Martime

Citation: 25 J. Mar. L. & Com.
1 1994
Content downloaded/printed from
HeinOnline (http://heinonline.org)
Tue Sep 17 04:25:47 2013
-- Your use of this HeinOnline PDF indicates your acceptance
of HeinOnline's Terms and Conditions of the license
agreement available at http://heinonline.org/HOL/License
-- The search text of this PDF is generated from
uncorrected OCR text.
-- To obtain permission to use this article beyond the scope
of your HeinOnline license, please use:
https://www.copyright.com/ccc/basicSearch.do?
&operation=go&searchType=0
&lastSearch=simple&all=on&titleOrStdNo=0022-2410
journal of Maritime Law and Commerce, Vol. 25, No. 1, January, 1994
Allocation of Risk and Standard of Care
Under the Jones Act: "Slight Negligence,
"Slight Care"?
ROBERT FORCE*
INTRODUCTION
At an October 1992 Maritime Law Seminar for federal district and
appellate judges,' the author of this article lectured on the subject of
"Maritime Personal Injury and Death Claims." During the presenta-
tion, the question that evoked the most lively discussion was
whether, or not, when instructing ajury on Jones Act
2
negligence, the
court should inform the jury that the plaintiff's burden is only to prove
"slight negligence."
The issue surfaced when the author stated:
[A]s a general proposition, with a few exceptions, American law does
not distinguish among "degrees" of negligence.
3
Thus, in tort law, for
*Niels F. Johnsen Professor of Maritime Law and Director, Tulane Maritime Law Center.
The author wishes to express his appreciation to Stephen K. Carr, Eldon E. Falon, Joshua S.
Force and Brian J. Miles for reviewing earlier drafts of this article and for their many helpful
suggestions. However, the opinions and positions expressed in this article represent the views
of the author.
IThe 1992 Maritime Law Seminar for Federal Judges (Annapolis, Md., Oct. 28-31),
organized and presented by the Federal Judicial Center and the Maritime Law Association of
the United States, in cooperation with the Association of American Law Schools Section on
Maritime Law. The program was arranged by Professor David J. Sharpe of the National Law
Center, George Washington University, as chair of the MLA Ad Hoc Committee on Judicial
Education.
246 U.S.C.A. 688 (1975). The Jones Act created a cause of action for seamen against their
employers for injuries sustained in the course of employment. The statute does not expressly
set forth the basis of such liability. It does, however, incorporate the liability rules of the
Federal Employers' Liability Act (FELA), 45 U.S.C.A. 51 (1986), which created an action in
favor of railroad workers against their employers. Under the FELA, an employer is liable for
any "injury or death resulting in whole or in part from the negligence of any of the officers,
agents, or employees of the" employer. Id.
3
1n some states the rules of comparative negligence preclude a plaintiff's recovery if his
negligence was greater than "slight negligence." W. Keeton, D. Dobbs, R. Keeton, & D.
Owen, Prosser and Keeton on the Law of Torts 475 (5th Ed., Hornbook Series, Lawyers Ed.
1984) ("Prosser and Keeton). Likewise in some states punitive damages are not recoverable
unless the plaintiff can show at least "gross negligence" of the defendant. Id. at 10.
2 Journal of Maritime Law and Commerce
example, usually it does not matter whether or not. defendant's negli-
gence was only "slight" or whether it was "ordinary" or whether it
was "great." It is in this sense that one may say "negligence" is
"negligence."
All negligence, regardless of the context in which the
doctrine is being applied, is premised on a finding of a breach of a duty
to act as a reasonable person under the circumstances. A finding of a
breach of duty is generally insufficient to justify recovery unless it is
also found that the breach of duty contributed to the injury or damage
in question. The "standard of care" required in maritime law can be
stated generically as being that of a reasonable person under the
circumstances.
Under the Jones Act, however, the courts often characterize the
seaman-plaintiff's burden as requiring that he prove only "slight
negligence".
4
It has been said that the seaman's burden of proof in a
Jones Act case is "featherweight."
5
Although courts do not always
articulate the difference between the standard of care and causation, it
is appropriate to speak of "slight negligence" when referring to the
quantum of proof plaintiff must adduce to withstand defendant's motion
for a judgment as a matter of law (formerly motion for directed verdict
and motion for judgment notwithstanding the verdict). Likewise it
seems appropriate to refer to plaintiff's burden of proving causation as
being "featherweight" because, the Jones Act, as it has been inter-
preted by the courts, only requires a seaman to prove that his
employer's negligence was a cause, sometimes referred to as the
"producing cause", and not the cause of his injury' This "feather-
weight" standard of causation and the "slight negligence" burden were
adapted from judicial decisions interpreting the FELA6 on which the
Jones Act was based.
Thus, even in a Jones Act case it is necessary for the seaman-plaintiff
to introduce some evidence from which a jury could find that his
employer's conduct fell below the standard of care that a reasonable
employer would have used under the circumstances. However, the
introduction of virtually any evidence regardless of how slight is
sufficient to have the jury resolve the issue of negligence. Stated
otherwise, the introduction of even the slightest evidence that the
employer's conduct fell below the reasonable person standard pre-
4
E.g., Davis v. Hill Engineering, Inc., 549 F.2d 314, 1977 AMC 1090 (5th Cir. 1977);
Peterson v. Chesapeake and Ohio Railway Company, 784 F.2d 732, 1987 AMC 769 (6th Cir.
1986); Gray v. Texaco, Inc., 610 So.2d 1090 (La. App. 3d Cir. 1993); Mistich v. Pipelines, Inc.,
609 So.2d 921 (La. App. 4th Cir. 1992); Collins v. Texaco, Inc., 607 So.2d 760 (La. App. 1st Cir.
1992). One of the strongest statements to this effect can be found in Allen v. Seacoast Products,
Inc., 623 F.2d 355, 361, 1981 AMC 1341 (5th Cir. 1980), where the court said: "The remedial
nature of the Jones Act and its imposition of a higher standard of care on employers results in
liability upon the showing of only 'slight negligence.' "
5
E.g., Bommarito v. Penrod Drilling Corp., 929 F.2d 186, 188, 1993 AMC 2107 (5th Cir.
1991); Landry v. Two R. Drilling Co., 511 F.2d 138, 142, 1975 AMC 2135 (5th Cir. 1975).
Federal Employers' Liability Act, 45 U.S.C.A. HI 51 et seq.
Vol. 25, No. I
"Slight Negligence," "Slight Care"?
cludes the trial judge from taking the case away from the jury or from
setting aside a plaintiff's
verdict.
7
These statements evoked comments from some judges that often
attorneys for plaintiffs request that the jury be instructed that the plaintiff
need only prove "slight negligence" and that Jones Act employers are
under a duty to exercise a "higher duty" to care for the safety of their
employees than other employers. In keeping with the requested instruc-
tion these lawyers want to argue the slight negligence - high duty
standard to the jury. As the discussion developed some judges stated
that they have refused to instruct juries on slight negligence, other
judges gave such instructions when requested, and some judges indi-
cated that they gave the instructions on some occasions but not on
others. Admittedly this group was not assembled as a representative
sample of judges, and the opinions they expressed are not offered as
reflecting any general practice in trial courts.
Based upon further research it has been concluded in this article
that the introduction of degrees of negligence with respect to the
standard of care would be confusing to jurors and a misstatement of
the law. Therefore, juries should not be instructed that a Jones Act
plaintiff's burden is only to prove slight negligence or that Jones Act
employers must exercise a higher degree of care than other employ-
ers. Instead-juries should be instructed according to the "reasonable
care under the circumstances" standard and according to other rules
established under the FELA which are discussed infra. This conclu-
sion has been reached by resolving the ambiguities in the use of the
term "slight negligence" in some appellate opinions and by contrast-
ing the approach of appellate courts to the standard of care with their
approach to the sufficiency of evidence and the lesser standard of
causation in Jones Act cases. However, the article will also show that
the "duty to provide a safe place to work" and the abolition of
assumption of risk and contributory negligence as complete defenses
allocate substantial risks of maritime employment to the employer. In
the opinion of the author the employer's duty of care can most clearly
and accurately be communicated to jurors by explaining the rules on
safe place to work, assumption of risk, and contributory negligence
and not by introducing the nebulous concept of "slight negligence."
The issue of degrees of negligence and the proper standard of care
has become, perhaps, troublesome in formulating the appropriate
7
The statements are contained in 1 R. Force and A. Yiannopoulos, Admiralty and Maritime
Law: Cases, Notes and Text 472-474 (1992). 1
January 19N
4 Journal of Maritime Law and Commerce2
instruction on contributory negligence. Some courts have held that
the jury should be instructed that the standard of care that must be
exercised by a seaman for his own safety is only slight care and not
ordinary or reasonable care. The latter part of this article explains
how this approach has developed and concludes that the proper
instruction should refer to reasonable or ordinary care under the
circumstances and not slight duty of care.
"SLIGHT NEGLIGENCE": TWO MEANINGS
In concluding that the term "slight negligence" does not refer to the
standard of care, it is important to understand to what the term does
refer. It is the author's position that the term "slight negligence" is used
by courts in two different contexts. First, it is used as meaning that a
plaintiff need only adduce "slight evidence of negligence" to get to the
jury or to keep a jury verdict. Second, it is used to clarify the special
causation rule applicable in Jones Act cases, whereby a plaintiff may
recover even though the defendant's negligence was only a contributing
cause of the plaintiffs injury.
8
Commentators who have analyzed the
evolution of the FELA and the Jones Act, as those statutes have been
interpreted by the Supreme Court, have concluded that a plaintiff-
employee who brings an action under these statutes has a better chance
of getting his case to a jury and of keeping a jury award compared to
those plaintiffs who bring common law negligence actions
9
and that the
8
This view is shared by S. Childress and M. Davis, who state in 1 Federal Standards of
Review 3.07 at 3-68 (1992):
This slight negligence standard, which can be classified as more a rule of lax causation
than a true burden of proof or negligence rule has been translated into a very strict
standard of review on appeal.
See also Miles, The Standard of Care in a Seaman's Personal Injury Action - Has the Jones Act
Been Slighted?, 13 Tul. Mar. L.J. 79 (1988-89) ("Miles").
9
One article, critical of some decisions of the Supreme Court, complained that the
"Roosevelt packed court" abrogated the established FELA rules which essentially were based
on the common law rules of negligence. The thrust of this criticism was that the "new" Court
had adopted a rule whereby
any plaintiff's case under the FELA must be submitted to the jury and that the jury's
verdict must be binding as to liability, no matter how absent any judicially recognizable
probative evidence that the defendant was negligent and that such negligence was the
proximate cause of plaintiff's injury or death, no matter how purely speculative or
conjectural that evidence might be, and no matter how clearly and convincingly the
evidence might have proved that the injured or deceased employee's own negligence was
the sole, efficient, the causa causans, of his own injury or death.
Alderman, What the New Supreme Court Has Done to the Old Law of Negligence, 18 L. &
Contemp. Prob. 110, 114 (1953). Another author reacted much more favorably to these
decisions. After characterizing the pre-1939 decisions of the courts as having "battered and
damaged" the FELA, this author stated: "[t]he Supreme Court of the United States, in an
Vol. 25, No. 1
causation requirement is less demanding than that required in common
law tort cases.'
0
It is the position of this article, however, that the term
"slight negligence" does not refer to a "degree" of negligence, and that
it is unnecessary either to use or explain this term to the jury. An
appropriate instruction on causation is legally sufficient and correct. One
article that has directly addressed the subject of "slight negligence"
supports this view," and there has been no suggestion in the literature
that the standard of care required of an employer is anything less than
"ordinary care under the circumstances."'
' 2
impressive series of decisions rendered subsequent to the 1939 amendment, ... has written
what may be accepted as the brightest page in the long struggle of operative railroad men to
achieve justice... in securing... adequate compensation for wrongful injury and death."
Griffith, The Vindication of a National Public Policy Under the Federal Employers' Liability
Act, 18 L. & Contemp. Prob. 160, 168 (1953). Yet another author has stated that:
The last decade has witnessed an almost unbroken series of decisions by the United States
Supreme Court consistently enlarging the role of the jury, in actions under the FELA, in
deciding fact issues, particularly relating to negligence and causation. The scope of jury
decision has been so expanded as to make the occasion for a directed verdict rare and
exceptional-perilous business for the trial court.
De Parcq, A Decade of Progress Under the Federal Employers' Liability Act, 18 L. &
Contemp. Prob. 257, 257 (1953) ("De Parcq").
'
0
One author has characterized this as "the liberalization of proximate cause." He
concluded that the Supreme Court was not using the traditional demanding tort standard of
proximate causation, but he was unable to distill the precise standard which was being used.
The Court appeared to be basing its use of the less demanding standard on the language of the
statute which makes a carrier liable where "injury or death results in whole or in part" from
carrier negligence. (Emphasis added). It should be noted, however, that this article was written
before the Supreme Court articulated the standard of FELA causation in Rogers v. Missouri
Pacific Railroad Co., 352 U.S. 500, 1957 AMC 651 (1957). Rogers is discussed in the text at note
21 et seq. infra. De Parcq, supra note 9, 18 L. & Contemp. Prob. at 266.
"Miles, supra note 8. This article, which focuses primarily on cases decided in the Fifth
Circuit, addresses the substantive issues rather than jury instructions, but in his conclusion the
author states:
Application of the term "slight" was never intended by Congress or the Supreme Court
to apply to every element of a Jones Act claim. Use of that term to modify the standard
of care is especially unwarranted. * * *
The foregoing historical analysis of the "slight duty" and "slight negligence" standards
illustrates the confusion over the standard of care by which actions of both seamen and
their employers are judged. Although "slight evidence" and "slight causation" may be
justified by the letter and spirit of the Jones Act, deviation from the standard of
"reasonable care under the circumstances" is unwarranted and unworkable in the
diversified workplace of today's Jones Act seaman.
'
2
Sitzman, A Look at the Federal Employers' Act in the Eighth Circuit, 21 Creighton L.
Rev. 1073, 1081 (1987-88) ("Sitzman"). As stated by Pollack, The Crisis in Work Injury
Compensation On and Off the Railroads, 18 L. & Contemp. Prob. 296, 301 (1953) ("Pollack"):
Some modifications in the meaning of negligence were, of course, inevitable. Viewed as a
personal dereliction of duty, employer negligence would soon have become utterly
meaningless. Obviously, the carrier's duty to its employees had to be re-defined in
institutional rather than personal terms. Likewise a narrow construction of proximate
cause had to be modified as large scale operations made it increasingly difficult to trace and
January 1I94
As will be seen from the cases referred to in this article, the term
"slight negligence"
or something
similar appears most often in
appellate court discussions of the standard to be used in determining
when a court may properly resolve the Jones Act-FELA negligence
issue itself, either without submitting it to a jury, or in setting aside a
jury verdict. "Slight negligence" forms part of a standard that guides
judicial action in deciding whether or not to grant motions for
summary judgment and motions for judgment as a matter of law. The
standard also is applied by appellate courts in reviewing rulings of
trial courts on these motions. When used in this context, the term
clearly has no relevance to jury instructions. The Supreme Court, in
discussing the perspective of an appellate court in defining the
province of jury and judge in an FELA case, has said:
These cases, as does the instant case, all involved the question of
whether there was evidence that any employer negligence caused the
harm, or, more precisely, enough to justify a jury's determination that
employer negligence had played any role in producing the harm.
13
In referring to the appropriate standard for granting a directed verdict
against a seaman in a Jones Act case it has been stated:
In Jones Act cases the more severe FELA standard was held
appropriate: a directed verdict is possible "only when there is a
complete absence of probative facts"'
14
supporting the nonmovant's
quantify the respective negligence of master and servant with respect to each injury. Also,
the doctrine of compensation regardless of fault was bound to have some impact even on
practices under negligence-oriented law. But the carrier's responsibility under the FELA
has always been limited to the exercise of ordinary care and prudence to provide a safe
working place and safe tools and appliances. From the beginning, the Supreme Court has
stressed that the employer is no guarantor of the employee's safety beyond the exercise
of due care and prudence.
This view is also expressed in McCoid, The Federal Railroad Safety Acts and the F.E.L.A.:
A Comparison, 17 Ohio St. L.J. 494, 498-99 (1956) ("McCoid"):
The FELA predicates liability upon the "negligence" of the carrier, its officers, agents,
and employees, which the courts have uniformly taken to mean the common law doctrines
of negligence which would be applied in other types of personal or property injury actions.
Variations from the common law doctrine arise from the specific language of the Act itself
in abolishing assumption of risk and the "fellow servant" doctrine as absolute defenses
and introducing the concept of "comparative negligence" rather than contributory
negligence into actions brought under the FELA alone.
1
3
Gallick v. Baltimore & Ohio R. Co., 372 U.S. 108, 116 (1%3).
14This statement is based on the Supreme Court's pronouncement of the proper standard of
appellate review in an FELA case, Lavender v. Kurn, 327 U.S. 645, 653 (1946):
It is no answer to say that the jury's verdict involved speculation and conjecture.
Whenever facts are in dispute or the evidence is such that fair-minded men may draw
different inferences, a measure of speculation and conjecture is required on the part of
Vol. 25, No. I
position.... Boeing [Boeing v. Shipman]
15
reasoned that directed
verdicts should be disfavored in Jones Act cases because (i) the Jones
Act was to be interpreted liberally in the seaman's favor; (ii) the
seaman had only to prove "slight negligence," which could be
accomplished by very little evidence; and (iii) adjudication by a
presumably seaman-sympathetic jury in Jones Act cases was congres-
sionally intended to provide "part of the remedy."'
6
... Boeing
those whose duty it is to settle the dispute by choosing what seems to them to be the most
reasonable inference. Only when there is a complete absence of probative facts to support
the conclusion reached does a reversible error appear. But where, as here, there is an
evidentiary basis for the jury's verdict, the jury is free to discard or disbelieve whatever
facts are inconsistent with its conclusion. And the appellate court's function is exhausted
when that evidentiary basis becomes apparent, it being immaterial that the court might
draw a contrary inference or feel that another conclusion is more reasonable.
15411 F.2d 365 (5th Cir. 1969) (en banc).
161n Rogers, supra note 10, 352 U.S. at 505-06, 510, the Supreme Court explained the jury's
role in applying the statutory standard of liability of the FELA:
The opinion [of the Missouri Supreme Court] may also be read as basing the reversal [of
the jury verdict for plaintiff] on another ground, namely, that it appeared to the court that
the petitioner's conduct was at least as probable a cause for his mishap as any negligence
of the respondent, and that in such case there was no case for the jury. But that would
mean that there is no jury question in actions under this statute, although the employee's
proofs support with reason a verdict in his favor, unless the judge can say that the jury
may exclude the idea that his injury was due to causes with which the defendant was not
connected, or, stated another way, unless his proofs are so strong that the jury, on
grounds of probability, may exclude a conclusion favorable to the defendant. That is not
the governing principle defining the proof which requires a submission to the jury in
these cases. The Missouri court's opinion implies its view that this is the governing
standard by saying that the proofs must show that "the injury would not have occurred
but for the negligence" of his employer, and that "[t]he test of whether there is causal
connection is that, absent the negligent act the injury would not have occurred." That
is language of proximate causation which makes a jury question dependent upon whether
the jury may find that the defendant's negligence was the sole, efficient, producing cause
of injury.
The kind of misconception evidenced in the opinion below, which fails to take into account
the special features of this statutory negligence action that make it significantly different
from the ordinary common-law negligence action, has required this Court to review a
number of cases. In a relatively large percentage of the cases reviewed, the Court has
found that lower courts have not given proper scope to this integral part of the
congressional scheme. We reach the same conclusion in this case. The decisions of this
Court after the 1939 amendments teach that the Congress vested the power of decision in
these actions exclusively in the jury in all but the infrequent cases where fair-minded
jurors cannot honestly differ whether fault of the employer played any part in the
employee's injury. Special and important reasons for the grant of certiorari in these cases
are certainly present when lower federal and state courts persistently deprive litigants of
their right to a jury determination.
In Johannessen v. Gulf Trading & Transportation Company, 633 F.2d 653, 656, 1981
AMC 18 (2d Cir. 1980), the court stated: "It is well established that the role of the jury is
significantly greater in Jones Act and FELA cases than in common law negligence actions.
The right of the jury to pass upon the question of fault and causation must be most liberally
viewed."
January 1994
therefore endorsed a long line of cases applying the FELA standard to
Jones
Act claims.'
7
Consider the following sentence extracted from the opinion of the
Fifth Circuit in In re CooperiT. Smith:
Under the Jones Act, a defendant must bear the responsibility for any
negligence, however slight, that played a part in producing the plain-
tiff's injury.'
8
One could find that the language of the sentence is ambiguous. One
of the reasons for this ambiguity is that sometimes courts use the
word negligence merely as reference to the defendant's conduct
measured against legal duty and standard of care. At other times the
term is used as embracing all of the elements of a negligence action:
duty to act carefully, conduct that falls below that standard of care,
and a causal relationship between that breach of duty and the
plaintiff's injury. If the word negligence is used in the first sense, then
"slight negligence"
could only relate to the standard of care which
would require that the defendant act in a very careful manner, that is,
in a manner more careful than would ordinarily be required in the
circumstances. If the word negligence is used in the latter sense, then
1
7
Allen, supra note 4, 623 F.2d at 360 (citations omitted). More recently the Fifth Circuit in
Bommarito, supra note 5, 929 F.2d at 188, has said:
As this Court has held in countless cases presenting the Jones Act "featherweight"
burden, directed verdict is justified "[o]nly when there is a complete absence of probative
facts to support the verdict." Thornton v. Gutf Fleet Marine Corp., 752 F.2d 1074, 1076
(5th Cir. 1985) (quoting Lavender v. Kurn, 327 U.S. 645, 652, 66 S. Ct. 740, 743, 90 L.Ed.
916, 922 (1946)); see also Comeaux v. T.L. James & Co., 702 F.2d 1023, 1024, 1984 AMC
2805, 2806 (5th Cir. 1983), modifying 666 F.2d 294 (5th Cir. 1982); Alvarez v. J. Ray
McDermott & Co., 674 F.2d 1037, 1042, 1984 AMC 302 (5th Cir. 1982). The jury's verdict
must be allowed to stand unless the plaintiff failed to put forth at least a marginal claim for
relief. See id.; Holmes v. J. Ray McDermott & Co., 734 F.2d 1110, 1120, 1985 AMC 2024,
2037 (5th Cir. 1984); Leonard v. Exxon Corp., 581 F.2d 522, 524 (5th Cir.), cert. denied,
441 U.S. 923, 99 S. Ct. 2032, 60 L.Ed.2d 397 (1979).
Clobber v. Bung Towing, Inc., 883 F.2d 372, 375, 1990 AMC 879, 882 (5th Cir. 1989) (only
slight evidence of negligence is required to uphold ajury verdict for the seaman-plaintiff); Miles
v. Melrose, 882 F.2d 976, 983, 1990 AMC 57, 65 (5th Cir. 1989) ("The standard of review for the
sufficiency of the evidence to establish claims arising under the Jones Act is less exacting than
that for general maritime law claims. The evidence suffices unless there is a 'complete absence
of probative facts' to support the non-movant's position.").
Likewise in Danghenbaugh v. Bethlehem Steel Corp., Great Lakes Steamship Div., 891 F.2d
1199, 1205, 1990 AMC 2049, 2059 (6th Cir. 1989), the court stated:
[fIn light of the "policy of providing an expansive remedy for seamen, submission of Jones
Act claims to a jury requires a very low evidentiary threshold; even marginal claims are
properly left for jury determination." Quoting Leonard v. Exxon Corp., 581 F.2d 522, 524
(6th Cir. 1978), cert. denied, 441 U.S. 923 (1979).
18929 F.2d 1073, 1076-77, 1991 AMC 2169, 2173 (5th Cir. 1991).
Vol. 25, No. I
it is not clear whether "slight negligence" refers to the duty-standard
of care elements, or the causation element, or to all elements.
19
Examining the statement in a vacuum, it could reasonably be
interpreted as meaning that negligence exists in varying degrees and
that the plaintiff in a Jones Act case need only show that the
defendant's conduct was negligence of the lowest degree. In this
sense the word "slight" refers back to the word "negligence" which
precedes it. As such it modifies the quality of negligence. It says
something about the standard of care, or stated otherwise, it quanti-
fies the degree of carelessness necessary to support recovery by the
plaintiff. This interpretation could support a contention that there is a
difference between "slight negligence" and "ordinary negligence."
20
19
See discussion at note 26 infra.
20rhe reference to the term "slight negligence" in Allen, supra at note 17, is part of a
quotation from Boeing, supra note 15, 411 F.2d at 370-71. Boeing was a diversity action based
on state tort and workers' compensation law. The issue in the case involved the standard to be
applied by a court in passing on the sufficiency of the evidence to create a jury question, that
is, when is it appropriate for a trial court to take a case away from the jury. More specifically,
the question was whether or not the standard articulated by the Supreme Court in FELA and
Jones Act cases should be applied. The FELA rule is very favorable to the plaintiff-employee
and gives the plaintiff the right to have his case resolved by a jury if there is any evidence to
support it. The court of appeals in Boeing held that the FELA standard should not be used and
instead that the usual standard should be applied. As part of its analysis, the court noted that
Congress in enacting the FELA and providing for jury trials had provided a remedy for injured
railroad workers and seamen which required less strenuous proof of negligence than is
otherwise required. The Boeing court quoted extensively from Rogers, supra note 10, the
seminal case articulating the negligence and causation standards under the FELA.
The Supreme Court further said in Rogers (citation omitted): "Under this statute (FELA)
the test of a jury case is simply whether the proofs justify with reason the conclusion that
employer negligence played any part, even the slightest, in producing the injury or death for
which damages are sought."
Note that the Rogers Court did not use the term "slight negligence." It used the term
slightest" in referring to causation. Yet it was in this context that the Boeing court (not the
Rogers Court) then said:
Slight negligence, necessary to support an FELA action, is defined as 'a failure to exercise great
care,' and that burden of proof, obviously, is much less than the burden required to sustain
recovery in ordinary negligence actions. Prosser, Law of Torts 34, at 186 (3d ed. 1964).
Note, however, that this gratuitous definition was immediately followed by this statement:
Beyond the fact that a statutory action under the FELA significantly differs from a
common law negligence action in terms of the standard of proof, it is clear that the
congressional intent in enacting the FELA was to secure jury determinations in a larger
proportion of cases than would be true of ordinary common law actions. In other words,
"trial by jury is part of the remedy" in FELA cases.
Except for the brief reference to the Prosser definition of "slight negligence," the entire
discussion by the Boeing court focused on the issue of when a court could take a case away
from ajury or set aside ajury verdict. The case did not address the subject ofjury instructions.
The reference to slight negligence as being a "failure to exercise great care" is not part of the
holding of the case. Furthermore, that reference to Prosser is misleading because the current
text of Prosser and Keeton generally rejects "degrees of negligence"
Januaryl1W
Under this interpretation of "slight negligence" the term "negli-
gence" must refer to the application of the standard of care to the
defendant's conduct.
On the other hand, the word "slight" in the sentence quoted above
takes on a quite different meaning when considered in its historical
context and when read together with the sentences which precede
and follow it. The seminal case defining FELA negligence is Rogers
v. Missouri Pacific Railroad Co.
21
Rogers appears to have been the
first case in which the term "slight" was used in defining the basis for
an employee's claim under the FELA.22 There the Supreme Court
said:
Under this statute the test of a jury case is simply whether the proofs
justify with reason the conclusion that employer negligence played any
part, even the slightest, in producing the injury or death for which
damages are sought. It does not matter that, from the evidence, the jury
may also with reason, on grounds of probability, attribute the result to
other causes, including the employee's contributory negligence. Judi-
cial appraisal of the proofs to determine whether a jury question is
..presented is narrowly limited to the single inquiry whether, with
reason, the conclusion may be drawn that negligence of the employer
played any part at all in the injury or death.
23
as a distinction that is "vague and impracticable in [its] nature, so unfounded in
principle," that it adds only difficulty and confusion to the already nebulous and uncertain
standards which must be given to the jury. The prevailing rule in most situations is that
there are no "degrees" of care or negligence, as a matter of law; there are only different
amounts of care, as a matter of fact. Prosser and Keeton, supra note 3, at 210-11.
Furthermore, with respect to FELA actions Prosser and Keeton state that the interpretation
of the Act by the courts:
has been said to reduce the extent of the negligence required, as well as the quantum of
proof necessary to establish it, to the "vanishing point." While it is still undoubtedly true
that there must be some shreds of proof both of negligence and causation .... there
appears to be little doubt that under the statute jury verdicts for the plaintiff can be
sustained upon evidence which would not be sufficient in the ordinary negligence action.
Prosser and Keeton, id. at 579. (Emphasis added).
Thus, the Boeing decision when read in the context described above supports the view that
if there is any evidence that an employer's negligence contributed to the plaintifs injury, a trial
court must allow the case to go to the jury and if the jury finds employer negligence and
causation, those findings must stand.
21352 U.S. 500 (1957).
2Cf. Atlantic Coast Line R. Co. v. Burkett, 192 F.2d 941 (5th Cit. 1951); Newsum v.
Pennsylvania R. Co., 97 F. Supp. 500 (S.D.N.Y. 1951); Walton v. Continental S.S. Co., 66 F.
Supp. 836 (D. Md. 1946).
23
352
U. S. 506-08 (1957) (emphasis added). This standard of liability is applicable in Jones
Act cases. Ferguson v. Moore-McCormack Lines, Inc., 352 U.S. 521 (1957).
Vol. 25, No. 1
The law [FELA] was enacted because the Congress was dissatisfied
with the common-law duty of the master to his servant. The statute
supplants that duty with the far more drastic duty of paying damages for
injury or death at work due in whole or in part to the employer's
negligence. The employer is stripped of his common-law defenses and
for practical purposes the inquiry in these cases today rarely presents
more than the single question whether negligence of the employer
played any part, however small, in the injury or death which is the
subject of the suit. The burden of the employee is met, and the
obligation of the employer to pay damages arises, when there is proof,
even though entirely circumstantial, from which the jury may with
reason make that inference.
24
The Court in Rogers clearly created a minimal standard for the
sufficiency of evidence needed to get a plaintiff's case to the jury and
for keeping a jury award of damages. The Court formulated this
standard clearly in the context of articulating the "appropriate" rule
of causation applicable in FELA cases. The rule announced by the
Court requires only that employer negligence play "any part, even
the slightest," in causing the plaintiff's injury. If the plaintiff's proof
satisfies this light burden of proof of causation, the plaintiff not only
gets to the jury but also keeps a favorable verdict.
Also consider in a fuller context the "ambiguous" sentence quoted
earlier:
The burden to prove causation in a Jones Act case is "very light" or
"featherweight." Under the Jones Act, a defendant must bear the
responsibility for any negligence, however slight, that played a part in
producing the plaintiffs injury. Although in Jones Act cases a "jury is
entitled to make permissible inferences from unexplained events,"
summary judgment is nevertheless warranted when there is a complete
absence of proof of an essential element of the nonmoving party's
case.
25
Placing the statement in this fuller context reveals several things.
First, as mentioned previously, the term "slight negligence" was
referred to here by the appellate court as part of its review of the
appropriateness of the trial court's grant of summary judgment
against a Jones Act claim. The court did not review the correctness of
jury instructions nor did it purport to prescribe appropriate jury
instructions as to Jones Act negligence. Second, note that the
reference to "slight negligence" follows the statement that "the
24
Rogers, supra note 10, 352 U.S. at 508.
25CooperT. Smith, supra note 18, 929 F.2d at 1076-77 (citations omitted, emphasis added).
January I004
burden to prove causation is very light. . .". In defining the appro-
priate rule of causation, the court states that "any negligence,
however slight, that played a part in producing plaintiff's injury" is
sufficient. This contextual reading should make it apparent that the
reference to "slight negligence" means that a seaman's employer
may still be held liable if the employer's conduct fell below the
standard of reasonable care even though this negligence was only a
minor factor in bringing about the injury. The fact that other causes,
including the plaintiff's own negligence, may have contributed to the
injury does not defeat a plaintiff's right to recover damages. In other
words the term "negligence" refers to the causation element of
negligence and not to the standard of care or defendant's conduct.
This interpretation of the Fifth Circuit's statement in In re Cooper/T.
Smith is consistent with the Supreme Court's holding and analysis in
Rogers. The ambiguity could be avoided, perhaps, if courts used
language more nearly approximating Rogers and by placing qualifying
terms such as "slight" after the reference to causation as suggested
in the various Pattern or Model Jury Instructions, discussed infra.
Another example of how context may be critical to interpretation is
illustrated in Gosnell v. Sea-Land Service, Inc.
26
There the court
said:
Jones Act negligence and unseaworthiness are two separate and
distinct claims, . . ., requiring two different standards of proof for
causation. The Jones Act, which adopted by reference the lax negli-
gence standard of the Federal Employers' Liability Act, requires only
that the defendant's negligence contribute in any way, however slight,
in causing plaintiff's injuries.... On the other hand, in order to prove
a claim of unseaworthiness, a plaintiff must show that the unseaworthy
condition of the vessel was the proximate or direct and substantial
cause of the seaman's injuries.
The trial court correctly instructed the jury on the elements of Jones
Act negligence and unseaworthiness, including the different standards
for causation. (Citations omitted, emphasis added).
Note that the first use of the word "negligence" (contrasting negli-
gence and unseaworthiness claims) seems to suggest that the court is
referring to all of the components of a negligence claim including the
causal element linking the defendant's conduct to the plaintiff's
injury. The second use of the term "negligence," that is, "lax
negligence," is less clear, but the subsequent reference to causation
26782 F.2d 464, 467 (4th Cir. 1986). See note 19 supra.
Vol. 25, No. I
would indicate that the court is including causation as an element of
negligence. But the third use of the word negligence seems to refer
only to the defendant's conduct and not to causation because the
court is saying that the jury must determine if the defendant's conduct
(negligence) caused the plaintiff's injury. By reading the words "lax
negligence" in context, it seems quite clear that the court means that
the causation element of Jones Act "negligence" may be satisfied by
a standard of proof that is more "lax" than the standard applied in
unseaworthiness claims.
Likewise, it has been stated that:
The "producing cause" FELA standard, used for Jones Act negli-
gence, facilitates proof by the employee, incorporating any cause
regardless of immediacy. Plaintiff's burden of proving such cause is
"featherweight," and all that is required is a showing of "slight
negligence." In keeping with this less demanding standard of proof of
causation, the test for sufficiency of evidence in a Jones Act case also
requires less evidence to support a finding and directed verdicts and
j.n.o.v. motions are granted "only when there is a complete absence of
probative facts" to support a verdict.
27
Again the reference to "slight negligence" read in context seems to
be nothing more than a verbal short cut for referring to the "less
demanding standard of proof" required for the causation element of
Jones Act negligence.
There does not appear to be a case in which an appellate court has
held that a trial court when instructing the jury on employer's Jones
Act negligence should explain the difference between "slight" and
"ordinary"
negligence
and that a court commits error if it fails to do
so. Likewise there does not appear to be a case in which a trial court
has been reversed for instructing the jury as to employer negligence
in terms of "ordinary" rather than "slight" negligence. Finally,
there does not appear to be an appellate decision indicating that
juries should be told that in Jones Act cases an employer is under a
higher duty of care than would ordinarily be required.
28
In most of
27
Comeaux v. T.L. James & Co., 702 F.2d 1023, 1024, 1984 AMC 2805 (5th Cir. 1983)
(citations omitted); Springborn v. American Commercial Barge Lines, Inc., 767 F.2d 89, 99 (5th
Cir. 1985).
28Occasionally appellate courts have referred to the "higher" standard of care imposed on
employers in Jones Act cases, but these cases do not even suggest that juries should be
instructed in terms of "slight negligence." See, e.g., Allen v. Seacoast Products, Inc., 623 F.2d
355, 361 (5th Cir. 1980); Interocean S.S. Co. v. Topolofsky, 165 F.2d 783, 784, 1949 AMC 198
(6th Cir. 1948); Springborn, supra note 27, 767 F.2d at 99; Dempsey v. MAC Towing, Inc., 876
F.2d 1538, 1542 (1lth Cir. 1989). Also S. Childress and M. Davis in 1 Federal Standards of
January 1994
the cases cited herein, the courts have simply referred to the
standard of care as being that of reasonable care under the circum-
stances. The Court of Appeals for the Fifth Circuit specifically has
held that a trial court did not commit error in refusing the plaintiff's
request that the jury be instructed that it need find only "slight
negligence" to establish liability.
29
In one of the leading works on
Review 3.07 at 3-72 (1992) assume that juries are routinely instructed on "slight negligence,"
but this assumption is not central to the authors' concern with the proper standard of appellate
review. On the other hand some courts have specifically referred to the standard as being that
of "ordinary care." E.g., Kokesh v. American Steamship Company, 747 F.2d 1092, 1094, 1985
AMC 2808, 2810 (6th Cir. 1984).
"'Rogers v. Eagle Offshore Drilling Services, Inc., 764 F.2d 300, 304-05 (5th Cir. 1985). On
appeal the plaintiff contended that "while the district court properly instructed the jury under
the Jones Act that all that is needed is slight causation, it also should have used the term
'slight,' rather than 'any' negligence when explaining the degree of negligence necessary to
establish liability." The Fifth Circuit then reviewed the instructions given by the district
court:
The district court instructed the jury that: "For purposes of this action, negligence is a
legal cause of damage if it played any part, no matter how small, in bringing about or
actually causing the injury or damage. So if you should find from the evidence in the case
that any negligence of the defendant contributed in any way toward any injury or damages
suffered by the plaintiff, you may find that such injury or damage was legally caused by the
defendant's act or omission."... Later, while instructing the jury on the unseaworthiness
claim, the district court also stated: "Unlike the Jones Act claim, with respect to which the
plaintiff may recover if the alleged negligence is proved to be a slight cause of the injury
sustained, in order to recover on a claim of unseaworthiness it must be proved that the
unseaworthy condition was a substantial cause of the injury." * * * A review of the
district court's charge to the jury indicates that the district court adequately explained to
the jury the lesser standard of negligence needed to establish liability under a Jones Act
claim. The lesser standard of care was not only explained to the jury in instructions
regarding the Jones Act claim, but it also was emphasized when instructions were given
on the unseaworthiness claim.
Likewise in Robin v. Watson Brothers Drilling, 719 F.2d %, 97 n.l (5th Cir. 1983), the
plaintiff complained that the trial court failed to instruct the jury that the "employer must show
a higher degree of care for work aboard a vessel than on land." The Court of Appeals held that
the following jury instruction was proper:
For purposes of this action, of this [Jones Act] claim, negligence is a legal cause of damage
if it played any part, no matter how small, in bringing about or actually causing the injury
or damage. So, if you should find from the evidence in the case that any negligence of the
defendant. . . , contributed in any way toward the injury or damages suffered by the
plaintiff, you may find that such injury or damage was legally caused by defendant's]...
act or omission.
Unlike the Jones Act claim, with respect to which plaintiff may recover if the alleged
negligence is proved to be a slight cause of the injury sustained, in order to recover on a
claim of unseaworthiness it must be proved that the unseaworthy condition was a
substantial cause of the injury complained of.
The instructions in both Rogers v. Eagle Offshore Drilling Services, Inc. and Robin v.
Watson Brothers Drilling, supra, basically followed the Pattern Jury Instructions for District
Judges in the Fifth Circuit, which are discussed infra.
Vol. 25, No. I
maritime personal injury, Jones Act negligence is simply defined as:
"The seaman must prove the existence of a duty, the negligent
violation of this duty by the employer, and, finally, a causal
relationship of the violation to the injury sustained."
30
No reference
to or discussion of "slight negligence" appears in the treatise. That
the term "slight" involves the relationship between the standard of
care and causation was illustrated by the Eleventh Circuit in
Dempsey
v. MAC Towing, Inc.
31
* In light of these general principles, the courts have allowed a seaman to
recover on a Jones Act claim with a lower showing of proximate cause
than would be required in a non-admiralty case. See id. at 222-23
(comparing proximate cause requirements in admiralty and non-admi-
ralty cases); see also Sanford Bros. Boats, Inc. v. Vidrine, 412 F.2d
958, 962 (5th Cir. 1969) (in Jones Act case, sufficient evidence exists to
support jury verdict on issue of causation if employer negligence played
even slightest part in producing injury); accord McClow v. Warrior &
Gulf Navigation Co., 842 F.2d 1250, 1251 (11th Cir. 1988).
The Second Circuit also has indicated that the term "slight"
implicates the relationship between the defendant's conduct and the
plaintiff's injury. It has stated that:
Under the Jones Act, a "plaintiff is entitled to go to the jury if 'the
proofs justify with reason the conclusion that employer negligence
played any part, even the slightest, in producing the injury . . . for
which damages are sought."'32
MODEL OR PATTERN JURY INSTRUCTIONS
Further support for the views expressed in this article may be
found in the Model or Pattern Jury Instructions which have been
The following instruction was upheld in Ardoin v. J. Ray McDermott & Co., 684 F.2d 335,
337 (5th Cir. 1982):
For purposes of this action, negligence is a "legal cause" of damage if it played any part,
no matter how small, in bringing about or actually causing the injury or damage. So, if you
should find from a preponderance of the evidence in this case that any negligence of the
defendant contributed in any way toward any injury or damages suffered by the plaintiff,
you may find that the injury or damage was legally caused by the defendant's act or
omission. Negligence may be a legal cause of damage even though it operates in
combination with the act of another, some natural cause, or some other cause if the other
cause occurs at the same time as the negligence and if the negligence played any part, no
matter how small, in causing such damage.
3M. Norris, 2 The Law of Seamen 30-34, at 460 (4th ed. 1985). Fraser v. U.S., 167 F.2d
141, 143, 1948 AMC 636 (1st Cir. 1948) (reasonably prudent man standard).
31
Supra note 28, 876 F.2d at 1542-43.
32
Oxley v. City of New York, 923 F.2d 22, 25, 1991 AMC 1816 (2d Cir. 1991).
January 1994
prepared for use by District Judges in the various circuits.
33
For
example, in the Ninth Circuit the suggested instruction on Jones Act
negligence
34
is as follows:
9.01.01 JONES ACT-NEGLIGENCE CLAIMS-ELEMENTS AND
BURDEN OF PROOF-AFFIRMATIVE DEFENSE
[On the plaintiff's claim,] the plaintiff has the burden of
proving each of the following by a preponderance of the evidence:
1. the defendant was negligent, and
2. the defendant's negligence was a [proximate] [legal] cause of an
injury to the plaintiff.
If the plaintiff has failed to prove each of these things, your verdict
should be for the defendant. If, on the other hand, you find that each of
the things on which the plaintiff has the burden of proof has been
proved, your verdict should be for the plaintiff.
9.01.02 JONES ACT-NEGLIGENCE DEFINED
Negligence is the failure to use reasonable care. Reasonable care is the
degree of care that reasonably prudent persons would use under like
circumstances to avoid injury to themselves or to others. Negligence is
the doing of something that a reasonably prudent person would not do,
or the failure to do something that a reasonably prudent person would
do, under like circumstances.
The instruction
35
suggested for District Judges in the Fifth Circuit
provides:
33
The Pattern or Model Jury Instructions referred to in this article have been prepared by
committees in the various circuits whose members include District Judges of the respective
circuits. The various instructions have been published as separate pamphlets by West
Publishing Co. and may include a caveat such as the following one contained in the Pattern Jury
Instructions - Civil Cases from the Fifth Circuit:
This work contains general civil jury instructions and special instructions for the most
frequently recurring federal question cases. These instructions are illustrative only.They
attempt to present the applicable law in language that is precise, clear, and brief. Judges
are encouraged to modify the instructions or the order in which they are presented to the
jury in any manner that will further these goals.
Although these instructions do not have the force of law, they do appear to represent the views
of the judges who prepared and approved them as to what they believe the law to be.
34Manual of Model Civil Jury Instructions for the Ninth Circuit (1993).
35Pattern Jury Instructions (Civil Cases) 4.4 and 4.6 (U.S. Fifth Circuit District Judges
Association, 1992 Edition).
Vol. 25, No. I
'Slight
Negligence,"
"Slight
Care"?
4.4
JONES ACT-NEGLIGENCE
Under the Jones Act, plaintiff _ must prove that his employer
was negligent. Negligence is the doing of an act that a reasonably
prudent person would not do, or the failure to do something that a
reasonably prudent person would do under the same or similar circum-
stances. The occurrence of an accident, standing alone, does not mean
anyone's negligence caused the accident.
In a Jones Act claim the word "negligence" is given a liberal interpre-
tation. It includes any breach of duty that an employer owes to his
employees who are seamen, including the duty of providing for the
safety of the crew.
Under the Jones Act, if the employer's negligent act or omission played
any part, no matter how small, in actually causing the plaintiff's injury,
then you must find that the employer is liable under the Jones Act.
36
4.6
CAUSATION
Not every injury that follows an accident necessarily results from it.
The accident must be the cause of the injury.
In determining causation, different rules apply to the Jones Act claim
and to the unseaworthiness claim.
Under the Jones Act, an injury or damage is considered caused by an
act, or failure to act, if the act or omission played any part, no matter
how small, in bringing about or actually causing the injury or damage.
In an unseaworthiness claim, the plaintiff must show, not merely that
the unseaworthy condition was a cause of the injury but that such
condition was a proximate cause of it. This means that the plaintiff must
show that the act or omission played a substantial part [was a
substantial factor] in bringing about or actually causing his injury, and
that the injury was either a direct result or a reasonably probable
consequence
of the act of omission.
37
36Instructions in the form of these Pattern Jury Instructions have been upheld by the Fifth
Circuit. See cases cited in note 22, supra.
37
Thus, a jury finding of causation on the negligence claim and of no causation on the
unseaworthiness claim may be sustained. Landry v. Oceanic Contractor, Inc., 731 F.2d 299,
1986 AMC 865 (5th Cir. 1984).
January 1994
Pattern Jury Instruction 5.1 for District Judges in the Eleventh Circuit,
which deals with Jones Act and Unseaworthiness claims states:
38
"Negligence" is the failure to use reasonable care under the circum-
stances. Reasonable care is that degree of care which a reasonably
careful person would use under like circumstances. Negligence may
consist either in doing something that a reasonably prudent person
would not do under like circumstances, or in failing to do something
that a reasonably careful person would do under like circumstances.
For purposes of this action, negligence is a "legal cause" of damage if
it played any part, no matter how small, in bringing about or actually
causing the injury or damage. So, if you should find from the evidence
in the case that any negligence of the Defendant contributed in an way
toward any injury or damage suffered by the Plaintiff, you may find that
such injury or damage was legally caused by the Defendant's act or
omission. Negligence may be a legal cause of damage even though it
operates in combination with the act of another, some natural cause, or
some other cause if such cause occurs at the same time as the
negligence and if the negligence played any part, no matter how small,
in causing the damage.
It should be noted that none of the jury instructions prepared and
suggested for use by district courts within the respective circuits
defines or even uses the term "slight negligence." Nothing appears in
any of the instructions which requires the jury to be told that the
defendant is under a duty to exercise more than reasonable care or
that the defendant must exercise a higher degree of care than would
be exercised by a reasonably careful person under the circumstances.
The word "slight" does not appear at all in any of the instructions.
The Fifth and Eleventh Circuits' instructions do use the phrase "no
matter how small." But that phrase clearly refers to the relationship
that negligence bears to the plaintiff's injury.
A leading text containing suggested jury instructions takes a similar
approach. It recommends the following with respect to Jones Act
negligence:
39
95.06 "Negligence"-Defined
8Pattern Jury Instructions 5.1 Civil Cases (U.S. Eleventh Circuit District Judges Associa-
tion, 1990 Edition).
3
9
E. Devitt, C. Blackmar & M. Wolff, 3 Federal Jury Practice and Instruction 635-36, 638
(4th ed. 1987).
Vol. 25, No. I
"Negligence" is the failure to use reasonable care. Reasonable care is
that degree of care which a reasonably careful person would use under
like circumstances. Negligence may consist either in doing something
that a reasonably careful person would not do under like circum-
stances, or in failing to do something that a reasonably careful person
would do under like circumstances.
95.09 Cause-Jones Act
For purposes of plaintiff's Jones Act claim, negligence is a cause of
damage if it played any part, no matter how small, in bringing about the
actual damage. So, if you find from the evidence in the case that any
negligence of the defendant contributed in any way toward any dam-
ages or injury suffered by the plaintiff, you may find that such injury or
damage was caused by the defendant's act or omission. Negligence
may be a cause of damage even though it operates in combination with
the act of another, some natural cause, or some other cause if such
other cause occurs at the same time as the negligence and if the
defendant's negligence played any part, no matter how small, in
causing such damage.
STANDARD OF CARE-SPECIAL RULES
To state that the proper jury instruction on the standard of care in
a Jones Act case should be phrased only in terms of "reasonable care
under the circumstances" and not in terms of "slight negligence" is
not a completely accurate or comprehensive statement of the stan-
dard of care. In order to fully understand the appropriate standard,
other rules established under the FELA-Jones Act must be consid-
ered, principally those that deal with the duty of an employer to
exercise reasonable care to provide its employees with a safe place to
work and the abolition of assumption of risk and contributory
negligence as complete defenses.
Every type of employment presents some risks to employees.
These risks may be inherent in the work site or the nature of the
work. Risks may stem from the necessity to use equipment or tools.
Risks may exist because of the need to work with others. How the
law distributes those risks between an employer and its employees is
an important factor in defining the "reasonableness" aspect of the
standard of care imposed on an employer and in determining whether
an employer's conduct fell below the standard of reasonable care it
owed to its employees, that is, whether or not the employer was
negligent. When an employee is injured because of some hazard of
the work place and sues to recover damages under the Jones Act, it
must be determined who had the responsibility for eliminating or
199n I4
minimizing that particular hazard. Did the employer have the duty to
make the work place safe for its employees or did the employees have
the duty to make their work place safe or, at least, to avoid the
hazard? Recovery in a negligence action requires proof of a breach of
duty. If the law imposes the duty to make the work place safe on the
employer, in a sense, it imposes a higher or greater duty on the
employer than if it imposed that duty on the employees. The
allocation of that duty to the employer helps define the employer's
duty of care to its employees.
In a similar vein, to what extent can it be said that employees
assume the risks of their employment? It might be suggested that
although the work of seamen is dangerous, that fact is known to them
and they are paid in part to endure those hazards. But the law might
adopt the view that seamen should not be penalized by imposing the
full burden of employment risks on them simply because they have
agreed to do work that exposes them to hazards. As indicated above,
recovery in a negligence action requires proof of a breach of duty. If
the law does not impose risks of employment on the employees, then
the duty to take reasonable steps to eliminate or minimize those risks
of which the employer is or should be aware may be imposed by the
law on the employer. The allocation of these risks to the employer not
only deprives the employer of a defense but also helps define the
employer's duty of care to its employees.
1. The Employer's Duty to Provide a Safe Place to Work
The Supreme Court, in FELA cases, has stated that "the employ-
er's liability is to be determined under the general rule which defines
negligence as the lack of due care under the circumstances; or the
failure to do what a reasonable and prudent man would ordinarily
have done under the circumstances of the situation; or doing what
such a person under the existing circumstances would not have
done."
40
The Supreme Court has also recognized that "[a]t common
law the duty of the employer to use reasonable care in furnishing his
employees with a safe place to work was plain. . . . That rule is
deeply engrained in federal jurisprudence."
41
Furthermore, the
FELA legislation was enacted as part of a scheme to protect railroad
employees from injury. The FELA, the Safety Appliance Act
42
and
4Tilier v. Atlantic Coast Line R. Co., 318 U.S. 54, 67 (1943).
4 1
Bailey v. Central Vermont Ry., 319 U.S. 350, 352 (1943).
42
Now included in 45 U.S.C.A. 1 (1986) et seq.
Vol. 25, No. I
the Boiler Inspection Act
43
were enacted as complementary legisla-
tion designed to promote a safe work environment for employees.
4
The FELA itself imposes liability for "injury or death resulting in
whole or part from the negligence of the officers, agents, or employ-
ees of such carrier, or by reason of any defect or insufficiency, due to
its negligence, in its cars, engines, appliances, machinery, track,
works, boats, wharves, or other equipment. "
45
It has been held by
lower federal courts "that when the issue is properly raised and an
instruction is requested, the FELA requires jury instructions on the
duty to provide a reasonably safe place to work."
46
In the context of FELA litigation the duty to provide a safe place
to work
47
has been construed to impose specific obligations on the
employer. As one court has observed:
Although specific standards of care are not stated in the statute, certain
employer duties have become integral parts of the FELA. These
include: the duty to provide a reasonably safe place to work; the duty
to provide reasonably safe tools and equipment; the duty to promulgate
and enforce safety rules; the duty to assign workers to jobs for which
they are qualified and to avoid placing workers in jobs beyond their
physical capacity; the duty to warn employees of unsafe working
conditions; the duty to protect an employee from intentional torts
committed by another employee; and the duty to guard against condi-
tions in the workplace that cause emotional harm to employees. In
addition to these duties, which are well beyond those imposed under
the common law of master and servant, the FELA also eliminates or
places conditions on common law defenses available to an employer.
48
43
Id. McCoid,
supra note 12.
44Uric v. Thompson, 337 U.S. 163 (1949); Lilly v. Grand Trunk Western R. Co., 317 U.S.
481 (1943); Jacobson v. New York, N.H. & H.R. Co., 206 F.2d 153 (1st Cir.), aff'd 347 U.S. 909
(1954); International-Great Northern R. Co. v. United States, 268 F.2d 409 (5th Cir. 1959).
4545 U.S.C.A. 51 (1986) (emphasis added). One commentator has stated that:
The courts have been most emphatic in insisting upon compliance with the duty to exercise
reasonable care to provide the employee with a safe place to work. This is a duty the strict
observance of which would almost universally tend to reduce employee accidents. Appar-
ently for this very reason courts have endowed this particular duty with special force and
vigor and from time to time have described it as nondelegable, affirmative, and continuing, so
that it "must be continuously fulfilled and positively performed."
Strictly as a matter of abstract law and treating the matter in a vacuum, there is no
reason why this duty should possess any greater vigor or virtue or require any greater
degree of care than, for example, the duty to notify and warn of dangers, but it does.
De Parcq, supra note 9, 18 L. & Contemp. Prob. at 276.
46Ragsdell v. Southern Pacific Transp. Co., 688 F.2d 1281, 1283 (9th Cir. 1982); Yehia v.
Rouge Steel Corporation, 898 F.2d 1178, 1184 (6th Cir. 1990).
47
Funkkhowser, What is a Safe Place to Work, 17 Ohio St. L.J. 367 (1956).
48Ackley v. Chicago and North Western Transp. Co., 820 F.2d 263, 266 n.5 (8th Cir. 1987)
(citations omitted). Also see, Sitzman, supra note 12, 21 Creighton L. Rev. 1081.
January 1994
Notwithstanding the evolution of specific duties as stated above,
the courts, including the Supreme Court, have stated that the duty to
exercise due care varies with the circumstances. The Supreme Court
has stated that an employer's duty to provide a safe place to work
becomes "more imperative" as the risk increases. "Reasonable care
becomes then a demand of higher supremacy, and yet in all cases it is a
question of the reasonableness of the care-reasonableness depending
upon the danger attending the place or the machinery. It is that rule
which obtains under the [Federal] Employers Liability Act."
49
Another court has stated:
An employer's duty of care in a FELA action turns in a general sense
on the reasonable foreseeability of harm. Gallick v. Baltimore & 0.
R.R., 372 U.S. 108, 117, 83 S. Ct. 659, 665, 9 L.Ed.2d 618 (1963). The
employer's conduct is measured by the degree of care that persons of
ordinary, reasonable prudence would use under similar circumstances
and by what these same persons would anticipate as resulting from a
particular condition. Id. at 118, 83 S. Ct. at 665. At the same time, the
FELA provides that the employer's duties are nondelegable and
become more imperative as the risk to the employee increases. Bailey,
319 U.S. at 352-53, 63 S. Ct. at 1063--64. This continuous duty to
provide a reasonably safe place to work, while measured by foresee-
ability standards, is broader under the statute than a general duty of due
care. Ragsdell v. Southern Pac. Transp., 688 F.2d at 1283.50
The court then characterized the standard of care in FELA cases as a
"heightened" standard of care
5
in the sense that "[a]s the risk of harm
becomes more foreseeable, the duty to foresee that risk increases and
the right to assume due care [on the part of the employee] correspond-
ingly decreases."
