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  • Top Ranked in Chambers & Partners UK Bar 2018View More

    Fri, 03 November, 2017

    Quadrant Chambers is deligted to be top ranked in the latest edition of Chambers & Partners UK Bar. We are top ranked for Aviation, Shipping & Commodities and Travel (Regulatory & Commercial) and are ranked for commercial dispute resolution.

    We have individual 65 recommendations and 46 barristers recommended across aviation, commercial dispute resolution, energy & natural resources, information technology, insurance & reinsurance, international arbitration, shipping & commodities and travel. 

    Aviation -  Highly distinguished chambers offering a top-tier aviation service with particular depth at junior level. The set is widely regarded as the market leader for high-profile insurance and reinsurance disputes, and routinely handles cases ranging from damaged aircraft to serious injury and fatality claims, as well as allegations of unlawful discrimination. Members act for both claimants and defendants, frequently tackling pioneering points of law in the process. Chambers is also equipped with a wealth of expertise in commercial and financial matters, and has a client base including top airlines and many of the pre-eminent law firms in the market. Two of the set's barristers recently acted in a serious fatality case involving a helicopter which crashed in the Democratic Republic of Congo with 11 passengers aboard. The case introduced novel questions as to the legal responsibility of banks and mining companies to assess the safety record of external transport suppliers.

    Client service: "The clerking is highly efficient." "The clerks are very easy to get hold of, always call back and do their best to get things sorted." The clerking is jointly led by Gary Ventura and Simon Slattery.

    Commercial Dispute Resolution - Barristers from Quadrant Chambers are regulars in the Commercial Court, Chancery Division, and Technology and Construction Court among others, and are particularly proficient at tackling international disputes including conflicts of law cases. The set receives instruction from leading commercial law firms, and is particularly noted for its shipping and energy practices. Notable recent work includes Caterpillar NI v John Holt & Co, the leading case on Retention of Title clauses and Sale of Goods. Peers remark that “the set has a good range of work, is well balanced and has people who do the job very well.”

    Client service: “They're very easy to deal with, and they understand the client's and the solicitor's needs well.” “The clerks are responsive and commercial when it comes to bills and cost estimates.” Simon Slattery and Gary Ventura are the senior clerks.

    Shipping & Commodities - This well-known shipping set has its roots in admiralty law and as such demonstrates masterful expertise in both wet and dry shipping disputes. It has excellent bench strength in the form of both silks and juniors, whom clients describe as "exceptional in their own right" and "willing to listen to solicitors' needs." Arbitration and mediation services are offered in addition to skilled courtroom advocacy. Many members are multilingual, which aids their participation in international cases. Several of them recently appeared in the Court of Appeal in Yemgas FZCO & Others v Superior Pescadores, which hinged upon the meaning of the clause paramount in bills of lading.

    Client service: "The clerks are friendly and efficient but also realistic about availability. Quadrant as a whole has a commercial attitude." Sarah Longden is the business development director. Gary Ventura and Simon Slattery head up the clerking team.

    Travel (International Personal Injury) - Solid travel law set that is well known for its expertise across aviation, regulatory and commercial matters. The chambers is frequently instructed by major airlines and tour operators in cases concerning flight delay disputes, package travel regulations and personal injury claims. It is noted for its "good reputation and undoubted force" in the field. It is also well versed in handling group litigation cases, often arising from package holidays.

    Client service: Senior clerk Gary Ventura heads the team and, according to interviewees, "is very approachable." The team are said "to understand the commercial pressures" and are "highly efficient."

    Quadrant Chambers is renowned for the breadth of its expertise, and has a deep bench of barristers who are at the forefront of regulatory travel matters. Barristers here regularly handle complex claims that take into account legal issues in multiple jurisdictions. They have experience of representing international airlines and tour operators, and possess expertise in aviation, personal injury and travel insurance cases. Recent highlights for the set include handling a test case involving 'missed connections' as well as Nolan & 42 others v TUI UK, a claim by passengers arising from an outbreak of gastroenteritis on a cruise.

    Client service: "The clerking is great." Gary Ventura leads the clerking team, which is considered "really responsive and helpful."

    A full list of the rankings can be found here

  • Expert determination clauses: traps for the unwary? - Jeremy RichmondView More

    Mon, 30 October, 2017

    This article was originally published in Thomson Reuters, Practical Law Dispute Resolution Blog on 30 October 2017.

    Expert determination clauses have proved popular in all sorts of contracts. This is because they offer the prospect of a cheap and relatively fast way of resolving disputes, unlike clauses providing for the resolution of disputes by arbitration or court proceedings. If such clauses also provide that the expert need not give reasons for their decision, it also means, in effect, that it becomes extremely difficult for the losing party to appeal the decision on substantive grounds.The jurisprudential basis for expert determination clauses was placed on a firm footing in Jones v Sherwood, where the Court of Appeal held that as a matter of contract law, where two persons agree an expert determination clause, they are bound by the outcome if the determination is made by the expert honestly and in good faith, even if there has been a mistake in the determination. The Court of Appeal expressly rejected the earlier authorities that had treated such clauses as mere machinery for calculation that could be automatically overridden by the courts if it appeared to be wrong. In light of this seminal case, one might have thought that subsequent litigation concerning expert determination clauses would have been limited, save in cases where dishonesty or bad faith is alleged against the expert. However, there has been a spate of recent cases concerning the logically anterior questions of whether, as a matter of contract:

    • The expert has the jurisdiction (or put another way, has the authority) in fact to determine the dispute referred to them.
    • If so, the circumstances in which a party to the contract could potentially waive their right to refer such a dispute to an expert.

    Chancellor Vos considered the second of these two issues in the February 2017 unreported Chancery Division case George Scarr-Hall v ISS (UK) Limited.

    The “jurisdiction” of the expert

    Before turning to the question of potential waiver, it is instructive to consider the court’s approach to dealing with questions of expert jurisdiction. In short, where the court considers that the expert will act, or is acting, outside their decision-making authority, the court will intervene and, if necessary, enjoin the expert determination process and its purported effect. The court will generally wait until the expert has made a determination before intervening. This is because it may transpire that the expert does not in fact act outside their authority: Director of General Telecommunications and another v Mercury Communications Ltd (per Hoffmann LJ dissenting but whose judgment was approved in the appeal to the House of Lords). The questions of if, or when, the court will intervene is determined on what is just and convenient in the circumstances of the case in question: Barclays Bank v Nylon Capital; MP Kemp v Bullen Developments Limited.

    The potential risk of waiving jurisdiction

    In George Scarr-Hall v ISS (UK) Limited, the claimant, GSH, had sought to claim deferred compensation under a business sale agreement. Deferred compensation was based on a series of post-completion accounts of the target company. Those post-completion accounts were to be prepared without interference by GSH or the defendant, ISS. In the event of a dispute arising from the post-completion accounts, the matter was to be referred to expert determination.

    GSH had commenced court proceedings for deferred compensation. It said that, since ISS had interfered with the preparation of the target company’s post-completion accounts, there were no accounts from which a dispute could be said to arise within the meaning of the expert determination clause. As such, the expert determination clause did not apply to the dispute. ISS filed an acknowledgment of service (but did not contest in that document the court’s jurisdiction to determine the dispute). ISS then served a defence reserving its right to refer the dispute to expert determination. Subsequently, ISS sought to invoke the expert determination procedure and applied for a declaration from the court that it was entitled to do so. GSH opposed the application on the basis that, by failing to dispute jurisdiction under CPR 11, ISS had been deemed to waive its right to expert determination. GSH relied on the submission that the court’s jurisdiction in CPR 11 covered questions of “the court’s power and authority” to determine issues: per Hoddinott v Persimmons Homes.

