Author: support

Just over a week ago, on 14 July 2015, the English High Court issued an important judgement in what has been described as a test case for shipowners around the world who had their bunkers supplied by the now financially struggling OW Bunker A/S and its subsidiaries.

The judgement’s importance stems from the fact that it is the first time that the Court has so closely analysed and ruled on the merits of a transaction which involves the supply of bunkers to a vessel on terms which can be described as typical of such purchases carried out globally.
These transactions usually include a chain of contracts, each with a retention of title clause in favour of the supplier, a provision that payment will be due a fixed number of days after delivery, permission for the shipowner to consume the bunkers in the meanwhile as the vessel goes about its business, and awareness on the part of all concerned that the bunkers may well be wholly consumed before payment becomes due.

The case of OW Bunker A/S has taught us that such contracts might sometimes prove to be difficult to interpret, and might cause potential problems whenever there is a long chain of supply involved.

The facts of the matter were as follows:

The owners of a vessel – “PST Energy 7 Shipping” LLC (the Owners) and the managers – “Product Shipping & Trading” S.A. entered into contract with OW Bunker group (OW Bunker). The standard terms of this contract provided that the payment for the bunkers shall be made to ING Bank N.V. (the Bank). They also included a retention of title clause, so that title would not pass to the buyer (i.e. the Owners) until the Bank receives the full amount due. The contract however did allow the bunkers to be consumed upon delivery, meaning that they could be utilised by the Owners before the payment for them fell due.

The bunkers were physically supplied by a Russian subsidiary of Rosneft Marine (UK) Ltd (Rosneft), with the delivery being subject to Rosneft’s standard terms, which also included a retention of title clause.

Payment from OW Bunker to Rosneft was due 30 days after delivery, while payment of the bunkers by the Owners to the Bank was due 60 days after delivery. Up until now no payments were made.

The Owners disputed their liability for payment for bunkers, stating that because OW Bunker did not pay Rosneft for the bunkers, Rosneft retained the property in them pursuant to the retention of title clause in the Rosneft/OW Bunker contract, with the consequence that OW Bunker never had such property and was not in a position to transfer property to the Owners. They argued that the contract of supply of the bunkers fell under the Sale of Goods Act 1979 and that OW Bunker’s failure to pay Rosneft meant that OW Bunker was in breach of the mandatory implied term in section 12 of the Act that the seller has a right to sell the goods or will have such a right at the date when property is to pass.

On the other hand, OW Bunker and the Bank contended that the bunker supply contract was not a contract to which the Sale of Goods Act applied. Thus, the payment under the OW Bunker contract was due from the Owners regardless of the fact that OW Bunker never acquired title to the subject bunkers.

The High Court sided with the Bank and OW Bunker, stating that in this particular case, provisions of the Sales of Goods Act do not apply.
In the High Court’s reasons, Mr Justice Males cited the arbitrators who have previously adjudicated on the matter and found that:
“Even at the time it was entered into – and even in the absence of the [retention of title] clause – both parties to the contract would have anticipated that some or all of the bunkers supplied would be likely to have been consumed and to have lost their identity before the expiry of the 60 days credit period. So, while this was not inevitable, it was likely that, even had the contract initially met part of the definition of “an agreement to sell”, this agreement would never mature into a sale, and the presence of the [retention of title] clause merely reinforces this conclusion. Stripped of all unnecessary detail, the deal between the parties was that OW Bunker would ensure delivery of the bunkers, the use of which would be immediately available to the Owners, who would pay for them according to OW Bunker’s invoice.”
The Judge admitted that such an agreement does resemble in some respects a contract of sale, however its terms and their performance do not to any extent rely on property or title or their transfer.

The Court thus recognised that:

• the bunker supply contract is not a contract of sale to which the Sale of Goods Act applies, and
• OW Bunkers’, and consequentially the Bank’s, claim to payment is a straightforward claim in debt not subject to any requirement as to the passing of property in the bunkers to the Owners at the time of payment.

This judgement, delivered by Mr Justice Males, is a strong sign for all the shipowner who were approached by ING Bank with claims for payment for bunker deliveries made by OW Bunker, as the judgement allows the contractual supplier, namely OW Bunker/ING to sue the owner/buyer to whom these deliveries were made.

Mr Justice Males did note also that he cannot exclude the possibility that the Owners may have a liability to the physical supplier (in this case Rosneft) under some system of law other than English law and, if so, that the vessel may be exposed to arrest in some jurisdictions (no such duplicate claim should be possible under English law), however he did state that “Exposure to claims with the possibility of arrests is one of the risks which shipowners run”.

