Carriage of Goods by Sea Assessment: Monsoon Ltd vs Ali Shipping

This report presents a comprehensive analysis of a legal case concerning the carriage of goods by sea, focusing on the charter of a Panamax vessel, The Matahari, under a SHELLVOY6 agreement. The case involves a dispute between Ali Shipping (shipowner) and Monsoon Ltd (charterer) regarding the transportation of refined fuel oil from Dubai to the Port of Felixstowe. The analysis covers several key issues, including the ship's grounding due to navigational errors, delays caused by industrial action, and damage to the vessel from an underwater object. The report examines the rights and liabilities of both the charterer and the shipowner under the charterparty and relevant maritime laws, including the Maritime Code of the UAE, the Merchant Shipping Act 1995, and the Carriage of Goods by Sea Act 1992. It explores the legal implications of demurrage claims, the authority for withdrawing a vessel, and the roles of bills of lading. The report considers the application of various legal clauses and conventions, such as the Hague-Visby Rules and the BIMCO Piracy Clauses, to determine the responsibilities for damages and delays. It evaluates the potential for legal claims and the limitations of liability for both parties involved, including the Port of Felixstowe's responsibility. The report also highlights the significance of timely hire payments and the shipowner's authority to withdraw a vessel in cases of non-payment, emphasizing the importance of chartering agreements and the remedies available to shipowners.

Carriage of Goods by Sea Assessment
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Table of Contents
Question 1........................................................................................................................................3
Case Overview.............................................................................................................................3
Rights along with Liabilities of the Charterer and Shipowner....................................................3
Question 2........................................................................................................................................9
Authority for Withdrawing Vessel..............................................................................................9
Question 3......................................................................................................................................15
Bill of Lading.............................................................................................................................15
Rights and Liabilities of the Relevant Parties............................................................................17
Bibliography..................................................................................................................................20
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Question 1
Case Overview
The legal case mainly comprises the activities associated with the transportation of refined fuel
oil in a Panamax vessel from Dubai to the Port of Felixstowe. This activity was chartered on the
1st of April by the Monsoon Ltd Company to transfer the refined fuel oil through the application
of the standard ‘SHELLVOY6’. The ship departed from Dubai on the 8th of April, however, on
9th April, the vessel was grounded in the sea due to the faulty navigation system. The ship finally
re-floated after two days of delays. Thus, at the time of refloating, the ship stayed at the
customary waiting area the Port of Felixstowe. This is mainly due to the ongoing industrial
activities at the port. While entering the port on the 28th of April, the ship hit an object that was
underwater, it was never revealed in the charts. However, it was later found that the ship had
already been warned by the port authorities about the presence of a large object in the seaport
area. Moreover, Ali Shipping further makes a legal claim on demurrage from Monsoon Ltd.
Besides, the Ali Shipping counterclaimed the damages caused to the ship, as they had breached
their legal rights based on the standard legal form of SHELLVOY6.
Rights along with Liabilities of the Charterer and Shipowner
In the UAE, there is no such regulation that governs the shipping activity such as wreck removal
convention in the sea. However, the Maritime Code of the UAE indicates that the owner of the
ship has a right to seize or confiscate the security department of a particular location since they
are in charge of handling such wreckage activities occurring nearby the seaport area as per the
article 95 of the Maritime Code1. The Maritime Code also provides legal rights to the ship-
owners for claiming a sum based on the severity of the wreckage that has taken place. During
1Article 95 of the Maritime Code
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this situation, the management authority of the port is further ordered to take part in removing or
handling the object, which caused the wreckage of the ship. Other powers may be exercised by
the ship-owners during such activities based on the legal regulation of the country followed by
the seaport2. Based on this legal context, the shipowner i.e. Ali Shipping has the right to claim
demurrage from the charter i.e. Monsoon Ltd, as wreckage convention took place nearby the
seaport location due to the negligence of the Port of Felixstowe’s seaport authority.