    The Chancellor rejected GSH’s argument on the particular facts of the case. The judge was concerned, as a matter of case management, that the expert determination procedure should provide an opportunity for the dispute to be resolved before the matter came on for trial. The judge also found that ISS on the facts had not waived its right to refer the dispute to expert determination in the first instance.

    Conclusion

    When a client is faced with concurrent court proceedings (potentially in breach of an expert determination clause) and expert determination proceedings, it must be careful not to waive its right to expert determination. It can protect its position by filing an acknowledgement of service contesting the court’s jurisdiction as appropriate.

    Jeremy Richmond

    Jeremy specialises in commercial and modern chancery law.  He is described in Chambers and Partners as a “superb advocate” whose “expertise in chancery, commercial and banking matters is a useful complement to his insolvency skills”. 

    Jeremy’s practice encompasses a broad range of matters including contentious insolvency (covering a wide variety of cross-border insolvency issues in particular in relation to insolvency / restructuring in Chambers’ core areas of shipping, commodities, insurance and aviation e.g. Jeremy has advised and / or appeared for key parties in OW Bunker, Hanjin Shipping and Arik Airlines), company law (including directors misfeasance), shareholder and joint venture disputes, sale of goods (both international and domestic), fraud (with an emphasis on asset recovery) and all aspects of general commercial law.  He regularly appears in the Chancery Division as well as in the Commercial and Mercantile Courts.  Jeremy often works in conjunction with Counsel from other jurisdictions and with experts. 

    Many of his cases involve a cross-over between ‘modern’ chancery and commercial litigation. 

    Jeremy was admitted to the New York Bar in 1996 and has worked as a New York lawyer for blue chip law firms in Manhattan and then the City.  

    > View Jeremy's full profile

    jeremy.richmond@quadrantchambers.com

  • Chambers UK Bar Awards 2017 - Nevil Phillips awarded Shipping Junior of the YearView More

    Fri, 27 October, 2017

    We are delighted to announce that Nevil Phillips was awarded Chambers UK Bar Awards Shipping Junior of the Year at last night's awards ceremony, which took place at the London Hilton, Park Lane.

    Details of the nominations and winners for each category are available via the attached link

    Nevil Phillips

    Nevil Phillips has been listed for many years as a Leading Junior in Shipping, Commodities, and Trade & Customs by The Legal 500, Chambers UK, Chambers Asia-Pacific, and Who's Who Legal, and Best Lawyers where he has been variously cited as "an outstanding advocate, incredibly fast thinking and a real problem solver", and "a very polished advocate, who gets results through his preparation and through his clear and compelling presentation of the client's case". Nevil was Acquisition International's "Best Shipping Barrister – UK" in their 2015 Legal Awards.

    He has featured as successful counsel in a number of recent high-profile commercial and shipping cases. These include SBT Star Bulk and Tankers (Germany) GmbH Co KG v Cosmotrade SA (The Wehr Trave) [2016] EWHC 583 (Comm) (the leading case regarding the scope of charterers' rights under a time charter trip), Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2015] EWHC 718 (Comm) (the leading case regarding renunciation under time charters and whether payment of timely advance hire is a condition), and Libyan Navigator Ltd v Lamda Maritime Holdings Sp. z. o. O [2014] EWHC 1399 (Comm) (the leading case regarding the interpleader procedure in the context of liened sub-hires and sub-freights.

    Nevil's practice envelops all aspects of commercial and shipping advisory and advocacy work, encompassing the broadest spectrum of contractual, international trade, commodities, shipping, maritime, energy, insurance, reinsurance, banking, and jurisdictional disputes and associated areas and remedies. He appears regularly in commercial arbitration (both domestic and international, with experience before a wide variety of arbitral institutions, bodies and trade associations, including LMAA, GMAA, LCIA, ICC and associated bodies), the Commercial Court, and the appellate courts.

    He has substantial experience as an arbitrator, and has also given expert evidence on English law to courts in other jurisdictions. He has also written and/or contributed to a number of leading text books in his fields, including his own authoritative work on "The Merchant Shipping Act 1995 – An Annotated Guide".

    Nevil is a popular and regular choice as a presenter/speaker at legal and corporate functions, seminars and lecture

    > View Nevil's full profile
    nevil.phillips@quadrantchambers.com

  • Guy Blackwood QC wins in Supreme Court: Taurus v. SOMO [2017] UKSC 64View More

    Wed, 25 October, 2017

    Taurus Petroleum Limited v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2017] UKSC 64

    In an important judgment given on Wednesday 25 October 2017, the Supreme Court has laid down important principles for the enforcement of international arbitral awards and specifically for the interception of funds payable under letters of credit

    Issues:

    1. The situs of a debt owed by the issuing bank under an unconfirmed letter of credit, the place where the issuing bank resides or the place of payment?
    2. Whether SOMO was entitled to sovereign immunity as an emanation of the State of Iraq or because it was exercising sovereign authority (first instance and Court of appeal only).
    3. Identification of the creditor under letters of credit.
    4. The principle of “honest dealing” (‘a garnishee order charges only what the judgment debtor can honestly deal with’) as it applies to the issuance of third party debt orders garnishing payments due under letters of credit.
    5. Whether such interest as the Central Bank of Iraq (“CBI”) had in the letters of credit was of itself a bar to execution.
    6. If the CBI had a recognisable interest in the letters of credit, was that interest entitled to immunity from execution pursuant to sections 13(2) and 14(4) of the State Immunity Act 1978 (the “1978” Act)?
    7. The circumstances in which a receivership order ought to be made.

    A copy of the judgment can be found here.

    Background:

    In February 2013 Taurus Petroleum Limited ("Taurus") obtained an international arbitration award against the State Oil Marketing Company ("SOMO") in the sum of US$8,716,477.  The arbitration was, by agreement of the parties, heard in London, although the official seat of the arbitration remained in Baghdad.

    SOMO failed to honour the award or any part of it, despite participating in the arbitration.

    In the circumstances, Taurus applied to the High Court without notice for leave to enforce the award as a judgment under section 66(1) of the Arbitration Act 1996 (it could not rely on the New York Convention 1958, because Iraq is not a contracting state). 

    Taurus also applied on a without notice basis for interim third party debt orders and the appointment of a receiver by way of equitable execution over debts payable by Crédit Agricole London Branch pursuant to letters of credit which were issued at the request of Shell International Eastern Trading Co (“Shell”) following the purchase of crude oil by Shell from SOMO. 

    The letters of credit were unconfirmed credits which were expressly made subject to UCP 600. They were addressed to CBI and provided as follows:

    “Please advise our following irrevocable documentary credit to Oil Marketing Company (SOMO) after adding your confirmation. Our reference GBRM300017 We hereby establish our irrevocable documentary letter of credit Number GBRM3000017
    By order of: … [Shell]
    In favour of: Oil Marketing Company (‘SOMO’)

    [ A ] Provided all terms and conditions of this letter of credit are complied with, proceeds of this letter of credit will be irrevocably paid in to your account with Federal Reserve Bank New York, with reference to ‘Iraq Oil Proceeds Account’.
    These instructions will be followed irrespective of any conflicting instructions contained in the seller’s commercial invoice or any transmitted letter.
    [ B ] We hereby engage with the beneficiary and Central Bank of Iraq that documents drawn under and in compliance with the terms of this credit will be duly honoured upon presentation as specified to credit CBI A/c with Federal Reserve Bank New York.”
    [[ A ] and [ B ] added]

    Taurus’ submission was that the effect of special clauses [ A ] and [ B ] was as follows:

    1. The principal obligation to make payment was owed to SOMO alone, as the named beneficiary, which obligation sounded in debt.
    2. A collateral obligation was owed to SOMO and the CBI jointly, to make payment in a certain way, which sounded in damages.

