English Law and Shipping Contracts
It is crucial to comprehend the applicable legal rules to be able to minimize the risk of issues materializing and to be aware of what the position is when any issue does materialize. This is particularly so as it may become apparent during or after chartering negotiations intended to bring about a commercial relationship, that the ingredients which create a commercial obligation may not necessarily create a legal obligation. Therefore, when faced with a case of court action, the parties may find that their legal position is considerably different from that which they assumed would result from their commercial relationship.
Broadly, Shipping Law is based on International Conventions which strive to create uniformity in all maritime countries. Such law is then integrated into several jurisdictions and therefore English Law will have corresponding and equivalent foreign provisions.
All societies have their own set of rules. These rules are the legal system or, the law. Legal rules have the primary objectives:
- Rules relating to the settlement by one person to another for injury caused
- Rules relating to punishment for those who break certain laws
- Rules prohibiting or compelling specific behavior
- Rules relating to certain procedural issues
- Rules for the running of the country.
- Rules for regulating the legislature
We will provide useful and comprehensive knowledge of the legal principles and requirements and obligations as are engaged in everyday business life, particularly about agreements for the carriage of goods by sea.
English law is a Common Law system. The main body of law is contained in a set of legal principles and rules that are not set down in a formal codified manner but are extrapolated from previously made judicial decisions. English law is unenacted.
Common Law must be contrasted with Civil Law systems, for instance, the Italian legal system, where the entire body of legal principles is contained in an enacted, Codified Law System. Furthermore, English law does also contain many enacted laws in the form of Acts of Parliament
Types of Law
1- Public Law: Public Law governs the relationship between people and the State. Therefore, when a person or company does not comply with a legal rule, that person or company will be dealt with by the State. In other words, on behalf of other members of the State. Public Law incorporates Criminal Law. In Criminal Law, if a person commits a criminal offense, that person is prosecuted by the State. Other areas of law within the Public Law category include Administrative Law and Constitutional Law.
2- Private Law: Private Law governs the relationship between one person and another. In English law, this is referred to as Civil Law and is oftentimes contrasted with Criminal Law. Non-compliance or breach of a Civil Law principle is a wrong against that person or property injured. Any right of action against the wrongdoer is only in the suit of the injured party; there is no outside intervention.
The English use of the phrase Civil Law is meant in contrast to Criminal Law. In other jurisdictions, the expression Civil Law may represent the entire codified law of the State which includes principles relating to both Criminal Law and Non-Criminal Law.
The effect of the Criminal Law is to prohibit people from conducting themselves in such a way as to be detrimental to the community as a whole. To accomplish this, the Criminal Law sets miscellaneous sanctions or penalties ranging from fines imposed for less serious crimes to confinement for more heinous crimes. The goals of these sanctions may be seen as deterrents or as retribution or reform.
Civil Law regulates relations between individuals in the main areas of human conduct. Civil Law imposes certain types of rules and principles of conduct which both act as a standard of behavior and also as a means of resolving conflicts when they materialize.
Civil Law sets obligations that regulate and control:
Contracts between people
- Tort: the law of civil wrongs
- The ownership and types of property include real property and the miscellaneous possessory interests in such property
There are more specialized areas of law, which are built upon these basic rules of business law and commercial law. For example, the specific law covers the Carriage of Goods by Sea.
Sources of Law
In English law, there are two (2) derivative sources of law:
- Case Law (Common Law)
The new law is enacted by Parliament in the form known as Statutes (Acts of Parliament). Statutes may be enacted to:
A- Clarify or update existing Common Law
B- Add new regulations to existing Common Law
C- Create new principles of law
Statute Law is supreme and prevails over any conflicting Common Law.
