The Liability of Classification Societies

The Liability of Classification Societies

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Classification societies are discharging various functions in the interest of flag States and shipowners. They are important actors in the system of maritime safety. Because the liability of shipowners is limited, classification societies have been considered as exempt from liability for a long time – and in several jurisdictions this view still prevails. This study analyses which actions of classification societies may give rise to claims and whether or not the societies can be held liable under English, German or United States maritime law. Moreover, the fundamental aspects of an international convention on the limitation of the liability of classification societies are developed.

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Published 30 June 2007
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EAN13 9783540729488
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Language English
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Table of Contents
Outline Table of Contents.................................................................................. IX
Table of Contents................................................................................................ XI
Abbreviations.................................................................................................. XVII
Introduction ........................................................................................................... 1
Part 1 [Factual Situation and Legal Foundations] ............................................. 5A. The Classification of Vessels ....................................................................... 5I. The Concept of ‘Classification’.............................................................. 5 II. The Historical Development of Classification Societies ........................ 8 III. The Relevance of Classification Societies for the Maritime Industry .. 11 1.The Necessity of a Classification of Vessels...................................... 112.................................... 13Marine Insurance and Classification Societies 3.16The Norwegian Saleform and a Confirmation of Class...................... 4.18Charter Parties and Classification Societies ....................................... 5.The Rules of a Classification Society................................................. 196.Marine Surveyors ............................................................................... 217.Other Activities .................................................................................. 21IV.The Relevance of Classification Societies for the International Community ........................................................................................... 22V.24The International Association of Classification Societies (IACS)........ VI.Current Challenges for Classification Societies ................................... 261.The Dual Role of Classification Societies .......................................... 262.29Selling Safety in a Competitive Environment .................................... 3.Shipowners/Operators Have to Report Damage................................. 344.35Sub-standard Classification Societies................................................. 5.Current International Developments: Goal-based Standards.............. 386.Classification Societies in Litigation.................................................. 40B. Private Operations and Public Functions in Detail..................................... 43I.43Private Operations ................................................................................ 1.Contracts and Contracting Parties ...................................................... 432.Obligations of the Classification Society ........................................... 46
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3.The Contents of the Classification Certificate, the Confirmation of Class and the Register of Ships .......................................................... 49II.Public Functions ................................................................................... 501.The Agreement with the Flag State on the Delegation of Power and the Statutory Survey Contract with the Shipowner or Shipyard .. 532.54Obligations of the Classification Society ........................................... C. Non-Delegable Duty of the Shipowner to Make the Vessel Seaworthy and Presumption of Unseaworthiness ........................................................ 55
Part 2 [Legal Analysis]........................................................................................ 59A. Private Functions: The Protection of Contracting Parties .......................... 59I.59English Law.......................................................................................... 1.Liability for Breach of Contractual Duty ........................................... 602...... 64Implied Contractual Duty to Exercise Reasonable Care and Skill 3.Tort of Negligence ............................................................................. 654.Exemption and Limitation Clauses .................................................... 66II. United States Law ................................................................................ 691.69The Applicable Law: Federal or State Law........................................ 2.Breach of Contract, Warranty of Workmanlike Performance and Tort Law............................................................................................. 713.72The Leading Precedents ..................................................................... a.The Great American Insurance Case ............................................ 72aa.72The Facts .............................................................................. bb.The Verdict ........................................................................... 73cc.Case Comment...................................................................... 78b.81The Shipping Corporation of India II Case .................................. c.The Sundance Case....................................................................... 82aa.The Facts .............................................................................. 82bb.The Verdict ........................................................................... 83cc.Case Comment...................................................................... 87d.The Interore III Case..................................................................... 90e.Conclusion.................................................................................... 944.96Exemption and Limitation Clauses .................................................... III.German Law ......................................................................................... 991.The Legal Nature of the Contract....................................................... 992.Liability for Breach of Contract ....................................................... 1023.Tort Law........................................................................................... 1044.Exemption and Limitation Clauses .................................................. 104IV.Conclusion.......................................................................................... 105B. Private Functions: Liability Towards Third Parties ................................. 105I.English Law........................................................................................ 1051.106Contractual Protection of the Third Party ........................................ 2.Tort of Negligence ........................................................................... 106a.Mariola Marine Corporation v. Lloyd’s Register of Shipping (The “Morning Watch”) ............................................................. 111b................................... 113The Marc Rich Case (The “Nicholas H.”)