When viewing from the legal perspective of the modern law standard (SHELLVOY 6), it can be
stated that the shipowner must be careful, especially while entering the seaport area until the
loading of the goods. Under the charter agreement, the owners of the ships mainly need to focus
on maintaining the quality standard of the vessel carrying goods, hull, tanks, equipment, boilers,
machinery, and other functioning areas are well maintained. Besides, the vessel operators or
handlers, officers, crew members along with the senior officers are also able to speak the English
language3. Emphasising the regulation followed in the location of the Port of Felixstowe i.e. the
UK, “The Merchant Shipping Act 19954 “grants wide-ranging powers to the relevant coastal
authorities to intervene in relation to wrecks, including the power to remove, destroy or take
possession of wrecks as necessary. The owner of the vessel is subject to unlimited liability for
the costs of wreck removal”5. Besides, the 1976 Convention on Limitation of Liability for
Maritime Claims (LLMC) further states that the liabilities are limited for the shipowners to claim
2Mohamed El Hawawy, ‘United Arab Emirates: Shipping 2019’ (The International Comparative Legal Guides,
2019) <https://iclg.com/practice-areas/shipping-laws-and-regulations/united-arab-emirates> accessed 28 January
2020
3Stephen Girvin, ‘The Obligation Of Seaworthiness: Shipowner And Charterer’ [2017] CMLFL 26
4The Merchant Shipping Act 1995
5Andrew Bicknell & Hatty Sumption, ‘United Kingdom: Shipping 2019’ (The International Comparative Legal
Guides, 2019) <https://iclg.com/practice-areas/shipping-laws-and-regulations/united-kingdom> accessed 28 January
2020
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the funds. However, it depends on the capacity of the vessel that is carrying goods to the
seaport6.
According to the standard of Shellvoy 6 form, Gencon 1994 form also portrayed that “The
Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the
goods only in case the loss, damage or delay has been caused by personal want of due diligence
on the part of the Owners or their Manager to make the Vessel in all respects seaworthy and to
secure that she is properly manned, equipped and supplied, or by the personal act or default of
the Owners or their Manager”7. This signifies that a liability might get enforced over the
shipowner on behalf of the charteters, if there is any setback in goods release because of loss or
damage of the same during the shipment journey or in case of delay in the period due to ship
owner’s personal use8. If the delivery of goods is delayed due to the technical functioning of the
ship, then a shipowner can be legally liable to claim damages caused during the delivery of
goods at the seaport from the charterer. Furthermore, another clause based on which the
shipowner could be legally accountable for making such claims from the charterer is related to
the vessels. However, on being liable, the shipowner must ensure that high-quality vessels are
used for carrying goods to the destined seaport. In case there is a delay in delivery time mainly
due to the vessel problems, the shipowner becomes accountable towards causing the damages
caused. In such cases, the owners are legally prohibited from claiming any such damages9.
As per these findings, it has been observed that the time taken for delivering goods from Dubai
to the Port of Felixstowe has been due to the failure of navigation system of the ship. Besides the
6The 1976 Convention on Limitation of Liability for Maritime Claims (LLMC)
7Stephen Girvin, ‘The Obligation of Seaworthiness: Shipowner And Charterer’ [2017] CMLFL 27
8The Standard of Shellvoy 6 Form
9Stephen Girvin, ‘The Obligation of Seaworthiness: Shipowner And Charterer’ [2017] CMLFL 32
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ship encountered major problems while entering the seaport to deliver the goods. From a legal
perspective, the BIMCO Piracy Clauses comprise solutions or legal decisions that are framed for
overcoming incidents that are usually faced by the ship. Besides, these clauses may or may not
be present in some voyage charters. During its absence, the application of Article IV Rule 4 of
the Hague-Visby Rules can be considered to form decisions or dealing with such types of
situations, especially at the time of entering the seaport for delivering goods10. Since neither
charterer nor the ship-owner can predict incidents nearby the location of the seaport, the general
provision portrays that the ship-owners are always allowed to engage in ensuring whether the
seaport, where the goods will be delivered is safe or not. At the time of forming a contract with
the charterer, the shipowners must consider that the seaport could be unsafe for entering. Thus,
the charterers failing to include this consideration, are bound to nominate the seaport or the place
for being liable in terms of any damages faced by the ship-owner. Based on this provision, Ali
Shipping can claim funds based on the damages incurred due to the incident caused at the Port of
Felixstowe since its authorities breached its duty even after being informed about the object
present underwater by the other ships11.