When interpreting and applying Statutes (Acts of Parliament), the courts have to give effect to the intention of Parliament. Usually, a Statute is precise and the terms will afford no room for contrasting interpretations. Sometimes, this is not so, and the court has to decide what was intended by Parliament. This can give rise to certain issues when a situation presents itself which was not anticipated when drafting the Statute. Similarly, there will usually be a choice of meanings for the words used in the Statutes (Acts of Parliament). The court seeks to arrive at a just and reasonable solution. Again, this presents the question of whether the judge is making the law. Nevertheless, there are rules of statutory interpretation which are there to direct the courts. The courts should consider the rules of statutory interpretation and keep them within their judicial limits.
2- Case Law (Common Law)
Case Law (Common Law) was originally the Word of the King which was applied to all the nation by designated judges. These designated judges the King’s Council (Curia Regis). These designated judges would decide cases according to the legal principles laid down by the King. Historically, these sources of modern English law can be traced back to around 1066.
During Henry II (1154 – 1189), a permanent Royal Court was founded in London. This permanent Royal Court was consisting of learned judges. This was known as the King’s Bench. These judges were also designated by the King to travel around the nation to hear cases. Each province would have its circuit, and these judges became known as Circuit Judges. Therefore, the same legal regulations were applied throughout the nation. These regulations were not enacted, in other words, these regulations were not set down in any formal code.
The development of the Case Law (Common Law) has relied upon the legal decisions of judges. The fundamental hypothesis of the application of legal principles was that judges should not make the law, but should apply existing regulations.
Similar cases should be treated alike to deliver consistency and assurance to the law. The court should be impartial to provide fairness. Therefore, the maxim is that judges should stand by what has been decided (Stare Decisis). This is the basis of judicial precedent whereby previous decisions are binding upon present cases.
Each case will incorporate a judgment which is the reason of each judge concerned and delivering the basis upon which the judge arrived at his judgment. This judgment may be long or short, depending upon the sophistication of the case. In appeal cases, the judgment consists of the reasoning of several judges. Even the judges who reach similar decisions may have varying grounds for so doing and therefore it is crucial to know precisely what part of the judgment is binding upon subsequent cases.
The Actual Precedent is the legal rule on which a court bases its decision known as the Ratio Decidendi (the legal reason for the decision). In contrast with the Ratio Decidendi (the legal reason for the decision) is the Obiter Dictum. Obiter Dictum is the judge’s expression of opinion when giving judgment. Obiter Dictum is not essential to the decision and thus without binding authority. However, Obiter Dictum may be deemed persuasive, by reference, in subsequent cases.
The facts of a case may not always fit precisely within the rule established by a binding Precedent. In this case, the judge must consider the most similar past cases, and draw from a piece of case law to find or extend principles to deal with the new case. This consideration of past judgments will be the justification for the judge’s decision and the basis upon which a New Ratio Decidendi (the legal reason for the decision) is formed. In this way, the original legal principle is developed. This method through which Common Law has developed. Therefore, the fairly misleading expression is judge-made law. In reality, judges are not free to make the law, judges role is to apply the law, not to make the law. An Appeal system and eventually Parliament assure that judges do mainly keep within the legal scope of their function.
Ejusdem Generis: Ejusdem Generis allows the presumption that where a series of particular words are followed by general words then the general words may be regarded within the scope as the particular words. For instance, in a Time Charter, Shipbrokers may encounter the words “ “Charterers shall pay for all port charges, pilotages, towages, agencies (those are the particular words) and all other usual charges “(the general words). In such a case a charge for dock dues, for example, would be construed as the same genus but a crew member’s dentist bill would undoubtedly not.
Equity comes from the Latin word “Aequitas” which means leveling. Equity deals with cases not stipulated by the rigidity of the Common Law system. Today, all the Civil Courts are empowered to administer both Common Law and Equity. Equity supplements the Common Law and Equity does not supplant the Common Law.
Equity is only applied where, at the court’s discretion and having regard to all the circumstances of the case, it is fair to apply Equity. Therefore, Equity supplements the Common Law.
If the court considers that Equity is not applicable, then the Common Law principles governing the situation will apply. Therefore, Equity does not supplant Common Law.
All systems of law provide limitation periods during which civil claims must be initiated. These time limitations are known as Time Bars.