    High Court [2014] 1 All ER (Comm) 942 (Field J)

    SOMO challenged the orders on the grounds of want of jurisdiction and state immunity. Field J held as follows:

    1. The situs of the debt owed under the letters of credit was the residence of the debtor, Crédit Agricole, which was London and not the place of payment, New York (distinguishing Power Curber International Ltd v National Bank of Kuwait SAK [1981] 1 WLR 1233).
    2. That SOMO was not entitled to sovereign immunity as an emanation of the State of Iraq or because it was exercising sovereign authority.
    3. The debt due under the letter of credit was owed jointly to both SOMO and to the CBI.
    4. The principle of “honest dealing” was no independent bar to execution.
    5. Joint debts could not be garnished.
    6. The CBI’s interest as joint creditor attracted state immunity from execution pursuant to sections 13(2) and 14(4) of the 1978 Act.
    7. A joint debt could not be brought in by a receivership order.

    Court of Appeal [2016] 2 All ER (Comm) (Moore-Bick, Sullivan and Briggs LJJ)

    The decision of the Court of Appeal was as follows:

    1. The Court was bound by the previous decision of the same Court in Power Curber to hold that the situs of the debts owed by Crédit Agricole was the place of payment, New York, as opposed to the residence of the debtor, London (unanimously). Following Société Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, this was fatal to the granting of third party debt orders.
    2. That SOMO was not entitled to sovereign immunity as an emanation of the State of Iraq or because it was exercising sovereign authority (unanimously; this point was not re-run in the Supreme Court).
    3. That the sole creditor under the letters of credit was the CBI (by majority, Sullivan and Briggs LJJ). Moore-Bick LJ (dissenting) accepted Taurus’ submissions on the construction of the letters of credit, holding that the principal obligation to make payment was owed to SOMO alone, which obligation sounded in debt and that a collateral obligation was owed to SOMO and the CBI jointly, to make payment in a certain way, which sounded in damages.
    4. That the principle of “honest dealing” did not preclude the making of the third party debt orders, other than by reference to the existence of recognised proprietary interests.
    5. The interest of CBI as sole creditor precluded execution (Sullivan and Briggs LJJ).
    6. Sullivan and Briggs LJJ held that since on their view the debts were owed to CBI alone, that property was immune from execution pursuant to sections 13(2) and 14(4) of the 1978 Act.
    7. The receivership order ought not to be grated because the connection between SOMO and the jurisdiction was tenuous (unanimously) and because such an order would interfere with CBI’s collateral right (Moore-Bick LJ).

    The Supreme Court [2017] UKSC 64 (Lords Neuberger, Mance, Clarke, Sumption and Hodge)

    The decision of the Supreme Court was as follows:

    Issue 1, situs of debt

    By unanimous decision, the Supreme Court overruled the decision of the Court of Appeal in Power Curber which had stood for 35 years, and ruled that the situs of the debt owed under unconfirmed letters of credit is where the issuing bank resides, in this case London. In so doing:

    1. Lord Clarke recorded that by Article 3 of UCP 600, “braches of a bank in different countries are considered to be separate banks”, with the consequence that
    2. Lord Neuberger said of the decision in Power Curber, “such unreasoned distinctions do the common law, and in particular commercial law, no favours” (para 125).
    3. In the case of letters of credit, there was no basis for departing from the ordinary rule, that the situs of the debt is where the debtor resides.

    Issue 2, emanation of State of Iraq

    SOMO did not pursue its argument that it was entitled to state immunity as an emanation of the State of Iraq or because it was exercising sovereign authority

    Issue 3, identification of the creditor

    By a majority of 3:2, the Supreme Court held that the creditor under the letters of credit was SOMO alone:

    1. Lords Clarke (paras 19 to 26), Lord Sumption (paras 61 to 65) and Lord Hodge (paras 74 to 78) accepted Taurus’ submission that Crédit Agricole’s debts were owed to SOMO alone, there being a separate collateral obligation owed to SOMO and the CBI jointly which was merely an ancillary obligation as to the manner of payment.
    2. Lords Mance and Neuberger dissented, holding that the debts were owed to the CBI alone, which was fatal to the appeal.

    Issue 4, “honest dealing”

    The Court analysed the principle as follows:

    1. Lord Clarke (para 46) agreed with Lord Justice Moore-Bick that the principle of “honest dealing” was not an independent principle limiting the cope of third party debt orders otherwise than by reference to recognised proprietary interests.
    2. Lord Sumption held that the cases were authority “for the straightforward proposition that execution cannot be levied against a debt if the judgment debtor has parted with his interest in it” (para 68).
    3. Lord Mance (para 90) took the view that the cases illustrated that the court would look at the debtor’s “actual entitlement to sue for the money” (para 90).  

    Issue 5; did the interest of the CBI in the l/cs preclude the granting of third party debt orders

    By a majority of 3:2, the Supreme Court held that the ancillary contractual right of CBI to have payment made in a certain way was no bar to the granting of third party debt orders, which ought to be restored:

    1. Lords Clarke, Sumption and Hodge all held that the existence of the CBI’s ancillary contractual interest was no bar to the granting of third party debt orders. Lord Clarke held that “the obligation on Crédit Agricole to pay in accordance with its promised method is necessarily subject to the implicit qualification that the funds have not been intercepted by judicial intervention” (para 56).
    2. Lord Sumption recorded that the effect of third party debt orders was to override personal obligations and that the collateral obligation owed to CBI to make payment in the specified manner “depended on the continued existence of the debt owed to SOMO. Once it had been discharged by operation of law by payment to the judgment creditor in accordance with the Third Party Debt Order, there was no subsisting debt to be paid by the issuing bank into the New York account.” (paras 69 and 70)
    3. Lord Hodge held (para 79) that “the discharge of the debt would discharge the ancillary obligation as to the mode of its payment, leaving CBI with no claim for damages or otherwise against the issuing bank. I therefore agree that CBI’s rights under the added conditions do not bar the making of a TPDO.”
    4. Lords Mance and Neuberger dissented, holding that the CBI’s interest was a bar to execution

    Issue 6; Central Bank immunity

    This issue was only addressed in passing by Lord Mance:

    1. Lord Mance held that on the assumption that only a collateral obligation was owed to the CBI, he “would not exclude the possibility that, on this analysis, the making of a third party debt order against Crédit Agricole might constitute indirect impleading with the right to the proceeds which the State of Iraq would otherwise have enjoyed.” (para 118)

    Issue 7; receivership orders

    By a majority of 4:1 (Lord Mance dissenting), the Supreme Court held that the receivership order ought to be restored:

    1. Lord Clarke (with whom Lords Sumption, Hodge and Neuberger agreed) held that:

    > Since the situs of the debts was London, whereas Moore-Bick LJ had been bound to find that the situs was New York, it was open to the Supreme Court to consider the matter afresh (para 53).

    > “International trade, and particularly the international oil trade, is conducted predominantly by means of letters of credit. London is one of the two major financial centres of the world and enormous numbers of letters of credit are issued by international banks from           their  London branches. It would have been entirely foreseeable by SOMO that a majority of the letters of credit against which they sold oil would be issued out of London and subject to English law. SOMO’s trade therefore involved a long term connection with the jurisdiction.” (para 54)

    Summary

    The Supreme Court has dispensed with the unreasoned distinction for the situs of debts under letters of credit created by Power Curber International Ltd v National Bank of Kuwait SAK [1981] 1 WLR 1233 and issued third party debt orders notwithstanding the collateral contractual right of the CBI under the l/cs that payment would be made in a certain way. It also interpreted the constraints to the exercise of the Court’s discretion when considering whether to issue a receivership order in a flexible manner, so as to reflect the commercial reality.      