Table of Contents XIII
aa.The Facts............................................................................. 113bb.The Verdict ......................................................................... 115(1)116Direct Physical Loss....................................................... (2)Voluntary Assumption of Responsibility ....................... 117(3)117Policy Considerations: Insurance ................................... (4)Policy Considerations: the Role of Classification Societies ......................................................................... 118(5)Policy Considerations: Regulations on the Limitation of Liability...................................................................... 118(6)Conclusions .................................................................... 120cc.Case Comment.................................................................... 121(1)Reasonable Reliance ...................................................... 121(2)Policy Considerations..................................................... 122(3)....... 125Consequences: to Whom Are the Societies Liable? c.Reeman v. Department of Transport........................................... 126aa.The Facts............................................................................. 126bb.......................................................................... 126The Verdict cc.Case Comment.................................................................... 129d.130Perrett v. Collins and Others....................................................... aa.130The Facts............................................................................. bb.......................................................................... 130The Verdict cc.Case Comment: Fairness, Justice and Reasonableness to be Considered?.................................................................... 133e.135Conclusion: Marc Rich Reasoning to be Applied to All Cases?. 3.Tort of Deceit ................................................................................... 137a.Braginton v. Chapman and Others (The “Midas”) ..................... 139b.Thiodon v. Tindall (The “Ibex”)................................................. 1394.140The Effect of Disclaimers of Liability.............................................. 5.Conclusion........................................................................................ 141II.142United States Law............................................................................... 1.143Contractual Right of Indemnity........................................................ 2.145Tort of Negligence ........................................................................... a.The Steamship Mutual Case ....................................................... 149b................................................... 152The Gulf Tampa Drydock Case c.The Continental Insurance Case ................................................. 153d.The Psarianos Case ..................................................................... 155e.Again: The Great American Insurance Case............................... 155f.Conclusions ................................................................................ 1583.Tort of Negligent Misrepresentation ................................................ 160a.The Coastal (Bermuda) Case ...................................................... 161b................................................................... 162The Somarelf II Case aa.The Facts............................................................................. 162bb.The Verdict ......................................................................... 164cc.165Case Comment.................................................................... c.Again: The Sundance Case ......................................................... 166d.169The Cargill Case .........................................................................
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e.171The Otto Candies Case ............................................................... aa.The Facts ............................................................................ 171bb.The Verdict ......................................................................... 172cc.Case Comment.................................................................... 174f.§ 311 Restatement (Second) of Torts ......................................... 1774.Strict Liability? ................................................................................ 179a.Abnormally Dangerous Activities .............................................. 179b.Liability for Defective Products ................................................. 181c.Conclusion.................................................................................. 1865.Tort of Fraudulent Misrepresentation............................................... 1866.187The Effect of Disclaimers of Liability ............................................. 7.Conclusion ....................................................................................... 188III.German Law ....................................................................................... 1881.Implied Agreement to Provide Information (Konkludenter Abschluss eines Auskunftsvertrages) ............................................... 1892.Contract with Protective Effects Towards Third Parties (Vertrag mit Schutzwirkung zugunsten Dritter) ............................................. 192a.Proximity of Performance (Leistungsnähe) ................................ 195b.Interest of the Contractual Creditor (Gläubigernähe198) ................ c.Foreseeability (Erkennbarkeit) ................................................... 202d.Third Party in Need of Protection (Schutzbedürftigkeit des Dritten) ....................................................................................... 205aa................................. 206Recipients of a Confirmation of Class bb.Passengers........................................................................... 208cc.209Crew Members ................................................................... dd.Insurance Companies.......................................................... 209e.................. 210Addendum: Incorrect Information by the Shipowner 3.210Culpa in Contrahendo ...................................................................... 4.§ 823 (1) BGB.................................................................................. 213a.Verkehrspflicht: Surveying and Rule-making as a Potential Source of Danger ........................................................................ 215b.TwoVerkehrspflichtenof a Similar Kind – Exoneration of One of the Tortfeasors? .............................................................. 222c.Technical Standards as the Relevant Standard of Care .............. 223d.Other Prerequisites of § 823 (1) BGB ........................................ 2245.225§ 823 (2) BGB.................................................................................. 6.§ 826 BGB ....................................................................................... 2257.227The Effect of Disclaimers ................................................................ 8.Conclusion ....................................................................................... 229IV.Application of the Conclusions to Claims by Different Parties.......... 2301.230Claims by Recipients of a Confirmation of Class ............................ 2.Claims by Persons Which have Consulted the Classification Certificate or the Ship’s Register ..................................................... 2323.Claims by Legal Subjects Which Have not Received Information .. 233a.Persons that Have Been Affected in Their Life or Health .......... 233b.Legal Subjects that Have Sustained Other Damage ................... 234
