Port Liability Regimes - Introductory Outline

In Article 3, it was stated that this Article (being the fourth in the Ports and World Trade series of articles) would consider Port Liability Regimes, in particular how Ports and Port Service Providers (PSPs) seek to manage their exposure to liability (including through the exclusion and limitation of liability regimes) and seek to impose liability on Port Users for damages and losses within the precincts of a Port (land and marine side).¹

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.

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.

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).

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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

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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

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

Table 4 – Summary of Timing Issues

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.

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

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.

1. For these purposes, it is necessary to outline the bases upon which liability may arise, including any damage and loss to any third party that may arise, and how to exclude or to impose responsibility for it, the extent to which the damage or loss or liability is capable of being insured (and in the ordinary and usual course is insured) and the extent to which the law of the country in which the port is located imposes responsibility or excludes or limits liability, or allows them to be excluded or limited (including by International Conventions), 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).
2. And in other key ports in the People’s Republic of China.
3. Under a Private Service Model the whole port is owned and operated entirely by the private sector, with Port Services provided by the Port, but likely with specialist private sector operators, typically, pilotage and towage.
4. Under a Public Service Model the port is owned and operated entirely by the host government or a government entity, with the port possibly allowing private sector operators to provide Port Services.
5. Under a Service Port/Labour Port Model, the port (including infrastructure and land within the precincts of it) is owned by the host government or a government entity, and is either operated by the host government or government entity, or the host government/government entity contracts with the private sector to operate all or part of the port, and in so doing provide Port Services.
6. Under a Landlord Model (whether publicly or privately owned), the port leases land within the landside precincts of the port to allow private sector PSPs/PFO to provide Port Services and on the marine side grants concessions/ licences to allow the provision of Port Services, typically, pilot and towage services.
7. The Freight Forwarding Function may include freight forwarders bookings capacity on Vessels on behalf of those wanting to have goods transported by Vessel (ie, Shippers). More broadly, the freight forwarders may provide services to track goods, to organise documentation to effect transport of goods and title transfer of goods, and payment on behalf of Shipper for services provided by shipping companies / shipping lines.
8. The Shipping Function involves the transportation of goods by shipping companies/shipping lines from the port of loading to the port of discharge/ unloading and transhipment.
9. The Port Function includes access to and use of port infrastructure, and the provision of Port Services by PSPs.
10. Sometimes referred to as a Contract of Affreightment (CoA).
11. There will be a CoC unless the Carrier and the Shipper are the same entity.
12. In many instances Incoterms being used to provide “substance” to contracts of carriage, or at least to provide a guide. Incoterms are published by the International Chamber of Commerce, most recently, in 2020. 1990, 2000, 2010 Incoterms remain on the shelves of many commercial and legal professionals, likewise the accompanying guides, because long term contracts used, them to provide substance.
13. It is critical to define the exact point of collection and delivery (or loading and unloading), rather than simply by reference to the port of loading or the port of discharge/unloading.
14. Any PAA/ COU/TOU, or combination of them, may refer to other documents the terms of which are incorporated by reference, and that impose obligations and liability on each Port User (and each person on whose behalf it contracts), these documents may include port handbooks.
15. The table (on page 35) provides a high level summary of International Convention that relate to the carriage of goods by sea.
16. Depending on the circumstances (typically of the Carrier/Vessel is the only user), the PFO and the Carrier/Vessel may contemplate knock-for-knock regime.
17. Depending on the circumstances (typically of the Carrier/Vessel is the only user), the PFO and the Carrier/Vessel may contemplate knock-for-knock regime.
18. Depending on the jurisdiction in which the Port is located and the OWA executed, the basis upon which each Port User contracts with each other Port User differs. Suffice it to say that it is possible to structure OWAs so as to be effective as among all Port Users so as to ensure that the Port or the PSP or PFO is able to claim against Port Users while at the same time excluding or limiting the actions and claims that the Port User may make.
19. This is distinct from third party benefit clauses, which give a party not party to a contract the benefit of a provisions or all provisions in a contract, not the burden of duties or obligations.
20. Discharge and Unload are often used interchangeably. While there is no hard and fast rule, port of discharge or port of unloading is the location at which a Vessel discharges its cargo, with discharge effected by unloading.
21. Import Containers are unloaded from Vessels by stevedores and stacked before being de-stacked to be transported into the hinterland or collected by the consignee. Export Containers are unloaded from rail or track transport and stacked before being de-stacked for loading on to Vessels. The basis of stacking and de-stacking and collection systems (including data systems) are beyond the scope of this Article, but are relevant to crane movements and as such efficiency within container terminals.
22. This is a key interface:
- with Vessel proceeding to berth/mooring with Port Services provided by the Pilot and Towage Service Provider (the PSA with the Buyer or its Carrier on a FOB delivery or with the Seller or its Carrier on an Ex-ship delivery): it is possible that the SOGC may require the Buyer (in a FOB delivery) or the Seller (in an Ex-Ship Delivery) to contract for these purposes in respect of Port Services (in some industries this is the norm, in others not so); and
- the Vessel being loaded or unloaded by the stevedore or PFO (the PSA with the Seller on a FOB delivery or with the Buyer on an Ex-ship delivery): it is likely that the SOGC will require the Seller (in a FOB delivery) and the Buyer (in an Ex-Ship delivery) to provide, or to procure provision of, safe berth/ mooring (ie a berth/mooring at which the Vessel, at all times, may lay fast and safe and to procure that the cargo is loaded (on a FOB delivery) or, as the case may be, is unloaded, safely (on an Ex-Ship delivery) and in a timely manner in accordance with all applicable standards.
23. The knock-for-knock indemnities tend to contemplate (a) physical damage/ loss; (b) death, injury and sickness; and (c) pollution and environmental damage.
24. Back-to-backing is achieved by contracting with a party (first party) whose actions may give rise to liability to another person (second party) under another contract as a result of the act or omission of the first party. For example, the buyer under a SOGC contracts to take FOB delivery, contracting as Shipper under a CoC with a Carrier. Under the SOGC the buyer has to agree to indemnify the seller in respect of any damage or loss caused to the facilities owned by the PFO caused by any agent or contractor of the buyer, which would include the Carrier. This is required because the seller under the SOGC has to contract with the PFO on the basis that the seller is liable for any act or omission resulting in damage or loss caused by any agent or contractor of the seller.