    Guy was led by Gordon Pollock QC of Essex Court Chambers and was instructed by Jeremy Davies and Sarah Hunt of HFW, Geneva.

    Andrew Guy Blackwood

    Guy has a comprehensive commercial practice, which includes large contractual disputes, international arbitration, insurance & reinsurance, banking & finance, civil fraud, energy & utilities, public international law including bilateral investment treaty arbitration, commodities and shipping.

    Much of Guy's time over the last 2 years has been taken up acting as lead advocate for the Hellenic Republic in a series of ICC and ICSID (ARB/16/20) arbitrations, the "Greek Submarines Arbitrations", which have been widely reported on in publications such as Global Arbitration Review. The breadth of Guy's practice is evident from the recent cases in which he has been instructed, including Taurus v. SOMO (Supreme Court,  21/22 March 2017, enforcement, sovereign immunity), The B Atlantic (Supreme Court, March 2018, war risks insurance) and Bilta v. SVS (Financial List, alleged dishonset assistance in carbon trading, 30 day trial fixed for 2018).

    Guy was one of The Lawyer’s Hot 100 for 2016, which noted the “fantastic” year which Guy had in 2015, involving major victories in Court and in arbitration. In Chambers & Partners, Guy has been referred to as “quiet and modest despite very obviously being an intellectual powerhouse."

    > View Guy's full profile

    guy.blackwood@quadrantchambers.com

  • The Longchamp – Supreme Court Judgment on Rule F of the York-Antwerp RulesView More

    Wed, 25 October, 2017

     Simon Croall QC and Paul Toms, who acted for cargo interests

    The judgment can be found here.

    In one of two Supreme Court judgments released today in which Quadrant Chambers acted, the Supreme Court has handed down judgment in The Longchamp. The case is the first time the English Courts have had to interpret the meaning of Rule F of the York-Antwerp Rules 1974 (“the Rules”).

    Rule F, first introduced in 1924, admits expenses in general average which would not otherwise be allowable.  The expenses are allowed where they have been “incurred in place of another expense which would have been allowable as general average” but “only up to the amount of general average expense avoided”

    The judgment is an important one for shipping practitioners and, although arising in the factual scenario of a seizure by pirates of a vessel and her cargo, it is of wider application and hence significance.

    The Facts

    The Longchamp was a chemical carrier that was hijacked in January 2009 by Somalian pirates.  On 30 January 2009, the pirates demanded U$6 m for its release.  The shipowners refused that demand and – consistent with normal practice – negotiated with the assistance of expert ransom consultants over a 51 day period with the result that the ransom paid was US$1.85 m.  During that period they incurred various operational expenses, namely crew wages, additional wages payable because the vessel was in a high risk area, the cost of food and supplies, and bunkers. The expenses totalled c. US$160,000 and amounted to increased operating expenses. Shipowners claimed that the expenses should be allowed in general average under Rule F.

    At first instance, it was held that the expenses fell within Rule F on the basis that if the shipowners had paid the initial ransom demand in full the payment of US$6 m would have been an expense “reasonably … incurred” within the meaning of Rule A and, therefore, “would have been allowable as general average” within Rule F.  The Court of Appeal overturned that decision. The Court concluded that expenses only fell within Rule F if they were incurred in place of other allowable expenses and this required there to be two or more alternative courses of action open to the party seeking to mitigate the consequences of an incident when incurring the actual expense. The Court held that a short negotiation by which agreement was reached to pay the initial ransom demand was not a different course of action to a longer negotiation which led to a reduction in the ransom paid.  The Court, however, refused to reverse the Judge’s finding that, had Rule F been engaged, payment of US$6 m would have been “reasonably … incurred”.

    Decision of Supreme Court

    The Supreme Court (by a majority of 4 to 1) allowed the shipowners’ appeal.  The majority concluded that the language of Rule F did not require that the expenses were incurred following an alternative course and that, in any event, payment of US$6 m in response to the initial demand was a different course of action to negotiating for 51 days, incurring the expenses, and paying a ransom of US$1.85 m.

    On the question of whether the expenses were “incurred in place of another expense which would have been allowable as general average”, the majority did not follow the approach taken by the courts below.  Lord Neuberger, giving the main judgment of the majority, appeared to have misgivings as to whether payment of the initial demand would have been reasonable and hence allowable under Rule A [18-19] but concluded that the Rules did not require this test to be met. The correct interpretation of Rule F was, he said, that the “reference to an “expense which would have been allowable” [in Rule F] is to an expense of a nature which would been allowable” [19].  Thus to qualify as allowable under Rule F it did not matter that the hypothetical expense avoided would not have been allowed so long as it was of a type which in principle was allowable under Rule A. The reasoning placed emphasis on the language “allowed” in Rule C to which the majority concluded Rule F was referring when requiring the avoided expenses to be “allowable”.   

    However, the closing words of Rule F which provide that the actual expense incurred shall be allowed “only up to the amount of the general average expense avoided” acts as a cap on the allowability in general average of the actual expense.  Thus, in each case, it is necessary to determine what general average expense has been avoided so as to give effect to the cap. This, in the present context, involves considering whether a ransom payment in excess of that which was in fact paid by at least the sum of the Rule F expenses claimed would have been allowable under Rule A.  On the facts of this case, Lord Neuberger concluded that this was the case [20].

    Lord Mance dissented. He concluded that the requirement that avoided expenses would have been allowable referred back to Rule A and hence required those expenses to be allowable under Rule A (both as to type and quantum).  He concluded that the payment of the initially demanded ransom would not have been allowable because it was unreasonable in its amount. He considered that it was not legitimate to allow the expenses because some lesser ransom figure (for example US$2.4 m) might have been reasonable because the Adjuster and the parties had proceeded on the basis that the expenses incurred were recoverable during the whole period of the negotiation when in fact the period of time spent negotiating from US$2.4 m to the final ransom sum was much shorter.

    Implications

    As Lord Sumption noted in his judgment, General Average rarely reaches the Courts and even more rarely reaches the appellate courts. The consequence is that aspects of the Rules have never been the subject of interpretation by the Courts.  Rule F is just such an example.  Instead it has been applied in accordance with practices and understandings adopted by adjusters. There seems little doubt that the ruling in this appeal will challenge some of what had hitherto been regarded as orthodox thinking. As the majority judgements note, the Court of Appeal in overturning the judge were following reasoning supported by the leading textbooks and obiter statements. It would appear that those texts (particularly on the question of whether there is a requirement for two alternative courses) and the practices which they reflect will need to be revisited.

    The reasoning of the Court as to the true meaning and effect of Rule F is important and has potentially wide reaching consequences. Whenever a shipowner negotiates with a third party to reduce expenses which are of a kind allowable in general average (repair or salvage costs are two possible examples) all and any operating expenses incurred in that period are strong candidates for Rule F allowances. It has never previously been thought that such expenses would be allowed. That they are likely to be allowable appears to be so even where the original figure quoted or demanded is excessive or exorbitant so long as it could be said that it was reasonable to agree a figure in excess of that finally agreed and the excess is at least the amount of the expenses claimed.

    In the context of piracy cases the final point made above is striking.  Both the Judge and the Court of Appeal were critical of any regime which required adjusters or courts to determine when a hypothetical ransom payment in excess of that actually agreed and paid was reasonably incurred. However that is precisely the exercise which must now be undertaken without any guidance from the Supreme Court as to how to perform it.

