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Gazette de la Chambre Internet news letter of “ Chambre Arbitrale Maritime de Paris “

Publishing committee : Philippe Delebecque - Claude Goussot - Jean-Yves Thomas - Michel Leparquier Editor : Philippe Delebecque 3 issues per year ( January - April - September)

Supplement to issue 38 - Autumn 2015

”Tantum operatur fictio in casu ficto quantum veritas in casu vero”

English abstracts of some recent awards rendered by the arbitrators of the “Chambre Arbitrale Maritime de Paris” Award 1222 – 2nd degree - C/P Synacomex 90 – Addendum to contract – Non reversibility between discharging ports – Laytime as a reward for freight (yes). As a wheat cargo could not be discharged in the port designated in the charter-party, the parties agreed t o d i s ch a r g e i n a n o t h e r p o r t according to an addendum stipulating new discharge conditions and additional freight. The parties were disputing the calculation of time in the first port, the shipowner asserting that no discharge having taking place, the waiting time should be counted entirely as demurrage while the charterer considered that he should benefit from the laytime as agreed in the charter-party. The arbitrators reminded the parties that stipulations not modified by an addendum remain valid and compelling for both parties. In this case, the addendum being silent on the laytime at first port but specifying that times allowed in each port should be non-reversible, it followed that two separate time accounts should be drawn up and that charterer should profit from the time allowed in the first port by the charter-party as a reward for the freight agreed.

During discharge in Dakar of a cargo of rice in bags loaded in Thailand, a shortage was ascertained. As the vessel had previously discharged a part cargo in Nouakchott where some bags were also found to be missing, the carrier asserted that the latter should have remained on board when arriving in Dakar and as the cargo was discharged there in its entirety, he could not be found liable according to the article 4.2 (q) of the Convention of Brussels. In return, the insurers were

claiming the carrier was fully responsible towards the holder of the bills of lading. The arbitral tribunal judged that, having issued clean bills of lading, the carrier did not produce evidence that he could benefit from an exception as provided by the Brussels Convention and that he had to indemnify the claimants for the shortage. However, the tribunal accepted Award 1223 – Rice in bags under B/L – not to hold the carrier liable for the losses Shortage at discharging – Letter of due to torn bags during discharge undertaking giving competence to CAMP operations performed on receiver’s behalf. - Subrogated insurers – Carrier’s liability (yes). Gazette de la Chambre Issue 38 - Automn 2015

Award 1224 – N/Y Produce 1946 – Rice in bags – Congenbill B/L –Shortage and damages to cargo – Letters of undertaking Subrogated insurers – Admissibility (yes) – Shipowner sea carrier – Shipowner’s liability for shortage (100 %) for losses due to mould (50 %). A vessel was time-chartered for a shipment of rice in bags from Vietnam to two ports in West Africa. Shortage and damage due to moisture were ascertained in both discharge ports. The claimant cargo insurers asserted that because the bills of lading were headed with the shipowner’s name, it should assume the responsibility of the sea carrier while the shipowner disputed the admissibility of the cargo insurers’ claim as well as the description of sea carrier attributed to him. Firstly, the arbitrators declared the claim was admissible after having v e r i fi e d t h e v a l i d i t y o f t h e s u b r o g a t i o n . Th e n , t h e y h av e considered that by allowing in the charter-party the time-charterer to sign the bills of lading on Master’s and/or Owners’ behalf and thus to enter in them the name of the owning company, the shipowner was in fact the sea carrier, and legally linked towards the bills of lading holders. Therefore, they judged that the shipowner was liable for the shortage but, as far as damage due to moisture was concerned, the amount was to be shared with the time-charterer whose fault the shipowner could take advantage of in order to mitigate his liability. J-Y. Thomas http://www.arbitrage-maritime.org/us/

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ICMA 2015

The International Congress of Maritime Arbitrators (ICMA) held this year in Hong Kong is a forum for maritime arbitrators, lawyers and for the shipping industry from around the world in which delegates deliberate on and exchange views and news of professional interest. Three French delegates attended the XIXe ICMA (http://www.icma2015hongkong.org) and presented a lecture. The “Gazette de la Chambre” publishes in this issue the lecture of its President, Philippe Delebecque, the other lectures from M. Jean-Patrick Marcq, maritime arbitrator, and M. Patrick Simon, maritime lawyer, will appear in the supplement to the January 2016 “Gazette de la Chambre”N°39 issue. (French translations of the two latter ones are proposed in the French version of the “Gazette de la Chambre” N°38).

