Newbuilding contracts

Transfer of title

When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Under Chilean maritime law, there are no specific regulations or compulsory requirements. Accordingly, title in the ship will pass subject to the parties’ stipulations. Otherwise, this is a matter to be analysed under the general sales of goods rules contained in both the Chilean Civil and Commercial Codes.

Refund guarantee

What formalities need to be complied with for the refund guarantee to be valid?

Under Chilean maritime law there are no specific regulations or compulsory requirements. Accordingly, such formalities would mostly depend on what the parties have agreed.

Court-ordered delivery

Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

Generally speaking, the owner may sue the yard to compel delivery of the vessel or claim damages based on the general rules applicable to all contracts contained in the Chilean Civil Code and the general obligation relating to sellers for delivering at the agreed place and time.

Defects

Where the vessel is defective and damage results, would a claim lie in contract or under product liability against the shipbuilder at the suit of the shipowner; a purchaser from the original shipowner; or a third party that has sustained damage?

Generally, under the Chilean rules relating to the sale of goods, once a contract is consummated the buyer must bear the risk of loss or wear and tear unless otherwise agreed, or if such loss or impairment is caused by the seller’s fraud or negligence or by inherent vice. A third party that has sustained damage may consider suing in tort.

Ship registration and mortgages

Eligibility for registration

What vessels are eligible for registration under the flag of your country? Is it possible to register vessels under construction under the flag of your country?

In Chile, any type of vessel, whether constructed or under construction, or naval devices can be registered at the following registries kept by the General Administration of the Maritime Territory and Merchant Marine (the Maritime Authority):

  • the Large Vessels Registry;
  • the Minor Vessels Registry;
  • the Vessels in Construction Registry;
  • the Naval Devices Registry; and
  • the Mortgage, Liens and Prohibitions Registry.

 

The rules relevant to the organisation and operation of the registries as well as the procedures, formalities and requirements of registration are contained in the respective regulations. In this respect, it is important to note that the practice of registering vessels chartered on a bareboat basis does not occur in Chile.

In accordance with article 15 of the Navigation Law, all large vessels (ie, those over 50 gross tonnage (GT)), must be registered in the Large Vessels Registry, which is kept by the Maritime Authority. Minor vessels (ie, those of 50 GT or less), are registered in the Minor Vessels Registries that are kept by the harbour masters.

In addition, the Navigation Law distinguishes between merchant and special vessels. The former is defined as those that are used for carriage purposes, whether on a local or international basis. Unless there is a cargo reservation in place, foreign merchant vessels have no restrictions on performing international carriage of goods by sea. However, cabotage is restricted, in principle, to Chilean merchant vessels. However, special vessels are those used for specific purpo,ses and with particular features relating to their functions (eg, tugs, fishing vessels, dredgers) and may, thereforesubject to further regulations.

Regarding vessels under construction, the proprietor must submit to the Maritime Authority the titles that justify his or her rights over the vessel, the technical specifications and other requirements established by the respective regulations.

Who may apply to register a ship in your jurisdiction?

Regarding merchant vessels, they can be registered by Chilean nationals or citizens. If the owner is a corporation, it must meet the following requirements to be deemed Chilean:

  • having its registered offices and true and effective headquarters in Chile;
  • having a Chilean president, manager and majority of directors or administrators, as the case may be; and
  • the majority of the equity capital is owned by Chilean individuals or bodies corporate.

 

Regarding special vessels, they can be registered in Chile by foreign natural persons as long as they are domiciled in the country and their main place of business is located locally (this rule does not apply to fishing vessels).

Documentary requirements

What are the documentary requirements for registration?

The registration of a merchant vessel in Chile involves aspects of domicile and nationality of her owners. To this must be added the Chilean nationality of the crew when the vessel, if already Chilean, wishes to fly the Chilean flag.

Dual registration

Is dual registration and flagging out possible and what is the procedure?

Although not regulated in depth, according to the Chilean Navigation Law, dual registration of national merchant vessels would be acceptable when, for reasons of obvious convenience to domestic interests, the President of Chile authorises the bareboat charter of national vessels for a certain period. In such cases, the vessel must fly a foreign flag, although her Chilean registration will continue in effect.

Regarding flagging out, the owner is free to do so. In such a case, the corresponding vessel or naval devices acquired or constructed abroad for registry in Chile and those that are built in Chile for sale abroad or registry in the country may navigate under the national flag without any document other than a ‘safe conduct’, namely, a document that, in the case of Chile, corresponds to the credentials issued by the consul of Chile or the Chilean Maritime Authority, as the case may be, that legitimises the journey of the vessel to or from a Chilean port (temporary document).

Mortgage register

Who maintains the register of mortgages and what information does it contain?

The rules relevant to the organisation and operation of the registries as well as the procedures, formalities and requirements of registration are contained in the respective regulations. In this respect, it is important to note that the practice of registering vessels chartered on a bareboat basis does not occur in Chile.

In accordance with article 15 of the Navigation Law, all large vessels (ie, those over 50 gross tonnage (GT)), must be registered in the Large Vessels Registry, which is kept by the Maritime Authority. Minor vessels (ie, those of 50 GT or less), are registered in the Minor Vessels Registries that are kept by the harbour masters.

In addition, the Navigation Law distinguishes between merchant and special vessels. The former is defined as those that are used for carriage purposes, whether on a local or international basis. Unless there is a cargo reservation in place, foreign merchant vessels have no restrictions on performing international carriage of goods by sea. However, cabotage is restricted, in principle, to Chilean merchant vessels. However, special vessels are those used for specific purposes and with particular features relating to their functions (eg, tugs, fishing vessels, dredgers) and may therefore be subject to further regulations.

Regarding vessels under construction, the proprietor must submit to the Maritime Authority the titles that justify his or her rights over the vessel, the technical specifications and other requirements established by the respective regulations.

Limitation of liability

Regime

What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The Chilean regulations that refer to tonnage limitation matters (ie, articles 889 to 904 of the Commercial Code) are inspired by both the international conventions signed in Brussels in 1957 (the 1957 Convention) and in London in 1976 (the 1976 Convention). With respect to the tonnage limitation figures, the Commercial Code follows the lines of the 1976 Convention. In addition, it is important to note that the Commercial Code establishes a specific set of procedural provisions in connection to the constitution and distribution of the corresponding limitation fund.

The claims subject to limitation are as follows:

  1. death or personal injury and damage to property on board;
  2. death or personal injuries caused by any person for whom the owner is responsible, whether on board or ashore (in the latter case, his or her actions must be related to the ship’s operation or to the loading, discharging or carriage of the relevant goods);
  3. loss of or damage to other goods, including the cargo, caused by the same person or people, grounds, places and circumstances given in (2) above; and
  4. resulting liability related to the damage caused by a vessel to harbour works, dry docks, basins and waterways.

