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Shipping & Transport
In 2017 South Africa promulgated the International Arbitration Act (IAA) with a view to creating a viable arbitral forum on the African continent to resolve international disputes. Although the IAA is still in its infancy, the Supreme Court of Appeal recently delivered an important judgment which illustrates the tension created by the overlapping boundaries of the IAA and the High Court's well-established admiralty jurisdiction under the Admiralty Jurisdiction Regulation Act.
The Supreme Court of Appeal recently took a hard line regarding an arresting party and delivered a salutary message to pay close attention to establishing a plausible link between the factors justifying a 'genuine and reasonable' need for security and the particular facts and circumstances of the party against which an arrest order is sought. The judgment is a cautionary tale for arresting parties that seek to rely on generalised allegations.
The litigation following the collapse of Hanjin Shipping and coming off the back of the Supreme Court of Appeal judgment handed down in January 2019 is ongoing in the South African courts. The latest decision in this regard hinged on whether, for the purposes of timing, the mere issuing of a writ of arrest was sufficient to commence an admiralty action (having the effect of protecting against a change of ownership) or whether physical service of the writ on the vessel was necessary.
Fishing remains one of the most dangerous occupations in the world. According to International Labour Organisation statistics, at least 24,000 people die and 24 million are injured each year on commercial fishing vessels. The International Union of Maritime Insurers 2018 Conference, which was recently held in Cape Town, provided a platform for discussing some of the issues and challenges currently facing the international marine insurance market.
The promulgation of the Companies Act 2008 saw the introduction of a company rehabilitation process termed 'business rescue'. As in many other jurisdictions, a company under business rescue enjoys a temporary moratorium on the prosecution of claims with a view to allowing the distressed company breathing space to reverse its financial difficulties and avoid full-scale liquidation. Against this background, admiralty matters have enjoyed special treatment in the context of claims against insolvent companies.
The recent promulgation of the International Arbitration Act gave the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration the force of law in South Africa. Given the cross-border nature of shipping disputes, the act promises to enhance the attraction of what is already a litigation-friendly jurisdiction.
The High Court's decision in a recent case involving a protective writ issued by a creditor of Hanjin at the time of the company's collapse was recently appealed before the Supreme Court of Appeal. A number of Hanjin creditors have filed an application for a time extension to serve the writs of arrest pending the outcome of the appeal. In the absence of an extension, the writs will have no further force or effect.
The longstanding practice of issuing a protective writ is directed at preserving the claimant's right to arrest a vessel in rem, notwithstanding a subsequent change of ownership. This matter did not come before the South African courts until recently, when the buyer of a vessel applied to the courts to have the protective writ set aside. The root of the problem lies in the apparent paradoxical Admiralty Jurisdiction Regulation Act provisions relating to the time of commencement of an admiralty action.
In a recent case, the Saharawi Arab Democratic Republic and the Polisario Front successfully applied to the Eastern Cape Local Division of the High Court for an order restraining and prohibiting the owners, master and charterers of the Cherry Blossom vessel, among other parties, from taking a cargo of phosphate out of the court's jurisdiction, pending the determination of the applicants' claim to ownership and delivery of the cargo.
The Department of Transport recently released the long-awaited draft Comprehensive Maritime Transport Policy (CMTP) for public consultation and comment. The CMTP aims to facilitate the revival, development and transformation of South Africa's maritime transport sector, in order to enhance its contribution to international trade and the development of the South African economy.
The existing state of the shipping market has led to an environment characterised by low to moderate value maritime claims coupled with high legal enforcement costs in relation to value. In many cases, this has left claims managers uncertain as to whether they should pursue debtors. South Africa is one of the few admiralty jurisdictions which offers an opportunity for maritime claimants to gain an advantage by obtaining security for claims before having to commence legal proceedings.
The High Court recently ruled in a case regarding an alleged breach of contract caused when the plaintiff's cargo was contaminated. The question before the court was whether the defendant had established that it had a right to stay the proceedings due to a vested right to refer the matter to arbitration. The court ultimately ruled that the plaintiff had failed to discharge its burden of proof and thus ordered that the action be stayed pending arbitration.
The capsizing of a fishing trawler in 2005 resulted in litigation between its owner and its hull underwriters; proceedings arose from repudiation of the claim for loss of the trawler. A recent Supreme Court of Appeal decision turned on the proper application of the Merchant Shipping Act warranty in the insurance policy and whether the loss of the trawler resulted from want of due diligence on the part of the owner.
