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A Guide to Container Overboard Claims

  • Market Insight 10 December 2020 10 December 2020
  • UK & Europe

  • Marine

A Guide to Container Overboard Claims

Introduction

Claims relating to containers falling overboard from large container vessels often involve different issues to those which arise in more routine containerised cargo damage claims caused by, for example, reefer unit failures, wetting or theft.  As a result, container overboard claims should be investigated and handled differently in order to obtain the best recovery.

This article considers some of the key elements to these claims, but the facts of each claim should always be considered on a case by case basis.

At any one time it is estimated that the world's fleet of vessels has approximately 20 million TEU container capacity and at least 10% of the world's fleet is comprised of container ships. Not all incidents of containers falling overboard are reported. However, between 2017 and 2020 an average of 779 containers were lost overboard each year.

The principles in this article equally apply to damaged containers remaining on board after a container stack collapse.

The potential causes of container overboard losses can broadly be divided into five categories:

  1. Stowage errors by the carrier;
  2. Stowage errors by the shipper;
  3. Defective equipment i.e. an unseaworthy vessel;
  4. Interaction between the ship and sea conditions; and
  5. Extreme weather.

The legal issues that often arise with these claims include, amongst others:

a) Title to sue, where containers are lost at an early stage in the voyage and the bill of lading and legal ownership of the cargo remains with the shipper;

b) Additional claims against the vessel and/or owners due to issues of unseaworthiness;

c) The defence of perils of the sea, which is often raised by the carrier as being the cause of the loss; and

d) Possible liabilities relating to hazardous materials, pollution and clean-up costs, which can sometimes arise years after the recovery claim is closed.

Causes

An allegation by a carrier that adverse weather and 'perils of the sea' caused containers to fall overboard should not be readily accepted and the circumstances should always be investigated further. Surveyors are often not engaged in these cases due to the lack of cargo to survey.

If surveyors are engaged, it is difficult for them to identify the underlying cause(s) of an incident because very little information is made available by the owners, and the surveyors are generally not given access to the vessel to inspect the equipment that has failed and to obtain copies of stowage plans, passage plans and log book entries, amongst other things.

There are a number of different possible causes of containers falling overboard. These vary in nature considerably, from unseaworthiness of the vessel by failing to use adequate and properly maintained lashings and/or securing equipment, mis-declared weights of other containers, failure of a vessel to avoid severe weather and/or a lack of training of the crew on how to avoid excessive rolling during rough conditions.

Container overboard losses are notified to cargo interests shortly after the event. If the values involved are significant, appointing a lawyer to co-ordinate an investigation, make requests to preserve equipment and documents for inspection and to gain access to the vessel, will often pay dividends.

Legal Considerations

Title to Sue

Most containers are carried pursuant to a bill of lading or sea waybill issued by a non-vessel owning common carrier ("NVOCC") or one of the main liner companies such as Maersk, MSC, CMA CGM, ONE Line, OOCL, Hapag-Lloyd and many others. There may be more than one bill of lading or sea waybill in the form of house and master bills of lading and/or sea waybills. These different contracts of carriage will contain different terms, will provide for different jurisdictions in which claims must be pursued and may apply different limitation of liability regimes. Title to sue should be considered under each bill of lading or sea waybill in order to benefit from the most advantageous terms.

In our experience, when the parties learn that a cargo has been lost overboard and will not arrive at the intended destination, bills of lading are often not transferred or sent, as originally intended. This will often result in the shippers, as opposed to the receivers, submitting a claim.  It is important to locate the original bills of lading at an early stage in order to overcome any title to sue issues with the cooperation of the relevant parties, rather than leaving this until shortly before a time bar.

As set out in more detail below, it is often possible to pursue a non-contractual claim against the owner of the responsible vessel. Title to sue for non-contractual claims differs to the rules for contractual claims and considering this at an early stage will provide time to obtain the required authority or assignments of rights from the parties involved.

Tort/Bailment Claim against the owners

Not all jurisdictions recognise non-contractual claims against the owners. However, if a suitable jurisdiction can be secured, this route can be used to obtain security for the claim, a more advantageous jurisdiction or forum, and a better liability/limitation regime.

As the underlying cause of containers falling overboard is often an issue of unseaworthiness of the vessel itself (and not necessarily an issue confined to an individual container), it may also be possible to bring a claim against the vessel itself or, subject to the applicable jurisdiction, to pursue a claim in tort or bailment against the owners or demise charterers of the vessel. To maximise the opportunity to explore these options and secure a claim against the relevant party or parties, it is important to think of the recovery aspect at an early stage in order that each party can be held liable and, where necessary, to secure time extensions from all of them.

Defence of Perils of the Sea 

The most common defence invoked by carriers in respect of container overboard claims is that of 'perils of the sea' pursuant to Article IV rule 2(c) of the Hague or Hague-Visby Rules ("the Rules"). However, the decision in Volcafe v CSAV [2018] UKSC 61 means that the evidential burden in these types of cases is now very much on the carrier as opposed to the cargo interests and carriers must be pressed to prove that they have not been negligent. If a carrier is unable to prove that it has not been negligent, it will be unable to rely on a 'perils of the sea' defence.

In the context of a container overboard case, this means that a carrier must provide evidence to prove that:

  1. It has complied with its Article III rule 2 obligation to properly and carefully care for the cargo; and
  2. One of the defences or exceptions in Article IV rule 2 of the Rules is applicable, for example, the loss was caused by the perils of the sea; and
  3. It has not been negligent.

In order to establish that the loss was caused by the perils of the sea, the carrier must demonstrate that the circumstances are exceptional. In that case, severe weather that is forecast or expected in a certain geographical region at a particular time of year, will not meet this requirement. Equally a carrier may find it difficult to prove that lashing or securing equipment was sufficient if it has also been lost overboard.

Conclusion

The cause of these losses is often complex and expert evidence is often required to determine how and why the containers were able to fall from the vessel into the sea. At Clyde & Co we have experienced ex-containership Master Mariners to advise on these aspects and who can assist with the investigation as part of the recovery claim.

Recent English court decisions mean that the carrier must overcome a high burden of proof to successfully defend claims from cargo interests.  In many cases carriers are unable to provide sufficient evidence because it has not been preserved, is difficult to obtain or because the evidence available simply does not support their defence.  From a tactical perspective, this puts cargo interests in a strong position from the outset.

Our underlying message is to 'think recovery' at an early stage. This will provide potential for significantly improved recoveries from carriers following container overboard losses.  

End

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