 

The people entitled to limit their liability under this regime are as follows:

  1. the shipowner as defined by Chilean regulations;
  2. the shipowner’s staff;
  3. liability insurers;
  4. the operator, carrier, charterer and ship’s proprietor, if a different person or entity than (1) above; and
  5. individual employees of (4) above, including the master and members of the crew, if sued.

 

Limitation in connection with civil liability for the damage resulting from the spillage of hydrocarbons and other hazardous substances is regulated as follows:

  • spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is subject to the International Convention on Civil Liability for Oil Pollution Damage (CLC) 1969, as renewed in 1992 (CLC 1992); and
  • spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law (among others, it extends the limitation benefit to the owner, proprietor and operator).

 

Regarding limitation in connection with contracts of carriage of goods by sea, Chilean law draws a distinction between lost or damaged goods and delayed goods. In the former case, the carrier’s liability is limited to an amount equal to 835 special drawing rights (SDR) per package or other shipping unit, or 2.5 SDR per kilogram of gross weight, if the latter is higher. In the case of delayed goods, the carrier’s liability is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed, but not exceeding the total sum of the freight payable under the respective contract of carriage by sea. The above rules do not comprise either the interests arising from the value of the damaged goods or the judicial costs.

Procedure

What is the procedure for establishing limitation?

The procedure for establishing a limitation fund in connection to general civil liability or carriage of goods by sea contracts is regulated in the Commercial Code (article 1,210 et seq). Its main features are as follows.

 Persons entitled to commence limitation proceedings

Persons who consider themselves entitled to limit liability under the Chilean general limitation regime or a carrier under the Chilean adoption of the Hamburg Rules may come before any of the courts mentioned below and ask that a procedure be initiated, aimed at constituting the fund and verifying and settling credits and distribution in accordance with the priorities provided by law.

 Competent courts

It will be up to an appropriate court to investigate all the matters referred to in the previous subheading and any that are an accessory or of consequence to them:

  1. when the limitation of liability refers to a vessel registered in Chile, it will be the civil court that lies within the jurisdiction of the port of registration of the vessel;
  2. if dealing with a foreign vessel, the appropriate Chilean civil court of the port where the accident occurred or the first Chilean port of call after the accident or, failing either of these, whatever court has jurisdiction in the place where the vessel was first retained or where a guarantee for the vessel had first been granted; and
  3. when such a procedure has still not been brought in any of the courts mentioned previously and the limitation of liability is filed in a plea, the same court before which it is being pleaded will be able to hear the case on limitation so long as it is an ordinary one. If dealing with a court of arbitration, copies of the pertinent background information will be sent to the court that is able to hear the case in accordance with the preceding points so that, before this court, the action aimed at constituting and distributing the limitation of liability fund can be brought.

 

In these cases, the plea for limitation of liability by constituting the fund may only be made when answering the lawsuit action.

 Term for exercising limitation of liability by constituting a fund

Except in the case of (3) above, limitation of liability by constituting a fund may be exercised up to the moment in which the deadline expires for filing defences within foreclosure proceedings or within the deadline of the summons referred to in article 233 of the Civil Procedure Code in court-ordered enforcement proceedings.

 Resolution declaring commencement of proceedings

The court, after examining whether the applicant’s calculations of the amount of the fund fall into line with the pertinent provisions, will issue a rule in which it will declare that proceedings have begun. At the same time, it will rule on the options offered for the constitution of the fund, ordering them to be complied with, if it approves them. In the same resolution, it will mention the sum that the petitioner shall place at the disposal of the court to cover all costs of proceedings and it will appoint a receiver plus a deputy to conduct and carry out all the acts and operations that he or she is entrusted with in this section. These appointments shall fall upon persons who are on the list of receivers mentioned in the Chilean Bankruptcy Law and it will not be necessary for their appointment to be ratified at a later date by the board of creditors.

 Rules regarding cash and guarantees

When money is handed over for the constitution of the fund, the court will deposit it in a bank, with the knowledge of the receiver and the interested parties. Any readjustments and interest obtained therefrom will be added to the fund to the benefit of the creditors. If the fund has been constituted by means of a guarantee, its amount will accrue current interest wherever the court sits and it will be left on record in the document establishing the guarantee.

 Limitation of civil liability for damage from spillage of hydrocarbons and other hazardous substances
  • Spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is subject to the CLC 1992; and
  • spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law, including those for fund constitution and distribution.
Break of limitation

In what circumstances can the limit be broken? Has limitation been broken in your jurisdiction?

Tonnage limitation

Under Chilean law, there is no single express test for breaking limitation, such as that contained in article 4 of the 1976 Convention, and the alternatives have to be concluded from different provisions contained in the Commercial Code, which are explained below.

First, according to article 885 of the Commercial Code, the liability of the owner for his or her personal acts is subject to the general liability rules contained in the Chilean Civil Code.

Second, article 891 of the Commercial Code establishes that:

The limitation of liability of the shipowner may be petitioned by his or her staff in such cases and for the causes contemplated by law, unless it is proved that the loss resulted from their act or omission, [1] committed with the intent to cause such loss, or [2] recklessly and with knowledge that such loss would probably result.

 

In addition, article 903 of the Commercial Code (based on article 6.3 of the 1957 Convention) states that:

When actions are brought against the master or against members of the crew such persons may limit their liability even if the occurrence which gives rise to the claims resulted from their own fault, unless it is proved that the loss resulted from their act or omission, [1] committed with the intent to cause such loss, or [2] recklessly and with knowledge that such loss would probably result. If, however, the master or member of the crew is at the same time the proprietor, co-proprietor, carrier, owner or operator of the ship, the limitation shall only apply to him or her where his or her fault is committed in his or her capacity as master or as member of the crew of the ship.

 

 

However, that in connection with the general test for breaking limitation, we are of the view that the general test would be the test contained in article 891.

 Limitation of civil liability for damage from spillage of hydrocarbons and other hazardous substancesSpillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo

Limitation of liability in this scenario follows the test set forth under the CLC 1992.

 Spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances

The benefit is lost if the damage has been caused by fault or neglect on the part of the proprietor, owner or operator of the vessel.

 Limitation in connection to contracts of carriage of goods by sea

The carrier forfeits his or her right to limit liability if it is proven that the loss, damage or delay in delivery arose from:

  • intentional damage by the carrier (act or omission), his or her staff or agents; or
  • an action or failure of the carrier, his or her servants or agents, done recklessly and with knowledge that such loss, damage or delay would probably occur.