     

    Simon Croall QC

    Simon Croall is an established commercial silk who has appeared in every court (including twice in the last 12 months in the Supreme Court). He is a sought after trial advocate as well as being respected in the appellate courts. In recent years much of his work has been in the context of International Arbitrations.

    Recent reported highlights include Fulton Shipping v Globalia (The New Flamenco) [2017] UKSC 43 [2017] 2 Lloyd’s Rep. 177, [2015] EWCA 1299 and [2014] 2 Lloyd’s Rep. 230, MV Longchamp ([2016] EWCA 708, [2016] 2 Lloyd’s Rep. 375 on the interplay between piracy and General Average, The CV Stealth [2016] 2 Lloyd’s Rep. 17 on the consequences of long term detention of  a Vessel in Venezuela and Essar Shipping v Bank of China [2015] EWHC 3266 on anti-suit injunctions. He also appeared in The Achilleas [2008] UKHL 48, [2009] 1 AC 61 a leading case on remoteness of damage, AET Inc v Arcadia Petroluem (“The Eagle Valencia”) [2010] 2 Lloyd’s Rep. 257 (CA), Mediterranean Salvage v Seamar [2009] 2 Lloyd’s Rep. 639 (CA) on implied terms and The Rafaela S [2005] 2 AC 243 on straight Bills of Lading.

    simon.croall@quadrantchambers.com

    > view Simon's full profile

    Paul Toms

    Paul is an experienced junior barrister practising across a wide range of commercial disputes. He is recommended by the Legal 500 for Commodities and Shipping, by the Legal 500 Asia Pacific for Shipping, and by Chambers UK and Chambers Global for Shipping & Commodities.  Recent directory quotes include, “He has great tactical awareness and a good sense of humour; a very sharp and thorough junior” (Legal 500, 2017) and “He is completely on top of his game in knowing the law and being able to give commercial user-friendly advice” (Chambers UK, 2015).

    Paul has particular expertise in shipping, commodities, shipbuilding, energy and insurance disputes. He appears regularly in the High Court (mainly the Commercial and Mercantile Courts) and in domestic and international arbitrations. Paul has also twice appeared in the Court of Appeal as sole counsel in addition to a number of other appearances alongside a leader.

    Reported cases include:  Moran Yacht & Shipping Inc v Pisarev [2016] 1 Lloyd’s Rep 625 (claim for commission by yacht brokers), Banque Cantonale de Geneve v Sanomi [2016] EWHC 3353 (Comm) (claim under promissory notes executed to secure a trade finance facility provided to an oil trading business), BP Oil International Ltd v Target Shipping Ltd [2013] 1 Lloyd’s Rep 561; [2012] 2 Lloyd’s Rep 245 (claim for repayment of freight mistakenly overpaid raising questions of rectification, estoppel and the constituent elements of a claim in unjust enrichment based on mistake), Transition Feeds LLP v Itochu Europe PLC [2013] EWHC 3629 (Comm) (ss.68/69 challenge to award of FOSFA Board of Appeal), Rohlig (UK) Ltd v Rock Unique Ltd [2011] 2 All ER (Comm) 1161 (reasonableness of standard terms of freight forwarder under UCTA) and Hatzl v XL Insurance Company Ltd [2010] 1 WLR 470 (jurisdictional dispute under CMR).

    paul.toms@quadrantchambers.com

    > view Paul's full profile

  • Increased value policies may not always work as the market expects - David WalshView More

    Fri, 20 October, 2017

    Increased Value (IV) policies are a common feature of Hull and Machinery (H&M) insurance. Their purpose is to enable the assured, in certain circumstances, to recover on the basis of a higher valuation of his ship than that contained in the underlying H&M policy. They do not, however, always seem to work in the way that the market anticipates, as the decision of Mr Justice Leggatt in the case of Involnert Management Inc v Aprilgrange Ltd [2015] 2 Lloyd’s Rep 289 illustrates.

    The Case

    The case concerned a claim for the CTL of a mega yacht, The Galatea, whose ultimate beneficial owner was the Russian cement magnate Mr Filaret Galchev. The yacht had been insured by the London Market for a total value of €13m. The cover was split into two sections: section A for H&M, which incorporated the American Yacht Form R12 Clauses; and section B for IV, which incorporated the American Institute Increased Value and Excess Liabilities Clauses. As is often the case, the cover of €13m was split 75% - 25% between the H&M and IV sections respectively, i.e. €9.75m on H&M and €3.25m on IV. The same underwriters insured the H&M and IV sections of the policy. 

    On 3rd December 2011, the yacht was destroyed by fire. Underwriters denied the assured’s claim for a CTL on the basis that: (i) they were entitled to avoid the policy for the assured’s failure to disclose before the insurance was placed that it had been advised and believed the yacht to be worth significantly less than the sum insured; (ii) they were entitled to avoid because of a misrepresentation in the proposal form that the market value of the yacht was believed by its managers to be €13m; (iii) the assured had lost any right to sue underwriters because of its failure to comply with policy conditions requiring (a) provision of a sworn proof of loss within 90 days of the casualty and (b) the production of documents reasonably requested by underwriter; and (iv) the assured had failed to give a valid notice of abandonment.

    Trial

    At trial, underwriters succeeded in their argument that they were entitled to avoid for material non-disclosure on the basis that the assured’s marketing of the yacht for €8m and possession of a €7m valuation at the time it was seeking cover for €13m were material facts, which were not disclosed and which induced underwriters to insure on the terms they did.

    The judge also found that, had underwriters not been entitled to avoid, the claim for a CTL on the H&M section of the policy would have failed because the assured had failed to provide a sworn proof of loss within 90 days and failed to tender a valid notice of abandonment. Leggatt J found, however, that whilst these arguments would have been enough defeat a claim for a CTL on the H&M section of the policy, they would not have prevented the assured claiming under the IV section.

    The judge’s justified his conclusions in the following ways. First, he noted that the obligation on the assured to provide a sworn proof of loss within 90 days was a condition precedent found in the H&M section of the policy but not the IV section. Secondly, the judge explained that the IV clauses contained a waiver of interest in the proceeds from the sale or other disposition of the vessel or wreck in the event of a total loss. As such, he concluded that a notice of abandonment was of no possible benefit to the underwriters of the IV section of the policy and therefore, under section 62(7) of the Marine Insurance Act 1906, a notice of abandonment was unnecessary.

    Thus, had underwriters not succeeded in avoiding the policy, it would have produced the highly unusual result of the assured being able to recover €3.25m on its CTL claim under the IV section of the policy, notwithstanding the fact that it could recover nothing under the H&M section.

    Conclusion

    This conclusion is surprising in two respects. First, IV cover is generally understood to be written on the basis that it will not be called upon in the event that the claim for a total loss on the H&M section of the policy fails. It is for this reason that the premium charged for IV cover is usually lower than that charged on H&M.

    Secondly, as the editors of Arnould point out, the approach would have led Leggatt J to conclude (had it been necessary) that if the claim on the H&M section of the policy had been settled as a partial loss, no recovery could have been made on the IV section, but that if there had been no recovery on the H&M section at all (for non-compliance with the clauses applicable to that section), the assured might yet have recovered on the IV section by proving that the yacht was a CTL.

    What can the market do to avoid such outcomes in the future and to ensure that IV cover works in the way that they anticipate? There are two potential options. Perhaps the most obvious solution is to include wording in the IV policy that makes clear that if the claim for a total loss on the H&M policy fails for whatever reason, the assured is not entitled to call on the IV policy.