Vessel Sharing agreements, slot charter agreements and arbitration, A civil law point of view Philippe Delebecque Professor Sorbonne Law School President of the Chambre arbitrale maritime de Paris

1. Alliances. An alliance between maritime companies can be defined as a contract of cooperation. We have many examples of alliances and especially of important alliances (2M, Grand Alliance, The new world alliance, …). It is a kind of consortium. As a consortium, an alliance is submitted to Competition law. We have in memory the last decision of Ministry of China (MOFCOM) about Alliance P3 between Maersk, MSC, CMA-CGM : it was a prohibited concentration. Is this juridical issue subject to arbitration ? Under civil law and especially under French law, it may not be, for reasons grounded in public order. But, one can wonder if an evolution is conceivable. Some alliances are tight. Other are loose and get their legal expression in vessel sharing agreements (VSA). The structure of a VSA is based on contract law and not on company law. Each partner brings one or two ships in order to form a common regular line In those conditions, arbitration is conceivable. In fact, most of the time, arbitration clauses are stipulated in VSAs. The structure is open to arbitration. Especially the termination of VSA and implementation of cancelling clauses raise conflicts. In practice, this kind of conflict is solved by settlements. 2. VSA and SCA. When a VSA is concluded, the parties turn to slot charter agreements (SCA). Slot charter is, from a Civil law point of view, a type of affreighment (affrètement, in French): time or voyage charter. The SCA is not necessarily linked to the VSA. But the latter can be considered as two cross SCAs. Under a SCA, an operator (owner or NVOCC) charters slots on vessels of a ship owner operating the lines: he thus increases the supply of transport. He takes advantage from the line. He takes advantage from the regular service offered by the owner. The parties are sometimes in conflict: after a claim issued by the merchant against the charterer, the latter exercises a suit against the owner, based upon an arbitration clause. Under a slot charter, a bill of lading is generally issued by the charterer. The question of determining if the consignee is bound by the arbitration clause included in the slot charter is often raised. 3. Slot charter – It is customary to oppose the chartering of the ship to the carriage of goods. The first is a form of tramp service; the second is a transport contract by a regular line (liner). In this pair, chartering space (slot charter) is an exception, because it has its roots in the practice of regular lines. The high costs of regular transport services have led owners to find legal means of collaboration or of cooperation. The slot charter is the result of this evolution. Its flexibility, combined with profitability requirements, explains its success. The slot charter is now a well-known figure of the contractual liner shipping, as evidenced by the standard contract – Slothire BIMCO4. Definition. - The slot charter is not defined by law. The French Code des transports (Transportation Code) does not mention it, which is not surprising, since the practice is recent. This charter-party can be defined as a contract by which, on payment of freight (or hire), the owner provides the charterer slots on one or more ships on a regular line he agrees to move on a predefined route. The agreement basically aims to ensure the movement of goods by sea. It demands two essential requirements of the owner: the provision of spaces (slots) and the displacement of the ship.