 

The right to limit liability is also forfeited if the goods have been carried on deck in breach of an agreement to carry them below deck. We are currently unaware of cases where limitation has been broken under any of the above-mentioned scenarios.

Regarding the consequences over a fund that has been established if limitation is broken, generally Chilean regulations allow to object limitation on the ground that the legal requirements are not met. This has to be done within 30 consecutive days counted as of mandatory publications required for creditors to verify credits.

Passenger and luggage claims

What limitation regime applies in your jurisdiction in respect of passenger and luggage claims?

Chile has not ratified the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. However, the fundamental regulations applicable to passenger and luggage claims are found in Book III, Title V, paragraph 5 of the Chilean Commercial Code ‘About passage contracts’ (article 1,044 et seq) and are loosely based on the principles set forth under the Athens Convention.

Port state control

Authorities

Which body is the port state control agency? Under what authority does it operate?

Such responsibility falls on the Maritime Authority in accordance with the Navigation Law and complementary regulations, as well as applicable international conventions.

Sanctions

What sanctions may the port state control inspector impose?

As a general rule, a vessel cannot sail unless otherwise authorised by the Maritime Authority. If a foreign vessel sails without the authorisation of the corresponding port state control officer appointed by the Maritime Authority, her captain, owner or ship agent may be jointly and severally liable for up to 1 million Chilean pesos.

Appeal

What is the appeal process against detention orders or fines?

Depending on the specific officer that granted the detention order or fine, the appeal process is to the next most senior officer, up to the head of the Maritime Authority.

Classification societies

Approved classification societies

Which are the approved classification societies?

According to resolution 12600/150 issued by the Maritime Authority, the current approved classification societies are as follows:

  • American Bureau of Shipping;
  • Bureau Veritas;
  • DNV GL;
  • Lloyd’s Register of Shipping; and
  • Nippon Kaiji Kyokai.
Liability

In what circumstances can a classification society be held liable, if at all?

The main source of the obligation of a classification society is found in its contract with the shipowner or shipbuilder, as the case may be. If such contract is subject to Chilean law, failure to comply with the corresponding obligations will imply liability.

Collision, salvage, wreck removal and pollution

Wreck removal orders

Can the state or local authority order wreck removal?

Yes. The associated costs are to be borne by the vessel’s owner, proprietor or operator, as the case may be.

International conventions

Which international conventions or protocols are in force in relation to collision, wreck removal, salvage and pollution?

Collision

Article 1116 et seq of the Commercial Code set out the main regulations applicable to collisions. The Chilean Navigation Law and the Collision Rules (1972) also apply.

 Salvage

Salvage is regulated by Book 3, Title 6, paragraph 5 of the Commercial Code, denominated ‘Services rendered to a vessel or other property in damage’ (article 1,128 et seq of the code). These rules are based on the Comité Maritime International’s draft International Convention (Montreal 1981) and the London International Convention on Salvage 1989.

 Pollution

Spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is regulated by the CLC 1992.

Spillage of hydrocarbons from vessels not carrying oil in bulk as cargo and spillage of other hazardous substances is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law.

 Wreck removal

Chile is not a party to the Nairobi International Convention on the Removal of Wrecks 2007. Wreck removal is regulated by Title VIII, paragraph 4 of the Chilean Navigation Law.

Salvage

Is there a mandatory local form of salvage agreement or is Lloyd’s standard form of salvage agreement acceptable? Who may carry out salvage operations?

The Chilean salvage regulations apply to all salvage operations unless the relevant contract expressly or implicitly stipu­lates otherwise. There are two exceptions: aid rendered to warships or other public vessels that are being used, at the time of salvage operations, exclusively in official non-commercial trade; and the removal of shipwrecked remains. The regulations also apply if the assisted vessel and the salvager belong to the same owner or are subject to the same administration.

However, there is no mandatory form of salvage agreement and these are subject to the principle of freedom of contract.

As to who may carry out salvage operations, there are no specific restrictions. In this respect, the salvor must: perform salvage operations with due care, making best efforts to salvage the vessel and property contained thereon and to impede or reduce damage to the environment; and if reasonably required by circumstances, request the aid of other available salvors and accept the intervention of other salvors when requested to do so by the owner or master. However, in such an event, the salvor’s payment is not affected if it is shown that such intervention was unnecessary.

Ship arrest

International conventions

Which international convention regarding the arrest of ships is in force in your jurisdiction?

Chile has not ratified any international convention regarding the arrest of ships. However, the fundamental regulations applicable to ship arrest that are found in Book III, Title VIII, paragraph 5 of the Commercial Code ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq) are loosely based on the principles set forth under the International Convention Relating to the Arrest of Seagoing Ships (Brussels, 10 May 1952).

Claims

In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested? Can a bareboat (demise) chartered vessel be arrested for a claim against the bareboat charterer? Can a time-chartered vessel be arrested for a claim against a time-charterer?

Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types, namely:

  • privileged credits as set forth by articles 844, 845 and 846 of the Chilean Commercial Code; or
  • credits other than those mentioned in the previous point.

 

Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest as per the special rules set forth by Book III, Title VIII, paragraph 5 of the Commercial Code, ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq). Articles 844, 845 and 846 of the Commercial Code establish and distinguish the following groups of privileged credits.

 Credits of article 844 of the Commercial Code
  • Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
  • the remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injuries of the surviving employees ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel;
  • the charges and rates of ports, channels and navigable waters, together with fiscal charges in respect of signalling and pilotage;
  • the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damages or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the fund of limitation of liability has not been constituted as established in Title IX of the Chilean Law of Navigation; and
  • the indemnities for damages or losses caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of the collision or other accidents during navigation, when the respective action is not susceptible to be founded upon a contract, and the damages in respect of bodily injury to the passengers and crew of these other vessels.
 Credits of article 845 of the Commercial Code

Mortgage credits on large vessels (ie, vessels over 50 GT) and secured credits on minor vessels (ie, vessels up to 50 GT).

 Credits of article 846 of the Commercial Code
  • Credits in respect of the sale price, construction, repair and equipping of the vessel;
  • credits in respect of supply of products or materials that are indispensable for the trading or conservation of the vessel;
  • credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
  • credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
  • credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.

 

The privileged credits of article 844 enjoy privilege over the vessel in the order enumerated in ‘Credits of article 844 of the Commercial Code’, above, with preference over mortgage credits and the privileged credits of article 846. Mortgage credits are preferred to those of article 846, which in turn follow the rank indicated under ‘Credits of article 846 of the Commercial Code’ above.