    An alternative, however, would be to ensure that all condition precedents in the H&M cover are expressly incorporated into the IV cover. This would mean that any breach of condition precedent which is a bar to the assured claiming for a total loss under the H&M policy would automatically also be a bar to a total loss claim under the IV policy.

    Lastly

    The market also needs to be careful about the possible unintended consequences of waiver of interest clauses in IV policies. It is highly unlikely that such clauses were ever intended to provide the assured with a route to claiming a CTL on its IV policy even if its claim for a CTL on the H&M policy fails for want of a valid notice of abandonment. It may be necessary, therefore, to spell out with greater clarity in policy wordings precisely what such clauses are, and are not aimed at achieving. 

    David Walsh was junior counsel for the successful underwriters in Involnert Management Inc v Aprilgrange Ltd [2015] 2 Lloyd’s Rep 289. This article was originally published in Insurance Day on 20 October 2017.

    David Walsh

    David is a highly regarded commercial junior with a strong reputation for intellectual rigour, skillful advocacy and client service. He has a broad practice with particular experience of insurance and reinsurance, shipping, commodities, shipbuilding and offshore construction disputes. He appears regularly in trials, interlocutory matters and on appeals in the English courts and also has a strong international arbitration practice, having been involved in numerous arbitrations on ICC, UNCITRAL, ARIAS, FOSFA, GAFTA, LMAA, LCIA and HKIAC terms.

    David is ranked as a leading junior in the Legal 500 UK, Chambers UK, Chambers Global and the Legal 500 Asia Pacific directories, in which he has been described as "incredibly bright and very easy to get on with", "an 'unflappable' dry shipping junior who is particularly noted for his skilful advocacy" and "a 'go-to' junior for marine insurance".

    david.walsh@quadrantchambers.com

    > view David's full profile

  • Quadrant Chambers in the latest Legal 500View More

    Wed, 18 October, 2017

    We are delighted to be recommended as a leading set in 8 different practice areas and are top ranked for Aviation, Shipping and Travel. We have 91 individual recommendations and 46 barristers recommended in this year’s edition.  We have a fantastic 19 new entrants and 7 barristers moving up the rankings.

    Set Overviews:

    Quadrant Chambers is ‘a top-flight go-to set in relation to commercial litigation, shipping and admiralty matters’, with additional expertise in aviation, energy and insurance disputes. For many, it is ‘at the top of its game’ due to the ‘quality of members across all ranks from QC to newly qualified’ and the ‘extremely proactive and approachable’ clerks, who are ‘among the best’. Leading the practice management, Gary Ventura and Simon Slattery are ‘well connected and respected; they know the market well and are very good at building relationships’. Ventura is ‘a tremendous support’ and will ‘never hesitate to put himself out to help if a crisis looms’, and Slattery is ‘hugely experienced’ and ‘sets a good example’.

    Leading set rankings:

    Aviation - Quadrant Chambers is a ‘first-class set for aviation-related disputes’, thanks to its ‘good strength in depth’. 

    Commercial Litigation - Quadrant Chambers has an excellent bench of commercial barristers, well versed in areas such as trade, commodities, shipping and more general contractual disputes. Members have been involved in several groundbreaking cases, including Enviroco v Farstad Supply that went before the Supreme Court, and Caterpillar NI v John Holt & Co.

    Commodities - Quadrant Chambers is ‘an excellent set with supportive clerks, who always deliver barristers of the right expertise and price to suit clients’ needs’. Simon Rainey QC represented Bunge in its landmark Supreme Court appeal against Nidera, while Simon Croall QC acted for Glencore in a $10m claim against Total Kenya concerning contract terms for oil shipments.

    Energy - Particularly recommended for the energy aspects of maritime work, Quadrant Chambers houses Lionel Persey QC, who appeared in Repsol Sinopec Energy UK v Baker Hughes. In other work, Simon Rainey QC represented Statoil in arbitration proceedings against Chevron, Petrobras and other oil major companies, pertaining to the redetermination of shares in oil field production in Nigeria.

    Insurance - Quadrant Chambers is highly regarded for marine insurance matters. Guy Blackwood QC acted for the defendant in AXA Versicherung v Arab Insurance Group, while Simon Rainey QC represented a number of London hull market syndicates in the fallout litigation from Brilliante Virtuoso.

    International Arbitration - Quadrant Chambers has ‘strength in depth in this area’ and a solid reputation for commodities, energy, insurance, shipping and general commercial disputes.

    Shipping - Quadrant Chambers is a ‘top’ shipping and admiralty set with ‘excellent people from its senior silks down to junior barristers’. Key instructions included Court of Appeal case Yemgaz FZCO and others v Superior Pescadores, which examined the meaning of a standard term in bills of lading, and Privy Council matter Borco v Phillips 66 (Cape Bari), the leading case on contracting out of the right to tonnage limitation.

    Travel Law (including jurisdictional issues) - Quadrant Chambers is ‘the go-to set for specialist aviation counsel’ with ‘great knowledge and experience’. 

    A full list of the recommendations can be found here

    We are also recommended in the Legal 500 Asia-Pacific guide for commercial, energy and shipping.

  • The Donald vs The Rocket Man - Simon Croall QC and David WalshView More

    Tue, 26 September, 2017

    Potential Legal Issues Under Time Charterparties for Vessels Operating in the Asia Pacific Region

    The escalating tensions on the Korean peninsula reached new heights following President Trump’s speech to the United Nations General Assembly last Tuesday in which he said that the United States could “totally destroy” North Korea (the DPRK). The DPRK’s Foreign Minister, Ri Yong-ho, who compared Mr Trump's speech to "the sound of a barking dog", warned on Friday that Pyongyang could conduct an atmospheric hydrogen bomb test in the Pacific in response to the US president's threat. Most recently he accused the United States of declaring war on the DPRK.

    The prospect of a hydrogen bomb test in the Pacific by the DPRK raises serious legal questions for ship owners and time charterers operating in the Asia Pacific region. We examine three such questions below.

    Might ports in the region be considered legally “unsafe” by reason of the latest DPRK threat?

    The classic English law definition of a safe port is that given by Sellers LJ in The Eastern City [1958] 2 Lloyd’s Rep 127, in which he stated at page 131 of the report that: “a port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship…”

    This test was recently approved by the Supreme Court in The Ocean Victory [2017] 1 WLR 1793. In that case, the Supreme Court focused, among other things, on the meaning of the words “abnormal occurrence” in Sellers LJ’s formulation. Lord Clarke JSC said at paragraph 25 of the judgment that the key question when considering whether something is an “abnormal occurrence” is to ask: “Was the danger…something rare and unexpected, or was it something which was normal for the particular port for the particular ship's visit at the particular time of the year?”

    Based on this approach it is hard to see how the threat of a hydrogen bomb test in the Pacific could, in the current circumstances, be anything other than an “abnormal occurrence” in the context of any potentially affected port. Assuming this is right, it seems likely that, for the time being, ports in the region will not be considered unsafe as a matter of English law: whilst the spectre of a hydrogen bomb test might be a danger to which a ship is exposed which cannot be avoided by good navigation or seamanship, it will almost certainly be an “abnormal occurrence” so far as particular ports are concerned.

    The position might be different, however, if extra-territorial weapons tests more generally by the DPRK became a regular occurrence. It might then be argued that for ports potentially affected by such tests the associated dangers had become features of such ports.