Last Friday (12.06.2015), Piotr Rosicki had the pleasure of delivering a lecture on the legal status of a forwarder in light of provisions of Polish law and international conventions. The lecture, held in Gdynia, comprised a practical look at the rights, obligations and mutual relations between various participants of a typical logistics supply chain, including carriers, forwarders, agents etc.

The lecture was a part of seminar on Managing Risk in the TSL sector, organised by Marsh Ltd. – a global leader in insurance broking and risk management, together with JG-MARINE Co. Ltd. – experts in the field of Independent Surveys and Loss Adjustment.

The Seminar – a part of continuing line-up of seminars organised by Marsh Ltd – was well received by all invited participants, who represented major players of the Polish transport and logistics industry.

On 15 May 2015, Szczecin hosted the twentieth international meeting of the shipping and maritime industry – Herring Szczecin 2015. Just over 2300 guests, representing more than 250 companies from the maritime sector (from both Poland and abroad) were invited to attend this event which plays a significant role in development of the Polish industry. Among those attending were Piotr Rosicki and Maciej Grudziński – senior partners of “Rosicki, Grudziński & Co.” Law Firm.

Herring Szczecin 2015 has a longstanding tradition of gathering the most important actors from the maritime sector, with the first such meeting – the Baltic Herring Meeting – taking place back in 1996 and playing host to around 400 guests. It is widely recognised as one of the most significant events of such type organised in Poland on a yearly basis.

9 April 2015 saw the entry into force of regulation on recognition of pilot bases and training facilities for the marine pilots, issued by the Ministry of Infrastructure and Development. It implements the provisions of the 2011 Polish Maritime Safety Act.

The Regulation introduces new procedures for recognition, renewal, suspension and voiding of certificates granted to training facilities and pilot training stations. It also sets forth the rules and criteria that should be applied when performing the audits.

The auditors, appointed by the Minister of Maritime Affairs, are obliged to conduct pre-recognition and pre-renewal audits in line with applicable provisions of the regulation as well as the provisions of the Polish Maritime Safety Act.

The regulation provides that the recognition certificate may be obtained either for training that cover a full training program, including practical training and simulator exercises, or for training covering simulator exercises only.

The new provisions allow the pilot training to be offered by any person or institution that meets the legal requirements to conduct educational activity in this regard. Pilot stations or training facilities shall be recognised as capable of offering such training, provided that the courses conducted during its run shall be taught by appropriately qualified personnel, in accordance with requirements set forth in the regulation.

Moreover, the training should be held in premises and with aid of equipment meeting the necessary regulatory criteria in a manner that allows for the pilot training to be completed. The station or training facility shall be recognised as capable of offering maritime pilot training only if they have implemented a quality management system and can document this fact with appropriate certificate. Newly established stations and facilities need to obtain such quality management system certificates within a year from commencing their activity.

On 5 March 2015, the England and Wales High Court has issued a verdict in the case Volcafe & others v CSAV that may prove influential in how claims for condensation damage to cargo are being resolved between cargo interests, shipowners and their underwriters.

In this action, the High Court was asked to adjudicate on claims for condensate damage to a consignment of Colombian green coffee beans transported by the defendant COMPANIA SUD AMERICANA DE VAPORES SA, trading as “CSAV” (“the carrier”), in dry and unventilated 20 ft containers.
The first leg of the sea-carriage, from Buenaventura to Balboa, was on deck; the on-carriage to Europe under deck; and the further carriage from Rotterdam to Hamburg on deck.

Before stuffing, the bare corrugated steel of the container was lined by the stevedores with Kraft paper. The Kraft paper was affixed to the walls with adhesive tape to a height just short of the roof. There was some discussion as to the gauge or weight of the Kraft paper, with claims that it was “thin Kraft paper”, although it was ascertained that it was also of a double-layer type.

On outturn however, the consignments transported in the containers were found to have suffered some degree of damage from condensation – moisture in warm air had condensed on contact with the cold roof of the container, fallen on to bags at the top of the cargo, and also run down the sides of the container wetting bags on the outside of the stow.

It should be noted that this occurrence is not uncommon in transport, when commodities such as coffee beans, grains or rice are carried in steel containers subjected to significant changes in external ambient temperature.

