Dangerous Goods Maritime Business

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Table of Contents

Introduction
Background
Carriage of Dangerous Goods Laws and Policies
Legal Obligations of the Parties when Transporting Dangerous Goods
Conclusion
References

Introduction

The transport of dangerous goods is a profoundly monitored sector whose guiding laws are frequently amended. Several international conventions and treaties deal with this sector. Some of these laws are enforced on international carriage whilst others only apply at the national level. Throughout the years, there has been detailed EU legislation to regulate marine transport of dangerous goods. Numerous laws give guidelines on the duties and responsibilities of each party taking part in the transport of dangerous goods. The vast volume of laws in this field is founded on the lawmakers’ concern concerning public security during the carriage of dangerous goods. Moreover, there is a specific legal framework governing how risks and responsibilities are distributed among the charterers and the ship-owner. In this era, where technology is at the zenith, with new chemicals and products being created and shipped daily, there is a high vulnerability of disastrous loss due to the transportation of dangerous goods. As this paper reveals, considering the high susceptibility to loss when transporting dangerous goods as well as the high volume of legislation in the field, charterers need to know their legal obligations and the remedies available to the carrier in case of a breach.

Background

In recent years, the difficulty of legal legislation in the carriage of dangerous goods by ship has gradually developed as a major issue of debate among all stakeholders. In the past decades, containerization has increasingly become the norm following the reduction of freight charges. As a result, more and more catastrophic goods are transported by sea. This has led to an increase in container insurance premiums through LNG carriers although many anticipate the vice versa because such carriers pose higher insurance risks through their exceptional occurrence (Hill 2011). There is a general assumption that several cases of accidents that occur during the transportation of dangerous goods end up unreported. Few of the cases that come to the limelight are because of media reports and/or when plaintiffs sue for remedies. Meanwhile, only a few accidents occur on goods transported by sea because they are handled urgently considering how disastrous they can be (Baughen 2012).

The carriage of goods by sea creates a great risk to all parties that form the contract. Consider the case where both the shipper and the carrier desire that the commodities meet all the demands set by law for carriage and that the commodities reach their destination safely, with payment being made in due time. Moreover, the carrier and all participants in the carriage of the goods have been burdened with the safety of the product because of their direct participation in processing and transporting the goods over a long distance and time.

The parties are not only exposed to monetary risks, but also other dangers that cannot even be handled by insurers. For instance, accidents caused by dangerous goods can lead to death or physical injuries to the crew. This can draw the attention of the media and government institutions, which may want to do private investigations. Meanwhile, there are several cargo claims. Moreover, environmental pollution may occur with the destruction of such dangerous goods. There may be the need to carry out some recovering operations while the vessel may be destroyed at times following the accident. The parties involved may lose the potential and existing clients as most of them (the clients) may lose their confidence in the parties about the event. All the aforementioned issues may have a traumatizing impact on the involved parties. Moreover, the filing of charges in courts that last years before being determined may exacerbate the effects. This confirms the need to have clear regulations to guide the handling of dangerous goods (Staring 2011).

Carriage of Dangerous Goods Laws and Policies

Even as this study seeks to know the rules governing the carriage of dangerous goods, it is important to initially know what is meant by dangerous goods and/or what type can be classified under that category. In the recent past, one of the main problems in relation to the carriage of goods was the definition of the term “dangerous goods”: Every country has its own version of the meaning of dangerous goods. Fortunately, the United Nations (“UN”) brought this issue to a closure. Currently, most states have a legal plan on how to monitor the carriage of dangerous goods through all the modes such as air, sea, or road. Globalization or diversification of the transport network has made it easy to have uniformity in a manner that when goods get to a different jurisdiction, there is no need to re-classify or re-package them (Redfern & Hunter 2004).

Furthermore, the International Maritime Organisation (“IMO”) and the International Civil Aviation Organisation (“ICAO”) have developed policies that govern the transport of goods by sea and air in various jurisdictions. The process of classifying, packing, and authorizing the transport of dangerous across the earth is now standardized (Diss & Heiko 1998).

According to the UN, dangerous goods are grouped into nine broad categories, with each being comprehensively explained using particular examples. These groups comprise gases, explosives, miscellaneous dangerous goods, corrosives, radioactive material, poisonous and contagious materials, oxidizing substances, flammable liquids, and flammable solids. However, when it comes to classifying dangerous goods, even those commodities that would be considered harmless are grouped as dangerous goods when they become disastrous (Sturley 2003). Consider the Amphion Case [1991] Q.B.D where a charterer was found liable of causing damage to the vessel through his bagged fishmeal cargo (Thomas 2008). Although the bagged fishmeal would not have been classified as dangerous, it was held that he was liable because he had failed to treat the bagged fishmeal with antioxidants to lessen the chances of it igniting. Due to this failure, the cargo ignited during unloading, thus causing damage to the ship (Nunes 2004).