    It is also important to remember that the charterers’ obligation is to nominate a port which is prospectively safe. Thus, in The Evia (No. 2) [1982] 2 Lloyd’s Rep 307, it was held that although the vessel had become trapped after discharging at the port of Basrah during the Iran/Iraq war, this was unexpected at the time the port was nominated and so the charterers were not in breach of the safe port warranty. Unless there is greater clarity from the DPRK about where precisely such a test might take place, it would appear difficult to argue that any particular port in the region is prospectively unsafe.

    Might owners be entitled to refuse to sail to the region in light of the threat by relying on war risks clauses?

    Time charters often incorporate one of the BIMCO war risks clauses and the 1993 Conwartime clauses are often seen reproduced in full towards the end of the charterparty terms. The provisions entitle owners, among other things, to refuse to sail to areas which, in the “reasonable judgement of the Master and/or the Owners, may be, or are likely to be, exposed to War Risks”.

    What do these words mean?

    The words “reasonable judgement of the Master and/or the Owners” import an element of objectivity into the analysis. The court or tribunal considering the clause would be asking what a reasonable owner or master would think in the particular circumstances. The subjective instincts of a particularly sensitive owner or master would not be relevant.  

    In The Triton Lark [2012] 1 Lloyd’s Rep 151, Teare J suggested that the degree of probability required by the words "may be, or are likely to be” could include an event which had a less than an even chance of happening but would not include a bare possibility.

    “War Risks” are defined broadly in the clauses and include “any war (whether actual or threatened), act of war, civil war, hostilities, revolution, rebellion, civil commotion, warlike operations, the laying of mines (whether actual or reported), acts of piracy, acts of terrorists, acts of hostility or malicious damage, blockades (whether imposed against all vessels or imposed selectively against vessels of certain flags or ownership, or against certain cargoes or crews or otherwise howsoever), by any person, body, terrorist or political group, or the Government of any state whatsoever, which, in the reasonable judgement of the Master and/or the Owners, may be dangerous or are likely to be or to become dangerous to the Vessel, her cargo, crew or other persons on board the Vessel.”

    In light of the above, one can certainly see scope for arguments between owners and charterers about whether orders to the potentially affected region can be refused. The tests themselves (especially set in a context where DPRK have indicated that the regard the US as having declared war upon them) might well be regarded as an act of war or a war-like operation. A more difficult question is likely to be the stage at which the risk of being exposed to a weapons test (or similar action) becomes more than a bare possibility for a particular vessel under time charter. This difficult issue is complicated further by the apparent unpredictability of the DPRK regime and the hyperbolic rhetoric which has recently been used on both sides.

    If the DPRK’s threat materialises, could owners or charterers cancel their charters by relying on the war cancellation provisions?

    A hydrogen bomb test in the Pacific, particularly if takes place anywhere near US territories such as Guam, could be construed by the US as an act of war by the DPRK. Indeed, as the DPRK’s most recent comments suggest, it is possible to envisage events short of such a test that will be regarded by one or both sides as meaning there is a state of war.

    War cancellation provisions are commonplace in time charters and can be found, for example, in Shelltime 4 (clause 33), NYPE 93 (clause 32), Asbatime (optional clause 31) and in the pre-2001 version of the Baltime (clause 21(E)). They do not usually require a formal declaration of war to be engaged (see for example the NYPE 93 form) but they are usually drafted by the parties such that the right to cancel arises only when two or more identified parties are at war. Clauses often identify those parties as the permanent members of the UN Security Council (the P5); sometimes the member states of the European Union and the flag state of the vessel are also included. One might not, therefore, expect such clauses to respond to an outbreak of war between the DPRK and the US.

    However, the Sino-North Korean Mutual Aid and Cooperation Friendship Treaty, signed between the PRC and DPRK in 1961, states in Article 2 that the two states will undertake all necessary measures to oppose any country or coalition of countries that might attack either nation.

    Might this open the door to arguments by owners or charterers that they are entitled to cancel because there has been an outbreak of war between two members of the P5, even if there are no actual hostilities between the US and PRC? We suspect such an argument would be difficult. The decision of the Court of Appeal in The Northern Pioneer [2003] 1 Lloyd’s Rep 212 suggests that the English courts would probably construe the ambit of such clauses restrictively. (In that case, NATO operations in Kosovo were not deemed to be a “war” for the purposes of the war cancellation clause.) The answer will, in the end though, depend on the precise formulation of the war cancellation clause in question. Indeed, given the current tensions, owners and charterers trading in the Asia Pacific region may think it worthwhile to include a more extensive list of countries in their war cancellation clauses than had hitherto been considered necessary.

    Conclusion

    As the war of words between the US and the DPRK intensifies, it is inevitable that some owners will become increasingly jittery about the prospect of sending their vessels into the region. They would no doubt be well advised to check that they have the necessary protections written into their time charters as it surely only a matter of time before these issues arise and are tested before courts and arbitration tribunals.

    Simon Croall QC

    Simon Croall is an established commercial silk who has appeared in every court (including twice in the House of Lords). He is a sought after trial advocate as well as being respected in the appellate courts. In recent years much of his work has been in the context of International Arbitrations.

    He led the team for Owners in landmark House of Lords case on remoteness in contract damages Transfield Shipping v Mercator Shipping ("The Achilleas") [2009] 1 AC 61. Recent reported highlights include another important case on damages Fulton Shipping v Globalia (The New Flamenco) in both the Court of Appeal [2015] EWCA 1299 and below [2014] 2 Lloyd’s Rep. 230, Essar Shipping v Bank of China [2015] EWHC 3266 on factors relevant to the grant of anti suit injunctions, AET Inc v Arcadia Petroluem (“The Eagle Valencia”) [2010] 2 Lloyd’s Rep. 257 (Court of Appeal), Mediterranean Salvage v Seamar [2009] 2 Lloyd's Rep. 639/ [2009] 2 All ER 1127 (Court of Appeal) on implied terms and Dalwood Marine v Nordana Lines (“The Elbrus”) [2010] 2 Lloyd’s Rep. 315.

    simon.croall@quadrantchambers.com

    > view Simon's full profile

    David Walsh

    David is a highly regarded commercial junior with a strong reputation for intellectual rigour, skillful advocacy and client service. He has a broad practice with particular experience of insurance and reinsurance, shipping, commodities, shipbuilding and offshore construction disputes. He appears regularly in trials, interlocutory matters and on appeals in the English courts and also has a strong international arbitration practice, having been involved in numerous arbitrations on ICC, UNCITRAL, ARIAS, FOSFA, GAFTA, LMAA, LCIA and HKIAC terms.

    David is ranked as a leading junior in the Legal 500 UK, Chambers UK, Chambers Global and the Legal 500 Asia Pacific directories, in which he has been described as "incredibly bright and very easy to get on with", "an 'unflappable' dry shipping junior who is particularly noted for his skilful advocacy" and "a 'go-to' junior for marine insurance".

    david.walsh@quadrantchambers.com

    > view David's full profile

  • Can Cyber Risk Challenge Traditional Concepts such as Seaworthiness? Luke Parsons QC & Julian ClarkView More

    Thu, 14 September, 2017

    By Luke Parsons QC and Julian Clark, Hill Dickinson LLP 

    This article was originally published in The Charterer, the newsletter of the Charterers P&I Club on 1 Aug 2017.

    Cyber Risk and security in the shipping industry is a relatively new concern that has only begun receiving industry-wide attention over the past five or so years. This is largely a result of the increased frequency and publicity of cyber-attacks in other high value industries, and the increased integration of the internet and satellite-based information exchange system into ships to improve safety, their operational capabilities, and comply with international standards and Flag Administration requirements. Once again, however, the drive for greater efficiency and safety has opened up an entirely new category of risk.