52
The development of the safe place to work cases under the FELA has
had its counterpart in Jones Act cases as is shown in Dempsey v. MAC
Towing, Inc.,53 where the court summarized the relevant law as follows:
49
Bailey, supra note 41,319 U.S. at 353 (citations omitted), quoting Patton v. Texas & Pacific
Ry. Co., 179 U.S. 658, 664 (1901), and cases cited. In Urie, supra note 44, 337 U.S. at 178, the
court explained:
[WMe think that negligence, within the meaning of the Federal Employers' Liability Act, attached
if respondent "knew, or by the exercise of due care should have known," that prevalent
standards of conduct were inadequate to protect petitioner and similarly situated employees.
In the same opinion it acknowledged that '"olrdinary care must be in proportion to the danger to be
avoided and the consequences that might reasonably be anticipated from the neglect."' Id. at 179.
5Ackley, supra note 48, 820 F.2d at 266.
51
1d. at 266 n.6.
52
Id. at 267.
53876 F.2d at 1542-43 (emphasis added).
Vol. 25, No. 1
Initially, we note that the duty of care a shipowner owes to a seaman
has traditionally been recognized to be a very high one.U Because
seamen are subject to rigorous discipline while at sea and must accept,
without criticism, working conditions on orders from superior officers,
admiralty law assigns a heavy responsibility for the safety of seamen to
the owner of the ship. See, e.g., Mahnich v. Southern S.S. Co., 321
U.S. 96, 104, 64 S. Ct. 455, 459, 88 L.Ed. 561 (1944). As a corollary of
this general duty, owners are held to a high degree of care in providing
a safe work environment. Spinks v. Chevron Oil Co., 507 F.2d 216, 223
(5th Cir. 1975). In light of these general principles, the courts have
allowed a seaman to recover on a Jones Act claim with a lower showing
of proximate cause than would be required in a non-admiralty case.
We review the evidence with this "slight negligence" standard and the
elements of a Jones Act negligence claim in mind. To find that MAC
Towing was negligent in its duty to provide a safe working environment
for Dempsey, the jury had to find some evidence that the condition of
the deck on ACBL 3088 was unsafe, that the company knew or should
have known of the danger, and that it did nothing about the danger. See
Perry v. Morgan Guaranty Trust Co., 528 F.2d 1378, 1379 (5th Cir.
1976) ("Under familiar principles of negligence, in Jones Act cases,
there must be some evidence from which ajury can infer that the unsafe
condition existed and that the owner either knew or, in the exercise of
due care, should have known of it.").
Likewise in Spinks v. Chevron Oil Company, the court stated:
The duty owed by an employer to a seaman is so broad that it
encompasses the duty to provide a safe place to work. By comparison,
the seaman's duty to protect himself (the ground for any countervailing
legal interest serving to exculpate the employer) is slight. His duty is to
do the work assigned, not to find the safest method of work. This is
especially true when his supervisor, . . ., knows the working method
used by the seaman, and does nothing about it.
55
Therefore, even though employer negligence is a prerequisite to
liability and negligence is measured under the reasonable person
standard, "the duty to provide a safe place to work" impacts on the
application of the standard of care to the circumstances (facts) in
question. Risks in the workplace which "heighten" danger to em-
ployees correspondingly "heighten" the duty of their employer to be
aware of those risks and to take appropriate action. Danger may be
"heightened by risks inherent in the work, unsafe conditions of the
54See also Gavagan v. United States, 955 F.2d 1016, 1022, 1992 AMC 2447 (5th Cir. 1992);
Interocean S.S. Co. v. Topolofsky, 165 F.2d 783, 784, 1949 AMC 198 (6th Cir. 1948).
55507 F.2d 216, 223, 1979 AMC 1165 (5th Cir. 1975) (citations omitted).
January 1994
24 Journal of Maritime Law and Commerce Vol. 25, No. I
workplace, and in circumstances where an employee is deprived of
independence of action, such as in the case of seamen who are
expected to follow orders.' '56 The greater an employee's dependence
on his employer for his safety, the greater the employer's duty to
protect the employee. The level of care required of the employer is
commensurate with the risk of injury to the employee.
57
An employee-plaintiff may also benefit from special rules which
bear directly on the employer's duty to provide a "safe place to
work." Generally the FELA does not impose on an employer an
absolute duty to its employees to provide a safe place to work but
only a duty to exercise reasonable care to provide a safe place to
work. This statement, however, is not necessarily true in all situa-
tions. In Urie v. Thompson, the Supreme Court held that proof of the
violation of a safety regulation contained or promulgated under the
Safety Appliance Act or the Boiler Inspection Act established "neg-
ligence as a matter of law."
'58
The same rule has been applied in Jones
56Darlington v. National Bulk Carriers, 157 F.2d 817, 819, 1947 AMC 315 (2d Cir. 1946)
(refusal to charge that seaman was bound to carry out orders of supervisor even when order
required seamen to work with unsafe tools or unsafe conditions and that in doing so he does
not assume the risk-was error); Hall v. American Steamship Company, 688 F.2d 1062, 1065,
1983 AMC 134 (6th Cir. 1982) ("Indeed, a seaman may not be contributorily negligent for
carrying out orders that result in his own injury, even if he recognizes probable danger.");
Earl v Bouchard Transp. Co., Inc., 917 F.2d 1320, 1323-1324, 1991 AMC 1060, 1063-64 (2d
Cir. 1990). (The trial court properly instructed the jury that "[I]f you find that the plaintiff was
injured because he was following the orders of his superiors [sic], the captain, then you cannot
find that there was any contributory negligence. That's true even if plaintiff knew that the
activity which he was ordered to do was dangerous. As a seam[a]n he had the obligation to
follow orders)[alterations in original]; Salem v. United States Lines Co., 293 F.2d 121, 125,
1962 AMC 1456 (2d Cir. 1961), aff'd in part, rev'd in part, 370 U.S. 31, 1962 AMC 1456 (1962)
("A seaman assumes no risk of employment even of obvious dangers when he acts under the
orders of a superior officer."); Merchant v. Ruble, 740 F.2d 86, 88 (1st Cir. 1984) (A worker
is not "obligated to protest against the method of operation which he had been instructed to
follow or to devise a safer method, nor was he obligated to call for additional or different
equipment.").
57
As stated in Prosser and Keeton, supra note 3, at 208-09:
The amount of care demanded by the standard of reasonable conduct must be in
proportion to the apparent risk. As the danger becomes greater, the actor is required to
exercise caution commensurate with it. Those who deal with instrumentalities that are
known to be dangerous, .. . must exercise a great amount of care because the risk is great.
Although the language used by some courts sometimes seems to indicate that a special
standard is being applied, it would appear that none of these cases should logically call for
any departure from the usual formula. What is required is merely the conduct of the
reasonable person of ordinary prudence under the circumstances, and the greater the
danger, or the greater responsibility, is merely one of the circumstances demanding only
an increased amount of care.
58337 U.S. at 189.
Act cases with respect to a breach of safety standards established by
statute or regulation.
59
Thus, the duty to provide a safe place to work
is supplemented by specific duties mandated by safety statutes and
regulations, the breach of which is considered "negligence as a
matter of law." This rule impacts on FELA-Jones Act negligence
because it imposes an absolute duty, the breach of which is sufficient
to carry the plaintiff's burden of proving both the duty and breach of
duty elements of a FELA-Jones Act negligence action. When one
considers that the burden of proof on the causation element is
"featherweight," it would be fair to say that the burden of proving
negligence in these circumstances is very light.
Furthermore, even in the absence of a statutory or regulatory
safety rule the general maritime law has been interpreted as impos-
ing on shipowners an absolute duty to provide seamen with a
seaworthy vessel.
6
Unlike the effect of statutory or regulatory
violations which are negligence as a matter of law, a plaintiff who
proves that an unseaworthy condition caused his injury must still
prove "negligence" to prevail on his Jones Act claim. But proof of
unseaworthiness does help the plaintiff sustain his burden of proving
negligence. Negligence requires proof that the defendant owed a
duty to the plaintiff, that the defendant unreasonably breached that
duty, and that this breach of duty caused the plaintiff's injury. The
requirement that a shipowner must provide seamen with a seawor-
thy vessel may constitute proof of the "duty" element of Jones Act
negligence. Proof that an unseaworthy condition existed also may
provide part of the proof of the "breach of duty" element. Although
a plaintiff must still prove that in allowing the unseaworthy condi-
tion to exist, the defendant's conduct fell below that of a reasonable
person under the circumstances, the ability to invoke the unseawor-
thiness doctrine may substantially lighten a plaintiff's burden of
proving negligence.
The importance of the "duty to supply a safe place to work" is
illustrated in Pattern Jury Instruction 4.4 for District Judges in the
Fifth Circuit which specifically refers to the employer's duty in this
respect.
61
5 9
Kernan v. American Dredging Co., 355 U.S. 426, 1958 AMC 241 (1958).
60
Mitchell v. Trawler Racer, Inc., 362 U.S. 539, 1960 AMC 1503 (1960).
6
1pattem Jury Instructions (Civil Cases) 4.4 (U.S. Fifth Circuit District Judges Association,
1992 Edition). See note 77 infra.
January 1994
2. Assumption of Risk and Contributory Negligence: Defendant's
Standard of Care
An employer's duty of care must also be evaluated in light of the
FELA's modification of the common law defenses of "assumption of
risk" and "contributory negligence."
62
The Act provides that con-
tributory negligence does not preclude recovery but merely dimin-
ishes the amount recoverable. It also provides "[t]hat no such
employee ... shall be held to have been guilty of contributory
negligence in any case where the violation by such common carrier of
any statute enacted for the safety of employees contributed to the
injury or death of such employee. "63 Likewise, the Act abolishes
"assumption
of risk" as a defense by stating that in FELA actions
"such employee shall not be held to have assumed the risks of his
employment in any case where such injury or death resulted in whole
or in part from negligence of any of the officers, agents, or employees
of such carrier .... '64 Furthermore, "no employee shall be held to
have assumed the risks of his employment in any case where the
violation by such common carrier of any statute enacted for the safety
of employees contributed to the injury or death of such employee."
The judicial implementation of the abolition of the defense of assump-
tion of risk is quite important. As stated by one commentator:
65
Many persons who would have been barred under the old defense have
been successful as plaintiffs because of this change in the statute, and
the Court has been careful to protect these plaintiffs against a new kind
of playing with the old defense.
66
It is not a risk of railroading which a
6Assumption of risk and contributory negligence are not defenses to an action brought
under FELA. Jacob v. New York, 315 U.S. 752, 755, 1942 AMC 616 (1942); Socony-Vacuum
Oil Co. v. Smith, 305 U.S. 424, 431, 1939 AMC 1 (1939); Joyce v. Atlantic Richfield Co., 651
F.2d 676, 1982 AMC 1823 (10th Cir. 1981).
6345 U.S.C.A. 53 (1986). In a Jones Act case, violation of a statute by the employer bars
its use of a contributory negligence defense.
6445 U.S.C.A. 54 (1986).
6Miller, An Interpretation of the Act of 1939 (FELA) to Save Some Remedies for
Compensation Claimants, 18 L. & Contemp. Prob. 239, 245 (1953).
6
T
here had been concern that the former defense of assumption of risk would merely be
"transformed" into a form of denial of negligence or an assertion of contributory negligence.
One commentator stated:
An employer is thus without fault under the FELA if he follows general practices and
safety standards in the industry. He is not required to eliminate unsafe working conditions
or introduce new safety devices if the condition of work and equipment are no worse than
those which prevail in the industry.
Pollack, supra note 12, 18 L. & Contemp. Prob. 302 (1953). As the cases in this article indicate,
the abolition of assumption of risk, as interpreted by the courts, has not allowed employers to
shift the risk of danger in the job to the employee. The standard of care is not necessarily the
Vol. 25, No. I
workman must accept, when a condition exists that the company can
reduce. Proof of that condition is enough to support a plaintiff's prima
facie case of fault.
These rules greatly favor employees who assert Jones Act claims
because courts have concluded that a seaman's job is dangerous and
that he does not assume the risks of those dangers. Those risks are
imposed on the seaman's employer. This means that the employer
must take steps to eliminate or minimize the risk to employees and an
employer does not fulfill its responsibility to provide a safe place to
work merely by assuming that employees will correct defects in the
work place or otherwise take steps to avoid the risk of injury. Also,
inasmuch as a seaman is obligated to follow oiders, risks which arise
as a result of following orders are not risks assumed by the seaman
and do not make him contributorily negligent. As the court explained
in Tolar v. Kinsman Marine Transit Co.:67
A seaman may not be denied recovery because he proceeds in an
unsafe area of the ship or uses an unsafe appliance in absence of a
showing that there was a safe alternative available to him. In an oft
cited case the court wrote, "Had an alternative safe route been
available to Smith, his deliberate choice of a course known to be unsafe
could possibly have indicated contributory fault but mere knowledge of
the unseaworthy condition and use of the ladder in the absence of a
showing that there was an alternative is not contributory negligence."
Smith v. United States, 336 F.2d 165, 168 (4th Cir. 1964). * * * One
court has stated the rule, "no risk that can be reasonably controlled by
the ship owner is assumed by the seaman." Reyes v. Vantage S.S. Co.,
558 F.2d 238, 244 (5th Cir. 1977).
To determine whether plaintiff was guilty of contributory negligence we
must focus on his actions after he assumed the risk of working with the
defective rig since the defense of contributory negligence requires
evidence of some negligent act or omission by the plaintiff other than
his knowledgeable acceptance of a dangerous condition.
Along the same vein is this statement from the Fifth Circuit:
Generally, a seaman has no duty to find the safest way to perform his
work.... ("His duty is to do the work assigned, not to find the safest
method of work.") Rather, the duty to provide for a safe course of conduct
standard of the industry, and Practice and Pattern Jury Instruction 4.4 for use by District Judges
in the Fifth Circuit expressly so states. Also see Schlichter v. Port Arthur Towing Company,
288 F.2d 801, 1961 AMC 1164 (5th Cir. 1961).
67618 F.2d 1193, 1195-96 (6th Cir. 1982) (citations omitted). Also see Had, supra note 56, 688
F.2d at 1066; Yehia, supra note 46, 898 F.2d at 1183; Joyce, supra note 62, 651 F.2d at 682-83.
January 1994
lies primarily with the vessel owner. A seaman, therefore, is not contrib-
utorily negligent merely because he uses an unsafe tool or appliance or
proceeds in an unsafe area of the ship. Only where it is shown that there
existed a safe alternative available to him of which he knew or should have
known, can a seaman's choice of an unsafe course of action be properly
considered in determining whether he was negligent.
68
In Joyce v. Atlantic Richfield Company, the court stated that a trial
court should not instruct the jury that an employer has no duty to
warn of obvious dangerous conditions or that the plaintiff may be
contributorily negligent if he acts in the face of a known dangerous
condition. Instead the court should tell the jury:
You may not find contributory negligence on the part of the plaintiff,
however, simply because he acceded to the request or direction of the
responsible representatives of his employer that he work at a dangerous
job, or in a dangerous place, or under unsafe conditions.
69
CONTRIBUTORY NEGLIGENCE-PLAINTIFF' S
STANDARD OF CARE
Prior to 198570 (or perhaps 198171 ), there seemed to be no doubt in
FELA-Jones Act actions that the standard of care applied to a
plaintiff's conduct for purposes of determining whether or not he was
contributorily negligent was the standard of an "ordinary" or "rea-
sonable" person under the circumstances. As the Fifth Circuit stated
in Page v. St. Louis Southwestern Railway Co. :72
As to both attack or defense, there are two common elements, (1)
negligence, i.e., the standard of care, and (2) causation, i.e., the
relation of negligence to the injury. So far as negligence is concerned,
that standard is the same--ordinary prudence-for both Employee and
Railroad alike.
6Ceja v. Mike Hooks, Inc., 690 F.2d 1191, 1194-95, 1985 AMC 2941, 2945-46 (5th Cir. 1982)
(citations omitted).
69Joyce, supra note 62, 651 F.2d at 683.
7
Brooks v. Great Lakes Dredge-Dock Co., 754 F.2d 536, 538, modified 754 F.2d 539 (5th
Cir. 1985).
71
Bobb v. Modem Products, Inc., 648 F.2d 1051, 1057-58, 1983 AMC 708 (5th Cir. 1981).
72349 F.2d 820, 823 (5th Cir. 1965). Recently the Fifth Circuit in a Jones Act case, Gavagan,
supra note 54, reiterated this position:
We have also stated that the same general negligence ("ordinary prudence") and
causation standards apply to both employer and employee in Federal Employers' Liability
Act (and, by extension, Jones Act) cases. 955 F.2d at 1019 n.7.
Vol. 25, No. I
January 199 "Slight Negligence," "Slight Care"? 29
Under this approach, in Jones Act cases, once the jury has applied
the appropriate standard and found employer negligence, it should
apply the "reasonable seaman under the circumstances" standard on
the issue of contributory negligence. The application of the reason-
able seaman standard must, however, be applied in the context of
other rules applicable in FELA-Jones Act cases which bear upon the
allocation of employment risks.
73
First, under the Jones Act, an
employer has a duty to provide a safe place to work including safe
tools and equipment, a safe plan for carrying out the work and proper
supervision. Second, under the Jones Act, a seaman does not assume
the risks of his employment, and such risks may not be shifted to him
merely by assigning to him the duty of minimizing or eliminating
those risks. Consequently, courts have said that a seaman is under a
duty to follow orders. He is expected to perform the work assigned to
him in the designated place with whatever equipment and tools have
been supplied by his employer and subject to whatever supervision
has been provided by his employer.
74
Risks arising from deficiencies
in these respects are imposed on the employer as a matter of law even
in situations where an employee recognizes or in the exercise of
reasonable care should be aware of the risk of harm to himself. In
other words an employee will not be held to have assumed a risk even
where he recognizes that it is present.
75
Reflecting the case law in the circuit,
76
the Pattern Instructions in
the Fifth Circuit provide that the jury should be instructed as to the
73See
note 84 infra.
74
See text at notes 67-69, supra.
75In Socony-Vacuum Oil Co., supra note 62, 305 U.S. at 430-31, 432, the Court was faced
with the issue of whether or not assumption of risk was a defense in a situation where an
employee knowingly used an unsafe appliance despite the fact that a safe alternative was
available. In deciding that it was not a defense the Court said:
The seaman, while on his vessel, is subject to the rigorous discipline of the sea and has little
opportunity to appeal to the protection from abuse of power which the law makes readily
available to the landsman. His complaints to superior officers of unsafe working conditions
not infrequently provoke harsh treatment. He cannot leave the vessel while at sea. Abandon-
ment of it in port before his discharge, to avoid unnecessary dangers of employment, exposes
him to the risks of loss of pay and to the penalties for desertion. In the performance of his duty
he is often under the necessity of making quick decisions with little opportunity or capacity to
appraise the relative safety of alternative courses of action.
We think that the consistent development of the maritime law in conformity to its
traditional policy of affording adequate protection to seamen through an exaction of a high
degree of responsibility of owners for the seaworthiness of vessels and the safety of their
appliances will best be served by applying the rule of comparative negligence, rather than
that of assumption of risk, to the seaman who makes use of a defective appliance knowing
that a safe one is available.
76
Spinks, supra note 55; Ceja, supra note 68.
employer's duty to exercise reasonable care to provide its employ-
ees with a safe place to work.
77
In addition they provide for the
following
instruction:78
A seaman does not have the same control over his work conditions as
does a person who works on land. A seaman must, to a certain degree,
accept conditions as they are. Therefore, he is not required to devise a
safer method of doing the work or to ask for additional equipment. A
seaman's duty is to obey his superiors and do his work as he is
instructed. A seaman is not negligent if he follows the orders of his
captain, mate or other superior, even if those orders put him in peril, or
require him to use defective equipment.
The "circumstances" of a seaman's employment including his
reliance on his employer to provide a safe work place, his obligation
to follow orders, etc., must be considered in determining whether he
acted reasonably on the occasion in question. But taking those
"circumstances"
into account should not mean that a seaman is not
obligated to avoid injuries which in the exercise of reasonable care he
is able to avoid. Certainly he must not make matters worse. In
determining whether or not his employer owed him a duty and
whether or not his employer negligently breached that duty, it is fair
to consider that a very substantial burden has been placed on the
employer. Once it has been determined that his employer has
77Instruction 4.4 Negligence, Pattern Jury Instructions (Civil Cases) Prepared by the
Committee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992
Edition) provides:
Negligence under the Jones Act may consist of a failure to comply with a duty of law.
Employers of seamen have a duty to provide their employees with a reasonably safe place
to work. If you find that the plaintiff was injured because the defendant failed to provide
him with a reasonably safe place to work, and that the plaintiff's working conditions could
have been made safe through the exercise of reasonable care, then you must find that the
defendant was negligent.
The fact that the defendant conducted its operations in a manner similar to that of other
companies is not conclusive as to whether the defendant was negligent or not.
You must determine if the operation in question was reasonably safe under the
circumstances. The fact that a certain practice has continued for a long period of time does
not necessarily mean that it is reasonably safe under all circumstances. However, a
practice is not necessarily unsafe or unreasonable merely because it injures someone.
A seaman's employer is legally responsible for the negligence of one of his employees
while that employee is acting within the course of his job [employment].
If you find from a preponderance of the evidence that the defendant assigned the plaintiff
to perform a task that the plaintiff was not adequately trained to perform, you must find
that the defendant was negligent.
78
1nstruction 4.7 Contributory Negligence, Pattern Jury Instructions (Civil Cases) Prepared
by the Committee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992
Edition).
Vol. 25, No. 1
breached that duty then the conduct of the seaman must be examined
in the context of that breach of duty. A rule that would, in effect,
allow a seaman to say: "My employer has violated its duty to provide
me with a safe place to work and will be liable to me for all injuries
that ensue regardless of how unreasonably I respond to the risk,"
would seem absurd. On the contrary a rule that imposes a duty on a
seaman to act as a reasonable and prudent seaman would act under
similar circumstances does no violence to the letter or spirit of the
FELA-Jones Act legislation. Neither statute was enacted to reward
unreasonable conduct.
Yet, just as the word "slight" has created some uncertainty as to
the appropriate instruction on Jones Act negligence, a similar prob-
lem with the word "slight" has surfaced in some cases in the
instruction on contributory negligence. It is submitted that the
problem arises, at least as reflected in reported decisions, from taking
the language used by the court in Spinks v. Chevron Oil Company
79
out of context. There the court said inter alia that "the seaman's duty
to protect himself ... is slight." This has been reiterated in some
subsequent Fifth Circuit opinions
so
and the court in Brooks v. Great
Lakes Dredge Dock Company
8
held that an instruction on contrib-
utory negligence that a seaman must use "ordinary care under the
circumstances for his own safety" was incorrect and prejudicial error
because a seaman is under a duty to exercise only "slight care."
Compounding the problem is the fact that the Pattern Jury Instruc-
tions for District Judges in the Fifth Circuit were amended after
Brooks to include the following statement: "Always bear in mind that
a Jones Act seaman does not have a duty to use ordinary care for his
safety. He need only exercise slight care.' '82
In Spinks the trial court had found that both the employer-
defendant and the seaman-plaintiff acted negligently.
8 3
The issue on
79Spinks, supra note 55; Ceja, supra note 68.
8Bobb, supra note 71, at 1057-58; Ceja, supra note 68.
81
Supra note 70, at 538.
82Instruction 4.7 Contributory Negligence, Pattern Jury Instructions (Civil Cases) Prepared
by the Committee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992
Edition).
83
Spinks was a nineteen year old member of the crew of a barge. At the time of the accident
he had been aboard for eight months. Part of his job was to clean up oil sprayed from a platform
onto the barge. This was a two person job. One person handled the nozzle of the hose that was
used and the other had to keep the engine which propelled detergent through the hose working.
This involved keeping the engine supplied with fuel and detergent. This person also had to
watch the machine and spray its belt with a non-stick compound. The machine leaked liquid
soap constantly. On the day of the accident Spinks and a fellow seaman, Walker, were engaged
in the clean up operation. Walker was older and more experienced. He had been on the barge
January 1994
appeal was whether the trial court's finding that plaintiff's negligence
was the sole cause of his injury was correct as a matter of law. Thus,
the principal issue was whether the trial judge applied the proper
standard of Jones Act causation, i.e., whether employer negligence
contributed even in the slightest to plaintiff's injury. There was no
standard of care issue on appeal. The resolution of the causation issue
required the court to define the full scope of the employer's duty to
plaintiff. It is submitted that the court in Spinks was speaking to the
allocation of employment risks and not as to the standard of care. The
court said:8
The duty owed by an employer to a seaman is so broad that it
encompasses the duty to provide a safe place to work. (Citation
omitted) By comparison the seaman's duty to protect himself (the
ground for any countervailing legal interest serving to exculpate the
employer) is slight. His duty is to do the work assigned, not to find the
safest method of work. This is especially true, when his supervisor,
... , knows the working method used by the seaman, and does nothing
about it.
As between Spinks, a nineteen year old seaman, and his supervisor, it
cannot be said that Spinks alone had the duty to realize that carrying
for two and a half years. Walker handled the nozzle and Spinks tended to the engine. In order
to supply fuel and detergent to the engine Spinks had to proceed over a ramp to get the fuel and
the soap. He would fill up two buckets and proceed back over the ramp to the engine. He
carried a bucket weighing forty pounds in each hand. His supervisor had observed Walker and
Spinks carry out this work. Nether the supervisor nor Walker told Spinks not to carry two
buckets at a time. The soapy conditions on the ramp had existed for four hours and had not been
washed down by Walker and Spinks as it should have. Also there was available an absorbent
substance which might have made the footing less slippery. Spinks could have used it but
didn't. His supervisor did not direct him to use it. Spinks slipped on the ramp and injured
himself in the fall.
84507 F.2d at 223 (emphasis added). In determining whether a seaman should be found to
have been contributorily negligent several separate inquiries must be made. These inquiries
include: (1) Has the law allocated the particular risk which resulted in injury to the employer or
the employee? (2) If it is allocated to the employer, did employer's conduct fall below the
standard of reasonable care? (omitting causation inquiry) (3) If so (assuming causation by the
employer's conduct), did the employee's own conduct also fall below the standard of
reasonable care? (omitting causation inquiry regarding employee's conduct) The fact-finder
should take the allocation of risk into account not only in evaluating an employer's duty to its
employees but also in evaluating an employee's duty to care for his own safety. If the risk is
allocated solely to the employee, the employer is exculpated. If the law allocates the risk to the
employer, the conduct of the employer must be examined to determine whether it acted
unreasonably, that is, whether its conduct fell below the standard of reasonable care under the
circumstances. If the employer is found to have been negligent (assuming causation) then the
employee's conduct should be examined to determine whether he acted unreasonably, that is,
whether his conduct fell below the standard of reasonable care under the circumstances.
Vol. 25, No. I
two buckets was dangerous, or apply the anti-skid material, or to see
that the deck was washed down.
It is quite clear that the court is not talking about whether Spinks was
contributorily negligent, a finding which the court seemed to accept,
but rather whether or not employer negligence also caused his
injuries. The court focused on the scope of the employer's duty to
determine whether the employer was also to blame for the manner in
which Spinks performed his work and not on whether placing a duty
on the employer relieved Spinks of his duty to use due care. Nowhere
in the court's opinion in Spinks does the court even suggest, let alone
hold, that an employee does not have a duty to exercise reasonable
care under the circumstances for his own safety or that an employee
can be found contributorily negligent only when his conduct is grossly
unreasonable.
As stated earlier in this article, the FELA, the Jones Act and other
statutes providing for the safety of railroad workers and seamen have
been interpreted by the courts as placing a major responsibility for the
safety of employees on the employer and do not permit an employer
to shift these risks to the employee. Because the duty to provide
seamen with a seaworthy vessel and to otherwise provide a safe place
to work, including safe equipment, tools and supervision is the
employer's non-delegable duty, the employee does not have a duty to
rectify deficiencies in the workplace. He does not have the duty to
make the workplace safe for himself.
8 5
It is in this sense that the court
in Spinks characterized the employer's duty to care for the safety of
its employees as being "broad" and the employee's duty as being
"slight." The court was simply saying that in allocating the risks of
employment, the law imposes a heavier burden on the employer than
on the employee.
86
Spinks was a non-jury trial. The court of appeals never discussed
jury instructions; there was no occasion to do so. The discussion of
95Of course, an employer may delegate to its employees the duty to make the vessel safe and
order its employees to always act carefully. But such a delegation does not relieve an employer
of its legal duty to provide a safe place to work. To hold otherwise would be to allow an
employer to contract out of its legal obligations to its employees simply by contractually
imposing its duties on its employees. Kelley v. Sun Transp. Co., 900 F.2d 1027, 1990 AMC 2209
(7th Cir. 1990); Yehia, supra note 46, 898 F.2d at 1183; McCoy v. United States, 689 F.2d 11%,
1983 AMC 2809 (4th Cir. 1982). CL Walker v. Lykes Bros. S.S. Co., 193 F.2d 772, 1952 AMC
269 (2d Cir. 1952). See discussion of these cases and others bearing on the point, infra.
8fTe contributory negligence issue is different. Once it has been determined that an
employer violated its duty thereby creating a risk of harm to an employee, what then is the
employees duty to protect himself?
Janwa I N4
the allocation of employment risks related to a legal issue, one that
was for the court to resolve, not the jury. The FELA and the Jones
Act, as they have been interpreted by the courts, allocate employ-
ment risks as a matter of law. Included within those risks are those
that emanate from an unsafe work place. The courts have determined
that it is the employer's duty to make the work place safe (the
employer's "broad" duty),87 A jury is not asked to determine
whether an employer has a duty to provide a safe place to work. That
is a legal question that has already been answered by the Supreme
Court.U Therefore, the jury is instructed that an employer has a duty
to provide a safe place to work. Furthermore, when appropriate, the
court may instruct the jury as to the scope of that duty, such as to
provide safe tools and appliances. Once the jury has been so
instructed, it must determine whether or not the work place was
unsafe, and if so whether or not the employer in the exercise of
reasonable care could have made if safe. In Spinks the court con-
cluded that the scope of the employer's duty extended to providing
adequate instructions and supervision to a young, inexperienced
employee. Where an employer assigns work to such an employee and
does not provide adequate instructions and supervision, the employ-
ee's negligence in carrying out his duties is attributable at least in part
to his employer. In other words, Spinks' employer should have
anticipated that this young and inexperienced employee might endan-
ger himself by selecting an inappropriate and unsafe method for doing
the work, and the employer should have taken steps to prevent this
from occurring. The holding in Spinks is simply that under certain
circumstances an employee's negligence may also be attributed to his
employer if the employer failed to properly supervise the work or to
give proper orders as to how the work should be carried out.
Once an employer has breached its duty to provide a safe place to
work and has created a risk of harm to an employee, what duty, if
any, does the employee have to care for his own safety? This question
goes to the standard of care imposed on an employee to avoid injury
to himself. This question was not addressed in Spinks and the trial
court's finding that plaintiff had been contributorily negligent was not
disturbed. Spinks only discussed the scope of an employer's duty and
"Bailey, supra note 41; Atchison T.& S.F. R. Co., 480 U.S. 558 (1987); Ragsdell, supra note
46, 688 F.2d at 1283; Yehia, supra note 46, 898 F.2d at 1183; Dempsey, supra note 28; Ackley,
supra note 48; Spinks, supra note 48; Ceja, supra note 68. Also see, Sitzrnan, supra note 12, 21
Creighton L. Rev. at 1081; De Parcq, supra note 9, 18 L. & Contemp.- Prob. at 276.
OBailey v. Central Vermont Ry., 319 U.S. 350 (1943).
Vol. 25, No. I
January I94 "Slight Negligence," "Slight Care"?
employer negligence. It did not discuss the appropriate standard of
care to be applied in determining contributory negligence.
It is submitted that the courts in Bobb
89
and later in Brooks
9o
took
the use of the word "slight" as used in Spinks out of context and
applied it not only to the allocation of employment risks between
employer and employee, but to the standard of care by which an
employee's conduct is evaluated. In Bobb, the court, in upholding the
trial court's refusal to grant plaintiff's motion for a directed verdict on
the issue of contributory negligence, said: "The language of Spinks
considered together with its holding, indicates, contrary to plaintiff's
argument, that the seaman has some duty to use reasonable care,
even though that duty is slight."
91
The court also said: "Although the
jury should be properly instructed as to the slight duty of care
required by a seaman, the question of a seaman's negligence in this
case remained for the jury."
92
Thus, the court applied the term
"slight" not only to the scope of duty but to the standard of care. In
Bobb the reference to "slight duty of care" was dictum, but in Brooks
the appellate court stated:
The court instructed the jury that Brooks, a Jones Act seaman, was
required to use ordinary care under the circumstances for his own
safety at the time of the accident. This court has consistently held that,
under the Jones Act, a seaman's duty to protect himself is not ordinary
care, but slight care.
93
89Supra note 71, 648 F.2d at 1057-58.
9Supra note 70, 754 F.2d at 538.
9 1
Bobb, 648 F.2d at 1057-58 (emphasis added). It is not altogether clear what the court
means. A duty to exercise reasonable care and a duty to exercise slight care are quite different
standards. The court's subsequent reference to a seaman's "slight duty of care" does nothing
to dispel the confusion. In the Brooks case, the court refers only to "slight care." In a later
case, Pickle v. International Oilfield Divers, Inc., the court used the expression "slight, not
ordinary care," in its original opinion published at 1987 AMC 2038, 2042. In the court's
modified opinion, published in the Federal Reporter, the court changed the standard of care to
"a slight duty to use reasonable care." 791 F.2d 1237,1240 (5th Cir. 1986). The Pickle case is
discussed at length and criticized in Miles, supra note 8, 13 Tul. Mar. L. J. at 90--98.
92Bobb, 648 F.2d at 1057-58 (emphasis added). The court did say that if "the actions taken
by the plaintiff were examples of 'bad seamanship' then the juiy might be warranted in finding
that the plaintiff had not fulfilled his slight duty of care." Id. at 1058.
93754 F.2d at 538. The court cited three cases for this proposition. The first, Thezan v.
Maritime Overseas Corp., 708 F.2d 175, 1985 AMC 1278 (5th Cir. 1983), cert. denied, 464 U.S.
1050 (1984), does not really support the statement in Brooks. In Thezan the court said that
"While the seaman's duty to protect himself is slight, the duty does exist." Id. at 180. It then
went on to state that: "A seaman has no duty to find the safest way to perform his work. But
where it is shown that there existed a safe alternative available of which he knew or should have
known, a seaman's course of action can be considered in determining whether he was
negligent." Id. at 181. The court indicated further that "age and experience can be considered
The court then held that the "erroneous" instruction was prejudicial
error and remanded the case to the trial court. As has already been
observed by one commentator, the Fifth Circuit has not consistently
applied the Bobb-Brooks "slight duty of care" standard.
94
The court,
however, has not repudiated the "duty of slight care" approach
either, and it is being perpetuated in the Pattern Instructions used in
the Fifth Circuit. It is interesting to note that the 1983 edition of the
Fifth Circuit Pattern Instructions
95
published prior to Brooks did not
refer to the seaman's "slight duty of care." That language was added
in the 1992 edition of the Instructions
96
after Brooks was decided.
Also the "slight duty of care" instruction is set out in brackets
indicating, perhaps, that although it is recommended, it should be
carefully examined because it may not be appropriate in all cases.
Furthermore, it is interesting that neither the Model Instructions in
the Ninth Circuit nor the Pattern Instructions in the Eleventh Circuit
make any reference to "slight duty of care." To the contrary, both
use the "reasonably careful person" standard.
97
However, the use of
in determining whether a seaman may properly be charged with a duty to select a safe course
of conduct from among safe and unsafe alternatives." Id. In this case, plaintiffhad been a
second engineer for 11 years. His duties included maintenance of boilers which required the
removal of waterwell doors. This was a difficult job because the doors weighed about 170
pounds. Four men were available to help him. He had received help in the past, but he also had
done the job alone. While doing the job himself he herniated a disc. He did not ask for help,
although it was available. He had control over the watch, the men working for him, and had the
authority to order them to help him. The trial court's denial of plaintiff's motion for a judgment
not withstanding the verdict on contributory negligence was affirmed as was the jury's finding
that plaintiff was 90% contributorily negligent. The second case, Savoie v. Otto Candies, Inc.,
692 F.2d 363, 1985 AMC 220 (5th Cir. 1982), also does not clearly support Brooks. There the
court said that: "A seaman has some duty to use reasonable care to protect himself even though
that duty is slight," 692 F.2d at 371. The court uses the term "reasonable" to qualify "care"
which is the usual standard but adds a qualification that the duty is only "slight." It is difficult
to understand the qualification. The court did uphold the jury's finding of contributory
negligence: "Where a seaman knowingly exposes himself to conditions of employment while
aware of an illness or disability which makes those conditions unsafe to him, or where a seaman
has the possibility of securing relief from unsafe conditions by informing his superiors of them,
but continues to work without doing so, he may be found to be contributorily negligent." The
third case, Bobb v. Modern Products, Inc., 648 F.2d 1051 (5th Cir. 1981), has already been
referred to and does provide some support for Brooks in its reference to a jury instruction on
"slight duty of care."
"'Miles, supra note 8, 13 Tul. Mar. L.J. at 90-98.
95
Pattern Jury Instructions (Civil Cases) Prepared by the Committee on Pattern Jury
Instructions, District Judges Association, Fifth Circuit (1983 Edition).
"Pattern Jury Instructions (Civil Cases) Prepared by the Committee on Pattern Jury
Instructions, District Judges Association, Fifth Circuit (1992 Edition).
97In the Ninth Circuit, the instructions define negligence to include that of the plaintiff
("Reasonable care is the degree of care that reasonably prudent persons would use under like
circumstances to avoid injury to themselves or others"). Manual of Model Jury Instructions for
Vol. -25. No. 1
the "slight duty of care" instruction has not been limited to courts
within the Fifth Circuit as other courts also have relied on the Brooks
holding.
98
The "slight duty" standard of care, which in reality translates into
a standard in which a seaman could be found to have been contrib-
utorily negligent only for his gross negligence, seems to have no basis
in law and can only be misleading. The United States Supreme Court
has neither adopted nor suggested that a seaman's duty of care is
anything other than "reasonable care under the circumstances." It
does not appear that any court of appeals other than the Fifth Circuit
has referred to the seaman's standard of care for his own safety as
being only "slight." The term "slight" is a comparative term, and it
was so used in Spinks. There, in discussing the allocation of employ-
ment risks, the court compared the employer's "broad" duty to
supply a safe place to work with the "slight" duty imposed on the
seaman. It was not, however, saying a fact finder is to make any
comparisons. By contrast merely referring to a seaman's "slight
duty" to care for his safety as in the Fifth Circuit Pattern Instructions
without providing any context cannot have much meaning to a lay
juror. Unless the term is explained by comparing it to something else,
such as a greater standard of care, it is difficult to understand what the
term means. The Spinks court used the term "slight" in comparing
the duties imposed on employers and employees with respect to a
safe place to work. Spinks did not use the term "slight" to distinguish
between a duty to exercise "ordinary" or "reasonable care" under
the circumstances, the traditional standard for determining contribu-
tory negligence, and a lesser standard, that is, "slight care under the
circumstances." It did not adopt "slight duty" as the proper standard
of contributory negligence. A "slight duty" standard of care in this
context would preclude a finding of contributory negligence even
though a seaman acted unreasonably unless his conduct was a gross
departure from the conduct of a reasonable seaman under the
circumstances.
the Ninth Circuit 9.01.02 (1993) (emphasis added). Thus, the plaintiff's duty to protect himself
from injury is the same as the defendant's duty to protect against injuring others.
The Instructions for the Eleventh Circuit define negligence as "the failure to use reasonable
care. Reasonable care is that degree of care which a reasonably careful person would use under
like circumstances." To invoke the rule of comparative negligence defendant need merely
prove by a preponderance of evidence that the plaintiff was "negligent" as that term is defined
above. Pattern Jury Instructions Prepared by the Committee on Pattern Jury Instructions,
District Judges Association, Eleventh Circuit (1990 Edition).
9Trindle v. Sonat Marine, Inc., 1990 AMC 867 (E.D. Pa. 1990).
January 1094
Use of a "slight duty" standard of care is unfair to employers
because it invites juries to disregard a seaman's unreasonable behav-
ior except in the most extreme circumstances. It completely disre-
gards the variety of circumstances in which seamen are injured.
Seamen are not a uniform group, and they are injured in a very wide
variety of circumstances. This is particularly true as the scope of the
persons who qualify for seaman status has been broadened to include
persons who do not perform the traditional seaman's navigation and
transportation functions, such as certain oil and gas workers. Con-
temporary "seamen" vary greatly in training and experience. Com-
pare the raw recruit in Spinks
99
with the experienced officer in Thezan
v. Maritime Overseas Corp.
1
00 Although perhaps not much could
have been expected of Spinks under the circumstances, even a
sympathetic appellate court in that case did not disturb the finding
that Spinks was contributorily negligent in the way in which he did his
work. Much more, however, ought to be expected of older personnel
who have the experience and training which should enable them to
avoid injury.
Let us consider some situations that may shed some light on the
appropriate standard for contributory negligence.
1. Dangers Inherent in the Job
It is recognized that a seaman's work is dangerous and that a
seaman cannot be faulted for exposing himself to those risks. If a
seaman sails on a vessel that is exposed to perils of the sea, he cannot
be held to be contributorily negligent simply because he is injured, for
example, from being thrown about during a storm.
101
Likewise, a
seaman whose job is fighting fires cannot be said to be negligent
merely because he is injured while fighting a fire. A seaman whose job
it is to repair defective equipment which has leaked oil on the deck,
should not be held to be contributorily negligent if he has to walk on
"For a more detailed statement of the facts in Spinks see note 83, supra.
100708 F.2d 175, 1985 AMC 1050 (5th Cir. 1983), cert. denied, 464 U.S. 1050 (1984). Plaintiff
had been a chief engineer. He had done the particular job on which he was injured on other
occasions and was aware of the potential danger. He did not ask for help, although it was
available. He had full control over the men who were working for him on his watch and he had
the authority to order them to help him. For a more detailed statement of the facts in Thezan,
see note 93, supra.
"lHall, supra note 56, 688 F.2d at 1066 (6th Cir. 1982) (seaman who had not been told to
leave the deck was not contributorily negligent in continuing to perform assigned task after
rough weather had arisen).
Vol. 25, No. 1
the slippery deck and slips and falls.1
0 2
In each of these situations the
employer, although not an insurer of the safety of its employees, must
exercise reasonable care to provide for the safety of its employees.
The fireman, for example, must be given adequate protective gear and
proper equipment to fight the fire. Unless he has been hired because
of his experience and training, he must be provided either with proper
supervision or training or both. In all of these situations, an employee
should not be considered contributorily negligent just because he
knowingly undertook to perform a dangerous job. The reason that the
employee is not contributorily negligent is that in each of these
situations his acceptance of the risk is reasonable under the circum-
stances and not because he has a duty to exercise only slight care for
his safety.
2. Following Orders
Although most employment situations involve hierarchies and
chains of command, the courts have suggested that the duty to follow
orders has special meaning at sea. 103 The consequences of disobeying
orders have been considered so severe or impractical that courts have
concluded that seamen are expected to obey orders. Thus, if a
seaman is ordered to engage in work in which he encounters risk, he
cannot be faulted for doing so. This is true not only where the risk is
inherent in the work, but also where the risk is created by the
negligence of the employer.104 If a seaman is ordered to fasten a line
on deck during a storm he is not negligent merely because he has
exposed himself to risk in obeying the order. If an employee is
assigned to work with defective equipment or provided with defective
tools and is ordered or expected to use them, the employee should not
be found to be contributorily negligent. Again the reason for conclud-
ing that the seaman is not negligent is that his conduct is not
unreasonable under these circumstances.
3. Seaman's Negligence
The examples above assume no independent act of negligence on
the part of the seaman except for undertaking to do his job. Some
1
2
McCoy, supra note 85, 689 F.2d at 1198.
1
0 3
Socony-Vacuum Oil Co., supra note 62, 305 U.S. at 430-31.
14See cases cited in note 56 supra. Also see, Diebold v. Moore McCormack Bulk Transport
Lines, Inc., 805 F.2d 55, 1987 AMC 308 (2d Cir. 1986).
January I N4
courts have said that '"... the defense of contributory negligence
requires evidence of some negligent act or omission by the plaintiff
other than his knowledgeable acceptance of a dangerous condi-
tion."'1
5
What happens, however, when the seaman's careless
conduct or mistake itself creates or contributes to the risk? A simple
answer is not easy to come by. In some circumstances negligence of
the seaman results in a finding of no negligence on the part of the
employer. In other circumstances negligence of the seaman coupled
with the employer's negligence is not a defense but results in a
diminution of recovery, i.e., the seaman is contributorily negligent.
Finally, under certain circumstances a seaman's error or mistake or
his knowingly exposing himself to risk is not considered negligence at
all, and fault, if there be any, is attributed to the employer. Examples
of this last category include the situations referred to above as
dangers of the job and following orders. It should also be noted that
violation of a statute by an employer prevents it from using contrib-
utory negligence to diminish plaintiff's recovery.
0 6
4. Disobedience of Orders
It seems fair that if following orders insulates an employee from a
charge of contributory negligence, disobeying orders should, at least,
make the employee contributorily negligent if, under the circum-
stances, it does not relieve the employer of liability. Where a seaman
has been instructed to wear safety gear such as a life jacket and
drowns when he falls into the water after having removed his life
jacket, his negligence may be the sole cause of his death.
107
In such
situations, there is no employer negligence on which to predicate a
Jones Act claim. If the disobedience concurs with employer negli-
gence, then the employee should be held to be contributorily negli-
gent. Likewise, if through the employer's negligence oil is leaked
from a piece of machinery onto the deck and a seaman, while
repairing the machine, slips and falls injuring himself, the seaman
should be held to be contributorily negligent if he violated a standing
l
0 5
Hall, supra note 56, 688 F.2d at 1066 (quoting Tolar v. Kinsman Marine Transport Co.,
618 F.2d 1193, 1196, 1983 AMC 283 (6th Cir. 1980)).
16Roy Crook & Sons, Inc. v. Allen, 778 F.2d 1037, 1985 AMC 2731 (5th Cir. 1985).
1TCooperT. Smith, supra note 18, 929 F.2d at 1078. Where an employee has been warned
of a danger, the employer may be found not to have been negligent where the danger itself (open
hatchway) was not the product of employer negligence. Valentine v. St. Louis Ship Bldg. Co.,
620 F. Supp. 1480, 1988 AMC 1216 (E.D.Mo. 1985), aff'd without opinion, 802 F.2d 464 (8th Cir.
1986).
Vol. 25, No. 1
order requiring personnel to wear certain foot gear designed to reduce
the possibility of slipping. In the latter instance, the employee's
conduct is unreasonable under the circumstances. Of course, if he
had been ordered by his superior to fix the equipment "immediately"
and had no time to go to his quarters to get the shoes, his conduct
might be considered reasonable under those circumstances.
5. Disregard of a Safe Alternative
Where an employer provides an unsafe place to work and the
employee shas no choice but to accept that condition, he is not
contributorily negligent for trying to do his job. On the other hand
where the circumstances are such that the employee can avoid or
minimize a risk by utilizing a safe alternative which is available to him
and of which he knows or of which he reasonably ought to know, then
the employee should be held to be contributorily negligent if he
unreasonably fails to follow the safe course of action.
0 8
Suppose an
employee discovers that he has been provided with a defective ladder
to perform his work, and he knows that in another part of the ship
there are other ladders in good condition. The employee, out of
laziness, decides to try to make do with the defective ladder. If he
falls and injures himself, he should be found contributorily negligent.
Suppose the employer unknowingly (but negligently) furnishes an
employee with a ladder which the employee finds to be defective.
Based on past experience or on other circumstances, the employee
has reason to believe that if he calls the defect to the attention of his
supervisor, he would be told not to use it until it could be replaced
18Socony-Vacuum Oil Co., supra note 62; Palermo v. Luckenbach Steamship Co., Inc., 355
U.S. 20, 1957 AMC 2275 (1957), modified, 355 U.S. 910 (1958); Burden v. Evansville Materials,
Inc., 840 F.2d 343 (6th Cir. 1988) (could have asked for help); Thezan, supra note 93 (could have
asked for help); Ceja, supra note 62 (as to use of defective tow line - appellate court rejects
finding of contributory negligence because there was no showing of safe alternative as plaintiff
used the only one available; upholds finding based on plaintiff's refusal to heed admonition to
move away from dangerous condition); American President Lines, Ltd. v. Welch, 377 F.2d 501,
1967 AMC 2223 (9th Cir. 1967), cert. denied, 389 U.S. 940 (1967).
In Savoie, supra note 93, 692 F.2d at 372, the court stated:
Where a seaman knowingly exposes himself to conditions of employment while aware of
an illness or disability which makes those conditions unsafe to him, or where a seaman has
the possibility of securing relief from unsafe conditions by informing his superiors of them,
but continues to work without doing so, he may be found to be contributorily negligent.
In Webb v. Dresser Industries, 536 F.2d 603, 608, 1976 AMC 2671 (5th Cir. 1976), cert. denied,
429 U.S. 1121 (1977), the court said:
mhe use of unsafe equipment and methods in the face of an available safe alternative,....
or the failure to take available action to minimize the dangers in a necessarily risky, course
of action, requires a finding of comparative fault.
January 199
with a proper ladder. It would seem that if the employer were to be
found negligent under the circumstances, then the use of the ladder
by the employee should be contributory negligence.
1
09 For contribu-
tory negligence to apply in these situations, however, the employee
must actually have had a safe option available and his failure to utilize
it must have been unreasonable under the circumstances.
How then does one reconcile statements to the effect that an
employee does not have a "duty to find the safest way to perform the
work" with the rule that a failure to utilize a reasonably available safe
alternative may result in a finding of contributory negligence? In the
initial assignment of work to a seaman, the law imposes on the
employer the duty to assess the risks presented by that task and the
duty to take precautionary measures. In this sense, it is the employ-
er's responsibility to find the safest method for performing the work.
It is not the seaman's responsibility to substitute for the orders or
assignment he has been given his own ideas about how the work
should be done or whether it should be done at all. This is particularly
true in the case of lower level employees.11
0
If the orders or
assignment subject an employee to unreasonable risk of harm, the
employer has breached its duty to its employee and is negligent.
Where the seaman has no choice but to obey, he should not be
faulted.
Thus, under certain circumstances, a seaman may assume that his
,employer has chosen to expose him to risk and that he has no choice,
no available safer alternative. In these situations the seaman should
not be faulted for doing what he was told to do in spite of the risk. But
circumstances vary. Suppose an employer tells his employee: "Nev-
10
9
Thezan, supra note 93; Savoie, supra note 93; Webb, supra note 108. If the employee asks
for assistance or for proper tools and such are not forthcoming he is not contributorily negligent
,in proceeding with the situation as it is despite his knowledge of the risk. Theriot v. J. Ray
McDermott & Co., 742 F.2d 877 (5th Cir. 1984).
I
0
The cases relied on by the court in Spinks illustrate the point. Those cases involved claims
brought by longshoremen (Sieracki seamen) based on unseaworthiness. In Ballwanz v.
Isthmian Lines, Inc., 319 F.2d 457, 462, 1964 AMC 1480 (4th Cir. 1963), cert. denied, 376 U.S.
970 (1964), the court said:
The plaintiff was one of a gang of eight longshoremen working in the hold of the defendant
ship. He had no responsibility for, or authority over, any of his fellow workers. His duty
was to do his work as he was instructed. He was in no sense obligated to protest against
the method of operation which he had been instructed to follow or to devise a safer
method, nor was he obligated to call for additional or different equipment. If the doctrine
of seaworthiness means anything, it is totally repugnant to the doctrine of assumption of
risk on the part of seamen. The plaintiff in this case was at the very bottom of the hierarchy
of command.
Also see, Grzybowski v. Arrow Barge Co., 283 F.2d 481 (4th Cir. 1960).
Vol. 25, No. I
er use defective tools! If the tools you are given are not in good
working order, get some other tools that are in good working order or
ask your supervisor to do so. Never, never expose yourself to risk of
injury by using defective equipment!" Can there be any doubt that a
seaman is contributorily negligent if he knowingly uses a defective
tool when he could. have procured a properly functioning tool by
following his employer's admonition? Yet even in the absence of an
explicit admonition there are other situations in which a seaman
should assume that his employer does not intend to expose him to a
particular risk of harm and that his employer expects him to use his
common-'sense and his experience to avoid that risk or, at least, to
minimize it. In other words, a seaman may assume that his employer
does not expect him to act foolishly.
111
When an employer provides
an employee with tools some of which are in good condition and some
of which are defective, an employee has no right to assume that his
employer wants him to use the defective tools and thereby expose
himself to risk of injury. On the contrary, it is reasonable for both the
employee and his employer to assume that given the choice the
employee will use the good tool, and it is unreasonable for the
employee to think otherwise.
Suppose, however, an employer has furnished one tool only and this
tool is defective. If the employee uses it and injures himself is he
contributorily negligent? If the employee can obtain a similar tool in
good condition either from another part of the ship or simply by asking
his superior, it would be unreasonable for him to believe that his
II'Blevins v. United States, 769 F.2d 175, 178, 179 (4th Cir. 1985). In Blevins, the plaintiff
was 24 years old and was on his first voyage after attending a six month classroom training
program in marine engineering. He had been ordered to obtain some plywood. After he found
a stack of plywood chained to a bulkhead he removed the chains while standing on front of the
stack. When the chains were removed he attempted to obtain a sheet of plywood. In addition
to the plywood, the stack contained some heavy metal plates. The stack fell forward injuring
plaintiff. The finding of contributory negligence was afflirmed. The appellate court distinguished
this case from those where the seaman was exposed to an "inherently dangerous situation." It
acknowledged that while the seaman "was not responsible for finding the safest method of
work, he nevertheless had a duty to act reasonably to protect himself from harm." Id. at 179.
By standing in front of the stack while removing the chains he deliberately placed himself in
what he should have realized was an unreasonably dangerous situation. "In practical terms
Blevins, may have 'assumed the risk' that the unsecured plywood would fall; in legal terms he
acted negligently by placing himself in a zone of danger that he need not have encountered to
get the job done." Id. The court did take his youth and inexperience into account but agreed
with the trial court which said: '[o]ne should not need any maritime experience to realize that
boards leaning against a wall ,or other vertical object may tilt over and fall when the chains
securing them are removed."' The court of appeals added: "This case did not involve a hidden
danger or an unforeseeable risk flowing from an otherwise obvious danger. *** Even the
greenest seaman must be charged with knowledge of the law of gravity." Id.
January 1994
employer did not expect him to procure a properly functioning tool
unless there are circumstances which would support that belief, such as
where his request for a substitute is denied or he is told to make do with
what has been given to him. In other words the issue boils down to
whether, under the circumstances then appertaining including custom
and the realities of maritime employment, the seaman truly has a safer
alternative available to him. If he did, and if he was aware or should have
been aware of it, then his use of the defective tool was unreasonable.
Under these circumstances, he is contributorily negligent, not because
he breached a duty to find the safest method to do the work, but because
he unnecessarily exposed himself to risk under circumstances where it
was unreasonable for him to do so.
Conduct Outside the Scope of Employment
When an employee acts for personal reasons and not in a manner
authorized or required by his employment, his employer either may
not be liable at all or may be able to assert contributory negligence to
reduce the amount of damages. Suppose an employee starts a fight
with a fellow employee and is injured. Under these circumstances the
employee who started the fight will be held solely liable.
112
As another
example, suppose an employee is required to use a particular pas-
sageway to get to another part of the ship. Oil has leaked onto the
deck of the passageway and the employee is aware of that fact.
Remembering the fun he had sliding on the icy streets during his
childhood, he decides to see how far he can slide on the oil. In the
process of doing so he falls and injures himself. If the employer was
not negligent in allowing the oil to spill or in not cleaning it up, the
employee will be found solely at fault. If the employer has been
negligent in allowing the oil to spill and remain on the deck, it seems
clear that the employee was contributorily negligent. In the examples
discussed, the employee's conduct measured by the reasonable
person standard is clearly unreasonable under the circumstances.
Sole or Concurrent Negligence of Employees: The Sole Cause Rule
Under the FELA and the Jones Act, the fellow servant doctrine is
not a defense to a claim. If two seaman are working together and one
1120f course, if a superior officer was present and should have intervened in preventing the
fight or in terminating it, the employer may be found to have been negligent and the employee
contributorily negligent.
