The Nature of the Time Limit for the Exercise of Claims for Loss or Damage to Goods under the Hague-Visby Rules – Limitation or Expiry?

The recent judgement no. 185/2024 of the 4th Section of the Murcia Provincial Court dated 8 February 2024, reviewing the case law referring to the nature of the one (1) year period for the exercise of claims for loss or damage during carriage by sea under a bill of lading established by the International Convention for the Unification of Certain Rules Relating to Bills of Lading signed on 25 August 1924, as amended by the Protocols of 23 February 1968 and 21 December 1979, the Hague-Visby Rules, has taken a position in favour of the figure of expiry of time.

The aforementioned ruling therefore joins other rulings in favour of expiry of time, such as, for example, No. 269/2023 of 26 January 2023 of the 1st Section of the Provincial Court of Pontevedra, to which it refers to summarise the controversy. The latter, in turn, cites Supreme Court judgments No 328/1983 of 7 June 1983, No 43/1984 of 31 January 1984, No 339/1984 of 30 May 1984, No 56/1985 of 29 January 1985 and No 583/1985 of 11 October 1985, which declare that the time limit provided for in Article 3.6 of the Hague-Visby Rules is one of limitation.

Referring to other judgments which, on the contrary, have declared that this period is a limitation period and not an expiry period, the aforementioned judgment no. 185/2024 of the Murcia Provincial Court, which is the subject of this article, also agrees with the judgment of the Pontevedra Provincial Court of 26 January 2023 in that, although article 278. 4 and Article 286 of the Maritime Navigation Act, when regulating the contractual carrier’s recourse actions against the actual carrier and the actions arising from the charterparty, use the expression “limitation” not “expiry”, this should not lead to error since the Hague-Visby Rules are of preferential application to national regulations and their interpretation must be made in accordance with them. Hence, coinciding with the criterion of the judgement of the 28th Section of the Madrid Provincial Court nº 357/2021 of 14 October, the analysed judgement of the Murcia Provincial Court states that the scope of application of articles 278 and 286 of the Maritime Navigation Act must be redirected to the contract of carriage of goods by sea, excluding that which takes place under the bill of lading regime, which is subject to a limitation period.

Mechanisms to Protect Against the Risk of Non-Payment by Shipyards and Shiprepairers

I. Introduction

In any commercial or industrial activity involving the exchange of goods or services, there is a risk for the supplier that he will not be paid for his goods or services. To avoid these risks, market operators can take appropriate contractual measures or assert the rights that the legal system, the law, grants them.

The risks of non-payment are not particularly higher in the shipbuilding or ship repair sector than in any other sector under consideration. However, due to the type of asset on which the entire maritime shipbuilding or ship repair business is based, the ship, sometimes under foreign flag and ownership, protection against such risks of non-payment deserves special attention.

Many shipowners are organised under single-ship corporate structures, which means that with the vessel gone, the shipping company is undercapitalised and collection of claims against it becomes impossible.  The mobility of ships, which can easily change jurisdiction, can also add complexity to the recovery of claims in cases where there are no other known assets of the shipping company in the jurisdiction where the shipbuilder or ship repairer operates.

In order to protect their interests, both shipbuilders and ship repairers can implement contractual mechanisms that best protect their claims. There are also legal mechanisms that the legislation provides to these operators with the same protective purpose. In this article we will try to explain some of these mechanisms.

II. Contractual Mechanisms:

When we talk about contractual mechanisms, we refer to preventive measures that can be agreed in shipbuilding or ship repair contracts. There is no legal limitation to adopt this type of contractual covenants, so the will of the parties and the creativity of their legal advisors are the limit. The most common mechanisms that shipbuilders or ship repairers usually adopt are:

(a) Advance payments:

The provision of funds by the shipowner prior to the execution of the work is a common preventive solution to ensure that the shipbuilder or repairer has the necessary resources during the shipbuilding or repair process.

Most commonly, milestone payments are agreed. Through this mechanism, the shipowner makes advance payments based on the achievement of milestones during the construction or repair process, ensuring that the operator receives funds as the work progresses.

This system usually involves the issuing of refund guarantees by the builder/repairer in favour of the shipowner in case the work for which the latter has made the advance payment is not executed as agreed.  The mechanism therefore has a banking/financial cost for the shipbuilder/repairer.

(b) Requiring Sureties or Enforceable Guarantees:

Payment guarantees are another effective form of protection for shipbuilders and ship repairers.  Through this mechanism, the shipowner provides the shipbuilder/repairer with a separate payment guarantee, so that in the event of non-payment by the shipowner, the guarantor, under the guarantee contract, is obliged to make payment on first demand. The most common guarantees are:

  • Bank Guarantee: In this case the guarantor is a bank that will issue a guarantee on first demand in the event of non-payment and up to the agreed monetary limit.

If certain requirements are met, this type of bank document is directly enforceable before the Spanish courts.  The cost of this banking instrument is generally borne by the shipowner.

  • Personal Executive Payment Guarantee: With due formalities, this instrument functions in a similar way to a bank guarantee. In this case the guarantor is a natural or legal person whose solvency is known to the constructor/repairer. By means of this guarantee this person guarantees with his present and future assets the non-fulfilment of the payment obligation by the shipowner.

(c) Retention of Ownership of the Ship.

Finally, we would like to comment on this mechanism of retention of ownership of the ship until the shipowner pays the price. Due to its nature and operation, this contractual solution is reserved for shipbuilders, as it will be difficult or impossible for ship repairers to implement.