A recent High Court decision highlighted the far-reaching scope of South African admiralty jurisdiction. The decision should encourage claimants to arrest property owned by the guarantor in South Africa as security for foreign claims under guarantees, provided that the language of the guarantee is sufficiently closely connected to an underlying maritime claim as recognised in South Africa.
In contrast to many other jurisdictions, the enforcement procedure in the South African admiralty jurisdiction is remarkably straightforward. A claimant seeking to enforce a judgment or award relating to a maritime claim can either pursue an arrest in rem of the maritime property relating to the dispute or pursue an attachment of property owned by the judgment debtor to found or confirm the court's jurisdiction.
A recent Cape Town High Court decision clarifies the effect of an application for leave to appeal the setting aside of an arrest in rem. The decision will be welcomed by shipowners and other parties that are adversely affected by an arrest, as it provides comfort that if a challenge to an arrest succeeds, the vessel should be allowed to sail from the jurisdiction irrespective of the threat of an appeal.
The South African courts witnessed a flurry of judicial ship sales in the first half of 2015. Most recently, the Durban High Court ordered the judicial sale of a bulk carrier. While South Africa is not necessarily a favoured jurisdiction for mortgage enforcement in terms of the priority afforded to a mortgagee, the ease with which vessels can be arrested in a bad market for a wide variety of claims often paralyses owners and forces the hand of banks to foreclose.
Great white shark diving recently came under the spotlight in a Western Cape Division of the High Court decision. In considering a claim for damages and personal liability, one of the factors taken into account by the court was that a prudent skipper should leave a margin of safety and not flirt with risk. This is particularly the case when a vessel is at anchor for shark viewing purposes, which can be extremely dangerous.
In a recent case the High Court had to determine whether it is lawful to deprive a shipowner of its vessel by way of a judicial sale where the claims lie against the bareboat charterer of the vessel and not the owner. The court exercised its discretion whether to order the sale of the vessel in light of the factual circumstances, such as its value, the length of time under arrest and ongoing expenditure for its maintenance.
The Merchant Shipping Act warranty has been a feature of hull and machinery policies written in the South African market, but its meaning and effect are often uncertain in coverage disputes owing to the absence of judicial consideration of the clause. The High Court recently had an opportunity to decide on the clause and revisit the effect of a breach of warranty in South African law insurance policies.
The Department of Agriculture, Forestry and Fisheries appears to have adopted a concerning stance on the requirements of the Marine Living Resources Act regarding the licensing of vessels entering South African waters.The policy affects reefer vessels in particular. The penalties for contravention of the act include vessel seizure or the arrest of anyone whom fishery control officers suspect has committed an offence.
A common feature of shipbuilding agreements is the requirement that parties provide guarantees from third-party institutions as security for the performance of their respective obligations. The legal nature and practical effect of this type of security are routinely a source of dispute and litigation internationally, often as a result of the uncertainty introduced by the way in which contracting parties choose to name the instrument.
Given the ease with which ships can be arrested in South Africa as security for legal proceedings, commenced either locally or in foreign forums, the question frequently arises as to whether it is possible to issue arrest proceedings in South Africa as a protective step to guard against a change of ownership or a possible time bar of the claim.
It has long been an open question as to whether a claimant can arrest a bareboat (or demise) charterer's rights in a bareboat charterparty as security for court or arbitration proceedings. There have been arrests in South Africa from time to time of the demise charterer's so-called 'right, title and interest' in and to the ship, but it was not until the recent case of mt Rio Caroni that the point was successfully challenged.
A recent flurry of major international shipping companies initiating proceedings for protection from creditors has highlighted the rights of creditors to arrest maritime property in South Africa as a mechanism to sidestep these proceedings. South Africa is well known for having a liberal arrest regime, and the insolvency provisions are no exception.
In the recent case of Lorcom Thirteen (Pty) Ltd v Zurich Insurance Company South Africa an interesting factual scenario gave the Western Cape High Court an opportunity to assess the correct approach to the question of insurable interest under South African law. The case concerned the MFV Buccaneer, a fishing vessel lost at sea in 2008.
South Africa continues to be a popular jurisdiction for maritime creditors to obtain security for claims. While the outstanding feature of the country's admiralty procedure remains the well-known 'associated ship' arrest, a number of other aspects also contribute to its potency. The South African arrest regime has a liberal nature and offers possibilities to creditors in the current distressed market.
The MV Alina II suffered serious hull damage in 2009. The vessel's charterer brought an application to set aside an arrest of bunkers aboard the vessel in South Africa as security for contemplated London arbitration proceedings. This case is noteworthy in that the initial hearing on the papers led to a referral of the matter to oral evidence. Referrals to oral evidence are a rarity in South African arrest applications.