Port Liability Regimes – Introductory Outline.

In developing this Article 4 it became clear that to provide a meaningful outline of the intended subject matter would require an article of greater length than had been originally anticipated. As such this Article 4 has been split into Part 1 and Part 2, to make its length manageable.
 

This has been done on the following basis:
 

• This Part 1 of Article 4 outlines how liability may arise for acts and omissions of the Port or any PSP in general terms, and whether or not it is possible to pass-on that liability to another participant in the supply chain. Also this Part 1 of Article 4 describes the interface between underlying contracts of carriage (between the Carrier and the Shipper) and any underlying sale of goods contract (between each seller and buyer of goods, with the seller as the Shipper on an Ex-Ship delivery and the buyer as the Shipper on an FOB delivery), and
   

• Part 2 of Article 4 (to be included in the next edition of InfraRead) will consider current Port Liability Regimes in the following key Ports: Shanghai2, Singapore, Hong Kong, Jebel Ali, Rotterdam, Port Kelang, Tokyo Bay, Incheon, Long Beach, Saigon and Surabaya (including any requirements as to insurance at each Port). Also Part 2 will consider the extent to which the law of the country in which the port is located imposes responsibility or excludes or limits liability and the means of avoiding, excluding and limiting liability, and any damages and losses that cannot be avoided, excluded or limited or may be subject to any test (including as to reasonableness).
   

As such, this Part 1 of Article 4 provides a general introduction to these matters. Part 2 will provide a more granular practical outline on a port-by-port basis.
 

In addition to Part 2 of Article 4, the next edition of InfraRead will include a further article in the Ports and World Trade series titled “Fundamentals of Terminal Use Agreements and Tolling Services Agreements”, authored by Michael Harrison, Dan Reinbott, Peter Vaughan and Matt Wood (members of the Ashurst International Projects Group). In that Article different funding and operational and ownership structures will be outlined, as will the key risks that arise, and the spread of risk allocation that is typical in terminal use and tolling services agreements. The article will consider fixed/ shore based and floating facilities, and how they interface with the upstream and downstream, and how the attendant risks, are dealt with contractually.
 

At the end of this Part 1 of Article 4, a Glossary is included of the terms used in this Part 1 of Article 4, and that are relevant to the subject matter of Article 4 generally.
 

Reflections on events since March 2020
 

Given what has happened since the publication of Article 3 (in April 2020), it would be remiss not to provide a perspective on the impact of Covid-19. Furthermore, for some time there has been gathering momentum towards decarbonisation of the Ports and Shipping sectors. This momentum appears to be gathering pace as ports have started to deploy hydrogen powered lifting and haul equipment and the advent of the testing of fuel cell electric units to propel and to power vessels.

In Narrative Box 1, the impact of Covid-19 is assessed: so far the impact has been less severe than was feared during Q2 of 2020.

In Narrative Box 2, the gathering momentum towards decarbonisation is assessed: without wishing to get carried away, the progress towards zero-GHG emissions, and the prospective shift to hydrogen (S2H2) appears to be opening up pathways to decarbonisation of the Ports and Shipping sectors.

Future Articles in the Ports and World Trade series will provide updates on the progress towards zero GHG emissions and the S2H2 to the extent that they appear likely to affect, and are adopted by, the Ports and Shipping sectors.
 

NARRATIVE BOX 1 – COVID-19 AND WORLD TRADE – THE STORY SO FAR

In Article 3 of the Ports and World Trade series, it as noted that, in the aftermath of the global financial crisis of 2008/2009 (GFC), aggregate world GDP fell by 1.9%. and world trade fell by 13%. As we were finalising Article 3, the impact of Covid-19 was starting to be seen. In the period from the end of March to the end of October 2020, after initial predictions that the impact of Covid-19 would be up to 2.5 times that of the GFC, it has become apparent that while it is likely to take longer to return to 2019 (pre-covid-19) levels than it took to return to pre-GFC levels post GFC, the impact of Covid-19 might not be as severe as the impact of the GFC on the basis of a year-on-year comparison between 2019 and 2020. After some startling predictions in Q2 of 2020, some may say cataclysmic predications (with predicted ranges of between 13% to 32% for contraction in world trade for finished goods), during the first half of 2020, it appears that the impact was at the lower end of the predicted range for the full calendar year 2020. In October 2020, the WTO forecast that year-on-year trade 2019 to 2020 is estimated to reduce by 9.2%. With a rise of 7.1% in 2021, and a return to pre-Covid-19 levels during 2022. For those who have followed the quarterly statistics this year, it has been a roller-coaster ride. After the first half of 2020, a year-on-year basis indicated that World Trade would contract by around 18.5% year-on-year from 2019 to 2020. And then as lockdowns were eased there was a surge in trade during July and August, and into September. There were a number of explanations for the upward curve during Q3 of 2020, including businesses seeking to replenish inventories to respond to increased demand. The acid test will be Q4 as the impact of stricter measures across countries with resurgent infection rates and the scaling down or cessation of stimulus packages take effect. Early indications during Q4 are that world trade may decrease again as a number of countries re-enter lock-down, and the effect of diminishing fiscal and monetary policy intervention is felt. Part 2 of Article 4 will include an update. It is has been noted that one of the reasons why world trade has been more resilient during Covid-19 than during the GFC is the speed with which, and the extent to which, governments responded with fiscal and monetary policies to maintain/ stimulate demand: the policies have included income support for households, meaning that expectations of households (or a return to normal, albeit the oft-mentioned new normal) have not been as adversely affected as was the case during the GFC. Furthermore, the reduction in GDP in many countries has been contributed to by a stepped reduction (some would say collapse) in the provision of non-tradeable services, including entertainment and hospitality, which while impacting GDP has not affected trade in goods. By Michael Harrison and Richard Guit

