Advanced Wage Agreements offer to pay “advanced wages” to an injured seaman, in addition to the legal obligations to pay maintenance and cure, in exchange for the seaman agreeing to arbitrate his personal injury claim if and when he decides to seek redress for his injury.
Advanced Wage Agreements define advanced wages as “compensation for wages that a seaman has lost as a consequence of his/her injury.” The advanced wages are not a substitute for the federal law requirement to pay all reasonable medical expenses (i.e., cure), or certain other expenses (i.e., maintenance), while the seaman recovers from his injury.
The timing of the Ever Given’s grounding in the Suez Canal could not have been better, at least as far as my admiralty law students at Drexel University and I were concerned. The incident occurred right after we covered the subject areas of casualties, cargo losses, and the potential liability of pilots. And just in time for me to add this extra-credit question to the final exam: “If the maritime law of the United States were applicable to the Ever Given incident, who would be liable for what, why, or why not?”
As readers will no doubt remember, Ever Given became hard aground by both its bow and stern across a single-lane portion of the Suez Canal in March. The pilots, who were employees of the Suez Canal Authority (“SCA”) lost control of the ship in a severe wind/sand storm, partly because of the enormous sail area created by the multi-tier deckload of containers.
While costly salvors worked to free the ship, one of the most important shipping shortcuts in the world was completely impassable. Hundreds of ships at each end had to either wait or take the long route around the Cape of Good Hope. These ships were loaded with livestock, agricultural products subject to spoiling, and parts inventories for the world’s “just in time” manufacturing economy. The SCA claims to have lost millions in passage fees. The ship was at least slightly damaged both bow and stern; owners of its cargo suffered delays and/or damage.
In the United States, state and federal courts operate on a dual track, with the difference that state courts are courts of “general jurisdiction” (hearing all cases not specifically reserved to federal courts), while federal courts are courts of “limited subject matter jurisdiction” (hearing cases involving “diversity of citizenship,” raising a “federal question,” or “sounding in admiralty”).
Admiralty and Maritime Subject Matter Jurisdiction
As it relates to admiralty and maritime subject matter jurisdiction, the U.S. Constitution states in Article III, Section 2 that “[t]he judicial Power shall extend. . . to all Cases of admiralty and maritime Jurisdiction…” The first statute defining the boundaries of admiralty jurisdiction was enacted in 1789 (known as the First Judiciary Act. (Chapter 20, section 9, 1 Stat. 73)). The current statutory grant of admiralty jurisdiction, however, can be found at 28 U.S.C. § 1333(1), which gives federal district courts original jurisdiction over “any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.” Some kinds of maritime cases—typically those involving in rem remedies against a vessel or cargo—are subject to the exclusive jurisdiction of the federal courts. Under the “savings to suitors” clause, on the other hand, state courts have concurrent jurisdiction over admiralty claims when a state court is competent to grant relief, which is in most instances where in personam jurisdiction may be had in a state court.
Without a doubt, shipping industry stakeholders should always strive to have zero days lost due to accidents. But, equally, the industry should also always be prepared to immediately respond to and investigate unfortunate events when they occur. In this regard, it is critical to understand the investigative process that sets in motion after a significant marine casualty occurs.
Our experience investigating and providing legal representation for clients following a marine casualty has shown that, despite decades of implementing international safety protocols, advancements in ship design, and an industry-wide focus and dedication to improved safety, marine casualties will continue to occur; maybe not as often, but they will happen. Simply put, following all the safety protocols put in place may not be enough to avoid a casualty. Indeed, vessels of all sizes, large and small, transiting the world’s oceans, subject themselves to influences beyond their control that create the inherent risk of a casualty occurring.
The Carriage of Goods by Sea Act (“COGSA”) defines the basic relationship—duties, liabilities, rights, and immunities—between ocean carrier and cargo owner. COGSA was passed in the United States in 1936 and its enactment was the result of various concerns by Congress. In the early nineteenth century, carriers were strictly liable for cargo damage, with only few limited exceptions to liability for an act of God, public enemies, and inherent vices. By the second half of the nineteenth century, carriers began issuing bills of lading containing exculpatory clauses that sought to reduce or eliminate a carrier’s liability altogether. Therefore, a compromise occurred in 1893 when Congress enacted the Harter Act, which sought to achieve uniformity in the rules of liability applied in international shipping and to strike a balance between carriers’ efforts to reduce liability and cargo owners’ efforts to impose liability regardless of fault. The Harter Act allowed carriers who furnished a seaworthy vessel and exercised due care with the cargo to be exempt from most liability. Currently, the Harter Act has not been repealed and does govern certain transactions where COGSA does not. Below is a detailed exploration of the key differences between the Harter Act and COGSA.
