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Carriage of Goods by Sea, 2nd Edition by Girvin, Professor Stephen (7th July 2011)

Part I Introduction, 1 The Business of Carriage of Goods

From: Carriage of Goods by Sea (2nd Edition)

Professor Stephen Girvin

Subject(s):
Bills of lading and carriage of goods — Bulk goods

(p. 3) The Business of Carriage of Goods

  1. A. Introduction 1.01

  2. B. Cargoes 1.02

  3. C. Vessels 1.16

  4. D. Markets 1.26

  5. E. Parties 1.29

  6. F. Contracts 1.41

A. Introduction

Overview

1.01  The concern of this book is all aspects of the law relating to the carriage of goods by sea. Its main focus is therefore the legal relationships which follow from such carriage by sea. This chapter considers, in outline, the nature of the business which underpins the legal relationships entered into. It also introduces the dramatis personae‎ to the various contracts.

B. Cargoes

Introduction

1.02  In the 2008 trading year, an estimated 8,168 billion tonnes of cargo were transported by sea. This was almost double that in 19901 and reflects a continuing growth in the transport of cargoes to all four corners of the globe. The cargo transported is extremely varied. There are raw materials, such as oil, gas, coal, and iron ore; agricultural commodities, such as grain, oilseeds and cake, sugar, and refrigerated foods; industrial materials such as rubber, cement, fertilizers, fibres, and chemicals; and manufactured goods, which can include anything from motor cars to machinery and consumer goods.2 In this part of the book we look in more detail at some of these cargoes, as a vehicle for an understanding of the legal issues which are discussed in the chapters which follow.

Nature and size

1.03  When goods are carried by sea from one place to another in the course of international trade, it is their nature and size which ultimately influences the contractual relationships which the parties enter into. As we have seen, the goods shipped by sea comprise an almost infinite variety. Thus, bulk goods are invariably treated differently from general cargoes,3 containerized cargoes, and refrigerated cargoes. Oil cargoes and other types of energy products, such as LPG and LNG,4 have their own unique requirements. Bulk cargoes (p. 4) are usually shipped aboard vessels which are tramps or general ships, in the sense that they do not operate on a fixed schedule, but respond to the market and are chartered either on a time basis or a voyage basis. General cargoes, on the other hand, are usually shipped on a liner basis.5 Typically, general cargo consists of goods which have a high value in relation to their weight and volume. A definition of a liner service is that it is

a fleet of ships, with a common ownership or management, which provide a fixed service, at regular intervals, between named ports, and offer transport to any goods in the catchment area served by those ports and ready for transit by their sailing dates. A fixed itinerary, inclusion in a regular service, and the obligation to accept cargo from all comers and to sail, whether filled or not, on the date fixed by a published schedule are what distinguish the liner from the tramp.6

Dry bulk cargoes

1.04  Economists typically divide dry bulk cargoes into two main categories, the major bulks (iron ore, coal, and grain) and minor bulks7 (soya beans and soya meal, rice, sugar, fertilizers, metals and minerals, such as manganese ore and cement, and forest products, such as lumber and paper). Each cargo type has different properties and stowage requirements which have to be considered when they are being carried.8 Dry bulk cargoes are subject to controls laid down by international conventions, including the International Convention for the Safety of Life at Sea 1974 (SOLAS).9 Grain, whether for human or animal consumption, is subject to Chapter VI(C) of SOLAS which requires cargo ships carrying grain to comply with the International Grain Code.10 Grain also requires a high standard of hold cleanliness,11 is susceptible to water damage and so must be kept dry, and requires good ventilation as it is liable to heat and ferment.12 Another example, coal,13 is a dangerous cargo which may emit flammable gases, depending on methane content, is liable to spontaneous combustion,14 and can exacerbate the corrosion of the steel hull of the vessel owing to the presence of sulphur.15

Illustration 1: grain

1.05  The major bulks commodity, grain,16 is seasonal in its trade and is irregular both as to route and potential volume in a given year. It is highly susceptible to weather changes, such as the climatic changes which can occur with the El Nino and La Nina weather phenomena. Within the category of ‘grain’, wheat tends to account for about half the annual trade and is destined for human consumption. The rest consists of maize, barley, and oilseeds, mostly used for feeding animals.17 The USA and Canada together account for (p. 5) more than 53 per cent of the export market,18 followed by Argentina.19 A typical contract of carriage might involve the processing of Canadian wheat into consumer products, such as flour or starch. Spring-sown wheat harvested in the Canadian Prairies, such as Saskatchewan, Manitoba, or Alberta, will be shifted by truck from the production field to a local storage elevator and then fed by either the Canadian National Railway or Canadian Pacific Railway, across the Rockies to Vancouver or Prince Rupert or eastwards to Thunder Bay or Duluth on the St Lawrence. At the designated port, the wheat will be transferred to a quayside elevator while awaiting transfer to a ship. It will be necessary for the shipper, who will commonly be the seller of the goods, to transport such large quantities of grain by using the entire carrying capacity of a ship, probably a bulk carrier.

Illustration 2: iron ore

1.06  Although there are a great variety of ores, including chrome, manganese, copper, bauxite, and zinc, our concern here is iron ore,20 which is widely required for the steel industry21 and used in areas such as structural engineering, and for industrial applications, and also in the automotive sector. An estimated 844 million tonnes of iron ore was shipped in 2008, with Australia and Brazil accounting for over 70 per cent of iron ore exports worldwide.22 The major importers of the product were in Asia, with the lion’s share going to China, followed by Japan, and Western Europe. Iron ore is mined at location and then moved either by special trains or truck to the nearest port. One particularly striking example of such a process is the ore which is mined at Sishen in the Northern Cape (South Africa).23 A specially-constructed railway, the Sishen-Saldanha railway line transports the ore 861km from Sishen to the port at Saldanha Bay in the Western Cape. The trains use to transport the ore are 4km long, consisting of ten locomotives and 342 wagons and said to be the longest production train in the world. However, this startling statistic notwithstanding, the largest producers of iron ore are Vale in Brazil24 and the Anglo-Australian companies, BHP Billiton25 and Rio Tinto.26 Iron ore from Brazil is typically exported from the ports of Sepetiba and Tubarão Carajas, on the east coast of Brazil, while Australian ore is mined from Northwestern Australia and exported from Port Hedland, Dampier, and Port Walcott.27

Minor bulk cargoes

1.07  A much more diverse range of cargoes falls into the category of minor bulk cargoes. This can include anything from the so-called agribulks (such as soya beans, soya meal, rice) to sugar, fertilizers, metals, and minerals (such as bauxite, coke, cement, scrap), and also include steel products and forest products. Approximately 993 billion tonnes was shipped in 2008.28 Although sometimes shipped solely on bulk carriers, one of the features of these cargoes is that they sometimes lend themselves to shipment either in bulk or by liner (often containers). Examples of this variability in shipment methods include cement, fertilizers, and sugar, each of which can be shipped in bulk or bags. As was noted in relation to (p. 6) the major bulk cargoes, each of the main minor bulk cargoes also have unique properties which have to be taken into account for shipment purposes. Rice is liable to heat and sweat and hence good ventilation is essential. Fertilizers29 require very special handling and are classed within the IMDG Code.30

Illustration 1: sugar

1.08  Sugar comprises raw sugar, typically shipped in bulk, refined sugar, which is usually shipped in 50 kg bags, and molasses, which has to be shipped in products tankers. Much of it comes from various developing countries, such as Cuba, Thailand, Brazil, and the Dominican Republic, but other producers include South Africa and Australia. Sugar also needs to be carefully treated when shipped.31 Thus, it is liable to set hard if it becomes overheated, while if kept too cold the sugar content will diminish. As is the case with many other cargoes, sugar is particularly susceptible to water damage from fresh or salt water and will solidify and invariably be condemned in such a case.

Illustration 2: metals and minerals

1.09  This group of dry bulks comprises a range of metal-industry related products, comprising bauxite, coke, cement,32 scrap. Of these, raw bauxite33 is frequently used to produce alumina which is, in turn, refined to produce aluminium. Aluminium is mainly used in the transportation, packing, and construction industries.34 The largest producer of bauxite is Australia followed by China, Brazil, Guinea, and Jamaica.35 Aluminium is chiefly produced in China, followed by the Russian Federation, Canada, the USA, Australia, Brazil, Norway, and India.36 Bauxite is typically carried in most types of bulk carrier and is known to have a high moisture content and it may therefore be important when carrying such a cargo to make provision for differences between the weight of the cargo on loading and at out-turn. Alumina is an abrasive and this may create problems in cargo handling if preventive steps are not taken.