NARRATIVE BOX 2 – DECARBONISATION OF PORTS AND SHIPPING

The Ports and Shipping sectors are reliant on fossil fuels to provide Port Services and Shipping Services. Both sectors are providing a focal point in a number of hydrogen road maps, plans and strategies released by countries that are early movers in the shift to hydrogen. Both sectors are mentioned as industries that are well-placed to decarbonise, and to do so relatively quickly, particularly by transitioning to the use of LNG bunkers and hydrogen as energy carriers to power vehicles and vessels. Also Ports, given their location, are increasingly being viewed as hubs around which, or close to which, hydrogen production and industrial use of hydrogen can cluster. There is increasing coverage of hydrogen (H2) as an energy carrier in so-called, “difficult to decarbonise” industries. While shipping may be regarded as easier to decarbonise than other industries, it nevertheless takes time to effect any shift. It is estimated the between 3% and 5% of global anthropogenic GHGs emissions arise from the shipping industry: we tend to view as closer to 3% than 5%. The Paris Agreement on climate change was agreed in 2015 by the parties to the United Nations Framework Convention on Climate Change (UNFCCC). The Paris Agreement entered into force on 4 November 2016. The Paris Agreement has as its objective limiting climate change to a 2oC (while striving to limit to a 1.5oC) increase in temperature. The Paris Agreement includes ports and domestic shipping (and as such are mandated under the laws of parties to the UNFCCC), but does not include international shipping. The International Maritime Organisation (IMO) is committed to reducing GHG emissions from international shipping on a sustainable basis. GHG from international shipping: The initial strategy of the IMO outlined goals for GHG emission reductions in April 2018 (Initial Strategy). There are three goals: first, to reduce GHG emissions across each transport network by an average of at least 40% by 2030 (2030 Goal) and at least 70% by 2050, compared to 2008; secondly, to reduce total annual GHG emissions arising from international shipping by at least 50% by 2050 from 2008 levels (ASAP Goal); and thirdly, to phase out GHG emissions arising from international shipping completely as soon as possible. These goals are intended to be achieved by “a pathway to CO2 emission reductions consistent with the Paris Agreement temperature goals” (i.e., 2030 and ASAP Goals). By some estimates, the operation of the international shipping industry results in 1 billion tonnes of GHG emissions annually. In the week beginning October 17, 2020 a new proposed MARPOL amendment (2020 Amendment) was released by the IMO Intersessional Working Group on Reducing Greenhouse Gas Emissions. It proposed the first binding regulation under the Initial Strategy. The proposal was intended to incentivise the use of fuel-efficient vessels through the implementation of a mandatory rating system, A to E. While the 2020 Amendment was welcomed, it was, and remains, a working assumption that countries would and will have to act to encourage achieve lower GHG outcomes for the purposes of achieving the 2030 and ASAP Goals. On November 17, 2020 after the conclusion of a meeting of the Marine Environment Protection Committee to consider the 2020 Amendment, while the commitment to the 2030 Goal is intact, it is apparent that the achievement of the ASAP Goal has been tempered, which may impact fulfillment of the overarching intent to place the international shipping industry on “a pathway to CO2 emissions reduction consistent with the Paris Agreement temperature goals”. There is still some work to be done to finalise the detail in the 2020 Amendment. We will report on that as it comes to hand. Given what may be regarded as the application of the brakes on the ASAP Goal, it is apparent that the European Green Deal (defined in the Glossary), and other economic bloc and individual country initiatives, will be critical. For example, the EU has provided funding for a HyShip: a hydrogen powered and propelled ro/ro vessel to distribute hydrogen to hydrogen hubs from 2024. In the context of World Trade, the implications of decarbonisation are developing, but it appears increasingly likely that H2 is going to play a key part, critically the use of H2 as an energy carrier to displace the use of fossil fuels in Port and Domestic Shipping and International Shipping activities. H2 can be used as an energy carrier to power and to propel haul and lifting equipment and vessels of all kinds. It is clear that Ports and their hinterlands are regarded as critical to decarbonisation. Since 2017 the number of countries that have developed H2 road maps, plans and strategies has being steadily increasing, including countries heavily dependent on trade, including G7 economies of PRC, Germany, Japan, Korea and Canada. During the first half of 2020, the number of countries releasing road maps, plans and strategies has increased, and during the second part of 2020, PRC, Japan and Korea have announced that they will move to net zero emissions by 2060, 2050 and 2050 respectively. By and large, these road maps, plans and strategies are consistent with the, and some recognise expressly that economies, need to decarbonise, and, in this context, setting targets to become carbon neutral. In short, this requires abatement of GHG usage and displacement of fossil fuel use. In the context of the Shipping sector, improved efficiency and use of lower carbon footprint energy sources, including the use of LNG bunkers is key. The world’s first H2 Carrier (the Suiso Frontier) built by Kawasaki Heavy Industries was launched in late 2019. The intention being that the H2 Carrier will transport liquified H2 from Australia to Japan, with brown coal used to produce brown hydrogen. It is anticipated that the first H2 import terminal will be completed and operational at Kobe in March 2021, again involving Kawasaki Heavy Industries. To follow developments, follow Low Carbon Pulse: www.ashurst.com/en/news-and-insights/insights/low-carbon-pulse/ By Michael Harrison, Richard Guit, Dan Reinbott and Peter Vaughan

Section 1
 

Who’s Who? And Who Contracts with Who?
 

1.1: A reminder of Port Models
 

Port Models are relevant for the purposes of determining the contractual relationship among the participants within the precincts of any port and the channels leading to, and from, that port.

In general terms, there are four port models. 1. Private Service Model;3 2. Public Service Model;4 3. Service Port Model/Labour Port Model;5 and 4. Landlord Model.6 (These models are considered in detail in previous articles in the Ports and World Trade series.)
 

The form of the port model that is used will determine the entity or the entities with which a Port User contracts, but the port model is most unlikely to impact the terms on which each of the Port, PSP and port facility owners (each a PFO) is prepared to contract with any Port User.

 

1.2: Port Service Agreements (each a PSA)
 

While port models may differ, the requirement for Port Users (including Carriers and Shippers) to contract with the Port and PSPs and PFOs, on terms required by each of them, does not. Port Users must contract, as a minimum, in relation to:
 

• access to channels leading to, and from, the Port precincts;

• access / entry to, and egress / exit from, the Port itself;

• the provision of pilotage and towage services;

• berthing/ mooring to load (if an export port) or to discharge (if an import port) or both (if both import and export port, including for transhipment); and

• provision of port services to load or to discharge the vessel carrying the goods, including with a stevedore (as a PSP) and a PFO, or both.
   

(Section 2 and 3 provide more detail in respect of the key contracts at the Port Function level of the maritime logistics system, as part of the supply chain.)
 

Given the nature of the provision of Port Services (outlined in Article 3 of the Ports and World Trade series), Port Users are likely to be required to contract under standard terms (commercial and legal), typically, non-negotiable. This Part 1 of Article 4 outlines the nature of liability that may arise, and how that liability may be addressed in contracts that Port Users are required to execute.
 

In outlining the liabilities that Port Users are likely to be required to assume, we hone in on the liabilities that the Port, each PSP and each PFO will require the Port User to assume (and that they themselves will require to be excluded or limited).
 

1.3: Maritime Logistics System
 

As noted in Article 3 of the Ports and World Trade Series, the maritime logistics system (as part of supply chain management) includes three distinct functions: 1. Freight Forwarding Function;7 2. Shipping Function;8 and 3. Port Function.9

Among other things, this Part 1 of Article 4 looks at Shipping and Port Functions, but principally the Port Functions.

In looking at the Shipping and Port Functions, we consider damage and loss, and liability, that may arise for the participants participating in these Functions.
 

PORT FUNCTION BY EACH SUB-FUNCTION:

1. Governance Functions: including Vessel Traffic Services (VTS); customs, immigration and quarantine; harbour master–vessel traffic management within the port, including to manage business as usual (and any business not as usual, including any allision or collision or grounding), and control of the port; Environment and Pollution Policy, Management and Response, and Security Management (including policing) of marine side; 2. Infrastructure (development and operation and maintenance) Functions: including breakwaters, harbour walls and shore protection and bridges; port channels and dredging – capital dredging and maintenance dredging – channels and berth boxes/pockets; jetties, piers, quays and wharfs, and berths; terminals – container terminals, roll-on-roll off, passenger terminals; and ship loading facilities – dry bulk commodity storage and conveyors and loaders and liquid storage and loading; and 3. Operational Functions: Land side – storage and warehousing and transport (likely road and rail, within the port precinct) and transport and logistics (to and from the port precinct); stevedoring services – loading and unloading, and handling, of cargo; marine side services – pilotage, towage, mooring and unmooring and services; Infrastructure developed under Design, Build, Finance, Operate and Maintain procurement structures.

WHO CONTROLS EACH PORT SUB-FUNCTION?