It involves retaining ownership of the vessel built until full payment by the shipowner. So that in the event of non-payment the shipbuilder can sell the ship to the highest bidder in order to collect the amount owed. If the market value of the ship is less than the price owed by the shipowner, the contractual arrangement should provide that the shipbuilder will continue to have a claim against the shipowner for the remainder.

In order to guarantee its effectiveness and proper operation, it is advisable to register the construction project in the name of the builder. In this way, if the shipowner’s non-payments are widespread, the registration of the ownership of the project in favour of the builder will prevent third party creditors of the shipowner from enforcing their claims against the vessel.

III. Legal Measures.

Spanish legislation provides shipbuilders and ship repairers with additional mechanisms that they can articulate without having to expressly agree on them. These mechanisms are mainly the following:

(a) Retention of possession of the vessel.

Article 7 of the International Convention on Ship Mortgages and Privileged Maritime Claims 1993 together with section 139 of the Shipping Act 2014 enables the builder and repairer of a ship to retain possession of the ship until they are paid what is due to them in respect of its construction or repair.

Certain requirements must be met:

  • In order to be retained, the ship must be in the possession of the shipbuilder or repairer. That is, the detention must operate prior to delivery and as long as the ship is on the premises or in the possessory custody of the shipbuilder’s or repairer’s personnel.
  • Retention is to be exercised for claims arising from the shipbuilding or ship repair contract, not for other claims.
  • The vessel that has generated these unpaid claims should be retained, not against another vessel.

It is important that all these requirements are scrupulously respected, otherwise there is a risk of improperly exercising the retention, which could lead to civil and even criminal liability.

Certain rules of the Civil Code apply to this lien which result in a lien on the ship. Some authors therefore argue that the shipbuilder or repairer of the ship can ask for the ship to be sold at public auction once the shipowner’s obligation to pay has expired. Thus the measure is sufficiently effective to persuade a shipowner to pay.

The Maritime Navigation Act 2014 only states that, if the compulsory sale occurs while the ship is retained by the shipbuilder or repairer, ‘the latter shall deliver possession of the ship to the buyer, but may obtain payment of his claim with the proceeds of the sale after satisfying those of the holders of maritime privileges… and before mortgage claims and other registered or noted encumbrances’. Thus, the shipbuilder or ship repairer will have preference of collection over ship mortgages and ordinary creditors, but not over privileged maritime claims (accruals in favour of the crew, compensation for death or personal injury caused by the ship, prizes for maritime salvage, port and pilotage fees and material damage caused by the ship due to non-contractual fault).

Since possession of the ship is a prerequisite for the lien, once the ship is delivered the lien and its collection preferences are extinguished.

(b) The Preventive Vessel Attachment:

The freezing of ships is a legal tool that enables the shipbuilder or repairer to secure the immobilisation of a ship wherever it is located in order to guarantee the collection of his claim.

This precautionary, preventive and urgent judicial measure can also be qualified as a burdensome measure due to the economic damage it can cause to the operator of the vessel, such as delays in its navigation, unforeseen costs due to its stay in a port, etc. It can also be a costly measure for the person requesting the seizure if it is wrongly or improperly proposed.

This measure is regulated by the International Convention on Arrest of Ships (Geneva 1999), the LNM and the Spanish Civil Procedure Act.

The immobilisation of the ship may be replaced by the provision of security by the shipowner/shipowner to the seizing court, since the ultimate objective of the attachment is to ensure the effectiveness of a subsequent judgment on the merits of the claim (‘maritime claim’) and thus to guarantee the creditor/shipper the possibility of enforcement.

In the event that the lien is unjustifiably or improperly applied for, the shipowner/shipowner of the vessel is entitled to claim any damages resulting from the lien.

The requirements are as follows:

  • Allegation of a ‘maritime claim’: The list of so-called ‘maritime claims’ is contained in Article 1(1) of the 1999 Geneva Convention, which includes, in paragraph (m), shipbuilders‘ or ship repairers’ claims;
  • attachment of the ‘offending ship’: attachment of the ship causing the claim is permitted provided that the person who was the owner/bareboat lessor of the ship at the time when the claim arose is still the owner/bareboat lessor at the time the attachment is requested. Under certain conditions it also provides for the possibility to seize other vessels owned by the person liable to pay (‘sister ships’).
  • the obligation for the attaching creditor to deposit a security: its purpose is to guarantee that in the event that the attachment is improperly requested, the damage caused to the shipowner/shipowner can be economically alleviated. At present, the minimum amount for this security is 15% of the alleged claim.
  • Where the application for attachment is made as an interim measure prior to the filing of the claim on the merits, it will lapse if the builder/repairer fails to commence proceedings on the merits before the competent court within the time limit set by the attaching court.

In short, this is a very effective precautionary measure that allows the builder or repairer to obtain sufficient security for his claims.

IV. Conclusions

It is a fact that shipbuilders and ship repairers face risks of non-payment by shipowners in their day-to-day business.

To protect against this risk there are a variety of solutions, both contractual and legal, which it is always and in any case advisable to bear in mind in order to minimise the risks to which builders and repairers are subject, all the more so when we are talking about foreign vessels and shipowners without a presence in our territory with complex corporate structures.