In this respect, it is worth noting that the privileged credits established by the aforementioned provisions have preference and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damages from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Commercial Code (‘About Privileges and Naval Mortgage’) in the specific matters to which they refer.

The lien on the ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also against a ship in the same ownership or a ship in the same administration or operated by the same person. In this respect, according to article 882 of the Chilean Commercial Code, the shipowner or armador is the ‘person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his name’. the same article defines the operator as ‘the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom’. However, as regards ship administration or management, these concepts are not expressly defined in the Commercial Code.

Under Chilean law, a bareboat charterer has the status of the shipowner with same rights and obligations. Accordingly, a bareboat-chartered vessel can be arrested for a claim against the bareboat charterer. As to whether a time-chartered vessel can be arrested for a claim against a time-charterer, there are no express provisions.

Maritime liens

Does your country recognise the concept of maritime liens and, if so, what claims give rise to maritime liens?

Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types, namely:

  • privileged credits as set forth by articles 844, 845 and 846 of the Chilean Commercial Code; or
  • credits other than those mentioned in the first point above.

 

Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest as per the special rules set forth by Book III, Title VIII, paragraph 5 of the Commercial Code, ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq). Articles 844, 845 and 846 of the Commercial Code establish and distinguish the following groups of privileged credits.

Credits of article 844 of the Commercial Code

  • Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
  • the remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injuries of the surviving employees ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel;
  • the charges and rates of ports, channels and navigable waters, together with fiscal charges in respect of signalling and pilotage;
  • the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damages or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the fund of limitation of liability has not been constituted as established in Title IX of the Chilean Law of Navigation; and
  • the indemnities for damages or losses caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of the collision or other accidents during navigation, when the respective action is not susceptible to be founded upon a contract, and the damages in respect of bodily injury to the passengers and crew of these other vessels.

Credits of article 845 of the Commercial Code

  • Mortgage credits on large vessels (ie, vessels over 50 GT) and secured credits on minor vessels (ie, vessels up to 50 GT).

Credits of article 846 of the Commercial Code

  • Credits in respect of the sale price, construction, repair and equipping of the vessel;
  • credits in respect of supply of products or materials that are indispensable for the trading or conservation of the vessel;
  • credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
  • credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
  • credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.

 

The privileged credits of article 844 enjoy privilege over the vessel in the order enumerated in ‘Credits of article 844 of the Commercial Code’, above, with preference over mortgage credits and the privileged credits of article 846. Mortgage credits are preferred to those of article 846, which in turn follow the rank indicated under ‘Credits of article 846 of the Commercial Code’ above.

In this respect, the privileged credits established by the aforementioned provisions have preference and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damages from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Commercial Code (‘About Privileges and Naval Mortgage’) in the specific matters to which they refer.

The lien on the ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also against a ship in the same ownership or a ship in the same administration or operated by the same person. In this respect, according to article 882 of the Chilean Commercial Code, the shipowner or armador is the ‘person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his name’. the same article defines the operator as ‘the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom’. However, as regards ship administration or management, these concepts are not expressly defined in the Commercial Code.

Under Chilean law, a bareboat charterer has the status of the shipowner with same rights and obligations. Accordingly, a bareboat-chartered vessel can be arrested for a claim against the bareboat charterer. As to whether a time-chartered vessel can be arrested for a claim against a time-charterer, there are no express provisions.

Wrongful arrest

What is the test for wrongful arrest?

First, under Chilean regulations, an arrest based on privileged credits is subject to the following conditions:

  • the arresting party must invoke one or more of certain privileged credits. In this respect, except for the regulations related to pollution or for avoiding damages from spills of hazardous substances, the maritime privileges preclude any other general or special privilege regulated by other laws in connection with the same goods. The maritime privileges also confer upon the creditor the right to pursue the vessel in whosoever’s possession she may be;
  • the arresting party must attach antecedents that constitute presumption of the right being claimed; and
  • if, in its discretion, the court considers that the antecedents attached are not sufficient or the petitioner states they are not yet available to him or her, the court may require that counter-security be provided for the eventual damages that may be caused if, subsequently, it is found that the petition lacked basis.

 

Second, when an arrest has been decreed as a prejudicial precautionary measure (ie, a measure to secure the outcome of a subsequent substantive action), the petitioner is obliged to file his or her complaint requesting that the decreed arrest remain in force within a time period that, in principle, is 10 days, but that may be extended for up to a total of 30 days, provided there is a sound basis to do so. The non-fulfilment of this obligation means the cancellation of the arrest and liability for the damages that may have been caused, on the irrefutable presumption that the proceedings for the arrest were fraudulent. In addition, if the arrest was wrongful, fraudulent or lacked basis, the defendant may claim damages in separate ordinary proceedings subject to the general rules set forth by the Code of Civil Procedure.

Bunker suppliers

Can a bunker supplier arrest a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, rather than with the owner, of that vessel?

Yes, an arrest can be made provided the claimant has a credit entitling him or her to do so. Such credit will be considered as a privileged credit in accordance with article 846(2) of the Commercial Code.

Security

Will the arresting party have to provide security and in what form and amount?

If the court requires that security is provided, there are no specific rules for establishing its form or amount.

How is the amount of security the court will order the arrested party to provide calculated and can this amount be reviewed subsequently? In what form must the security be provided? Can the amount of security exceed the value of the ship?

The amount of security is usually established by the court based on the petition of the arresting party. Such amount cannot exceed the value of the arrested vessel and can be reviewed subsequently through incidental proceedings. Regarding the form of security, there are no specific rules and it will depend on the court’s resolution, but the guarantee usually requested and granted is a bank guarantee issued at the order of the court. As regards protection and indemnity insurance (P&I) club letters of undertaking, for a long time, P&I club letters of undertaking were accepted only if agreed by the arrest petitioner, mainly because the Chilean courts were not accustomed to them. However, in a recent arrest following a pollution case, the court hearing the arrest accepted a letter of undertaking with no prior approval from the arrest petitioner.

Formalities

What formalities are required for the appointment of a lawyer to make the arrest application? Must a power of attorney or other documents be provided to the court? If so, what formalities must be followed with regard to these documents?

Under Chilean law, the general rule is that either individuals or corporations are required to be represented by a counsel, which means granting a power of attorney (POA) with judicial faculties. The POA has to follow Chilean law and practice and the quickest way to produce it is via the ship agent assisting the vessel at the pertinent Chilean port (they are entitled to do so on behalf of the owner). Depending on the circumstances, a POA is not necessarily required at the first presentation but security may be need to be provided. If the POA is granted abroad, Chile is a signatory to the Apostille Convention.

Ship maintenance

Who is responsible for the maintenance of the vessel while under arrest?