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5. Legal nature : .Partial chartering. – One of the features of chartering space is that it is a partial chartering. It covers the provision of slots. Each of the owners is ready to receive an appropriate container on board a ship. Its purpose, however, is not limited to this provision of spaces : the slot owner is committed, above all, to move a vessel on a predefined route. The provision of the cells of this ship, therefore, constitutes the means of delivery of the service offered. . Voyage charter.- The slot charter is a hybrid contract. It has many aspects that look like the contract of carriage : the transportation of goods by sea ; the use of regular shipping lines ; the provision of a service. The contract, however, is not a usual shipping contract. The slot charter is a particular form of voyage charter. Its purpose is to render a service whose subject matter is the ship. In contrast, the main subject matter of the transport contract is a service whose subject matter is the goods themselves. While the slot charterer agrees to take on board the containerized cargo and to move the vessel on a predefined route, the sea carrier undertakes to deliver the goods from one port to another. The service lies on the ship in the first contract and on the goods in the second contract. The difference is on the load handling operations. The slot charter, as the voyage owner, is not required to furnish the handling operations, in contrast to the sea carrier. The slot charter is a kind of voyage charter. Some consider that slot charter is a time charter when practiced as part of an exchange of spaces : this theory is inaccurate. Under French law, the distinction between the different varieties of charter is based on the division of management powers on the ship. The owner keeps the nautical management and the commercial management of the ship. It cannot be otherwise as business management is a prerogative that cannot be performed by several persons at the same time. Since the owner assumes the nautical management and business management of the ship, the contract is a voyage charter. 6. Arbitration. As we are in the presence of a charter contract, arbitration is common. It is quite usual, though it is exceptional in bills of lading relative to regular sea liners. Most slot charter parties contain an arbitration clause referring to an arbitration institution of the maritime world. CAMP (Chambre Arbitrale maritime de Paris) had the opportunity to hear an important number of disputes between the slot owner and its charterer or about the charterer against the cargo interest. Awards delivered make it possible to realize the importance of chartering spaces. 7. Relations. The slot charterer gathers the freight, that is to say gets the contact between the cargo interests, but does not perform himself the transport service. The relationship that results from the implementation of the slot chartering is not bilateral but trilateral. Two contractually separate but linked relationships coexist. .the relationship uniting the slot charterer and the owner (I) and .the relationship uniting the slot charterer and the cargo interest (II). The third relationship is a non contractual one : it s the relation existing between the slot owner and the cargo interest (III). I. - Contractual relation between owner and slot charterer 8. The slot charter is a partial voyage charter. According to these conditions, the right to charter, dominated by contractual freedom, may be applied. Two awards rendered by the CAMP organization recognize this solution. .Award n° 1100, 13 may 2004 In a slot allocation contract, the expiry of the time bar depends upon the agreement made between the parties. A writ served by way of publication in the press requesting to appear before a Chinese court, does not interrupt the time bar because the defendant cannot be made aware of it. .Award n° 1110, 15 apr. 2005 In a slot allocation contract, it is like under charter-parties : freedom of contract is essential. It is a principle. The obligations of the owner (A) and those of the charterer (B) require a few observations. They are marked by specific characters. A. Owner’s obligations 9. The obligations of the slot charterer are of two kinds. Some are linked to the ship 1), the other to the goods (2). 1) Obligations in relation with the vessel 10. Ship disposal - The tendering of slots means that the owner furnishes the vessel nominated by the charter party at the time and place agreed. The presentation of a seaworthy ship is the first obligation of the owner. The owner is, in principle, bound to ensure the seaworthiness of the vessel provided for the duration of the trip. However, this requirement shall not apply if the slot charter party contains a paramount clause. Such is the case in the usual charter party (slothire, cl. 14 (a)). Under these conditions, the slot charterer is obliged to ensure the seaworthiness at the beginning of the voyage. His position is that of a single carrier. See Award CAMP n° 1100, 13 may 2004 : When the contract requires that the party providing slots is liable towards the cargo loaded within allocated slots only in case of ship unseaworthiness, evidences of any such unseaworthiness must be shown up in order to make the party providing those slots liable for containers lost overboard. Nevertheless, the identification of the ship is not as important as in the voyage charter. The establishment of a regular line supposes a certain standardisation of ships that are used. Often, the ship disappears behind the regular line. The most important elements are the characteristics of the line (ports served, cruise ships and rotation frequency, time, etc.). The ship’s performance itself is not important ; at least, the performance is not as critical as in the voyage charter party.