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Scope of the International Jurisdiction Clause in the Bill of Lading

THE COURT OF JUSTICE OF THE EUROPEAN UNION RULES THAT SPANISH LAW CANNOT IMPOSE GREATER REQUIREMENTS FOR THE VALIDITY OF INTERNATIONAL JURISDICTION CLAUSES INSERTED IN BILLS OF LADING IN FAVOUR OF EUROPEAN COURTS

EXTRACT: The recent Judgment of the Court of Justice of the European Union (CJEU) rules that the Spanish Law requirement of a separate and individual negotiation of jurisdiction clauses in favour of European courts contained in a Bill of Lading contradicts European Regulations and adds that Spanish courts should not apply the Maritime Navigation Act in those cases as it would be in breach of the European Union Regulation 1215/2012, better known as the Brussels Ia Regulation.

CONTENTS:

The validity and application of jurisdiction clauses inserted in bills of lading has always been a subject of controversy in Spanish litigation relating to matters of carriage of goods by sea.

With regard to jurisdiction clauses that confer jurisdiction to courts of European Union member states, to which the European Union Regulation 1215/2012, better known as the Brussels I bis Regulation, applies, jurisdiction clauses were generally accepted by Spanish courts until the Maritime Navigation Act 14/2014 came into force.

Article 468 of the Maritime Navigation Act requires that, without prejudice to the provisions of the international conventions in force in Spain and the rules of the European Union, jurisdiction clauses must always be negotiated individually and separately for them to be considered valid. In addition, Article 251 of the Maritime Navigation Act provides that the acquiring part of a bill of lading acquires the document with all its rights and actions except for the international jurisdiction and arbitration clauses.

Having said that, the Brussels Ia Regulation regulates jurisdiction within the European framework without establishing the requirement of separate and individual negotiation, although it does establish that the effectiveness of the jurisdiction clause depends on the national law of the member state. Furthermore, it adds that jurisdiction clauses must be considered as an independent agreement to other clauses of the contract.

After a certain evolution of case law in Spain, in cases where the dispute was between the original parties to the Bill of Lading contract (generally the shipper and the carrier), the courts granted validity to those clauses in favour of courts in EU member states. The reason? Because the Brussels Ia Regulation prevailed over article 468 of the Maritime Navigation Act and therefore different requirements to those required by the supranational regulation were not required.

However, there have been several Spanish courts that have not given validity to jurisdiction clauses in favour of courts of the European Union member states when the dispute arose between the legal holder of the Bill of Lading, a non-originating party to the contract, and the carrier. The reason? This condition of independent and individual negotiation of jurisdiction clauses is not met when a third party acquires the Bill of Lading, not having been a contractual party to the original contract of carriage, and when acquiring the Bill of Lading does so without international jurisdiction or arbitration clauses as it is provided for by Art.251 Maritime Navigation Act.

These regulations and their provisions taken together have created several doubts for the Spanish courts which have been reflected in repeated lawsuits before the Courts. Consequently, on 16 November 2022, the Appeal Court of Pontevedra referred a question to the Court of Justice of the European Union (hereinafter referred to as CJEU) for a preliminary ruling in order to clarify the following aspects:

1) Whether the enforceability of the jurisdiction clauses to a third party, not party to the original contract, must be analysed in accordance with the law of the Member State to which the parties have conferred jurisdiction.

2) Whether inserting additional validity requirements for the effectiveness of jurisdiction clauses inserted in bills of lading is contrary to the Brussels Ia Regulation.

On 24 April 2024, the CJEU delivered its judgment on the questions referred to it.

As regards to the first question, the CJEU recalls that the Brussels Ia Regulation does not expressly stipulate whether a jurisdiction clause may be transferred to a third party who succeeds, in whole or in part, to one of the contracting parties. In fact, the enforceability of the jurisdiction clauses against the third party does not relate to the substantive validity of the clause, but to its effects. The CJEU concludes that “the enforceability of a jurisdiction clause against the third-party holder of the bill of lading containing that clause is not governed by the law of the Member State of the court or courts designated by that clause. That clause is enforceable against that third party if, on acquiring that bill of lading, it is subrogated to all of the rights and obligations of one of the original parties to the contract, which must be assessed in accordance with national substantive law as established by applying the rules of private international law of the Member State of the court seized of the dispute.”

In other words, as the Court ruled in Coreck Maritime GmbH v Handelsveem BV and others (C-387/98), in order to determine whether the third-party holder of the bill of lading succeeds to the contract, the law of the State which is applicable according to the laws of conflict shall be applied. In Spain, the rules of private international law are set forth in EU Regulation 593/2008, known as Rome I -which is arguably not applicable to negotiable instruments to the extent that the obligations arise out of their negotiable nature – and in article 10 of the Spanish Civil Code. The latter establishes that the applicable law according to which subrogation (and the rest of the merits of the case) will be assessed will be the law agreed by the parties, or in the absence thereof, by the law of the country where the Bill of Lading was issued, or, should Rome I be considered applicable, the law of the country where the carrier has its habitual residence, provided that the place of receipt or the place of delivery, or the habitual residence of the sender, is also located in that country or the law of the country where the place of delivery agreed by the parties is situated. Therefore, in most cases, the applicable law will rarely be Spanish law, although the circumstances of each case will have to be considered.