In addition, goods are not only termed as hazardous when they pose a danger to the cargo or vessel but also when they confine the movement of the ship. For instance, consider the case of Mitchell, Cotts v Steel Bros and Co Ltd, [1916] 2 KB 610 where the charterer failed to notify the carrier that the British government had to authorize the unloading of the cargo. It was unlawful to deliver cargo to a different destination without the approval of the British Government. If the latter were determined, then it would lead to vessel confinement. This latter case is often referred to as the principle of legal dangerousness whereby the interruption or the expense of unloading cargo at the port is triggered by domestic legal obstacles (Hooper 2010).

Legal Obligations of the Parties when Transporting Dangerous Goods

The transport of dangerous goods by sea is still a broad legal platform for debate amongst charterers, carriers, and their insurers with regard to vulnerability to liability. Going by the judgment made in Primetrade v Ythan Limited [2005] APP.L.R, the probability of having liabilities linked to the bill of loading being shifted to the buyer or the transitional possessor of a bill is high. Several issues may spring up during the carriage of dangerous goods such as the pressure of moving goods before the spaces are correctly ventilated. Considering the vast risks that dangerous goods pose to the carrier, it is important to know the legal obligations of the shipper and carrier in moving dangerous goods (Grammenos 2002).

Common law provides that shippers have a legal obligation not to issue dangerous goods for transport without informing the shipowner that the cargo is hazardous. The shipper cannot remain silent and/or assume that the carrier is aware that the goods are dangerous, even if that was the case. Nonetheless, if the carrier of any individual in the crew knows or should have rationally known that the goods are dangerous in nature, the shipper is not mandated to inform the carrier (Murry 2012). The leading authority in this legal obligation is Brass v Maitland [1856] 6 E & B 470. In the latter case, it stated that the carrier ought to have been aware of the dangerous nature of chloride upon considering that cargo in transit was bleaching powder. The carrier had the onus to show that he was reasonably unaware of the hazardous nature of the cargo. In his ruling, Lord Campbell CJ stated the following:

“…it’s a clear law that it’s the duty of a person putting on board a ship a dangerous commodity to give notice to the master, or other persons employed in the navigation, of its dangerous nature, without any question being put” (Law and Sea 2012, Para. 2).

Nevertheless, Lord Campbell’s statement faced opposition in many ages, with many people questioning whether the failure of notification or unawareness by the shipper is substantial enough to the extent of the carrier using it as a defense for a claim. To tackle this issue, Lord Lyold made a ruling in the case of Effort Shipping Co. Ltd v Linden Management SA (The Giannis NK) [1998] All ER 495 stating as follows:

“…the liability of a shipper for shipping dangerous goods at common law, when it arise, does not depend on his knowledge or means of knowledge that the goods are dangerous” (Law and Sea 2012, Para. 2).

Moreover, the common law holds that the duty of the shipper in relation to the carriage of the goods implies that the goods to be transported will not harm the ship in any way and that they will not cause any interruptions. If that is not the case, the concerned party has to notify of the possible risks as long as the ship-owner is oblivious of these facts as held in Mitchell, Cotts & Co v Steel Bros & Co Ltd [1916] 2 KB 610. Nevertheless, if both parties are aware of the risks of transporting the commodities when forming the contract and that they both sign the contract, the shipper cannot be held accountable for any interruption or destruction because of transporting the goods. The only exception to the latter rule is when the commodity on transit has a hidden feature that causes damage, with the ship-owner being reasonably unable to foretell or avoid it (Baatz et al. 2011).

. When forming the contract, there are certain burdens that are laid upon the ship-owner to handle during the shipment of dangerous goods whilst others are not. In The case of Athanasia Cominos [1990]1, Mustill J gave the distinction of those risks (Zekos 1997). He stated that a carrier who agrees to transport goods of a given nature also consents to do the transit in a particular way that conforms to the nature of the goods. Hence, he or she is accountable for any damages that occur due to the failure of transporting the cargo in that particular way (Cavanah 2012). He claimed that doing so would help in eliminating challenges related to shipping hazardous cargoes because if the carrier takes the relevant precautions as provided in the contract, instances of damage would be rare (Loiseau 2009). On the contrary, he asserted that carriers should be accountable to scenarios whereby even after meticulous observation on how to carry the dangerous goods, the accident still occurs. However, Mustill J held that if carriers opt to choose a technique of carriage, which has some elements of danger, the carrier will bear the danger because he or she implies that his ship can handle the dangers created by the cargo when the carrier accepts to carry the dangerous goods (Leung 2008).

The legal obligations of parties during the shipping of dangerous goods are also stipulated by the Hague Rules/Hague-Visby Rules. The latter is composed of international laws governing the transit of commodities by sea. The International Convention for Unification of Certain Rules of Law relating to Bills of Lading was prepared in Brussels in 1924 and eventually became effective in 1931 (Zsidisin et al. 2007). The Hague-Visby Rules are founded on the principle that since the ship-owner has more interest to secure about the shipper. The law should operate in a way that demands fewer obligations from the carrier in relation to the shipper (Moffett, Stonehill, & Eiteman 2005).

About shipping of dangerous goods, Art IV(6) stipulates that in case the carrier realizes that shipper gave him/her commodities of a dangerous nature to transport without his knowledge or consent, he or she has the liberty to dispose or damage the goods prior to reaching the point of discharge without reimbursing the charterer (Treitel 2003). The shipper will be held accountable for any damage that occurs because of transporting the goods. Indeed, Art IV (6) compels the unconditional responsibility to the charterer (Carr 2010).