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11. Move of the ship. - The second duty of the ship owner relating to the vessel is the move. The slot owner must do everything possible to ensure that the ship reaches in due time the final port or the ports of call nominated by the charter party. He is under a duty of “due care” in the performance of the trip. This obligation is usual in the voyage charter. 2) Duties of care in relation to the cargo 12. Duties of care concerning the cargo. - The purpose of slot chartering is the transportation by sea of containerized goods. However, the goods are not at the heart of the contract. The slot charterer is not liable for the goods before loading them ; he takes them aboard. He is responsible from the time the cargo is loaded and stowed, during the whole journey. From this point of view, the chartering of space is no different from the traditional charter trip. 13. Stevedoring. - The slot owner is not legally liable for the loading, the unloading and the stowage of the goods. The contract is thus stipulated FI0S (Slothire, cl. 15 (a)). Possible liner terms clause cannot change this liability. This clause must be analysed as a simple financial clause. Instead, the FI0S clause is a clause putting into effect the sharing of the risk. Nevertheless, the operation of the ship as part of a regular line service involves the owner choosing the stevedore and working closely with him. There should be only one handling contractor per call, which excludes any possibility of choice of the latter by the slot charterer. Consequently, the charter party provides that the slot owner deals with the handling contractor as an agent of the charterer (Slothire, cl. 11 (a)). Consequently, the charterer is liable for the spaces and sustains liability for stevedoring operations. Award CAMP, Carrymar, n° 1150, 10 jan. 2008 . The ship was under a VSA between a slot charterer, a subsidiary belonging to a group of companies, and the owner. The holding company has no title to sue when it has explicitly rejected the concept that the economic entity that represents a group of companies is entitled to circumvent the legal entity of each company forming the group. Even if a holding company owns 100 % of a subsidiary, this does not legitimate that the holding company has a title to sue on its behalf. In terms of liability for damages resulting from the loss and the destruction of containers following an incident at sea, the arbitrators held that the owner, in accordance with c-p terms, was entitled to refer to 2 exculpatory exceptions : . error in navigation or management of the ship (choice of course and speed) . peril of the sea. The blame put onto the owner as regards the stowing of containers on deck cannot be taken into account, because the change in the lashing process was well known to the charterer as well as the failure of some deck rings. Damages were caused by the brutal dislocation of part of the deck cargo following an important list due to a huge cross wave whose effect was exacerbated because of the course chosen by the captain (nautical fault). The arbitration tribunal held that the owner was not responsible for damages which occurred. 14. "Reefer" containers (integral refrigerated containers). - The connection of reefer containers is part of the lashing operation. However, this operation lies with the slot charterer. The slot owner, however, must provide the necessary electricity and verify the proper operation for the duration of the voyage (Slothire, cl. 14 (c)). Many decisions have thus retained the responsibility of the slot owner in case where reefer containers were not properly connected to the installation of the board by the stevedore : this failure, due to the slot owner in the audit of the connections, characterizes a violation of its obligation to supply electricity. However, we have considered that the slot owner was not required to check the temperature of reefer containers during the voyage. See Award CAMP, n° 1110, 15 apr. 2005. The owner assumes a simple obligation of means (“obligation de moyens”, under French law). 15. The guarantee due by the slot owner. - Finally, it should be noted that the slot owner must guarantee the slot charterer, if the slot charterer is condemned for loss or damage caused to the goods. The claim of responsibility of the charterer on the owner is secured by a lien on the ship. The exercise of this privilege requires the seizure of the ship. Needless to say, the guarantee is thus quite illusory. B. Slot Charterer’s obligations 16. The main obligation of the space charterer is to pay the freight to the owner (1). This obligation is not the sole charterer’s obligation (2). 1) Obligation in relation with the freight (or hire)