However, even if Spanish law were the applicable law, in the answer to the second question raised regarding the consistency between European law and the national law requiring that jurisdiction clauses must be individually and separately negotiated as a prerequisite for them to be considered valid, the CJEU agreed with the Advocate General’s conclusions. This is, that the Spanish law “has the effect of circumventing Article 25(1) of the Brussels Ia Regulation, as interpreted by the case-law of the Court of Justice”.

Taking this statement into account, the Court inevitably holds that Article 25(1) of the Brussels Ia Regulation is not compatible with the national legislation which declares jurisdiction clauses null and void t when they have not been individually and separately negotiated by the third party legal holder of the Bill of Lading. Therefore, following the principle of primacy and in order to guarantee the effectiveness of the European Union rules, even in the event that Spanish law is the substantive law applicable to the substance of the dispute, when the Brussels Ia Regulation is applicable, the Spanish Courts must refrain from applying the provisions of the Maritime Navigation Act that require individual and separate negotiation of the rules of jurisdiction in order to consider them validly enforceable against third parties legal holder of the Bill of Lading.

In conclusion, when it is agreed that the competent Court to hear the dispute will be a Court of the European Union, this jurisdiction clause will be directly applicable before third party holders of the bill of lading, regardless of whether or not there has been an individual and separate negotiation of these jurisdiction clauses.

It should also be noted that, although the cases which gave rise to the questions referred for a preliminary ruling contained clauses in favour of the London courts, these cases were subject to European law. The fact is that the cases under consideration in the question referred for a preliminary ruling correspond to those in which the plaintiffs brought their actions during the transitional period of Brexit, and prior to the definitive separation of the United Kingdom, before 31 December 2020. Currently, a jurisdiction clause in favour of the courts of the United Kingdom is no longer a clause in favour of the courts of a member state of the European Union, and therefore the Brussels I Regulation does not apply. Consequently, in those cases where Spanish law is applicable to hear the merits of the case, all the provisions of the Maritime Navigation Act would apply and jurisdiction clauses that have not been individually and separately negotiated may be considered null and void.

In short, in order to determine whether jurisdiction clauses in favour of the courts of a member state of the European Union are applicable in Spain, the laws of the state that will rule on the merits of the case must be applied. Therefore, if Spanish law were to be applied to the resolution of the merits of the case, this same rule would also apply to determine the enforceability of the jurisdiction clauses of a bill of lading against third parties. However, this statement must be understood with all due caution since, even if Spanish law were applicable, by prevalence of the Brussels Ia Regulation the requirement that the jurisdiction clauses have to be individually and separately negotiated in order to be enforceable against a third party would not apply and therefore the jurisdiction clauses agreed in the bill of lading would be valid, even if there had been no such negotiation, as long as they comply with the requirements of formal and material validity demanded by the Brussels I bis Regulation.

Damages in Maritime Project Contracts: The “Knock for Knock” RULE; when negligence does not matter

In both project cargo shipping and offshore installation projects (offshore wind, oil & gas) it is crucial to understand the rules governing liability in the event of damage, the fundamental principle being the “Knock for Knock” (“KFK”) rule.

While in some contracts (HEAVYLIFT) the negligent party is liable for damages, in other contracts – HEAVYCON, PROJECTCON, SUPPLYTIME – the rule is that each party to the contract is liable for its own damage to its property and/or its personnel, even if caused by the negligence of the other party. Negligence does not matter; this is what the KFK rule summarises.

Example: Under HEAVYCON, the project cargo suffers serious damage due to the negligence of the shipowner, and an operator of the charterer is injured. Under the KFK rule, the charterer cannot claim damages from the shipowner. Moreover, if the charterer’s operator sues the shipowner, the charterer must indemnify him, even if the shipowner was negligent. This rule is reciprocal, if the damage was to the ship due to the charterer’s negligence, the shipowner should bear the cost of the damage.

The “KFK” rule was developed in London during World War II when, in response to the threat of German U-boats, British ships sailing in the dark with all lights off increased the incidence of collisions between ships. To avoid costly and protracted litigation for damages, operators accepted the KFK principle. This rule has been taken up by the offshore and project cargo shipping industry.

To cover these damages, each party must take out own damage and/or liability insurance. High excesses expose the operator to a high risk, therefore we recommend negotiating to exclude the KFK rule for the first tranche of damages, the equivalent of the excess.

In conclusion, operators in the maritime project sector should be aware of this KFK rule by taking advice to cover their risks.

The LEGAL 500″ and “CHAMBERS & PARTNERS” guides endorse AIYON Abogados’ good work

Once again, Aiyon Abogados has been highlighted as one of the best maritime law firms in the Spanish market by both Chambers and Partners  and The Legal 500 in their respective 2024 Guides. Our clients have recognised the adaptability and efficiency of the team and its extensive experience in dispute resolution, contract drafting, maritime accidents, pollution, shipbuilding, maritime claims, etc.

During direct client surveys, our clients have highlighted that Aiyon’s lawyers “are client-oriented with a service that goes beyond the legal advice” offering “quick responses and analytical advice and guidance”. The broad knowledge and set of different personalities at the law firm maintain a solid basis for sharp and tailor-made legal advice“.

On an individual level, Verónica Meana and Mikel Garteiz-goxeaskoa have also been included, once again, in the rankings of the 2024 Guide of both publications as outstanding professionals for their recognised experience and prestige, in which they have been appearing for years, highlighting that Verónica “is very reactive, available and efficient” and Mikel “is a great professional with deep knowledge of the subject matter“.

We would like to thank all our customers for their comments and trust. It is our customers who make us want to improve every day.