Vol. 25, No. 1
negligently injures the other that negligence is attributable to the
employer under the doctrine of respondeat superior. Suppose, how-
ever, a seaman is working alone and he negligently injures himself,
can his negligence be attributed to his employer so as to support a
Jones Act claim? The answer probably depends on whether the
negligence of the employee, under the circumstances then existing, is
considered to be the sole cause of his injury or whether it concurred
with employer negligence.
a. Inexperienced, Untrained or Low Level Employees
These situations usually present an issue for the jury. As in Spinks
the employee, the only "active" party, has made an error in per-
forming his work which resulted in injury to him. Spinks, for
example, decided to carry two buckets at a time, he failed to apply the
non-stick substance and he failed to wash down the area. The first
question in these cases is whether the employer was negligent at all.
As the Spinks court intimated, when an employer knows or should
know that an employee is inexperienced or untrained, it is the
employer's responsibility to issue proper orders or instructions,
provide training or supervision, etc. Even if the employee's mistake
amounts to negligence on his part, his negligence is not exclusive.
113
The employer is negligent not only because of what the employee did
but because of what the employer failed to do. If the employer is
found to be negligent, the second question is whether the employee's
mistake is entirely attributable to the negligence of the employer or
whether, under the circumstances the employee, as in Spinks, was
also negligent because his conduct was unreasonable even taking his
inexperience, youth, and lack of training into account. Just because
an employer is negligent does not mean that an employee is not
required to use common sense and whatever experience he does have
to avoid placing himself in danger or in extricating himself from
danger.
114
It is submitted that the standard of reasonable or ordinary
care under the circumstances is a fair and proper standard for
determining contributory negligence. A very important "circum-
stance" in these cases is the lack of knowledge, training and
1'3Not every mistake or error by an employee is negligence. In Spinks, for example, if the
only "mistake" the seaman made was in not applying the absorbent substance because he did
not know about it, never having been instructed on its availability and use, he should not have
been held to be negligent at all.
114
See Blevins v. United States, 769 F.2d at 178, 179 (4th Cir. 1985), described in more detail
in note 111, supra.
January I W4
experience of the injured employee. The employee may have per-
formed his work improperly, but under the circumstances one may
conclude that considering his lack of qualifications and lack of
instruction or supervision, that a reasonable inexperienced seaman
may have made the same mistake under similar circumstances. On
the other hand, as in Spinks, even youth and inexperience will not
excuse some errors of judgment.
b. Officers and Supervisory Personnel
When the employee is an officer or supervisor the analysis is
somewhat similar but there is a major difference. Officers on a vessel
are hired and entrusted with responsibility for the safety of the vessel,
crew, cargo and passengers. An employer may justifiably rely on their
training, skill and experience. They supervise the activities on the
vessel. Thus, when an officer is injured he should be able to recover
damages only when his injuries result from the negligence of others.
If the officer's negligence was the sole cause of his injuries then the
employer should not be liable.
115
If, however, the officer's negligence
combines with the negligence of others, then his contributory negli-
gence reduces the amount of his recovery."
6
A major distinction
between an officer and an inexperienced seaman is that the former is
supposed to supervise while the latter is entitled to proper supervi-
sion. It is submitted that the proper standard of care which should be
applied is "reasonable care under the circumstances" because it
would be contrary to reasonable expectations and basic fairness to
say that the master and mates on a vessel need exercise only "slight"
care for their own safety.
Some earlier cases had formulated a special rule for cases involving
an officer's negligence. In Walker v. Lykes Bros. S.S. Co.,"
7
the
Second Circuit referred to two forms of contributory negligence. It
said that it was necessary to; distinguish between the duty "the
injured party [in this case the Master] has to the wrongdoer" and "a
duty which the injured person has consciously assumed as a term of
nSRoche v. United States, 1990 AMC 26% (E.D. La. 1990). The court stated that plaintiff
who was a bosun in charge of tank cleaning operations "was provided both the ability and
option to lift the pump, as he contends was safe and appropriate, with two men; he cannot now
complain for having chosen otherwise." Id. at 2697. The court added that if the defendant was
liable that it would assign to the plaintiff "a large percentage of comparative fault." Id. at 2698
n.12.
"
6
See Thezan, supra note 93.
17193 F.2d 772, 1952 AMC 269 (2d Cir. 1952).
Vol. 25, No. 1
his employment." Breach of the former results in a diminution of
recovery while breach of the latter results in a bar to recovery. In this
case the Master failed to have some broken file cabinets in his
quarters repaired. His failure to do so was not merely a momentary
lapse but a breach of his contractual obligation to his employer. This
approach was followed by the First Circuit in Peymann v. Perini
Corporation.
118
There, a second engineer who had the primary
responsibility for performing certain work negligently exposed him-
self to injury and the court found that he was barred from recovery.
These cases stand for the proposition that where one has contractu-
ally undertaken to perform certain duties and has the primary
obligation for doing so, including the correction of defective condi-
tions, breach of this duty precludes recovery for injuries that result
from the breach. They suggest that even though there might be some
minimal preexisting employer negligence, the employer has a right to
have the employee properly perform his duties. These decisions do
not purport to be "sole negligence" cases, although this is alluded to
in Peymann. Recently, however, Peymann was distinguished by
excluding from the rule situations where the plaintiff was not respon-
sible for creating the condition that caused his injuries even though he
was ordered to correct the defective condition and was negligent in
not doing so.
1
1
9
In such situations the employer is entitled to rely on
the employee to exercise reasonable care, knowledge and skill as an
experienced person. The employee's failure to do so results in the
diminution of damages up to 100%. This appears to move closer to the
"sole fault" view preferred
in more recent decisions.
In Villers Seafood Co., Inc. v. Vest,
1 20
which involved a claim for
injuries by a Master based on allegations of a defective ladder, the
court first refused to hold that either the Master's knowledge of the
defective condition or his negligence in failing to discover and correct
it would bar recovery. It noted that assumption of risk and any
contributory negligence only mitigated damages. The court then
indicated that even if it followed the Walker-Peymann rule, it would
not extend it to situations where there "was no misconduct or actual
knowledge of an unseaworthy condition" despite the fact that it was
the Master's duty to keep the vessel in repair.
18507 F.2d 1318, 1975 AMC 1698 (lst Cir. 1974), cert. denied, 421 U.S. 914 (1975).
"
9
Joia v. Jo-Ja Service Corp., 817 F.2d 908, 1988 AMC 2259 (lst Cir. 1987), cert. denied, 484
U.S. 1008 (1988).
120813 F.2d 339, 1987 AMC 1850 (1 1th Cir. 1987).
January I99W
Kelley v. Sun Transportation Company
121
purports to adopt the
prevalent, contemporary rule, that is, that negligence of an officer or
of supervisory personnel does not totally bar recovery unless the
employee's negligence was the sole cause of the injury. The court
stated:
We believe that the modem cases after Walker and Peymann present
the prevalent rule of law in the United States. The inquiry at trial should
endeavor to apportion responsibility for the injury. This does not mean,
however, that a supervisory employee will recover in every case for.
injuries suffered on the ship. A ship's officer can be found to be
negligent with respect to his accident. If such negligence is the sole
cause of the injury, the employer's non-negligence bars recovery. See
Boudreaux v. Sea Drilling Corp., 427 F.2d 1160, 1161 (5th Cir. 1970).
As Judge Hand noted in Walker, the bar is not based on the contribu-
tory negligence of the officer, but on a finding of no negligence of the
employer. But when the employer is negligent, and that negligence is
based on activity other than that of the ship's officer, recovery is
permitted to the extent of the employer's negligence.
The defendant, Sun, would have the court acknowledge the supervi-
sory duties of Mr. Kelley as first mate and end the inquiry there.
Accepting such a proposition effectively would bar all ship's officers
from recovery for injuries caused at least in part by the negligence of
another seaman. This approach frustrates the congressional intent
embodied in the Jones Act, which was designed to give seamen an
available remedy for injuries sustained in an inherently dangerous
profession. Our rejection of a rule absolutely barring recovery by a
ship's officer comports with the statute's rejection of a harsh applica-
tion of contributory negligence.
c. Experienced Employees and Specialists
The most difficult situation arises when an experienced, skilled
employee is injured. The difficulty stems, however, not from the
contributory negligence issue, which can be readily resolved under
the standard of the reasonable seaman under the circumstances, but
from the issue of employer negligence. Let us consider an employee
whose duties include the maintenance and repair of equipment. He is
on the vessel, at least in part, to correct things that go wrong or to
prevent things from going wrong. Assume that a piece of equipment
malfunctions and he is dispatched to repair it. In attempting to repair
the defect he is injured. Like the officer, the specialist should be able
to recover when his injuries result from the negligence of others. If his
1
2 1
Supra note 85, 900 F.2d at 1031.
Vol. 25, No. 1
negligence combines with that of others, then his contributory
negligence should reduce the amount of his recovery.
Suppose, however, the only other negligence is that of the Master,
who knew of the defect in the equipment when the vessel left port.
The Master decided to take the risk that the defective equipment
would be sufficiently operational until the vessel reached its next port
where other repairs had been scheduled. He told the repairman to
keep an eye on the equipment. Assume that the Master's decision and
his action in pursuing the voyage instead of first having the defect
repaired would support a finding that the vessel and crew were
unreasonably exposed to risk of harm. When the equipment began to
malfunction, the repairman reported this to the Master, who in turn
told the repairman to fix the equipment. If, in attempting to repair the
equipment the repairman is injured through no fault of his own, he is
clearly entitled to recover damages. But suppose he negligently turns
a component of the equipment the wrong way causing it to come apart
with such force that part of it strikes him in the eye. It would seem
that he is still entitled to recover damages, subject to reduction
because of his contributory negligence.
It might be argued that the only reason he is on the vessel is to take
care of defects; this is part of his work. Thus, employer negligence
should not be considered the cause of his injury. What difference
should it make whether the risk (defect) arose with or without
employer negligence? When the employee confronted the situation he
faced a piece of defective equipment, regardless of its cause. In
essence the employer is arguing that either it was not negligent as to
the plaintiff or its negligence was superseded by the negligence of the
employee. Its negligence did not cause the employee's injury; the
employee's own negligence did. But there are several responses to
this argument. First, not every defect implicates the negligence of the
employer. If the employee had been injured through no fault of his
own, he would have had a valid claim against his employer under the
Jones Act if the employer had been negligent, but not otherwise.
Therefore, the presence of employer negligence is crucial. It is no
defense to argue that the same risk could have been created even
without employer negligence. Second, an employee does not assume
the risks of his employment, that is, those presented in repairing
defective equipment even when that is his job and he is aware of the
risk. Finally, the Jones Act rule on causation requires that employer
negligence play only the slightest role in bringing about the employ-
ee's injury. An employee may recover damages even where his own
January I9N4
negligence played the major role in bringing about his injury, although
in such circumstances his damages will be substantially reduced.
122
Suppose, however, that the defect had been latent and that the
employer had not been negligent in any respect. The sole negligence
is that of the repairman in turning the component the wrong way.
There should be no question that if the employer had been negligent
under these circumstances, the employee likewise should be found to
be contributorily negligent. The sticky question is whether the
negligence of the injured employee can be attributed to his employer
in the first place in a Jones Act action. The employee may argue that
an employer is liable for the negligent conduct of its employees. An
employer knows statistically that over a period of time some of his
employees will act negligently and that their negligent conduct will
cause harm to either the vessel, the cargo or to members of the crew.
What difference should it make which member of the crew is
negligent or which member of the crew is injured. If a member of the
crew negligently injures a member of the crew, the employer should
be liable even though the negligent employee and the injured em-
ployee are one and the same individual. The FELA and the Jones Act
have singled out two high risk occupations for federal safety protec-
tion. In doing so Congress recognized the danger to railroad workers
and seamen, including the risk that they might injure themselves.
The employer's counter argument is more compelling. The doctrine
of respondeat superior was created so as to protect third parties not
employees.
1 23
In fact, until abrogated by the FELA and the Jones
Act, the fellow servant doctrine precluded recovery by an employee
against his employer for injuries negligently inflicted by another
employee let alone self-inflicted injuries. When an employer hires an
employee who purports to have some expertise because of experi-
ence, training or education, the employer has a right to rely on that
expertise.
1 24
The FELA and Jones Act are predicated on liability
based on fault. They are not workers' compensation statutes. A
seaman is already protected under a strict liability regime under the
law of unseaworthiness
12 5
and under maintenance and cure he is even
1
22
Thezan, supra note 93 (90% contributory negligence).
1
23
St0ot v. D & D Catering Service, Inc., 618 F. Supp. 1274 (W.D. La. 1985), aftd, 807 F.2d
1197, 1987 AMC 1288 (5th Cir. 1987), cert. denied, 484 U.S. 821 (1987).
1
24
Joia, supra note 119; Nieva v. United States, 1988 AMC 2222 (S.D. N.Y.), aft'd, 831 F.2d
284 (2d Cir. 1987).
125As to unseaworthiness actions, see Matthews v. Ohio Barge Lines, Inc., 742 F.2d 202 (5th
Cir. 1984). In Snow v. Boat Dianne Lynn, Inc., 664 F. Supp. 30, 1988 AMC 512 (D. Me. 1987),
Vol. 25. No. 1
protected against injuries he negligently causes to himself. It is simply
unfair to attribute the negligence of an employee to his employer
when the employer reasonably believed that the employee was
competent to perform his duties in a proper manner. An employer
who has acted in all respects in a reasonable manner should not be
liable to an employee who was the sole cause of his own injuries.
26
Having said that, however, some caution must be used in applying the
rule of sole cause. The last example under consideration has assumed
that the employee was the sole cause of his injury. There undoubtedly
are situations, however, when even the work of an experienced
employee is subject to supervision or review. Where there is a basis
for finding employer negligence, apart from the actions of the injured
employee, then the rule of comparative negligence applies.
It is submitted that the standard of a reasonable seaman under the
circumstances is the proper standard to be applied to determine if a
seaman was contributorily negligent. It is the traditional rule. It is
clear and because it takes the circumstances of the occasion into
account, it is a flexible rule. The use of comparative negligence is fair
to the seaman. It is also fair to the seaman's employer because it falls
short of imposing de facto strict liability which is possible under a
"slight duty of care" standard
and holds an employee
responsible
to
the appropriate degree for his own behavior when it is determined to
be unreasonable under the circumstances.
CONCLUSION
Analytically, one might believe that the formulation of the employ-
er's duty of care for its employees' safety and the employees' duty to
care for their own safety are discrete considerations whereby the fact
finder must first determine if the defendant was negligent. If the
employer is found to have breached its duty to exercise reasonable
care for the safety of its employee, then the causation issue must be
the court refused to apply the rule to an unseaworthiness claim with respect to a preexisting
unseaworthy condition. The court said:
a seaman is solely responsible for his injuries only if the seaman creates the hazard that
causes the injury. If, however, the hazard is an existing condition of the ship, the ship itself
is unseaworthy ... , and the exception does not apply. The seaman's responsibility to
remedy a pre'existing hazard is relevant to the issue of the seaman's comparative fault,
and thus his damages.
126There is no compelling reason why the sole liability rationale should not be applicable to
experienced personnel. Sotell v. Maritime Overseas, Inc., 474 F.2d 794, 1973 AMC 579 (2d Cir.
1973); Donovan v. EssoShipping Company, 259 F.2d 65, 1958 AMC 2096 (3d Cir. 1958), cert.
denied, 359 U.S. 907 (1959).
J anuary I W4
resolved. If that "featherweight" burden has been satisfied, then the
employee's breach of duty becomes relevant on the issue of damages.
What appears to be analytically correct, however, ignores the appli-
cability of special rules which regulate the allocation of duties to the
employer, and which may determine whether or not the employer
owed and breached a duty to its employee. Thus, defining the
seaman's duty to himself and to his employer also defines the scope
of the employer's duty to the seaman. The more a seaman is required
to care for his own safety, the less responsibility is placed on his
employer. Conversely, the more a seaman is entitled to rely on the
employer for his safety, the greater is the employer's duty to care for
its employee.
127
Obviously, rules which impose on an employer a
duty to provide a safe place to work, including a seaworthy vessel,
directly affect and impose a greater or higher burden on the employer
than a rule which places the risk of an unsafe workplace on the
127This correlation between the scope of an employee's duty to care for his own safety and
the employer's duty to care for the safety of its employees was discussed in Ackley v. Chicago
& North Western Transp. Co., 820 F.2d 263, 267 (8th Cir. 1987). There the court remarked that:
What the Railroad is entitled to assume about its employees' behavior, therefore, bears
directly on the question of its own duties. See Atchison, T. & S. F. Ry. Co. v. Seamas, 201
F.2d 140, 142 (9th Cir. 1952). If the Railroad may assume that an employee will not act
negligently, then the scope of foreseeability charged to the Railroad is significantly
diminished.
Thus, the court concluded that in situations in which an employee is exposed to danger the
employer may not assume that the employee will take proper steps to avoid the danger. The
employer has the duty to provide a safe place to work and the employer must take steps to
eliminate the risk of danger.
In Bobb, supra note 71, the issue was whether the court should have directed a verdict that
the plaintiff was not contributorily negligent. After noting that contributory negligence does
"not defeat a seaman's claim" but merely reduces the claim in proportion to the plaintiff's fault,
the court stated that in order for contributory negligence to exist, the plaintiff must have a duty
in the first place to act or refrain from acting. In Ceja, supra note 68, the court remarked that
"[a]lthough the seaman has a duty to use reasonable care, this duty is tempered by the realities
of maritime employment 'which have been deemed ... to place large responsibility for his
safety on the owner.' " 690 F.2d at 1193 (citations omitted).
Notwithstanding that some courts have characterized the seaman's duty to care for himself
as being only "slight care," once seaman negligence has been established, it appears that the
employer's burden of showing causation is measured by the same lax standard as the seaman's
burden of proving that the employer's negligence caused his injury. Under the various
suggested jury instructions, the jury should be instructed that the plaintiff's damages will be
reduced to the extent that his negligence contributed to his injury. Pattern Jury Instruction 5.1
for District Judges in the Eleventh Circuit applies the same "legal cause" definition in regard
to assertions of the plaintiff's negligence. Pattern Jury Instruction 4.7 for District Judges in the
Fifth Circuit provides in pertinent part: "If you find that defendant was negligent ..., but you
also find that the accident was due partly to the contributory negligence of the plaintiff, then you
must determine the percentage the plaintiff's contributory negligence contributed to the
accident." In the Ninth Circuit, the same definition of negligence applies to the plaintiff and the
defendant.
Vol. 25, No. 1
seaman-employee.
128
But so do rules which relate to the abolition of
contributory negligence and assumption of risk as complete defenses.
The acknowledged danger of seamen's work and the duty of seamen
to follow orders prevent the shifting of certain risks to a seaman and
may preclude a finding of assumption of risk or contributory negli-
gence. From a pragmatic perspective, the application of the totality of
these rules
129
does make it easier for an employee to recover damages
in Jones Act and FELA cases than in ordinary negligence actions.130
It is submitted that although the jury should be instructed on these
rules when applicable, the jury should not be instructed on "slight
negligence" in regard to evaluating the defendant-employer's duty to
its employees and should not be instructed on the duty of "slight
care" of an employee with respect to his safety.
128Ceja, supra note 68, 690 F.2d at 1193 ("[U]nder the Jones Act, a vessel owner will be
deemed negligent if he fails to exercise reasonable care to maintain a reasonably safe work
environment."); Yehia, supra note 46, 898 F.2d at 1183, 1184, quoting McCoy v. United States,
689 F.2d 1196, 1198 (4th Cir. 1982) (employer has a duty to use reasonable care to provide safe
place to work and employee is entitled to an instruction to that effect); Joyce, supra note 62, 651
F.2d at 681 (Jones Act "negligence, however, may arise from a dangerous condition on or about
the ship, failure to use reasonable care to provide a seaman with a safe place to work, failure
to inspect the vessel for hazards and a variety of other breaches of the shipowner's duty of
care. "1).
129
Standard for allowing a case to be resolved by a jury, featherweight causation, safe place
to work, contributory negligence, and assumption of risk.
13Sitzman, supra note 12, 21 Creighton L. Rev. at 1082.
January 1994
Journal of Maritime Law and Commerce, Vol. 25, No. 1, January, 1994
Inconsistencies Between OPA '90 and
MARPOL 73/78: What is the Effect on Legal
Rights and Obligations of the United States
and Other Parties to MARPOL 73/78?
AKINTAYO A. AYORINDE*
I.
INTRODUCTION
The discharge of oil into the oceans and other navigable waters
poses an increasingly serious environmental problem. The problem of
marine pollution defies national solutions. It is a condition which
knows no national boundaries. This ambulatory character can frus-
trate efforts to deal with the problem because ofjurisdictional barriers
to acquiring control over its sources. The International Convention
for the Prevention of Pollution from Ships, and its 1978 Protocol
2
(MARPOL 73/78) are international responses to the threat of contam-
ination of the marine environment. These treaties establish global
standards for the prevention of vessel-source oil pollution.
On August 18, 1990, the United States adopted a new legal regime
governing the discharge or threat of discharge of oil on the navigable
waters adjoining shorelines and exclusive economic zone of the
United States.
3
The new legal regime, known as the Oil Pollution Act
*LL.B., University of Ife, Nigeria; M.C.J., Howard University School of Law; LL.M.
(International and Comparative Law), Georgetown University Law Center. The author would
like to thank Allan I. Mendelsohn, Esq., Warren L. Dean, Jr., Esq., and Admiral Sidney A.
Wallace for their assistance in the preparation of this article.
lInternational Convention for the Prevention of Pollution from Ships, Nov. 2, 1973, 12
I.L.M. 1319 [hereinafter "MARPOL 73"].
2
Protocol of 1978 Relating to the International Convention for the Prevention of Pollution
from Ships, 1973, Feb. 17, 1978, 17 I.L.M. 546 [hereinafter "MARPOL 73/78"].
3
Section 511(d) of the Restatement (Third) of The Foreign Relations Law of the United
States defines the exclusive economic zone as a belt of sea beyond the territorial sea that may
not exceed 200 nautical miles from the baseline from which the breadth of the territorial sea is
measured [hereinafter "Restatement (Third)"]. This subsection follows Articles 55 and 57 of
the United Nations Convention on the Law of the Sea, Dec. 10, 1982, U.N. Doc. A/Conf. 62/122
(1982), reprinted in 211 I.L.M. 1261 (1982). In 1983, President Ronald Reagan, by Proclamation
of 1990,
4
establishes a comprehensive federal scheme for the preven-
tion, removal, liability, compensation and penalties relating to oil
pollution. This article will consider the relationship between OPA '90
and MARPOL 73/78, more particularly addressing the following
questions. First, if OPA '90 confficts with an amendment to MAR-
POL 73/78 that is negotiated and enters into force after OPA '90's
effective date, which governs? Second, if the United States declares
that it does not accept an amendment to MARPOL 73/78 and the
amendment later enters into force, what is the effect on legal rights
and obligations under MARPOL 73/78 in respect of the United States
and other parties to MARPOL 73/78? The article will conclude by
making recommendations for actions which will be in the best
interests of international maritime trade and protection of the marine
environment.
II.
THE INTERNATIONAL MARITIME ORGANIZATION
For a host of reasons, the establishment of an inter-governmental
organization concerned exclusively with merchant shipping after
World War II was inevitable. The establishment of the International
Civil Aviation Organization (ICAO) by an international convention in
19445 undoubtedly provided the final impetus. Thereafter, a counter-
part inter-governmental organization for maritime affairs became a
political as well as practical necessity. The International Maritime
Organization
6
was conceived at an international conference in
No. 5030, established an exclusive economic zone of the United States and asserted rights over
natural resources thereof, both living and nonliving, as well as over economic activities in the
zone. 48 Fed. Reg. 10601 (1983); 3 C.F.R. 2 (1983); 16 U.S.C. 1453; 83 Dep't. State Bull.,
No. 2075, at 71 (1983). The proclamation also asserted United States jurisdiction over all
artificial islands, as well as installations and structures in the zone having economic purposes.
In respect of protection and preservation of the marine environment, the proclamation declared
that the United States would exercise its rights to the exclusive economic zone in accordance
with the rules of international law and that other states will enjoy in the zone the high seas
freedoms of navigation, overflight, the laying of submarine cables and pipelines, and other
internationally lawful uses of the sea.
4
0il Pollution Act of 1990, Pub. L. No. 101-380, 104 Stat. 484 (1990), reprinted in 1990 U.S.
Code & Admin. News 484; 33 U.S.C. 2701-61, 43 U.S.C. H 1642, 1651, 1653, 1656, 26
U.S.C. 4612 & 9509 (1990) [hereinafter "OPA '90"].
5
Convention on International Civil Aviation, Dec. 7, 1944,61 Stat. 1180, T.I.A.S. No. 1591,
15 U.N.T.S. 295.
6
The original official title was Convention on the Intergovernmental Maritime Consultative
Organization, March 6, 1948, 9 U.S.T. 621, T.I.A.S. No. 4044. The title was changed to the
Convention on the International Maritime Organization, Nov. 14, 1975, IMCO No. 68.01.B
(entered into force May 22, 1982). Amendments to the IMCO Convention are as follows: Sept.
Vol. 25, No. I
OPA '90 and MARPOL 73/78
Geneva in 1948, but its governing Convention did not enter into force
until March 17, 1958 and its first organizational assembly met in
London in January 1959.
A. IMO'S Historical Development
A number of organizations preceded the establishment of IMO.
The Comitd Maritime International
7
created in 1897, and still in
existence today, had been responsible for the preparation of a number
of conventions dealing with, among other issues, collisions, salvage
and assistance at sea, limitation of shipowners' liability and exemp-
tion clauses in bills of lading.
During the First World War, the need to coordinate the allocation
of available tonnage among the Allied Powers resulted in the creation
of the Allied Maritime Transport Council, which lasted from 1917 to
1919. The advent of the Second World War again prompted the major
allies to provide for the effective utilization of their shipping re-
sources. As a result, the Combined Shipping Adjustment Board was
created in 1942. In 1945, most of its functions were transferred to the
short-lived United Maritime Authority. The purpose of the Authority
was to ensure the continued availability of the tonnage resources of
the various nations in light of the changed conditions prevailing
during the later phases of the Second World War.
When the United Maritime Authority was dissolved in 1946, after
the termination of hostilities, it was succeeded by the United Mari-
time Consultative Council, itself a predecessor of the Provisional
Maritime Consultative Council (PMCC) created in 1947. The PMCC
existed until the foundation of IMO. Matters related to shipping were
also discussed within the League of Nations and the United Nations.
The League had created a Committee for Communications and
Transit in 1921. In 1946, that Committee transferred its functions to
the Temporary Transport and Communication Commission of the
Economic and Social Council of the United Nations. In 1947, the
body was replaced by a permanent Transport and Communication
15, 1964, 18 U.S.T. 1299, T.I.A.S. No. 6285 (entered into force Oct. 6, 1967); Sept. 28, 1965,
19 U.S.T. 4855, T.I.A.S. No. 6490 (entered into force Nov. 3, 1968); Oct. 17, 1974, 28 U.S.T.
4607, T.I.A.S. No. 8606 (entered into force Apr. 1, 1978); Nov. 14, 1975, IMCO No. 68.01.B
(entered into force May 22, 1982) [hereinafter "IMO"]. See generally, Lampe, The New
International Maritime Organization and Its Place In Development of International Maritime
Law, 14 J. Mar. L. & Com. 305 (1983).
7
Berlingieri, The Work of the Comitt Maritime International: Past, Present and Future, 57
Tul. L. Rev. 1260 (1983).
JanuarJy 1994
Commission.
8
It was against this background of temporary and ad hoc
organizations that IMO came into being.
9
The IMO is a specialized
agency of the United Nations in the field of shipping. It is a creation
of and its operations are governed by the IMO Convention.10
In the IMO, the major working organs are constitutional bodies: the
Maritime Safety Committee, the Legal Committee and the Marine
Environment Protection Committee."
B. IMO as an International Legislator
IMO's legislative instruments can be classified into two broad cate-
gories: those of a formal nature and those which are less formal and
more flexible. The former category includes treaties; the latter consists
of recommendations. Article 2(b) of the IMO Convention defines the
purposes of the Organization. IMO is to provide for the drafting of
conventions, agreements or other suitable instruments and recommend
them to governments and inter-governmental organizations and to
convene such conferences as may be necessary.1
2
Article 15(j) empow-
ers the Assembly to recommend to members for adoption regulations
and guidelines concerning maritime safety, the prevention and control of
marine pollution from ships and other matters concerning the effect of
shipping on the marine environment assigned to the organization by or
under international instruments, or amendments to such regulations and
guidelines which have been referred to it.13
Pursuant to these provisions, the texts that regularly emanate from
the IMO are recommendations. Conventions can only be adopted by
conferences convened by the Organization. Thus, IMO conventions
are not attributable to the Organization itself, but to the member
states. In recent times, however, IMO organs have assumed the
responsibilities of making amendments to conventions originally
adopted by plenipotentiary conferences. Because IMO is the major
initiator of standards contained in the conventions elaborated by such
SUnited Nations Conference (1948), United Nations, ECOSOC, Doc. E/Conf. 4. See
further, two texts entitled, respectively, Meeting about the Inter Governmental Maritime
Consultative Organization, London, October 1953, and Preparatory Committee of IMCO, 1st -
4th sessions, 1948-59.
9
C. E. Henry, The Carriage of Dangerous Goods by Sea: The Role of the International
Maritime Organization in International Legislation 37 (1985) [hereinafter "Henry"].
1
0
See IMO Convention, supra note 6, art. 54. See also, I. Arroyo, International Maritime
Conventions 16 (1990).
1IMO Convention, supra note 6, art. 12.
121d. at art. 2(b).
13Id. at art. 15(j).
Vol. 25, No. I
conferences, and because of the legislative nature of the activity by IMO
organs when adopting amendments to those standards, a real link does
exist between activities of the Organization and the continuing obliga-
tions of member states under the respective Conventions.1
4
C: Accelerated Amendment Procedure in IMO Conventions
The question of accelerated amendment procedures was dealt with by
IMO's various committees, originally the Maritime Safety Committee
and the Legal Committee. These bodies prepared proposals aimed at
bringing more rapidly into force amendments to Conventions for which
IMO is the depository.1
5
Thus, it was decided that the most practical
way of dealing with the problem was the incorporation of new amend-
ment procedures into new conventions or into existing conventions
whenever the latter came up for revision. 16 Furthermore, both commit-
tees were of the view that the most suitable method of accelerating the
entry into force of amendments to technical provisions of conventions
was a procedure based on the principle of tacit acceptance.17
Article 66 of the IMO Convention provides:
Texts of proposed amendments to the Convention shall be communi-
cated by the Secretary-General to Members at least six months in
advance of their consideration by the Assembly. Amendments shall be
adopted by a two thirds majority vote of the Assembly. Twelve months
after its acceptance by two-thirds of the Members of the Organization,
other than Associate Members, each amendment shall come into force
for all Members.'
8
Article 66 enables an amendment to enter into force for all member
states of IMO once the amendment is ratified by two-thirds of the
membership of the Organization.
Article 16 (2)(f)(ii) of MARPOL 73/78 prescribes the tacit amend-
ment procedure. It provides:
1
4
Henry, supra note 9, at 58.
15Resolution A.249 (VII) of Oct. 15, 1971. The Maritime Safety Committee dealt with the
subject at its 15th and 16th Sessions (Mar. 20-24, 1972 and Oct. 30-Nov. 3, 1972). The Legal
Committee considered the subject at its 12th Session (Apr. 17-21, 1972), its 14th Session (Sept.
18-22, 1972), and its 17th Session (Jan. 22-26, 1973). The results of these sessions are
reproduced in IMO Official Records, Docs. MSC XXV/17, Apr. 4, 1972, paras. 81-87 and
Annex XXI; MSC XXVI/19 paras. 67-75; LEG. X11/8, Apr. 25, 1972, paras. 14-23, and Annex
III; LEG. XIV/4, Sept. 27, 1972, paras. 6-37, and Annex; and LEG. XVII/7, Jan. 31, 1973,
paras. 5-17 and Annex I.
1
6
Id.
'
7
Id.
1
8
See IMO Convention, supra note 6, art. 66.
January 1994
An amendment to an Annex to the Convention shall be deemed to have
been accepted in accordance with the procedure specified in sub-
paragraph (f)(iii) unless the appropriate body, at the time of its
adoption, determines that the amendment shall be deemed to have been
accepted on the date on which it is accepted by two-thirds of the
Parties, the combined merchant fleets of which constitute not less than
fifty percent of the gross tonnage of the world's merchant fleet.
Nevertheless, at any time before the entry into force of an amendment
to an Annex to the Convention, a Party may notify the Secretary-
General of the Organization that its express approval will be necessary
before the amendment enters into force for it. The latter shall bring
such notification and the date of its receipt to the notice of Parties.1
9
Article 16(2)(f)(iii) further provides:
An amendment to an Appendix to an Annex to the Convention shall be
deemed to have been accepted at the end of a period to be determined
by the appropriate body at the end of its adoption, which period shall be
not less than ten months, unless within that period, an objection is
communicated to the Organization by not less than one-third of the
Parties or by the Parties the combined merchant fleets of which
constitute not less than fifty percent of the gross tonnage of the world's
mechant fleet whichever condition is fulfilled.
20
Under the method of tacit acceptance, an amendment is deemed to
have been accepted on a specified date unless, at a prior date, it has been
rejected by a certain number or percentage of Contracting Parties. This
method raises two problems. The first is the setting of the deadline for
the communication of rejections; the second is that of defining the
blocking minority. Other issues which arose in the development of the
tacit acceptance method were the possibility of contracting-out and the
legal position of objecting parties. The essence of contracting-out is to
avoid legal obligations which would otherwise result. The possibility of
contracting-out was seen to contain both advantages and drawbacks. On
one hand, it might make the procedure more acceptable; on the other, it
could encourage governments to use contracting-out as a tool of
competitive advantage.
2
' One of the attributes of the tacit acceptance
method is that it makes it very difficult for governments to adopt a policy
19
See MARPOL 7378, supra note 2, at art. 16(2)(f)(ii).
20Id.
2
1Each individual state can contract out, which is not the case for tacit acceptance; the latter
requires the collective action of a minimum number of states. Furthermore, contracting-out can
be considered to be an active procedure, while tacit acceptance is passive and requires no
action. The first is intended to avoid legal obligations, while the second presumes an assumption
of such obligations.
Vol. 25, No. I
of wait and see, i.e., to observe how other governments act and to react
accordingly within the fixed period.
The accelerated amendment procedures thus introduced two sig-
nificant elements: the preparation and adoption of amendments
within the Organization by one of its organs, and the concept of tacit
acceptance which makes decisions automatically binding unless a
notification of a state's intention not to be bound is received before
the amendment enters into force.
III.
EVOLUTION OF NEW INTERNATIONAL
ENVIRONMENTAL REGULATORY REGIME
There is no doubt that marine pollution must be viewed as an
integral part of developing international law. Before the IMO's
Convention entered into force on March 17, 1958, the first substantial
step taken towards an international solution to oil discharges was the
1954 Convention on the Prevention of Pollution of the Sea by Oil.22
A. The 1954 International Convention for the Prevention of
Pollution of the Sea by Oil
The 1954 Convention was concluded at a Conference held in
London in 1954. All the proposals presented at the meeting implicitly
recognized the practical impossibility of prohibiting all discharges of
oily waste, and the resulting Convention was generally generous to
shipping interests. When more than fifty miles from shore, tankers
were free to dispose of oil without restriction, but within the fifty-mile
prohibition zone, only discharges with an oil content of less than 100
parts per million were allowed.
23
Even these modest provisions,
however, were relatively meaningless due to the 1954 Convention's
complete dearth of a reliable compliance mechanism.
24
The 1954
Convention did not adopt effective regulations preventing marine
pollution. Although the regulations protected coastal zones from
immediate discharges of oily ballast water and residues, they could
not prevent pollutants from drifting into the designated prohibited
zones after a legal discharge at sea. In view of these shortcomings, it
22
International Convention for the Prevention of Pollution of the Sea by Oil, 12 U.S.T. 2989,
T.I.A.S. No. 4900, 327 U.N.T.S. 3 [hereinafter "the 1954 Convention"].
23
1d. at art. III.
24
R. M'Gonigle & M. Zacher, Politics, Pollution and International Law: Tankers at Sea 219
(1979).
danuawy M14
is hard to dispute the observation of some scholars that the regulatory
system established by the 1954 Convention was notable only for its
inadequacy.25
During this period, the IMO began to play an increasing role in the
regulation of ocean pollution.
26
In 1959, the IMO Secretariat called
for a new conference to amend the 1954 Convention.
27
Numerous
conferences at this time were discussing the Law of the Sea. In 1958,
the Conference on the Law of the Sea was held in Geneva, producing
the Convention on the High Seas.
28
Specific reference was made to
existing conventions concerning the oil discharge pollution prob-
lem.
29
These actions encouraged international recognition of an
increasing pollution problem caused by oil tankers on the high seas.
Because of the lack of progress in pollution control under existing
international law, the Intergovernmental Maritime Consultative Or-
ganization
30
(IMCO) called a conference in 1962 to amend the 1954
Convention. Although the 1962 amendments
31
sought to strengthen
some of the provisions of the 1954 Convention, its effectiveness
remained doubtful. The system was a sham.
32
In March 1967, the tanker Torrey Canyon grounded off the south-
west coast of England illustrating, for the first time, how the physical
evidence of a major shipping pollution disaster, with wide media
coverage, can influence public policy. In every respect, whether
scientific, ecological or legal, the Torrey Canyon disaster caught the
maritime world completely unprepared. Public concern, aroused by
the wide variety of problems caused by the wreck, resulted in
relatively rapid action by various governments as well as by several
international organizations. Suddenly, the anti-pollution campaign
was no longer only the focus of environmentally conscious individu-
als and organizations, which had persuaded only a few governments
to voice their concerns. The campaign was quickly taken over by a
large number of states which saw the dangers of a major oil spill to
their own vulnerable coastlines. Such states consisted not only of
BId.
26Juda, IMCO and the Regulation of Ocean Pollution From Ships, 26 Int'l & Comp. L.Q. 558
(1977).
27
M'Gonigle & Zacher, supra note 24, at 91.
2Convention on the High Seas, April 29, 1958, 13 U.S.T. 2312, T.I.A.S. No. 5200, 450
U.N.T.S. 82.
2l
9
d. at art. 24.
3IMO Convention, supra note 6.
311962 Amendments to the 1954 Convention, April 11, 1962, 17 U.S.T. 1523, T.I.A.S. No.
6109, 600 U.N.T.S. 332 [hereinafter "1962 Amendments"].
32
M'Gonigle & Zacher, supra note 24, at 222.
Vol. 25, No. 1
coastal states without shipping interests, but also shipping states with
coastal
interests.
33
In 1968, the United Kingdom submitted amendments
34
to IMCO
which would legitimize the already widespread use of the load-on-
top-system. Under this system, the oily water mixture which would
otherwise be discharged is put in a special tank on the vessel. The
water and oil are then allowed to separate, and the water is drained
from the bottom. New cargo can then be loaded on top of the oil
residue. The 1969 Amendments adopted the load-on-top ("LOT")
system.
35
In 1970, the United States, confronted with the domestic
environmental movement, questioned the ability of LOT to curtail the
oil discharge problem. Because of these doubts, the United States
advocated the use of segregated ballast tanks (SBTs) that would be
restricted to ballast water.
36
Equally important was the passage of the
Ports and Waterways Act in 1972 which permitted the United States
to require SBTs in national waters.
37
Due to the United States initiative and a growing world-wide
concern for pollution, the International Conference on Marine Pollu-
tion was convened in London on October 8, 1973. The Conference
sustained and strengthened the acceptable standards for new tank
vessels. It is interesting to note that the international community also
addressed the seriousness of marine pollution from the civil liability
perspective. Shortly after the Torrey Canyon disaster, the interna-
tional maritime legal community embarked upon an effort to draw up
a convention covering the limits and terms of liability for future cases
of pollution damage. The work was undertaken largely by the newly
created Legal Committee of the Intergovernmental Maritime Consul-
tative Organization
(now IMO).
38
33
Gold, "The Control of Marine Pollution From Ships: Responsibilities and Rights,"
presented to Panel IV of the 20th Annual Conference of the Law of the Sea Institute, Miami
Beach, July 22, 1986, printed in Marine Research Series No. 12 at 4 (1986).
These proposals coincided with the entry into force of the 1962 Amendments in May 1968.
The United Kingdom advocated the use of the load-on-top-system.
351969 Amendments to the 1954 Convention, Oct. 21, 1969, 28 U.S.T. 1205, T.I.A.S. No.
8505 [hereinafter "the 1969 Amendments"].
36
Ironically, some states eventually supported SBTs in 1978 because a high percentage of
their tanker fleet was laid up. The use of SBTs meant more tankers would be needed to
transport the same amount of oil because SBTs reduced cargo space. See generally M'Gonigle
& Zacher, supra note 24, at 133-36.
37
Pub. L. No. 92-340, Titles I and II, 86 Stat. 424 (1972) (amended 1978), 46 U.S.C.
391-391(a) (1982).
38
Mendelsohn, Maritime Liability for Oil Pollution-Domestic and International Law, 38 Geo.
Wash. L. Rev. 1, 35 (1969).
January 1994
B. The International Convention for the Prevention of Pollution
from Ships
The primary convention that expressly addressed the problems of
vessel-generated pollution was the International Convention for the
Prevention of Pollution from Ships.
39
Annex I of MARPOL 73
regulates oil pollution and Annex II regulates pollution from noxious
liquid substances; both were to be compulsory with the ratification of
MARPOL 73. Annex I permits operational discharge as long as tank
vessels are more than fifty nautical miles from land or are not in a
designated special area.
40
Successful implementation of earlier discharge standards was ques-
tionable because the LOT system depended upon the conscientious
application of tank vessel operators. In response, MARPOL 73
sought to reduce the reliance on the human element
4
' by requiring the
use of a discharge monitoring and control system (Regulation 15). The
problem with Regulation 15, however, was that there were no
commercially viable monitoring systems in 1973. The most celebrated
regulation in Annex I required segregated ballast tanks for all new
tank vessels over 70,000 deadweight tons.
42
Annex II governs a wide
variety of chemicals and prescribes that ballast water, tank washing
residues or mixtures containing any noxious substances be dis-
charged only at a reception facility unless the concentrations are
diluted to acceptable levels. These tough concentration standards and
the corresponding need for reception facilities provided a stumbling
block to MARPOL 73's ratification. The fact that Annex II was
compulsory compounded the difficulties.
43
Although the work of IMCO and the member state delegations at
the 1973 Conference appeared competent, in reality, ratification of
the Convention was slow and the opposition to MARPOL 73 was
strong due to technological problems, economic considerations and
the mandatory nature of Annex II. The incentive to correct the
situation came again from the United States. A series of tank vessel
accidents in the United States renewed interest in the issue of oil
pollution. The first of these accidents, involving the Argo Merchant
on December 15, 1976, was followed in rapid succession by the
39
MARPOL 73/78, supra note 2.
4
0
1d.
4 1
D. Abecassis, Oil Pollution From Ships 57 (1978) [hereinafter "Abecassis"].
42
Curtis, Vessel-Source Oil Pollution and Marpol 73/78: An International Success Story?, 15
Envtl. L. 679 (1985).
43
M'Gonigle & Zacher, supra note 24.
Vol. 25, No. I
Oswego Peace on December 24, the Olympic Games on December 27
and the Grand Zenith on December 29. Twelve other accidents
occurred in late 1976 and early 1977.
44
In response, President Jimmy
Carter called for the adoption of domestic and international standards
to reduce operational and accidental oil pollution. He encouraged
immediate ratification of MARPOL 73 and advocated renewed efforts
towards pollution regulation by the international community.
45
The Intergovernmental Maritime Consultative Organization, now
the IMO, and the international community saw this as a demand for
legitimate progress to control vessel-source oil pollution. This pres-
sure resulted in the Conference on Tanker Safety and Pollution
Prevention in London in February 1978. The conference was con-
vened to correct what by then were perceived as deficiencies in
MARPOL 73 and the Safety of Life at Sea Convention.
46
This
Conference resulted in both procedural and substantive changes in
MARPOL 73. One procedural change that facilitated early ratification
of the 1978 MARPOL Protocol was Article 1(2).4
7
The modification
allowed entry into force for Annex II to occur after entry into force
for the articles and Annex I. Additionally, a two-thirds majority of the
parties in the Marine Environment Protection Committee could
further extend the entry date for Annex 11.
48
C. Protocol of 1978 Relating to the International Convention for
the Prevention of Pollution from Ships
The 1978 Protocol implemented a more effective system for pre-
vention of oil pollution. The United States advocated the use of SBTs
in new and existing tankers which would eliminate the human
element, allegedly the main problem with the LOT system.
49
After
intense negotiations, a new Regulation 13 emerged as a compro-
mise.
50
Although the drafters of MARPOL 73/78 were enthusiastic
44Curtis, supra note 42, at 698.
45123 Cong. Rec. 7931 (Mar. 17, 1977) containing statement of President Jimmy Carter.
46Intemational Convention for the Safety of Life at Sea, Nov. 1, 1974, T.I.A.S. No. 9700.
47
MARPOL 73/78, supra note 2, at art. 1(2). This article provides that the 1978 Protocol and
MARPOL 73 shall be read and interpreted together as one instrument. A state therefore
becomes a party to the 1973 Convention as modified by the 1978 Protocol.
48Id.
49For a discussion of the political aspects of the SBTs debate, see M'Gonigle & Zacher,
supra note 24, at 130-41.
5ORegulation 13 provides that all new oil tankers of 20,000 deadweight tons and new product
tankers of 30,000 deadweight tons be equipped with SBTs and use crude oil washing (COW) as
a cargo tank cleaning system. Regulation 13(B)(3) requires inert gas systems in each cargo and
slop tank, a response to the potential for tank explosions.
January 1994
about the regulations, the structural and operational requirements
placed a heavy economic burden on a private industry that was
experiencing price cutbacks and higher percentages of tanker inac-
tivity. In a major step towards international acceptance of the new
standards, President Carter signed the Act to Prevent Pollution from
Ships on October 21, 1980, implementing MARPOL 73/78 well before
its entry into force.
51
In October 1982, the requirements of Article V52
were met when Greece and Italy accepted MARPOL 73/78 which
meant an entry into force in October 1983.
53
The success of MARPOL 73/78 depends, first, on the substantive
provisions of the agreement regarding compliance and, second, on
the efforts taken by the international community to enforce those
provisions. A legitimate concern is the ability of the current interna-
tional legal system to implement and monitor environmental protec-
tion laws. Treaty obligations that encroach upon the customary law of
freedom of the high seas are difficult to enact and enforce. In practice,
close verification of a ship's activity on the high seas is impossible
and compliance depends largely upon the integrity of the ship's
operators.
Article I demands that contracting parties undertake to give effect
to the provisions of MARPOL 73/78.54 Parties are obligated to
cooperate in the detection of violations and the enforcement of
pertinent provisions.
55
The flag state's duty to initiate proceedings for
an alleged violation is established in Article 4 of MARPOL 73/78.56
Under Article 6(5) of MARPOL 73/78, a port state may inspect a ship
within its jurisdiction if sufficient evidence exists that a violation has
occurred any place. However, the report of such investigation carried
out by a port state shall be sent to the party requesting it or to the flag
state so that the appropriate action can be taken. Effective enforce-
ment depends upon compliance certificates and inspection require-
ments. MARPOL 73/78 now requires periodic and intermediate
surveys. If a port state is aware of a ship in port which fails to meet
equipment standards, that port state shall take such steps as will
insure that the ship shall not sail until it can proceed without
51
Act for the Prevention of Pollution from Ships, 33 U.S.C. 1901 (1982).
5 2
Art. V of the 1978 MAPROL Protocol states that the present Protocol shall enter into force
twelve months after the date on which not less than fifteen states, the combined merchant fleets
of which constitute not less than fifty percent of the gross tonnage of the world's merchant
shipping, have become parties.
53
1nt'l. Env't. Rep. (BNA) 432 (Oct. 13, 1982).
54MARPOL 73/78, supra note 2, at art. 1.
55Id.
56Id. at art. 4.
Vol. 26, No. I
OPA '90. and MARPOL 73/78
presenting an unreasonable threat of harm to the marine environ-
ment.
57
MARPOL 73/78 does not provide that a port state may institute
proceedings for violations outside its territorial waters. The enforce-
ment method imposes a duty on the port state to inspect a ship if clear
evidence of a violation exists. Even then, evidence is turned over to
the flag state to initiate action.
58
D. Vessel Source Pollution under Law of the Sea Convention
Article 211 of the Law of the Sea Convention, 1982, requires states,
acting through the competent international organization or general
diplomatic conferences, to establish international rules and standards
governing vessel-source pollution, including the adoption of routing
systems designed to avoid collisions at sea.
59
Under the Law of the
Sea Convention, differing types of regulatory jurisdictions are ac-
corded to flag states and to coastal states with respect to vessels
within their ports, within their territorial seas, and within their
exclusive economic zones.
o
Flag states are obligated to adopt laws and regulations for the
prevention of pollution of the marine environment from vessels flying
their flags or of their registries, which measures must be at least as
effective as generally accepted international standards. In particular,
flag states must regulate the design, construction, equipment, opera-
tion and manning of vessels, and they must take measures for
preventing accidents (including the designation of routing systems),
dealing with emergencies, ensuring the safety of operations at sea and
preventing both intentional and unintentional discharges.
6
' The flag
state has the primary responsibility for ensuring that its ships comply
with international rules and standards and those of the flag state.
62
Coastal states may adopt laws and regulations for the prevention,
reduction and control of marine pollution from foreign vessels within
their territorial seas, including vessels exercising the right of innocent
passage. However, such measures may not impede innocent passage.
63
51Id. at art. 5.
58
1d. at art. 6(5).
5 9
Article 211 of the United Nations Convention on the Law of the Sea, Dec. 10, 1982, U.N.
Doc. A/Conf. 62/122 (1982), reprinted in 211 I.L.M, 1261 (1982).
6Id. at art. 211(3).
6 1
1d. at arts. 194(3)(b) and 211.
62
1d. at art. 217.
63
1d. at art. 211(4).
January 1994
States may establish standards for pollution prevention as a condition
for entrance into their ports or internal waters or for a call at their
off-shore terminals but must publicize such requirements, both directly
and through the competent international organization. Where a coastal
state believes that international rules and standards are inadequate to
protect an area of its exclusive economic zone, the coastal state may
submit a request to the competent international organization for a
determination that special conditions exist which merit additional
coastal state regulation of vessel-source pollution in that area. Upon a
finding that special conditions exist, the coastal state may adopt laws
and regulations for the area, which may relate to discharges or naviga-
tional practices, but which may not relate to design, construction,
manning or equipment standards, other than generally accepted inter-
national standards.
64
E. The Mandate of IMO in Light of the 1982 United Nations
Convention on the Law of the Sea
In many of its articles, the Law of the Sea Convention refers to
"competent
international
organization"
and to "generally
accepted
international rules and standards." The negotiations which led to the
adoption of the Law of the Sea Convention clearly indicate that the
IMO was contemplated whenever the term "competent international
organization" was used in the singular and reference was being made
simultaneously to standards relating to the safety of navigation and
the control and prevention of the marine environment.
65
The terms
"applicable
international
rules and standards"
or "generally
ac-
cepted international rules and standards" are to be found in many
articles of the Law of the Sea Convention.66 It can therefore be said
64Id. at art. 211(6).
65Van Reenen, Rules of Reference in the New Convention on the Law of the Sea, in
Particular in Connection with the Pollution of the Sea by Oil from Tankers, Netherlands
Yearbook of International Law 3, 9 (1981). Other organizations are sometimes addressed as
well, UNEP for instance. See also Popp, Recent Developments in Tanker Control in
International Law, Canadian Yearbook of International Law 3, 11 (1980). (The author states
that "the emphasis in this provision and others on adoption of rules and standards by the
competent international organization will emphasize the important role that the Inter-Govern-
mental Maritime Consultative Organization (IMCO) has to play in this area. It may provide
IMCO with a mandate which, in the realm of environmental marine protection, has not always
been entirely clear.").
66See, e.g., Article 218(I), which provides:
When a vessel is voluntarily within a port or at an off-shore terminal of a State, that State
may undertake investigations and, where the evidence so warrants, institute proceedings
in respect of any discharge from that vessel outside the internal waters, territorial sea or
Vol. 25, No. 1
that the Law of the Sea Convention gives special recognition to IMO
as the organization entrusted with the adoption of standards relating
to safety at sea and the control and prevention of marine pollution. It
acknowledges the standards adopted by IMO.
The practice of states, supported by the broad consensus achieved
at the Third United Nations Conference on the Law of the Sea, has
effectively established as customary law the concept of the exclusive
economic zone and the basic rules governing it. These are binding,
therefore, on states generally even before the Law of the Sea
Convention comes into effect and thereafter even as to states not
party to the Convention. In those respects, the Convention is an
authoritative statement of customary international law.
6 7
IV.
DEVELOPMENT OF OPA '90
Prior to OPA '90, four major federal statutes provided for oil
pollution liability and compensation: Section 311 of the Federal
Water Pollution Control Act (commonly known as the Clean Water
Act (CWA)),68 the Deep-Water Port Act (DWPA),69 the Outer Con-
tinental Shelf Lands Act Amendments (OCSLAA),70 and the Trans
Alaska Pipeline Authorization Act (TAPAA).
7
1 Each applies to
various geographic regions and activities and contains differing
funding, liability, and administrative provisions. Section 311 of the
exclusive economic zone of that State in violation of applicable international rules and
standards established through the competent international organization or general diplo-
matic conference.
67
See Restatement (Third), supra note 3, at 514 and comment a.
68Federal Water Pollution Control Act Amendments of 1972, Pub. L. No. 92-500, 85 Stat.
816 (codified as amended at 33 U.S.C. 1251-1387 (1988) [hereinafter "the Clean Water Act"].
The Clean Water Act had its origin in the Federal Water Pollution Control Act of 1948, 62 Stat.
1155. Section 311 relating to oil and hazardous substance spills, generally originated in the
Water Quality Improvement Act of 1970, Pub. L. No. 91-224, 84 Stat. 91, but may also have
had some faint beginnings in the Oil Pollution Act of 1924, ch. 316, 43 Stat. 604, the Oil Pollution
Act of 1961, Pub. L. No. 87-167, 75 Stat. 402, and the Oil Pollution Act Amendments of 1973,
Pub. L. No. 93-119, 87 Stat. 424. See Rodgers, 2 Environmental Law: Air and Water
4.35-4.37 (1986) (contains an extensive legislative history and analysis of CWA 311 and other
laws addressing oil pollution).
6Pub. L. No. 93-627, 88 Stat. 2126 (1974) (codified as amended at 33 U.S.C. 1501-24
(1988)).
"Pub. L. No. 95-372, 92 Stat. 674 (1978) (codified at 43 U.S.C. 1811-66 (1988)). For a
summary of OCSLAA, see Bagwell, Liability Under United States Law for Spills of Oil or
Chemicals from Vessels, Lloyd's Mar. & Com. L.Q. 513-15 (1987).
71
Pub. L. No. 93-153, 87 Stat. 589 (1973), (codified at 43 U.S.C. 1651-55 (1988)). For a
summary of TAPAA, see Bagwell, supra note 70, at 515-17.
Januwy I W4
Clean Water Act has the broadest scope, covering tankers and inland
barges, and applies to spills upon inland navigable waters, the
territorial sea, the contiguous zone and the exclusive economic
zone.72
Since 1975, many unsuccessful attempts had been made to stream-
line United States oil pollution law. The oil spill resulting from the
grounding of the Exxon Valdez in Prince William Sound, Alaska, on
March 24, 1989, followed by other high profile oil spills, including the
American Trader incident in California, the Mega Borg explosion and
fire in the Gulf of Mexico and several spills in New York Harbor,
catalyzed the enactment of new, far-reaching legislation.
73
Congress responded with an unprecedented flurry of oil spill
hearings and proposals subsequent to the Exxon Valdez incident. One
of the most significant responses was the reintroduction of S.686, the
Senate's comprehensive companion Bill to H.R. 1465, which had
been before committees of the House since the opening days of the
101st Congress.
74
Senator George Mitchell orchestrated this timely
development less than two weeks after the Exxon Valdez's spill.
75
S.686 and H.R. 1465 then began to move, picking up significant
amendments and support along the way. The Administration also
responded with its own proposal.