Time Bars are developed to prevent a defendant from being confronted with a claim many years after the event when witnesses may have disappeared or the records may have been destroyed. The claimant must confirm that the claim is brought within the specified period, otherwise, the claim will be time-barred.
These are two (2) types of Time Bars:
1- Specific Time Bars: apply to specific claims
2- General Time Bars: apply generally and are governed by statute
1- Specific Time Bars
1a- International Convention Time Bars
1b- Contractual Time Bars
Shipbrokers should be aware of those Specific Time Bars set by the Statutes of International Convention and Specific Time Bars that are Contractually agreed upon.
1a- International Convention Time Bars
Hague and Hague-Visby Rules set a one (1) year period limit commencing from the date of delivery of the cargoes where the cargoes are damaged or the date when cargoes should have been delivered if the cargoes are lost.
Generally, carriers grant extensions of this one (1) year. Nevertheless, the Hamburg Rules allow the cargo owner a two (2) years period limit in which to start any action for loss or damage to cargoes.
Athens Convention 1974 stipulates a two (2) year limit in respect of death or personal injury of passengers or passengers’ luggage from the date of disembarkation or expected disembarkation.
Convention on Civil Liability for Oil Pollution Damage 1969 has a three (3) year limit provided from the date of damage but no action can be brought after six (6) years from the date of the incident which caused damage.
Brussels Collision and Salvage Convention 1910 stipulates a special time bar of two (2) years for Collision and Salvage Actions. The time was to run from two years from the date of the casualty or when the operations of salvage terminated.
1b- Contractual Time Bars
Contractual Time Bars are clauses incorporated in a Contract (Charterparty) that mandate the contracting parties to give notice of a claim or to bring a claim within a specific time. Contractual Time Bars are treated as Exemption Clauses. Contractual Time Bars are precisely construed against contracting parties aiming to rely on them.
For example, some tanker charterparty forms stipulate that if a demurrage claim is not received within 180 days “it shall be deemed to be waived, extinguished and barred”. Shipbrokers are usually interested in preparing tanker demurrage claims, Contractual Time Bars may be particularly crucial.
Shipbrokers are accountable for missing the Contractual Time Bars. Shipbrokers may encounter serious claims for damages from the Principal for the loss suffered as a consequence of the claim becoming time-barred.
2- General Time Bars
In England, General Time Bars are governed by the Limitation Act 1980. General Time Bars set out the limit within which claims must be brought.
Limitation Act 1980 (Section 5) provides that claims relating to a Charterparty (Contract) must be brought within six (6) years of the breach. This limit would apply to standard Charterparty Claims that are not covered by any Specific Time Car.
Limitation Act 1980 (Section 2) provides that claims in Tort, for instance, negligence causing property damage must be brought within six (6) years of the date on which the cause of action occurred or, in the case of Personal Injury or Defamation (Libel or Slander) within three (3) years from the moment that the plaintiff knew or ought to have known of the damage. The six (6) years time limit commences counting from the date on which the material damage happened.
Limitation Act 1980 (Section 11 and 12) provides that claims in respect of Personal Injury must be brought within three (3) years although the court has a wide choice of extending this period if such a limitation runs inequitably. An individual injured on a ship has three (3) years in which to bring a claim against the ship.
Limitation Act 1980 does not apply to Admiralty Actions in Rem.
What does expression in rem mean?
In rem means actions against a thing, generally a vessel as opposed to actions in personam which mean actions against a person. Actions in rem must be brought under the Maritime Conventions Act 1911.
Fatal Accidents Act 1976
Fatal Accidents Act 1976 provides a three (3) year period applicable to claims in respect of Wrongful Death.
Maritime Conventions Act 1911
Maritime Conventions Act 1911 provides for a two (2) year period in which a shipowner must bring legal action against the other vessel after a collision. Maritime Conventions Act 1911 provides a two (2) year period in consideration of Salvage Claims.
Carriage of Goods by Sea Act 1971
Under the Carriage of Goods by Sea Act 1971, the owner of cargo has one (1) year in which to bring action against the carrier of the cargo. One (1) year period commences from the date the goods were or should have been delivered.