The Abandonment of Containers in Maritime Traffic

A recurring problem in maritime transport is the abandonment of containers loaded with goods.

When the consignee of the goods does not come to collect them after having been requested to do so as the authorised party, shipping companies are faced with a series of costs such as delays due to the occupation of the container with other people’s goods, the storage of the container or the internal transport costs of the container.

In this situation, there are two possible solutions: to initiate a procedure for abandonment and auction of the cargo by the competent customs office, or to initiate a notarial procedure for the deposit and sale of the goods.

Abandonment proceedings initiated by the Customs Department

In order to initiate this procedure, a declaration of abandonment must first be issued by the competent customs administrator and the following rules must be complied with.

As soon as the goods are in a situation of abandonment, in accordance with the provisions of Article 316 of the Decree of 17 October 1947 approving the revised and amended text of the General Customs Regulations, a file is opened, headed by the written declaration of the interested party or by a statement of the facts justifying the abandonment. Within a maximum of 5 days from the opening of the file, the goods shall be examined and, after hearing the second head of customs, the administrator shall decide whether or not the abandonment is admissible.

This decision shall be notified to the person concerned with the goods, if known, and he shall be given a period of 5 days in which to accept or contest it.

If the person concerned is not known, the decision is published in the BOP and on the notice board of the customs office, and a further period of 5 days is granted for the submission of any objections. At the end of this period, the file is sent to the General Directorate of Customs for a decision.

If abandonment is finally declared, the administrator seizes the goods on behalf of the Treasury, which sells them by public auction.

From the proceeds of the sale, customs duties, fines, storage and warehousing costs and any other costs relating to the goods shall be deducted in order. Freight and the costs of loading and unloading the goods may then be deducted and, after the above deductions have been made, the balance, if any, shall be paid tothe Public Treasury as abandoned goods.

Notarial Deposit and Sale of Goods Procedure, regulated in Law 14/2014 on Maritime Navigation (Article 513 ff.)

This procedure for the deposit and sale of goods, regulated in Law 14/2014 on Maritime Navigation (articles 513 et seq.), may be initiated when the law applicable to the charter party of the vessel authorises the carrier to request the deposit and sale of the goods in cases where the consignee does not pay the freight or does not appear to collect the goods transported (containers and their contents).

In order to initiate the procedure, the interested party must indicate the transport in question and provide a copy of the Bill of Lading (B/L); it is also necessary to identify the consignee, the freight or expenses claimed, the type and quantity of goods and an approximate value of the same.

Once the application has been accepted, the Notary will request payment from the addressee, unless the title is not nominative, in which case payment will only be requested if the applicant so wishes and designates a person to do so.

If the addressee is not found within 48 hours, or if the addressee does not pay, the notary will order the goods to be deposited.

Once the goods have been deposited and the depositee has been appointed,

the notary shall authorise their valuation and sale by a specialised person or body or by public auction; the amount obtained from the sale shall be used first to pay the deposit and the costs of the auction, and the remainder shall be delivered to the applicant to pay the freight, or expenses claimed, and only up to that limit.

However, if the holder of the goods objects to payment at the time of the summons or within 48 hours thereafter, the remainder of the sale proceeds shall be deposited pending the outcome of the case. In this case, the holder must initiate legal or arbitration proceedings before the competent court. If the action is not brought within the time limit set, the Notary will return the balance to the claimant in payment of the freight or expenses claimed and up to that limit.

Finally, if the deposit has been avoided or cancelled by the provision of sufficient security by the addressee, the latter must file an action within the time limit. If he fails to do so, the notary will order payment of the claim from the security provided.

Since the notarial procedure involves costs (notary, expert opinions, etc.), it is not advisable for goods of low value, in which case it is preferable to use the customs abandonment procedure.

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“GREEN SHIPPPING”, 2050

Like so many other industries, the maritime industry is heading or at least intends to head towards a gradual decarbonisation in this century. While it is true that, as published in the report of the United Nations Conference on Trade and Development (UNCTAD) on the analysis of maritime transport in 2023 (1), greenhouse gas emissions from the maritime sector have increased by 20% in the last decade, and that the sector operates a largely older fleet powered almost exclusively by fossil fuels, it is no less true that at the recent United Nations Climate Conference (COP28) in December 2023, numerous milestones were set in the interests of the longed-for decarbonisation.

In principle, the year 2050 has been set as the target date for the total decarbonisation of the sector according to the new strategy published by the IMO, which will undoubtedly require massive capital investment that could lead to a rise in the costs of maritime transport, and the consequent concern for all those island developing countries that are highly dependent on maritime trade.

The UNCTAD report stressed how environmental objectives will need to be balanced against economic needs, but in any case, the cost of inaction far outweighs the investment required. Similarly, it outlined how factors such as cleaner and more efficient fuels, and digital solutions such as AI or blockchain, are sure to play a key role in improving the sustainability and efficiency of maritime transport.

However, the question of who should be responsible for the transition to full decarbonisation is a complex one.

Well, it appears that the major flag states such as Liberia, Panama and the Marshall Islands will be responsible for meeting and enforcing the new green shipping standards, but in turn, the burden of making investments in alternative fuels, facilities to supply such fuels and more efficient and greener ships, falls on maritime operators in general, ports and the energy industry.