Differences Between the COGSA and the Harter Act
COGSA applies by force of law to contracts for the carriage of goods by sea, to or from foreign ports and U.S. ports. The Harter Act applies to the carriage of goods to or from U.S. ports. COGSA preempts the Harter Act with respect to contracts of carriage pertaining to foreign trade. COGSA does allow for parties to incorporate its provisions for the contract of carriage for voyages between U.S. ports. In fact, it is not uncommon for parties to do so. The question may be asked why a carrier would agree or even want to expand coverage: one reason could be that COGSA provides carriers with a wide array of defenses, and where liability does exist it can be limited.
A recent wave of vessel seizures premised on alter-ego theories has swept through various U.S. federal courts. These cases present significant risks for vessel owners and ship managers, even if the underlying claims are ultimately defensible. Plaintiffs employ Supplemental Admiralty Rule B as the procedural device to seize vessels as an asset of the target defendant. Rule B requires a prima facie showing that the defendant is not present within the district to satisfy the existence of general-personal jurisdiction. The Supreme Court’s general jurisdiction ruling in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), has made it much easier to meet Rule B’s requirement because such jurisdiction is now predicated upon proof that the defendant’s systematic and continuous contacts render it essentially at home within the district, effectively requiring its principal place of business to lie within the district. Given the peripatetic existence of merchant ships and their ownership—often by single ship-owning companies incorporated within flag-of-convenience countries—satisfying Rule B’s “presence within the district” standard now is nearly automatic.
Plaintiffs couple Rule B’s easy compliance with alter-ego allegations that the ship manager or ship-owning group are dominated and controlled by a single individual or entity to the disadvantage of the plaintiffs and that the target defendant is but a corporate extension of the company with whom the plaintiffs’ real dispute exists (and that dispute may have absolutely no connection with the United States). Supplemental Admiralty Rule E(4)(f) permits a defendant whose property has been seized to an immediate post-seizure hearing. While the federal courts are not aligned as to the standard that applies at such a hearing, it is fair to say that plaintiffs are required, at minimum, to meet the probable-cause test, which equates to reasonable grounds for supposing the allegations are well founded.
Blank Rome’s internationally recognized Maritime & International Trade practice group presents a new series of informative webinars covering hot topics in the shipping industry and key insights into 2021 and beyond. Sessions will cover:
As the United States develops offshore wind capacity, the need for vessels to support the industry for installation and maintenance will rapidly expand. While it may seem perfectly logical for the industry to adopt the BIMCO WINDTIME form, the SUPPLYTIME 2005 form is more common and generally known to the U.S. service and supply-vessel industry. In any case, we wholly expect that there will be a good deal of modifications to any form or perhaps use of bespoke agreements as the work comes online. We review here the various forms available and look at particular terms and issues we expect to be the subject of specific negotiation and modification.
SUPPLYTIME: Then and Now
The SUPPLYTIME form was first developed in 1975 to meet the rising demand for specialty vessels to support offshore oil and gas exploration and production. This form and its progeny became the leading time-charter terms for offshore-support vessels, and its use has spread beyond the oil and gas industry to include cable and pipe laying, seismic work, anchor handling, surveying, ROV and dive support, and other offshore and near-shore construction work. While there is a 2017 version of the SUPPLYTIME, it hasn’t been widely adopted in the United States, particularly since it came out after the substantial decrease in offshore oil and gas activity. (Interestingly, the drafting committee that developed the WINDTIME form differed from the SUPPLYTIME 2017 committee, and the difference is noticeable.) As for the U.S. offshore marine service and support industry, it appears that the SUPPLYTIME 2005 version remains prevalent at this time. (Obviously, any SUPPLYTIME form used with respect to the offshore wind industry would need to be logically amended to change oil and gas industry references to the appropriate wind-industry terms. For example, the term “offshore unit” in the SUPPLYTIME 2017 form is defined as “any vessel, offshore installation, structure and/or mobile unit used in offshore exploration, construction, pipe-laying or repair, exploitation or production.” There are also repeated reference to the defined term “well”.)
At the heart of the SUPPLYTIME form since the 1989 version came into play is a “knock-for-knock” indemnity provision, allocating liability regardless of fault with each party indemnifying the other for the injury or death of its personnel and for the loss of or damage to its property—without recourse. Initially, this was a difficult concept to accept in the United States—the idea that a party must indemnify another for a loss even though the loss was caused solely by the fault of the other party was a hard pill to swallow. However, in practice, the industry found it far more efficient for the parties to provide insurance for their own people and their own property and simply name the other party as an additional assured, rather than litigate every loss with each party claiming the other was at least partially to blame. The knock-for-knock indemnity concept is particularly efficient where a project involves a number of offshore contractors and all the parties agree to the same allocation of liability.
