The English High Court decision in the “Afra Oak” deals with the issue of whether Owners can rely on Article IV rule 2(a) of the Hague Rules as a Defence to a claim that Owners are in breach of the obligation to follow employment orders given by the Charterers. Article IV Rule 2(a) provides that:
Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.
The “Afra Oak” was under a voyage charterparty incorporating the US Carriage of Goods by Sea Act 1936. Whilst loading her cargo of fuel oil she was ordered by her Charterers to “proceed to Spore EOPL [Singapore Eastern Outer Port Limits] for further orders. Discharging plan still not known yet.” There were two principal areas for anchoring within EOPL, one within Malaysian territorial waters and the other one within Indonesia. The master chose to anchor within the Indonesian territorial waters which was illegal under Indonesian Law. The vessel and the master were arrested by the authorities and the master was convicted under criminal proceedings.
The vessel’s arrest resulted in substantial claims and counterclaims by Owners and Charterers, respectively. An arbitration ensued. One argument that was brought by Owners in the arbitration was that Charterers were in breach of the safe port/place warranty as the vessel was exposed to a political risk of unlawful detention, alternatively that Charterers had provided an implied indemnity to Owners. Both arguments were dismissed by the Tribunal who held that the detention was the result of the master’s own actions. Charterers counterclaim that the vessel was unseaworthy because of a defective passage plan was also dismissed.
It was held by the arbitrators that the Owners were in breach of the Charterers’ orders but also that they could rely on the negligent navigation defence under Section 4(2)(a) of the US Carriage of Goods by Sea Act 1936 which is the same under the Hague Rules and stated above. Charterers brought an appeal on the issue of whether the negligent navigation defence could be raised by Owners in those circumstances.
Charterers argued that the vessel’s master had made a legal error rather than an error in navigation or management and therefore Owners could not rely on the “negligent navigation” defence to exclude Owners’ liability. Charterers relied on the “Hill Harmony” and other various previous cases to support their position.
The Court however distinguished the current case from previous court decisions. To be able to rely on the negligent navigation defence it is necessary to ensure that the nature of the master’s decision is an act of navigation. This was the case here where the master had made a mistake when selecting where to anchor. In contrast it was held by the Court of Appeal in the “Hill Harmony” that “The choice of ocean route [by the master] was, in the absence of some overriding factor, a matter of the employment of the vessel, her scheduling, her trading so as to exploit her earning capacity” There was no act of navigation there and therefore no possibility to raise the “negligent navigation” defence.
The Court affirmed the arbitration award and held that the issue of whether the “negligent navigation” defence may be raised by Owners in response to a claim for breach of employment orders will depend on the facts of each case.
This is an important decision for Charterers that highlights the tension between navigation and vessel’s employment and the need to carefully examine the facts to determine whether Owners’ reliance on Article IV rule 2(a) of the Hague Rules when incorporated in the charterparty may exempt Owners from liability for a breach of the charterparty. The master’s decision as to where to anchor or whether to call a tug or a pilot for assistance will usually fall under navigation whereas the choice of route will usually fall under vessel’s management or employment but there may be occasions where the choice of route may be a matter of navigation if there is a risk to the vessel, her cargo or crew.