The Hague-Visby Rules applied to the carriage and it was effected on LCL/FCL terms. The core of the dispute was whether or to what extent were the carrier’s responsibilities properly effected in order to prevent the threat of damage through condensation, whether the carrier was liable for any consequent damage.

The High Court based its decision largely on the wording of Article III (2) of the Hague Rules, which provides that “subject to the provisions of Article IV (of the HVR), the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.”

As indicated by Deputy High Court Judge David Donaldson, the expression “properly” in Article III (2) HVR has been construed, on the basis of its natural and ordinary meaning, as “in accordance with a sound system” (Albacora SRL v. Westcott & Laurance Line Ltd [1966] 2 Lloyds Rep. 58 following G.H.Renton v Palmyra Trading Corporation, [1957] A.C. 149 at 166 per Lord Kilmuir L.C.).

He added that the “soundness” of the system needs to be ascertained without reference to any “weaknesses and idiosyncrasies of a particular cargo” (Albacora at 62 per Lord Pearce), since these are not matters of which a carrier ought normally to be aware.

In the present case, the fact that the carrier dressed the containers with Kraft paper reflected an industry awareness of condensate damage as a general and significant risk in unventilated containerised carriage of coffee beans.

Having noted the above, the judge applied res ipsa loquitur rule, a doctrine in tort law, where the elements of duty of care, breach, and causation are inferred from an injury that does not ordinarily occur without negligence.

The onus of proof was therefore on the carrier to demonstrate that the consignment was properly and carefully cared for, i.e. they had to demonstrate that by applying Kraft paper insulation, they had employed a “sound system”.

In the High Court’s eyes, the defendants failed to prove this contention. What is of significance is that the judge not only dismissed the measures taken by the carrier as insufficient but, in addition, held that ‘since the “soundness” relates to the prevention of damage to a normal cargo from the risks reasonably to be expected during the contracted carriage, it is no answer to an allegation of breach of that obligation to say that, since such damage is always unavoidable, no such system exists’.

In other words, the carrier cannot use to their defence an argument that no system that could be employed by them is efficient enough to prevent damage to the cargo.
The judge added that there must exist a minimum of a rational, adequate and reliable basis for concluding that the applied “sound system” will prevent the otherwise threatened damage.

As the carrier was unable to demonstrate that it had adopted a sound system, the court awarded in favour of the claimants.

The above discussed court decision may have significant implications in how cargo claims are resolved between the shipowners and cargo interests. It points to the fact that the burden of proof that the measures undertaken to protect the cargo from damage through condensation were sufficient, or “sound”, lays with the carrier. In some instances, this might prove a difficult task.

The risks related therewith can be mitigated by careful drafting of the wording of charterparties, with particular attention paid to the rights and obligations of both the carrier and the charterer during the transport of the consignment from the port of loading to the port of discharge.

28th January 2015 will see entry into force of the Regulation on particular conditions of safe navigation by sea-going vessels, issued by the Polish Ministry of Infrastructure and Development.

The purpose of this regulation is to implement the provisions of Chapter V of the SOLAS (Safety of Life at Sea) Convention, by specifying the conditions required to safely operate sea-going vessels. It should be noted that the procedures and requirements set forth in the said regulation shall not, in all probability, have a significant effect on Polish maritime practice, as most of the provisions stipulated therein have been previously implemented by relevant marine authorities on lower legislative level.

The provisions of the new regulation are addressed in most part to the shipowners and other entities responsible for ensuring that the vessels flying Polish flag are properly equipped (technical managers in particular). Chapter 1 of the regulation sets out its scope, excluding from its domain vessels flying foreign flag. Some of the provisions of the regulation shall however still apply to all vessels, regardless of their flag. This pertains in particular to passenger ships and ro-ro ferries, operation of which is covered by chapters 3 and 4 of the regulation. And, obviously, the exclusion of the said vessels from the scope of the Polish regulation does not in any way exempt them from compliance with the requirements set forth in the SOLAS Convention.
Chapter 2 of the regulation holds general provisions on safe shipping, which shall apply to Polish vessels, with the exclusion of sea-going yachts, inland waterway vessels and ships that are not subject to entry in the Polish register of vessels or registries held by the maritime office directors.

As stated above, regulation enters into force on 28th January 2015. However, pursuant to its §39, shipowners will have yet 12 months to adapt their vessels to comply with the new provisions. After this period expires, all ships should meet the requirements set forth in the regulation, which means appropriate equipment, marine safety devices, as well as navigation and radio instruments will have to be acquired or adjusted.