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17. Freight determination. – The payment of freight is the main obligation of the charterer. This duty continues in the presence of a crossover exchange of slots. The parties, which are at the same time slot charterer and slot owner, pay each other the freight corresponding to the number of leased chartered on the ships of the other party. Freight is payable in any event : it does not matter whether the slots chartered are actually used by the charterer or not. Freight is flat (lumpsum freight) and is calculated on the number of charter areas and on the duration of the contract, which is expressed in the number of voyage (s) or in time. When the freight is calculated for a specified number of voyage(s), it is generally prepaid. However, when calculated for a certain period of time, it is paid at regular intervals. It is fixed and cannot be increased by any demurrage. 18. Privilege (lien) of the ship owner on the goods. - The default of payment of the freight by the slot charterer leads to his contractual liability. In such a situation, the owner is entitled to invoke the exception of non performance (exceptio non adempleti contractus under Frech law) to influence the charterer The owner has also a lien on the goods for the payment of his freight (C. transp. art. L. 5423-3). However, the charterer is an intermediary for slots and thus he is not the owner of the goods delivered to the owner of the ship. Despite that, the Adriana case allows the owner to exercise its lien on the goods, even if the charterer does not own them. However, the case law limits the exercise of the privilege of the owner. When the owner of the goods is not sub-charterer of the ship, it requires that the claim relating to the freight is enforceable against the consignee of the goods. This solution, contrary to the fact that the lien is linked to the goods, makes it lose much of its interest. 2) Obligations in relation with the cargo 19. Presentation and declaration of the goods. - The charterer must present the goods at the port of loading at least 24 hours before the loading time (Slothire, cl. 12 (b)). He must also inform the slot owner of the nature of the goods stuffed in the containers that he tenders to him (Slothire, cl. 12 (a)). This disclosure requirement mainly concerns hazardous or radioactive goods, whose transport is subject to the prior approval of the slot owner (Slothire, cl. 4 (d) and (e). A failure to report would engage its liability and would make him lose the benefit of the limitation of liability. 20. Loading and unloading. – The slot charterer is legally obliged to load, stow, unload and undock its containers. As a creditor of the stevedore, he must indemnify the owner for damages caused to other goods or to the ship during handling operations. Its liability towards the slot owner is limited to the amount of money that he recovers from the stevedore (slothire, cl. 15 (a)). 21. Indemnity for damages due to the goods. – The slot charterer shall indemnify the owner for all judgments decided against him because of the goods (Slothire, cl. 15 (c)). This provision applies to failures to comply with the laws and regulations in force in the countries of call and, especially, the consequences of the discovery of drugs and migrants in containers of the slot charterer. Similarly, he must indemnify the slot owner for all damages caused by the goods to the vessel or to other goods carried by the slot owner, except in cases of Acts of God (Slothire, cl. 15 (b) and 16). Finally, one can ask if the slot charterer could assert against the owner limitation of liability for damages done to the ship. Neither the LLMC, neither the domestic law exclude from their scope the damages made to the ship. The damage suffered by the ship is not a damage occurred on the ship, see Djakarta LLR 2004, 1, 460 : the damaged property cannot be the very same thing as the operation which caused the damage. II. - Contractual relation between slot charterer and cargo interest 22. Slot charterer’s function. - The slot charterer « takes freight », whatever may be his role : owner, NVOCC or multimodal transport operator. He is bound to his customer, i.e. the cargo interest by a contract under which he undertakes to carry goods from one point to another. He is therefore the carrier. He may also engage himself in organising the route and take the role of a forwarder. The slot charter is part of a subcontractor scheme concerning the capacity of the market. The slot charterer thus occupies a central position between the delivery party (the slot owner) and the final consignee (the cargo interest). The slot charterer is a contractual carrier or a freight forwarder. The qualification changes if he committed to deliver the goods or to organise the transport. Regardless of his legal role, the slot charterer delivers a bill of lading on its headed paper. This transport document represents the goods and must designate him as a carrier. 23. Slot charterer’s contractual liability. – The contractual liability of the slot charterer towards the final cargo interest depends on whether his role as an intermediary is apparent or not. The liability adopts the regime of forwarding agent responsibility, in the first situation, and of the sea carrier, in the second. The contractual liability of the cargo interest against the slot charterer is not a preferred claim on the ship. To do this, the slot charterer should be the main ship charterer (C. transports, art. L. 5114-7) ; for, if it is not the case, he has no management control over the ship.

