too. Her energy and

enthusiasm, of which previous forewords have spoken, are well known. Michael

Mustill described this as a book for the library, the study and the office. Anthony

Clarke said that practitioners would use it as a tool to educate future Admiralty judges.

All that is true. It is also a work which calls on shipowners and those who advise

them to find in the law here so helpfully discussed a challenge to achieve that safe

and successful operation of maritime commerce which is so important to the

development of international peace and prosperity.

Sir Bernard Rix

September 2013

FOREWORD TO THE THIRD EDITION

xii

PREFACE TO

THE THIRD EDITION

Thinking about – let alone writing – a new edition of a legal textbook is a great burden

for any author and takes a considerable span out of the writer’s life for not much

reward. Yet the zest and drive of any committed writer remains, and the first question

is whether a new edition is necessary. Unless the law has changed to a considerable

extent, there would be no point in filling up legal libraries with another volume.

However, as the readers of Modern Maritime Law will witness, the insurmountable

amount of new legislation, EU Directives, Regulations and IMO Conventions that

have emerged, coupled with the copious case law, since 2009, has made the new

edition an absolute necessity.

Thus, the result is that the book is now in two volumes, owing to the increased

amount of the included material and because each volume is self-contained, making

it easier for readers to manage them.

Apart from the fact that the book provides a cohesive overall view of aspects of

maritime law – with a fairly detailed account of important decisions – and brings

together the major ‘Bibles’ written on individual topics, Modern Maritime Law has

stimulated a great interest in the subject of risk management and promoted its

importance among commercial and legal professionals, as Lord Mustill had predicted

in the foreword to the first edition. In the last decade or so, industry organisations,

shipping companies, insurers, as well as lawyers and their professional organisations,

have focused on legal, regulatory and other risk issues in a more systematic way for

corporate strategies, as well as for loss prevention and dispute avoidance. Commercial

people take more care to express their intention in contracts as to the allocation of

risks between themselves, and the judges often try to decipher the parties’ intention

in terms of allocation of risks when they interpret contracts in the context of the factual

matrix.

It is made clear in this and in the previous editions that the price for failing to

recognise and address proactively how to keep up with compliance with regulations

and minimise the hazards that can lead to accidents, or disputes, could be high in

terms of financial or reputational losses, business disruption and damage to

commercial or client relationships.

Thus, the title of this book reflects its modern perspective, and the subtitles of

each volume are about, first, the risks of litigation (first volume) and, second, how

to manage risks and liabilities (second volume). A third volume will follow in due

course to complete the series.

xiii

VOLUME 1: ‘JURISDICTION AND RISKS’

Since the second edition (2007), considerable case law and significant developments

have taken place in jurisdictional matters and conflict of laws, including, but not

limited to, the redraft of the Brussels I Regulation, which poses new thinking with

regard to choice of forum agreements, arbitration and other issues (applicable from

2015).

The chapters have been substantially overhauled, and a new chapter on freezing

injunctions and the US Rule B Attachment has been included (8 chapters in this

volume); the Rule B attachment is contributed by Alan Van Praag, a New York lawyer.

Aside from the introductory parts on the jurisdiction of the English courts and the

principles of the arrest of ships, there have been new court decisions in the areas of:

sovereign immunity, stay of proceedings for breach of jurisdiction or arbitration

agreements, forum non-conveniens, anti-suit injunctions, anti-arbitration injunctions,

damages for breach of arbitration agreements, appeals against arbitration awards,

tiered dispute resolution clauses, freezing injunctions and the US Rule B attachment,

beneficial ownership and the piercing of the corporate veil, including how the law of

associated ship arrest in South Africa has developed. A critical analysis of the law in

relation to wrongful arrest of ships is made, and reform of the present law is proposed.

Foreign case law is referred to when it is necessary to show how the law develops, in

particular areas, in the other common law jurisdictions.

Conflict of jurisdictions under both common law and the EU jurisdiction regime,

including an interpretation of the new provisions of the EU recast Regulation 2012

and a forecast about its possible effect from 2015 upon the English jurisdiction and

arbitration should be of particular interest to legal practitioners.

VOLUME 2: ‘MANAGING RISKS AND LIABILITIES’

The substantive parts of maritime law are dealt with in the second volume, consisting

of 16 chapters. It appeared to me necessary to reorganise this volume in order to

explain aspects of risk management, with particular emphasis on risks and liabilities

in the light of new regulations and codes. All the chapters have been substantially

reviewed and include basic principles of the law of contract, tort, economic torts,

causation and remoteness of damages.

Part I: ‘Overarching Aspects of Risk Management’

A general overview of managing risks in the twenty-first century in the light of new

technological developments is given in Chapter 1, which places in context what follows

in this volume but also reflects on risks in connection with dispute resolution and

jurisdictional aspects, which are dealt with in Volume 1. The risks to which the owners

and managers are exposed are highlighted.

The EU’s unflagging energy in issuing new directives and regulations for the

promotion of quality shipping has created a ‘no-escape net’ for non-compliant

companies. Any non-compliance will be caught up by inspections and audits. So

Chapter 2 includes all new safety at sea legislation and codes of good practice

affecting ship operators, ports, flag administrations, classification societies and other

xiv

PREFACE