The decision rendered by the Court of Appeal of Versailles on 15 December 20151 shows how the French Courts consider claims made on an extra-contractual basis against classification societies. The court found that the classification society was liable for the loss and damage suffered by the buyers of two previously certified vessels.

Facts

In October 2005, Unicorn Tankers International (UTI) concluded two shipbuilding contracts with a Chinese shipyard, Taizhou Sanfu Ship Engineering. The French classification society, Bureau Veritas, issued class certificates for both vessels, the BERG and the BREEDE. The BERG was delivered to Petrochemical Shipping Ltd in November 2008 and the BREEDE was delivered to UTI who then resold it to Unicorn Baltic Ltd, in March 2009.

A few months after the deliveries, leaks were detected in the cargo collectors and both vessels were subsequently obliged to undertake repairs which took several months.

UTI claimed their losses from the yard but under the terms of the shipbuilding contracts, only the costs of the necessary repairs were recoverable. Ultimately a settlement was reached for both vessels. In order to recover the additional damages suffered during the period of repair (e.g. loss of hire), UTI, Unicorn Baltic and Petrochemical Shipping brought a claim against Bureau Veritas on the basis of tort law.

The decision

Before dealing with the substantive claim, the French Court had to decide what was the applicable law. Bureau Veritas argued in favour of English law whereas the claimants argued that Chinese law was applicable.

The court found that in this case Regulation 864/2007 (Rome II)2 was not applicable because the events giving rise to damages (the delivery of the classification certificates) occurred before the entry into force of this regulation. As a result China was identified as being the country which was the most closely connected with the tort (being the place of construction, delivery of the vessels, inspections and delivery of certificates).

The French Court thus applied Chinese tort law, whose requirements are very similar to French law. To succeed, the claimants needed to demonstrate: (i) a wrong committed by the classification society, (ii) losses suffered by the buyer, and (iii) a causal link. The classification society was found liable because the shortcomings of its testing and verification operations (in particular, its failure to detect defective welds) constituted a wrong which had caused the claimants to suffer losses.

The court therefore awarded damages to the claimants but on different grounds. In the case of Petrochemical, whose charterers terminated the charterparty with them as a result of the problems with the cargo collectors, damages were awarded by reference to the loss of hire during the periods of repair and the loss of the opportunity to obtain a replacement charter at an equivalent hire rate. UBL, whose vessel was not under charter at the time of repairs, were awarded damages for loss of the chance to charter the vessel out.

While both claimants were successful, neither was awarded the full amount of damages claimed from Bureau Veritas as the court took into account a number of other factors.

Comments

This ruling appears to be in line with existing French law with regard to extra-contractual liability of classification societies.

In 1996, the French Court of Appeal of Versailles3 held a classification society liable for the damages suffered by a third party (purchaser of a vessel). The court stated that its repeated and significant failures, which went to the heart of its duty, constituted gross negligence.

A similar decision was reached in the Wellborn case, in 20044. The classification society was held liable having committed a gross negligence by the delivery of certificates which enabled a dangerous vessel (dubbed a ‘wreck’ by the court) to sail for years in international waters.

This latest case therefore reinforces the view that the French Courts are prepared to award damages where they consider that a classification society has breached its extra-contractual duties. It also underlines that France is a more favourable jurisdiction than England in which to bring claims in tort against classification societies.