There are no specific provisions as to this matter. However, the owner is in principle responsible for the associated costs, notwithstanding its right to claim damages if it appears that the arrest was wrongful.

Proceedings on the merits

Must the arresting party pursue the claim on its merits in the courts of your country or is it possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere?

Chilean procedural regulations are silent on this matter. However, when an arrest is decreed as a prejudicial precautionary measure (ie, a measure to secure the outcome of a subsequent substantive action), it would be possible to arrest to obtain security and then pursue proceedings on the merits elsewhere. Note that the procedural obligations established must be met; namely, filing the petitioner’s complaint requesting that the decreed arrest remains in force for a period that, in principle, is 10 days but may be extended for up to a total of 30 days provided there is sound basis to do so.

However, this is an option that has to be further tested in Chilean courts.

Injunctions and other forms of attachment

Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

An arrest requested by invoking a credit other than privileged ones, namely, a credit not covered under articles 844, 845 and 846 of the Chilean Commercial Code, is subject to the general rules set forth by the Chilean Code of Procedure (CCP) regarding pre-judicial and precautionary measures.

If the arrest is requested as a pre-judicial precautionary measure, in other words, a measure to secure the results of the exercise of the forthcoming action against the debtor, then the measure to be petitioned is the ‘prohibition from sailing’, which is subject to the following conditions:

  • existence of qualified and serious grounds for requesting the measure;
  • the value of the vessel upon which the precautionary measure falls must be determined; and
  • security deemed as satisfactory by the court to cover the damages that may come up or fines that may be levied must be granted.

 

The prohibition from sailing may be also requested as a precautionary measure, together with filing the principal action itself. In this case, to obtain the measure it is necessary that either the defendant’s wealth does not provide sufficient guarantee or that there are grounds to consider that he or she will try to conceal his or her assets. In addition, the claimant must provide supporting documentation to evidence at least a serious presumption of the right being claimed and counter-security if requested by the court. In this respect, when dealing with serious and urgent cases, the court may grant the measure without the required supporting documentation, for a term not longer than 10 days, until such documentation is submitted. In such a case, the court must necessarily require counter security.

Having said the above, under Chilean practice it is unusual to petition an arrest in accordance with the general rules of the CCP, as it faces more technicalities than an arrest based on the special system established by the Commercial Code for privileged credits.

Delivery up and preservation orders

Are orders for delivery up or preservation of evidence or property available?

In Chile, the closest concept is the use of precautionary prejudicial measures, which includes the following:

  • deposit in court of a specific asset at stake that has led to a dispute between the parties;
  • placing property under the authority of a court-appointed administrator;
  • prohibition on concluding acts or contracts over some specific asset or real estate (prohibition). This measure is aimed at preventing the sale or transference of the asset or real estate; and
  • sequestration of monies, assets or credits (sequestration).

 

In addition, in shipping matters there are special provisions contained in the Commercial Code for the verification of facts and the production of evidence before a trial.

Bunker arrest and attachment

Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

In Chile, bunkers can be subject to the general rules set forth by the CCP regarding pre-judicial and precautionary measures.

Judicial sale of vessels

Eligible applicants

Who can apply for judicial sale of an arrested vessel?

In the context of a ship arrest, the petitioner that requested it.

Procedure

What is the procedure for initiating and conducting judicial sale of a vessel? How long on average does it take for the judicial sale to be concluded following an application for sale? What are the court costs associated with the judicial sale? How are these costs calculated?

According to the Commercial Code, the judicial sale of a vessel, whether voluntary or forced, must observe the rules and formalities set forth by the Code of Civil Procedure for the judicial sale of real estate. The procedure may take from a couple of months up to one or two years, subject to the debtor’s behaviour towards the proceedings. Court costs are usually minor, but other costs might be generated, such as those relating to the administration of the attached property (incumbent on a depositary who has to render an account of his or her administration before the pertinent court).

Claim priority

What is the order of priority of claims against the proceeds of sale?

It will depend on the ranking of the lawful and recognised privileged creditors.

In respect of mortgage creditors, if a mortgage creditor of a lower grade seeks a mortgaged vessel against the personal debtor who owns it, the creditors of a preferred grade are entitled either to require the payment of their credits over the price of the auction according to their respective grades or to keep their mortgages over the auctioned vessel, provided their credits are not due. Saying nothing, during the challenge term, shall be understood as opting in favour of being paid at the price of the auction.

Legal effects

What are the legal effects or consequences of judicial sale of a vessel?

Privileged credits are extinguished either by the judicial sale registration at the pertinent registry or after 30 consecutive days, counted from the auction’s date, whichever is the shortest period.

As to mortgage credits, the mortgage is extinguished if the auction is done with acknowledgement of the preferred mortgage creditors, if applicable.

Foreign sales

Will judicial sale of a vessel in a foreign jurisdiction be recognised?

Yes, but only as far as the sale concerns a foreign-flagged vessel.

International conventions

Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

No.

Carriage of goods by sea and bills of lading

International conventions

Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some variation in force and have they been ratified or implemented without ratification? Has your state ratified, accepted, approved or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea? When does carriage at sea begin and end for the purpose of application of such rules?

In 1982, Chile ratified the United Nations Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules), which were in force internationally as of 1 November 1992. Additionally, the Chilean legislature included them in the Commercial Code in 1988 (Book III, Title V, paragraph 3), with minimal changes (the Chilean Rules).

Chile has not considered the ratification, acceptance or approval of the Rotterdam Rules. As explained above, Chile ratified the Hamburg Rules in 1982 and any departure from these Rules is very unlikely for the time being.

Multimodal carriage

Are there conventions or domestic laws in force in respect of road, rail or air transport that apply to stages of the transport other than by sea under a combined transport or multimodal bill of lading?

The main rules regarding multimodal transport can be found in article 1041 et seq of the Chilean Commercial Code. Thus, article 1041 defines the main concepts applicable to multimodal transport: multimodal transport, contract of multimodal transport and operator of multimodal transport.

Furthermore, article 1043 sets out the regime of liability applicable in multimodal transport. The relevance of this article is that, under Chilean law, the liability of all those involved in any part or parts of the multimodal transport is joint.

Likewise, the Hamburg Rules must be taken into consideration when dealing with multimodal transport, especially in connection with the limitation of responsibility set out by the Hamburg Rules, of which Chile is a signatory country.

Title to sue

Who has title to sue on a bill of lading?

The shipper, consignee or third-party holder or endorsee, as the case may be.

Charter parties

To what extent can the terms in a charter party be incorporated into the bill of lading? Is a jurisdiction or arbitration clause in a charter party, the terms of which are incorporated in the bill, binding on a third-party holder or endorsee of the bill?