76
OPA '90's voyage through the
legislative process ended fittingly in Maine, the state where an
unlimited liability regime and certain elected officials had played
integral roles throughout the bill's development.
77
This time, how-
ever, the drama unfolded not in the state legislature or in Senator
Mitchell's district office, but in Kennebunkport, the site of President
Bush's summer home. With scant media coverage, the President
signed OPA '90 into law on August 18, 1990.78
7233 U.S.C. 1321(a)-(b) (1988).
7Uda, The Oil Pollution Act of 1990: Is There a Bright Future Beyond Valdez?, 10 Va.
Envtl. L.J. 403 (1991).
74S.686, 101st Cong., 1st Sess. (1989) introduced by Sen. George Mitchell on Apr. 4, 1989.
The House passed H.R. 1465 on Nov. 9, 1989, falling just five votes short of unanimous
passage. The final tally of votes was 375 to 5. See 135 Cong. Rec. H7892-98 (Nov. 1, 1989),
H7954-75 (Nov. 2, 1989), H8120-67 (Nov. 8, 1989), H8241-8288 (Nov. 9, 1989).
75
See "Mitchell Scores Bush's Decision Against U.S. Takeover of Oil Spill," Wash. Times,
Apr. 5, 1989, at AS.
76
See S.1066, 101st Cong., 1st Sess. (1989) (introduced by Sen. Chafee by request); H.R.
2325, 101st Cong., 1st Sess. (1989) (introduced by Rep. Davis by request).
77Sen. Mitchell played a dominant role as Senate Majority Leader, as a member of the
Senate Environment and Public Works Committee, and as a primary sponsor of S.686.
78
President's statement on signing H.R. 1465, the Oil Pollution Act of 1990, 26 Weekly
Comp. Pres. Doc. 1265-66 (Aug. 27, 1990).
Vol. 25, No. 1
A. Double Hull Requirement
OPA '90 contains safety requirements as well as liability provi-
sions. It requires that all new vessels constructed for the carriage of
oil shall be equipped with double hulls when operating in United
States waters or the United States exclusive economic zone.
79
With
regard to existing vessels, the double hull requirement is phased in
over a period of years, starting in 1995, depending upon the age and
size of the tank vessel.
8 0
By the year 2010, all vessels over 5,000 gross
tons must have double hulls, except that those which currently have
double bottoms or double sides may continue operating in United
States waters until 2015.81 The year 2015 is also the date by which
vessels unloading oil at a deep water port or off loading in lightering
operations more than 60 miles from the coast must have double hull
construction.
8 2
Double hull construction places a second steel barrier
between vessel cargoes and the environment. The second, or inner
hull, will be located sufficiently inboard so that the probability of its
rupture during a low-energy collision or grounding is relatively low
compared to that of a single hull.
OPA '90 substantially alters and increases the pollution liabilities
imposed on those engaged in the exploration, production, and trans-
portation of oil within the territorial seas and the exclusive economic
zone
83
of the United States in the event of the discharge of oil. It
imposes liability for oil spills in the navigable waters, exclusive
economic zone, or shorelines of the United States on the owner,
operator, or demise charterer of a vessel as the responsible party in
the event of an oil spill.
84
The Act requires the responsible party to
pay all removal costs including the costs to prevent, minimize or
mitigate oil pollution in any case in which there is a substantial threat
of, or an actual discharge of oil.85 The responsible party must pay
removal costs incurred by the United States, a state government, or
an Indian tribe pursuant to the Clean Water Act,
86
the Intervention on
79OPA '90, supra note 4, at 4115 (adding new 3703(a) to 46 U.S.C.).
MId. at 4115(a) (codified at 46 U.S.C. 3703a(c)(3)).
81
1d
.
82id.
83
See supra notes 3 and 4 for a definition of the exclusive economic zone and coverage of
OPA '90 respectively.
8OPA '90, supra note 4. With respect to an offshore facility, the responsible party is the
lessee or permittee of the area in which the facility is located or the holder of a right of use and
easement granted under state law or the Outer Continental Shelf Lands Act.
85Id. at 1001(31), 1002(a).
8633 U.S.C. 1251-1387 (1988).
January 1994
the High Seas Act,87 or state law, as well as removal costs incurred by
any person for acts consistent with the National Contingency Plan.
88
In addition to removal costs, the responsible party shall be liable for
damages for injury to natural resources,
8 9
injury to real or personal
property, including economic losses resulting from that injury, loss of
subsistence use of natural resources, loss of revenues (including
federal, state or local taxes) on the use of natural resources and real
or personal property, loss of profits and impairment of earning
capacity resulting from such pollution, and the costs of providing
additional public services during or after removal activities.
90
After OPA '90 was signed into law, the United States proposed to
the International Maritime Organization (IMO)
91
that Annex I of the
International Convention for the Prevention of Pollution from Ships
1973 and the Protocol of 1978 relating thereto (MARPOL 73/78) be
amended to apply the double hull construction standard to new tank
vessels in line with provisions found in OPA '90.92
V.
DEVELOPMENT OF REGULATIONS 13F AND 13G
Under the Convention on the International Maritime Organiza-
tion,
93
the Marine Environment Protection Committee is the organ
responsible for considering any matter within the scope of the
Organization concerned with the prevention and control of marine
pollution from ships. It is the organ responsible for performing such
functions as are or may be conferred upon the Organization by or
under international conventions for the prevention and control of
marine pollution from ships, particularly with respect to the adoption
and amendment of regulations or other provisions, as provided for in
such conventions.
Under Article 16 of MARPOL 73/78, an amendment proposed by a
party to MARPOL shall be submitted to the International Maritime
Organization and circulated by its Secretary-General to all members
of the International Maritime Organization and all parties at least six
8733 U.S.C. 1471-87 (1988).
88OPA '90, supra note 4, at 1002(b)(1).
"Id. at 1006.
9Id. at 1002(b)(2).
9 1
The U.S. proposed to the appropriate body of the IMO because, by virtue of Art. 19 of
MARPOL 73/78, the Convention is deposited with the Secretary-General of the IMO.
92OPA '90, supra note 4, at 4115.
93
1MO Convention, supra note 6, at art. 39(a).
Vol. 25, No. I
months prior to its consideration.
9
4 Any amendment proposed and
circulated shall be submitted to the appropriate body by the organi-
zation for consideration.
95
The appropriate body to consider the
proposed amendment is IMO's Marine Environment Protection Com-
mittee.
9 6
The procedure contemplated for use in adopting the pro-
posed amendment is the tacit amendment procedure.
97
A party may
notify IMO that its express approval will be necessary before the
amendment enters into force for that party.
98
In July 1991, the MEPC approved a draft regulation designed to
impose new construction standards on new tank vessels. Draft
Regulation 13F contained requirements for double hull standards and,
in the alternative, a construction standard involving double sides and
a horizontal deck separating upper and lower cargo tanks (mid-
deck).
99
The draft Regulation also provided for acceptance of other
construction standards to be considered and approved in the future in
accordance with guidelines developed by IMO. 100 The standards are
to be applied according to dates calculated on the basis of building
contracts, keel laying, delivery or major conversion.
10
The IMO
conducted a major study into the comparative performances of the
double hull and mid-height deck tank vessel designs with funding
from the oil and tanker industries and concluded in January 1992 that
the two designs could be considered as equivalent, although each
gives better or worse outflow performance under certain condi-
tions. 1
0 2
On March 6, 1992, important changes to the design and construc-
tion of new and existing oil tankers were agreed by 250 representa-
9MARPOL 73/78, supra note 2, at art. 16(2)(a).
9id. at art. 16(2)(b).
9IMO Convention, supra note 6, at art. 12, stating that the Marine Environment Protection
Committee [hereinafter "MEPC"] is one of the organs of the IMO.
97MARPOL 73/78, supra note 2, at art. 16, which describes the tacit amendment procedure.
1Id. at art. 16(2)(f)(ii).
99IMO Briefing Papers on Comparative Study, July 10, 1991.
1001d.
I'Id.
102IMO Briefing Papers, Jan. 16, 1992. These papers conclude that mid-deck and double hulls
give equivalent protection. See also MEPC 31/Prevention of Oil Pollution (in response to
Resolution A.675 (16)), where the United States delegation reserved its position on the lower
limit of application of 600 dwt, since, in its view, it should be applicable to all tank vessels. In
addition, the United States reserved its position on the dimensions of double hull tank vessels
less than 5,000 dwt as outlined in paragraph (3)(a)(ii) of Regulation 13F, and the arrangement of
protective tanks for vessels below 300 dwt outlined in paragraph (7) of Regulation 13F. Further,
the United States delegation reserved its position on paragraph (4) of Regulation 13F relating to
mid-deck oil tankers. The United States also reserved its position on Regulation 13G regarding
existing oil tankers.
January IM9
tives of 51 countries meeting at the headquarters of the International
Maritime Organization, the United Nations Agency
10 3
concerned
with shipping, safety and the prevention of marine pollution. The
32nd session of IMO's Marine Environment Protection Committee
(MEPC 32) adopted Regulations 13F and 13G to Annex I zof
MARPOL 73/78, which is concerned with regulating oil pollution.104
Regulation 13F deals with new tank vessels of 600 deadweight tons
and above. These are tank vessels for which the building contract is
placed after July 6, 1993, the keels of which are laid on or after
January 6, 1994; or which are delivered on or after July 6, 1996.105
Tank vessels of 5,000 deadweight tons and above must be fitted
with double bottoms and wing tanks extending the full depth of the
ship's sides.
106
The regulation allows mid-deck height tank vessels
with double sides as an alternative to double hull construction. Other
methods of design and construction may also be accepted provided
that they ensure the same level of protection against pollution in the
event of a collision or stranding. The design methods must be
approved-by the MEPC based on guidelines which are to be devel-
oped by IMO. Oil tankers of 600 deadweight tons and above but less
than 5,000 deadweight tons must be fitted with double bottom tanks
and the capacity of each cargo tank is limited to 700 cubic meters,
unless they are fitted with double hulls.
Regulation 13G establishes a phaseout schedule which begins on
July 6, 1995, for existing single hulled tank vessels to be removed
from service or converted into a double hull or mid-deck configura-
tion. Regulation 13G is applicable to existing crude oil carriers of
20,000 deadweight tons or over, or product carriers of 30,000
deadweight tons or over.
1 07
It makes provision for an enhanced
program of inspections to be implemented, particularly for tank
vessels which are more than five years old.
10 8
Regulation 13G allows
1
0 3
1MO Convention, supra note.6, at art. 59, which provides:
The Organization shall be brought into relationship with the United Nations in accordance
with Article 57 of the Charter of the United Nations as the specialized agency in the field
of shipping and the effect of shipping on the marine environment. This relationship shall
be effected through an agreement with the United Nations under Article 63 of the charter
of the United Nations, which agreement shall be concluded as provided in Article 25.
14Amendments to the Annex of the Protocol of 1978 Relating to the International
Convention for the Prevention of Pollution of Ships, 1973, adopted by Resolution 52(32) of the
Marine Environment Protection Committee, Mar. 6, 1992 [hereinafter "the Mar. 6, 1992
Amendments to MARPOL 73178"].
1
05
1d.
0Id.
107Id.
1O8Id.
Vol. 25, No. I
for future acceptance of other structural or operational arrange-
ments such as hydrostatic balance as alternatives to the protective
measures spelled out in the Regulation. 1
09
It is anticipated that many
older tank vessels which cannot be brought up to the new standard
economically will be scrapped, and the MEPC recognized this
possibility by adopting a resolution on the development of ship
scrapping capacity to ensure the smooth implementation of the
amendments.
110
The resolution recommends that member govern-
ments take initiatives, in cooperation with the shipbuilding and
shipping industries, to develop scrapping facilities at a world-wide
level, to promote research and development programs and to
provide technical assistance to developing countries in developing
ship scrapping facilities.
111
On December 23, 1992, the U.S. Embassy in London deposited a
declaration with IMO stating that the express approval of the U.S.
Government will be necessary before Regulations 13F and 13G of
MARPOL 73/78 would enter into force for the U.S. In this declara-
tion, the U.S. cited the technical differences between MARPOL
amendments for new and existing tankers and the mandated require-
ments of OPA '90.112
Pursuant to OPA '90, the Coast Guard published an Interim Final
Rule (IFR).113 The IFR established technical standards for double
hulls on vessels carrying oil in bulk, as cargo or cargo residue, that
are constructed or undergo a major conversion under contracts
awarded after June 30, 1990.114 The IFR also included a phase-out
schedule for existing single hulled tank vessels."
5
The MARPOL 73/78 Convention has been ratified by 70 countries
whose fleets comprise about 90% of the world merchant marine. In
practice, virtually every tank vessel operating today complies with
MARPOL 73/78. These amendments will have a major impact upon
the tank vessel market. The amendments entered into force under
MARPOL's tacit acceptance procedure. The amendments could have
been blocked only if rejected by one-third or more of the contracting
'0
9
Id.
1od.
I Id.
"
2
Double Hull Standards for Vessels Carrying Oil in Bulk; U.S. Position on International
Standards for Tank Vessel Design, 58 Fed. Reg. 39087, July 21, 1993.
113Double Hull Standards for Vessels Carrying Oil in Bulk; 57 Fed. Reg. 36222, Aug. 12,
1992; 57 Fed. Reg. 60402, Dec. 18, 1992.
1
4
1d.
115id.
January 1994
parties, or by parties whose fleets form 50% or more of world
merchant
shipping
tonnage.
1 6
The new Regulation 13F for new tank vessels differs significantly
from OPA '90's standards. OPA '90 requires all new tank vessels
constructed for the carriage of oil to be equipped with a double hull
when operating in United States waters or the United States
exclusive economic zone,"
7
while Regulation 13F allows for tank
vessels, 5,000 deadweight tons and above (a mid-deck height
standard) to be fitted with double-sided hulls. Regulation 13F also
permits other methods of design and construction to be accepted
provided that they ensure the same level of protection against
pollution in the event of a collision or stranding.
1 8
What then
happens if a double-sided hull tank vessel belonging to a MARPOL
73/78 state party seeks to enter the United States' navigable waters?
What happens if the United Sates Coast Guard denies it entry?
Alternatively, would allowing entry violate OPA '90? As men-
tioned earlier, the thrust of this article is to seek answers to such
questions. In providing answers to these questions, one has to
examine the United States' approach to regulation of vessel design
standards.
VI.
THE UNITED STATES' APPROACH TO REGULATION OF
VESSEL DESIGN STANDARDS
The Tank Vessel Act of 1936 was substantially revised by the Port
and Waterways Safety Act of 1972.119 The 1936 legislation, while
broad in the scope of its coverage, related to protection of life and
property without specific reference to environmental protection. It
was the intent of Congress in revising the 1936 Act to emphasize its
concern with the environment.
20
After 1972, maritime traffic in United States waters continued to
expand, maritime casualties continued to occur and the incidence of
pollution damage increased. In 1972, approximately 35 tankers per
116MARPOL 73/78, supra note 2.
11
7
OPA '90, supra note 4. See 46 U.S.C. 3703(a).
I
8
rTlhe Mar. 6, 1992 Amendment to MARPOL 73/78, supra note 104.
"1
9
Formerly 46 U.S.C. 391(a). A partial recodification of Title 46 of the United States Code,
P.L. 98-89, was enacted on August 23, 1983. The provisions of the Tank Vessel Act, formerly
46 U.S.C. 391(a), have been moved to several recodified sections of Title 46. The principal
provisions are now contained in 46 U.S.C. 3701-18, which is Chapter 37 - Carriage of Liquid
Bulk Dangerous Cargoes.
120S. Rep. No. 92-724, reported in 1972 U.S. Code Cong. & Admin. News 2781.
Vol. 25, No. I
day entered United States ports. Continued growth in United States
importation of foreign oil, if not for immediate use, for implemen-
tation of the Government's strategic petroleum reserve program,
continued to concern Congress as to the effectiveness of its pollu-
tion prevention legislation.1
2
1 The 1978 amendments to the Tank
Vessel Act prescribed certain minimum standards for tank vessels
which were consistent with the standards adopted at the 1978
Conference on Tanker Safety and Pollution Prevention. 122 While the
1978 amendments were not meant to implement any international
agreement, and were deemed to represent the independent evalua-
tion of Congress as to standards for vessels operating in United
States waters, the Congressional Committee adopted the TSPP's
international standards to the extent it was concluded as feasible.
123
Since the 1978 amendments to the Tanker Vessel Act presaged the
ratification of MARPOL 73/78, the Act to Prevent Pollution from
Ships may be considered as remedial legislation to implement those
aspects of MARPOL 73/78 which had not previously been imple-
mented by the 1978 Amendments. The two Acts may thus be seen as
complementary with the intention of giving MARPOL 73/78 full
domestic
effect.
1 24
VII.
JUDICIALLY CREATED DOCTRINES
Resolution of the inconsistencies between OPA '90 and MARPOL
73/78 will be influenced by judicially created doctrines concerning the
interpretation of treaties and cases where such doctrines have been
applied.
A. Last in Time Doctrine
The issue of priority of application where a treaty and a subsequent
statute conflict has been resolved by the adoption of what is known as
the last in time doctrine. This theory derives from the fact that the
supremacy clause, by its wording, affords equal weight to both
1
2 1
H.R. Rep. No. 95-1304, reported in 1978 U.S. Code Cong. & Admin. News 3274.
1
22
1nternational Conference on Tanker Safety and Pollution Prevention, Feb. 6-17, 1978
[hereinafter "TSPP"].
1
23
See H.R. Rep. No. 95-1384, at 3289-90.
1
24
Abecassis, supra note 41, at 455. See also Port Safety and Tank Vessel Safety Act of 1978,
P.L. 85-474, codified as 33 U.S.C. 1228-1232, and Act to Prevent Pollution frm Ships, supra note
51.
January I994
treaties and federal statutes.1
25
As the Supreme Court stated in
Whitney v. Robertson:
Congress may modify such provisions so far as they bind the United
States or supersede them altogether. By the Constitution, a treaty is
placed on the same footing, and made of like obligation, with an act of
legislation. Both are declared by that instrument to be supreme law of
the land, no superior efficacy is given to either over the other. When the
two relate to the same subject, the courts will always endeavor to
construe them so as to give effect to both, if that can be done without
violating the language of either; but if the two are inconsistent, the one
last in time will control the other. 1
26
Thus, the Court provided what is essentially a two part test for the
applicability of this doctrine. The first part requires that the judiciary
determine whether a conflict actually exists when the two provisions
are read in their most consistent light. Only if the two cannot be
reconciled should the court apply the last in time doctrine. A further
requirement which has been imposed by the Court is that the treaty
must be self-executing. This was rationalized by the court in Chae
Chan Ping v. United States
127
(The Chinese Exclusion Case):
A treaty, it is true, is in its nature a contract between nations and is
often merely promissory in its character, requiring legislation to carry
its stipulations into effect. Such legislation will be open to future repeal
or amendment. If the treaty operates by its own force and relates to a
subject within the power of Congress, it can be deemed in that
particular only the equivalent of legislative act, to be repealed or
modified at the pleasure of Congress. In either case, the last expression
of the sovereign will must control. 1
28
Clarification of the factors to be used in determining whether a
treaty is self-executing has been provided by the Seventh Circuit in
Frolova v. Union of Soviet Socialist Republics.
129
Factors to be consid-
ered in determining the intent of the parties to the treaty include the
language and purpose of the agreement as a whole, the circumstances
125U.S. Const. art. VI. Art. VI states in pertinent part:
This Constitution, and the Laws of the United States which shall be made in Pursuance
thereof; and all Treaties made, or which shall be made, under the Authority of the United
States, shall be the supreme law of the Land; and the Judges in every State shall be bound
thereby, any Thing in the Constitution or Laws of any State to the Contrary notwith-
standing.
126124 U.S. 190, 194 (1888).
127130 U.S. 581 (1889).
12id. at 600.
129761 F.2d 370, 373 (7th Cir. 1985).
VOL. 25, No. 1
surrounding its execution, the nature of the obligations imposed by the
agreement, the availability and feasibility of enforcement mechanisms,
the implications of permitting a private right of action and the capacity
of the judiciary to resolve the dispute.
30
Moreover, it has been held that
where the intent of the parties is clear from the language of the treaty,
the reviewing court need not consider additional factors.
13
1
Section 115 of the Restatement (Third)
32
provides that an Act of
Congress supersedes an earlier rule of international law or a provision of
an international agreement as law of the United States if the purpose of
the Act is to supersede the earlier rule. Section 115 further provides that
if a rule of international law or a provision of an international agreement
is superseded by domestic law, it does not relieve the United States of
its international obligation or of the consequences of that obligation.133
Section 115(2) provides that a provision of a treaty of the United States
that becomes effective as law of the United States supersedes as
domestic law any inconsistent pre-existing provision of a law or treaty of
the United States.
134
Section 321 provides that every international
agreement in force is binding upon the parties to it and must be
performed by them in good faith.
35
B. Canons of Statutory Interpretation
A case involving the extraterritorial application of public legislation
raises issues of legislative intent and reasonableness. Two canons of
statutory interpretation guide the decisions to apply U.S. legislation
extraterritorially. The first requires courts to determine whether
Congress intended the statute to have extraterritorial effect.
36
The
extent to which courts require legislative intent to be clearly articu-
lated, however, usually depends upon their own judgments about the
13
0
See also Tel Oren v. Libyan Arab Republic, 726 F.2d 774, 808-10 (D.C. Cir. 1984), cert.
denied, 470 U.S. 1003 (1985).
13
1
Cardenas v. Smith, 733 F.2d 909, 918 (D.C. Cir. 1984).
1
32
Restatement (Third), supra note 3, at 115.
1
33
1d. at 115(l)(b).
1341d. at 115(2).
1351d. at 321 and comment a, which provides that the doctrine of pacta sunt servanda lies
at the core of the law of international agreements and is perhaps the most important principle
of international law. It includes the implication that international obligations survive restrictions
imposed by domestic law.
1
36
Absent a finding of legislative intent to the contrary, courts presume that Congress meant
for legislation to govern only activities carried out in U.S. territory. See Foley Bros. v. Filardo,
336 U.S. 281,285 (1949); see also G. Born & D. Westin, International Civil Litigation In United
States Courts 434 (1989).
January 1994
desirability of giving the law extraterritorial effect.
137
If courts find
congressional intent, they then determine whether the extraterritorial
application of the law in a particular case would violate norms of
international comity.138 To make this determination, courts inquire
whether the United States has the power to legislate over the
defendant
39
and whether the exercise of legislative power would be
reasonable. 140
In fact, the reasonableness constraint is defined in the same manner
as the choice of law rule found in the Restatement (Second) of
Conflict of Laws that balances states' relative interests in a particular
suit.'
4
' Here, as with the Restatement (Second) of Conflict of Laws,
courts have yet to develop criteria specifically suited to balance the
particular interests implicated by extraterritorial environmental reg-
ulations.
42
Thus, identifying the costs and benefits specific to envi-
1
37
For example, despite similarly worded legislative materials, courts have determined that
Congress intended the antifraud provisions of the Securities Exchange Act, 15 U.S.C. 78
c(a)(17) (1988), but not provisions of NEPA, 42 U.S.C. 4332(2)(c) (1988), to apply extrater-
ritorially. Compare Schoenbaum v. Firstbrook, 405 F.2d (2d Cir. 1968) (en banc), cert. denied,
393 U.S. 906 (1969), with Natural Resources Defense Council v. Nuclear Regulation Commis-
sion, 647 F.2d 1345, 1366 (D.C. Cir. 1981) (finding that NEPA does not apply extraterritorially
to Nuclear Regulatory Commission export licensing decisions) and Greenpeace U.S.A. v.
Stone, 748 F. Supp. 749 (D. Hawaii 1990), appeal dismissed, 924 F.2d 175 (9th Cir. 1991)
(district court held that NEPA does not apply extraterritorially to movements of munitions
through and within West Germany pursuant to presidential agreement between United States
and Germany requiring removal of munitions). Given the courts' tendency to confine the scope
of environmental legislation, any effort to strengthen an extraterritorial environmental regime
requires that Congress explicitly express such an intent.
13
8
'his notion of comity was first developed in a series of antitrust cases, including
Timberlane Lumber Co. v. Bank of America Nat'l. Trust and Sav. Ass'n, 549 F.2d 597, 613-15
(9th Cir. 1976), and later stated as a canon of statutory interpretation in 403 of Restatement
(Third) of Foreign Relations Law. See G. Born & D. Westin, supra note 136. Although
Congress could enact a law that violates principles of international comity, courts presume that
Congress did not intend to do so and will not apply such law unless the statute cannot be given
narrow interpretation that accords with deference due to a foreign sovereign's policies. See
Restatement (Third) 403, comment g, supra note 3.
139This power is known as prescriptive jurisdiction and accords with notions of international
comity. See Restatement (Third), supra note 3, at 402. To the extent that nationality and
territoriality are the primary basis of jurisdiction, they are similar to the basis of personal
jurisdiction; nationality corresponds to the general jurisdiction over claims arising against a
United States citizen and territoriality corresponds to specific personal jurisdiction because it
applies to activities likely to cause harm within the forum.
14Id. at 403(2).
141Id. at 403, n. 10 (explaining that the criteria of reasonableness for prescriptive jurisdic-
tion are the same as the criteria for choice of law under the Restatement (Second) of Conflict
of Laws).
1
42
See, e.g., Laker Airways, Ltd. v. Sabena Belgian World Airlines, 731 F.2d 909, 949-50
(D.C. Cir. 1984). The D.C. Circuit criticized the unprincipled balancing:
Vol. 25, No. 1
ronmental protection and setting forth a method by which courts can
balance those interests may help courts decide when environmental
disputes should be subject to U.S. tort law, U.S. public law and U.S.
jurisdiction.
In the absence of legislative guidance, courts should determine
whether to regulate extraterritorially by openly balancing the likely
effects of their actions.
1 43
Courts should conduct two distinct inqui-
ries to determine whether extraterritorial environmental regulation is
reasonable. Courts must determine the costs and benefits associated
with such regulation in terms of environmental protection and bur-
dens on economic development. In addition, they should consider
whether independent political and ethical values favor or disfavor
extraterritorial regulation.'"
Another fundamental approach to statutory interpretation under An-
glo-American law is the social purpose approach. Under this approach,
the court will make sure that the construction of a statute shall suppress
subtle inventions and advance the purpose according to the true intent of
the makers of the Act.
1 45
Congressional abrogation of prior national
agreements or treaties can be accomplished either by a statutory
denunciation of the treaty, a denunciation coupled with legislation
inconsistent with the prior treaty or a repeal by implication, where
subsequent legislation does not explicitly abrogate a treaty but is found
to override provisions of the prior treaty.
While Congress clearly has the power to denounce treaties or
agreements, the intention to abrogate or modify a treaty is not to be
lightly imputed to Congress.46 The canon of construction developed
by the courts has been that when a statute and a treaty relate to the
same subject, the courts will always endeavor to construe them so as
Given the inherent limitation of the Judiciary, which must weigh these issues in the limited
context of adversarial litigation, we seriously doubt whether we could adequately chart
the competing problems and priorities that inevitably define the scope of any nation's
interest in a legislated remedy.
1
43
1d. at 948-51. Many commentators and courts have expressed a distaste for judicial
balancing of conflicting national laws, claiming that such balancing is a legislative function.
Currently, courts are confronted with suits calling for extraterritorial environmental regulation
and must decide these suits without any legislative guidance in the environmental field.
Ultimately, the best solution might be to enact a special substantive law governing international
disputes. See Von Mehren, Special Substantive Rules for Multistate Problems: Their Role and
Significance in Contemporary Choice of Law Methodology, 88 Harv. L.Rev. 347, 358-59
(1974). For now, courts must be free to assume this legislative function.
144id.
1
45
See E. Bodenheimer, J.B. Oakley and J.C. Love, An Introduction to the Anglo-American
Legal System 137 (1988).
I
4
Tores v. Immigration and Naturalization Service, 602 F.2d 190, 193 (7th Cir. 1979).
January 1994
to give effect to both, if that can be done without violating the
language of either.
47
In United States v. The Palestine Liberation
Organization,
148
the United States District Court for the Southern
District of New York held that the Anti-Terrorism Act of 19871
49
did
not supersede the Headquarters Agreement between the United
States and the United Nations regarding the headquarters of the
United Nations.15
0
The court stated that the Anti-Terrorism Act and
its legislative history do not manifest congressional intent to abrogate
the obligation of the United States to refrain from impairing the
function of the Palestine Liberation Organization's Observer Mission
to the United Nations."'1 The court further noted that the Anti-
Terrorism Act remains a valid enactment of general application even
though the Headquarters Agreement is still a valid and outstanding
treaty obligation of the United States. The court construed both the
Headquarters Agreement and the Anti-Terrorism Act by giving effect
to both without violating the language of either. In Transworld
Airlines v. Franklin Mint. Corp.,
52
where the question presented was
whether the 1978 repeal of the Par Value Modification Act rendered
the Warsaw Convention's
153
cargo liability limit unenforceable in the
United States, the Court concluded that the 1978 repeal of the Par
Value Modification Act was not intended to affect the enforceability
of the Warsaw Convention in the United States.
In Speiss v. C. Itoh and Co. (America), Inc.,1
54
the Fifth Circuit
held that federal statutes ought never to be construed to violate the
law of nations if any other possible construction remains. It is only
when Congress intends to depart from the obligations of a treaty that
inconsistent federal legislation will govern. Thus, unless federal laws
reflect an affirmative disavowal of the rights provided by the treaty, it
is the duty of the court to implement the treaty rights.
155
Therefore,
for a later Congressional Act to overturn a prior treaty or executive
agreement, there must be a clear showing of a Congressional intent to
1
47
See supra note 126.
148695 F. Supp. 1456 (S.D.N.Y. 1988).
1
49
Pub. L. 100-204, Title X, 1002(a), 101 Stat. 1331, 1407, set out in 22 U.S.C.A.
5201-5203 (West Supp. 1988).
1
50
See G.A. Res. 169 (11), 11 U.N.T.S. 11, No. 147 (1947); 61 Stat. 3416, T.I.A.S. No. 1676,
authorized by S.J. Res. 144, 80th Cong. 1st Sess. See 22 U.S.C. 187 (1982).
15'See supra note 146.
152466 U.S. 243, 250, 1984 AMC 2402 (1984).
153Convention for the Unification of Certain Rules Relating to International Transportation
by Air, Oct. 12, 1929, 49 Stat. 3000, T.S. No. 876 (1934).
154643 F.2d 353, 356 (5th Cir. 1981).
151Id.
Vol. 25, No. I
January 1994 OPA '90 and MARPOL 73/78
so abrogate the treaty or the terms of the treaty and the statute must
be irreconcilable, so that effect cannot reasonably be given to both. 1
5 6
In Japan Whaling Ass'n v. American Cetacean Society,
157
the
Supreme Court held that nothing in the legislative histories of the
Pelly and Packwood Amendments
58
requires the Secretary, regard-
less of the circumstances, to certify each and every departure from
the International Whaling Commission's whaling schedules estab-
lished pursuant to the International Convention for the Regulation of
Whaling.
159
In McCulloch v. Sociedad Nacional de Marineros de
Honduras, 160 the Supreme Court concluded that without the presence
of the affirmative intention of Congress clearly expressed, the provi-
sions of the National Labor Relations Act'
6
' would not be extended
and applied to foreign vessels. However in South African Airways v.
Dole,
62
the D.C. Circuit found in favor of the Secretary of Trans-
portation, holding that the Congressional intent of the Anti-Apartheid
Act was to breach the Executive Agreement and immediately termi-
nate air service with South Africa.
C. Self-Executing Treaty
In international law, there is the presumption that a valid treaty will
be executed by its contracting parties.
63
What is a self-executing
1
56
A repeal by implication is where a treaty and a statute are irreconcilable by their terms,
but there is no clear congressional intent to denounce the treaty. The courts disfavor finding a
repeal by implication where a reasonable construction can give effect to both. See Morton v.
Mancari, 417 U.S. 535 (1974).
'57478 U.S. 221 (1986).
5 8
See 85 Stat. 786, as amended, 22 U.S.C. 1978; 90 Stat. 337, as amended, 16 U.S.C.
1821 (Pelly Amendment to the Fishermen's Protective Act of 1%7 directing the Secretary of
Commerce to certify to the President if nationals of a foreign country are conducting fishing
operations in such a manner as to diminish the effectiveness of an international fishery
conservation program, and the President, in his discretion, may then direct the imposition of
sanctions on the certified nation. Also, Packwood Amendment to the Magnuson Fishery
Conservation and Management Act, requiring expedition of the certification process and
mandating that, if the Secretary certifies that nationals of a foreign country are conducting
fishing operations in such a manner as to diminish the effectiveness of the International
Convention for the Regulation of Whaling, economic sanctions must be imposed by the
executive branch against the offending nation).
159See International Convention for the Regulation of Whaling [hereinafter "ICRW"], Dec.
2, 1946, 62 Stat. 1716, T.I.A.S. No. 1849.
160372 U.S. 10, 1963 AMC 283 (1963).
161See the National Labor Relations Act, as amended, 61 Stat. 136, 73 Stat. 541, 29 U.S.C.
151.
162817 F.2d 119 (D.C. Cir. 1987).
1
63
See Advisory Opinion regarding Exchange of Greek and Turkish Population under
Lausanne Convention VI, P.C.I.J., Ser. B. No. 10, 20, where it was said that a state which has
treaty? The term may be applied to two categories of treaties. Strictly
defined, a self-executing treaty is immediately effective as law upon
ratification (or exchange of ratifications where required) and entry
into force without further implementation and provides a rule for
individuals and for the federal and state governments.1
64
A non-self-
executing treaty requires implementation by either the legislative or
the executive branch in order to be effective as law. The question of
whether a treaty is self-executing or not is a matter of practical
concern, rather than of political polemic, for the executive branch
when it is called upon to enforce a treaty or for the judicial branch
when it is called upon to determine individual rights and duties under
the terms of a treaty.
To determine self-execution, U.S. courts look at a series of factors
but they look primarily at the intent of the drafters, including intent
implied or expressed in the treaty itself. When that language is
sufficiently precise and indicates that no further government action is
needed to apply the treaty norms, a U.S. court will be willing to
conclude that the treaty is self-executing. However, under a long
string of precedents over a hundred years, U.S. courts have ruled that
a directly applied treaty has the same status as federal laws and the
latest in time therefore prevails. 1
65
Thus, for internal law purposes, a
later U.S. statute will prevail over the international agreement (which
sometimes causes the United States to violate its international
obligations).1
66
In other cases, U.S. courts have looked for evidence
of Congressional intent to determine whether a treaty is self-execut-
contracted valid international obligations is bound to make in its legislation such modifications
as may be necessary to ensure the fulfillment of the obligations undertaken.
161'he classic definition of self-executing treaty is found in Foster & Elam v. Nielson, 27
U.S. (2 Pet.) 253, 314 (1829). Chief Justice Marshall laid out the basis for distinguishing between
self-executing and non-self-executing treaties. While ruling on a property claim, the court
interpreted the Treaty of Amity, Settlement and Limits between the United States and Spain as
non-self-executing. The Court dismissed the plaintiff's claim, declaring that the phrase "shall be
ratified and confirmed" was the language of contract, and that the legislature must execute the
contract before it can become a rule for the court. This early opinion profoundly affected the
later development of the doctrine of self-executing treaties. See also Iwasawa, The Doctrine of
Self-Executing Treaties in the United States: A Critical Analysis, 26 Va. J. Int'l L. 627, 633,
644-45, 687, 689-90 (1986).
165See Restatement (Third), supra note 3, at 115. See also L. Henkin, Constitutionalism,
Democracy and Foreign Affairs (1990)..
'6Several GATT dispute panel reports have concluded that the implementation of U.S.
statutes enacted later than GATT caused the United States to be in contravention of its GATT
Treaty obligations. See, e.g., United States Manufacturing Clause, GATI, Basic Instruments
and Selected Documents, 31st Supp. 74 (1985) (regarding copyright); U.S. Section 337 of the
Tariff Act of 1930, 36th Supp. 345 (1988).
Vol. 25, No. 1
ing.1
67
When Congress clearly expresses its intent in a statute or other
resolutions, the legislative will must be respected. Since Congress has
the power to enact a statute contrary to a treaty under the last-in-time
rule, its power to declare a treaty not directly applicable should also
be recognized.16 If, in giving its advice and consent to a treaty, the
Senate passes a resolution that the treaty is not self-executing, that
expression of Senate intent should be given effect because it is a sine
qua non of the advice and consent.
1 69
D. Analysis of the Inconsistencies Between OPA '90 and
MARPOL 73/78.
If the last-in-time doctrine is applied to the inconsistencies between
OPA '90 and MARPOL 73/78, OPA '90, being later in time to
MARPOL 73/78 and to the Act that implemented MARPOL 73/78,
should supersede the requirements of both. Regulation 13F17
0
adopted by IMO's Marine Environment Protection Committee in
March 1992, contains requirements for a double hull standard and, in
the alternative, a construction standard involving double sides and a
horizontal deck separating upper and lower cargo tanks (that is, a
mid-deck) for new tank vessels of 5,000 deadweight tons and above.
Other methods of design and construction may also be accepted
provided that they ensure the same level of protection against
pollution in the event of a collision or stranding. In contrast, OPA '90
requires that all new vessels constructed for the carriage of oil when
operating in United States' waters or the United States' exclusive
economic zones be fitted with double hulls.
171
The new amendments
to MARPOL 73/78 entered into force on July 6, 1993 under MAR-
POL's tacit amendment procedure which does not require the advice
and consent of the U.S. Senate and does not require an instrument of
ratification to be deposited by the President. Pursuant to the suprem-
acy clause of the U.S. Constitution,
172
the amendments to MARPOL
73/78 (Regulations 13F and 13G) should supersede OPA '90 because
they are later in time. However, the U.S. made a declaration of
1
67
The view of Congress may be expressed in many different ways. In re Damjanjuk v.
Meese, 784 F.2d 1114, 1116 (D.C. Cir. 1986) (in reports of the Senate Committee on Foreign
Relations); Bertrand v. Sava, 684 F.2d 204, 218-19 (2d Cir. 1982) (in legislative history).
168See Riesenfeld, The Doctrine of Self-Executing Treaties and U.S v. Postal: Win at Any
Price?, 74 Am. J. Int'l L. 892, 901 (1980).
1
69
See L. Henkin, Foreign Affairs and the Constitution 135 (1972).
17
0
The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.
17
1
0PA '90, supra note 4, at 4115.
1
72
See supra note 125.
January 1994
non-acceptance under Article 16 of MARPOL 73/78,173 thereby
making OPA '90 later in time to MARPOL 73/78 (without the
Regulations).
Under Article 16 of MARPOL 73/78, there are two different ways
by which a Party can prevent an amendment to an Annex from
entering into force for it. The first is to object to the amendment
together with other contracting states constituting not less than
one-third of the Parties, the combined merchant fleets of which
constitute not less than fifty percent of the gross tonnage of the
world's merchant fleet.
174
Since Regulations 13F and 13G were
adopted on March 6, 1992175 and one-third of the Parties did not
object, the United States clearly could not avail itself of this proce-
dure, as the amendments have in fact already been accepted.
The second would be to make a declaration before the amendments
enter into force
176
which the U.S. in fact made.
1 77
What will be the
effect of such a declaration on legal rights and obligations under
MARPOL 73/78 in respect of the U.S. and other parties to the treaty?
VIII.
AUTHORITY TO IMPLEMENT OPA '90 AND MARPOL 73/78
The effect of such a declaration on legal rights and obligations of
parties to MARPOL 73/78 can be examined by analyzing how U.S. oil
pollution laws are enforced and further by addressing its impact on
international law.
The enforcement of oil pollution law can be viewed through several
stages beginning with the President.
178
Section 4 of the Act to Prevent
Pollution from Ships
79
charges the Secretary of Transportation
180
with the responsibility for enforcing MARPOL 73/78 and requires him
1
73
See supra note 112. See also MARPOL 73/78, supra note 2, at art. 16(2)(f)(ii), which
provides that a party may notify the Secretary General of the Organization that its express
approval will be necessary before the amendment enters into force for it.
17 4
1d.
171The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.
1
7 6
MARPOL 73n8, supra note 2, art. 16(2)(f)(ii), (iii). See also, art. 16(4)(b) which provides:
"Any party which has declined to accept an amendment to an Annex shall be treated as a
non-party for the purpose of application of that amendment."
17
7See supra note 112.
17
8
See U.S. Const. art. II, 3, which states that the President shall take care that the laws
be faithfully executed.
17933 U.S.C. 1903, supra note 51.
'"The Secretary referred to is the Secretary of the Department in which the Coast Guard is
operating, currently the Department of Transportation. See 33 U.S.C. 1901 (7). The Secretary
of Transportation has delegated her responsibility under the Act to the Coast Guard.
Vol. 25, No. I
to prescribe any necessary or desired regulations to carry out the
provisions of MARPOL 73/78.181 Similarly, OPA '90 charges the
Secretary of Transportation with the responsibility for implementing
OPA '90.182
The Coast Guard is a service in the Department of Transportation.
It has the primary duty of enforcing or assisting in the enforcement of
all applicable federal laws in waters subject to the jurisdiction of the
United States.18
3
Article I, 1 of the United States Constitution
lodges all legislative power in Congress. Article I, 8 also permits
Congress to make all laws which shall be necessary and proper for
carrying into execution the enumerated powers. 1
4
The power of the
Secretary of Transportation to prescribe any necessary regulations to
carry out the provisions of MARPOL 73/78 is a delegated authority
from Congress. The Secretary of Transportation has delegated to the
Commandant, U.S. Coast Guard, the authority to issue regulations
regarding the functions, powers and duties of the Coast Guard
together with the authority to redelegate and authorize successive
redelegations of that authority within the Coast Guard.
18 5
The United
States reserved its position during the adoption of Regulations 13F
and 13G, due to differences with OPA '90 regarding the applicability
of double hull requirements to certain categories of vessels and the
allowance of the mid-deck concept as an alternative to the double-
hull.1
8 6
The U.S. has taken a position with IMO that the express
approval of the U.S. Government would be necessary before the new
international tank vessel design standards will be enforced by the
U.S.
8 7
The Coast Guard has also established technical standards for
double hulls on vessels carrying oil in bulk, as cargo or cargo residue,
that are constructed or undergo a major conversion under contracts
awarded after June 30, 1990.188
OPA'90 requires the Coast Guard to evaluate relevant information
on potental alternatives to the double hull design and send its
evaluation to Congress, along with recommendations on any alterna-
tive concepts that afford environmental protection equivalent to (or
better than) double hulls, which the Coast Guard considers to merit
18'33 U.S.C. 1903(b).
1
82
0PA '90, supra note 4.
'
83
See 14 U.S.C. 1.
184See U.S. Const. art. I.
'
8
SSee 33 C.F.R. 1.05-1, referring to 47 C.F.R. 1.45, 1.46.
8'5The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.
'
87
See supra note 112.
January 1994
adoption.
8 9
The U.S. Department of Transportation has transmitted
a report to Congress on alternatives to the double hull design for tank
vessels. The report states that no other designs are presently avail-
able that would provide equal or greater protection to the environ-
ment than that provided by the double hull tankers and recommends
that no changes be made by Congress to OPA '90 concerning the
double hull requirements for tank vessels.
190
Is it reasonable for the
U.S. to violate MARPOL 73/78 and apply its own unilateral action to
foreign vessels by virtue of OPA '90?
Several authorities show that it is unreasonable. The inconsisten-
cies between OPA '90 and MARPOL 73/78 can be effectively re-
solved by considering the following recommendations.
A. Consideration of Studies on Tank Vessel Designs
OPA '90 requires the Coast Guard to issue rules implementing
various measures to reduce the risk of oil spills in U.S. waters.
91
A
substantial amount of oil imported to the United States is transported
aboard foreign flag vessels. Since OPA '90 applies to all vessels in
U.S. waters, the Coast Guard recognized that U.S. double hull
regulations would have a significant global impact. 1
92
It is a misguided view of OPA '90 for the Coast Guard to conclude
that it does not have discretion to apply any other standards other
than the double hull design standard.
1 93
The purpose of OPA '90 is to
mitigate oil pollution in waters subject to U.S. jurisdiction, and to
adopt a standard that gives equivalent protection that would be
consistent with such purpose. The long-term intent of OPA '90 is to
develop hull designs which maximize environmental protection under
as many circumstances as possible. The U.S. Coast Guard partici-
pated as a member of the IMO's Steering Committee which coordi-
nated a comparative study on tank vessel design.
94
The Coast Guard
also initiated an independent research and development project with
Herbert Engineering Corporation, using probabilistic computer mod-
189
Td. See also OPA '90, supra note 4.
'goLetter from Andrew H. Card, Jr. to Thomas S. Foley (Dec. 24, 1992) (discussing the
report to Congress on Alternatives to Double Hulls in Tank Vessels Design required by
4115(e)(1) of OPA '90).
1
9 1
0PA '90, supra note 4.
192Supra note 113.
1
93
d.
194Letter from Andrew H. Card, Jr. to Thomas S. Foley, supra note 190.
Vol. 25, No. I
eling to study oil outflow of various alternative designs.
195
The
Herbert Engineering analysis considered both the double hull and
mid-deck tankers to be the most oil preventative and cost effective in
the study.
196
Furthermore, the U.S. Coast Guard should re-evaluate
the IMO Comparative Study on Design Standards which concluded
that both the double hull and mid-deck tanker designs give equivalent
protection.1
97
The National Academy of Sciences also conducted a
comprehensive review of the safety, economic and environmental
implications of various alternative tank vessel designs and confirmed
the effectiveness of both the mid-deck and double hull designs under
different scenarios.
198
Even though the U.S. Coast Guard has estab-
lished technical standards for double hulls on vessels carrying oil in
bulk as cargo or cargo residue, that are constructed or undergo a
major conversion under contracts awarded after June 30, 1990, the
Coast Guard under OPA '9019 is still required to periodically review
recommendations from the National Academy of Sciences and others
on methods for further increasing the environmental and operational
safety of tank vessels; assess the impact of the double hull require-
ment on the safety of the marine environment and the economic
viability and operational makeup of the maritime oil transporation
industry; and report to Congress.
2
00 The first report
201
transmitted to
Congress on alternatives to the double hull design for tank vessels
was inconclusive and misguided.
B. Deference to Administrative Agencies
Several reasons exist for giving some degree of deference to the
administrative agency's view of the law. First, in a highly technical
area, the agency usually has more experience than the judge in
applying the statute. Second, Congress has given the agency, rather
than the court, primary responsibility for carrying out the law. Third,
it is often important that private individuals or local governments be
able to respond immediately in reliance on an administrative agency's
view of the statute. If the agency's view of the statute were given no
19
5
1d.
1
Id.
197IMO Briefing Papers, Jan. 16, 1992, supra note 102.
19Letter from Andrew H. Card, Jr. to Thomas S. Foley, supra note 190.
'"See OPA '90, supra note 4. See also House Cong. Rep. No. 101-653, reported in 1990
U.S. Code Cong. & Admin. News 821.
Mq
0
1d.
January 1994
credence at all by the court's, it would be unsafe to rely on the
agency's position until the issue had been litigated all the way to the
Supreme Court. Thus, giving deference to the agency's view serves
the purpose of expediting compliance with the law.
Under the Administrative Procedure Act,
20 2
the standard of review
for factual issues depends on the type of proceeding. In an adjudica-
tive action, the standard for review of factual issues is the substantial
evidence test. The agency's action must be upheld by the court unless
there is no substantial evidence in the record to support the agency's
ruling. With respect to other forms of administrative action, the court
in Citizens To Preserve Overton Park, Inc. v. Volpe,
203
found that the
key to reviewability lay in 701 of the Administrative Procedure
Act.
2o4
In Chevron, U.S.A., Inc. v. NRDC,
205
a case which involved the
use of bubbles in nonattainment regulations under the Clean Air Act,
the Supreme Court concluded that the Environmental Protection
Agency's interpretation represents a reasonable accommodation of
manifestly competing interests and is entitled to deference.
206
In
Natural Resources Defense Council, Inc. v. Coleman,
207
the court, in
the interpretation of 46 U.S.C. 391(a)(7), concluded that, even if the
Secretary of Transportation and Coast Guard were under a continu-
ing legal duty to revise antipollution regulations governing the design,
construction and repair of United States flag vessels engaged in the
coastwise trade, it was not appropriate for the court to impose a strict
time-table for promulgation and revision of regulations where, among
other considerations, it was not in the public interest to impose such
a time-table as it would likely impair the quality of regulation.
202See Administrative Procedure Act, 5 U.S.C. 701.
203401 U.S. 402 (1971).
204See 5 U.S.C. 701, supra note 202, which provides that the action of every administrative
agency is subject to judicial review except (1) where there is a statutory prohibition on review
or (2) where agency action is committed to agency discretion by law.
205467 U.S. 837 (1984).
2
0
6The basic idea behind the bubble is to treat the various components of an industrial plant
as a single source for regulatory purposes. Thus, emissions from all stacks are considered only
in the aggregate. The bubble concept could be used to allow a plant operator to reduce his total
pollution abatement costs by changing the mix of controls so as to maximize emission reduction
for the processes which are least expensive to control, while decreasing controls for processes
which cost the most to clean up.
27411 F. Supp. 449, 1976 AMC 2507 (D.D.C. 1975).
Vol. 25, No. I
C. Consistency of Interpretation with Purpose of Statute
The U.S. Coast Guard's action in establishing technical standards
for double hulls on vessels carrying oil in bulk as cargo or cargo
residue does not presently satisfy the substantial evidence test.
However, if the Coast Guard re-evaluates relevant information on
potential alternatives to the double hull design and issues regulations
adopting the double hull standards of OPA '90 or equivalent stan-
dards under MARPOL 73/78, such regulations should not only be
deferred to because of the expertise and experience of the Coast
Guard as an administrative agency entrusted with such function, but
also because such regulations would be consistent with the purpose of
OPA '90. OPA '90 in its legislative history pointed out that the best
interests of the United States would be served by participation in an
international regime that provides for preventive measures from oil
spills at least as effective as domestic law.
208
The Coast Guard could
interpret OPA '90 as a whole statute, i.e., that the double hull
requirement does not alter OPA '90's objective of maintaining
consistency with generally recognized principles of international law.
In Citizens to Save Spencer County v. U.S. Environmental Protec-
tion Agency,
2
the court concluded that it is appropriate for an
agency in harmonizing conflicting provisions to look for guidelines in
the statute as a whole and to consider underlying goals and purposes
of the legislature in enacting statutes, while avoiding unnecessary
hardship or surprise to affected parties, and remaining within gener-
ally prescribed statutory bounds.
D. United States Treaty Obligations
The Coast Guard in issuing further regulations could decide to
adopt the double hull standards or other equivalent measures as
required by Regulation 13F because of United States treaty obliga-
tions under both the IMO Convention and MARPOL 73/78.
In 1977, environmental organizations,
2 0
which had been critical of
the Coast Guard for its failure to follow the mandate of the 1972 Ports
2 See House Conf. Rep. No. 101-653, reported in 1990 U.S. Code Cong. & Admin. News
814.
29600 F.2d 844 (D.C. Cir. 1979).
21
The legal arm of national environmental organizations is the Center for Law and Social
Policy, a public interest law firm that represents the Sierra Club, Wilderness Society, Natural
Resources Defense Council, National Wildlife Federation, Environmental Defense Fund,
Friends of the Earth, National Audubon Society and Environmental Policy Center. The center
is based in Washington, D.C.
January I99W
and Waterways Safety Act, sued the Coast Guard for not implement-
ing the Act as an engine for reform but merely as a vehicle for
implementing previously agreed upon international solutions.
2
1' The
Coast Guard's justification for this approach was that a cooperative
international effort for oil pollution control is essential, and that U.S.
leadership in this effort is linked to a decision not to go beyond
international agreements.
212
The United States is a party to the IMO
Convention.
2 3
The United States is also a party to MARPOL
73/78.214 Even though MARPOL 73/78 is not a self-executing trea-
ty,
215
Congress expressly endorsed the tacit amendment procedure
prescribed in Article 16(2)(f)(ii) and (iii) of the treaty by passing
implementing
legislation to that effect.
216
Every treaty in force is binding upon the parties to it and must be
performed by them in good faith. Under Article 18 of the Vienna
Convention on the Law of Treaties,
2 7
a state is obliged to refrain
from acts which would defeat the object and purpose of a treaty.
218
The United States should refrain from an act that would defeat the
object and purpose of MARPOL 73/78.
211
See NRDC v. Adams (Civ. Action No. 76-0181, D.D.C.) This case was settled following
the Carter 1977 proposals and the IMO Protocols of 1978.
21
2See Hearings on Oil Pollution Caused by Routine Tanker Operations, Before the
Subcommittee on Government Activities and Transportation of the House Committee on
Government Operations, 95th Cong., 2d Sess. (1978) (Statement of Clifton E. Curtis). See also
Oil Transportation by Tankers: An Analysis of Marine Pollution and Safety Measures, Office of
Technology Assessment, U.S. Congress 83 (1975).
213
See I. Arroyo, supra note 10, at 30. The author notes that the date of receipt of the
instrument of acceptance for the United States was Aug. 17, 1950.
214
See MARPOL 7378, supra note 2.
21
5
Supra note 51, the Act to Prevent Pollution From Ships as implementing legislation for
MARPOL 7378. See also Abecassis, supra note 41.
216
See 33 U.S.C. 1909, Pub L. 100-220, reprinted in 1987 U.S. Code, Cong. & Adm. News,
2525. Congress expressly mentioned Article 16 of MARPOL 7378 implemented by 10(b) & (c)
of the Act to Prevent Pollution as an important aspect of the Act, providing the legal structure
for applying the Annex amendment procedures.
217
Vienna Convention on the Law of Treaties, May 22, 1969. Opened for signature, May 23,
1969. U.N. Conference on the Law of Treaties, First and Second Sessions, March 26-May 24,
1968 and April 9-May 22, 1969, U.N. Doc. A/Conf. 39/27, at 289 (1969), reprinted in 8 I.L.M.
679 (1969).
218
The rationale for the application of the Vienna Convention is that it generally represents
existing international law. The Secretary of State's letter of transmittal described the Vienna
Convention to be generally recognized as the authoritative guide to current treaty law and
practice. See generally Secretary of State Rogers' Report to the President, Oct. 18, 1971, 65
Dep't. St. Bull. 684, 685 (1971).
Vol. 25, No. I
E. Law of the Sea Mandate
The Coast Guard should also take into consideration Article 211 of
the Law of the Sea Convention which requires states, acting through
the competent international organization or general diplomatic con-
ferences, to establish international rules and standards governing
vessel-source pollution. Even though the United States is not a party
to the Law of the Sea Convention, the practice of states, supported
by the broad consensus achieved at the Third United Nations
Conference on the Law of the Sea, has effectively established as
customary international law the coastal states' jurisdictional powers.
A coastal state may not adopt laws and regulations which relate to
design, construction, manning or equipment standards, other than
generally accepted international standards.
2 9
This is a principle of
law that has evolved into customary international law. The United
States would be violating such principle by not permitting tank
vessels that have equivalent standards to enter United States'
navigable waters.
CONCLUSION
MARPOL 73/78 is a global treaty that has 70 contracting states.
The United States was a leader in the elaboration of the 1973
Convention and its 1978 Protocol, and has been a leader in its
implementation over the years. United States delegations have al-
ways assumed a position of leadership in the proceedings of the
Marine Environment Protection Committee. It will be a major
set-back in the development of international maritime law, trade,
commerce and environmental protection if the United States decides
to implement the double hull requirement of OPA '90. The principle
that an exercise of jurisdiction is nonetheless unlawful if it is
219
Trhe exclusive economic zone is an area beyond and adjacent to the territorial sea, which
by Article 57 shall not extend beyond 200 nautical miles from the territorial sea baselines. A
coastal state does not enjoy sovereignty over its exclusive economic zone; rather, under Article
56(1), it has certain sovereign rights for the purpose of exploring and exploiting the natural
resources of the sea-bed, its subsoil and the superadjacent waters, and it has certain limited
jurisdictional rights with regard to the protection and preservation of the marine environment.
One should also note that Article 73, which gives powerful rights of arrest and detention in the
exclusive economic zone, only applies where this is in the exercise of the coastal state's
sovereign rights to explore, exploit, conserve and manage the living resources of the zone. In
view of the other elaborate and specifically pollution oriented provisions in the Convention,
Article 73 should not be taken to cover enforcement of standards relating to oil pollution from
ships. See generally, arts. 56, 57, 73, 211 and 217 of the Law of the Sea Convention, supra note
3. See also, Abecassis, supra note 41, at 109-10.
January 1994
unreasonable is established in United States law, and has emerged as
a principle of international law as well.