Liquid bulk cargoes

1.10  The class of cargoes known generically as the liquid bulks are of vital importance in world trade and represent approximately one-third of the total goods transported by sea.37 This consists principally of crude oil and its associated products, liquefied gas and liquid chemicals, and vegetable oils. By far the most important is crude oil and oil products.38 Although in earlier times trade in crude oil was somewhat predictable, this changed dramatically by the end of the late 1980s and is now recognized as a volatile and risky business.39 Oil cargoes typically originate in defined geographical areas, with the greatest source being the Middle East, which dominates. Saudi Arabia is still the world’s largest producer.40 Other important oil-producing countries include Mexico, Venezuela, (p. 7) West Africa (Nigeria, Angola), North Africa (Algeria, Libya), the North Sea, and the Russian Federation. Indonesia is important in South East Asia.41

Illustration 1: oil

1.11  A typical consignment of oil cargo, such as that destined for shipment from Ras Tanura, the main export terminal in Saudi Arabia, will be transported from the oil field to the port by pipeline where it is stored in large terminal areas with storage tanks. It is pumped on board tankers directly, at Ras Tanura from two piers and one sea island with a total of 18 berths, which can accommodate ships of up to 550,000 dwt. At the discharge port, which may be a deep water harbour or an offshore facility, such as the LOOP42 facility off New Orleans or the single buoy mooring (SBM) off Durban in South Africa,43 the oil will be discharged into a local oil terminal and then pumped to a refinery by pipeline or direct to a shoreside refinery.

Illustration 2: LPG

1.12  Liquid Petroleum Gas (LPG),44 is a generic name for three principal types of petroleum gas, namely propane, ethane, and butane, all of which are produced from crude oil, natural gas fields, and oil refining. But LPG transportation also typically involves the carriage of chemical gas, such as ammonia, and olefins of various types, which are inter alia‎ used for the manufacture of plastics and tyres. Propane and butane45 may be used as fuel for engines, oxy-gas torches, barbecues, portable stoves, and even central heating and refrigeration. For land transport, typically transportation is by gas pipeline but for sea transportation they must be liquefied to reduce their volume by 99.8 per cent. They may be transported by sea under pressure at ambient temperature, or fully refrigerated at temperatures ranging from minus 30°C and minus 48°C, or semi-refrigerated under a combination of pressure and reduced temperature. The largest importers of LPG are in North East Asia (Japan, China, and South Korea), followed by Western Europe and the USA.46 Ammonia, which boils at minus 33°C, is used principally for the manufacture of fertilizers and in the making of explosives and certain chemical processes. It is exported from Russia, Canada, Trinidad and Tobago, and Indonesia while major importers include the USA, India, South Korea, and Malaysia.

Illustration 3: LNG

1.13  Much more important than LPG is Liquid Natural Gas (LNG),47 the third most important energy source transported by sea after oil and coal. Natural gas is typically comprised of 70–90 per cent methane and the remainder natural ethane, propane, and butane.48 The process of liquefying natural gas reduces it in volume by around 600 per cent, typically when it is also cooled to minus 162°C. In 2008 almost 226.5 billion cubic metres of LNG was transported by sea.49 The main exporters were Qatar, Algeria, Indonesia, Malaysia, and Nigeria. The principal importers of LNG are Japan, South Korea, USA, Spain, France, and India.

(p. 8) Break bulk cargoes

1.14  Many cargoes do not need to be shipped in bulk mainly because the quantities involved are unlikely to require the use of the entire carrying capacity of a vessel. Such cargoes may include loose individual items, boxes, cartons, crates, bags, bales, or small quantities of liquid and, in traditional liner carriage, would be handled and stowed separately.50 The effect of such carriage may require the use of dunnage51 to keep in place the various individual items to limit damage by sweat,52 breakage, chafing, crushing, or contact with the hold. Breakbulk shipments53 are, however, traditionally characterized by relatively high labour costs because of time-consuming multiple handling of the goods. Thus, since the late 1960s, it has become common for loose cargo to be unitized,54 either as containerized cargo,55 or onto pallets56 which can easily be stacked and handled. These innovations have cut down on the movement of individual items of cargo from ship to shore and the reverse.

Containerized cargoes

1.15  In the nineteenth century the most important change in the shipping industry was the gradual move from sail to steam in the 1860s and 1870s. In the 1960s and 1970s, approximately a century later, there was a similar significant technological advance: from general cargo vessels carrying all kinds of cargoes to container vessels carrying containers which consolidate cargo. Indeed, the movement of goods in a single container by means of more than one mode of transport has led to a revolution57 in international and domestic trade.58 Although this was a US invention, in the sense that the first two recorded voyages were an experimental journey by the Ideal X from New York on 26 April 1956 and the inaugural sailing from San Francisco of the Hawaiian Merchant, a converted C-3 freighter, on 31 August 1958,59 it was introduced into British shipping by four leading British shipowners and then took off in a big way in continental Europe and in Japan. The packing60 of a cargo or a series of different cargoes into a single modular box—a container61—which can form a single lorry load, railway wagon load, or be transported by ship or aircraft has dramatic economic consequences, including increasing the speed of transit, reducing handling costs, and giving increased protection to the goods being transported since, in theory at least, the container can be transferred between different modes of transport in a single operation. In just a few decades, containers have become the principal form of general cargo transport and in the 2008 trading year some 137 million TEUs were shipped in containers along the trans-Pacific, Asia-Europe, and trans-Atlantic routes.62

(p. 9) C. Vessels

Introduction

1.16  As important as the cargoes carried are the ships which are used to carry them. In this section we look briefly at some of the main vessel63 types and their characteristics, as a vehicle for an understanding of the kinds of cargo disputes which may arise.

Multi-purpose cargo vessels64

1.17  Traditionally, at least until the 1970s, most general cargo was shipped aboard multi-purpose cargo vessels. Today, these vessels amount to 9.1 per cent of the total world fleet.65 Such vessels are attractive because they were able to accommodate a wide range of cargoes. Although displaced in some trades, because many general cargoes are now containerized, general cargo vessels still have a place in carrying goods. Typically, such a vessel would include ’tween decks,66 dividing each hold of the vessel into lower and upper portions, for the carriage of mixed general cargo, and helping to avoid problems caused by compression of overstowed cargo.67 Apart from holds for various types of general cargo, such multi-purpose cargo vessels might have tanks for carrying liquid cargoes and, usually, some refrigerated cargo as well. A further feature of such vessels is that they may have their own cargo handling gear, or derricks,68 with heavy lift ability. Alternatively, such vessels may be gearless, and hence dependent on shore-based cranes for loading and discharging of cargoes. The numbers of older type general cargo vessels of this sort have gradually diminished.69 Although very effective in being able to load a wide range of cargo types, a major drawback is the amount of time and labour which must be applied to load and discharge cargoes. A more modern solution has been to commission the building of general cargo vessels which are lo-lo70 vessels, having traditional holds and ’tween decks, but are also designed to hold containers71 as well as general cargo.72

Container vessels73

1.18  Container ships, or cellular container ships as they are sometimes referred to, are today a vital part of the commercial shipping scene and the liner trades in particular and comprise 13.6 per cent of the total world fleet.74 Although ISO standards75 identify a range of containers, the two main standard dimensions are 20ft × 8ft × 8ft 6in units and 40ft × 8ft × 8ft 6in units, which in the industry are measured as TEUs.76 The size and capacity of container ships has shown a tendency to grow; thus, by 2009, the average size had risen (p. 10) to 2,618 TEUs.77 The larger vessels tend to spend longer at sea,78 while smaller and mediumsized vessels tend to concentrate regionally. Container vessels tend now to be categorized as either Feeder (0–499 TEUs), Feedermax (500–999 TEUs), Handy (1,000–1,999 TEUs), Sub-Panamax (2,000–3,000 TEUs), Panamax (3,000–4,000 TEUs), post-Panamax (4,000–5,999 TEUs),79 and VLCs (over 6,000 TEUs).80 The last two named classes are too large for transit via the Panama Canal.81

Refrigerated ships82

1.19  Refrigerated vessels (or reefers) are vessels which are equipped to carry cargoes such as fruit, vegetables, meat, and fish and which must be refrigerated to preserve them. Precise control of temperature is vitally important. In many respects, these ships resemble normal cargo ships, with the principal exception that the main cargo spaces are refrigerated. However, more and more refrigerated cargoes are these days transported in reefer containers.83

Bulk carriers84

1.20  A significant proportion of the world fleet falls into the general category of bulk carriers.85 As the type suggests, they are manufactured for the carriage of general or specific bulk cargoes. As a class, bulk carriers are categorized as Handysize (10,000–39,999 dwt), Handymax (40,000–59,999 dwt), Panamax (60,000–99,999 dwt),86 and Capesize (over 100,000 dwt).87 Handysize bulk carriers are particularly useful in serving ports with draught and berth limitations.88 Major Handymax routes include the Black Sea to the Far East and the Far East to the Atlantic and the cargoes include fertilizers, grain, coal, bauxite, and iron ore.89 Panamaxes are of a size which can transit the Panama Canal and serve the trades in coal, grain, bauxite, and other minor bulks.90 Capesize bulk carriers are dependent on iron ore and coal.91 A major factor in the design of such vessels is flexibility, particularly in the case of vessels of smaller size, which carry minor bulk cargoes and smaller parcels of major (p. 11) bulk cargoes. However, equally important factors are cheapness and simplicity. For the operator of such a ship, questions of cubic capacity, ease of access to the holds, and cargo handling gear (or lack thereof ) are important considerations. The design of the holds of such vessels is a major safety consideration as bulk cargoes can shift easily and, if unchecked, can cause the vessel to capsize. A further point of difficulty has sometimes been associated with steel hatch covers. There were many well-publicized examples of this and other failures in the 1990s,92 and this eventually led to the adoption by the IMO of a new chapter into SOLAS 1974, Chapter XII.93 Many modern bulk carriers now have self-trimming holds94 which are sloped in such a way that cargoes can be loaded by gravity without having to trim the cargo.

