reliability of the information and cargo documents provided by shippers will need to be checked, often requiring visits to stockpiles ashore, further sampling and testing. This will lead to delays and increased costs, which one party to the adventure will ultimately have to pay for. In too many cases, the cargo information and documents were obviously unreliable, for example, if the testing was carried out more than six months prior to the date of loading. Whilst the lack of diligence on the part of the ship in such situations is less than ideal, it is ultimately the responsibility of the shipper to provide a cargo suitable for shipment and any information necessary to ensure safe carriage.
If a carrier is advised that cargo onboard is not safe for shipment, a choice will need to be made whether to have the dangerous cargo removed from the ship, or to try and remediate the situation. In many situations there is no way that cargo once onboard a ship can be physically removed or legally reimported to the country of origin. Remediation may involve waiting for the cargo to dry (sometimes aided by fans) or introducing safe cargo or a drying agent. Such steps need to be taken under the guidance of an appropriate cargo expert. The process can take months, often with no guarantee of success.
Depending on the terms of the contract of carriage or charterparty, the charterer and the shipper are likely to face a claim for the owner’s losses arising from the dangerous nature of the cargo – discussed further below.
Cargo experts might disagree as to when suspect cargo has become safe to carry. In particular, some experts take the cautious view that the ship cannot sail until samples of the cargo have passed one of the tests described in the Code. Other experts may consider that the testing outlined in the Code is rudimentary and only intended to identify potential liquefaction risks prior to sailing and that, once a liquefaction risk has materialised, assessment outside the scope of the Code is permissible to determine whether cargo will in fact liquefy on the voyage. A stand- off between experts on the correct approach may be protracted and expensive for the party in the wrong.
Carriers have been known to continue with loading or to sail against the recommendation of cargo experts. The Club then finds itself in the role of a critical friend, understanding of the commercial need to trade without undue delay or additional cost but fairly warning of the potential implications if the ship is put to sea in a dangerous condition. If cargo is not safe to carry, this may prejudice Club cover and other forms of insurance, even where cover is not explicitly reserved. Operational costs arising from ensuring safe loading, even when incurred in anticipation of potential future P&I liabilities, are unlikely to be paid for by the Club.
North has also seen a rise in charterparty terms limiting the carrier’s ability to comply with the Code by, for example, restricting access to stockpiles ashore. The existence and application of such terms are also likely to prejudice cover and are strongly discouraged.
Liquefaction risk identified during voyage
Liquefaction may only become apparent for the first time during a voyage and the ship may then have to call at a port of refuge. In some cases, however, the ship will have no better option than to continue to the intended destination.
Cargo experts will be able to advise on the level of risk in continuing the passage and on the steps which can be taken to minimise the danger. In such situations, the additional expenses incurred by the carrier in dealing with the emergency situation will in principle be recoverable in General Average. H&M will pay the ship’s share of GA (with discretionary P&I cover for any shortfall due to under-insurance) subject to the terms of the hull policy. Collection from other interests will depend on the existence of actionable fault on the part of the carrier leading to the incident. If there is an actionable fault defence then, in principle, the unrecoverable GA will be reimbursed by P&I unless the owner knowingly failed to follow the Code or take other prudent precautions to avoid the risk of liquefaction.
Liquefaction causing the loss of a ship
The loss of a ship with the death of her crew following liquefaction will lead to various costs falling to P&I and other marine insurances. The loss of the ship itself will fall to H&M. P&I covers claims arising from the loss of cargo; injury or death claims relating to those onboard; wreck removal; and, pollution. Owners may pay for extensive search and rescue costs – either using their own assets or paying for state or private S&R efforts – which would not automatically fall to insurers.
Where P&I cover has been prejudiced because the Member failed to follow the Code or in some other way acted imprudently, the Club will not reimburse Members for losses resulting from cargo claims and people claims. In any event, cargo claims are usually not a major cost arising from a total loss caused by liquefaction. Typically, those cargoes prone to liquefaction are not very valuable. The claim is also likely to fail where the cargo itself was the cause of the loss [3]. Cargo interests
74 | The Report • September 2022 • Issue 101
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