Under the Chilean Rules, any party may be subject to the provisions of our rules regarding carriage of goods by sea, which are applicable if:

  • the port of loading or discharge as provided for in the contract of carriage by sea is located in Chile;
  • the bill of lading or other document evidencing the contract of carriage by sea (such as the sea waybill, through bill of lading, short form bill of lading, etc) stipulates that the contract will be governed by Chilean law (such as through a clause paramount); or
  • one of the optional ports of discharge provided for in the contract of carriage by sea is the actual port of discharge and such port is located in Chile.

 

The Chilean Rules are compulsorily applicable regardless of the nationality of the ship, carrier, actual carrier, shipper, consignee or any other interested person. In this respect, it is important to note that clauses paramount have been held as unwritten by the Chilean Supreme Court (AJ Broom v Exportadora, Supreme Court of Chile, Case No. 683-98) as they would be contrary to public policy.

The Chilean Rules are applicable to all contracts of carriage by sea and it is not a condition that they are necessarily evidenced in a bill of lading or other documents of title such as sea waybills or short-sea notes. In respect of combined transport bills or through bills of lading, the Rules are applicable only to the corresponding sea leg carriage. The Rules do not apply to charter parties. Nonetheless, a bill of lading issued in compliance with a charter party is under the Rules if it governs the relation between the carrier and the holder of the bill of lading other than the charterer.

In the case of contracts providing for future carriage of goods in a series of shipments during an agreed period (eg, tonnage or volume contracts used for cargo projects), the Rules apply to each shipment. However, where a shipment is made under a charter party, the Rules do not operate, with the exception explained in the preceding paragraph.

Demise and identity of carrier clauses

Is the ‘demise’ clause or identity of carrier clause recognised and binding?

Chilean law recognises a basic distinction between the ‘carrier’ (also known as the ‘contractual carrier’) and the ‘actual carrier’. The former is defined as ‘any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper’ (article 975, No. 1 of the Commercial Code) and the latter as ‘any person to whom the performance of the carriage of the goods, or part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted’ (article 975, No. 2 of the Commercial Code).

The above distinction has very much simplified the identity of the carrier problem, as anyone who issues a bill of lading as a principal may be treated as a contractual carrier. This applies even to freight forwarders if they issue their own ‘house’ bill of lading and, as a matter of Chilean practice, many cargo claims are normally based on these documents alone. In this regard, it is important to note that under Chilean practice ‘demise’ or identity of carrier clauses have no effect.

In this respect, where the performance of the carriage or part thereof has been entrusted to an actual carrier, the carrier nevertheless remains responsible for the entire carriage. The carrier is jointly and severally responsible, in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his or her staff and agents acting within the scope of their employment. Additionally, all the provisions governing the responsibility of the carrier also apply to the responsibility of the actual carrier for the carriage performed by him or her.

Shipowner liability and defences

Are shipowners liable for cargo damage where they are not the contractual carrier and what defences can they raise against such liability? In particular, can they rely on the terms of the bill of lading even though they are not contractual carriers?

Under the Chilean Rules, the main principle is that the liability of the carrier is based on presumed fault or neglect. Accordingly, the carrier is liable for loss resulting from loss or damage to the goods, as well as from delay in delivery, if the occurrence that caused the loss, damage or delay took place while the goods were in the carrier’s charge. If the shipowner is deemed an actual carrier (as opposed to the ‘carrier’ definition) and damage occurs during his or her custody period, such shipowner would be liable. However, in Chile a carrier may avoid liability if he or she discharges the burden of proving that he, his or her staff or his or her agents adopted all measures that could reasonably be required to avoid the cause of loss or damage, and consequences thereof.

The above is notwithstanding the carrier’s right to limit liability as per certain rules, if applicable.

Deviation from route

What is the effect of deviation from a vessel’s route on contractual defences?

Under the Chilean Rules, there are no specific provisions dealing with deviation. If he or she is the cause of the loss or damage, the carrier is subject to the general test of proving that he or she took all measures that could reasonably be required to avoid the cause of loss or damage, and consequences thereof. However, the carrier is not liable, except in general average, where loss, damage or delay in delivery resulted from measures to save life or from reasonable measures to save property at sea.

Liens

What liens can be exercised?

According to Chilean law, privileges on a vessel are attached to credits arising from the following cases:

  • legal cost and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
  • the remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injuries of the servants who survive ashore, on board or in the water, and always provided that they stem from accidents related directly with the trading of the vessel;
  • the charges and rates of ports, channels and navigable waters, together with fiscal charges in respect of signalling and pilotage;
  • the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damages or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the fund of limitation of liability has not been constituted as established in Title IX of the Chilean Law of Navigation; and
  • the indemnities for damages or losses caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of the collision or other accidents during navigation, when the respective action is not susceptible to be founded upon a contract, and the damages in respect of bodily injury to the passengers and crew of these other vessels.

 

There is also a privilege attached to mortgage credit over major and minor vessels; however, the credits mentioned above will prefer any mortgage.

Last, privileges on a vessel are attached to the following credits, which will be preferred over the credits mentioned in the paragraphs above, namely:

  • credits in respect of the sale price, construction, repair and equipping of the vessel;
  • credits in respect of supply of products or materials, which are indispensable for the trading or conservation of the vessel;
  • credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
  • credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
  • credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.

 

Likewise, privileges on cargo are attached to credits arising from the following cases:

  • legal and other disbursements caused by a lawsuit aimed at the preservation of the goods or the forced alienation and distribution of the yield, which is in the common interest of the creditors of the owner of the goods;
  • reimbursement of expenditure and remuneration related to salvage operations and to which cargo interests contribute, as well as general average contributions;
  • removal of shipwrecked goods; and
  • freight and accessory charges, including loading, discharging and warehousing costs when applicable.

 

In this respect, in Chile, shipowners or carriers are not entitled to retain cargo on board at the port of discharge in order to secure the freight payment. Instead, they may file an application before the competent judge at the port of discharge to deposit the goods with a third party to sell them at auction. This application is normally handled quickly. Charterers or consignees are able to release the goods if they provide enough security for the outstanding payment; the judge decides whether the security offered is adequate.

Delivery without bill of lading

What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

The main regulations applicable to cargo delivery procedures are the Hamburg Rules, which have been incorporated without major changes into the Commercial Code (article 974 et seq). In addition, the Customs Ordinance, the Compendium of Customs Regulations, the Coastal Shipping Regulations and Customs resolutions regarding free trade zones are also applicable.