Ore, Bulk, and Oil (OBO) carriers95

1.21  OBO carriers, or combined carriers, are essentially dry bulk carriers which are designed also to carry oil. They are susceptible to similar stresses as bulk carriers.96 The principal advantage of such ships is that shipowners are in a position to switch between the tanker and dry bulk markets and to reduce the amount of time spent in ballast by carrying dry and liquid cargoes on alternate legs. Up until the 1970s such vessels made substantial profits, particularly in the periods of tanker boom, but in subsequent years there has been a fall in such capacity and this class of vessels is now relatively unimportant compared with the tonnage and number of vessels of other types.

Ro-ro ships97

1.22  ‘Roll on, roll off’ ships were first developed from tank-landing craft used during World War II. They come in two principal versions, the better-known passenger version (or ro-ro ferry),98 and the version for cargo, which is sometimes referred to as a combi carrier.99 The main distinguishing feature of such vessels is a hinged ramp, typically offset at the stern, which allows motor vehicles (including passenger cars, trucks, trailers, bulldozers, and farm tractors) to drive on and off the vessel. The passenger version often permits access through a bow door and this allows vehicles to be stored on the car deck below the passenger accommodation areas. A number of disasters100 focused attention on this passenger type and were one of the factors which led to the promulgation of the International Safety Management Code (the ISM Code) as part of the SOLAS 1974 Convention.101 The cargo version has not attracted such adverse attention. One of the principal attractions of such vessels is that they permit relatively fast cargo handling while also allowing greater cargo flexibility. The price of this flexibility is that such ro-ro vessels do require particularly careful stowage planning. Originating in the 1960s, such vessels became attractive in those trades with cargoes which (p. 12) could not readily be containerized. Thus, such vessels are particularly useful for the carriage of general cargo which can be handled by a fork-lift truck, including palletized cargo, bales, and packaged timber. An important sub-type is the car carrier,102 a specialized ro-ro vessel which is designed to carry newly manufactured cars. Fires on board such vessels, unless contained, can prove devastating.103

Crude oil tankers104

1.23  A significant proportion of the world’s energy needs comes from crude oil and vessels for the transportation of this particular commodity form a significant part of the total world fleet.105 Oil tankers now vary enormously in size. The smallest tankers are those of less than 10,000 dwt.106 Handysized tankers are those of 10,000–59,999 dwt. In tonnage terms, the next class is Panamax tankers, which are capable of transiting the Panama Canal, and can be up to 79,999 dwt. Aframax tankers are those between 80,000–119,999 dwt.107 Suezmax tankers are those of a maximum tonnage for transiting the Suez Canal108 and may be up to 200,000 dwt. A number of factors have promoted the building of even larger tankers, particularly after the 1970s. The first of these was pure economics; an increase in physical size could be matched by an increase in the earning power of the ship, although this has to be set beside countervailing demands, such as investment in port infrastructure, primarily for the purpose of enlarging and deepening facilities for accommodating such large vessels. Political factors, such as war, have also played a role in the increased size of oil tankers.109 The biggest class of tankers are VLCCs,110 which carry up to 350,000 tonnes of oil, and ULCCs,111 which can carry over 350,000 tonnes of oil. A notorious feature of the tanker trade was highlighted in 1967 when the Torrey Canyon struck Pollard’s Rock in the Seven Stones reef midway between the Scilly Isles and Land’s End, discharging much of her oil cargo into the sea.112 The resultant outcry was the catalyst for work on liability and compensation within the IMO, directed by that organization’s newly-established Legal Committee.113 Later disasters, such as that involving the Amoco Cadiz,114 which ran aground off the rocks at Porsall in Brittany in 1978, and the Exxon Valdez, which grounded in Prince William Sound in Alaska in 1989,115 have led to a raft of measures which have sought to address safety problems with tankers, including issues relating to structural weakness, lack of (p. 13) manoeuvrability, low buoyancy margins, and anchoring and towing difficulties.116 Particular responses have included the Convention for the Prevention of Pollution from Ships (MARPOL) of 1973, and, in the years following the Exxon Valdez incident, tough domestic legislation in the USA117 and a particular focus on single hulls. Most tankers had single hulls only until well into the 1990s, but in 1992 an important amendment was made to MARPOL, which enacted a new Regulation 13F which requires tankers built after July 1993 to have a double hull.118 Provision was also made, in Regulation 13G, for the phasing-out of the existing fleet of single hulled tankers. Following the Erika incident in 1999, when a tanker carrying 30,000 tonnes of heavy fuel oil broke up in heavy seas off the coast of Brittany (France),119 and the Prestige incident in November 2002, when a tanker laden with 77,000 tonnes of heavy fuel oil broke in two off the coast of Galicia (Spain),120 the timetable for phasing out has picked up speed and further amendments have been made to Regulation 13G, advancing the phase out of single hulls with effect from 5 April 2005.121 The Erika and Prestige incidents have also led to similar moves within the European Union.122

Products tankers123

1.24  Products tankers, as the name suggests, carry oil products, ranging from crude oil to so-called ‘clean’124 and ‘dirty’125 petroleum products being carried from refineries to consumers.126 However, such vessels also carry acids, vegetable oils, molasses, caustic soda, and other chemicals. Products tankers are characterized by having coated tanks to prevent the refined product from corroding the tanks and to ease the cleaning of the tanks when switching the product type carried.127 Global trade in such products has increased significantly but the fleet is still considerably smaller than the equivalent fleet of crude oil tankers. A particular feature of this class of vessel is its ability to carry many different types of cargoes as parcels within the ship, hence the further name, ‘parcels tanker’, which is sometimes also used.

Liquid gas carriers128

1.25  While not as important in deadweight terms as most other major classes of vessels discussed here, liquid gas carriers have emerged as an important, though niche sector, in the last 30 years or so. There are two main types: liquid petroleum gas (LPG) carriers129 and liquid natural gas (LNG) carriers.130 The former type carries liquid petroleum (p. 14) gas, such as butane or propane, which is housed in special tanks capable of freezing the gas to very low temperatures. Typically, such carriers may be divided into four groups, namely, (i) fully pressurized vessels, for the carriage of liquefied gas in typically two to six cylindrical carbon steel pressure tanks built into the hull; (ii) semi-refrigerated vessels, which have pressurized tanks constructed of carbon steel; (iii) fully refrigerated vessels, built for the long-haul trades, and carrying the cargo in unpressurized prismatic cargo tanks made of heat-treated carbon steel or alloy; (iv) ethylene carriers, which carry ethane and ammonia in insulated, self-supporting tanks. LNG carriers transport natural gas, or methane, and are notable for special domed or cylindrical tanks which protrude above the deck. Considerable skill is required to design such vessels which load, transport, and discharge their liquid cargoes at a temperature of minus 161.5°C. Given the highly volatile nature of such cargoes, the manufacture of such ships and the carriage of their cargoes is subject to strict regulatory control in the form of Part C of Chapter VII of SOLAS 1974, as amended, which mandatorily applies the International Gas Carrier (IGC) Code131 to all gas carriers built after 1 July 1986.

D. Markets

Markets

1.26  One of the most important considerations in operating a ship, making a decision whether to order a newly built ship or to sell a ship on the sale and purchase market, is the state of the market for freight at any one time. Essentially the market for freight is the sum of all the different markets for the different types of vessels discussed above and, like all markets, is dependent on the forces of supply and demand.132 Shipping economists make a distinction between two different types of transaction: freight contracts, in which a shipper buys transport from the shipowner at a fixed price per ton of cargo and time charter, under which the ship is hired on a daily basis.133 Freight contracts suit those who prefer to pay an agreed sum, leaving the management of the transport to the shipowner while time charterparties134 are best suited to experienced operators who are comfortable making their own commercial arrangements.

The freight market

1.27  Many freight contracts are negotiated on the basis that a shipper only requires space on a ship, rather than the entire carrying capacity of the ship.