Table of Contents XV
C. Public Functions........................................................................................ 234I................................................................ 235Liability under English Law 1.235Claims by Private Parties ................................................................. a.Liability of the Classification Society......................................... 236b.Liability of the Crown for the Acts of the Classification Society ........................................................................................ 2382.Recourse of the Flag State................................................................ 239II.Liability under United States Law ...................................................... 2401.240Claims by Private Parties ................................................................. a.Choosing the Plaintiff: Whether to Sue the Classification Society or the U.S. Government ................................................. 240b.The Concept of Immunity........................................................... 243c.245The Discretionary Function Exemption...................................... 2.248Recourse of the Flag State................................................................ III.Liability under German Law .............................................................. 2481.Claims by Private Parties ................................................................. 248a.248Civil Liability or State Liability for the Survey of Vessels ........ b.252Preconditions of § 839 BGB....................................................... c.254State Liability as a Subsidiary Liability...................................... 2.255Recourse of the Flag State................................................................ IV.Excursus: Damage Caused by Both a Classification and Statutory Survey................................................................................................. 256
Part 3 [A Convention on the Limitation of Liability of Classification Societies] ............................................................................................................. 259A. The Limitation of Liability in Shipping ................................................... 259I.The History of Limitations ................................................................. 260II.Cargo Limitations ............................................................................... 263III.Global Limitations.............................................................................. 265IV.Limitations as Regards Passengers ..................................................... 269V.Limitations of Civil Liability for Oil Pollution Damage .................... 271B. Limitation of Liability under the Current System of Limitations............. 277I.On the Application of Existing Limitation Regulations to Classification Societies....................................................................... 2771.International Conventions ................................................................ 277a.Cargo Limitations: The Hague/Visby and Hamburg Rules ........ 277aa.Interpretation of Servant, Agent and Independent Contractor in the Hague/Visby Rules ................................. 277(1)Grammatical Interpretation ............................................ 280(2)Systematic Interpretation................................................ 280(3)................................................ 281Functional Interpretation bb............................................................. 281The Hamburg Rules cc.Private Limitations under the Bills of Lading: Himalaya Clauses................................................................................ 282b.Limitations by the LLMC ........................................................... 284c.287Limitations by the Athens Convention .......................................
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d......................... 288Special Limitations: CLC and HNS Convention aa.............................................................................. 288The CLC bb.The HNS Convention ......................................................... 2902.Regional Regulation: Directive 94/57/EC........................................ 2913.National Regulation: USA ............................................................... 292a.Cargo Limitations ....................................................................... 292b.293Global Limitations...................................................................... c.Special Limitations: OPA 1990 and CERCLA........................... 2934.CMI Model Contractual Clauses and Principles of Conduct............ 2985.Conclusion ....................................................................................... 299II.The “Estonia” Case – an Example of the Effects of the Current System ................................................................................................ 300III.Conclusion.......................................................................................... 303C. Justifications of a New Convention on the Limitation of Liability .......... 304I.Classification Societies as a Part of the Maritime Safety System....... 304II.304Insurance and Compensation.............................................................. 1.304Insurability of Unlimited Claims Against Classification Societies .. 2.Should the Shipowner be Protected from Additional Insurance Costs? ............................................................................................... 306III.... 307Existence of a System of Compensation for Oil Pollution Damage IV.Self-Protection of Classification Societies by Company Law ............ 307V.Liability and the Control of Old Vessels ............................................ 308VI.308How Should the Interests be Balanced? ............................................. 1.Prevention and Compensation.......................................................... 3102.Economic Efficiency ........................................................................ 3123.Conclusion: Exemption, Limitation or Unlimited Liability? ........... 315D. Principles of a Convention on the Limitation of Liability ....................... 316I.European or International Law? ......................................................... 316II.Strict Liability?................................................................................... 318III.................................................. 320Harmonised Basis of Fault Liability? IV.Reversal of the Burden of Proof? ....................................................... 322V................................................ 322Basis of Limitation: Tonnage or Fees? VI.323Level of Limitations ........................................................................... VII.Interrelation with the Limitation of Liability of the Shipowner ......... 327E. The Limitation of Liability for Public Functions ..................................... 328F. Conclusion ............................................................................................... 329
Bibliography ...................................................................................................... 331
Table of Cases .................................................................................................... 351
Table of International Conventions ................................................................. 365
Index ................................................................................................................... 373
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