Civil Court System
Generally, civil actions are dealt with at three (3) ascending levels:
1- Court of First Instance
2- Court of Appeal
3- Supreme Court (House of Lords)
In the United Kingdom, the Court of First Instance is where the case is first brought to court and has two (2) levels. Moderately minor claims are dealt with in the County Courts and more serious cases go to the High Court.
1- Court of First Instance:
1a- County Courts (Minor Claims)
1b- High Court (Major Claims)
The High Court is divided into three (3) divisions: The Queen’s Bench is the biggest division which hears all matters not dealt with by the other divisions. There are two (2) courts within the Queen’s Bench: the Commercial Court and the Admiralty Court.
A- Queen’s Bench
A1- Commercial Court
A2- Admiralty Court
B- Family Division
C- Chancery Division
A1- Commercial Court where the judges have particular experience and knowledge in commercial issues. The system in Commercial Court is more flexible than the standard procedure. Commercial Court hears cases on insurance banking, mercantile agency, and construction and enforcement of contracts and shipping documents such as Bills of Lading and Charterparty Forms.
A2- Admiralty Court exercises a broad jurisdiction over admiralty issues. Admiralty Court hears cases on claims such as ship ownership, mortgages, damage done by or to a ship, cargo damage, personal injury and death involving ships; ship salvage, ship towage, ship pilotage, General Average (GA), and marine pollution damage. Maritime Law has long authorized a plaintiff to proceed not only In Personam for instance against a shipowner but also In Rem which is against the thing itself such as the ship. The jurisdiction of the Admiralty Court In Rem is very comprehensive. For example, in collision suits, it can be exercised against the ship wherever the collision occurred and whatever the nationality of the Shipowner.
The other two divisions of the High Court are the Family Division and the Chancery Division which hears tax cases; trusts; probate and wills.
2- Court of Appeal
The Court of Appeal may hear any appeal from the High Court. The losing party may apply of right either because the trial judge was wrong in Law or on Facts. Nevertheless, in practice, appeals are expensive and a party should think carefully before deciding to appeal. In reality, it is usually only appeals on a question of Law that will be successful as the Court of Appeal is usually unwilling to overturn a trial judge’s decision on Facts. Generally, three (3) judges sit on the Court of Appeal.
3- Supreme Court (House of Lords)
Supreme Court (House of Lords) is United Kingdom’s highest (supreme) court and an appeal to the Supreme Court (House of Lords) is heard by judges called Lords of Appeal in Ordinary or Law Lords. Furthermore, the Lord Chancellor may sit, and at times Retired Law Lords may be drafted in.
In the Supreme Court (House of Lords), unlike the Lower Courts, there is no functional division between Civil Cases and Criminal Cases.
There is No Right of Appeal to the Supreme Court (House of Lords). Permission must be granted, either from the Supreme Court (House of Lords) or the Court of Appeal. Permission will only be given where the case involves an issue of Public Importance.
Supreme Court (House of Lords) is the ultimate Court of Appeal for Domestic Law. Cases concerning a question of interpretation of European Law must be referred to the European Court.
European Court of Justice
The European Court of Justice is located in Luxembourg. As European law has been enacted into English law by the European Communities Act 1972, the rulings of this court have direct authority upon English law and the courts.
The European Court of Justice’s jurisdiction is to hear disputes between member states and also between those states and the Community institutions such as the Commissions.
Furthermore, an individual may appeal to the European Court of Justice where a community rule creates rights or obligations which are to be directly enforced by any one individual. A national court is obliged to refer any question to the European Court of Justice where a decision concerning European law is required by that question.
European Court of Human Rights
The European Court of Human Rights is located in Strasbourg. The European Court of Human Rights was established by the European Convention on Human Rights. The European Convention on Human Rights is a treaty signed in 1950 by 21 European States including the United Kingdom.