Some of the COP 28 milestones that may have the most potential to help achieve full decarbonisation in maritime transport are:

IN RELATION TO GREEN MARITIME CORRIDORS:
The US announced its partnership with the UK, Canada and Korea to form green shipping corridors for major shipping lanes.  In parallel, the US and Korea also announced that they are undertaking feasibility studies on the use of green ethanol or ammonia to power ships on selected routes.

The UK, for its part, also announced that agreements have been reached on green maritime corridors, including the creation of an International Green Corridors Fund hand in hand with the Netherlands, Norway and Denmark.

The pre-feasibility study of the Chilean Green Corridor has been completed and feasibility studies are underway.

ON ALTERNATIVE FUELS AND THE PROGRESS OF SHIPS:
The Pacific Blue Shipping Partnership (Fiji, Marshall Islands, Kiribati, Solomon Islands, Tonga, Tuvalu, and Vanuatu) – committed to the retrofitting/replacement of more than 11,000 vessels among the 7 member countries.

France announced a USD 800 million investment in green shipping innovations, as well as the creation of a USD 1.2 billion public-private investment fund as part of its national maritime decarbonisation plan, including already USD 500 million in public investment and USD 200 million from CMA CGM for investments in port infrastructure, sustainable marine fuel production, retrofitting and replacement of existing vessels and decarbonisation of the government fleet.

The US Department of Energy invested $7 billion in hydrogen hubs across the country, working in conjunction with several of its ports.

In light of this, together with the other milestones achieved at COP28, it is clear that the outlook for the maritime sector has changed significantly. Maritime transport maintains the lowest level of CO2 emissions per tonne/mile compared to all other types of transport, and the sector is certainly keen to maintain this position as other transport sectors decarbonise as well, having demonstrated at COP28 that shipping is making efforts to invest in and take advantage of the opportunities offered by the energy transition.

(1) Review of Maritime Transport 2023 | UNCTAD

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Sanctioning Powers of the Directorate General of the Merchant Navy (DGMN)

Receiving notification of the initiation of an Administrative Disciplinary Proceedings is something that leaves no one indifferent, not only because of the final amount of the sanction, but also because of the general lack of knowledge that exists about the particularities of this administrative procedure.

Specifically, in this article we will analyse the characteristics of the Administrative Sanctioning Proceedings in the maritime field, as well as the sanctioning discretion of the Directorate General of the Merchant Navy (DGMN) in this regard.

COMPETENCE

The competence for the processing of a maritime Administrative Sanctioning Proceedings is stipulated in Annex II, article two of Royal Decree 1772/1994, of 5 August, which adapts certain administrative procedures in matters of transport and roads to Law 30/1992, of 26 November, on the Legal Regime of the Public Administrations and Common Administrative Procedure.

In accordance with this regulation, the Directorate General of the Merchant Navy, and the corresponding Maritime Harbour Master’s Office where applicable, will be responsible for the investigation and processing of an Administrative Sanctioning Proceedings.

PROCEDURE

The Administrative Sanctioning Proceedings of the Spanish maritime administration is generally governed by the same provisions that regulate such procedures for any other Spanish administration, i.e. by Law 39/2015 of 1 October, on the Common Administrative Proceedings of Public Administrations.

The Sanctioning Proceedings will be initiated once the irregularity has been noticed by the Administration, generally after an ocular inspection of the vessel or by a complaint from another competent authority, and the interested party or affected party must be notified of this Agreement to initiate the Administrative Sanctioning Procedure.

In the case in question, the competent body for sending this notification will be the competent Maritime Harbours Master’s Office of the place where the ship is located. In this communication, in addition to advising the parties concerned of the irregularity(ies) or deficiency(ies) identified and the possible rule(s) infringed, they shall also be required to provide a financial guarantee to terminate the detention of the vessel subject to the sanction, where this is stipulated. The guarantee shall remain deposited while the administrative procedure is being processed and at the expense of its outcome.

Following notification of the Agreement, interested parties shall have 15 working days to submit any observations they may wish to make. This period may be extended for a maximum period of 7 days beyond the expiry date, provided that the interested parties so request, and the Harbour Master’s Office authorises it.

Once the allegations of the interested parties have been reviewed, the Harbour Master’s Office will issue a Resolution Proposal, in which, in addition to identifying the precepts it considers having been infringed, it must also quantify them, thus determining the amount of the proposed sanction.

Interested parties shall have a further period of 15 days to make representations, should they consider it appropriate.

This point of the procedure is very important, not only because it is the procedural moment in which the Administrative Sanctioning File is transferred from the Harbour Master’s Office to the DGMN, which is ultimately responsible for issuing the Resolution, but also because it gives the interested parties the possibility of ending the process, by voluntarily acknowledging their liability and making prompt payment of the proposed amounts, in compliance with the provisions of Article 85 of Law 39/2015. Thus:

  • Voluntary acknowledgement of liability grants the interested party the benefit of a discount of 20% of the amount of the proposed penalty. However, on the other hand, it also obliges the interested party to renounce any subsequent administrative action or appeal.

In short, whoever acknowledges his or her responsibility for the alleged facts will lose the possibility of denying them in the future or appeal them.

  • Prompt payment of the penalty, before the Resolution was issued, entitles the interested party to a discount of 20% of the amount of the proposed penalty.

Both discounts are cumulative, and the interested party may therefore obtain a discount of at least 40% on the amount of the proposed penalty.