It remains the case that port authorities (government or government owned entities) control governance functions at ports, and, depending on the Port Model (see Section 1.1) applicable at the port, the port authority may undertake some or all of the infrastructure and operational functions (and will ultimately have control of them). Many port authorities were established to achieve strategic economic policy outcomes of government, and many still have this role, including the promotion of trade (or possibly, the maximisation of trade).

1.4: Contractual arrangements on either side of the Port precinct
 

While contracts of carriage (and any charter party) and sale of goods contracts (SOGCs) not considered in detail in this Part 1 of Article 4 it is important to understand their relevance to liability to the Port or any PSP or PFO:
 

• Contract of Carriage10: There will be a CoC (between the Carrier and Shipper).11 Under the CoC, the Carrier, typically a shipping company or shipping line, will agree with the Shipper to carry goods from one point to another point on the terms of that CoC.

  The CoC may incorporate terms by reference. 12 For these purposes, it is important that the place of collection and the place of delivery (collection and delivery tying to the place/point at which risk passes in the goods the subject of the CoC) are defined in the CoC, and the implications understood.

  To enable the Carrier to perform its obligations under the CoC, it needs to have a Vessel, that it will either own or charter (under a charterparty). It is not unusual for the terms of the CoC to incorporate terms from the charterparty,including in respect of liability of the charterer to the Vessel owner.
   

• Sale of Goods Contract: It is likely that there will be a SOGC or multiple SOGCs in respect of the goods that are being carried. Under each SOGC there will be a seller that has agreed to sell, and a buyer that has agreed to purchase goods, subject to the terms of the SOGC.

  The SOGC will detail which of the seller or the buyer is responsible for the carriage of the goods, and the point at which those goods are to be delivered (by the seller) and collected (by the buyer) and as such, in the ordinary course, the point at which risk in, and interests in the property in the goods, and title to the goods, passes from the seller to the buyer.
   

For the purposes of this Part 1 of Article 4, we use the concepts of the seller being responsible for the collection from the port of loading to the port of discharge/ unloading (Ex-ship delivery) and the buyer responsible for collection from and taking delivery at the port of loading (FOB delivery).
 

It is possible that the SOGC will, or should, include terms reflecting the liability regime at the Port or under the CoC.

As we note in Section 4, while not all SOGCs include provisions incorporating terms from other contracts comprised in the maritime logistics chain, and the supply chain more broadly, a good number do, particularly in respect of vessels carrying full cargoes of bulk for the seller or the buyer of that bulk cargo. In these circumstances it is likely that some attempt at matching and back-to-backing provisions will be undertaken (see Section 4).
 

Please refer to pdf download for image
 

Section 2
 

Overview of Liability and Limitation of Liability
 

2.1: Means of imposing liability and limiting liability
 

Means of imposing liability and limiting liability Within the approaches and channels to and within any Port, liability may arise as a matter of law and regulation and contract. The Port, each PSP and each PFO will want to be able to recover from each Port User, in particular in respect of death or personal injury and any damage, destruction or loss of property, and to avoid, to exclude or to limit liability their own liability to the extent permitted by law (and as appropriate to obtain an indemnity in respect of any such liability). Ports and each PSP and PFO may do this by regulation or other law, but most typically it is done contractually.
 

2.2: Trade – Key Contracts in the Transport and Logistics Chain Transportation and Ports Contracts
 

In the context of international trade a number of contractual relationships arise, key among them are:

1. Freight Services Contracts under which the Shipper (of goods) contracts with a freight forwarder for the provision of freight forwarding services (by the freight forwader), and under which the freight forwarder may contract (for and on behalf of the Shipper) with a Carrier to transport goods (by land, inland waterway or sea);

2. CoCs (Contracts of Carriage)(also may be referred to as contracts of affreightment) for the transportation:
 

• by land to the port of export, between the providers of those land transport services and the Shipper (and Cargo Interests);

• by Vessel to the port of import or transhipment, and in the case of transhipment, from the port of transhipment to the next or final port, between the Carrier and the Shipper (and Ship and Cargo Interests);

• by land from the port of import to delivery, between the Shipper and the provider of those land transport services (and Cargo Interests);
   

3. Contracts for Port access and use and provision of Port Services:
 

• allowing access to and from, Port using channels leading to Port, between the Carrier and the channel authority, as distinct from the Port;

• allowing access/entry to use of and egress/exit from Port (Port Access Agreement / PAA or Conditions of Use / COUs or Terms of Use / TOUs14. For simplicity “COU” is used for the balance of this Part 1 of Article 4, including the diagram in Section 3), and use of channels leading to Port (if under the control of the Port) between the Carrier and the Port;

• for provision of pilotage and towage services, between the Carrier and the applicable PSP;

• for provision of loading services (in the case of export) and discharge or unloading services (in the case of import), or both in the case of transhipment;

• for provision of stacking/de-stacking, stockpiling/de-stockpiling, and storage and warehousing, and provision of loading and unloading services on to, and from, land transport delivery/loading points;

• omnibus and waiver agreements (OWAs) regulating liability as between each Port User, and each other Port User, among the Port, any channel authority, each PSP and PFO, and each Port User; and
   

4. Sale of Goods Contracts for the sale and purchase of the goods transported under CoCs and subject to the COU and each PSA. For the purposes of this Part 1 of Article 4, liability and limitation of liability under COUs, PSAs and SOGCs are considered at a high level.

While CoCs (and any associated charterparty) in respect of waterborne trade need to be considered in the context of liability (including to understand the position of the Carrier/ Vessel), they are beyond the immediate scope of the Ports and World Trade Series. As are CoCs (including cartage and haulage contracts) by road and rail delivering goods to port for export, and transporting goods from port on import and delivering to final destination.

In addition, it is important to understand the basis upon which International Conventions may apply, but critically to understand that they do not regulate, directly, the liability or limitation of liability of Ports and PSPs and PFOs15. Before considering contracts for COUs and PSAs, outlined in Table 1 are the key interfaces that arise within the precincts of a Port.
 

Table 1 – Key Interfaces within the Port and among Port, PSPs and PFOs and Port Users

PARTY TO PARTY/PERSON TO PERSON INTERFACE	PERSPECTIVE OF PORT, PSP AND PFO	PERSPECTIVE OF OTHER PARTY/ PARTIES, AND INSURERS
Vessel to own Crew and Cargo Interests & Vessel Interests	COU may provide a Port Liability Regime stating responsibility	Carrier/Vessel will accept responsibility contractually and at law
Vessel to Vessel damage or loss (typically for allision and collision)	COU may provide a Port Liability Regime between Vessels stating responsibility	Carriers/Vessels will accept responsibility at law and to insurances
Vessel to other Vessel Crew and Cargo Interests & Vessel Interests	COU may provide a Port Liability Regime between Vessels stating responsibility	Carriers/Vessels will accept responsibility at law and to insurances
Vessel to Port (including in respect of damage and loss arising on grounding)	Port will want to recover any cost/damage incurred and suffered by Port	Carrier/Vessel, Cargo & Vessel Interests will want to limit to insurance
Port to Vessel, Crew and Cargo Interests & Vessel Interests	Port will want to avoid, exclude or limit liability to the extent permitted by law	Carrier/Vessel will accept Port not responsible as permitted by law
Vessel to Port Service Provider (PSP), incl. pilotage, towage and stevedores	PSP will want to recover damage or loss caused, and sufficient insurance cover	Carrier/Vessel, Cargo & Vessel Interests will want to limit to insurance
PSP to Vessel, Crew and Cargo & Vessel Interests	PSP will want to avoid, exclude or limit liability to the extent permitted by law	Carrier/Vessel will accept PSP not responsible as permitted by law
Vessel to Port Facility Owner (PFO), typically on loading/unloading16	PFO will want to recover damage or loss caused, and sufficient insurance cover	Carrier/Vessel, Cargo & Vessel Interests will want to limit to insurance
PFO to Vessel, Crew and Cargo & Vessel Interests on loading/unloading17	PFO will want to avoid, exclude or limit liability to the extent permitted by law	Carrier/Vessel will accept PFO not responsible as permitted by law
Vessel to Government Agency (GA), including contamination & pollution	GA will to recover damage and loss caused, and sufficient insurance cover	Carrier/Vessel, Cargo & Ownership Interests will want to limit to insurance