The European Court of Human Rights ensures that all Member States comply with specified civil and political rights. Issues may be taken to the European Court of Human Rights by either Member States or private people.
The Member States have agreed to accept the jurisdiction of the European Court of Human Rights. The European Court of Human Rights has significant influence over the development of English law.
International Court of Justice
The International Court of Justice is located in Hague. The International Court of Justice was established by the United Nations (UN) Treaty.
The International Court of Justice’s jurisdiction is limited to hearing disputes between different countries on queries of international law where both countries consent to the hearing.
The International Court of Justice’s judgments binds only the participating countries.
In reality, any judgment from the International Court of Justice is hard to enforce. However, international law is usually considered as being part of English law. Therefore, a decision of the International Court of Justice will establish an international legal principle that may have some influence over the English courts.
Tribunals are bodies other than Courts of Law. Tribunals have statutory jurisdiction to settle claims. Generally, Tribunals settle claims between an organization and a government division. Tribunals are the product of legislation.
Tribunals deliver expert knowledge but more quickly and less expensively than under the Court System. There are many types of tribunals, each with its limited jurisdiction over a particular type of claim. For example, National Insurance Tribunals, Industrial Tribunals, etc. Every Tribunal should be readily accessible to the individuals bringing their claims.
Some Tribunals are called Commissions. Some Tribunals are called Committees.
Privy Council acts as the final Appeal Court for the legal systems of the smaller British Commonwealth Nations which have no Supreme Court (House of Lords) of their own. The Privy Council hears both Criminal Appeals and Civil Appeals. Privy Council’s judgment is binding on the Commonwealth Court from which the appeal has come. Privy Council’s judgment is not binding on any other Commonwealth Nation.
Arbitration is a private means of resolving a conflict. Arbitration does not form part of the public legal system, but Arbitration is subject to legislation.
There are Arbitration Centers in many nations. London, New York, and Singapore are popular Arbitration Centers for arbitration in Charterparty conflicts.
Depending on the terms of the Arbitration Clause, Arbitration proceedings are also performed in Moscow, Paris, and Beijing.
In the United Kingdom, the statutory regulation of the law relating to arbitration is incorporated in the Arbitration Acts of 1950, 1975, 1979, and 1996. The Arbitration Act 1950 is the main Act.
The parties choose their Arbitrator and will pay for the Arbitrator’s services. According to the Arbitration Act 1950 (Section 26), an Arbitrator’s Award may be enforced in the same way as a High Court Judgment.
Reference to Arbitration may be performed in one of three methods:
1- Order of the Court.
2- Act of Parliament.
3- Agreement of the Parties
Reference by Agreement of the Parties must originate in an Arbitration Agreement. If a party to an Arbitration Agreement starts proceedings in Court, contrary to the Arbitration Agreement to submit to arbitration, the Court, on the application of the other party, has the choice to insist upon the Arbitration Proceeding or, in specific rare cases, the Court may disregard the Arbitration Agreement and hear the conflict.
The Arbitrator must make an Arbitration Award on the issues in dispute between the parties submitted for the Arbitrator’s decision. The Arbitrator must settle the case according to the law.
A Lay Arbitrator may hear the arbitration with a legal assessor. A Commercial Arbitrator is entitled to rely on knowledge and experience and to assess the Arbitration Award.
The Arbitration Award is final. An application may be made to the High Court to decide a Question of Law materializing in the study of the Arbitration.
There is No Appeal in respect of the Arbitration Award itself except in limited circumstances. For example, under the Limitation Act 1979, for judicial review on a Question of Law.
Arbitration is a method of settling commercial conflicts without the length and expense involved in proceeding to Court. The extra advantages are that the procedure is much more flexible in Arbitration and is tailored to the requirements of the individual conflict. The parties may select the Arbitrator and the Arbitration is private.
In the United Kingdom, the Arbitration Award is published only to the parties involved in the conflict. On the other hand, in the United Kingdom, most court proceedings are open to the public. In some countries, such as the United States, Arbitration Award is made public.