LIMITATION PERIOD

The Administration shall have a maximum period of 12 months from the date of issue of the Agreement to Initiate the Sanctioning Proceedings, to resolve the proceedings (1).

The lack of an express decision will result in the proceedings lapsing and they will be closed, which does not prevent a new one from being initiated if the possible infringements are not time-barred.

EFFECTS OF PROMPT PAYMENT ON THE DGMN’S DISCRETION TO IMPOSE PENALTIES

The power to impose penalties in the maritime field lies with the Ministry of Public Works, and more specifically in the hands of the DGMN, articles 263.k and 315.1.d of the Consolidated Text of the Law on State Ports and the Merchant Navy. There is an express obligation for the DGMN to resolve the procedure before the end of the one-year period granted for this purpose (art. 21 of Law 39/2015).

In fact, the jurisprudence of the Supreme Court (Judgment of 6 October 2022) is well known, confirming that until the competent Administration has issued an express resolution for the procedure, it will not have imposed any sanction, and may even incur the expiry of the actions when the time comes.

We highlight this fact, since the obligation to resolve provided for by law, together with the provisions of article 315.1.d. of the Consolidated Text of the Law on State Ports and the Merchant Navy, clashes with the usual practice of the sector, and more specifically with the right to prompt payment recognised by article 85 of Law 39/2015, which could turn the DGMN’s power into a merely declaratory power lacking any real power to impose a sanction.

Article 85 of Law 39/2015 on the Common Procedure of Public Administrations is clear in stating that “voluntary payment by the allegedly liable party, at any time prior to the resolution, will imply the termination of the procedure”. What is discussed in this case is the effect that article 85.2 of Law 39/2015 could have on the sanctioning power of the DGMN, according to article 315.1.d of Consolidated Text of the Law on State Ports and the Merchant Navy.

What we consider clear is that payment by the interested party should entail the Administration’s commitment to terminate the Sanctioning Proceedings, as is the case in other administrative sanctioning areas. The question to be asked is, how will the proceedings be terminated?

  • The first of the criteria shared by some of the professionals of the sector argues that, in those cases in which the interested party proceeds to make prompt payment of the proposed penalty and to recognise their responsibility, the DGMN may only terminate the procedure without modifying the Resolution Proposed by the Harbour Master’s Office in charge of the investigation of the proceedings.

The main argument defended by this current is that the fact that the DGMN retains the discretion to modify the amount of the sanction, once the interested party has acknowledged his liability and renounced his actions, having thus lost all possible means of defence, would place him in a situation of absolute vulnerability, due to defencelessness, incompatible with the Fundamental Right to effective judicial protection of article 24 of the Constitution. This trend is supported not only by the wording of Article 85 of Law 39/2015, but also by the Supreme Court’s Ruling 1830/2018, which was handed down on 19 February 2018, which interpreted Article 8 of Royal Decree 1398/1993 of 4 August 1993, which has the same content as the current Article 85 of Law 39/2015.

  • On the other hand, the DGMN and other professionals in the sector consider that the Consolidated Text of the Law on State Ports and the Merchant Navy, as a specific regulation of the maritime sector, should prevail over the general provisions contained in Law 39/2015, as the sanctioning power of the administration is an inalienable right of that body. This trend bases this power of the DGMN on Article 90(2) of Law 39/2015, which allows the decision-making body to deviate from what was proposed by the investigating body when it considers the infringement to be more serious. Therefore, they argue that limiting the DGMN’s ability to freely issue the resolution of the case it deems appropriate would be an unjustified limitation of its powers, transferring part of them directly to the Harbour Master’s Office.

This second criterion is the one followed and shared to date by the Spanish Administration, so that all parties involved in a Maritime Administrative Sanctioning proceedings should take this competence of the DGMN into account when assessing whether or not to assume their responsibility and make prompt payment, thus waiving any possible future action to defend their position. In practice, prompt payment and the assumption of responsibility do not guarantee the termination of the procedure, and there is a risk that the DGMN will increase the penalty paid and acknowledged by the defendant.

In any case, as we always advise, each case and scenario should be assessed individually, and be advised by professionals such as the team that makes up AIYON, since relations with the handling of these files and relations with the administrations are part of our day-to-day work.

(1) This is stipulated in Annex 1 of Additional Provision 29 of Law 14/2000 of 29 December on fiscal, administrative and social measures, amended by Article 69 of Law 24/2001 of 27 December on fiscal, administrative and social measures, applicable by virtue of the provisions of the Sole Repealing Provision, section 3 of Law 39/2015 of 1 October.

“ESTRATEGIA EMPRESARIAL”, echoes our almost 9 years of experience in the market

As a firm founded in 2015 in Bilbao, the publication highlights our multidisciplinary team of eight expert lawyers, valuing our comprehensive 360º legal advice. 

With a proven impact at national level acting from our four offices located in Bilbao, Cadiz, Madrid and Algeciras, with which we cover strategic areas for the transport and logistics sector, ESTRETAGIA EMPRESARIAL also highlights the fact that we have all kinds of collaborators at national and international level that help us to cover all the demands for advice and assistance that our clients may have anywhere in the world.

Likewise, the publication points out our commitment to disseminate all kinds of legislative and jurisprudential developments related to the logistics sector, both in terms of maritime law, transport law in general, insurance and national and international trade via our conferences, talks to clients or the two corporate websites: www.aiyon.es and shiparrestrelease.com.