As per the legal regulations of Carriage of Goods by Sea Act 1992 of England, the legal
shipowner, who experiences any damage due to the incidents at the seaport, could legally claim
damages as per the carter12.
According to the Carriage of Goods by Sea Act, Ali Shipping can be legally liable for claiming
funds from the charterer for the damages that have incurred by the ship in the Sea Port of
10Article IV Rule 4 of the Hague-Visby Rules
11Richard Williams, ‘Gard Guidance on Maritime Claims and Insurance’ [2013] GARD 312
12The Carriage of Goods by Sea Act 1992 (COGSA92)
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Felixstowe13. The Rule 34 Cargo Liability entails that “liability for loss, shortage, damage or
other responsibility arising out of any breach by the Member, or by any person for whose acts,
neglect or default he may be legally liable, of his obligation properly to load, handle, stow, carry,
keep, care for, discharge or deliver the cargo or out of unseaworthiness or unfitness of the
Ship”14;15.
“The UK is a party to the 1976 Convention on Limitation of Liability for Maritime Claims (the
1976 Convention) as amended by the 1996 Protocol. Under the 1976 Convention, the persons
entitled to limit their liability include ship-owners, charterers (including slot charterers,
according to a recent decision of the English High Court), managers, operators and salvors as
well as any person for whose act, neglect or default those parties are responsible, and the insurers
of the liability of any of those parties”16;17. Based on this, it can be stated that a regulation
empowers the ship-owner, as well as the charterer, on limiting their liability for the damages
faced while entering the seaports of England and Wales under different conditions. This
regulation mainly empowers the charterers, as they could impose a limitation on being liable in
case the shipowner claims funds for ship damages when travelling from a route that leads to the
destined seaport of England and Wales. Besides, the charterers can also make legal claims if the
goods carried in the ship are damaged or affected due to the poor containment of the ship or the
vessel. In these types of circumstances, the shipowner can set limitations when paying a certain
13Andrew Bicknell & Hatty Sumption, ‘United Kingdom: Shipping 2019’ (The International Comparative Legal
Guides, 2019) <https://iclg.com/practice-areas/shipping-laws-and-regulations/united-kingdom> accessed 28 January
2020
14GARD,‘Risks Covered - Rule 34: Cargo Liability’ (IGP&I, n.d.)
<http://www.gard.no/web/publications/document/chapter?
p_subdoc_id=20747996&p_document_id=20747880> accessed 28 January 2020
15Rule 34 Cargo Liability
161976 Convention on Limitation of Liability for Maritime Claims
17Jonathan Lux, Anna Fomina and Ina Gueorguieva. ‘England & Wales’ [2011] I&C 59
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sum of amount for the damaged goods to the charterer. This legal rule of limitation on liability is
ruled out by the High Court of England.
The legal rules highlighted under the s.3(1) of the Carriage of Goods by Sea Act 1992 states that
the ship-owner can legally claim funds from the charterer in case any damage is caused to the
ship during entering the destined seaport for delivering goods18. However, the damages caused to
the goods during entry can favour the charterer to claim these damages19. Emphasising the legal
rights along with the liabilities of the current case scenario, Ali Shipping has the right to claim
funds from Monsoon Ltd (Charterer) and the authority of the Port of Felixstowe since they
neglected their duties to safeguard the dock even after they were reminded by the ships travelling
to the seaport. Even the highlighted legal rules have portrayed certain scenarios, wherein
Monsoon Ltd could also claim funds from Ali Shipping based on the damages incurred by the
ship or the goods due to the object lying nearby the dock. As these incidents may not be included
in the charter, Monsoon Ltd could impose liability over the authority of the Port of Felixstowe,
as it is their misconduct that has led to such incident. Thus, Ali Shipping can claim funds in case
of damages faced by the ship due to the object lying at the dock.