The charterparty market

1.28  Most charters135 of ships, are tramps,136 which are fixed where and when particular cargoes become available. The charter market for ships is highly competitive and the costs of chartering can fluctuate significantly, depending upon market conditions.137 As with other types of markets, including the markets for the different commodities, the (p. 15) market changes on a daily basis covering geographical areas as well as the whole spectrum of types, sizes, and features of ships. The market reacts quickly to wars, wherever they occur, sudden changes in demand for specific commodities, an economic boom or severe recession, the closure of important routes, crop failures, congestion in particular ports, over- or undersupply of specific ship types, late or early closure of ice-bound waters,138 and dramatic increases in piracy, as for example off the east coast of Africa since 2008.139 Information on the state of the market is readily available from larger firms of specialized shipbrokers,140 but also published in print form daily in Lloyd’s List,141 and weekly in Fairplay magazine.142

E. Parties

Sellers and buyers

1.29  Most contracts for the carriage of goods are ancillary to other contractual arrangements, such as contracts of sale and financing, between parties in different countries.143 Of especial importance here are contracts for the international sale of goods, with a seller (often the shipper) located in one country, and a buyer in a different country. The responsibilities of sellers and buyers under the contracts of sale will depend upon the terms of the sale contract entered into. The underlying principles governing such sales may be the common law and statute,144 where English law is stated to apply,145 or INCOTERMS 2000, to the extent incorporated by the parties.146 The Vienna Convention on the International Sale of Goods (CISG) may also be relevant,147 where not excluded.148 In the case of an f.o.b.149 sales contract, the seller’s principal obligation is to perform his duty to load the cargo, although under certain types of f.o.b. sale he may have documentary obligations.150 (p. 16) Thus, under the ‘classic’ type, he must ‘procure a bill of lading in terms usual in the trade’.151 Under a c.i.f.152 contract, the seller must ship the goods to a named destination, take out insurance on the terms usual in the trade while the goods are in transit,153 and, within a reasonable time after shipment,154 tender the shipping documents to the purchaser.155 The seller’s obligation is to enter into a ‘proper’ contract of carriage156 which would cover the whole transit of the goods from the port of shipment to the port of discharge, breach of which would entitle the buyer to reject the bill of lading. Thus, in many cases, the seller of the goods is also the shipper of the goods and named as such on the face of the bill of lading.

Agents: forwarding agents

1.30  It would be an onerous responsibility for the parties to carriage contracts to make their own arrangements for shipment. Accordingly, most parties make use of specialized agents for this purpose. In the case of a straightforward port-to-port shipment the seller (or shipper) will make use of the services of a forwarding agent, or freight forwarder,157 to arrange all the formalities relating to shipment of the cargo.158 Traditionally, these services would include booking space on a ship, preparing in advance a bill of lading, sending a draft to the loading brokers, or agents for the shipowner, arranging for the goods to be brought alongside, arranging customs clearance, and collecting the signed bill of lading after shipment.159 Ultimately, however, the extent of a freight forwarder’s responsibilities must be determined by reference to the contract upon which he has been engaged,160 for he may agree to perform more than these basic functions.161 In addition to these traditional duties, forwarders, when acting as agents, may also undertake further responsibilities, which may extend to the packaging, warehousing, lighterage,162 and insurance of the goods. Some forwarders may also carry out functions as consolidators or groupage operators grouping together several compatible consignments into a full container load. In such a case the forwarder will issue a house bill of lading163 for the particular shipper’s consignment. The forwarder will receive from the carrier a groupage bill of lading, covering all the consignments. A particular difficulty which sometimes arises is whether the forwarder is acting as an agent or whether he is acting as principal.164

(p. 17) Agents: loading brokers

1.31  Loading brokers are agents acting for the shipowners, usually at the port of loading. Among their principal functions are advertising sailings by the shipping line and obtaining cargoes for carriage.165 They will sign bills of lading on behalf of the master, receive payment of freight166 on the shipowners’ behalf, and will be paid commission on the freight engaged. Loading brokers have a lien on the bill of lading, and thus indirectly on the goods, for these commission charges.167

Shipowners

1.32  The ownership of ships is an expensive and risky business. This after all is one of the reasons why, historically, limitation of liability was justified.168 Container ships and tankers can cost up to US$150m while LNG tankers, the most expensive, can cost up to US$225m.169 Apart from the financing of the purchase,170 there are many other commercial criteria which will impact on a decision to venture into shipowning. Not least of these will be decisions as to the choice of ship’s flag,171 which determines the law to which the vessel is subject and, importantly, the fiscal regime.172 Operating costs, particularly the costs of labour, and access to finance might also determine the choice and, for many shipowners, this may be an incentive to flag with an open registry.173 Shipowning companies are typically structured in the way which exposes the shipowner to the least risk.174 Thus, there may be a beneficial owner,175 who is the ultimate controlling owner who benefits from the profits made but is not the registered shipowner. Beneficial ownership is commonly associated with one-ship companies,176 companies which are incorporated with just one ship and no other assets, which protects the beneficial owner from claims.177 Another device for owning ships is to form a holding company, the sole assets of which are the shares in each one-ship company. Day-to-day running of the ships owned by the holding company may be vested in a management company, formed specially for this purpose.

Carriers

1.33  Carriers can include a range of individuals who enter into contracts of affreightment178 with other charterers or shippers for the shipment of cargoes.179 The identity of the carrier may depend upon the particular contract of carriage which is entered into. In the most straightforward scenario, the contract will be embodied in a liner bill of lading with a (p. 18) shipper, with the registered shipowner as the carrier. If, however, the vessel is under charter, the charterer may be the carrier, especially if the contract is on his standard form. The charterer may seek to restrict his liability under the bill of lading by inserting in it a demise clause or identity of carrier clause180 which identifies the registered shipowner as the carrier although the highest court has since indicated that information on the face of the bill of lading, rather than the terms on the reverse, is to be prioritized.181 A further scenario is where the shipper enters into a contract which involves at least two legs, usually including one at sea, with a combined transport operator (CTO) or multimodal transport operator (MTO)182 carrying on business as a freight forwarder. In such a contract the CTO or MTO may be responsible for the carriage of goods from the time of shipment until they are received by the consignee at the destination.183 In many cases the freight forwarder would be combining the shipments of many small shippers who are too small to deal directly with a shipping line. Thus, the CTO or MTO will often contract not only for a sea leg, but also the carriage of the cargo to an inland destination. In such circumstances, whether he is the ‘carrier’ for the purpose of suit by the shipper or receiver will depend upon a construction of the contract.

Charterers

1.34  Few large shipping companies necessarily have available the tonnage which may be needed to respond to the demands of the freight market at any one time, whether there is an oversupply or shortage of particular types of vessels. For this reason, much of the world fleet is on charter at any one time and it is, for example, a well-known fact that most major liner shipping companies charter many of the ships that they use.184 The shipowner will place his ship on the market for hire and, when this is agreed, it is said that the ship has been ‘fixed’. The hirer may, depending on the contract, be a time charterer, a time trip charterer, a voyage charterer, a consecutive voyage charterer, a slot charterer, or a demise charterer.185

Disponent owners

1.35  A disponent owner is a person who is not the shipowner but who charters the ship and controls its commercial operations, usually under a time charterparty. The disponent owner may sub-charter the vessel under the time charterparty.186

Consignee

1.36  The consignee is the person named in the bill of lading to whom the goods have been consigned and who is entitled to delivery at the discharge port.187 His name will be stated in the appropriate box on the face of the bill of lading.188 If the bills of lading name the consignee and are to order, they are said to be made out to the order of a named consignee.189

Consignor/shipper

1.37  The consignor or shipper is the person who places the goods in the charge of the carrier. He may be (and often is) named as the shipper in the bill of lading.

(p. 19) Tally clerks

1.38  A tally clerk is a person employed by a shipping company, a shipper, a receiver, or a stevedoring company, to carry out a physical count of the cargo which is being loaded or discharged from a vessel. Entries as to this cargo are recorded in a tally sheet or tally book and the information recorded relates to the number of pieces, their description, and also any distinctive marks190 on the goods or packaging, for the purpose of identification.

Stevedores

1.39  Stevedores or longshoremen,191 or dockers, are individuals (or more likely a company) providing the service of loading, stowage, and unloading of ships. Stevedores are invariably independent contractors and shipowners will not be vicariously liable in tort for damage caused in the course of their work.192 Charterparties often make provision for the payment of stevedores193 and also the question of liability for damage.194 In such a case the question may also arise as to whether the stevedore is the servant of the owners or charterers, but it is probably true to say that no principle can be laid down. A further point is whether or not stevedores might rely on the terms of a Himalaya clause.195 It is now apparent that an appropriately worded clause may indeed extend the terms of contractual clauses to stevedores.196

The master

1.40  Of all shipboard personnel, it is the master or captain who is the most important, as he is in command of the ship.197 To reach this position he will have progressed through the deck officer positions, from third mate to second mate to first mate and will have served in these capacities in a number of different ships. His principal responsibility is the safety and welfare of everybody who sails on the vessel, the vessel itself, and its cargo. Other tasks for which he is commonly responsible include: planning of the ship’s route; ensuring that all maritime laws, rules, and regulations are followed; ensuring that the speed, position, and course of the ship are correct; ensuring that a log is kept of events, weather conditions, and the ship’s position; ensuring that repairs, fuel, and supplies for the ship are arranged; ensuring that the vessel is maintained; ensuring that the loading, unloading, and stowing of cargo is supervised; overseeing any harbour pilot198 when entering and leaving ports. Some of these basic functions may vary considerably, depending upon the type of company and the type of contract under which the master is engaged. So far as the shipowner is concerned, the master is his agent and the scope of his authority as such will be defined in his contract of employment. In relation to contracts of carriage, the master must sign bills of lading ‘as presented’,199 but may not vary the contract. If he signs bills of lading for goods which are not actually shipped, the carrier will be bound by his signature.200 He is not bound to sign bills of lading (p. 20) which contain some discrepancy, such as a false statement,201 and must note on the face of the bill of lading any qualification to the statement that the goods are shipped in ‘apparent good order and condition’.202

F. Contracts

Contracts of affreightment

1.41  Although also used in a technical sense,203 the term contract of affreightment is also a generic term for all contracts of carriage by sea.204 Thus whenever a shipowner, or some other person, agrees to carry goods by sea in return for the payment of freight205 or hire,206 such a contract is a contract of affreightment.207 In this part of the chapter, we look further at each of the main types which will be encountered in this book.