SUPPLYTIME vs. WINDTIME
The WINDTIME form, introduced in 2013, was primarily intended for offshore wind farm personnel transfer and support vessel services and was largely adopted from the SUPPPLYTIME 2005. Key differences from the SUPPLYTIME 2005 include:
the WINDTIME form expressly encompasses an indemnitee’s gross negligence, as well as simple negligence in the knock-for-knock indemnity obligations, but excludes intentional or willful misconduct, while the SUPPLTIME 2005 form only expressly addresses the indemnitee’s negligence;
the SUPPLYTIME 2005 form is more owner-friendly concerning cancellation with no provision for the recovery of damages; and
the WINDTIME form includes a broader waiver of consequential damages encompassing subcontractors.
It has been reported that the committee drafting the WINDTIME form initially considered, but quickly abandoned, the idea of including contract terms appropriate for installation vessels. We understand that industry practices for installation vessels were considered too varied and complex to reach consensus. Thus, the better option for installation vessels may be a SUPPLYTIME 2005 particularly modified to allocate liabilities and responsibilities, or a bespoke contract. Continue Reading
In many civil disputes, the application of choice of law principles as well as the jurisdiction in which the lawsuit is filed can have a significant impact on the outcome of a case. This is especially true where one of the parties conducts business in the maritime industry and the other does not. Some parties may prefer that state law be applied to the dispute because of a favorable state statute (such as a statute of limitations) or because the state’s courts have rendered decisions that support the parties’ position on a substantive issue. Others may prefer that federal law apply where it is more advantageous to a party given the facts of the case. Of course, some parties prefer to litigate in federal court rather than state court, or vice versa, for cost or other reasons.
There is a small subset of cases in which the question of whether maritime or admiralty law should be applied arises. One of the most significant decisions addressing that question is Norfolk Southern R. Co. v. James N. Kirby Pty, Ltd., 543 U.S. 14 (2004). In Kirby, the U.S. Supreme Court held that the liability of a rail carrier that transported over land cargo that was brought to the United States from Australia on board ships, through bills of lading calling for carriage from Australia to Huntsville, Alabama, via the Port of Savannah, Georgia, for damage to the cargo that occurred during that leg of the journey should be determined by applying maritime law, because the entire contract of carriage, and not just the ocean segment of it, constituted a maritime contract. More specifically, the court in Kirby determined that the default liability rule in the Carriage of Goods by Sea Act (“COGSA”) ($500 per package) applied to a train wreck that allegedly caused $1.5 million in damages. Continue reading “Analyzing Maritime (or Non-Maritime) Contracts and Practical Considerations for Litigation Strategy”
Blank Rome’s maritime attorneys have represented clients in some of the largest maritime casualties in the last 20 years, including the Staten Island Ferry allision with a maintenance pier in New York, the blow out and eventual loss of the Deepwater Horizon drilling rig in the Gulf of Mexico, the sinking of the El Faro during Hurricane Joaquin, and the collision between the Navy Destroyer USS John S. McCain and the tanker ALNIC MC in the Singapore Strait. These casualties have resulted in the catastrophic loss of life, significant personal injuries, damage to the environment, and property damage.
Our experience investigating and providing legal representation for clients because of these casualties has shown that, despite decades of implementing international safety protocols, advancements in ship design, and an industry-wide focus and dedication to improved safety, marine casualties will continue to occur; maybe not as often, but they will happen. And following all the safety protocols put in place may not be enough to avoid a casualty. Simply put, large vessels transiting the world’s oceans subjects them to influences beyond their control and creates the inherent risk of a casualty occurring.
Obviously, the shipping industry’s primary goal should always be to have zero lost days due to accidents. But, equally, the industry should also always be prepared to immediately respond to and investigate unfortunate events when they occur. In this regard, it is critical to understand the investigative process that occurs when there is a significant marine casualty.
First, it is important to note that although not required, it is not unusual for the National Transportation Safety Board (“NTSB”) and the United States Coast Guard (“USCG”) to coordinate, in part, their efforts to investigate and establish the root cause of a marine casualty. The process by which the NTSB and USCG investigate a casualty are similar in many ways, but different in some key areas. And recommendations made by the NTSB and/or the USCG, if any, following the conclusion of their respective investigations, differ in scope. Continue reading “Anatomy of a Marine Casualty Investigation”