On 15th January, partly as a response to various calls from business circles for simplification of legal complexities that govern some aspects of running a Polish commercial company, a much awaited revision of the Commercial Companies Code has entered into force.

The 2014 Act on amending the Commercial Companies Code and other related laws introduces a series of new legal instruments which could be used by business owners, should they choose to run their affairs in a form of a commercial company.

These new tools were introduced with a purpose of simplifying some of the procedures related with establishing and registration of a commercial company in Poland, as well as other corporate activities that are usually undertaken during the course of its running.

In particular these enhancements include:

• the ability to establish and register a legal partnership or a limited partnership via Internet, through a secure network operated by the Ministry of Justice. This has been previously made possible only for the limited liability companies. The lawmakers however decided that this scope should be widened to include some of the types of partnerships;
• allowing the shareholders of limited liability company, or partners of a partnership, to adopt some of the typical corporate resolutions through virtual shareholders’ meetings, without the necessity of formal convocation;
• simplifying the procedures related to transfer of shares in such virtually established companies (for the sake of clarity, we shall refer to them in this article as “virtually established companies”, or VEC’s for short);
• lowering of the registration fees for these virtually established companies.

Following the suit of limited liability companies, which already can be established and registered via Internet (a concept successfully introduced back in 2012), legal partnerships and limited partnerships can be now established, registered and dissolved in the same way, without having to leave one’s home. Their articles can be also modified without the need to visit the notary. Moreover, all of the above actions may now be performed on the basis of specimen documents prepared by the Ministry. A prospective company owner is therefore presented with complete business package, a so-to-speak DIY set for establishing a company.

The new amendments also provide that some of the corporate resolutions in VEC’s may be adopted virtually, without the need for any formal convocation of shareholders. Additionally, some of those resolutions will be published on a ready-to-use forms. These include in particular change of company’s address, approval of its financial reports, or increasing its share capital.

The revised act was aimed at making running of a commercial company more accessible to the greater public. Up until now, one could only initiate some procedures in writing or in other prescribed form. Few actions that could be undertaken through internet were accessible only on the condition of upon being granted a certified electronic signature, obtaining which was usually a hassle.
The amendments provide for another type of electronic signature called e-PUAP which, in principle, should be much easier to apply for and maintain, thus making it easier to manage the company via the internet.

The new act will allow shareholders to transfer their shares more easily. Up until now, all shares in limited liability company were transferred by a written deed with signatures of the seller and the buyer certified by a notary. As from the entry into force of the revised act, shares in the VEC’s can be transferred via the Ministry’s of Justice secure network, without the need for any written deed.

It should be noted however that the new, simpler procedures, will not apply to the companies and partnerships that already exist. These will be have to dealt with in a traditional manner, i..e. with assistance of the notary (at least with regards to limited liability companies and limited partnerships). The same applies to VEC’s, whose articles were amended in any other way than through the internet (i.e. whenever the articles were amended in the traditional way – in writing or by a notarial deed).

A significant change in relation to the VEC’s (as compared to the companies set up in a traditional way) shall be the decreased registration court fees. These will go down from 500 to 250 PLN for first entry in the entrepreneurs’ register and from 250 to 200 PLN for all subsequent entries. We do underline however, that these lower rates pertain only to the VEC’s.

One of other changes introduced by the revised Act will mean that the company will no longer be obliged to submit specimen signatures of its representatives to the registry court. This move was justified by stating that such specimen signatures have proven to be redundant and obsolete, since in practice no-one actually verifies those for any commercial purposes.

Such change, however, may bode some potential problems for creditors of limited liability companies. This is because specimen signatures of the members of the company’s management board usually contain a reference to each member’s home address.
This in turn allowed the creditors to quickly verify a given member’s address of residence, enabling them to pursue that member for any claims that they might have had against the company (in Poland, members of a management board of a limited liability company are not immune from claims addressed against that company, if it turns out that the company does not have any assets).
Removing the obligation to provide such specimen signatures will cause pursuing of creditor’s claims to be unnecessarily lengthened by the time required to established a member’s address (be it on the basis of data archived in various governing bodies or otherwise).