Destination

1.42  Considerations of quantity and destination are among the principal factors which determine the form that a contract of affreightment will take. If the contract is for a sea voyage only, or port-to-port, the contract of affreightment will reflect this by being in an appropriate form.208 On the other hand, if the contract is intended to be door-to-door, or from the shipper’s inland destination to the buyer’s inland destination, the contract of affreightment may reflect the fact that it is for through transport to the destination. A contract which involves two or more modes of transport is known as a through contract or a multimodal contract.

Nature and size

1.43  The nature of the goods and their size are two further factors which will affect the contract of carriage entered into. In the case of the bulk cargoes discussed earlier in this chapter, it is likely that the shipper will need the entire carrying capacity of the ship. In such a case, he will charter a whole ship, or part of a ship, either on a time or voyage basis or, if he intends to contract on the basis of long-term contract lifting the same cargoes, on a contract of affreightment or volume contract.209 It would not, however, be necessary to charter the entire carrying capacity of a vessel for the carriage of most goods, apart from bulk goods, and the contract of carriage in such a case would be a bill of lading. If the bill of lading is issued in a liner trade, it will be a liner bill of lading. However, the bill of lading may be a charterparty bill of lading if it is issued pursuant to a charterparty. Finally, as we have previously noted, bills of lading can also be issued by freight forwarders—so-called house or groupage bills of lading—and, in the case of contracts which are door-to-door, through transport bills of lading and multimodal bills of lading.210 Where the parties have no need for (p. 21) a bill of lading, particularly in the case of short sea shipments and where goods are moved between the constituent companies in a corporate group, a sea waybill211 may be issued.212

Standard forms

1.44  Most charterparties are fixed on published standard forms213 and it would today be quite unusual to have an oral charterparty, usually because of the disputes which might arise from not finally agreeing the terms, although an oral agreement is legally possible.214 One of the positive features of agreeing terms on a printed standard form is that it should make the negotiation of the final contract much easier. The negative side of this practice lies in the fact that the contracting parties may not apply their minds to the terms as printed or that rider terms or amendments are introduced without adequate consideration of existing printed terms.

Time charterparties215

1.45  For a shipowner, the main advantage of fixing a ship on time charter is that he has the security of an assured income throughout the period of the charter. Large vessels, in particular, are usually heavily mortgaged and the financial risk in not having the vessel earning is usually a powerful incentive to time charter. This is also assisted by the fact that, with some types of cargoes, supply and demand is relatively well known and this also lends itself to time charters. However, where the market is rising, it is less attractive to time charter, simply because the shipowner will lose out on the better rates available in a bullish market. On the other hand, in a falling or bearish market, there is clear financial advantage for a shipowner in fixing on a time basis. The fundamental principle of time chartering is that the shipowner provides the charterer with the services of the ship and its crew for the stated period of time. The shipowner runs the ship, takes out hull and machinery insurance and P & I insurance,216 is responsible for the hiring and remuneration of the master and crew, but is not responsible for finding commercial employment for the ship. The charterer has to find employment for the ship and must pay hire to the shipowner throughout the period of the charterparty.217 There are a range of standard forms in use in the industry. Pre-eminent among the general forms are the New York Produce Exchange Form, NYPE 93,218 and its predecessor NYPE (1946), which are widely used in the market.219 Another equally wellknown general form is Baltime 1939,220 which is an ‘approved’ form by the well-known organization, BIMCO.221 BIMCO also produces a newer form, Gentime, intended as an alternative to the NYPE 93 form. There are specialized time charterparty forms for the (p. 22) carriage of oil, most of them associated with the major oil companies and these include Shelltime 4222 and BPtime 3.

Time trip charterparties

1.46  The time trip charterparty, or trip charterparty, is a hybrid type of charterparty, usually on one of the well-known time standard forms.223 The difference between a trip time charter and a period time charter, however, is that a trip charterparty is for a single trip or voyage only, defined more precisely or quite loosely.

Voyage charterparties224

1.47  A shipowner who fixes his vessel for single voyages is better placed to respond quickly to a rising market. On the other hand, he can also be adversely affected when freight rates are in a trough. It is often a question of luck or good judgement in estimating when freight rates will stop rising and how long they will remain depressed. Seasonal commodities, such as grain,225 are particularly well suited to voyage chartering.226 However, whether a commodity is shipped on a voyage or time basis will ultimately depend on the particular preferences of shipowners and charterers. A voyage charterparty involves the chartering of a ship for a single voyage from the port of loading to an agreed delivery port or range. The shipowner is responsible for paying for virtually everything, with the exception of delays at the loading and discharge ports, which are paid for by the charterer by way of charterparty freight and in agreed days or hours for loading and discharge, known as laytime. If the charterer exceeds these agreed days or hours, he is liable to pay demurrage at an agreed rate.227 There are a full range of standard forms charterparties available. The most widely used general form is Gencon (1994). Multiform 1982, intended to replace Gencon, has not generated nearly as much interest as was hoped.228 Among the forms for specialized commodities may be mentioned the following: Amwelsh 93, for coal, is one of the oldest. Centrocon is a well-known form used for grain carriage from South America, while Synacomex, also for grain, is issued by French charterers. Two of the best known North American grain forms are Norgrain 89 and Baltimore Form C. Among other commodities, may be noted Nubaltwood (1964), for timber and Sugar 77, for sugar. There are a number of well-known forms for oil, the best known of which is Asbatankvoy. Other important forms are connected with oil companies, and include Shellvoy 6 and Beepeevoy.

(p. 23) Contracts of affreightment (COAs) or volume contracts230

1.49  In some cases, it may be necessary for a shipper to transport large quantities of a particular commodity which far exceeds the carrying capacity of a particular ship. It would, therefore, be necessary to use the carrying capacity of many ships.231 Such a contract is known as a contract of affreightment (COA), used here in its more precise technical sense. Such contracts are sometimes simply known as ‘volume’ contracts.232 They share many of the characteristics of voyage charterparties. For this reason, the parties often choose simply to use one of the well-known voyage forms, modified for a succession of contracts. Alternatively, they may use one of the specialized standard form contracts which are available, such as Volcoa, for dry cargoes, or Intercoa 80, for oil.

Slot charterparties

1.50  Slot charterparties233 involve the chartering of a part of a ship. This type of charter is quite common in the chemical parcels trade234 but is increasingly common in trading in container vessels. Slot charterparties have been described as follows by BIMCO:

The feature of a slot charterparty as a contract of carriage is unique in the sense that, whereas the slot charterparty is neither a time charterparty nor a voyage charterparty, it bears some similarity to both types of contract. As such, a slot charterparty can be said to be a hybrid type of contract. It may be mentioned that, as distinct from a time charterparty when the entire vessel is being chartered, the slot charterers are only hiring space on a vessel and they are therefore not acting as operators as under a time charterparty and usually have no control over the operation of the vessel.235

Demise (bareboat) charterparties236

1.51  Demise or bareboat charterparties237 are quite different, in several respects, to all the other types we have encountered so far. The fundamental difference in the case of a demise charterparty is that possession and control of the vessel passes to the charterers, which vessel is supplied ‘bare’ to them. As confirmed by Evans LJ in The Guiseppe di Vittorio:

[The hallmarks of the demise charter] … are that the legal owner gives the charterer sufficient of the rights of possession and control which enable the transaction to be regarded as a letting—a lease, or demise, in real property terms—of the ship. Closely allied to this is the fact that the charterer becomes the employer of the master and crew. Both aspects are combined in the common description of a ‘bareboat’ lease or hire arrangement.238

Whether or not a charterparty amounts to a demise of the vessel will depend upon construing its terms, looking at those terms as a whole:

… [t]he question depends, where other things are not in the way, upon this: whether the owner has by the charter, where there is a charter, parted with the whole possession and control (p. 24) of the ship, and to this extent, that he has given to the charterer a power and right independent of him and without reference to him to do what he pleases with regard to the captain, the crew, and the management and employment of the ship. That has been called a letting or a demise of the ship. The right expression is that it is a parting with the whole possession and control of the ship; and in such case the captain is not the captain of the owner, and if so he has no authority to bind the owner by any bill of lading or by any contract.239

Demise charterparties are not uncommon and are used mainly for those periods of time when the charterer wishes to hire a vessel, with full operational control, or by way of a longterm lease of the vessel, for its entire commercial life. In the former case, it is not unusual to find such demise chartering in the case of passenger ferries, cruise ships, and yachts. Charterers in such cases are usually permitted to change the vessel’s name, to use their own markings on the vessel’s funnel, and to fly their chosen flag. In return for this, the charterer is responsible for the costs of repair and maintenance and also for insurance. In the case of a long-term lease, the scenario is that of a finance charter or lease, with the lessor as financier and holding title, but with all operational responsibilities on the lessee. This is a popular form of ship finance, usually because of the tax incentives offered by flag states. The capital cost of the vessel may be offset against the taxable profits on the vessel. There are a relatively small number of standard forms in use, by far the most popular of which is the Barecon (2001) form.240

Footnotes:

1  Review of Maritime Transport 2009 (UNCTAD, 2009), 8.

3  ie those cargoes which are too small for bulk shipment and which do not warrant the use of the entire ship space. Also known sometimes as ‘break-bulk’.

