All questions

Shipping contracts

i Shipbuilding

There is no substantial shipbuilding industry in Australia, although there are some small and medium-sized shipyards that are predominantly involved in the construction and repair of naval, high-speed aluminium-hull passenger and roll-on/roll-off vessels, and recreational vessels. Accordingly, there is no significant local jurisprudence, specific local laws or regulations concerning shipbuilding contracts.

ii Contracts of carriage

The Carriage of Goods by Sea Act 1991 (Cth) (COGSA) contains important, mandatory provisions concerning choice of law and jurisdiction in relation to contracts of carriage. Certain contracts for the carriage of goods from places in Australia to places outside Australia (outbound carriage) are deemed subject to Australian law (i.e., that of the state of the port of shipment). Any agreement to the contrary is invalid, as is any agreement that seeks to restrict the jurisdiction of Australian courts with respect to such a contract.38 COGSA also invalidates any agreement that seeks to restrict jurisdiction with respect to carriage from places outside Australia to places in Australia (inbound carriage).39 However, these mandatory provisions do not apply to sea carriage between Australian ports, with the somewhat curious consequence that parties are free to contract pursuant to foreign law and jurisdiction for such voyages (but not for outbound carriage).

The purpose of these provisions is to give local cargo interests the protection of Australia's laws and judicial system. The provisions are regularly relied on by parties who may otherwise have to pursue a carrier in a less favourable jurisdiction or under a less favourable cargo liability regime. As discussed in Section III.iii, they can also be relied on, for example, to resist local enforcement of a foreign judgment or arbitration award obtained pursuant to an agreement that contravenes the mandatory provisions.40

An important consequence of these mandatory provisions is that, when a contract of carriage is subject to Australian law through the operation of COGSA and in certain other cases in which an Australian court has jurisdiction, cargo liability may be regulated by a modified version of the Protocol to amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading 1968 (the Hague-Visby Rules) (the Modified Rules).41 These Rules primarily apply to contracts for outbound carriage.42 They also apply in respect of sea carriage between Australian ports, except when carriage is between ports within the same state or territory.43 Furthermore, the Modified Rules apply in respect of inbound carriage if another international cargo liability regime does not otherwise apply by agreement or law.44

The Modified Rules regulate cargo liabilities in respect of 'sea carriage documents' (defined as including bills of lading and certain types of consignment note, sea waybills and ship delivery orders),45 which need not necessarily be documents of title. The Modified Rules apply therefore to a broader range of shipping documents than the Hague-Visby Rules. A decision of the Full Court of the Federal Court of Australia, however, has held that a voyage charter party is not a sea carriage document, thereby largely resolving a point of law that had given rise to considerable uncertainty in Australian maritime law.46

The Modified Rules adopt the basic cargo liability regime of the Hague-Visby Rules. There are a number of important differences in the Modified Rules, however, some of which are explained in the context of cargo claims in Section IV.iii.

iii Cargo claims

The question of title to sue under bills of lading, sea waybills and ship delivery orders is the subject of uniform legislation in each Australian state and territory47 based on the Bills of Lading Act 1855 (UK). In the case of a bill of lading, for example, a cargo interest will need to prove that it is the lawful holder of the bill to have title to sue the carrier under the contract of carriage evidenced by the bill.48

A cargo interest with title to sue must establish, based on the proper construction of the contract of carriage and the mandatory provisions of COGSA, which cargo liability regime regulates its claim. This can be a complex inquiry that will depend on the circumstances of each case. However, there is a range of circumstances in which the Modified Rules will apply to a cargo claim brought in Australia.49

The obligations and immunities of the carrier under the Modified Rules are generally consistent with the Hague-Visby Rules, with three important qualifications. First, the period of the carrier's responsibility under the Modified Rules commences when goods are delivered to the carrier within a port, and ends with delivery to the consignee within the destination port.50 This extension is most relevant to containerised cargo, which is generally delivered to and by the carrier at the container terminal. If cargo is shipped on a free in/free out basis, delivery to and by the carrier at both ends occurs on board, in which case the mandatory period of responsibility is limited to the 'tackle-to-tackle' period. Second, the Modified Rules apply generally to the carriage of goods on or above deck.51 Third, the Modified Rules contain additional provisions that render the carrier liable for delay in certain situations.52

With regard to the carrier's right to limit liability, the Modified Rules incorporate the amendments to the Hague-Visby rules effected by the Protocol of 1979 to amend the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (the SDR Protocol 1979). Accordingly, the carrier is generally entitled to limit its liability to the greater of 666.67 special drawing rights (SDRs) per unit or 2 SDRs per kilogram, unless the nature and value of the goods is declared.53 As with the Hague-Visby Rules, the Modified Rules incorporate a one-year time bar for bringing suit against the carrier.54 Finally, in the event that the Modified Rules apply, the carrier is not usually permitted to contract out.55

iv Limitation of liability

Australia is party to, and has incorporated into domestic legislation, the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976) and the Protocol to amend the LLMC Convention 1996 (the 1996 LLMC Protocol) (the Limitation Convention).56 The 2012 Amendment to the 1996 Protocol (which increases the limits of liability) entered into force in Australia on 8 June 2015.57

Accordingly, an owner, charterer, manager, operator and salvor of a ship are entitled to limit liability with respect to certain maritime claims in accordance with the Limitation Convention, including the increased limits of liability under the 2015 amendments. Australia is also party to, and has incorporated domestically, the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (the Bunker Convention),58 which preserves the right to limit liability under the Limitation Convention with respect to certain claims concerning bunker oil pollution damage.59

There have been a number of Australian court decisions concerning the application and interpretation of the Limitation Convention. In one decision, for example, the Federal Court of Australia decided (apparently, for the first time in relation to the Limitation Convention) that claims for pure economic loss are subject to limitation.60 In another decision, the same Court determined that the facts of a marine casualty gave rise to two 'distinct occasions', with the result that a shipowner was required to constitute two limitation funds in respect of the casualty.61 It should be added that shipping incidents have generated some controversy surrounding a shipowner's right to limit liability, and the issue may be the subject of further political and media attention in the event of a serious casualty in Australian waters.62

If a claimant seeks to argue that a shipowner is guilty of conduct barring limitation under Article 4 of the Limitation Convention, the shipowner may be required to provide security for claims in excess of the limitation amount, even if the claimant's argument is very unlikely to succeed.63

Australia is also party to, and has incorporated into domestic legislation, the International Convention on Civil Liability for Oil Pollution Damage 1969 (the CLC Convention) and the Protocol of 1992 and the further amendments of 2000 (the Civil Liability Convention).64 A shipowner is therefore entitled to limit liability with respect to certain claims for oil pollution damage in accordance with the Civil Liability Convention, including the increased limits of liability under the 2000 amendments.65

An important issue arising under both the Limitation Convention and the Civil Liability Convention concerns the application of these conventions to a ship. The former contains no definition of 'ship' and the latter contains a definition that is often regarded as convoluted and ambiguous.66 The vexed question of exactly what amounts to a ship in these conventions, and in other maritime legislation, is especially relevant in Australian waters, where a range of unique offshore craft is engaged in the exploration and production of oil and gas. The issue creates considerable uncertainty for many participants in the offshore marine sector and remains the subject of debate.67 For instance, in the context of ship arrest, which is addressed in Section V.i, the Federal Court of Australia has held that a remotely operated vehicle was not a ship and therefore could not be subject to arrest.68