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The English Court of Appeal in the „LEHMANN TIMBER“ case – Just another interesting court decision, or reason for cargo underwriters‘ concerns?
IUMI Professional Partners since 2010
Prof. Dr. Dieter Schwampe Dabelstein & Passehl 1 Hamburg/Germany
“LEHMAN TIMBER” - the Facts • Maiden voyage China / Europe • Two consignments: Hatch covers for Germany 1.089 steel coils under 4 bills of lading for the same consignee in St. Petersburg / Russia
• Captured by Somali pirates 28 May 2012 – held hostage for 42 days • After release main engine damage on way to Salalah as port of refuge • General Average (GA) declared IUMI Professional Partners since 2010
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“LEHMAN TIMBER” - the Facts • GA Securities (Bond and Guarantee) requested • Hatch covers: Bond and Guarantee provided – cargo discharged in Germany • Steel coils: Guarantee provided for 98 coils under B/L No. 4 No guarantees provided for remaining coils No bond provided for any coil • Advice to shipowner: imminent risk of arrest in case of call at St. Petersburg • Vessel diverts and arrives 28 September 2012 at Hamina / Finland IUMI Professional Partners since 2010
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“LEHMAN TIMBER” - the Facts • October 2012: discharge of steel coils into warehouse under control of ship owners • Monthly costs: USD 20.000 • Cargo interests do not pay • Shipowner starts legal action in London • 7 June 2013: Cargo still at Hamina, when Court of Appeal renders decision • Storage charges accrued: > USD 1,000,000
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The Court of Appeal:
Leave St. Petersburg roads for Hamina?
• Issue relevant only for the 98 coils?
• Perfectly legitimate to leave • Owner may demand a GA Bond even when holding a GA Guarantee
• If no Bond is provided, Owner may exercise his rights • No need to run risks when exercising rights
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Legal Literature:
Recover the Storage Fees?
Lowndess & Rudolph:
In the absence of a contractual provision to the contrary the shipowner must enforce the lien at his own expense; If he were to land and store the goods, or deposit them with a wharfinger, the cost cannot be recovered from the consignee“
IUMI Professional Partners since 2010
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Legal Literature:
Recover the Storage Fees?
Cooke/Kimball/Young a.o.
Absent express agreement to the contrary it is a general rule that costs of retaining possession of goods in the exercise of a lien are not recoverable from their owner.
IUMI Professional Partners since 2010
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The Court of Appeal:
Recover Storage Costs?
• Perfectly legitimate: right of recovery
• No principle in common law that lienor must bear the costs of exercise of the lien • Only existing case law (Somes v. Empire Shipping, 1858) relates to a special case and does not lay down a rule
IUMI Professional Partners since 2010
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Consequences for the Cargo Insurer?
• Do not lose time to issue your Guarantee – it may become expensive • Recoverable costs are not only those of storage, but likely also loss of earnings • Owner may exercise lien even with Guarantee of Cargo Underwriters in hands, if no GA Bond has been issued • The BIG Question: Does the Cargo Underwriter pay the shipowner’s costs to exercise the lien?
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Consequences for the Cargo Insurer? Wording of a usual GA Guarantee form: … hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC Average Adjusting Company, London, on behalf of the various parties to the adventure as their interests may appear, any contribution to General Average and/or Salvage and/or Special Charges which may hereafter be ascertained to be properly and legally due in respect of the said goods.
IUMI Professional Partners since 2010
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Consequences for the Cargo Insurer?
… hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC Average Adjusting Company, London, on behalf of the various parties to the adventure as their interests may appear, any contribution to General Average and/or Salvage and/or Special Charges which may hereafter be ascertained to be and/or Special Charges properly and legally due in respect of the said goods.
IUMI Professional Partners since 2010
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Consequences for the Cargo Insurer?
• GA Adjusters start treating expenses for exercise of liens as special charges • GA Guarantee binds cargo underwriter regardless of cover conditions
• If there is no cover for the costs: pay first and then run after your money
IUMI Professional Partners since 2010
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Ways to avoid this?
• Issue your guarantee only once the Bond is placed? No • Amend insurance conditions: provides only secondary rights
IUMI Professional Partners since 2010
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Ways to avoid this?
• Issue your guarantee only once the Bond is placed? No • Amend insurance conditions: provides only secondary rights • Amend wording of GA guarantee hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC Average Adjusting Company, London, on behalf of the various parties to the adventure as their interests may appear, any contribution to General Average and/or Salvage and/or Special Charges, unless due to delayed submission of a General Average Bond, which may hereafter be ascertained to be properly and legally due in respect of the said goods. IUMI Professional Partners since 2010
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Ways to avoid this?
• Issue your guarantee only once the Bond is placed? No • Amend insurance conditions: provides only secondary rights • Amend wording of GA guarantee • Qualify your GA Guarantee please find attached our general average guarantee. It is submitted in the understanding and under condition that it shall not cover any costs incurred as a consequence of a delayed submission of a General Average Bond IUMI Professional Partners since 2010
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Resumé
• Owners may exercise lien if no GA Bond is placed • Cargo Underwriters are liable under their GA Guarantees • Amendment of insurance conditions do not really solve the problem • Solution possible only in the context with the GA Guarantee – but difficult
IUMI Professional Partners since 2010
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Thank you for your attention Please feel free to direct questions or comments to
Prof. Dr. Dieter Schwampe
[email protected]
IUMI Professional Partners since 2010
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