220
Legislatures and adminis-
trative agencies in the United States have generally refrained from
exercising jurisdiction where it would be unreasonable to do so.221
The position set forward in this article is that OPA '90's double hull
requirement is unreasonable because it violates United States treaty
obligations. The extent to which a regulation is consistent with the
traditions of the international system is one of the factors to be
considered in determining whether the exercise of jurisdiction is
unreasonable. OPA '90's double hull requirement has disregarded the
justified expectations of the international community by regulating
the design of ships in a manner inconsistent with generally accepted
international standards.
The Coast Guard has a major role to play in prescribing further
regulations under both OPA '90 and MARPOL 73/78. The Coast
Guard should continue to work with IMO to develop international
criteria and methodology for tank vessel designs. OPA '90 and
MARPOL 73/78 can both be effectively implemented if the United
States imposes standards consistent with those that have been
adopted by the IMO, especially in a situation where the two standards
can be considered as equivalent. As has been noted by one legal
scholar:
A ship may strand on the high seas and cause pollution in two
neighboring states, i.e. France and England (as with the Torrey Canyon
in 1967). She may be owned by a Liberian company, bareboat chartered
to a Bermuda Company, managed by an English Company, time
chartered to a Greek company and voyage chartered to an American
company. Her cargo may have been sold during the voyage by the
American company to a Japanese one. The officers may be English and
the crew Indian. The international nature of the shipping business
creates such diversity of interests, with potential conflicts of law and
jurisdiction.
222
Only through international efforts can solutions be found for the oil
pollution problem, which stems from commercial marine activity.
The nature of the maritime business mandates multilateral attention.
22
See Restatement (Third), supra note 3, at 403.
22
1
B.E. Carter & P.R. Trimble, International Law 740-41 (1991).
22
2
Abecassis, Marine Oil Pollution Laws: The View of Shell International Marine Limited,
8 Int'l. Bus. Law 3 (1980).
Vol. 25, No. 1
Total Loss and Abandonment in the Law of
Marine Insurance
RUBINA KHURRAM*
I
INTRODUCTION
The Marine Insurance Act 19061 of the United Kingdom provides in
56 that a loss may be either total or partial, and defines a partial loss
as "any loss other than a total loss." The measure of indemnity
recoverable in the event of a total loss is not necessarily complete or
absolute indemnity, but rather, indemnity up to the amount agreed in
the insurance contract. In contrast, in the event of a partial loss, only
a proportionate amount of the agreed limit of indemnity is recover-
able.
Total losses in marine insurance are of two kinds, namely, actual
total loss and constructive total loss. This article proposes to examine
the notion of constructive total loss and the doctrine of abandonment,
both of which are unique to marine insurance. It is the author's
intention to present the salient features of these two concepts with
reference to the leading cases. The distinction between the doctrines
of subrogation and abandonment also will be discussed.
II
ACTUAL TOTAL LOSS
An actual total loss is said to occur where, for example, a vessel
sinks in very deep waters and is not recoverable; where it is captured
and condemned; or where, as in Cossman v. West,
2
it is salved and
sold under an order of the admiralty court for less than the salvage
*B.A., M.A., LL.B., LL.M. (Karachi), LL.M. (IMLI). Advocate, Education Officer, and
Lecturer in Maritime Law, Pakistan Marine Academy, Karachi. Formerly Lecturer in Political
Science and Comparative Law, Federal Government Degree College, Peshawar and Wah
Cantonments, Pakistan.
'Hereinafter referred to as "the Act."
2(1887) 13 App. Cas. 160.
charges. It remains to be inquired as to what kind of casualty amounts
to an actual total loss. Goods are regarded as having become an actual
total loss as soon as they cease to be goods of the kind insured from
a commercial point of view.
3
Lord Abinger, in the leading case of
Roux v. Salvador,
4
held that:
If, in the progress of the voyage, the thing insured becomes totally
destroyed or annihilated, or if it be placed by the perils insured against
in such a position that it is totally out of the power of the assured or the
underwriter to procure its arrival the latter is bound, by the very letter
of his contract, to pay the sum insured.
5
A partial or constructive total loss may develop into an actual total
loss after the policy expires. Generally speaking, there are three
classes of actual total loss: those cases where the subject matter is
destroyed; where it is so damaged as to cease to be a thing of the kind
insured; or where the assured is irretrievably deprived of the insured
subject matter. In the case of total loss by deprivation, it is unnec-
essary to deal separately with ships and goods. But in considering
total losses by destruction, the classes of insurance need to be treated
separately.
An actual total loss of freight is not difficult to determine where a
ship or goods have been actually lost so that freight can no longer be
earned. But freight may be actually lost even when the ship and goods
are still in existence, though so damaged as to entitle the assured
under ship and goods policies to regard them as commercially lost and
no longer of any value to him since their reconditioning or recovery
would cost more than their value when repaired. In such cases as
Rankin v. Potter,
6
the loss of freight on a policy on freight would be
an actual total loss. So an actual total loss of freight can occur where
the adventure is frustrated, such that the shipowner is freed from his
obligations under the carriage contract, even though the ship, and
possibly the goods, remain in existence.
According to 57(1), an actual total loss occurs: "Where the
subject-matter insured is destroyed, or so damaged as to cease to be
a thing of the kind insured or where the assured is irretrievably
deprived thereof." There are three elements in this definition that can
give rise to a claim for actual total loss, namely:
3
See J. Goodacre, Marine Insurance Claims 661 (2d ed. 1981).
4(1836) 3 Bing (N.C.) 266.
5Id. at 286.
6(1873) L.R. 6 H.L. 83, at 102.
Vol. 25, No. 1
Total Loss and Abandonment
(1) if the subject matter is destroyed; or,
(2) if it ceases to be a thing of the kind insured; or,
(3) if the assured is irretrievably deprived of the subject matter.
Some common examples of the first element are destruction of a
ship by a catastrophic fire, or as a result of sinking in very deep
waters, or by foundering in a severe tropical storm. A ship also could
be totally destroyed by enemy attack in war time. Where a ship is
reported missing over an extended period of time there is a rebuttable
presumption that she is lost as a result of a peril of the sea. As was
made clear in the Popi-M,
7
however, in such instances the onus rests
on the assured to show that the ship was seaworthy.
The second element mentioned above is often described as a total
loss by "alteration of species." The classic example is that of a tanker
which, after a disastrous fire, has sunk and is no longer a thing of the
kind insured but now is simply a "charred hulk of twisted sunken
metal."
The loss by alteration of species also frequently occurs with respect
to cargoes. For example, in Montoya v. London Assurance
8
a cargo
of tobacco was rendered worthless as a result of being tainted by the
stench of rotten hides that had been damaged by the entry of sea
water into the cargo hold. In another case, a cargo of dates was so
damaged by water that it became inedible and unfit for human
consumption.
9
In the same case it was held by Lord Esher, M.R., that
where a thing damaged is no longer "merchantable" as a thing of the
kind insured it is a loss by alteration of species for purposes of
business or mercantile value. Where damaged cargo is capable of
being restored for reduced commercial value, however, the loss is
held to be only partial and not an alteration of species.10
The final provision dealing with actual total loss is the one generally
referred to as "irretrievable deprivation." In this day and age, due to
advancements in salvage and other technology, it is difficult to allege
that a ship or other property at sea is irretrievably lost. Virtually
anything lost at sea is capable of being retrieved. However, capture
or seizure of a ship by an enemy could constitute irretrievable
deprivation. In this regard, however, it is interesting to note that in
Marstrand Fishing Co. v. Beer (The "Girl Pat")" the court held that
7[1985] 2 Lloyd's Rep. 1.
8(1851) 6 Exch. 451.
9
See Asfar v. Blundell, [1896] 1 Q.B. 123.
I
0
See Francis v. Boulton, (1895) 1 Com. Cas. 217 (damaged rice dried in a kiln and sold as
low quality rice).
"(1936) 56 LI. L. Rep. 163.
JanuMr 1I94
the vessel was never irretrievably lost. In that case, the crew of the
vessel had taken possession of her by an act of barratry. But after
several weeks of searching by the authorities, the vessel was appre-
hended and the crew arrested.
Where, however, because of technological feasibility, an argument
based on irretrievable deprivation is likely to fail, there may be
another avenue available to the assured. If as a practical matter the
cost of retrieval exceeds the value of the retrieved ship or thing, the
assured may be able to claim that a constructive total loss has
occurred.
III
CONSTRUCTIVE TOTAL LOSS: GENERAL PRINCIPLES
The doctrine of constructive total loss is unique to marine insur-
ance, as Moore v. Evans
2
makes clear. The celebrated Chalmers
described the peculiarities of constructive total loss in the following
words:
Constructive total loss lies midway between actual total loss on the one
hand, and partial loss on the other. It is in effect a hybrid loss, and its
dual character has complicated the decisions. In some instances notice
of abandonment has been given as a matter of precaution, and a case is
treated as one of constructive total loss when the facts would have
justified its being treated as an actual total loss. In other instances due
notice of abandonment has not been given, and the case has to be
treated as a partial loss, though the facts show a constructive total loss.
... The result is that the outlines of the law are somewhat blurred.
13
The statutory definition of constructive total loss is contained in
60 of the Act, which provides as follows:
(1) Subject to any express provision in the policy, there is a construc-
tive total loss where the subject-matter insured is reasonably aban-
doned on account of its actual total loss appearing to be unavoidable, or
because it could not be preserved from actual total loss without an
expenditure which would exceed its value when the expenditure had
been incurred.
(2) In particular, there is a constructive total loss:
(i) Where the assured is deprived of the possession of his ship or
goods by a peril insured against, and (a) it is unlikely that he
12(1918) A.C. 185, 194.
I
3
M. Chalmers & D. Owen, A Digest of the Law Relating to Marine Insurance 61, at 83-84
(2d ed. 1903) (hereinafter Chalmers).
Vol. 25, No. I
can recover the ship or goods, as the case may be, or (b) the
cost of recovering the ship or goods, as the case may be, would
exceed their value when recovered; or
(ii) In the case of damage to a ship, where she is so damaged by a
peril insured against that the cost of repairing the damage
would exceed the value of the ship when repaired. In estimat-
ing the cost of repairs, no deduction is to be made in respect of
general average contributions to those repairs payable by other
interests, but account is to be taken of the expense of future
salvage operations and of any future general average contribu-
tions to which the ship would be liable if repaired; or
(iii) In the case of damage to goods, where the cost of repairing the
damage and forwarding the goods to their destination would
exceed their value on arrival.
Section 60(1) provides a general definition of constructive total loss
in respect of any insured subject matter. There are three kinds of
properties insured, namely: ship, cargo, and freight. This subsection
is of general application to all such properties. There are three notable
elements. First, the subsection is subject to any express provision
contained in the policy. In other words, the principle of freedom of
contract is maintained, bearing in mind the standard forms of marine
insurance policies in use commercially.
Second, there can be a constructive total loss where the subject
matter is reasonably abandoned under circumstances where actual
loss of the property is imminent. An example of this could be where
a ship is stranded on the rocks and, though it is not yet an actual total
loss, the possibility of it breaking up into pieces and being completely
destroyed prompts the master to abandon the ship.1
4
Third, using the
same example, there could be a constructive total loss if the vessel
could in fact be prevented from becoming an actual total loss, but not
without incurring an expenditure that would be in excess of its value.
Section 60(2), on the other hand, sets out specific conditions in
respect of ship and goods. Paragraph (i) is again of general application
to both ship and goods. The key requirement for constructive total
loss is that there must be a deprivation of possession resulting from an
insured peril. In addition, there are two alternative requirements.
There must either be the unlikelihood of recovery, or, if recovery is
possible, the cost of such recovery would be in excess of the value of
the ship or goods when recovered.
1
4
See R. Lambeth, Templeman on Marine Insurance: Its Principles and Practice 217 (5th ed.
1981).
January 1994
Paragraph (ii) refers specifically to damage to ships and provides
that there can be a constructive total loss if the cost of repairing such
damage exceeds the value of the ship after repairs. There are further
details provided in respect of inclusion or exclusion of general
average contributions and salvage expenses in the calculation of the
cost of such repairs. Paragraph (iii) specifically provides, in respect to
damage to goods, that there is a constructive total loss if the cost of
repairs plus the costs of forwarding the goods to the destination (i.e.,
transhipment costs) would be in excess of the value of the goods upon
arrival.
In summary then, it can be said that there are basically two types
of constructive total losses: (1) where the assured is deprived of the
possession of the insured property, and under the circumstances the
likelihood of its recovery is remote or virtually nil; and, (2) where the
insured property is so lost or damaged that the cost of repairs would
far exceed the value of the property after its recovery or repair.
A. Deprivation of Possession
The issue of deprivation was discussed at length by Staughton, J.,
in The Bamburi.
1 5
In that case the vessel had been detained by Iraqi
authorities at the outbreak of the Iran-Iraq war. A skeleton crew
remained on. board and as of the date of the arbitration decision
permission for the vessel to leave had not been granted by the
harbour master. One of the issues before the arbitrator was whether,
under the Act, the owners had been deprived of possession of the
vessel.
In reviewing the authorities Staughton, .J., first dealt with the
claimants' contention that the words "deprived of the possession" in
60(2)(i) carried the same meaning as the words "Owner's loss of the
free use and disposal" of the vessel as used by writers prior to the
adoption of the Act. The respondents argued that the law was
incorrectly stated by such writers. They further argued that Rodoca-
nachi v. Elliott,
16
a leading case in the field, was authority for the
proposition that with respect to goods an owner could claim either for
the loss of the goods themselves or for the loss of the adventure. In
Rodocanachi, the detainment of a cargo of silk goods in Paris due to
a siege of the city by the Germans was held to be a constructive total
loss due to restraint of princes. In contrast, in the case of a policy on
15[1982] 1 Lloyd's Rep. 312.
16(1874) L.R. 9 C.P. 518.
Vol. 25, No. I
the ship the insurer is liable for the loss of the ship but not for the loss
of the adventure.
While Staughton, J., could not find a rationale for the distinction
between ship and goods, he concluded that the principle was so
well-established as to be beyond question. He pointed out further that
the "free use and disposal" test was cited with approval by the court
in Polurrian Steamship Co. v. Young.'
7
After a thorough survey of
that case, he held that "the loss of 'free use and disposal' in this case
amounted to loss of possession within the meaning of the Policy."'
8
B. Likelihood of Recovery
The question of whether it is unlikely that the assured will recover
the insured res must be considered in reference to a certain time
frame. In The Bamburi it was pointed out that 62(3) of the Act
requires that in the case of a constructive total loss notice of
abandonment must be given with "reasonable diligence." Assuming
the assured has fulfilled this requirement, it would be logical to start
counting the time for determination of the unlikelihood of recovery
from when the notice is given. This was how the matter was decided
in The Bamburi. It was held further that "recovery must be unlikely
within a reasonable time."'
9
Given the facts of The Bamburi, a
reasonable time was held to be twelve months from the date that
notice of abandonment was given.
C. Cost of Repair in Excess of Repaired Value
The cost of repair exceeding repaired value basis for a constructive
total loss claim pre-dates the Act. As pointed out later in this article,
it is based on the commercial realities of the shipping industry. In
Benson v. Chapman
2o
it was stated that:
Where the damage to the ship is so great from the peril insured against
that the owner cannot put her in a state of repair necessary for pursuing
the voyage insured, except at an expense greater than the value of the
ship, he is not bound to incur that expense, but is at liberty to abandon
and treat the loss as a total loss.
2
'
7(1915) 19 Com. Cas. 143.
18[1982] 1 Lloyd's Rep. at 321.
19Id.
20(1843) 6 M. & Gr. 792.
21
1d. at 810.
101 January 1994
In Sailing Ship "Blairmore" Co. v. Macredie
22
the test was stated
by Lord Watson as follows:
it must be shown that a shipowner of ordinary prudence and uninsured
would not have gone to the expense of raising and repairing the vessel,
but would have left her at the bottom of the sea, because her market
value when raised and repaired would probably be less than the cost of
restoration and repair.
23
Notably, the Institute Clauses stipulate that the insured value,
rather than the actual value after repairs, is the value to be taken into
account. Similarly, it is provided in the Institute Clauses that the
value of the wreck cannot be added to the cost of repairs.
24
D. Distinction Between Actual Total Loss and Constructive Total
Loss
It is stated in Arnould that the nature of a constructive total loss is
best demonstrated by comparing it with an actual total loss. While
actual total loss is a total loss in law as well as in fact, a constructive
total loss is something of a legal fiction. In other words, it is a total
loss in law but not necessarily in fact. It is capable of being converted
into a total loss in fact by the process of abandonment which is a legal
doctrine that co-exists with constructive total loss and is peculiar to
the law of marine insurance. Thus, it has been written: "A construc-
tive total loss exists when the subject matter insured is not in fact
totally lost, but is likely to become so, from the improbability,
impracticability or expense of repair or recovery."
25
A further exposition of the doctrine is provided by the same author
in the following words:
Mhat is a case of constructive total loss where the thing insured has
been reduced to such a state or placed in such a position, by the perils
insured against, as to make its total destruction or annihilation though
not inevitable, yet highly probable or its ultimate arrival under the
terms of policy though not utterly hopeless, yet exceedingly doubtful.
26
22(1898) A.C. 593.
2Id. at 603.
24This issue was a source of great controversy and conflicting decisions before being settled
by express stipulation in the Institute Clauses. For a description of the controversy, see M.
Mustill & J. Gilman, Arnould's Law of Marine Insurance and Average 1196-1200, at 981-85
(16th ed. 1981) (hereinafter Arnould).
25Id. at 1168, at 954-55.
26Id. at 1169, at 955-57.
Vol. 25, No. 1
Often the distinction between actual and constructive total loss has
been characterized by the distinction between practical impossibility
and commercial or business impossibility.27 When the cost of carry-
ing on business is so prohibitive that it is virtually impossible for the
commercial venture to "stay afloat," the reality of the market place
dictates the course of the law. The distinction between actual and
constructive total loss is illustrated well by George Cohen, Sons &
Co. v. Standard Marine Insurance Co.
2
8 In that case an old naval
vessel was being towed to a particular location to be dismantled and
broken apart. During the passage the vessel ran aground on the Dutch
coast. In regards to a dispute as to whether the incident gave rise to
an actual or a constructive total loss, Roche, J., after citing the
relevant statutory definition of actual total loss, held as follows:
Having regard to the whole of the evidence... I am of [the] opinion
that this vessel physically could be got off. It would be a matter of great
elaboration and difficulty, but at all events, putting the matter at the
highest, I am not satisfied that she could not .... In these circum-
stances there has been no irretrievable deprivation which a Court can
find by reason of physical impossibility.
29
It is interesting to note that Roche, J., also stated in his opinion that
both in accordance with the Act, as well as the common law, no
notice of abandonment need be given where an actual total loss is
rightfully claimed. The learned judge gave two reasons for holding
that this was a case of constructive total loss. First, after ruling that
the argument of irretrievable deprivation failed, he was satisfied that
the vessel could be gotten off the ground, albeit at a cost far exceeding
the insured value of the vessel. Second, the evidence before the court
established that while retrieval of the vessel would be an engineering
feat, it was not a technological impossibility. This case thus illustrates
the point made earlier in this article that while a claim for actual total
loss may fail due to the failure of the irretrievable deprivation
argument, a claim for constructive total loss may well succeed.
27See supra note 6.
2(1925) 21 L. L. Rep. 30 (Q.B.).
29
1d. at 33.
103
January I N4
IV
DOCTRINE OF ABANDONMENT
As has been pointed out elsewhere, the term "abandonment" is not
defined in the Act.
30
There are therefore different connotations to the
term. The first may be described as the "legal" connotation, which
signifies the "voluntary cession" or giving up by the assured to the
insurer the remains of the res, together with all the residual rights and
remedies attached it.
31
This is the meaning which is contemplated in
61, 62, and 63 of the Act. It is clear from a reading of these sections
that "abandonment" in this sense is a legal concept that operates
only in connection with the doctrine of constructive total loss.
32
Besides the statutory connotation, abandonment also can take
place by operation of law independent of a voluntary cession. This
occurs in cases where voluntary abandonment is not necessary, such
as in the instance of an actual total loss. As pointed out in Arnould,
"Abandonment is ... an incident of all cases of total loss, whether
actual or constructive. "33 Chalmers states that in this sense it is a
corollary of the doctrine of subrogation which is a necessary incident
of every contract of indemnity.
34
In the leading case of Kaltenbach v. MacKenzie,
35
Brett, L.J.,
provides a clear exposition of this concept in the well-known passage
cited below:
There are two kinds of total loss: one which is called an actual total
loss, another which in legal language is called a constructive total loss
- but in both the assured claims as for a total loss. Abandonment,
however, is applicable to the claims whether it be for an actual total loss
or for a constructive total loss. If there is anything to abandon,
abandonment must take place, as for instance, when the loss is an
actual total loss, and that which remains of a ship is what has been
called a congeries of planks, there must be an abandonment of the
wreck, or where goods have been totally lost, as in the case of Roux v.
Salvador, but something has been produced by the loss, which would
not be the goods themselves. If it were of any value at all, it must be
abandoned. But the abandonment takes place at the time of the
settlement of the claim; it need not take place before.... Whenever
there is a contract of indemnity, there must be an abandonment on the
"Amould, supra note 24, at 1171, at 957.
31
1d. See also Arnould, supra note 24, at 1171, at 958.
32
See supra note 6, at 144, and Kaltenbach v. Mackenzie, (1878) 3 C.P.D. 467, at 471.
33
Arnould, supra note 24, at 1259, at 1043.
3See Chalmers, supra note 13, at 80, at 118-19.
35(1878)
3 C.P.D. 467.
Vol. 25, No. 1
part of the person claiming indemnity of all his rights in respect of that
for which he receives indemnity.
36
The third connotation of the term abandonment has to do with the
sense in which it is used in 60 of the Act. This may be characterized
as the literal or physical sense of the term. At the risk of being
repetitive, it is important in this context to reiterate the definition of
"constructive
total loss" in 60(1). Section 60(1) refers to the subject
matter insured being "reasonably abandoned." It is submitted that
the word "abandoned" in this respect means the physical abandon-
ment of the res, i.e., where the res has been given up for lost as a
matter of objective
fact.
37
The decision to physically abandon a ship in circumstances involv-
ing a potential total loss of the vessel is one that is usually made by
the master and not the assured. Furthermore, such physical aban-
donment can take place regardless of the existence of a relevant
marine insurance policy. For example, in Roura & Fourgas v.
Townend
38
the court held that even though there was no insurance
coverage on the ship itself, for the purposes of the freight policy,
there was a constructive total loss of the ship. Clearly, therefore,
abandonment in terms of 60 of the Act is not simply abandonment in
favor of the insurer.
That abandonment to the insurer is not a necessary requirement of
a constructive total loss, but only of a claim in respect of such a loss,
was settled by the decision of the. House of Lords in Robertson v.
Nomikos.
39
The construction of abandonment in 60 was discussed at
length by Lords Wright and Porter. The claim by the assured was on
a freight policy that provided that if the vessel became a constructive
total loss, the assured would be entitled to recover the entire amount
of the insured freight. After suffering heavy damage the vessel was
repaired and the cost of repairs exceeded the insured value of the
vessel. Although the vessel was never physically abandoned, the
court held that for the purposes of the freight policy the vessel was a
constructive total loss within the meaning of 60 and upheld the
claim.
40
Last but not least, the fourth connotation of "abandonment" is the
one in which the term is often confused with "notice of abandon-
36Id. at 470-71.
3
See Court Line Ltd. v. The King, (1945) 78 U. L. Rep. 390.
8(1919) 1 K.B. 189.
39[1939] A.C. 371.
40The shipowner did recover for a partial loss on the hull policy after effecting the repairs.
January I W4
106 Journal of Maritime Law -and Commerce
ment" and used incorrectly as a substitute for, or interchangeably
with, the latter expression. The notice is a procedural requirement
under the Act and is an adjustment to the legal or statutory conno-
tation incidental to the claim for a constructive total loss. This point
will be discussed in further detail later.
The Act provides that in the event of constructive total loss the
assured may treat the loss as a partial loss, or treat it as if it were an
actual total loss, in which case he will then have to abandon the
property to the insurer.
4
' This provision illustrates the notion that a
constructive total loss is a legal fiction, but is convertible to an actual
total loss in fact by the act of abandonment. The rationale behind this
legal fiction is to provide the insurer with the means to recoup
whatever he can from the abandoned vessel or property after he has
indemnified the assured to the extent of his contractual liability.
Where there is a valid abandonment, the insurer is entitled to take
over all the proprietary rights and interests of the assured in the
insured property.
A. Notice of Abandonment
It is obvious from the above discussion that in a case of construc-
tive total loss the assured has to abandon the property to the insurer
but for this purpose, i.e., if he elects to abandon the insured subject
matter, he must give notice of abandonment, otherwise the loss can
be treated only as a partial loss.
42
The first reason for notice is that the
assured should inform the underwriter immediately as to what he has
done and should not keep it secret in the hopes of being able to take
advantage of a subsequent change in circumstances. The second
reason for giving notice of abandonment is so that the insurer may
evaluate the measure of the indemnity against the benefit that may
accrue to him from the abandoned res. In essence, abandonment in
the event of a constructive total loss is a reciprocal exchange. A third
factor is the right of the assured to recover for a total loss depending
4
Section 61 of the Act reads as follows:
Where there is a constructive total loss, the assured may either treat the loss as a partial
loss or abandon the subject-matter insured to the insurer and treat the loss as if it were an
actual total loss.
42
Section 62(1) provides as follows:
Subject to the provisions of this section, where the assured elects to abandon the
subject-matter insured to the insurer he must give notice of abandonment. If he fails to do
so, the loss can only be treated as a partial loss.
Vol. 25, No. 1
upon whether the nature of the thing abandoned continued to exist
down to the time of bringing the action.
Consideration of time is also important in the election of abandon-
ment. After receiving information about the thing to be abandoned,
the assured should give notice of abandonment without delay.
Section 62(3) of the Act provides: "Notice of abandonment must be
given with reasonable diligence after the receipt of reliable informa-
tion of the loss, but where the information is of doubtful character the
assured is entitled to a reasonable time to make inquiry."
In Kaltenbach,
4 3
the assured was informed on 7th February that
the ship was a constructive total loss. On 23rd February she was sold
for what she could fetch. On 10th March notice of abandonment was
given, but the court held that it was too late. Therefore, if the assured
neglects to abandon within a reasonable time, the right to abandon
may be lost.
Section 62(2) deals with the manner in which notice of abandon-
ment may be given. It is notable that this provision requires an
unconditional abandonment of the res to the underwriter. It reads as
follows:
Notice of abandonment may be given in writing, or by word of mouth,
or partly in writing and partly by word of mouth, and may be given in
any terms which indicate the intention of the assured to abandon his
insured interest in the subject-matter insured unconditionally to the
insurer.
In practice, notice of abandonment is generally given by means of
a letter or a pro forma intimation. It is now well-established in English
jurisprudence that a written notice of abandonment is not necessary,
and that an oral intimation of the assured's intention to abandon is
sufficient to comply with the Act. Indeed, notice may be partly in
writing and partly oral, so long as the intention of the assured to
abandon is clear from his conduct. Furthermore, there must be
evidence of unconditional abandonment, whether communicated
orally or in writing."
The question of how the assured's intention to abandon is to be
gleaned from the communication is of some significance. In Parmeter
43
See supra note 35.
44
See, e.g., Hall v. Hayman, (1911) 17 Com. Cas. 81, and Vacuum Oil Co. v. Union
Insurance Society of Canton, (1926) 32 Com. Cas. 53. See also Russian Bank for Foreign Trade
v. Excess Insurance Co., (1919) 1 K.B. 39 (C.A.), where a notice contained a condition to the
effect that the assured would release the insurer from liability if a certain value was attributed
to a cargo of barley.
January 1994
v. Todhunter,
45
Lord Ellenborough held: "The abandonment must be
direct and express and I think the word 'abandon' should be used to
make it effectual." In that case, it was the insurance broker who
communicated with the underwriters and asked them to treat the loss
in question as a total loss and issue the necessary directions for action
to be taken regarding the vessel and its cargo. Lord Ellenborough
went so far as to say that oral notices of abandonment ought to be
prevented entirely. Nevertheless, they were held to be operative and
acceptable.
The Parmeter decision was disapproved of by the Privy Council in
Currie v. Bombay Native Insurance Company.4
6
In that case, the
word "abandonment" was not used but the court held that the
message as communicated was sufficiently clear to indicate the
assured's intention to abandon his interest in the subject matter to the
insurer. Subsequent cases have established quite clearly that oral or
mixed notices are acceptable and use of the word "abandonment" or
"abandon" is not necessary so long as the intention to abandon is
otherwise clear from the language in the communication.
In Cohen,
47
the assured wrote to his underwriter that the vessel
insured was a total loss and asked to be paid the proceeds of the
insurance. Roche, J., held that even though the word "abandon-
ment" did not appear in the notice it was sufficient for the purposes
of the Act. In the case of The Litsion Pride,
48
the sending of telexes
followed by a writ claiming for total loss was held to be a valid notice
of abandonment. In Panamanian Oriental Steamship Corporation v.
Wright,
49
the policy endorsed with a claim for constructive total loss
submitted to the insurer by a broker was held to be a sufficient notice
of abandonment.
50
B. Acceptance of Notice and Change of Circumstances
The essence of abandonment is that there must have been a total
loss. If a loss in fact has not occurred, the giving of a notice of
abandonment will be considered premature and acceptance of the
notice by the insurer may be refused. Whether or not a constructive
45(1808) 1 Camp. 541.
46(1869) L.R. 3 P.C. 72.
47
See supra note 28.
48[1985] 1 Lloyd's Rep. 437.
49[1970] 2 Lloyd's Rep. 365.
- TIhe decision was reversed by the Court of Appeal on other grounds unrelated to the giving
of the notice of abandonment.
Vol. 25, No. I
total loss has in fact occurred depends on the state of affairs at the
time of the issuing of the writ.
In Ruys v. Royal Exchange Assurance Corporation,
51
proceedings
had been commenced by the shipowners against the underwriters.
During the proceedings, the vessel was in fact in the shipowners'
possession, having been released by an Italian prize court. The
insurers alleged that since the ship had been restored, the owners'
claim for constructive total loss was invalid. The court, however,
held that the circumstances prevailing at the time when the proceed-
ings were instituted was the determining factor as to whether the
claim for constructive total loss was valid under the policy. At the
time the writ was issued the assured had in fact lost possession of the
ship. Subsequently, however, there was a change of circumstances
whereby possession was returned to the assured, and this occurred
before the matter went on trial. The rule which emerges from this
case is that in the event of a change of circumstances between the
time the writ is issued and the time of commencement of the trial, the
material time for determining whether a state of constructive total
loss existed is the time of issuance of the writ.
It is important to stress that a claim made in conjunction with an act
of abandonment of the res by the assured is prima facie of no benefit
to the assured, unless the insurer accepts the notice.
5 2
Furthermore,
the factual state of affairs at the time of abandonment does not
necessarily determine, as a matter of law, whether or not there was a
constructive total loss. Where the underwriter accepts the notice and
pays indemnification in respect of a total loss there is no debate as to
whether there was a constructive total loss. In such event, the insurer
is free to derive whatever benefit he can from the abandoned res.
Indeed, if the underwriter simply accepts the notice it becomes
obvious that he acknowledges the claim as valid for the purposes of
a constructive total loss. Section 62(6) thus provides: "Where notice
of abandonment is accepted the abandonment is irreversible. The
acceptance of the notice conclusively admits liability for the loss and
the sufficiency of the notice." The insurer then utilizes the thing
abandoned to his own benefit. The acceptance of the notice of
abandonment by the insurer thus signifies an admission by the
underwriter of the alleged total loss of the assured's property by an
insured peril, and the acceptance is then irrevocable.
5'(1897)
2 Q.B.
135.
52
Templeman, supra note 14, at 221.
109
January IM9
If the insurer refuses to accept the notice of abandonment, there
are basically two avenues open to the assured. First, if there is an
appropriate provision in the policy he can treat the loss as a partial
loss and be indemnified accordingly. Section 62(4) of the Act provides
that the assured's rights are not prejudiced by a refusal of the insurer
to accept the notice of abandonment if the notice was properly given.
The assured's right to claim for a partial loss in such event is not
prejudiced by the fact that at the time of the notice, on the facts of the
case, a constructive total loss might have been validly established. In
Pesquerias y Secaderos de Bacalao de Espana, S.A. v. Beer,
53
it was
held by Atkinson, J., that by their very actions the plaintiff shipown-
ers demonstrated that they were treating the loss as partial and were
not claiming a constructive total loss; indeed, such action by the
plaintiffs went condoned and free of any objections by the insurer.
The other course of action available to an assured whose notice of
abandonment is not accepted by the insurer is to legalize the claim by
the issuance of a writ; in other words, to seek the aid of proper
judicial process in order to enforce his alleged claim. The time of the
issuing of the writ, as we have seen, is crucial in that it is the material
time at which it is determined whether a constructive total loss
situation existed to justify a claim. It is important to note that where
there is a change of circumstances between abandonment and the
issuance of the writ the state of affairs at the time of issuance of the
writ is again the material time for determining whether or not there
was a constructive total loss. If the assured fails in his proceedings
against the insurer for a constructive total loss he may still be in a
position to claim for a partial loss under his policy.
Notably, if there is a change of circumstances between the act of
abandonment and the issuance of the writ the state of affairs at the
time of the issuance of the writ dictates whether or not there was a
valid constructive total loss. If, for example, the vessel was under
capture at the time of the abandonment but had been restored to the
owner by the time the writ was issued, a claim for constructive total
loss would be defeated. The notable exception to this rule is where
the change of circumstances occurs as a result of the underwriter's
action. In such instances, the state of affairs at the time of the
abandonment would be looked to by the court to determine whether
there was a valid constructive total loss.
In Macredie,
54
the Blairmore sank in San Francisco Bay as a result
53(1946) 79 LI. L. Rep. 417 (K.B.).
54
See supra note 22.
Vol. 25, No. 1
of an insured peril. The notice of abandonment given by the assured
shipowners was rejected by the underwriters. Shortly thereafter,
however, the underwriters proceeded to salvage the vessel and raise
her off the bottom. They were entitled to do this under the "waiver
clause" in the policy, paying for the expenses themselves. In pro-
ceedings commenced against the underwriters for payment of an
alleged total loss, the shipowner conceded that the cost of repairs at
the time of issuance of the writ was less than the value of the vessel
after repairs, but contended that the cost of repairs plus the cost
incurred by the underwriters would be in considerable excess of the
value of the ship after repairs. The underwriters contended that the
cost incurred by them should not be taken into account in this
determination, and that there was, consequently, no basis for a claim
for constructive total loss.
The resulting decision of the House of Lords was clear: the
intervening actions of the underwriters could not be allowed to
impact on the rights of the assured under the policy. In other words,
a claim for constructive total loss by the shipowner was valid in the
circumstances. The court ruled that the material time for determina-
tion of the question as to whether there was a constructive total loss
was the time of abandonment and not the time at which legal
proceedings were commenced. The claim of the assured could not be
converted into a partial loss simply because of the actions taken by
the underwriters to restore the condition of the vessel prior to
commencement of the proceedings by the assured. Lord Watson held
that the arguments submitted by the underwriters in this regard were
contrary to the general law of contracts under which a party to a
contract cannot benefit from the contract, or defeat the obligations
which he has undertaken to fulfil, by his own act, omission, or
default.
55
C. Waiver of Notice of Abandonment
There is often the case where the assured gives notice of abandon-
ment which the underwriter refuses to accept. In such a situation the
assured may wish to take certain steps to preserve or protect the res
from further damage. If he does so, he runs the risk of being treated
by the underwriter as having withdrawn or waived his notice of
abandonment. Section 62(8) provides that notice of abandonment
may be waived by the insurer. In the same circumstances, i.e., after
55
See also Templeman, supra note 14, at 222.
January 1994
the insurer has declined to accept the assured's notice, if the insurer
does anything to preserve or prevent the property from further
damage his action may be considered to be a reversal of his previous
rejection of the notice of abandonment. It is obvious in such situa-
tions that both the assured as well as the insurer run the risk of being
prejudiced by their actions. To overcome this dilemma the typical
marine insurance policy contains a so-called "waiver clause." The
clause usually is worded as follows:
Measures taken by the Assured or the Underwriters with the object of
saving, protecting or recovering the subject-matter insured shall not be
considered as a waiver or acceptance of abandonment or otherwise
prejudice the rights of either party.
56
There are two elements to this clause. The first specifically states that
any action taken by the assured or the insurer is not to be construed
as a waiver or acceptance of the abandonment, as the case may be.
The second element is wider in scope. It provides that whatever
action is taken under the circumstances is not to "otherwise preju-
dice" either party's rights.
In Robertson v. Royal Exchange Assurance Corporation,
57
the
vessel Tarv was abandoned to the underwriters following a stranding.
The notice of abandonment was refused, whereupon the underwriters
proceeded to engage salvors to refloat the vessel. The salvage
contract was entered into on a "no cure-no pay" basis, but a fixed
amount was agreed to as an award if the salvage was successful. The
salvors did not commence the salvage operations on the Tarv at that
point, but proceeded to salve some other stranded vessel. Eventually,
however, they returned to the Tarv and successfully refloated her. In
the interim, the vessel suffered further damage. The shipowners
alleged that their interest was seriously prejudiced by the salvors, as
agents of the underwriters, failing to carry out salvage operations on
the Tarv expeditiously and allowing the vessel to suffer further
damage. It was further alleged by the shipowners that such conduct
by the salvors was tantamount to an acknowledgement by the
underwriters that the vessel was a constructive total loss. The court
held that the withdrawal of the salvors amounted to acquiescence on
the part of the underwriters with respect to the tender of abandon-
ment by the assured, and ruled in favour of the plaintiff shipowners.
This case illustrates the second element of the waiver clause.
56Institute Time Clauses-Hulls, Clause 13.3.
57(1924) 20 Ll. L. Rep. 17.
Vol. 25, No. I
The first element is illustrated by Crouan v. Stanier,
58
where the
underwriters refused acceptance of the notice of abandonment given
by the shipowner after the vessel had stranded in the Amazon River.
The underwriters then engaged a ship repairer who successfully
refloated the vessel. The shipowner sued the underwriters, claiming a
constructive total loss, but the action failed. The underwriters then
counterclaimed against the shipowner for the costs incurred in
refloating the vessel, alleging that under the sue and labour clause in
the policy it was the duty of the shipowner to prevent the vessel from
becoming a total loss. In the first instance, this case demonstrates the
utility of the first element in the waiver clause. Even though the
underwriters took steps to preserve the vessel, such action on their
part did not amount to a waiver of their refusal to accept the notice of
abandonment. As it turned out, the assured was unable to establish
the validity of his claim for a constructive total loss.
The second point is that the counterclaim by the underwriters
against the shipowner also failed. Kennedy, J., held that the under-
writers could not rely on the sue and labour clause to recover the
costs of refloating the vessel on the basis of an implied contract,
because under the same clause the shipowner would have been
entitled to recover back from the underwriters had the shipowner
sued and laboured for the preservation of the res.
It is arguable that the waiver clause does not necessarily refer to a
waiver of the notice of abandonment, but rather to the act of
abandonment. With reference to the wording of the waiver clause, it
has been suggested that: "[I]t would generally be difficult, in the light
of that wording, to assert that such actions following a casualty
amounted to waiver of the requirement of notice."
59
It also has been suggested in this regard that if the underwriter has
been made aware of the fact of the incident and of the assured's
intention to abandon the vessel, and persuades the assured not to
abandon his vessel, the underwriter effectively has waived his right to
a notice of abandonment.60
Quite apart from the waiver of abandonment or of the notice, there
may be certain instances where notice may not be necessary. The Act
provides in 62(7) that: "Notice of abandonment is unnecessary
where, at the time when the assured receives information of the loss,
there would be no possibility of benefit to the insurer if notice were
(1904) 1 K.B. 87.
59
Arnould, supra note 24, at 1270, at 1053-54.
WDa Costa v. Newnham, (1788) 2 T.R. 407.
113
,January 1994
given to him." From the perspective of the underwriter, if he cannot
benefit from the notice then it is "merely a vain and useless form."
61
In Rankin v. Potter,
62
a vessel was chartered to carry cargo from
Calcutta to London and an insurance policy was taken out on the
homebound freight. The policy also covered the eastbound voyage
from the United Kingdom to New Zealand. The vessel became a
constructive total loss by insured perils as a result of which the entire
homebound freight was lost. It was held that no notice of abandon-
ment was necessary because there was nothing which the assured
could abandon under the circumstances.
In The Litsion Pride,
63
the assured's vessel sank in the Persian Gulf
during the Iran-Iraq war. Being in the war zone made it impossible for
the vessel to be salvaged. It was held that under the circumstances no
notice of abandonment was necessary to claim for a constructive total
loss.
D. Vesting of Property as a Consequence of Abandonment
It would appear that abandonment of the res by the assured does
not automatically vest the property in the insurer. This question is
crucial because if there is an automatic vesting the underwriter would
immediately have to assume all the liabilities and obligations inciden-
tal to ownership. Although the precedents on this point are far from
definitive, the better view appears to be that abandonment divests the
assured of his proprietary interest but does not, per se, invest the
underwriter with the same. In other words, the property becomes res
nullius.
64
It is difficult, however, to reconcile this proposition with the
rule that allows the assured to rescind his notice of abandonment and
claim for a partial loss instead.
65
V
DISTINCTION BETWEEN ABANDONMENT AND
SUBROGATION
The doctrine of subrogation in the law of insurance may be best
described as the right of the insurer to "step into the shoes" of the
61
Arnould, supra note 24, at 1268, at 1051-52.
6 2
See supra note 6.
63
See supra note 48.
64Boston Corp. v. France, Fenwick & Co., (1923) 28 Com. Cas. 367. See also other cases
cited in Arnould, supra note 24, at 1289-90, at 1069-72.
65Blane Steamships Ltd. v. Minister of Transport, (1951) 2 K.B. %5 (per Cohen, L.J.).
Vol. 25, No. 1
assured after indemnifying his loss. He then is entitled to all the
rights, remedies, benefits, and advantages of the assured. This
principle prevents the assured from making a windfall profit out of his
loss. In the leading case of Castellain v. Preston,6 Brett, L.J., held
that "in order to apply the doctrine of subrogation . . . the insurer
must be placed in the position of the assured." He went on to say:
[T]hat as between the underwriter and the assured, the underwriter is
entitled to the advantage of every right of the assured, whether such
right consists in contract, fulfiled or unfulfilled, or in remedy for tort
capable of being insisted on, or already insisted on, or in any other
right, whether by way of condition or otherwise, legal or equitable,
which can be, or has been exercised or has accrued, and whether such
right could or could not be enforced by the insurer in the name of the
assured by the exercise or acquiring of which right or condition the loss
against which the assured is insured, can be, or has been diminished.67
Section 79 of the Act, which deals with subrogation, provides as
follows:
(1) Where the insurer pays for a total loss either of the whole, or in the
case of goods of any apportionable part, of the subject-matter insured,
he thereupon becomes entitled to take over the interest of the insured
in whatever may remain of the subject-matter so paid for, and he is
thereby subrogated to all the rights and remedies of the assured in and
in respect of that subject-matter as from the time of the casualty causing
the loss.
(2) Subject to the foregoing provisions, where the insurer pays for a
partial loss, he acquires no title to the subject-matter insured, or such
part of it as may remain, but he is thereupon subrogated to all rights and
remedies of the assured in and in respect of the subject-matter insured
as from the time of the casualty causing the loss, in so far as the assured
has been indemnified, according to this Act, by such payment for the
loss.
By virtue of the doctrine of subrogation, therefore, the insurer,
after having indemnified the assured under the policy, becomes
entitled to the benefit of claim and other remedies of the assured. In
other words, the insurer acquires legal rights which are independent
of the ownership of the insured property. In contrast, the doctrine of
abandonment, which occurs as a result of the constructive total loss,
bestows upon the insurer the ownership of the lost property.
66(1883) 11 Q.B.D. 380, at 388 (C.A.).
67
1d. See also Burnard v. Rodocanachi, (1882) 7 App. Cas. 333, referred to by Brett, L.J.
January 1994
The distinction between subrogation and abandonment was con-
sidered in the case of Attorney-General v. Glen Line Ltd.68 In that
case, the issue was whether the Government of the United Kingdom,
as re-insurer of eighty percent of the hull policy on the vessel
Glenearn, could claim from the shipowner a proportionate amount of
the money recovered by the shipowner from the German Government
under a judgement of a tribunal established by the Treaty of Ver-
sailles. The German Government had seized the vessel and shortly
thereafter the shipowner had abandoned her to the underwriters. A
claim for total loss was made and settled. Five years later, the
German Government released the ship and paid to Glen Line, the
owner, 136,699 as settlement for lost profits during the ship's
detention. The insurers and the British Government contended that
the monies were received by Glen Line as trustee for the insurers. In
deciding in favour of the shipowner, the House of Lords, per Lord
Atkin, noted that "confusion is often caused by not distinguishing the
legal rights given by abandonment .(Sect. 63) from the rights of
subrogation (Sect. 79)" and held that "in respect of abandonment the
rights exist on a valid abandonment, whereas in respect of subroga-
tion they only arise on payment .... "69
The foregoing passage was cited with approval by Diplock, J., in
Yorkshire Insurance Co. v. Nisbet Shipping Co.
7
0 In that case the
assured's vessel collided with a vessel belonging to the Government
of Canada. The insurers paid 72,000 to the assured under the policy.
Subsequently, the assured, with the approval of the insurers, sued the
Canadian Government in Canada and obtained a judgement in
Canadian dollars, which, due to the sharp fall in the value of the
pound sterling in 1949, yielded 55,000 more than the amount paid out
by the insurers. The assured repaid the 72,000 but retained the
excess. The insurers claimed that they were entitled to the extra
55,000 by subrogation under the relevant statutory provision. It was
held that the assured was entitled to keep the excess. In so- holding,
Diplock, J., referred to King v. Victoria Insurance Co.
7
' and stressed
the point that "under the doctrine of subrogation an insurer was
entitled to recover from the assured only 'to the extent of the
payment' made to the assured by the insurer under the policy."
72
68(1930) 37 LI. L. Rep. 55.
69
1d. at 61.
70[1961] 2 All E.R. 487.
71[1896]
A.C.
250.
71(196
1
] 2 All E.R. at 493-94.
Vol. 25, No. I
Of course, one purpose of subrogation is to prevent the assured
from making a windfall profit after he has received payments from the
insurer by way of indemnification under the policy. In contrast,
abandonment of the res by the assured to the insurer results in the
insurer acquiring ownership of the res. It is interesting to note that in
both the above cases the shipowner benefitted from the windfall.
VI
CONCLUSION
Incidents giving rise to loss and abandonment are the same today as
they were years ago. Strandings, groundings, collisions, founderings,
captures, and destructions in war are just as common today as they
were during times which gave rise to the jurisprudence in this area of
the law. Recent cases arising from occurrences, such as, for example,
the Iran-Iraq war, and cases involving ships trapped in the Suez Canal
during the Arab-Israeli war, continue to invoke the classic cases of
the past as authorities. The law of constructive total loss and
abandonment will no doubt continue to challenge and inspire inno-
vative legal minds as maritime events unfold and casualties continue
to occur.
117
January I9W4
Damages for a Charterer's Failure to Load:
An Anglo-Australian Perspective
GEORGE PANAGOPOULOS*
Upon a charterer's failure to load, damages are awarded to a
shipowner' so as to place it in the same position as if the contract had
been performed.
2
This means that the shipowner would be able to
recover the net revenue under the repudiated charter. That is the
gross amount of freight less the cost of earning such freight.
3
The measure of damages has been expressed in three basic ways:
1. Traditionally, it has been defined as the net freight subject to a
duty (of various magnitudes) to mitigate.4 This view is based on the
general contractual principle of a duty to mitigate.
2. More recently, the formula of net freight less any substitute
freights earned during the duration of the repudiated charter has been
seen as the appropriate
measure.
5
3. Today, the emerging measure of damages is that of contract
freight less market freight. This formula considers the market as the
most appropriate measure for mitigable loss.
6
*B.A., LL.B. (Hons.) (Monash). Solicitor at Mallesons Stephen Jaques, Melbourne. This
article is a summary of the author's thesis as part of his Honours degree at Monash University.
Martin Davies, Associate Professor at Monash University, was the supervisor of the thesis and
offered valuable advice and criticism for this article.
IFor the purposes of this article, shipowner means a party contracting to supply vessels and
therefore includes a disponent owner.
2
Wertheim v. Cicoutimi Pulp Co., [1911] A.C. 301; Rheinoel G.m.b.H. v. Huron Liberian
Co. (The Concordia C), [1985] 2 Lloyd's Rep. 55 (Com. Ct.); Sib International S.R.L. v.
Metallgesellschaft Corp. (The Noel Bay), [19891 1 Lloyd's Rep. 361 (C.A.).
3
Smith v. McGuire, (1858) 3 H. & N. 564, 157 E.R. 589.
4
1d,; Aitken Lilburn v. Ernsthausen, [1894] 1 Q.B. 773 (C.A.); Stainforth v. Lyall, (1830) 7
Bing. 169, (131) E.R. 65.
5
Rheinoel G.m.b.H. v. Huron Liberian Co. ('The Concordia C), supra note 2; Sib International
S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2; see also Den Norske Afrika og
Australie Linie v. Pt. Said Salt Assoc. Ltd., (1924) 20 LI.L.Rep. 184, 186 (C.A.).
6
Cobelfret (U.K.) Ltd. v. Austen & Butta (Sales) Ply. Ltd., N.S.W. Court of Appeal, 23
April 1991 (unreported); Scrutton on Charterparties, art. 191 (19th ed. 1984); McGregor on
Damages, para. 1155 (15th ed. 1988); see also Koch Marine Inc. v. D'Amica Societa Di
Navigazione A.R.L. (The Elena D'Amico), [1980] 1 Lloyd's Rep. 75 (Com. Ct.).
Although'one could safely assert that the first of the three measures
is no longer applicable,
7
it is uncertain which of the latter two
formulae is the appropriate measure. Furthermore, neither of these
two can accommodate consequential losses arising from contracts
with optional modes of performance or placement losses.
This article will focus first on what the appropriate measure or
combination of measures is for a failure to load. It then will examine
whether in addition to damages for lost freight, consequential losses,
such as demurrage and deadfreight, are recoverable. Finally, it will
examine the recovery of losses in placement.
I.
THE APPROPRIATE MEASURE
When assessing damages a general tendency has arisen to use the
market as the standard measure. The value of lost performance is
assessed by reference to the difference between the market value of
the contract and the price expressed in the contract.
8
It has been
submitted by commentators that the modem measure of damages for
a failure to load is the contract rate of freight less the market rate of
freight.
9
Basically it could be expressed as:
(Contract freight - costsl) - (Market freight - costs2)1
0
Although neat and simple, the market formula is somewhat unreal-
istic. Assuming the market as perfect, it presupposes that a ship-
owner can instantly earn substitute freights, for the repudiated
charter's full duration, at the market rate. Furthermore, although
there will always be a market rate of freight, circumstances will arise
where a shipowner cannot find employment for its vessels. It would
be inappropriate to deduct the market rate of freight in such
circumstances.
7
Scrutton on Charterparties, art. 191; McGregor on Damages, para. 1155.
8
J. W. Carter & D. J. Harland, Contract Law in Australia, para. 2158 (2d ed. 1991); A.G.
of the Republic of Ghana and Ghana National Petroleum Corp. v. Texaco Overseas Tankships
Ltd. (The "Texaco Melbourne"), [1992] 1 Lloyd's Rep. 303 (Com. Ct.); see also Lombard
North Central Plc v. Butterworth, [19871 1 Q.B. 527, 537 (C.A.); Koch Marine Inc. v. D'Amica
Societa Di Navigazione A.R.L. (The Elena D'Amico), supra note 6.
9
Scrutton on Charterparties, Art 192; McGregor on Damages, para. 1155.
10
Costs generally represents the cost of earning the freight. Costsl represents the costs that
would have arisen under the primary charter. Costs2 represents those costs in earning freight
under a substitute voyage.
Vol. 25, No. 1
In Cobelfret v. Austen & Butta Sales Pty. Ltd.II the Court of Appeal
of New South Wales accepted the market formula in awarding damages
for lost freight. The Court recognised four distinct possibilities that
might occur in the market when alternative freights are sought:
1. Other vessels were at the relevant times available for voyage
charter and substitute cargo for them was available;
2. Other vessels were available for voyage charter and no substi-
tute use for them was then available;
3. No other vessels were available for voyage charter but substi-
tute use for them was available;
4. No other vessels were available for charter and there was no
substitute use for them to be put to had they been available.
12
Situations (2) and (4) above deal with the problem where a shipowner
cannot find substitute employment for its vessels. However, the case
did not address the problem which arises where the substitute
employment found is not for the repudiated charter's full duration or
not at the full market rate of freight.
1. The correct measure
In Cobelfret the plaintiff shipowner, Cobelfret, had entered into
successive contracts of affreightment with the defendant for the
carriage of coal from New South Wales to Europe. The quantity of
coal the defendant could lawfully export had been reduced owing to
industrial trouble, inadequate coal loading facilities and the adoption
of export restrictions by the Joint Coal Board. Among other damages,
Cobelfret claimed freight for the cargo it would have carried under
one of the contracts of affreightment if it had been fully performed.
In awarding damages the New South Wales Court of Appeal did not
universally apply the market formula as the measure of damages for a
failure to load. It applied it only to the theoretical
13
voyages that would
have been performed by vessels which the shipowner did not own or have
on time charter. For such vessels, Cobelfret could not be expected to
have found substitute voyages. The true loss therefore was the contract
freight less the market freight at the time of the intended voyage.
14
11N.S.W. Court of Appeal, 23 April 1991 (unreported).
12
At page 46 of the transcript.
3aTese are the voyages that would have occurred if the contract had been fully performed.
M
4
Assumedly the market freight would have fallen considerably given the adoption of export
restrictions by the Joint Coal Board, meaning that there was little demand for vessels seeking that
Failure to Load 121 January 1994
Damages were not awarded for the two theoretical voyages the
plaintiff would have made with vessels it owned or had on time-
charter. The market formula could not apply as the plaintiff had failed
in its onus of proving what damages should be awarded. It had not
allowed for the profits those ships would have made once released
from the contract of affreightment. For the plaintiff to recover the full
net contract freight it had to show that no substitute employment was
available for its vessels. Although it had shown that during the
relevant period there was an oversupply of vessels, akin to Cobel-
fret's time-chartered vessels, it had failed to show that there was no
cargo available for them. Thus, the court held, Cobelfret had not
shown that it fell within situation (2) above, as opposed to situation
(1).
In adopting the market formula, the New South Wales Court of
Appeal did not seek to depart from or distinguish cases which applied
the net contract freight less net substitute freight formula such as the
Noel Bay1
5
or the Concordia C.16 In fact, it referred with approval to
the latter. It is submitted that both the second and third measure are
applicable according to the circumstances of the case.
a. Vessels not in shipowner's disposition
According to Cobelfret, the market formula applies where the
vessel that was to be used for the repudiated charter was not in the
shipowner's disposition. This occurs where the shipowner had
planned to charter in a vessel on the spot market to fulfill its
contractual obligations. In such situations the shipowner could not be
expected to find substitute employment. The market formula's appli-
cation is quite straightforward as the cost element in calculating the
net contract freight and the net market freight is the same. Such cost
is that of chartering the vessel.
Although there will always be a market rate of freight, there will be
circumstances where a shipowner cannot find employment for its
vessel. It would be inappropriate to deduct the market freight in such
circumstances. The court in Cobelfret recognised this in its four
possibilities of what might occur in the market. In situations (2) and
(4) where there are no available cargoes, employment will be unavail-
type of employment. Furthermore, it was found by the court that there was an oversupply of such
vessels in the market at that time, thus also contributing to the lowering of the market rate.
15Sib International S.R.L. v. Metallgeselischaft Corp. (The Noel Bay), supra note 2.
1
6
Rheinoel G.m.b.H. v. Huron Liberian Co. (The Concordia C), supra note 2.