Please refer to pdf download for image 
 

3.1: Carrier contracting for access to and use of channels and Port
 

The Carrier (including as agent for Ship Interests (including Vessel owner) and Cargo Interests) has to contract with the Port (and any channel authority responsible for any channel to and from the Port) detailing the basis on which the Vessel operated by the Carrier is permitted to access and to use the Port (COU). The COU details the obligations of Port Users in respect of business as usual and non-business as usual matters (including in the context of any emergency or incident within the Port) and the liability regime that applies within the Port as between the Carrier (and those for which it is acting as agent) and the Port.

OWAs: In addition to a contract between the Carrier and the Port, in some Ports omnibus and waiver agreements (OWA) are used. Under OWAs, each Port User contracts with each other Port User (and the Port and possibly each PSP and PFO) so that the basis of any action or claim is regulated on like terms across the Port and to ensure that the basis of liability among each Port User is regulated to the extent possible.18

Typically, under an OWA the basis of liability in respect of each possible cause of action and claim is stated, as is the extent of liability (often as the exclusive and sole basis of liability), with the inclusion of a waiver of any recourse, remedy or right in respect of any action or claim to the extent not consistent with the liability regime prescribed in that OWA.

 

3.2: Carrier contracting for Port Services
 

The Carrier has to contract for the provision of Port Services (each a PSA). If the Port provides Port Services itself, the PSA will be between the Carrier and the Port. It is more likely however that the PSA will be between the Carrier and the provider of the particular Port Service, ie. the particular PSP.
 

The key PSAs are likely to be with pilotage and towage service providers (but which may include mooring and unmooring, and will include waste collection and removal services). In the ordinary course, the terms of contracts for pilotage and towage are most unlikely to be negotiable, with each PSP excluding and limiting its liability to the extent permitted by law, and requiring the Carrier to assume liability on terms (and other commercial terms) favourable to the PSP. This is likely to be the case even if multiple PSPs are providing pilotage or towage services, and as such there is competition.
 

As is the case with COUs, it is likely that the terms of each PSA will require the Carrier to contract on the basis that it is agent for any entity that may have an action or claim against the PSP (or any person for whose acts and omissions the PSP may be responsible). As such, under each PSA the PSP will require the Carrier to contract for itself and as agent for Ship Interests and Cargo Interests: the effect of this is that the terms of the liability regime will bind all those against which the Port or PSP may have an action or claim or want to have a defence (both as to their liability and the exclusion and limitation of liability of the Port or PSP).
 

Under the PSA, the PSP will contract for itself and for each person for whose acts and omissions it may be liable or who may be liable to the Carrier or any person for which the Carrier is acting as agent (a so-called Himalaya Clause). A Himalaya Clause has the effect of binding any person with whom the Carrier contracts to the liability regime in the PSA “agreed” with the PSP, even though that person does not itself execute the PSA, and this is likely to include each party named on the applicable Bill of Lading (BOL) or other document of title (DOT).19 Typically, these provisions are also reflected in BOLS or DOTS, often incorporated by reference. For the Port or PSP, it is important that the PSA is the only contract governing the relationship between it and the Carrier and each entity on whose behalf the Carrier contracts, including the Shipper (under the CoC).

 

3.3: Shipper contracting for Port Services to load or to discharge
 

The Shipper has to contract for the provision of loading services or discharge! unloading services. If the Port provides these Port Services itself, the contract will be between the Port and the Shipper. This said, it is more likely that a PSP will provide these loading or discharge! unloading services (including any stevedore (as a PSP) or PFO). As is the case with other PSAs, the terms of the contracts for loading services or discharge! unloading services 20 are most unlikely to be negotiable. The Shipper will contract as agent for any person that may have an action against the Port or PSP and will have a Himalaya Clause ensuring that any person undertaking any activity for or on behalf of the Port or PSP gets the benefit of the exclusions and limitations of liability under the liability regime in the PSA. More likely than not, stevedores and PFOs have very well drafted Himalaya Clauses: they are intended to work effectively, and almost all do so.
 

In addition, some of the more sophisticated contracts with stevedores (as PSPs) and PFOs will contain waivers and indemnities to ensure the effectiveness of exclusion and limitations of liability provisions, including requiring the Shipper to indemnify the PSP or PFO in relation to any action or claim (brought or threatened) against the PSP or PFO by the Shipper or any person on whose behalf it executes, or purports to execute, the contract for loading or discharge! unloading services. Subject to any law, stevedores (as PSPs) and PFOs will provide for “all care, no responsibility”.
 

3.4: Shipper contracting for Port Services to stack or stockpile or to store or warehouse (within the precincts of the Port or at bonded warehouse)
 

The Shipper has to contract for the provision of stacking and de-stacking (containers21), stockpiling (bulk) or storage and warehousing (all other forms of cargo) (Port Side Logistics).
 

If the Port provides the Port Side Logistics services itself, the contract will be between the Port and the Shipper. This said, it is more likely that the contract will be with a PSP providing these Port Side Logistics services (including any stevedore (as a PSP) or PFO) (Port Side Logistics Contract).
 

As is the case with other PSAs and the contracts for loading and discharge! unloading, the terms of Port Side Logistics Contracts are most unlikely to be negotiable. The Shipper will contract as agent for any person that may have an action or claim against the Port or PSP and will have a Himalaya Clause (or a third party benefit clause) ensuring that any person undertaking any activity for or on behalf of the Port or PSP gets the benefit of the exclusions and limitations of liability under the liability regime in the Port Side Logistics Contract.
 

Because Port Side Logistics services may be provided by the same PSP that provides loading and discharge! unloading services, the provision of each distinct service may be covered under the same contract. It is important that these contracts recognise all causes of action and claim, ideally specifically or generally in all-embracing terms.
 

To the extent to which the Port or PSP is required to load onto, or unload from, any vehicle (road or rail) the Port Side Logistics Contract will ensure that its liability for any damage to, or destruction of, any vehicle or death, or personal injury to any individual is addressed.

 

3.5: Understanding the causes of action that may arise
 

Table 2 outlines (in summary form) the possible causes of action that may arise. Among other things, the concepts of negligence (breach of a duty of care) and strict liability (liability for an event or incident irrespective of fault) are well understood to Port Users (and Ports, PSPs and PFOs).
 