4  ie Liquid Petroleum Gas and Liquid Nitrogen Gas. See Packard (2004), ch 19.

5  By shipping lines, as private (rather than common) carriers. See especially Graham McBain, ‘Time to Abolish the Common Carrier’ [2005] JBL 545.

7  See para 1.07 below.

9  Chapter VI.

10  The International Code for the Safe Carriage of Grain in Bulk, adopted by resolution MSC.23(59).

11  As testified by a number of reported London arbitrations, where hold cleanliness has been an issue: see London Arbitration 11/05 (LMLN 665); London Arbitration 14/03 (LMLN 622); London Arbitration 23/89 (LMLN 259).

12  For full consideration, see Sewell (1999); Packard (2005), ch 7.

13  See the Code of Safe Practice for Solid Bulk Cargoes (IMO, 2001), App B, 69–74.

14  See, eg, London Arbitration 20/86 (LMLN 184); The Athanasia Comninos & Georges Chr Lemos [1990] 1 Lloyd’s Rep 277. See also para 21.20 below.

16  On the carriage of grain generally, see Sewell (1999); Packard (2004), ch 4; Stopford (2009), 453.

17  In 2008, 323.3 million tonnes of grain were shipped and of this wheat accounted for 110 million tonnes and so-called ‘coarse grains’ (ie maize, barley, soybeans, sorghum, oats, and rye) 213.3 million tonnes: Review of Maritime Transport 2009 (2009), 23.

18  Ibid.

19  Argentina accounted for 11 per cent of production in 2008: Review of Maritime Transport 2009 (UNCTAD, 2009), 21.

20  On the carriage of iron ore generally, see Stopford (2009), 446; Packard (2005), ch 10.

21  See particularly the detailed treatment in Sparks & Coppers (2009).

22  Review of Maritime Transport 2009 (UNCTAD, 2009), 22.

23  South Africa exported 31.6 million tonnes of iron ore in 2008: ibid.

24  See <http://www.vale.com> (accessed 14 February 2011).

25  <http://www.bhpbilliton.com> (accessed 14 February 2011).

26  <http://www.riotinto.com> (accessed 14 February 2011).

28  Review of Maritime Transport 2009 (UNCTAD, 2009), 24.

29  See Packard (2004), ch 8.

30  ie the International Maritime Dangerous Goods Code. This Code was adopted by resolution MSC.122(75) of the IMO and its application is made mandatory under SOLAS, ch VII.

31  Lloyd’s Survey Handbook (1999), 252; Packard (2004), 72.

32  See Packard (2004), ch 9.

33  At 131.

34  Review of Maritime Transport 2009 (UNCTAD, 2009), 85.

35  Ibid.

36  Ibid.

37  Ibid, 94.

38  In 2008, 2,749 billion tonnes of crude oil was shipped: see ibid, 8.

40  13.1 per cent of the total market share in 2008: Review of Maritime Transport 2009 (UNCTAD, 2009), 16.

41  Ibid.

42  ie ‘Louisiana Offshore Oil Port’. Around 12 per cent of all US oil imports arrive via this particular facility. See Kendall and Buckley (2001), 156–8; <http://www.loopllc.com> (accessed 14 February 2011).

43  Approximately 75 per cent of the country’s crude oil imports are received through this SBM. This was replaced in June 2009. See <http://www.sapref.co.za> (accessed 14 February 2011).

44  See Stopford (2009), 478; Packard (2004), 231.

45  Both these gases fall within the IMDG Code, Class 2.1.

47  At 483. See also Packard (2004), 229.

48  This also falls within IMDG Code, Class 2.1.

49  Review of Maritime Transport 2009 (UNCTAD, 2009), 91.

50  For an example of a stowage plan for the carriage of general cargo, see Packard (2005), 9.

51  ie pieces of wood, burlap (coarse canvas), or matting.

54  Unitization is said to increase the rate of loading and discharging of the ship and help contain costs.

55  See para 1.15 below.

56  ie flat trays which can be moved by fork-lift truck, on which single or multiple units can be packed for easy handling.

57  See, eg, W David Angus, ‘Legal Implications of the “Container Revolution” in International Carriage of Goods’ (1968) 14 McGill LJ 395.

59  At ch 16. See also Hayuth (1987), 1.

60  Or ‘stuffing’, to use the trade jargon.

61  For illustrations of the different container types, see Branch (2007), 362–3.

62  An increase of 5.4 per cent over the previous year. See Review of Maritime Transport 2009 (2009), 24.

63  The terms ‘vessel’ and ‘ship’ are often used interchangeably. In law the Merchant Shipping Act 1995, s 313(1), states that ‘“ship” includes every description of vessel used in navigation’. The latter phrase ‘used in navigation’ has caused difficulty: see R v Goodwin (Mark) [2005] EWCA Crim 3184; [2006] 1 WLR 546; The Von Rocks [1998] 2 Lloyd’s Rep 198; Steedman v Scofield [1992] 2 Lloyd’s Rep 163.

64  See Stopford (2009), 585; Branch (2007), 67. See, eg, Transgrain Shipping BV v Global Transporte Oceanico SA (The Mexico I) [1990] 1 Lloyd’s Rep 507 (CA), discussed at para 32.26 below.

65  Review of Maritime Transport 2009 (UNCTAD, 2009), 38.

66  As in Kallang Shipping SA Panama v AXA Assurances Senegal (The Kallang No 2) [2008] EWHC 2761 (Comm); [2009] 1 Lloyd’s Rep 124.

68  See Brodie (2010), 51.

69  Many excellent examples from former times are to be found in Gardiner (1994), ch 2.

70  ie ‘lift on, lift off’.

71  For container ships generally, see para 1.18 below.

75  See <http://www.iso.org> (accessed 14 February 2011).

76  ie ‘Twenty Foot Equivalent Units’.

78  The largest container ships include a fleet of eight 15,500 TEU vessels owned by Maersk Line (see <http://www.maerskline.com/link/?page=brochure&path=/our_services/vessels> (accessed 24 March 2011)) and a fleet of nine 14,000 TEU vessels owned by the Meditterranean Shipping Company (MSC) (see <http://www.mscgva.ch/> (accessed 24 March 2011)).

79  eg the MSC Napoli, of 4,419 TEUs, which had to be broken up by salvors after getting into difficulties and having to be beached at Branscombe (Dorset). See now Metvale Ltd v Monsanto International SARL (The MSC Napoli) [2008] EWHC 3002 (Admlty); [2009] 1 Lloyd’s Rep 246, discussed at para 30.50 below.

81  See <http://www.pancanal.com> (accessed 14 February 2011), the website of the Panama Canal Authority.

83  See, eg, Tasman Orient Line CV v New Zealand China Clays [2010] NZSC 37; [2010] 2 Lloyd’s Rep 13, discussed at para 29.08 below.

84  See Stopford (2009), 590; Branch (2007), 52; Gardiner (1992), 14. See, eg, Cobelfret Bulk Carriers NV v Swissmarine Services SA (The Lowlands Orchid) [2009] EWHC 2883 (Comm); [2010] 1 Lloyd’s Rep 317, discussed at para 32.41 below.

85  In 2009, this type made up approximately 35 per cent of the total world fleet. There was a 7 per cent increase over the deadweight tonnage of the previous year. See Review of Maritime Transport 2009 (2009), 37–8.

86  Such as the Achilleas. See Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48; [2009] 1 AC 61, discussed at para 33.51 below.

87  Stopford (2009), 590. But cf the marginally different tonnages suggested by Branch (2007), 60.

88  See, eg, Branch (2007), 61.

89  Ibid.

91  At 592. See, eg, Seagate Shipping Ltd v Glencore International AG (The Silver Constellation) [2008] EWHC 1904 (Comm); [2008] 2 Lloyd’s Rep 440.

92  See Stephen E Roberts and Peter B Marlow, ‘Casualties in Dry Bulk Shipping (1963–1990)’ (2002) 26 Marine Policy 437.

93  ‘Additional Safety Measures for Bulk Carriers’, entered into force on 1 July 1999 and has since been amended in 2002 and 2004.

94  See, eg, IMT Shipping & Chartering GmbH v Chansung Shipping Co Ltd (The Zenovia) [2009] EWHC 739 (Comm); [2009] 2 Lloyd’s Rep 139, discussed at para 33.124 below.

96  eg The Derbyshire, which was lost with all hands off Japan on or about 9 September 1980. For litigation involving the vessel, see Coltman v Bibby Tankers Ltd (The Derbyshire) [1988] AC 276.