Vol. 25, No. 1
able. If the shipowner can show that situations (2) or (4) apply, then the
market freight will not be subtracted as, in the words of Priestley JA,
there is only "one profit"
17
available, that of the contract. Yet, the court
did not clarify exactly when there is "no substitute use" for vessels.
The market formula will not apply where the market rate of freight
falls lower than the cost of earning freight. In such a case the
shipowner will receive the difference between contract freight and
costs.
18
If the market formula applied the shipowner would be placed
in a better position than if the contract had been performed.
19
b. Vessels which are in the shipowner's disposition
The question to be asked is what happens in cases where, upon a
charterer's repudiation, the shipowner, having ships in its disposi-
tion, finds and enters into substitute voyages? Does the market
formula or does the second measure, that of net contract freight less
net substitute freight, apply in such circumstances? Cobeifret leaves
this somewhat unanswered.
It could be submitted that the market formula is now the applicable
view. Therefore, there would be no need to calculate and subtract
substitute freights. It would follow that the shipowner could keep any
freights earned.
For example, if a shipowner had contracted at $15 per ton, with the
costs of running its own ship at $10 per ton, the shipowner would
have earned $5 per ton profit. If the market freight at that particular
time was $12 per ton, then in ordinary situations, where the charterer
failed to load, the shipowner will recover $3 per ton; e.g., the
difference between the net contract and market freights:
D = ${(15 - 10) - (12 - 10)}.
= $5 - 2 per ton.
= $3 per ton.
1
7
Supra
note
12.
18
Andrew Weir v. Dobell, [1916] 1 K.B. 722.
'
9
1n Andrew Weir v. Dobell, id., the plaintiffs chartered in a vessel for a voyage at 21s per
ton. They then sub-chartered this to the defendants at 28s. 6d. per ton. The defendants refused
to load. It was held that the plaintiffs could not recover the difference between the contract
freight of 28s. 6d. per ton and the market freight of 17s. per ton. Being able to cancel the original
charterparty, the plaintiffs were not expected to put the ship on the market (thereby earning 17s.
per ton) but to cancel the charterparty and save 21s. per ton. Therefore the plaintiffs' true loss
was 7s. 6d, that is the difference between the contract freight and the cost. If the plaintiffs had
been awarded the difference between the contract freight and market freight, they would have
recovered more than they would have earned under the repudiated voyage.
Failure to Load 123
January 1994
In this example the shipowner has earned $2 per ton less than if the
contract had gone ahead. This $2 shortfall would be earned by putting
the vessel on the market at $12 per ton and earning $2 per ton net profit.
What happens if the prudent shipowner earns more on the substi-
tute voyage than the market would pay?
If in the above example, the shipowner who contracted at $15 per
ton enters a substitute charter at $14 per ton,
20
will it recover $3 per
ton under the market formula in addition to the $4 per ton net profit
under the substitute charter? This would give the shipowner a net
profit of $7 per ton.
Alternatively, if the shipowner only finds freight at $11 per ton, on
the spot market, even though the going market rate was $12 per ton,
should not $4 per ton be recovered? Will the shipowner merely
recover $3 per ton under the market formula and be penalised $1 per
ton for not finding a substitute freight at the full market rate?
Although, according to McGregor, the "normal measure of dam-
ages" today is "contract rate of freight less the market rate of
freight,"
21
it would be inappropriate to apply it in cases where the
shipowner does find alternative employment. Clearly, the best indi-
cation of the market rate is any substitute employment found.
22
The
courts should not axiomatically use the "market" freight as the
measure where substitute employment has been found.
Furthermore, although the shipowner may realistically find substi-
tute employment for the vessel at the market rate of freight, this
employment may only cover a portion of the primary charter's
duration. For example, if laytime for loading under the primary
charter was to commence on January 1st and laytime for discharging
was expected to have finished by January 31st, realistically the
shipowner might not find alternative employment until well into
January. In both The Noel Bay and The Concordia C, the substitute
voyage did not cover the primary charter's entire duration.
There is no indication in Cobelfret whether the plaintiff had
executed substitute voyages for the vessels in its disposition. It could
be safely assumed that it had not,
23
which would also explain why it
2This would be possible, for example, if the shipowner had already entered this contract at
$14 per ton intending to charter in a vessel. Upon the repudiation of the charter at $15 per ton,
the shipowner uses this vessel for the substitute voyage.
21
McGregor on Damages, para. 1155.
22Sib International S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2, [1989]
1 Lloyd's Rep. at 366 (per Staughton L.J.).
23The effect of the quota system would suggest that contracts for the carriage of coal would
have been scarce.
Vol. 25, No. 1
sought to establish that no alternative freight could have been earned.
It follows that the market formula was sought to be applied as an
alternative to situations where the shipowner has obtained substitute
voyages.
2. Conclusion with respect to direct damages
It is submitted that where a charterer fails to load, the shipowner's
correct measure of damages is the profit that would have been made
under the repudiated charter, less the profit that could have been
earned throughout such charter's duration. Substitute employment,
throughout the repudiated charter's duration, is prima facie evidence
of the profit that could have been earned. In cases where the
shipowner did not make a substitute profit, the market rate of freight
represents what could have been earned in this period.
II.
RECOVERING CONSEQUENTIAL LOSSES: DEMURRAGE
AND DEADFREIGHT
So far the appropriate measure of a shipowner's damages for lost
freight where a charterer fails to load has been examined. However,
damages for lost freight do not truly put the shipowner in the same
position that it would have occupied if the contract had been
performed. This is particularly so where there are optional modes of
performing the contract. In such a case, if the charterparty or
contract of affreightment had gone ahead the shipowner may have
earned demurrage and deadfreight. By not going ahead with its
contractual obligations the charterer has denied the shipowner such
an opportunity.
Suppose a voyage charterparty provided a fixed laytime of three
running days. Laytime was to commence upon the acceptance of
notice of readiness. Notice of readiness was given on Friday at 17:00.
Saturday and Sunday were non-working days, whilst Monday was a
public holiday. If the charterer indicated at 17:01 that it would be
unable to load and the shipowner accepted this as repudiation, it
could be found as a question of fact that the loading would have
occurred after the laytime period. Therefore, from Tuesday onwards,
demurrage would have been payable. In this example, it is inevitable
that the shipowner would have earned demurrage.
Deadfreight, however, will only be recoverable by a shipowner as
a consequential loss for failing to load where the failure to load
Failure to Load 125
January 1994
occurred in a contract of affreightment without a specified number of
liftings.24
Although it may be hypothesized that in a given unperformed
contract demurrage and deadfreight would have been incurred, there
are problems in awarding such consequential damages. First, there is
no clear authority on whether a shipowner can recover lost demur-
rage and deadfreight where there has been a failure to load. Secondly,
even if, in principle, such damages can be awarded, there are inherent
problems of quantification.
1. Are consequential losses recoverable?
The authorities are unclear as to whether a shipowner may recover
consequential losses arising from a charterer failing to load.
In Reidar v. Arcos
25
the charterer exceeded the laytime, and
demurrage became payable. Had the ship been loaded within the
fixed time the summer cargo would have been loaded. However by
the time she was loaded she could only lawfully carry to the United
Kingdom a smaller winter cargo. The Court of Appeal upheld the trial
judge's decision allowing the owner to recover, in addition to
demurrage at the fixed rate, the difference between the summer and
winter cargoes. Thus, for detaining the vessel beyond the agreed
time, damages in addition to the agreed demurrage rate were payable
by the charterer. Such damages were for the consequential loss of
freight in failing to load a full and complete cargo.
In The Altus
26
the converse occurred. In addition to claiming
deadfreight, the owner contended that demurrage was payable by the
charterer for failing to load the minimum contractual cargo. The
defendant had agreed to load a minimum of 40,000 tons of crude oil.
In breach of this it loaded 34,447 tons. It paid deadfreight for this
difference. However, under the charterparty the demurrage rate was
dependent on the amount loaded. If 40,000 tons had been loaded the
24
1t would be inappropriate to award deadfreight as a consequential form of loss where a
charterer fails to load in either a voyage charterparty or a contract of affreightment with a
specified number of liftings. This is because where damages are awarded for a failure to load,
it is assumed that a full cargo, or at least the minimum contractual cargo, had been loaded. If
a full cargo had been loaded the shipowner could not have earned deadfreight. However, in the
situation of a contract of affreightment without a specified number of liftings, the shipowner
could have earned the full freight and deadfreight. See L. Gorton & R. Ihre, Contracts of
Affreightment and Hybrid Contracts 25, 37 (1986).
25(1926) 25 Lloyd's Rep. 513, [1927] 1 K.B. 352 (C.A.).
2 6
Total Transport Corp. of Panama v. Amoco Transport Co., [1985] 1 Lloyd's Rep. 423
(Com. Ct.).
Val. 25, No. I
Failure to Load 127
demurrage rate would have been significantly higher than it in fact
was.
In holding that the lost demurrage was recoverable, Webster J.
closely examined Reidar v. Arcos so as to decide whether the
recovery of both deadfreight and demurrage required two distinct
breaches. His Honour found that the majority in Reidar v. Arcos had
held that the charterer had committed one breach
27
giving the owner
two distinct claims.28 He stated the ratio of Reidar v. Arcos as:
Where a charterer commits any breach, even if it is only one breach, of
his obligation either to provide the minimum contractual load or to
detain the vessel for no longer than the stipulated period, the owner is
entitled not only to the liquidated damages directly recoverable for the
breach of the obligation to load (deadfreight) or for the breach of the
obligation with regard to detention (demurrage), but also for, in the first
case, to the damages flowing indirectly or consequentially from any
detention of the vessel (if it occurs) and, in the second case, to damages
flowing indirectly or consequentially from any failure to load a com-
plete cargo if there is such a failure.
29
Applying this ratio Webster J. was able to hold that in addition to the
deadfreight already received, the owner was entitled to the demur-
rage rate difference consequent upon the charterer's failure to load
the minimum agreed cargo.
The Altus would seem favourable to a shipowner in the situation
under consideration here. Even where there is only one breach, that
of failing to load, the owner could recover damages for lost demur-
rage or deadfreight where they flow "indirectly or consequentially"
from the breach. The reference to "any failure to load a complete
cargo" is broad enough to include a complete failure to load.
The charterer could distinguish the cases of Reidar v. Arcos and
The Altus from a situation where there has been a complete failure to
load. If these cases were to be restricted to their particular facts, they
apply only where consequential damages are recovered in addition to
liquidated damages. In the "failure to load a complete cargo"
situation, a shipowner would seek to recover consequential losses,
such as demurrage, in addition to lost freight. The latter does not
amount to liquidated damages.
27
According to Bankes L.J. the charterers had failed to load at the stipulated rate, whilst
according to Atkin L.J. they had failed to load a full cargo within the laydays.
28[1985] 1 Lloyd's Rep. 423, 435.
29
d.
January 1994
However, it seems to be irrelevant whether the damages flowing
directly from the breach are liquidated or not. Webster J. awarded
these damages independently of the nature of the deadfreight dam-
ages.
30
Demurrage is recoverable in addition to damages for lost
freight despite the fact that the latter are not liquidated damages. It is
submitted that consequential losses are recoverable if they flow
"indirectly or consequentially" from the breach of failing to load.
3
'
Although the cases mentioned are favourable to a shipowner, they
did not deal with a complete failure to load. Rather, they were
concerned with situations where the contractual minimum was not
loaded. The actual voyages still went ahead. The case of the Noel
Bay
32
may be more relevant. The parties had agreed to carry gasoil
under a voyage charterparty. The charterer failed to nominate a port
in breach of the agreement. After receiving notice that the charterer
was withdrawing from the contract, the owner accepted such conduct
as repudiatory and entered a substitute voyage.
The owner claimed demurrage in addition to the profit lost. Such
claim was based on the owner's allegation that 72 hours would have
been consumed in addition to the four and a half days spent waiting
for orders. The Court of Appeal held that three days lost demurrage
was not recoverable. However, no clear principle can be discerned
from the case.
According to Staughton L.J., the owner was entitled to damages
for the vessel's delay. However, as the voyage had not gone ahead,
the fixed demurrage rate was not applicable. Damages for delay were
to be assessed at the market rate. The market rate of the vessel was
that which was earned under the substitute employment. Thus, the
damages for delay were extinguished by the charterer's entitlement to
credit at the same rate.
33
The majority of Stocker and Balcombe L.JJ. did not agree with this
reasoning. They reasoned that, as the owner had merely pleaded
damages for repudiation of the charterparty, it could not recover the
demurrage claim. A breach of the obligation to nominate a port,
which gave rise to damages for detention, was not pleaded at any
point in the proceedings. On this basis, the trial judge was correct in
saying that the owner had suffered no loss beyond the lost freight.
34
301d.
31
See Richco International Ltd. v. Alfred C. Toepfer International G.m.b.H. (The Bonde),
(1991] 1 Lloyd's Rep. 136 (Com. Ct.).
32
SIB International S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2.
33
1d. at 365.
34Id. at 368.
Vol. 25, No. 1
Arguably, the majority would have awarded damages for lost demur-
rage had it been pleaded.
The Noel Bay essentially dealt with a situation where demurrage
would have been recoverable as arising from a breach independent of
the failure to load. That is, as arising from an alleged breach of the
obligation to nominate a port. Yet, the vessel's delay, for which
demurrage would have been recoverable, would have only arisen
after the shipowner's acceptance of the charterer's conduct as
repudiatory. Had the delay arisen whilst the contract was still on foot,
then it would be appropriate to speak in terms of an independent
breach. As it did not, the demurrage should have been claimed as a
consequential loss arising from the failure to load. This would
overcome Staughton L.J.'s difficulty with awarding damages for
detention at the demurrage rate when there was no voyage.
Upon the facts of The Noel Bay, it is certain that some demurrage
would have resulted if the voyage had gone ahead. With respect, the
majority erred in suggesting that a breach of the obligation to
nominate a port should have been pleaded. Such a breach (in those
circumstances) would have only given rise to damages for detention
and not demurrage. What the shipowner should have claimed, at least
in the alternative, is that the demurrage was a consequential loss
stemming from the failure to provide a cargo, as per The Altus.
Neither this case nor its predecessors were mentioned in The Noel
Bay. It can only be speculated whether a different outcome would
have resulted if the owner had pleaded the lost demurrage as a
consequential loss. It is submitted that consequential losses for a
failure to load are recoverable. This is particularly so where it is
inevitable that some demurrage or deadfreight would have been
incurred.
2. The charterer's arguments against recovery
Where there are optional modes of performance, so that the
contract might be performed in several ways, the outcome which is
least profitable to the plaintiff, and least burthensome to the defend-
ant, is adopted by the courts.
35
The charterer, as defendant, could
seek to extend this principle to cover consequential losses. As it
35
Cockburn v. Alexander, (1848) 6 C.B. 791, 814; Kaye S. S. Co. v. Barnett, (1931) 41
LI.L.R. 231, 239; Maredelanto Compania Naviera SA v. Bergbau-Handel G.m.b.H. (The
Mihalis Angelos), [1971] 1 Q.B. 164; TCN Channel 9 Pty. Ltd. v. Hayden Productions Pty.
Ltd., (1989) 16 N.S.W.L.R. 130 (N.S.W.C.A.).
Failure to Load 129
Jauary I994
cannot be said for certain that demurrage or deadfreight would have
been incurred, damages should be assessed on the outcome that is
least burthensome to the defendant. Such an outcome would ignore
the incursion of demurrage or deadfreight.
. However, this principle is unlikely to be extended. It applies where
the outcome of a contract is dependent on the exercise of an option
under the contract. It seeks to impose damages on the defendant no
greater than the minimum the defendant could legally have paid under
the contract. It would apply, for example, in cases where there is an
optional minimum/maximum range of cargo to be loaded in a contract
of affreightment. Thus, in an action for non-delivery of 200 tons, 5%
more or less, the seller was liable on the assumption that 190 tons had
been delivered.
36
The courts award damages to a shipowner for a
failure to load or deliver on the assumption that the charterer would
have loaded the smallest contractual cargo.
It is submitted that the principle's true scope is restricted to where
the defendant is given alternative modes of performance under the
contract.
37
Thus, this argument is unlikely to assist a defaulting
charterer. At any rate, the principle of awarding damages upon the
outcome least burthensome to the defendant will not apply in
disregard to the facts of any situation.3
8
3. The quantification of consequential losses
Even if consequential losses such as demurrage and deadfreight are
recoverable in principle, a charterer could argue that the inherent
problem of quantification would bar such recovery. Although a
shipowner may show that some demurrage would have been in-
curred, often its extent will not be accurately determinable. This is
further complicated if one considers that standard charterparties
often fix the amount of demurrage at a specified sum per day and pro
rata for part of a day.
39
In awarding damages for consequential losses, the court could,
depending on the circumstances, adopt one of two basic approaches:
(a) Approximate the amount of demurrage or deadfreight that
would have been earned; or
36Re Thornett & Fehr, [1921] 1 K.B. 219.
37
Maredelanto Compania Naviera SA v. Bergbau-Handel G.m.b.H. (The Mihalis Angelos),
[1971] 1 Q.B. 164; TCN Channel 9 Pty. Ltd. v. Hayden Productions Pty. Ltd., supra note 35,
16 N.S.W.L.R. at 130, 150, 154.
3 8
TCN Channel 9 v. Hayden Productions, supra note 35.
39
See Clause 7 of the Gencon form.
Vol. 25,140. 1
Failure to Load 131
(b) Award the shipowner an amount for losing the opportunity to
earn demurrage or deadfreight.
The first approach would be employed in situations where the court
has objective criteria before it so it is able to approximate the amount
of demurrage or deadfreight. The second approach would apply
where there is no means of calculating the potential deadfreight or
demurrage that would have been earned.
a. Approximation of the consequential loss
The court may have circumstances before it which enable it to
estimate the amount of demurrage or deadfreight that the shipowner
would have earned. This is particularly so in contracts of affreight-
ment that have been repudiated half-way. That is where a significant
number of liftings under a contract of affreightment have gone ahead,
but the charterer has failed to provide cargo for the remaining liftings.
Definite evidence exists of the demurrage and/or deadfreight that was
incurred in the executed liftings. The court could assume that the
unexecuted part of the contract would have been performed in a like
manner. Thus, if eight liftings had been completed before the char-
terer repudiated, and several more were still to be performed, the
court could calculate a figure representing the average demurrage or
deadfreight per lifting. The shipowner would be awarded such a figure
for every outstanding lifting, as well as lost freight.
In Cobelfret4 the Court -of Appeal of New South Wales adopted
such an approach. The defendant had failed to supply the remaining
cargo of 226,000 tonnes, during the contract's first period, due to an
export restriction. The plaintiff, on appeal, argued that it would have
carried the 226,000 tonnes in four voyages and not in five. If the cargo
had been carried in five voyages, the plaintiff would have carried an
average of 45,200 tonnes per lifting and thus have made a loss. If,
however, the plaintiff had carried 56,500 tonnes per lifting, the cargo
would have been carried in four liftings and it would have made a
small profit. This was essential to the plaintiff's case as the trial judge
had deducted the hypothetical losses in the first period from the
plaintiff's claim regarding the second and third period.
In holding that five and not four theoretical voyages would have
occurred, the court looked at the amounts actually carried during the
first period. Omitting the smallest lifting, it arrived at an average of
4Supra note 11.
January 1I9W
50,333 tonnes per voyage. Thus, the court held that the trial judge was
right in rejecting the contention that the uncarried cargo would have
been carried in four 56,500 tonne liftings.
It follows that where a contract of affreightment is repudiated
half-way, the court can award lost demurrage and deadfreight to the
shipowner by ascertaining the average incurred per voyage. Cer-
tainly, Cobelfret could be authority for the proposition that the court
is to use the voyages executed under a contract of affreightment as
evidence of what, on the balance of probabilities, would have
occurred if the contract had been fully performed.
b. Sum representing lost opportunity
The court may recognize that the shipowner's loss was not the lost
demurrage and deadfreight per se, but rather the opportunity to earn
them. This may be particularly so where it is uncertain how much
demurrage or deadfreight would have been incurred. In such circum-
stances it would be more appropriate for the court to award to the
shipowner a sum representing this lost opportunity.
(i) Nominal damages
A nominal amount could be awarded to cover this lost opportunity.
Beside cases where there is injuria or wrong without loss or damage,
nominal damages are also awarded where loss is shown but evidence
as to its amount is not.
41
Similarly, nominal damages are awarded
where the plaintiff's loss is so dependent on a person's discretion or
a contingency that it is impossible to say that there has been any
assessable loss. The plaintiff will only receive nominal damages.
42
However a shipowner would want to recover substantial damages for
this lost opportunity.
(ii) Uncertainty in measuring loss
There is authority to suggest that where it is clear that some
pecuniary loss was suffered but its extent is uncertain, the plaintiff
should not be deprived of substantial damages. The guiding principle
is that "the fact that damages cannot be assessed with certainty does
not relieve the wrong-doer of the necessity of paying damages for his
41
Dixon v. Deveridge, (1825) 2 C. & P. 109; Twyman v. Knowles, (1853) 13 C.B. 222.
42
Fink v. Fink, (1946) 74 C.L.R. 127 (H.C.A.).
Vol. 25, No. I
Failure to Load 133
breach of contract."
43
Thus, where a seller delivered defective goods,
the fact that it was impossible to accurately measure the level of
market diminution did not prevent the plaintiff from recovering
substantial damages in Biggin v. Permanite."
In a case where it seems inevitable that some demurrage or
deadfreight would have been incurred, the impossibility of accurately
quantifying it should not bar the shipowner from recovering. In
Biggin v. Permanite, in the absence of precise evidence, Devlin J.
estimated what he thought "the value of the goods would have been
... if they had been sold with all faults."
45
Such an approach had
also found approval in the joint judgment of Dixon and McTiernan
J.J. in Fink v. Fink. Their Honours said that:
[w]here there has been an actual loss of some sort, the common law
does not permit difficulties of estimating the loss in money to defeat the
only remedy it provided for breach of contract, an award of damages.
47
In Chaplin v. Hicks
8
Fletcher Moulton L.J. said that:
where it is clear that there has been actual loss resulting from the
breach of contract, which it is difficult to estimate in money, it is for the
jury to do their best to estimate; it is not necessary that there should be
an absolute measure of damages in each case.
49
The court therefore must, upon the available facts, determine the
damages as best it can by arriving at a figure which represents the
loss. In the case of a voyage charterparty, for example, if evidence of
circumstances such as port congestion, public holidays, or strikes
make it clear that the charterers would have gone well beyond the
laytime period the shipowner could recover an approximate sum.
(iii) Loss of a chance
In situations where it is difficult to categorically say that demurrage
or deadfreight would have been incurred, the shipowner's true loss is
43
Chaplin v. Hicks, [1911] 2 K.B. 786, 792 (C.A.); Howe v. Teefy, (1927) 27 N.S.W.L.R.
301, 306 (N.S.W.C.A.); see also Hardware Services Pty.-Ltd. v. Primac Association Ltd.,
[1988] 1 Qd. R. 393 (Qd.S.C.).
441951] 1 K.B. 422, rev'd on other grounds, [1951] 2 K.B. 314 (C.A.).
45
Id. at 439.
46(1946) 74 C.L.R. 127 (H.C.A.); see also The Commonwealth v. Amann Aviation Pty. Ltd.,
(1991) 174 C.L.R. 64 (H.C.A.).
47(1946) 74 C.L.R. 127, 143.
48[1911] 2 K.B. 786 (C.A.).
49Id. at 795.
January I994
the chance to earn them. Where denied potential benefits as a result
of the defendant's breach, a plaintiff may receive damages represent-
ing this lost chance.
50
The court must award damages according to its
estimation of the plaintiff's chance of obtaining such benefits. This
creates difficulties in quantification. Yet, such difficulties are no basis
for denying the plaintiff a substantial recovery.
In Chaplin v. Hicks
5
l the Court of Appeal upheld a jury's award of
100 to the plaintiff for being deprived of a chance to compete in a
contest. The court accepted that the plaintiffs chance of winning the
prize was dependent on a contingency. However, according to
Vaughan Williams L.J., this was not to say that "damages are
unassessable merely because certainty is impossible of attain-
ment.
' ' 52
It is only "whenever the contingencies on which the result
depends are numerous and difficult to deal with"
53
or where "dam-
ages might be so unassessable that the doctrine of averages would be
inapplicable"
54
that the plaintiff would be denied recovery.
The decision of Chaplin v. Hicks was adopted by the full court of
the Supreme Court of New South Wales in Howe v. Teefy.
55
There,
a race horse was leased by the defendant to the plaintiff, who was a
trainer, for three years. After three months, the defendant removed
the horse from the plaintiff in breach of the contract. The plaintiff
claimed for the earnings he would have made out of the horse's prize
money, from betting on the horse and from supplying information to
other people. The jury awarded the plaintiff 250.
The Supreme Court of New South Wales unanimously upheld the
jury's award. Street C.J., with whom Gordon and Campbell J.J.
concurred, said that the plaintiff's "injury which he sustained was the
deprivation of his right under his agreement to train and race the
horse, and make what profit he could out of doing so. "56
Following Chaplin v. Hicks, the court in Howe v. Teefy recognised
that difficulties or uncertainty in assessing damages are no grounds
for denying recovery.
57
In both these cases there is a notion that
damages in such situations are to be assessed for losing a right or
5Richardson v. Mellish, (1824) 2 Bing. 229, 239, 130 E.R. 294, 298; Chaplin v. Hicks, [19111
2 K.B. 786, 792 (C.A.); Howe v. Teefy, (1927) 27 N.S.W.L.R. 301, 306 (N.S.W.C.A.); The
Commonwealth v. Amann Aviation Pty. Ltd., supra note 46.
5 1
Supra
note 48.
52(1911]
2 K.B. at 792.
53
1d.
at 791.
54Id. at 792.
55(1927) 27 N.S.W.L.R.
301 (N.S.W.C.A.).
6Id. at 307.
57
1d. at 306.
Vol. 25, No. I
Failure to Load 135
opportunity. Although neither court actually assessed damages,
indications were given as to how a court should assess such damages.
The common thread through these cases is that damages should
reflect the loss of the right or chance to make a profit.
Vaughan Williams L.J. in Chaplin v. Hicks said that although the
competitor could not have gone into the market and sold her right to
compete, the jury "might well take the view that such a right, if it
could have been transferred, would have been of such a value ...
that a good price could be obtained for it."58 More significantly,
Street C.J. said in Howe v. Teefy that:
[t]he calculation which they [the jury] had to make was not how much
he would probably have made in the shape of profit out of his use of the
horse, but how much his chance of making that profit, by having the use
of the horse, was worth in money.
59
In Kerry v. Spriggs
6
on similar facts to Howe v. Teefy, the defendant
wrongfully repossessed a racing horse leased to the plaintiff for two
years. The plaintiff claimed $60,000 on the basis that the horse had
great potential and that this is what he could have earned had he been
allowed to continue with his contract. Hammond J. found that the
horse's performance had been declining and thus doubted that it
would have earned this amount. He awarded $5,000 as representing
the loss of opportunity to train the horse for reward.
61
Thus, despite
a finding that the horse would not have earned the amount claimed, in
the spirit of Howe v. Teefy and Chaplin v. Hicks, Hammond J.
awarded damages for the lost opportunity.
It would follow that where a charterer fails to load and it cannot be
shown on the balance of probabilities that demurrage or deadfreight
would have been incurred, the shipowner has still lost something of
value. It has lost the chance or right to earn demurrage or deadfreight.
Damages for such loss would not be assessed on the monetary basis
of the amount that might have been earned. Instead, damages are to
be assessed reflecting that lost right or opportunity.
c. Conclusion: recovering for lost opportunity
The situation regarding recovering damages for a lost opportunity could
be summarized as follows. Where, on the balance of probabilities,
58[1911] 2 K.B. 786, 793.
59(1927) 27 N.S.W.L.R. 301, 307 (N.S.W.C.A.).
60[
19 8 9
] 5 S.R.(W.A.) 273 (Dist. Ct.).
61
1d. at 278.
Januafy I N4
demurrage or deadfreight would have been incurred, the shipowner can
recover for such loss even though its extent is uncertain. The court must,
upon the evidence, estimate the damages as best it can.
In a situation where it cannot be said that demurrage or deadfreight
would have been incurred, the shipowner has lost the right or
opportunity to earn either. Such right or opportunity has monetary
value. Yet, this monetary value will not reflect the loss of what the
shipowner might have earned. Rather, it will reflect the value of the
lost right or opportunity.
III.
RECOVERING LOSSES IN PLACEMENT
Ordinarily, a shipowner does not enter into charterparties in
isolation. Instead, it plans ahead for its vessels. Subsequent charters
to be performed upon the completion of a voyage are secured. Upon
a charterer's failure to load, any employment the vessel was to
engage in after the completion of the repudiated charter may be
impossible or unprofitable to. perform.
A shipowner may seek to recover damages for this placement loss.
The charterer would argue that any loss of future employment is not
connected to the contract breached and therefore too remote. Recov-
ery for lost future employment, contingent upon the due performance
of the repudiated charter, will therefore depend on the concept of
remoteness of damage.
1. Remoteness of damage
Upon a breach of contract, damages will be recoverable if the party
in breach could reasonably have contemplated that the breach was
not unlikely to cause the damage, or that the damage was liable to
result from the breach or was a serious possibility or a real danger.
62
Communications of special circumstances, by one party to another,
allow recovery for losses that ordinarily may not have been within the
parties' reasonable contemplation. The special circumstances com-
municated alter the types of losses the parties might reasonably
62Hadley v. Baxendale, (1854) 9 Exch. 341; Koufos v. Czarnikow, [1969] 1 A.C. 350 (H.L.),
per Lord Reid at 385-386, per Lord Hodson at 411, per Lord Pearce at 415, and per Lord Upjohn
at 425; Wenham v. Ella, (1972) 127 C.L.R. 454 (H.C.A.); Alexander v. Cambridge Credit Corp.
Ltd., (1987) 9 N.S.W.L.R. 310 (N.S.W.C.A.); Burns v. M.A.N. Automotive, (1986) 161 C.L.R.
653 (H.C.A.); Scrutton on Charterparties, art. 191 (19th ed. 1984).
Vol. 25,'No. i
Failure to Load 137
contemplate.
63
They "extend the horizon to include losses that are
outside the natural course of events."
64
Thus, in a case where a
charterer has failed to load a cargo from Newcastle to North Europe,
the shipowner's communication of the existence a contingent subse-
quent charter from Europe to New Zealand may alter what types of
losses were in the parties' contemplation.
2. Recovering placement losses
a. In ordinary cases
A shipowner will be allowed to recover a placement loss, if the loss
was one which the charterer should have reasonably contemplated as
not-unlikely, liable to result, a serious possibility or a real danger. In
essence, damages will be limited to what was in the contemplation of
the parties.
65
A charterer knows that vessels are used for profit making. Unlike
most shippers, a charterer under voyage charterparties and contracts
of affreightment is usually exporting bulk cargoes. This would suggest
a greater understanding of the economics of the shipping industry.
Such a charterer should be able to foresee that the shipowner would
have entered into subsequent employment and that all did not end
upon the voyage contracted. Furthermore, it should be able to
foresee that such subsequent employment would be affected by its
breach. The shipowner would lose its geographic placement and
would be unable to perform these subsequent voyages.
In the words of Lord Reid, the question to be asked is whether the
charterer would have realised, when the contract was made, that
losses of subsequent voyages were sufficiently likely to result from its
failure to load.
66
Surely the charterer could reasonably contemplate
that its repudiation would interrupt the shipowner's scheduling and
that this would cause loss of some kind. It would be in its reasonable
contemplation that these interruptions to scheduling are "not unlike-
ly"61 to cause contingent employment losses. The critical question is
how specific a loss must have been within the charterer's contempla-
tion. May the loss be merely general, or must the charterer have
63Thus Lord Hodson in Koufos v. Czarnikow, supra note 62, [1969] 1 A.C. at 409, refers to
"special circumstances
in which the contract was made."
64Id., per Lord Pearce, at 416.
61Id. at 415-16.
66Id. at 385.
67
1d.
January 1994
contemplated an actual, subsequent voyage which becomes difficult
or impossible to perform?
It seems that, upon the application of the remoteness principle,
whether losses in subsequent employment would ordinarily be recov-
ered remains somewhat unanswered. However, according to one au-
thority such losses are recoverable if specifically identifiable In Spiliada
Maritime v. Louis Dreyfus6 the charterer wrongfully repudiated a
voyage charterparty. The owner claimed, inter alia, damages for the
excess duration of the substitute voyage. The owner's vessel had been
employed for some 34 days longer than it would have been on the
contractual voyage. The owner contended that if the contractual voyage
had been performed, it could have obtained a fixture for the carriage of
grain from Brazil to Yugoslavia. It argued that it should recover the
returns from this notional, subsequent voyage from Brazil to Yugoslavia
in addition to the returns from the repudiated voyage. , I- .
Having had its claims for damages dismissed at arbitration, the
owner sought leave to appeal. Parker J. dismissed, noting that the
arbitrators had found on the evidence that the owner could not have
obtained a fixture. Arguably, if the owner had already made a
contract for carriage from Brazil to Yugoslavia the requisite evidence
would have been present.
Parker J. did say that if the arbitrators had held that, as a matter of
law, damages arising in the period after the duration of the :contrac-
tual voyage were irrecoverable, then they would have erred. It
follows that damages arising after the contractual voyage, such as
losses in subsequent voyages, can be recovered. Although Spiliada
Maritime v. Louis Dreyfus is not solid authority, it indicates that
there is no reason why, in principle, subsequent employment losses
should not be recovered. Such an indication was also given in The
Noel Bay.
69
Staughton L.J. recognised that a "vessel may have been
[after entering a substitute voyage], better--or worse-placed for
future employment at the end of one voyage than at the end of the
other."
70
A worse placement would suggest that any future employ-
ment losses should be recovered.
The owner in Spiliada Maritime v. Louis Dreyfus failed to recover
as it had been shown that it could not have obtained subsequent
employment. In cases where subsequent employment is obtainable
but its nature is uncertain, the owner would want to claim, in the
6[1983] Com. L.R. 268, (1983) 133 New L.J. 1102 (Com. Ct.).
69Supra note 2.
70(1989] I Lloyd's Rep. at 363.
.Vol. 25, No. 1
Failure to Load 139
alternative, for the lost opportunity. Such a claim would be on the
same grounds as already examined above with respect to lost
demurrage and deadfreight.
b. Special circumstances and actual knowledge
Losses incurred in relation to subsequent voyages resulting from a
charterer's default would be recoverable if special circumstances
were communicated or actual knowledge was possessed. Such com-
munications need not become a term of the contract.
7
' For example,
let us suppose the owner in the Louis Dreyfus case had already
entered into the Brazil to Yugoslavia contract. If the charterer knew
of this and that it was contingent upon the performance of the
repudiated voyage, then related losses would be in its contemplation
as arising from its wrongful repudiation.
c. Imputed knowledge
The remaining issue to be addressed is in what circumstances
knowledge will be imputed so as to put the type of loss within the
charterer's reasonable contemplation. Both parties to a charterparty
or a contract of affreightment are usually mature, professional bodies
that regularly deal with contracts of carriage. Certain facts and
consequences should therefore be imputed as within their knowledge.
The authorities show a trend in favor of awarding damages for loss
of business or resale profits against a seller of goods but not against
a carrier or consignor.
72
Lord Upjohn in Koufos v. Czarnikow
73
said
a carrier of goods ... is not carrying on the same trade as the consignor
of goods and his knowledge... of the other's trade may be limited and
less than between buyer and seller of goods who probably know far
more about one another's business.
74
The question is to what extent the court is prepared to impute
knowledge of shipping practice and freight markets. A charterer in
voyage charterparties and contracts of affreightment is to be distin-
guished from an exporter (or consignor) under a bill of lading. It
71
Koufos v. Czarnikow, [1969] 1 A.C. at 422.
7McGregor on Damages, supra note 6, para 258.
73[1969] 1 A.C. 350.
74
1d. at 424; see also Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 2
K.B. 528, 537.
JAMU"I N4
usually exports bulk cargoes on a regular basis and therefore knows
more about a shipowner's "business."
Let us suppose, for example, a charterer had entered an agreement
for the carriage of cargo from Newcastle to the west coast of India.
Assuming that the west coast of India was an undesirable destination,
as vessels will rarely find employment out of that region, the owner
may have accepted the fixture on the basis of a subsequent voyage
from the Middle East back to Fremantle. If the charterer had been
told of this subsequent voyage, then losses arising from the vessel not
being in that vicinity would be within its contemplation. The charterer
would have actual knowledge. However, what if the charterer was
not specifically told that India was an undesirable destination? Could
such knowledge be imputed?
In Diamond v. Campbell-Jones
75
it was said that:
a party entering into a contract must [not] be treated as having
constructive notice of the nature of the other party's business, or of its
probable bearing on the loss which that other party might suffer in
consequence of a breach of contract.
76
Although notice will not be imputed, the charterer will be assumed to
know certain facts. In the Victoria Laundry case
77
the defendant sold
a boiler to the plaintiff, who operated a business as a launderer and
dyer. The boiler had been damaged and the plaintiff refused to accept
it. The Court of Appeal allowed a claim for profits that would have
been made if the boiler had been functioning properly.
The plaintiff relied on the defendant's knowledge that it was in
business and that it needed the boiler for its business. The court
allowed the plaintiff to recover something for the lost profits, but not
the actual profits lost, because the defendant did not know the precise
nature of the boiler.
It would follow that this would apply analogously, if not a fortiori,
in a voyage charter case. A charterer should appreciate the implica-
tions of voyage interruptions. Where certain facts are known, subse-
quent voyage losses should be awarded. Where the charterer knows
that the destination of its cargo is undesirable to a shipowner, then
notice could be imputed, upon its repudiating a charter, that the
shipowner would have made subsequent arrangements. This will be
particularly so in cases where the freight to the undesirable location
71[1961] Ch. 22.
76
1d. at 35-36.
77Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 2 K.B. 528.
Vol. 25, No. I
was not unreasonably high. The shipowner would only accept a
voyage to such an undesirable, geographic placement at a reasonable
freight rate by securing a proximate subsequent voyage. However, if
the freight rate to the undesirable location is particularly high, then it
could be reasonably contemplated that this is to compensate for
subsequent voyages in ballast. Thus, where special circumstances are
present, although the nature of subsequent employment has not been
communicated, losses arising from these subsequent voyages would
be in the reasonable contemplation of the charterer in default.
d. Repudiated contracts of affreightment
The principles so far deal more appropriately with placement losses
arising from repudiated voyage charterparties. Whether an owner
suffers any placement losses under a contract of affreightment will
also depend upon whether the owner was using vessels in its
disposition.
If for example, an owner enters into a contract of affreightment
from Newcastle to North Europe and a consecutive one from Europe
to New Zealand, the vessels would be performing a global circuit over
the various liftings. Where the Newcastle charterer repudiates the
contract of affreightment after completing two out of eight liftings, a
disponent owner might not suffer any contingent losses on the
remaining six voyages. This would be so if the owner was going to
charter in ships to perform these voyages and such ships were not
ready and earmarked. It would simply not charter in ships for those
six, repudiated liftings. The Europe-New Zealand voyages that were
contingent on the Newcastle contract of affreightment voyages could
be performed by chartering in vessels to do those liftings on the spot
market in Europe, rather than chartering vessels to do both liftings.
Thus, unless the disponent owner had earmarked particular ships to
perform the repudiated voyages, it will not suffer any contingent
voyage losses.
In a situation where a shipowner was to use its own vessels, or had
earmarked chartered ships, it is more likely to suffer contingent
losses. The vessels that were to be used on the repudiated voyages
would enter substitute voyages. Unless the shipowner can find
employment that would relocate these vessels so as to make the
contingent voyages, it would need to charter in vessels. The loss
would arise from chartering in these new vessels on the spot market.
Therefore, in a case where a contract of affreightment is repudi-
ated, the remoteness question is altered somewhat. For the ship-
Failure to Load 141
January 1994
owner to recover the question will also turn upon whether the
charterer knew, or ought to have known, that the shipowner was
going to use its own ships or chartered ships that had been earmarked
for these voyages. This is as the contingent losses can only be in the
charterer's contemplation if it had such knowledge or if it was
imputed. The charterer cannot contemplate contingent losses unless
it knew or ought to have known that vessels to be used on the
repudiated voyages were owned by the shipowner or had been
specifically earmarked for these voyages.
Presumably, in addition to knowledge of the vessels, a knowledge
of the subsequent employment would be required, as with single
voyage charterparties. That is, a certain degree of knowledge,
possessed or imputed, would be required so as to show that the
charterer could reasonably have contemplated these contingent
losses.
CONCLUSION
The measure of damages payable to a shipowner for a failure to
load has progressed from the initial measures of the mid-nineteenth
century. Whilst still purporting to place the shipowner in the position
it would have occupied if the contract had been performed, the focus
of the mitigating component seems to be on what the shipowner
should have earned rather than on what it did earn. With this shift in
onus the measure has become pro-charterer. Yet, contrary to this
change, a shipowner would be able to recover consequential losses
such as demurrage and deadfreight, as well as losses in placement.
The shift in onus and the change in the measure of damages may have
been offset by the availability of these further consequential claims.
Vol. 25, No. I
Further Thoughts on The Carriage of Goods
by Sea Act 1992 (UK)
BARNEY REYNOLDS*
Readers of Tim Howard's article in the January, 1993 issue of this
Journal
1
will have noted the substantial change regarding title to sue
which will occur in respect of claims on bills of lading in the United
Kingdom when disputes governed by the new Carriage of Goods by
Sea Act 1992 arise for resolution. But it must be borne in mind that
the older wording controlling the transmission of the contract deriv-
ing from the Bills of Lading Act 1855, now superseded in the United
Kingdom for bills of lading issued after 16 September 1992, is still
applicable in some form in many, if not all, common law territories
outside the United States (where of course a different technique for
the transmission of the right to sue was used by the Pomerene Act of
1916). It is the purpose of this article to suggest that there are other
problems which could have arisen out of the wording of the 1855 Act,
beyond those which prompted the 1992 legislation; and that these
problems could still occur in jurisdictions retaining the older form of
wording, and also, of course, in the United Kingdom until disputes
under the old legislation cease.
As is explained in Mr. Howard's article, the pressure for reform in
the United Kingdom was triggered by two pressing problems that had
manifested themselves in litigation in England and hence affected
dealings in the market. These were, in the chronological order in
which they attracted attention, the problem of bulk goods, and the
problem created by the situation where the goods were dealt with
independently of the bill of lading (for example because they arrived
before it). In both situations the linking of the transfer of the contract
with property could cause difficulties: in the first, because under the
English Sale of Goods Act 1979 (in effect a reenactment of a former
Act of 1893) property cannot pass in an undifferentiated part of a
*Solicitor, Clyde & Co., London.
'Howard, The Carriage of Goods by Sea Act, 24 J. Mar. L. & Corn. 181 (1993).
143
144 Journal of Maritime Law and Commerce Vol. 25, No. 1
bulk, and in the second, because in such cases it may not be possible
to say that property passes by virtue of consignment or indorsement
of the bill of lading. This is all explained in more detail in the relevant
report of the English and Scottish Law Commissions which led
eventually
to the 1992 legislation.
2
The Carriage of Goods by Sea Act 1992 therefore alters the law
operative in the United Kingdom so as to tie the contract of carriage
to the "lawful holder" of the bill in all but a few minor instances. It
was the policy of the draftsman that the holder of a bill should be able
to sue the carrier irrespective of whether property in the goods to
which the bill relates had actually passed to him. In general, the new
approach creates certainty and reinforces expectations.
However, as already indicated, there are other problems relating to
the transfer of the carriage contract which similarly stem from the
application of the technique used in 1855 to the more sophisticated
and complex market dealings of the late twentieth century. Fortu-
nately, these have not yet arisen, or at least have not reached
litigation, in the United Kingdom. But they could still do so there for
a considerable period, and for longer in jurisdictions retaining the
1855 formula. This article will outline the nature of these other
problems and then consider whether the new United Kingdom Act
manages to avoid them. The conclusion is that, with slight reserva-
tions, it normally does, even if sometimes by accident.
The position under the 1855 regime
Situations can arise under the 1855 regime where sellers who have
transferred property and parted with the bill remain the only persons
entitled to a remedy against the shipowner, because no rights have
passed to the transferee. Such sellers are the only parties who may
sue for cargo damage, despite their interest in the goods having
ceased when the damage occurred, and despite no longer being in
possession of the bill.
The bill of lading contract is therefore capable of becoming
separated from the holder of the bill and the person who has property
in the goods carried. However, what is sometimes overlooked is that
it is then capable, in certain circumstances, of jumping back to its
2
See the Law Commissions' Report on Rights of Suit in Respect of Carriage of Goods by
Sea, Law Com. No. 1%, Scot. Law Com. No. 130 (1991) (hereinafter "The Report"), and
Beatson and Cooper, Rights of Suit in Respect of Carriage of Goods by Sea, [1991] Lloyd's
Mar. & Com. L.Q. 1%.
Carriage of Goods by Sea Act 1992
more appropriate position between bill of lading holder and carrier;
and that it may subsequently become separated again.
These anomalies spring from the wording of 1 of the 1855 Act. By
1, all the rights which arise from the contract contained in the bill of
lading are transferred to, and a set of identical liabilities created in, a
consignee or indorsee of the bill if the consignment or indorsement
plays an "essential causal part"
3
in the passing of property. This rule
will be satisfied when property passes from seller to buyer in
accordance with the contract, on payment against documents, and
also in a far wider (but generally "causal") range of circumstances
which are harder to categorise and/or specifically outline. It would
also appear that if the seller (not being the buyer's agent) initially
takes the bill to the buyer's order and immediately transfers the bill to
the buyer, the seller waives any right to reserve property, so that
property then passes on consignment.
However, if for some reason property does not pass in accordance
with 1, the rights of action and the liabilities under the bill of lading
contract do not either. This is often the case, for instance, where
property passes to the buyer by manifested intention (other than by
transfer of the bill) when the goods are afloat, or by physical delivery
from the ship at the end of the voyage. This is so because in neither
case does property normally pass by virtue of dealings with the bill of
lading, nor does the transfer of the bill ordinarily play an "essential
causal part"
4
in the passing of property. In addition, rights of action
may well not pass where the seller keeps for security a bill of lading
made out to the buyer, since in that situation it is arguable he is not
passing property on consignment, and because the bill is made out to
the buyer, he has no power to endorse it. If he later transfers it on
payment, 1 cannot apply and again it would seem that the contract
is not transferred.
The 1 regime thus permits, in significant instances, the detach-
ment of property and the holding of the bill from the rights and
liabilities which should accompany them, thereby producing uncer-
tain results. It is theoretically possible to evade some of these
problems when a dispute arises, since rights of action can be
transferred without the aid of 1 by virtue of an assignment of the
3
Per Mustill L.J. in Enichem Anic S.p.A. v. Ampelos Shipping Co. Ltd. (The Delfini),
[1990] 1 Lloyd's Rep. 252, 274, building on his earlier tentative formulation in Karlshamns Olje
Fabriker v. Eastport Navigation Corporation (The Elafi), [1981] 2 Lloyd's Rep. 679, 687.
4
per Mustill L.J. in The Delfini, supra note 3.
145
Januar 1994
benefit of the contract contained in or evidenced by the bill of lading.
5
However, such assignments are rare, and involve an impracticable
shift of responsibility onto the parties concerned. I shall therefore
ignore this possibility for present purposes.
Problems arise in four main cases. The first is well known. If the
original shipper transfers the bill in such a way as not to attract the
operation of 1, the new holder has no right of action under the bill
of lading contract, whilst the original shipper can still sue: nothing has
transferred the original contract away from him. Not only can the
transferee not sue, but even if the original shipper were to sue on
behalf of the transferee, he might be confronted by difficulties over
damages if he had parted with property. By analogy, in The Albaz-
ero,
6
charterers were effectively unable to recover on the charter-
party where both property and risk had passed. On one view this was
because someone else could sue by virtue of the Bills of Lading Act;
7
that would not apply here. But on another (wider) view, they could
not sue because they had not suffered any loss. If the latter view were
to be adopted, the same reasoning may apply here (at least unless no
one else at all can sue
8
) especially since no distinction was made in
The Albazero
9
as to the position which would obtain if the contract
was one contained in or evidenced by a bill of lading.
The second case has received less attention. Problems can arise
concerning the transferee who has the bill and the property, but, as
above, obtained the property independently of the bill in such a way
that indorsement of the bill did not play an "essential causal part"'
0
in the transfer of property. Arguably, once that transferee does get
the property, he can then transfer it on by means of the bill of lading,
and if he does so in a way attracting the operation of 1, the contract
now passes to the second transferee, even though it had not resided
in the first transferee. It would seem reasonable to assume that a
party who is in the unsatisfactory position of having property but no
contract rights can still transfer property by means of the bill,
especially if there is an appropriate delivery and perhaps an indorse-
ment (though of course the bill may cease to be an effective document
5
See Kaukomarkkinat ON v. Elbe Transport-Union G.m.b.H. (The Kelo), (1985] 2 Lloyd's
Rep. 85, and Benjamin's Sale of Goods 18-038 (4th ed. 1992) (hereinafter "Benjamin").
6[1977] A.C. 774.
7
See Hobhouse J. in The Sanix Ace, [1987] 1 Lloyd's Rep. 465, at 469-470.
'See The Aibazero, supra note 6, at 847, referring to the survival of a limited role for the old
case of Dunlop v. Lambert, (1839) 6 Cl. & F. 600.
9
Supra note 6.
1oPer Mustill L.J. in The Delfini, supra note 3.
Vol. 25, No. I
of title when the goods are finally delivered). Such actions would
bring the wording of 1 back into play, transferring the contract
rights to the second buyer" despite the absence of such rights in his
seller.
It might be objected that the word "transfer" in 1 only applies
where the holder has something to transfer. However, the section
does not specify from whom the rights are transferred, and the fact
that goods have been transferred once independently of the bill can
hardly be said to deprive it of the status of document of title: for a
start, the shipowner will still be liable to the bill of lading holder if he
delivers to someone else.'
2
Also, a similar revival of the contract, into
the hands of the holder of the bill, appears to take place upon the
indorsement of the bill by a charterer.'
3
The third case springs from the previous one and concerns the
position of the second transferee. If he then transfers property in such
-a way as not to attract the provisions of 1, the contract arguably
remains with him, though someone else is now on risk who does not
have the contract. This may occur, for instance, if property passes
under the terms of a sale contract rather than by virtue of an
indorsement. 14Such a scenario is different from the first, that of the
original shipper, who had the original contract of carriage of which
the bill of lading was merely evidence. The second transferee is in the
surprising situation of having had a contract transferred to him which
now does not leave him.
Such an analysis is based on what would appear to be a reasonable
assumption that, if the contract rights are not transferred, they remain
with the person who previously held them. The most plausible
analysis of such a situation is not that the bill of lading contract is
extinguished, but that it remains with the transferor of the bill, who
has rights of action under it. If this were not the case, there would be
losses in respect of which no one could sue, since even the ultimate
receiver would not be able to sue despite being on risk: The Delfini.15
It would seem strange if the carrier is to be absolved fortuitously from
all liabilities under the contract, whilst being protected himself, for
the carrier is always able to sue the shipper under the original carriage
contract.
1 6
But, given the proposed analysis, there are difficulties
"With the probable result that the original shipper can no longer sue.
1
2
Berjamin, supra note 5, at 18-017.
1
3
Scrutton on Charterparties art. 33 (19th ed. 1984).
1
4
As it did to the first plaintiffs in The Delfini, supra.
15[1990] 1 Lloyd's Rep. 252.
1
6
Benjanin, supra note 5, at 18-040.
147 January 1994
with the extent of damages recoverable by the person with whom the
contract resides, with the likelihood of cases where carriers can avoid
liability because there is in effect no claim except for nominal
damages,
as in The Albazero.'
7
Fourthly, if there is a way in which the second transferee can
transfer the property without reference to the bill of lading other than
by delivery of the goods at the port of destination, further transfers
down a chain can raise similar problems, with the bill of lading
contract becoming further separated from its holder.
-Such examples show how unsatisfactory the 1855 formula could be.
Where cargo damage occurs, the bill of lading holder who suffers loss
might not be able to sue, but instead be forced to rely on attempts to
ensure that some previous holder of the bill (or, in some cases, the
original shipper) brings an action for him. This may involve almost
impossible problems, both legal and practical, in locating the person
who can sue. Moreover, if the present holder manages to sue in tort,
which would on current authority in Commonwealth countries in-
volve showing that he had property at the time of the damage,'
8
then
although he will have taken the bill with sight of its terms, the carrier
will be unlikely to be able to rely upon them, despite the fact that such
terms were agreed by the shipper.'
9
Also, in certain (albeit rare)
instances where the carrier wishes to sue on the contract, for example
where the shipper has disappeared or gone into liquidation, he might
have to carry out the same arduous investigative work in order to find
out whom he could sue. Here the problems are likely to be even
greater, since the consecutive holders of the bill have no incentive to
assist.
In addition, in some cases the presenter of the bill at the discharge
port will be unable to rely on the contract which it contains. He will
instead have to hope to establish an implied contract arising out of his
presentation of the bill.
2
0 Such a contract can be hard to establish,
especially given the strict judicial approach taken in recent years.
2
'
The Law Commissions recognised the limited nature of the remedy in
their
Report.
22
17[1977] A.C. 774; supra, text at note 6.
'
8
Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. (The Aliakmon), [1986] A.C. 785.
191d. at 817-818.
2Brandt v. Liverpool, Brazil & River Plate Steam Navigation Co. Ltd., [1924] 1 K.B. 575,
and Benjamin, supra note 5, at 18-032 et seq.
2 1
E.g., The Aramis, [1989] 1 Lloyd's Rep. 213.
22The Report, supra note 2, at paras. 2.11-2.12.
Vol. 25, No. I
Finally, a person who was once holder of the bill might, at least in
theory, be subject to suit for losses in respect of a period of time after
he had ceased to be holder.
23
This seems absurd, contradicting the
expectations of most sellers.
The position in the United Kingdom under the 1992 Act
The Carriage of Goods by Sea Act 1992 links the carriage contract
almost inseparably to the "lawful holder" of the bill. This reduces
uncertainty and decreases the number of instances of conceptual and
theoretical difficulty. The position is therefore greatly improved.
Section 2(1)(a) gives the rights under the contract of carriage to the
"lawful holder,"
24
which, broadly, is any person who becomes
holder of the bill of lading in good faith.
25
Thus, when a person hands
over the bill of lading, even if this occurs much later than the transfer
of the property (and lacks any causal connection with it), the rights of
suit under the contract of carriage are transferred to and vested in the
recipient and the rights of the previous holder are thereby extin-
guished.
26
Furthermore, the liabilities under the contract of carriage
only attach in the circumstances set out in 3(1) which, crudely
summarised, only involve the shipper and any person who takes or
demands delivery or makes a claim against the carrier.
This produces clarity as to the effect of dealings with the bill. For
a start, a previous holder will not normally be attacked for later
losses. There is still the possibility of a holder having to sue for the
loss of another, whether the person on risk or holder of property.
Indeed, he is entitled to do so under 2(4). However, buyers could
provide that they will not assume the risk in the goods without the
bill, or at least without a letter of indemnity, in which case the seller
will be encouraged to sue since he will effectively be suing for his own
loss.
The carrier can clearly identify those whom he has to sue on the
carriage contract. In addition, the holder will usually only be liable in
circumstances where he must perceive the possibility of being so
liable since the examples of difficulties arising under the old law are
harder to concoct under the new. Similar problems may still arise
23There are however issues as to whether a party to the bill of lading contract can be liable
for another person's breach; for it will be difficult to regard the later holder as an agent of the
earlier party to the contract.
24
This is subject only to a few minor exceptions, as set out in 2.
25Section 5(2).
26
Section 2(5).
149
January 1994
where, for example, someone acquires the bill in bad faith. Then the
prior holder will still be liable, and if the mala fide holder subse-
quently transfers the bill to another who acquires in good faith, the
carriage contract will jump to the new holder. Also, as in the
examples concerning the 1855 formula, the prior holder may not be
able to prove when or if this happened. But this is hardly cause for
surprise. Any holder must realise that if he loses or is tricked out of
the bill, such consequences are quite possible.
