Brief Review of Maritime Law
Arthur NITSEVYCH
Partner, Interlegal law firm. LMAA supporting member, SCMA member, Chairman of the Nautical Institute of Ukraine, FNI
Nikolay MELNYKOV
Partner, Interlegal law firm. LMAA supporting member, GMAA member, member of the Nautical Institute of Ukraine
Natalia MYROSHNYCHENKO
Associate Partner, Interlegal law firm. AIJA member, President of WISTA Ukrainian
Artem SKOROBOGATOV
Associate Partner, Interlegal. Representative in FOSFA
PROfile
Interlegal
- Tel.:
- +380 482 33 7528
- Fax:
- +380 482 33 7529
Interlegal is a recognized law firm with its head office in Odessa, the biggest sea-gate of Ukraine. Established in 1995, Interlegal acquired the reputation of boutique maritime law expert operating and servicing clients in the Black Sea region. Interlegal’s expertize has been focused on the following major practices crystallized from our 20 years of experience: shipping, transport & logistics, ports & terminals, international trade, corporate, investment & transactions, litigation & arbitration. Within wide practice in commercial shipping Interlegal also renders the full range of yachting services: making sales contracts of yachts and ships, their registration and insurance.
All participants of the transportation process are among the firm’s clients: cargo owners, carriers, forwarders, agents, ports, terminals, charterers, ship owners, insurers, banks, etc. Interlegal employs 20 top level law experts advising clients 24/7. Careful selection brought together talented, enthusiastic, goal oriented professionals united by high standard team spirit able to solve hard tasks effectively and fast. Thinking of the future, in 2013 the firm grew 25% when it was enriched by young prospective lawyers. The firm was the first in Ukraine to implement a hybrid management system. Continuously developing legal practice in Shipping and International trade in the Black Sea region, we opened offices in Batumi, Georgia and in Istanbul, Turkey. The annual research of the legal service market Ukrainian Law Firms 2012-2015. A Handbook for Foreign Clients has determined Interlegal as one of the leading companies dealing with maritime, transport and infrastructure.
Ukraine is a maritime state on the Black Sea and Azov Sea coasts, owning its own fleet, shipbuilding and ship repair facilities, 18 sea ports and 11 river ports on two rivers, the Dnieper and the Danube, which are open for navigation. Due to the Russian invasion of Crimea in 2014, four sea ports in Crimea have been declared by the Ukrainian state as officially closed for calls by vessels.
Ukraine continues to be one of the world’s leading grain and sunflower oil exporters and generally is an important gate for the import and export of commodities and goods. The prospects of grain export in 2015 from Ukraine came to about 35 million tons. According to data from the last few years, 80% of cargo loaded from Black Sea region consists of grain products. Although the deadweight of the fleet under the Ukrainian flag has shrunk six-fold since then, a great number of shipping companies do business in Ukraine as operators, shipbrokers and charterers. Ukrrichflot and the Ukrainian Danube shipping company are among the major shipowners. Ukraine is also ranked as the 5th supplier of seafarers to the world fleet market, providing some 75,000 officers and ratings.
Main Features of Maritime Law
The real purpose of the entire commercial shipping industry and its regulatory and contractual framework is to make international trade possible, safe and efficient.
About 90% of the world’s trade is moved on ships. These vessels are often owned by one party, managed by another party, then chartered and sub-chartered to additional actors. The shipowners and their home ports are spread across the world, creating a serious need for a predictable, uniform, and simple set of law rules that resolve disputes and make trade flow smoothly. In addition to appropriate substantive maritime law rules, it is important that the owners of vessels be subject to process in national courts to enable fair and convenient adjudication of disputes for all maritime players.
When an international dispute comes out of a maritime contract or incident such as a collision or grounding, it is necessary to consider which law applies to the dispute; which tribunal has jurisdiction to resolve the dispute on merits; whether there is any time limit or whether the claimant can obtain security for the claim. Maritime Law has several basic features which are reflected in everyday practice within this area.
One feature is its international nature, which pleads for international uniformity in maritime law. This necessity has been satisfied internationally by implementing a number of international conventions or agreed rules like the Hague-Visby Rules, which unify certain rules of law relating to Bills of Lading or the York-Antwerp Rules fixing the grounds for general average assessment. In some jurisdictions and particularly in Ukraine the provisions of such conventions are implemented in the local laws such as the Merchant Shipping Code or similar. The widespread use of standard form documents as the basis of most contracts of carriage (like GENCON, SIINACOMEX, NYPE or BPTIME3) also has the effect of unification.
The second obvious feature of maritime law is that contracts for carriage of goods by sea fail to be performed in specific and often hazardous conditions in which it is practically impossible for one party to supervise over the other party’s work on a daily basis. This factor is the key instrument in developing the sea carrier’s general duties and legal grounds for them, including the duty to provide a seaworthy ship and not to deviate from the route stipulated by the charter party as well as other carrier’s duties connected with voyage by sea.