The purpose of the amended act was to simplify the corporate procedures related to conducting a commercial company and ridding of barriers administrative and financial. Indeed, these new provisions will allow entrepreneurs to run their companies virtually, where most of the corporate duties can be performed via Internet and shareholders or partners will be allowed to use specimen resolutions already prepared by professionals.
Of course on the other hand, some will choose to stay with the traditional way of handling their companies. This applies in particular to the more structurally complex businesses and holdings, that may wish to introduce in their articles and other corporate documents various instruments and procedures unavailable in the specimen documentation provided by the Ministry.

The new provisions have entered into force in major part on 15th January 2015. However few regulations, i.a. those introducing the specimen documentation published by the Ministry of Justice, as well as provisions on electronic signatures, shall enter into force in April 2016.

Beginning of year 2015 saw entry into force of the revised Polish Prevention of Pollution from Ships Act. The amendments to the Act were introduced in order to implement the provisions of 2012/33/UE Directive on the sulphur content of marine fuels (known as the EU sulphur directive) into Polish law.

The revised law contains also a reference to the 2001 International Convention on the Control of Harmful Anti-fouling Systems on Ships (the AFS Convention) which was signed by Poland in 2004, and entered into force on 17 September 2008.

The amended Prevention of Pollution from Ships Act allows Poland to fulfil the stringent requirements introduced by the revised Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL), with regards to the sulphur content in marine fuels used in vessels navigating European waters. In accordance with these new, stricter regulations, from 1 January 2015 on, all vessels sailing through the Emission Control Areas (ECA), which include i.a. the Baltic and the North Sea area, should use marine fuel with sulphur content not exceeding 0.1%. Until now, this level was set at a 1.00% mark.

The above means that shipowners will be forced to either use marine fuel that meets the new criteria, i.e. has a lower sulphur content or, alternatively, they might resort to other means by which admissible levels of SOx and particulate matter emission control, both outside and inside ECA, may be achieved (emission reduction methods).
According to provisions of the Prevention of Pollution from Ships Act, these can be applied to vessels flying either Polish flag or foreign-state flags sailing Polish waters. The methods might range from utilising a particular device, system or material that aids in reducing the emissions, to introducing new procedures, alternative fuel or other methods ensuring reduction of the sulphur oxides emitted to the atmosphere. This, among other things, could mean that shipowners might wish to consider using LNG fuel-powered engines, equipping the ships with scrubbers etc., instead of switching to less sulphur-heavy marine fuel.
The minimum requirements that should be met while employing various methods of reduction of sulphur oxide emissions have been laid out in the Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC.

As stated above, the new, stricter rules regarding SOx emisions have been introduced by the revised Annex VI of MARPOL Convention, in particular its Regulation 14. These new amendments have been adopted in October 2008 and entered into force on July 2010.

The Emission Controlled Areas established are:

• Baltic Sea area – as defined in Annex I of MARPOL (SOx only);
• North Sea area – as defined in Annex V of MARPOL (SOx only);
• North American area – as defined in Appendix VII of Annex VI of MARPOL (SOx, NOx and PM);
• United States Caribbean Sea area (expected to enter into effect 1 January 2014) – as defined in Appendix VII of Annex VI of MARPOL (SOx, NOx and PM).

 

Peter Rosicki was representing “Rosicki, Grudzinski & Co. Law Firm” at the Shale Gas World Europe 2014 Conference in Warsaw, Poland. Our law firm has been providing legal support throughout 2014 in proceedings relating to geological works, including exploration of shale deposits for the purpose of future extraction of shale gas.

This prestigious conference gathered hundreds of companies representing the oil and mining industry, as well as various related branches. Among participants there were some well recognized major entities such as Halliburton, Baker Hughes, Golder Associates, Tenaris Global Services or Vallourec.

The participants debated about various aspects of shale gas extraction, including its commercial viability, safety measures and legal regulations. It is worth noting that for the last few years shale gas has been one of the hot topics in Poland and intense explorations have been carried out during that time to evaluate the potential of Polish shale gas deposits.

Incidentally, it should be mentioned that from the legal point of view, one of the serious legal issues might be the compensation for the landowners, should shale gas be pursued on or produced from their properties. These issues were discussed in London between our partner Maciej Grudzinski and the companies involved in preparing such special compensation programs on the request of UE countries. Our firm assumes, that as the explorations of shale gas in Poland continues, these types of legal issues will have to be thoroughly and quickly addressed.

We are happy to announce that our new website has just been launched. One of the new features is the ”News” section which will mainly provide information on some of the issues that relate to Firm’s scope of practice. We hope you will find our website interesting and please visit us regularly.