TT Talk - Legal eagle: the consequences of foreseeability
The judgment in 'MSC Flaminia' found that extensive information available concerning the stability of the commodity was ignored and not disclosed to the carrier. "Disaster was foreseeable result".
Many will be aware of the essential facts behind this incident aboard 'MSC Flaminia'. In mid- July 2012, the ship was crossing the Atlantic from the United States bound for Antwerp, Belgium, having left New Orleans, Louisiana some fourteen days earlier, laden with containerised cargo.
Alarms began sounding early on the morning of 14 July, alerting the crew to a smoky cloud rising from one of the cargo holds. Firefighting procedures were initiated, but an explosion cost the lives of three crewmembers and the fire continued to burn for a number of weeks whilst the ship remained at sea.
In an earlier part of the complex and protracted proceedings, the Court had determined that the explosion was the result of runaway auto-polymerization of cargo consisting of divinylbenzene (DVB), stowed in the hold. Having reached a conclusion on the causation, the more recent phase of the trial was to establish responsibilities between the parties remaining in the proceedings, being essentially the owner, manager and operator interests in the ship itself, the shipper of the DVB, and both the freight forwarder and NVOC involved.
A case note of this nature can hardly do justice to the range of arguments and counter-arguments raised between the parties; the judgment makes very interesting reading, providing detailed analysis of the facts, logistics industry processes, and the interface of mandatory regulations and contractual terms. Most important, however, is the clear application of the law.
Relying heavily on the decision in 'DG Harmony' (click here for summary of the case), the judge stated the breach of the duty of care "may arise both from a failure to conform with regulatory requirements, or with standard industry or reasonable practice", neatly balancing the interface of obligations under regulation and general negligence. As a consequence, it was found reasonable for the carrier to assume that the cargo was "manufactured and had been delivered in a manner that would allow it to arrive safely at an overseas destination under normal voyage conditions"; there was no expectation, absent additional warning, that the carrier be aware of "dangers greater than those detailed in the International Maritime Dangerous Goods (IMDG) Code". By extension, a shipper has a duty to "warn the carrier of dangers posed by the cargo". Importantly, the judge concluded that there is "nothing in the IMDG Code [stating] that a shipper and NVOCC may not provide additional information".
While the commodity was correctly classified as Class 9, UN 3082, this was a generic listing that, absent more specific information, denoted that the goods did not present dangers covered by any of the other classes. However, the circumstances were found to be other than "normal, reasonably anticipated conditions" in that, contrary to the shipper's own internal protocols, the shipment was authorised to be loaded in a hotter location, with no additional measures, such as specific temperature monitoring or carriage in refrigerated containers.
These factors were compounded by the NVOC with deficient system infrastructure, on which there was misguided reliance, and poor training together with a misunderstanding that industry practice sees the Dangerous Goods Declaration (DGD) as the "primary source of safe handling information for dangerous goods", rather than the Safety Data Sheet that may typically accompany the bill of lading/carriage document. Critically, the DGD needs to contain sufficient information to warn the carrier and permit appropriate actions, including stowage decisions.
The court found that the shipper failed to take account of the nature of the cargo and specific circumstances of this shipment. The NVOC failed to act on the extensive information available from the shipper and specifically did not disclose key information about the cargo to the carrier. Following this reasoning, both the shipper and NVOC were strictly liable under US Carriage of Goods by Sea Act (COGSA), because while the carrier was aware of the generic dangers posed by the cargo, it did not have "sufficient and relevant information" (and hence no responsibility) for the specific additional hazards presented.
The judge went further to analyse the bill of lading terms, finding specific obligations in relation to dangerous goods and a full indemnity (including "all reasonable legal expenses and costs") in favour of the carrier.
This case may be rare in that the shipper and NVOC are substantial US resident entities. Not only did the evidence build sufficiently to pin liability to them, but there are none of the common pitfalls concerning enforcement of the judgment (once quantum has been determined).
The clear messages for shippers concern compliance with own procedures, and ensuring that actions are considered and justifiable. The court was equally clear that NVOCs are exposed where their negligence causes or contributes to a loss that is foreseeable.
Utilising the bill of lading provisions was particularly favourable to the carrier since it presents the potential (in the US) to recover beyond the scope of COGSA alone.
The decision is subject to appeal.
We hope that you will have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club