Question 2
Authority for Withdrawing Vessel
In general case of the chartering agreements between the ship owners, the charterers are lawfully
gratified to pay to employ money in advance on a monthly basis. Besides, the shipowners are
legitimately bound to receive lease payment in advance since they are held responsible for
paying costs that are related to the vessel and salaries being paid to the crew members of the ship
18s. 3(1) of the Carriage of Goods by Sea Act 1992
19BMLA, ‘Response to Questionnaire Prepared by CMI Working Group on Issues of Transport Law’ (Transport
Laws, n.d.) <https://www.bmla.org.uk/documents/issues_transport_law.htm> accessed 28 January 2020
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until the goods are loaded at the destined seaport as per the chartering agreement. Thus, hire
payment, which is to be made by the charterer, can be referred to as security since liquidity of the
payments can occur at any moment. Untimely payments can cause issues such as delay in salary
payment of the employees. Subsequently, these types of financial risks are highly avoided by
shipowners. “When timely payment of hire as such is certainly of the essence for the ship-owner,
the chartering agreements must contain a remedy in case of non-payment or late payment. Often
the ship-owner will be protected by a suspension and/or a cancellation clause. The charterer, on
the other hand, must know what awaits him or her if he or she is in default when it comes to the
payment of hire”20. Thus, any sort of damages caused by the delay or breach of contract on
paying the hire by the charterer further empowers the shipowner to make claims for the damages
caused by the charterer intentionally21.
Besides, the newly reformed legal regulations of the English law further portrayed that any issue
related to the payment of hire must seek on taking advice from the lawyers before the
establishment of a chartering agreement between the charterer and the shipowner. In this context,
the advice from the lawyers further ensures the introduction of legal clauses in exercising
cancellations into the chartering agreement. Even after such practices, any act of breach by the
charterer on paying hire could help in empowering or giving the legal rights to the ship owners
on terminating the charter. This right is applicable during delivery breakdown of the products by
the shipowner to the destined ports on the agreed time mentioned in the charter. Besides, the
NYPE93 Clause 11 on such intentional acts of the charterer highlights that lease payment on
behalf of the charterer through any means must be paid prior to the time period of 15 days in
20UIO. ‘Non-Payment of Hire, the Cancellation and Suspension clauses in Time Chartering Agreements and the
Remedies given the Party not in Breach’ [2015] UO 2
21UIO. ‘Non-Payment of Hire, the Cancellation and Suspension clauses in Time Chartering Agreements and the
Remedies given the Party not in Breach’ [2015] UO 2
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advance. Not complying with the legal rules in the charter or engaging in a fundamental breach
of the act by the charterer could legally empower the shipowner for exercising rights to cancel
the charter or withdraw vessels22. Based on these conditions, it is also understood that Ali
Shipping (Shipowner) has the legal right to cancel the charter, as well as withdrawing vessels, if
Monsoon Ltd performs any fundamental breach or delays payment of hire to the ship-owner.
With respect to the English law, the newly formed NYPE93 Clause 45 comprises a legal
condition, which may benefit the charterer in avoiding cancellation of the charter or withdrawal
of vessels. This is irrespective of the breaching the duty of paying hire within the given time
period of 15 days in advance23. Thus, it is important for the shipowner to engage in confirming
that their vessels are loaded with goods, as well as possess, bills of lading. In case the shipowner
fails to possess any of the two legal aspects then, “the charterers may at their convenience choose
to cancel the chartering agreement, regardless of whether or not the delay was substantial or not.
