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Nine observations on navigating UAE port claims

19.12.2018 Shipping

Mohamed El Hawawy

Mohamed El Hawawy Partner

Anna Fomina

Anna Fomina Managing Associate / Practice Development Lawyer

According to the European Maritime Safety Agency’s Annual overview of marine casualties and incidents 2017, 42% of incidents happened inside the port area, which may lead to claims against vessels by port authorities and vice versa. In this article, we highlight the legal and practical pitfalls that parties need to bear in mind when dealing with claims involving ports in the UAE.


1. Port terms and conditions may purport to exclude any liability of the port to the vessel

The terms and conditions of the UAE ports tend to sway significantly in favour of the ports. The ports’ terms and conditions are contracts of adhesion and whilst it could be difficult for the parties dealing with the ports to renegotiate these terms, they should be aware of the exact terms they are contracting under.

They usually contain exclusion clauses which are widely drafted and purport to exclude the liability of the port for any loss, detention, delay, misdelivery, damage, personal injury or death howsoever by whosoever caused including liability for any negligence.

2. Port terms and conditions may purport to shift responsibility for pilot’s mistakes onto the vessel

In addition, some ports have terms and conditions which include clauses that provide that when the vessel is under the control of the pilot, the owners, charterers or authorised agents of the owners shall be liable for the pilot’s acts, neglect or default. 

3. Port terms and conditions may contain onerous indemnity clauses

It is not unusual to find hold harmless or indemnity provisions which provide that the vessel, its owners, operators, charterers or agents, will indemnify and hold the port authority, its agents, servants and employees, harmless from and against all losses, claims, damages, death, personal injury or property damage which may be imposed on the port. The effect of such hold harmless clauses, depending on how they are drafted, can be such that even where a party has a prima facie claim against the port, this claim can fail for circularity as the party who would receive damages from the port would then have to indemnify the port for the same amount.

4. Parties can challenge exclusion clauses in port terms and conditions

Whilst the parties to commercial contract under the UAE law are free to agree on the terms and conditions of their contractual relationship, Article 296 of the UAE Civil Transactions Law (UAE Federal Law No. 5 of 1985) provides that “Any condition purporting to provide exemption from liability for a harmful act shall be void.” Whilst we have seen the port terms and conditions successfully challenged in UAE Courts, each case is fact specific.  

5. UAE ports are state owned entities

On a practical level, the position of the UAE ports as state owned entities strengthens their commercial bargaining position.

6. Ports are likely to detain the vessel as security for their claims

In relation to claims presented by port authorities against vessels, the owners may find themselves in a situation where the port authorities are not granting clearance to the vessel before the owners pay the claim. By not providing clearance for the vessel, the vessel would not be able to leave the port, meaning the vessel would be under a de facto arrest, but without the port authority having to formally arrest her through the court system. This is a reality shipowners have to deal with and the first port of call in such a situation would be to enter into negotiations with the port in order to agree on a form of security to obtain clearance for the vessel.

7. Ports may accept bank guarantee or P&I letter of undertaking as security

The UAE ports may accept letters of undertaking as security for their claim. Some of the UAE ports insist on bank guarantees or cash payment, which in theory can then be claimed back via courts but in reality this practice leaves the shipowner out of pocket and forces settlement.  

If the port authority obtains an arrest order from local courts, the courts would accept bank guarantee or cash as security.

8. Ship agents may face exposure for ports’ claims

The shipagents often find themselves caught in the middle of the dispute. Not only do they face financial exposure, as the port authority is likely to pursue the agents at the first instance, but their contracts tend to be directly with the ports so by not paying they may put their future working relationship at risk. The ship agents have an option of defending their position in court.

9. Recent case in Dubai World Tribunal gives hope for limitation of liability

A recent judgment handed down by the Dubai World Tribunal, a specialist tribunal applying the UAE law, where Ince & Co represented successful shipowners, has held that the owners were entitled to limit their liability for a claim presented by UAE port under the Convention on Limitation of Liability for Maritime Claims 1976 and they can do so by way of a letter of undertaking from a P&I Club. It remains to be seen whether similar approach will be adopted by onshore courts.

Conclusion

Overall, dealing with a matter involving local port authorities is not that much different from handling other commercial claims, but certain considerations would need to be kept in mind in order to avoid any surprises further along the line.

Article authors:

Mohamed El Hawawy Anna Fomina