Table 2 – Causes of Action
 

CAUSE OF ACTION	BASIS OF LIABILITY	PARTY/PARTIES
Breach of contract: — Terms of access and use; — Terms of PSA; and — Terms of PFO contract	Contractual relationship imposes obligations which if breached will give rise to liability for damage or loss caused by the breach of contract	Parties signing access and use, PSP contract or PFO contract will be liable likely on terms favourable to the Port or PSP or PFO
Breach of duty of care: — Death, disease or injury; — Damage, destruction or loss; and — Economic loss (including possibly pure economic loss)	Law of any contract and law of country in which the applicable Port is located imposes a duty of care that if breached will give rise to liability for damage or loss caused by breach of the duty	Parties signing contracts may assume duty of care, but in any event any person within Port Area should regard themselves as owing a duty of care, unless excluded in accordance with law
Breach of statutory duty (civil claim), typically imposed by statute or by-law or regulation	Law of country in which Port is located may impose a duty that if breached will give rise to liability	This is not a question of signing or not signing a document, the duty arises as a matter of law
Breach of statutory duty (crime) relating to any activity or omission, typically imposed by statute or possibly by regulation	Law of country in which the applicable Port is located may impose a duty that if breached may give rise to penalty of imprisonment or fine, or both	This is not a question of signing or not signing a document, the duty arises as a matter of law, and it is important to understand whether any such law
Commission of a crime arising from any activity or omission at general law	Law of country in which the applicable Port is located will prescribe crimes	Likely Port Users aware of activities/omissions amounting to a crime
Agency (agent contracting for principal): agent contracts for Vessel, and Cargo and Ownership Interests (each a principal) to ensure Port, PSP and PFO not liable	No authority or exceeding authority, typically liability arises from making a representation or a warranty, backed by an indemnity	This is the means by which Port, PSP or PFO avoid, exclude or limit claims to parties with whom they are no contracting for access/use or a service
Indemnity given to the other party in respect of any damage, destruction, or loss on no-fault basis, ie, if damage, etc arises the party is liable	If an indemnity is given on no-fault basis, party giving it is liable for any damage, loss or loss arising in any event, subject to public policy (PP)	One of the means by which Port, PSP or PFO may seek to make full recovery irrespective of fault of party giving it
Indemnity given to other party in respect of fault of the party giving the indemnity	If an indemnity is given, party giving it is liable if it applies, subject to PP	One of the means by which Port, PSP or PFO may seek to make full recovery
Indemnity given to other party in respect of the fault of that other party	If an indemnity is given, party giving it is liable if it applies, subject to PP	One of the means by which Port, PSP or PFO may avoid or exclude liability
Knock-for-knock (KFK) indemnity: mutual indemnities are given, typically, for damage/loss of property or death or personal injury of employees of party	If KFK indemnity is given, party giving it will be liable for damage/loss of its property or its employees however caused, subject to PP	It is not usual for Port, PSP or PFO to seek KFK indemnities, but may arise in contracts between Port Users. Backed by release or waiver, or both
Release given by the party that has incurred or suffered damage or loss	Contractual in accordance with its terms, typically backed by indemnity	One of the means by which Port, PSP or PFO may avoid or exclude liability
Waiver given by the party that has incurred or suffered damage or loss	Contractual in accordance with its terms, typically backed by indemnity	One of the means by which Port, PSP or PFO may avoid or exclude liability
Release and waiver by the party that has incurred or suffered damage or loss	Contractual in accordance with its terms, typically backed by indemnity	One of the means by which Port, PSP or PFO may avoid or exclude liability
Claim covered by insurance contracts: — Damage to or loss of Vessel caused by a peril of the sea while in transit: Hull & Machinery insurance; — Vessel run-aground/wrecked – P&I insurance; — Collision or allision with Vessel, Hull and Machinery/P&I insurance; — Damage to or loss of Cargo in transit: Marine Cargo Insurance; — Damage to or loss of Cargo not in transit: Marine Cargo Insurance; — Death or injury to crew; — Damage or loss of third party property not caused by Vessel or crew: Marine Cargo Insurance; — Damage or loss of third party property caused by Vessel (including crew) – P&I insurance; — Death or injury to third party, other than employee of Port, PSP or PIO: P&I Insurance; — Death or injury of any third party that is employee of Port, PSP or PIO: P&I Insurance; and	There are five key marine insurances: 1. Hull and Machinery insurance among other things, covering Vessel owners for damage to the Vessel and its Cargo, and terminals and other transport from point of origin to final destination; 2. Marine Cargo insurance among other things covering Vessel owners and Carriers for loss of or damage to Cargo during transit, and loss arising from delay and damage caused by Cargo; 3. Freight insurance among other things compensates the shipper company/line if freight is lost or damaged; 4. P&I insurance among other things, covers damage to other Vessels; property in the water and collision and allision (not covered by H&M insurance), damage to cargo and costs of defending pollution claim; and 5. Oil Pollution insurance: among other things covers Vessel owners for damage caused by oil pollution.	The Port will be concerned to ensure that the terms of port access and use require each Port User to effect and to maintain insurances, likely backed by an indemnity if the required insurance is not effected and maintained. PSP and PFO will be concerned to ensure that P&I Insurance is in place to cover death and injury and damage to property, and may require Port User with which they are contracting) to ensure that the Vessel P&I Insurance in place (as well as public liability and product liability insurance). P& Clubs providing P&I insurance, likely concerned to ensure insured gets the benefit of limitation of liability under any convention and any law in which the Port is located. Given the ability of a Carrier to contract out of under any convention, this may be the subject of some debate with the Port if the P&I Club is not able to get comfortable with the possible extent of liability.
Subrogation to insurer of insured’s claim against person who caused damage / loss in respect of which insured makes claim under the contract of insurance	As a matter of law, insurer steps into the shoes of the insured in respect of the claims that the insured may have against any person	Port, PSP and PFO likely to require any right of subrogation waived, including direct written confirmation from the, or each, insurer

To ensure that no cause of action is overlooked, a narrative box entitled “Bailment – sometimes a forgotten cause of action” is included. Bailment – sometimes a forgotten cause of action In some jurisdictions a concept of bailment arises: a person (bailor) delivers possession of property into the custody, and control or a another person (bailee), which property is accepted by the bailee for safekeeping on the basis that the bailee will be paid for the bailment and will return the property into the possession of the bailor (or a person acting as its agent). Depending on the law of the applicable jurisdiction, a bailment gives rise to duties of the bailee as follows: positive duties: to take proper care of the property, to keep the property separate from other property, and to return the property; and negative duties: not to use the property unless authorised to do so (unlikely) and not to allow any adverse title or interest to arise in respect of the property. A bailment allows the bailor to enforce the duties owed to it by the bailee, including a right for breach of bailment and a right to terminate for any act (or omission) that is not consistent with the bailment. The basis for a claim for bailment is different from a claim for breach of contract or any claim for breach of another duty of care, most importantly in relation to the burden of proof: if the bailor demonstrates delivery, and acceptance of possession, of property, if the property is damaged or lost it is for the bailee to prove, beyond reasonable doubt, that it did not breach its duty to take proper care. Bailment is a distinct and separate cause of action to any claim for breach of contract, breach of any other duty of care, or any cause of action arising under statute. All contracts under which a party delivers possession of property into the custody and control of another person should deal with bailment, most typically, by recognition that no obligation arises other than as provided expressly under the contract (this is best done expressly) and to ensure that the exclusion and limitation provisions are drafted to exclude liability completely or in terms consistent with the rest of the contract, and that no right of termination arises other than as expressly provided for in the contract.

Section 4
 

Sale of Goods Contract
 

Section 4.1:
 

World Trade is based on the sale and purchase of goods (and services). While Carriers and Shippers contract under Contracts of Carriage (each a CoC), this is a means to an end: the transportation of goods from one part of the world to another, pursuant to a Sale of Goods Contract (SOGC).
 

