1976 Apportionment of Risk In

Comité Maritime International Apportionment of risk in maritime law Report of proceedings at a seminar held in Aix en Provence 9-11 September 1976 Further copies of this Report may be obtained from: D. J. L. Watkins, 1 Pepys Street, London, E.C.3 CONTENTS Introduction The Lord Diplock Page 1 Risk allocation in practice today A shipowner's view B. G. Nilson Page3 The cargo owner's view and his insurance requirements Niklas Kihlbom Page5 The insurance of Shipowners' liabilities William Birch Reynardson Page 7 The apportionment of risk between ship and cargo Under Bills of Lading Francesco Berlingieri Page 9 The apportionment of risk between ship René Rodiere and cargo Under Charterparties delivered by Jacques Potier Page 11 The apportionment of risk between ship and cargo General Average Kaj Pineus Page 14 The apportionment of risk between Shipowner and third parties Shipowner and Shipowner Collisions Nicholas Healy Page 15 The apportionment of risk between Shipowner and third parties Shipowner and other third parties Pierre Bonassies Page 17 The apportionment of risk between Shipowners and third parties The Hull insurer Richard Rutherford Page 19 Limitation of Liability Alex Rein Page 21 Summary of Discussion Page 23 Summary and Conclusion The Lord Diplock Page 26 Appendix I Summaries of papers issued by the speakers before the Seminar Page 33 Appendix II Hague Rules 1924. Article 3, paragraphs 1 Et 2 Page 64 Appendix III Hague Rules 1924. Article 4, paragraphs 1Er 2 Page 64 Appendix IV Uncitral Draft. Article 5 Page 64 Appendix V Institute Amended Running Down Clause Page 65 LORD DIPLOCK: INTRODUCTION In the Comite Maritime and its constituent associations there is an unrivalled wealth of practical experience and legal expertise in maritime law and maritime affairs. At the previous conferences of the CMI we have devoted our time to the drafting of conventions for consideration at the Diplomatic Conference in Brussels and also voluntary agree- ments such as the York/Antwerp Rules and such indeed as the Tokyo Rules have become. This time we are proposing to make an experiment, to take a fresh look at the concept of the apportionment of risk in maritime law. That is a topic which has a significant effect upon the economics of sea transport and is a major pre-occupation of maritime law. I would like to start by trying to define very briefly the risks that we will be talking about. They are the risk of physical damage to or destruction of property (I am excluding personal injury because it is really a separate topic) and also the risk of loss due to the temporary removal from commerce of goods or ships, the loss due to delay. Losses of those two kinds are necessarily part of the overall cost of maritime transport and of overseas trade, whether the loss is allowed to lie where it initially falls or whether it is transferred from where it originally falls to some other person by a recourse action. Maritime law, or at any rate maritime lawyers, tend to lose sight of the fact that whichever way we do apportion the liability for the loss it is going to form part of the cost of maritime transport and is going to be reflected ultimately in the price of the goods at their destination. What we do in maritime law is to distribute risk in two ways, one by classifying it according to its cause, and the other by distributing it according to its quantum whatever the cause may be. I speak for example of the package limitation in the Hague Rules or of the Shipowner's global limitation of liability under the 1957 convention. So far as cause is concerned, in trying to clear my mind on this subject I found it convenient to classify risk as misfortune risks, those which cannot be reduced by precautions taken or extra care taken which is economically justifiable, and fault risks which are those which can be reduced by precautions taken or by greater care. The latter, fault risk, one can classify as maritime law has tended to classify it, as management fault: bad organisation before the voyage starts, navigational fault, carelessness broadly speaking after the voyage has started. In using the expression 'fault risk' one must remember that this has nothing to do with 'sin'. Maybe it had something to do with 'sin' 500 or 600 years ago but it has not today, andifthe cost ofadministering recourse claims exceeds the reductioninloss or damage consequent upon such deterrent effect as recourse liability may have, then no liability for conduct however carelessis justifiable economically. Ifa limit is to serve a useful purpose then it must in this context be a limit that is unbreakable, apart from scuttling or something of that kind. What I suggest is, that instead of thinking about 'sin' and who is to blame, the questions which we ought to be asking ourselves are those which are set out in the last paragraph of the summary of my introductory remarks (see Appendix I): how does the current allocation of risk loss from a particular class of risk, misfortune risk or fault management or fault navigational risk, affect the overall cost of seaborne trade of the kind in which the risk occurs. This is a question which in my experience lawyers, or at any rate judges, seldom ask themselves.It gives rise to the question, is there any other way of allocating the loss that would be more economical? Then the third question if the answer is yes is, to what extent could the more economical way be adopted voluntarily without conflict with national law? There are, as all of you are aware, two proposals at present actively being considered to alter the present method of allocation of risk. One, which is coming up at the Diplomatic Conference in November, is the IMCO proposal for the institution of a new convention on limitation of liability. This convention is based upon the draft which the CM! itself produced at the Hamburg meeting. The other is the proposals not yet so far advanced by Uncitral for an amendment of the Hague Rules. Now as practical men and women we shall no doubt in the course of this Seminar pay particular attention to those two proposals for alteration of allocation of risk but our discussions are intended to range over a wider field because allocations of risk throughout the field react on one another. To give a simple example they affect global limitation: if you remove a liability from a shipowner or increase the liability on a shipowner that affects the amount of the limitation fund available for other forms of loss. Another reason for the wider range is that when we look at different aspects, different areas of the field of allocation of risk, we find that there are different ways of allocating it. The question to ask ourselves it why should there be? I think we shall find very often the answer is a purely historical one, the reasons for which have now disappeared, but at any rate it is worthwhile asking the question. And if we find that one is wiser than another we should consider whether it should not be extended beyond the field in which it at present applies. At this opening stage I do not know the answer to any of the questions which I hope we are going to consider in the next few days, nor do the panel of distinguished speakers who you see sitting around me. By Saturday morning, as compared with now I hope we shall have cleared our minds about the questions which I have posed, or at any rate some of them, and 1 may have reached some general consensus upon some of the matters, in particularI would hope upon the changes proposed in allocation of risk in the two proposals for amendments to conventions, the IMCO proposal and the Uncitral proposal, that I have already mentioned. The way in whichI hope we are going to clear our minds and see if we can reach some general consensus is that we shall start with the members of the panel who will introduce the discussion and stress the points of importance in the papers, the outline of which I hope you have read because the object of this exercise is not to have a series of lectures upon different aspects of maritime law. If that were the object and if the panel knew the answers to the questions there would not be much point in having this Seminar at all. They could write down the answers and circulate them to you. So I am going to invite them to introduce quite briefly the points which they have summarised in the papers that are before you, to stress those which are important. I shall then invite questions and comments from the audience in the hall and from the members of the panel. We have got among this audience people with vast and specialised experience in various aspects of the matters which we are going to discuss and I hope that we shall get you in the audience into a discussion arguing the oros and cons. You may not agree with the speakers: the speakers do not agree among themselves on various issues. Let us get these differences out, let this be a real Seminar, something where one gets a socratic discussion going, clears one's mind and gets some way towards the answer to the problems posed. 2 B. G. NILSON: Risk allocation in practice todaya Shipowner's view The figures that I have given in my paper are, to take an expression from our trade, believed to be correct but not guaranteed.

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