97  Stopford (2009), 585. See, eg, Tor Line AB v Alltrans Group of Canada Ltd (The TFL Prosperity) [1982] 1 Lloyd’s Rep 617.

98  Such ferries are commonly used in short sea transportation, such as between continental Europe and the UK.

99  See Branch (2007), 62.

100  In particular the Herald of Free Enterprise disaster off Zeebrugge on 6 March 1987 and the Estonia disaster on 28 September 1994. See Boisson (1999), 218; Hooke (1997), 272.

101  See ch IX.

102  See Branch (2007), 74.

103  See, eg, Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) [2002] EWHC 118 (Comm); [2002] 1 Lloyd’s Rep 719.

105  In 2009 approximately 35 per cent of the total world fleet comprised tankers for the carriage of crude oil. See Review of Maritime Transport 2009 (2009), 38.

106  ‘deadweight tonnage’, ie the total weight of cargo, fuel, fresh water, stores, and crew, of a vessel when loaded to her summer loadline. See Brodie (2010), 50.

107  See, eg, AIC Ltd v Marine Pilot Ltd (The Archimidis) [2008] EWCA Civ 175; [2008] 1 Lloyd’s Rep. 597, discussed at para 21.25 below.

108  Controlled by the Suez Canal Authority. See <http://www.suezcanal.gov.eg> (accessed 14 February 2011).

110  ‘Very Large Crude Carrier’. See, eg, ENE Kos 1 Ltd v Petroleo Brasileiro SA (The Kos) [2010] EWCA Civ 772; [2010] 2 Lloyd’s Rep 409, discussed at para 33.86 below.

111  ‘Ultra Large Crude Carrier’. See, eg, The Abt Rasha [2000] 2 Lloyd’s Rep 575 (CA).

113  In particular, the Civil Liability Convention (CLC) 1969. See now the CLC 1992. For detailed consideration, see de la Rue and Anderson (2009), 12–19; Måns Jacobsson, ‘The International Liability and Compensation Regime for Oil Pollution From Ships—International Solutions for a Global Problem’ (2007) 32 Tulane Maritime LJ 1; Tan (2006), ch 6.

114  See de la Rue and Anderson (2009), 27. See also The Amoco Cadiz [1984] 2 Lloyd’s Rep 304.

115  At 48–52.

117  See the Oil Pollution Act (OPA) 1990, discussed in de la Rue and Anderson (2009), 52–64. See also Steven R Swanson, ‘OPA 90 + 10: The Oil Pollution Act of 1990 After Ten Years’ (2001) 32 JMLC 135.

118  See reg 13F(3). See Tan (2006), 139. On the effect of this regulation in the charterparty context, see Golden Fleece Maritime Inc v ST Shipping and Transport Inc (The Elli & The Frixos) [2008] EWCA Civ 584; [2008] 2 Lloyd’s Rep 119, discussed at para 24.25 below.

120  At 76.

121  See reg 13G (as amended in 2003). See Tan (2006), 150.

122  See, eg, de la Rue and Anderson (2009), 75–8; Malgorzata Anna Nesterowicz, ‘European Union Legal Measures in Response to the Oil Pollution of the Sea’ (2004) 29 Tulane Maritime LJ 29.

124  This covers light products such as gasoline and naphtha: Stopford (2009), 599. See also SK Shipping (S) Pte Ltd v Petroexport Ltd (The Pro Victor) [2009] EWHC 2974 (Comm); [2010] 2 Lloyd’s Rep 158, which arose out of the carriage of a cargo of naphtha.

125  This covers black oils, such as fuel oil: ibid.

126  See, eg, Caltex Refining Co Pty Ltd v BHP Transport Ltd (The Iron Gippsland) [1994] 1 Lloyd’s Rep 335.

129  Stopford (2009), 604. See, eg, Borealis AB v Stargas Ltd (The Berge Sisar) [2002] 2 AC 205, discussed at para 8.26 below.

130  At 606. See, eg, Golar Gas Transport Inc v The Liquefied Gas Shipping Co Ltd (The Hilli, Khannur & Gimi) [1979] 1 Lloyd’s Rep 153.

131  ie the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk, adopted by MSC.5(48).

132  For some of the factors which affect the freight market, see Branch (2007), 190.

134  See para 1.45 below.

135  This term comes from carta partita‎, a medieval term used to indicate an instrument written in duplicate on a single piece of parchment and subsequently divided, so that each part fitted together. See further CL Trowbridge, ‘The History, Development and Characteristics of the Charter Concept’ (1975) 49 Tulane LR 743; Leighton v Green & Garrett (1613) Godb 204; 78 ER 124.

136  For detailed explanation of the business, see Kendall and Buckley (2001), ch 3.

137  See Alderton (2004), 181. For a classic statement of the nature of this market, see Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1, 7 (Lord Diplock). See also the discussion of this case at para 32.10 below.

138  See Gorton (2009), 19.

139  See, eg, Masefield AG v Amlin Corporate Member Ltd [2011] EWCA Civ 24.

140  Well-known companies include Clarksons (<http://www.clarksons.co.uk> (accessed 14 February 2011)), Galbraiths Ltd (<http://www.galbraiths.co.uk> (accessed 14 February 2011)), Gibson Shipbrokers Ltd (<http://www.galbraiths.co.uk> (accessed 14 February 2011)), How Robinson & Co Ltd (<http://www.howerobinson.com> (accessed 14 February 2011)), and Simpson Spence & Young Ltd (<http://www.ssyonline.com> (accessed 14 February 2011)). See Gorton (2009), 41.

141  See <http://www.lloydslist.com> (accessed 14 February 2011). In publication since 1696 and published six days a week, Sundays excepted, since 1837.

142  See <http://www.fairplay.co.uk> (accessed 14 February 2011). In publication since 1883.

144  Notably the Sale of Goods Act 1979, c 54, as amended.

145  As it often is, particularly in the case of commodity contracts. See, eg, GAFTA 100, cl 26; FOSFA 53, cl 27.

146  As they commonly are in oil transactions, but not dry commodities, where they are often excluded, eg GAFTA 100, cl 28(d). See Benjamin (2010), para 18-002; Bridge (2007), para 1.17. For difficulties which may be occasioned by such incorporation clauses, see Debattista (2008), para 1.38.

147  The UK is not a party to the CISG although many countries in other parts of the common law world are, including Australia, Canada, New Zealand, Singapore, and the USA. For arguments about whether the UK should ratify the CISG, see Bridge (2007), para 11.04. See also Sally Moss, ‘Why the United Kingdom has not ratified the CISG’, available at <http://www.uncitral.org> (accessed 14 February 2011).

148  It may be excluded (see art 6) and often is in the case of commodity sales. See, eg, cl 28(b) of the GAFTA 100 standard form; cl 28(b) of the FOSFA 53 form. For more detailed discussion, see JD Feltham, ‘C.I.F. and F.O.B. Contracts and the Vienna Convention on Contracts for the International Sale of Goods’ [1991] JBL 413.

149  ie ‘free on board’. See INCOTERMS 2010, p 87. See Benjamin (2010), ch 20; Bridge (2007), ch 3.

150  This will depend upon how the respective obligations of the seller and buyer are expressed. See the various explanations of the three main types in Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402.

151  At 424.

152  ie ‘cost, insurance, freight’. See INCOTERMS 2010, p 105. See also Benjamin (2010), ch 19; Bridge (2007), ch 4.

153  Another variant of c.i.f. is c. & f. (i.e. ‘cost and freight’)—CFR under INCOTERMS 2010, p 95—which does not oblige the seller to take out insurance.

154  See Groom Ltd v Barber [1915] 1 KB 316, 324 (Atkin J).

155  ie a bill of lading, a policy of insurance and an invoice. See Ireland v Livingston (1872) LR 5 HL 395, 406 (Blackburn J).

156  As to which, see Geofizika DD v MMB International Ltd [2010] EWCA Civ 459; [2010] 2 Lloyd’s Rep 1; Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 305, 316.

157  For a useful overview, see Branch (2007), 301.

158  For extended treatment, see Bugden and Lamont-Black (2010); Glass (2004); Hill (1972).

159  See Heskell v Continental Express (1950) 83 Ll LR 438, 449 (Devlin J). See Bugden and Lamont-Black (2010), ch 1.

160  This may be subject to the British International Freight Association (BIFA) Standard Trading Conditions (2005A ed): <http://www.bifa.org> (accessed 14 February 2011). See Uniserve Northern Ltd v Birkart Globistics Ltd [2008] EWHC 11 (Mercantile); [2008] 1 CLC 205.

161  See, eg, Landauer & Co v Smits & Co (1921) 6 Ll LR 577, 579 (Roche J).

162  ie for the purpose of carrying cargo discharged from a vessel so as to reduce her draught. See Brodie (2010), 94.

163  See para 3.19 below. The BIFA house bill of lading is one example. See <http://www.bifa.org> (accessed 14 February 2011).

164  Discussed at para 3.20 below. See Elektronska Industria Oour TVA v Transped Oour Kintinentalna Spedicna [1986] 1 Lloyd’s Rep 49, 52 (Hobhouse J).