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Brief comments on the reform on digital and procedural efficiency (Royal Decree-Law 6/2023 of 19 December for the Administration of Justice)

Following in the wake of the now repealed Law 18/2011, of 5 July, regulating the use of information and communication technologies in the Administration of Justice, and driven by the COVID-19 pandemic crisis suffered in 2020, which made even more evident the urgent need to achieve technological adaptation of the Administration of Justice, the Royal Decree-Law 6/2023, of 19 December, approving urgent measures for the implementation of the Recovery, Transformation and Resilience Plan in the field of public service in the public administration of justice, has recently been legislated, Royal Decree-Law 6/2023 of 19 December, approving urgent measures for the implementation of the Recovery, Transformation and Resilience Plan for the public service of justice, civil service, local government and patronage, published on 20 December 2023 in the BOE.

This RDL introduces several changes to different legal provisions, seeking to modernise and digitalise the administration of justice, as well as to implement procedural efficiency measures that contribute to reducing the number of lawsuits and increasing the dynamism of procedures in all the different jurisdictional orders.

The aim is thus to make the digital relationship with the Administration of Justice the most common and ordinary one, providing a new, faster, and more efficient channel under this cover of norms and rules, if possible, to better satisfy the rights of citizens when they come into contact with the Administration of Justice. In any case, effective judicial protection, regulated in art. 24 of the Spanish Constitution, is an absolute priority.

It seems that the “Electronic Court File” will be called upon to be the centrepiece of the future of digital justice, which will be developed in conjunction with the application of the general principle of data orientation, with the aim of opening the door to new technological solutions and the use of artificial intelligence in the administration of justice.

So, within the enormous list of modifications contained in this Royal Decree-Law 6/2023, of 19 December, this article will focus below on the new features of digital efficiency and telematic hearings introduced, as well as on the changes for civil proceedings.

It must be assumed that its provisions will be applicable exclusively to legal proceedings initiated after its entry into force, and therefore its retroactive application is not envisaged. This entry into force will take place twenty days after its publication in the Official State Gazette (on 9 January 2024), except for the new provisions on procedural efficiency, which will enter into force three months after their publication in the Official State Gazette (on 20 March 2024).

a) The telematic hearing as a general rule:
With this new RDL, and the required modification of the LEC, the holding of telematic hearings will be the new general rule in civil jurisdiction, conditional, of course, on the judicial offices having the necessary technical means (art. 129 bis 1 LEC).

As an exception to the above, only those hearings in which the appearance, declaration or testimony of the parties, witnesses or experts is required will be held in person; however, even in these cases, the telematic modality may be chosen if certain circumstances are met (for example, if the person who must intervene lives in a different location from that of the court).

b) The first summons shall be served electronically:
Given that telematic means of notification are preferable, it is not surprising that the new content of art. 155 LEC indicates that the first summons will be made electronically, except in the case of natural persons who are not represented by a solicitor, who may choose whether they are communicated on paper or by electronic means. If three days have passed without the addressee accessing its content, it will be published by means of the Single Judicial Notice Board.

The Constitutional Court’s interpretation that, according to the previous regulations, the first summons had to be made in paper format to entities obliged to relate to the Administration of Justice by electronic means, such as companies, will thus go down in the history of law (STC 47/2019, of 8 April).

This brings with it a new and clear “de facto” obligation for this type of entity, which must now categorically manage and control each and every one of the electronic platforms to which judicial notifications may reach them, namely:

  • The Justice Folder.
  • The Electronic Judicial Headquarters.
  • The Single Enabled Electronic Address (DEHú).
  • The Single Bulletin Board.

Hence the importance of subscribing to the so-called “alert systems” contained in these electronic platforms, in order to receive an email notification that a new notification has been made and to access it, otherwise you will have to check these platforms on a daily basis if you want to be diligent, in case one has been made.

c) Modifications to the procedure of the Verbal Judgment:
As a result of the new wording of art. 249 LEC modified by this RDL, the amount of the ordinary trial procedure is raised from 6,000 to 15,000 euros. Consequently, the matters that must now be heard by means of a Verbal Trial will be those that are determined by the amount of 15,000 euros or less.

Its scope of application is also extended by reason of the subject matter, covering for the first-time lawsuits in which individual actions are brought in relation to general contracting conditions (art. 250.1.15º LEC).

d) Amendments concerning appeals and review of final judgments:
As a result of the new wording of articles 458 and 461.1 LEC, introduced by this RDL, the Appeal will no longer be devolutive and will be lodged directly before the Provincial Court, instead of before the Court of First Instance that heard the case, as has been the case until now.

The regulation of the Appeal in Cassation has also been modified in two main aspects, namely (i) withdrawal of the Appeal in Cassation will not be permitted once the date for deliberation, voting and ruling has been set (art. 450.1 LEC) and (ii) with regard to the costs of the Appeal in Cassation, there will be the possibility that the appellant who has seen his appeal rejected will not be ordered to pay the costs in those cases in which our highest court appreciates circumstances that justify it.

To conclude, we would like to point out that the first phase, which began more than a decade ago, aimed at the transition from paper to digital in the Administration of Justice, is now behind us, and that we are now in a new, much more advanced phase, in which the aim is to achieve substantial and concrete improvements in the already existing digital environment. This is why the wording and content of this RDL should not surprise us, as even greater changes are expected in the future in this line of digitalisation, promoting greater effectiveness and efficiency in the Administration of Justice, which we will always consider more than welcome.