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John Wilson The legal implications of the ISPS Code
was the topic for a presentation to the Hong Kong Branch on the 30th
March 2004. Over 50 members and
guests attended to hear Martin Heath, Senior Partner of the law firm Clyde
& Co give a summary of possible legal
implications and scenarios that could well affect the numerous shipping
companies and container terminal operators in Hong Kong. As well as ship managers, owners,
charterers, ship brokers and agents, there were also representatives of
several insurers and P and I Clubs, as well as some of the container terminal
operators and the Hong Kong Marine Department. Around 30 port facilities in Hong
Kong will need to comply with the Code which of course comes into force on the
1st July 2004. The Hong Kong Government have not been slow to react to the latest
legislation and have begun the process of approving the necessary new
domestic legislation that will give force to the ISPS Code and the other
maritime security amendments to SOLAS.
The Hong Kong legislation will be known as the Merchant Shipping
(Security of Ships and Port Facilities) Ordinance. The presentation began with a brief summary of the new ISPS Code and the vessels and ports to which it is applicable Mr. Heath pointed out that with regards to the ports it is the location where the ship and port interface takes place, which falls under the Code, and not the whole port area. Having said that, the definition of port facility does include anchorages, waiting berths and approaches from seaward, which in the case of Hong Kong encompasses many areas outside the main port and container terminals and, most importantly, it also includes the mid-stream operations whereby purpose built barges work cargo alongside ships anchored or secured to buoys. Approximately 30% of the containers handled in Hong Kong are worked at mid-stream operations. The problems of controlling access of the barges to the vessels and also of the identification of the numerous stevedores that are engaged on working on these barges, was one of the issues touched upon in the lively discussions at the end of the formal presentation. Mr. Heath discussed the various
contracts between parties involved in maritime trade, and the obligation for
the carrier to exercise due diligence as per the Hague/Hague-Visby Rules,
with the focus being on the fact that the obligation to exercise due
diligence is non delegable. As
there have yet to be any ISPS Code related cases, Mr. Heath looked to the way
in which the Courts have ruled upon the systems requirements within the ISM
Code, and discussed as an example a case in 1998 involving a fire onboard a
car carrier. Here the fire was found to have been caused due to inadequate supervision
of the stevedores, who had used improper procedures to jump start one of the
cars on the car deck. The Judge
ruled in favour of the Claimant finding that the vessel was unseaworthy, that
the unseaworthiness had caused the damage and loss and that the carriers had
failed to show they had exercised due diligence. In his ruling the Judge made reference to the inadequacies
in the vessel’s equipment, incompetence and inefficiency of the Master and
crew and the lack of adequate documentation. What is interesting, was that the Judge had showed that he
had given consideration to the practices and procedures in the industry at
that time, as well as the requirements of the ISM Code, even though at the
time of the incident the vessel was not required to comply with the
provisions of the ISM Code. The case was used to demonstrate how a possible future scenario
involving due diligence with respect to the ISPS Code could be dealt with by
the Courts. Picking up on this
theme, Mr. Heath considered an imaginary scenario where inadequate supervision
and checking at the gangway of the identification of people believed to be
stevedores had allowed an unauthorised person to gain access
to a container vessel and the actions of that person subsequently then causes
damage to the vessel and cargo.
Mr. Heath then continued the imaginary tale which involved the ship
being delayed and being boarded by Port State Control Officers on the basis
of the initial breach of security, and conducting further investigations which found other deficiencies and inadequacies in the ISPS
procedures onboard. The breaches
included the fact that dangerous cargo,
not declared on the manifest as such, was found onboard, as well as
containers that appeared to have been tampered with and not properly sealed,
with the result that the inspector
ordered the vessel to be detained in a secure quarantine anchorage pending
further investigation and rectification of the deficiencies. Mr. Heath then spoke of the various
claims that could materialise as a result of such an incident, and the fact
that the carriers would find themselves fighting a claim for lack of due
diligence in that they failed to provide a seaworthy vessel due to the
failures of the onboard security system and implementation of that
system. Taking it further, questions
would also arise as to whether the vessel was improperly manned due to the
lack of training given to the crew In concluding this scenario, Mr. Heath referred back to the
previous decided case where the Court considered industry practices at that
time and the provisions of the ISM
Code as a measure of required industry standards. Mr. Heath proposed the Court would undoubtedly now be
required to look at the requirements of the ISPS Code when assessing whether
the carrier had exercised due diligence. Furthermore, they would also now be
prompted to consider more carefully whether or not the carrier, or for that
matter, the port operator, should bear the greater responsibility for what cargo is actually within
containers loaded onboard the vessel.