Section 4.2:
 

The interface between any SOGC and the CoC needs to be understood: at the most basic level each international SOGC provides for the delivery of goods to be delivered to a stated delivery point (possibly a stated place), whether in the country of export (if the buyer, as the Shipper, is responsible for organising shipping, by contracting with a Carrier (FOB delivery)) or in the country of import (if the seller, as the Shipper, is responsible for organising shipping, by contracting with a Carrier (Ex-ship delivery)). This is straight-forward, and is well-understood.

What is often not as well-understood is the interface between the SOGCs and the COUs and the PSAs, whether from a physical or liability interface perspective (with the former informing the latter at least in respect of damage to property (real or personal)) and more generally in respect of any action or claim. This is particularly the case in respect of timing at Port, berthing / mooring and Port Facilities.

To assist in understanding these physical interfaces, Table 3 outlines the Contractual Matrix giving rise to the key interfaces, and Narrative Box 4 provides something of an aide memoire in respect of timing issues.
 

Table 3 – Contractual Matrix giving rise to the key interfaces
 

SUMMARY OF CONTRACTUAL MATRIX
FOB		EX-SHIP
SELLER	BUYER	SELLER	BUYER
Deliver commodity using Port Facility	Take delivery on Vessel using Vessel Loading System	Deliver Commodity using Vessel under CoC	Take delivery using Port Facility
PSA for Port Services with PSP or Seller owner of Port Facility	Contract for carriage (CoC) with Vessel/Vessel Interests	CoC will impose restrictions on liability of Vessel, subject to International Conventions	PSA for Port Services with PSP or Buyer owner Port Facility
Commodity may damage Vessel	Buyer liable under CoC for damage to Vessel	Commodity may damage Port Facility	Buyer liable under PSA for damage to Port Facility
PSP may damage the Vessel, but PSA will excuse liability	Buyer liable under CoC for damage	PSP may damage the Vessel, but PSA will excuse liability	Buyer liable under PSA under indemnify for PSP liability
Vessel may damage Port, Seller may be liable jointly under Port Liability Regime	Vessel contracts with Port for access and use, and liability, should indemnify Seller	Vessel contracts with Port for access and use, and liability, should indemnify Buyer	Vessel may damage Port, Buyer may be liable jointly under Port Liability Regime
No need to address in CSPA, unless Seller retains Cargo risk	Vessel contracts for pilotage and towage services	Vessel contracts for pilotage and towage services	No need to address in CPSA unless Buyer has Cargo risk
Seller may be liable jointly under Port Liability Regime	Vessel contract under COU for Vessel and Cargo Interests	Vessel contracts under COU for Vessel and Cargo Interests	Buyer may be liable jointly under Port Liability Regime

Table 4 – Summary of Timing Issues

SUMMARY OF TIMING ISSUES
FOB delivery		Ex-Ship delivery
Clearance/Compliance and any acceptance regime	Buyer at risk to the extent not compliant/cleared, accepted	Clearance/Compliance and any acceptance regime	Seller at risk to the extent not compliant/cleared, accepted
VAS / VTS	Buyer to seek to match in SOGC & CoC	VAS / VTS	Seller to seek to match in SOGC & CoC
ETA regime: timing and form	Buyer at risk if does not match any charterparty	ETA regime: timing and form	Seller at risk if does not match any charterparty
NOR regime: timing and form		NOR regime: timing and form
Cargo documents (CDs), incl. any bill of lading and waybills	Buyer at risk: not ready in all respects if do not have all CDs	Cargo documents (CDs), incl. any bill of lading and waybills	Seller at risk: not ready in all respects if do not have all CDs
Ready in all respects (RAR)	Buyer at risk to extent CoC/ any charterparty not matched with consequences at Port of not being RAR or FP, and not able to cure under both CoC/any charterparty and COU/PSAs	Ready in all respects (RAR)	Seller at risk to extent CoC/any charterparty not matched with consequences at Port of not being RAR or FP, and not able to cure under both CoC/any charterparty and COU/PSAs
Free pratique (FP)		Free pratique (FP)
NOR invalidity		Free pratique (FP)
NOR perfection of invalidity, incl. waiver		NOR perfection of invalidity, incl. waiver
Berthing/Mooring regime	Buyer at risk to extent CoC/any charterparty, COUs and PSAs not matched. Its critical to note that NOR and berthing/mooring are distinct This is a key area of mismatch across the contractual matrix	Berthing/Mooring regime	Seller at risk to extent CoC/any charterparty, COUs and PSAs not matched. Its critical to note that NOR and berthing/mooring are distinct This is a key area of mismatch across the contractual matrix
Rate of loading/discharge, and required lay-time		Rate of loading/discharge, and required lay-time
Lay-time regime		Lay-time regime
Extension of lay-time		Extension of lay-time
Demurrage/Dispatch		Demurrage/Dispatch
Possible non-delivery	Buyer at risk, but unlikely once at Port/berthing/ mooring	Possible non-delivery	Seller at risk, but unlikely once at Port/berthing/mooring
Any right to require de-berthing/ mooring	Buyer at risk, but not regarded as key risk unless vessel defect, in which case possible claim under the CoC/any charterparty	Any right to require de-berthing/ mooring	Seller at risk, but not regarded as key risk unless vessel defect, in which case possible claim under the CoC/any charter-party
Regime for return to berth/ mooring		Regime for return to berth/ mooring
Cooperation: not possible to load/discharge without co-op.	Good practice to include standard provisions	Cooperation: not possible to load/discharge without co-op	Good practice to include standard provisions
Timing issues in the left hand column (under FOB delivery and Ex-Ship delivery) arise as a result of any mismatch between the COU, any PSA, and the CoC/any charterparty. Any mismatch may give rise to a delay or non-delivery under the SOGC (unlikely), and possible liability Buyer to Seller in the case of FOB delivery, and Seller to Buyer in the case of Ex-ship delivery (more likely)

VAS and VTS – Distinct Concepts but related, and, increasingly, integrated Over many years the co-authors have advised on vessel arrival systems (VAS). In some instance, the co-authors have been fortunate enough to be involved in, and to have advised, on the development of systems overtime, including in respect of systems that are responsive along the entire supply chain. If a new VAS is introduced it is likely, in fact it is almost certain, that the terms under the contracts of carriage (between the Shipper and the Carrier) and the underlying sale of goods contracts will require updating, in some cases, a complete rethink, followed by a complete rework, may be required. Increasingly, the primary objectives of VAS are to improve efficiency and to increase productivity, both at Port and on the approach to, movement within, and departure from Port. In this context, Notice of Readiness (NOR) and priority have, in effect, been displaced by systems that seek to maximise efficiency and productivity. As noted in Article 3 of the Ports and World Trade Series, each Port provides vessel traffic system (VTS) services, being services that are provided by the Port (the Harbour Master) to direct vessel movements within the Port. If a Port has a VAS, the VTS will be responsive to the VAS, while ensuring safety in respect of all vessel movements with the Port. Part 2 of Article 4 will outline which of the Ports the subject of the article, have VAS, and the form it takes.