The mere fact that the vessel was not – or could not be – at the disposal of the charterers in the
agreed condition, seaworthy and ready to load, is decisive”24. Following this newly formed legal
regulation, Ali Shipping possesses a vessel with loaded goods i.e. refined fuel oil, but they must
make sure that they possess bill of lading, as it is crucial for exercising power to cancel the
charter or withdraw the vessels when the charterer fails to pay to hire in advance. Failing to
possess any one of these aspects could empower Monsoon Ltd to engage in avoiding cancellation
of the charter or any withdrawal of the vessel by Ali Shipping. Furthermore, concerning the
English law, there are different legal terms along with conditions, which govern the legal rights
22NYPE93 Clause 11
23NYPE93 Clause 45
24UIO. ‘Non-Payment of Hire, the Cancellation and Suspension clauses in Time Chartering Agreements and the
Remedies given the Party not in Breach’ [2015] UO 7
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to be exercised by the shipowner and the charterer. These conditions on certain legal rights are
portrayed under the newly reformed Baltime 1939 (as revised 2001)25.
Under this regulation, the shipowner is bound to exercise the power of cancelling the charter
agreement and further can withdraw the vessels on certain terms. Besides, Baltime 1939 (as
revised 2001) states that the charterers are liable to make lease payments in advance and the
preference of currency must be agreed between the two parties before forming a charter
agreement. Hence, it is the legal responsibility of the charterer to engage in establishing an
agreement in terms of the currency to be paid to the shipowner before 15 days in advance. Either
way, the charterer is at risk since there are no provisions in their favour and not performing any
of these duties could empower the shipowner to cancel the charter agreement and withdraw
vessels as well. However, if these duties mentioned in the charter agreement are performed by
the charterer, then they are given the right to engage in cancelling the charter agreement with the
shipowner if the delivery of the goods carried is delayed. Even if the delay in delivery of goods
took place due to technical problems such as poor functioning of the navigation system of the
ship, the charterer still exercises power to cancel the charter at any time.
Thus, Monsoon Ltd as the charterer could cancel if the delivery of goods is delayed by the Ali
Shipping (Shipowner) due to the problem related to the vessel or any equipment of the ship
under the Baltime 1939 (as revised 2001). Similarly, the legal regulations of Supplytime 2005
are also in the favour of the shipowner, as they are provided with several legal remedies26. The
shipowner is legally liable to cancel the charter agreement with the charterer or withdraw the
vessels loaded with goods. Concerning this legal regulation, the shipowner can further decide on
25 Baltime 1939 (as revised 2001)
26 Supplytime 2005
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receiving interest on hire payment from the charterer if the payment is delayed. However, on
enjoying this service, the shipowner needs to offer the charterer with a notice relating to an
additional tie provided to them in paying hire mount. During this period, ship-owner possesses a
legal right on withdrawing the vessels at any time. Moreover, if the shipowner fails to receive the
hire payment from the charterer within 5 days after handing over the written notice, the
shipowner still possesses the right to withdraw the vessel even if they are at service. They can
also cancel the charter agreement with the charterer at any moment. If the hire payments are paid
by the charterer after the completion of 5 days, the legal right still remains with the shipowner
based on Clause 12(f) of Supplytime 200527.
Furthermore, there are higher chances of claiming legal rights by Ali Shipping (Shipowner) on
withdrawing vessels or cancelling the charter agreement. Additional provision comprises a legal
option on clamming interest on the hire payment from Monsoon Ltd if they fail to pay the
amount even after providing a written notice regarding additional days in which Monsoon Ltd
can make respective payment. Charterer at this situation can set a limitation on their liability
regarding certain consequential damages faced by the ship, but this is not possible unless there is
the presence of fundamental breach by them in paying hire amount. When considering the legal
standard form of Clause 9(a) of the Shelltime 4, the shipowner needs to give a notification to the
charterer in a written form28. Contextually, this form must include a statement regarding the grant
from the charterer on agreeing to pay the hire amount within 7 days. Clause 9(b) of the Shelltime
4 further states that after granting the payment, if the charterer failt to make lease payments
within the specified timeframe, then the shipowner can withdraw vessels and the charter
27 Clause 12(f) of Supplytime 2005
28 Clause 9(a) of the Shelltime 4
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