Mr. Heath also took the opportunity to sound a warning that
although several of the more stringent (guideline) requirements are within
Part B of the ISPS Code which the IMO state is not mandatory, the US
Government has implemented both Parts A and B into its Maritime Transportation
Security Act of 2002 and their Port State Control inspectors will be taking
into consideration the guidelines in Part B when they are examining
ships. Several other Flag States
are also requiring compliance with all or certain sections of Part B and the
European Union is treating certain sections of Part B as mandatory. To complete the picture, Mr Heath then discussed the possible defences available within Article IV Rule 2 of the Hague-Visby Rules One potential defence that is relevant in the context of the ISPS Code is exclusion (a) : “Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.” Improperly following the ISPS Code requirements prior to the commencement of the voyage, if causative of a loss, would be a breach of the non-delegable duties in Article III Rule 1 of the Hague-Visby Rules. Mr. Heath pointed out that defences in Article IV Rule 2 of the Hague-Visby Rules are not available if there is a causative breach of Article III Rule 1. The new ISPS clauses drafted by BIMCO and
INTERTANKO were then reviewed.
In the subsequent open forum discussion it was stressed that the
clauses are not part of any of the new SOLAS legislation and the wording can
be amended to suit the requirement agreed between the owners and
charterers. One shipbroker in
the audience commented that in his experience thus far, the willingness to
agree to a particular wording is very much market driven with owners in the
present market being seen to have the upper hand. “Time will tell” one charterer countered. The BIMCO ISPS Clause addresses the potential “arrived ship”
problems and it is quite favourable to owners as any time used for security
inspections etc counts as laytime.
BIMCO also deal with the major issue of who is responsible for costs
incurred due to any delay imposed by security measures, and Mr. Heath
mentioned a recent award in an arbitration where a vessel under a NYPE form
time charter called at a US port and the port required that armed guards be
placed on the ship. The
arbitration panel held that these costs fell within the meaning of port
charges for that port and consequently were a charge for Charterers’ account. Turning to the INTERTANKO Maritime Security Clause for voyage charters, Mr. Heath pointed out that this also has suggested wording to deal with the situation wherein an alternative port has to be used due to access being denied at the originally nominated port, something which is not covered in the BIMCO clause for voyage charters. In short, Mr. Heath commented that this clause would succeed in focusing the mind of the charterer in ensuring that the nominated port is indeed one at which the vessel is not going to have any problems. He also noted that the issue of off-hire was not included in the BIMCO ISPS Clause for time charters, such that it is recommended that the off-hire clause be amended to specifically refer to the ISPS Code. The
availability of tonnage limitation of liability was also touched upon,
dealing separately with the 1957 and 1976 conventions. Under the 1957 Convention which is
still applicable in Singapore, it may be difficult to limit by showing
absence of Owner’s fault or privity in relation to loss resulting from ISPS
Code breaches where the Company Security Officer has direct access to Board
level in the Owner’s organisation as would be the case where the same person
is also the ISM Code ‘designated person’. On the other hand it would be highly improbable that
Owner’s will not be able to limit liability under the 1976 Convention where
to break limit the claimant has to show loss resulted from Owners’ personal
act or omission committed with intent to cause the loss or recklessness with
knowledge that the loss would probably result. The impact of the ISPS Code on insurance cover and the P&I
Clubs as well as Freight Recognising that in the time allowed, he was unable to discuss all possible problems and consequences arising from the ISPS Code, Mr. Heath concluded by summarising some of the matters that were worthy of further discussions. These included: problems arising from the divergence of approach, whereby the differing interpretations of different Port State Control Officers was a major concern; the Master’s responsibility for safety overriding that of security, which is clearly stated in the ISPS Code; the possible criminal liabilities that the Company Security Officer and Port Facility Security Officer might be exposed to; and then the numerous new documents that the ISPS Code would generate and the likelihood that these documents, which would initially be expected to be treated as being confidential, could possibly need to be disclosed in Court proceedings. Before retiring to enjoy further refreshments, the audience then engaged in a useful discussion forum where the experiences of various people in the shipping community were exchanged. A plaque commemorating the event was presented to Mr. Heath by the Branch Chairman Mr. Y.K. Chan. John Wilson Clyde & Co
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