4.3: Liability arising under the Sale of Goods Contract
 

In the context of any SOGC under which a cargo is sold and purchased as a full cargo lot (likely in the case of bulk cargoes such as coal, grain, iron ore and LNG) the SOGC needs:(A) to reflect which party is to contract with the Port, each PSP and PFO:
 

• in the case of any SOGC contemplating FOB delivery:

  (a) at the port of loading, the Buyer, as the party responsible for arranging transportation, must ensure that the Carrier contracts with the Port and any channel authority in relation to the COU and with the pilot and the towage service providers, and the Seller must contract with PSP / PFO for the provision of Port Services to allow the delivery of the goods to the point of delivery at the port of discharge/unloading or downstream of the port of discharge/unloading;

  (b) at the port of discharge/unloading, the Buyer must ensure that its Carrier contracts with the Port and channel authority in relation to the COU and with the pilot and the towage service providers, and the Buyer or the person taking delivery of goods from the Buyer, must contract with the PSP / PFO for the provision of Port Services to allow delivery of the goods at the point of delivery (under the Sale of Goods Contract) on discharge/unloading;
   

• in the case of any SOGC contemplating Ex-ship delivery:

  (a) at the loading of loading, the Seller, as the party responsible for arranging transportation, must ensure that the Carrier contracts with the Port and any channel authority in relation to the COU and with the pilot and towage service providers, and the Seller or the person from which the Seller is taking delivery, must contract with the PSP / PFO for the provision Port Services;

  (b) at the port of discharge/unloading, the Seller, as the party responsible for arranging transportation, must ensure that its Carrier contracts with the Port and channel authority in relation to the COU and with the pilot and the towage service providers, and the Buyer or the person taking delivery of goods from the Buyer, must contract with the PSP / PFO for the provision of Port Services to allow delivery of the goods at the point of delivery (under that SOGC) on discharge/unloading;
   

(B) to reflect the operational requirements of the Port and each PSP and each PFO under the COU and each PSA:
 

• in the case of a SOGC contemplating FOB delivery, it may be necessary to include provisions to address the basis:

  (a) for access / entry to, and egress / exit from, the Port (including any VAS or NOR and priority regime), including to define commencement of lay-time and responsibility for demurrage, and extension of lay-time, and most importantly the charges that will be payable by the Carrier (and as such the Buyer, as Shipper, under its CoC with the Carrier);

  (b) on which a Vessel is determined to be compliant (and the consequences of not being compliant), including any inspection of, or any current certification in respect of, any Vessel;

  (c) of lay-time permitted at berth/mooring, and the rights of the Port, PSP or PFO to require a Vessel to, move away from berth or mooring (including any general right); and

  (d) of liability of the Carrier within the precincts of the loading port; and

  (e) of liability of the Port for any delay within the Port or any PSP or PFO for delay in the provision of any service or otherwise causing delay to a Vessel;
   

• in the case of a SOGC contemplating Ex-ship delivery, it may be necessary to include provisions to address the same issues as for a FOB delivery (save that in relation to the charges,it will be the Seller that will be concerned about amount payable), but also contemplating non-discriminatory access to the discharge/unloading port and the facilities at the Port;
   

(C) to reflect the liability that either party may incur as a result of any act or omission of the other party within the precincts of the loading port (in the case of a FOB delivery) or the discharge / unloading port (in the case of an Ex-ship delivery), and to consider whether it is necessary to address / to seek to address in the SOGC the extent to which liability may arise under the applicable CoC as a result of any act or omission of the party to the SOGC that is not party to the CoC; and

(D) to address what (if anything) happens if the Carrier does not sign the COU or any OWA at the port of loading (in the case of a FOB delivery) or the port of loading or port discharge / unloading (in the case of an Ex-ship delivery), including, in the unlikely event that it is not permitted to do so under the CoC.

It should be emphasised that these issues are live issues on bulk trade, but are unlikely to arise on any container trade.
 

NARRATIVE BOX 3 – BACK-TO-BACKING CONTRACTS

It is not usual for the terms of Sale of Goods Contracts (SOGCs) not to reflect the COU/OWA (or the terms of each PSA) on a back-to-backed (ie matched basis). In the context of world trade, ensuring that each contract is back-to-backed with each other contract may be regarded as unnecessary, at least from an operational perspective, with the logic being that the likely consequence, demurrage, is a liability that may be regarded as manageable or recoverable, with other risks insured. While the natural reaction of legal professionals is to want to back-to-back, the commercial professionals, applying a high level cost benefit analysis and having regard to the possible impact on time, are unlikely to see the benefit. This said, the lawyers can at least identify and grade the risks to allow the commercial team to make an informed decision. In the context of single cargo SOGCs or shorter term SOGCs for bulk commodities this commercial logic is sound. In the context of longer term contracts, there may be an argument for seeking to back-to-back operational provisions, and liability provisions, but on liability this will tend to depend on the bargaining position of each party. Over the years we have seen ETA/NOR/Berthing/Mooring priority/and Lay-time provisions in SOGCs that bear no relation to the requirement for the equivalent provisions in COUs and PSAs. Further, flexibility in respect of Vessels under the SOGCs either may not be permitted or may not be workable under COU or PSAs, and rights to require de-mooring/de-berthing under COUs not matched under the SOGCs. Narrative Box 4 outlines the areas that may give rise to mismatch, and as such require back-to-backing.

Section 4.4: SOGC party as Seller or Buyer as Carrier or Shipper

 

There will be some instances in which the buyer or the seller under the SOGC is also the Carrier or the Shipper, or both. In which case, no CoC will be required. While this may not be typical, it is not unknown.

On a FOB delivery, the Buyer may be the owner or the charterer of the Vessel, in which case it will be both Buyer and Carrier. In these circumstances, the Buyer, as Carrier, will contract with the Seller of the goods under the SOGC to take delivery of the goods at the port of loading, If the Buyer is the owner of the goods while they are in transit, it will be the Shipper of the goods.

On an Ex-Ship delivery, the Seller may be the owner or the charterer of the Vessel, in which case it will be both the Seller and the Carrier. In these circumstances, the Seller, as Carrier, will contract with the Buyer of the goods under the SOGC to deliver the goods at the port of discharge/unloading. If the Seller is the owner of the goods which they are in transit, it will be the Shipper of those goods.

In either of these circumstances the contractual matrix (described at Table 1 above, and throughout this Part 1 of Article 4) will not include a CoC between the Buyer and a Carrier (on FOB delivery) or as the case may be the Seller and a Carrier (on Ex-ship delivery). The absence of a CoC will not affect the terms of the COU or any PSA, but it will affect who is party to the COU and the PSA. Section 4.5: Port Operational requirements reflected in SOGC: The party to each SOGC with the obligation to arrange the transportation of the goods under that SOGC is the “meat in the sandwich”: as a practical matter that party will have no ability to influence the terms on which it has to contract under the CoC or under the COU and each PSA.
 

As noted in Section 4.3 and Narrative Box 3, it may be regarded as unusual for the operational arrangements at a Port or any Port Facility to be reflected in a SOGC or, if provisions dealing with certain subject matter are included, for the provisions to be consistent with the terms of the COU or each PSA. Also as noted above, the “default” position may be to understand any mismatch between the SOGC and the terms of access and use of the Port or any Port Facility, but not to amend the SOGC to seek to address the mismatch.
 

It will be apparent from the narrative in respect of COU and PSAs (almost universally taking a standard and non-negotiable form), that if the terms of any contract are to be amended to back-to-back with the terms of access and use of the Port and each Port Facility it is the SOGC that will need to be amended. It is likely that ensuring consistency from an operational perspective will not give rise to any issue, but back-to-backing changes that are not consistent with typical risk allocation, and as such allocation of liability, is unlikely to be accepted.
 