The old problems have not entirely disappeared, however, and
parties may be surprised by a contractual jump which might occa-
sionally occur where the bill passes through the hands of a pledgee,
most notably, a bank. For such a holder does not come within the
definition of "lawful holder" unless he is a named consignee, or he
comes to possess the bill as a result of "the completion, by delivery
of the bill, of any indorsement of the bill, or, in the case of a bearer
bill, of any other transfer of the bill. "27 Pledgees are rarely consignees
and often not indorsees. Whilst bearer bills are always likely to make
the pledgee a lawful holder, and bills indorsed in blank probably
satisfy the definition (the indorsement acting to authorise all subse-
quent transfers), deliveries to pledgees of ordinary indorsable bills
which do not name the pledgee as consignee or indorsee are unlikely
to come within the phrase "completion of any indorsement." Where,
for instance, the actual indorsee is the next buyer in the chain rather
than the pledgee, it would be hard to argue that any indorsement had
been completed when the bill was handed over to the pledgee. For a
start, if it were held that an indorsement was completed on such a
transfer, and the pledgee did become lawful holder, then the actual
indorsee could never become the lawful holder since, presumably, an
indorsement cannot be completed twice.
Thus, where the pledgee is not consignee or indorsee and (proba-
bly) when the bill is not indorsed in blank, he will be most unlikely to
acquire the contractual rights under 2(1) and the carriage contract
will remain with the last lawful holder of the bill (contrary to the aims
stated in the Report
2 8
). Once the bill comes back into the hands of an
indorsee, thereby presumably effecting the completion "by delivery
of the bill" of an indorsement, the contract will jump from the
previous holder to the next. Such a situation will often arise where
27
Section 5(2).
28The Report, supra note 2, at para. 2.31. The pledgee will also not be liable on the contract
in the situations in which The Report seems to envisage he would invoke it, since 2(1) will not
have operated in his favour, thereby precluding the operation of 3(1).
Vol. 2S, No. I
payment is to be made by letter of credit through a bank or banks, the
contract jumping from seller to buyer without touching the banks,
even though they "hold" the bill.
This position may be intended, since pledgees (especially banks)
frequently wish to avoid being involved in the mechanics of ship-
ments. Further, even if there is cause to sue in such a situation, the
new law (designed to avoid the problem of The Albazero
29
) enables a
previous holder to sue "to the same extent" as the party suffering the
damage,
30
permitting him to recover substantial damages even though
he has suffered no personal loss. The only real problems for pledgees
will lie in persuading the previous holder to sue, or, in the event of an
insolvency, having to rely on an implied contract: difficulties some-
times arise in establishing such a contract.
31
Thus the possible lacuna in the new law would seem to be mild, and
the overall effects of the new Act seem likely to prove satisfactory.
The policy of the draftsman and the arguments in the Report in favour
of specifically extinguishing the right of the original shipper and of
any intermediate transferee
32
are much reinforced by the examples of
what could happen, at any rate in theory, under the previous Act. If
the holder is to have the action, it is important that the legislation
makes clear that others do not.
33
CONCLUSION
The Carriage of Goods by Sea Act 1992 seems likely to increase
certainty for carriers and bill of lading holders alike by tying rights of
suit in the United Kingdom under the contract of carriage firmly to
the document which is intended to pass those rights. Some problems
still remain, but the overall effect seems likely to be satisfactory.
Any law reform agency contemplating reform on similar lines may
however wish to consider a minor improvement to obviate a confu-
sion which may have been created by the wording of the new Act
concerning the nature of the contract which is transferred. The Act
uses the words "contract of carriage" throughout; most importantly,
it does so in 2(1) and 3(1), which transfer the rights and impose the
29[1977] A.C. 774.
"Section 2(4).
3 1
Supra
note 21.
32
The Report, supra note 2, at paras. 2.32-2.41.
33The examples also cast modest doubt on Dr. E.M. Clive's Note of Partial Dissent to The
Report, supra note 2, at 41-44, in which he advocated leaving the original shipper with certain
rights against the carrier.
January 1994
liabilities. These words are defined in this context as "the contract
contained in or evidenced by" the bill of lading.
34
This seems to imply
that it is the original carriage contract which is transferred (with all its
terms, whether or not these are contained in the bill) rather than, as
under the 1855 regime, the contract appearing on the face and reverse
of the bill of lading.
35
If such an interpretation is upheld, it could
cause obvious problems for buyers caught by terms not recorded on
the bill, of which they may have no knowledge.
34Section 501).
35
Because 1 of the Bills of Lading Act 1855 referred only to the contract contained in the
bill of lading. Cf. Leduc v. Ward, (1888) 20 Q.B.D. 475.
Vol. 25, No. 1
Book Reviews
VOYAGE CHARTERS. By Julian Cooke, Timothy Young, Andrew
Taylor, John D. Kimball, David Martowski, and LeRoy Lambert.
London: Lloyd's of London Press, 1993. Pp. xcvii/931. UKP125.
Admiralty, on the one hand, is a field where great and dramatic
changes in technology have taken place, but on the other hand, in the
area of contracts and reference materials, nothing much has changed
for decades. We still prefer to fix ships on the basis of those charter
party forms we were familiar with when we got into the business, and
we still read and rely on those reference books we have grown up
with. Strangely enough, this is not because of the absence of new
publications, but because of the lack of more authoritative and
definitive works. Therefore, Voyage Charters (following Lloyd's
earlier publication of Time Charters') is a most welcome, long
overdue, and authoritative addition to the reference library, filling an
existing void.
The book was written by six highly regarded authorities in the
maritime field,
2
one of whom also co-authored Time Charters.
The Rt. Hon. Lord Justice Staughton, in the foreword to this work,
stated it all when he suggested that this book not only will fill
numerous functions for the ship master, but also will be a valuable aid
to those in the owners' and charterers' offices trying to solve
problems or resolve disputes. (P. vii.)
In some ways, the title Voyage Charters is an understatement, as
the work covers more than just select charter parties. In Sections I
and II, the authors address both the U.S. and English court cases and
arbitration decisions regarding the GENCON and ASBATANKVOY
charters. The user can obtain ready guidance to contractual or
operational difficulties arising under these contract forms. The work
also contains discussion on some currently unresolved legal and
'M. Wilford, T. Coghlin & J. Kimball, Time Charters (3d ed. 1989).
2
Julian Cooke is a barrister of Lincoln's Inn; Timothy Young is a barrister of Gray's Inn;
Andrew Taylor is a partner with Richards Butler; John D. Kimball is a partner with Healy &
Baillie; David W. Martowski is a partner of Thos. R. Miller & Son; and LeRoy Lambert is a
partner with Healy & Baillie.
153
practical problems. Section III covers The Hague and Hague-Visby
Rules. In Section IV, the authors reprint statutes and rules, the most
frequently used voyage charter party forms, and a list of charter party
laytime definitions.
In my opinion, and for those interested in international views, the
strength of the work lies in the fact that, like its forerunner Time
Charters, it provides line-by-line or clause commentaries as well as
comparative law, i.e., English and U.S. decisions.
The reader will notice that the references to the U.S. interpreta-
tions generally cite New York arbitration awards, while the English
references are to court decisions. One of the explanations for this
difference is that most U.S. arbitration awards do not "progress" into
the judicial system for review. Arbitration awards are final and only
subject to court review on very limited issues. The courts do not deal
with the substantive issues of the arbitration, but rather with matters
of procedure, including arbitrator conduct. Because the New York
arbitration awards are published upon their issuance and only rela-
tively few cases find their way into the court system for confirmation
or vacatur, the focus is much more on the arbitration awards.
Although arbitrators in the U.S. are not bound by precedent, be it a
court or arbitration decision on point, a review of approximately the
last 1500 arbitration awards will show that in many instances panels
discuss or distinguish prior court and/or arbitration decisions. If
arbitrators were bound by legal precedent, we could never see
changes unless the courts created a sufficient body of law at the
highest level, and overruled their earlier decisions.
For those focusing on the U.S. law aspect of the subject, this work
provides a further benefit through its citations to the awards pub-
lished by the Society of Maritime Arbitrators, Inc. (SMA). The book
reflects the state of the law and arbitration decisions as of 1 January
1993. At that time, the SMA had published 2935 arbitration awards,
of which 513, involving the GENCON and ASBATANKVOY char-
ters, are referred to in the book. The citations not only include
corresponding or related court proceedings, but also state the names
of the participating arbitrators. Although there are divergent views on
the benefits of identifying the names of the arbitrators with their
respective awards, from the standpoint of providing a broad data
base, this work, like Time Charters, goes a long way. Having
personally participated in some of the New York arbitration awards
cited, I find that the authors quite accurately and succinctly summa-
rized and applied the cases. This type of referencing facilitates the
Vol. 25, No. I
arbitrators' research and preparation, but it also highlights, among
other things, the records and views of their colleagues.
I, for one, have no difficulty in reviewing and relying on decisions
reached in a different jurisdiction. Reading and weighing decisions as
cited in this work, irrespective of whether they were reached in
London or New York, makes for law that is alive and responsive. The
wording of the contract clauses per se might not change, but the
interpretations and applications should reflect today's conditions and
permit the arbitrators to place an issue into proper perspective and
not have to rely on a case that might have been good law at a different
time and under completely different commercial circumstances. Voy-
age Charters provides the practitioner a realistic and well-presented
showcase of the present state of charter party law.
Because of its detailed reference and cross-reference system, the
informative appendices, and expansive coverage of terms, clauses,
and interpretations, this book should be of great interest to scholars
and researchers as it will make their tasks easier.
If one were to find fault with the book, it would be with respect to
its overall length. On occasion, the authors get bogged down in details
by trying to cover too much. The book would benefit if some of the
passages could be tightened and the basic definition of terms could be
omitted. There are a number of old standbys on the bookshelves; they
eliminate the need for this book to be an all-encompassing work. As
stated at the outset, the value of this work lies in the detailed
treatment of specific charter party forms, in the parallel, comparative
law analysis, and in the combined wealth of experience of the authors
involved. Just as an aside, a point I should like to raise-and this is
without reflection on the authors or the work itself-is that it is a
shame that books cost as much as they do.
For those engaged in the field of admiralty, be it as lawyers,
arbitrators, principals, or at sea, this book will not only be a great
addition to the library, but also an invaluable tool for effectively
dealing with contract and operational problems on an every day basis.
Manfred W. Arnold*
*Past President, Society of Maritime Arbitrators, Inc.
Book Reviews 155
January 1 ON
THE LIABILITY OF THE HYDROGRAPHER. By N. R. Guy.
Special Publication No. 10. Institute of Marine Law. Cape Town:
University of Cape Town, 1989. ISBN 0 7992 11893. Pp. 56. No price
given.
This slim volume provides, on the one hand, an education for
lawyers in the processes involved in the production and maintenance
of nautical charts and, on the other, an education for hydrographers
on the terminology and essential facets of delict. Chapter 1 discusses
the evolution and present role of the State Hydrographer, including a
historical lead-in, and then a description of the processes and people
involved in producing nautical charts. The author completes the
chapter with some comments on potential problem areas from a legal
perspective.
Chapter 2 discusses delict and its five essential elements of con-
duct, wrongfulness, causation, fault (negligence) and accountability,
and damages and injury. To the non-lawyer, these terms take some
getting used to, particularly the legal process of applying tests.
Chapter 3 examines three court cases and one incident involving
possible state hydrographic culpability. Some of these cases have
been examined in earlier references but this publication particularly
examines them in the context of delict. These cases are the grounding
of the Esso Essen in 1968 in South African waters, the grounding of
the Potomac in 1972 while entering the port of Casablanca, the Tsesis
grounding in 1977 in Swedish waters, and the sinking of the Urquiola
in 1974 in the Spanish port of Coruna.
Finally, in Chapter 4, Conclusions and Recommendations, the
author brings together his findings with reference to some of the
better known authorities and cases. In this part of the book, he once
again refers his conclusions to the elements of delict, and notes that
the State Hydrographer is not immune to litigation, irrespective of the
fact that he is providing a service to the community at great expense
to the State. Immediately before his final conclusions, the author
makes reference to changing technology and the electronic era in
which charts may no longer be provided on a paper medium but in the
form of a video display.
In the narrow field of hydrography and the even narrower field of
the law dealing with hydrography, one can count the number of books
and articles dealing with the subject on the fingers of one hand. It is,
Book Reviews 157
therefore, a pleasure to have another reference to add to the library.
The actual publication and printing of this book has clearly been on a
limited budget as the type-style is rather poor (although it is perfectly
readable). The illustrations leave much to be desired. They are
primarily copied sections of charts but, unfortunately, as such
provide no information on the scale or whether the units used are in
metres or fathoms or which Hydrographic Office produced the
original chart of which a portion is shown. While the reader may pull
out the actual chart, it would have been convenient to have been able
to study the features directly from the illustrations.
It is rather surprising that no quotation has been made in the
publication of what must surely be the most relevant and well-known
statement concerning the legal liability of hydrographers. The state-
ment, made by Lord Justice Asquith in 1951, is worth repeating:
The case has been instanced ... of a marine hydrographer who
carelessly omits to indicate on his map [i.e., a chart] the existence of a
reef. The Captain of the "Queen Mary," in reliance on the map and
having no opportunity of checking it by reference to any other map,
steers her on the unsuspected rocks, and she becomes a total loss. Is
the unfortunate cartographer to be liable to her owners in negligence for
some millions of pounds damages? If so, people will, in future, think
twice before making maps. Cartography would become an ultra-
hazardous occupation.'
In fairness to the author, his main attention has been given to South
African law, although he does also give reference to some of the
better-known cases in English and Commonwealth law, such as
Warwick Shipping Ltd. v. The Queen.
2
The above points of criticism must be considered minor. This is a
useful reference and should prove helpful both to lawyers and
hydrographers alike in understanding something more about each
other's world.
Adam J. Kerr*
*Director, International Hydrographic Bureau, Monaco.
'Candler v. Crane, Cristmas & Co., [1951] 2 K.B. 164, 194 (C.A.) (Asquith, L.J.). This
statement was paraphrased by Peter M. Troop, Q.C., in a well-known reference on the subject.
See Troop, The Legal Liability of the Chartmaker, 62 Int'l Hydrographic Rev. 115, 120 (1985).
21[1982] 2 F.C. 147 (Can. Fed. Ct., Trial Div. 1980).
January 1994
journal of Maritime Law and Commerce, Vol. 25, No. 2, April, 1994
A Corporate "Citizen of the United States" for
Maritime Law Purposes
JOHN W. McCONNELL, JR.*
I.
INTRODUCTION
In December 1990, the Coast Guard issued a final rule amending its
regulations to require that each stockholder contributing to the stock
or equity interest qualifications of a vessel-owning corporation be a
United States citizen eligible to document vessels in its own right with
the trade endorsement sought.'
In July 1991, the Maritime Administration ("MarAd") promulgated an
interim final rule implementing 2 and 9 of the Shipping Act, 1916, as
amended ("1916 Act") (" 2" or "section 2" and " 9" or "section 9"),2
and the Bowaters Amendment,
3
which applied the citizenship require-
ments of 2 to any controlling interest stockholder, any person whose
stock is being relied upon to establish the requisite citizenship owner-
ship, and any parent corporation, partnership or other entity at all tiers
of ownership.
4
The final rule was promulgated in June 1992.5
*Of Counsel, Haight, Gardner, Poor & Havens (Washington Office). University of Alabama,
B.A. and M.A.; Yale Law School, LL.B. The author wishes to acknowledge the very able
assistance of Franceska Schroeder, an associate in the Washington Office of Haight, Gardner, Poor
& Havens, in researching some of the issues discussed, in verifying citations, in formatting, and
generally in reviewing this article. The views and opinions expressed in this article are those of the
author and do not necessarily reflect any of his firm or of any client of the firm.
155 Fed. Reg. 51,244, 51,251 (CGD 88-031) (1990), to be codified at 46 C.F.R. 67.03-2(b).
This regulation was proposed in a Supplemental Notice of proposed rulemaking published in 54
Fed. Reg. 41,992, 41,998 (1989).
2Pub. L. No. 260, ch. 451, 2 and 9, 39 Stat. 728, 729, 730 (1916), 46 U.S.C. app. 99 802, 808 (1988).
3
This Amendment was added as section 27A of the Shipping Act, 1920, as amended, in 1958
by Pub. L. No. 85-902, 72 Stat. 1736, and codified at 46 U.S.C. app. 883-1 (1988).
456 Fed. Reg. 30,654, 665 (1991) (Docket No. R-135), to be codified at 46 C.F.R. 221.3(c).
These rules resulted from 104(a), Pub. L. 100-710, Title I, 102 Stat. 4735, 4750, effective January
1, 1989, and 304(a), Title Ill, Pub. L. 101-225, 103 Stat. 1908, 1924, which amended 9, and from
102(c), Pub. L. 100-710, 102 Stat. 4739, which amended the Ship Mortgage Act, 1920. MarAd
initially proposed an "interim final rile" in 54 Fed. Reg. 5382 (amended in 54 Fed. Reg. 8185)
(1989). MarAd then issued a notice of proposed rulemaking in 55 Fed. Reg. 140 (1990).
557 Fed. Reg. 23,470, 23,479 (1992), to be codified at 46 C.F.R. 221.3(c).
159
These regulations were challenged but upheld when, on July 16,
1992, the Court of Appeals for the Third Circuit rendered a decision
in Conoco, Inc. v. Skinner.
6
In 1991, Conoco, Inc. ("Conoco") and E.I. Du Pont de Nemours
("Du Pont") filed a complaint in the U.S. District Court for the
District of Delaware against Samuel K. Skinner (Secretary of Trans-
portation), Warren G. Leback (Maritime Administrator), Nicholas F.
Brady, William A. Kime (Commandant of the Coast Guard), and
Carol B. Hallett (Commissioner of Customs), challenging certain
regulations of the Coast Guard, the Customs Service and MarAd. The
defendants in this action moved to dismiss for lack of jurisdiction
based upon provisions of the Hobbs Act
7
which place exclusive
jurisdiction to determine the validity of rules and regulations issued
by the Secretary of Transportation pursuant to, among others, 2,
9 and 37 of the Shipping Act, 1916, in the courts of appeal.
8
The
district court granted the motion for dismissal
9
and the plaintiffs
appealed to the Court of Appeals for the Third Circuit.
10
In the meantime, Conoco and Du Pont had filed a petition chal-
lenging the same regulations in the Third Circuit under the Hobbs Act
against Skinner, Leback and the United States.
The Circuit court consolidated the appeal with the original suit filed
in that court," and the Conoco decision was rendered in that
consolidated
proceeding.'
2
The Conoco decision is most important because of: (1) its interpre-
tation of the citizenship requirements of 2 as applied to 9 and to
27 of the Merchant Marine Act, 1920, as amended ("1920 Act")
("section 27" or " 27"),13 (2) its approval of the MarAd and Coast
Guard regulations implementing those statutory sections, and (3) its
interpretation of 27A of the 1920 Act ("Bowaters Amendment" or
"Amendment" or "section 27A" or " 27A").1
4
This decision is the
most comprehensive court decision on the interpretation and appli-
cation of these statutory provisions since the decision of the Supreme
6970 F.2d 1206, 1992 AMC 2816 (3d Cir. 1992) [hereinafter Conoco].
728 U.S.C..
2341-58
(1988).
&28 U.S.C. 2342(3)(A) (1988).
9
Conoco v. Skinner, 781 F. Supp. 298, 1992 AMC 2408 (D. Del. 1991).
I'No. 91-3920.
"No.
91-3589.
1
2
The plaintiffs filed a motion for rehearing and suggestion for rehearing en banc, which was
denied. Conoco at 1230. The plaintiffs did not file a petition for certiorari with the Supreme
Court.
OPub. L. No. 261, 41 Stat. 988, 999. 46 U.S.C. app. 883 (1988).
1
4
Conoco, 970 F.2d at 1212 n.5, 1992 AMC at 2823 n.5.
Vol. 25, No. 2
Citizen of the United States
Court in Central Vermont Transportation Co. v. Durning.
1 5
The
purpose of this article is to show that the decision is fatally flawed,
particularly in its interpretation of Central Vermont, and that Central
Vermont, as correctly interpreted, should be the controlling case in
interpreting 2 and the agency regulations.
In order to properly analyze the court's decision and its importance
to the interpretation of the applicable statutes and regulations, this
article is divided into two parts. First, the language, purpose and
history of the applicable statutory provisions and implementing
regulations will be examined. Second, the Conoco decision will be
analyzed with respect to its interpretation and application of those
statutory sections and regulations to the facts of the case.
II.
ANALYSIS OF STATUTES AND REGULATIONS
The statutory provisions to be examined are: 2, the citizenship
requirements for the 1916 Act and for the 1920 Act
16
; 9, the transfer
provisions of the 1916 Act; 27, the citizenship requirements for
owners of vessels transporting merchandise by water in the coastwise
trade; 316 of Title 46 U.S.C. app. ("section 316" or " 316"), the
requirements for vessels towing other vessels in the coastwise trade;
12102 and 12106 of Chapter 121 (Documentation of Vessels) of
Title 46 U.S.C. ("section 12102" or " 12102" and "section 12106"
or " 12106"), which relate respectively to vessels eligible for
documentation and for coastwise endorsements; and 27A, the
Bowaters Amendment.
2.1 Requirements for a Corporation To Be Deemed a Citizen of the
United States
2.1.1 Section 2, Shipping Act, 1916, as amended
Section 2 of the 1916 Act, as originally enacted, provided in part as
follows:
'5294 U.S. 33, 1935 AMC 9 (1935) [hereinafter Central Vermont].
1
6
Section 37 of the 1920 Act provides that for purposes of the 1920 Act the term "citizen of
the United States" shall have the meaning assigned to it by "sections 1 and 2 of the 'Shipping
Act, 1916,' as amended". 46 U.S.C. app. 888 (1988). Also section 905(c) of the Merchant
Marine Act, 1936, provides that the words "citizen of the United States" include a corporation
"only if it is a citizen of the United States within the meaning of section 802 [ 2 of the 1916
Act] of this Appendix." 46 U.S.C. app. 1244(c) (1988).
A1 19N
Sec. 2. That within the meaning of this Act no corporation, partnership,
or association shall be deemed a citizen of the United States unless the
controlling interest therein is owned by citizens of the United States,
and, in the case of a corporation, unless its president and managing
directors are citizens of the United States and the corporation itself is
organized under the laws of the United States or of a State, Territory,
District,
or possession
thereof.
17
In 1918, 2 was amended by adding the following paragraph:
The controlling interest in a corporation shall not be deemed to be
owned by citizens of the United States (a) if the title to the majority of
the stock thereof is not vested in such citizens free from any trust or
fiduciary obligation in favor of any person not a citizen of the United
States; or (b) if the majority of the voting power in such corporation is
not vested in citizens of the United States; or (c) if through any contract
or understanding it is so arranged that the majority of the voting power
may be exercised, directly or indirectly, in behalf of any person who is
not a citizen of the United States; or (d) if by any other means
whatsoever control of the corporation is conferred upon or permitted to
be exercised by any person who is not a citizen of the United States.
18
In 1920, 2 was further amended by 38 of the 1920 Act
19
by
making the first unnumbered paragraph of that section into subsection
(a) and adding at the end thereof the following: "but in the case of a
corporation, association or partnership operating a vessel in the
coastwise trade the amount of interest required to be owned by
citizens of the United States shall be 75 per centum." The amend-
ment also made the second unnumbered paragraph of that section
(defining "controlling interest") into subsection (b) and added the
following as subsection (c):
(c) Seventy-five per centum of the interest in a corporation shall not be
deemed to be owned by citizens of the United States (a) if the title to 75
per centum of its stock is not vested in such citizens free from any trust
or fiduciary obligation in favor of any person not a citizen of the United
States; or (b) if 75 per centum of the voting power in such corporation
is not vested in citizens of the United States; or (c) if, through any
contract or understanding, it is so arranged that more than 25 per
centum of the voting power in such corporation may be exercised,
directly or indirectly, in behalf of any person who is not a citizen of the
United States; or (d) if by any other means whatsoever control of any
interest in the corporation in excess of 25 per centum is conferred upon
1
7
Supra
note 2.
l
8
Public L. No. 198, ch. 152, 2, 40 Stat. 900.
19
Supra note 13, at 1008.
Vol. 25, No. 2
or permitted to be exercised by any person who is not a citizen of the
United States.
Subsection (c), in defining 75 per centum of the interest, merely
substituted into the definition of "controlling interest" in subsection
(b), the words "75 per centum" for "majority" and "control of any
interest in the corporation in excess of 25 per centum" for "control
of the corporation."
Section 2 was amended for the last time in 1959. In 2(a), the
words "unless its president and managing directors are citizens of the
United States" were replaced by the words "unless its president or
other chief executive officer and the chairman of its board of directors
are citizens of the United States and unless no more of its directors
than a minority of the number necessary to constitute a quorum are
noncitizens.
"20
MarAd has issued regulations specifying the procedures by which
a corporation may prove its U.S. citizenship.21 These regulations
provide that, to prove its U.S. citizenship, a corporation must submit
an affidavit to MarAd stating its place of incorporation and the
citizenship of its officers and directors and of its shareholders. Where
there are less than 30 shareholders of a corporation, each shareholder
with his citizenship (and how it was acquired) may be named in the
affidavit along with the number of shares held by each shareholder
and the total amounts of stock and of voting power held by U.S.
citizens meeting the requirements of 2.
The task becomes more onerous where there is a larger number of
shareholders. Such a corporation can still prove its U.S. citizenship
by listing in the affidavit each of its shareholders and their respective
citizenship. However, to forestall the difficulties inherent in the
requirement that a corporation with a large number of shareholders
obtain evidence of his or her citizenship from each shareholder,
MarAd adopted the so-called "fair inference" rule based upon the
decision in Collier Advertising Service, Inc. v. Hudson River Day
Line.
22
The fair inference rule allows corporations to count as citizens
of the United States those shareholders with registered addresses in
the United States as shown on its books and records. Shareholders
holding more than 5% of the stock of the corporation must be listed
2Pub. L. No. 80-237, 3, 73 Stat. 597 (1959).
2146 C.F.R. Part 355 (1993). These regulations pertain to citizenship requirements under the
Merchant Marine Act, 1936, as amended, 905(c) of which incorporates into the 1936 Act the
definition of citizens of the United States as provided in 2. See supra note 16.
2214 F. Supp. 335, 339, 1936 AMC 206, 212 (S.D.N.Y. 1936).
163
Apdl 1994
separately. Under the fair inference rule, the "controlling interest" of
a corporation is deemed to be held by citizens of the United States if
65% of its stock is held in the name of persons with registered
addresses in thie United States. The same rule also holds that "75%
interest" of the corporation is deemed to be held by citizens of the
United States if 95% of its stock is held in the name of persons with
registered addresses in the United States.
23
This rule infers that
persons with registered addresses not in the United States are not
U.S. citizens and further that less than 15% of the stock, in the case
of controlling interest, and less than 20% of the stock, in the case of
the 75% interest, held by persons with registered addresses in the
United States is actually held by persons who are not U.S. citizens.
A corporation, partnership or association satisfying the citizenship
requirements of 2 is sometimes referred to as a "section 2 citizen."
However, it should be cautioned that this shorthand reference covers
entities with both a "controlling" and a "75%" interest held by U.S.
citizens.
2.1.2 Section 9, Shipping Act, 1916, as Amended
The second and third unnumbered paragraphs of 9 as adopted in
the 1916 Act provided in part as follows:
Every vessel purchased, chartered, or leased from the [United States
Shipping] board ... No such vessel, without the approval of the board,
shall be transferred to a foreign registry or flag, or sold; nor, except
under regulations prescribed by the board, be chartered or leased.
When the United States is at war, or during any national emergency the
existence of which is declared by proclamation of the President, no
vessel registered or enrolled and licensed under the laws of the United
States shall, without the approval of the board, be sold, leased, or
chartered t any person not a citizen of the United States, or trans-
ferred to a foreign registry or flag.
24
In 1918, the third unnumbered paragraph of 9 was struck and a
new section, 37, was added, which provided, in part:
Sec. 37. That, when the United States is at war or during any national
emergency, the existence of which is declared by proclamation of the
President, it shall be unlawful, without first obtaining the approval of
the board:
23
46
C.F.R. 355.3 (1992).
24Supra note 2.
Vol. 25, No. 2
(a) To transfer to or place under any foreign registry or flag any vessel
owned in whole or in part by any person a citizen of the United States
or by a corporation organized under the laws of the United States, or of
any State, Territory, District, or possession thereof; or
(b) To sell, mortgage, lease, charter, deliver, or in any manner transfer,
or agree [to the same] to any person not a citizen of the United States
(1) any such vessel or any interest therein, or (2) any vessel docu-
mented under the laws of the United States, or any interest therein, or
(3) any shipyard, dry dock, ship-building or ship-repairing plant or
facilities, or any interest therein; or
(e) To make any agreement or effect any understanding whereby there
is vested in or for the benefit of any person not a citizen of the United
States, the controlling interest or a majority of the voting power in a
corporation which is organized under the laws of the United States, or
of any State, Territory, District, or possession thereof, and which owns
any vessel, ship-yard, dry dock, or ship-building or ship-repairing plant
or facilities .... 25
The second unnumbered paragraph of 9 was amended by the 1920
Act, so that the prohibition against transfers to foreign flags, sales or
charters was made into a separate third unnumbered paragraph:
It shall be unlawful to sell, transfer or mortgage, or, except under
regulations prescribed by the board, to charter, any vessel purchased
from the board or documented under the laws of the United States to
any person not a citizen of the United States, or to put the same under
a foreign registry or flag, without first obtaining the board's approval.
26
The 1916 and 1918 Acts were enacted during, and were greatly
affected by, World War I. Originally, the principal purpose of 9 was
to restrict the transfer of U.S. vessels during periods of war or
national emergency. As amended, 9 was to apply during normal
periods and old 9 became 37 and continued to apply during
periods of war or national emergency.
Originally, 9 applied exclusively to vessels purchased or char-
tered from the Board, and prohibited any transfers to foreign registry
or flag and any sales and charters of such vessels without Board
approval. However, as amended in 1920, during normal periods, 9
also applied to U.S. documented vessels (without regard to the
citizenship of owners except as required for documentation purposes)
and to mortgages of such vessels and, for the first time, such transfers
to U.S. citizens did not require Board approval.
25Supra note 18, 4, at 901-2.
26Supra note 13, 18, at 994.
Citizen of the United States 165
April 1994
Originally, during times of war or national emergency, 9 prohib-
ited any documented vessel from being sold or chartered to any
person not a U.S. citizen or transferred to foreign registry. However,
as amended in 1918 as 37, the wartime restrictions were made much
more stringent. Section 37 applied to all vessels owned by a citizen of
the United States (in whole or in part) or by a U.S. corporation
(without regard to the citizenship of its officers, directors or share-
holders) and to all transfers of such vessels to noncitizens.
27
Most
importantly, 37 also prohibited the "controlling interest" or "a
majority of the voting power" of a U.S. corporation which owns any
vessel from vesting in or for the benefit of a noncitizen. At the same
time, 2 was amended to add the definition of "controlling interest."
The third and fourth unnumbered paragraphs of 9 were struck in
1938 and replaced by two new unnumbered paragraphs, the first of
which provided, in part, as follows:
[I]t shall be unlawful, without the approval of the United States
Maritime Commission, to sell, mortgage, lease, charter, deliver, or in
any manner transfer, [or agree to such] to any person not a citizen of
the United States, or transfer or place under foreign registry or flag, any
vessel or any interest therein owned in whole or in part by a citizen of
the United States and documented under the laws of the United States,
or the last documentation of which was under the laws of the United
States.
28
It is important to note that 9 as amended included for the first
time the specification that its applicability was to vessels that were
not only documented in the U.S.
29
but also owned by citizens of the
United States.
30
Thus, for the first time, the definition of "citizens of
the United States" in 2 applied to the owner of the vessel being
transferred and not just to the transferee. This meant that, except in
times of war or national emergency when 37 applied, documented
vessels owned by a corporation with less than a controlling interest
owned by U.S. citizens could be transferred to a noncitizen without
27These restrictions would apply equally to foreign-flag as well as U.S.-flag vessels owned by
U.S. citizens or U.S. corporations.
28
Pub.L. No. 705, ch. 600, 42, 52 Stat. 953, 964 (1938).
29Section 37 of the 1916 Act still applied to any vessel owned by a U.S. citizen regardless of
where documented.
"When the national emergency declared during the Korean action ended in 1978, thereby
terminating the application of 37, MarAd attempted to apply this requirement in the
disjunctive by treating "and" as "or" in the phrase "owned by a citizen of the United States
and documented", which interpretation was effectively blocked by the dropping of "and" from
9(c)(1) as amended in 1988. See infra note 32 and accompanying text.
Vol. 25, No. 2
the approval of MarAd. The phrase "or the last documentation of
which was under the laws of the United States" was added to prevent
the withdrawal of the vessel's documentation followed by a transfer
of the vessel without the required approval.
In 1988, the third unnumbered paragraph of 9 was designated
subsection (c) and was split into two subparagraphs,
3
1 so that
subsection (c)(1), the relevant portion of 9, now provides, in part, as
follows:
(c) [A] person may not, without the approval of the Secretary of
Transportation-
(1) sell, mortgage, lease, charter, deliver, or in any manner transfer,
or agree to sell, mortgage, lease, charter, deliver, or in any manner
transfer, to a person not a citizen of the United States, any interest in
or control of a documented vessel . . . owned by a citizen of the
United States or the last documentation of which was under the laws
of the United
States;32
Responsibility for administration of 9 has been delegated by the
Secretary of Transportation to MarAd. Thus, MarAd's approval is
required for certain transfers (i.e., sales, mortgages, leases, charters),
or agreements for the same, or of any interest in or control of U.S.
documented vessels (or vessels the last documentation of which was
under the laws of the United States). Note, however, that all such
transfers do not necessarily require such approval. Only transfers of
a "documented vessel owned by a citizen of the United States" to a
person "not a citizen of the United States" require approval. Thus,
if the vessel being transferred is a documented vessel, the citizenship
of the owner of the vessel being transferred and of the transferee must
be determined to ascertain whether approval of such transfer is
required.
In the MarAd regulations implementing 9, the definition of
"citizen of the United States" is set out in 221.3(c) and provides, in
part, as follows:
(c) Citizen of the United States means a Person . . . including any
Person (stockholder, partner or other entity) who has a Controlling
Interest in such Person, any Person whose stock or equity is being
relied upon to establish the requisite U.S. citizen ownership, and any
parent corporation, partnership or other entity of such Person at all
tiers of ownership, who, in both form and substance at each tier of
31
Pub. L. No. 100-710, 104(b)(3), 102 Stat. 4735, 4750 (1988).
3246 U.S.C. app. 808 (1988). The words "or control of" were added by Pub. L. No.
100-710 in 1988.
167
April 1I94
ownership, satisfies the following requirements-
(2) A corporation organized under the laws of the United States or of
a State, the Controlling Interest of which is owned by and vested in
Citizens of the United States and whose president or chief executive
officer, chairman of the board of directors and all officers authorized
to act in the absence or disability of such persons are Citizens of the
United States, and no more of its directors than a minority of the
number necessary to constitute a quorum are Noncitizen;
33
The provisions of paragraph (2) of subsection (c), quoted above, are
the same as those in the citizenship definition of 2(a) of the 1916 Act
with the exception of the addition of "and all officers authorized to act
in the absence or disability of such persons." However, the definition in
the opening paragraph of subsection (c) applies, in the case of corpora-
tions, not only to the corporation whose citizenship is being determined
for 9 purposes, but also to any stockholder who has a controlling
interest in such corporation, to any corporation whose stock or equity is
being relied upon to establish the requisite U.S. citizen ownership and to
any parent corporation, at all tiers of ownership.
Subsection (d)(1) of 221.3 defines "Controlling Interest," in the
case of a corporation, in language almost verbatim to that of 2(b).
However, subsection (d)(5) of 221.3 covers the situation addressed
in subsections (a) and (c) of 2, corporations owning vessels oper-
ated in the coastwise trade, and provides that:
(5) In the case of a corporation, association or joint venture owning a
vessel which is operated in the coastwise trade, the amount of interest
and voting power required to be owned by and vested in Citizens of the
United States shall be not less than 75 per cent as required by 46 U.S.C.
app. 802. [emphasis added].
Thus, 221.3(c) requires that each stockholder (corporation, part-
nership or other entity) having a controlling interest (as defined in
221.3(d)) in a corporation whose citizenship is to be determined
under 2 must also be a citizen of the United States as defined in that
section. This citizenship requirement applies through each tier of
corporate (or partnership or other entity) ownership up to the
stockholders of the corporation (or equity owners) at the top of the
tier. This results from 2's requirement that the controlling interest
in each entity of this tier be owned by citizens of the United States in
order for the corporation at the lowest tier to be deemed a citizen of
the United States.
3346 C.F.R. 221.3(c) (emphasis added).
Vol. 25, No. 2
2.1.3 Section 27, Merchant Marine Act, 1920
Section 27 provides, in relevant part, as follows:
Sec. 27. That no merchandise... shall be transported by water, or by
land and water, on penalty of forfeiture of the merchandise .. ,
between points in the United States .... embraced within the coast-
wise laws, either directly or via a foreign port, or for any part of the
transportation, in any other vessel than a vessel built in and docu-
mented under the laws of the United States and owned by persons who
are citizens of the United States ....
Thus, in order to transport merchandise in the coastwise trade, the
vessel performing such transportation must satisfy three conditions:
(1) it must have been built in the United States, (2) it must be
documented under the laws of the United States, and (3) it must be
"owned by persons who are citizens of the United States."
35
A vessel not built in the United States may be documented under the
laws of the United States. However, in order for a vessel documented in
the United States to qualify for a coastwise endorsement, 46 U.S.C.
12106(a)(1)(A) (1988) requires that it be built in the United States and
"otherwise qualify under the laws of the United States to be employed
in the coastwise trade," that is, under 27 (among others).
2.1.4 Documentation laws
Chapter 121 of Title 46 U.S.C. (1988, Supplement 111990) contains
the requirements for documenting vessels under U.S. laws. Section
12102 contains the requirements for owners of vessels to qualify to
document vessels under U.S. laws.
36
Subsection (a) of 12102
provides that a vessel of at least five net tons not registered under the
3446 U.S.C. app. 883. The first cabotage law which prohibited the carriage of cargo
between coastwise points in foreign vessels was enacted by the Act of March 1, 1817, ch.
XXXI, 4, 3 Stat. 351 (later codified at 4347, Revised Statutes, Second Edition, 1878), which
provided "That no goods, wares, ormerchandise shall be imported, under penalty of forfeiture
thereof, from one port of the United States to another port of the United States in a vessel
belonging wholly or in part to a subject of any foreign power.. . ." This statute was changed
in 1898 by the Act of February 17, 1898, ch. 26, 1, 30 Stat. 248, to read more like 27 by
substituting "in any other vessel than a vessel of the United States" for "in a vessel belonging
wholly or in part to a subject of any foreign power."
3The term "citizen of the United States" when used in the 1920 Act shall have the meaning
of 2. Supra note 16.
36The persons or entities who, as owners of vessels, qualify to document vessels under
12102 are sometimes referred to as "documentation citizens." A documentation citizen may
be, and in the case of corporations, partnerships and associations usually is, different from a 2
citizen. See infra note 37.
169
Citizen of the United States April 1W
laws of a foreign country is eligible for documentation if the vessel is
owned by-
(4) a corporation established under the laws of the United States or of
a State, whose president or other chief executive officer and chairman
of its board of directors are citizens of the United States and no more
of its directors are noncitizens than a minority of the number necessary
to constitute a quorum;
This is the same requirement as provided in 2(a) except that 12102
does not require that the controlling interest of the corporation be owned
by citizens of the United States. Thus, a documented vessel owned by
a corporation meeting the requirements of 12102(a)(4), but not the
"controlling
interest" requirement
of 2, could be transferred
to a
non-citizen without the approval of MarAd, because it would not be a
transfer of a documented vessel "owned by a citizen of the United
States" as required in 9. However, if a documented vessel owned by
a citizen of the United States as defined in 2 were to be transferred to
a corporation meeting the documentation requirements of 12102(a)(4),
but not the controlling interest requirement of 2, such a transfer would
be subject to approval by MarAd, because it would be a transfer to a
person not "a citizen of the United States" as provided in 9.37
Section 12106(a) provides that:
a certificate of documentation may be endorsed with a coastwise
endorsement for a vessel that-
(1) is eligible for documentation;
(2)(A) was built in the United States;38 or
37
Such a situation does not exist in the case of partnerships or associations, which like
corporations are subject to the definition in 2. Section 12102(a)(2) provides that a vessel is
eligible for documentation if it is owned by "an association (A) all of whose members are
citizens of the United States"; whereas 2(a) requires that only a controlling interest in an
association need be held by citizens of the United States for the association to be deemed a U.S.
citizen. Also 12102(a) provides that a vessel is eligible for documentation if it is owned by "(3)
a partnership whose general partners are citizens of the United States and the controlling
interest in the partnership is owned by citizens of the United States;" whereas 2 requires that
only a controlling interest in the partnership need be held by U.S. citizens (without regard to the
citizenship of its general partners) for the partnership to be deemed a U.S. citizen. Thus, the
citizenship requirements for the owner for documentation purposes differ from those of 2 for
partnerships, associations and corporations. However, in the former two, the documentation
statute has more stringent requirements than those in 2; whereas for corporations the
documentation requirements are less stringent than those in 2.
38
The same "place of build" requirement applies to vessels to be eligible for a Great Lakes
endorsement ( 12107) and a fishery endorsement ( 12108). However, there is no such
requirement for a registry endorsement ( 12105) or a recreational endorsement ( 12109). From
the beginning of the Nation, with the exception of certain special statutory provisions and
special legislation, a vessel to be documented under the laws of the United States must have
Vol. 25, No. 2
(3) otherwise qualifies under the laws of the United States to be
employed in the coastwise trade.
2.1.5 Section 316, Title 46 U.S.C. app.
Section 316(a) of Title 46 provides in part as follows:
(a) It shall be unlawful for any vessel not wholly owned by a person
who is a citizen of the United States within the meaning of the laws
respecting the documentation of vessels and not having in force a
certificate of documentation issued under section 12106 or 12107 of
Title 46 to tow any vessel other than a vessel in distress, from any port
or place in the United States, its Territories or possessions, embraced
within the coastwise laws of the United States, to any other port or
place within the same. .... 39
Subsection (b) of 316 provides:
(b) The term "person" as used in subsection (a) of this section, shall be
held to include persons, firms, partnerships, associations, organiza-
tions, and corporations, doing business or existing under or by the
authority of the laws of the United States, or of any State, Territory,
district, or other subdivision thereof.
40
Thus to perform such a tow, a vessel must be (1) wholly owned by
a person who is a citizen of the United States within the meaning of
the documentation laws, and (2) must have a certificate of documen-
tation issued under 12106 (coastwise endorsement) or 12107
(Great Lakes endorsement). As noted earlier, in order for a vessel to
have its document endorsed with a coastwise license, 12106 re-
quires that: (1) it is eligible for documentation (which it is under
12102 if it meets the ownership requirements of that section), (2) is
built in the United States, and (3) "otherwise qualifies under the laws
of the United States to be employed in the coastwise trade."
been built in the United States. This requirement was changed in 1912 to allow vessels not more
than five years old wherever built to be U.S. documented (provided that such vessels could not
be used in the coastwise trade). Pub L. No. 337, ch. 390, 5, 37 Stat. 560, 562 (Panama Canal
Act). The restriction on documentation of foreign built vessels over five years of age was
repealed in 1914. Pub. L. No. 175, ch. 256, 1, 38 Stat. 698.
3946 U.S.C. app. 316(a) (1988) (emphasis added). The forerunner of this statute was 4370,
Revised Statutes. When that statute was amended in 1940, by Pub. L. No. 599, ch. 324, 54 Stat.
304, instead of "certificate of documentation issued under section 12106 or 12107 of Title 46,"
4370 provided "certificate of registry, a certificate of enrollment, or a license, issued pursuant
to this section" and instead of "other than a vessel in distress," provided "other than a vessel
of foreign registry or a vessel in distress." The present wording was adopted by Pub. L. No.
99-307, 10, 100 Stat. 444, 447 (1986).
4046 U.S.C. app. 316(b) (1988).
Apdl 1994
In the case of merchandise transported by water between points in
the United States embraced within the coastwise laws in a vessel, the
vessel must be owned by a citizen of the United States as defined in
2. However, the towing of one vessel by another has been held not
to be transporting merchandise in a vessel subject to 27.
4 1
Nowhere are the terms "employed in the coastwise trade" or
"coastwise
trade" defined in or for the relevant statutes. They are not
defined in the general definitions applicable to subtitle II nor in the
definitions applicable to chapter 121 of 46 U.S.C. (1988). "Coastwise
trade" is defined by the Coast Guard in 46 C.F.R. 67.01-1 as
including "the transportation of passengers or merchandise between
points embraced within the coastwise laws," and does not limit such
transportation to water or in a vessel (without citing any authority).
42
However, it is generally recognized that transporting merchandise or
passengers by water in a vessel between two U.S. points is coastwise
trade.
The Customs Service has issued regulations pertaining to vessels in
foreign and domestic trades.
4 3
Coastwise procedure is contained in
4.80 through 4.93. Section 4.80 pertains to "vessels entitled to
engage in coastwise trade" but it appears to apply only to transpor-
tation covered by 27 and 46 U.S.C. app. 289." For a definition of
"citizen,"
reference is made to the Coast Guard definition at 46
C.F.R. 67.03. Section 4.92 pertains to towing and provides only that
the prohibition against the use of foreign vessels in towing operations
shall be enforced with respect to such operations between coastwise
points, citing and quoting 316(a).
Section 316(a) requires that such owner be "a citizen of the United
States within the meaning of the laws respecting the documentation of
vessels" and that the vessel have a coastwise endorsement. However,
12106 (coastwise endorsement) has no specific requirement as to the
4 1
See C.S.D. 82-74 (Customs Ruling 105369 PH 1981) (citing The Dolphin, 3 F.2d 1 (1st Cir.
1925)).
42
1n addition to 27 (which pertains to merchandise transported between points in the
United States embraced within the coastwise laws in a vessel) and 316(a) (which pertains to
the tow of a vessel by another vessel between two points in the United States embraced within
the coastwise laws), there are other laws relating to other maritime transportation activities.
Among these are 46 U.S.C. app. 289 (1988) (transport of passengers between ports or places
of the United States), 46 U.S.C. app. 292 (1988) (dredging in the United States) and 46 U.S.C.
app. 316(d) (1988) (salvaging operations in U.S. waters). But only 27 and 316(a) have a
specific requirement as to the citizenship of the owner of the vessel engaging in such activity
and the latter only refers generally to the documentation laws, which have no specific
requirements as to towing activities.
43 19 C.F.R. Part 4 (1993).
4See supra note 42.
Vol. 25, No. 2
citizenship of the owner except as may be required under the general
provision "otherwise qualifies under laws of the United States to be
employed in the coastwise trade." The 2 definition of citizenship
applies to provisions of the 1916 Act of which it is a part (and therefore
applies to 9) and of the 1920 Act (and therefore applies to 27) and to
other maritime laws (Merchant Marine Act of 1936, Merchant Ship Sales
Act of 1946, and others) by reference, but not to 316(a). The Coast
Guard regulations apply the 2 citizenship requirements for a coastwise
endorsement in keeping with its definition of coastwise trade, which is
based on the requirements of 27 and which incorporates the 2
definition of citizen of the United States.
4 5
Thus, because a tug towing barges is not transporting merchandise
in a vessel, such a tug is not subject to 27 and its citizenship
requirements. The tug could obtain a coastwise endorsement if built
in the United States and if eligible for documentation under 46 U.S.C.
12102 (which, in the case of a corporation, requires only that it be
a U.S. corporation and that certain of its officers and directors be
citizens of the United States but with no requirement as to the U.S.
citizenship of its stockholders). Even if 2 were to apply in this
situation, only the general rule, the controlling interest test, of 2
should be imposed as the 75% interest requirement added in 1920 was
meant only to cover 27 (which is not applicable to 316(a)).
46
Transfers of documented tugs may, however, still be subject to 9,
depending upon whether the owner and the transferee meet the 2(a)
definition of citizens of the United States.
2.1.6 Application of Section 2 to Section 27, Section 9 and the
Documentation Laws
2.1.6.1 Application to Section 27
The amendment of 2 by 38 of the 1920 Act increased, in the case
of a corporation which owned a vessel operating in the coastwise
trade, the amount of interest required to be owned by citizens of the
United States from a controlling interest to a 75% interest. This
requirement was the result of a compromise between the provisions
4546 C.F.R. 67.03-5, 67.03-9 and 67.17-5 (1992).
46In general, there is little correlation between the various statutes governing coastwise
operation of vessels. Each has had a separate statutory beginning and has been amended over
the years often without regard to the enactment or amendment of other statutes. This has been
compounded by the lack of statutory definitions, such as coastwise trade. See supra note 9 at
301 n.2.
173
April IO94
of the bill approved by the House of Representatives and that
approved by the Senate.
47
The bill initially passed by the House
would have retained the controlling interest requirement contained in
the 1916 Act, as amended in 1918, with no differentiation between
coastwise and foreign trade. The bill, as amended by the Senate,
would have required 100% U.S. citizen ownership of a corporation,
association, or partnership operating a vessel in the coastwise trade
and 75% ownership by U.S. citizens of such entities operating vessels
exclusively in the foreign trade.
4
A The compromise, as adopted in the
amended 2, retained the "controlling interest" requirement in all
cases except where a corporation, partnership or association owns a
vessel which operates in the coastwise trade, in which case the 75%
interest
is required.
49
Thus, the requirement that the controlling interest in a corporation,
partnership or association be owned by citizens of the United States
in order for such entity to be deemed a citizen of the United States is
the general rule of 2. The only exception to that general rule is
where such an entity owns a vessel operating in the coastwise trade,
in which case the amount of interest required to be owned by citizens
of the United States is increased to 75%.50
Section 27 sets out the eligibility requirements for a vessel to
engage in the coastwise trade and its citizenship requirement applies
only to owners of such vessels. The 75% interest exception of 2(a)
and (c) applies only to the citizenship requirement of corporations (or
partnerships or associations) that own vessels operating in the
coastwise trade. The parent or any entity whose stock is being relied
upon to establish the requisite U.S. citizenship of the owner of a
47
See H. R. 10378, 66th Cong., 1st Sess. (1920).
4
8See S. Rep. No. 573, 66th Cong., 2d Sess. 7, 9 and 10 (1920). The Senate version of the bill
provided in 29 (which became 27 in the 1920 Act) that a vessel engaged in the coastwise
trade must be "wholly owned by persons who are citizens of the United States." Section 41 of
the Senate version of the bill (which became 38 in the 1920 Act) would amend 9 of the 1916
Act to provide that "no corporation, partnership, or association shall be deemed a citizen of the
United States unless all the stock and securities of such corporation, partnership, or association
are at all times wholly and bona fide owned by citizens of the United States .... (emphasis
added). In the following paragraph, it set out the requirements that title to all stock and of all
voting power be vested in citizens of the United States and by no other means could voting
power or control of the corporation be permitted by any person who is not such a citizen with
the proviso that "for purposes of operating vessels exclusively in foreign commerce" only 75%
of the stock must be so owned. Id. at 23-24.
49
H.R. Rep. No. 1107 (Conference), 66th Cong., 2d Sess. 33 (1920).
50The bill as passed by the Senate would have made the "wholly owned" or 100% U.S.
citizenship requirement the general rule with the 75% requirement for vessels operating
exclusively in the foreign commerce the limited exception.
Vol. 25. No. 2
vessel operating in the coastwise trade, at each tier of ownership
above the corporation owning such vessel, is not the owner of that
vessel. Therefore, the only possible interpretation that can be ob-
tained from the wording and history of 2(a) is that such entities need
to meet, not the 75% interest exception standard but, only the
controlling interest general rule of 2.51
Corporations referred to in 2 as originally enacted and as
amended in 1918, prior to the addition in 1920 of the language
regarding corporations owning vessels operating in the coastwise
trade and the addition of 2(c), are any corporations to which the
definition in 2(a) and (b) apply.
52
Corporations referred to in 2(c),
as added in 1920 (along with the exception added to 2(a)), are only
corporations which own vessels operating in the coastwise trade.
2.1.6.2 Application to Section 9
The meaning and effect of the 75% interest requirement in 2 were
at issue in Alaska Excursion Cruises, Inc. v. United States.
53
The
case held that 2(a) is "definitional in character" and does not
expand the privileges and restrictions of any other statute, stating in
this connection:
Section 802(a) [ 2(a)] delineates which business entities are considered
United States citizens "within the meaning of this chapter." Among
other requirements, a "controlling interest" in the entity must be
owned by United States citizens. For those vessels "in the coastwise
trade," however, a greater degree of United States ownership is
required; the entity which operates them must be 75% United States
owned in order to "be deemed a citizen of the United States" "within
the meaning of this chapter." Section 802(a) is thus definitional in
51
See Central Vermont, discussed infra notes 130-133 and accompanying text.
52
The terms "citizens of the United States" or "such citizens" as contained in subdivisions
(a) through (d) of 2(b), as amended in 1918, refer to a corporate stockholder of a corporation
which has a controlling interest in the corporation whose citizenship is determined by the
controlling interest requirement of that section. The same terms as contained in subdivisions (a)
through (d) of 2(c), as added in 1920, refer to a corporate stockholder of a corporation which
has a 75% interest in the corporation which owns a vessel operating in the coastwise trade
whose citizenship is determined by the 75% interest requirement of that section. However, in
both instances each parent corporation (neither of which owns a vessel operating in the
coastwise trade) has its citizenship determined by the general or controlling interest definition
of 2(b), not the 75% interest definition of 2(c).
53595 F. Supp. 14 (D.D.C. 1984) [hereinafter Alaska Excursion 1]. It is strange that neither
party in its opening briefs or the court in its decision in Conoco referred to or discussed this
case. Conoco in its reply brief did refer to it but only on the question of whether a demise
charterer is the owner of the chartered vessel. See infra note 63 and accompanying text.
175
Apri 1994
character. It does not grant any privileges or impose any restrictions,
but merely groups corporations, partnerships and associations into
those deemed United States citizens and those deemed non-citizens.
Any privileges or restrictions which follow from this distinction must be
found elsewhere in the Act.
54
It is clear that the 75% interest citizenship requirement applies only
to corporations owning vessels operating in the coastwise trade. The
phrase "the entity which operates them" does not change the
ownership requirement (which is imposed by 27) and the fact that
the 75% interest requirement applies only to the owner. Section 27
requires that vessels operating in the coastwise trade be owned by
citizens of the United States but imposes no requirements as to the
citizenship of the "operator" of such vessels (where the operator is
not the owner) nor does 2 add anything in this regard.
The position adopted by the district court in Alaska Excursion I
was urged upon it by MarAd.
55
Proposed MarAd regulations in April
1990 would have applied the 75% requirement to a "corporation
owning or operating a vessel in the coastwise trade" rather than to a
"corporation
owning a vessel which is operating
in the coastwise
trade."
56
In replacing "owning or operating a vessel" with "owning
a vessel which is operated" in the interim final rule issued in 1991,
MarAd stated that the change was made because:
Exception was taken to the proposed citizenship requirement in para-
graph (d)(5) regarding a corporation, partnership, association or joint
venture operating a vessel in coastwise trade. Commentators suggested
that it would be in excess of statutory authority, since.46 U.S.C. app.
883, the relevant authority, speaks only to ownership of vessels used in
the coastwise trade.
That is correct, and paragraph (d)(5) has been amended to clarify that
the citizen requirement applies to the ownership of vessels operating in
the coastwise trade, not to the operator of those vessels.
57
54Alaska Excursion I at 16 (opinion by Judge Gesell) (emphasis added). This position was
concurred in by Judge Flannery in the same case reported at 603 F. Supp. 541, 548 (D.D.C.
1984) [hereinafter Alaska Excursion 11]. The case was assigned to Judge Flannery, who ruled on
certain pre-trial motions reported at 603 F. Supp. 541. In Judge Flannery's absence, Judge
Gesell heard a preliminary motion for injunctive relief reported at 595 F. Supp. 14.
55Defendants' Memorandum of Points and Authorities in Opposition to Plaintiff's Cross-
Motion for Summary Judgment in Alaska Excursion Cruise, Inc. v. United States of America,
U.S. District Court for the District of Columbia, Civil Action No. 83-2366 (February 24, 1984),
at 3-4.