Moreover, if the carrier is aware of the danger and agrees to transport the dangerous goods, which pose a danger to the cargo or the vessel while on transit, the carrier can go ahead and discharge the goods at any place, damage or make them harmless. He or she will only be accountable in the normal average. However, since Hague-Visby Rules do not necessarily define the meaning of the word “dangerous”, it creates a lot of ambiguity during interpretation. For instance, consider the case of Giannis NK [1998] where the court ruled that a vessel transporting processed nuts was said to be shipping dangerous goods pursuant to Article IV(6) when the cargo was attacked by beetles. After interpretation of the latter article, the shipper was held accountable for the expenses the carrier had gone through when he damaged goods and disinfected the vessel (Baatz 2011).

However, a contrary ruling was made in The Darya Radhe Case [2009] EWHC 845 (Comm). In the latter case, the appellants appealed by seeking to overturn the arbitration awards that had been granted concerning a conflict involving the transport of goods that are suspected to be dangerous. The ship was transporting a consignment of soya beans meal pellets. During the loading process, rats were seen in the soya beans cargo forcing the carrier to decontaminate the ship after being ordered by the Brazilian authorities. The goods were further re-examined in Lisbon before they proceeded to their point of discharge in Iran where the shipper discharged the goods. The appellants testified that after noticing the rats, they incurred loss amounting to $2 million because of delay and fumigation. They claimed that the cargo of soya beans with rats inside amounted to dangerous goods and that the shippers had contravened the provisions of Art IV (6). However, the court ruled in favor of the shippers because the common law principle established in the Giannis NK case was absent in Iran, as it did not classify cargo accompanied by rats as dangerous goods (Tindall 2011).

Although Art IV (6) of Hague-Visby enforces a strict liability on the charterer, it is not the case when common law is applied. For instance, in a recent ruling made in the case of Compania Sud American De Vapores SA v Sinochem Tianjin Ltd (the Aconcagua) [2010] EWCA Civ 1403, the presiding judge Clarke cited the ruling made by judge Diamond in The Fiona Case [1993] 1. This ruling comprehensively outlined the facts that a carrier had to affirm before he or she could claim compensation under Art. IV (6) for the damages he incurs because of shipping dangerous goods (Tozaj 2010). Diamond stated that a charterer can claim compensation if the goods in transit are inflammable, explosive, or hazardous in character. In this case, the carrier and his crew were oblivious since they approved the shipping of goods with that nature. The loss incurred by the carrier occurred because of shipping the dangerous goods (McDorman 2006).

In case of breach of contract, one of the remedies that the carrier can demand from the shipper is indemnity. The claim for indemnity is not determined based on whether the shipper knew the hazardous character of the commodities, negligently allowed the goods to be shipped, or failed to remind the carrier of the danger posed by the cargo. However, the carrier can lose the right to claim for indemnity with respect to Article IV (6). It is established that the carriage of the hazardous commodities obliviously conformed to the ship-owner’s seaworthiness duty as provided by Article III (1) of the Hague-Visby Rules as it was held in The Kapitan Sakharov [2000] 1.

If the aforementioned is determined to have occurred during the transit of the dangerous, it is irrelevant if the ship-owner’s contravention was substantial or a minimal cause. What has to be established is that it was simply a cause as it was evident in Compania Sud Americana De Vapores SA v Sinochen Tianjin Ltd (The Aconcagua) [2009] [EWHC 1606. Furthermore, consider the case of Maxine Footwear Company Ltd V Canadian Government Merchant Marine [1957] S.C.R. 801 where the plaintiff cargo goods were damaged by fire in the cargo. It was later established that goods had been stored after a fire had started but before being noticed (Wilson 2012). The presiding judge decreed that with regard to fire, the onus of due conscientiousness with regard to the provisions of Art III (1) was a dominant duty (Augello 2002). If not performed, with the non-performance leading to destruction, immunities described in Art IV (2) become undependable. However, the carrier can be exempted if the cause was a result of the crew negligence because the carrier can not be impervious to crew negligence although he or she must make the ship seaworthy.

Conclusion

Most of the instances that occur during the carriage of dangerous cargo are triggered by poor classification and handling of goods. However, the shipper and the carrier have obligations by law to warrant the safe transit of dangerous goods. Indeed, the common law and Hague-Visby emphasize that the shipper will always be held accountable if he or she ignores to inform the carrier of the dangerous nature of the goods during the formation of the contract. Nonetheless, the shipper will remain answerable only if the ship was seaworthy at the time of transit. As noted in the text, if the carrier approved the shipping of the dangerous goods, it is assumed that his or her vessel could carry the cargo. However, this extends to incorporate the question of whether the danger remained inevitable even after providing the special carriage services to dangerous goods. From the above discussion, it can be stated that the accountability for damage triggered by carrying dangerous goods will fall on who was aware or ought to have known at the time of transit. Considering the probable disastrous nature of dangerous goods, both parties should perform their obligations sincerely.

References

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