Narrative Box 4 outlines, in short form, the provisions in respect of which back-to-backing is key so as to avoid mismatches. If it is accepted that provisions need to be back-to backed, it is important to consider the COU and PSA for any of the following in the context of a CoC / charterparty and SOGC:
 

• Vessel compliance: vetting for compliance, and acceptance, regimes exist to ensure that Vessels entering a Port and using Port Facilities are compatible and safe and secure. While it is unlikely that a Vessel will not comply (at least to any significant extent), it is important to allow sufficient time to ensure that this is the case;
   

• ETA Notices/VAS/VTS: It is important to understand what notices must be given by a Vessel on its approach to Port, including for the purposes of arrival at safe anchorage and in due course the PBS. To the extent that notice must be given it is appropriate to reflect this in the SOGC, and as such the SOGC should reflect which party needs to give notice as between the party required to arrange transportation under the SOGC (the Carrier Party), and that party that is not (the non-Carrier Party);
   

• If a party that is not the party required to arrange transportation under the SOGC has an obligation to give notice to a third party (typically, to a PFO) the SOGC can address this, either through requiring the provision of notice to allow the non-Carrier party to comply with its obligation to the third party on a timely basis (more likely) or to appoint the Carrier Party to give notice to the third party as agent for the non-Carrier Party (less likely);
   

• Notice of Readiness/NOR: Each of the following needs to be understood: (a) the point at which a NOR may or must be given under the COU, (b) the effect of giving NOR (typically the time by reference to which lay-time may commence), (c) the consequence of the NOR not being validly given (in particular whether the Vessel can be required to be de-berth or de-moor, and move away from mooring or berth to safe anchor and the effect on the lay-time calculation). Also, it is likely that one or more of the following phrases will need to be understood and as necessary back-to-backed: PBS (Pilot Boarding Station), “ready in all respects”, and “fast at berth”;
   

• Lay-time and Extension of lay-time (including consistency across relevant definitions, including Adverse Weather Condition and Force Majeure), will need to be consistent, critically to reflect the rate of loading or discharge/unloading of the Vessel; and
   

• Berthing/mooring priority: the time of arrival and the giving of a valid NOR will affect the time at which the Vessel may proceed to berth/moor, and load or, as the case may be, discharge/unload its cargo, but it does not deal with berthing/mooring priority. It is not unusual for a SOGC to contemplate berthing / mooring priority, but equally it is not unusual for it to be inconsistent with the NOR provisions, and other provisions, in other contracts in the contractual matrix.22
   

NARRATIVE BOX 4 – HOW TO BACK-TO-BACK

If it is decided to seek to back-to-back provisions across contracts in the supply chain, this is achieved by ensuring that the application of a provision in one contract allows the application of a provision in another contract in the supply chain or, in the case of liability provisions, allows exclusion or limitation or recovery. This is best illustrated by examples: ETA (and other notices): If a party to a PSA has to give notice to a PFO, but to do this that party (being the Non-Carrier Party) needs notice from the other party to its SOGC (being the Carrier Party), the SOGC must require the Carrier Party to provide notice to the Non-Carrier Party in time to enable the Non-Carrier Party to discharge its obligation to give notice under its PSA with the PFO; Adverse Weather Conditions (AWC), Allowed Lay-time and Force Majeure: If the Carrier Party (being the Buyer in the case of a FOB delivery, and the Seller in the case of an Ex-Ship delivery) is to get the benefit of relief provisions under the SOGC (being provisions that apply such that the Carrier Party is not liable for a consequence of AWC or Force Majeure) it needs to make sure that the provisions in the SOGC allow it to claim relief (from delay or non-delivery) by events and circumstances that may affect its ability to perform under the SOGC: critically this is done by drafting these definitions so that they allow relief if any entity in the supply chain is affected by an event or circumstance. Care needs to be taken here because each industry has slightly different norms; and limitation of liability: As noted elsewhere, the Port and each PSP will seek to exclude and to limit liability to the extent permitted bylaw. If the Carrier Party (being the Buyer in the case of a FOB delivery, and the Seller in the case of an Ex-Ship delivery) is to get the benefit of the same exclusion and limitation and liability regimes, again care needs to be taken. This said, it is fair to say that the norms for exclusion and limitation of liability under SOGC tend to follow the bandwidth of acceptable outcomes (market norms) and the Force Majeure provisions are left to relieve a party from liability; and Acts and omissions of one party: If a party to the COU or any PSA may be liable to the Port or any PSP as a result of an act or omission (with or without fault) of the other party to its SOGC, it is likely that that party will want to back-to-back this under that SOGC. Of all the provisions to back-to-back, this is the easiest conceptually. This situation, and the means of back-to-backing liability effectively is considered in Section 4.6.

Section 4.6: Liability arising to a third party from act or omission of other party to the SOGC
 

If either party (first party) to a SOGC is liable to the Port, PSP or PFO as a result of the actions or omissions of the other party (second party), the first party may seek to include in the SOGC a right to recover costs and expenses, damages, liability and losses for which it is liable to the Port, PSP or PFO. Typically, this is done by the use of an indemnity in respect of particular categories of damage and loss (back-to-backing). In some circumstances,23 the parties to a SOGC may agree to knock-for-knock indemnities in respect of certain damage, liability and loss, but the appropriateness of this needs to be considered given that in most circumstances neither party to the SOGC will own or operate either the Vessel or own or operate any asset or infrastructure within the precincts of the Port that may be damaged or lost. As such, any knock-for-knock regime that may be proposed under a SOGC will need to be considered carefully.

While back-to-backing of prospective liability from one contract24 may or may not be undertaken consistently or at all (and may or may not be successful), there are circumstances in which irrespective of any exclusion or limitation of liability regime a party is liable. Typically, this is the case in which the party to the SOGC will be stated to be liable for its gross negligence or wilful misconduct, ie under an indemnity the indemnifying party may be liable to the indemnified party as a result of any damage or loss arising from gross negligence or wilful misconduct. Unless the indemnity extends to the agent or contractor of the indemnifying party this indemnity will not allow the indemnified party to recover under the indemnity for its liability to the Port, or any PSP or PFO, arising as a result of the gross negligence or wilful misconduct of the Carrier.

As, or possibly more, typically, an indemnifying party will indemnify the indemnified party in respect of death or personal injury to any person or damage or loss to any property of any person, most likely as a result of negligence, but often without fault. The reason for this is the second party has insurance that will respond in respect of legal liability arising from its negligence. The same issue arises in respect of any such indemnity for negligence as arises in respect of any indemnity for gross negligence or wiful misconduct.

It follows that the only means of back-to-backing liability is to provide that if the first party is liable to the Port, PSP or PFO as a result of any act or omission of the second party or any agent or contractor of the second party, that the second party must indemnify the first party.
 

Conclusion
 

As a general statement, the bases upon which Ports, PSPs and PFOs contract with Port Users are well-established, and given the nature of world trade, these bases are well understood, and accepted. The issue for Port Users is not to seek to change these well-established practises, but to understand the risks that arise, and to assess, and to manage, them.

Part 2 of Article 4 will consider risk in more detail in the context of ports around the world, and in so doing the many norms that exist will be identified, as will unique features of any port. Part 2 of Article 4 will be published in the next edition of InfraRead, anticipated for publication in late May early June 2021.