Although article 977 of the Commercial Code defines a ‘bill of lading’ as a document that obliges the carrier to deliver the goods upon presentation of the bill of lading to the carrier, under old customs regulations in place until 2005, this verification often could not take place. Customs Resolution No. 2250/05 overcame the problem of cargo delivery at Chilean ports without surrender of the original bill of lading – the problem arises as a result of the conflict between local shipping regulations and customs regulations. The resolution was issued after lengthy negotiations with the Customs Authority in the context of its internet systems integration project for the development of customs operations. As a result of the resolution, ocean carriers in Chile are now directly involved in cargo delivery procedures, both in practice and from a legal point of view, for the first time. Accordingly, under the new regulations, if carriers proceed to deliver cargo without production of the bill of lading, they can face both contractual and tort liability.

The Chilean regulations that refer to tonnage limitation matters (ie, articles 889 to 904 of the Commercial Code) are inspired by both the international conventions signed in Brussels in 1957 (the 1957 Convention) and in London in 1976 (the 1976 Convention). With respect to the tonnage limitation figures, the Commercial Code follows the lines of the 1976 Convention. In addition, the Commercial Code establishes a specific set of procedural provisions in connection to the constitution and distribution of the corresponding limitation fund.

The claims subject to limitation are as follows:

  1. death or personal injury and damage to property on board;
  2. death or personal injuries caused by any person for whom the owner is responsible, whether on board or ashore (in the latter case, his or her actions must be related to the ship’s operation or to the loading, discharging or carriage of the relevant goods);
  3. loss of or damage to other goods, including the cargo, caused by the same person or people, grounds, places and circumstances given in (2) above; and
  4. resulting liability related to the damage caused by a vessel to harbour works, dry docks, basins and waterways.

 

The people entitled to limit their liability under this regime are as follows:

  1. the shipowner as defined by Chilean regulations;
  2. the shipowner’s staff;
  3. liability insurers;
  4. the operator, carrier, charterer and ship’s proprietor, if a different person or entity than (1) above; and
  5. individual employees of the previous point above, including the master and members of the crew, if sued.

 

Limitation in connection with civil liability for the damage resulting from the spillage of hydrocarbons and other hazardous substances is regulated as follows:

  • spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is subject to the International Convention on Civil Liability for Oil Pollution Damage (CLC) 1969, as renewed in 1992 (CLC 1992); and
  • spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law (among others, it extends the limitation benefit to the owner, proprietor and operator).

 

Regarding limitation in connection with contracts of carriage of goods by sea, Chilean law draws a distinction between lost or damaged goods and delayed goods. In the former case, the carrier’s liability is limited to an amount equal to 835 special drawing rights (SDR) per package or other shipping unit, or 2.5 SDR per kilogram of gross weight, if the latter is higher. In the case of delayed goods, the carrier’s liability is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed, but not exceeding the total sum of the freight payable under the respective contract of carriage by sea. It is worth noting that the above rules do not comprise either the interests arising from the value of the damaged goods or the judicial costs.

Shipper responsibilities and liabilities

What are the responsibilities and liabilities of the shipper?

The shipper is subject to a general rule that he or she is not liable for loss sustained by the carrier or the actual carrier, or for damage sustained by the ship, unless such loss or damage was caused by the fault or neglect of the shipper, his or her staff or agents. Nor is any servant or agent of the shipper liable for such loss or damage unless the loss or damage was caused by fault or neglect on his or her part. In addition, the shipper is subject to further special rules on dangerous goods.

Shipping emissions

Emission control areas

Is there an emission control area (ECA) in force in your domestic territorial waters?

No.

Sulphur cap

What is the cap on the sulphur content of fuel oil used in your domestic territorial waters? How do the authorities enforce the regulatory requirements relating to low-sulphur fuel? What sanctions are available for non-compliance?

The cap on the sulphur content of fuel oil used in our domestic territorial waters is that established in the MARPOL Convention. The enforcement of these requirements is carried out by the local representative of the vessel’s flag state authority and the sulphur content is verified according to the bunker delivery note certificates for the bunker’s supply.

Ship recycling

Regulation and facilities

What domestic or international ship recycling regulations apply in your jurisdiction? Are there any ship recycling facilities in your jurisdiction?

Chile has not signed the Hong Kong Convention; however, the IMO Guidelines on Ship Recycling (2003) are applicable.

Jurisdiction and dispute resolution

Competent courts

Which courts exercise jurisdiction over maritime disputes?

Article 1203 of the Commercial Code establishes the general principle that the resolution of any maritime dispute, including those relating to marine insurance, is subject to mandatory arbitration. In short, all maritime disputes must be resolved by an arbitrator. However, in certain cases set forth by the same article, the ordinary civil courts may hear maritime disputes, including if the parties mutually agree to this and in the instance of claims relating to oil pollution regulated by the Navigation Law.

Service of proceedings

In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

A party who wants to sue a foreign entity from Chile must do so by way of a letter rogatory (ie, a formal request from a local court to a foreign court). The party must submit the complaint to the relevant foreign civil or criminal court, and request that the court notify the respondent through the appropriate channels. The foreign court will forward the complaint to the Chilean Supreme Court. Once the Chilean Supreme Court reviews the complaint and finds it appropriate for service, it will transfer the complaint to the Ministry of Foreign Relations. The Ministry will proceed to fulfil the request in accordance with the relevant mutual legal assistance treaty. The Ministry may also be guided by a specific bilateral treaty, or if there is no formal bilateral arrangement, it may work directly with the foreign ministry of the country where the entity is legally domiciled.

Arbitration

Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

The most well-known arbitration centre is the Santiago Arbitration and Mediation Centre of the Santiago Chamber of Commerce (CAM). Notwithstanding that the CAM does have arbitrators specialising in maritime issues, under Chilean maritime practice the regular choice is to appoint ad-hoc arbitrators rather than institutionalised ones.

Foreign judgments and arbitral awards

What rules govern recognition and enforcement of foreign judgments and arbitral awards?

Foreign judgments and arbitral awards are enforced through exequatur. This process is contemplated in the Civil Procedure Code under which judgments issued in a foreign country shall have in Chile the force granted to them in existing treaties; for their enforcement, the procedures set out by Chilean law shall be followed unless they have been modified by such treaties. If there are no treaties related to this matter, Chile shall grant to the judgment the same force granted to Chilean judgments by the jurisdiction originating the judgment. If the judgment comes from a jurisdiction that does not enforce Chilean judgments, it shall not be enforced in Chile. If none of the previous rules may be applied, foreign judgments shall be enforced in Chile provided that:

  • they contain nothing contrary to the laws of the republic, except that procedural rules to which the case would have been subject in Chile shall not be considered;
  • they are not contrary to national jurisdiction;
  • the party against whom enforcement is sought was duly served with process, except that such party may still be able to allege that for other reasons it was prevented from making a defence; and
  • they are not subject to appeals or further review in the country of origin.