The third notable feature which is affecting the nature and the practice of maritime law is that shipping regulated by such maritime law is directly dependent on other commercial activities. Contracts for the carriage of goods by sea are not made in commercial isolation. They are typically concluded so as to sell goods or to give effect to a previous sale. This means that contracts for sea carriage often reflect the direct interest of both sellers and buyers under a sales contract. Third parties may become involved in the carriage of goods in other ways. This leads to complex questions about who can sue and who can be sued. In the absence of a contract provision dealing with the particular problem, the main role in such cases plays the governing law of a carriage contract, which is English law, for the majority of sea carriage contract forms or local law as the law of the place of incident.
Use of Standard Forms of Contracts
The use of standard forms is a great point of maritime law practice. This use in itself constitutes an important feature of overseas trade. The biggest part of maritime law consists of settled interpretations of common clauses and agreements. Such interpretations are fixed in certain court decisions, as is usual for common law countries, or in particular provisions of legislation together with different kinds of resolutions/recommendations/authorities orders in countries with a continental system of law like Ukraine.
Parties in the shipping industry have engaged in charter arrangements for centuries. Charter arrangements allow the parties to allocate the risks and costs of engaging in business by creating agreements that fit their particular needs.
The vast majority of standard contracts developed by international associations, in particular, BIMCO (Baltic and International Maritime Council), FOSFA (Federation of Oils, Seeds and Fats Associations) and GAFTA (Grain and Feed Trade Association), contain standard or default provisions on application of English law. So, under the circumstances, Ukrainian maritime law practitioners deal mainly with casualties and incidents, not with contracts. The Merchant Shipping Code of Ukraine of 23 May 1995 regulates all the main questions in this respect like collision, pollution or grounding. Ukraine has signed and is a party to many international conventions, e.g. the International Convention for the Prevention of Pollution From Ships 1973 as modified by the Protocol of 1978 (MARPOL 73/78), the International Convention on Maritime Liens and Mortgages (Geneva, of 6 May 1993), the International Convention Relating to the Arrest of Sea-Going Ships (Brussels, 10 May 1952), etc. A number of conventions are not ratified but implemented into the text of the Merchant Shipping Code of Ukraine, e.g. the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (Hague Rules, Brussels, 25 August 1924), the International Convention for the Unification of Certain Rules of Law With Respect to Collision Between Vessels (Brussels, 23 September 1910), the International Convention on Salvage 1989 (SALVAGE, London, 28 April 1989), etc.
Arbitration vs. Litigation in Shipping
In recent years, arbitration has become an increasingly favored means of dispute resolution, particularly in maritime disputes.
The most popular choice for maritime arbitration is London. The majority of standard form charter parties, international sale contracts, salvage contracts, reinsurance and P&I Club Rules provide for London arbitration and, in particular, arbitration at the LMAA (London Maritime Arbitrators’ Association). Many bills of lading incorporate an arbitration clause in the charter party under which the bill is issued.
In Ukraine there is the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry, an independent permanent arbitration institution operating under the On International Commercial Arbitration Act of Ukraine of 24 February 1994, the Statute on the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry (Annex No.2 to this Act) and the Rules, approved by the Decision of the Presidium of the Ukrainian Chamber of Commerce and Industry No.18 (1) of 17 April 2007, amended in 2012. This tribunal shall resolve disputes arising out of contractual or other civil law relationships in the area of merchant shipping regardless of whether participants of such relationships are subjects of Ukrainian and foreign law or exclusively of Ukrainian or foreign. To be honest, the number of cases here is not significant and in the main this forum considers disputes with the engagement of state-owned companies.
Typically, maritime disputes revolve around:
— investigation of damages to transported goods and ensuing liability attached to the maritime carrier;
— damage to the ship caused by the nature of the carried goods;
— issues of lay days and demurrage including damages resulting from late entry to a port or late access to the operative quay;
— damages suffered by the carrier as a result of force majeure;
— issues relating to non-execution of charter parties (for example, non-payment of the charter fee, late return of the vessel or early collection of the ship);
— sale, construction and ship repairs;
— matters relating to salvage at sea;
and maritime insurance.
Maritime cases are very specific and very complex. Many of them are connected with casualties. The accidental factor is very strong. Which vessel is guilty when a collision arises? Why is the cargo found wet? Is it because of unfit hatches? To draw the right conclusion, one needs to have specific knowledge and expertise. That is why many in shipping favor arbitration over litigation. Arbitrators are more knowledgeable in maritime matters rather than judges, who have limited exposure to shipping. Arbitrators are not bound by existing law doctrine and have broad latitude to use their commercial sense of fairness. Neither are arbitrators bound by strict court rules of evidence and procedure.
To Be Continued in Ukraine
All the above are reasons why, despite a long maritime tradition, Ukrainian maritime arbitration and court practice are of minor importance for the maritime business. The serious drawback of Ukrainian legislation in the maritime sphere is the absence of a unified approach in issues related to maritime activity. Ukrainian legislation consists of the Merchant Shipping Code, laws and subordinate acts that regulate certain specific maritime relations. The legal framework is in this respect imperfect. Ukraine should refuse to regulate shipping by subordinate acts and base it mainly on international conventions and traditions. There is a strong need to systemize legal norms regulating maritime activity. If Ukraine is positioning itself as a maritime state then it should follow global trends.