Shipping Lawyer Shipping Lawyer 5 — Questions and Answers
Question 1: What is a 'bareboat charter' and how does it differ from a time charter in terms of control and liability?
- A bareboat charter transfers operational control and manning to the charterer, who becomes the de facto owner/operator; a time charter leaves navigation and crewing with the shipowner (Correct answer)
- A bareboat charter includes fuel and crew costs; a time charter does not
- A bareboat charter is limited to vessels under 500 GT; a time charter applies to larger vessels
- A bareboat charter requires FMC approval; a time charter does not
Correct answer: A bareboat charter transfers operational control and manning to the charterer, who becomes the de facto owner/operator; a time charter leaves navigation and crewing with the shipowner
Under a bareboat (demise) charter, the charterer takes complete possession, control, and navigation of the vessel, assuming full liability as if it were the owner, whereas a time charterer merely directs commercial employment while the owner manages the ship.
Question 2: Under OPA 90 (Oil Pollution Act of 1990), who is the 'responsible party' for oil spill liability from a vessel?
- The cargo owner whose oil was spilled
- The owner, operator, or demise charterer of the vessel (Correct answer)
- The terminal facility operator at the port of discharge
- The US Coast Guard as the designated federal on-scene coordinator
Correct answer: The owner, operator, or demise charterer of the vessel
OPA 90 defines the responsible party for a vessel as the owner, operator, or demise charterer, who is strictly liable for removal costs and damages up to the statutory liability limits.
Question 3: In admiralty, what is the 'economic loss rule' and how does it affect cargo damage claims against third-party tortfeasors?
- It bars recovery of purely economic losses unaccompanied by physical damage to the claimant's own property (Correct answer)
- It limits recovery to the market value of the goods at the port of destination
- It requires proof of lost profits before any cargo claim can be brought
- It prohibits punitive damages in all maritime tort cases
Correct answer: It bars recovery of purely economic losses unaccompanied by physical damage to the claimant's own property
Following Robins Dry Dock v. Flint (1927), US admiralty courts generally deny recovery for pure economic loss (e.g., lost profits) to parties who suffered no physical damage to their own property from a third-party tort.
Question 4: What is 'forum selection clause' in a bill of lading and is it enforceable in US courts?
- A clause designating the port of loading as the place of suit; generally unenforceable as contrary to COGSA
- A clause designating a specific court or country for dispute resolution; generally enforceable under The Bremen v. Zapata principle (Correct answer)
- A clause allowing either party to select any US federal court; always enforced under 28 USC §1333
- A clause waiving the right to jury trial in maritime disputes; void as against public policy
Correct answer: A clause designating a specific court or country for dispute resolution; generally enforceable under The Bremen v. Zapata principle
Following M/S Bremen v. Zapata Off-Shore Co. (1972), the Supreme Court held that forum selection clauses in maritime contracts are prima facie valid and enforceable unless shown to be unreasonable or unjust.
Question 5: A cargo insurer pays a shipper's cargo damage claim and then seeks to recover from the negligent ocean carrier. What legal doctrine allows the insurer to do this?
- Indemnification under the carrier's bill of lading terms
- Subrogation, whereby the insurer steps into the shoes of the insured to assert the insured's rights (Correct answer)
- Contribution, requiring the carrier to share the loss equally with the insurer
- Novation, substituting the insurer as a party to the contract of carriage
Correct answer: Subrogation, whereby the insurer steps into the shoes of the insured to assert the insured's rights
Subrogation allows a cargo insurer who has paid a loss to stand in the place of the insured and bring a cargo claim against the ocean carrier or other responsible party.
Question 6: Under US customs law, what is a 'customs broker' and what federal license is required to act as one?
- A freight forwarder licensed by the FMC to handle ocean shipments
- A licensed professional authorized by US Customs and Border Protection to transact customs business on behalf of importers (Correct answer)
- A bonded warehouse operator authorized to store imported goods in bond
- A maritime attorney admitted to practice before the Court of International Trade
Correct answer: A licensed professional authorized by US Customs and Border Protection to transact customs business on behalf of importers
A customs broker holds a license issued by CBP under 19 USC §1641 and is authorized to file entry documents, pay duties, and handle customs transactions as the importer's agent.
Question 7: Which clause in a bill of lading or charter party typically incorporates international arbitration as the dispute resolution mechanism, and why is it commercially significant?
- The cesser clause, which ends charterer liability after cargo is shipped
- The arbitration clause, which provides a private, enforceable, and neutral forum for resolving disputes under the New York Convention (Correct answer)
- The paramount clause, which invokes COGSA protections over all cargo claims
- The both-to-blame collision clause, which allocates collision damages between vessels
Correct answer: The arbitration clause, which provides a private, enforceable, and neutral forum for resolving disputes under the New York Convention
An arbitration clause in shipping contracts directs disputes to private arbitration (commonly London or New York), and awards are enforceable in over 170 countries under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Shipping Lawyer Shipping Lawyer 5
What is a 'bareboat charter' and how does it differ from a time charter in terms of control and liability?