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24. Limitation of liability. – The slot charterer, in its relations with the cargo interest, takes advantage of the liability limitation for maritime claims. The liability claims of the cargo interest are claims resulting from damage “that occurred aboard on the ship” and / or damages that are “directly related to (…) the use of the ship” (Code des transports, art. L. 5121-3). The partial nature of the slot charter is not an obstacle to the application of the limitation of liability of benefit for the charterer. Neither French law, nor LLMC excludes partial chartering from their scope. This analysis was confirmed by the CAMP in a case where a fund was constituted by the slot owner: it was decided that the slot charterer could join the limitation suit, brought in court by the former. Award CAMP n° 1069, 20 oct. 2002 (DMF 2003, 385). The BL refers to Hague Visby Rules and LLMC. Those clauses are compatible. But the parties cannot modify calculation modalities of limitation of liability provided by LLMC, if this clause could make the limitation in favor of the carrier. The carrier, as space charterer, can invoke the limitation of liability provided by LLMC. 25. Privilege (lien) of the slot charterer on the goods. - The debt of freight of the slot charterer towards the cargo interest is a privileged claim on the goods. This privilege is based on the idea of pledge. It guarantees the payment of freight, due under the contract between the slot charterer and the cargo interest. Today, however, the privilege of the forwarder is wider that of the sea carrier, as to the privileged claims and as to the importance of the property on which the lien is fixed (C. com. art. L. 132-2). Thus, if we qualify the slot charterer as freight forwarder or as a contractual carrier, the extent of his privilege varies. The problem is similar in the case of a right of retention of the goods. III – Extra contractual relation beween the owner  and the cargo interest 26. No documentary relation between the owner and the cargo interest. – The cargo interest is not a party to the slot chartering contract. It remains, however, that his relationship with the slot owner is precisely regulated and organized by the charter party. This originality is that slot chartering is a technique of subcontract in which the actual debtor (the slot owner) intends to hide behind the contractual debtor (the slot charterer). Consequently, the charter party excludes any document link and thus any contractual link between the slot owner spaces and the final beneficiary of the transport operation (cargo interest). The slot owner shall issue an administration bill of lading, that is to say, a non negotiable transport document. This document does not represent the goods ; it is only a receipt of the goods on board of the ship made by the owner. Under these conditions, any documentary relation between the owner and the cargo interest is normally excluded. However, such a link could be established by the bill of lading issued by the slot charterer. This document is normally issued with the header of the slot charterer. It must not contain an “Identity of carrier” clause, which would designate the slot owner as a carrier (Slothire, cl. 13 (a, i)). However, the failure, by the slot charterer to fulfill his obligations would allow the cargo interest to question the mechanism established by the charter party. In the event that the slot owner is the ship owner, a bill of lading, issued without header should lead to designate, prima facie, the ship owner as the carrier. 27. No direct contractual action. – Apart from this case, French law does not allow any direct action on contractual liability for the benefit of the cargo interest, neither on the basis of subcontract, nor on the basis of the carriage commission. The solution stems from the common law : the case law has excluded any contractual direct action, even the presence of a subcontract, in the absence of successive transfers ownerships. Similarly, sea chartering is excluded from the scope of the article L. 132-8 of the (French) Commercial Code. The text states that the consignee is a party to the contract of carriage, as well as the freight forwarder and the carrier. The cargo interest therefore cannot act on that basis against the slot owner if he is not the carrier. 28. Lien. However, French law grants the cargo interests the possibility to act against the slot owner on the basis of article 1382 of the Civil Code. This liability based on torts liability of the cargo interests against the owner is privileged on the ship. First, because it is part of the “compensation for loss or damage to cargo” (c. transp. art. L. 5114-8, 5° in fine) ; and secondly, because the law (cf. c. transp.) does not exclude quasi-tort claims from its scope. Anyway, arbitration is excluded because of the absence of a contractual relationship between cargo interest and owner of the ship. But, nothing prevents the parties from concluding a “compromis d’arbitrage” and to agree to go to arbitration before any arbitration chamber and especially before CAMP. We did not have any case on this kind of issue, but the gate is totally open.

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