In the United Kingdom, the Arbitrator’s professional organization is the Chartered Institute of Arbitrators.
By definition, Arbitration is a secondary profession, usually carried out alongside a primary profession. Arbitration attracts all types of professionals.
In the United Kingdom, the Maritime Arbitration organization in London is the LMAA (London Maritime Arbitration Association) which sets out rules which apply to parties bringing an Arbitration who agree to the LMAA (London Maritime Arbitration Association) rules should apply.
In the United States, the Maritime Arbitration organization in New York is the SMA (Society of Maritime Arbitrators).
The Arbitration Act 1996 aims to restate the law of arbitration. The Arbitration Act 1996 does not try to restate the whole law relating to arbitration. However, the Arbitration Act 1996 presents a straightforward and rational explanation of the main principles of the law.
The Arbitration Act 1996 reflects the general principles of arbitration which is that the parties who have entered into an Arbitration Agreement should be free to provide how their conflicts are to be solved, subject only to such safeguards as are in the public interest.
The Arbitration Act 1996 spells out in explicit English that the Arbitration Agreement is separate from the contract to which the Arbitration Agreement relates. Therefore, if the contract fails or is invalid or ineffective, this does not result in the Arbitration Agreement correspondingly failing.
The Arbitration Act 1996 brings in particular changes:
1- The Arbitration Act 1996 confirms the judgment by the Supreme Court (House of Lords) in The Nema (1982) case. This hardly restricts the right of appeal from an Arbitration Award. Under the Act, an appeal is only possible on a point of English law or where the Arbitrator was wrong or, in a case of public importance, where the Arbitrator’s decision was open to serious doubt.
2- The Arbitration Act 1996 removes the power of the Court to Arbitration Award Security for costs in arbitration. The Arbitral Tribunal may do this.
3- The Arbitration Act 1996 abolished the distinction between foreign and domestic arbitrations.
4- The Arbitration Act 1996 furnishes that the Arbitral Tribunal may fix a cap on recoverable costs from the other party.
Furthermore, the Arbitration Act 1996 defines the role of Arbitrators. Arbitrators must supervise and manage the Arbitral Process. The Arbitration Act 1996 imposes provisions for handling the Arbitration Proceedings.
Short Form of Arbitration and Alternative Dispute Resolution (ADR)
Short Form of Arbitration
The parties may run the arbitration according to shortened forms of Arbitration Procedure. The parties may agree that the Arbitration is to proceed based on
1- Written submissions and documentary evidence only Without a Hearing or
2- Hearing to receive oral submissions and evidence
Alternative Dispute Resolution (ADR)
1- Mediation: A Mediator is appointed by an agreement between the parties. A Mediator endeavors to help the parties to a conflict to negotiate a settlement.
2- Conciliation: Similar to Mediation but the Conciliator takes a view on what the Conciliator thinks would be fair to settle the conflict and recommends that view to the parties. The Conciliator’s’ Recommendation is not binding on the parties but may form the basis of further negotiations.
European Community Law
The United Kingdom has been under the European Communities Act 1972 enacted that all rights, obligations, etc. produced by or arising under the EU treaties are part of United Kingdom Law.
The fundamental regulation incorporated in the treaties became a part of the law of the United Kingdom by what has been styled self-enforcement.
Two (2) major types of European Community Law:
Regulations are directly applicable in all member states and are, consequently, upon being issued, directly becomes law within all member states. Thus, achieving uniformity of law within the European Community. Regulations must not be re-enacted in any form and the member states must not in any form interfere with their application. Uniformity may not be achievable because of the miscellaneous national traditions and systems of law.
Directives may be published to solve the uniformity problem. Directives may mandate each member state to achieve a particular result within a specified time limit, but leave some degree of choice of method and detail to each member state. Directives are planned to accomplish harmonization, not uniformity.
The third type of Community Law tool is the Decision. The Decision is different from both Regulations and Directives, in that Decision is particular, rather than general, in character. A Decision is utilized mainly where a member state must request permission from the Community to depart from the terms of a Community Treaty.