5655 Fed. Reg. 14,040, 14,051 (1990) (proposed to be codified as 46 C.F.R. 221.3(d)(5)).
5756 Fed. Reg. 30,654, 30,657 (1991) (emphasis added).
Vol. 25, No. 2
Despite this recognition in its discussion of the interim final rule, in
the final rule, MarAd quoted from that discussion and then stated:
It should be understood that this change in the July 3 interim final rule
does not mean that MARAD has somehow waived the requirement of
section 9 that persons not qualifying as section 2 citizens require
approval before chartering citizen-owned vessels. The statutory re-
quirement imposed by section 9 that citizen owners of documented
vessels must get MARAD's approval before chartering them to persons
who are not section 2 citizens could not be more clear. The section 2
definition of "Citizen of the United States" is equally clear. As that
definition applies to section 9, a person operating a vessel in the
coastwise trade is not a citizen unless at least 75% of the ownership
resides
in citizens.
58
In support of this position, MarAd quoted the above language from
Alaska Excursion I with respect to "the entity which operates them,"
while ignoring the admonition of that court that 2(a) "does not grant
any privileges or impose any restrictions" and that "[a]ny privileges
or restrictions which follow from this distinction must be found
elsewhere in the Act."
59
This restriction certainly cannot be found in
27 to which the 2 definition applies, for 27 clearly applies only
to the owners of vessels operating in the coastwise trade. It is clear
that the court in Alaska Excursion I, as urged by MarAd, applied the
75% requirement only to the owner and not to the operator (where the
owner is not the operator) of vessels engaged in the coastwise trade.
In the case of a sale of a vessel documented with a coastwise
endorsement, 9 approval is not required if the transferee satisfies
the "controlling interest" requirement. However, the transferee, if it
does not satisfy the "75% interest" requirement, could not then as
owner continue to have the vessel documented with a coastwise
endorsement since it does not meet the 75% interest required of
owners of vessels operating in the coastwise trade. However, this is
a matter subject to the jurisdiction of the Coast Guard as the agency
responsible for the administration of the documentation laws, not of
MarAd in applying 9. Approval by MarAd under 9 does not
operate to waive any requirements for documentation. Likewise, a
charter of a vessel documented with a coastwise endorsement (its
owner meets the 75% interest requirement) to a person satisfying the
controlling (majority) interest but not the 75% interest requirement
does not require 9 approval, even if the charterer thereafter
5857 Fed. Reg. 23,470, 23,472 (1992) (emphasis added).
59
Alaska Excursion
I at 16.
177
April 1W
operates that vessel in the coastwise trade since the charterer is not
the owner of such vessel.
Thus, for purposes of 9, MarAd, in applying the definition of
"citizen of the United States" to a documented
vessel "owned by a
citizen of the United States" transferred to a person not a "citizen of
the United States," must apply the "controlling interest" test in
2(a) and (b) to the owning corporation and to the transferee. This
test will apply regardless of the citizenship requirements for docu-
mentation of the vessel.
If the controlling interest of a corporation owning a vessel docu-
mented with a registry endorsement (which does not require that any
of the corporation's shareholders be citizens of the United States) is
in fact owned by citizens of the United States, then a transfer of that
vessel is subject to the approval requirements of 9. If the corporate
owner's controlling interest is not owned by U.S. citizens, then
MarAd approval would not be required.
In order to place 2 citizens on a par with documentation citizens
eligible to document vessels pursuant to 12102 but who may not be
2 citizens and who may transfer their vessels to noncitizens without
approval by MarAd, MarAd determined in its interim final rule that,
for 9 purposes, "it is appropriate to grant general approval for the
sale, mortgage, lease, charter, etc. (but not transfer of registry) of
citizen-owned vessels [to noncitizens] so long as the country is not at
war, there is no Presidential declaration of national emergency and
the noncitizen is not subject to the control of a country with whom
trade is prohibited."
6
This determination was continued in the final
rule with certain exceptions (including demise charters to non-section
2 citizens of vessels operating in the coastwise trade).
61
With respect to transfers, whether a sale (transfer of the owner-
ship), a mortgage
62
or a charter of a vessel, the controlling interest
6056 Fed. Reg. 30,654; 30,655; 30,677-78 (1991) (to be codified, with certain exceptions, at 46
C.F.R. 221.13(a)).
6 1
Supra note 58 at 23,470-1 and 23,481, 46 C.F.R. 221.13(a) (1992). This does not affect a
partnership, all general partners of which must be U.S. citizens and the controlling interest of
which must be held by U.S. citizens, or an association, all of whose members must be U.S.
citizens, not just a controlling interest held by U.S. citizens. Supra note 37. If the vessel has a
coastwise endorsement, which requires ownership of 75% of the stock of a corporation by U.S.
citizens, then that corporate owner will, of course, satisfy the controlling interest requirement
of 9.
6246 U.S.C. 31322(a)(l)(D) (1988) provides that a preferred mortgage is a mortgage that has
as the mortgagee "(v) a person qualifying as a citizen of the United States under section 2 of the
Shipping Act, 1916 (46 App. U.S.C. 802)." Section 27 applies to the owner, not the mortgagee,
of a mortgaged vessel. For 9 purposes MarAd is not concerned with whether a 75% or only
a controlling interest of the corporate mortgagee is owned or controlled by U.S. citizens.
Vol. 25, No. 2
standard or general rule will apply. Irrespective of the general
approval granted by MarAd in 221.13, if the purchaser, the mort-
gagee or the charterer meets the controlling interest standard, MarAd
approval is not required by statute.
A charterer is the operator, not the owner (to which the 75%
interest test applies) of a vessel. If a bareboat charterer, by reason of
provisions in the charter or otherwise, is considered the "owner" of
a vessel, however, then, unless the charterer (as owner) meets the
75% interest test, the vessel could not be documented in the name of
the charterer (as owner) with a coastwise endorsement. Furthermore,
even if MarAd approved the charter, the vessel could not be operated
in the coastwise trade due to 27 and the documentation require-
ments for owners of vessels operating in the coastwise trade. In
another decision involving the Alaska Excursion Cruises v. United
States case, it was held that "a bareboat charter to a noncitizen is not
per se illegal simply because such an arrangement typically transfers
a considerable degree of control over the chartered vessel" but only
if the terms and conditions "indicate whether so many of the indicia
of ownership have been transferred that the charterer has become the
'owner' for purposes of the Shipping Act."
63
Thus, the citizenship
requirements of 27 are generally not an issue for charterers. If
anything, the term "or control of' (a documented vessel), as added
to 9(c) by the 1988 amendment, might be applicable to a bareboat
or demise charter, but not the term "controlling interest" as to the
transferee or charterer.
64
However, transfer of "control" of a vessel,
if made to a corporation whose "controlling interest" (but not 75%
interest) is owned by citizens of the United States, would not subject
such charter (transfer) to MarAd approval under 9(c)(1).
2.1.6.3 Application to the Documentation Laws
Section 12106(a) provides that a certificate of documentation may
have a coastwise endorsement for a vessel that "is eligible for
documentation" and "otherwise qualifies under the laws of the
United States to be employed in the coastwise trade." Section 12102
provides the requirements for vessels to qualify for documentation
and 27 provides the requirements for vessels to qualify to engage in
63
AIaska Excursion Cruises, Inc. v. United States, 608 F. Supp. 1084, 1088 (D.D.C. 1985)
[hereinafter Alaska Excursion i1] (the third opinion in this case, also by Judge Flannery). Supra
note 54.
64Supra note 32. See also infra notes 110-114 and accompanying text.
179
April 1994
the transportation of merchandise in the coastwise trade. These
requirements are fairly clear and generally are reflected in the Coast
Guard regulations implementing the documentation statutes. Like Ma-
rAd,
65
the Coast Guard looks at the citizenship of each entity in the tier
of ownership. However, where MarAd requires that each entity in that
tier meets the 2 citizenship requirements, the Coast Guard-requires
that any entity owning an interest contributing to the citizenship quali-
fication of another entity must be "a citizen eligible to document vessels
in its own right with the trade endorsement sought."
66
This regulation
has no statutory authority in 2 or otherwise.
The Coast Guard has stated that the purpose of 67.03-2(b) is to
prevent "easy circumvention" of the intent and effect of the 75%
interest requirement for the owner of a vessel engaging in the
coastwise trade by allowing entities that own such 75% interest in
turn to be owned by citizens who own only a controlling interest.6
7
However, when Congress in 1983 codified various laws relating to
vessels, including the Vessel Documentation Act, the report of the
Senate Committee on Commerce, Science and Transportation noted
that "[t]he citizenship provision in 12104 [ 12102 as enacted], the
'Vessels eligible for documentation' section, remains unchanged, but
the Committee wishes to note the conflicting interpretation of the
corporate citizenship requirements of 12104(4) of this bill as it
relates to Section 2 of the Shipping Act of 1916. Such ambiguity
merits further attention. In the interest of expedition, we do not now
address this issue, but intend to do so."
68
In 1990, while considering the appropriation for fiscal year 1991 to
be authorized for the Maritime Administration, the House Committee
on Merchant Marine and Fisheries noted the Coast Guard's applica-
tion of 12102(a)(3)'s requirement that all general partners of a
partnership be citizens of the United States in order for a vessel
owned by the partnership to be documented to the definition of
Citizens of the United States in 2, and commented as follows:
During debate on H.R. 4205, Congressman Young suggested a clarifi-
cation as to Congressional intent when agencies implement and inter-
f5See supra note 33 and accompanying text.
6646 C.F.R. 67.03-2(b)(1991). By notice of proposed rulemaking (CGD 89-007), 57 Fed.
Reg. 10,544 (1992), this regulation would be recodified as 67.31(b).
67
Final rule (CGD 88-031), 55 Fed. Reg. 51,244, 51,247 (1990). The explanation of the Coast
Guard is not clear since it seems to confuse the documentation requirements of 46 U.S.C.
12102 and the controlling interest requirements of 46 U.S.C. app. 802(a) ( 2(a)), but the
rationale is the same.
68S. Rep. No. 98-56, 98th Cong., 1st Sess. 21 (1983).
Vol. 25, No. 2
pret the citizenship requirements for ownership of certain vessels as
contained in chapter 121, title 46 of the U.S. Code. Section 12102 of
Title 46 addresses the citizenship of the documenting entity itself.
Section 12106 then requires that, for coastwise licensing, the entity
documenting a vessel must, in turn, qualify for coastwise service under
other applicable laws. As an example, a vessel is permitted by section
12102 to be documented by an owning U.S. corporation having
qualified officers and directors without regard to the stock ownership of
the corporation; to engage in the coastwise trade, sections 802 and 883
of title 46 require 75% of the stock of the corporation to be owned by
U.S. citizens.
Rules proposed by Department of Transportation agencies mix these
carefully separated strands together. The rules apply to a corporation
authorized by section 12102 to document a vessel and set out the
further requirements for a coastwise license. They not only require
ownership of 75% of the stock by U.S. citizens (as set out in section
802), but also require that if any of the corporation's qualifying stock is
owned by a partnership, all the general partners of the partnership must
be U.S. citizens. This additional requirement does not appear in section
802 but seems to be drawn from the partnership documenting require-
ments in section 12102. The latter requirements are not, however,
applicable to stockholders of corporations that own vessels; partner-
ships owning stock in a vessel-owning corporation need only meet the
75% controlling interest standard of section 802.
Congress never intended to alter the historic distinction between
ownership of the vessel for purposes of documentation and ownership
of the vessel-owning entity for purposes of licensing. Accordingly,
whether a stockholder of a corporation that owns a coastwise vessel is
a citizen is determined by section 802, not section 12102.
The Committee further stated that it "views section 12106 as not
interfering with the distinction discussed above and concludes that
this explanation should be sufficient to guide the agencies in their
rulemaking."
6
9 These comments were noted but ignored by the Coast
Guard in its final rule.
70
Citizenship requirements for documentation of a vessel owned by
a partnership under 12102(a)(3) and of an association under
12102(a)(2) are different from, and more stringent than, those of 2.
However, the citizenship requirement for documentation of a vessel
owned by a corporation under 12102(a)(4) is different from, and less
stringent than, that of 2(a) and (b). For a coastwise endorsement of
69
H.R. Rep. No. 101-487, 101st Cong., 2d Sess. 11-12 (1990).
7
Final Rule (CG 88-031), 55 Fed. Reg. 51,244, 245-246 (1990). See supra note 67 and
accompanying text.
April 1994
a documented vessel owned by a corporation under 12106(a), the
citizenship requirement is the same as that of 2(a) and (c) because
12106(a)(3) stipulates that the vessel "otherwise qualif[y] under the
laws of the United States to be employed in the coastwise trade,"
which refers to, among others, the requirements of 27 and, there-
fore, of 2.
The requirements of 27 apply only to the citizenship of the owner
of the vessel operating in the coastwise trade.
71
Citizenship of the
owner is the only determination to be made by the Coast Guard in
connection with the documentation of a vessel. Any entity in the tier
of ownership above the corporation (or partnership or association)
owning the vessel is required to meet only the general rule of
citizenship of 2(a), that of controlling interest, and not either the
citizenship requirements for the owner of a vessel operating in the
coastwise trade, as set out in the exception to the general rule in
2(a) and (c), or the requirements for an entity to document a vessel
in its own right with a coastwise endorsement as required by the
Coast Guard. Thus, in the case of such corporations, only a "con-
trolling interest," not a "75% interest," is required; in the case of
partnerships, only a "controlling interest," not "all general part-
ners," is required; and, in the case of associations, only a "control-
ling interest," not "all members of the association," is required.
2.2 Bowaters Amendment
2.2.1 Citizenship of a Bowaters Corporation
The Bowaters Amendment, adopted in 1958, added 27A to the
1920 Act, and provides, in part, as follows:
Notwithstanding any other provision of law, a corporation incorporated
under the laws of the United States or any State, Territory, District, or
possession thereof, shall be deemed to be a citizen of the United States
for the purposes of and within the meaning of that term as used in
sections 9 and 37 of the Shipping Act, 1916, as amended (46 U.S.C. 808,
835), section 27 of the Merchant Marine Act of 1920, as amended (46
U.S.C. 883), Revised Statutes, section 4370 (46 U.S.C. 316), and the
laws relating to the documentation of vessels, if it is established by a
certificate filed with the Secretary of the Treasury as hereinafter
provided, that [setting out certain requirements].
72
71
See supra notes 34-35 and accompanying texts.
72
Supra note 3 (emphasis added).
Vol. 25, No. 2
The bill that subsequently became 27A, H.R. 9833, as originally
introduced, was an amendment to 27 in the form of a proviso to the
effect that 27 would not apply to transportation in barges and towing
vessels built in and documented under the laws of the United States
and owned by a corporation meeting the requirements set out in the
subsequently adopted Bowaters Amendment. If adopted in this form,
the proviso would have replaced the three requirements of 27 with
its own three requirements, two of which, built in and documented
under the laws of the United States, were the same. However, the
27 requirement that vessels be owned by persons who are citizens
of the United States would have been replaced by a requirement of
ownership by a corporation meeting the requirements of the proviso
which had no citizenship requirement for stockholders of the corpo-
ration.
73
In letters to the House Committee to which the bill was referred,
the Secretaries of both Commerce and Treasury pointed out that the
bill as introduced would not achieve its purpose because of conflicts
with other laws, referring specifically to the documentation laws and
2, 9 and 37.74 To meet these objections, all provisions after the
enacting clause were struck and, in lieu thereof, the 1920 Act was
amended by adding a new section 27A to contain the language as
finally adopted.
The Committee recognized that Bowaters, a domestic corporation,
by reason of control by non-U.S. citizens was not eligible for
"operation
and ownership"
of vessels in the U.S. domestic
trades.
To rectify this situation, the bill was meant to authorize operation in
the U.S. domestic trade of non-self-propelled barges and certain
small self-propelled vessels in the transportation of merchandise and
passengers owned by corporations which are not U.S. citizens under
2 of the 1916 Act, but which meet the standards set out in the bill.
75
A mere proviso to 27 exempting Bowaters (as well as Shell and
similarly situated corporations) from its provisions would not achieve
the desired results without specifically considering 2, 9 and 37 of
the 1916 Act, 27, the documentation laws and laws relating to
tugboats. Except for 2, this could easily have been done by simply
providing that, as to those laws, a corporation meeting the require-
ments of the amendment would be deemed a citizen of the United
States. Because the citizenship requirements of 9, 37 and 27 derive
73
H. Rep. No. 2270, 85th Cong., 2d Sess. (1958).
74
1d. at 6-13.
75
1d. at 2-3.
183 .Aprl 1994
from 2, a proviso to 2 could have exempted Bowaters from its
provisions. However, because 2 also applies to other laws (such as
the 1936 Act) but not the documentation laws or 316(a), the better
method was to apply the citizenship provision only to the specific
laws deemed necessary. To make certain that 2 or any other law
that might be involved did not frustrate the purpose of the amend-
ment, the language "[n]otwithstanding any other provisions of law"
was placed at the beginning of the amendment. Thus, a Bowaters
corporation would be "deemed a citizen of the United States for the
purposes of and within the meaning of that term as used in" 9, 37 and
27 and would replace the definition of that term in 2 otherwise
applicable to these sections. Likewise, a Bowaters corporation would be
so treated for the purposes of the documentation laws and 316(a) and
would replace any law or definition otherwise applicable in that regard.
The Bowaters Amendment neither applies to nor affects 2 and a
Bowaters corporation is not deemed a citizen of the United States for
the purposes of and within the meaning of 2, unless it separately
qualifies as such a citizen. However, it is quite clear that a Bowaters
corporation is deemed a citizen of the United States for the purposes
of and within the meaning of that term as used in the four identified
laws without reservation or limitation. Thus, where a Bowaters
corporation seeks to document a vessel it owns under U.S. laws with
a coastwise endorsement, the "deemed citizen of the United States"
provision of the Bowaters Amendment will replace the citizenship
requirements in 12102(a)(4) for purposes of the documentation laws
and in 2 for purposes of 27.76
The Bowaters Amendment provides that a corporation seeking to
document a vessel under the laws of the United States pursuant to
that Amendment shall file with the Secretary of the Treasury of the
United States
77
a certificate under oath, establishing that such corpo-
ration complies with the conditions required by the Amendment.
76
A Bowaters corporation, in addition to the requirements that it be incorporated under the
laws of the United States or a subdivision thereof, which is also a requirement of 2(a) and of
12102(a)(4), must have as a majority of its officers and directors citizens of the United States;
whereas 2(a) and 12102(a)(4) require that the president or other chief executive officer and the
chairman of its board of directors be such citizens and that no more of its directors than a
minority of the number necessary to constitute a quorum may be noncitizens. Like
12102(a)(4), there is no requirement that any interest in a Bowaters corporation be owned by
citizens of the United States; whereas 2 requires that a controlling or 75% interest in a
corporation be held by U.S. citizens for it to be considered a U.S. citizen.
77This function is now performed by the Coast Guard. 46 C.F.R. Part 68, 68.01-5 (1992).
The same procedure applies to formally qualify a parent or subsidiary of a Bowaters
corporation. 46 C.F.R. 68.01-7 (1992).
Vol. 25, No. 2
When this certificate has been filed, the Coast Guard will furnish the
corporation with a Certificate of Compliance.
78
With the filing of an
application for a Certificate of Documentation accompanied by the
Certificate of Compliance, and compliance with normal documentation
requirements, any vessel of the type described in the Amendment
owned by a Bowaters corporation may be issued a Certificate of
Documentation with a coastwise endorsement subject to the Amend-
ment's restrictions.
79
Such a vessel may have its Certificate of Docu-
mentation simultaneously endorsed with as many endorsements as it is
qualified for, including operation under the Bowaters Amendment.
80
There is no need to look to the citizenship of any parent corpora-
tion or entity of a Bowaters corporation to determine its citizenship
and whether such corporation is entitled to document vessels with a
coastwise endorsement. In fact, the whole purpose of the Bowaters
Amendment was to get around the fact that the parents of Bowaters
Southern Paper Corporation and of Shell Oil Co. were noncitizens,
thus preventing those two subsidiary U.S. corporations from owning
vessels documented under U.S. laws with coastwise privileges.
The Coast Guard is charged with responsibility for documentation
of vessels under the vessel documentation statutes, which normally
include the requirements of 27 for coastwise endorsements. This in
turn requires the application of the 2 definition of citizens of the
United States to determine whether the U.S. citizenship requirement
of 27 is met. However, in the case of documentation of vessels
owned by a Bowaters corporation, the 2 definition has been
replaced by the Bowaters Amendment definition of U.S. citizens for
purposes of 27 and of the documentation laws and has no applica-
tion in determining if such vessels qualify to be documented with a
coastwise endorsement.
MarAd is charged with responsibility for the administration of 9,
which normally requires the application of the definition in 2 to
determine the U.S. citizenship of the owner of a vessel being
transferred and of the transferee. Again, however, in the case of
transfers of vessels owned by or to a Bowaters corporation, the 2
definition is replaced by the "deemed citizen" provision of the
Bowaters Amendment. Despite this fact, MarAd, in its regulations
78
4 6
C.F.R. 68.01-5(b) (1992).
7946 C.F.R. 68.01-17 and 68.01-11 (1992).
8OCoast Guard regulations specify that vessels employed subject to the Amendment are
"entitled to operation only in the coastwise trade" within the prescribed limitations. 46 C.F.R.
68.01-15(a). However, other regulations allow multiple endorsements on the document. 46
C.F.R. 99 68.01-3, Note and 67.17-1(c).
185
AMI I994
implementing 9, has defined a Bowaters corporation as "a Nonci-
tizen corporation organized under the laws of the United States or of
a State that has satisfied the requirements of 46 U.S.C. app. 883-1(a)-
(e) and holds a valid Certificate of Compliance issued by the Coast
Guard.' '81 This is directly contrary to the specific provisions of the
Bowaters Amendment.
Thus, for purposes of 9, a Bowaters corporation shall be deemed
to be a citizen of the United States where such a corporation owning
a documented vessel makes one of the transfers specified in 9(c)(1)
of that vessel to a person not a citizen of the United States. Thus, the
sale, mortgaging, chartering or the transferring in any manner to a
person not a citizen of the United States of any interest in or control
of a documented vessel owned by a Bowaters corporation is subject
to MarAd approval under 9(c)(1). However, the sale, charter or
transfer of any interest in or control of a documented vessel owned by
a citizen of the United States to a Bowaters corporation is not subject
to approval of MarAd under 9(c)(1).
2.2.2 Chartering Vessels By and To Bowaters Corporations
The Bowaters Amendment provides: (1) the requirements to qual-
ify as a Bowaters corporation, (2) that such a corporation shall be
deemed to be a citizen of the United States for the purposes of and
within the meaning of that term as contained in the five specified
statutory sections, (3) the definition of a parent or subsidiary of such
a corporation, and (4) that vessels "owned" by any such corporation
are prohibited from engaging in the fisheries or in the transportation
of merchandise or passengers for hire in the coastwise trade except as
a service for a parent or a subsidiary corporation and except when
such vessel is under demise or bareboat charter at prevailing rates for
use otherwise than in the domestic noncontiguous trades to a com-
mon or contract carrier meeting certain conditions.
82
By providing that vessels owned by such a corporation are re-
stricted as to their use, it is implied that such corporations can acquire
a vessel by purchases from others. If such a purchase involved a
documented vessel owned by a U.S. citizen, then the sale by that
owner would be subject to MarAd approval if the acquiring Bowaters
8146 C.F.R. 221.3(a) (1992) (emphasis added). However, subsection (n) of the same
regulation defines a "Noncitizen" as "a Person who is not a citizen of the United States." A
Bowaters corporation may be a "non-section 2 citizen" where that section applies but is a
citizen where the Bowaters Amendment applies and its definition replaces that of 2.
82
Section 27A, the last portion of the first unnumbered paragraph.
Vol. 25, No. 2
corporation was not deemed a citizen of the United States for
purposes of 9. MarAd has recognized this possibility and has held
that such a transfer would not be subject to its approval despite its
definition of a Bowaters corporation as a "noncitizen. "83
Because 9 applies to charters of documented vessels owned by
citizens of the United States to a noncitizen and 9 is referred to
specifically in the Bowaters Amendment without limitation, it also
can be implied that Bowaters corporations can charter vessels and
that the chartering of a documented vessel to such a corporation
would not be to a noncitizen and would not require MarAd approval
under 9.84
Vessels owned by Bowaters corporations are restricted in the
transportation of merchandise for hire between coastwise points to
service for a parent or a subsidiary corporation.
8 5
Another exception
in the use of Bowaters corporation owned vessels is the demise or
bareboat chartering of such vessels at prevailing rates to common or
contract carriers under the Interstate Commerce Act (which; by the
terms of the Amendment, also must be a 2 citizen, and thus no
approval by MarAd would be required) for use otherwise than in the
domestic noncontiguous trades (i.e., those places outside the lower
48 States). Although not clearly stated, because a Bowaters corpo-
ration itself could perform such transportation, it appears that a
Bowaters corporation could charter its vessels to a parent or subsid-
iary corporation for transportation of their own cargo and such a
charter would not be subject to MarAd approval. If a Bowaters
corporation carries the products of the parent or subsidiary itself
(without charter to such parent or subsidiary), it is also implied that
it can charge for the hire and need not charter the vessels for such use
at prevailing rates to a common or contract carrier under the
Interstate Commerce Act. Because: (a) a vessel owned by a Bowa-
83
Supra note 81.
84MarAd has granted general approval to the transfer of documented vessels owned by 2
citizens to noncitizens. Supra notes 60 and 61. However, it made this general approval subject
to a few exceptions, among which are transfers to Bowaters corporations (which it defined as
a "noncitizen") of vessels operating in the coastwise trade (46 C.F.R. 221.13(a)(l)(i)), but the
exceptions do not apply to time charters to such corporations (46 C.F.R. 221.13(b)(4)). This
regulation is directly contrary to the Amendment and arises from MarAd's definition of a
Bowaters corporation as a "noncitizen" for 9 purposes.
85
Section 27A does not specifically state that a vessel owned by such corporation may or
may not engage, or is in any way restricted, in the transportation of its own products between
coastwise points. However, it can be assumed from requirements (c), (d) and (e) of the first
unnumbered paragraph that the corporation must meet in order to qualify as a Bowaters
corporation that this was an original purpose of that Amendment and that no exception for this
purpose was needed.
187
April 1994
ters corporation can be demise or bareboat chartered under limited
circumstances to a 2 citizen, and (b) a charter may be subject to the
approval requirements of 9, then by reference to 9 in the Bowa-
ters Amendment, it is implied that: (1) a vessel may be chartered as
well as sold to such a corporation, and (2) a vessel owned or chartered
by such a corporation may be chartered to certain others, subject to
the limitations on use in the exceptions in the Amendment.
A reasonable interpretation of the Bowaters Amendment would
recognize that: (1) a vessel owned by such a corporation may engage in
the transportation of its own merchandise or products between coast-
wise points, (2) a vessel owned by such a corporation may transport
merchandise or products of its subsidiary or parent in the coastwise
trade, either as a service for hire or by charter of the vessel to the parent
or subsidiary for the sole carriage of the merchandise or products of such
parent or subsidiary, (3) a vessel owned by such corporation may be
demise or bareboat chartered at prevailing rates for use otherwise than
in the domestic noncontiguous trades to a common or contract carrier
under the Interstate Commerce Act for the carriage of its products or the
products of its parent or subsidiary or of any merchandise for any other
party as a common or contract carrier, and (4) a Bowaters corporation
may charter in vessels documented under U.S. laws with a coastwise
endorsement without MarAd approval.
III.
ANALYSIS OF COURT'S DECISION
3.1 Facts of Case
3.1.1 Relationship of Parties
Conoco is a U.S. corporation which, the decision infers, meets the
requirements for documentation of its vessels under the U.S. docu-
mentation laws, except for the citizenship of its parent corporation. It
is engaged in the production, transportation, refining and marketing
of petroleum and petroleum products. It is wholly owned by Du Pont
Energy Company ("Energy"), a U.S. corporation which may meet
the requirements to document vessels under U.S. laws with a
coastwise endorsement if its officers and directors meet the corporate
citizenship requirements and its parent corporation is a U.S. citizen.
Energy is a wholly owned subsidiary of Du Pont.
Du Pont is a U.S. corporation, which has a certificate of compli-
ance as a Bowaters corporation. Of Du Pont's stock, 24.5% is owned
Vol. 25, No. 2
by JES Development, Inc. ("Development"), a corporation whose
citizenship is not disclosed, and .59% is held by stockholders with
registered addresses outside the United States. Development is a
wholly owned subsidiary of Joseph E. Seagram & Sons, Inc., a
Canadian corporation ("Seagram"). Thus, Du Pont is not considered
a citizen of the United States for purposes of the 75% interest
requirement of 2. As such it cannot document vessels it owns under
the U.S. documentation laws with coastwise endorsements.
86
However, pursuant to the Coast Guard documentation regulations,
Du Pont is not eligible to document vessels in its own right with a
coastwise endorsement and, therefore, Conoco (the lowest corpora-
tion in the ownership tier to which the intervening corporations,
culminating in Du Pont, contribute the 75% interest required for it to
be able to document its own vessels with coastwise endorsements)
does not qualify for such documentation of its vessels. Also, Du Pont
and the other intervening corporations in the ownership tier between
Du Pont and Conoco do not meet the 75% interest requirement of the
MarAd regulations implementing 9 and, therefore, Conoco does not
qualify as a citizen of the United States.
87
3.1.2 Activities of Parties
Du Pont owned thirty-two bulk liquid chemical barges with limited
coastwise endorsements and had on bareboat or demise charter
twelve additional such barges. It used these barges to transport its
chemical products between its own facilities and occasionally to its
customers. Each of these barges was dedicated to transportation of a
single chemical product to avoid the necessity of cleaning the barges
between trips.
Conoco owned seventeen tank barges and ten pushboats (tugs or
towboats) with coastwise endorsements and had on bareboat charter
one pushboat and nine tank barges. In 1990, Conoco used its
coastwise vessels to carry 27 million barrels of crude and refined
petroleum products, including approximately 10 million barrels that it
carried for unrelated third parties for which it received compensation.
However, under the fair inference rule, Du Pont would be considered a citizen of the
United States under the controlling interest requirement of 2(a) and (b), assuming that Du
Pont meets the documentation and 2(a) citizenship requirements for its officers and directors.
87However, because the controlling interest requirement of 2(a) applies in all 9 cases (see
supra part 2.1.6.2), then Du Pont is a citizen of the United States for 9 purposes and so is
Conoco.
AMI 19M
Its own products were carried either between its facilities or to its
customers.
3.1.3 Status of Parties
Du Pont has a certificate of compliance making it a citizen of the
United States for purposes of 9 and 27 and of the documentation
laws of the United States.
88
Conoco qualifies as, but has not applied
for a certificate of compliance so as to be considered, a Bowaters
corporation.
89
Conoco contended that it was a citizen of the United
States for purposes of 27 and 9. This contention was based on the
premise that the corporations in Conoco's tier of ownership needed to
meet only the controlling, not the 75%, interest requirement of 2.
Du Pont and Conoco argued: (a) that only the controlling interest
requirement is applicable to such corporations, (b) that Du Pont, the
ultimate parent corporation of Conoco, meets the controlling interest
requirement, even under the 65% requirement of the fair inference
rule, and (c) that, therefore, Conoco, more than 75% of whose stock
(interest) is held by Energy, a U.S. citizen, whose controlling interest
in turn, as well as that of other corporations above it in the tier of
ownership, is held by citizens of the United States, is entitled to
document vessels it owns with coastwise endorsements and is a
citizen of the United States for purposes of 9.
3.2 Court's Holdings
The court stated that on the merits there were two separate but
interrelated issues:
9
0 (1) whether the parent of a subsidiary which
owns a coastwise vessel must itself satisfy the 75% citizenship
8If Du Pont was not certified as a Bowaters corporation, it still might be possible for it to
document vessels owned by it with coastwise endorsements. Because 24.5% of Du Pont's stock
is held by Development, a subsidiary of Seagram, a Canadian corporation, not more than .5%
of the remaining stock of Du Pont may be held by noncitizens. However, since the Coast Guard
does not recognize the fair inference rule, it is highly doubtful that under the circumstances the
Coast Guard would document vessels owned by Du Pont with coastwise endorsements without
further proof that 75% of its stock is owned by U.S. citizens.
"Although the court fails to provide an explanation as to why no such application was made
by Conoco, it was probably due to the fact that Conoco was of the opinion that it satisfied the
citizenship requirements for documenting its owned vessels with coastwise endorsements and
did not want its use of these vessels limited if it had them documented under the provisions of
the Amendment.
9t
The appeals court initially decided whether jurisdiction of the case was in the district court
or the court of appeals under the Hobbs Act. It held that jurisdiction was in the court of appeals.
Conoco at 1213, 1216. That portion of the decision is not reviewed here.
Vol. 25, No. 2
requirements of 2; and (2) whether a Bowaters corporation has
unfettered authority to bareboat charter vessels from other corpora-
tions for the transportation of non-proprietary cargo as a common
carrier.91 The first issue involved an interpretation of 2 as applied to
27 and the second issue involved an interpretation of 27A as
applied to 9.
3.2.1 Citizenship Requirements For a Parent Corporation Whose
Subsidiary Corporation Owns a Vessel Operating in the Coastwise Trade
Du Pont has no parent corporation (that is a corporation that holds
a majority or 75% interest in it). However, aside from its status as a
Bowaters corporation, it may not be possible for it to prove that a
75% interest in it is held by citizens of the United States. If it cannot
prove this, it cannot then document vessels owned by it with
coastwise endorsements. However, Du Pont has received a certifi-
cate of compliance certifying that it is a Bowaters corporation and,
therefore: (a) it is deemed a citizen of the United States for 9 and
27 purposes, (b) vessels owned by it can be documented with
limited coastwise endorsements, (c) it can charter vessels from
others, and (d) it can bareboat charter its owned or chartered vessels
to others.
92
Thus, this portion of the opinion, in effect, deals with the
citizenship of the corporate parents of Conoco.
3.2.1.1 The Language of Section 2 is Ambiguous
93
The court initially observed that:
In determining whether the Marad regulation is valid, we look first at
the language of section 2 and the plain meaning of that language.
94
The court, in construing section 2, followed the usual rules of
statutory construction and controlling cases. Courts must look at the
language of a statute and the plain meaning of that language
95
with the
91
Conoco, 970 F.2d at 1216, 1992 AMC at 2828.
92See supra notes 82-85 and accompanying and following text.
93
The subheadings in this discussion of the court's holding follow the points raised by the
court's discussion of the issues.
94Conoco, 970 F.2d at 1216, 1992 AMC at 2829. Although the court looked to 2 in determining
the validity of the MarAd regulation, such interpretation would also apply to the Coast Guard
regulation. However, it was not so treated in the court's decision because the petition for review
originally filed in that court did not ask for review of the Coast Guard regulation.
9Id.
191
April 1994
assumption that the legislative purpose is expressed by the ordinary
meaning of the words used.
96
Also, and most importantly in ascer-
taining the plain meaning of the statute, the court must look to not
only the particular statutory language at issue but also the language
and design of the statute as a whole.
97
If, after that initial inquiry, the
court determines that the statute is unambiguous, its inquiry is over
because courts and agencies must follow the clearly expressed intent
of Congress.
98
However, if the statute is silent or ambiguous with respect to the
specific question addressed by the regulations, the court then examines
the agency interpretation under Chevron and other cases to determine
whether the agency's construction of the statute is permissible, conflicts
with the plain language of the statute, is reasonable, and whether the
current interpretation is consistent with its previous interpretations.
99
The Conoco court proceeded under these guidelines to examine 2
and stated that it "must first determine whether the language of
section 2 on its face applies the 75% citizenship requirement to parent
corporations.'
' 00
It noted that the government argued that the
meaning of 2 is ambiguous and the court should defer to MarAd's
interpretation; whereas Conoco contended that 2 is not ambiguous,
thus, no such deference is required. After stating the question and the
positions of the parties, the court then found that:
[T]he wording of section 2 is incomplete since it merely states that "in
the case of a corporation, association, or partnership operating any
vessel in the coastwise trade the amount of interest required to be
owned by citizens in the United States shall be 75 per centum." 46
U.S.C. App. 802(a). Section 2 does not address whether the parent of
the subsidiary must also meet this citizenship requirement.'
0
'
Although the court, in referring to the wording of 2, appears to be
discussing the entire section, it addresses only the exception in
subsection (a), the case of a corporation "operating any vessel in the
coastwise trade." In so addressing the issue, the court ignored
9Id. (quoting Immigration and Naturalization Service v. Elias-Zacharias, 112 S.Ct. 812, 816
(1992)). See also Mills Music, Inc. v. Snyder, 469 U.S. 153, 164 (1985).
97Id. (quoting K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988)).
98id. (quoting Board of Governors, FRS v. Dimension Fin. Corp., 474 U.S. 361, 368 (1986),
-- which quoted from Chevron, USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 842-43 (1984) [hereinafter Chevron]). See also Tennessee Valley Authority v. Hill, 437
U.S. 153, 187 n.33 (1978), and Rubin v. United States, 449 U.S. 424, 430 (1981).
"Conoco, 970 F.2d at 1216-1217, 1992 AMC at 2829.
'Conoco, 970 F.2d at 1217, 1992 AMC at 2829-2830.
'
01
Id.
Vol. 25, No. 2.
entirely the general, or controlling interest, rule of 2(a) and (b). This
was a fundamental flaw in the court's decision. It ignored the
admonition in K Mart, which it quoted in its opinion,
02
that the
language and design "of the statute as a whole" must be looked to as
well as the statutory language at issue. The court found that the
"wording of 2 is incomplete"
because the language quoted from
the exception (in 2(a), not all of 2) "does not address whether the
parent of the subsidiary [corporation operating a vessel in the
coastwise trade] must also meet this [75%] citizenship requirement."
Thus, two conclusions can be drawn that are contrary to that of the
court: (1) the 75% interest requirement does not apply to a parent
corporation because the exception applies only to the subsidiary
corporation that owns the vessel which operates in the coastwise
trade; and (2) one must look elsewhere in 2 to determine the
citizenship requirement, if any, for such parent corporation.
The 75% interest requirement of 2(a) and (c) is an exception to the
general rule of 2(a) and (b), the controlling interest requirement. 103
The latter applies in all cases involving the meaning of citizens of the
United States except the sole case of corporations which own vessels
operating in the coastwise trade. The exception in 2(a) and (c) does
not refer to parents of corporations owning vessels operating in the
coastwise trade and, therefore, applies only to the corporations
actually owning such vessels. However, 2(a) (without the excep-
tion) and (b) apply to all other corporations, which include parents of
corporations owning vessels operating in the coastwise trade. By
focusing on the exception and ignoring the general rule, the court
violated a basic rule of statutory construction that the language and
plain meaning of a statute are conclusive and that all parts and
language of the statute must be considered.1
0 4
The court also stated:
Although the Marad regulation is not inconsistent with the language of
section 2, we concede that the language is not "plain and unambiguous",
Tennessee Valley Auth. v. Hill, 437 U.S. 153, 184 n. 29 (1978), since section
2 does not deal explicitly with the citizenship of parent corporations.
1
0
5
It was not necessary for 2 to be more explicit than it was. It
covers only two situations: (1) the general situation in which the
12Supra note 97.
1
0
3See supra notes 47-52 and accompanying text.
14Supra notes 95 and 97 and accompanying text.
1
05
Conoco, 970 F.2d at 1219, 1992 AMC at 2833-2834. (footnotes omitted) (emphasis added).
193
April 1W9
citizenship of a corporation, any corporation, is determined by
ownership of its controlling interest, and (2) a special exception to
that general rule in which the citizenship of a corporation which owns
a vessel operating in the coastwise trade is determined by ownership
of 75% interest in that corporation. Section 2(a) and (b) does not have
to address any specific cases (such as a corporate mortgagee, charterer,
owner of a vessel operating in the foreign trade or a parent corporation
of any of these corporations, including the parent corporation of a
corporation owning a vessel operating in the coastwise trade) because it
applies to all corporations not owning a vessel operating in the coastwise
trade. As a general rule applying to all corporations, it is necessarily
silent as to cases to which it applies, specifying instead only the one case
to which the general rule does not apply-corporations which own
vessels operating in the coastwise trade.
Under the general rule, the term "controlling interest" of a corpora-
tion, as defined in four subdivisions of 2(b), applies to any corporation,
whether it is the owner of a vessel for purposes of documentation, or the
owner or transferee of a documented vessel for purposes of 9, or the
parent corporation of such a corporation, or any corporation in the tier
of ownership up to the ultimate individuals.
With respect to the exception to the general rule, a corporation
owning a vessel operating in the coastwise trade, 2(a) and (c) require
that a 75% interest in that corporation be owned by a citizen of the
United States. However, if that 75% interest in the vessel owning
corporation is owned by another corporation (or corporations in a tier of
corporate owners), then the latter corporation(s), is a corporate "citizen
of the United States" as referred to in the four subdivisions of 2(c)
(because it is not a corporation owning vessels operating in the coast-
wise trade) and needs only to satisfy the general rule that the controlling
interest in it is owned by citizens of the United States.
Section 2 applies to every corporation whose citizenship is in
question under 9 and 27,106 whether it is a corporation that owns
"
3
6MarAd is concerned with transfers of documented vessels under 9 and the citizenship
of the owners and of the transferee of such vessels. For such purposes only the controlling
interest is required (even if 75% or all of the interest of the owner is held by U.S. citizens).
MarAd applies the 75% requirement to the transferee when a vessel documented with a
coastwise endorsement is being transferred, although that was not the intent and purpose of
Congress, since the transferee may not necessarily be an owner (and even if it is the owner may
not be able to document the vessel after the transfer with a coastwise endorsement) but may be
a charterer or a mortgagee (for which only the general rule of controlling interest would be the
test). See supra notes 53-464 and accompanying texts.
The Coast Guard is concerned with documentation of vessels and, therefore, with the
citizenship of the owner of the vessel being documented. Where a coastwise endorsement is
Vol. 25, No. 2
a vessel or a corporation that owns a controlling or 75% interest in the
corporation owning the vessel. Once the citizenship analysis goes
beyond the corporate (or partnership or association) owner of a
vessel and other entities (such as other corporations, partnerships or
associations) own an interest in the entity whose citizenship is in
question or in any intervening entity in the chain of ownership, then
the citizenship of the intervening entities is determined under the
controlling interest general rule of 2(a) and (b).
It is true, as the court observed, that "any corporation which was
majority owned by U.S. citizens but did not meet the 75% interest
requirement could simply circumvent that requirement by creating a
wholly-owned subsidiary which held nominal title to the vessel."'
1 7
However, this does not mean that the vessel owning corporation or its
vessel(s) is any less subject to the ultimate control of U.S. citizens (since
the parent corporation's controlling or majority interest is owned by
U.S. citizens) than if 75% of its parent's interest was owned by such
citizens. Nevertheless, if the Congress feels that this is a circumvention
of its objectives and intent, it can simply amend 2 to require such
increased percentage of ownership. If this is a loophole in the law,
108
it
is for Congress, not MarAd or the courts, to correct.
10 9
sought for the vessel, then the 75% interest requirement of 2(a) and (c) as applied to 27 and
12106 would apply to the owner. The Coast Guard regulation does not apply the 75% interest
test to a parent corporation of the owner but requires that the parent corporation be qualified
to document the vessel with the endorsement sought in its own right. In the case of a
corporation, the requirements are the same but not in the case of a partnership or an
association. See supra notes 66-67 and 71 and accompanying texts.
1TConoco, 970 F.2d at 1222, 1992 AMC at 2838. There is no indication as to what the court
means by "nominal title" since the documentation laws as to the ownership of the vessel must
be met before the Coast Guard will document the vessel. However, this was the reason given
by the Coast Guard in justifying its regulation at 46 C.F.R. 67.03-2(b). Supra note 67.
1
8
"Such a loophole would make the citizenship requirements of 46 U.S.C. 12102(a)(3) and
12102(a)(4) so easy to evade that they would be virtually meaningless as a practical matter."
Final Rule, Coast Guard (88-031), 55 Fed. Reg. 51,244, 51,247 (1990).
1
09
First, it should be noted that Congress was aware of this problem when it enacted the
Vessel Documentation Act in 1983, and indicated that it would address it in the future. Supra
note 68. Second, when Congress has intended the requirements for a corporate owner of a
vessel to apply to other corporations where the controlling interest of such corporate owner is
held by other corporations, it has specifically so provided. Section 7(a) of Pub. L. No. 100-239
(the Commercial Fishing Industry Vessel Re-Flagging Act of 1987) amended 46 U.S.C. 12102
by adding the following as subsection (b)(1) (re-designated as subsection (c) by 301(a)(2)(B) -
(D), Pub. L. No. 101-225 in 1989):
(c)(1) A vessel owned by a corporation is not eligible for a fishery license under section
12108 of this title unless the controlling interest (as measured by a majority of voting
shares in that corporation) is owned by individuals who are citizens of the United States.
However, if the corporation is owned in whole or in part by other United States
corporations, the controlling interest in those corporations, in the aggregate, must be
owned by individuals who are citizens of the United States. (emphasis added).
April 1994
3.2.1.2 Meaning and Effect of Term "Operating"
If the court had correctly interpreted the general rule of 2 as applying
to corporate parents, then no analysis of the wording of the exception to
the general rule in 2(a) would have been necessary. However, in order
to determine whether MarAd's regulations were reasonable and permis-
sible in the absence of specific language in the statute to the effect that the
75% interest requirement applies to the parent corporations of corporate
owners of vessels operating in the coastwise trade, the court examined the
terms "operating" and "controlling interest." In this effort, the court also
reached erroneous conclusions.
The court stated that:
Conoco argues that the 75% requirement only applies to the corpora-
tion which actually "operates" the vessels (in this case Conoco), while
the 50% "controlling interest" requirement applies to the parent
corporation (Du Pont) and other corporate stockholders."
0
The court focused its attention on 2 without examining 27,
which contains the requirement that a vessel transporting merchan-
dise in the coastwise trade be owned by U.S. citizens as defined by
2. Section 2 was amended to cover the 27 situation by the addition
of the exception to 2(a) and the definition in 2(c). However, the
exception has meaning only if it applies to the owner of the vessel
which is operated in the coastwise trade, not to the operator (unless
the operator is also the owner).'
After focusing on the term "operating" in the 2(a) exception, the
court turned to 2(c), the 75% interest definition, and particularly
subdivisions (c) and (d) of that subsection. The court contended that
these provision supported its "broad" reading of "operating" in 2
(a) as they indicated Congress' intent that the requirements of 2
extend beyond the subsidiary which "legally owns and operates" the
vessels.
1 2
In so doing, the court erred by not looking first to 2(a)
before considering 2(c). The purpose of the 1920 amendment adding
the 75% interest requirement to 2(a) and the definition of 75%
interest in subsection 2 (c) was to provide a definition for the term
"citizens of the United States" used in 27 of the 1920 Act, which
section required that vessels transporting merchandise in the coast-
wise trade be "owned by persons who are citizens of the United
IConoco, 970 F.2d at 1217, 1992 AMC at 2830. Even if Conoco did so argue, it is clear that the
court was speaking only of the case where the operator is the owner (as in the case of Conoco).
"'See supra notes 47-59 and accompanying texts.
"
2
Vol. 25, No. 2
States."
11 3
This amendment provided a specific and exclusive defini-
tion of "citizens of the United States" for corporations owning
vessels operating in the coastwise trade. The 75% U.S. ownership
requirement applies only to the corporation that owns the vessels
operating in the coastwise trade and, therefore, 2(c)'s application is
limited to that situation as well. If the citizenship of the corporate
operator of such vessels (not also the owner of the vessels) is in
question, then its citizenship is determined under the general rule that
only a controlling interest in the corporation (as defined in 2 (a) and
(b)) must be held by U.S. citizens. There can be no ambiguity or
uncertainty in this interpretation of 2.
The 1920 Act not only contained 27, but also amended 2(a) to
add the exception to that section's general rule. If Congress had
intended the 75% requirement to apply to the operator (as well as the
owner) of a vessel operating in the coastwise trade, it could have
worded 27 to read "must be owned and/or operated" and worded
the exception in 2(a) to read "corporation owning and/or operat-
ing," or similar language. The fact that Congress did not do so is clear
evidence that the 75% interest requirement applies only to the
owner.
14
Section 2 is unclear or ambiguous only to the minds of those
wanting to extend its application to operators as well as owners of
vessels operating in the coastwise trade.
3.2.1.3 Parent's "Controlling Interest" of the Vessel Owning
Corporation, Not "Control" of the Vessel, Is the Issue
In its analysis of the term "operating," the court found that the
corporate parent has "ultimate control" over the subsidiary and its
actions and concluded that "in the context of section 2, we analyze
the word 'operating' in terms of corporate stock control rather than
actual control over the vessel."'
1
1
5
Although Conoco argued that it and Du Pont were two separate
entities, the court said that this did not "negate the fact that Du Pont
owns all of Conoco's stock and thus, necessarily owns Conoco's
vessels."
6
However, it should be noted that Public Law No. 100-710,
"
3
See supra notes 47-52 and accompanying text (emphasis added).
"
4
Recourse here by the court to Alaska Excursion I and its interpretation by MarAd would
have been most helpful. See supra notes 53-57.
"
5
"
6
1d. (citing H. Rep. No. 100-918, 100th Cong., 2d Sess., 24, reprinted in U.S.C.C.A.N.
6104, 6117, for the proposition that "a transfer of control of a subsidiary also transfers all
vessels owned or operated by that subsidiary.") (emphasis added).
197
April 1994
which was the subject of House Report No. 100-918 relied upon by the
court in this finding, added the words "control of" a vessel to 9(c) in
1988.117 As an example of the effect of the addition of "control of"
vessels to 9, the House Report stated that "the transfer of a controlling
interest in the stock of a parent corporation constitutes a transfer of
control of its subsidiary and thereby control over all vessels owned or
operated by that subsidiary."'
1 8
Control of or over a vessel is different
from ownership of that vessel, particularly under 27, where owner-
ship, not control, is the requirement.
In United States v. Niarchos, the court held that it was basic law
that a stockholder of a corporation does not own an interest in any
particular property, such as a vessel, owned by that corporation, and
that a transfer of a share of stock by a stockholder of a vessel owning
corporation is not a transfer of "an interest in" a vessel owned by
that corporation and does not require MarAd approval under 9 (as
then worded) as a transfer of "an interest in" a vessel."
9
As
recognized in that case, the court's interpretation is not the law for
9 purposes and cannot be read into 2. In fact, House Report No.
100-918 provides that "[s]tock transfers were construed [by the court
in Niarchos] to be transfers of an interest in the shipowner and not the
vessel. " 120
The House Committee indicated
21
that the addition of "control
of" vessels was to reconcile the disparate judicial constructions of 9
in the Niarchos case and that in United States v. Meacham.1
22
There
was no reference to 2 or the term "controlling interest" in the
House Report. The amendment to 9(c) corrected the position of
MarAd, that had been overruled in Niarchos but which MarAd
continued to apply, that a transfer of a share of stock in a corporation
owning a vessel was a transfer of "an interest in" that vessel. The
Committee acknowledged that "Section 103(b) [of Public Law No.
100-710] also makes a substantive change to law by amending section
9 of the Shipping Act, 1916 (46 U.S.C. app. 808) to ensure its
applicability to transfers of control of vessels as well as the transfers
of an interest in vessels ... ,"123 The court recognized that the
11
7
Supra notes 31 and 32.
"
8
H. Rep. No. 100-918, 100th Cong., 2d Sess., reprinted in 1993 Pamphlet, Title 46 Shipping
(West), 634, 649.
"9125 F. Supp. 214, 228 (D.D.C. 1954).
12Supra note 118 (emphasis added).
12l1d.
122207 F.2d 535 (4th Cir. 1954).
1
23
Supra note 118 (emphasis added).
Vol. 25, No. 2
amendment was intended "to prevent corporations from circumvent-
ing section 9 [not 2] by transferring de facto control of a vessel
without transferring an interest in the vessel."
124
The House Report further stated that the objective of the amend-
ment of 9(c) was "to ensure that decisions concerning the use and
operation of a documented vessel remain in the hands of citizens of
the United States with a view toward making those vessels available
to the United States for national defense."'
125
This amendment spoke
solely to "control of a vessel." There is no doubt that so long as the
"controlling
interest" of a corporation owning a documented
vessel
is owned by U.S. citizens, those vessels remain available to the
United States for national defense. Amended 9 ensures that objec-
tive with regard to any vessel documented under U.S. laws and
owned by citizens of the United States. Section 2 ensures the same
objective by requiring for purposes of 27 that a 75% interest in a
corporation owning a vessel operating in the coastwise trade be
owned by U.S. citizens, and that the controlling interest in any parent
or other corporation in the tier of ownership of the vessel owning
corporation, or in any corporation for any purpose other than 27, is
owned by U.S. citizens. To mix 2 and 9(c) of the 1916 Act with
differing objectives, although with the same or similar purpose, is not
required in the interpretation of either section.
Except in the case of a corporation owning a vessel operating in the
coastwise trade, the general rule as contained in 2 as originally
enacted in 1916 and as amended in 1918, which requires only a
"controlling
interest" in a corporation,
should apply. Thus, the
citizenship of Conoco, as to the vessels owned by it and documented
with coastwise endorsements, must meet the exception to the general
rule, the 75% interest requirement. However, as to its parent corpo-
ration, Energy, and to the latter's parent, Du Pont, neither of which
for purposes of determining Conoco's U.S. citizenship is an owner of
vessels operating in the coastwise trade,
126
the general rule, the
controlling interest requirement, should apply to determine their U.S.
citizenship.
1
2 4
1
25
SupM note 118.
126
Du Pont may have vessels owned by it documented under the Bowaters Amendment but
not with a coastwise endorsement under 27 and 12106. It could also have the documents of
its vessels issued with registry endorsements since it probably meets all the requirements for
such an endorsement which does not require that any of the stock of the corporate owner of the
vessel be held by U.S. citizens.
199
Apfil 19N4
It is clear that: (1) 100% of the stock, the voting power and the
interest of Conoco is held by Energy, (2) 100% of the stock, the voting
power and the interest of Energy is held by Du Pont, and (3) in excess
of a majority (a controlling interest), but less than 75%, of the stock,
the voting power and the interest of Du Pont is held by citizens of the
United States. Energy and Du Pont must be "citizens of the United
States" (under the controlling, not the 75%, interest requirement) in
order for a 75% interest in Conoco (and a controlling interest in
Energy and Du Pont) to be considered held by "citizens of the United
States" and, thus, for Conoco to be a citizen of the United States
itself for purposes of 27 and 12106.
Because Du Pont holds a certificate of compliance, it is a Bowaters
corporation and deemed a "citizen of the United States" for purposes
of documenting its own vessels for operation in the coastwise trade
under the Bowaters Amendment and 27. However, it must qualify
separately as a citizen of the United States for other purposes. As the
ultimate corporate parent of Conoco, for Du Pont to qualify as a U.S.
citizen for the purpose of Conoco's qualification to document its
vessels with coastwise endorsements under 27 (not the Bowaters
Amendment), Du Pont must satisfy only the general rule that a
controlling interest in Du Pont (as in Energy) is held by citizens of the
United States. For Conoco (or Du Pont) to qualify as a Bowaters
corporation and have its vessels documented with a limited coastwise
endorsement, there is no requirement as to the citizenship of its
shareholders
(or of its parent corporation).
12 7
The court's reference to subdivisions (c) and (d) of 2(c)
128
does
not alter this requirement. The corporation referred to in these
subdivisions (as well as in subdivision (b) of 2(c)) ("such corpora-
tion" or "the corporation") is the corporation to which the 75%
interest requirement as defined in 2(c) applies (i.e., the corporation
referred to in the exception added to 2(a) which owns vessels
operating in the coastwise trade). Energy holds 100% interest in
Conoco, the actual vessel owner. Du Pont holds 100% interest in
Energy. Although slightly more than 25% interest in Du Pont is held
by noncitizens, there is no way that the holders of this minority
interest can exercise any voting power or control over any interest in
Conoco. So long as a majority of the stock, the voting power and the
127
Supra note 76. A "parent" of a Bowaters Corporation is defined as a corporation which
controls, directly or indirectly, at least 50 per centum (not 75 per centum) of the voting stock
of the Bowaters corporation. Section 27A second unnumbered paragraph.
128Conoco, 970 F.2d at 1218, 1992 AMC at 2831.
Vol. 25, No. 2

Martime

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Martime

Transféré par

Droits d'auteur :

Formats disponibles

Citation: 25 J. Mar. L. & Com.

Vous aimerez peut-être aussi