165  See Heskell v Continental Express (1950) 83 Ll LR 438, 449 (Devlin J).

166  See para 22.38 below.

167  See Edwards v Southgate (1862) 10 WR 528.

168  See para 30.02 below.

170  See, generally, Stopford (2009), ch 7; Stephenson Harwood (2006). In 2008, almost 3,000 newly built ships were delivered: see Review of Maritime Transport 2009 (2009), 62.

172  Some jurisdictions, including the UK, try to operate beneficial tonnage tax regimes for shipowners. For the UK, see the Finance Act 2000, c 17, discussed at <http://www.hmrc.gov.uk/international/tonnage.htm> (accessed 14 February 2011). See also Evangelia Selkou and Michael Roe, ‘UK Tonnage Tax: Subsidy or Special Case?’ (2002) 29 Maritime Policy & Management 393.

173  Sometimes referred to pejoratively as ‘flags of convenience’. For a recent study, see Mansell (2009). See also Francisco J Montero Llácer, ‘Open Registers: Past, Present, and Future’ (2003) 27 Marine Policy 513.

174  See, especially, Stopford (2009), 281.

175  See The Father Thames [1979] 2 Lloyd’s Rep 364, 367 (Sheen J); I Congreso del Partido [1978] QB 500, 538, 542 (Goff J). See also Bakri Bunker Trading Co Ltd v The Neptune [1986] HKLR 345.

176  See, eg, The Evpo Agnic [1988] 1 WLR 1090, 1097 (Donaldson MR). See also The Skaw Prince [1994] SGHC 18; [1994] 3 SLR(R) 146.

177  Such structures also avoid the possibility of an arrest of a sister ship, introduced by art 3(1) of the Arrest Convention 1952. See Supreme Court Act 1981, c 54, s 21(4)(ii).

178  See para 1.49 below.

179  See Hague-Visby Rules, art I(a); Hamburg Rules, art 1(1); Rotterdam Rules, art 1.5.

180  See para 12.12 below.

181  See Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12; [2004] 1 AC 715. See the discussion of this case at para 12.13 below.

182  Such parties may also be known as a ‘non vessel owning common carrier’ (NVOCC) or ‘non vessel operating carrier’ (NVOC), reflecting the fact that such persons rarely operate the carrying ship.

183  See, eg, Multidoc 95, cl 10(a).

185  See the discussion at para 1.45 below.

186  See, eg, NYPE 93, cl 18; NYPE 1946, line 16.

187  See, eg, Hamburg Rules, art 1(4); Rotterdam Rules, art 1.11.

188  See, eg, Conlinebill 2000 (liner bill of lading); Congenbill (charterparty bill of lading).

189  See para 5.13 below.

190  Sometimes known as shipping or loading marks.

191  This tends to be the term used in the USA. See, eg, the treatment of the subject in Schoenbaum (2004), ch 7.

192  A remedy lies against the stevedore: see Murray v Currie (1870) LR 6 CP 24.

193  See, eg, Brys & Gylsen v Drysdale (1920) 4 Ll LR 24; Harris v Best (1892) 7 Asp MLC 272; Steinmen v Angier [1891] 1 QB 619; The Helene (1865) B & L 415; 167 ER 426; Blaikie v Stembridge (1860) 6 CB (NS) 894; 144 ER 703.

194  NYPE 93, cl 35; Gencon 1994, cl 5(c). See also the NYPE Inter-Club Agreement 1996, cl 8 (discussed further at para 33.106 below).

195  See para 9.33 below.

196  See Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138 (PC); New Zealand Shipping Line v Satterthwaite (The Eurymedon) [1975] AC 154 (PC).

197  See, generally, Cartner (2009).

198  As to this, see Douglas (2007), chs 21–2.

199  See, eg, NYPE 93, cl 30(a).

200  But cf Grant v Norway (1851) 10 CB 665 (CP); 138 ER 263, now rendered obsolete by the Carriage of Goods by Sea Act 1992, s 4 and art III, r 4 of the Hague and Hague-Visby Rules. See para 6.07 below.

201  See Rudolf A Oetker v IFA Internationale Frachagentur AG (The Almak) [1985] 1 Lloyd’s Rep 557.

202  For the extent to which he may do so, see now The David Agmashenebeli [2002] EWHC 104; [2003] 1 Lloyd’s Rep 92; para 6.39 below.

203  See para 1.49 below.

204  See, eg, Cook Island Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422, 440 (Mahon J).

205  Discussed in detail in ch 22, below. See also Rotterdam Rules, art 1.28.

206  Hire is payable in the case of a time charterparty, not freight. See para 33.54 below.

207  See also Hansson v Hamel & Horley Ltd (1921) 6 Ll LR 432 (CA), 433 (Barkes LJ).

208  Some bills of lading are in ‘hybrid’ form, permitting their use port-to-port or door-to-door (see eg P & O Nedlloyd bill of lading) although the practice was disapproved of in JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2003] EWCA Civ 556; [2004] QB 702, 752 (Rix LJ).

209  See para 1.49 below.

210  See para 3.24 below.

211  Sometimes just referred to as a ‘waybill’, although this may sometimes cause confusion with similar documents which are well known in air transport, namely, air waybills.

212  For detailed discussion, see para 4.02 below.

213  See the references below under each of the main types.

214  See Lidgett v Williams (1845) 4 Hare 456, 462; 67 ER 727, 730 (Wigram V-C).

215  Discussed in detail at ch 33 below. For an overview, see Gorton (2009), ch 13. For specialist treatment, see Scrutton (2008); Coghlin (2008); Williams (1999), ch 3.

216  As to this, see Hazelwood (2010).

217  See Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC 638, 641 (Lord Bingham); Torvald Klaveness A/S v Arni Maritime Corp (The Gregos) [1994] 1 WLR 1465 (HL), 1468 (Lord Mustill); Care Shipping Corporation v Itex Itagrani Export SA (The Cebu (No 2)) [1993] QB 1, 11–12 (Steyn J).

218  An intermediate version produced in 1981, Asbatime, has been little used.

219  The 1946 form is also still used extensively, often with many rider clauses.

220  The most recent revision was undertaken in 2001.

221  The Baltic and International Maritime Council. See <http://www.bimco.dk> (accessed 14 February 2011).

222  Revised most recently in 2003.

223  See Care Shipping Corporation v Itex Itagrani Export SA (The Cebu (No 2)) [1993] QB 1, 12 (Steyn J); Chiswell Shipping Ltd & Liberian Jaguar Transports Inc v National Iranian Tanker Co (The World Symphony & World Renown) [1991] 2 Lloyd’s Rep 251, 257 (Hobhouse J).

224  Discussed in detail at chs 31 and 32 below. For an overview, see Gorton (2009), ch 12. For specialist treatment, see Scrutton (2008); Cooke (2007); Williams (1999), ch 1.

225  See the discussion at para 1.05 above.

227  See para 32.52 below.

228  Despite a revision in 1986.

229  See, eg, Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd (The Kildare) [2010] EWHC 903 (Comm); [2011] 1 Lloyd’s LR Plus 4; Chiswell Shipping Ltd & Liberian Jaguar Transports Inc v National Iranian Tanker Co (The World Symphony & World Renown) [1991] 2 Lloyd’s Rep 251, 257 (Hobhouse J); Anglo-Saxon Petroleum v Adamastos Shipping Co (The Saxon Star) [1957] 2 QB 233 (CA), 275–6 (Sellers LJ).

231  As in Fyffes Group Ltd & Caribbean Gold Ltd v Reefer Express Lines Pty Ltd & Reefkrit Shipping Inc (The Kriti Rex) [1996] 2 Lloyd’s Rep 171.

232  See now the definition in the Rotterdam Rules, art 1.2 and the special rules for such contracts at art 80.

233  For full consideration, see particularly Christopher Hancock QC, ‘Containerisation, slot charters and the law’ in D Rhidian Thomas (2008), ch 14; Richardson (2000), ch 3.

234  See The Tychy [1999] 2 Lloyd’s Rep 11 (CA), 21 (Clarke LJ).

235  Cited in Metvale Ltd v Monsanto International SARL (The MSC Napoli) [2008] EWHC 3002 (Admlty); [2009] 1 Lloyd’s Rep 246, at [11] (Teare J). For further discussion of this case, see also para 30.51 below. See also Coli Shipping (UK) Ltd v Andrea Merzario Ltd [2002] 1 Lloyd’s Rep 608.

236  For specialist treatment, see Davis (2005); Williams (1999), ch 4.

237  The terms are used interchangeably.

238  [1998] 1 Lloyd’s Rep 136 (CA), 156.

239  Baumwoll Manufactur von Scheibler v Gilchrist & Co [1892] 1 QB 253 (CA), 259 (Lord Esher MR). See also Anderson’s (Pacific) Trading Co Pty Ltd v Karlander A New Guinea Line Ltd (1980) 2 NSWLR 870, 873 (Hunt J); Australasian United Steam Navigation Co Ltd v The Shipping Control Board (1945) 71 CLR 508, 521 (Latham CJ).

240  Previously Barecon 89.