    New though the concern may be, the reality is that most legal issues that will arise as a consequence of cyber-attacks will fall to be considered against a legal framework that is now centuries old. In this piece, we focus on one (albeit, a significant) element of that traditional legal frame- work: the seaworthiness of the vessel.

    Various hypothetical scenarios involving the compromise of a ship’s cyber security may be envisaged: the ECDIS or AIS systems on board may be attacked to facilitate piracy or other criminal or terrorist objectives; shippers of dangerous cargoes could electronically make changes to cargo manifests so as to give the appearance of carrying non-dangerous cargo; or criminals intent on stealing high value cargo could facilitate such a theft by electronically manipulating cargo handling systems (as recently took place in a major European port).

    In each scenario, there is high likelihood of legal claims and cross-claims involving shipowners, charterers, cargo interests, and insurers: in the piracy scenario shipowners (or their subrogated underwriters) may seek general average contributions in respect of any ransom and other payments; in the dangerous cargo scenario an explosion or a fire causing damage to other cargo will give rise to significant claims; and in the theft scenario, a claim by the owners of the stolen property can be expected. The adequacy of the ship’s preparedness to deal with the nature of the relevant cyber-attack will almost certainly fall to be considered in each case.

    In this respect, it is worth remembering three central tenets of the traditional concept of the seaworthiness of a vessel:

    First, a ship is seaworthy if she has that degree of fitness which the ordinary careful owner would re- quire his vessel to have at the commencement of her voyage having regard to all the probable circumstances of it. In short, the question is: would a prudent owner have required it should be made good before sending his ship to sea, had he known of it?

    Second, a vessel’s seaworthiness extends beyond its physical fitness of the relevant voyage. It extends to ensuring that the vessel has (i) sufficient, efficient and competent crew, and (ii) adequate and sufficient systems on board to address matters that might be encountered during the relevant contractual voyage.

    Third, whether a vessel is seaworthy is to be considered by reference to the state of knowledge in the industry at the time.

    Viewed against these tenets, the first observation in the context of the threat of cybercrime in shipping is that its precise parameters   are currently unknown. It will, however, become increasingly difficult for shipowners to argue successfully that the state of knowledge in the industry is such as to permit them to do nothing to address the potential of cyberattacks. P&I Clubs, international organisations, and critically, the IMO, have done a great deal over the past few years   to raise awareness of the threat which cyber security poses to the shipping industry. Take for example,  the “Be Cyber Aware At Sea” campaign supported by many significant players  in the industry, the “Guidelines on Cyber Security On Board Ships” produced by BIMCO, CLIA, ICS, INTERCARGO, and INTERTANKO in February 2016, and the IMO’s recent “Interim Guidelines on Maritime Cyber Risk Management” is- sued on 1 June 2016. If it is not there already, the industry is certainly moving closer to a world where shipowners will be expected to take positive steps to address potential cyber-crime risks that may arise in the course of a voyage, in order for the vessel to be considered seaworthy.

    Precise positive steps that would be required to ensure the seaworthiness of a ship in this respect are beyond the scope of this piece. However, it is noteworthy that two of the central themes of most of the publicly-available guidance on how to address the risk are described in terms that closely mirror two of the central tenets of seaworthiness – the implementation of cyber risk management systems and protocols (both on shore and at sea) designed to avoid, transfer, and mitigate the risk of cyber-attacks; and the training and education of relevant crew and personnel on the identification and mitigation of cyber-risks. In the absence of being able to show positive steps taken in line with either of these themes, a shipowner caught in a hypothetical claim of the type discussed above may well find itself in an uphill battle to establish the fitness of its vessel.

    The following are just two examples of recent cases that involve these issues. In case one unidentified cyber terrorists managed to hack remotely into the stability programs of an offshore platform. They were able to make changes that destabilised the rig which in turn led to its shut down and the loss of production for 48 hours. No direct demand or responsibility statement was received and it is believed that this could well have been the action of a protest group or simply an individual “trying their hand” at infiltrating the systems.

    Case two involved the hacking into accounting systems of both operators and their brokers changing two digits in a standard bank account number.  This lead to the mis-payment of funds to   a re-directed bank account. Initially when a query was raised the hacker (who had planted a virus in the system) was able to intercept email correspondence in order to pose as the client and explain the reason for the change in details. It was only due to the perseverance of the accounts personnel that the fraud was discovered and steps taken to intercept the accounts to prevent funds being removed from the duplicate account.

    From a charterers’ perspective, as highlighted during a series of presentations recently given by the Club to charterers and operators in China, there are a number of areas where in the future charterers’ liability could well be extended into the arena of cyberattack. Take for example the charterers’ obligations in relation to providing a safe port. In circumstances where a vessel suffers damage as a result of a ports cyber security being compromised and it can be shown that the port had inadequate cyber security systems in place, could it be argued that the port is rendered unsafe for the vessel in question? Likewise in relation to the obligations for safe stowage which often may rest with charterers as a matter of contract, in circumstances where the loading operation is affected due to a cyber-attack could resulting damage, both physical and financial, ultimately be found to  be the responsibility of the charterer?

    Currently there is no direct case law which considers such issues in a maritime context. Further the extent to which existing clauses in commercial contracts and insurance policies effectively address the concerns is unclear, not least as every day new developments in cyber technology modify the way in which such crimes are carried out. While previously existing clauses were often aimed at “computer viruses” it is now regularly the case that the infiltration is not by means of something which can properly be termed a virus. Also the intentions of the person responsible may not fall within existing definitions of “intentional harm” - see case one above.

    Luke Parsons QC and Julian Clark (Global Head of Shipping at international law firm Hill Dickinson LLP)  

    Luke Parsons QC

    Luke is Head of Quadrant Chambers and a Commercial and Admiralty silk whose practice encompasses insurance and reinsurance, international trade, energy, sale of goods, banking, commercial contracts, and shipping. Shipping Silk of the Year at the Chambers UK Bar Awards, 2014, Luke is ranked by Chambers UK. Legal 500 UK, Chambers Global and the Legal 500 Asia Pacific legal directories. He has been described by the directories as: “…an excellent team leader and team player…who gives pragmatic, sound, commercial advice…” Legal 500 2014 and “very persuasive in advocacy, down-to-earth and easy to work with…..he has the ability to boil down different issues into a few important points that are easy for clients to understand.” Chambers UK 2016.

    Luke is often called in to handle the highest value, most complex claims, involving coordinating large teams of experts and has acted on many precedent-setting cases in the High Court, and Court of Appeal.

    Given the frequently international dimension of his practice, Luke has extensive experience in dealing with foreign law and multi-jurisdictional disputes.  In particular he frequently acts in arbitrations with a cross-border element and is experienced in making applications to the High Court in support of English arbitrations and also in support of foreign arbitrations in the English courts and advises on the enforcement of awards under the New York Convention.

    Before coming to the Bar, Luke worked with a firm of international Lloyd’s brokers and then with a multi-national underwriting company. This experience in the London and International Markets assists with his practical and commercial approach to disputes whilst maintaining the intellectual rigour for which he is well-known.

    > view Luke's full profile

    luke.parsons@quadrantchambers.com

  • Shortlisted for three awards at The Chambers UK Bar Awards 2017View More

    Wed, 30 August, 2017

    We are delighted to announce that Quadrant Chambers, Luke Parsons QC and Nevil Phillips have been shortlisted for The Chambers UK Bar Awards 2017 in association with Saunderson House.

    • Shipping Set of the Year
    • Luke Parsons QC – Shipping Silk of the Year
    • Nevil Phillips - Shipping Junior of the Year

     

    The awards ceremony will be held at The London Hilton on Park Lane on Thursday, 26th October 2017. Full nominations can be viewed here.