 

A duly legalised copy of the judgment, officially translated into Spanish, if necessary, must be presented to the Chilean Supreme Court in order to begin the exequatur process. In the case of arbitral awards, its authenticity must also be certified by attestation of a High Court of the originating jurisdiction.

Notice of the enforcement request must be served on the party against whom it is sought. Such party shall have a period of 15 days, extended depending on where it is domiciled, to respond. An opinion from an independent court official is also requested by the Supreme Court.

The Supreme Court entertains the matter in a hearing at which the parties may make oral statements.

After enforcement is allowed, the judgment must be presented to the competent civil court to commence an executive proceeding (under which the defendant’s assets can be foreclosed, if applicable).

In respect of foreign arbitral awards, a law on international commercial arbitration, based entirely on the UNCITRAL Model Law, was passed in September 2004. Article 35 of that law regulates the recognition and enforcement of foreign arbitral awards. Article 36 lists the defences that can be asserted against enforcement and regulates orders of stay. Chile is also a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In this respect, Chilean courts have enforced all foreign arbitral awards that comply with the rules set out in the law for enforcement.

Asymmetric agreements

Are asymmetric jurisdiction and arbitration agreements valid and enforceable in your jurisdiction?

As regards jurisdiction agreements, generally they are valid and enforceable with few exceptions, such as when dealing with claims under the Chilean adoption of the Hamburg Rules.

Breach of jurisdiction clause

What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

In Chile, there are no remedies available for bringing the case back to the country, but the defendant, notwithstanding the remedies he or she may have abroad, may contest the enforcement of the foreign judgment or award in Chile in accordance with certain rules.

What remedies are there for the defendant to stop domestic proceedings that breach a clause providing for a foreign court or arbitral tribunal to have jurisdiction?

Except for cases of compulsory jurisdiction, such as those relating to contracts of carriage of goods by sea, the defendant has a formal defence based on lack of competence.

Limitation periods for liability

Time limits

What time limits apply to claims? Is it possible to extend the time limit by agreement?

Under Chilean maritime law the general principle is that any action relating to maritime disputes is time-barred after two years. Actions relating to passage contracts, freight, general average and contributions are time-barred within six months. In addition, in the case of collision actions, the two-year period is extended to three years if the responsible vessel was not arrested or detained while in Chilean jurisdictional waters, provided that the vessel abandoned them without calling at a Chilean port after the collision.

As to time extensions, under Chilean maritime law, the running of the corresponding limitation period can be interrupted by a declaration in writing to the claimant by the person to whom the limitation period applies. This can be done successively but the corresponding period shall run again as of the date of the last declaration.

Court-ordered extension

May courts or arbitral tribunals extend the time limits?

Not unless otherwise agreed by the parties.

Miscellaneous

Maritime Labour Convention

How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

The Maritime Labour Convention was enacted by Decree No. 11 of the Chilean Ministry of Foreign Affairs, published in the Official Gazette dated 22 February 2019.

Relief from contractual obligations

Is it possible to seek relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract where economic conditions have made contractual obligations more onerous to perform?

Generally, Chile applies the principle of the immutability of the contracts (mainly based on article 1545 of the Chilean Civil Code). In this respect, there are no express regulations that allow modification of the terms of a shipping contract, where economic conditions have made contractual obligations more onerous to perform. Nevertheless, and although not within the shipping industry, in recent years there have been a few cases accepting this criterion, which is based on the ‘unforeseen event’ theory supported by some local academics.

Other noteworthy points

Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

No.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics that may affect shipping law and regulation in your jurisdiction in the foreseeable future?

Covid-19 pandemic and changes to cargo delivery procedures

In the context of the current covid-19 pandemic, Customs recently issued Resolution 1179/20, which implements transitory modes for the treatment of various customs procedures and the ways of presenting documents associated therewith to facilitate foreign trade transactions.

Among these transitory measures, Customs has authorised electronic exchanges and amendments to bills of lading. However, customs agents must now obtain the original bill of lading from its issuer and keep it in its importation file.

 

Antecedents

The main regulations applicable to cargo delivery procedures are the Hamburg Rules, which are incorporated without major changes into article 974 and following of the Commercial Code. In addition, the Customs Ordinance, the Compendium of Customs Regulations and the Coastal Shipping Regulations apply.

Article 977 of the Commerce Code defines a 'bill of lading’ as a document by which the carrier undertakes to deliver the goods against surrender of the document to the order of a named person, or to order, or to bearer.

With this in mind, the Compendium of Customs Regulations expressly includes the original bill of lading as one of the documents used to prepare import declarations.

In this respect, from an ocean carrier’s perspective, the most important aspects of the customs procedures set out in the Compendium of Customs Regulations are as follows:

  • Customs agents must surrender the original bill of lading to the carrier once the import declaration has been accepted for its handling and prior to withdrawing the goods from the warehouse under the jurisdiction of Customs.
  • The import declaration must be drawn up on the basis of several documents, including the original bill of lading.
  • In the case of cargo in containers, the surrender of the original bill of lading to the ocean carrier is a condition precedent for the issuance of the title for the temporary admission of containers.
  • Customs agents must keep a copy of the bill of lading in their file. This copy must show:

(i) the endorsement of the bill of lading to the customs agent, which constitutes its authority to collect the goods; and

(ii) the acknowledgment of receipt from the person authorised to receive the original bill of lading.

  • In the case of transport documents issued by freight forwarders (eg, house bills of lading) and used as the basis for the import declaration, these documents must include a reference to the transport document from which they are derived so that the information is stated in the customs destination declaration.

 

Implications of Resolution 1179/20

The main implications of Resolution 1179/20 for ocean carriers are as follows.

  • A copy of the exchange of the original bill of lading and amendments to it can now be sent to custom agents electronically.
  • Customs agents have 30 working days to obtain the original bill of lading that was accepted as part of the import declaration. Upon receipt, the original bill of lading must be kept within the customs agent’s file.

 

Given that Resolution 1179/20 has not expressly modified the Chilean Customs Compendium, there are several greys areas regarding its interpretation and practical implementation, including with regard to potential delivery of cargo without surrender of the original bill of lading.

Until clarifications are obtained from Customs, ocean carriers should proceed carefully and liaise with their Chilean port agents to define interim protocols. Ocean carriers should also consider requesting letters of indemnity or similar guarantees from their shippers or consignees, as the case may be.

Law stated date

Correct on

Give the date on which the information above is accurate.

8 May 2020.